Second half looks brighter for Malaysian cement makers

Second half looks brighter for Malaysian cement makers
Published: 01 September 2005

Three of the four listed cement players in the country – Cement Industries of Malaysia Bhd (Cima), Lafarge Malayan Cement Bhd and Tasek Corp Bhd – have posted losses for the quarter ended June 30. 

Cima recorded a net loss of RM26.9m for its second quarter compared with a net profit of RM4.7m in the corresponding quarter last year, while revenue fell 6.8% to RM136.2m from RM146.2m. Lafarge posted a net loss of RM26.9m versus a net profit of RM24.8m last year on the back of revenue of RM420.2m, down 5.2% from RM443.4m in 2004.

Tasek registered a net loss of RM15.2m compared with a net profit of RM6.4m quarter-on-quarter, while revenue fell 31.2% to RM43.9m from RM63.9m.

YTL Cement Bhd, which managed to remain in the black for the quarter under review, saw its net profit drop more than half to RM10.1m from RM24.5m, still below the quarterly range of RM14m to RM25m reported in the past three years. Revenue, however, rose 40.6% to RM212.3m from RM151m.

The companies, in their quarterly results filings with Bursa Malaysia, had attributed the losses and lower profit to the on-going price war to gain market share, which resulted in lower selling prices as well as higher cost of coal and fuel.  The contraction of activities in the construction sector was also cited as another contributing factor. However, things may be looking up for the industry. An analyst from a bank-backed stockbroking firm expects stronger cement demand and an improvement in pricing in the second half of the year.

A pick-up in construction activities on the back of faster disbursement of development expenditure by the Government will boost cement demand, claims a research note. Having noted that, the sustainability of the recent increase in domestic cement prices from RM117 to RM180 per tonne since July 1 might still hinge on the overall demand condition.

Prices are expected to stabilise in the next three to four months as the weak financial performance of domestic cement producers in the first half of the year would help to ensure that industry players commit to a more disciplined pricing environment in the second half,” say analysts.

Cement is a controlled item. Since August 1995, the Government’s ceiling price on bulk cement in Kuala Lumpur has been RM198 per tonne. Prices in other areas range from RM194 to RM282, with distance from the cement plants being a key determinant.