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

the worldwide increases in freight, steel and steel products also continued to put upward
pressure on costs. In summary, while the fixed cost elements were absorbed to some extent
by increasing production volumes, the direct unit cost of production increased by 18%, and
operating profit as a percentage of sales fell to 16%, compared with 20% in 2003.
Finance costs on the other hand reduced over 2003 as a result of the following two key factors, viz.:
• The foreign exchange rate remained relatively stable over the year, depreciating by 2%
compared to the 20% devaluation in 2003. The loss on currency exchange was $3M
compared to the $100M in 2003.
• Interest expenses reduced by $52M, primarily as improved cash flows reduced the reliance
on borrowings to fund working capital.
Additionally, there was a reduction in the taxation charge as, in accordance with the
International Financial Reporting Standard, Jamaica Gypsum and Quarries Limited (JGQ)
recognized a deferred tax asset amounting to $231M arising from unused tax losses, based on
an assessment that future taxable profits will be available against which these losses can be
utilized.
Over the last three years a Revitalization Programme has been instituted at JGQ aimed at
improving productivity and quality and returning the Company to viability. The programme
has included a re-capitalization of the rolling stock, improvements to crushing plant and
environmental control equipment and the introduction of new management and work systems
that has resulted in a revitalized work force and significant improvements in the quality of the
product. In addition, the port facilities have been upgraded and marketed successfully for use
by third parties for the export of aggregates. In fact, the Company received the award for the
largest bulk exports in 2004. Jamaica Gypsum and Quarries port facilities, and Carib Cement’s
cement and coal wharfs, are all fully in compliance with the International Ship and Port Facility
Security (ISPS) Code.
The Company’s balance sheet strengthened during the year and significant pay downs on
outstanding loans were made. Working capital became positive for the first time since 1996.
Market Review
Carib Cement achieved record total domestic sales for the year 2004, ending the year at 803,855
MT, 33% over the prior year’s performance. This represents an additional 198,364MT of cement
sold by the Company in 2004 over the previous year. The domestic market grew by 13% over
the previous year. The cumulative annual growth rate in domestic cement sales has averaged
8% over the last three years, compared with 5% over the previous ten years.
In their final determination in July 2004, the Anti-Dumping & Subsidies Commission
recommended the imposition of a safeguard duty of 25.83% on cement entering the Jamaican
market. This recommendation was based on the highest FOB price on record for cement
imported into the Jamaican market and, when added to the 15% CET, would result in total
duties payable on cement imports of 40.83%.
However, the Government of Jamaica, while accepting the recommendations of the
Commission, decided instead to increase the Common External Tariff (CET) on all cement
imports to 40%. Approval for the adjustment of this duty was granted by Parliament in
December 2004.
In a more disciplined market place, Carib Cement’s market share improved to 93% compared
with 77% in 2003. From December 2003, the Company’s monthly market share has been in the
ninety percentiles and during the last quarter of 2004 the Company commanded 100% of the
local market. This is the first time since the beginning of 2000 that the Company supplied the
complete domestic market for such a period.
The Montego Bay,
Portmore and Mandeville
depots continue to service
the Company’s customers
with depot sales now
accounting for 30% of total
sales. Plans are underway
to further expand the
network with the opening
of a new depot in Spanish
Town by mid 2005, along
with increasing the
capacity of the Mandeville
depot.
Our new brand, Carib Cement Plus, was well received by contractors and premix concrete
operators. Carib Cement Plus is a Portland Pozzolan Cement or ASTM Type 1P Cement and
produces concrete that develops a lower heat of hydration, has higher later strengths and
is more resistant to alkali and sulphate reactions. In addition, during the manufacturing
process, less energy is required to produce this cement and less carbon dioxide is released
to the atmosphere, reducing the greenhouse effect. Carib Cement’s introduction of this
blended cement is in line with international best practices subscribed to under the Cement
Sustainability Initiative (CSI). In February 2005, Carib Cement Plus was launched in 42.5kg
sacks and has also received a very positive response from this market segment.
Operations Review
Cement production totalled a record 808,070MT 33% or 200,388MT over the 2003
performance. Clinker production totalled 605,814MT. This was 4,834MT more than the
performance in 2003 and also established a new production record. This performance, which
was in spite of the interruptions arising from Hurricanes Charlie and Ivan and the frequent
power outages that continued thereafter, has validated the previous expenditure in 2003 on
refurbishing the cement milling areas, the training of our staff and improving the information
and work systems in the plant through the Manufacturing Excellence Transformation
Programme.
2004 ANNUAL REPORT 14 15
2004 ANNUAL REPORT