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Holcim Philippines plans US$500 worth of investments

World Cement,

New opportunities in infrastructure spending and private construction activities has reportedly led Holcim Philippines to plan investments of around US$500 million in a new Philippine cement plant to cater to this potential future increase in demand.

Holcim’s Chief Operating Officer Roland van Wijnen commented recently that the company would make a decision over the course of this year on whether to activate more idle assets to increase capacity or build an entirely new cement line. According to sources, Holcim currently operates near its rated capacity of 7.8 million tpa.

Expecting demand to grow by 3 – 5% this year, capital spending for this year is set at around PHP1 billion. Van Wijnen noted that if the demand pace picked up, it might require investment in a new cement plant, which would take around 14 months to build. The company is therefore preparing for the possibility that it might have to build a new plant to serve bigger volumes over the medium-term.

The Asian financial crisis set back cement demand and it was only in 2010 that the industry finally exceeded its 1997 levels. As election-related spending and private residential and commercial projects fuelled construction activities, the industry grew by 7%.

Despite heightened competition, and challenges arising from a power crisis in Mindanao – where the company operates two plants – Holcim reported that its domestic volumes grew 10% in 2010, slightly higher than the growth of the market. The company significantly reduced its export sales to serve the local market, increasing revenues by 8%. Net income grew by 23% to PHP3.8 billion, as hikes in operating costs were offset by increased selling prices and significantly reduced borrowing costs.

In 2010 the pace of construction activities accelerated as consumer confidence reached a historic high, which brought cement demand to its highest level in 13 years.

“In a period of high demand, the primary challenge for us was to keep our domestic markets supplied,” Van Wijnen said. “We met this challenge better than anyone in the industry because we were able to respond in a timely and effective manner to significant market developments, including power curtailments which forced the shutdown of one manufacturing line in our Lugait plant.”

Furthermore, there are reports of the cement giant’s Indonesian branch planning to construct three new silos, each with a 2000 t capacity, worth a total of US$8 million, to cater to the rising demand in the Sumatra region. The silos’ completion is targeted at the end of this year.

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