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Consolidated Bakeries (Jamaica) Limited Reports Dip in Q1 Profits Published: 12 June 2019

  • Consolidated Bakeries reported a decline in profits for the three-month period ended March 31, 2019. Net Profits ended the period at $13.58Mn (EPS: $0.06) which represents a 34.3% fall relative to the corresponding period of 2018.
  • Contributing to this performance was a decline in interest and other income which fell 20.8% whilst administrative & other expenses and cost of sales experienced increases of 8.8% and of 2.1% respectively.
  • The stock has risen 15.9% since the start of the calendar year. Consolidated Bakeries closed trading yesterday at $1.97 and currently trades at a P/E of 65.67x earnings which is above the Junior Market Manufacturing sector average of 25.91.

 (Source: Consolidated Bakeries Financials)

Barbados Offered Haircut, Par Options in Debt Restructuring Published: 12 June 2019

  • The Barbados government said it presented holders of foreign debt with two scenarios last month and plans to launch a formal exchange offer after another round of negotiations with creditors.
  • The first scenario included 14-year amortizing notes issued at 66.67% of face value. Two-year grace period with 3.5% coupon, followed by 7.5% coupon in years 3-14, semiannual payments and natural disaster clause.
  • The second scenario included bond issued at par to face value maturing in 25 years, maturing in 25 years, the 15-year grace period on the principal and a natural disaster clause.
  • Both scenarios “are at the limits of what is compatible with the debt sustainability framework that underpins” loan agreement with IMF. The government plans to discuss scenarios with creditors in coming weeks “with a view to adjusting the structure of the bonds to meet creditor preferences so long as they are compatible with the debt” targets agreed to with IMF.

(Source: Bloomberg)

Barbados Government introduce National Industrial Policy Published: 12 June 2019

  • The government is preparing a National Industrial Policy that will seek to revive the manufacturing sector, according to Ronald Topping, the Minister of International Business and Industry. The first draft of the policy is expected to be ready by September and finalized before the end of the current financial year in March 2020.
  • This is a response to the decline of the sector over the last decade based on the reduction in employment in the sector, the number of companies in the sector, the level of investment, and the contribution of the sector to GDP. The minister also noted that there are several challenges facing the sector, particularly as it relates to access to financing.
  • He added that talks are ongoing between the government and local manufacturers, and there are plans for national consultation in the coming months to hear their concerns. The government is also aiming to create two new industries, particularly in ICT and pharmaceuticals.

 (Source: Barbados Today)

UK's Labour Party says it will not allow May's successor to pursue a no deal Brexit Published: 12 June 2019

  • Britain’s opposition Labour Party is not prepared to let Prime Minister Theresa May’s successor pursue a “disastrous” no-deal Brexit, the party’s spokesman said on Wednesday.
  • The Labour Party is using a vote on Wednesday to try and seize control of the parliamentary agenda later this month to give lawmakers the chance to introduce legislation aimed at preventing the suspension of parliament or a no-deal exit.
  • “Boris Johnson and a series of other Tory (Conservative) leadership candidates have made clear they are prepared to see a no-deal exit from the European Union which quite clearly, even under the government’s own assessments, would be disastrous for the British economy,” Labour’s spokesman said.

 (Source: Reuters)

U.S. Core Inflation Cools, Bolstering Case for Fed Rate Cut Published: 12 June 2019

  • The core consumer price index, which removes energy and food costs, rose 2% from a year earlier, below forecasts, according to a Labour Department report Wednesday. The figure rose 0.1% from the prior month for a fourth-straight time and missed estimates. The broader CPI increased at an annual 1.8%, less than projected.
  • U.S. stock futures briefly advanced and Treasury yields dipped as below-forecast inflation followed signs of slower economic growth that stands to bolster investor expectations for Fed rate cuts this year.
  • The market-implied odds of a July cut increased after the report, with Fed funds futures now indicating almost a quarter-point of easing in the next two months.
  • Lower gasoline prices played a role in keeping broader inflation tame. Energy prices fell 0.6% from the prior month and 0.5% from a year earlier as all major components in the category fell on an annual basis.

