Republic Cement eyes $300M expansion

Aboitiz Equity’s Erramon Aboitiz and Sabin Aboitiz talk about Republic Cement’s expansion plan at the May 15 stockholders meeting

Republic Cement and Building Materials Inc., the cement-making joint venture between Aboitiz and European cement firm CRH, plans to invest $250 million to $300 million to boost its annual domestic production capacity by one million tons.

Seeking to expand its market share and improve operating margins amid cutthroat competition from cement importers and other local producers, the additional investment will be made in the next five years, said Sabin Aboitiz, president of Aboitiz InfraCapital which is the parent firm of Republic Cement.

Republic Cement is currently the country’s second largest cement-maker in terms of annual capacity at seven million tons. It has six cement plants across Luzon, Visayas and Mindanao.

In a briefing ahead of the stockholders meeting of parent conglomerate Aboitiz Equity Ventures (AEV) yesterday, Aboitiz said this cement expansion program would be pursued partly by taking out factory bottlenecks to produce more cement and partly by building new kilns, referring to the cylindrical machines used for the pyro-processing of cement raw materials.

But to encourage cement-makers to build more capacity, Aboitiz said the government must put in place a strategy to ensure that there would be enough domestically-produced supply to cover demand so that the country won’t have to rely on imports.

Apart from giving incentives to players which will increase capacity, Aboitiz said the government should ensure the good quality of cement allowed to enter the market by following the ruling on 28-day “curing” period for cement imports.

“It (curing period) is not days. It’s not one day. When you bring in cement from abroad, you need to test that cement to make sure that if you get an earthquake, the bridge (that used that cement) won’t fall,” Aboitiz said.

AEV president Erramon Aboitiz added that compliance to the curing period was crucial to ensure public health and safety. “If you have cement coming in from wherever. If you’re not sure about the quality of cement and you are going to be putting it in high-rise, in your bridges, there are procedures that have to be followed to ensure that health and safety parameters are met,” Aboitiz said.

Erramon Aboitiz added that for long-term strategic thinking, the government must encourage the local cement industry to build capacity than rely on imports.

At present, current cement consumption in the country has exceeded what can be produced locally, thus encouraging the influx of imported cement. As of December 2016, the Philippine cement industry had an estimated annual clinker and cement capacity of 20.6 and 28.63 million tons, respectively, based on nameplate capacities of integrated cement manufacturing and grinding plants in the country.

Apart from its cement business, AEV has a stake in infrastructure through its involvement in various projects. As the government bids out infrastructure projects or accepts unsolicited proposals, Erramon Aboitiz said the group would be interested to look at these.

“Our focus is on airports, roads and trains,” he said.