Malaysian Cement Market Expected to Recover


4 December 2007



Cement demand in Malaysia is expected to recover in 2008 to grow about 5 percent annually, buoyed by increased government infrastructure spending, the country's largest producer, Lafarge Malayan Cement, said Tuesday.


President and Chief Executive Alain Crouy said domestic cement consumption has been stagnant since 2005 amid a slowdown in state spending on infrastructure projects. The market, estimated at around 16.5 million tons a year, has been supported mainly by private investments in the real estate, commercial and industrial sectors, he said.


But government spending is expected to rise under the 220 billion ringgit (US$65.7 billion) Ninth Malaysia Plan, a five-year national development program until 2010, he said.


"With the major projects that the Ninth Malaysia Plan is bringing in, we are confident the market should rebound next year and for a few years," Crouy told Dow Jones Newswires. "The growth could be in the region of 4 to 5 percent a year for the next two to three years."


Crouy said Lafarge Malayan - formed in 1950 and part of French building materials group Lafarge since 2001 - has no plans to raise production but will cut back exports to meet an expected rise in domestic consumption.
Crouy said company earnings are expected to rise further this year after government-controlled cement prices were raised around 9 percent in December 2006, as well as the company's cost savings and improved production efficiencies.


After two straight years of decline in earnings in 2004 and 2005, the cement maker posted a fivefold rise in net profit to 173.4 million ringgit (US$51.8 million) in 2006.


Lafarge Cement will maintain its capital expenditure at up to 80 million ringgit (US$24 million) a year to upgrade its plant, improve operational safety and on employee training, Crouy said.