San Miguel Cement Corp to consolidate its leading position

San Miguel Cement Corp is expected to receive clearance to proceed with its consolidation of Eagle Cement. The Philippine cement producer aims to purchase a 88.5 per cent stake in Eagle Cement, subject to review by the Philippine Competition Commission (PCC). Credit Sights Asia-Pacific comments that this transaction as it stands would not be subject to review by the PCC and "then it is likely the transaction could go through."

Minority shareholders are not expected to block any deal as the offer valued the shares at a 43 per cent premium over the share price when the deal was announced. Eagle Cement's majority shareholders agreed to sell their holdings to San Miguel Equity Investments Inc (SMEII) in October 2022. SMEII had previously seen its attempt to acquire Holcim Philippines blocked by the PCC. 

The next step will be a mandatory offer for the remaining 11.5 per cent of Eagle's shares that are owned by businessmen Ramon Ang and his family.

The consolidated enterprise
SMEII and its three subsidiaries – Eagle Cement Corp, San Miguel Cement and Northern Cement Corp – would have a cement production capacity of 9Mta on completion of the acquisition, according to Credit Sights. Eagle Cement's Bulacan (San Ildefonso) plant has a cement capacity of 8.6Mta. Eagle Cement also has a project for the construction of its 2Mta greenfield Cebu cement plant. The Cebu plant is scheduled to come on-stream at the end of 2022.

Northern Cement Corp and San Miguel Corp are erecting a 1Mta greenfield cement plant in Sison as a joint venture, which was scheduled for completion in 2022. The Pangasinan cement plant owned by Northern Cement Corp also has a 0.5Mta expansion planned. In addition, San Miguel Corp has a 2Mta greenfield project for the Pagbilao plant under construction. This plant is to be operated by the Ionic Cementworks Industries Inc and is scheduled for commissioning in the 2H23. 

If all cement projects connected with the San Miguel Corp reach completion, the group would see its total cement capacity reach 14.5Mta in the 2H23. This would leave San Miguel Corp well ahead of both Holcim Philippines (10.1Mta) and Republic Cement (10.4Mta) as the leading cement manufacturer in the country. Even this may not be the end of the capex expansion for San Miguel Corp as CEO, Ramon Ang, said in February 2022 that the Southern Concrete industries Corp subsidiary (formerly Oro Cemento Industries Corp) may double cement capacity at its 2.4Mta Darong plant and the company has plans for an additional grinding plant.

Imports
The operating environment for Philippine cement producers remains highly competitive. Imports are also expected to step up after the Philippine Tariff Commission recently scrapped antidumping duties on Vietnam cement and rejected domestic industry pleas for extending safeguard duties on cement imports. According to Cirilo Pestano, executive director of the Cement Manufacturers Association of the Philippines (CeMAP), Vietnam accounted for 91 per cent of cement imports to the country in terms of volume and value in 2017 from almost nil in 2013. 

While the Philippines is estimated to need 66Mt of cement by 2025, local cement producers continue to invest in modernisation projects and new capacity to hold off increasing volumes of imports, mainly from Vietnam.