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Cement firms expect return to prepandemic sales levels in 2021

/ 04:00 AM May 03, 2021

The cement industry is on track to its return to prepandemic sales levels this year as home builders make up for the slump in demand from infrastructure and nonresidential sectors, the chief of Republic Cement said.

Some of the country’s leading cement-makers have reported a big improvement in profitability in the first quarter but for some, it was mostly due to belt-tightening measures as cement volumes remained sluggish.

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Cemex Holdings reported on Friday that its first quarter net income surged by 130 percent year-on-year to P205 million, but this was mainly due to a reduction in financial expenses, reflecting lower debt levels and declining interest rates.

Its sales volumes, however, decreased by 4 percent year-on-year during the first quarter, citing the ongoing COVID-19 pandemic and its impact on economic activity. On a sequential basis, cement volumes increased by 14 percent, as its performance in the fourth quarter of 2020 was affected by adverse weather conditions.

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For the full year, Cemex expects its cement volumes to grow by 5 to 7 percent.

Holcim Philippines grew its first quarter net profit by 81 percent to P909 million, driven by improved operational efficiency. Net sales fell by 6 percent year-on-year mainly due to lower volumes sold amid an anemic construction and building activities.

For its part, Republic Cement’s income contribution to Aboitiz Equity Ventures in the first quarter amounted to P334 million, 446 percent higher year-on-year due to the ramp-up in sales volume arising from new cement capacities in Bulacan and Iligan, alongside reduced costs and increased overall efficiency.

For the whole of 2020, Republic Cement president Nabil Francis estimated that total cement demand had dropped by 10 percent as the pandemic curbed construction activities.

“We strongly believe that we will get back to 2019 level in 2021, [and attain] a 12-percent growth compared to 2020,” Francis said.

This year, the market should be back with a demand of 35 million tons of cement, matching the prepandemic demand.

“The main driver is the bag cement. Individual house-builders —that’s the real backbone of the demand and the segments that are lagging behind are the infrastructure and nonresidential [sectors],” Francis said.

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Imports are still hurting the domestic cement manufacturing industry as these capture about 15 percent of the market, he said.

“This is a big concern to us and to everybody, because everybody knows that when you buy local, you inject three times more to the local economy rather than when you buy imported cement,” he said.

As such, Francis welcomed efforts from the government, through the Department of Trade and Industry, to investigate the dumping of cement from Vietnam. He pointed out that it was possible that imported cement products were being sold at a much lower prices locally because the Vietnamese cement industry was state-subsidized.

Meanwhile, Cemex reported that its domestic cement prices remained flat quarter-on-quarter. Net of freight charges, domestic cement prices decreased by 1 percent year-on-year due to “subdued activity and competitive market dynamics.” As a result of lower volumes and prices, its net sales decreased by 8 percent during the first quarter to P5.2 billion compared to year-ago level.

Cemex has set aside P6.68 billion for capital expenditure this year, P5.33 billion of which will go to Solid Cement’s plant expansion.

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TAGS: Business, Cement
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