Mr Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.
Work and Products
Very few Guyanese probably know or care what the acronym CCI means. Even the full name of Caribbean Container Incorporated probably does not ring a bell to most Guyanese, except for those who live around and work at the production facilities of the organization. Despite having been around for a long time, CCI does not come across as a household name in Guyana. The work and products of CCI constantly enters the lives of Guyanese through the paper or cartons used to wrap or hold their daily purchases. CCI produces paper used in the packaging industry in Guyana and the Caribbean, some of which is used to wrap seafood, meats and fast foods. Yet, the activities of this company are not well known. One way of getting to know this corporate being requires knowing who the owners are. That knowledge might also offer some insights into why this company seems confident about its future even in the face of current challenges.
Ownership
CCI was known by the former name of Seals and Packaging Industries Limited or SAPIL. SAPIL came into being on July 12, 1978 and when ownership changed in 1999 the name was converted to CCI. The company, which is located at Farm on the East Bank of Demerara, has a few shareholders and is part of a multilevel ownership structure. Two companies own the majority of shares of CCI: Demerara Holdings Incorporated and Secure International Finance Company. Demerara Holdings is itself a little known company in Guyana, but owns over 85 percent of the shares of CCI. This makes it the largest and principal shareholder of the company. Demerara Holdings is also a subsidiary of Technology Investments and Management Inc, thus making CCI a subsidiary of a subsidiary and part of a multilevel ownership structure.
Secure International Finance Company Inc, the other substantial shareholder of CCI, owns over five percent of the shares of the company. This latter owner also might not be a household name in Guyana, even though it is the parent of some prominent companies in the country. The Guyana Bank for Trade and Industry (GBTI) is one well-known company that is owned by Secure International Finance Company. Through its ownership structure, it could be said that CCI has good family ties.
Optimism
Another way of getting to know CCI is through the work it does and what that work means to Guyanese. CCI produces paperboard products such as fluting, recycled linerboard and single face linerboard. It also produces corrugated packing materials for use in the agricultural, marine and commercial sectors. The office line of products includes filing boxes, stackable desk trays, magazine holders and cheque boxes. In order to acquire its products for sale, CCI operates a paper mill and a box manufacturing facility. It had 134 staff members and productive assets of over G$2 billion at the end of 2008.
During 2008, CCI was able to earn approximately G$847 million from the sale of its line of products. The nearly four percent increase in sales, along with the strong raw materials position that it found itself in, led the management of CCI to offer an optimistic outlook for the company in 2009. This optimism was boosted further by the planned initiatives of the company to strengthen its sales capability, improve the quality of its products and diversify its product line. The initiatives were clearly aimed at improving the productivity of the company and placing it in a position to compete in the regional and global marketplace. With the optimism of the company hinged on initiatives that must produce results in the short-term, success clearly depends on how easily and quickly the investment strategy of the company could yield the desired results. The 2009 annual report would offer some evidence of the extent to which CCI has been successful in pursuing its goals.
Uncertainty
In the meantime, the data provided by CCI in its 2008 annual report indicate that it could face some serious challenges in pursuing its goal of increasing productivity and sales. One thing that emerges from the report is that CCI might be too conservative in the execution of its strategy. The company has had some rough experiences that might be informing its cautious attitude, such as equipment failures and severe declines in raw material supplies. No one would disagree that these two factors adversely affected production and sales and the fallout from the two events appears to have pushed management to seek higher levels of protection. One indication of this conservatism is the substantial increase in working capital within a short span of time. CCI increased its working capital by 103 percent between 2007 and 2008.
CCI increased its working capital in several ways. One significant move was to increase inventories by 54 percent, reflecting management’s preoccupation with the uncertainty of the availability of much needed raw materials. With the massive increase in working capital within one year, management also seems disinterested in using long-term funds to invest in its short-term strategy. Consequently, the cash balance rose by 36 percent between 2007 and 2008. In addition, CCI increased its receivables by 22 percent.
High Price
CCI might be paying a high price to protect itself against unforeseen contingencies. In 2007, CCI invested 40 days of net sales in inventory to support its operations. By 2008, the investment of net sales in inventory had risen to 59 days. The decrease in efficiency of 19 days is the price that CCI was willing to pay to feel comfortable that it could meet its production goals. In monetary terms, CCI appears willing to give up about five percent of any increase in sales to ensure that it could keep its plants running and its staff in place. The proof of the pudding is in the eating, and the 2009 report will tell us if the strategy yielded the kind of production and sales results for which CCI was looking.
