Friday, December 5, 2008

Billionaire businessman Lawrence Duprey believes his CL Financial Group

Published: Fridaay December 5, 2008

Billionaire businessman Lawrence Duprey believes his CL Financial Group, which recently acquired Jamaica's Lascelles DeMercado, has seen opportunities in the ongoing financial crisis around the world.

The CL Financial chairman has decided to form a network of subsidiary brokerage companies the group owns around the world to acquire new assets at bargain prices.

Brokerage and financial services firm Caribbean Money Market Brokers - a CL Financial subsidiary - will be the central node around which a network of global brokerage houses will be built.

Duprey, who is chairman of CMMB, recently met with the heads of brokerage operations in the CL Financial Group and told them the global financial crisis offered a "unique opportunity to acquire assets at greatly undervalued prices".

Duprey told his brokerage executives that CMMB, along with the other firms in the group, would be taking advantage of this situation, the statement added.
CL Financial owns brokerage operations in the Caribbean, Central America, New York and London.

With Port of Spain-based CMMB linked to these brokerages, it creates a network through which CMMB and other investment houses can access liquidity and trade in a wide range of instruments, Duprey said.

CL Financial, which owns more than 70 companies in 32 countries, is registering a brokerage house in the Middle East, which continues to have a significant amount of liquidity given its oil and gas revenues.

The CL Financial Group owns and operates a methanol plant in Oman and is seeking to establish two more plants in Saudi Arabia and Qatar.

To achieve these goals, Duprey has appointed former CMMB managing director Ram Ramesh as vice chairman of the company.

Management consultant and former chief executive at what used to be tourism promotion company, Tidco, Vishnu Ramlogan, has also been appointed a CMMB director.

Source: Jamaica Observer

Scotia DBG joins billion-dollar profit club

Published: Friday December 5, 2008

Scotia DBG Investment Limited (SDBG) has, for the first time, recorded net pro-fit above one billion dollars, a performance chief executive officer Anya Schnoor has credited to growth in funds under management and growth by acquisition.

ScotiaDBG reported net profit of $1.2 billion at financial year ending October 31, 2008.

"This reflects a credible performance for Scotia DBG," said Schnoor.

"Despite a challenging fiscal year both in Jamaica and the financial markets worldwide, we managed to produce a record year of profitability."

Schnoor and her team grew profit by 81 per cent, due in part to the merger of Scotia Jamaica Investments Management Limited (SJIM) into Scotia DBG, and general growth in product lines the company reported.

Schnoor has indicated that the company will continue to build on the strategies that worked so well in the year just ended.

"During 2009, the focus will be on expanding our distribution channels in partnership with the overall Scotia Group, looking for ways to make the organisation more efficient and bringing to the market products and services which meet the demands of our clients," she told the Financial Gleaner.

Net profit increase

The increase in net profit generated earnings per share of $2.93.

Net interest income for the reporting period amounted to $1.96 billion.

Gains were also reported on securities and foreign currency trading bringing the company's total operating income to approximately $2.6 billion.

According Scotia DBG, which is among the top ten brokerage houses, the focus going forward will be on the continued restructuring of the operation.

The company has already sold its Trinidad branch to Scotiatrust and Merchant Bank Trinidad and Tobago Limited, but did not disclose the price.

The Trinidad operation repre-sented less than one per cent of the company's revenue.

With the acquisition of SJIM by Scotia DBG funds under management moved to $84.5 billion, while its branch network grew from seven to 19 access points, leveraging on its connection with parent company Scotia Group Jamaica.

The company has approved a dividend of 27.5 cents per stock unit, totalling $116 million, payable in January to shareholders on record as at the end of December.

Sabrina Gordon
Jamaica Gleaner

Lascelles rakes in $3 billion profit

Published: Friday December 5, 2008

Lascelles deMercado and Company, which deals predominantly in wines and spirits, made $3 billion of net profit in the year just ended, September 30, on strong performance in most business segments.

But the William McConnell-led conglomerate, for which $3 billion is a new profit record and a 13 per cent improvement on last year's $2.7 billion, said it could have done better were it not for disappointing returns from its sugar estate.

"The performance of the company overall was below expectations," said Finance Director Anthony Bell.

"The wines and spirits segment was below expectations due to losses incurred in our cane and sugar operations. Although the spirits division experienced growth, it was not sufficient to offset the losses in sugar."

Bad weather

The losses attributed to cane and sugar amounted to approximately $500 million against the com-pany's original break-even target.

"Bad weather conditions, which commenced with Hurricane Dean in August 2007, led to a reduction in cane quality and quantity beyond that which we had estimated," said Bell, adding that increased usage of fuel at higher costs also significantly affected operations.

Bell also explained that the division was dealt another blow with the passage of Tropical Storm Gustav in August 2008, and had to take a write-down of approxi-mately $220 million on future crop quantities in the company's year-end financial results.

New year investments

Notwithstanding, the broader 'liquors, rums, wines and sugar' segment, which represents the largest business unit, accounted for 59 per cent of the group's revenue, contributing approximately $13.6 billion.

In the year ahead, Lascelles will be investing $1.6 billion in capital projects, but Bell said global conditions did not allow for accurate forecasts of how the business would likely perform.

The company is planning a new distribution warehouse for its merchandise division, and new bottling equipment and additional ageing warehouses for rum for its primary operation, Wray and Nephew, said the finance director.

Within the year just ended, total revenue came within a nose of $23 billion, up from $19.5 billion in the year ending September 2007.

The "increase in the spirits segment was mainly due to growth in the international markets and price increases in the local market," said Bell.

"A very small amount of Angostura products would have been included in this segment," he added.

Some 92.01 per cent of voting rights in Lascelles is now owned by CL Spirits Limited, a holding company created by Angostura and its parent CL Financial group of Trinidad to effect the takeover that was initiated last December and finalised seven months later on July 28.

Synergising operations

Since then, Angostura and Lascelles have been devising plans to synergise their operations. Lascelles, for example, is now Angostura's chief distributor of spirits in this market. CL Financial's owner, Lawrence Duprey, has taken over as chairman of Lascelles, replacing George Ashenheim.

Lascelles' general merchandise and investment segments both reflected huge jump in earnings. Investments for the reporting period more than doubled, moving from $485 million to in excess of $1 billion, though some was credited to book adjustments.

New principals

The general merchandise segment which markets products for several local and international companies, with its latest addition being 3M, reflected an increase of 55.2 per cent.

"The increase in general merchandise is all due to growth in business and the addition of new principals," said Bell.

"The investment segment performed beyond our expectations primarily due to a significant increase in dividends from Carreras and also a significant increase in our IFRS adjustments," he added.

Insurance and transportation services moved by 12.5 and 15.4 per cent, respectively, and performed to expectations, said Bell.

During the financial year, the company also disposed of the Lascelles Telecoms division on July 31, for $93.6 million, resulting in realised gains of $100.8 million, exiting the telecommunications market it had entered in July 2003.

The buyer was not disclosed.

Planned merge

Duprey, on a visit to Jamaica last November, told Lascelles share-holders that he envisions the marriage of its spirits business with that of Angostura's to build a company large enough to comfortably take on big international markets.

Within the expenditure laid out by Lascelles in 2008 was a new half a billion larger bill for administrative and selling expenses.

Those charges, now at $6.2 billion, would continue to climb in 2009.

"Administrative, marketing and selling expenses increased by a moderate seven per cent, but is expected to increase by more in 2009 due to significant planned investments in the international market," Bell explained.

"The planned investments would be a combination of increased marketing spend, in particular in the US market, and capital investments totalling approxi-mately $1.6 billion."

Sabrina Gordon
Jamaica Gleaner

Cement crisis... again!

Published: Friday December 5, 2008

The local cement industry is yet another victim of the global financial crisis which has seriously impacted the Jamaican economy. According to the general manager of Caribbean Cement Company (the largest supplier of cement in Jamaica) Anthony Haynes, the sector has seen a 30 per cent decline in sales and continues to experience turbulence.

"Without getting into hyperbole, the construction sector is collapsing. If one looks at the first quarter of this year, compared to last year, sales are down 30 per cent and I'm not talking about just Carib Cement, I'm talking about the entire sector! This is, of course, anecdotal because when I talk to people in steel and lumber, they validate these figures. Over the course of this year we have seen a month-by-month steady decline," said the Carib Cement boss.

He further pointed out that total volumes are down 12 per cent compared to last year and the sector continues to contract. But by no means is this peculiar to Jamaica alone. The construction industry the world over is seeing a downturn.

"I was speaking with a colleague who is a cement supplier in Florida who told me that cement production and sales are down 40 per cent there and 30 per cent in other states across America," added Haynes.

Faced with rising input costs, inflation and the precarious state of the local economy, Caribbean Cement took the decision to raise the price of cement by six per cent in August of this year. This followed an earlier increase in January.

During the first half of its financial year, Carib Cement recorded a net profit of $271 million, an increase on the $252 million reported last year. However, for the September quarter this year it suffered a loss of $57 million mainly due to high input costs.

Caribbean Cement has weathered a number of calamities - both natural and man-made - over the last two years, but continues to remain resilient. It has had to endure lower local demand while seeing an increased supply of cheaper cement, particularly from China and Thailand. Last year, a 29 per cent increase in prices assisted in offsetting its decline in revenues. The Government also took measures to eliminate the 40 per cent tariff on imported Portland Grey Cement thus levelling the playing field and so stemming the tide of cheap and, in many cases, substandard product flooding the market.

