Conglomerate San Miguel Corp., by acquiring Holcim Philippines Inc. two weeks ago, has cemented its hold as one the country’s biggest infrastructure companies.
It is now in a better position to see the significant completion of its major infrastructure projects from toll roads and airports to railways, in step with the ambitious drive of the President Rodrigo Duterte to bring the Philippines to the golden age of infrastructure, when gridlock will be a thing of the past and travel time is very much predictable.
San Miguel’s acquisition of Holcim from European giant LaFarge Holcim for $2.15 billion has made the diversified conglomerate a total infrastructure corporation, with significant assets in the toll road and railway sectors, water and power, airports and port operations.
San Miguel, with assets of P1.7 trillion, also broke the decades-old hold of foreign multinational companies on a vital industry where the country’s future economic growth is literally built on: cement manufacturing. The conglomerate bested Anhui Conch, China’s largest cement company, for the right to buy Holcim from LaFarge Holcim, which has decided to exit Southeast Asia.
Cement supply is a major and critical input to infrastructure development. The Philippines, in the midst of a property boom and construction frenzy, cannot afford to be at the mercy of global risk factors affecting foreign multinationals and international suppliers.
Prior to San Miguel’s major entry, the top three cement companies, LaFarge Holcim, Republic Cement, and Cemex—all affiliated with foreign multinational companies—aggregately controlled over 70 percent of the local market. In contrast, the cement industry in Indonesia, Vietnam, Malaysia and Thailand is dominated by local players.
There has been a pushback on foreign ownership of the cement industry across Southeast Asia because of the product’s critical role in economic development.
The situation is worse in the Philippines. It is now the third largest importer of cement in the world after relying on foreign manufacturers that dominate the local market.
The Philippines in 2016 imported some 6.4 million tons of cement, with 3.8 MT coming from Vietnam. Almost 25 percent of Philippine cement consumption at the time was fed by imports. In 2018, it became the only net importer of cement among the five large countries in Southeast Asia. The Philippines imported some 8.4 million tons, or 25 percent of the domestic capacity. Imports accounted for 35 percent of the demand, while the local industry supplied the balance.
With the continued rise in cement demand brought about by Build Build Build, private sector infra initiatives and the overall rise in construction projects fueled by the country’s growing economy, it makes a lot of sense for a Filipino company like San Miguel to take over Holcim.
As one of the country’s largest and most diversified conglomerates, San Miguel has the capability and resources to manage—even upgrade and upscale—Holcim’s operations. In much the same way it is increasing its manufacturing capacity for food and beverage products, raising cement production to meet the projected demand—or just lessen dependence on imports—is one of the things that the conglomerate can immediately do.
None of the foreign groups has invested in a single new kiln line since taking over the local cement industry, although the demand has risen from around 12 million tons in 2003 to over 30 million tons in 2018. They simply made minor adjustments to old facilities and took out from the Philippines huge amounts of dividends, technical fees and other payments to invest in other countries.
San Miguel president and chief Ramon Ang, meanwhile, is one local business leader who is capable of making Holcim more efficient to meet the country’s needs. San Miguel, under the helm of Ang, owns one of the largest infrastructure firms in the country, responsible for such large-scale projects such as the MRT-7, Skyway Stage 3, the Tarlac-Pangasinan-La Union Expressway, the Naia Expressway, the SLEX TR4 extension to Quezon province, and the Southeast Metro Manila Expressway or Skyway 4 projects.
A major consideration for San Miguel’s bid for Holcim will most likely be its infrastructure business. By leveraging on the combined strength and synergies between these two businesses, the company will not only be in a better position to complete and pursue new infrastructure projects, it will also be able to supply the needs of other infrastructure companies in the country.
San Miguel is also looking to build possibly the largest and most ambitious infrastructure project in the Philippines today: The New Manila International Airport that will rise rise on a 2,500 hectare property in Bulacan province. Such a vital infrastructure project cannot be subject to risks associated with foreign cement manufacturers.
E-mail: rayenano@yahoo.com or extrastory2000@gmail.com
or business@manilastandard.net
