Holcim Philippines forecast flat net income

Holcim Philippines forecast flat net income
04 May 2016

Holcim Philippines Inc delivered flat earnings in 1Q16 although the cement maker expects strong private construction activity and the implementation of the projects under the government's public-private partnership (PPP) programme to improve matters along with state spending on infrastructure later this year.

In a briefing in Makati City yesterday, Holcim President and Country CEO, Eduardo A Sahagun, said the company's bottomline was unchanged at PHP1.5bn (US$31.8m) in the January to March period, dragged by the scheduled maintenance shutdown of its plants in Luzon and additional costs for the importation of clinker to support demand.

"The scheduled maintenance happened in this (first) quarter when in 2015 there is none... You can say if there were no shutdowns, it (profit) should be PHP1.7bn," Mr Sahagun said.

Asked by Business World Publishing on its full-year earnings outlook, the Holcim CEO said: "Normally, there is an improvement."

Holcim sold 54m bags of cement in the first quarter, 14.9 per cent higher from the 47m bags sold a year ago. Of the total bags sold, 7m bags were sourced overseas.

The cement manufacturer rode on strong demand to push revenues by 17.2 per cent YoY to PHP10.1bn in the three-month period from PHP8.6bn, driven by the sustained rollout of private projects and higher state spending for infrastructure. The government allocated this year PHP760bn for infrastructure spending, equivalent to five per cent of GDP.

The company is spending PHP2bn – higher than the regular capital expenditure budget of PHP600m – to raise its cement capacity by 9Mta by the end of the year, Mr Sahagun said. This is in line with a three-year plan to boost capacity by an additional 10Mta by 2017 through the debottlenecking of existing facilities, from 8.2Mta in 2015, to support increased demand for cement.

The cement maker remains "cautiously optimistic" as the country elects a new president, with Mr Sahagun anticipating a temporary weakness in government spending later this year.

"I anticipated a slowdown in my plan, but that will be in the fourth quarter [this year] and first quarter of next year until they put together a new Cabinet," Mr Sahagun, noting that public spending accounts for 40 per cent of sales.

The decline in state spending may be offset by demand from the private sector and PPP projects which are now in the implementation stage.

"Whoever gets elected has to spend on infrastructure," Mr Sahagun said.

Published under Cement News