Holcim sees flat growth
Written by Writer on Monday, October 20th, 2008
Slowing private construction hurting cement maker
Holcim sees flat growth
By Likha Cuevas-Miel, Reporter
The Manila Times
Tuesday, October 21, 2008
THE cement industry is taking a hit from the ongoing global financial crisis as private construction slowed while government infrastructure spending dwindled, Holcim Philippines Inc. said, adding demand growth has ground to a halt.
“What we’ve seen at the moment, there’s a lot of caution in starting new projects so there is a slowdown in cement demand and we’ve seeing that in the last month or two. So there’s a fairly strong slowdown in cement demand,” Ian Thackwray, Holcim Philippines chief operating officer, said on the sidelines of the 34th Philippine Business Conference and Expo on Monday.
The executive said the demand for cement at the beginning of the year grew by 5 percent to 6 percent but government has been spending less for infrastructure than promised. In the last two months, growth has dipped to zero as companies delayed their construction commitments while their ongoing projects slowed, he said.
“I think people are going to be cautious for a while and so it’s possible that next year it may be flat or some growth. I don’t know because it seems like the Philippines is not heavily hit by the financial crisis but confidence has to return for people to commit to new projects,” Thackwray said.
He didn’t rule out the possibility that demand may contract next year if government finances do not permit it to invest much in infrastructure and if the private sector remains risk averse.
Holcim closed down one of its kilns in July as demand for its products began to crawl, with the shut down likely to continue next year if demand fails to pick up. The shut down resulted in a drop in production of 1 million tons or 15 percent of the company’s total capacity.
Besides lowering demand, the company is hurt by higher input costs, such as coal, gypsum, fuel and logistics, which are eating into its profits.
“We have to deal over the last two years with very high input costs increases without the ability to pass that in terms of selling prices,” Thackwray said. After holding off any price increase last year, the company adjusted prices last month.
The price increases, however, were not enough to cover the higher cost of input, the Holcim executive said.
Because of the escalating cost of cement, the government is mulling over the reduction of tariffs on imported cement. Thackwray however said this is not the solution to this problem since the issue is not the lack of competition but rather high input costs.
“A better solution is [for the government] to invest in energy and in infrastructure,” he said.
