Consunji sees Cemex turnaround by 2025
Construction and engineering conglomerate DMCI Holdings Inc. is confident it will be able to turn around the poor financial health of Cemex Holdings Philippines, Inc. (CHP) by next year, as the Consunji-led firm anticipates better market conditions and efficient operational synergies with the cement producer.
DMCI on Tuesday said it expected power, fuel and other production supply costs, which represented 73 percent of CHP’s costs last year, to decrease on “normalizing” market prices and support from the “more affordable” services of Semirara Mining and Power Corp.
High operational costs and weak demand suffered by the cement industry doubled CHP’s losses last year to P2 billion.
“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 Isidro Consunji, DMCI chair and president.DMCI is set to take over CHP in a $305.6-million deal forged with the majority shareholder of the country’s fourth largest cement manufacturer.
According to the holding firm, CHP is currently constructing a 1.5-million-ton integrated cement production line in Antipolo, Rizal province, that is scheduled to begin commercial operations by September this year.The facility is projected to double the CHP’s production capacity in Luzon and boost overall installed annual production capacity by 26 percent to 7.2 million tons.
DMCI is banking on the integration of its subsidiaries with CHP to help recover losses.
DMCI and its property development arm, DMCI Homes, are expected to source around 400,000 metric tons of cement from CHP, with a potential to expand further, “subject to growth in DMCI’s order book and a recovery in DMCI Homes’ project launches.”
Earlier, DMCI Homes said it would earmark P16 billion in capital outlays this year as it aims to launch residential and leisure projects within Metro Manila’s central business districts.As for Semirara, it is anticipating a 227-percent increase in coal sales to 500,000 metric tons annually to supply power for CHP.
The integrated energy company can likewise supply CHP with 50 megawatts of electricity for production.DMCI has priced its acquisition of CHP at P1.42 per share, way below the latter’s initial public offering price of P10.75 in 2016.
This values CHP at P19.5 billion, which is also lower than its current market capitalization of P25.6 billion. This led to negative sentiment from the market, but analysts have said that buyers could “turn things around” for CHP in the long run. INQ
