Displaying items by tag: Cement Manufacturers Association of the Philippines
Update on the Philippines
30 January 2019The cement industry in the Philippines has been generating a lot of ‘steam’ in the past three months. Some of this has now come to a head in the last few weeks with the Department of Trade and Industry’s (DTI) decision to impose tariffs on imported cement and the Philippine Competition Commission’s (PCC) on-going investigation into alleged-anti-competitive behaviour. Then, there was the unnamed sourced quoted by Bloomberg this week that LafargeHolcim was seriously thinking about selling up in the country.
Resistance to imported cement has been building for a while as local producers and importers have repeatedly clashed in the media. The latest thread of this story started in September 2018 when the DTI started an investigation into imports. A review by the department found that imports grew by 70% year-on-year in 2014, 4391% in 2015, 549% in 2016 and 72% in 2017. However, the market share of imports grew from 0.02% in 2013 to 15% in 2017. This was followed by various organisations taking sides. The Philippine Constructors Association, Laban Konsyumer (a consumer group), the Philippine Cement Importers Association and others came out on the side of the importers, warning of the risk to prices and consumers if duties were implemented.
It didn’t stop the DTI though. It imposed a provisional safeguard duty of US$0.16/bag on imported cement, around 4% of the cost of a 40kg bag. The PCC then said that it was going to consider the new tariff as part of its on-going investigation. Its probe started in 2017 following allegations that the Cement Manufacturers Association of the Philippines (CEMAP), LafargeHolcim Philippines and Republic Cement and Building Materials had violated the Philippines Competition Act by engaging in anti-competitive agreements.
Amid all of this, LafargeHolcim popped up earlier this week with a news story that it was actively trying to find the ‘right’ price for its local subsidiary, Holcim Philippines. The ‘right’ price at the moment being something around US$2.5bn for four integrated plants and associated assets. That’s around US$225/t of production capacity using the total of 8.4Mt/yr in the Global Cement Directory 2019 and considering LafargeHolcim’s 75% share in the subsidiary. This is about what you’d expect, but it is certainly higher than the US$120/t LafargeHolcim has officially accepted for its divestment of its Indonesian operations.
Given the anonymous nature of the sources involved, it’s uncertain whether LafargeHolcim’s alleged intentions to sell in the Philippines is anything more than market scuttlebutt. What is more certain is that Holcim Philippines has had a tough time so far in 2018, reporting a 23% year-on-year drop in earnings before interest, taxation, depreciation and amortisation (EBITDA) to US$64.8m in the first nine months of 2018 from US$83.9m in the same period in 2017. Sales have grown but this has been hit by the fuel, power and distribution costs as well as the depreciation of the Philippine Peso against the US Dollar. It also blamed imports for its problems. However, alongside all of this the company announced in December 2018 that it was spending US$300m towards increasing its production capacity by 30% to 13Mt/yr by 2020. This includes upgrades to its plants at Bulacan and Misamis Oriental with the installation of new kilns, mills and waste heat recovery systems.
The latest victory in the war between producers and importers seems to be on the side of the producers as the government steps in with protection for the industry. The Philippines’ economy is doing well with its gross domestic product (GDP) forecast to rise by 6.5% in 2019 by the World Bank. The trick for the government will be striking the balance between shielding industry from dumping and allowing the construction industry to keep on growing. Rumours about LafargeHolcim selling up are enticing but seem less likely than LafargeHolcim’s decision to exit Indonesia. Leaving would mean abandoning South-East Asia and exiting a country with a growing industry.
Cement Manufacturers Association of the Philippines to stop gathering sales data over competition concerns
23 August 2017Philippines: The Cement Manufacturers Association of the Philippines (CEMAP) has decided to stop collating quarterly sales data on the cement industry due to competition concerns. Instead its president Ernesto Ordonez has urged the government to gather the information, according to the Philippines Star newspaper. Its last report was in 2016. CEMAP is currently under investigation by the Philippine Competition Commission for allegations of anti-competitive behaviour.
Philippine Competition Commission expects to complete investigation of cement industry by 2019
03 August 2017Philippines: The Philippine Competition Commission (PCC) expects to complete an investigation in alleged violations of competitive practice by the cement industry by 2019. PCC commissioner Stella Quimbo made the comments at a forum on the Philippines Competition Act (PCA), according to the Philippines Star newspaper. The investigation follows a probe earlier in 2017 in which the commission says it found reasonable grounds to proceed based on allegations made by the former trade undersecretary Victorio Dimagiba. According to a legal statement made by Dimagiba, the Cement Manufacturers Association of the Philippines (CEMAP), led by its president Ernesto Ordonez, Lafarge Holcim Philippines and Republic Cement and Building Materials violated the provisions of the PCA by engaging in anti-competitive agreements.
