2006 - Eastern Caribbean Securities Exchange

Group Chief Executive Officer’s Report and Management DiscussionDespite the enhanced sales performance of its cementsubsidiaries, the Group faced serious challenges inmeeting the expectations of its export market, whichresulted in Caricom’s suspension of the CommonExternal Tariff (CET) for cement for a two year periodwith a review after the first year. The TCL Group hasobjected to the suspension and is prepared to challengethe decision, if necessary, through the Caribbean Courtof Justice (CCJ).The Group’s packaging companies both experiencedsignificant improvements in performance over theprevious year. TPL’s total sales were 14% higher, withincreases in the local and export markets of 19% and12% respectively, despite reduced demand from someof its main customers including TCL (due to increasedbulk cement sales) and Carib Cement (due to increasedbagged cement imports into the country). For TPM,the total slings sold during the year were 40% higherthan the 2005 level and the highest recorded salesin the company’s history. Intra-Group and third partysales both improved and a shortfall in budgeted salesto the company’s traditional markets was offset byincreased sales to Cuba.The Readymix Group had an excellent performance in2006, despite challenges in the St. Maarten market. InTrinidad and Tobago, the concrete market grew by 27%and RML produced and sold a total of 233,640 cubicmetres of concrete for the year, which was 4.6% abovethe volume sold in 2005. The company also implementedprice adjustments in light of steadily increasing costinputs, including the importation of aggregates. Withrespect to the Barbados operations, PPCI sold a total of28,075 cubic metres of concrete in 2006, which was13.3% above the volume of 2005 and attracted 5%higher prices. In St. Maarten, ICNV/SARL sold a totalof 21,436 cubic metres of concrete for the year, whichwas 10.2% below the prior-year volume. This was duein part to a shutdown of construction during Octoberand November, which resulted from a shortage of steel.However, the company was able to obtain higher sellingprices and maintain its market share.With respect to the marketing of gypsum, pozzolanand lime, JGQ in Jamaica sold 225,636 tonnes and158,217 tonnes of gypsum and pozzolan respectively.Total lime sales by the Arawak Lime Division in Barbadosamounted to 9,397 tonnes. Comparing year-on-yearresults, pozzolan sales increased by 72%, while sales ofgypsum and lime both fell 29% and 22% respectively.The reduced sale of lime was primarily due to reducedlocal demand and the withdrawal of a major exportcustomer from the market.4.0 Group Operations4.1 Cement Sector OperationsClinker Production (‘000 MT)800 -600 -400 -200 --634 667604542306293TCL CCCL ACCL2005 2006Clinker Production is the Key Profit Driver of the Group.In 2006, the Group produced 1,563,306 tonnes ofclinker, which was 5% higher than the previous year.Additionally, the Group imported 192,914 tonnes ofclinker during the year, in order to supplement kilnoutput at TCL and Arawak Cement and optimiseits increased milling capacity. Clinker production atCarib Cement was the second highest recorded in thecompany’s history.In respect of cement production, the plants’ totaloutput of 1,982,334 tonnes represented an increaseof 5% over 2005. TCL recorded its highest everAnnual Report 200627