Cemex cuts 2008 outlook, sees 3Q EBITDA down

Cemex cuts 2008 outlook, sees 3Q EBITDA down
Published: 12 September 2008

Cemex announced today that it expects EBITDA for the quarter ending September 30, 2008 to be about US$1.25bn, a decrease of about 3% on a like-to-like basis for the ongoing operations versus the same period last year, while operating income is expected to be close to US$800m. Cemex expects sales for the third quarter to be about US$5.9bn, flat on a like-to-like basis versus the same period last year. For the first nine months of the year and on a like-to-like basis, Cemex expects EBITDA of about US$3.55 billion, an 8% decline versus the same period last year, while revenue is expected at about US$17.6bn, a 2% increase in the same period.

Like-to-like basis comparisons include the effects of: the consolidation of Rinker starting July 1, 2008; the sale of some U.S. assets as required by the U.S. Department of Justice related to the Rinker acquisition; the sale of certain U.S. assets to Cemex’s joint venture with Ready Mix USA; as well as the exclusion of its Venezuelan operations starting August 1, 2008, reflecting the nationalization of our assets in that country, despite the fact that Cemex compensation has not yet been determined.

”We continue to face a challenging economic environment in most of our markets. Volumes during the quarter have been negatively affected by the continuing downturn in markets such as the United States, Spain, and the United Kingdom. In addition, foreign-exchange fluctuations have also had an impact on our full-year estimates, as the Mexican peso has depreciated since the end of the second quarter,”aid Rodrigo Treviñ, Cemex  Chief Financial Officer.

Realized synergies and cost-cutting initiatives to improve efficiency have helped to partially offset the sharp increase in energy and transportation costs. Furthermore, average pricing for our products remained resilient and has helped mitigate input-cost inflation.

“For 2008 we now expect EBITDA to be between US$4.6 and US$4.7bn. About half of the drop in our EBITDA guidance is the result of the lower expected performance from our U.S. operations. We also expect lower EBITDA contribution from our Spanish and UK operations. Additionally, this guidance reflects the exclusion of our Venezuelan operations starting in August, as well as a negative foreign-exchange effect of close to US$100 million, primarily as a result of the weaker Euro. We expect free cash flow after maintenance capital expenditures to be about US$2.6 billion for the year.

“Our net-debt-to-EBITDA ratio was slightly below 3.5 times by the end of the second quarter. We expect to continue to be in compliance of this ratio going forward.”

During the third quarter, CEMEX expects domestic cement and ready-mix sales volumes in Mexico to decrease by about 3% and 1%, respectively, versus the comparable period last year. For the first nine months of the year volumes are expected to decrease by about 3% and 7%, respectively, versus the same period of last year. The main driver of cement demand in the country continues to be the formal residential sector. Higher input cost inflation has negatively affected the self-construction sector. In addition, the infrastructure sector continues to be affected by a delay in project starts, which are expected to pick up in the last quarter of 2008. Finally, adverse weather conditions throughout the country have affected volumes during the quarter. Given this performance in volumes for the first nine months of the year, we now expect domestic cement volumes in Mexico to decrease by about 1% for the full year 2008, and ready-mix volumes to decrease by approximately 2% for the full year 2008.