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Friday, March 20, 2009

Cement demand to fall for first time in 25 years

PETALING JAYA: The world’s biggest cement maker Lafarge SA is forecasting a contraction in demand for cement globally this year – the first in 25 years – due to the global financial crisis and economic slowdown.

Chairman and chief executive officer Bruno Lafont expects cement consumption worldwide to drop by up to 3% this year as the economic slowdown takes a toll on construction and infrastructure activities globally.

Lafarge SA chairman and chief executive officer Bruno Lafont - Starpic by Brian Moh

“However, to be conservative, we did not take much into account the economic stimulus packages that have been announced by various countries, not because they will not have an influence on cement demand as they all have an infrastructure component, but because we do not know when they will start to take effect.

“So there could be upsides depending on the effectiveness of the implementation of the stimulus packages. It should have a positive material impact on demand this year,” he told StarBiz in an interview during his two-day visit to Malaysia to meet key stakeholders.

According to Lafont, the global demand for cement has been growing at an average 5% annually for the past 25 years until 2007, with strong growth in emerging markets and more limited growth in developed countries.

He said global cement demand had started to shrink last year mainly due to the economic slowdown in developed countries such as the United States, Britain and Spain.

“Demand still grew to 2% last year boosted by good growth in most emerging markets,” he added.

Lafont also foresees a slowdown in cement demand in the country this year.

“We are not extremely optimistic this year but the stimulus package will help,” he said.

The country’s cement demand grew 7% to about 17 million tonnes last year versus 2007.

Lafarge’s Malaysian operations, Lafarge Malayan Cement Bhd, is one of the group’s largest business units globally and is the second largest in Asia, after China in terms of production.

Lafarge Malayan Cement has a production capacity of 12.95 million tonnes of cement annually.

To Lafont, Malaysia remains one of the 20 more important countries for the Lafarge group in terms of production capacity, profits, number of employees and so forth.

Its other 19 important countries include France, Canada, Britain, Spain, US, India, China, Egypt, Algeria, South Korea and Nigeria.

Lafont aims to turn the Malaysian operations into the best business unit of the group and best competitor in the Asian region.

“To be the best competitor means having the lowest cost, highest quality and most innovative products among others and this is what we are working towards,” he said.

The Lafarge group, which has a presence in some 80 countries, recorded a 2.2% growth in operating profit to 3.36 billion euros for the year ended Dec 31, 2008 versus 2007 while revenue improved by 8% to 19.03 billion euros.

By The Star (by Elaine Ang)

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