Cemex 2Q sales, profits seen down on economic weakness

Cemex 2Q sales, profits seen down on economic weakness
Published: 24 July 2009

Cemex probably had a difficult second quarter, with economic weakness in its major markets hurting sales and profits, according to Dow Jones Newswires

Mexican results may be negatively affected by the Easter holiday, which came in April this year instead of March, and by an outbreak of influenza that interrupted economic activity at the beginning of May.

Cemex is expected to report sales of $4.4 billion in the second quarter, down from $6.35 billion in the year-ago period, according to the median estimate of six analysts polled by Dow Jones Newswires.

EBITDA probably fell to $837 million from $1.37 billion a year ago, while net profit is seen at $187 million, compared with $444 million in the second quarter of 2008.

"Weak operating results for Cemex shouldn’t be a surprise and should already be partly reflected in the share price," Banco Santander said in a report.

Cemex’s shares will likely be more sensitive to the company finalizing its debt restructuring with bank creditors, including the possibility that a deal will involve a capital increase, Santander added.

Cemex presented a proposal to banks last month which, in broad terms, seeks to extend $14.5 billion in 2009-2011 debt maturities through 2014.

Expectations for the refinancing improved when Cemex agreed to sell its Australian assets to global competitor Holcim Ltd for $1.62 billion. Cemex’s progress in asset sales received a setback, however, when Austria’s Strabag SE pulled out of an agreement to buy its Austrian and Hungarian operations for EUR310 million. Cemex is challenging that decision.

Cemex’s shares have had a year of ups and downs, with its locally traded CPO shares sinking below MXN6 in March and rising above MXN15 mid-June. The shares closed up 4.6% Thursday at MXN12.94 following a positive report on U.S. existing-home sales.

"The real catalyst for Cemex’s shares will come when the company’s operating prospects start to improve," brokerage Ixe said in a report. "We estimate that this will happen in the second half of 2009 and that, in 2010, backed by the economic recovery in the U.S. and Mexico, growth will resume."

Absent in the second quarter will be much of the financial pressure from losses on derivatives which contributed to Cemex making a net loss in the fourth quarter of 2008 and a miniscule US$3m net profit in the first quarter of this year.

Source: Dow Jones Newswires