Mexico’s Cemex hit by souring US mortgage sector

Mexico’s Cemex hit by souring US mortgage sector
15 March 2007

Cemex has seen its share price fall four per cent this week on concerns that trouble brewing in the US housing sector could hurt future sales. 
The United States is Cemex’s biggest market, but a crisis in the subprime mortgage market there is driving concerns that the US housing market as a whole could deteriorate more than previously expected. 
Rising defaults by US homeowners have led at least two dozen companies to close shop in the US subprime market, which finances buyers with poor credit histories.
"The company has a rather tight link with the U.S. housing market, which makes up a substantial segment of its operations in the United States," said Carlos Hermosillo, a cement industry analyst at Vector brokerage in Mexico City. 
"The idea of more defaults does not paint a very positive picture for the outlook on future housing demand," he said. 
Hermosillo said sales in the housing sector account for about 30 per cent of Cemex’s U.S. business, which in turn made almost a quarter of global revenues in 2006.
Turmoil in the US mortgage sector has hit stock markets around the world in recent sessions, with Mexico’s benchmark IPC index down about two per cent this week. 
Cemex has been hit particularly hard, however, with its shares down four per cent this week.
On Wednesday, it was down 1.06 per cent at 36.40 pesos, while its New York traded shares were off 0.27 per cent at $32.66. 
"The bad news is in the United States, especially about the housing sector, is hitting Cemex’s shares," said Vanessa Quiroga, an analyst at Credit Suisse.
Cemex is currently bidding to become the world’s biggest ready-mix concrete and aggregates firm with an unsolicited takeover bid for Australian building materials company Rinker . 
Cemex has offered $12bn  for the firm, though Rinker’s board has recommended shareholders reject the US$13 (A$16.51) a share bid as too low. 
Hermosillo said a souring housing sector in the United States, where Rinker sources 80 per cent of its revenues, might convince some shareholders to take the offer. 
"It could give them a little push," he said. 
Published under Cement News