Mexican cement-maker Cemex will step up efforts to cut costs
in its bid to return to profitability as demand recovers and as
a "prudent" financial strategy starts to pay off - despite
disappointing first quarter results - its chief financial
officer has said.
CFO Fernando González told LatinFinance in
an interview that the company's multi-billion dollar debt
restructuring process has granted the company much-needed
flexibility to cut costs further by tackling interest
This could mean smaller and more targeted transactions,
while the company will also consider exploring asset sales as
well as measures to extract more profit from those sales.
"We are in a favorable position to reduce interest
expenses," González said. "These are the types of
His comments come just weeks after the company reported a
wider than expected loss in the first quarter, following a drop
in cement sales.
Cemex reported a net loss of $281 million in that period,
compared to $30 million a year before. Sales in the quarter
fell 5% from a year earlier to $3.3 billion, attributed mainly
to a slump in Europe.
But González insisted the company now has a
"liquidity runway" to reduce its costs further, González
said, adding that the company has embarked on a "new phase" in
its strategy following a turbulent few years.
Following a collapse in its sales in the wake of the financial
crisis, Cemex "paid a high price" and was forced to issue debt
in the high single-digit yields amid concern over its ability
to meet its debt covenants.
"What we have to do, the type of transactions or amount of
what we have to do in next three to four years is 30-40%
compared to what we did in last four years. The types of
transactions [going forward] are going to be different,"
Although Cemex has no short-term refinancing needs until
2017, it recently received shareholder approval to exchange
three series of convertible bonds. A tender could happen as
soon as this year, González said.
As of December, Cemex is able to call $2.2 billion dollars
in debt on which it pays interest of just above 9.5%, he
Noting pricing of $600 million 5.875% 2019 senior secured
notes in March, the opportunity for interest reduction is
immense, González said. Savings could total $450 million
- a fact that could help the cement producer on its quest for a
return to investment grade.
The $600 million sale in March was part of a process to
replace €200 million ($260 million) of its 4.75% 2014
Following four years of market declines after the
global financial crisis, Cemex has started to see a turnaround
in its core US business, boosting cashflow and Ebitda in 2012.
González said 2013 is on track to be "a second recovery
Cemex expects the Americas to perform better than its
European operations, where growth will remain lackluster over
the next four years. The company plans to offset weakness there
through increased business diversification, González
Part of its new strategy includes finding new efficiencies
and economies of scale. Cemex has undertaken a 10-year
strategic agreement with IBM to deliver business process and
information technology services to the cement company. Cemex is
expected to generate savings close to US$1 billion over the
life of the contract, González said. LF
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