Fortune Cement Corp. expects a decline in sales and demand, or at best, a flat performance for 2006 due to less government infrastructure spending and high energy rates.
For this year, officials of the cement firm, which is heavily dependent on public works spending, said they are focusing on keeping their head above water amid adverse economic conditions and slow demand. Local cement demand decreased by 4.5% in 2005, to 11.8Mt from 2004’s 12.4Mt.
Edgardo R. Soriano, Fortune Cement president, said they would be satisfied if the company is able to "sustain the P531m bottom line" they earned in 2005. Last year’s income before tax of P531m was an improvement from 2004’s P521m.
But overall, Mr. Soriano noted that they do not expect "big prospects" for the year.
"Cement demand for 2006 is projected to continue to decline or flat at best with the private sector leading consumption, as government infrastructure spending will continue to be limited on account of the delayed approval of the government," Mr. Soriano told the company’s stockholders in its annual meeting yesterday.
Government is now performing its work based on the 2005 budget due to the failure of Palace and lawmakers to agree on spending cuts in the much- delayed appropriations for this year.
Renato Sunico, the publicly-listed firm’s chairman, said they also anticipate a "slight contraction" for this year due to rising power rates, coal prices, and freight rates.
"On a calendar basis, coal and power prices increased by approximately 35%, other raw materials by 9% while packaging materials also increased by 17%. The improved reliability helped offset cost input increases," the firm’s letter to the stockholders said.
Mr. Soriano said it would be good for the company and the industry, in general, if the government increase infrastructure spending through the supplementary budget.
The firm also urged the government to fast track the rehabilitation of the South Luzon Expressway, which Fortune Cement officials said, would increase their sales. The SLEX project, which is envisioned to improve the major arterial road connecting Manila and Quezon, was supposed to start early this year.