Over the years 2006 and 2007, there was a boom in construction, so much so that Caribbean Cement's ability to supply the market was called into question. The company announced that it would add a new kiln and would be expanding its production of cement from 900,000 tonnes a year to 1.8 million tonnes a year which would more than adequately supply the market. This exercise will come in at a cost of US$150 million a year.

"All the big construction projects began in 2006 but are now nearing completion," said Haynes. "All these projects such as work on Sabina Park, the Riu hotel have not been replaced with other sizeable projects. What exacerbates the situation in our industry is that the big projects are great but we have always enjoyed good sales with home construction, which we are not seeing now.

This can perhaps be traced back to the collapse of the unregulated financial organisations, the fall-off in remittances and the financial crunch which is gripping the country. I can tell you that the inflows from the unregulated financial organisations certainly had a positive impact on home construction and in turn the cement industry."

Importers of cement have often complained that Caribbean Cement enjoys a monopoly and is protected by the Government. When Caribbean Cement had quality and supply issues many claimed they were vindicated and that the law of supply and demand should prevail. Haynes maintains that the importers of cheap cement do the industry a disservice.

"The market is currently contracting and there is still significant imported cement here in Jamaica; however, in the last quarter these importers have seen their supplies dry up," he said. "In most cases these importers are opportunists and are very unreliable. Last year, in the same quarter when they had supply issues which caused a ripple in the market, we were able to supply all of Jamaica with 225,000 tonnes in sales.

"I predict for this current quarter - that is in 2008 - we will see a market of 185,000 tonnes, which is 40,000 tonnes down on the same quarter last year. Back in 2006 when we had a severe crisis, particularly in the months of March, April and May, the market took 189,000 tonnes. Now you see we are selling less cement than we did during that unfortunate period which caused a lot of grief and strife. Also, the market is taking in 25 per cent less than in the last quarter when Carib Cement supplied the entire market."

In 2004 the Government imposed a 90 per cent duty on imported cement because it deemed dumped cement as unfairly traded. Haynes notes that at this time when the market is contracting, anti-dumping legislation is not being enforced, allowing cheap dumped cement to proliferate. This he sees as being very unfair and should be addressed expeditiously. He points out that if one should raise pricing issues, then Caribbean Cement has always honoured its commitment to keep prices at a certain level and it did so when it was experiencing difficulties.

"What we have found is that every time we have corrected prices the importers have followed us, so the consumer never really gains. Also, the question has to be asked, why is the Government forgoing millions of US dollars in duties from these importers at a time when it is in desperate need of revenues?"

Although he concedes that the global financial crisis has its part to play, Haynes is of the view that the crisis is of itself a failure of globalisation.

"This crisis is not about toxic assets and people defaulting on their loans and mortgages," he argued. "It's about greed, corruption and an absence of regulation. What we continue to see is developing nations seduced by cheap goods to the detriment of national development. Very often these developing countries support regimes that are suppressive and indulge in child labour.

"Then you have manufacturers coming under pressure from trade unions, or environmental groups. Their solution is to shut down the plant and set up in so-called "friendly countries" where they can turn a blind eye to environmental and labour concerns. As you can see, we are now reaping what we have sown. All this financial witchcraft has led to failed policies, which we still continue to pursue.

Albert Einstein once said, 'You can't solve a problem with the same level of thinking that got you into the problem'. The solution to everything is not the free market and globalisation. There must be boundaries and regulations. You must have a conscience and ask yourself what cost are you willing to pay for development."

Carib Cement continues to engage in dialogue with the Government and put forward its position. Haynes went on to say that the country's leading cement supplier has found it extremely frustrating that government policy-makers have not been exactly accommodating.

The company has met with other stakeholders, more notably the Ministry of Labour, not to announce possible lay-offs but to point out that over the last quarter the market has dried up and that there is now a serious risk to the industry. The aim, Haynes says, is to stabilise the industry then get it out of the quagmire and into growth.

Source: Jamaica Observer

Broilers to triple capacity at cogeneration plant

Published: Friday December 5, 2008

Jamaica Broilers Group has a plan to triple capacity at its power co-generation plant in St Catherine, with targeted investment of US$4 million to US$5 million (J$312 million to J390 million).

But Chief Executive Officer Robert Levy says the addition of another 10 Megawatts rests on the finalisation of a power purchase agreement with monopoly Jamaica Public Service Company, which manages the national electricity grid.

Broilers, whose main business is poultry, produces its own electri-city, but generates more than it needs to power its operations.

"Right now, we are producing five MW and we are selling to JPS and using some, and there is real potential of expanding that by another 10 MW," Levy told the Financial Gleaner.

But Levy said the expansion would not commence until he has a deal with JPS, which he hopes to finalise early next year.

No comments from JPS

"We have sent them a whole proposal, however I think they are also assessing (developments)," he said.

JPS chose not to comment, saying the relevant officer was unavailable.

"They might be looking at potential downturn in usage. So, they might be looking at when they are going to need the 10 megawatts," said Levy. "They have promised to get back to us pretty shortly."

Dionne Rose
Jamaica Gleaner

Friday, November 28, 2008

Jamaica group to track economic fallout

Published: Friday November 28, 2008

Jamaica expects to soon appoint a group of union leaders and employers that would track the effects of the global financial crisis.

Labour Minister Pearnel Charles says the group will report to the government and suggest ways to prevent layoffs. The government recently warned that companies will start dismissing workers but was not specific.

Confederation of Trade Unions president Winston James said job loss forecasts were not available because employers from the tourism and bauxite sectors did not attend Tuesday's meeting.

The government expects to ask multilateral lenders for help in closing a US$250 million budget shortfall.

Source: Nation Newspapers

$431.8m profit:Scotiabank beats economic crisis...

Published: Friday November 28, 2008

Despite a faltering global economy and inflation woes on the domestic front, Scotiabank Trinidad and Tobago Limited and its subsidiaries have raked in an after tax profit of $431.8 million for the year ended October 31, 2008, the bank said in a statement yesterday.

The company has made 16.4 per cent more profit than last year, the statement added. Every shareholder got $2.44 cents Earnings Per Share (EPS) for the year thus far.

This year marks Scotia's sixteenth consecutive year of record profitability.

The rate of return on shareholders' equity for the bank's common shares was on par with the previous year, while the Return on Assets (ROA) dipped slightly from 3.58 per cent to 3.45 per cent.

An indicator of how profitable a company is relative to its total assets.Â

Scotiabank's Managing Director, Richard Young, attributed the group's growth to their drive to sustain revenue growth, wise management of Scotia's capital and good leadership skills.

Based on the group's performance, the Board of Directors approved an interim dividend of 25 cents, making a total dividend of 96 cents per share for the year.

According to the website, a dividend is a taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings, usually quarterly.

Source: Trinidad Express Newspapers

Monday, November 24, 2008

Imports must be duly labelled

Published: Monday November 24, 2008

ALL ITEMS IMPORTED into or manufactured in Barbados must comply with local labelling and standards laws, says the Department of Commerce and Consumer Affairs.

In a release issued recently, the departent sought to remind importers and local manufacturers of their obligations under local laws, and that failure to comply would result in products being confiscated or denied entry into the island.

Under the Barbados National Standard, Compulsory Labelling Standards and the Standards Act, importers and manufacturers are required to ensure that dates of minimum durability, of manufacture, of packaging and use-by dates all be declared on labels for all prepackaged food items sold in Barbados.

Those labels should have the day and month for items for consumption within three months, and the month and year for those for consumption within a period longer than three months.

Months should be represented using the first three letters of the word, and where the year is declared, the complete four-digit representation should be used.

Julian Code

The department also clarified its position on allowing importers who bring in items whose labels carry date markings using the Julian Code.

"The Department of Commerce and Consumer Affairs has agreed to grant a grace period, not exceeding December 2008, to all importers and local manufacturers to allow their products to become compliant . . . with respect to date markings. During this period, importers will be allowed to affix stickers to the products to convert the date markings to the required format. However, the [department] must be notified of all products to be modified," the release said.

Source: Nation Newspapers

Citigroup stock plunges on uncertainty

Published: Monday November 24, 2008

Shares in Citigroup, one of the biggest banks in the US, plunged on Friday amid uncertainty about the firm's future.

The firm’s stock rose in early trade but later tumbled 28 per cent as investors awaited the outcome of a meeting of the firm’s board members.

The Wall Street Journal reported that Citigroup was considering selling parts of the firm. There are also rumours it might merge with another firm.

Earlier in the week the firm announced 52,000 job losses worldwide.

These cuts came on top of previously announced reductions of 23,000 positions.

The total 75,000 job cuts represent a cut of about 20 per cent of its staff, leaving it with 300,000 jobs worldwide "in the near term.”

Bank’s future

Chief executive Vikram Pundit told employees on Friday that the firm did not want to change its business model, Reuters reported, citing two employees.

Shares in the firm have fallen sharply since the start of the year and are trading more than 80 per cent down since January.

Saudi Prince Al-Waleed Bin Talal's decision to buy about US$350 million of its shares on Thursday did not calm investors' nerves.

The firm insisted on Thursday that it had “very strong capital and liquidity position and a unique global franchise.”

But Pandit has come under increasing pressure from critics who doubt his ability to turn around the company and survive the financial crisis.


