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Cement firm rides construction uptick

Vol. XXII, No. 201-A [ BusinessWorld Online ]

Saturday, May 16, 2009 | MANILA, PHILIPPINES

Listed cement firm Holcim Philippines, Inc. saw its profits in the first quarter jump by almost three-fourths on increased demand for cement due to a rise in construction activities. Holcim Philippines’s net income hit P792.99 million from January to March, on sales of P5.49 billion.

"For the first quarter of 2009, cement demand increased by 6% year-on-year on account of the government’s infrastructure spending and the sustained private commercial and residential construction activities," it said.

This led to a P0.12 earnings per share, while return on assets stood at 3%. In a telephone interview , Eduardo A. Sahagun, Holcim Philippines senior vice-president for sales, marketing and distribution, said demand for cement was up due to the government’s efforts to boost the economy.

"The general volume of industry is really high primarily because of the pump-priming of the government infrastructure in the country ... We will be a little bit shielded from the financial crisis," he said.

Mr. Sahagun said private sector spending also remains strong as only high-end residential developments will likely to taper off this year.

In a separate interview, Cement Manufacturers of the Philippines President Ernesto M. OrdoƱez said that while government spending has lifted the industry this year, sustaining growth would depend on how the global financial crisis affects the country. "If [we] are not affected we could continue [the 5% growth], but if it hits private consumption we may not," he said.

Mr. Ordonez said his group is also keeping its eye on substandard cement imports sold at dump prices.

"Countries in recession will be tempted to export at dump prices since demand in their countries may go down," he said. Holcim Philippines increased spending on its manufacturing facilities in the first quarter to P44. 55 million from P33.95 million in 2008. Costs and expenses have remained stable for the past few months, but increased by 28% in the first quarter to P3.39 billion due to the higher cost of distribution, fuel and power.

Mr. Sahagun said energy costs, cement manufacturers’ largest expense item, have been steadily going up, but the company would try to maintain prices.

The firm’s shares closed P0.5 lower at P3.60 on Thursday, or a price-to-earnings ratio was of 30.

Holcim Philippines is more than three-fifths owned by Union Cement Holdings Corp, a joint venture between Bacnotan Consolidated Industries, Inc. and Swiss cement giant Holcim. — Don Gil K. Carreon


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