2 September 2013
Lafarge Embarks On Massive Expansion Plan
MEETING BUOYANT DEMAND: Firm to ramp up output, retain market leader position
LOCAL leading construction material producer Lafarge Malaysia Bhd is embarking on a massive expansion plan across all product lines to help meet local and overseas buoyant demand.
The largest cement producer in Malaysia in terms of plants and installed capacity also intends to retain market leader position by way of ramping up production.
"We feel it is important to maintain our position in the marketplace. We have been evaluating different options and the board agreed that the most effective way is to invest in capacity.
"The market is growing, so we want to grow with it," said chief executive officer Bradley Mulroney.
This year, Mulroney expects Malaysian cement consumption to grow four per cent to five per cent, reflecting a similar trend across the region.
"Market grew five per cent to six per cent in 2011 and six to seven per cent last year. It is expected to expand four per cent to five per cent this year. In total, cement consumption has grown 20 per cent in three years," he said.
Lafarge Malaysia plans to bump up annual cement output by 1.2 million tonnes to service the peninsula market.
On concrete and aggregates, there will be two new ready-mix batching plants and one new quarry in the pipeline, said Mulroney during a an interview here recently.
"On cement, we will be expanding capacity at the Rawang block in Selangor and Kanthan block in Perak. This will further increase capacity in the two plants with combined 1.2 million tonnes."
It was learnt that the 1.2 million tonnes of extra capacity should fully go onstream from year 2015 onwards.
By increasing the production output in the two peninsula plants, it means Lafarge Malaysia could pare down logistic footprints, as the company servicing the peninsular market with significant supplies from Langkawi plants, he said.
The Langkawi plants are the largest among three with a total land area of 78.56ha.
Mulroney sees the expansion as a move to service the peninsula market better, and at the same time enable the company to tap into the exciting opportunities in Southeast Asia.
"It also enables us to improve our service and efficiency in terms of availability of products. And it releases other opportunities for the Langkawi plants, because it has the option to export to Myanmar, Sri Lanka, Bangladesh, Indonesia, Sabah and Sarawak and other potential markets.
"The terminal we are going to export to should be ready by end of September or early October. So we expect to start exporting to Myanmar around October," said Mulroney.
Plans are also afoot for concrete and aggregate businesses. Lafarge Malaysia plans to construct two new ready-mix batching plants in Chan Sow Lin and Sungai Buloh, Kuala Lumpur. It also proposes to open one more new quarry in Nilai to boost the aggregates output.
Spanning across 0.8ha, the Chan Sow Lin plant will be the first of its kind in Malaysia. It is slated to commence operation in October this year.
"We will build a flagship plant in Chan Sow Lin to service the Kuala Lumpur market. It will be an enclosed plant with facilities contained in the building," Mulroney explained.
The company now has three integrated cement plants and a grinding plant. It also operates five quarries and has more than 29 ready-mix batching plants.
He reassured the expansion activities will not affect the company's dividend payout and it has an impressive track record of distributing 80 per cent to 90 per cent of net profit to shareholders.
After experiencing a 16 per cent drastic drop in net profit in the first quarter of this year, Lafarge Malaysia's financial performance has rebounded. Second quarter net gain for the period ended June 30 slipped a marginal 0.8 per cent to RM81.43 million, from RM82.09 million a year ago.