(Jamaica Observer) Faced with a pending debt payment at the end of March, Caribbean Cement Company (Carib) has increased the prices by an average 16.5 per cent.
Having already implemented a 9.2 per cent price increase in June, the manufacturer should see close to a J$500-million or 21 per cent increase in revenue during the first three months of 2013.
But that’s if domestic sales over the next three months are the same as the first quarter sales over the last two years, approximately 140,000 tonnes.
The new price takes effect on January 7. Carib has been experiencing financial difficulty in recent times and has racked up J$5.6 billion in losses over the last three years.
It got a break from servicing its debt over a year ago, while its parent — Trinidad Cement Limited (TCL) — completed the restructuring of its debt, which includes some of Carib’s liabilities.
Under new terms, the servicing of the restructured debt will occur over six years starting with interest in December 2012.
Up to now, the local cement maker has been relying on the support of TCL to continue to operate, according to notes in the company’s latest financial statements.
But the move appears to mean that Carib will now have to do more on its own going forward.
“While we have sought and obtained a suspension of our debt servicing, this moratorium has come to an end and the enterprise must begin servicing its debt from the end of this month,” said Anthony Haynes, Carib’s general manager, in a statement issued to the Jamaica Stock Exchange yesterday. “In the current environment, we need to adjust our prices if we are to generate the required cash flows to meet our next debt payment, at the end of March 2013.”
Prices for its flagship product — packaged Carib Plus — will be increased by 15.4 per cent, but other products will see higher increases, which resulted in a weighted average increase of 16.5 per cent.
Haynes said that Carib’s prices have been the lowest among cement manufacturers in Mexico, Colombia and the Dominican Republic, which are the major producers in this region, and sister companies operated by TCL in Trinidad and Barbados.
“I wish to assure you that this adjustment is reasonable and it is the minimum that we must make to avoid defaulting on our upcoming commitments,” he said.
The company recently reported a modest operating profit after nine consecutive quarters of losses.
The $15-million operating profit for the three months to September 30 reflected a trend of shrinking losses since December.
The price increase in June, in response to escalating energy and other costs, helped the company post higher revenue — J$2.1 billion for the three months to September 30 compared to J$2 billion during the same period last year.
At the same time, the company managed to slash its cost of operations by J$630 million, or 24 per cent year over year.
Nevertheless, the company posted a net loss of J$245 million during the three-month period, compared to J$551 million during the three months to September 30, 2011.
The company’s working capital has declined from J$610 million at the end of June to J$427 million at the end of September.
What’s more, its capital base, which was J$409 million at the beginning of the year, was negative J$1 billion on September 30.
