Cemex hasn’t published its quarterly report (17Q) yet. But it issued a press release which was picked up by media.
First, a rewind back to Cemex’s 1Q performance
From Philstar.com May 15, 2017 (bold mine)
Cemex Holdings Philippines Inc., the Philippine subsidiary of the Mexican cement giant, reported a 24 percent drop in its first quarter net income to P350 million.
It said cement volumes were lower by nine percent due to adverse weather conditions that persisted from last year into January and February and a high base of comparison, which was marked by strong construction activity prior to the 2016 elections.
“The first quarter sales performance has been challenging, but we are encouraged by improvements in cement volumes versus the prior quarter and a strong sales performance in March which was the highest in the last 17 months. As a result, our revenues also increased by two percent versus the prior quarter,” said company president and CEO Pedro Jose Palomino. CHP’s prices declined by seven percent on a year-on-year basis but the lower volume and price were partially mitigated by bettercost of sales and lower financial expenses.
Despite the challenging demand situation, Palomino said the company remains motivated by rosy prospects of the Philippine construction industry, especially in light of government’s pronouncements on infrastructure investments.
Now to the 2Q and 2H report, from the Businessworld.com July 28, 2017
In a quarterly report to the stock exchange on Thursday, the cement manufacturer said its net income plunged 69% to P136.52 million in the April to May period, from the P436.12 million pro forma income it booked in the same period in 2016. Net sales dropped to P5.6 billion in the second quarter, as both cement prices and volumes slowed due to the sector’s competitive environment.
“In terms of the competitive landscape, indications are there are a lot of competition for both volume and price, very robust competitive situation... Markets remain challenged in terms of pricing, and going for demand,” CHP Vice-President for Strategic Planning and Marketing Paul Vincent Arcenas told analysts in a conference call on Thursday.
CHP reported domestic gray cement volumes fell by 3% during the second quarter, and 6% year to date. Domestic gray cement prices also dropped 9% year on year in the second quarter.
The decline was further attributed to weak demand, marked by the government’s delayed infrastructure spending and growth in the private sector, as well as the shutdown of its APO cement plant in Cebu last May.
“The APO shutdown was equivalent to 15% of our cement capacities, because of the unexpected shutdown,” CHP Treasurer Vincent Paul Piedad said.
This brought the company’s year-to-date earnings to P486 million, 46% lower than what it delivered in the first half of 2016. Net sales slipped 14% during the January to June period to P10.98 billion, from P12.71 billion a year ago….
Mr. Mijares expects an uptick in economic activity in the second half to help boost CHP’s sales, as well as the absence of any scheduled shutdown at the company’s facilities.
Some comments
1. Real economy “low” prices which likewise imputed “low volume” already provided astute observers clues of the industry and the company’s performance.
2. For the 2Q, the company interjected its dismal outcome to COMPETITION. The problem is that competition means the taking of one’s share at the expense of another. With Holcim and Cemex seemingly plagued by similar slacks of low price and low volume, competition has barely been the relevant case. The shutdown of the APO plant is immaterial.
3. Infrastructure spending should signify a compliment to a private sector led construction boom. Apparently, such inauspicious outcomes indicated otherwise. In fact, a Cemex official interpolated the weak demand of cement to the “growth in the private sector”. Unless the cement industry is unrelated to real estate industry, then just why have property stocks been ablaze???
4. Media focused on the prospective improvements of the industry. They did the same in 1Q, which of course, did not happen. 2Q turned out to be worst.
5. Has the stock market anticipated such turn of events?
The short answer is NO.
After a big upside from the July 2016 IPO, Cemex descended only in the middle of the 1Q 2017. Meanwhile, HLCM climbed until March 2017 before it began factoring in the industry’s woes. Eagle even had a strong showing from its IPO last April-May.
The stock market largely remains ebullient over the "infrastructure" led construction industry.
A short note on the Phisix
The Phisix climbed to near record from a week of organized and synchronized pumps and dumps
The institutionalization of the price fixing process has truly been incredible.
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