Cemex plans to sell about US$1bn of assets by the end of 2012 to reduce debt, CEO, Lorenzo Zambrano said.
Businesses that don’t generate at least a 10 per cent return on capital over time will be sold, Zambrano said in a webcast of a meeting with analysts today in New York during Cemex Day.
The company plans to sell US$180m of assets this year, he said.
Cemex, which had US$17.8bn in debt at the end of the second quarter, will meet bank covenants for 2011 and 2012 without renegotiating or selling equity, Zambrano said. The company will instead rely on asset sales, cost cuts, lower energy costs and management of working capital, he said.
Zambrano said the company’s debt was 7.16 times EBITDA at the end of June, just within target. Cemex has promised to cut debt to no more than seven times earnings by end-2011.
He said he expected annual EBITDA of at least US$4.5bn to US$5bn mid-cycle, or in about five years.
“There are many things working in our favor and that’s why I’m optimistic,” Zambrano said.
The U.S. market, could bring in up to US$1.8bn over that same period, Zambrano said.
Concrete and ready-mix volumes in United States will remain in the red this year, but in 2012 the outlook is more optimistic, the company said.
"As you know, our business here is under water," Zambrano said about the U.S. operation. "Let me be clear: We expect our U.S. operations to be profitable next year.
Cemex is set to sell non-core assets – mostly real estate holdings like quarries – to raise additional cash. But some of those transactions could include swapping assets with other competitors, management said.
Some US$180m of the expected US$1bn in asset sales could happen as early as this year.
"We don’t want to own assets that aren’t core or aren’t producing cash," Zambrano said. "If a business cannot generate at least a 10 per cent return on capital over time, we don’t want to own it."
The company was not considering issuing equity in current market conditions.