Lafarge to Leverage on New Plants


Business News
By Daniel Khoo


3 March 2014


PETALING JAYA: Lafarge Malaysia Bhd looks to benefit from a quicker turnaround time and higher efficiency stemming from its new plants. The locally listed French cement maker will open a new concrete batching plant in the heart of Kuala Lumpur at Jalan Chan Sow Lin and another quarry in Nilai this year.


A concrete plant smack right in the middle of Kuala Lumpur would enable quicker delivery for raw materials for property and infrastructure projects in the city.


Indeed, these investments from Lafarge indicate that it is positive on riding the continued trend of rapid urbanisation in Malaysia, that will drive demand for raw materials for infrastructure and property development projects.


In an interview with StarBiz, Lafarge Malaysia president and CEO Bradley Mulroney said demand-led growth for its products was expected to rise by 2%-5% this year and it may see further growth in the concrete business segment.


The company sells three basic raw materials necessary for construction: cement, concrete and aggregates, with established plants located around Peninsular Malaysia.


"We still have future expansion plans in the pipeline as there is a demographic need for property given the relatively young population in Malaysia. When people say that the property industry is having a hard time, I would say: I'm not sure I agree," he said.


"I think there has been some pressure on the high-end market but in terms of the general market it is alright," he added.


Mulroney said Lafarge Malaysia's customers were diverse and included those who purchase its products for every day general use as well as large corporate clients.


"Because we have a total Peninsular Malaysia coverage it means that we have an extremely large spread of customers. For example, we had an exclusivity on KLIA2 but this project only represented about 1% of our (annual) sales," he noted.


As for competition, Mulroney said it's about keeping close tabs on the industry.


The industry had been liberalised in 2008. Prior to that, prices had been regulated by the Government.


Industry players today have to watch their backs when implementing or adopting any price increase for its customers.


"Competition is present in any business. And it is about understanding what the context of the market is and the context of cost increases are for the business," he says.


Despite deciding not to implement a price increase for its customers now, it will have to relook this decision every month vis-a-vis what their competitors are doing and balancing that out with its continual cost pressures.


Indeed, the cost pressures are present and felt even stronger with the weakened ringgit versus the US dollar as the coal it purchases from overseas are denominated in US dollar.


Transportation costs are another factor that has to be looked at as the Government's subsidy rationalisation plan is still on the back-burner.


But Mulroney said that despite these hiccups, which he considered as part of the regular challenges of running a business, the growth picture on the industry was intact. This is considering that government infrastructure projects such as the mass rapid transit and Johor's Iskandar are being carried out at full steam while there are also other projects such as the Tun Razak Exchange that could soon be coming on stream.