Holcim to spend $40M to boost cement factory output

THE PHILIPPINE unit of Swiss cement group Holcim Ltd. is spending $40 million (P1.8 billion) over a three-year period to increase capacity amid strong demand, as earnings fell by a tenth in the first three months of the year on higher costs.

In a briefing yesterday, Holcim Philippines, Inc. ( HPI) President and Chief Executive Officer Eduardo A. Sahagun said the investment will mainly finance the “debottlenecking” of existing facilities starting this year that will push cement capacity to 10 million metric tons (MT) by 2016 through 2017.

The company has an existing capacity of 8.2 million MT.

This year, the listed firm is earmarking roughly P2 billion for capital expenditures, P1.3 billion of which will go to the maintenance of its facilities.

HPI remains keen on undertaking the development of a brownfield plant in Norzagaray, Bulacan, subject to the approval of its principals in Zurich, Mr. Sahagun said.

“It’s still there, but if we rely on that it won’t catch up because the market is growing faster than we anticipated,” he added.

Asked how the company will finance capacity expansion, Mr. Sahagun said: “Financing is not a problem,” noting that the firm has very little debt and ample cash.

A regulatory filing showed HPI saw a 10% drop in its bottom line to P1.5 billion in the first quarter from P1.67 billion in the same period last year despite a 6.6% growth in revenue to P8.6 billion from P8.1 billion.

Mr. Sahagun attributed the decline to the importation of clin- ker from Vietnam, which costs almost twice as much as its own, to support the market. Operating expenses rose 21% to P503.36 million from P415.29 million.

“In a way, we have exhausted some of our inventory. We see that growth to be continuing in the second quarter. We can feel it this month,” Mr. Sahagun said.

Despite lower earnings in first quarter, the HPI executive expects net profit for the entire 2015 to be “better than last year.”—