31 May 2005
(Malaysia) LAFARGE Malayan Cement Bhd, Malaysia's largest cement producer, will not initiate a price war despite a fall in cement demand due to the weakening in the local construction industry, said president and chief executive officer Alain Crouy.
"However, we will match the price of competitors to protect our market share," he said after the company'S AGM in Petaling Jaya yesterday.
Crouy said Lafarge was the clear market leader with share of close to 40%.
Other big cement producers are YTL Cement Bhd (24%), Cement Industries of Malaysia Bhd (16%), and Tasek Corp Bhd (13%).
Most analysts expect cement companies to record losses in the first half of 2005 due to the contraction of the industry fuelled by an ongoing price war.
The ceiling price for cement set by the Domestic Trade and Consumer Affairs Ministry is RM198 per tonne but recently, some cement manufacturers have sold well below this.
An analyst said the current cement price war was worse than the previous one in 1999 in terms of intensity and duration.
"The price war in 1999 lasted three months while the current price war has gone on for six months," he said, adding that there were no signs the price war would slow down in the near term.
"This will definitely hurt the industry and its smaller players," he said.
Crouy said the price war was not healthy for the industry and would price out some of the smaller players.
"As the biggest cement manufacturer in the local market with strong support from our parent, the Lafarge Group, the company is able to withstand the price war," he said.
Crouy viewed the current state of affairs in the cement industry as a temporary setback.
"Lafarge is here for the long term and we are confident the construction industry will improve in time, especially if the Government brings forward RM2.25bil worth of development projects under its 9th Malaysia Plan as announced," he said.
He said Lafarge would continue to focus on the local market because of better profit margins.
"Due to high freight and material costs, we only export 'excess' cement overseas," he said.
Currently, about 30% of Lafarge's output is exported.
The company reported a 2.6% decline in revenue for the first quarter of 2005. It posted a pre-tax loss of RM21.6mil for the first quarter compared with RM22.9mil in the previous corresponding quarter.
For the year ended Dec 31, 2004, Lafarge posted RM1.76bil revenue compared with RM1.75bil a year earlier. Pre-tax profit fell about 33% to RM103.7mil from RM156.2mil.