Sub prime fears a growing concern for Cemex

Sub prime fears a growing concern for Cemex
19 September 2007

Cemex, the world’s top building materials company by revenue and parent of Rugby Cement, yesterday forecast strong third-quarter revenues, but said sub prime worries had made the outlook for its main market in the US uncertain.

The group said it was also said it was in talks with Irish aggregates and building materials group CRH to sell up to £2.2 billion in US and European assets.

Cemex said it expected quarterly revenues to rise 29 per cent to above £3 billion, boosted by its £7 billion acquisition of Australian building materials supplier Rinker in July, overcoming a weak US market.
The Department of Justice has required Cemex to divest the US assets as a result of its takeover of Rinker.
Cemex also predicted earnings before interest, taxes, depreciation and amortisation of £668 million, around a 22 per cent increase on the year-ago period.

However, it warned that the failure of some borrowers in the US to repay their mortgages and a crisis in the low-income sub prime lending market had combined to slow real estate construction, holding back cement sales.

It said it expected third quarter cement sales volumes in the US to dip by around two per cent.
However, helping to offset this was a strong sales performance in its UK and South American markets.
CRH, which is rumoured to be possibly interested in buying Wolverhampton-based Tarmac, is in negotiations to acquire some or all of Cemex’s assets in the US including its concrete pipe business; all the company’s materials and products operations in the Pacific Northwest, Utah, Wyoming, Nebraska, New Mexico, and El Paso, Texas; he aggregates operations in Kentucky; the cement plants in Wampum, Pennsylvania and Fairborn, Ohio; and its gypsum wallboard distribution business in Florida.

In Europe, the assets under negotiation include the San Feliu cement plant in Catalonia, Spain and Cemex’s ready-mixed concrete and aggregates assets in Austria and Hungary.

CRH said it had sufficient balance sheet capacity to debt-finance any transaction that might take place.
It said, given the mix of Cemex and Rinker assets, and the fact that Cemex’s acquisition of Rinker had only recently been completed, detailed financial information in relation to the deals was not yet available.
CRH has embarked upon an aggressive acquisitions campaign this year and has been linked with a £3 billion takeover of Tarmac.

Published under Cement News