Caribbean Cement begins asset buy-back
CARIBBEAN CEMENT Company Limited paid the first instalment of $1.3 billion on the asset buy-back agreement struck with immediate parent Trinidad Cement Limited.
The companies signed off on (TL) the transaction on April 27, under which Caribbean Cement has 90 days to pay US$118 million to TCL — which converts to $14.5 billion in local currency — to terminate the operating lease for Kiln 5 and Mill 5 at its plant in Rockfort, Kingston, and reclaim ownership of the assets.
“The initial payment of $1.3 billion towards the acquisition represents a significant investment in plant and equipment, improving the company’s asset base,” Caribbean Cement said in a statement appended to its newly released financial results.
The cement maker reported a six per cent rise in revenue for the March quarter to $4.3 billion, but its profit dipped 27 per cent to $334 million. Still, the company is more bullish about its financial health, having described 2017 as a year of transition, and the first quarter of 2018 as the beginning of a stabilisation period.
The agreement to return the assets to Caribbean Cement was struck in March, ending the operating lease agreement in effect since July 2010 — an arrangement through which TCL effectively collected on debt owed to it for financing upgrades to the Rockfort plant around that time. Caribbean Cement will also redeem preference shares issued to TCL in 2010 and 2013 for some US$40.5 million to be paid over nine years, starting in 2018. The financing arrangements to fund the asset acquisition and the share redemptions are yet to be disclosed, but General Manager Peter Donkersloot has indicated it will include the acquisition of debt.
Queries to the company on Tuesday were unanswered, but in late March, Donkersloot told a Mayberry Investors Forum that the lease payments would be replaced with interest costs from loans related to the buy-back and depreciation of the asset.