About Us - Press Release - CEMEX's third quarter 2002 sales volumes remain unchanged; net sales decrease 2% in dollar terms
October 28, 2002
CEMEX, S.A. de C.V. (NYSE: CX) announced today that its consolidated cement sales volumes for the third quarter were 16 million metric tons, virtually flat compared to the third quarter of 2001, while ready-mix volumes, at 5 million cubic meters, were 10% higher.
Net sales for the third quarter 2002 decreased 2% in dollar terms versus the same quarter of 2001, to US$1.72 billion. In real peso terms, net sales remained flat, at MXP17.6 billion.
Higher revenues in Spain and the Caribbean were offset by the effect of softer demand and wet weather conditions in the U.S., as well as lower average prices in some of our markets. CEMEX Mexico's sales volumes increased; however, the depreciation of the Mexican peso pushed dollar sales down 1%, when expressed at the weaker end-of-period peso/dollar exchange rate.
EBITDA (operating profit plus depreciation and amortization) for the quarter was US$505 million, declining 10% in dollar terms year over year. The consolidated EBITDA margin was reduced to 29.3% from 31.9% a year ago, mainly due to upfront expenses in information technology, our increased effort to strengthen CEMEX's commercial and distribution networks worldwide, and lower average prices in some of our markets. In real peso terms, EBITDA, at MXP5.2 billion, was 8% lower.
Hector Medina, Executive Vice-president of Planning and Finance, said: "We are living through very challenging and volatile times. Over the last decade, CEMEX has built a strong foundation upon which to withstand this challenging environment, based on cost leadership and vigilant free cash flow deployment. We continue to implement the tools that will make CEMEX more customer-focused, more innovative, more competitive, and even more efficient."
Third quarter operating income decreased 14% in dollar terms to US$354 million. In real peso terms, operating income fell 12% to MXP3.6 billion.
Cash earnings dropped 11% year over year, to US$375 million (US$1.23 per ADS), as a result of the lower EBITDA.
Majority net income declined to US$16.5 million (US$0.05 per ADS) in the third quarter of 2002 versus US$106.8 million in the same quarter of 2001. The decline was primarily due to non-cash items, such a reduction in the value of our marketable securities as the mark-to-market value of some of our derivative instruments declined during the quarter. In real peso terms, net income declined to MXP169 million (MXP 0.11 per CPO).
Consolidated free cash flow for the third quarter was US$217 million, 54% lower than the same quarter a year ago.
Interest plus preferred dividend coverage (EBITDA divided by interest expense plus preferred dividend, all for the last twelve months) increased to 5.5 times, versus 4.1 times a year ago. Additionally, financial leverage (net debt plus preferred equity to trailing twelve-month EBITDA) increased to 3.1 times versus 2.7 times for the same period in 2001.
CEMEX's Mexican operations reported net sales of US$633 million in the third quarter, a 1% decline versus the comparable period of 2001. Domestic cement sales volumes increased 6% and have increased 3% for the first nine months of 2002. Demand from the public sector has been strong, becoming the main driver of demand during the year, while the self-construction sector remains stable. Ready-mix volumes grew 10% for the quarter, driven by increased government projects.
In the United States, CEMEX's net sales were US$478 million, 6% lower compared to the year-earlier period. EBITDA decreased 14% to US$124 million. Cement sales volumes decreased 6% compared to third quarter 2001, and increased 2% versus the second quarter of 2002. Ready-mix volumes rose 2% compared to the third quarter of 2001, and also grew 2% vis-à-vis the second quarter of 2002. Public works and residential construction continue to be the main drivers of demand, while cement consumption in the industrial and commercial sectors of the economy remain soft.
In Spain, the company's net sales and EBITDA grew 11% and 10%, respectively, compared to third quarter 2001. Domestic cement volumes increased 4% and ready-mix volumes grew 8%. Public works spending and residential construction continue to be the main drivers of cement demand.
CEMEX Venezuela's operations reported a 16% decrease in domestic cement volumes year over year, and a 2% growth compared to second quarter 2002. The country's political and economic climate continues to affect overall economic activity, driving down public and private investment when compared to last year. The economic climate has least affected the self-construction sector's cement demand.
CEMEX Colombia's domestic cement volume was 4% higher compared to third quarter 2001, and ready-mix volume increased 7%. Demand from the residential and self-construction sectors has increased and were the main drivers of demand during the quarter. Demand from the public works sector has declined, as several major projects ended this year.
CEMEX Philippines' domestic cement volume increased 36% versus the third quarter of 2001, and has grown 41% year-to-date. Fewer cement imports into the Philippines led to our increased market participation.
CEMEX Egypt recorded flat domestic cement volumes compared to the third quarter of 2001. For the first nine months of the year, volumes have increased 18% compared to the same period in 2001. Government expenditures in infrastructure projects were the main driver of demand during the quarter, as well as our continued commercial effort in Lower Egypt.
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.
This press release contains forward-looking statements and information that are necessarily subject to risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of CEMEX to be materially different from those expressed or implied in this release, including, among others, changes in general economic, political, governmental and business conditions globally and in the countries in which CEMEX does business, changes in interest rates, changes in inflation rates, changes in exchange rates, the level of construction generally, changes in cement demand and prices, changes in raw material and energy prices, changes in business strategy and various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein.
EBITDA is defined as operating income plus depreciation and amortization. Free cash flow is defined as EBITDA minus net interest expense, capital expenditures, increase or decrease in working capital, cash taxes, preferred equity dividend payments, employee profit-sharing payments paid in cash, U.S. dumping charges paid in cash and other cash items. Net debt is defined as total on balance sheet debt plus preferred equity and capital securities minus cash and cash equivalents. Cash earnings is defined as EBITDA minus net financial expenses, cash taxes (including statutory profit sharing), income attributable to minority interest (including preferred dividends) and other cash expenses. All of these items are presented under Mexican generally accepted accounting principles.