Q1 net income falls 10% due to costly clinker imports
HOLCIM Philippines Inc., one of the country’s largest cement makers and distributors, will spend an additional $40 million (P1.8 billion) from 2015 to 2017 to increase its production capacity to 10 million metric tons from 8 million MT currently.
“We have to invest more than we invest today to be able to meet the target. We need, of course, additional capex [capital expenditure]. The whole project will cost $40 million,” Eduardo Sahagun, Holcim president and chief executive officer, said in a press briefing on Thursday.
Holcim has programmed capital expenditure of P2 billion for 2015.
To achieve the 10 million MT production capacity target by 2017, the company “will have to invest more” than the P2 billion capex programmed for this year, the official explained.
Asked if there will be future fund raising—whether equity or
debt—down the line, Sahagun said he is still uncertain if the firm needs third party financing as the company can generate funds internally, or rely on future gains from the Lafarge-Holcim merger.
“Financing is not a problem for us,” he said.
Expanding capacity is top priority for Holcim after the company had to shut down some of its manufacturing plants last January for periodic maintenance, resulting in importation of clinker raw materials to meet the strong demand from the construction industry.
Clinker imports affected the company’s first quarter net income—also announced in the same briefing—which declined by 10 percent to P1.5 billion from P1.67 billion in the same period last year.
“Our first quarter net income is just slightly lower than last quarter the previous year. We used more imported clinker, which is twice as costly as the local clinker,” Sahagun said.
“We exhausted some of our inventory and we have to supply that with imported clinker. Growth will continue in the second quarter.”
He said the company had utilized “about 30 percent” imported clinker out of the total clinker usage for the quarter, which was outsourced mostly from Vietnam.
Total sales grew by 6.6 percent to P8.6 billion from P8.1 billion in the first three months last year —at pace with industry growth of 6 percent in the same period.
Sahagun said that the company faced a bottleneck in capacity and clinker supply this year as demand from both public and private construction projects has been increasing.
Holcim Philippines is the local arm of Holcim Group based in Switzerland and Zurich. It produces and supplies cement and aggregates (crushed stone, gravel and sand). The cement maker has four factories in the Philippines in La Union, Bulacan, Misamis Oriental and Davao.