AmInvestment Bank predicts larger net loss for Lafarge

KUCHING: Fol lowing the release of Lafarge Malaysia Bhd’s ( Lafarge) weaker third quarter financial year 2017 ( 3QFY17) results; AmInvestment Bank Bhd (AmInvestment Bank) is now projecting a much larger net loss of RM165.1 million in FY17 for the cement manufacturer.

In a company results report, the bank said that this was huge leap from their previous FY17 forecast of RM36.5 million net loss and is due to their decision to cut their FY18 and FY19 net profit forecasts of the group by 90 and 40 per cent respectively.

The forecast cuts are due to Lafarge’s cumulative first nine months of FY17 (9MFY17) results coming in at RM135 million net loss – severely missing the mark of the bank’s net loss forecast of RM36.5 million and consensus forecast of a net profit of RM18.5 million.

“We believe the key variances against our forecast came from the slower-than expected recovery in sales volume, increased industry capacity and hence lower average selling price (ASP) for cement on the back of fierce competition in the market.

“Not helping either was the high operating cost stemming from fuel and electricity costs, and higher depreciation cost for the PPE,” guided the bank.

The negatives were however partial ly cushioned by the group’s land disposal and foreign exchange gains of RM9.2 and RM5.6 million respectively as well as improved aggregates sales.

Lafarge’s aggregate business has improved signi f icantly registering an operating profit of RM14.4 million in 9MFY17, a stark contrast to the RM5.1 million operating profit in FY16.

In light of the soft demand of recent, AmInvestment bank is lowering their sales volume assumptions for FY17- 19 by 7, 5 and 7 per cent to 7.1, 7.8 and 8.4 million metric tonnes respectively.

FY17-19 average selling price assumptions for the group is maintained at RM245, RM255 and RM265 per metric tonne.