As we get ready to bring in the New Year, one of the things that I have resolved to do is increase the percentage of my salary that is being saved and invested. The issue, then, is what institution should I trust my few pennies with and what type of investment product would be most suited to me and my stage of development. More about those surprisingly thorny issues next year. One subset of the discussion on investments for 2011 is the impact that the regional economies are having on local, listed companies.
TCL, which has subsidiaries in Barbados and Jamaica, reported net losses attributable to group shareholders of $55.1 million for its third quarter compared with a net profit of $17.9 million in the same period in 2009. Its revenue for the current nine-month period declined to $1.2 billion compared with $1.37 billion for the nine months of 2009. The cement production company stated that its T&T operations remained profitable notwithstanding lower demand levels, but that it sustained "heavy losses" at its Barbados and Jamaica subsidiaries "due to continued depressed market conditions.
"Those two markets declined by a further 17 per cent and 20 per cent, respectively, in 2010," according to the directors' statement that accompanied TCL's third quarter results, which was signed by the company's chairman, Andy Bhajan, and its CEO/director, Dr Rollin Bertrand and dated December 3.
"Caribbean economies remain challenged even though the economic recovery in North America and Europe seems to have started," stated the TCL directors. The sentiment is similar in the full year results of Neal & Massy Ltd, which were published on December 14.
"The prevailing economic environment throughout the region continues to adversely impact the group. Key operating business units experienced reasonable growth, but the results for 2010 were mainly impacted by the disappointing performance of Almond Resorts and losses on the operations of Bahamas Supermarkets and Warrens Motors Inc, which were being held for sale. The regional conglomerate, which took a decision to sell Warrens Motors and Bahamas Supermarkets, reported a loss of $118 million from those enterprises. As a result, its profit attributable to shareholders declined by 31 per cent from $483.6 million for 2009 to $306 million in 2010.
Neal & Massy has a major Barbados subsidiary, Barbados Shipping and Trading, and operates throughout the region. BS&T reported that its revenue for the nine months ending June 30, 2010 declined by 4 per cent compared with the year earlier period, while its profit after tax for the same period in 2010 was 19 per cent lower than 2009. Republic Bank, which has subsidiaries in Barbados, Grenada and Guyana, also reported issues in Barbados. In his managing director's discussion and analysis, David Dulal-Whiteway stated: "The non-performing loans ratio has started to trend downward and, more importantly, the delinquency within our loan portfolio is below the long-term average, except in Barbados, where in 2010 the impact of the financial crisis really hit home."
Republic Bank reported that the after-tax profits from its Barbados operations declined by 17 per cent falling from $176.5 million in 2009 to $146.4 million in 2010, while the profit in its Eastern Caribbean, Guyana and Cayman operations increased by 14 per cent and its T&T operations were higher by 7.5 per cent. According to the Central Bank's Monetary Policy Report for October, the recovery in the Caribbean region has been less robust than in Latin America: "In 2009, the Caribbean region expanded by 0.4 per cent, with several economies entering into recession, including The Bahamas (-4.3 per cent), Barbados (-5.5 per cent), and Jamaica (-3.0 per cent). "During the first nine months of 2010, the Barbadian economy contracted by 0.9 per cent compared to a contraction of 4.7 per cent in the corresponding period of 2009.
"In Jamaica, while there are signs of a nascent recovery, real GDP is estimated to have declined by 1.5 per cent (year-on-year) during the first half of 2010. This compares to a contraction of 3.7 per cent (year-on-year) during the first six months of 2009." The common theme which connects TCL, Neal & Massy and Republic Bank is their involvement in the tourism-dominated island of Barbados, which seems to have suffered a more significant reversal of fortune than most of the other islands of the Caribbean. TCL is seeking to deal with its regional challenges by exploring new markets in the Caribbean, including in Haiti, in the French West Indies-where it would have duty free access under the Economic Partnership Agreement between Cariforum and the European Union-and in Venezuela.
In Venezuela, TCL and the Jamaican Government are negotiating to have Venezuela accept cement at reasonable prices as payment of the northern Caribbean country's large oil's bill from Venezuela under the PetroCaribe arrangement. Under PetroCaribe, Caribbean countries are allowed to purchase oil from Venezuela on conditions of preferential payment, generally a percentage of the oil at market value with the remainder treated as a 25-year loan at 1 per cent interest.In addition, PetroCaribe allows for nations to pay part of the cost with other products provided to Venezuela, such as bananas, rice, and sugar, according to Wikipedia.
If the parties are able to conclude this deal, it would be a significant coup for TCL, Jamaica and Venezuela. This is a most interesting development for which those who desire further information should keep watching this space. Neal & Massy has sought to deal with the problems in the Barbados economy by closing a motor vehicle dealership on the island. Republic Bank sought to deal with its issues in Barbados by offering to buy out the minority shareholders of Barbados National Bank, who together own 34.87 per cent of that bank-a significant part of which is owned by the Government of Barbados and the Barbados National Insurance Board. Republic's initial offer was made in October and at the end of November it announced that it would "not be pursuing its proposed offer to purchase the remaining shares in its subsidiary, the Barbados National Bank.
In making the announcement, managing director, David Dulal-Whiteway, advised that although the group was satisfied with its existing shareholding in BNB, it had been willing to acquire the additional shares since the Government was desirous of selling. "Following discussions with the Government, both parties were unable to agree on an appropriate transaction price and as a result, the Group would not be proceeding with the transaction at this time." This entire transaction was very strange and I don't know whether I was alone in expecting that there would have been a follow-up statement announcing that either the Barbados Government or the bank (or both) had had a change of heart and that the transaction had been completed. One would expect that if the Government was "desirous of selling" and Republic willing to buy that negotiating an appropriate price would not have been so difficult.