Cost and Cement Plants

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Time Context:
PHINMA’s presence in the Philippine cement industry began in 1956 when the company was founded by several Filipino investors, principally Mr. Ramon del Rosario Sr. and Engr. Filemon Rodriguez. It purchased ownership of Bacnotan Cement Co. from the government. In 1969, PHINMA constructed a second plant, the Davao Union Cement Co., under a turnkey agreement with F.L. Smidth of Denmark. In 1976, the Rizal Cement company, owned by the Madrigal family, came under the management of PHINMA under a management contract with the owners. In 1978, General Luzon Cement (now Central Cement), a company foreclosed by PCI Bank, was purchased by PHINMA. In 1983, an expansion plant for the Davao Union Cement was constructed. In 1983, PHINMA also purchased the HI Cement company from the Yuchengco family. Finally, in 1988, the Madrigal Family acquired the Island Cement Company (now Solid Cement) from the government (APT), with PHINMA as a partner and manager of the plant.

Each of PHINMA’s cement plant is owned by the company in partnership with different equity holders. PHINMA had acquired considerable operating expertise in cement manufacturing over the years.
PHINMA is thus far the only cement company in the Philippines that had demonstrated the capacity to design and construct its own cement plants using its in-house engineering group. The general practice in the industry is to contract cement plant construction to foreign suppliers under a “turnkey” agreement. In the latter, the contractor designs and constructs the entire plant and turns over to the owner a fully operating cement plant. Until 1991, all the cement plants in the Philippines were constructed in this manner.

I. Objective
* To decide on whether to design and build its own cement plants or continue contracting with foreign suppliers?

II. Central Problem
* Design and build its own cement plants or continue contracting with foreign suppliers...
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