CEMEX results boosted by RMC

CEMEX results boosted by RMC
Published: 27 January 2006

Cemex consolidated net sales for the fourth quarter of 2005 grew 98 per cent to US$3.96bn compared to the same quarter of 2004, mainly as a result of the acquisition of RMC. Majority net income for the year ended December 31, 2005 increased 62 per cent compared to 2004.

Cemex’s consolidated cement volume increased 27 per cent to 20.7Mt during the fourth quarter of 2005 versus 16.3Mt in the fourth quarter of 2004. Consolidated ready-mix volume grew 210 per cent to 18.6 million cubic meters also in the fourth quarter. The company’s consolidated aggregates volume reached 42.3Mt in the fourth quarter of 2005, an increase of 293 per cent over the fourth quarter of 2004. For the full year 2005, CEMEX’s consolidated cement volume increased 23 per cent to 80.6 million metric tons and consolidated ready-mix volumes were up 191 per cent reaching 69.5 million of cubic meters. Consolidated aggregates volume for the full-year 2005 was 160 million metric tons, 257 per cent higher than in 2004.

Hector Medina, Executive Vice President of Planning and Finance, said: "We are very pleased with our results for the year. We achieved important financial goals for the year, driving significant increases in sales and earnings growth, and we strengthened our position in our key operational and regional markets, enhancing our growth platform. The integration of RMC progressed smoothly and ahead of schedule and we were able to realize additional synergies from the transaction. Looking ahead into 2006, we are very well positioned to continue to build on our record of sustained revenue growth, while maintaining strong profitability, free cash flow expansion and a low cost of capital."

Chief Executive, Lorenzo Zambrano, already has his eyes on new prey: India and China. "China and India are very interesting because they are large, fast-growing economies," Mr. Zambrano said in an interview in the company’s Monterrey headquarters (with the Wall Street Journal). Indeed, Mr. Zambrano has a full-time analyst researching the Chinese market for potential acquisitions, on top of a regular market-intelligence team that flies in and out of the country as needed. "Right now, we have terabytes of information on China," he says.

Mr. Zambrano’s interest in China and India show that Cemex’s strategy of growing by acquisitions is unlikely to slow as it puts the finishing touches on the integration of RMC. Indeed, the RMC experience,the biggest purchase ever by a Mexican firm, is likely to encourage the world’s third-largest cement company to do more.

Zambrano said 2006 will be an important year for improving existing operations and consolidating the RMC acquisition. He also said he has no intention of rushing into an acquisition in either India or China, which he described as highly complex markets that would be expensive to enter, with their sheer size demanding an initial investment of at least US$1 bn. That means an extensive process of due diligence before making a move, Mr. Zambrano said. "The problem is, so far, everyone who has gone into China or India has had difficulty," he said. "You need to figure out how to do it first."