Financially troubled TCL is going ahead with a nine per cent increase in the retail price of cement, the company confirmed on Friday, the same day the company lost a major wage battle in the Industrial Court and days after the nine-member TCL board received the news that a majority of the company's shareholders want to dismiss six directors.
TCL plans to hike the price of a 42.5 kg bag of Premium Plus Cement by nine per cent on July 1. That price increase will take the price of a bag of cement, which currently sells for between $57 and $60, to between $62 and $65.40.
On Tuesday, the company ran advertisements in two daily newspapers, promoting its claim that "cement represents approximately five per cent of your material costs" to build a house. The percentage contribution of cement to the cost of building a house is an argument that TCL has often used in the past to justify increasing the price of its main product.The last time TCL increased the price of cement was in January 2013, when it increased the price of the commodity by 9.5 per cent.
In the statement 18 months ago justifying the price increase, TCL said that it had announced in July 2012 that a review of prices would be conducted during the last quarter of 2012.TCL said: "The decision was therefore predicated on this analysis, which confirmed an increase in operating costs, specifically in the areas of energy, packaging and spares for which TCL as a price taker has no control." (See sidebar for June 2014 rationale)
9 per cent wage increase
The Industrial Court on Friday ordered TCL to institute a nine per cent wage increase for the period 2008 to 2011 for four categories of the cement company's workers: hourly rated/weekly paid; senior staff; confidential secretaries and monthly rated. The wage award is for two per cent in the first year, three per cent in the second year and four per cent in the third year.
In arguments before the Industrial Court, TCL contended that its workers should accept a three-per cent wage increase for the three year period, which it had reduced from 6.5 per cent. The representative trade union, the Oilfields Workers Trade Union, had demanded a 12 per cent package.The Industrial Court rejected TCL's arguments that it should be allowed "a reasonable time period" for it to pay any awarded pay increase/backpay."
TCL proposed four quarterly installments based on its submission "that all cash generated by them and the TCL group was being used to meet the loan repayment requirements," according to the judgment's reporting to the employer's submission.The court ordered that the payment of arrears be effective on or before August 8.
The Industrial Court case arose out of a 90-day strike/lockout at TCL from February 27 to May 26, 2012, which led to the workers staying off the job for three months. The award by the court is expected to cost the company millions in increased recurrent expenditure plus a large backpay bill.According to TCL's 2013 annual report, the group's debt service (inclusive of principal and interest) is forecast to be $368 million in 2014.
Last month, TCL postponed an attempt to raise US$300 million on the international capital markets as "some investors requested modifications to the proposed coupon and covenant package."The local company issued a notice on May 20, in which it said that it proposed to "await more favourable market conditions, which are expected in the near future."
Shareholders want six directors out
Some of TCL's largest institutional and individual shareholders–comprising a majority of cement producer's issued shares–have requisitioned the board of the financially troubled company to call a compulsory meeting of shareholders to remove immediately six of the company's nine directors.
The shareholders hold in aggregate 54.7 per cent of TCL's issued shares and include the National Insurance Board, the Unit Trust Corporation, Republic Bank, Tatil Life, a trust fund account controlled by RBC and the company's largest single shareholder, the Mexican cement giant Cemex.Among the shareholders–all of whom signed documents confirming their participation in the requisition–are some of TCL's large individual shareholders such as Helen Bhagwansingh and Stephen Espinet.
The six TCL directors who the shareholders want removed are the chairman Andy Bhajan, the chief executive Rollin Bertrand and directors Bevon Francis, Carlos Hee Houng, Leonard Nurse and Brian Young. The three directors who are not the subject of the requisition are Wayne Yip Choy, Alejandro Cantu of Cemex and Jean Michel Allard of the International Finance Corporation.
The shareholders propose that after the six directors have been removed, there should be an election to replace them with seven new directors: retired permanent secretary Alison Lewis, Chris Dehring, Wilfred Espinet, the UTC's Nigel Edwards, Mexican engineer Francisco Aguilera, Panamanian engineer Carlos Palero and Port-of-Spain attorney Glen Hamel-Smith.
The shareholders are taking the action under section 133 of the Companies Act, which allows the holders of not less than five per cent of the issued shares of a company to requisition a shareholders meeting.Section 133 requires directors to call a meeting if they are requisitioned by shareholders, unless:
�2 a record date has been fixed under section 110(2) and notice thereof has been given under section 112;
�2 the directors have called a meeting of shareholders and have given notice thereof under section 113; or
�2 the business of the meeting as stated in the requisition includes matters described in section 119 (b) to (e).
Those clauses personal grievances, similarity to previous proposals and publicity seeking.But the section 133 compulsory meetings exclude 119 (f), which allows directors to block requisitioned meetings "where the matter in the best judgment of the directors is inimical to the commercial interest of the company."The TCL board used this clause last year to deny an attempt by shareholders–then representing 5.68 per cent of the company's issued shares–to nominate five directors for election to the company's board.
A High Court judge on July 12, 2013 granted an injunction restraining the holding of TCL's annual meeting and the matter has been in court ever since.Asked Friday night to comment of the requisition for a compulsory meeting, TCL chief executive Rollin Bertrand said: "As you know there is an active case before the High Court between TCL and a group of shareholders. There is also an injunction in place prohibiting the Board from holding its annual shareholders' meeting to elect directors.
"Given the overlap between parties and issues in these matters, the board is initially treating the recent initiative as part of ongoing legal action and everything as subjudice. We are awaiting an assessment from counsel before we make any public statement or take any action to avoid being held in contempt of court."
In providing a justification for the price increase, TCL said in a statement Friday night:
"Continual increases in major cost components over the last 18 months, but more so over the last 6 months, freight rates, equipment spares, supplier services and raw materials have increased significantly.Improved operational efficiencies towards mitigation of external rising costsThe company said that it has:
�2 Out sourced some non-core activities i.e. Packing Plant and Quarry hence mitigating the escalating labour cost.
�2 Installed an expert operator system on its kilns and mills to reduce costs
�2 Automated aspects of its operations
Market Development � TCL has commenced export of oil well (Class G) cement to South America and is pursuing other opportunities in Latin and South America to increase revenue.Industry price increases within the last 6 months
�2 Sharp Sand 67%,
�2 Gravel 50%,
�2 Clay Bricks 21%,
�2 Ready-mix Concrete 20%
�2 Concrete Blocks 15%
"It is apparent that the entire local construction industry has been experiencing increased operational costs.Independent studies by Quantity Surveyors have shown that cement accounts for only 5% of building material costs in the construction of a basic dwelling house."TCL also argued that its prices "remain close to the lower end of the tier when compared in a global context."
The company also offered all contractors registered with the Trinidad & Tobago Contractors' Association (TTCA) a three-month waiver of TCL's price increase for fixed price contracts with their clients."This will allow them the opportunity to re-negotiate their terms and minimize the impact," TCL said.