Citigroup has lost more than US$20 billion in the past year because of the global financial crisis.

The bank has reported four straight quarterly losses and some analysts believe it will not return to profitability until 2010.

Investors are worried that further losses could threaten the bank’s future.

“Its fear and panic at this point,” said Gerard Cassidy, a banking analyst at RBC Capital.

Source: Trinidad Guardian Newspapers

Challenging times for GKC

Published: Monday November 24, 2008

GraceKennedy Limited

Jamaican conglomerate, GraceKennedy Limited (GKC), in its recently released third quarter financials reported weak results. For the period ended September 30 2008, the Group reported a relatively flat year on year diluted EPS of J$5.06, compared to J$5.09 at the close of September 2007.

Revenue for the nine-month period totaled J$40.2B, representing a 13.5 per cent increase from J$35.4B. The growth in Revenue was matched by a 14.2 per cent increase in Expenses to J$38B, with the Expense margin increasing by 0.5 per cent to 94.7 per cent . Cost containment proved to be an ongoing issue for the Group as the Expense margin of Q3 2008was 1.3 per cent higher than the comparable quarter of 2007. Other Income experienced growth of 9.2 per cent to J$582M. The net effect on Operating Profit was a mere 4.3 per cent improvement from J$2.6B to J$2.7B.

Interest Income from non-financial services grew by 15.3 per cent to J$312.5M, while Interest Expenses from non-financial services declined year on year by 17.7 per cent to J$423.1M.

Overall, GKC achieved a Profit before Taxation of J$2.7B, a 9.9 per cent improvement over the J$2.4B for the nine months of 2007. Net Profit totaled J$1.8B and represented a 6.8 per cent increase from J$1.7B. Minority Interest of J$152.6M, led to an insignificant 0.1 per cent increase in Profit Attributable to Shareholders.

The first nine months of the year presented a challenging operating environment for GraceKennedy. The following Exhibit 1 gives a clear graphical picture of how the Group's top line and bottom line growth has moved from September 2007 to September 2008.

The Insurance arm of the Group was the only sector to record declining Revenue growth year on year. However, the Money Services business was the sole segment to produce growth in earnings for the period under review.

The Food Trading sector remained the main Revenue generating segment but recorded a decline in Profit before Tax for the period of 1.7 per cent . Escalating costs continue to present a challenge as supplier prices increased in products manufactured in Jamaica. The downturn in the UK has also lowered sales levels in that region.

The chairman indicated that sales levels in the Grace owned brands have grown 12 per cent year to date when compared to the comparable period of 2007.

A few of the developments which have taken place within the Group include:

l The GK Foods division launched a number of new products under the Rio Pacific brand.

l Progress was also made into the Indian, Ghanaian, and South Korean markets.

l The Turks and Caicos subsidiary, First Global Insurance Brokers Limited purchased the insurance brokerage portfolio of United Reliance International Limited, the largest insurance broker in the Turks and Caicos Islands.

The Jamaican economic environment has gotten even more testing over the past few months. The economy continues to experience challenges from a macroeconomic point of view. The impact of the fallout of the international markets has definitely been felt by Jamaica. Domestic GDP growth projections for the fiscal year 2008/2009 have dwindled with the last projection by the Bank of Jamaica being between 1.2 per cent and 2.2 per cent from 2.5 per cent to 3.5 per cent . Inflation projections were also adjusted from 11.5 per cent to 14.5 per cent to a revised projection of 15 per cent to 17 per cent .

A depreciating currency has also been a key concern for the economy. The Bank of Jamaica has continued to take measures to assist in mopping up excess liquidity which could threaten the stability of the currency. International ratings agency, Standard & Poor's recently revised its outlook on Jamaica from B stable to B negative. Furthermore, Moody's Investors Service placed Jamaica's ratings on review for downgrade this month. Declining international commodity prices have also lowered earnings in areas such as bauxite exports, while remittances to Jamaica are anticipated to fall between 10 to 15 per cent by December 2008.

It is worth noting however that Jamaica being an importer of oil would reap the benefits of this commodity's falling price.

Shares of GKC are currently trading at a price of $5.30 and a forward P/E multiple of 9.1 times compared to a market multiple of below 10 times. Economic conditions continue to weaken in Jamaica, and the currency faces further devaluation pressures. Although GKC generates 25 per cent of revenue outside Jamaica, the global economic slowdown may affect these revenue streams, BOURSE revises its recommendation to a SELL.

Jamaica Money Market Brokers (JMMB)

On October 2008 Jamaica Money Market Brokers Limited (JMMB) made a significant adjustment to their operations with the sale of its 45 per cent stake in its Trinidad affiliate Caribbean Money Market Brokers (CMMB). This transaction reflected a gain of J$2.3B on their income statement for the half year ended 30 September 2008. As a result, for the period JMMB recorded an EPS of J$0.77 which represents 141 per cent increase over 2007.

It must be noted that in the second quarter of 2008 JMMB recorded a provision of J$1.9B for the impairment of bond holdings in the Group's investment portfolio as a result of its exposure to Lehman Brothers. Excluding this one-of item as well as the gains on sale of its shareholdings in CMMB, JMMB Profit before tax for the half year would have amounted to approximately J$620M a mere 18 per cent increase over 2007.

JMMB's main revenue source Net interest income grew to J$993.6M from J$686.9M a 44.6 per cent increase over 2007.

However, JMMB other three sources of revenue reflected varying results. Gains on securities trading fell approximately 43 per cent compared to same period last year, a reflection of the dampened regional and international markets. Fees and commission income were up a marginal 0.5 per cent while Foreign exchange margins from cambio trading increased 39 per cent.

Administrative expenses continue to be a challenge for JMMB in the current financial year. For the half year ended 30th September 2008, there was a 25 per cent increase in Administrative expenses compared to prior year. Of greater concern, expense margin as a percentage of Operating Revenue was 80 per cent for the period versus a 68 per cent margin in 2007. As a result, Operating Profit fell 35 per cent to JA$288M in 2008 compared to JA$443M in 2007.

The future success of JMMB lies on the Group's ability to generate alternative revenue streams. Management has indicated that they would be exploring several investment schemes which would serve as additional sources of revenue. These include the expansion of the commercial bank IBL, the build out of JMMB Dominicana as well as entering into commercial banking in Jamaica.

BOURSE revises its recommendation to a SELL on this stock.

Source: Trinidad Express Newspapers

Friday, November 21, 2008

Caribbean faces squeeze from financial crisis

Published: Friday November 21, 2008

The international financial crisis is putting a squeeze on cash-strapped governments across the Caribbean as the region braces for a steep economic slowdown.

A severe spillover from the crisis will be seen in the Caribbean's important tourism market during the winter high season, with the economic deterioration in the United States and Europe causing hotel bookings to plummet, analysts say.

The leisure industry will also lose business as airlines have cut flights and raised prices, prompted by the surge in oil prices earlier this year.

Making matters worse, the region is just coming out of an active Atlantic hurricane season that killed about 800 people in Haiti, the poorest country in the Americas, and caused an estimated US$10-billion damage in Cuba alone.

Crop destruction from the busy storm season caused food prices to spike throughout the region.

"It's really been a double whammy. The Caribbean has been hit hard by the tropical storms and hurricanes," said Kal Wagenheim, publisher of the 23-year-old Caribbean Update newsletter.

The full force of the economic turmoil, in the form of lost jobs, is only just beginning to be felt by Caribbean residents, said Maurice Odel, an economic adviser to the Organisation of Eastern Caribbean States.

He pointed to a November 13 announcement by the iconic Atlantis Hotel in Bahamas that it had laid off 800 workers, or roughly 10 per cent of its work force due to decreased business, as a concrete example of the coming effects on regional employment levels.

"The impact is slowly accelerating. Hotels are beginning to make layoffs, so the man in the street is more likely to be without a job," Odel said. "We feel all sectors will feel the pinch. The retail sector will see people buying less and may have to reduce jobs."

Meanwhile, the International Monetary Fund (IMF) said last month that the global economic problems are already decreasing remittances sent home to the region by Caribbean migrants in the United States and Europe. The Dominican Republic received US$3.12 billion of remittances in 2007, Haiti US$1.83 billion and Jamaica US$1.97 billion, according to the Inter-American Development Bank.

The economies of Jamaica, Haiti and Guyana are among those most heavily reliant on remittances, Odel said.

"The worsening global financial conditions are increasingly clouding the regional outlook," the IMF said in a recent report.

"With the large shock to US financial conditions still playing out, the effects of the financial tightening in the United States on growth in the region could still be in the pipeline," it said.

Real economic growth in the region is expected to be 3.25 per cent for 2008, the IMF said, with most of it fuelled by a strong first half, but still down from the average four per cent from 2003-2007.

Even Trinidad and Tobago, the twin-island Caribbean nation that has seen growth averaging 9.2 per cent per year over the last five years, said this week that it now sees growth at no more than 3.5 per cent in 2008.

The IMF sees growth slowing to two per cent in natural gas-rich Trinidad and Tobago in 2009.

Big resort construction projects have been halted or delayed in the Dominican Republic and the Bahamas recently, and in Bermuda Finance Minister Paula Cox said the country faced "unprecedented economic challenges" that could delay capital projects as the government looks to save cash.

