Lafarge Malayan Cement Bhd, has been singled out by AmResearch in a report released yesterday. With its 44 per cent market share, Lafarge was also the leader in the domestic cement market, said the bank-backed research house.
“Lafarge expects construction projects to start kicking in by the fourth quarter of this year,” AmResearch said. It also noted that domestic cement prices continued the uptrend in the first half, and reckoned that prices were likely to remain stable in the second half.
“We think domestic prices are likely to remain stable in the second half due to the end of domestic price war in the second half of 2005, tight supply in the international cement market, and better demand outlook” it said. In addition, investors could expect margin expansion from financial year 2006 to 2007 despite cost pressures.
Lafarge remained wary of rising cost of electricity and diesel but “moderating this is the peaking in prices of key raw materials such as coal and gypsum,” AmResearch said.
Although Lafarge’s first-quarter net profit fell 64.3 per cent quarter-on-quarter, the research house said it expected earnings momentum to pick up in the next two to three quarters given that no major capital expenditure (capex) could be expected for the rest of the year.