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Annual Report 2004

I am very pleased to report that overall the ANSA McAL Group has had another successful year. In a fiscal punctuated with significant challenges, the CDC/CGL industrial action and the effects of Hurricane Ivan, this performance not only signals early delivery of a significant V06 objective, but also speaks well of the strength in the Group’s diversified portfolio and the resilience of our people at all levels.
Profit before taxation grew by 21.9% to $466.3 million and earnings per share increased to $1.82 up from $1.44 last year. The price of ANSA McAL shares moved considerably in the last year from $23.06 at the end of 2003 to $41.76 at yearend 2004 – an 81% appreciation.

Vision 2006
Although the results of .04 have propelled us close to V06 targets, ahead of forecast as we move in to the second quarter of .05, the Executive team and I are firmly committed to retain Vision 2006 as the transformation blueprint for the ANSA McAL Group. I believe all other V06 targets will be surpassed within the remaining eighteen months.

During 2004 much has been speculated and editorialised about the timing and impact of the CSME and FTAA. Even though progress has been faltering, the implications for Latin America and our businesses in the Caribbean have kept our Management teams focused on the goal to be the lowest cost producers of world class products and services. As in 2003, for the period 2004 considerable capital investment ($229,344,000 in 2004) has been deployed for the continued transformation of our businesses particularly in the Brewing and Manufacturing sectors with export potential. This V06 objective continues to be a priority as we gear up for the opportunities that are already apparent in this emerging trade environment.

Significant Events of 2004
The devastating effects of Hurricane Ivan on the Island of Grenada and the negative impact of the industrial action at Caribbean Development Company and Carib Glassworks Limited stand out as the most significant on our ’04 calendar.

Ivan hit Grenada on September 7, 2004. As this unprecedented natural disaster posed a direct threat to the lives, well-being and property of our people at Grenada Breweries and our partners Bryden & Minors, I have chosen to report in an order that reflects our concern and admiration for the people of Grenada and the members of the ANSA McAL corporate family that endured this tragedy. Although the Brewery suffered extensive damage to the roof and equipment, the support of our people, resources and equipment from Trinidad enabled production to be resumed on October 13, 2004. I wish to commend our Management Team at Grenada Breweries for their courage and dedication along with all those members of the ANSA McAL family that assisted in person or via donations with the relief effort.

After a relatively short period of negotiation for a new collective agreement that encompassed the important pre Christmas .03 and pre Carnival .04 sales periods, the NUGFW resorted to work-to-rule and chronic absenteeism at the our Champs Fleurs plants that threatened to disrupt supply to the trade. On June 23 responding to the threat of strike action and serious acts of sabotage on the production lines, management exercised the right to a ‘lock out’ in order to safeguard workers from injury, and plant and equipment from further damage. For the next three months management and non-unionised staff worked round the clock to maintain some supply to the trade and thirsty consumers. I must applaud this tremendous effort and personal sacrifice made by our CDC/ CGL people and the patience and loyalty of our trade partners and consumers. Consequently, the financial performances of CDC and CGL have been adversely affected. Turnover for the period under review declined by 1.5% in relation to .03 and PBT slipped behind the .03 figure of TT$187.1m by 23.3%. I am pleased to report however that our brewery products are in full supply once more, and the installation of a new state of the art filling line and packaging line upgrades will be completed on schedule in .05.

Another significant initiative in 2004 was the merger of the Tatil Group and ANSA Merchant Bank Limited. This strategic alliance has created a financial services entity with one of the largest asset bases ($2,406,989,000) in the market today. Synergies that have resulted continue to be explored at the strategic level and once operational, will translate into an enhanced portfolio of innovative financial service products, better customer service, more efficient marketing and better overall results. As a sector, Financial and Insurance Services continues to make a significant contribution to overall Group performance. Turnover in .04 was TT$533m or a 103% improvement on .03. PBT climbed by 106% over .03 to TT$165.4m in 2004.

On September 10, 2004, ANSA McAL signed a Joint Venture Agreement with BORAL International Pty. BORAL International Pty’s US – based subsidiary is the largest manufacturer of clay roof tiles and clay bricks in the United States. The JV agreement provides for the establishment of a Trinidadian entity (Caribbean Roof Tile Company Limited) responsible for the manufacture of clay roof tiles for export to the US Market, and the establishment of a US entity responsible for marketing and distribution of the tiles in the United States. ANSA McAL will have a 50% shareholding in both entities. The manufacturing plant is expected to start production early in 2006 and produce approximately 15 million clay roof tiles per year. At full capacity, the plant will employ approximately seventy people. First shipments to the US are scheduled for Q1 2006.

The Brydens Barbados acquisition has enabled the further consolidation of our Marketing and Distribution footprint in most of the major Caribbean markets. We are moving rapidly with our Bryden partners to establish the most efficient and cost effective distribution network with a Miami gateway and leverage its Regional value with our suppliers and principals. Although the full potential of the consolidation exercise is still to be realised the integration of our brewery distribution business (BDL) and A&R Tempro into divisions of A S Bryden & Sons (Barbados) Ltd, has maintained each entities’ frontline marketing and sales focus while unlocking considerable value by utilising the back office resources of Brydens. Cost savings and an almost immediate improvement in sales have prompted a similar exercise with our brewery products distribution company ANSA McAL Trading (St Lucia) Ltd. The operations of this company will be rolled into the beverage division of Brydens & Partners (St. Lucia) Ltd. The expectation is that similar benefits will be realised.

