KUALA LUMPUR (May 22): Kerjaya Prospek Group Bhd remains optimistic about its ability to navigate rising construction costs and a more challenging industry environment despite ongoing global uncertainties linked to the Middle East conflict.
Executive chairman and major shareholder Tee Eng Ho said the group’s four decades of industry experience have equipped it with the expertise to manage cyclical market volatility and cost fluctuations effectively.
Speaking during a media briefing following the company’s first-quarter financial results announcement, Tee expressed confidence that the current surge in material prices would remain manageable for the group despite industry-wide concerns over escalating construction costs.
The conflict in the Middle East has disrupted global energy and commodity markets, resulting in higher prices for key construction materials. Tee noted that the price increases became more significant after February, with steel bar prices rising approximately 10% and ready-mix concrete costs surging around 40% compared to last year.
Despite higher diesel prices, Kerjaya Prospek said the overall impact on operations has been relatively limited because many of its construction sites are directly connected to the national power grid, reducing dependence on diesel-powered co-generation systems. While certain heavy machinery still requires diesel fuel, the company believes its operational structure has helped cushion part of the cost pressure.
Tee also expects the current supply chain disruptions and pricing pressures to gradually stabilise over time, adding that higher prices would eventually encourage additional supply from alternative markets.
To protect profitability, Kerjaya Prospek has incorporated revised cost assumptions into its newer construction contracts. According to Tee, the company’s disciplined pricing strategy and proactive budgeting approach have enabled it to adapt more effectively to rising costs.
Interestingly, Tee described the current slower construction market as potentially healthier and more sustainable for the industry. He explained that during overheated market conditions, contractors often face difficulties pricing projects accurately due to rapid cost escalation. A more measured environment allows companies to price jobs more carefully while maintaining healthier margins.
The company also sees opportunities emerging from the cautious sentiment within the industry. As some contractors become more conservative or struggle with tighter margins, Kerjaya Prospek believes it could potentially secure additional projects and even surpass its RM2 billion job replenishment target for the year.
Currently, Kerjaya Prospek’s outstanding order book stands at RM4.4 billion, with approximately 78% comprising related-party projects linked to property developers associated with Tee, including Kerjaya Prospek Property Bhd and Eastern & Oriental Bhd. Eastern & Oriental is notably involved in the large-scale Andaman Island development project in Penang.
Tee holds substantial stakes in the related companies, including 74.1% in Kerjaya Prospek Property, 62% in Eastern & Oriental and 68.3% in Kerjaya Prospek itself.
Beyond construction, Kerjaya Prospek also owns approximately 89 acres of land bank for future property development. However, the group currently has no immediate plans for new property launches this year and is instead targeting future launches in the following year.
The company’s outlook reflects growing industry caution amid rising costs and global economic uncertainty, while highlighting how experienced contractors with strong pricing discipline and stable project pipelines may continue to perform resiliently despite market headwinds.
Indonesia