The country’s leading cement-maker Holcim Philippines expects to beef up its production capacity by about 2.5 million metric tons by end-2016 as it proceeds with plans to build a new cement plant in Norzagaray, Bulacan, which could be the single biggest cement plant in the Philippines.
The new plant would cost $400 million to $550 million and would be built using internally generated funds and new borrowings, said Holcim Philippines chief executive officer Ed Sahagun.
In a press briefing on Wednesday, Holcim reported a 77-percent year-on-year growth in its first-quarter net profit to P1.43 billion as the company improved operating efficiency amid an industry-wide slowdown in demand for cement early in the year.
Revenues grew 8 percent to P7.16 billion from a year ago, supported by healthy demand from Luzon, particularly the National Capital Region. Cement demand growth in the country slowed to 3.4 percent from 20 percent in the same period last year as the sector came from a very high base given record volumes registered last year, according to the Cement Manufacturers Association of the Philippines.
Holcim was affected by the heavy rains in January and February in Mindanao. Sales volume grew by a modest 1 percent in the first three months, slower than the 3.5-percent industry-wide growth as more than 10 percent of the company’s business was coming from Mindanao, Sahagun said.
However, he added that the bulk of cement volumes have been gradually rising, pointing to the sustained pace of large construction projects. For the whole year, the local cement industry was likely to grow volume by 5-7 percent and Holcim would likely outpace this growth, Sahagun said.
Holcim expects demand to pick up in the second quarter as the private and public sector ramp up construction to take advantage of the dry season.
“Our positive financial performance in the first quarter shows the continued demand growth felt by the industry, albeit at a slower pace, and the recovery of prices. Aside from this, the improved efficiency of our plants and the organization’s commitment to keep costs in check were also factors in our good performance,” Sahagun said.
Sahagun noted that the credit rating upgrades given by Fitch Ratings and Standard & Poor’s to the Philippines would further drive the construction sector as lower interest payments on government debt would free up funds for infrastructure. The investment grade rating is also expected to encourage more foreign direct investments in the Philippines, thus helping spur construction and fuel cement demand even more, he said.