Lafarge's Rawang production line probably not affected, says Maybank IB

Lafarge president and chief executive officer Thierry Legrand said the company planned to increase sales to regional markets and negotiate new contracts.

KUALA LUMPUR: Maybank Investment Bank Research believes Lafarge Malaysia's production line at Rawang is not affected by the fire incident involving a diesel storage tank last Friday.

It has maintained its Hold call and target price of RM6.90 on the counter.

"Based on the picture from the press, it seems to be that the diesel storage tank is located at an open area and did not damage the production line at Rawang. 

"Additionally, the fuels used for the production of clinker/cement are mainly coal/electricity and not diesel. Hence, it is possible that LMC would be able to resume its production at Rawang in a matter of few weeks," said the research firm.

Maybank IB Research estimates that Rawang accounts for about 25% of Lafarge's total cement production. 

It believes the damage could be compensated by insurance coverage. 

The research firm added that Lafarge may opt to utilise its extra capacity at Kanthan given its closer proximity to end-demand. 

The line at Kanthan has a cement capacity of abot four metric tonne per annum compared to the line at Rawang with a cement capacity of about two metric tonnes per annum.

At present, the Kanthan line is only operating at 50% capacity.

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