Lafarge Mulls Expansion Drive


By Roziana Hamsawi


1 April 2013

Lafarge Malayan Cement Bhd (LMC), the country's largest cement producer, may go on an expansion drive to help meet buoyant domestic demand.


The expansion is also to ensure that the company retains its lead in the cement industry here.


Lafarge Malaysia has a 40 per cent share of the local market, in which the total industry production averages 20 million tonnes annually.


The major rivals in the sector are YTL Cement Bhd, Tasek Corp Bhd and Cement Industries of Malaysia Bhd (CIMA). Both YTL Cement and CIMA have planned capacity expansion of around 1.5 million tonnes, leaving the industry guessing how LaFarge would respond to its rivals' plans.


"We will probably expand... (but) it needs to be finalised by our board and I can't discuss it in advance," said Lafarge Malaysia president and chief executive officer Bradley Mulroney in an interview.


He added that as market leader, the company has to make sure that it has sufficient capacity to maintain its position.


Sectorial analysts note that the industry's production sector is expected to increase by 22 per cent, which could bring down the prices of cement.


"We have to plan our investment at least two to three years ahead. At the moment, we are fine but we need to start talking what we must do next in order to cope with the demand from 2015 to 2017," said Mulroney.


Industry players are also banking on brisk growth in Malaysia's construction sector that will keep prices stable.


According to Bank Negara Malaysia, the construction sector is primed for a 15.9 per cent growth this year, helped by various projects under the government's Economic Transformation Programme (ETP).


Mulroney said ETP and the 10th Malaysia Plan have kept the industry vibrant and given companies, like LMC, huge business opportunities.


"We are confident of the 2013 outlook. The Malaysian economy has been managed well and had held its way throughout the global economic crisis," he added.


In its 60th year of doing business in Malaysia, Lafarge shows no sign of resting on its laurels.


The company has three integrated cement plants and a grinding plant, and operates five quarries here. In its concrete business, it has more than 29 ready-mix batching plants.


The company has kept its investors happy, in line with its market leader status. Last year, Lafarge Malaysia paid out a dividend of 37 sen a share, which accounts for some 90 per cent of its net profit of RM349 million.


For the year ended December 31 2012, the company reported a 10 per cent growth in net profit while revenue grew seven per cent to RM2.74 billion.


Maybank Research expects Lafarge Malaysia to clock a revenue of RM2.79 billion this year, alongside a net profit of RM374.3 million.