Lafarge Malaysia ��ragge�� ��ow�� by o��e-off acquisitio�� expe��ses
KUCHING: Contrary to expectations, Lafarge Malaysia Bhd (Lafarge) reported a weaker 4Q15 with net profit falling to RM43 million leading to a slight dip in FY15 net profit of RM251 million.
AmResearch Sdn Bhd ( AmResearch) noted that the negative variance was mainly attributable to one-off expenses arising from the acquisition of Holcim Malaysia and the associated increase in interest cost to part finance the deal.
The losses from its associate operations further compounded the group’s performance. Earnings before interest and tax (EBIT) margins for its cement and clinker operations fell to 10.5 per cent in 4Q15 vs. 15.2 per cent in 3Q15.
“We project Lafarge’s FY16F net profit to rebound to RM306 million, albeit from a depressed base. Lafarge will reap the benefit from a full year consolidation of Holcim Malaysia.
“In addition, the scheduled expansion of Lafarge’ Rawang and Kantan plants should also be completed by the end of this year,” explained the research house.
Both deals will boost Lafarge’s cement capacity by circa 2.4 million tonnes or 20 per cent to reach a combined total of 15.2 million tonnes, and help strengthen its dominant position as the largest cement player in Malaysia.
Lafarge also looks set to benefit from the continued weakness in coal prices.
At home, the rollout of the 11MP projects should provide fresh impetus for Lafarge’s cement products.
Weighing against this is the expected increase in capacity via expansion projects by the local incumbents.
This, in turn, could see a prolonged period of price volatility as the market digests these new supplies, opined AmResearch.