Cemex Shares Tumble for Fourth Day on Europe Slump, Peso

Cemex SAB fell for the fourth straight day as the European economic slump and a weaker Mexican peso weighed on the largest cement maker in the Americas.

Cemex, based in Monterrey, Mexico, dropped 3.4 percent to 7.63 pesos at the close, bringing the four-day decline to 16 percent, the most since Oct. 4.

Europe’s stagnating economy and stepped-up financial crisis may hurt sales at Cemex, which gets about a third of its revenue from the region. The declining peso makes the company’s Mexican profits less valuable in dollar terms, while Cemex has $7.4 billion in debt coming due in 2014.

“When you have global risk aversion, you tend to see investors not invest in companies that have high leverage and a high exposure to currency risk, and Cemex obviously has both,” said Benjamin Theurer, an analyst with Barclays Capital, in a telephone interview from London. “Investors are also less keen on investing in building materials.”

The company’s improving U.S. business will help make up for sluggishness in Europe, said Maher Al-Haffar, Cemex’s chief of communications and investor relations. Cemex is well positioned to withstand the region’s slump because of its exposure to Germany and other countries that have stronger economies than those of the so-called peripheral nations, he said.

“Most of our presence actually is in the stronger, more resilient parts of the euro zone and Europe,” he said in a telephone interview from London.

Germany accounted for about 8 percent of Cemex’s sales last year. The country’s economy expanded 0.5 percent in the first quarter over the previous quarter, compared with the 0.1 percent median estimate by economists.

The U.K. also accounted for 8 percent of Cemex’s sales in 2011, while France made up 7 percent. Spain, which recently slipped into recession, represented about 4 percent of revenue.

Weaker peso

Another challenge is the weaker Mexican peso, which has fallen about 4 percent against the U.S. dollar over the past month, the second-largest decline in Latin America after Brazil’s real.

During the first three months of this year, Mexico accounted for about half of Cemex’s earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as Ebitda. As of March 31, 79 percent of the company’s debt was denominated in dollars while 17 percent was in euros and 4 percent was in pesos.

While the weakness in the peso is going to have an impact on the company, a price increase of about 7 percent for bag cement in Mexico, announced in April, will help shore up revenue in the country, Al-Haffar said.

“We certainly don’t think that the weakness you’re seeing in the peso has anything to do with the economic fundamentals of Mexico,” he said.

Al-Haffar said a weaker euro helps Cemex’s debt burden in dollar terms. The euro has fallen about 3 percent against the dollar over the last month.

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