Gov’t infra projects hike Holcim cement profit by 40%

MANILA, Philippines – The government’s spending for infrastructure projects nationwide boosted cement manufacturer Holcim Philippines Inc.’s financial performance in the first 6 months.

On Tuesday, July 31, Holcim executives reported a 40% increase in the company’s January-to-June net income to P2.01 billion from  P1.44 billion in the same period last year.

In a press briefing, Holcim Philippines chief operating officer Roland Van Wijnen said that their net sales grew 24% to P13.8 billion, reflecting a 24% increase.

Of this, sales of cement due to government infrastructure projects accounted to a range of 35% to 40%. When the government was underspending in 2011, this range was only 30% to 35% of their sales.

Holcim Senior Vice President Ed Sahagun said they noticed that most of the demand came from Mindanao, followed by central Philippines, then Metro Manila.

“Regular public works and local government projects are responsible for the increase in demand….The rule of thumb is that whatever the project cost is, 10% will be cement,” Sahagun said.

“We see the government’s efforts to reform the system for public spending in contributing to the reinvigorated construction industry. With strong infrastructure activities, the construction industry is again running on two legs as it did in 2010, when the construction industry contributed to strong economic growth,” Van Wijnen said.

The company maintains a positive outlook for the rest of the year as they expect steady demand from the government, which had announced that more infrastructure projects, especially the big-ticket ones under the public-private-partnership (PPP) scheme will be rolled out.  

Volume sales in the first half already registered a 21% increase to 3.3 million metric tons. “We should reach about 6 million metric tons this year, that’s about 10% higher than last year,” said Van Wijnen.

“Normally our projects would correlate with GDP. If the PPP projects [push through] — and we do expect they will kick-in in the next 5 years — we will probably see cement [to post an annual growth rate] slightly above GDP. So if GFP was about 5%, cement would be 6%,” the executive said. – Rappler.com