CMS is ramping up its clinker production capacity from 625,000 tonnes at present to 750,000 tonnes after its phase 2 upgrading, and a further to 800,000 tonnes under Phase 3 in 2022.
KUCHING: Cahya Mata Sarawak Bhd (CMS) has appeared bullish on construction job wins, AmInvestment Bank Bhd (AmInvestment Bank) gathered from an analyst briefing, while also noting that the maintenance work at the group’s clinker plant is on track for completion in the first quarter of 2021 (1Q21).
According to AmInvestment Bank, CMS appeared bullish on construction job wins, ahead of the Sarawak state election which must be held by September 2021.
However, the research firm noted that the group fell short of providing specific details such as the nature, value and timing of the award of potential jobs.
Meanwhile, AmInvestment Bank highlighted that CMS’ maintenance work at its clinker plant, which first started in October 2020, is on track for completion in 1Q21.
The research firm recalled that CMS is ramping up its clinker production capacity from 625,000 tonnes at present to 750,000 tonnes after its phase 2 upgrading, and a further to 800,000 tonnes under Phase 3 in 2022.
“The rationale is to reduce its reliance on imported clinker of which prices could be quite volatile, hurting its cement division’s margins,” the research firm said.
“Upon the completion of the entire plan, we estimate that CMS’ dependence on clinker imports (largely from
Southeast Asia and Peninsular Malaysia) will decline to 45 to 50 per cent from 60 per cent.
“We understand that the sizes of the clinker and cement markets in Sarawak are about 1.4 million and 1.7 million tonnes annually respectively.”
CMS guided for a turnaround of 25 per cent-owned associate OM Materials (Sarawak) in financial year 2021 (FY21F), which was consistent with AmInvestment Bank’s forecast of RM40 million profits, from about RM23 million losses in FY20.
“This is on the back of an uptrend in global commodity prices (ferrosilicon included) driven by a synchronised recovery in the global economy, underpinned by the availability of effective vaccines.
“Already, ferrosilicon (FeSi) currently trades at US$1,400 per tonne to US$1,500 per tonne, well above our estimated breakeven price of US$950 per tonne.
“OM Materials (Sarawak) will achieve profitability despite only six out of its total of 10 FeSi furnaces being operational.”
The research firm gathered that of the four units that are offline now, two are being converted to produce silicomanganese and there are plans to convert the other two to produce metallic silicon.
“The reason for the conversion is that silicomanganese and metallic silicon provide more stable margins compared to FeSi.
“All these four units are expected to come back online in FY22F.”
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