KUALA LUMPUR (July 12): 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 (ECRL) Sdn Bhd, following the suspension of the project pending a government review.
According to Lafarge's filing with Bursa Malaysia, this follows the instruction received by China Communications from Malaysia Rail Link Sdn Bhd on July 3 on the ECRL project suspension; Lafarge received a letter today 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 had on March 19 executed an agreement with China Communications, to supply 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 its operations and financials upon receipt of clear direction from China Communications and Malaysia Rail Link after 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 shares closed up 7 sen or 2.3% today to RM3.05, for a market capitalisation of RM2.59 billion.