Mexico’s Cemex 3Q earnings seen lower, but stabilising

Mexico’s Cemex 3Q earnings seen lower, but stabilising
Published: 22 October 2009

In August, Cemex refinanced US$15bn in mostly bank debt, stretching maturities through early 2014. Since then it has raised US$1.78bn in a capital increase and US$1.7bn from the sale of its Australian assets to global competitor Holcim Ltd, using the money to pay down debt.

At the time the debt deal was completed, company officials were cautious yet positive about prospects, as government infrastructure projects kick in and economies, particularly the U.S. economy, start to recover and generate more demand for cement.

In Mexico, currently Cemex’s biggest market, the economy is expected to grow in the third and fourth quarters following four consecutive periods of quarter-on-quarter contractions.

The global downturn led Cemex to carry out severe cost-cutting, including laying off more than 10 per cent of its global workforce and shutting in capacity. More than half of the savings are expected to carry over into a recovery, promising greater profitability ahead.

Under the debt refinancing agreement, Cemex will keep its capital expenditures to US$700m in 2010, and US$800m a year in the 2011-13 period.

"Cemex has enough slack at present to accommodate substantial volume growth without adding incremental capacity," Scotia Capital said in a report.

Cemex plans to release its third-quarter earnings report after the market close on Oct. 27. Its CPO shares trading on the Mexican stock market fell 0.5 per cent Wednesday to 17.15 pesos (US$1.32).