Construction-based companies flourish in COVID-19 environment
Cement, hardware, lumber and painting entities show increases in revenues, profitsSunday, June 06, 2021
BY DAVID ROSE
EVEN against the backdrop of the worst economic downturn in modern history, companies in the construction sector in Jamaica and across the world are experiencing growth.
Cemex S A B de C V saw its aggregate revenue peak at a historic US$31.75 billion while its profit attributable to shareholders rose by 1476 per cent to US $665 million as construction across the world rallies despite the novel coronavirus pandemic.
Despite the rest of the economy continuing to lag as the pandemic limits activity in various segments of the country, the construction sector has continued to fire on all cylinders.
After posting a strong 6.3 per cent improvement in the fourth quarter, the construction sector posted a 12.6 per cent jump in the first quarter according to the Planning Institute of Jamaica.
This has been adequately reflected in the financials of Jamaica's only cement producer Caribbean Cement Limited (CCC). Following an astonishing 2020 performance which saw the company's sales increase by 13 per cent to $20.11 billion, CCC's first-quarter sales were up by 31 per cent to a high of $5.97 billion. This was followed up with its net profit increasing by 216 per cent to $1.53 billion or 48 per cent of its $3.20 billion net profit for 2020. CCC even set a new production record of 100,000 metric tonnes of cement produced during the month of March.
As part of its focus on maintaining enough demand to meet the local market, CCC introduced a modern palletiser system and has committed $1.5 billion in yearly plant upgrades. CCC's strong performance allowed it to record cashflow from operations of $3.30 billion, which it used to pay down $1.92 billion of debt. This meant that the company was able to fully pay off its remaining $1.37 billion of USD debt owed to Cemex, allowing for it to start paying down more of its National Commercial Bank debt along with redeeming more of its $2.1 billion preference shares from Trinidad Cement Limited (TCL).
Other companies involved in construction have also seen a steady rise in sales and earnings from the recent boom.
Lumber Depot Limited which owns a hardware store in Papine has seen its sales hit a new nine-month record of $1.05 billion. Its net profit up to January 31 was $100.87 million compared to the nine-month performance of $22.18 million leading up to April 2020. Lumber Depot derives 75 per cent of its earnings from lumber, cement and steel.
Some hardware stores in the southern end of the island have begun to limit sales of cement to only 2 bags per person while others are only ordering cement for it to be deposited immediately into the vehicles of customers.
Berger Paints Jamaica Limited also experienced an 18 per cent rise in sales to $597.51 million while Cargo Handlers Limited spent $104.2 million to purchase a 30 per cent stake in The Buying House Cement Limited (BHCL). BHCL imports about 10 per cent of the country's cement needs. Some private operators have stated, however, a need for BHCL's limit on cement imports to be increased as demand in the western end of the island reaches an all-time high.
TCL's revenue for the first quarter grew by 19 per cent to TT $492.57 million. Apart from being the largest direct shareholder in CCC, TCL also owns stakes in various construction-related businesses involved in concrete bagging, cement production and distribution across the entire Caribbean region. TCL's net profit attributable to shareholders improved by 767 per cent to TT $31.09 million, which is in stark contrast to its 2020 net loss of TT $24.18 million. The price a bag of cement in Trinidad and Tobago has risen by 200 per cent from TT $50 to TT$150 over the last year. TCL's cement sales rose by 14 per cent to TT$470.50 million while its concrete and packaging segments earned TT$20.59 million and TT$12.14 million, respectively.
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