Cemex Boosts Outlook

Recently, Mexican cement maker CEMEX S.A.B. de C.V. (CX - Analyst Report) posted decent results for the third quarter of 2009, considering the difficult economy. 

Net sales decreased to US$4.2 billion versus US$5.8 billion in the comparable period in 2008, representing a decrease of 27% − or a decrease of 19% when adjusting for the exclusion of the Venezuelan operations − on the sale of the assets in the Canary Islands, besides currency fluctuations. 

Lower sales in the quarter were primarily attributable to lower volumes, mainly from the U.S. and Spanish operations, as well as the exclusion of Venezuelan operations and the sale of assets in the Canary Islands. 

EBITDA decreased 38% in the quarter to US$806 million from US$1.3 billion in the same period of 2008, or 30% when adjusting for the exclusion of abovementioned assets and currency fluctuations. 

Cemex earned US$121 million in the quarter, a 40% fall compared to the same period a year ago. Net debt was US$17.1 billion, representing a decrease of US$1.2 billion during the quarter. 

Cemex intends to reduce its net debt by approximately US$3.6 billion in 2009 to reach US$14.3 billion at the end of the year in order to restore financial flexibility as soon as possible and meet its financial commitments. The company is indeed making a huge effort to restore its creditworthiness and adapt itself to the new and much more difficult market conditions. 

Almost all the important governments in the world, including the U.S., European Union and China, are announcing huge expenditure for infrastructure in the coming quarters. However, we believe it is still too early to be sure that the expected government expenses will provide all the demand needed for the company to generate the cash flow necessary to reduce its huge debt and return to profitability.