CMS resumes full operations on easing of MCO measures

  • Corporate News
  • Monday, 31 Aug 2020

Group managing director Datuk Isaac Lugun said the Sarawak conglomerate is catching up with pending orders and works that were halted in the April-June 2020 period.

KUCHING: Cahya Mata Sarawak Bhd (CMS) has resumed its operations in full force following the lifting of the more stringent movement control order (MCO) measures that severely impacted its businesses.

The company’s traditional core businesses involve cement and construction materials, construction and road maintenance projects.

Group managing director Datuk Isaac Lugun said the Sarawak conglomerate is catching up with pending orders and works that were halted in the April-June 2020 period.

“Despite the temporary setback due to Covid-19 pandemic and the resulting MCO, we are cautiously optimistic of better performance in the coming quarters, ” he said when reviewing the group’s second quarter performance ended June 30(2Q2020).

In 2Q2020, the group posted lower profit of RM16.7mil (Q22019: RM41.3mil) as revenue fell sharply to RM206.8mil (RM399.2mil).

Lugun said the 2Q2020 financial results were mainly impacted by the March 18-May 18 stretch of the MCO which had resulted in shorter operation days. In first half 2020 (1H2020), CMS recorded group profit of about RM34mil, down from RM82.1mil in 1H2019 as revenue slumped to RM489.3mil from RM817.4mil.

CMS group is involved in several ongoing mega infrastructure projects. Its 51%-owned subsidiary PPES Works Sdn Bhd, and Bina Puri Sdn Bhd, are jointly undertaking a RM1.36bil work package under Pan Borneo Highway Sarawak project.

PPES Works and China Communication Construction Company (M) Sdn Bhd are in a joint venture to build a bridge crossing Kemena River in Bintulu under the Sarawak Coastal Road project. The contract value is RM466.7mil. On road maintenance, PPES was awarded a 10-year contract from Jan 1,2020 to maintain some 3,300km of state road. The contract is worth about RM99.2mil per annum, excluding any additional works.

CMS is Sarawak’s sole manufacturer of cement and the group is involved in quarry operation and supply of premix and other road construction materials. In 1H2020, the cement division’s revenue fell by 31% to RM195 mil while that of the construction materials & trading division plunged by 47% to RM133.8 mil. The construction and road maintenance division’s turnover shrank by 37% to RM151.8mil. The property division’s revenue dipped by 63% to RM29mil.

CMS said the construction and road maintenance divisions mid-term prospects are well supported by its order book of RM1.23bil.

“We believe that the incoming mega infrastructure projects in Sarawak will bode well for our traditional core businesses, especially the cement, construction materials and trading and construction and road maintenance divisions, ” said Lugun in a press statement.

“We will continue to leverage on our local knowledge and experienced management team to maximise our participation in the Sarawak growth story, ” said Lugun in a press statement.

The new mega infrastructure projects funded by the Sarawak government includes the second Sarawak Trunk Road project which is expected to kick off the ground this year.

According to Deputy Chief Minister and Minister for Infrastructure and Port Development Tan Sri Dr James Masing, the 225km road is expected to take 48 months to complete. It will eventually link up to the Pan Borneo Highway and connect the Sarawak Coastal Road at major bridge crossings.

More water-related contracts under the Sarawak Water Supply Grid Programme are to be dished out as the Sarawak government has recently raised the allocation for the project by RM1.2bil to RM4bil from RM2.8bil.

The government has also made big allocation for electricity supply projects to light up the rural areas and its digital development programme.

Lugun said CMS group has taken prudent steps to enhance its cost control initiatives, including managing and rationalising capital expenditures.

On Friday (Aug 28), CMS entered into a share sales agreement with its long-time joint-venture partner Sarawak Economic Development Corp (SEDC) for the proposed disposal of 2% equity interest in its subsidiaries - CMS Resources Sdn Bhd (CMSR) and PPES Works (PPESW - for RM17.5mil cash.

The transaction will effectively lower CMS’s stake in each of these two subsidiaries to 49% while SEDC will have a 51% controlling stake in these companies.

CMS expects a pro-forma gain of RM212.1mil on disposal from the proposed disposal.

CMSR has six subsidiaries which are involved in quarry operations, marketing of aggregates, manufacture and sales of concrete products and premix and road construction activities.

CMS described the transaction as a step in the right direction given the new role the Sarawak government has entrusted on SEDC.

SEDC is to play a more direct and catalytic role in the state’s economic development, including the change in quarry licensing policy requiring SEDC to have a stake in all quarries in the state.

“Pursuant to the transaction, all of CMSR’s quarry-related operations and PPESW’s construction operations, including its roads construction activities, will come under the direct control of SEDC.

“CMS, however, will continue to manage CMSR’s and PPESW’s day-to-day operations until such time when SEDC may introduce changes to align the management of the two companies with the management of the SEDC group, ” it said.

Lugun said the transaction places CMS on a stronger footing to capture business opportunities, particularly as the time when several mega infrastructure projects are underway or in the pipeline in Sarawak.

“The transaction cements the marriage of strength and a realignment of our business strategy moving forward.SEDC has the necessary platform while CMS possess industry knowledge and a healthy balance sheet, These elements constitute a strong rationale for the disposal and we look forward to continuing our long and fruitful relationship with SEDC, ” he added.

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