CIMA to spend RM400m on expansion

CIMA to spend RM400m on expansion
Published: 05 June 2007

Malaysia’s third largest cement maker, Cement Industries of Malaysia Bhd (CIMA), plans to invest RM400m on expansion after plans to partner French-based cement maker Vicat Group fell through.

Last year, it was reported that Vicat wanted to buy a controlling stake in five of CIMA’s eight subsidiaries. The offer was made for Negri Sembilan Cement Industries Sdn Bhd, Pemasaran Simen Negara Sdn Bhd, Unipati Concrete Sdn Bhd, Cimaco Edar Sdn Bhd and Cimaco Quarry Sdn Bhd.

Yesterday, CIMA said it is focusing on organic growth. The group, which is 51.06 per cent owned by UEM World Bhd, has two plants in Perlis and Negri Sembilan with combined clinker production capacity of 2.8Mta and a total cement output capacity of 3.4Mta.

"Vicat Group expressed its interest in CIMA but subsequently the option lapsed. So nothing happened," CIMA chairman Abdullah Yusof said, adding that: "We’re going on our own and we’re not looking for any strategic partner at the moment."

As part of UEM Group, CIMA managing director Che Halin Mohd Hashim said, the group needs to expand the Bahau plant in Negri Sembilan to meet the needs of projects like the Second Penang Bridge and the development of Nusajaya. "By 2010, we’ll need to put in another kiln at our Bahau plant costing about RM350m to RM400m. That will boost the group’s clinker production to 4.2Mt a year," he said, adding that the group’s gearing level is around 0.3 times and manageable.

It will take 24 months to 30 months to implement this expansion as environmental impact studies have to be carried out, he told reporters yesterday after the company’s annual general meeting held in Kangar, Perlis.

Asked if CIMA is interested in buying smaller-sized rival Tasek Corp Bhd, Che Halin said: "We have no intention to buy any rivals. This is not part of the growth plan set out by our parent company.

"Our earnings growth is dependent on the projects to be embarked by UEM Group level," he said, adding that for the current year, CIMA is aiming for 15 per cent revenue growth and 11 per cent return on equity.

In the first quarter ended March 31 2007, CIMA saw its net profits jump 43 per cent to RM13.44m from RM9.49m previously. Revenue increased 4 per cent to RM135.52m from RM129.82m.

"We’re using more padihusk and waste tyres to fuel our cement plants.

We have been cutting costs on coal and fuel oil," Che Halin added.