Firms to return growth, Malaysia

Firms to return growth, Malaysia
Published: 27 February 2006

After a tough year battling problems like limited supply and going through a price war in 2005, cement companies in Malaysia look set for a more stable year ahead.

Cement prices, for one, have stabilised and rebounded to about RM185/t, against RM90/t in the first half of last year when the price war occurred. This greatly narrows the margin of current prices to the RM198 ceiling price for bulk cement set by the Government. Although the cost of raw materials has, over the past few years, seen an average 30% increase, the difference is likely to be passed on to the customers through higher cement prices.

According to sources, local cement players plan to request the Government to raise the ceiling price for bulk cement in view of rising costs that include the widely anticipated electricity tariff hike.

They are believed to be thinking of a percentage increase that corresponds with the cost increase.

Based on the latest financial results of several cement companies, the industry is already showing signs of marked improvement. Lafarge Malayan Cement Bhd’s net profit for its second quarter ended Dec 31, 2005 showed a 50.74% increase to RM37.28mil, compared with the previous corresponding quarter.

YTL Cement Bhd, largely seen as Lafarge’s rival, saw its net profit growing by 76.67% to RM32.49mil in its fourth quarter ended Dec 31, 2005 against the previous corresponding period.

Tasek Corp Bhd’s net profit in its second quarter ended Dec 31, 2005, improved by 57.9% year-on-year, to RM8.4mil. Cement Industries of Malaysia Bhd’s second quarter to Dec 31, 2005, saw its net profit grew a whopping 2,016.4% to RM11.09m. In its second quarter ended Dec 31, 2004, it made only RM524,000 in net profit.

The dominant factor for a better financial performance for these companies, according to one analyst is the Ninth Malaysia Plan, which is strongly expected to give the construction industry a much-needed boost.

“The increase in government building projects will boost orders for these companies by a fair bit,” he said. “The overall industry will benefit simply due to increased demand and it should be a positive year for the cement players.”