|Believing CX is a safe, long term hold, I recently put 3 family members in it. I am confident they will work through this temporary hiccup with RMC costs and will streamline efficiencies and systems.|
Cemex's management proving once again that it is an expert at merger integration and the sharing of best practices across operations. With its highly centralized management structure, the firm has already reduced overhead expenses significantly. In fact, the combined entity's profitability has surpassed our expectations.
We've since evolved this system into a comprehensive intelligent platform called GINCO, which further leverages our proprietary information technology. GINCO uses a single interface and standardized workflow to fulfill our client's orders. The new platform, which is operational in our major markets worldwide, encompasses all aspects of the ready-mix business; the same interface that helps our sales force track customer satisfaction can also determine the exact mix for a specific customer order at each plant, ensuring consistent quality, less waste, and greater client savings.
MEXICO CITY, Jan 27 (Reuters) - Mexico's Cemex, the world's No. 3 cement maker, said on Friday its exports to the United States will surge in coming years now that Washington and Mexico have ended a long fight over U.S. cement duties.
After posting a decline in fourth quarter net profit, Cemex said it would grab the lion's share of the 3 million tonnes per year of cement exports that has been allocated to Mexican cement makers in the new trade accord.
Washington and Mexico brokered a deal last week to end a 16-year row over anti-dumping duties on Mexican cement, driven to an accord in part because of U.S. cement shortages and a need to rebuild New Orleans and other hurricane-hit regions.
"We believe we will be allowed to export 2 million tonnes, or roughly 750,000 above 2005 levels," Cemex's planning and finance chief Hector Medina told analysts.
Medina also said Cemex will use cash flow to increase its cement and concrete output capacity in its main markets, opening the door for expansion in the United States, where it is already the No. 1 player, or in its home base of Mexico.
Despite the positive U.S. export outlook, Cemex shares fell after its sickly earnings report. Local shares (CEMEXCPO.MX: Quote, Profile, Research) closed down 2.31 percent at 67.74 pesos. Its American Depositary Receipt (CX.N: Quote, Profile, Research) was off 1 percent at $65.45.
Cemex's October-December net profit fell 27 percent to $244 million as costs jumped from its takeover of Britain's RMC Group and from a one-time impact of changes to pensions.
Cemex acquired RMC, the world's biggest ready-mix concrete maker, in March. The $5.8 billion acquisition is the largest by a Mexican company.
Operating in more than 50 nations, Cemex said its cost of goods sold rose 128 percent in the fourth quarter versus a year earlier, "primarily due to the acquisition of RMC."
TWO U.S. PRICE HIKES
Medina said Cemex expects core EBITDA -- or earnings before interest, taxes, depreciation and amortization -- to hit $4 billion in 2006, up from $3.6 billion last year.
Chief Financial Officer Rodrigo Trevino said EBITDA could even be higher if the peso stays strong -- and sales from Mexico translate into higher dollar amounts -- and if the additional cement exports to the United States materialize.
"There is significant upside to that guidance," Trevino told analysts on a conference call.
Analysts hailed Cemex's openness about its official conservative stance on EBITDA for 2006.
"There is a margin of security there," said Carlos Hermosillo, an analyst with Vector brokerage.
Cemex also plans to push through two price increases in the United States this year, one in the first quarter for $11 per metric tonne, and a second for half that amount in July. Average U.S. prices are now $96/tonne, Medina said.
In fourth-quarter results released overnight, Cemex said sales jumped 98 percent to $3.96 billion, in line with expectations, and mainly because of the RMC acquisition, which doubled the size of the company.
A Reuters survey of analysts had forecast that Cemex would report fourth quarter net profit of $565 million, higher than a year earlier, on revenues of $3.949 billion.
EBITDA rose 55 percent to $901 million in the fourth quarter, slightly below market consensus.
Cemex cut net debt in the fourth quarter by $235 million and its net-debt-to-EBITDA ratio fell to 2.4 times from 2.6 times at the end of the third quarter.
That means Cemex moved even further inside its so-called "cruising speed" of 2.7 times net-debt-to-EBITDA ratio, its comfort level to take on debt for more acquisitions.
The U.S.-Mexico cement deal allows Mexico to export 3 million tonnes of cement to southern U.S. states, the worst hit by hurricanes last year, at a duty of $3 per tonne, down from $26.28 currently. Duties will end after three years.