Strong private construction pushes Holcim sales up

The strong growth in private sector construction has pushed up the domestic sales of cement manufacturer Holcim Philippines, Inc. by 16 percent in the first half of the year. Holcim’s net sales for the first half of the year reached P12.9 billion, compared to only P11.5 billion in the same period last year, showing a growth of 12%. Its net income grew to P2.8 billion. Holcim’s sales growth came mostly from election spending and private commercial projects such as office buildings, residential condominiums, condotels, and schools in the National Capital Region (NCR). Holcim is one of the world's leading suppliers of cement and related products such as crushed stone, gravel, sand, ready-mix concrete, and asphalt. Holcim Philippines, Inc. (HPHI) manufactures, sells, and distributes cement both to the domestic and export markets. It has four cement products: Holcim Excel, Holcim WallRight, Holcim Premium Bulk and Holcim 4X. Roland van Wijnen, chief operating officer of HPHI, is optimistic that the company can sustain its sales growth throughout the year. “The new government recognizes the urgency of putting in place much-needed infrastructure projects to sustain economic recovery, and is looking to partner with the private sector to achieve this," says Van Wijnen. “Apart from this, we also need to address the significant housing gap. If we view these potentials against the continued growth of remittances and credit availability, we can expect that the construction sector will continue to be vibrant," he added. Van Wijnen said the company’s sales growth, operational improvements, more effective cost management have helped offset the challenges brought about by higher freight and electricity costs. Van Wijnen is heartened both by the brisk sales of their main product and the market’s growing preference for its other products. The sales of “Holcim 4X," bulk cement for large users, for instance, has gone up. Holcim 4x is supplied in bulk for ready-mix concrete applications in high-rise projects and infrastructure that require high compressive strength and workability. Another product enjoying higher sales is Holcim WallRight, suited for masonry applications. HPHI operates four cement plants in La Union, Bulacan, Misamis Oriental, and Davao. It currently has 1,500 employees. Anticipating a stronger demand for its products, HPHI plans to resume operations at its cement terminal in Calaca by early 2011. While it does not have cement production facilities, the Calaca terminal can house 1.5 million tons of cement and facilitate product deliveries to markets in Luzon. The company is now also back to running two lines in its Lugait plant, after it was forced to shut down one line last March due to power curtailment in the region. High power costs Van Wijnen said higher power costs have negatively affected HPHI. In April this year, Holcim’s power cost in Mindanao soared by over 40% compared to the end of 2009, as the El Nino-induced dry spell required more expensive energy sources. Even as power sources are now stabilizing in Mindanao, the rates are expected to remain high for the rest of the year. The National Grid Corporation of the Philippines recently signed a one-year deal with an ancillary service provider to ease the power problem in the region. The Philippines is said to have the second-highest power rates in Asia, next only to highly-industrialized Japan. HPHI is also looking closely at rising global coal index prices because power and fuel account for more than half of Holcim’s variable costs. The global coal market is vulnerable to heightened demand and transport problems, especially when the winter season comes in other countries. As of June, the Newcastle index prices of coal showed an increase of more than 20 percent since the end of 2009. –VVP, GMANews.TV