Brand matters in the Philippines
03 May 2017The Philippines has been messing up the balance sheets of cement producers so far in 2017. Over the last week Holcim Philippines, CRH and Cemex have each reported lacklustre first quarter results dragged down by poor performance in the country. CRH’s chief executive officer Albert Manifold seemed to receive the worst kicking when analysts in a conference call refused to let it pass that the company’s sales had dropped by 12% year-on-year in Asia. Although to be fair to him the group’s Asian division only represented 2% of global sales at Euro0.5bn…
CRH’s quarterly financial reports tend to be in the form of sparse trading updates. So this lack of detail and CRH’s plans to invest over Euro300m in the market may have prompted Manifold’s grilling. According to the Irish Times he blamed the situation on cheap imports from south-east Asia pulling down the price. He then defended the investment on the grounds that local producers would have an advantage as they increase production capacity due to constant production and ‘guaranteed’ regulation and certification.
CRH isn’t the only organisation that has been burned by the Philippines. Before Christmas this column was praising the local industry for being in a boom. Cement sales had risen by 10.1% year-on-year to 20.1Mt according to CEMAP data in the first nine months of 2016 and the Duterte Infrastructure Plan was starting to target hundreds of billions of US dollars towards infrastructure spending. In the end cement sales rose by 6.6% to 26Mt for the full year in 2016 and this was a solid performance despite being brought down by the fourth quarter.
From the cement producers mentioned above, Cemex reported that its Ordinary Portland Cement sales volumes fell by 9% in the first quarter. It blamed the fall on bad weather and a tough quarter to compare against in 2015. Holcim Philippines said that its net sales fell by 12% to US$176m and it attributed it to lower public infrastructure spending, tighter industry competition and higher production expenses. Eagle Cement meanwhile, the fourth of the country’s major producers, is preparing to float on the local stock market in May 2017 to fund an expansion drive. The poor results of the other three cement producers may dent its proceeds from the initial public offering (IPO).
The words CRH’s Albert Manifold used in his defence were that, “Brand matters over there.” Funnily enough the other big Philippines cement industry news story that has been rumbling away for the last few months is an investigation by the Philippine Competition Commission (PCC) into the conduct of the Cement Manufacturers Association of the Philippines (CEMAP) and some of the leading cement producers. Naturally this includes CRH’s joint venture Republic Cement. The enquiry was prompted in mid-2016 by the accusation of anti-competitive agreements by a former trade official. He also made direct allegations against Ernesto Ordonez, the head of CEMAP. The investigation is on-going and perhaps it will find out exactly how much ‘brand matters’ in the Philippines.
Philippine Competition Commission expected to complete investigation of cement industry in first half of 2017
30 March 2017Philippines: Arsenio Balisacan, the chairman of the Philippine Competition Commission (PCC), says that the commission has 90 days in which to conduct an investigation into the local cement industry. It is expected to complete its probe in the first half of 2017, according to the Manila Bulletin newspaper. The investigation period follows the point at which the PCC found reasonable grounds of alleged violations of competitive practice. Potential fines the local industry could face are US$2m for a first offence and US$5m for a second.
The PCC announced in early March 2017 that was preparing to investigate the cement sector for alleged violations of competitive practice following a legal statement by Victorio Dimagiba, the head of Laban Konsyumer – a consumer rights organisation, accusing the Cement Manufacturers Association of the Philippines (CEMAP), LafargeHolcim Philippines and Republic Cement and Building Materials of engaging in anti-competitive agreements.
Cement Manufacturers Association of Philippines seeks ‘fair’ treatment in competition investigation
09 March 2017Philippines: The Cement Manufacturers Association of the Philippines (CEMAP) has asked that the local industry be treated fairly in an investigation by the Philippine Competition Commission (PCC). In a press statement, Ernesto M Ordoñez, President of CEMAP said that his association had not been notified or given a copy of a compliant filed by a legal firm, according to the Manila Bulletin. He added that the association’s lawyers had previously tried to find out more about the complaint in late January 2017 but had not had a reply.
"Fairness requires that both sides are heard. Not only were we not given a chance to be heard. More than a month after our letter to PCC asking for what the complaint is about so we could give our side, we still have no reply from PCC. We just found out about the nature of the complaint through the newspapers. This is one-sided and unfair, specially considering the track records of the subjects of the complaint," said Ordoñez.
The PCC announced in early March 2017 that was preparing to investigate the cement industry for alleged violations of competitive practice following a legal statement by Victorio Dimagiba, a former trade undersecretary, in August 2016 accusing CEMAP, LafargeHolcim Philippines and Republic Cement and Building Materials of engaging in anti-competitive agreements.
