IAN THACKWRAY Chief Operating Officer of Holcim, Philippines

Meeting rising demand
Cement industry

Demand for cement dropped in the Philippines after the 1997 Asian financial crisis and in the last four years it has been either flat or slightly down. Since the start of the year, however, it has been rising as new infrastructure projects get under way and growth continues in the housing and commercial property market.

“It is the first time in the last 10 years that the government will be implementing such vast projects in such a very short period of time,” says Ian Thackwray, Chief Operating Officer of Holcim Philippines (HPHI), the country’s leading cement manufacturer. “It is the beginning of what should be a sustained period of growth, because we have not yet seen the full scope that the projects could bring.” He cites optimism in the economy, liquidity and low interest rates as other driving factors.

The change is reflected in HPHI’s own bottom line. Increased sales pushed up the firm’s first quarter net profit by 174 per cent year-on-year to 475.9 million pesos ($10.3 million). Net sales for the period rose 18.9 per cent to 4.15 billion pesos ($89.5 million) as domestic demand for cement grew by 14 per cent.

According to Mr Thackwray, the industry as a whole has plenty of capacity to support infrastructure development for the coming years. “Overall, we can meet the demand in both the short and medium term. Longer term, we need to continue improving our profitability in order to afford new kiln investments,” he says.

HPHI’s own operating capacity is currently around 6.5 million tons, but another 1.4 million tons can be brought on stream as needed and further improvement can be made by upgrading equipment. Part of the international Holcim Group, which has invested substantially in the Philippines, the company has four plants and employs around 1,350 people. Sales last year amounted to 14 billion pesos ($300 million).

Mr Thackwray rejects suggestions that cement products in the Philippines are overpriced. “Despite the perception that prices are high, they are mid-range for the region, and still not high enough to reinvest and build new capacities,” he says. HPHI itself made returns of 5 per cent and 7 per cent for 2005 and 2006 respectively – “a long way below an appropriate return on assets.”

Last year, the company sold 3.42 million tons in the domestic market, and exported 872,760 tons of cement and clinker to Asia, the Pacific and Africa. Holcim has consistently received awards for its its environmentally-friendly performance, especially in quarry rehabilitation for its operation of a continuous emissions monitoring system. In February it joined forces with the World Conservation Union to work on ecosystem conservation and biodiversity issues relevant to the building materials industry. As part of its CO2 reduction efforts, it has a public-private partnership with GTZ (the German Corporation for International Cooperation) to co-process waste in a cement kiln as alternative fuels and raw materials.

For the future, HPHI has two main aims: to continue to improve its manufacturing performance and to expand the business. Competition, says Mr Thackwray, is not only about product. “It’s also about being more cost effective and having a market approach that is more responsive to customer needs.”