The cement industry in the eyes of a veteran player

(By Bernie Cahiles-Magkilat, published in Manila Bulletin, B-7 – August 15, 2007)

"Their entry is a blessing for the industry because they not onlv rescue the industry but elevated it to world class standards, improved on the technology, and enhanced the implementation of social corporate responsibility." Renato C. Sunico Chairman and President, Iligan Cement Corp

Cement is one commodity that is highly controversial and is often maligned for its cartel-like operation Now, this local industry is placed in a more precarious situation after the giant foreign players acquired most of the local cement plants.

Renato C. Sunico, chairman and president of Iligan Cement Corp., one of the five cement plants under the Republic Cement Corp. that are controlled by French firm Lafarge Holdings (Philippines) Inc., comes to the defense of foreign capitalists.

A veteran having spent more than 20 years of liis life in the industry, Sunico gives us a better appreciation of the industry and its make-up.

THE WITNESS

Sunico had been connected with the cement business long before he joined the actual cement manufacturing industry.

He was with Amon Trading, a distributor of cement and a majority owner of the Republic Cement then. Aside from Amon, other original owners of the 50-year old Republic Cement were Jardine Davies, De leon and Delgado groups.

Sunico had wanted to put up his own business when he resigned from Amon in 1983 but the assassination of former Senator Benigno Aquino had sent the county’s economy downhill and that prevented him from pursuing his business plans.

“There was an economic slowdown that started so it was unwise to go into business,” he recalls.

At that time that then Republic Cement invited him to join the company.

But the cement industry was not spared from the economic plunge as construction literally stood still. The political turmoil in the country culminated in the EDSA revolution in 1986.

The EDSA revolution was providential because it was followed by a recovery of the economy albeit at a very erratic pace.

After working for 19 years in Republic Cement, Sunico retired in 2002. But he now serves as president of Iligan Cement, one of its subsidiaries.

As an industry leader, Sunico also serves as chairman of the Cement Manufacturers Association of the Philippines (CeMAP).

“Of course I witnessed the evolution of the cement industry from the Martial Law in 1983 to the Edsa Revolution in 1986 and the transition and expansion of cement plants and then the entry of the multinational corporations,” he says.

All in all, he has spent 24 years in the cement industry. As such, Sunico is one of the remaining industry stalwarts who knows the industry like the back of his hand.

BEST YEARS

According to Sunico, the best years of the cement industry occurred during the pre-Asian financial crisis.

Industry’s sales volume peaked in 1997 as sales volume soared to 14 million tons.

Those were the best years,” he says. Now sales volume is only hitting 11.9 million metric tons.

That boom years was characterized by the rapid economic expansion under the administration of then President Fidel V. Ramos.

The cement industry shared in that boom because of the robust construction sector that was propelled by the strong real estate development.

The boom, however, was cut short when the Asian financial crisis took a beating on most Asian economies including the Philippines in mid-1997. The impact was felt by the Philippine economy in 1998.

Sunico hopes the industry would be able to match the 1997 sales volume. “It is not more of seeing the industry reaching 14 million MT sales volume but rather hoping that with the resurgence of infrastructure projects of the government – cement demand will improve once more,” he says.

For the period 1988 to 1998, Sunico said the industry experienced between 10-15 percent annual growth based on demand because the Philippines was part of the Asian boom.

“As a cement man who has seen the glory years, my wish is to go back to 10-15 percent annual growth so we can catch up with other ASEAN countries like Vietnam,” he says.

MNC BLESSINGS

Sunico also witnessed the entry of the multinational cement corporations in the local market. Looking back, Sunico believed the entry of MNCs was providential to the industry and the country in many ways.

Aside from Lafarge, the three global cement giants include CEMEX and Holcim.

“The entry of MNCs has helped in keeping this industry afloat because in 1998 many of them incurred foreign denominated loans except Republic Cement to finance their expansion programs as cement companies anticipated a further economic growth only to be caught in a deep economic debacle,” he says.

An estimated investments of $1 billion had been poured by the three global cement plants to gobble up local cement plants.

Among the big three cement players, Lafarge has the biggest capacity with 7.7 million MT with its seven plants, Holcim’s four cement plants have a combined capacity 7.238 million MT and CEMEX with 4.6 million MT.

