Yeoh cements his mark on Lafarge
New CEO, with 30 years’ experience, has seen peaks and troughs in the industry
LAFARGE Malaysia Bhd’s new chief executive officer, Yeoh Khoon Cheng is no stranger to the operation of the country’s largest cement company given his vast experience in the industry, both locally and abroad.
Yeoh who succeeds Mario Gross last week, has been with LafargeHolcim Group for over 30 years with 18 years as the chief financial officer (CFO). This includes six years as CFO in Lafarge Cement China Ltd with 28 million tonnes capacity and later, in LafargeHolcim’s associate, Huaxin Cement Ltd with 70 million tonnes capacity in China.
Lafarge Malaysia is 51%-owned by Switzerland based LafargeHolcim Ltd, with a current annual capacity of about eight million tonnes of clinker and around 13 million tonnes of cement.
Yeoh tells StarBizWeek that “Over the years as a CFO and prior to that, I have been heavily involved in all areas of the cement operations including M&A activities and have experienced the peaks and troughs of the cement industry and the various challenges faced by the company.
“During my stint in China, the challenges were similar to what we are seeing now in Malaysia and on a much larger scale,” Yeoh recalls.
In the past few months, he has been working with Mario Gross on the strategy and plans to turn around the company.
“My appointment as the new CEO will ensure the continuity of such strategy and plans being properly laid out,” adds Yeoh.
AffinHwang Capital in its recent report says when Yeoh was CFO for Lafarge Malaysia between 1999 and 2011, he was instrumental in reducing high debt level of Lafarge Malaysia and turning it into a net cash position in 2009.
The research unit is positive that Lafarge Malaysia’s current management under Yeoh would be able to lead the company to improve its cost efficiency and financial standing, which is crucial to withstand the current industry downturn.
The local industry outlook currently is gloomy, as the market is beseiged with oversupply situation, weak demand and a prolonged price war.
Yeoh expects the domestic market to remain challenging and that the current oversupply situation in cement is likely to persist in the short to medium term.
He stress that “the company’s priority would be to enable all our plants to run at tip-top condition at all times and at lowest cost possible in order to compete effectively in the market.
“At the same time, we need to continuously raise the bar of our services to customers in terms of product quality, consistency and delivery.
Furthermore, Lafarge Malaysia has the technical expertise backed by the LafargeHolcim group and the right leadership at various levels and functions at the top and on the ground, and a lean and effective organisation to implement the changes required to turn the company around.
On the export front, Yeoh points out that the clinker export markets has turned much more positive with growing demand and expected increase in prices going forward.
“With our Langkawi plant, which is situated by the coast and equipped with a terminal and ship loaders, we are well-placed to take full advantage of this growing demand for clinker.
At the same time, Lafarge Malaysia is also focusing on growing other segments of its existing business.
For example, its ready-mix concrete division has established itself as the leading supplier to many technically sophisticated and highly complex projects such as the Merdeka PNB 118 and the Refinery and Petrochemical Integrated Development (RAPID) project.
Yeoh also says Lafarge Malaysia will start delivering to several new projects including the Tun Razak Exchange Lifestyle Quarter, Oxley Tower and KLCC Lot L, M&N foundation works.
“Our earlier years’ strategy to establish a Construction Development Laboratories, which is also our innovation hub has started to bear fruits.
“We will continue to innovate and develop a niche in highly complex projects requiring more superior and sophisticated products with the backing of LafargeHolcim’s global presence and technical expertise,” adds Yeoh.
Lafarge Malaysia’s Drymix segment is now a leader on mortar products for floor and wall finishing.While construction market may not be growing in the short to medium term, Yeoh says the company will continue to reinforce its presence in both the ready-mix and Drymix segments, differentiating itself with both technical expertise and unique portfolio of highend products in the market.
According to Yeoh, the soft property market and the delay and suspension of some major infrastructure projects have impacted the construction market, which in turn has affected the cement demand.
Moving forward into 2019-2020, the domestic cement market is expected to remain challenging as “domestic demand is not expected to improve and there is still oversupply in the market where competition is likely to remain intense.”
He also expects the cement market will recover in tandem with “a recovery of the construction market, when it happens.”
However, industry players should also look at expanding the use of cement and concrete into road construction, Yeoh suggests.
“It is more cost effective to build roads using local resources where abundant supplies are available rather than imported bitumen currently used in asphalt roads.
“Furthermore, less than 1% of the roads in Malaysia are made from concrete. Concrete pavements are suitable for certain types of road, for instance rural roads in flood-prone areas used by heavy loaded vehicles. There are concrete pavement solutions that are less expensive to construct and are highly durable, requiring less maintenance,” he adds.
Meanwhile, AffinHwang Capital in its research report also expects the stiff price competition will continue.
“The current oversupply situation will put pressure on the average selling prices (ASPs) due to stiff price competition among the cement manufacturers to gain market share.
Furthermore, rebates for bulk and bag cement remain high at 44% and 23%, respectively.
“However, we believe it is unlikely for players to provide more rebates as most players are currently selling at lower than EBITDA-breakeven price.
“Hence, we expect prices to remain flat for the rest of the year,” adds AffinHwang Capital.
However, it believes that selling prices will likely to pick up in 20192020 given the uptick in domestic cement demand in tandem with its view of acceleration of construction activities in second half of 2019.
The government’s continuous effort to introduce a comprehensive housing policy and target to build more affordable housing are expected to support cement demand.
Apart from that, rising raw material prices and fuel costs will likely to put pressure on manufacturers to reduce cement rebates.
The retail cement prices started to pick up to RM350 per tonne in October, after the price fell to its five -year historical low of RM345 per tonne in July.
For the first 10 months of this year, retail ASP has declined by 6.8% year-on-year to RM355 per tonne. In 2017, retail ASP contracted by 2.3% to RM376 per tonne.