Lafarge plans to double Chinese capacity

Lafarge plans to double Chinese capacity
Published: 13 October 2006

Lafarge, the world’s leading cement producer, plans to double its production capacity in China in the coming years, the company’s chief executive officer said yesterday.

"Our cement production capacity in China should reach at least 40Mt, if we follow China’s 11th Five-Year Plan," Bruno Lafont told reporters during his first visit to Beijing after he took over as CEO in January.

The French company is currently able to produce 20Mt of cement a year in China. The expansion could be done in the short-term, Lafont said, without elaborating.

The company has already started to expand its production facilities. It began building a new line in Chongqing at the beginning of the year and will start a second line at its Dujiangyan plant in Chengdu this month.

"We are also studying new projects in all the regions we operate in," said Lafont.

He added that the expansion will include both new facilities and mergers and acquisitions. Lafarge has so far followed a mergers and acquisitions strategy in China for its expansion.

In 2005, it formed a joint venture with Shui On Construction and Materials Ltd, a top cement company in Southwest China, establishing its leadership in the local cement market.

It also signed an agreement to buy a controlling stake in another cement producer, Sichuan Shuangma Cement Co, late last year.

The company is now dedicated to business integration, but is still looking for further merger and acquisition opportunities in Chengdu, Chongqing, Yunnan and Guizhou, where it already has bases. At present, Lafarge’s strategy is to focus in these cities and provinces.

"We want to have strong local locations in the southwest," said Lafont.

Cryille Ragoucy, chief executive officer of Lafarge’s cement business in China, believes China’s western development strategy offers the company opportunities to grow.

"There are many new infrastructure construction projects in the country’s southwest and we are pleased to take part in them," said Ragoucy.

However, focusing on Southwest China does not mean it will not look elsewhere. "We may, when we think it is the time, look at other regions, but will do that one by one," Lafont said.

The company aims to have an annual growth of more than 8 per cent for its cement business in China in the next few years.

According to Lafont, China is already one of the largest markets for the company’s cement business and the country is helping its business in the rest of the group. The company has co-operated with Chinese equipment suppliers in building facilities outside China.

It has signed contracts worth 2 billion yuan (US$253 million) to purchase Chinese equipment in January.

"We are just ready for another 4 billion yuan (US$506 million) of orders," said Lafont.