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Holcim Philippines reports decline

World Cement,

The cement-maker’s six-month net profit amounted to PHP1.44 billion, down by 48.6% from a year ago. For the second quarter alone, net profit was likewise down by 55% to PHP622.3 million.

Although still above 2009 levels, the company’s sales volumes mirrored the industry’s performance, affected by the overall slump in demand. Holcim has attributed the 9% decline in cement demand to weak government expenditure due to the absence of election-related spending and efforts to cut the national budget deficit. However, as property developers sustained the rollout of commercial and residential projects, construction activities in the private sector remained robust.

Holcim Philippines’ Chief Operating Officer Roland van Wijnen, said that government traditionally accounted for roughly half of total cement demand, which was why the lower infrastructure spending had such an impact on the industry.

Earlier this month, the finance department reported that public spending fell short of its programmed PHP838.55 billion expenditure ceiling, reaching instead only PHP698.87 billion in the first half. The government’s first-half spending was also lower than the PHP788.83 billion spent in the same period last year.

Van Wijnen commented on the weak government expenditures, stating that the company and business, in general, appreciate the government’s efforts to ensure transparency and credibility in construction projects and activities. “We look to the government, however, to set realistic timelines to guide our business and investment plans,” he added.

Additionally, the challenging market saw aggressive pricing schemes from competitors, and Holcim Philippines was compelled to pass on higher input costs to its customers. Van Wijnen noted the company could no longer hold off a price increase, as coal prices have been steadily climbing in the past months. “We need to protect our margins in order to ensure a sustainable business that has sufficient returns to allow for reinvestment to grow our business and serve our customers better,” said Van Wijnen.

The company is reportedly optimistic that the demand downturn is only temporary and that there are, in fact, already signs of invigorated spending. There is another bright outlook in that the government might be able to bid out several of its Public-Private Partnership Projects towards the end of the year, which would boost cement demand.

“Our people on the ground have started to see some government projects being approved, and the Public Works department has committed to spend 90% of its budget before the year ends so we are hopeful we will be able to report better performance in the future,” Van Wijnen said.

As it looks to benefit from this growth, Holcim Philippines is focusing on areas within its control. “We’ve further sharpened our mindset of better cost management among our employees across all our facilities,” said Van Wijnen. “We continue to run our plants efficiently and we are looking to increase the use of alternative raw materials to save on fuel.”

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