Philippines: The Philippine Competition Commission (PCC) is preparing to investigate the cement industry for alleged violations of competitive practice. It says it has found reasonable grounds to proceed to a full administrative investigation on the cement industry for possible violations of Sections 14 and 15 of the Philippine Competition Act, according to the Philippine Star newspaper. This follows a legal statement by Victorio Dimagiba, a former trade undersecretary, in August 2016 accusing the Cement Manufacturers Association of the Philippines (CEMAP), LafargeHolcim Philippines and Republic Cement and Building Materials of engaging in anti-competitive agreements.
Dimagiba has accused the cement producers of striking illegal agreements including, “restricting competition as to price or components thereof or other terms of trade, abusing their dominant position by engaging in conduct that substantially prevents, restricts, or lessens competition, imposing barriers to entry, or committing acts that prevent competitors from growing within the market.” He has also alleged that Ernesto Ordonez, the head of CEMAP, has used the trade association to justify violating the Philippine Competition Act, as well as maintaining prices of domestic cement in the retail market ‘unreasonably’ high.
Ordonez responded to the claims saying that he was puzzled about the PCC’s decision and that CEMAP had not been informed about a preliminary inquiry.
Philippine cement sales rise by 6.6% to 26Mt in 2016
01 March 2017Philippines: Cement sales rose by 6.6% year-on-year to 26Mt in 2016 from 24.4Mt in 2015 the Cement Manufacturers Association of the Philippines (CEMAP) has said. CEMAP president Ernesto Ordonez attributed the increase in sales to ‘continuing momentum for increased infrastructure,’ according to the Philippines Star newspaper. Despite this sales, volumes fell in the fourth quarter of the year. Ordonez blamed this on the run-up to the elections in 2016 and bad weather. Increased public and private infrastructure spending is expected to keep the local cement industry buoyant in 2017.
Update on the Philippines
07 December 2016Construction firm DMCI Holdings announced plans this week to enter the Philippine cement market. The company intends to build one cement plant on Semirara and three cement grinding plants elsewhere – at Batangas, Iloilo and Zamboanga – to give it a national presence. DMCI’s managing director Victor Limlingan admitted to local press that his company was taking a gamble on spending US$368m in this way.
It has staked its money on the Duterte Infrastructure Plan, a scheme from the new administration that was elected in June 2016 to target US$165bn (!) towards infrastructure spending until the early 2020s. Even if a portion of this money makes it from political hyperbole to the diggers then it is likely to mean a sustained construction boom for an economy that is already growing at around 6%/yr. DCMI’s excitement was almost palpable in mid-November 2016 when it put out a press release calling for potential partners to help it benefit from the rush when it comes. Although the company did add that all the discussions were at the exploratory stage at this time because it was still awaiting bidding documents.
DMCI’s project joins six plants in various stages of planning and construction from San Miguel, Northern Cement, Eagle Cement and LafargeHolcim. In addition four existing plants are carrying out upgrades to increase their production capacity. Clearly, things are looking up for the local cement industry. DMCI follows San Miguel which announced that it was going to spend US$1bn on building five cement plants around the country in mid-2015.
In line with this kind of investment the Cement Manufacturers Association of the Philippines (CEMAP) said that cement sales had risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016. This follows annual sales growth of 8.7% to 21.3Mt in 2014 and of 14.3% to 24Mt in 2015. CEMAP’s data for 2015 also shows that local demand overtook the country’s kiln capacity in 2014. Subsequently imports peaked to 314,000t in 2014, the highest level since 2002.
The country’s second largest producer Republic Cement, a joint venture between CRH and Aboitiz, reported sales growth similar to CEMAP’s one for the first three months of the year. LafargeHolcim, the largest producer, didn’t reveal any figures in its third quarter report but it marked the Philippines as one of its key contributors in the quarter. By contrast, Cemex noted lower growth in its third quarter report at 4% for the nine months to September 2016. It also said that the government transition following the election had slowed cement consumption, especially from infrastructure projects.
The Philippine cement industry is in the enviable position of being in a boom. The kind of problems it has to cope with includes provincial cement shortages, lobbying to increase usage of blended cements, scrutiny of prices by the government and a rise in technical smuggling. Once the new plants and upgrades start becoming operational the true nature of the market should become more apparent. At present it looks likely that DCMI gamble may turn out to be a wise one. The next question will be how many more companies want a piece of the piece too?
Philippines: Cement sales have risen by 10.7% year-on-year to 13.2Mt in the first half of 2016 due to increased government spending on infrastructure and improved private sector involvement in construction. Ernesto Ordoñez, president of the Cement Manufacturers Association of the Philippines, also cited good weather as helping drive up sales, in comments made to the Philippine Daily Inquirer. Private sector construction constitutes 76% of cement sales, while public construction projects use the remaining 24%.