In a move that signals the largest management shakeup in more than two decades, Trinidad Cement (TCL) yesterday announced that five executives employed by Cemex–its largest shareholder–would assume key senior positions in running the Claxton Bay-based company and its regional subsidiaries.
Cemex employees will assume the positions of group CEO, group operations manager, group strategic planning manager, acting general manager of Readymix and general manager of Caribbean Cement, TCL's Jamaican subsidiary, TCL said in a notice published in yesterday's Guardian.
The announcement of the recruitment of five Mexican executives came one day after TCL entered into a technical services agreement with Cemex on Thursday.
Under the terms of the agreement, Cemex will provide support to TCL by making available "suitable, qualified and experienced executives to fulfill the tasks required from key executive positions as required."
The agreement also calls for Cemex to provide training sessions for TCL managers and employees, as required and to provide TCL with technical assistance to support the operations of the TCL Group's trading and shipping departments.
The following changes were announced by TCL:
�2 Jose Luis Seijo will assume the position of group CEO with effect from May 4, 2015. Alejandro Ramirez Cantu, who served as the acting group CEO from August 19, 2014 will resume his non-executive directorship position on the board of directors of the company;
�2 Alejandro Var�s will assume the position of general manager, Caribbean Cement Company Ltd, with effect from May 4, 2015. Anthony Haynes, who served as general manager of CCCL for more than 13 years resigns from the post effective April 30, 2015. He will continue with the group as a consultant until October;
�2 Miguel Estrada will assume the position of TCL group operations manager effective May 4, 2015. This post replaces the previous position of group manufacturing and development manager;
�2 Ricardo Garcia will assume the new position of TCL group strategic planning manager effective May 4, 2015.
�2 Andres Pe�a, who served as group strategy implementation manager from November 1, 2013, will be appointed to act as general manager of Readymix (West Indies) Ltd (RML) effective May 4, 2015. Manan Deo, who has served as general manager of RML since 2005 is currently on pre-retirement leave, and will retire officially on October 16, 2015, after which Pe�a will assume the substantive position of general manager of RML.
In a statement, TCL's board of directors, which is chaired by local business executive Wilfred Espinet, said: "It wishes to reiterate its commitment to returning the company to stable value creation and would continue to update stakeholders on developments in this regard."
Asked yesterday to comment on whether TCL was outsourcing its management to Cemex, a Mexican construction products giant, Espinet said: "I have never been one to complain about foreigners. We had a Canadian commissioner of police and no one complained. Machel Montano has dancers from Miami.
"We are simply trying to get the best people to run TCL in the context of some local managers leaving the company for different reasons.
"The new board of TCL is simply trying to do what it feels is in the best interest of its shareholders, employees, creditors and the purchasers of cement and concrete."
Questioned on if there were any locals who could have taken up the jobs that have gone to Mexicans, Espinet said: "We do not have the skills to operate and manage concrete plants sitting around."
He also noted that about 47 per cent of TCL's shares are owned by foreigners.
The announcement of the management changes at TCL comes 24 days after the company disclosed the results of last month's successful rights issue, which raised US$57.13 million (TT$361.5 million) in new capital for TCL by the issue of 124,882,568 new shares.
Sierra Trading, the Cemex subsidiary that holds its shares in TCL, subscribed for 78.5 per cent of the new shares that were offered in the rights issue, contributing US$44.85 million to TCL's recapitalisation.
As a result of the rights issue, the Cemex stake in TCL went from 20 per cent to 39.5 per cent, cementing its role as TCL's largest shareholder.
In an April 2 notice to shareholders, TCL stated that it intends to use the proceeds of the rights issue in the following priority:
�2 Restructuring and transaction expenses;
�2 Replenishment of working capital (including the settlement of long-outstanding payable balances that include amounts due to employees);
�2 Debt service; and
�2 Investment in capital expenditure.
In addition, TCL's creditors made raising equity capital of at least US$50 million a condition precedent of debt restructuring agreements, which came into effect on March 30, 2015.
The main elements of the debt restructuring agreements include that the interest rate on TCL's debt reverted to December 2010 levels (about 8 per cent) and the company experienced forgiveness on its default moratorium interest (which was set at about 12 per cent).
TCL also has the ability to prepay originally secured and unsecured debt on a discounted basis within 90 days of the effectiveness of the restructuring.
In an interview published in the April 2 edition of the Business Guardian, TCL chairman Espinet said: "One of the specific benefits of the rights issue is that it will result in an immediate reduction in TCL's interest charge...As a result of us getting in this new capital from the rights issue, our creditors are going to reverse the two per cent penalty and have agreed to lower the average interest from 10 per cent to eight per cent from January 1, 2015."
TCL profit jumps 259%
The cement company's after-tax profit for the first quarter of 2015 skyrocketed to $46.6 million compared with $12.96 million in the first quarter of 2014.
This sharp increase in TCL's profitability came about even though there was a marginal increase in the company's revenues, which totaled $514.85 million for the period January to March 2015, compared with $513.56 million for the same period in 2014.
The company's earnings before interest, tax, depreciation, impairment, loss on disposal of property, plant and equipment and restructuring expenses jumped by 38 per cent from $100.43 million in 2014 to $138.21 million in 2015.
The directors' comments attributed this improvement in earnings to higher sales and production volumes and price increases implemented in 2014 at TCL and lower fuel and electricity costs at Caribbean Cement.
TCL's operating profit increased from $68.41 million in 2014 to $110.56 million in 2015, while its profit before tax went from $17.63 million for the first quarter of 2014 to $56.99 million for the same period in 2015.
At the end of the first quarter, TCL's cash balance amounted to $548.3 million, largely as a result of the rights issue proceeds of $361.5 million. As a consequence of the restructured debt agreement, TCL's loans have been re-classified from short term to long-term, which has improved the company's the working capital from a deficit of $1.5 billion at December 31, 2014 to a surplus of $600 million at March 31st 2015.
With regard to its balance sheet, TCL's net assets increased from $245.5 million at the end of 2014 to $648.9 million at the end of March, 2015.
In comments on the company's first quarter unaudited results, Espinet and TCL's acting group CEO, Alejandro Ramirez, described the results as "a milestone in the history of the TCL group."
Speaking yesterday on TCL's first quarter result Espinet noted that the real benefits from the company's introduction of operational efficiencies had not yet flowed through to its bottom line.
He noted, as well, that TCL will get achieve significant savings, of as much as US$30 million, if it is able to pay off its existing creditors, who are owed about US$280 million by the end of June.
The company is planning to borrow the US$280 million from new creditors for a period of up to 18 months, said Espinet, in the April 2 interview.
This short-term loan would be rolled over into a longer-term note, he said.