Carib Cement second quarter loss

Carib Cement second quarter loss
Published: 03 August 2006

For the second quarter to June 30, 2006, Carib Cement reported a loss of $43.7m which, when added to the first quarter loss of $190.6m that includes $160m for claims relating to non-conforming cement, results in a Group Net Loss of $234.3m for the first six months, compared to a group net profit of $293.8m for the prior year six month period.

Second quarter 2006 sales volume of 229,000t was comparable to the 230,000t  which was sold in the prior year second quarter. The half-year sales volume of 443,000t  was 18,000t [4%] lower than the prior period half year. Sales revenue for the half year was $162.9m [5%] more than prior period following, price increases implemented to partially recover the rising costs of energy and its consequent impact.

Financing costs of $84.4M at the half year were $68.6M more than the prior period, as borrowingsincreased to support the operating losses and the depreciation of the Jamaica dollar compared to prior period half-year.

The Company has successfully resolved the quality problems incurred during the first quarter of the year and payments to affected consumers are being settled as independent valuators assess claims.

Production approached normal levels but still could not satisfy the extremely buoyant market.

Importation of cement to close the deficit has been very challenging given the current worldwide shortage of cement. During the second quarter, 38,000 tonnes of cement were imported to bring the total for the half-year to 80,000t. However, in most instances, the cost of imported cement was higher than the local sales value.

The company continues to incur operating losses as the continuously rising costs of energy outpace price increases as well as the internal efficiencies garnered from better operating procedures.

Consequently, a further price increase of 15% was put into effect on July 24, 2006. This price increase is expected to result in an improved performance for the remainder of 2006, however, it is not anticipated that the year’s results will be satisfactory.

The expansion and modernization programme continues to be on schedule for production to commence in 2008.