In Jamaica, meanwhile, the two main Wall Street credit rating agencies, Standard & Poor's and Moody's Investors Services, have put the country's debt on credit watch for a possible downgrade because world market conditions are expected to erode the government's fiscal position.

Moody's said Jamaica's debt burden exceeded 125 per cent of gross domestic product, leaving it very little room to absorb an economic shock of the current magnitude.

Puerto Rico, a US territory that sells bonds just like other local governments across the United States, had to turn to its Government Development Bank for cash to fund its operations when the floor fell out of the market in September.

It was shut out of the market for more than a month before it could place a US$1 billion issue of tax revenue anticipation notes on November 6 in the tax-exempt market.

Source: Jamaica Observer

Fitch aligns NCB credit rating with Jamaica's

Published: Friday November 21, 2008

National Commercial Bank (NCB) has fallen victim to Fitch's downgrade of Jamaica's sovereign rating.

The bank's issuer default rating has also been cut from B+ to B, in line with Jamaica's, consistent with the policy of international ratings agency whereby companies cannot be rated higher than the countries in which they are domiciled.

Fitch highlighted NCB's exposure to government as a factor in its decision to bring the bank in line with the creditworthiness of the sovereign.

Positive qualities highlighted

But NCB in a statement Wednesday acknowledging the downgrade stressed that its "strong domestic franchise, adequate profitability, good asset quality and capital levels" were also highlighted by Fitch.

The Patrick Hylton-led banking group, Jamaica's largest by assets, but No. 2 in deposits and the loans market, has just reported another record year of profits of $8.7 billion, up 32 per cent.

Billion-dollar writedown

Net earnings would have been even more fulsome were it not for a writedown of $1.2 billion reported by its investment arm, NCB Capital Markets Limited, relating to downturns in the bond market and global financial system.

"The revision in rating was not surprising given Fitch's recent announcement on Jamaica and in light of the global economic challenges being experienced at this time." said NCB group managing director Hylton.

"However, we are very confident that the measures that we have adopted for several months now to deal with the market conditions being experienced are more than adequate to maintain our strong performance."

Rating maintained

The ratings agency has maintained its 'BBB-' rating on Jamaica Diversified Payments Rights Company, which represents future remittance flows that have been securitised by the bank, which NCB said is Fitch's recognition that the bank can survive future economic stresses.

The Bank of Jamaica also reaffirmed this week that the financial system was "adequately capitalised".

Source: Jamaica Gleaner

GK sales top $40b, but profit sluggish

Published: Friday November 21, 2008

Conglomerate GraceKennedy Limited reported a slight dip in earnings in the July-to- September quarter, but its nine-month result indicate signs of a company with strong sales and a slightly better profit outurn.

GraceKennedy's bottom line grew 6.7 per cent, from $1.71 billion to $1.83 billion, within the nine-month period when sales topped $40.1 billion (9M 2007: $35b).

In the third quarter, however, net profit slipped from $591 million to $556 million on revenues that were basically flat - moving from $12.4 billion to $12.8 billion.

"The world is in a global financial crisis and we need to prepare ourselves. In GraceKennedy we make sure that everything is done in a systematic way," said Douglas Orane, chairman and chief executive officer of GraceKennedy.

Higher sales

Markets have softened in Jamaica and worldwide because of the crisis, but GraceKennedy still tweaked 13.5 per cent higher sales from loyal customers, putting the group on track for another record year of revenue.

Last year, the company averaged turnover of $12.2 billion per quarter, but is averaging $13.4 billion so far this year, with its most lucrative quarter left to come.

According to the company, GK Foods which contributed 60.5 per cent to overall revenue at the end of the nine month period had increases of four per cent and 15 per cent increase in sales and profits amidst a challenging environment.

Indeed, the insurance segment was the only business division recording a fall in sales, from $3.1 billion to $2.8 billion year-on-year.

GraceKennedy says its major concerns are the impact of rapidly increasing prices from suppliers in Jamaica and downturn in the United Kingdom food service business, due to recession.

"We have seen a whole range of increases," said Erwin Burton, chief executive officer of GK Foods.

And there has been pass through to prices.

Vienna sausage increased by 15 per cent for the year, corn beef produced in Brazil went up by 70 per cent, mackerel by 26 per cent and dairy products an average of 50 per cent, said Burton, who says it has taken a toll on sales.

"There has been a small reduction in overall volume in terms of the number of cases - a 5 per cent reduction in volumes," he told the Financial Gleaner.

Downward price adjustment

Burton, however, would not disclose the number of cases, but said a downward adjustment in prices was likely early next year, depending on the performance of the dollar.

"We have had unprecedented increases in the UK in the last 12 months," he said.

"In some cases, we have been able to pass on the increases to pubs and restaurants, but in supermarket chains, for example, they have not been accepting the price increase," said the GK Foods boss.

"To that extent, we have had to cut cost as much as possible," he added.

Expenses for the quarter amounted to $12.2 billion, a 4.2 percentage increase over the $11.7 billion recorded last year.

UK food service business

The company further reported that the food service business in the UK saw a downturn particularly in the pubs and restaurants.

"People are not eating out anymore, they are drinking and buying pre-package food to take home," said Burton.

For FunnyBones, one of the three food companies in the UK, there has been a 12 per cent reduction in sales.

FunnyBones contributes approximately 38 per cent to GK Food business in the United Kingdom.

The entire UK food business, which comprises Enco Products, Chadha Oriental Foods Ltd as well as FunnyBones, contributes approximately 23 per cent to total revenue from the food trading segment.

Food trading earned the company $24 billion in the nine months to September, representing 60 per cent of revenue.

To counteract the decline in business, Gk said that the company has launched several new products in Jamaica and for the export market.

Source: Jamaica Gleaner

Thursday, November 20, 2008

First Citizens seeks big bond investors

Published: Friday November 21, 2008

Commercial bank, First Citizens is in the process of drumming up investor support for two of the biggest investor bonds to be launched in Trinidad and Tobago.

Earlier this year the bank issued a bond worth $500 million, last month another bond for the same amount of money was also launched.

First Citizens remains the only indigenous bank that has previously floated two US$100 million bonds (February 2004 & January 2005.)

All attempts to contact CEO Larry Howai to find out what the bond issues would be used to finance once the public pools their money into these debt instruments proved unsuccessful yesterday.

The bank is offering public investors an interest payment of 8.35 per cent per year for the first bond which was launched in August and will mature in February 2014. This means investors will receive a payment worth 8.35 per cent of their investment every year for the next six years.

When the bond matures in February 2014, the investor will be re-paid the initial sum that he "lent" to the bank.

Source: Trinidad Express Newspapers

TCL disappointed Insider traders scot-free:

Published: Friday November 21, 2008

Trinidad Cement Ltd is disappointed that individuals who were allegedly involved in insider trading of its shares could not be prosecuted by authorities.

The Claxton Bay company was responding yesterday to a statement by the Securities and Exchange Commission in which it noted that a three-year investigation into allegations of insider trading in TCL stock had found unacceptable market conduct.

The trades took place during an attempted takeover by Mexican cement giant Cemex in 2002.

Chairman Osborne Nurse said in a statement the SEC decided to close the matter after legal counsel determined that the evidence in the matter did not support the required standard of proof.

TCL noted as interesting an extract from the SEC's notice, published in yesterday's Express, which indicated that external advisers and representatives of institutional investors and their colleagues, associates and family members conducted trades in TCL during the takeover bid.

Group chief executive Dr Rollin Bertrand said yesterday: "We are very disappointed that it has not been possible for the regulatory authorities to initiate prosecution of those persons, (including a number of high profile individuals), who were involved in insider trading of its shares. A properly functioning stock market requires a strong regulatory environment to prevent abuse by market actors, which can seriously undermine investor confidence."

In a statement, he added that TCL was nevertheless heartened by the fact that the SEC recognised there was considerable evidence of unacceptable market conduct and made recommendations for the strengthening of securities regulation.

The company urged the authorities to implement the recommendations.

Congress of the People political leader Winston Dookeran said the party was dismayed by the SEC's statement and its decision to close the matter because of insufficient evidence to meet the requirement of the law.

"This is preposterous; it is up to the courts to make the determination of this matter and not the SEC," a statement signed by Dookeran said.

The party called for a public investigation into the matter and urged Prime Minister Patrick Manning to expose the evidence of unacceptable market conduct in the TCL trades.

Source: Trinidad Express Newspapers

Uncertain future for natural gas

Published: Thursday November 20, 2008

The future for natural gas is grim.

That's the view of BP's group chief economist and vice president, Christof Ruhl.

Ruhl predicted yesterday that natural gas demand will decline and prices will soften in the coming year as liquefied natural gas (LNG) projects in Quatar and Indonesia come on stream putting pressure on prices.

But he said he was not willing to speculate about how much pressure and what the price of natural gas would be.

He said that while oil prices have jumped about 300 per cent over a five year period, the same did not apply to natural gas. Instead, he said the gas price grew a bit slower but steadily and the current natural gas price average of US$6.81 per million metric British thermal unit (mmbtu) was just a 100 per cent increase.

"The demand decline, as a result of a recession, is different from oil because it is harder to calculate because there are several different (LNG) contracts. The reaction will be differnet," he said.

Since the passage of the 2008/9 budget, the Patrick Manning Government has responded to criticism of the US$70 per barrel price it had used to estimate Government revenues from oil by saying that T&T was now a gas-based and not an oil-based economy. The Government has insisted that the figure to watch was the gas price which was pegged at US$4 per mmbtu.

