Caribbean Cement recently signed a Memorandum of Understanding (MOU) to terminate its lease agreement with parent company, Trinidad Cement Limited. The lease was first signed in July of 2010 and covers two of Caribbean Cement’s facilities; the Clinker Kiln 5 and Cement Mill 5.
Shareholders welcomed the news as for years they have been complaining that the arrangement has been inefficient and caused the company to lose money. In 2016, Caribbean Cement paid $3.3 billion to its parent company in operating lease and for 2017 it was projected that the company would have paid another $2.8 billion. Caribbean Cement admits that the lease arrangement is in deed nonsensical as the company is now able to finance its assets compared to five years ago when they could not.
The MOU will see Caribbean Cement amassing US$118 million in assets previously owned by Trinidad Cement Limited. But that’s not all. Caribbean Cement did not stop there. The company plans to repossess 52 million preference shares given by Caribbean Cement to Trinidad Cement in 2010 and 2013, which cost US$40.5 million. This amount should be paid over a period of nine years starting from this year and will be financed using at least one third of available funds from Caribbean Cement’s profit from the previous year.
The end of these transactions will only be complete when certain conditions have been met. First being the approval from the corporate body of both companies, then the procurement of financing options by Caribbean Cement and the absence of any material tax or accounting effect which may arise once the transactions go through.
Caribbean Cement Limited has been trading on the Jamaica Stock Exchange for close to five decades. The stock currently trades at $40.
If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.