FW: RAM Ratings reaffirms Lafarge Malaysia's issue ratings

Published on 04 June 2015

RAM Ratings has reaffirmed the AA2/Stable/P1 ratings of Lafarge Malaysia Berhad’s (Lafarge Malaysia or the Group) RM350 million Islamic Securities Programme (2010/2017).
The ratings are premised on Lafarge Malaysia’s strong business and financial profile. The Group is the leading producer of cement in Malaysia, whose annual production capacity of almost 13 million MT accounts for about 40% of total production capacity in Peninsular Malaysia. Its foothold in the peninsula is expected to be strengthened further subsequent to the Group’s impending merger with Holcim Malaysia Sdn Bhd, as well as the completion of expansions at its Rawang and Kanthan plant by 2016. Additionally, Lafarge Malaysia is able to export excess production overseas through its access to jetty infrastructure in Langkawi, and by leveraging on the global distribution network of its parent, Lafarge S.A..
Lafarge Malaysia’s financial profile stayed superior as at end-December 2014, with a net cash position and strong debt-coverage metrics that were underpinned by the Group’s strong cashflow-generating ability. Its operating profit before depreciation, interest and tax margin remained commendable at 19.2% (FY Dec 2013: 23.3%), in spite of disruptions in its production process as well as a more challenging operating environment that had dampened the Group’s performance in FY Dec 2014. This overall solid financial profile was maintained as at end-March 2015.
Nevertheless, the ratings remain moderated by the Group’s exposure to volatile input prices as well as the cyclicality of the construction and property sectors on which demand for cement is dependent. “We are also cautious of the risk of pricing pressure on cement should supply of the commodity outpace growth in demand in the near term, as new capacity comes onstream,” notes Thong Mun Wai, RAM’s Head of Agribusiness, Real Estate and Construction Ratings.

Media contact
Juliana Koay
(603) 7628 1169
juliana@ram.com.my