• Momentum from strong public spending boosts cement demand
• Holcim Philippines to commission Mabini facility to keep market supplied
• Major cost drivers, electricity and coal, continue to grow from their high base while cement prices are still below 2010
• Cost vigilance, operational efficiencies and price increases throughout the year are required to ensure attractiveness of investments
The cement industry soared to new record volumes in the first quarter of 2012, as the strong public spending that began towards the end of 2011 was sustained.
Market leader Holcim Philippines is optimistic that the cement demand will continue to do well, especially as the country catches up to meet much-needed infrastructure and housing requirements. Thus, it is looking to reopen its grinding plant in Mabini, Batangas next year, which will increase its capacity by up to 22.5 million cement bags annually.
Holcim’s Mabini plant will be its second facility in Batangas. Early last year, the company reactivated its terminal in Calaca, Batangas to better serve its customers in Southern Luzon, and facilitate cement transfers from Holcim’s facilities in Mindanao to Metro Luzon, where demand is highest.
Holcim Philippines plans to spend around Php 400 million to rehabilitate the facility. The cement manufacturer acquired the Mabini plant in 2003 but deferred operations due to low demand in the years that followed.
Holcim Philippines COO Roland van Wijnen said the plan to recommission its Mabini grinding facility shows the company’s commitment to keep the market well-supplied for its development needs.
“South Luzon is one of the fastest growing areas in the country and we expect this growth to continue, fuelled by both public and private construction,” said Van Wijnen. “We want to be sure we have the facilities, ready to deliver the volumes when and where these are needed.
“Having facilities across the country – from North Luzon to Mindanao – gives HolcimPhilippines the strong advantage of being near its markets, and our Mabini facility will help further strengthen capability and accessibility in bringing our products to where our customers are,” he added.
The cement industry benefited from the steady rollout of private construction projects and strong public spending. Holcim Philippines was able to sell nearly 20% more in the first quarter of 2012 compared to the same period last year. This growth is in line with the estimated total growth of the industry. Consequently, it posted total net sales of Php6.6 billion, up from the Php5.7 billion a year ago.
Despite the volume growth, Van Wijnen noted that the company’s profitability continued to be eroded by high production costs, especially as it has not achieved the price levels needed to recover from these costs. “Prices are still below what they were in 2010, which puts us in a difficult situation as we are faced with increased cost of inputs, particularly electricity and coal,” he explained.
Even as the company hopes to achieve better prices this year, it is also implementing more measures to keep improving operational efficiencies while increasing use of alternative fuels and raw materials to manage costs and mitigate impact on financial performance. It is also closely monitoring the power situation in Mindanao where it has two plants, and putting in measures to proactively address any disruption in electricity supply.