(Source: Bloomberg)

K.L.E. group Recovers from Losses in Q1 Published: 11 June 2019

  • For the three-month period ended March 31, 2019, K.L.E. Group reported a net profit of $198,000 (EPS: $0.003) which represents a significant improvement over the $1.8Mn loss reported in the corresponding period of 2018.
  • Improvement in the bottom line was partly attributed to a reduction in the cost of goods sold (17.6%) as well as a decline in the administrative and other expenses (6.4%).
  • The stock has fallen 39.7% since the start of the calendar year. K.L.E. Group closed trading yesterday at $1.90 and currently trades at a P/B of 1.88x earnings which is below the Junior Market sector average of 3.85x.

(Source: K.L.E. Group Financials)

U.S. tightens Venezuela oil sanctions, indicates more actions to come Published: 11 June 2019

  • The U.S. Treasury Department on Thursday tightened its pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to U.S. sanctions.
  • The change, announced on the Treasury Department’s website, is the latest U.S. measure aimed at pressuring Venezuelan President Nicolas Maduro by limiting access to oil export revenue from PDVSA.
  • PDVSA had long relied on imports of diluents from the United States to add to its extra-heavy oil to make the crude exportable. But that trade was banned in January, forcing the company to look abroad for other suppliers.
  • The changing of the language puts international companies on notice that any continued engagement or transactions they have with PDVSA selling diluents is at risk, or subject to future potential sanctions.

 (Source: Reuters)

Sugar Revenues Decline in Guyana Published: 11 June 2019

  • The local sugar industry reportedly raked in US$27.1Mn in 2018, a 44.1% reduction from what was reported in 2017.
  • The out-turn was attributed to a 28.0% decline in the volume of sugar exported and a decline in the average export price.
  • The average export price for sugar declined by 22.4% to US$348.4 per metric tonne, compared to the US$449.2 per metric tonne it was being sold at in 2017.

 (Source: Guyana Chronicle

How Mexico talked Trump out of tariff threat with immigration crackdown pact Published: 11 June 2019

  • Mexican negotiators persuaded President Trump to back down from his tariff threat by agreeing to an unprecedented crackdown on Central American migrants and accepting more-expansive measures in Mexico if the initial efforts don’t deliver quick results, according to officials from both governments and documents reviewed by The Washington Post.
  • The enforcement measures Mexico has promised include the deployment of a militarized national guard at the Guatemalan border, thousands of additional migrant arrests per week and the acceptance of busloads of asylum seekers turned away from the U.S. border daily, all geared toward cutting the migrant flow sharply in coming weeks.
  • Trump officials Monday described the accord as a breakthrough, and the president considered Mexico’s plan aggressive enough to suspend his tariff threat, even though he liked the idea of imposing the duties over howls from members of his own party.

(Source: The Washington Post)

China hints it will choke off U.S. ‘rare earths’ access. But it’s not that easy. Published: 11 June 2019

  • China dominates the global market for rare-earth metals and has been threatening to take them hostage in the deepening trade conflict. 
  • Just the suggestion that Beijing could starve American factories of essential materials has sent rare-earth prices soaring over the past month, with dysprosium oxide, used in lasers and nuclear-reactor control rods, up by one-third.
  • But the alarm overlooks the rise over the past decade of alternative sources of rare earths and ignores the difficulties China would face in implementing a ban, including the prospect of widespread smuggling and the likelihood of hurting countries that Chinese authorities may prefer not to alienate.
  • President Trump, fresh from an immigration dispute with Mexico pivoted Monday to his stalled China trade talks. In a CNBC interview, the president who is expected to meet Chinese President Xi Jinping later this month in Japan said their “differences can be worked out very easily.”
  • But Xi shows no sign of caving and may use rare earths as a bargaining chip.

 (Source: The Washington Post)