Displaying items by tag: Cemex
US: Cemex USA has officially opened its new headquarters in Houston, Texas. Division president Ignacio Madridejos marked the event by presiding over a ribbon-cutting ceremony at the site at 10100 Katy Freeway in Memorial City in west Houston. More than 200 employees are now working at the new offices.
“These new offices show how Cemex USA stands strong,” said Madridejos. “This beautiful building will be part of the community for years and illustrates our commitment to being part of it.”
Mexico: Cemex is selling a 15.6% stake in Grupo Cementos de Chihuahua (GCC). If all 51,750,000 shares of GCC are sold the cement producer will raise around US$240m in revenue before expenses. Following the sale Cemex will retain a 7.4% direct interest in GCC.
US: Cemex has completed the sale of its Fairborn cement plant in Ohio and a cement terminal in Columbus to Eagle Materials for US$400m. Cemex said proceeds from the sale will be used for debt reduction and general corporate purposes. Bank of America Merrill Lynch acted as financial advisor to the cement producer for the transaction.
Mexico: Cemex has grown its profit in 2016, reporting that its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) has risen by 6% year-on-year to US$2.75bn from US$2.59bn in 2015. On a like-for-like basis adjusted for investments, divestments and currency fluctuations it rose by 15%. Its net sales fell by 3% to US$13.4bn from US$13.8bn, although on a like-for-like basis they rose by 4%. Sales volumes of cement remained stable at 66.7Mt. The company hailed a 10-year high in net income for 2016 and said that sales had increased on a like-for-like basis in the fourth quarter due to higher prices and higher volumes in Mexico, the UK and Germany.
“2016 was a very good year for Cemex. Despite continued volatility and uncertainty in the markets, we were able to deliver strong underlying operational and financial results by remaining focused on the variables that we control,” said Fernando A Gonzalez, chief executive officer of Cemex.
By region Cemex saw its net sales rise in both real-terms and on a like-for-like basis to US$2.86bn from US$2.84bn. It said that cement volume growth during the quarter and full year 2016 was mainly driven by the industrial and commercial, formal housing and self-construction sectors. In the US net sales remained static at US$3.67bn but they rose on a like-for-like basis. The company said that construction spending for the cement-intensive segments in the industrial and commercial sector grew by 1% in 2016, reflecting growth in the lodging and office segments, offsetting a decline in energy, agriculture and manufacturing. It also noted growth in the infrastructure spending in the last quarter of 2016 following the US presidential election.
In South and Central America and the Caribbean net sales fell by 9% to US$1.73bn from US$1.89bn. Cemex noted a flat market for cement sales volumes in Colombia in 2016 and high competition in a ‘soft demand’ market. In Europe net sales fell by 5% to US$3.3bn from US$3.43bn. Here, cement sales volumes fell in Spain and Poland through the year. However, sales volumes rose by 7% in the UK due in part to higher sales of blended cement that resulted from fly ash scarcity. Sales volumes in Germany remained flat in 2016 but the market picked up in the second half of the year supported by the residential sector. Finally, the group’s Asia, Middle East and Africa division reported that its net sales fell by 7% to US$1.54bn for US$1.65bn with a significant dip of 14% in sales volumes of cement in the fourth quarter of the year although volume remained flat in the year as a whole. The Philippines suffered from poor weather towards the end of the year although Cemex noted that cement demand weakened in the second half of the year in conjunction with the transition to a new government. In Egypt, government infrastructure spending drove cement demand.
Mexico: Cemex has said that it will start selling its 23% minority stake in Grupo Cementos de Chihuahua. The cement producer previously announced its intent to sell its stake but it sought permissions from the regulators first. It intends to sell its shares via a public offering authorised by the Comisión Nacional Bancaria y de Valores and conducted through the Mexican Stock Exchange. It will also run a private placement to eligible investors outside of Mexico.
Trinidad & Tobago: The directors of Trinidad Cement have once again advised shareholders to reject an offer by Cemex to buy the company. In a circular to shareholders the cement producer said that the amended offer made by Cemex in early January 2017 was still below the value its auditors had calculated. Cemex previously made an offer to Trinidad Cement in December 2016.
With president-elect Trump due to take office this week we wonder what this means for the cement industry in Mexico. In 2016 this column looked a couple of times at the implications of Trump upon the US cement industry. First, we looked at who might benefit if he builds his wall along the Mexican border and then we wondered what his policies might mean for the US industry. To answer the latter first, the main issues for the US industry are infrastructure, changes to the Environment Protection Agency (EPA) and the repercussions if Trumps serious about a trade war with China. So long as a trade war doesn’t happen then Trump is probably good news for the US cement industry. As for Mexico, the joke has been that Trump will be good for the construction business ever since market analysts Bernstein’s passed a note around in the summer of 2016 about that wall.
