Displaying items by tag: Philippines
Philippines: The Cement Manufacturers Association of the Philippines has warned that so-called ‘technical’ smuggling is on the rise. CEMAP president Ernesto Ordoñez claimed that the declared freight costs for nine out of 12 imported cement shipments that it inspected were undervalued at only US$3 – 10/t. These compared to the average freight costs of US$19/t for shipments from Vietnam or China. He added that the difference in the freight costs meant that the government could be losing at least US$175,000 in value added tax (VAT), according to the Philippines Daily Inquirer.
Based on the sample, Ordoñez estimates about 75% of the 161,000t of imported cement that entered the country in the first quarter of the 2016 were technically smuggled. CEMAP have called for inspection of other shipments that entered the country in last quarter of 2015 and in the first quarter of 2016. They added that unchecked smuggling might lead to violations such as cement misclassification and substandard cement that in turn might endanger public safety.
CEMAP data shows that imports of cement grew from 4000t in 2014 to 314,000t in 2015. Cement imports of 161,000t were recorded for the quarter of 2016.
Philippines: The Securities and Exchange Commission (SEC) has approved the US$857m initial public offering of Cemex Holdings Philippines. Documents filed with the SEC showed that Cemex Holdings planned to sell 2.032 billion common shares at an offer price of up to US$0.37/share to raise US$746m in proceeds. Another 304.94 million shares were allotted in case of oversubscription, which could increase total proceeds to US$857m, making it among the largest IPOs in the country, according to the Manila Standard newspaper.
Documents show that Cemex Holdings aimed to use the proceeds to repay up to US$504m worth of short-term loans from related third party New Sunward Holdings, which was used to acquire operating subsidiaries Apo Cement Corp and Solid Cement Corp. Cemex Holdings said it planned to spend US$52m for 2016 capital expenditures, including US$13m for maintenance of existing cement facilities.
Cemex Holdings is a newly formed subsidiary of Cemex Asian South East Corp., which is wholly-owned by Cemex España, which in turn is indirectly owned by Cemex. Cemex Holdings operates two cement plants in the Philippines with a cement production capacity of 5.7Mt/yr.
Philippines: Seasia Nectar Port Services has started commercial operations at Mariveles Dry Bulk Terminal in Bataan. Seasia chairman Ramon Atayde said the new facility would optimise the operations of dry bulk handling, according to the Manila Standard. The terminal is intended to handle shipments of clinker, coal, silica sand, other raw materials for cement and other dry bulk cargoes.
The company started the development of the 11.4 hectare port in 2015, including the development of a 5.9 hectare port facility with a 247m quay equipped with a 13.5m draft under the first phase. The initial phase of the project will accommodate two vessels of 120m or one supramax/panama vessel. It is designed to handle at least 3Mt/yr. The second and third phases will expand the dry bulk terminal to accommodate another two vessels or one supramax/panama vessel. Seasia is a joint venture company between Seasia Logistic Philippines and Nectar Group.
Philippines: Ernesto Ordoñez, the president Ernesto Ordoñez Cement Manufacturers Association of the Philippines (CEMAP), has said sales in the first three months of 2016 rose by 13% year-on-year to 6.43Mt in the first three months of 2016 from 5.7Mt in the same period in 2015. It was driven by strong construction activity in the country according to the Philippines Star newspaper.
“Demand will continue to be strong, especially with presumptive president Duterte saying that infrastructure will remain a high priority during his administration,” said Ordoñez. He added that the local cement industry benefitted from the higher infrastructure budget being allocated for the Department of Public Works and Highways (DPWH). CEMPA forecast that construction growth in both the pubic and private sectors will remain strong in 2016.
Cement Manufacturers Association of the Philippines lobbies for government projects to use blended cement09 May 2016
Philippines: The Cement Manufacturers Association of the Philippines (CEMAP) has asked the government to use more blended cement in its infrastructure projects to meet its emissions targets. “In the Philippines, the private sector uses more than 80% of blended cement. The government, on the contrary, does the opposite. It uses 80% Portland cement,” said CEMAP president Ernesto Ordoñez in an interview with local press.
In October 2015 the Philippines submitted to the United Nations its initial commitments to address climate change that included a 70% reduction of carbon emissions by 2030. The reduction is targeted to come from the energy, transport, waste, forestry and industry sectors.
Philippines: Holcim Philippines’ profit was flat year-on-year in the first quarter of 2016 at US$31.7m, despite revenues increasing by 17% to US$213.6m. The company reported, however, that production costs rose by 23%, eating into revenues.
Holcim Philippines president and country chief executive Eduardo Sahagun said that the company’s first-quarter performance was due to its ability to make supply available in the market on time and its strong regional presence.
“Moving forward, we are cautiously optimistic as we await the results of the coming elections. Hopefully, the focus on infrastructure remains, as this is much needed by the country to sustain its development,” Sahagun said.
