On The Line - Caribbean Containers
Annual Report 2001
Business Page we review the 2000 and 2001 Annual Reports of Caribbean
Containers Inc (CCL), formerly known as Seals and Packaging Industries
Limited (SAPIL), which held its 19th Annual General Meeting on November 15,
2002 at the CCL Complex, East Bank Demerara. This is not the first time that
the company has presented two sets of financial statements at one annual
general meeting, having done so in 1999 when the directors presented three
years’ accounts. It is clear that the company did not hold an Annual
General Meeting in 2001 which seems to contravene the provisions of the
Companies Act and the company’s by-laws which require the holding of
annual general meetings annually. We understand, however, that permission
for the late holding of the meeting was obtained from the Minister of
activities of the company include the manufacture and sale of corrugated
fibreboard containers and the manufacture of paper using recycled
cardboard boxes for sale and use in the production of corrugated fibreboard
containers. The company has bad a series of problems particularly with the
Paper Mill over the years and it is clear that it is not yet out of the
woods. The story of the mill goes back to 1992, a year during which Ansa
McAl acquired a controlling interest in the company. However, after several
problems Ansa McAl in 1997 gave the Government of Guyana an ultimatum: sell
us your shares for a nominal sum or buy those of Ansa McAl for a similar
sum. It was a Hobson’s choice and the government thereby re-acquired
Rand-Whitney, the US corporation, came along and in 1998 acquired majority
control promising to “fully complete the Plant in the first quarter of
2000.” However, after a brief period of operations, the plant was closed
“pending resolution of certain process and energy related issues,” which
apparently had not been anticipated despite the vast expertise of
Rand-Whitney. It seems that there were other fundamental problems since it
required both “modifications and installation of new power generating
equipment” as well as the approval of the company’s bankers to a
strategic plan before the mill was brought back into operation in September
The Restructuring Plan
restructuring plan has received the support of the company's bankers, the
auditors still find it necessary to emphasise in their report on the 2001
financial statements that the company’s ability to continue is dependent
on its ability to make substantial profits in the future and the provision
of adequate financing. The company remains heavily dependent on its
bankers and other creditors and the restructuring includes a search for
equity participation with several potential investors.
below the 2000 and 2001 financial results of the company which are extracted
from the audited accounts included in the report and offer some indicators
which may be useful to readers.
of the company increased by 2.9% while pre-tax loss increased by 238% from
G$121M to G$409M. The Managing Director reported that this was due mainly to
the high cost of energy supply to the Paper Mill which resulted in a
closure of this plant and the failure of automatic scanning equipment. The
company has initiated legal action against the overseas contractors to
recover the substantial losses suffered as a result of the performance of
this equipment. Despite the increase in sales the selling and distribution
expenses of the company decreased by 13% from $61M to $53M.
the capital structure and the application of accounting rules, the
company’s finance and foreign exchange costs have increased quite
substantially. In 2000, interest on loans taken out to acquire the Paper
Mill and foreign exchange loss totaling $210M were not charged in the profit
and loss statement but were capitalised. Financial charges in the profit
and loss statement for 2000 amounted to $74.7M but this increased to $255M
in 2001. Interestingly, in presenting the comparative figures for 2000,
the 2001 statements are showing not the $74.7M but$66.SM.
share in dollars increased by 222% from 0.84 to 2.71. Despite having as one
of its objectives the maximisation of “shareholder value creation,” it
is now at least seven years since the company has paid any dividend.
have decreased from $264M to $162M while current liabilities have increased
from $544M to $665M, with the result that working capital continues to
decrease. This too has been referred to in the auditors’ report and the
combination of interest charges and deteriorating working capital continue
to put a severe strain on the company.
of fixed assets by 37% is due mainly to the revaluation of land &
building and equipment by $839M. While this has the effect of nominally
increasing shareholder value, that too is being eroded by substantial losses
which at December 31, 2001, amounted to $986M.
also be noted that the revaluation surplus would have to be realised in the
normal course of business or by sale of the respective assets before it can
be considered of major benefit to the shareholders, especially given that
the company is currently being restructured.
regrettable that another of Guyana’s recently privatised public companies
appears unable to comply with the requirements of the law with respect to
the holding of annual general meetings. Under the restructuring, the
Chairman of the company has changed with R. Scogin taking over from J.
Cobery, both of Rand-Whitney.
been a significant reduction in the number of directors since 1999, with the
number of directors halved from eight in 2000 to four in 2001. No longer on
the board are three Rand-Whitney directors and Mr. Azam Khan of Banks DIH
who resigned during the year. Long-serving Company Secretary, Mr. Colin
Wiltshire, was added to the board on July 6, 2001.
and the Paper Mill in particular had offered the country some hopes of
economic diversification, and the government obviously recognised this in
granting it a tax holiday on the profits of the mill. However, the company
has suffered tremendously from a high consumption tax rate and competition
from those who seem to evade the tax with impunity.
all the difficulties experienced in the past, a small domestic market, high
cost of transportation of both raw material and exports and prohibitive
energy costs, the company’s failure to deliver value to shareholders is
understandable. That raises the question, however, whether the current
majority shareholders can persuade new equity into the company.