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Annual Shareholders Meeting: Advantages Moving Forward

In his presentation during CEMEX Annual Shareholders Meeting in Monterrey, Mexico, CEMEX Chairman and CEO, Lorenzo H. Zambrano, discussed the company’s results during 2009, as well as its expectations and advantages moving forward. Approximately 500 people attended the Annual Shareholders Meeting to learn more about the company’s goals, strategies, and initiatives.

Mr. Zambrano described the complex global context under which the company operated during last year. As he stated, “At the beginning of 2009, there was practically no access to the financial markets, and what is now known as ‘the great recession’ seemed to worsen by the day.”

However, he assured CEMEX’s shareholders that, thanks to the company’s prompt, decisive measures—and especially the dedication of all of CEMEX people—the company now is in a better position to take advantage of all of the business opportunities that arise as the economic recovery progresses.

Despite the exceptionally adverse economic environment, the company managed to achieve significant results in 2009. Over the course of the year, CEMEX implemented an integrated financial and operating strategy designed to reposition the company. Key actions included:

• First, the company executed a rigorous US$900 million cost-reduction program.
• Second, the company substantially reduced its maintenance- and expansion-capital expenditures by more than US$1.5 billion, from approximately US$2.2 billion in 2008 to US$636 million in 2009.
• Third, the company closed a refinancing agreement with its financial institutions that extended the maturities of nearly US$15 billion in debt, with a final maturity of February 2014.
• Fourth, the company gained access to the financial market and raised approximately US$1.8 billion through the completion of a global equity offering.
• Fifth, the company sold its Australian operations for approximately US$1.7 billion.

As a result of these and other initiatives, the company decreased its net debt by US$2.9 billion during the year, while aligning CEMEX’s global operations network with prevailing market conditions. Summarizing the company’s results, Mr. Zambrano pointed out, “Our response capability to the current economic crisis allowed us to prove the talent of our people, the strength of our business model, and the confidence the financial markets have in CEMEX.” Succinctly, “today CEMEX is leaner, more flexible, more agile and more focused on our core business operations” and is “better prepared to create greater value in a sustained manner.”

Nevertheless, CEMEX Chairman and CEO emphasized that “we are far from satisfied because we know that we will be able to achieve much more once conditions in our markets recover steadily.” In the short and medium term, several factors can drive demand, including:

• The application of about a trillion dollars worth of government economic stimulus programs for infrastructure development in the different countries in which CEMEX operates
• The favorable demographic trends in most of CEMEX’s markets, which will generate greater demand for new housing
• The accumulating backlog in all of the construction sectors as a result of the recession, particularly in the United States

Considering these factors, Mr. Zambrano outlined “several advantages to create greater free cash flow as demand grows.” First, the company has strengthened its capital structure, extended its debt maturities, reduced its refinancing risk, and improved its liquidity. “For this reason, our priority continues to be to recover our financial flexibility as soon as possible—as it represents the key to our future growth.”

Another major advantage is CEMEX’s operational capability. For example, to stay at the forefront of the industry, the company established a specific area to promote a greater culture of innovation across the organization. Based on a new technological platform, CEMEX people can collaborate more easily to create and apply specific ideas that will translate into competitive advantages and more efficient business practices.

Furthermore, Mr. Zambrano reinforced that “one of the most important advantages that we have is the consistency of our energy and sustainability strategy, which   we   have   followed   for   years.”    For    example,

CEMEX’s capacity to substitute alternative cementitious materials—such as fly ash and blast furnace slag—for clinker enables the company to consume fewer natural resources as raw materials, to save costs by using less energy in the cement production process, and to reduce CO2 emissions.

“Finally, our greatest advantage is that we have the most talented and dedicated people in our entire industry,” underscored Mr. Zambrano. In one of the worst crises that CEMEX has confronted in the past 75 years, “the professionalism shown by CEMEX people was truly exemplary.”

As the organization has learned, every crisis can represent an opportunity. In CEMEX’s case, the sheer size of the crisis drove the company to implement an in-depth evaluation of the entire organizational structure; to simplify its processes; to reinforce its capacity to innovate; and to develop new products and services that better fit the company’s changing market conditions. Thus, stated CEMEX Chairman and CEO, “I am convinced that, by focusing even more on the core aspects of our business, we will continue to improve our capability to satisfy the most exacting demands in all of our markets.”

“To conclude,” closed Mr. Zambrano, “I want to thank you again for your trust in CEMEX and assure you once more that all of us, who are proud to be part of this great company, are dedicated to obtaining the best results for you.”

All of this information can be found in the 2009 Annual Report, which is now available online through our Reports page in this website.