Cemex 1Q net seen suffering from tough YoY Comparison

Cemex 1Q net seen suffering from tough YoY Comparison
Published: 20 April 2007

Cemex is expected to report a drop in first-quarter net profit due to the absence of a one-time gain enjoyed in the year-earlier period, while topline growth should remain modest despite continued weakness in the U.S.  
Cemex  is expected to generate a net income in a range of around US$375m to US$450m, according to analysts surveyed by Dow Jones Newswires.  
That would come in below the $505m profit the company posted during the first quarter of 2006, though most of the difference can be explained by a $126m one-time gain recorded a year ago in relation to the cement accord between the U.S. and Mexico.  
The company is expected to report revenue of between $4.1bn and $4.2bn in the quarter, with Ebitda around US$835m to US$860m, say analysts.  
That’s up from sales of US$3.93bn and Ebitda of US$818m in the year-earlier quarter, and is in line with the company’s guidance of $4.2bn in revenue and $830 in Ebitda.  
Santander Serfin analyst Gonzalo Fernandez said the U.S. continues to be the biggest drag on revenue, especially considering very difficult comparisons with a strong first quarter last year.  
Other regions, especially Mexico and Spain, remain strong, said Fernandez, adding, "But it’s not enough to compensate for the U.S., and that’s why we’re seeing relatively moderate growth."  
The first quarter is expected to be Cemex’s worst, with expectations of an improvement in the U.S. and elsewhere throughout the year.  
"It seems like the situation in the U.S. is already stabilizing, so it will be interesting to see what the company’s point of view is," said Vector brokerage analyst Carlos Hermosillo, citing recent signs of recovery in U.S. housing data.  
Cemex, which generates the most revenue from the U.S., is trying to greatly expand its presence through an offer for Austalia’s  Rinker Group Ltd. (RIN). Earlier in the month, its bid was increased by 22% to $14.25 billion, winning the support of Rinker’s board. The offer expires May 18.  
Hermosillo said he thinks the higher bid will be successful in bringing on board holders of the required 90% of Rinker’s shares.  
He will also be listening to Cemex’s conference call for details on the 39 facilities in Arizona and Florida that must be divested to win approval from the U.S. Department of Justice, including how much revenue the plants generate and what price they should fetch from investors.  
Cemex plans to report its first-quarter results Monday after the market closes.