Cement volumes continue to be challenged by soft demand


Key Messages
•  Increased government spending has begun and is expected to reinvigorate the market going forward 
•  For Q3, the typhoon season slowed down construction activity with Holcim Philippines’ volume down by 6%
•  Pro-active cost management and manufacturing excellence initiatives helped mitigate effects of challenging market

Successive weather disturbances during the third quarter interrupted the momentum of construction activities that were beginning to take off, following government’s efforts to step up infrastructure spending.

In light of this, Holcim Philippines saw its sales volumes shrink by 6% during the third quarter compared to the same period last year. Holcim Philippines COO Roland van Wijnen noted that the volume decline was lower than in the previous two quarters, giving credit to the government’s move to increase spending for infrastructure.

“The increased implementation of government projects in the third quarter bodes well for the Company and the industry in general,” he said. “This would have pushed up monthly volumes had it not been for the typhoons.”  He added that private construction remained vigorous, driven by continuing demand in BPO and tourism-related facilities.

Van Wijnen noted that while the cement industry is challenged by soft volumes and volatile prices, Holcim Philippines is doing what it can to mitigate the impact on its business performance. “We’re managing areas within our control, seeing to it that all our plants run efficiently and instilling a mindset of better cost management across the entire organization. These initiatives will certainly help prepare us for whatever opportunities will come in 2012,” he said.

Another challenge faced by the industry is the continued increase in operating costs, particularly for coal and electricity. In addressing this challenge, Van Wijnen says that Holcim Philippines is stepping up usage of alternative fuels and raw materials through its Geocycle business. Geocycle makes use of a responsible and environment-friendly technology of cement kiln co-processing which converts a range of waste streams into alternative fuel or raw material. However, even with these efforts, price adjustment will be necessary to ensure a level of profitability required to have a sustainable business than can make continuous investments to supply the growing demand.

Apart from its Geocycle business, Van Wijnen said its ready-mix concrete business continues to improve, steadily positioning itself as one of the most reliable suppliers of quality concrete and services in Metro Manila. “Holcim Concrete continues to grow, which indicates that there is sustained activity for high-rise residential and commercial buildings.”

Amid the challenging market environment and intense competition, Van Wijnen is hopeful that demand will pick up in the coming months as government continues to step up spending.