DMCI to Boost Cemex Production, Cites Synergies
Construction giant DMCI Holdings, Inc. is planning to increase the production capacity of its recent acquisition Cemex Holdings Philippines (CHP) even as the cement manufacturer’s results have been dismal in the past years.
CHP, the Philippines’ fourth-largest cement company, reported a loss of PHP 1.0 billion in 2022 and PHP 2.0 billion in 2023. The losses were mainly attributed to escalating costs and 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,” DMCI Holdings Chairman and President Isidro Consunji said in a statement.
“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,” Consunji added.
DMCI, together with the Consunji family’s privately-owned company, Dacon Corporation, and subsidiary, Semirara Mining and Power Corporation (SMPC), recently acquired CHP for $305.6 million. The acquisition was executed through a share purchase agreement with CEMEX Asia B.V. to acquire its entire holdings of 42,140,266 common shares in Cemex Asian South East Corporation (CASEC). CASEC is the majority shareholder in CHP with an 89.86% equity interest.
The CHP acquisition is DMCI’s largest investment to date and its first acquisition in a decade, it noted.
According to the statement, CHP is in the process of constructing a 1.5-million-ton integrated cement production line at its solid plant in Antipolo, Rizal. The expansion will effectively double the company’s cement production capacity in the Luzon region and will boost the company’s overall installed annual production capacity by 26% from 5.7 million tons to 7.2 million tons, DMCI said. The new cement production line is scheduled to begin operations by September.
Further, DMCI said it expects power, fuel and other production supplies costs, which represented 73% 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.”
Additionally, administrative and selling expenses, which accounted for 52% of prior-year operating expenses, are expected to decline from talent and business process onshoring initiatives, following the exit of CEMEX, DMCI noted.
According to the statement, SMPC expects a significant increase in its coal sales to CHP, estimating a 227% rise to 500,000 metric tons annually compared to 2024 levels. The integrated energy company can also supply CHP with 50 megawatts of electricity and fly ash. Based on historical consumption patterns, DMCI and DMCI Homes are estimated to source around 400,000 metric tons of cement from CHP, with the potential to expand further, subject to growth in DMCI’s order book and a recovery in DMCI Homes’ project launches.