Cement sector seen getting big boost

MANILA, Philippines - The country’s cement industry is getting a major boost from the robust expansion of the construction sector, which in turn, gets its strength from increased infrastructure development, according to a study.

Business consultancy firm Oxford Business Group (OBG) said, however, that there is concern over the government’s ability to maintain a steady flow of new developments.

Oxford Business Group is a global consultancy firm that procedures annual investment and economic reports to more than 30 countries. Experienced analysts craft business intelligence reports based on in-country research.

The Philippine’s gross domestic product (GDP) grew by 6.6 percent last year, and the government’s outlook for the next two years is anything but optimistic.

State planners are looking at between 6.6 percent and 7.6 percent economic growth this year, and by 7.4 percent and 8.6 percent in 2014, with industry,including construction, leading the growth.

According to the Cement Manufacturers Association (CEMAP), demand for cement rose by 18 percent in 2012, the steepest in 15 years. While prospects for the industry remain good for 2013, the growth rate for 2013 is only seen at 10 percent.

CEMAP president Ernesto Ordoñez told OBG that higher spending from the government on infrastructure would boost turnover.

Increased investments by the private sector in building developments is also expected to fuel the sector’s expansion this year.

Lafarge Republic Inc., one of the Philippines’ largest cement companies, is increasing the capacity of its manufacturing plants and subsidiaries to supply an additional 200,000 tons of cement per year in Luzon, 650,000 tons per year in Visayas and another 100,000 tons per year in Mindanao this year.

“Given the rapid growth in construction investment, the outlook for the cement industry is positive, and most players are engaged in expansion plans to meet the growing demand for cement, aggregates, and concrete,” Don Lee, president of Lafarge Holdings, told OBG.

It appears increased state investments have already impacted cement producers, with several of the largest companies in the sector posting strong earnings for 2012.

At the end of February 2012, Holcim Philippines saw its sales rise by 21 percent, following a fall of five percent the previous year. The company’s net income rose from the 2011 figure of around $50 million to $89 million, an increase of just under 80 percent.