AEV pins hopes on gov’t projects to lift cement sales
ABOITIZ EQUITY Ventures, Inc. (AEV) is banking on the implementation of the government’s infrastructure projects to boost its cement business in 2018, as the segment suffered from lower volumes and increased competition during the first nine months of 2017.
Republic Cement and Building Materials, Inc., under AEV’s infrastructure arm Aboitiz InfraCapital, experienced an 80% drop in earnings in the January to September period to P1.3 billion. Aboitiz InfraCapital Sabin M. Aboitiz noted earnings will remain flattish for the rest of the year, with a turnaround expected next year.
“We had new domestic competition also, those two things brought the prices to where they are today. Next year we believe the volume will grow, that the DTI ( Department of Trade and Industry) DAO ( Department Administrative Order) will be implemented, and the build program of the government will start. With those three issues then we will have the volume growth,” Mr. Aboitiz, who also sits as AEV’s chief operating officer, said in a press conference late Wednesday.
The Duterte administration has committed P8 trillion in both public and private spending until 2022 to construct roads and railways, among others. The plan looks to place infrastructure spending at 5.3% of the economy in 2017, and then up by 7% by 2022.
AEV is also in the process of increasing its cement capacity by a million tons in the next three to five years. The increase will be done in two phases, starting with the debottlenecking of its existing six plants in the country to maximize production. The second phase will involve the actual construction of a plant that produces both clinker and cement.
Mr. Aboitiz noted expanding clinker capacity would help bring down costs as opposed to importing the material from other countries.
“Those with clinker capacity actually has lower costs. We only have 4 million tons with clinker capacity out of our total of 7.5 million. So we’re gonna increase the clinker capacity. We’re deciding whether to make it in Iligan first or Bulacan,” Mr. Aboitiz said.
Asked on the other factors that would boost cement demand should the government experience delays in its infrastructure program, Mr. Aboitiz said construction from private businesses will drive growth.
“Residential is still very strong, we feel that next year residential will be very strong. But still the NHA (National Housing Authority) program, the government has talked about housing, there are big requirements,” Mr. Aboitiz told reporters.
On the company’s other plans for infrastructure, the executive noted their focus remains to be in airports.
“The small airports we are waiting for a clarification from the government whether they’re going to make it unsolicited or solicited actually, so we’re very interested in airports,” Mr. Aboitiz said.
The group said it is also willing to assist the government in rebuilding Marawi, which the government has just declared free from terrorist influence.
“Our cement plant is 30 kilometers away from there. So we feel like we have a role to play, be it with contractors, we’ll bid for supply of materials for example. We plan to do that when the plan is there, but of course we need to see what the government’s plan is,” Mr. Aboitiz said.
Shares in AEV added 85 centavos or 1.16% to P73.90 each at the stock exchange on Thursday.