Global recession continues to undermine Cemex

Global recession continues to undermine Cemex
Published: 31 July 2009

 Cemex’ results continue to slide as global recession undermines second quarter results.

Cemex reported net sales of US$4.2bn in the second quarter, representing a 34% drop YoY, and is mainly attributed to lower volumes in its major markets in the US (down 37%) and Spain (down 43%). The company was also affected by the exclusion of its Venezuelan operations and the sale of its assets in the Canary Islands which were partially mitigated by price stability in most of its markets. 

Group EBITDA fell by 41% to US$812m from US$1.4bn in the same period of 2008. By comparison, first quarter net sales fell by 32%, while EBITDA levels were reported to have dropped by 25%. 

The company noted that while infrastructure was the main driver of demand in most markets, it had not seen the positive impact of stimulus packages announced around the world. 

Cemex remains highly leveraged and net debt at the end of the second quarter stood at US$18.3bn. Debt restructuring is ongoing, and the company announced on the 30th July that it has 90 per cent creditor support for its refinancing plan which would extend US$14.8bn in debt maturities through to February 2014. Such a deal would, however, include restrictions on Cemex acquisitions, investments and other actions. 

The company’s efforts to divest non-strategic assets has resulted in the agreement to sell its Australian operations to Holcim Group for approximately A$2.02bn, including Cemex’s 25% stake in Cement Australia.

However, efforts to divest other assets have not been as straightforward. On July 1st, Strabag SE notified Cemex of its intention to withdraw from its agreement to buy Cemex’s operations in Austria and Hungary for €310m. Cemex believes the agreement is still valid and is considering legal action. Croatia-based Nexe Group is now waiting in the wings, and has indicated its interest in taking over some parts of Cemex Hungary. 

Cemex is also seeking to restore financial flexibility through a cost reduction initiative which is targeting an additional US$200m in recurrent cost savings by the end of 2009, bringing total expected savings for the year to US$900m.