Amid the rising energy prices and falling margins, cement prices across the region have risen by double digits year-to-date as Trinidad Cement Limited’s (TCL’s) core markets continue their carbon dioxide emission reduction efforts.

The cost of construction material has continued to increase as supply chain disruptions worsened and raw materials spike. While oil (West Texas Intermediate) prices have abated from the US$120 per barrel highs seen earlier this month, they still trade around US$112, which is nearly 50 per cent higher than the US$75 seen at the start of the year. Steel prices have dropped below the May highs of US$783 while coal prices are up 162 per cent to US$394.

As a result, Trinidad and Tobago saw a 15 per cent price increase in cement prices in December, while it went up 12 per cent in Barbados in December and 11 per cent in Guyana recently.

“We obviously have seen our margins deteriorate from 2020 to 2021. We anticipate that the input costs will continue to go up, so we needed to take a decisive action in the increase of prices. We took the lead not only in the industry but in some of our markets in these price increases,” said TCL Managing Director Francisco Aguilera Mendoza at the company’s virtual annual general meeting (AGM) held on Tuesday at its head office in Claxton Bay.

Caribbean Cement Company Limited, a subsidiary of TCL, raised cement prices by eight per cent on January 17 and by seven per cent on May 17. The company saw a 19 per cent rise in fuel and electricity costs to $1.25 billion and the introduction of a $133.86 million royalty payment to the ultimate parent, Cemex SAB de CV, in the first quarter. Mendoza explained that the company’s increases also would have factored in for the depreciation of the Jamaican dollar to the United States dollar. The foreign exchange rate has appreciated in recent weeks to $151.53 compared to the $155.08 at the start of the year.

“At the end of the day, the price increases have been done in pretty much all the geographies and it’s been driven primarily by the situation as these are unprecedented times that we’re experiencing. Obviously, this puts us in the position that we needed to increase prices to be able to maintain the value for our shareholders through our margins,” Mendoza added on the need to increase prices.

While there is an expectation that commodity prices will continue to rise, TCL believes that the Cemex network will be quite beneficial to navigating the murky waters. Carib Cement has produced 419.33 thousand metric tonnes of Vertua cement — a low-carbon, ready-mix cement — while TCL has produced 93.25 thousand metric tonnes of Vertua cement in Trinidad and Tobago. This has reduced emission rates in Barbados, T&T and Jamaica by seven per cent in January to March quarter. Cemex aims to use 51 per cent alternative fuel by 2030 and move to a net zero production by 2050. Cement volumes were down two per cent in the South, Central America and Caribbean segment.

“We’re leveraging all the levers that we have. Actually, in this case, Cemex has operations in over 50 countries and that helps us to leverage those networks to be able to secure our supplies. The priority is to be able to get the supplies on time. At the end of the day, sometimes we have to postpone a few weeks just because we want to ensure that all the elements and inputs are here. We’re doing a good job in that regard when we compare to other companies where the delay has been a lot larger. Obviously, that’s at a certain cost and that’s why inflation has impacted us considerably,” Mendoza added.

While Mendoza deferred to Carib Cement’s Managing Director Yago Castro on the US$30-million expansion, he did state that it was a significant opportunity for the company as it would push it to export more cement across the region. Carib Cement plans to expand its production capacity from one million tonnes to 1.4 million tonnes. It exported nearly 30 per cent of the 755,071 tonnes of cement it produced in 2012. In 2021, it produced 1,078,964 tonnes of cement, but only exported 960 tonnes. Carib Cement’s virtual AGM is set for July 19.

“We’re very excited about this project. The fact that we’re going to be able to expand our capacity and move from being a net importer to an exporter will be a big change. We’re right now completing the engineering. As you can imagine, it’s been a challenge with the pandemic, but in the middle of that, we’ve been able to make good progress,” Mendoza explained on the Carib Cement expansion.

When asked about the scheduling of the company’s annual maintenance, he stated it might be deferred to later in the year as Carib Cement and the overall TCL group consider supply chain events. Carib Cement’s plant was shut down for three weeks last July. As a result, it imported 67,000 metric tonnes of cement to cover for the production loss due to the shutdown. The importation measure pushed Carib Cement’s total expenses up by 44 per cent to $5 billion and crushed its net profit by 96 per cent to $43.71 million.

“Relative to the maintenance, last year we did it around that time. We’re maybe considering delaying the maintenance between September and October just because of the supply chain restrictions that we’re having. We might be able to postpone the shutdown by a few months, but we need to take care of our equipment. We’re going to do it as soon as we have everything in place to proceed,” Mendoza explained.

All resolutions were approved at the company’s AGM including its dividend policy which is to distribute surplus funds from its distributable profits to shareholders. Carib Cement recommended a dividend payment of $1.5032 to be discussed at its July AGM which totals $1.28 billion and is payable in September. TCL would net $947.87 million due to its 74.08 per cent stake in the subsidiary. Mendoza didn’t answer a question posed on whether or not TCL would call a poll to pass through this resolution as it did with the Cemex royalty payment at the December 2021 AGM which was approved. Most minority shareholders were against the measure. Cemex owns 69.83 per cent of TCL through Sierra Trading.

TCL has begun a return-to-work programme and has implemented a hybrid approach of three days in office with the remaining two days either done at home or in office. Mendoza closed by expressing well wishes for shareholders as tropical storms pass by the twin-island republic.

Carib Cement’s stock price is down 11 per cent year to date to $62.20 while TCL’s stock price is up one per cent to TT$3.60.