Weaker-than-expected 3QFY17 expected for Lafarge Malaysia

KUCHING: A weaker-thanexpected third quarter of financial year 2017 ( 3QFY17) has been anticipated for Lafarge Malaysia Bhd ( Lafarge), with analyst believing the group was not spared the lull in July-September 2017.

AmInvestment Bank Bhd (AmInvestment Bank), which anticipated a weaker-than- expected 3QFY17 for Lafarge, said that this was due to the subdued JulySeptember 2017 quarterly results announced by the group’s smaller competitors Tasek Corporation Bhd ( Tasek) and Hume Industries Bhd ( Hume Industries) last week.

On Tasek, AmInvestment Bank believed the group could have resorted to a more aggressive pricing strategy to gain market share.

“Also not helping was the escalation in production costs,” it said.

As for Hume Industries, the research firm believed the group’s sales volume was flat or slightly lower quarter on quarter (q- o- q) during the quarter.

“We do not expect Lafarge to be spared the lull in July-September 2017.”

While AmInvestment Bank maintained its FY17-19F average selling price (ASP) assumptions for Lafarge of RM245 per metric tonne ( MT), RM255 per MT and RM265 per MT respectively, the research firm lowered its sales volume assumptions for FY17-19F by two per cent, three per cent and one per cent from 7.8 million MT, 8.4 million MT and 9.1 million MT, to 7.6 million MT, 8.2 million MT and nine million MT respectively.

Overall, AmInvestment Bank liked Lafarge because the group is the dominant player in the cement sector in Peninsular Malaysia with a 40 per cent market share, making it a good proxy for public infrastructure spending

The research firm also liked Lafarge because the group practises strong environmental, social and governance ( ESG) standards.