Cemex rating raised – Moody

Cemex rating raised – Moody
16 August 2005

Cemex SA, had its debt rating raised one level to investment grade by Moody’s Investors Service less than six months after the company made its largest acquisition ever. Moody’s raised Cemex’s rating to Baa3, its lowest investment- grade rating, from Ba1 and said the outlook is stable. Monterrey, Mexico-based Cemex paid US$5.8 billion in March to acquire Britain’s RMC Group PLC, the world’s biggest producer of ready-mix concrete.

“Cemex’s management has made progress in mitigating the near-term debt refinancing risk associated with the RMC Group acquisition through absolute debt reduction and the lengthening of its debt maturity profile,’’ Moody’s said in a statement. The change puts the Moody’s rating on par with Standard & Poor’s, which increased its rating on Cemex to investment grade BBB- in May 2000.

Cemex used its profits and cash from asset sales to reduce net debt by US$811m in the second quarter to US$9.62 billion, helping ease concern over the company doubling its debt to pay for RMC, said Anne Milne, chief of Latin American corporate debt research for Deutsche Bank Securities in New York.

“It looks like Cemex is on target to meet their leverage goals,’’ Milne said. “If they’ve digested this acquisition, which is probably as big as
their going to get on an individual basis, it looks like they’ll be able to manage their leverage going forward.’’

Since Lorenzo Zambrano was appointed chief executive in 1985, Cemex has acquired more than 15 companies, including the $2.8 billion purchase of Houston-based Southdown Inc., to become a global company. The RMC acquisition made Cemex the largest cement and concrete producer in the US and added 22 countries in Europe, Asia and Latin America to its operations. Cemex will probably reduce debt by US$2 billion this year and recently extended the maturity of its debt to 4 years from 3.1 years, Moody’s said. The company doesn’t face any “significant’’ refinancing of debt until 2009,Moody’s said.

The company said on a June 21 conference call with analysts it will achieve annual cost reductions of US$360m per year from RMC by the end of 2007, higher than the US$200m Cemex announced last year.

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