RAM Ratings has reaffirmed the respective long- and short-term ratings of Lafarge Malaysia Bhd’s MYR350m Islamic Securities Programme (2010-17) at AA2 and P1. The long-term rating has a stable outlook.
The reaffirmation of the ratings is based on the cement producer’s strong business profile as the largest integrated cement player in Malaysia. The group owns four cement plants and has the largest installed capacity in the industry. The strategic location of its Langkawi plant coupled with its dedicated port facilities and access to a global distribution network via its parent, Lafarge SA, provide the company the flexibility to shift excess production to overseas markets, RAM noted.
Nonetheless, the rating's agency warns that the company remains exposed to volatile input prices as well as the cyclicality of the construction and property sectors. Price undercutting, which had occurred in the past, has been a lesser issue in recent times, despite the debut of a new entrant in the domestic market.
Additional capacities expected to come on-stream may pressure prices further in the event of insufficient demand. In the medium term, demand for cement is expected to be supported by fiscal spending on the construction sector, generated by projects under Budget 2012, the Tenth Malaysia Plan and the Economic Transformation Programme.
