Cemex 2Q results bolstered by domestic sales growth

Cemex 2Q results bolstered by domestic sales growth
Published: 24 July 2006

Cemex is expected to post solid revenue gains in the second quarter, with domestic sales growth making up for some weakness in its US business. 
The world’s biggest supplier of ready-mix concrete and No. 3 cement maker is expected to register sales of at least US$4.5bn in the quarter and generate over US$1bn in earnings before interest, taxes, depreciation and amortization, or Ebitda, according to analyst estimates. 
That’s in line with guidance the company gave last month that its sales would rise 5 per cent on the year to US$4.6bn, with a 14 per cent gain in Ebitda to $1.13bn. 
"In general, the guidance and the expected results for the first half of the year are very much in line with what we expect for the whole year," said Gonzalo Fernandez, an analyst at Santander Serfin in Mexico City.  Thus, Cemex looks on track to achieve its goals of US$4bn in Ebitda in 2006 and US$2.5bn in free cash flow, he added. 
Still, the company’s preview of US results was disappointing, estimating a three per cent decline in cement and 24 per cent drop in ready-mix sales due to poor weather conditions and a slowing housing market. 
"The US represents approximately 30 per cent of group Ebitda and has benefited substantially in recent quarters from strong demand and aggressive price increases - a situation that could be reversed if rising interest rates stall construction activity and the sold-out conditions that have been so favorable for U.S. cement begin to ebb," said Deutsche Bank analyst Dan McGoey in a recent report. 
On the other hand, Fernandez of Santander Serfin believes that positive surprises in Mexico and Spain will likely provide some balance to the quarterly report.  Revenue from Spain is expected to increase by six per cent in cement and 24 per cent in ready-mix as home-building remains strong.