Weak public spending seen hurting Lafarge Philippine profits

Weak public spending seen hurting Lafarge Philippine profits
Published: 17 November 2011

Lafarge Philippines expects to end the year with a profit decline before posting a single-digit growth in 2012 due to weak public spending on infrastructure, an official said last week.

“Year-on-year sales will definitely be lower compared to last year because of slow public spending, and this is true for the entire cement industry,” Cirilo M. Pestano II, Lafarge Cement Services Philippines, Inc. vice-president for corporate communications, told BusinessWorld in a chance interview.

“Although in 2010, we had elections, and that typically boosts public and private spending, the lack of PPP projects and even overall road reconstruction requirements really put a dent in our cement sales,” Mr. Pestano said, referring to the public-private partnerships (PPP) for infrastructure which the administration had promised to roll out this year.

“Private sector construction remained strong all year long. Our sales mostly came from commercial developments – high-rise buildings, offices, and hotels. But they weren’t enough to compensate for the lack of activity in the public sector,” he continued.

The sluggish momentum is expected to carry over in 2012, since budget disbursements don’t necessarily mean construction projects will commence immediately, Mr. Pestano explained.

“There will be moderate growth in 2012. We might see cement sales from projects funded by the stimulus package – also the PPP – in the middle of next year, but it’s very possible that we won’t see them until the end of 2012,” he said.