PETALING JAYA: Lafarge Malaysia Bhd, the country’s largest cement maker, believes the construction industry is “positively orientated” and will encourage the group’s growth this year.

“We see that the market is positively orientated. We anticipate cement (demand) growing (in line) with the overall construction activity growth … we obviously believe this is good for us,” its president and chief executive officer Bradley Mulroney told The Edge Financial Daily after launching the group’s first Construction Development Lab in Southeast Asia here yesterday.

“What we are trying to focus on is moving our business much more towards meeting the challenges of the construction industry. It’s really about how we position ourselves as a real partner of the construction industry in terms of providing solutions to those challenges,” he added.

Lafarge saw its cost of production increase after the average electricity tariff increased by 14.98% in January this year as part of the government’s subsidy rationalisation exercise.

“We use energy in the form of electricity, fuel and coal and we have various alternative fuels that we use. So, energy is a very sizable component in relation to our cost and therefore any one aspect of the energy piece that increases has an impact in relation to our variable cost,” Mulroney said.

To offset rising costs, Lafarge has increased the prices of its products but the levels of increase are different for different customers.

Despite higher costs of production, Mulroney believes that the government’s partial removal of subsidies “make good economic sense” and is “the right strategy to adopt”.

“The construction industry is clearly linked to the economic success of the country. And, therefore, the most important factor for us is to see a good, strong construction sector and a key driver for that is the economic policy, to see a very strong economic policy,” he explained.

Mulroney added that he expects demand for cement to grow by 4% this year.

Meanwhile, Mulroney said it is still “premature” and “far too early” to say how the proposed global merger between Lafarge’s parent company Lafarge SA and Swiss-based Holcim Ltd will have an impact on the Malaysian operations of both companies. The merged entity will create the world’s largest cement maker with a market value of US$55 billion (RM177 billion).

Analysts in Malaysia have speculated that the merger of the two cement giants will lead to either a merger or acquisition of Holcim Malaysia Sdn Bhd.

“The merger is effectively between the parent companies of Holcim and Lafarge and what they have stated obviously is the intention to merge. There are a number of countries [involved] …particularly in Europe,” said Mulroney.

“In those countries, they need to satisfy the competition authorities and the European competition authority. And, therefore, until such time as they resolve that, there’s nothing happening [in Malaysia],” he added.

Meanwhile, Lafarge’s Construction Development Lab will serve as an education facility for the construction industry in Malaysia as well as develop new solutions and promote construction efficiency.

CONCRETE DEAL... (From left) President and chief executive of?cer of Lafarge Malaysia Bhd Bradley Mulroney, Deputy Minister of Science, Technology and Innovation Datuk Dr Abu Bakar Mohamad Diah and Lafarge Malaysia vice-president, marketing Shirley Low at the launch of the group’s first Construction Development Lab in Southeast Asia in Kuala Lumpur yesterday.

 

This article first appeared in The Edge Financial Daily, on June 24, 2014.

 

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