Holcim warns against rising prices

Controlling cement prices will inhibit investment, a top cement manufacturer warned the government. “Controlling cement prices will block people investing in the construction industry and related fields,” Manilal Fernando, Chairman Holcim (Lanka) Ltd told The Sunday Times FT.

He also said that war does not affect the cement industry as much as the increases in fuel prices. “US Dollar fluctuations will impact the cement market, because we have to import raw materials from overseas,” he said. Among the other elements that inhibit the industry growth, the cost of fuel and electricity are a major obstacle. Fernando said 2006 was a ‘lucky’ year for Holcim. “We are not catering to the high rise market but the home builders’ market ,” he said.

Commenting on the Kankasanthuri (KKS) plant the company was planning to acquire, he said that with the prevalent military activity it is not possible. “As long as we have military activity, it will be difficult for any government to release the KKS land,” he said adding that the area is the ‘biggest arms dump’. “Therefore it is unrealistic to invest there, but as long term cement industry players, we do not want any industry resource going away from us, without bidding for it,” he said.

Holcim and Tokyo Cement fluctuate at 29 to 30 percent share in the market while La Farge Cement comes in as the third player with 18 to 20 percent. Ambuja Cement, Ceylinco Ultratec and International Cement Traders (ICT) all have 10 percent each. Presently the construction industry growth rate stands at seven percent. Peter Spirig, Managing Director/CEO noted the ‘difficult’ economics environment.

“The government is printing money to cover the budget deficit which in turn makes the interest rates rise,” he said, explaining that 72 percent of Holcim’s costs are tied to the US dollar. “When the currency slides, we will be impacted as well,” he said, pointing out that price hikes of Holcim products will be inevitable if such a situation prevails.