Challenging outlook for Lafarge Malaysia

In the first three months of this year Lafarge Malaysia reported a net loss of MYR48.9m (US$11.4m) compared to a net profit of MYR20.6m for the same period a year ago due to lower operating profit and worsening pricing pressure. The group’s revenue decreased by 16.1 per cent to RM561.9m YoY.

“This decrease was mainly attributable to the lower sales contribution from the cement segment due to the soft market demand, coupled with the increased industry capacity and the continued pricing pressures in the market,” it said in a filing with Bursa Malaysia on Monday.
 
“The decrease in revenue in the cement segment was partially mitigated by the higher sales contribution from the concrete segment."

The profitability was further hurt by higher operating costs attributed mainly to the higher fuel and electricity cost and a one-off separation cost incurred in the current quarter.

“The above was partially mitigated by a one-off gain on disposal of land and higher foreign exchange gains,” the company said.

Against a backdrop of such persisting challenging conditions, a programme of commercial and cost measures is being implemented by the company.

The near-term prospects for cement maker Lafarge Malaysia are expected to remain plagued by industry overcapacity and weak a property market, according to a report by analysts at Hong Leong. The investment bank expects demand and pricing to remain under pressure longer than it had expected.  It has cuts its earning forecast on Lafarge and reduced its target price a further 11 per cent to MYR4.92 (US$1.15).