Eagle Cement rebound prospects dim on weak property sector, competition
MANILA, Philippines — An early resumption in the construction of state infrastructure projects during lockdown did not stop earnings of Eagle Cement Corp. from plummeting as of June, with a full recovery not yet in the cards due to high production costs and a weaker property sector.
In a disclosure to the stock exchange on Monday, the listed cement manufacturer reported P128 million in net income for the three months to June, dropping 92.5% from P1.7 billion net profits same period a year ago. Net sales, which sank 73% year-on-year to P1.4 billion, were to blame.
From January to June, net profits shrank 61% from last year at P1.3 billion.
Shares in Eagle Cement fell 2.34% to P10 at the close of trade, bucking an uptrend in the main index.
“These are very difficult times but we remain confident that the economy will recover from this pandemic and emerge stronger,” Paul Ang, company president and chief executive, said in a statement.
But Ang is also optimistic of a rebound in the next quarters coming from a revitalized construction sector buoyed by building government infrastructure projects. “Our balance sheet remains strong and well-capitalized and the Company is well-positioned to take advantage of a rebound in the construction industry,” he said.
'Tough call'
Whether earnings recovery from capital outlays will materialize is no longer a question, however, the scale of the rebound might be more tempered without the typical support of a once-booming property sector and with price pressures rising due to tight competition.
For Luis Limlingan, managing director at Regina Capital Development Corp., a brokerage, said it is a “tough call” whether Eagle Cement can bounce back strongly with developers postponing new projects and expecting to cut prices by as much as 30% due to lackluster demand.
Even as the company is optimistic to return to pre-coronavirus levels in terms of cement production volume, Piper Chaucer Tan, research analyst at Philstocks Financial Inc. said having a number of cement players competing over fewer number of projects this time may force Eagle Cement to lower prices, which would hurt its bottom-line.
“The question right now will be the cost of production since cement industry has a huge competition. Price pressure will be a major headwind for the company,” Tan said in a text message.
As it is, construction of state projects resumed early last May 15 while on lockdown, and yet Eagle Cement still suffered a dive in profits. Despite this, Ang is banking on the Duterte administration’s “Build, Build, Build” program to recoup some losses.
“The government’s steady push for the completion of major infrastructure projects and the private sector’s readiness to bounce back offer encouraging signs for our Company’s prospects moving forward,” he said.
Metro Manila and four key urban areas in Central Luzon and Calabarzon are back to stricter quarantine protocols until Aug. 18. At the very least, both Tan and Limlingan said it will not help if the modified enhanced community quarantine gets extended.
“If we can revert back to (more relaxed) general community quarantine, or better, soon, the construction and Eagle Cement will be able to make up for lost time,” Limlingan said in a Viber message.
- Latest
- Trending
