Holcim Philippines posts record volumes in Q2 amid strong demand

07.31.2012
 

Key Messages

 

· Holcim posted record volumes in Q2 as cement demand surged on strong government spending and steady rollout of private sector projects

 

· Financial performance was strong as record volumes were complemented with recovery of prices, further improvements in operating efficiencies and effective cost management

 

· Demand expected to dip as rains dampen construction activity, but volumes for full year seen to be higher than last year

Leading cement manufacturer Holcim Philippines, Inc. posted record sales volumes in the second quarter, after demand surged to unprecedented levels on the government’s efforts to hasten infrastructure spending and the private sector’s steady rollout of projects. Demand peaked in May, allowing the company to post its highest sales volume.

Holcim Philippines COO Roland van Wijnen said the company’s performance mirrors the strong industry growth, as government pushed infrastructure projects and the private sector sustained its robust construction activities, particularly for residential and commercial sectors. 

“We see that the government’s efforts to reform the system for public spending is contributing to a reinvigorated construction industry,” said Van Wijnen. “With strong infrastructure activities, the construction industry is again running on two legs as it did in 2010, when the construction industry contributed to strong economic growth,” he added.

The Public Works department was earlier reported to have bid out most of its projects and released nearly three-fourths of its infrastructure budget to date.

Van Wijnen noted that while the company benefited from a robust market, its good performance was the result of deliberate initiatives including strong customer focus, continuous improvements in its manufacturing facilities, and effective cost management. He stressed the important role of its manufacturing facilities in being able to consistently and reliably deliver the required volume and product quality.

“The capability to provide reliable supply and consistent superior quality is critical especially in a very strong market, and it is to our huge advantage that all our manufacturing and distribution facilities across the country were able to rise to the challenge,” said Van Wijnen.

Even as it enjoyed strong volumes, Holcim Philippines continued to be challenged by high input costs. Effective cost management helped it achieve a First Half net income of Php 2.02 billion. While this is 40% higher than the previous year, it is 28% lower compared to 2010. Net sales rose by almost a quarter to Php 13.82 billion.

Van Wijnen expects the cyclical dip in demand in the second half as construction slows due to rains, but sees sales to exceed last year’s as private-public partnership projects finally start and election-related spending trickle in.

“In anticipation of the sustained strong demand, we will be reviving our grinding plant in Mabini, Batangas to add up to 22.5 million bags to our capacity when it opens next year. This facility will allow us to supply one of the fastest growing areas in Southern Luzon,” he said.

While Holcim Philippines is optimistic about its full year prospects, Van Wijnen said the company continues to monitor input costs, particularly power as it continues to adversely impact its financial performance. Availability of power is equally challenging, particularly in Mindanao where the company operates two cement plants. To proactively address this, the company has secured contracts with power suppliers while stepping up use of alternative fuels.

Van Wijnen said Holcim is closely watching Executive Order 79, the government’s new directive to ensure responsible mining.

“We support the government’s effort to push for better compliance and HolcimPhilippines, for its part, has always remained committed to responsible operations in all its quarry sites,” said Van Wijnen who cited the numerous awards given by government, business and communities to Holcim Philippines in recognition of its excellent environmental practices. “We still have to see the full impact of the executive order as the implementing rules and guidelines yet have to be completed, but we trust that our policy makers will recognize vital role of the cement industry in supporting the country’s infrastructure program, and that it can only do so if it has sustainable access to raw materials.”