2006 - Eastern Caribbean Securities Exchange

Group Chief Executive Officer’s Report and Management Discussionin 2006 on our new bagging terminal in Guyana,through subsidiary TCL Guyana Incorporated.The balance sheet at December 31, 2006 reflectedcontinued improvement in our financial position.Shareholders’ equity increased by $127.2m over theyear after paying dividends of $12.5m and Long TermDebt to Group Equity was reduced to 93% comparedwith 98% at year end 2005. Debt to EBITDA (Earningsbefore Interest, Tax, Depreciation and Amortisation)also improved from 4.4 at last year end to 3.7 at 31stDecember, 2006.3.0 Group Marketing92.5%. Notably, TCL won the Business DevelopmentCompany / Republic Bank Limited “Excellence inExport / International Competitiveness Award” foroutstanding export achievement in 2006.During the year, TCL Premium Cement (Portland-Pozzolan blended cement) was successfully producedand launched in the local and regional markets.The year 2006 was a challenging one for Carib Cementin Jamaica, as events during the year (including boutsof heavy rainfall, the removal of duties on cement, there-introduction of retail competition and fluctuationsin the quality and quantity of cement) resulted in salesbeing 2.5% below the performance of the prior year.Sales (‘000 MT)1000 -865 843800 -620600 - 565400 -263201200 -165 17813710330-2005 2006 2005 2006 2005 2006TCL CCCL ACCLLOCALEXPORTThe Group’s total sales of 2.0 million tonnes of cementin 2006 significantly surpassed its performance for2005, as a direct consequence of TCL’s Cement Mill #3upgrade in late 2005 with its concomitant enhancedmilling capacity. Total Group cement sales in thedomestic markets increased by 4%, while there wasa marked increase of 15% in export sales.In Trinidad and Tobago, TCL’s total sales for the year wasa record achievement at 882,735 tonnes, with localsales at its highest ever of 619,739 tonnes. TCL’s exportsales also surpassed the prior year’s performance byThe company faced a significant quality issue during thelatter part of February as a quantity of non-conformingcement (which did not gain the required strengthswithin the specification’s timeframe) was inadvertentlyreleased into the market. The company publiclyacknowledged the problem and voluntarily issued arecall of the faulty product. To date, 91% of the totalrelated claims have been finalised, and the companyhas introduced a tighter regime of testing policies andprocedures to ensure non-recurrence of the crisis. Theplant suspended sales for twelve days to correct thequality problems which severely disrupted constructionactivity. Consequently, 2006 was a record year forcement importation into Jamaica (with Governmentand third party (retailer) imports representing 11% and62% respectively). The quantum of imported cementsold by CCCL last year was 119,302 tonnes. CCCLis pursuing ISO 9002 certification in 2007. The othercompanies in the Group have already been certified.At Arawak Cement in Barbados, local sales exceededthe 200,000 tonne milestone for the first time ever.However, third party export sales were 42% lower thanthe prior year as ACCL provided CCCL with 29,000tonnes during 2006. Performance on the local marketwas bolstered by projects related to World Cup Cricket,tourism, government projects and housing.26