Cemex net gains after RMC buyout

Cemex net gains after RMC buyout
Published: 21 July 2005

Cemex posted a better-than-expected 197 per cent increase in quarterly net profit following its $5.8bn takeover of Britain’s ready-mix concrete producer RMC. Cemex said on Wednesday its April-June net profit was $733m versus $247m in the same period a year earlier and higher than a Reuters survey of analysts that forecast a bottom line of $634m.
In March, Cemex bought Britain’s RMC, which strengthened its business base in Europe and doubled sales. Until 12 months elapse from the takeover, the acquisition will continue to skew Cemex’s results from the year earlier periods.
Cemex said its earnings before interest, taxes, depreciation and amortization rose 56 per cent to $989m mainly due to the acquisition of RMC.  With operations in more than 50 countries, Cemex said its net profit tripled due to a strong consolidated operating performance and from currency gains after the Mexican peso appreciated 3.6 per cent against the dollar in the quarter. 
Sales grew to $4.376bn, up 125 per cent from a year earlier although the costs and expenses rose at an even higher tick.  "We are in the preliminary stages of implementing Cemex’s standardized practices aimed at reducing costs and expenses in the newly acquired operations," Cemex said, adding that higher oil prices had also driven up energy and transport costs. 
Net debt at the end of the quarter was $9.624bn, down $811m from the end of March as Cemex continued to cut debt following the RMC acquisition. "The net-debt-to-EBITDA ratio improved to 2.9 times from 3.2 times at the end of the first quarter of 2005," Cemex said.  Company officials have said they want to hit the so-called "cruising speed" of 2.7 times by the end of 2005 
In Mexico, traditionally Cemex’s main market, said its cement volumes rose 5 per cent in the quarter and ready mix volumes jumped 17 per cent.  In the United States, cement volumes rose 9 per cent and ready mix volumes soared 227 per cent in the quarter following the RMC consolidation. A note of concern can be seen in central and southern America where falling cement prices are biting into profits in regions where Cemex traditionally has performed very well.