Despite declaring record profits for 2015, TCL chairman Wilfred Espinet is driving the regional cement producer to continue on its programme of improving the company's efficiencies in order to make the regional group globally competitive.
TCL–which has production operations in Trinidad, Jamaica and Barbados–reported after-tax profits of $428.8 million in 2015. This was a significant improvement compared with the after-tax loss of $211 million the group sustained in 2014.
The profit performance resulted in earnings per share of $1.19, which includes the effect of a one-time financing gain of $205.8 million of $0.61 per share. Stripping out the one-time gain leaves TCL with core profit of $223 million for last year.
The one-time gain resulted from the renegotiation of the company's debt, which contributed to the group achieving a 23 per cent reduction in its annual finance costs and a reduction in the group's total borrowings to $1.2 billion, as at December 31, 2015, from $1.8 billion as at December 31, 2014.
The TCL group also recorded its highest ever revenue in 2015 of $2.1 billion, an increase of $12.4 million compared to the year 2014.
Despite this achievement, Espinet is not resting on his laurels but is driving the company to deepen and widen the improvement it has already made in its competitiveness.
Espinet said when the new board was elected in August 2014–replacing the board led for years by Andy Bhajan and Rollin Bertrand–it had three specific objectives:
�2 restructuring of the company's balance sheet;
�2 company has to become globally competitive;
�2 retain and expand existing markets.
The restructuring of the company's balance sheet was completed with the renegotiation of the group's debt and the rights issue in March last year, which raised a total of US$57.1 million in new capital as a result of the sale of 124.8 million new shares. As Mexican cement giant, Cemex, contributed US$44.8 million to the rights issue, its shareholding in the company increased from 20 per cent to 39 per cent.
The TCL group chairman said that the company will, in 2016, focus on ensuring that it becomes globally competitive.
"The second phase requires internal efficiency transformation, which would include spending capital on the plants that have not been adequately maintained for years. As a result of the lack of maintenance, we had to satisfy those inefficiencies by retaining more labour than was required."
Espinet said that driving cost efficiencies to improve competitiveness across TCL, involves: upgrading of skills of the workers, upgrading equipment and rightsizing employee numbers.
Jamaica has reduced its total manpower by close to 20 per cent, including contract workers, while Barbados has reduced its head count by 28 per cent from 204 to 147.
Jamaica has become the most competitive of the three plants that TCL operates. This was due to the sharp fall in the cost of energy to fuel the operations there, but it was also as a result of the reduction in the workforce in Jamaica, along with an increase in production.
According to the TCL directors' statement accompanying the 2015 summary, consolidated audited financial report: "TCL's record-breaking 2015 revenue achievement was mainly driven by a 12 per cent increase in cement sales volumes in Jamaica and a 16 per cent increase in clinker sales volumes."
Espinet noted that Jamaica's target capacity is 1.6 million tonnes, which is substantially more than at TCL's Claxton Bay operations, where there is a target to increase output to 900,000 tonnes this year. In Barbados, it is 400,000. In total, the TCL group is close to three million capacity.
"This means that the Caricom region can be supplied from the production capacity in Jamaica," said Espinet, adding that the mantra in the group is to ensure that all three of the operations–in Trinidad, Jamaica and Barbados–are operating as efficiently as possible.
As a result of the high cost of production in Barbados, TCL is threatened by cheap imports coming into that market, including from as far as Portugal.
He said that the need to continue driving competitiveness was as a result of an over-production of commodities, including cement in the world. This, coupled with the low cost of freight–as a result of the collapse of global oil prices–has increased the potential for low-cost imports, which has forced TCL to reduce prices in Barbados.
The drive for competitiveness means that the TCL operations at Claxton Bay will also need to experience some measure of cost reduction to improve competitiveness.
"The business is governed by arithmetic. I cannot have revenue that is shrinking and expenditure that is growing and expect the business to survive in a highly competitive, commodity industry."
Espinet said that any time TCL makes a decision, the cost implications do not negatively impact on its competitiveness.
He drew the example of ArcelorMittal, in the context of a global oversupply of iron and steel, deciding to mothball its Trinidad operations.
"It seems to me that the iron and steel complex operated by ArcelorMittal in Point Lisas will only survive the reduction of global production capacity if it is more competitive than the steel mills it is be compared with.
"That is a general statement that is true for all producers."
Questioned on how he would respond to the Oilfield Workers' Trade Union–which represents workers at TCL–if there is a request for wage increases for the next trimester, Espinet said wages will only be increased if they can be justified on financial grounds.
"It would be very reasonable request in the context of an increase in the operation's revenue and a decrease in its cost of production."
All of TCL's raw material–mainly limestone and natural gas–are sourced locally and the company's only call on foreign exchange is to pay its debts and to purchase capital equipment.
As a result, TCL is a net foreign exchange earner in a context where many local manufacturers are not.