Eagle Cement Corporation, a Filipino-owned company, intends to participate through its subsidiaries in quarrying, mining and leasing of real properties. The company generates its revenue mainly through manufacturing, marketing, sale and distribution of cement.2
Below is the EAGLE’s revenue mix per customer:
Sales of cement bags to retail customers comprise the main revenue source of the Company accounting for about 77.1%, 81.7%, and 87.7% of the consolidated net sales for years ended December 31, 2016, 2015, and 2014, respectively. However, demand of bulk cement has seen a CAGR of 67.57% over the past three (3) years, accounting for about 22.9%, 18.3%, and 12.3% of the consolidated net sales for years ended December 31, 2016, 2015, and 2014, respectively.3
Below is the revenue mix per product:
The Company’s Type 1P under the brands Eagle Cement Advance and Eagle Cement Exceed (packed in 40 kilograms/bag) accounts for 88.0%, 82.4%, and 79.0% of consolidated net sales for years ended December 31, 2014, 2015, and 2016, respectively.3
Type 1P is the Company’s top products sold which is used for general construction applications such as floorings, plastering, as well as the production of concrete products like hollow blocks, culverts and concrete pipes. Distribution of said product is generally done through direct plant pick-up or delivery to cement retailers, dealers and distributors which in turn is sold to various customers like retailers, contractors, and home builders.3
Type 1 bulk cement Eagle Cement Strongcem contributes around 21.0%, 17.6% and 12.0% of the consolidated net sales for years ended December 31, 2016, 2015, and 2014, respective. Bulk cement is usually used for cement and concrete applications that require higher compressive and early strength development such as concrete slabs, foundations and matting in high rise buildings and infrastructures like roads and bridges. Distribution of said product is done through direct plant pick-up or truck delivery to institutional customers such as ready mix concrete suppliers, real estate and infrastructure developers and contractors.3
EAGLE has the following corporate structure: 4,5
Far East Cement Corporation4,5
Ultimate parent company, Far East Cement Corporation (FECC) is 100% owned by shareholder Ramon S. Ang. FECC is into manufacturing, marketing, sale and distribution of cement, cement products and by-products. Currently, FECC has ownership interest in holding companies and companies engaged in the cement manufacturing industry.
South Western Cement Corporation4,5
South Western Cement Corporation (SWCC) was strategically acquired by EAGLE on December 23, 2016 for a total consideration cost of P450 million. Acquisition cost was inclusive of P3.8 million goodwill due to value in SWCC’s ability to grow and expand the EAGLE business in Visayas region through its limestone reserves and other resources. As of December 2016, SWCC has an outstanding Mineral Production and Sharing Agreement (MPSA) of 812.25 hectares of limestone and shale mineral rights. This will increase EAGLE raw material sources by around 38.38%.
KB Space Holdings, Inc.4,5
On August 13, 2015, EAGLE acquired 100% ownership in shares of stock of KB Space Holdings, Inc. (KSHI) amounting to P534 million. KSHI primary purpose is to purchase, acquire, lease, develop or in any manner hold, own, use, sell or turn into account or dispose of, land and real estate of any kind and description. As of December 31, 2016, KSHI owns five (5) contiguous properties with an estimated aggregate area of 4,815 square meters. KSHI is located in a prime commercial area in Brgy. Wack-Wack, Mandaluyong City, Metro Manila.
The Company’s management team are as follows:
Table of Ownership6
Table of directors and executive officers6
EAGLE is being managed and run by a father and son duo, and John Paul L. Ang. RSA is highly associated with San Miguel Corporation (SMC), holding numerous position domestically and internationally for the last 5 years. RSA boost experience and affiliations on different companies, on different industries.7 JPA, on the other hand, is the proponent of turning a distressed Malaysian cement company (Sarawak Clinker) into a 60million dollar worth Cement Company. JPA at 37 years old, is now being considered a 15-year industry veteran in the cement business.8
RSA and JPA are being supported by highly competent Board Directors and Executive officers.
Below is EAGLE historical cash dividends declarations for the last 3 years:
Cash dividends for common shares in 2016 accounts for 10% of net income after tax of 2015. In its prospectus EAGLE stated that it intends to pay dividends annually in the amount of up to 50% of its audited net income after tax of the previous year subject to compliance with the requirements of applicable laws and regulations and subject to investment plans and financial condition of the Company.
Recent business developments:
• Construction of the third production line in Bulacan Cement Plant – the 3rd line is set to be ted to be completed in 2018. It will increase EAGLE’s cement production capacity by about 2 Million MT or about 50 Million bags per annum. This will bring total production capacity to about 7.1 Million MT or about 180 Million bags per annum.2
• Construction of the Cebu Cement Plant – it is estimated to commence within the fourth quarter of 2017 in which 100% of the IPO proceeds will be used to partially finance construction of a 2 Million MT capacity cement plant and its support facilities in Cebu. The Cebu Cement Plant will include construction of a manufacturing plant in Cebu, and distribution centers and marine terminals in Southern Luzon, Visayas, and Mindanao such as, but not limited to, the following areas: Camarines Sur, Camarines Norte, Bacolod, Iloilo, Negros Occidental, Negros Oriental, Palawan, Sorsogon, Leyte, and Davao.10,2
The following are the key considerations of the author’s when investing in the company:
Growth prospects of construction, real estate, and infrastructure industries – historically, the cement industry is primarily driven by aforementioned industries. Any slowdown of these industries will adversely affect the ability of EAGLE to grow and meet its target.
Currently, the Duterte administration had communicated its support for the infrastructure. According to the Public-Private Partnership Center, a total of 64 big-ticket projects are either for implementation or in the pipeline as part of the infrastructure projects of the new administration. These projects include major road networks, railway systems, bus rapid transit systems, airports and seaport modernizations.
× Increasing fuel and electricity cost relative to cost of goods sold11 – For the years 2016, 2015 and 2014, fuel costs accounted for approximately 20.87%, 16.34%, and 18.98%, respectively of the cost of goods sold of the Company. Meanwhile, electricity costs accounted for approximately 29.77%, 28.38%, and 23.55% of the cost of goods sold of the Company for the years 2016, 2015, and 2014, respectively.
The kilns at the Bulacan Cement Plant of the Company are fueled by coal sourced from Semirara Mining and Power Corporation (SMPC) and Manyplus Energy Pte. Ltd. (MEPT). Historically, the Company has entered into supply agreements with SMPC and MEPT. As to the writing of this article, the renewal of these agreements are still being negotiated by the parties.
- EAGLE Audited Financial Statements (AFS) 2016, 2015, 2014, 2013
- EAGLE Final IPO Prospectus, Business Overview page 82, https://goo.gl/9THByt
- EAGLE Final IPO Prospectus, Products and Brands page 86-88
- EAGLE Final IPO Prospectus, Corporate Structure page 85-86
- Supplementary Schedule of AFS 2016, the Map of the Conglomerate 2016
- Public Ownership Report as of June 16, 2017, https://goo.gl/Q1qd7g
- EAGLE Final IPO Prospectus, Board of Directors and officers page 115-119
- Inquirer Net, “Introducing Paul Ang, the next cement magnate” by Doris Dumlao-Abadilla (May 14, 2017), https://goo.gl/U519Bc
- EAGLE Final IPO Prospectus, Dividends and Dividend Policy page 54-56
- EAGLE Final IPO Prospectus, Use of Proceeds page 46-48
- EAGLE Final IPO Prospectus, Risk relating to the business page 37
- EAGLE Final IPO Prospectus, Raw Material sources page 90