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[October 2008]
Downturn amongst Predictions by Philippines Tile Manufacturer
Mariwasa Siam Holdings Inc in the Philippines made the following comments as part of a disclosure to the Philippines Stock Exchange on 24 October 2008:
(1) For the period January–September 2008, Mariwasa had positive sales growth compared to the same period of last year. However, the remaining months of the year would be very difficult for the company due to the current world financial crisis.
(2) The continuous inflow of imported tiles has eroded the market share of local tile manufacturers, Mariwasa included.
(3) Increased fuel prices have negatively impacted on the manufacturing cost of ceramic tiles. High manufacturing cost reduces the competitiveness of our products.
Ceramic tile manufacturing is an energy intensive industry, thus the increase in fuel prices have a direct impact on the production cost.
Logistics cost increased with the increased in fuel prices. Trucking charges for both local and imported raw materials increased resulting in higher raw material cost.
Handling and delivery cost of finished products increased with the increase in fuel prices.
The weakening peso also negatively impacted on imported raw material cost and consequently the cost of manufacturing ceramic tiles.(4) Mariwasa believes that the current world financial crisis would continue for more than a year (not less than 18 months). Given this unfavourable business climate, the company sees negative sales growth for the company due to:
Slowdown in the economy affecting several sectors and industry, including the Construction sector.
The construction is expected to slow down due to higher cost of construction materials, tighter credit limits and reduced purchasing power of consumers.
Tougher competition is seen as more inflow of imported tiles is expected due to the lowering of safeguard duty and countries exporting to the US diverting their goods to other countries, including the Philippines.(5) The safeguard duty adds up to the cost of imported tiles, which in effect reduces the price gap between imported and locally manufactured tiles. However, there is still a surge of imported tiles and we expect this to increase due to the impending lowering of the safeguard duty.
The local ceramic tile industry needs more help from the government, especially in the control of smuggling. The company is of the opinion that the implementation of the safeguard measure should be in tandem with stricter control policies as this can lead to importers undervaluing their goods.(6) One of the company’s strategies is to intensify marketing promotion emphasising on Mariwasa’s “Quality” tiles. Product presentations were conducted to educate consumers on the importance of having quality tiles. The company is implementing cost saving programmes, but is not sacrificing the quality of its products.
MSC for some time now have been implementing cost efficiency and cost saving programmes to soften the negative impact of increasing prices of cost inputs. Tile manufacturing is energy intensive, thus, the focus of the company’s cost efficiency and cost saving programmes is on energy. Among the programmes the company is initiating is the utilisation of alternative fuels to lower cost, installation of energy saving equipment and heat recovery.
Despite the current financial crisis, the company is still maintaining its no lay-off policy as it believes that people is one of the key success factors. Relative to this, Mariwasa sends its employees to trainings in order to have more skill and competency to support the direction of the company. This is also one of the company’s contributions to its social community – job generation.
In addition, the company keeps on introducing new designs in the market to stimulate market demand.
MSC have no expansion plans for 2009, but the company is trying to optimise its current capacity.(7) With the current world financial crisis, the industry does not expect the business climate to improve within the next 18 months. Thus, the industry foresees negative growth in 2009.
(8) Although there is still a recorded surge in imported tiles, the imposition of safeguard duty has helped the local industry be more competitive. The added cost of imported tiles from safeguard duty added cost to tile imports and thus lessened the pricing gap between local and imported tiles.
(9) CTMA believes that by the time the free trade deals are implemented, local tile manufacturers have already completed their adjustment plans and would have built a strong foundation to be globally competitive. In the meantime, CTMA is giving all its support to the local manufacturers by helping police smuggled/undervalued tile
(10) The industry would like to see more control in the entry of smuggled and undervalued imported tiles. And that a ceiling for the cumulative volume of tile imports be implemented to protect local tile manufacturers.
The CTMA is the country’s Ceramic Tile Manufacturers’ Association.
ENDS