Aboitiz spending up to $300 M to expand cement business

MANILA, Philippines - The Aboitiz Group is investing $250-300 million in three to five years to expand cement plant capacities as the Duterte administration ushers in the country’s golden age in infrastructure.

Republic Cement & Building Materials Inc. has approved a five-year capital expenditure (capex) program that will expand its clinker and cement capacities to help meet the country’s growing cement requirements, Aboitiz InfraCapital Inc. president Sabin Aboitiz said in a briefing yesterday.

“We have agreed to increase capacity of our cement business in the Philippines. The investment will bring about  a million tons a year of capacity,” he said. “Over the next five years, investment will be about $250-300 million.”

He said the expansion will entail a combination of maximizing the cement plants’ efficiency and also building a new kiln.

Current capacity of Republic Cement is at seven million tons.

Aboitiz InfraCapital serves as Aboitiz Equity Ventures’ strategic business unit for all future infrastructure-related investments of the group.

Under this is Republic Cement, formerly Lafarge Republic Inc., which is owned by a joint venture of AEV and Ireland-headquartered CRH International.

Aboitiz InfraCapital chairman Erramon Aboitiz said the group’s investment in the cement company will aid in its infrastructure strategy.

“Our infrastructure strategy is both direct investments in projects themselves… and also businesses that are related to infrastructure… that’s why we got it into Republic Cement, we think it’s a proxy for infrastructure investments. Even if it’s not a direct investment in infra project itself, we foresee, with government spending and plans of build build build, that the demand for cement will go up,” he said.

The Duterte administration has laid down a P7-trillion public infrastructure plan from 2017 until 2022 under its “Build Build Build” program.

Earlier, AEV CFO Manuel Lozano said the outlook for cement is strong this year since there are more “projects in the works, both government and private.”

To keep up with demand, Republic Cement is focused on upgrading manufacturing network with plants in Bulacan, Teresa in Rizal, Taysan in Batangas, Danao in Cebu, and Iligan City in Mindanao.

“Right now, we’re doing a lot of work to improve efficiency because a lot of the plants are quite old. We need to make sure, before we even start to expand the existing plants. We still have issues when it comes to efficiencies, some bottlenecks we have to clear. That’s our priority especially this year,” Lozano said.

Upgrades would entail bringing in of new equipment both for efficiency and lesser environmental impact.

“Part of it is improving the processes so that we burn fuel efficiently, have less wastage on raw materials. It’s not all new equipment. Some of it is just fixing existing plants,” the company official said.