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Analysts welcome TCL shareholder move

By VERNE BURNETT Friday, August 22 2014

GODFREY GOSEIN, chief executive officer of Republic Securities Ltd, yesterday said the move by shareholders of Trinidad Cement Ltd (TCL) to replace directors of the company has set a precedent in that it is the first time shareholders of this country have banded together and been able to successfully remove six directors from the board of a publicly listed company.

Wayne Dass, chief executive officer of Caribbean Information and Credit Rating Services Ltd (CariCris), agreed, saying it is a reflection of the power of shareholders to take action to ensure the proper governance of the companies in which they have an interest. In an emailed response to questions submitted by Newsday, Dass said. “The recent developments highlight the fact that minority shareholders have rights too and can leverage these rights to effect a change in governance if so desired. This is a positive sign for our capital market evolution.”

Gosein said it was unlikely that the Mexican cement company, CEMEX, which owns 20 percent of the shares of TCL, and now has three directors on the board, including one holding the position of acting CEO, would make another effort to take over TCL following one such bid back in July 2002. He said, “The CEMEX representatives on the board would now work alongside the other board members chosen at the compulsory shareholders’ meeting to steer TCL in a new direction.

“So I don’t think there is any threat from CEMEX to take over in the near future. The very presence of CEMEX in the compulsory meeting, meaning that they had thrown their hat into the ring of the rest of the shareholders, I think indicates there is no threat by CEMEX to takeover.”

He said the price of TCL stock is likely to continue to rise. “TCL’s price has been depressed for a very long time because the company has not performed as shareholders felt that it ought to have and therefore there is speculation among the investing public that now a new board has taken over that the company will now begin to perform at its true potential and as a result there is speculation that the price will continue to rise.”

On this issue, Dass said, “The company’s share price increased by $0.22 yesterday (Wednesday), reflecting that there is some level of optimism about the future, following the recent developments. As to whether this price increase will continue, it will depend on how quickly the new board and management team can posit a plan for the future that points to improving performance on a sustainable basis, and at the same time is realistic in the eyes of investors.”

Gosein acknowledged the huge debts owed by the company will constrain the new board in what it is able to accomplish. He said for the new board “the first item on the agenda is to go in there and look at the financial position or health of the company and thereafter look to pay the debts and to restructure the finances in my view before the company can return to profitability.”

He added that the movement in the TCL share price was due to speculation that this is going to happen at some point in time in the future. He said that at $2.02 per stock unit, which was the price the day before the shareholders’ meeting, investors were of the view that the stock was undervalued at that price given the potential for the new board to do a better job.

Dass said that as far as he could see the only real option for the new board of directors “would be a restructuring of the debt combined with a renewed focus on cost rationalisation and revenue enhancement.”

The president of the Oilfields Workers Trade Union (OWTU), Ancil Roget, could not be reached yesterday for comment on the developments at TCL, but Edward Durity, the acting president of the OWTU branch at TCL, said the union was looking to “go forward” in light of the new developments. Although there have not yet been any contact between the union and the newly installed board of directors, Durity said the union hoped to have a meeting with the board sometime next week. He said TCL owes its employees some $100 million representing backpay of wages as well as Cost of Living Allowances (COLA) which had accumulated over the years.

Durity and nine union officers were suspended and subsequently dismissed by TCL in 2012 following strike action called by the OWTU. The strike began on February 27, 2012, after the union rejected the company’s offer of a 6.5 percent wage increase for a three-year industrial agreement when the union was seeking a 16 percent increase. Durity remained optimistic that all the dismissed workers would return to work under the new board.

He said on July 3, the union obtained a judgment stating three workers who were dismissed from TCL’s Mayo operations were to return to their jobs. He added that a court matter involving himself and the other workers who had been fired is due for hearing in September, and he was optimistic that it would result in them all returning to their jobs.

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