Malaysia: Lafarge Malaysia Bhd's management has said that for the first half ended June 30 2016, core net profit was down 69.4% mainly due to lower cement revenue (-5.3%) due to weaker demand for cement on the back of a slowdown in the property market and delay in the commencement of mega projects such as KL118 Tower project, Tun Razak Exchange; Holcim 'synergisation' costs of about US$4m and a higher effective tax rate (+13.8%) from lower capital allowances.
Management expects the effective tax rates to be normalised in the 2017 financial year from capital allowances from its newly-commenced Rawang (Selangor) and Kanthan (Perak) plants expansions.
With the new capacity expansion in the Rawang and Kanthan plants commencing in March and April 2016 respectively, management revealed that this would provide savings in overall transportation costs as clinker is no longer required to be delivered from Langkawi (Kedah) to its grinding units in Pasir Gudang (Johor) which can now be delivered from Kanthan instead - which is approximately half the travelling distance.
Malaysia is due to see an increase in overall cement production capacity of 13% in 2016 due to the completion of expansion projects and the weak market is expected to become tougher-still. Besides looking out for further cost-saving avenues, Lafarge Malaysia is also looking for differentiation in this competitive market through higher investment in dry-mix cement and strengthening of its brand name through more aggressive marketing.
