Lower infra spending, poor weather conditions drag down cement firm’s Q4 2016 earnings

Lower public infrastructure activity, adverse weather conditions and intensified market competition gnawed at the earnings of cement-maker Cemex Holdings Philippines Inc. (CHP) in the fourth quarter of 2016.

CHP’s pro-forma net sales declined by 13 percent year-on-year to P5.56 billion in the fourth quarter of last year. As operating expenses rose, CHP booked a pro-forma net loss of P7.18 million for the three-month period.

Full-year net profit stood at P1.87 billion, supported by a modest 2-percent growth in net sales to P25.37 billion. This was on the back of an increase in volume and price.

The cement maker’s share price fell below its initial public offering (IPO) of P10.75 per share after releasing its fourth quarter results.

CHP attributed the decline in infrastructure spending in the second half to the transition in government leadership.

“We observed more projects being completed, rather than new projects being started,” the company said in a regulatory filing. For instance, it noted that the airport public-private partnership project bundle, initially scheduled to be awarded in the fourth quarter of 2016, had been put up for rebid.

CHP’s consolidated pro-forma cash flow grew by 11 percent last year to P6.7 billion.

“We are proud of our operating results. Despite challenging market conditions in the second half of 2016, which was marked by a slowdown in construction activity, coupled with La Niña-like weather conditions, we managed to increase both our bottom line and profitability through cost management efforts,” Pedro Jose Palomino, CHP president and chief executive officer, said in a statement.

CHP said it had remained upbeat on the multiplier effect of the government’s investment in infrastructure and the state’s ability to support it under its current fiscal program. It anticipates renewed public construction activity in the second half of 2017.

Ebitda (earnings before interest, taxes, depreciation and amortization) margin increased by 2.2 percentage points in 2016 to 26.5 percent, due to lower cost of sales, derived from power and fuel inputs.

CHP was incorporated in September 2015 for purposes of the IPO concluded on July 18, 2016. For accounting purposes, the group’s reorganization—which entailed its acquisition of consolidated subsidiaries—took effect on Jan. 2, 2016.

The company prepared pro-forma consolidated income statement information so that to the extent possible, it could present operating performance under an assumed normalization of operations. —DORIS  DUMLAO-ABADILLA