LOWER volume and cement prices dragged the profitability this year of Republic Cement and Builders Materials Inc. Still, an official of the Aboitiz Group-led cement manufacturer said they expect business to be better next year.
Sabin Aboitiz, Aboitiz InfraCapital president, said its 2017 outlook for Republic Cement will remain “flattish,” since the government will only start infrastructure projects next year.
“The outlook will probably remain flattish,” Aboitiz said. “But prices are not going to go any lower than today.”
Aboitiz InfraCapital and Republic Cement are units of Aboitiz Equity Ventures (AEV).
“Cement-demand slowdown was experienced in the first nine months of [the year], as compared to the same period last year when there was strong demand due to the election season,” AEV said. “Also, this year, we will have a flattish volume, [as we] have new domestic competition.”
The subdued business environment saw Republic Cement posting an 80-percent profit drop for the nine months of the year to P249 million, down from P1.3 billion last year. Two other cement manufacturers—Holcim Philippines Inc. and Cemex Holdings Philippines Inc.—also reported steep drops in earnings.
“So, next year, the projects will start. Next year we believe the volume will grow,” Aboitiz said. “Once we have the volume growth, the prices should improve automatically.”
Aboitiz also expressed confidence the surge in demand by next year will make exported clinker expensive than locally produced clinker, giving more upside for the locally produced cement raw material.
With soft prices, Republic Cement’s debottlenecking continues as the company works to expand its capacity to over 1 million metric tons (MT). The said effort will increase its capacity to 700,000 MT.
“We are evaluating all different options for the most optimal kiln,” Aboitiz said.
Aboitiz earlier added the company is looking at spending $300 million to $50 million in the next five years for expansion.