Ruhl said that the US was looking at its own energy security and would seek to increase its LNG production which could impact its demand.

Energy Minister Conrad Enill has previously dismissed the notion that T&T's preferrential LNG market in the US was threatened. T&T exports 70 per cent of its LNG to the US and the US gets 58 per cent of its total LNG imports from T&T.

Enill says if T&T's loses access to the US market, there are more markets available.

But T&T already faces revenue losses in the energy sector as several plants in the Point Lisas Industrial Estate have ceased production and are using the downtime to do maintenance work. More importantly, the National Gas Company already has excess gas on its hands.

Ruhl said, "Because of the recession, consumption is doubtful. It would be dishonest to say that consumption would decrease, we can't know. That's a risk to the downside. There will be a situation where there will be no additional demand for enegry from the US but there may be a need to cut down domestic production.

"Gas markets in the short term are in a difficult position. In the long term, they will continue to do what they do at the moment which is an increasing amount of global integration. In particular, the LNG market becomes more globally integrated and more and more susceptible to changes in cargoes given changes in spot prices," he told reporters at a luncheon hosted by bpTT yesterday at its headquarters at Queen’s Park West, Port-of-Spain.

In its 2008 report, the International Energy Agency noted that global demand for natural gas will grow more quickly than oil, by 1.8 per cent per year, its share in total energy demand rising marginally to 22 per cent.

Most of the growth in natural gas use comes from the power-generation sector, it said.

Source: Trinidad Guardian Newspapers

Insider trading found...But TCL's hands tied

Published: Thursday November 20, 2008

A three-year investigation into allegations of insider trading of Trinidad Cement Ltd shares has found evidence of improper stock market behaviour.

But a legal shortcoming and insufficient proof will prevent the alleged perpetrators from being brought to justice.

The Trinidad and Tobago Securities and Exchange Commission in Port of Spain said it concluded its investigation into insider trading allegations of TCL stock in 2002.

On July 5 that year, the SEC said it received a complaint from the Claxton Bay-based cement producer alleging insider trading in relation to two attempted takeovers of TCL by Mexican cement giant Cemex in February and June.

TCL alleged that insiders illegally used price sensitive information about the takeovers to trade in TCL shares.

A team from the SEC launched an investigation in February 2005, the first of its kind under the existing Securities Industry Act, 1995 and submitted its report to the SEC in March 2006.

The SEC also sought external legal advice from Senior Counsel in Barbados and Canada.

In a statement signed by chairman Osborne Nurse, the SEC said yesterday that the investigation found "considerable evidence of unacceptable market conduct" in the two trades of TCL shares six years ago.

But legal advice from the Senior Counsel indicated that the current Securities Act required the SEC to prove intent.

This established a higher standard of proof than is usually required for administrative proceedings and that the evidence in the matter and the evidence in the matter did not support the required standard of proof.

The SEC stated that the evidence was also insufficient to overcome defences provided in the law and that the probability of success in prosecuting these matters was extremely low.

"As a result, the Commission has accepted the advice and recommendations of its legal counsel and has decided to close the matter," the SEC said.

While evidence "clearly demonstrated behaviours that were unacceptable and violated the intent of the law", the SEC said it was not enough to meet the test of the Act.

The SEC has recommended that the law be revised to ensure that insider trading is not provided with any defences within the securities regulation.

TCL Group chief executive Dr Rollin Bertrand could not be immediately reached for comment yesterday.

Source: Trinidad Express Newspapers

Tuesday, November 18, 2008

Economy flagging despite Q3 blip

Published: Tuesday November 18, 2008

Economic growth in the third quarter of the year was flat, rounding out overall growth for the first nine months of the year at a -0.3 per cent, according to the Planning Institute of Jamaica (PIOJ).

However, Dr Wesley Hughes, director general of the PIOJ, yesterday said the performance of the local economy actually improved over the review period when compared against the previous quarter, where growth was a negative 2.7 per cent. Hughes explained that a 0.1 per cent growth in services for the third quarter helped slow the decline of the local economy, which has been affected by the shocks created by the global financial meltdown and soaring commodities prices - mainly oil and grains - which have been trending downward in recent months.

Speaking at a press conference at the PIOJ's New Kingston offices, Hughes pointed out that services grew by a minute 0.5 per cent over the nine months, while the goods-producing sector contracted by 2.2 per cent over the same period.

Source: Jamaica Gleaner

Citigroup to shed at least 50,000 jobs

Published: Tuesday November 18, 2008

Citigroup Inc is shedding approximately 50,000 more employees in the coming quarters as the banking giant struggles to steady itself after suffering massive losses from deteriorating debt.

The New York-based bank, which has already reduced its assets by about 20 per cent since the first quarter of the year, also plans to trim expenses by 19 per cent in 2009 from third-quarter levels to US$50 billion. The plans, posted on the company's website, were discussed by CEO Vikram Pandit at the company's town hall meeting in New York on Monday with employees.

The company said it is shrinking its workforce by 20 per cent from its 2007 peak of 375,000. The company had already announced in October that it was eliminating about 22,000 jobs from that level.

Sell businesses

About half the expected workforce reductions will come from business sales; Citigroup already announced that it was selling Citi Global Services and its German retail banking business, accounting for about 18,000 jobs. Citi is planning to sell other businesses, too, but has not announced them yet, a spokesman said.

The other half of the workforce reductions will come from layoffs and attrition, the spokesman said.

The New York-based bank has posted four straight quarterly losses, including a loss of US$2.8 billion during the third quarter.

In an effort to instil confidence in the company, Citigroup emphasised in its presentation on Monday that its Tier 1 capital ratio, a measure of financial strength, is 10.4 per cent after a US$25-billion nvestment from the government - part of the US$700-billion financial rescue package passed by Congress last month.

That ratio is higher than peers, Bank of America Corp and Wells Fargo & Company, after their purchases of Merrill Lynch and Wachovia Corp, respectively.

Citigroup also stressed that it has doubled reserves in a year to US$24 billion; that its revenues are stable; and that Citigroup has lower exposure to US consumer mortgages than JPMorgan Chase & Co, Bank of America and Wells Fargo.

Share price falls

But the announcements were not met with enthusiasm from investors. Citi shares fell 46 cents, or 4.8 per cent, to US$9.06 in morning trading. The company's shares have been trading at 13-year lows.

Shortly before the town hall meeting in New York, Citigroup Chairman Win Bischoff said at a business forum in Dubai, United Arab Emirates, that it would be irresponsible for Citi and other companies not to look at staffing in the event of a prolonged economic downturn.

Source: Jamaica Gleaner

IMF advises Govt to cut spending

Published: Tuesday November 18, 2008

The International Monetary Fund (IMF) has called on the Government to cut back its infrastructure expenditure as well as the range of subsidies.

The IMF said that after seven consecutive years of economic growth, T&T’s growth rate would slow as a result of a detriorating external environment.

“Recessions in advanced economies, their spillovers to the tourism-dependent economies of the region and sharply lower prices for energy products are projected to slow growth to 3.5 per cent in 2008 and 2 per cent in 2009,” said Christina Daseking, deputy division chief in the Western Hemisphere Department of the Washington-based IMF.

She said the IMF expected oil prices to average about US$60.

Prime Minister Patrick Manning said last week that the Government would have to revisit its $51 billion 2008-2009 budget because of falling oil and natural gas prices. The budget is pegged on an oil price of US$70 and a natural gas price of US$4 per million metricc British thermal units (mmbtu).

With fertilizer prices declining sharply over the past few months, several plants in the Point Lisas Industrial Estate, have ceased production and are using the downtime to do maintenance work. As a result, the National Gas Company has excess gas to on its hands and service companies in the energy sector are feeling the pinch.

Daseking was speaking during a news conference at the Ministry of Finance tower, Eric Williams Financial Complex, Independence Square, Port-of-Spain, following the completion of the IMF’s regular Article 4 Consultation with the T&T Government.

She said that T&T’s current account surplus is expected to decline by 13 per cent to about 15 per cent of gross domestic product (GDP) in response to falling energy export earnings. Under its present budget, T&T will move into a deficit of 2 per cent of GDP.

She said that fiscal policies need to be adjusted to already lower energy prices and the possibility of a considerable economic slowdown in 2009.

“Fiscal revenues and trade surpluses are projected to decline significantly as a result of falling energy prices. Thus, even though the government has cushions to weather shocks, spending adjustments are warranted to contain the deterioration in the fiscal position and safeguard sustainability under more difficult circumstances,” she said.

She said there was a need to reduce the large non-energy deficit to generate adequate savings in the Heritage and Stabalisation Fund that would allow the country to benefit from its existing energy wealth.

Daseking said the main policy challenges are to prepare for the risk of contaigon and preserve macroeconomic stability in the face of declining energy revenues and still high inflation.

“The most pressing need is to prepare for the possibility of more severe spillovers from the global financial crisis by strengthening the crisis-response framework and developing contigencies measuers,” she said.

She said the Government has scope for reducing expenditures while targeting them more efficiently to support its development objectives.

“In this light, the recent increase in electricuty tariffs and the price of premium gasoline are steps in the right direction and should be built upon by adopting a comprehensive approach to phase out unproductive subsidies over time,” she said.

