Weaker-than-expected 4Q17 anticipated for Lafarge M’sia
KUALA LUMPUR: Weakerthan-expected fourth quarter of 2017 (4Q17) results for Lafarge Malaysia Bhd (Lafarge Malaysia) has been anticiapted by analysts.
According to AmInvestment Bank Bhd (AmInvestment Bank), this was due to the subdued results (for the October-December 2017 quarter) posted by Lafarge Malaysia’s peers like Tasek Corporation Bhd and Hume Industries Bhd.
“We do not expect Lafarge Malaysia to be spared from the lull in October-December 2017,” the research firm said.
While AmInvestment Bank maintained its financial year 2017 (FY17), FY18F and FY19F average selling price (ASP) assumptions for Lafarge Malaysia of RM245 per metric tonne (MT), RM255 per MT and RM265 per MT respectively, the research firm lowered its sales volume assumptions for FY17-18F by five per cent and three per cent from 7.1 million MT and 7.8 million MT to 6.8 million MT and 7.5 million MT respectively.
However, the research firm maintained its sales volume assumption for FY19F at 8.4 million MT on the back of stable demand in FY19F onwards from ongoing mega infrastructure projects.
Overall, AmInvestment Bank cut its earnings forecast for Lafarge Malaysia’s FY17-18F, projecting a higher net loss of RM192 million and RM16.4 million in FY17 and FY18F respectively, versus net loss of RM165.1 million and net profit of RM4.7 million in FY17-18F previously.
Again, the research firm maintained its earnings projection for FY19, at a net profit of RM75.7 million.
AmInvestment Bank continued to like Lafarge Malaysia 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.
Additionally, the group practices strong environmental, social and governance (ESG) standards.
“However, while the demand for cement will pick up over the near term thanks to the rollout of key mega infrastructure
projects, it may not immediately absorb the expanded industry capacity stemming from aggressive capital expenditure (capex) by key players in recent years,” the research firm said.