DMCI sees Cemex PHL’s turnaround by next year


By Revin Mikhael D. Ochave, Reporter

CONSUNJI-LED engineering conglomerate DMCI Holdings, Inc. said it expects the financial performance of the newly acquired Cemex Holdings Philippines, Inc. (CHP) to rebound by next year, led by stronger demand and the government’s infrastructure program.

“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,” DMCI Chairman and President Isidro A. Consunji said in a stock exchange disclosure on Tuesday.

“While cement demand is currently soft, we expect it to rebound as our turnaround plan progresses, supported by the ‘Build, Better, More’ program and the anticipated easing of interest rates next year,” he added.

DMCI Holdings said the acquisition of CHP is the conglomerate’s “largest investment to date and first acquisition in a decade.”

CHP, the country’s fourth largest cement manufacturer, saw a P2 billion loss in 2023, up by 100% from the P1 billion loss in 2022, mainly due to higher costs and lower sales volumes.

Last week, DMCI Holdings, Dacon Corp., and Semirara Mining and Power Corp. (SMPC) announced the acquisition of CHP for $305.6 million under a share purchase agreement. The transaction is expected to close before the end of 2024.

DMCI bought the entire shares of Cemex Asia BV in Cemex Asian South East Corp. (CASEC), the majority owner of CHP with an 89.96% equity interest.

Dacon has been appointed as the bidder for the mandatory tender offer to acquire the remaining 10.14% of the total issued and outstanding capital stock of CHP.

Under the transaction, DMCI is set to acquire a 56.75% stake in CASEC, Dacon will secure 32.12%, and SMPC will purchase the remaining 11.13%.

To increase production volume, DMCI said that CHP is in the process of building a 1.5-million ton integrated cement production line at the cement company’s solid plant in Antipolo, Rizal. It is expected to begin operations by September.

The new line will increase CHP’s capacity by 26% to 7.2 million tons from the previous 5.7 million tons, the company said.

“This expansion will effectively double the company’s cement production capacity in the Luzon region,” it noted.

DMCI also anticipates a decline in power, fuel, and other production supplies costs as a result of normalizing market prices and CHP’s transition to a more affordable energy supplier with SMPC.

Power, fuel, and other production supplies costs took up 73% or P10.01 billion out of CHP’S total costs of sales last year worth P13.74 billion.

The conglomerate added that administrative and selling expenses, which accounted for 52% of prior year operating expenses, are expected to decline due to talent and business process on-shoring initiatives following the acquisition.

SMPC expects a significant increase in its coal sales to CHP, estimating a 227% rise to 500,000 tons annually compared to 2024 levels.

The energy company could also provide CHP with 50 megawatts of electricity and fly ash.

DMCI and DMCI Homes are also projected to source around 400,000 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,” it said.

Sought for comment, AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message that DMCI’s projection on CHP’s turnaround is possible.

“We think it’s possible given that CHP can be integrated vertically into DMCI Holdings’ other business units. But we really need to see costs for cement manufacturing to come down and to see some easing in competition versus imported cement,” he said.

However, Mr. Garcia remains cautious about calling the recent transaction a “good move” for DMCI Holdings.

“We’re still cautious on it, as CHP has a track record of non-profitability. We’re hoping that the change in management, and maybe infusion of additional capital, is the key to turning the business around,” he said.

“Although, given the weak profits of most cement manufacturing companies, there’s a possibility that there is an underlying fundamental weakness in the sector,” he added.

On Tuesday, DMCI Holdings shares dropped by 0.18% or two centavos to P11.08 apiece. SMPC stocks rose by 0.46% or 15 centavos to P32.95 per share. CHP shares increased by 0.73% or one centavo to P1.38 each.