Displaying items by tag: Eagle Cement

Philippines: Companies including Japan’s Taiheyo Cement, Thailand’s Siam City Cement and China’s Anhui Cement have been linked to the sale of Holcim Philippines. Local companies include Eagle Cement and DMCI Group, according to sources quoted by the Philippine Star. Non-binding offers were have been submitted in February 2019 but it is not clear which companies were involved. However, no agreement has been reached on price yet. LafargeHolcim has reportedly looking at selling its business in the Philippines as part of a review of its operations in South-East Asia.

Philippines: Eagle Cement's net income reached US$88m in 2018, a 13% increase from US$82m in 2017. It credited strong sales, despite some macroeconomic headwinds. The company’s net sales rose by 11% to US$320m from US$290m. In the fourth quarter alone, net income surged by 39%.

"While we are faced with challenges in the industry, we remain steadfast to expand the company to meet the increasing local demand for cement, driven by the thriving property sector and growth in consumption, as well as the anticipated roll out of the government's infrastructure projects," said Eagle Cement’s President and Chief Executive Officer Paul Ang.

Philippines: Eagle Cement says that it is not involved in any discussion for the acquisition of Holcim Philippines. However, it did say that its chairman Ramon S Ang had expressed interest in a potential purchase of the subsidiary of LafargeHolcim. Eagle Cement made the announcement following local media reports that Ang had formally submitted a bid to buy Holcim Philippines. In January 2019 LafargeHolcim was said to be to be considering selling its business in the country.

US: Eagle Materials has appointed Margot Carter to its board of directors. She currently serves as the lead independent director, Chair of the Nominating and Governance Committee and a member of the Audit Committee of Installed Building Products, an installer of building products, and a director of Freeman Company, a brand experience business. Carter has previously worked as the executive vice president, chief legal officer and secretary of several public companies, including RealPage, a global provider of software and data analytics to the real estate industry.

The Philippines has been messing up the balance sheets of cement producers so far in 2017. Over the last week Holcim Philippines, CRH and Cemex have each reported lacklustre first quarter results dragged down by poor performance in the country. CRH’s chief executive officer Albert Manifold seemed to receive the worst kicking when analysts in a conference call refused to let it pass that the company’s sales had dropped by 12% year-on-year in Asia. Although to be fair to him the group’s Asian division only represented 2% of global sales at Euro0.5bn…

CRH’s quarterly financial reports tend to be in the form of sparse trading updates. So this lack of detail and CRH’s plans to invest over Euro300m in the market may have prompted Manifold’s grilling. According to the Irish Times he blamed the situation on cheap imports from south-east Asia pulling down the price. He then defended the investment on the grounds that local producers would have an advantage as they increase production capacity due to constant production and ‘guaranteed’ regulation and certification.

CRH isn’t the only organisation that has been burned by the Philippines. Before Christmas this column was praising the local industry for being in a boom. Cement sales had risen by 10.1% year-on-year to 20.1Mt according to CEMAP data in the first nine months of 2016 and the Duterte Infrastructure Plan was starting to target hundreds of billions of US dollars towards infrastructure spending. In the end cement sales rose by 6.6% to 26Mt for the full year in 2016 and this was a solid performance despite being brought down by the fourth quarter.

From the cement producers mentioned above, Cemex reported that its Ordinary Portland Cement sales volumes fell by 9% in the first quarter. It blamed the fall on bad weather and a tough quarter to compare against in 2015. Holcim Philippines said that its net sales fell by 12% to US$176m and it attributed it to lower public infrastructure spending, tighter industry competition and higher production expenses. Eagle Cement meanwhile, the fourth of the country’s major producers, is preparing to float on the local stock market in May 2017 to fund an expansion drive. The poor results of the other three cement producers may dent its proceeds from the initial public offering (IPO).

The words CRH’s Albert Manifold used in his defence were that, “Brand matters over there.” Funnily enough the other big Philippines cement industry news story that has been rumbling away for the last few months is an investigation by the Philippine Competition Commission (PCC) into the conduct of the Cement Manufacturers Association of the Philippines (CEMAP) and some of the leading cement producers. Naturally this includes CRH’s joint venture Republic Cement. The enquiry was prompted in mid-2016 by the accusation of anti-competitive agreements by a former trade official. He also made direct allegations against Ernesto Ordonez, the head of CEMAP. The investigation is on-going and perhaps it will find out exactly how much ‘brand matters’ in the Philippines.

Construction firm DMCI Holdings announced plans this week to enter the Philippine cement market. The company intends to build one cement plant on Semirara and three cement grinding plants elsewhere – at Batangas, Iloilo and Zamboanga – to give it a national presence. DMCI’s managing director Victor Limlingan admitted to local press that his company was taking a gamble on spending US$368m in this way.

It has staked its money on the Duterte Infrastructure Plan, a scheme from the new administration that was elected in June 2016 to target US$165bn (!) towards infrastructure spending until the early 2020s. Even if a portion of this money makes it from political hyperbole to the diggers then it is likely to mean a sustained construction boom for an economy that is already growing at around 6%/yr. DCMI’s excitement was almost palpable in mid-November 2016 when it put out a press release calling for potential partners to help it benefit from the rush when it comes. Although the company did add that all the discussions were at the exploratory stage at this time because it was still awaiting bidding documents.

