Diversified engineering conglomerate DMCI Holdings, Inc. aims to return to profitability by 2025 Cemex Holdings Philippines (CHP), its largest investment to date and its first acquisition in a decade, through synergies within the group.
CHP, the Philippines' fourth-largest cement manufacturer, reported losses of P1.0 billion in 2022 and P2.0 billion in 2023, primarily attributed to escalating costs and reduced sales volumes.
“We recognize CHP's operational and financial issues, but we are positive that we can turn it around by 2025 because of its ongoing capacity expansion and the clear synergies it brings to our group,” said DMCI Holdings Chairman and President Isidro A. Consunji in a statement.
While cement demand is currently soft, Consunji expressed confidence of a rebound as the company's "turnaround plan progresses." He also expects growth support from the government's Build Better More program and the anticipated easing of interest rates next year.
CHP is in the process of constructing a 1.5-million ton integrated cement production line at its Solid Plant in Antipolo, Rizal. The new cement production line is scheduled to commence operations by September 2024.
This expansion will effectively double the company's cement production capacity in the Luzon region. It will also boost CHP's overall installed annual production capacity by 26 percent from 5.7 million tons to 7.2 million tons.
DMCI Holdings anticipates power, fuel and other production supplies costs, which represent 73 percent of CHP’s cost of sales in 2023, to decrease due to normalizing market prices and the transition to a more affordable energy supplier, Semirara Mining and Power Corporation (SMPC).
Additionally, administrative and selling expenses, which accounted for 52 percent of prior-year operating expenses, are expected to decline from talent and business process onshoring initiatives, following the exit of CEMEX.
Meanwhile SMPC expects a significant increase in its coal sales to CHP, estimating a 227 percent rise to 500,000 metric tons annually compared to 2024 levels. In addition to coal, the integrated energy company can also supply CHP with 50MW of electricity and fly ash.
On the other hand, based on historical consumption patterns, DMCI and DMCI Homes are estimated to source around 400,000 metric tons of cement from CHP.
This volume has the potential to expand further, subject to growth in DMCI's order book and a recovery in DMCI Homes' project launches.
The Consunji Group recently sealed the deal to acquire a controlling 89.86 percent of CHP, the fourth largest cement manufacturer in the country, for $305.6 million in cash.