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A holding company primarily engaged, through its operating subsidiaries, in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates and clinker.
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NetscribeInterna (23.62) Submitted: 2/12/07 8:12 AM : Start Price: $34.05 CX Score: 38.18
Cemex is primarily involved in the business of producing cement, ready-mix concrete, aggregates and clinker. Having an installed cement capacity of 98.2 million tons, it is the third largest cement producer in the world. The company operates in most of the large markets across the globe, with the U.S. and Mexican markets contributing over 40% of the revenues. Cemex is also involved in trading of cement and clicker, where about half the traded volume is purchased from third party vendors.The cement industry is globally dominated by few large players, holding production plants spread at significant markets. As the industry requires huge capital investment and high lead time, acquisitions are seen as key strategy for capacity expansions. Growth in the cement industry is highly correlated to housing and infrastructure development. At present the rising input cost and U.S. housing market slowdown is affecting companies like Cemex and Lafarge. The long term outlook of the industry appears strong with booming infrastructure and housing sectors in developing markets.The Mexican major is currently witnessing a strong setback, with massive drop in cement, ready-mix and aggregate volumes in the U.S. market. Looking ahead in 2007, the reduced volumes in U.S. are likely to continue, as housing market slowdown is estimated to prolong till 2008. Adding to it, with Cemex’s $12 billion offer to acquire Rinker Group, the Australian heavy building materials major, is in doldrums with Rinker rejecting the bid. Cemex will have to find a different route to attain inorganic growth. Moreover, considering company’s increasing debt levels, due to recently raised $750 million by selling its bonds, which was done to fund Rinker acquisition; the difficult market conditions; and slow organic growth, it is better to stay away from the stock. However the rising cement prices gives a respite for the makers, yet in the short run, the fixed capacity of the company and lack of any significant inorganic growth makes it very difficult for Cemex to beat the benchmark.
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NetscribeInterna (23.62) Submitted: 5/28/07 5:22 AM
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Cemex continues to be affected by US housing slowdown. For the first-quarter ended 31 Mar 2007, revenues observed an increase of 9.5% to $4.3 billion, as a result of higher cement and aggregates volumes. Improved demand outside the U.S. also aided the company to boost its top-line. However it is the net income tally that leaves much to be desired, declining 20.5% to $412 million. The decline can be attributed to higher energy prices and transportation costs, which also laid a negative impact on company’s operating and net margins. The company recently announced likely completion of acquisition of rival Rinker Group, the Australian based heavy building materials producer. It can provide significant synergies and will make Cemex one of the largest producers in heavy building materials segments. However, the price of $14.3 billion estimated to be paid for the company, which is over $2 billion higher than previously quoted by Cemax, might prove to be too steep in the current scenario. Especially when we consider that 80% of Rinker’s operations are located in the U.S.So considering Cemex and Rinker both having a major stake in the U.S. market, their fortunes will surely run by how well the U.S. housing market fares. Any major sings of a pull back can bring in strong inflows for the company as well as for the shareholders. But all this is easier said then done, when one considers that housing permits in Florida have fallen 52% for the first three months of the year. Going ahead, it will be very difficult for Cemex to generate a strong bottom-line in the short run scenario, as company would face additional interest pressures if the acquisition goes through, while increasing operating costs will continue to cause its own worries, making it better for an investor to stay away from Cemex at this point of time.
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cgsonic1 (< 20) Submitted: 7/21/08 4:55 PM
I think you guys forget that the US and Mexico represent only 6 to 7% of the worlwide population. CEMEX is a worldwide company with operations in more than 50 countries... yes, including India and China... about 40% of the population !!! Where do you think these guys (CEMEX heads) think the growth is ???
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