DMCI’s project joins six plants in various stages of planning and construction from San Miguel, Northern Cement, Eagle Cement and LafargeHolcim. In addition four existing plants are carrying out upgrades to increase their production capacity. Clearly, things are looking up for the local cement industry. DMCI follows San Miguel which announced that it was going to spend US$1bn on building five cement plants around the country in mid-2015.

In line with this kind of investment the Cement Manufacturers Association of the Philippines (CEMAP) said that cement sales had risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016. This follows annual sales growth of 8.7% to 21.3Mt in 2014 and of 14.3% to 24Mt in 2015. CEMAP’s data for 2015 also shows that local demand overtook the country’s kiln capacity in 2014. Subsequently imports peaked to 314,000t in 2014, the highest level since 2002.

The country’s second largest producer Republic Cement, a joint venture between CRH and Aboitiz, reported sales growth similar to CEMAP’s one for the first three months of the year. LafargeHolcim, the largest producer, didn’t reveal any figures in its third quarter report but it marked the Philippines as one of its key contributors in the quarter. By contrast, Cemex noted lower growth in its third quarter report at 4% for the nine months to September 2016. It also said that the government transition following the election had slowed cement consumption, especially from infrastructure projects.

The Philippine cement industry is in the enviable position of being in a boom. The kind of problems it has to cope with includes provincial cement shortages, lobbying to increase usage of blended cements, scrutiny of prices by the government and a rise in technical smuggling. Once the new plants and upgrades start becoming operational the true nature of the market should become more apparent. At present it looks likely that DCMI gamble may turn out to be a wise one. The next question will be how many more companies want a piece of the piece too?

San Miguel Corporation has upped the pace of its capacity expansion this week to a US$1bn investment towards five new 2Mt/yr cement plants in the Philippines. The announcement builds on its previous plans to build two plants for US$800m. At that time construction had already begun at subsidiary Northern Cement's plant in Pangasinan and Quezon. Plants in Bulacan, Cebu and Davao have now joined the list for completion in 2017.

The scale of this expansion is vast considering that the Philippines has 17 active cement plants with a total integrated production capacity of 24.6Mt/yr. San Miguel president and COO Ramon Ang's comments to media that if there were an oversupply of cement the market would correct itself in a couple of years may sound flippant to anyone who isn't the head of a multi-billion dollar corporation. However, if achieved it will propel the San Miguel subsidiaries from the country's fourth largest cement producer to its largest.

However each of the other major producers also have their own expansion plan in various stages of completion. Holcim Philippines announced US$40m plans in May 2015 to expand its production capacity to 10Mt/yr by the end of 2016, mainly through reviving existing projects. Cemex announced plans in May 2015 to spend US$300m towards building a new 1.5Mt/yr integrated line at its Solid Plant. Lafarge Republic had plans in April 2015 to raise its cement output through the opening of grinding plants at its Rizal and Bulacan cement plants. The former was opened in April 2015 but this is the one plant that hasn't been acquired by CRH following the sale of Lafarge Republic in the run-up to the LafargeHolcim merger. The latter was last reported due for opening in December 2015.

The big change in the Philippine cement industry in 2015 has been the merger of Lafarge and Holcim to form LafargeHolcim. Given that Lafarge Republic and Holcim Philippines held over 55% of the country's production capacity before the merger, it was inevitable that they would be forced to sell off assets. In the end CRH picked up most of Lafarge Republic's cement assets bar the Teresa Plant in Rizal, which stayed with Holcim. The merger has skewed the market towards one clear leader, LafargeHolcim (9.5Mt/yr), followed by Cemex (4.73Mt/yr) and CRH (4.19Mt/yr) with similarly sized cement production bases. These producers are then chased by San Miguel (2.15Mt/yr) and the other smaller firms. If San Miguel succeeds in its expansion strategy then the market will change once again.

Cement sales rose by 11.1% to 11.9Mt in the first half of 2015 according to the Cement Manufacturers Association of the Philippines (CeMAP). They attributed this growth to strong construction activity helped by increases in government infrastructure spending. Alongside this, gross domestic product (GDP) is predicted to rise by 6% in 2015 and 6.3% in 2016 by the Asian Development Bank. Another promising sign for development came from a study by Antoinette Rosete of the University of Santo Tomas which forecast that cement demand would meet 27Mt/yr. Capacity utilisation rates rose to 85% from 68% in 2014 according to Department of Trade and Industry data.

With this kind of encouragement, no wonder San Miguel is betting on such a large expansion project. If Rosete's forecast and capacity utilisation rates hold then the Philippines might need a capacity base of around 36Mt/yr. San Miguel's growth will fill that gap.

Of course other players might have their own ideas about giving away market share. LafargeHolcim and Cemex are likely to be saddled with debt or existing projects. CRH meanwhile is the wildcard as its expansion strategy is opaque. In recent years it has seemed to focus on acquisitions over building its own projects. The Euro5.2bn the company has spent on buying Lafarge and Holcim assets this year seems likely to slow down investment on any internal development plans. However CRH is bringing in local partner Aboitiz in the Philipines to help with a US$400m loan.

The Philippines is clearly an exciting market for the cement industry at the moment. One consequence of the current situation is that it may signal what CRH's global intentions are following the LafargeHolcim merger. If it decides or is able to start building new capacity then it may reveal the start of a new phase for the Ireland-based multinational.