Source: Trinidad Guardian Newspapers

Tuesday, November 11, 2008

Wall Street falls on US economic woes

Published: Tuesday November 11, 2008

Wall Street’s initial enthusiasm about a US$586 billion Chinese stimulus package fizzled out yesterday, as investors caved in to anxieties about how US companies will survive a severe pullback in spending.

Stocks got a short-lived boost by China’s plans to boost its economy through a mix of spending, subsidies, looser credit policies and tax cuts. The package could benefit multinational companies with business in China such as General Electric Co and Caterpillar Inc.

But Wall Street’s optimism quickly waned, as it has tended to do since the mid-September downfall of Lehman Brothers Holdings Inc and government takeover of the troubled insurance giant American International Group (AIG). Market participants realised that while China’s stimulus is a positive sign that governments around the world are working to fix the global economy, the stimulus itself will likely have only a limited effect in the US.

There was little news yesterday to placate investors worried about the health of corporate America. AIG got more money from the US government yesterday, but the nation’s struggling automakers have yet to hear whether they, too, will get federal aid. And electronics retailer Circuit City Stores Inc filed for bankruptcy protection yesterday.

With few signs of recovery in the economy, there are not many investors confident enough yet to make big bets on stocks, although they look cheap; the major indices are down about 40 per cent from their October 2007 peaks.

“They’d like to be optimistic, but individual investors are still very worried,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors.

Uncertainty about the economic outlook is “likely to hold any recovery somewhat in check. We’re arguably undervalued, so we can work our way higher. But it's not going to be with a lot of gusto.”

According to preliminary calculations, the Dow Jones industrial average fell 73.27, or 0.82 per cent, to 8,870.54, after rising by 215 points in early trading and tumbling by as many as 183.

But trading was fairly orderly in the last hour — in recent weeks, stocks have often seen high volatility late in the day.

Broader indices also ended lower. The Standard & Poor's 500 index fell 11.78, or 1.27 per cent, to 919.21, and the Nasdaq composite index fell 30.66, or 1.86 per cent, to 1,616.74.The Cross Listed Index shed 0.65 points on its way to 77.92.

Source: Trinidad Guardian Newspapers

Central Bank official says compliance vital

Published: Tuesday November 11, 2008

Inspector of Financial Institutions at the Central Bank, Carl Hiralal, yesterday said T&T has much work to do to build a culture of compliance in local financial institutions.

Hiralal made the comment at the opening of a two day conference hosted by the Caribbean Regional Compliance Association (CRCA) at the Hyatt Regency Trinidad hotel, 1 Dock Road, Port-of-Spain.

“In T&T it is clear that we still have a way to go before we make a culture of compliance within our institutions, although we have come a long way from where we were. We recognise that compliance is an important function for all corporations,” he said.

Hiralal said the current global financial crisis had shown that there is a need for good governance and risk management capability.

“In recent times the financial services industry has experienced numerous challenges that has tested compliance and risk management capabilities. There are a number of well known examples of breakdown of compliance culture in financial institutions.

“The current financial crisis which Alan Greenspan referred to as a ‘financial tsunami’ has underscored the need for good governance,” he said.

He said compliance risk management systems are important safeguards against financial losses.

“Compliance is a critical factor for any country. In the financial services industry you need more effective compliance systems given that public confidence is a critical factor. Therefore, it is evident that robust and comprehensive and compliance risk management systems are a critical defence system against significant losses,” he said.

He said financial institutions now operate in a complex world.

“Increasingly globalisation, trade, interests with corporate governance and complex institutions, changing laws and regulations, the understanding of what constitute sound risk management creates a complex situation for financial institutions particularly those that operate on a cross border basis,” he said.

Hiralal said that the cost of non-compliance could be costly.

Source: Trinidad Guardian Newspapers

China stimulus plan fuels hopes for new investments

Published: Tuesday November 11, 2008

Stocks surge

China's massive stimulus package is its "biggest contribution to the world," Premier Wen Jiabao said Monday, as hopes rose that heavy spending on construction and other projects would help support global growth by fuelling demand for imported machinery and raw materials.

With Sunday's announcement of the four trillion yuan (US$586 billion) package, China staked out a bold position as President Hu Jintao prepared for next weekend's Washington meeting of leaders of 20 major economies to discuss a response to the global financial crisis.

"China has really set the pace for expansionary policies elsewhere," said Tim Condon, Asia regional economist for the Dutch bank ING.

Stocks rose

Stocks rose in major markets on news of the stimulus. US shares opened strongly, but later retreated.

The FTSE 100 index of leading British shares finished up 38.96 points at 4,403.92.

The DAX closed up 87.07 points, or 1.8 per cent, higher at 5,025.53. And France's CAC-40 gained 36.63 points, or 1.1 per cent, to close at 3,505.75.

Asian stock markets surged Monday on news of the plan. Japan's Nikkei index rose 5.8 per cent and Hong Kong's Hang Seng index gained 3.5 per cent. In China, the Shanghai Composite index jumped 7.3 per cent to 1,874.80.

Wen, the country's top economic official, said the plan is meant to boost investment and consumer spending, maintain export growth and promote corporate competitiveness and financial reform, state television reported on its national evening news.

It said he made the comments at a meeting of government leaders.

"We must implement the measures to ensure a fast and stable economic development," Wen said in comment read by an announcer.

"They are not only the needs of the development of ourselves, but also our biggest contribution to the world."

The plan calls for higher spending through 2010 on airports, highways and other infrastructure, more aid to the poor and farmers and tax cuts for exporters.

That could boost demand for iron ore from Australia and Brazil, factory and construction equipment from the United States and Europe and industrial components from throughout Asia.

"Faster growth in China will be better for its neighbours. For every country in the region, it's either their top trading partner or is on the way to becoming the top," Condon said.

On a global scale, "countries that supply capital equipment look like they will be the front line beneficiaries of this package."

The dramatic Chinese plan was motivated by growing government alarm at an unexpectedly sharp downturn in the country's fast-growing economy that raised the threat of job losses and social unrest.

Economic growth slowed

China's economic growth slowed to 9 per cent in the last quarter, down from last year's stunning 11.9 per cent growth and its lowest level in five years.

Export orders have fallen sharply as global demand weakens, leading to layoffs and factory closures.

Analysts have slashed forecasts of next year's economic growth but said Monday that with the new stimulus it should be at least eight per cent.

The slowdown has rippled through Chinese industries and outward to foreign suppliers.

China is the world's biggest steel producer, but mills responded to weaker demand this year by cutting output 20 per cent, which eroded demand for imported ore.

The spending package is "definitely positive news for all steel companies.

It will boost demand for steel and iron," said a spokesman for steelmaker Beijing Shougang Group, who would give only his surname, Wu.

China's announcement came as economic officials from the Group of 20 leading economies, which includes major wealthy and developing nations, called Sunday for increased government spending to boost the troubled global economy.

At the weekend meeting in Brazil, G20 finance ministers and central bank governors also said emerging economies deserve a prominent role in talks to overhaul the world financial system.

Hu plans to press that demand in Washington at the leaders' meeting on Saturday, a Chinese government spokesman said last week.

Beijing's stimulus package represents another drastic step away from lending curbs and other anti-inflation measures that it imposed over the past three years, but has been rolling back since mid-2008 as growth slowed.

Wholesale inflation eased in October, which gives authorities more leeway to stimulate the economy without igniting new price rises, according to data reported Monday. The government said producer prices rose 6.6 per cent in October from the year-earlier period, down from August's 12-year high of 10.1 per cent.

China switched its official goal in mid-2008 from a single focus on fighting inflation to a dual target of ensuring fast economic growth while also containing price rises.

Source: Jamaica Gleaner

Pollard appointed to Republic Bank's board

Published: Tuesday November 11, 2008

Former president and chief executive officer of Caribbean Nitrogen Company Limited, Stephen Pollard, has been appointed to Republic Bank's board of directors, the bank's chairman, Ronald Harford, said yesterday.

Pollard has 25 years' experience in the energy sector, with most of his business career being in the ammonia-manufacturing industry. He also spent six years in the commercial sector at executive management level in companies listed on the Trinidad and Tobago Stock Exchange, and has held several board appointments in both the private and State sectors in Trinidad and Tobago. Pollard is also a member of the American Institute of Certified Public Accountants and formerly served as the institute's president for over two years.

Speaking about his appointment, Pollard said, "I am happy for the opportunity to join the Bank's board and to contribute in whatever way that I can."

Source: Trinidad Express Newspapers

Friday, November 7, 2008

US, world stocks fall on bleak spending and jobs

Published: Friday November 7, 2008

Slumping retail sales, poor corporate earnings and trouble in the auto industry conspired to darken the outlook for the American economy yesterday. But investors bet that the worst was yet to come.

The Dow Jones industrial average plummeted 443.48 points, bringing its total loss since Tuesday to nearly 1,000 points. The Standard & Poor’s 500-stock index, a broader measure of the stock market, dropped five per cent; in two days, the S.&P. has lost nearly 10 per cent of its value.

But analysts said that investors may be selling off ahead of today’s report on the job market, which economists expect to be grim. Forecasters believe the Labour Department will report that employers cut hundreds of thousands more jobs in October, bringing the simmering problems in the labour market to a full boil.

European investors sent stocks down more sharply than their American counterparts. Stocks in London fell 5.7 per cent; Paris’ were down 6.4 per cent. The benchmark index in Germany tumbled more than seven per cent.

