Tasek ... Jun 09

Cement producer Tasek Corporation Bhd has emerged a stronger player in the industry with a shot at expansion into the building material segment with the recent changes in shareholding which saw Hong Leong Asia Ltd (HLA) taking more than a 70% stake in the former.

The acquisition creates synergistic benefits for both parties. Their combination has created the synergy whereby HLA will become stronger by having its in-house cement manufacturing arm and Tasek will be able to ride on HLA’s broad network in expanding into the building material industry.

HLA, a Singaporean-based regional manufacturing and distribution group, has an integrated building material division spanning the region but lacked a cement manufacturing company. Tasek is an integrated cement manufacturer in Malaysia. HLA acquired Tasek late 2008.

In April 2008, HLA had injected some S$323.5 million (RM777 million) worth of assets into Tasek in exchange for 212.249 million new shares in the company at an issue price of RM3.54 per share.

This effectively brought HLA’s direct shareholding in Tasek to 57.84% from 9.33% while its collective shareholdings with its subsidiaries increased to 68.34% from 31.92% previously.

Subsequently, HLA, through its wholly owned subsidiary Hartwell Pte Ltd, then launched a conditional takeover offer for Tasek’s remaining shares in November 2008 for RM3.80 per share. However, HLA’s bid to take Tasek private failed with it only achieving an eventual shareholding of 72.63% in the company.

Tasek has a manufacturing plant in Perak with a production capacity of 2.3 million tonnes with a 90% utilisation rate. It also has a total of 12 batching plants with total capacity of 160,000 cubic metres.

With such a rate of growth, Tasek is able to achieve full operating capacity in three to four years times.

The acquisition by HLA had enhanced Tasek’s competitiveness in the local market. With the invaluable support, experience and network of HLA, Tasek is believed to be able to expand into the building material segment at a faster pace.

Financial Results … For the first quarter ended March 31, 2009 (FY09), Tasek’s net profit dropped 10% to RM13.58 million from RM15.07 million a year earlier. Revenue, however, rose 21.6% to RM129.17 million from 106.24 million previously.

Earnings declined due to lower production and sales volume as well as higher operating cost arising from major plant maintenance. The 1QFY09 results excluded a portion of the profit of associates with effect from Feb 19, 2009 as a result of its acceptance of a proposal by an existing shareholder to acquire its equity in the associates.