About Us - Press Release - CEMEX's second quarter 2003 net sales grew 7%; free cash flow increased 3% in dollar terms
July 18, 2003
CEMEX, S.A. de C.V. (NYSE: CX) announced today that its consolidated net sales for the second quarter of 2003 were US$1.9 billion, increasing 7% in dollar terms compared with the second quarter of 2002. The growth in sales was primarily due to the positive contribution of our newly acquired Puerto Rican unit, and higher revenues in Mexico, Spain, and Venezuela. In real peso terms, net sales also grew 7%, to MXP19.4 billion.
Our consolidated cement sales volume during the quarter was 16.8 million metric tons, up 4% compared with the second quarter of 2002, while ready-mix volumes were 15% higher, at 5.6 million cubic meters.
Free cash flow for the second quarter was US$390 million, up 3% in dollar terms compared with the same quarter of 2002. EBITDA (operating income plus depreciation and amortization) declined 1% to US$552 million. Our consolidated EBITDA margin was 29.8%, versus 31.9% in the second quarter of 2002. This margin contraction is due to the increased weight of our multi-products and ready-mix sales-both of which have lower margins than cement sales-and to higher energy costs with stable average prices. In real peso terms, EBITDA was MXP5.8 billion, practically flat compared to the second quarter of 2002.
Hector Medina, Executive Vice President of Planning and Finance, said, "Despite the challenging operating environment, we are pleased with the performance of CEMEX in what we believe is the down part of the cycle of many of our markets. We are confident that our balanced portfolio will continue to allow us to weather today's challenging global environment as well as individual market volatility. In the better times, we are convinced that the CEMEX model will return to a mid to low tens rate of growth. This could be achieved through a combination organic and acquisition growth, with continued strength in free cash flow generation."
Second-quarter operating income decreased 3% in dollar terms, to US$390 million. In real peso terms, operating income was also reduced by 3% to MXP4.1 billion. Our selling, general and administrative (SG&A) expenses, as a percentage of sales, decreased 110 basis points vis-à-vis the same year-ago quarter, and for the first six months of 2003, they fell by 150 basis points, reflecting CEMEX's continuing efforts to control expenses and increase efficiency.
Majority net income for the second quarter was US$309 million (US$1.00 per ADR), increasing 322% from US$73 million in the year-ago quarter. The increase was primarily the result of a US$48 million foreign exchange gain (versus a loss of US$107 million in the second quarter of 2002), and a gain in marketable securities of US$66 million (compared to a loss of US$122 million a year ago). The gain recognized in marketable securities was attributed mainly to the US$347 million increase in the value of our derivatives instruments during the quarter, part of which is recognized in the income statement. In real peso terms, quarterly net income increased 324%, to MXP3,232 million (MXP2.1 per CPO).
During the quarter, our net debt decreased 6%, to US$5,829 million. Free cash flow in the amount of US$388 was used to reduce net debt during the quarter; however, when expressed in U.S. dollars, net debt decreased by US$350 due to the strengthening of the euro versus the U.S. dollar.
CEMEX's interest coverage (EBITDA divided by interest expense plus preferred dividends, all for the last twelve months) was 4.9 times, versus 5.3 times a year ago. Our net debt to EBITDA ratio stood at 3.0 times, versus 2.9 times at the end of the second quarter of last year.
CEMEX's Mexican operations reported net sales of US$714 million in the second quarter, a 9% growth versus the same period of 2002. EBITDA was up 5%, to US$325 million. Domestic grey cement sales volumes increased 2% for the quarter, driven by a strong residential sector and public works on infrastructure projects. The self-construction sector remains stable. Ready-mix volumes grew 10% for the quarter.
In the United States, CEMEX's net sales were US$452 million, 6% lower than the second quarter of 2002. Quarterly EBITDA was 27% lower year-over-year, reaching US$92 million. Cement sales volumes decreased 3%, compared with the year-earlier period. The residential sector remains strong; however, lower spending on infrastructure and highways coupled with lower construction in the industrial and commercial sector drove down cement demand during the quarter. Heavy rainfall throughout our markets had an impact on our cement sales volumes. Ready-mix volumes grew 9% for the quarter, driven mainly by strong sales in the western U.S.
In Spain, the company's net sales and EBITDA grew 22% and 6%, reaching US$291 and US$81 million, respectively, compared with the second quarter of 2002. Domestic cement volumes increased 7%, and ready-mix volumes grew 5% compared to the year earlier period. Spain's infrastructure program, together with a low interest rate environment, has benefited cement and ready-mix demand in the country.
CEMEX Venezuela reported a 17% growth in sales, reaching US$80 million. EBITDA, at US$42 million, was 27% higher year over year. The effects of the economic downturn in Venezuela have been partially compensated by cost reductions and customer-oriented initiatives, which have strengthened the value proposition to our customers.
CEMEX Colombia's net sales were US$49 million, down 5% versus the year-ago period. EBITDA, at US$30 million, was reduced 4%. Cement volume was down 1% versus the second quarter of 2002, while ready-mix volume grew 25%. Cement and ready mix demand was fueled by public investment and the housing sector, while the low interest rate environment is fostering private investment and generating modest demand.
Our operations in Central America and the Caribbean reported quarterly net sales of US$154 million, up 34% vis-à-vis the second quarter of 2002. EBITDA also grew 5%, reaching US$33 million. Regional cement sales volumes for the quarter were 26% higher. These increases are mainly attributable to a strong performance of our operations in Panama, Costa Rica and Nicaragua, as well as the consolidation of our newly acquired Puerto Rican unit.
Regarding our operations in the Dominican Republic, CEMEX has initiated a US$130 million investment plan for installing a new kiln for producing clinker with annual capacity of 1.6 million metric tons per year. This investment would increase our total clinker production capacity in the Dominican Republic to 2.2 million tons per year. The new kiln is expected to be completed in early 2005, with the majority of the investment expected during 2004 and 2005.
CEMEX Egypt's sales decreased 18%, to US$31 million, while EBITDA was up 10%, to US$15 million. Cement volumes declined 24% compared to the second quarter of 2002. The construction sector in Egypt remains stable, with public works driving most of demand. The commercial and tourism sectors remain depressed.
Our Asian operations, which include the Philippines, Thailand, Taiwan and Bangladesh, posted net sales of US$49 million, 8% lower than the second quarter of 2002. Domestic cement volumes declined 5%. The lower cement volume in the Philippines was due to the early start of the rain season, and weak public works spending. The self-construction sector in the Philippines continues to be the main driver of demand.
CEMEX is a leading global producer and marketer of cement and ready-mix products, with operations concentrated in the world's most dynamic cement markets across four continents. CEMEX combines a deep knowledge of the local markets with its global network and information technology systems to provide world-class products and services to its customers, from individual homebuilders to large industrial contractors. For more information, visit www.cemex.com.