In Asia, where stock markets had several sessions of modest rises before the US presidential election, the Nikkei 225, Hang Seng and Kospi indexes all dropped more than 6.5 per cent, wiping out most of a recent rally.

In Tokyo, the Nikkei 225 share average closed 6.5 per cent lower after weak US economic news on Wednesday spelled tough times for Japanese exporters.

Investors in Australia joined the retreat with the S&P/ASX 200 index down 4.3 per cent. The Kospi index in South Korea dropped 7.5 per cent.

Source: Trinidad Guardian Newspapers

JMMB posts handsome profits of J$1.1 billion for six-month period

Published: Friday November 7, 2008

Jamaica's largest brokerage house, Jamaica Money Market Brokers (JMMB), saw a boost in its profits for the six-month period ended September 2008 largely due to the sale of Caribbean Money Market Brokers (CMMB) and a jump in its net interest income.

Unaudited financial statements for the period under review show the Group reporting gross revenues of J$6.15 billion, generating a net profit of J$1.1 billion. This compares favourably with gross revenues of J $5.12 billion producing a net profit of J$473.6 million for the six-month period ended 30th September 2007.

JMMB's Group CEO Keith Duncan made it clear that this 140 per cent jump in profits was primarily due to two one-off events, namely, a realised gain of J$2.32 billion from the sale of CMMB, and a write-down of the impairment of bond holdings in the Group's investment portfolio of J$1.87 billion as a result of its exposure to Lehman Brothers. However, the Group profit grew 44 per cent over the prior period, irrespective of the two major one-off events.

Net interest income increased by 45 per cent and came in at J$993.6 million for the six-month period ended 30 September 2008. This represents a J$306.6 million increase on the J$687 million registered for the same period last year.

Gains on securities trading have been steadily falling throughout the brokerage sector and JMMB was not immune.

Here the Group saw this revenue stream fall to J$323 million compared to the J$562.5 million it booked for the corresponding period last year. Fees and commission income made a marginal increase on the previous year, coming in at J$98.4 million compared with J$98 million for the same period last year.

JMMB's cambio trading operations put in a creditable performance, raking in J$72 million - J$20 million more than the J$52 million posted last year. Operating revenue net of interest expense increased by 6.3 per cent to J$1.5 billion despite a 42.6 per cent decline in trading gains.

Like many of its competitors JMMB saw an increase in its administrative expenses. Expenses rose to J$1.19 billion compared to J$956 million for the same period last year, an 18.5 per cent increase due to increase in staff costs and spiralling inflation.

Operating profit of J$288.2 million spelt a decline of 35 per cent largely due to an increase in administrative expenses. The Group's total assets of J$118 billion were boosted by a J$23 billion increase in investments and resale agreements, representing a 27.8 per cent increase on the J$92.3 billion posted last year for investments and resale agreements.

Speaking at a press conference held at its Kingston headquarters, Group CEO Keith Duncan outlined JMMB's strategy of focusing on different revenue steams and becoming an integrated financial service provider. The aim is to package a suite of services for corporates, which will help to grow the Group's asset base.

The private sector has long bemoaned the absence of reasonable financing facilities in Jamaica and cites this as one of the reasons for the anaemic performance of the productive sector. JMMB intends to address this with a special focus on small and medium enterprises. With 120,000 clients, JMMB is able to diversify its product offering and not allow it to be stymied by car loans serving as its leading credit facility. It sees opportunities in the agricultural sector and energy-saving measures, and is actively encouraging people to come forward with their plans and ideas. It will in effect be offering practical corporate solutions.

Later this month, JMMB will launch its dual currency ETMs at three locations within the city.

Looking to the next fifteen years JMMB will be employing a five-pronged strategy, namely:

1. Asset management (providing access to global investment opportunities for its client base including pension fund management);

2. Brokering;

3. Financing (consumer, commercial and corporate finance together with securitisation and syndication;

4.Greenfield expansion (JMMB bdi Americana (Dominican Republic), Central America (CAFTA);

5. Commercial banking (Application to the Bank of Jamaica for a licence to operate commercial banking facilities).

JMMB will continue to extend its footprint across the Caribbean. It currently has a 50 per cent stake in Trinidad's Intercommercial Bank Limited together with management control. It has an option to increase its holdings in this institution of which the steel magnate Mittal also has an interest. Next month, JMMB will open a new branch of IBL in Trinidad's capital Port-of-Spain.

Speaking with Caribbean Business Report yesterday, Duncan said: "We are very pleased with these financial results as we have taken prudent provisions which you can see have paid off. We are well capitalised to move forward.

Over the next six months the financial markets will face their fair share of challenges and we at JMMB are well equipped to face them."

Source: Jamaica Observer

Charles Johnston - A business titan joins the pantheon of greats

Published: Friday November 7, 2008

Chairman of the Jamaica Producers Group Charles Johnston is one of the true heavyweights of corporate Jamaica, a man who has left an indelible mark on both the agricultural and maritime sector. He has been a transformational figure in that he has brought both sectors, out of a colonial paradigm into the age of the modern free market where competitiveness is the true baromoter of success. There are very few people who can help shape two major industries simultaneously and no one in Jamaica readily comes to mind but Charles Johnston.

Johnston has never rested on his laurels and has continued to seek business opportunities - he is the embodiment of the entrepreneurial spirit who brings a sharpened pragmatism to the task at hand. His lineage tells a story but not the whole story. He has built on successive generations, learned from them and forged a most enviable career on his own terms. His forebears would be most proud of him for taking the family business into both a new century and new millennium.

But industry and commerce does not totally define Charles Johnston - that would be looking at him through a one- dimensional prism. He is that rarest of men, one able to walk among princes and paupers and still win their affection and respect effortlessly. The next generation of Jamaican entrepreneurs can learn much from him and it will be many years before someone sits astride two major economic drivers and make it look so easy. Below is the full text of his address to the PSOJ Hall of Fame Banquet, which took place last week at the Kingston Hilton Hotel.

I am extremely honoured and proud to be inducted into the PSOJ Hall of Fame as this award can very well be considered the premier award of the private sector in Jamaica. I am joining a list of esteemed and respected Jamaicans and I wish to thank the president Chris Zacca and his selection committee for this honour.

Chris, I must comment, however,that the Observer and the PSOJ need a more recent photo library.

I am also very surprised, because frankly, there are a few persons who, had I been on the selection committee, would be standing here instead. Surprised also, because I have never been heavily involved with this organisation.

I ran for vice-president one year, and was elected, but never went back for a number of reasons:

My year as VP was the year of the bankers' cabal, with Delroy Lindsay, Elon Beckford and Cliff Cameron. Billy McConnell, the perrenial VP, was the only non-banker with me. So I did not feel too comfortable. Douglas Orane was the one who convinced me to run for the VP post. You know how it goes - we really need people like you, there is no one else etc etc - so I fell for it. I was fully immersed in the paper that the PSOJ sends out when it dawned on me that Douglas really wanted to distract me from the waterfront.

In announcing my selection, the Gleaner had two headlines on the same page. "Jamaica Producers quits banana exports" and below that "Johnston for PSOJ Hall of Fame".

I was wondering if Oliver was trying to make a connection and what that connection would be. I am still trying to figure it out.

The Johnstons have been exporting bananas for over a century. Pat Johnston and Charles Johnston (great grand and grandfather) started shipping bananas out of Mosquito Cove in Hanover in the 1890s, then switched to Port Antonio.

Jamaica Fruit was formed in 1919 and partnered with Di Giorgio Fruit Co to export and run ships to the US. This continued until 1929 when Jamaica Producers was formed.

It is therefore very painful for me to have to announce the cessation of banana exports from Jamaica, by JP. It is also very painfull because of the loss of jobs that results from the closure of the farm in St Thomas and though it will be switching to cane, cane does not employ the same volume of workers and on such a steady basis.

This decision had to be made because of the change in the weather pattern in Jamaica. And believe me, if the weather goes back to us having a hurricane every 10 years, we will be resuming the export of bananas from Jamaica.

One of the things we are proud of at Jamaica Producers is our involvement in the formation of the Jamaica Welfare Ltd, which is now the Social Welfare Commission. That was in the 1930s. In 2008 JP was spearheading a similar system.

JP Farms had achieved fair trade status, which allowed us to brand our bananas with the Fair Trade brand. To quote the Fair Tade website: "Fair Trade is a strategy for poverty alleviation and sustainable development. Its purpose is to create opportunities for producers and workers who have been economically disadvantaged or marginalised by the conventional trading system. If fair access to markets under better trade conditions would help them to overcome barriers to development, they can join Fair Trade."

Fair Trade standards comprise both minimum social, economic and environmental requirements, which producers must meet to be certified, plus progress requirements that encourage continuous improvement to develop farmers' organisations or the situation of estate workers.

The Fair Tarde premium is money paid on top of the Fairtrade minimum price that is invested in social, environmental and economic developmental projects, decided upon democratically by a committee of producers within the organisation or of workers on a plantation.

All this had been put in place and the first shipments were on the dock the week of Gustav.

We will be looking to see how we can assist other products with Fairtrade registration. Kingston Wharves has recently been in the news and the issue of redundancy is being well ventilated so I will leave that alone, except to say that management must have the right to make jobs and positions redundant, under the law, and in a fair and equitable manner.

I wish to comment on the article in The Sunday Observer, which wondered why Jamaica Fruit was "competing with KW in stevedoring, and that this represented a conflict of interest".

