Eagle Cement Q2 profit soars as construction continues

Eagle Cement's [EAGLE 14.88 0.95%] second-quarter profit of P1.97 billion rose 1,447% from Q2/20 profit of P1.28 billion, and inched up 15% from Q1/21 profit of P1.72 billion. EAGLE manufactures and distributes cement; it owns and operates the largest cement plant in the country, is the 4th largest producer of cement by volume, and the fastest-growing (by market share) cement producer since it started in 2010. EAGLE’s 1H net income of P3.7 billion was a record high for the company, beating its 1H/20 number by 181% and beating its 1H/19 number by 11%.

The company reported that its per-bag profit was lower due to “tight competition”, but that it was able to overcome the margin loss through sheer force of sales volume. The company was also able to pay out substantially more in the way of dividends in 1H this year (P1.65 billion) as opposed to last (P0.09 billion). EAGLE noted huge increases in expenses like freight but noted that these expenses are just derivative of its vastly increased sales volume. Sell more cement, ship more cement. 

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EAGLE is putting up video game-like numbers compared to what it did during the initial lockdown last year, but that makes a lot of sense considering the utter state of chaos that we found ourselves in during that first COVID lockdown, especially in Luzon (where EAGLE sells the majority of its cement). The biggest change for EAGLE has to be the private sector’s (and government’s) willingness to push on with construction through the 2nd wave lockdowns; this continued to drive cement sales despite the ECQ/MECQ lockdowns earlier this year, resulting in EAGLE’s amazing earnings report for a period that was (for most others, not EAGLE) tarnished by a lockdown.

Will construction projects benefit from the same full on-site capacity treatment during the Delta lockdowns, considering the huge uptick in Delta’s contagiousness?

I personally think that the government will do everything in its power to keep the construction industry turning, but that things could change if there are any high-profile incidents of mass infection events. Still, given the government’s treatment of mines and the mass outbreak incidents that we’ve had in that industry, I doubt that anything less than something catastrophic would alter the rules for an industry-like construction that is so relevant to the President’s signature Build, Build, Build program. 

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