Eagle Cement in talks to buy existing players

Newly listed Eagle Cement Corp. is in talks to acquire other existing cement factories, fast-tracking its capacity expansion and possibly starting a wave of consolidation in the domestic cement industry.

Any prospective acquisition will boost the company’s capacity to produce cement by two million metric tons (MT) a year, equivalent to the capacity of its new manufacturing plant in Cebu that will start operations by 2020.

“Even before the IPO (initial public offering), we have already been looking or discussing potential acquisition targets, but these are still in due-diligence stage so we can’t reveal anything more than that,” Eagle chief finance officer Monica Ang said in a press briefing on Friday.

However, she said Eagle would not use any of the proceeds from the IPO if and when these potential acquisitions materialize.

“We have specific qualifications before we target any company. The area must be close to a strategic market. It could have the raw materials but if it’s not close to a good market, huwag na lang (we won’t go for it). It should also have good standing with permits or the compliance stage and also the valuation, how much are owners willing to sell,” Ang said.

Ang said many cement factory owners were trying to sell to Eagle, knowing that the company was aggressively expanding.

In its prospectus submitted to corporate regulators for the IPO, Eagle had said that it would “continuously evaluate business prospects, potential capacity expansion and acquisitions, subject to the prevailing competitive landscape and cement supply demand balance.”

Any new acquisition could be the equivalent of one production line or two million MT. “That’s still conservative given the market growth rate [and even] given imports coming in,” Eagle president Paul Ang said. “We believe that even with those factors and even if we build [the] Cebu [facility] and whatever factories we build in the near term, we think those projects will be viable.”

With the completion of the third production line in Bulacan, Eagle’s production capacity is set to increase to 7.1 million MT next year from the current 5.1 million MT. With the completion of the Cebu plant in 2020, its capacity will increase to 9.1 million MT.

The capacity expansion is seen to catapult Eagle to be the biggest cement producer in the Philippines. It is now the fourth-largest player in the industry.

While Eagle is selling only in the Luzon area, its target is to start selling from Cebu by next year even while it has yet to complete its production line there. Paul Ang said Eagle’s cement grinding and terminal in Cebu should be ready by 2019, allowing the firm to enter this new market ahead of the completion of its production line.

In its prospectus, Eagle had also said it was interested to venture into other related products or market segments such as ready-mix concrete, masonry or mortar cement. Asked whether there were initiatives to pursue these, Monica Ang said it was “still under the research stage.”

Eagle’s net profit in the first three months rose by 30 percent year-on-year to P1.03 billion on the back of a 19-percent growth in net sales to P3.77 billion, bucking the earnings downturn among its peers.