Earlier this week Cemex reported that its third-quarter loss narrowed as a housing recovery drove sales growth in the US market, indicating that the Mexican major is headed in the right direction towards financial health.
Consolidated net sales reached US$3.9bn during 3Q12, an increase of two per cent on a like-for-like basis due to higher prices in local currency terms in most of its regions. The infrastructure and residential sectors were the main drivers of demand in most of its markets.
Net losses from July to September 2012 fell to US$203m from US$730m a year ago. Operating EBITDA grew nine per cent compared with last year to reach US$730m. “This is the highest EBITDA generation since the third quarter of 2009 and the fifth consecutive quarter with a YoY EBITDA increase,” Cemex CFO Fernando Gonzalez said in a statement.
Net debt at the end of September was 4.4 per cent lower than a year earlier at US$16,866m, with gearing coming down from 153.1 per cent last year, but still at a very high 146.8 per cent. The number of employees as at end-September was 0.5 per cent higher at 45,087. However, IBM is set to hire around 450 Cemex workers, or one per cent of its global staff, in a previously-announced outsourcing deal. Another 675 people, or 1.5 per cent of its workforce, will be made redundant. This downsizing is expected to be completed by December 2013.
Regional developments
Mexican deliveries showed a four per cent advance, but over the nine months to September 2012 were one per cent higher. Cement prices improved by two per cent in local currency but fell by nine per cent in US dollar terms. Cemex expects a recovery in its volumes during the 4Q12 with new infrastructure projects in the pipeline.
US grey cement deliveries showed a 16 per cent improvement in the nine months to September, with half of that coming in the third quarter. While demand from the industrial and commercial sectors has improved, the residential sector has underpinned growth. Year-to-date housing starts (as of August 2012) were up 25 per cent YoY and are trending towards Cemex’s estimate of 750,000 starts for 2012. In its key states of Florida, California, Texas and Arizona, housing permits grew at a rate of 37 per cent over the same period, versus a 27 per cent growth for the country. Based on its nine months results Cemex is increasing its 2012 US cement volume guidance from high single-digit growth to the low teens.
Northern Europe also saw an eight per cent improvement in third quarter deliveries but over the nine-month period there was an overall reduction of 13 per cent. Some of the more striking declines were registered in Great Britain (nine per cent), Germany (13 per cent) and Poland (12 per cent) compared with strong numbers in the previous year. Cement prices improved by three per cent in the former two countries but eased by one per cent in Poland.
Over in the Mediterranean, cement shipments were down 20 per cent between Jan-Sept 2012, while the average selling price in local currency showed a two per cent drop. Spanish deliveries plummeted 42 per cent as infrastructure spending and a lacklustre performance by the residential sector placed downward pressure on volumes. Exports account for about one-third of volumes during the third quarter.
Cement volumes in the South/Central America and Caribbean division improved by six per cent in the first nine months and prices were some 12 per cent higher in local currency terms. In the thriving market of Colombia, Cemex saw cement volumes six per cent higher although it has revised down its full-year volumes guidance from seven to five per cent given an extremely strong first half.
Asian turnover also improved and volumes advanced by 13 per cent across the region. The Philippines was the largest contributor with a 15 per cent rise and Cemex announced in the third quarter that it is to invest US$65m in a 1.5Mta capacity increase there.
Outlook
On its 2012 outlook, Cemex now expects consolidated volumes for cement to decline by one per cent and ready-mix and aggregate volumes on a like-for-like basis to drop by two per cent mainly reflecting lower-than-anticipated volumes in its European countries. The company, however, said: “We anticipate that the estimated increased profitability from our operations in Mexico, the US, the South/Central America and the Caribbean region and Asia will more than offset the expected weaker Northern European and Mediterranean regions.”
Cemex also said it expects to receive authorisation soon regarding the planned listing of minority shares in Cemex Latam Holdings. It is expected to start trading on Colombia's bourse on 16 November, according to a recent Reuters report. The offering, which could yield at least US$750m, is expected to be priced on 7 November, pending approval by Colombia's market regulator. |
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