Lessons from the global crisis

Written by Roderick L. Abad / Special Features Writer

Thursday, 27 August 2009 22:20

Amid the ensuing global economic slowdown, the Philippine cement industry continues to grow, registering 5-percent volume growth in 2008. The country’s leading cement manufacturer, Holcim Philippines Inc. (HPHI), also reported record volumes during the first half. HPHI chief operating officer Ian Thackwray told the BusinessMirror that this market growth is the result of increased government infrastructure spending and low-cost and affordable housing activities. THACKWRAY: “Stick to the ‘golden rule.’” Although North Luzon still had the biggest volume while demand rose across all regions, it was southern Mindanao where growth was outstanding—thanks largely to infrastructure projects bankrolled by the government’s stimulus package during the crisis. Not to be ignored also was the prolonged housing-construction activities brought about by hefty inflows of overseas Filipino workers’ (OFWs) remittances and declining interest rates. Following an increase in cement demand of 2.9 percent in the second quarter of this year and 5 percent for the full semester year-on-year, HPHI registered revenues worth P6 billion for the second quarter, or 14 percent higher than last year’s P5.2 billion “The reason we’re doing better than expected is not only because the market is doing well, however, but also because of improved efficiencies, better quality and service, and most important, a better understanding of our customers’ needs,” explained Thackwray. Holcim owns about one-third of the market. Taking note of other positive performance indicators, earnings before depreciation, amortization interest and taxes of Holcim surged 33 percent to P2.2 billion from P1.6 billion in 2008, while net income reached P1.2 billion, a significant 58-percent growth compared with last year’s P742 million. For the first semester of this year, meanwhile, the cement firm generated profits of P11.4 billion, bringing net income to P2 billion from last year’s P1.2 billion. Furthermore, the company succeeded in enhancing net working capital, creating P4.1-billion cash flow from its operating activities. “This year will probably be the best-ever year for Holcim despite the recession worldwide. Although next year may be more difficult, we at Holcim are better prepared by continuing to invest wisely, focus on manufacturing productivity, and take care of the customers and employees,” Thackwray said. Unperturbed by crisis It’s been a year since the credit crunch has created its impact on economies the world over. While there may be countries that until now have been gravely affected by the crisis, there are those that already have risen to the challenges. One of them is the Philippines. According to Thackwray, this is due to the government’s significant fiscal reforms. “It’s interesting to note that the Philippines has not been so much touched by the global financial crisis. To some extent, it’s because the government has done at least its job in the last few years, particularly the secretary of finance and the governor of the central bank. The fiscal discipline has been good, and so it has given the country some sort of resilience,” he said. “But it’s also because OFW remittances have stayed strong and that helps a lot to support the domestic economy, particularly the investments in housing.” In response to this, he added that the Holcim Group, to which HPHI belongs, “has had an emphasis on cash conservation and being careful with spending—meaning we have been careful in the capital expenditure and also in managing our support cost.” While the group has been doing reasonably well in a better market like that of the Philippines, Thackwray reiterated that the company did not have to “cut back on anything that is simple and up to the long term health of the business.” Instead, “we’ve continued to invest on our plants to improve their productivity and cost-effectiveness,” he said. Since July last year, HPHI’s second production line in Lugait, Misamis Oriental has been put on hold following weak market demand. But recently, it announced that the plant would resume operations in November this year. “We recognize that government is hard at work, pump-priming the economy with infrastructure projects, and we want to make sure that we are able to continue supporting this initiative,” said Thackwray. “By operating a second line in Lugait, we ensure that there continues to be sufficient market supply.” To continue to invest in the programs deemed important for the company from its customer point of view in the future, HPHI has several strategic initiatives, which have been consistently fall out with energy for the last three years—one of which focuses on their customers. “One important thing that we must do in a downturn is not forget to continue to productively serve our customers well. That means good quality product, excellent service, and being attentive to new opportunities for our products for those customers,” explained Thackwray. The company also has a strong emphasis on manufacturing excellence, wherein it invests on people, capital as well as training and development to make sure that all of our manufacturing plants continue to improve that performance. “We also invest in alternative fuel and raw materials,” he added. “So we have a business for these—the Geocycle business, which is very well suited to help the country in the processing of wastes.” The Geocycle business of Holcim Philippines is focused on helping the waste management program in the country by turning wastes into fuel. As for its advantages, it helps in waste management thrust of the government and keeps an alternative fuel source. Recognizing the big contribution of its manpower to the business, the company also invests in its employees by not resorting to retrenchment despite the global economic turmoil. “We’ve not lain off any people as we recognize that job loss has far-reaching consequences to the employee, his family and community. We try to keep our people motivated and we communicate [with them] frequently so they understand what’s happening in our business. We have an organizational culture that drives open communication, skills training and professional development, and performance-based compensation and rewards,” Thackwray said. Holcim currently employs around 1,500 workers. Recognizing its role as corporate citizens, the company implements CSR initiatives through its flagship programs and community development projects. In all the areas where it operates, it has sustainable community programs that are focused on education, livelihood and infrastructure [like building farm-to-market roads and potable water sources]. Its flagship projects consist of the “WIWAG”, a business entrepreneurship appreciation program for college students and the “’galing Mason,” which provides skills training for masons, leading to national certification. Lessons learned So what have we learned from the challenges of the economic downturn? Says Thackwray, “Stick to the ‘golden rule.’ Don’t panic and don’t do anything that may hurt the business in the long run. “Don’t go for quick gains in the short term that could damage the long term. Protect your business for the long term—stay close to your customers, invest in productivity, keep your employees engaged and motivated. If you do these things while in a crisis, then chances are you emerge an even stronger and better positioned business,” he said.