A Time To Build Caribbean Cement Company Limited Annual ...

operating profit as a percentage
of sales decreased from 20% in
2003 to 16%.
CHAIRMAN’S STATEMENT
Dear Shareholders,
After the challenges of 2003, 2004 proved to be a year of
outstanding performances in regard to production, sales and
brian w. young
profits. Profit after tax (PAT) attributable to shareholders grew
to $842M, up 85% over the prior year, driven primarily by the return to profitability of the
subsidiary company, Jamaica Gypsum & Quarries Limited. In USD terms, the net profit
amounted to USD13.7M, a significant improvement over prior years.
Year 2004 2003 2002 2001 2000 1999
PAT (US$M) 13.76 7.81 7.79 6.36 6.60 (13.48)
The Jamaican market grew by 13%
over the previous year, with the
Company improving its market share
from 77% to 93%. During the last
quarter of 2004, with the temporary
trade tariff of 25.83% in place, the
Company enjoyed 100% market share
for the first time since the first quarter
of 2001. Cement sales and production
increased by 33% over the previous
year. Annual cement sales of 803,855 MT was a record and cement production of 808,070,
exceeded sales by 4,215MT.
The significant increase in net profit was primarily influenced by the return to profitability of
the subsidiary company, Jamaica Gypsum and Quarries Ltd (JGQ). Over the last three years
a Revitalization Programme has been instituted at JGQ aimed at improving productivity and
quality. This initiative has seen significant improvements in production and sales. In addition,
the Company has actively sought to optimize its port assets, also growing third party business
considerably. Within the next five years, this Company is expected to realize profits that will
utilize the existing accumulated losses. Therefore, in compliance with International Financial
Reporting Standards, deferred tax is now being accounted for. The impact of this reduced the
tax charge on the consolidated operating profit by $231M.
While the Company was able to grasp the opportunity provided by the favourable ruling of the
Anti Dumping and Subsidies Commission and demonstrate its ability to supply the growing
domestic market, 2004 was not without its challenges. The drastic increases in input costs such
as fuel, electricity, steel products and freight adversely affected our cost of sales, but were partly
offset by economies of scale from our increased production and sales. Notwithstanding, our
In addition, Hurricanes Ivan
and Charlie and the frequent
interruptions in the electricity
supplies that followed, severely
disrupted our third quarter’s
performance. JGQ was especially hard hit and had to suspend its operations for over a
month to carry out repairs following Hurricane Ivan. While the cement company was able to
quickly resume sales and cement grinding, the quarry and clinker manufacturing operations
were more affected and approximately 30,000MT of clinker production and 35,000MT of
gypsum production was lost as a result of the hurricanes. At the end of the year however,
both companies were fully back in production. The Company was able to recoup most of the
hurricane losses from its insurance coverage.
We are particularly proud of the fact that, in an environment where inflation grew by 13%
and building materials such as lumber and steel doubled and trebled in price, there were no
price adjustments to cement during the year. In fact, in real terms, our customers enjoyed a 3%
reduction in cement prices.
With the significant
improvement in profitability
Shareholders’ equity increased
to $2.77 billion and the
Company’s working capital
became positive for the first
time in many years, increasing
by $465.4M from a negative
-$346.7M at the beginning of
the year to a positive $118.7M
at year-end. Bank advances
and loan obligations reduced
from $207M (2003) to $98M at
year-end, and cash and shortterm
deposits increased from
$56M (2003) to $100M.
Perhaps the most significant
event affecting the Company
for 2004 was the passing
in Parliament of a bill to
increase the Common External
Tariff (CET) to 40% on all
cement imports into Jamaica,
2004 ANNUAL REPORT 10 11
2004 ANNUAL REPORT