Graph 1: Breakdown of Mexican cement industry by production capacity. Source: Global Cement Directory 2017.
The makeup of the domestic Mexican cement industry hasn’t changed too much in the last decade, even with the merger between Lafarge and Holcim, preserving the same market share in production capacity between the companies. Most of the producers have reported growth in 2016. Cemex reported that its cement sales volumes rose by 3% for the first nine months of 2016 and by 10% in the third quarter of that year. Overall though, its net sales fell slightly to US$2.16bn in the first nine months, alongside a fall in ready-mix concrete sales volumes. Cemex, crucially, also seems to have taken charge of its debts in 2016, saying that it was on track to meet its targets and that it had announced nearly US$2bn worth of divestments in that year. Currently the company is trying to buy out Trinidad Cement in the Caribbean, which may be a sign that it has turned a corner.
Grupo Cementos de Chihuahua’s (GCC) cement sales volumes rose in the first three quarters of 2016, in its case by 4%. Its overall net sales in Mexico rose by 4.2% in Mexican Pesos for the same period but fell when calculated in US Dollars due to currency variations. GCC attributed its sales growth to better pricing environment and increased cement volumes, mainly for projects in the commercial and industrial sectors that compensated for a decline in the public sector, following the culmination of two major urban paving and highway construction projects in 2015. At the smaller end of the market, Elementia reported that its cement sales skyrocketed by 30% to US$104m in the first nine months of the year aided by higher prices and volumes.
The major Mexican cement producers all have a presence in the US with the exception of Cruz Azul. Cemex has held assets north of the border for years, Cemento Portland Moctezuma has links to Buzzi Unicem, GCC bought US assets from Cemex in 2016 and Elementia completed its purchase of Giant Cement also in 2016. These companies have clinker in their kilns in plants on US soil manned by US citizens. This represents investment in local industry and it is exactly the kind of thing that appeals to the rhetoric of Trump’s approach so far. If the new president builds his wall then Mexican producers will probably be producing much of the cement that builds it. Even the Mexican Peso’s slow decline since 2014 could help the local cement industry, as it will cut the cost of moving exports and materials north of the border. Indeed, Enrique Escalante, the chief executive officer of GCC said in late 2016 that his company was ‘ready to build’ Trump’s wall.
However, the sheer uncertainty factor of an incoming president with as little experience of public office as Donald Trump must be giving chief executives pause for thought. After all, Trump's tweets before he has assumed office have forced car manufacturers to change policy. If he manages to disrupt the North American Free-Trade Agreement (NAFTA) in order to protect US jobs then the repercussions for the Mexican economy will be profound. It sends nearly three quarters of its exports to the US. Local cement producers would surely suffer in the resulting economic disruption.
So, currency devaluations aside, Mexican producers are making money from their cement operations at home and they are increasingly hedging their bets by operating or buying units in the US. Some, like GCC, are even being ebullient about the benefits that might come their way. It may be a bumpy ride but the Mexican industry is ready. However, it may wish to avoid appearing in any of Donald Trump’s tweets anytime soon.
Trinidad & Tobago: Cemex has increased its offer to buy a controlling stake in Trinidad Cement. The cement producer has instructed its subsidiary Sierra Trading to make a higher offer and take-over bid with a value of US$101m with a deadline of 24 January 2017. Previously, in early December 2016 it offered US$89m. The amended offer is dependent on Cemex acquiring control of Trinidad Cement, among other conditions. In late December 2016 the directors of Trinidad Cement advised shareholders to reject Cemex’s offer because it was seen as poor value.
Trinidad & Tobago: The directors of Trinidad Cement have advised shareholders reject an offer by Cemex to take over the company. The cement producer issued a circular to its shareholders in late December 2016 advising them that the offer by Cemex’s subsidiary Sierra Trading was ‘not fair’ from a financial point of view. Cemex released plans in early December 2016 to present an offer and take-over bid to Trinidad Cement’s shareholders that would, if successful, give it control of the company. The value of the offer was placed at US$89m and it expires on 10 January 2016.
Colombia: Cemex has received a subpoena from the US Securities and Exchange Commission (SEC) seeking information to determine whether there have been any violations of the US Foreign Corrupt Practices Act (FCPA) in relation to a new cement plant being built by Cemex Colombia at Maceo in Antioquia.
In late September 2016 Cemex fired several senior staff members in relation to the Maceo project and its subsidiary’s chief executive resigned. This followed at internal audit and investigation into payments worth around US$20.5m made to a non-governmental third party in connection with the acquisition of the land, mining rights, and benefits of the tax free zone for the project. Cemex referred the situation to the Colombian Attorney General at the same time. The group has also confirmed that it maintains an anti-bribery policy applicable to all of its employees and subsidiaries.s