The MNCs saved the industry from a total collapse, introduced new safety culture in the manufacturing plants, implemented technical innovations and best practices that they have been practicing in their plants in other countries.

“The MNCs rescued the local cement companies,” he points out.

Sunico pointed out that before the MNCs came, the country’s cement plants were already old. What the MNCs did was put in new equipment to make them world- class plants that can be benchmarked with their other plants abroad.

Had the MNCs failed to come in on time, the aging and financially strapped local cement plants would have folded down on their own.

“With their presence, we have now plants that can perform with other world class plants. These plants would not have been improved in such a short period of time had it not for the MNCs,” he stresses. For instance, Lafarge spent P700 million pesos for the Iligan cement plant last year.

UNFAIR

Thus, Sunico feels that the barrage of criticisms against the MNCs that they are operating a cement cartel not just in the country but globally and creating a domestic monopoly as unfair.

The only Filipino-owned cement firms in the country left now are the Cojuangco-owned Northern Cement, Pacific Cement in Mindanao, Goodfound and Taiheyo in Cebu.

“It is unfair because they were able to rescue the industry. Filipinos did not lose out in the sell-off but even regained their investments. In hindsight, it is more than what they invested,” he says.

“We could not have recovered in 10 years without the MNCs because cement companies had been saddled with debts that there could be not enough funds to modernize,” he adds.

In the case of Lafarge, it is confident of wiping out the PI.2 billion deficit of Republic Cement Corp. following an upbeat industry outlook even as it continues to invest in its five manufacturing cement plants to make its operations more efficient.

The company hopes this could be the start of a good cycle with the massive infrastructure program of the Arroyo administration and the strong real estate sector.

As of the first quarter, the company’s cement sales volume went up 12 to 13 percent over the same period last year.

Despite its uphill climb, the company has finally declared dividends this year, the first in a decade.

Its cement plants have already attained an average capacity utilization rate of 70 percent.

In addition, the company has also invested over P700 million to expand the capacity of its plant in Batangas by 30 percent on prospects of higher demand.

Last year, the company spent up to P800 million to upgrade the safety features, efficiency as well as equipment of its plants.

“Their entry is a blessing for the industry because they not only rescue the industry but elevated it to world class standards, improved on the technology, and enhanced the implementation of social corporate responsibility,” he says.

 

STRATEGIC INDUSTRY

Needless to say that Sunico has put to task the government for its continued support to the cement industry.

“Cement is a very strategic industry for this country. It should be given the right kind of policy support, not assistance, by the government because a cement industry is crucial to the economic growth of a country,” he says.

“The presence of MNCs should not detract us from pursuing what is good for the industry,” he stresses.

Sunico explained that unlike other local industries, cement is one domestic industry that is highly sustainable because it is using domestic natural resources. It is locally manufactured and therefore has a high value added.

It employs thousands of Filipino workers. Republic Cement has 1,000 workers for its five plants including Iligan Cement, which has 200 workers.

“It’s a pity if it will just follow other manufacturing industries that have been outsourced,” he notes. “It’s a good thing the MNCs are here for the long term” he says.

The MNCs can really sustain long-term operations despite loses and are not going to bail out despite high domestic cost of production.

 

FULFILMENT

Sunico said that what makes a job in the manufacturing sector most fulfilling on his part is its very visible results. As an engineer he is trained to be a technical guy.

“I have a technical background I see the importance of this industry,” he says narrating the joys of having people patronizing your products.

“When you produce something and see people buying and using your product then it feels good. When a building is built and our product is applied I feel fulfilled,” he adds.

RESULTS-ORIENTED

It has been a pleasure for Sunico to see his people moving up in the organization.

“It makes me happy when I see people I hired move up in the organization because they have performed well and improved their lives in the end,” he stresses. As a manager, Sunico would like to be always on top of every situation “I asked for updates and I want results,” he said.

At times, he had to do things on his own because he cannot delegate a work unless he knew it can be done by someone else.

In his family, Sunico is the corporate man while his wife attends to their restaurant and catering business. They own the famous Makati Skyline.

The 65-year old executive dreams of one day leaving the corporate world completely and spend more time with his family. He has long wanted to go on a Mediterranean cruise.

“When the right time comes when I have fully wind up all my work, I will have more time to see my three boys but for now I am still enjoying my work.” he says.

Print Friendly

Comments are closed.

News Archive