Lafarge Malayan to focus on organic growth

Lafarge Malayan to focus on organic growth
Published: 24 January 2005

Lafarge Malayan Cement Bhd (LMC), the country’s largest cement maker, has put on hold all capacity expansion and acquisition plans and will focus instead on organic growth - preserving its competitiveness and improving efficiency.  

The present state of the domestic construction and cement industries does not make size and capacity expansions viable, LMC president and chief executive Alain Crouy told Business Times. "We want to boost our productivity without  additional investments," he said.

The outlook for the domestic construction industry remains bearish, with less public sector projects. Prospects lie mainly in the private residential sub-sector.  

Lafarge can produce 8Mt clinker and 13Mt of cement a year at its three clinker and cement factories located in Rawang, Selangor; Kanthan in Perak and Langkawi, with another grinding plant in Pasir Gudang, Johor. It is the market leader in terms of market share with just under 50 per cent of the domestic market, company officials said.

Lafarge’s  local competitors are YTL Cement Bhd, Tasek Cement, Cement industries of Malaysia Bhd and Swiss- headquartered Holcim. Distribution-wise, Crouy said the local market will be given priority while excess capacity will be exported. Exports account for about a third of LMC’s domestic business. LMC has buyers in Singapore, Sri Lanka and Bangladesh, among others.  

This year will also see the cement maker allocating a significant portion of its exports for its Indonesian operations in Acheh.

Crouy expects the domestic cement industry to consolidate with little increase in demand locally. "The costs of raw materials to make cement such as gypsum, and coal asfuel for our kiln are on the rise, too," he said.

Crouy was cautiously optimistic on LMC’s financial performance for current fiscal year ending December 31 2005 anticipating a less impressive increase in local cement demand, rising coal prices, besides a competitive environment. "We will, however, be helped by the increased capacity in Rawang, better productivity and higher export prices," he said, adding that the company’s borrowings are expected to decline during the period.