Zambrano in New York, but not China

Lorenzo Zambrano seems to be one of the few global chief executives not rushing into China - at least not yet. Such caution is uncharacteristic for Mr. Zambrano, the man who built Cemex into the world’s third-largest cement company by snapping up companies from Colombia to Egypt, and on to Indonesia. But the Chinese market, he says, is unattractive in a new interview with the New York Times "The industry isn’t profitable" there, he said, citing governmental factors like informal price controls and a tax system that he says is designed to suck up profits.

Mr. Zambrano, who recently turned 60, dismisses Wall Street’s concern about Cemex’s debt, calling analysts "napkin scribblers." He has continued to borrow to expand. He borrowed to buy the Houston-based cement maker Southdown Inc. for $2.6 billion in 2001, a deal that made Cemex the largest cement producer in the United States but increased the company’s debt to $6 billion, an amount nearly equal to Cemex’s annual sales. By the end of last year, the debt dropped to $5.6 billion, or four-fifths of annual sales of $7.16 billion, sales that represented a 9 per cent rise from the previous year as the company benefited from the economic recovery in America and Mexico.

Right now, "Cemex is doing a lot of housekeeping," said Carlos Perezalonso, an analyst at BBVA-Bancomer in Mexico City. "The market is grateful it isn’t taking risks in a time of uncertainty."

Cemex’s most pressing problem at the moment is in Indonesia. Local protests over foreign ownership have led the Indonesian government to renege on an agreement to sell to Cemex control of the cement maker PT Semen Gresik; Cemex has already spent $300 million for a 25 percent stake. This stumble has made Cemex more cautious, Mr. Zambrano admitted. (Original report New York Times - April 15th)