2006 - Eastern Caribbean Securities Exchange

Chairman’s Reviewslings by 92%. TCL Group’s operating profit, beforea charge of $30.3m to settle cement claims at CCCL,which arose as a result of the inadvertent release ofnon-conforming cement in the market, increased by$111.2m or 60% over that for 2005. It is estimatedthat operating profits have been impacted by anadditional $29.3m because of curtailed productionlevels and other expenses associated with the qualityissue in Jamaica. Steps have been taken to improveCCCL’s quality systems and to strengthen the relevantdepartment in order to ensure that there is no repeatof this problem.of 54%. Additionally, our new state-of-the-art cementterminal in Guyana was substantially completed byyear end, resulting in an improved cement supplyto the Guyanese market. Our third major capacityexpansion project, the construction of a new kiln atCaribbean Cement Company Limited in Jamaica, wasinitiated during the year and is on target for substantialcompletion at the end of 2007 and commissioning inearly 2008. By early 2008 therefore, the Group willhave significantly increased its clinker and cementproduction capacity in anticipation of, and in responseto strong regional demand.Group net profit attributable to shareholders amountedto $145.7m compared with $160.3m in 2005.Earnings per Share (EPS) was 60 cents compared with66 cents for the prior year. In both cases, the declinesmust be considered against the background that the2005 results included one time tax credits of $67.5mresulting from the reduction in Corporation Tax ratesin Trinidad and Tobago. Our Balance Sheet remainsstrong, reflecting a continuing improvement in theGroup’s financial position.Dividend PolicyThe TCL Group’s dividend policy has been to paydividends approximating one third of Net Earnings.The application of this policy has had to be kept undercontinuous scrutiny because of the stringent terms andconditions of the external loans associated with thecapacity expansion and modernisation programmes.The Group is required to conserve cash in order tocontribute towards project funding. Accordingly, nointerim dividend was paid for 2006 and a reduced finaldividend has been approved for the year.Capacity Expansion and ModernisationDuring 2006, the Group made significant progressin its capacity expansion and plant modernisationprogrammes. Our new cement milling facility atthe Claxton Bay Plant, Cement Mill 3, becameoperational, adding some 420,000 tonnes to theannual productive capability of that plant, an increaseWe consider it important to highlight theseachievements because they communicate to ourshareholders, potential investors and stakeholders thefact that the Group remains fully committed to meetingthe developmental needs of the Caribbean regioninsofar as these are reflected in physical infrastructuralimprovement triggered by the strong demand for ourproducts.The TCL Group is also the proud sponsor of the WestIndies Under 19 Cricket Tournament and we haveincluded, at page 49 of this report, an article aboutthis sponsorship in recognition of the ICC’s CricketWorld Cup which is being hosted in the region forthe first time.Share Price PerformanceMarket conditions on regional stock exchanges weregenerally ‘bearish’ with indices having declined. Onour primary market, the Trinidad and Tobago StockExchange (TTSE), the efforts of institutional investors toensure compliance with regulatory restrictions resultedin a decline of 8.86% in the All T&T Index and 9.2% inthe Composite Index as many of them became sellersrather than buyers of equities. The protracted marketdecline abated somewhat in the last six weeks of theyear. In this context, the TCL share price exhibitedmixed fortunes for the year, having started at $10.00and ending the year at $7.01, a decline of 29.9%.The price hit a 52 week low of $5.70 in August beforeAnnual Report 200621