About Us - Press Release - CEMEX provides guidance for the second quarter of 2008
June 16, 2008
CEMEX, S.A.B. de C.V. (NYSE: CX) announced today that it expects EBITDA for the quarter ending June 30, 2008 to be close to US$1.4 billion, an increase of about 23% versus the same period last year, while operating income is expected to be about US$960 million, 19% higher than the same period a year ago. Sales for the second quarter are expected to be in excess of US$6.4 billion, an increase of about 31% versus the same period last year. For the first six months of the year, CEMEX expects EBITDA of about US$2.3 billion, while revenue is expected at close to US$11.8 billion, a growth of 15% and 26%, respectively. These results include the effect of consolidating Rinker starting July 1 2007.
On a pro-forma basis for the ongoing operations - adjusting for the consolidation of Rinker - sales and EBITDA for the quarter are expected to increase by 4% and decrease by 2%, respectively, versus the same period last year. For the first six months of the year, sales are expected to remain flat and EBITDA decrease by 12%, versus the comparable period last year.
Rodrigo Treviño, CEMEX's Chief Financial Officer, said: "We have had better-than expected performance in the South / Central America and the Caribbean, Africa and Middle East, Rest of Europe, and Asia and Australia regions. However, this performance has not fully mitigated the downturn in the United States and the negative impact from higher energy input costs. We continue to face a difficult economic environment in the United States with construction falling more than originally anticipated."
"Given the performance of our markets during the first half of the year, and the fact that our guidance numbers are now calculated using the average of monthly exchange rates, we now expect EBITDA for 2008 of about US$5.3 billion, while we continue to expect full-year sales of about US$24.5 billion. However, due to lower interest expense that more than compensates for the lower operating results, we maintain our full year guidance for free cash flow after maintenance capital expenditures to be in excess of US$3.0 billion."
"We remain committed to regaining our financial flexibility and reaching our steady-state net-debt-to-EBITDA capital structure target of 2.7 times by mid next year. We expect to reach a net-debt-to-EBITDA level of about 3.5 times by the end of the second quarter, and maintain our target of 3.0 times by the end of the year."
Cement and ready-mix volumes for CEMEX's operations in Mexico are expected to increase by about 2% and decrease by about 3%, respectively, during the quarter versus the comparable period last year. For the first six months of the year volumes are expected to decrease by about 2% and 9%, respectively, versus the same period of last year. The formal residential sector continues to drive cement demand in the country. However, the infrastructure sector continues to be affected by a delay in project starts, which are expected to pick up during the second half of the year and continue well into 2009. Given this performance in volumes for the first half of the year, we continue to expect domestic cement volumes in Mexico to grow by about 3% for the full year 2008, and ready-mix volumes to grow by approximately 8% for the full year 2008.
During the second quarter, CEMEX expects cement, ready-mix and aggregates volumes in the United States to decrease by about 5%, increase by about 28%, and increase by about 113%, respectively, versus the same period last year. For the first six months of the year, cement volumes are expected to decrease by about 4%, ready-mix volumes are expected to increase by about 30%, and aggregates volumes are expected to increase by about 114% versus the same period in 2007.
On a like-to-like basis for the ongoing operations, cement volumes are expected to decrease by about 19%, ready-mix volumes are expected to decrease by about 29%, and aggregates volumes are expected to decrease by about 26% for the quarter versus the comparable period last year.
Given this performance in volumes for the first six months of the year, we now expect domestic cement volume in the U.S. to decrease by around 12%, ready-mix volume to decrease by about 21% and aggregates volumes to decrease by around 20% for the full year 2008.
The ongoing correction in the residential sector continues its downward trend and has negatively impacted other demand sectors in the U.S. Activity from the industrial-and- commercial sector has started to soften as a result of the continued weakness of the U.S. residential sector together with the tightening of credit conditions and the overall weakening of the U.S. economy. In addition, input cost inflation has affected our results for the quarter as higher fuel, electricity and transportation costs have had a negative impact on our quarterly estimates. Finally, adverse weather conditions in portions of the Southeast and Midwest regions have also affected our volumes during the quarter. The U.S. operations have significantly reduced costs to right-size the business for lower sales volumes, and is in the process of implementing substantial synergies from the Rinker post-merger-integration process to further reduce costs and improve productivity.
In our operations in Spain, cement and ready-mix volumes in the second quarter are expected to decline by about 29% and 23%, respectively, when compared to the same period a year ago. For the first six months of 2008, cement volumes are expected to decrease by about 23% while ready-mix volumes are expected to decrease by about 19% versus the same period in 2007. A continued deceleration from the residential sector affected volumes during the quarter. In addition, tighter credit conditions have started to delay the initiation of new infrastructure projects in the country. Given this performance in volumes for the first half of the year, we now expect domestic cement volumes to decrease by about 17% and ready-mix volumes to decline by around 15% for the full year 2008.
During the quarter, CEMEX expects cement, ready-mix and aggregates volumes in the United Kingdom to decrease by about 8%, 7%, and 1%, respectively, versus the same period last year. On a like-to-like basis for the ongoing operations - adjusting for the divestments done during 2007 - ready-mix volumes are expected to decrease by about 2% versus the comparable period of last year. For the first six months of the year, cement, ready-mix and aggregates volumes are expected to decrease by about 9%, 12%, and 3%, respectively, versus the same period in 2007. Demand across all sectors is being adversely influenced by a slow down in construction, particularly in the private housing sector. Given this performance in volumes for the first six months of the year, we now expect domestic cement volume in the U.K. to decrease by around 9% and ready-mix volumes to decrease by around 12% for the full year 2008. On a like-to-like basis - adjusting for the divestments made during 2007 - ready-mix volumes are expected to decrease by about 8% versus the comparable period of last year.
Guidance and historic numbers are calculated on the basis of the average of monthly exchange rates through May 2008 and market close exchange rates as of June 13, 2008 for subsequent guidance periods. Given the volatility of foreign exchange rates and the exposure of our operations to factors beyond our control, our actual results could be materially different from our indicative guidance.
CEMEX is a growing global building materials company that provides high quality products and reliable service to customers and communities in more than 50 countries throughout the world. CEMEX has a rich history of improving the well-being of those it serves through its efforts to pursue innovative industry solutions and efficiency advancements and to promote a sustainable future. 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, weather conditions, 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. CEMEX assumes no obligation to update or correct the information contained in this press release.
EBITDA is defined as operating income plus depreciation and amortization. Free Cash Flow is defined as EBITDA minus net interest expense, maintenance capital expenditures, change in working capital, taxes paid, and other cash items (net other expenses less proceeds from the disposal of obsolete and/or substantially depleted operating fixed assets that are no longer in operation). Net debt is defined as total debt minus the fair value of cross-currency swaps associated with debt minus cash and cash equivalents. The net debt to EBITDA ratio is calculated by dividing net debt at the end of the quarter by EBITDA for the last twelve months. All of the above items are derived from generally accepted accounting principles in Mexico. EBITDA and Free Cash Flow (as defined above) are presented herein because CEMEX believes that they are widely accepted as financial indicators of CEMEX's ability to internally fund capital expenditures and service or incur debt. EBITDA and Free Cash Flow should not be considered as indicators of CEMEX's financial performance, as alternatives to cash flow, as measures of liquidity or as being comparable to other similarly titled measures of other companies.