Lafarge Malaysia MYR270m ECRL contract suspended

Lafarge Malaysia Bhd MYR270m (US$66.7m) contract to supply cement to the East Coast Rail Link (ECRL) project has been suspended.

The cement producer said that China Communications Constructions (ECRL) Sdn Bhd (CCC), the main contractor to the project, has suspended the contract as the government is currently reviewing the project.

LafargeHolcim’s wholly-owned subsidiary had signed an agreement with CCC to supply cement to all eight work packages for the rail link. The contract was due to expire on 31 December 2019 with the option of renewing it for a further two years.

Lafarge said the completed work would be compensated in according with the terms and conditions of the contract and the suspension “is not expected to have any significant financial impact on the operations and financials of the company in the financial period up to the date of the suspension,” according to the cement producer.

However, for the period subsequent to the suspension date, the company will only be able to assess the actual financial impact upon receipt of clear direction from the client and/or Malaysia Rail Link Sdn Bhd after the government's review of the ECRL project is completed, according to reports in the Sun Daily.

"In the event the suspension of the contract is lifted, it is expected for the contract to contribute positively to the earnings of the Lafarge Malaysia group for the financial year ending 31 December 2018 and the financial period thereafter within the duration of the contract," the company said in a filing to Bursa Malaysia.