Caribbean Cement Company Limited (CCCL) has been engaged in a multiyear turnaround programme since CEMEX assumed majority control in February 2017, and the programme, which relied heavily on CEMEX global expertise, has led to significant results, benefitting both the company as well as Jamaica. With the introduction of CEMEX Safety Management systems, employee safety has improved with Lost Time Injuries declining from 9 incidents in 2017 to zero in 2021, while COVID employee infection rates have been significantly below national levels.
The company has taken advantage of numerous global education programmes to develop the skill base of its employees, providing more than 38,000 hours in training since 2017. With investments as well as global expertise, operational efficiency has materially increased, and cement production has jumped 28%. This has led to additional benefits in thermal efficiency as well as a reduction in carbon emissions, creating a greener and more sustainable Jamaica for all. CCCL’s financial turnaround has been equally impressive – operating income has increased 295% in the last four years, taking the company from an accumulated net losses of ($2.6B) JDM at the end of the 3rd quarter of-2017 to an accumulated net income of $5B JDM at the end of 3rd quarter of 2021.
This performance also contributed to a reduction of total debt from $12.1B JDM at 2018 to less than $560M JDM at the end of the 3rd quarter of 2021. None of this would have been possible without the support of the parent CEMEX. Between 2017 to 2021, CEMEX has invested $12B JMD in capital expenditures, and has brought over 130 multidisciplinary experts to CCCL to consult and monitor aspects of the turnaround, introduced global production and financial best practices.
This transfer of global expertise standards to CCCL was all possible through CEMEX’s robust global network.
With this turnaround largely complete, CCCL is now in a position where we can formalize the relationship between the company and its parent. In 2021, we announced our intention to replicate CEMEX’s standard Services and Intellectual Property arrangement with CCCL, which would compensate the parent for CCCL’s future utilization of CEMEX’s trademarks as well as financial and operational expertise. These technical and intellectual property expertise sharing agreements are standard practice for many industries around the world.
At CCCL’s Annual General Meeting of Shareholders on Dec. 7th, shareholders agreed to move forward with this agreement. The contracts to formalize this arrangement are effective January 1st 2022.
Under these agreements, CCCL will pay an annual fee equivalent to 2% of consolidated net sales. The arrangement will begin with a reduced annual fee relative to other CEMEX subsidiaries in the world, reflecting that CCCL is still in the process of integrating CEMEX’s full business model and that there are still valuable initiatives to implement in the future, which will bring additional benefits to CCCL.
CCCL looks forward to continuing to benefit from CEMEX know-how and best practices throughout the execution of these agreements. We are particularly excited about CEMEX’s world class climate action program, Future in Action, which promotes a lower carbon footprint in the construction industry. CEMEX brings important leadership in this area by virtue of its footprint in Europe where it has been able to reduce carbon emissions by over 30%. We believe CCCL could significantly leverage these programmes to contribute favourably to climate change.
With CCCL’s turnaround program largely achieved, it is also time for the company to introduce a dividend program for shareholders. Our largest shareholders have indicated full support of this program. At the Board level, a Dividend Policy Committee was established last year; and we expect a proposal to be forthcoming during 1st quarter with a possible first dividend under the programme in 2022.