Jamaica Fruit was one of the founding shareholders in Kingston Wharves in 1938, and have operated there continuously, bringing ships to KW then loading and unloading those ships, which process is known as "stevedoring". The shipping lines contract the stevedoring companies, and the lines pay for the service.

Until the year 2000, KW only took the cargo after it was landed, stored it, and delivered it. The consignees pay KW for this service. In 2000 when KW started to stevedore, they were now competing with their customers, but we have not objected to their right to stevedore.

We do however, vehemently object to anyone saying that we do not have that same right.

We were there first.

We all know that crime is the biggest problem in Jamaica, and there are endless studies and initiatives which have been developed to reduce the crime rate.

But there is another problem which Jamaica suffers from which may be as damaging to our economy.

Jamaica has the fastest runners in the world and the slowest approvers in the world. We are natural sprinters on the track but we are marathon runners with development.

I'll give you a classic example. In 1980 Prime Minister Edward Seaga appointed a maritime task force to look into and set up a ship's registry. The task force decided that it was an excellent project but the registry came into being in 1999.
In the meantime, Panama has 6,000 ships registered and the Bahamas 1,200. We lost 19 years.

You will notice the time span covered two goverments, so the problem is not specific to one party.

I am very happy to see that the government may be finally deciding on what sources of fuel to use in the future. This has swung back and forth between coal, LNG, CNG and now back to coal, while all the time we are taking to decide, we are using the most expensive fuel to generate electricity. this decision has been pending for at least six years. again not confined to one government, but a Jamaican problem.

The problem is also not specific to governments. It is a Jamaican problem, with the private sector contributing to it in our own way. We used to only have the Chamber of Commerce, now we have the JMA, JEA, PSOJ, SAJ.

A company like Producers has to pay fees to all, send reps to all, we all come away saying that was a good meeting. We have too many good meetings and too few good results.

I would like to make two recomendations. One to the government:

That is, no new studies should be commissioned by any ministry until they have read all the old studies and rejected them. If they approve any then logically there would be no new study.

To the private sector, can we put a stopwatch on projects, measuring them so that records can be set and broken. Publish the times in the paper monthly so that we can see the progress or lack of it. Nothing should take 19 years to happen. If we can solve our productivity and bureaucracy problems, I am of the opinion that Jamaica has been looking in the wrong direction with our trade, by looking to English-speaking Caricom for our markets, with a population of three million.

The entire Caricom market is smaller than Jamaica, whereas the Dominican Republic is 9.5 million, Cuba is 11.5 million, Costa Rica four million, Honduras 7.6 million, and Panama 3.3 million with total markets of over 36 million. They are our true geographical trading partners, all of them are a day or day and half away by ship. Trinidad is three days away.

In truth we are an English-speaking island in a Latin sea. What has prevented us from trading is largely cultural they are multilingual and we are not. To remedy this our children need to learn Spanish and our government and our schools should make that language mandatory.

Although I am the one being honoured tonight, this award is not just about me. I would not have been able to achieve all that I have achieved alone, and I would like to take the opportunity to recognise some of the persons who have helped me along the way.

Firstly, my colleagues and staff members, past and present, at the Jamaica Producers Group and the Jamaica Fruit and Shipping Group, as well as my business partners, who have worked with me throughout the years.

I would especially like to thank the former MD of Jamaica Producers, Marshall Hall (who unfortunately could not be here tonight). together, Marshall and I made a great team and I am glad to be able to continue to exchange thoughts and ideas with him, as he still sits on the JP board. I would also like to thank my secretary, Andrea Anderson. I may not be an easy person to work with, but this does not alter her ever sunny disposition.

I am eternally grateful to my father and my grandfather, who laid the foundations of my business education and taught me many valuable lessons about life. To my mother Anna, for her unconditional love and support. To my brothers, sisters, nieces and nephews, my thanks. we have had our disagreements, but have always managed to overcome, and there are now 5th generation family members in the business. To my former wife Sakina, for her support over the years, and for being a wonderful mother to our children.

My sons, Edward, Aaron, Marek and Liam who are constant reminders of what life and family are really about, I am really proud of my sons. And to my beautiful wife Lisa, who continues to work by my side , as we enjoy our lives together, thanks for your patience and understanding.

My gratitude to all of you for the parts you have played in my life, this honour is as much yours as it is mine.

Source: Jamaica Observer

Angostura looks to export one million cases of Appleton rum a year to the US

Published: Friday November 7, 2008

Angostura, the new parent of both Appleton Rum and J Wray & Nephew, is expecting to export one million cases of Appleton rum to the United States within the next three years said its new chairman Lawrence Duprey.

Speaking with Caribbean Business Report en route to the Middle East, Duprey said: "We have high expectations for our recent acquisition of Lascelles de Mercado's Appleton rums. The United States is a lucrative market and one where you have to position your premium brands. We are expecting to export one million cases of Appleton rum a year there and we should be able to do so in two to three years time. Angostura is in the United States showcasing all its brands. We want our 1919 Rum to be a global brand."

This is in keeping with Duprey's vision of PanCaribbean brands that go on to becoming global in recognition. Earlier this year he said at a special business luncheon in Jamaica, "Our vision is to create a drinks company that produces high-quality spirits marketed in niches where we can maximise the profit from quality products. This is not Caribbeanisation in theory, it is Caribbeanisation in practice."

With Angostura enjoying a presence in 178 countries, he sees it being able to create strong brand recognition which will create jobs in marketing, advertising and production for people of the Caribbean.

Duprey has ambitions of placing both Appleton and J Wray & Nephew rums in markets in the Far and Middle East, East Africa and Eastern Europe. The Colonial Life (CL) financial boss already has an office in Taiwan and will use it as a springboard into that side of the world.

"Jamaica was fantastic in the recent Olympic Games held in China and reggae music is everywhere. We can ride on the popularity of Jamaica and create a platform for our Caribbean brands. We can target small countries and get them familiar with our product line. I have always felt that Africa, particularly South Africa, and Ghana present many opportunities for Angostura.

"We will be looking to place J Wray & Nephew in both Russia and the Balkans and have its over proof rum go up against Russian vodka. Now that would be a battle indeed!

Duprey went on to say that he expects Angostura/Lascelles to cross list on the region's leading stock exchanges next year. With its stable of leading brands he predicts it will be an attractive stock that will excite not just Caribbean people but international investors.

"We will be undertaking a global advertising campaign supported by CL Financial. This should help us when we eventually list as a major Caribbean company on the London Stock Exchange. I have received many offers to sell Angostura but the truth be told, I want to keep it as a Caribbean company that champions West Indian brands with top management from the region.

Duprey has said on many occasions that the Angostura / Lascelles deal gives both Jamaica and Trinidad an opportunity to partner in an enterprise that can go global.

Lawrence Duprey's CL Financial Group created a holding company, CL Spirits Limited for its acquisition of Lascelles de Mercado. The deal at close to US$900 million and at US$9.25 a share is the largest seen in the Caribbean.

CL Spirits is 100 per cent owned by CL Financial, which now holds 86 per cent of Lascelles. The second and final tranche of US$4.75 per share was paid at the end of July this year. Lascelles produces US$2 billion in net income annually.

Source: Jamaica Observer

Sagicor aims to tighten - Revenue strong but inflation worries insurance group

Published: Friday November 7, 2008

Sagicor Life Jamaica will pay out dividends of $1.65 billion or 44 cents per share on nine-month results that saw only a slight gain in profit for the insurance group.

Sagicor Jamaica grew profits attributable to shareholders by two per cent to $2.3 billion off revenues of $14.5 billion.

Minority companies contributed another $424 million to the bottom line pushing net profit to $2.7 billion.

Top line income rose by $2 billion or 17 per cent year-on-year, suggesting robust growth in sales, but the company also said that over the same period inflation was at 16 per cent, essentially handing it real growth in revenue of only one per cent.

Source: Jamaica Gleaner

Margin calls weaken weaken Jamaica dollar - Currency slides 5% in a month

Published: Friday November 7, 2008

Five per cent decline in value of the Jamaican dollar over the past month was triggered by demands from US brokers that their Kingston counterparts pay up for government bonds bought on their behalf, analysts here say.

"Thirty to 50 per cent for overall emerging market brokers who offered margin on securities overseas made calls, basically sending up demand for US dollar currency to cover positions," said Mark Croskery head of the Kingston brokerage, Stocks and Securities Ltd.

Although it floats freely, the Jamaican dollar benchmarks primarily against the US greenback, and in recent years has slipped annually in a range of between three and five per cent.

But in the past month, as the credit crisis in America caused institutions there go sour on emerging market assets - including normally well-prized Jamaican government bonds - the Jamaican dollar has been in something of a free fall.

At October 8, it hovered at J$72.87 for US$1, but the next day passed the psychologically important J$73 to US$1.

By Wednesday of this week, it had tumbled to J$76.54 to US$1, a full five per cent drop since the end of the first week of October. On Thursday, the JMD fell even further to $76.72.

Precipitous decline

The precipitous decline of the Jamaican currency came despite the island's central bank having dipped into its reserves to sell US dollars directly to local brokers to cover their foreign obligations.

It also, during the second week of October - when the Jamaican dollar was trading at around J$74 to US$1 - announced its willingness to lend financial institutions up to US$300 million for the same cause.

Source: Jamaica Gleaner