All will feel cement $$ pinch
By JANELLE DE SOUZA Thursday, January 10 2013
ALL persons in the construction sector, whether the “big man” or small time contractor, will feel the pinch as a 9.5 percent increase in the price of Trinidad Cement Ltd’s (TCL) premium plus cement kicked in yesterday.
Trinidad and Tobago Contractors Association president Mervyn Chin said this was so, since the construction sector is slow and sluggish and the increase would further depress the industry.
Chin noted that the price increase was anticipated given TCL’s debt repayment restructuring exercise, which he said, took longer than expected.
He believes the price increase was a result of the exercise, rather than operating costs, which was the reason given by TCL.
In 2012, TCL declared a 26 percent increase in after-tax losses between January and September, in keeping with its audited loss of $384 million for the 2011 financial year. The company also recorded a $1.8 billion debt to creditors, the restructuring of which was completed in June 2012.
Chin said he found it “strange”, that TCL would effect a price increase after it made a $15-million operating profit for the three months to September 30, 2012, even though the company said its turnover was slow. An increase, Chin said, would simply translate to an increased profit margin.
He recalled, when the company increased its cement prices by eight percent in January of 2012, a break down in gas and other costs was given. However this time, TCL is blaming operational costs for the latest increase.
“They can’t simply say that,” said Chin. “They should prove that there was an increase in operational costs by giving details, as they did before.” He gave the example of a single story house that was less than 1,000 square feet. He said the house would account for approximately 300 bags of cement and if the cost of a bag were to increase from $52 to $60, the cost to build this house would also increase by $2,400.
In the case of large contracting firms, most he said, would have a fixed price contract with clients who asked for an acceleration clause accounting for price uncertainties. The clause usually stated if there was a ten percent or less price increase in materials, the contractor would absorb the cost, thereby cutting profits.