During 2004 our Marketing & Distribution companies performed well in markets that are consolidating into large retail clusters within rival Conglomerates in Trinidad & Tobago, Barbados and St Lucia. In spite of these challenges Alstons Marketing Company, AMCO, received awards for Distributor of the Year from Proctor & Gamble and Cadbury and an award for Distributor with the Best Performance from Kodak.

In 2004 the Group’s Automotive Sector in T&T made significant strides to becoming the leader in the luxury car segment with two new agencies. Classic Motors will represent Jaguar, and McEnearney Motors will represent Land Rover thus securing two of the World’s most prestigious automobile brands. Almost from inception interest and firm orders have confirmed the markets appetite for these unique and distinctive brands.

Group Overseas Operations
The acquisition of 100% of the A.S. Bryden Barbados Group by our subsidiary, McEnearney Alstons (Barbados) Limited continues to yield opportunities and value beyond our initial expectations. The Brydens Barbados management teams have integrated well and are working closely with their ANSA McAL partners to leverage synergies in the areas of Finance and Insurance, Manufacturing and Distribution. Improvements in the Bryden’s Barbados Group results are very encouraging and have been consolidated with ANSA McAL Group results effective April 1, 2004.

ANSA McAL (Trading) Guyana. Once again the .04 results of our trading company in Guyana demonstrate the resourcefulness of this team, in spite of the difficult economic, social and political climate. For the period, our bleach, household cleaner, match and paint brands continued to expand on already significant and major market share. In 2004 the growth of our brewery brands Carib Beer, Royal Extra and Smalta, although constrained by supply as a result of industrial unrest at the Brewery in Trinidad, still continue to grow market share, approximately 25% in the face of Tough competition from indigenous brands and illegal imports from Suriname and Brazil continue to be a challenge in this market.

Dividend and return to shareholders
I am pleased to announce that the Board of Directors has recommended a final dividend of $0.40 per ordinary share. This together with the interim dividend paid of $0.25 will bring the total dividend payable to shareholders for the year to $0.65. In 2004 the appreciation our share price by 81% continued to reflect the market’s confidence in the Group’s ability to deliver extraordinary returns to investors even in challenging years. ANSA McAL shares closed at $23.06 at the end of .03, compared to $41.76 at the end of .04.

Economic Outlook for Trinidad and Tobago
Trinidad and Tobago over the last 11 years has firmly established itself as the leading economy in the region. After registering real GDP growth of 4.1% in 2003, the economy recorded its eleventh consecutive year of growth in 2004. Led primarily by the buoyant energy sector, growth of nearly 8.0% was achieved for 2004. The non-oil manufacturing sector registered an improved performance, growing by 6.0% in the first nine months of the year.

Continued high prices and export volumes for oil, natural gas and petrochemicals will continue to underpin growth in the local economy, contributing to a widening of the current-account surplus to around 21% of GDP in 2005-06. Inflation is now the main concern, as it reached 7.3% year over year to March 2005. The rise in inflation may force the Central Bank to increase interest rates to prevent an inflationary spiral, damaging growth prospects in the non-energy domestic economy.

Overall the US Dollar market showed improved liquidity on the supply side for 2004. Central Bank intervention was approximately US$386 million, 21% less than the amount sold to the market for 2003. This could be attributed to increased activity in the energy sector and less US$ denominated capital market issues. Despite this, the exchange rate remained virtually unchanged for most of the year as demand for the currency intensified.

Positioning the Group for Global Competition
As stated in my last Chairman’s Report, internally the Group has committed to .go global’ this is expressed in our Vision 2006 statement via commitment to double our exports by .06. This initiative will compel us to think, produce, market and deliver our Brands and Services at World Class Standards and at an internationally competitive cost per unit. Significant investments have therefore continued in ‘state of the art’ plant and technology and to upgrade existing facilities in key sectors – Manufacturing, Brewing, Financial Services and Trading, to world-class competitiveness, as the Group expands its reach beyond CARICOM into the Latin and North American marketplace. The Group also continues to actively explore other opportunities including a significant Energy Sector project.

The ANSA McAL Foundation
The ANSA McAL Foundation is an autonomous body from the ANSA McAL Group of companies. The Foundation’s focus has been to create, evaluate, and fund projects of scale deemed to be of national need.

In addition, the Foundation continues to fund to a maximum of $500,000 scholarships/bursaries to selected children of Group employees in the categories of secondary school, community college and university.

The ANSA McAL Family
My fellow Directors continue to provide meaningful contributions to our deliberations and I thank them for their support. During the year Mr Glenn Castagne retired from the Company and I take this opportunity to thank him for his service.

Our management teams and dedicated and committed staff at all levels deserve the highest commendation and I so confer.

We look forward to an ongoing mutually beneficially relationship with our partners, suppliers, customers and shareholders as we move towards our 125th year.

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A. Norman Sabga
Chairman