Cement manufacturers continue to feel pinch

Local cement manufacturers continue to feel the pinch of stiff market competition and poor market conditions as they remained largely in the red last year.

Publicly-listed Republic Cement Corp. (RCC) and Southeast Asia Cement Holdings Inc. (Seacem) reported losses of P1.812 billion and P943 million, respectively, in 2001, which both attributed to the consistent decline in total cement demand over the past four years and the increased competition from imports.

In the case of RCC, its president Juan Miguel Montinola said despite the improvement in their operating profit, this was offset by an exceptional provision resulting in a bigger loss from P421 million in 2000.

"Given the continuing decline in the cement demand by approximately five percent for the first quarter this year, it has been projected by management that certain non-operating assets are unlikely to be commissioned or to operate for some years and therefore a prudent exceptional provision has been applied to the 2001 accounts in the amount of P1.565 billion," he said.

The equipment referred to form part of the assets of Fortune Cement Corp. and Premier Cement which are fully consolidated into the accounts of RCC as subsidiaries, Montinola explained.

The company’s operating profit, however, improved by 30 percent to P527.4 million as operations were enhanced by safeguard measures against imports. In November 2001, the trade department implemented a provisional safeguard tariff to address the unabated flow of imports, which averaged 21 percent of the market during that year. This, amid the three- percent contraction in overall industry demand in the same period.

For the first quarter of 2002, Montinola said cement imports have fallen below five percent and signs of a pick up in the industry are turning up as falling interest rates that favor property developers and the benefits of integration are coming through in improved technical and procurement performance.

RCC is fortifying its position in the local cement industry as it plans to acquire four cement firms in its fold: Continental Operating Corp., Southeast Asian Cement Holdings Inc., FR Cement Corp. and Lloyds Richfield Industrial Corp.

RCC has a trademark agreement with the Paris-based Lafarge S.A., a global leader in the building and construction supply industry, which is seen to further improve RCC’s market development program.

In 2001, Seacem incurred a net loss of P943 million, higher than P772 million in 2002 this time due to a P316-million provision for doubtful accounts.

Seacem president Arlene de Guzman said this was due to the fact that collecting long outstanding receivables from costumers was a priority as some of the accounts go back to the onset of the Asian crisis. "As a result, Seacem has had to initiate measures to recover and collect accounts from certain costumers including, in some cases, strong legal action ," she added.