Lafarge Malayan Cement Bhd is getting ready to focus more on the domestic market as it expects demand - stagnant in recent times - to recover in 2008 and keep growing for the next few years.
"With the major projects that the Ninth Malaysia Plan is bringing in, we are confident the market should rebound," President and Chief Executive Alain Crouy said, referring to a new MYR220 billion, five-year government national development program.
"The growth could be in the region of 4 to 5per cent a year for the next two to three years," he told Dow Jones Newswires in an interview late last week.
Domestic consumption hasn’t risen for three years - including in 2007 - as state spending on infrastructure projects slowed.
The market, estimated at around 16.5Mta, has of late been supported mainly by private investment in the real estate, commercial and industrial sectors, said Crouy. The new development plan is likely to change all that.
But LafargeMalayan Cement, the country’s oldest cement maker - and the largest by sales - is not looking to increase capacity and will instead cut back on exports to meet demand at home.
The reason: Exports yield lower profit margins because of higher freight costs and a rising ringgit.
Currently, the company exports around 30 per cnet of its annual production to Singapore and other countries in the region, Crouy said.
"We are not looking either at expanding or acquiring. If we were to do something, it would be (to increase) grinding capacity, but even that’s not decided yet," he said.
The production facilities of LafargeMalayan Cement - formed in 1950 and part of French building materials group Lafarge since 2001 - are already running at full capacity, making more than 8Mtof clinker and nearly 13Mt of cement a year.