Newsbreak: Talks on CIMA sale back on as cement industry consolidates

UEM Group Bhd, which is wholly owned by Khazanah Nasional Bhd, has been looking into selling its cement manufacturing arm, Cement Industries of Malaysia Bhd (CIMA), according to sources.

They say two local companies are vying to acquire CIMA from UEM Group.

“One company has gone as far as to make a bid of between RM800 million and RM900 million. It is not known how much the other company put in as its bid as details are scarce at this point in time,” says one source.

The Edge understands that CIMA’s replacement cost is around RM1.9 billion.

For clarity, the replacement cost refers to the amount of capital needed to replace an old cement plant.

CIMA has two plants — one in Bukit Ketri, Perlis, and the other in Bahau, Negeri Sembilan. They have a total cement production capacity of 7.2 million tonnes per annum, according to its website.

When contacted, UEM Group declined to comment on whether CIMA was up for sale.

“We do not comment on speculation,” the group tells The Edge in an email.

Talk of CIMA being put up for sale is not new in the cement industry.

“At one time, every player in the industry with the financial means was looking at CIMA, so talk of it going up for sale has been around for quite some time,” says another source.

As for its financials, CIMA reported a net loss of RM158.95 million as at Dec 31, 2017 — from a net profit of RM42.39 million the year before — on the back of a 24% decline in revenue to RM915.69 million.This comes as no surprise as, according to The Cement & Concrete Association of Malaysia, the three public listed cement manufacturers — Lafarge Malaysia Bhd, Tasek Corp Bhd and Hume Industries Bhd — incurred losses of close to RM1 billion in total over nine quarters, stretching from 2017 to 2019. This was the result of lower cement prices combined with higher operating costs.According to the association, cement prices in Peninsular Malaysia have been on a downward trend since 2016 and have reached a level that is not sustainable.Reports emerged last week of an upward adjustment to prices, but following a meeting with the government, cement players agreed not to increase prices.One way the industry has been coping with the growing losses is through consolidation.A recent bout of deals involving larger players was made in order to deliver synergy and improve operational efficiency. In […]

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