Cemex’ priority is to reduce gearing

Cemex’ priority is to reduce gearing
Published: 04 June 2010

At its annual investor presentation, Cemex left the volume expectations for this year unchanged at 3% growth in cement and a 1% growth in aggregates, with ready-mixed concrete deliveries expected to be slightly lower than last year. 

EBITDA is expected to emerge in the region of US$2750m, some 3.5% higher than the US$2657m achieved last year.  Capital expenditure this year is expected to amount to approximately US$630m, compared with US640m last year.  Net debt remains high, at some US$18,045m at the end of March, but seasonal factors have reduced the debt and the 93.1% gearing since then. The agreement with the banks has pushed forward the peak in debt repayments by some three years from 2011 to 2014, but acquisition capital expenditure is limited to US$100m per annum.  For this year, and probably also in 2011, this will go entirely into the Blue Rock partnership, whose initial investment will be in Peru, where Cemex has already started building up a downstream business.  No acquisitions are planned for the foreseeable future, other than through Blue Rock. 

The non-core assets to be sold are mainly in the USA, but achievable prices are still seen as being too low.  This also applies to the former RMC operations in Malaysia, which will be sold, once an acceptable price can be obtained.   Cemex admitted that had the Rinker deal been financed by a combination of equity and long term debt, rather than relying on short term funding, the group would have been able to retain its activities in Australia and in the Canary Islands, that were sold to Holcim and Cimpor respectively.

Additional cost savings of some US$150m are expected to be achieved this year.  The usage of alternative fuels, which reached 16% last year, is expected to increase to approximately 21% this year and to about 25% in 2011.  The use of alternative fuels is the highest in Europe at around 37%, helped by the 78% currently being achieved in Germany and in Poland.

Spanish volumes are expected to fall by a further 12% this year and not to start recovering until some time in 2012. By contrast volumes are expected to grow by 5% in Germany this year and by 2% in Great Britain, the French volumes, which are limited to aggregates and concrete, are expected to decline by 3%. The falling domestic volumes in Spain are being partially compensated by increasing exports from Spain to markets like Algeria, Morocco and the Ivory Coast.  In spite of this, Cemex hopes to maintain its margins in Spain this year.  Poland and Latvia should show improved results this year, with Poland achieving a 0.2m tonnes per annum increase in cement capacity.  

Outside the Americas and Europe, Cemex expects to achieve record profits this year in both Egypt, where volumes are heading for an 8% improvement, and in the Philippines.  While Cemex considers longer term opportunities still to exist in India and China, there does not seem to be any hurry to act, as the Indian market is likely to be come more difficult in view of new capacity being added, and Chinese margins being very low.