Holcim Philippines will expand US$450 Million Cement manufacturing plant on strong Demand & 20% sale increase

Holcim Philippines Incorporated (PSE: HLCM) is a publicly-listed company that engages in the business of manufacturing, selling, distributing cement and clinker. Holcim Philippines is part of the Holcim Group. It is one of the largest cement manufacturers in the Philippines and one of the world's leading suppliers of cement. It is the first in the Philippine cement industry to receive ISO 9002 certification (Quality Management System Standards) from the International Organization for Standardization (ISO). Additionally, all of the Holcim Philippines' four plants are ISO 14001 certified (Environment Management System Standards) and OH&S 18001 (Occupational Health & Safety Management) certified.

Holcim Philippines to boost cement capacity

Holcim Philippines has announced that it is planning to invest US$350m-450m in a new 2Mta cement plant to meet long term domestic market needs.

Speaking at a press briefing, Holcim Philippines COO Roland van Wijnen said that the company has been in the process of increasing its capacity in line with recent strong gains in local consumption. It has begun reactivating its idle facilities beginning with its terminal in Calaca, Batangas last year and its grinding plant in Mabini will be operational by 3Q13.

 "What follows would be to build a new cement plant, and we hope to be able to take the first important step next year," he explained adding that "we are now in the midst of preparing a proposal for a new cement plant to be submitted for Board approval in the first half of 2013," said van Wijnen.

Holcim incoming president Eduardo Sahagun said the plant will be built in Bulacan with a capacity of 2Mta. This will boost the firm's capacity to about 9.5Mta when it is completed in 2016. Van Wijnen said they looking at a brownfield project which would take less than three years to complete.

Higher sales offset by rising costs

The company, however, reported a 17 per cent drop in third-quarter net profit as a double-digit growth in sales was offset by higher production and other costs as it tries to keep up with market requirements. This company usually uses the rainy season as time for maintenance and repair. But, as demand exceeded expectations it had to import clinker to prevent insufficient supply.

Sales in the third quarter increased 20 per cent on year to ₱ 6.39 Billion  (US$155 million), getting a boost from better prices, increased construction activity and more government projects. But sales growth was offset by a 27 per cent jump in cost of sales to ₱ 5.18 Billion due to higher sales volume and production costs.

In the nine months to September, Holcim Philippines posted a net profit of ₱2.53 Billion, up 23 per cent from the ₱2.07 Billion recorded in the year-earlier period. Sales climbed 23 per cent to ₱20.21 Billion from ₱16.50 Billion.

Van Wijnen remains confident though that the company expects to achieve double-digit volume growth this year and expects better performance in the months ahead, especially as the plants achieve full efficiencies following the completed maintenance and repair initiatives.

Consumption accelerates

For the first six months of 2012, cement consumption rose 20 per cent YoY to 9.45Mt, according to the Cement Manufacturers Association of the Philippines (CeMap). The increase was attributed by CeMap president Ernesto Ordoñez to higher infrastructure spending comprising new infrastructure projects for 2012 and pent up demand from the year before.

For the remainder of this year, cement sales are expected to remain robust, according to Cemap, with the prevailing good investment climate seen further boosting construction activities in the country. Holcim continues to have an optimistic outlook on the industry, and is confident that growth will carry over to 2013 given the positive economic climate and as the impact of the Private-Public Partnership projects begins to be felt.

Lafarge and Cemex have also announced plans to increase their respective capacity in the Philippines. Cemex is to raise capacity at its plant in APO by 1.5Mta through an investment of US$65 million. The project is expected to be operational by 2014. Meanwhile, Lafarge Republic plans raise capacity by 1Mta through a revamp a its Danao grinding plant in Cebu and debottlenecking its Norzagaray plant's mill in Bulacan. By the first quarter of 2013, Lafarge hopes to supply an additional 0.2Mta of cement to Luzon, 0.65Mta to Visayas and another 0.1Mta to Mindanao.

Cemnet