Lafarge’s RM270m cement contract for ECRL project suspended

KUALA LUMPUR (July 13): Lafarge Malaysia Bhd’s RM270 million cement supply contract for the proposed East Coast Rail Link (ECRL) project has been suspended by China Communications Construction Sdn Bhd, following the suspension of the ECRL project pending a government review.

In a filing with Bursa Malaysia, Lafarge said that following the instruction received by China Communications from Malaysia Rail Link Sdn Bhd on July 3 on the ECRL project suspension, the company received a letter yesterday from China Communications on the suspension of the cement supply with immediate effect until further notice.

Lafarge’s wholly-owned subsidiary Lafarge Cement Sdn Bhd on March 19 executed an agreement with China Communications for the supply of cement for all eight packages of work for the ECRL project, with a total estimated value of RM270 million.

The contract was to expire on Dec 31, 2019, with the option for the parties to renew the contract for a further two years.

Lafarge said the suspension is not expected to have any significant financial impact on the operations and financials of the company for the financial period up to the date of the suspension, as completed work will be compensated for in accordance with the terms and conditions of the contract.

However, for the period subsequent to the suspension date, the company will only be able to assess the actual financial impact on the operations and financials of the company upon receipt of clear direction from China Communications and Malaysia Rail Link after the completion of the government’s review of the ECRL project.

“In the event the suspension of the contract is lifted, it is expected to contribute positively to the earnings of the Lafarge Malaysia group for the financial year ending Dec 31, 2018, and the financial period thereafter within the duration of the contract,” the group said.

Lafarge’s share price closed up seven sen or 2.35% at RM3.05 yesterday, with a market capitalisation of RM2.59 billion.

This article first appeared in The Edge Financial Daily, on July 13, 2018.

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