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13 July 2018

Lafarge Malaysia’s East Coast Rail Link cement supply contract paused due to project suspension

First publishedon www.AggBusiness.com

Lafarge Malaysia’s RM270 million (US$68.8mn) contract with China Communications Construction for the supply of cement for the country’s East Coast Rail Link (ECRL) has been suspended following the suspension of the project.

Domestic news outlets report that in a filing with Bursa Malaysia yesterday, Lafarge Malaysia said it received a letter from China Communications Construction (CCC) confirming the suspension of the cement supply contract with immediate effect until further notice.

It is reported that Lafarge does not expect the suspension to have any significant financial impact on its operations and financials in the financial period up to date of the suspension, as completed work will be compensated for in accordance with the contract.

However, for the period subsequent to the suspension date, the company has told Malaysian news sources that it will only be able to assess the actual financial impact upon receipt of clear direction from the client and/or Malaysia Rail Link Sdn Bhd after the government's review of the ECRL project is completed.

The ECRL is a 688km railway line stretching over four states, linking the Klang Valley to Pengkalan Kubor, Kelantan. In 2016, China’s state-owned China Communications Construction Company Ltd won the RM55 billion (US$13.61bn) contract to be the main contractor for the ECRL via its Malaysian unit CCC. The project will have two phases: Phase 1 from the Integrated Transport Terminal (ITT) Gombak, Selangor to Kota Bharu, Kelantan; and Phase 2 from Gombak North to Port Klang, Selangor and Kota Bharu to Pengkalan Kubor, Kelantan.

Under the terms of Lafarge Malaysia’s ECRL contract, the company is supplying cement to all eight packages of work relating to the project until 31 December 2019. The agreement is renewable for a further two years subject to mutually agreed renewal terms and conditions.

Speaking during the announcement of the cement supply agreement in March this year, Lafarge Malaysia president and CEO Thierry Legrand said, “This agreement marks a major milestone in our relationship with CCC. We are very pleased to be awarded the trust to supply such a landmark project. Working closely with CCC, we are privileged to support the country’s infrastructure requirements.”

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