CEMEX Holdings Philippines expects cement sales to recover in the second half of 2017 after a continued slowdown in the second quarter, amid heightened competition and the longer-than-expected shutdown of one of its plants.
In a quarterly report to the stock exchange on Thursday, the cement manufacturer said its net income plunged 69% to P136.52 million in the April to May period, from the P436.12 million pro forma income it booked in the same period in 2016. Net sales dropped to P5.6 billion in the second quarter, as both cement prices and volumes slowed due to the sector’s competitive environment.
“In terms of the competitive landscape, indications are there are a lot of competition for both volume and price, very robust competitive situation… Markets remain challenged in terms of pricing, and going for demand,” CHP Vice-President for Strategic Planning and Marketing Paul Vincent Arcenas told analysts in a conference call on Thursday.
CHP reported domestic gray cement volumes fell by 3% during the second quarter, and 6% year to date. Domestic gray cement prices also dropped 9% year on year in the second quarter.
The decline was further attributed to weak demand, marked by the government’s delayed infrastructure spending and growth in the private sector, as well as the shutdown of its APO cement plant in Cebu last May.
“The APO shutdown was equivalent to 15% of our cement capacities, because of the unexpected shutdown,” CHP Treasurer Vincent Paul Piedad said.
This brought the company’s year-to-date earnings to P486 million, 46% lower than what it delivered in the first half of 2016. Net sales slipped 14% during the January to June period to P10.98 billion, from P12.71 billion a year ago.
Despite slowdown in the first half, CHP maintained its 3% sales volume growth target for the full year.“We are expecting high single-digit growth for the second half. We look at private consumption and the government spending,” newly appointed CHP President and Chief Executive Officer Ignacio Alejandro Mijares Elizondo said during the briefing.
Mr. Mijares expects an uptick in economic activity in the second half to help boost CHP’s sales, as well as the absence of any scheduled shutdown at the company’s facilities.
The CHP executive also noted that they will leverage on the use of their port terminals to maintain their market base, and recover customers they may have lost to competition.
“We could easily conclude that we have lost some temporary market share. We intend to recover our position in the second half of the year,” Mr. Mijares added.
Mr. Arcenas added they are ramping up marketing activities in order to maintain CHP’s reach.
CHP’s cement products are sold under three brands. The Island and Rizal brands are sold in Luzon, while APO is available in the Visayas and Mindanao region. Meanwhile, its ready-mix concrete product under the Promptis brand is sold in Metro Manila.
This year, the company has earmarked P2.085 billion for capital expenditures, with P918 million to be used for maintenance capex, P889 million for solid plant expansion, and the remaining P277 million for other strategic expenses.
CHP targets to start operations of the $225-million integrated cement-production line at its Rizal facility by the fourth quarter of 2019. The facility will add 1.5 million metric tons (MT) to its current capacity of 5 million MT.
CHP is the local unit of Mexican cement and construction materials company Cemex S.A.B. de C.V.
Shares in CHP dipped by 74 centavos or 10.51% to P6.30 each on Thursday.