Cement demand in the Philippines grew 12% in the first quarter of 2016, on sustained rollout of private sector projects and higher state spending for infrastructure.
Cemex has taken action towards its debts over the course of the last week. First, it announced that it had amended its credit agreements in order to delay the looming effects of consolidated financial leverage and coverage ratio limits by one year to March 2017 with other similar deadlines also delayed. Then it announced the pricing of US$1bn of Senior Secured Notes due in 2026, a form of secured borrowing. This was followed by confirmation of asset sales in Bangladesh and Thailand. Finally, it announced that it was seeking regulatory permission to sell a minority stake in its subsidiary in the Philippines.
This column has discussed the on-going financial travails at Cemex a few times, notably recently when the group released its fourth quarter results for 2015 and in the wake of HeidelbergCement’s announcement to buy Italcementi. Basically, it all comes down to debt, as the following graph shows.
Figure 1 - Cemex assets, debt and equity, 2006 - 2015
Cemex took on large amounts of debt following its acquisition of Rinker in 2007. Since then the value of its assets have been falling faster than it has been able to reduce its debts. However, its equity (assets minus debts) is looking like it might dip below its debts in 2016. Hence, action needs to be taken. Cemex appears to have attempted to do this over the last week. Will it be enough?
The credit amendment was probably the most pressing issue for the Cemex management given that the terms have been reliant on maintaining a leverage ratio (debt divided by assets) below a set limit. Cemex has extended the terms of the borrowing in its favour so it can keep the leverage ratio higher for longer without penalty from its creditors. Note that the leverage ratio here means the ratio between debt and operating earnings before interest, taxation, depreciation and amortisation (EBIDTA).
Selling assets and shares in Asia is the next step in cutting debt in the window the group has negotiated for itself. It holds minor cement production assets in Thailand and Bangladesh that it is selling to Siam City Cement for US$53m. These include a 0.8Mt/yr integrated cement plant in Saraburi, Thailand and a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh. Unfortunately for Cemex it purchased the Saraburi plant for US$77m in 2001 from Saraburi Cement making it a loss of at least US$24m.
A minority sale of shares in its Philippines assets is more promising. The group runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu with a combined cement production capacity of 6.23Mt/yr and a new 1.5Mt/yr production line on the way at Solid Cement also. Local media estimate that the sale could earn Cemex as much as US$850m from the booming market. The Cement Manufacturer's Association of the Philippines reported that cement sales volumes grew by 14.3% to 24.4Mt in 2015 with more growth predicted for 2016.
The credit amendment and asset sales of US$0.9bn may give Cemex the breathing room it requires to keep the creditors at bay for a while longer. It originally refinanced its debts in 2009 at the height of the financial crisis to keep the business running until the markets picked up again. They haven’t. A question that might be legitimately asked at Cemex’s analyst day later this week, on 17 March 2016, is this: when is Cemex going to seriously tackle its debts? As the situation continues the group may end up devoting more time to managing its debts than it will to actually making cement and other building products.
Philippines: Republic Cement has inaugurated its new cement grinding mill at its Norzagaray cement plant in Bulacan. The US$19m expansion will add 0.85Mt/yr of cement production capacity to the plant, according to the Philippines Star.
“This capacity expansion initiative reaffirms Republic Cement’s commitment to support our country’s growth through the provision of top quality cement and building materials,” said Renato Sunico, president of Republic Cement. The new mill will also decrease the plant’s energy consumption.
Republic Cement, formerly Lafarge Republic, is owned by a joint venture of Aboitiz Equity Ventures and CRH.
Philippines: Cemex Philippines has started proceedings to sell a minority stake in its assets. The subsidiary of Cemex has filed a registration statement with the Securities and Exchange Commission (SEC) of the Philippines and the Philippine Stock Exchange. Subject to obtaining approvals from both bodies it will then sell a minority interest in the company’s cement manufacturing assets in the Philippines, the company said in a statement.
Cemex runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu. The decision to sell shares of assets in the Philippines is part of Cemex’s wider asset divesture plant.
Mexico: Cemex has obtained consent to amend its credit agreement dated 29 September 2014 in order to delay the scheduled tightening in its consolidated financial leverage and coverage ratio limits by one year. The formalisation of the amendment is subject to customary conditions and is expected to be finalised in the following days.
The amendment to the credit agreement will allow the leverage ratio covenant to remain at 6.0 times until and including 31 March 2017. It will then gradually decline to 4.0 times by 30 June 2020. The margin grid in the credit agreement will be modified such that if the consolidated leverage ratio is greater than 5.50 times in the reference periods ending on 31 December 2016, 31 March 2017, 30 June 2017 and 30 September 2017. The applicable margin will be 425 bps instead of 400 bps. All other levels in the margin grid remain unchanged.
In addition, the credit agreement will be amended to allow Cemex the right, subject to meeting local requirements in the Philippines, to sell a minority stake in a subsidiary that directly and indirectly mainly owns Cemex’s cement manufacturing assets in the Philippines.