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Cemex Rises Most Since July as Europe Adds to U.S. Gains

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Oct. 24 (Bloomberg) -- Cemex SAB, the largest cement maker in the Americas, rose the most in more than three months after reporting a narrower third-quarter loss as sales gained in the U.S., Europe and other global markets.

The loss was $155 million, compared with $203 million a year earlier, the Monterrey, Mexico-based company said in a statement today. Operating earnings before interest, taxes, depreciation and amortization rose 1.6 percent to $747 million, trailing the $782.6 million average of eight analyst estimates compiled by Bloomberg.

Cemex boosted sales in all its major markets except Mexico, led by U.S. increases in cement volumes and prices that pushed Ebitda to almost triple a year earlier. Housing permits in the company’s “four key states” of Texas, Florida, California and Arizona climbed 25 percent this year through August compared with a year earlier as the U.S. housing industry rebounds, Chief Financial Officer Fernando Gonzalez said on a conference call.

The U.S. operations “continued to show a positive trend during the quarter” and Cemex’s performance in northern Europe was “surprisingly strong,” Barclays Plc analyst Benjamin Theurer said in a note to investors. “The South/Central America and the Caribbean region was also a key driver of growth.” Theurer, based in Mexico City, rates the shares overweight.

Cemex rose 3.9 percent to 14.25 pesos at the close in Mexico City, the biggest gain since July 11 and the second-highest increase on the benchmark IPC index today. The shares have advanced 17 percent this year, as the IPC index has fallen 7.9 percent.

Positive Flow

Third-quarter sales advanced 3.2 percent to $4.02 billion. Ebitda was 18.6 percent of revenue, compared with 18.8 percent a year earlier. The company reported free cash flow of $209 million, the first positive figure this year.

“Positive free cash flow was very good, as was keeping the consolidated Ebitda margin unchanged despite Mexico’s contraction,” Esteban Polidura, an analyst at Deutsche Bank AG in Mexico City, said in an e-mailed response to questions. “The numbers were not bad taking into account how weak Mexico was.” He recommends buying the shares.

Total cement sales volume was little changed at 17.1 million metric tons and ready-mix concrete volume advanced 1.1 percent to 14.7 million cubic meters. Aggregates such as sand, gravel and crushed stone were little changed in volume.

Global Gains

U.S. sales climbed 7.9 percent to $891 million, and Ebitda increased to $78 million. Cement volume advanced 7 percent with a 2 percent price increase while ready-mix concrete volume advanced 8 percent and prices rose 6 percent.

Revenue in northern Europe was up 5.8 percent to $1.17 billion, with a 14 percent gain in Ebitda to $162 million. Sales rose 9.6 percent in Mediterranean markets, 15 percent in its South America, Central America and Caribbean region and 4.5 percent in Asia.

Mexico sales fell 11 percent to $776 million, the smallest revenue figure in more than three years for the company’s home market, and operating Ebitda tumbled 21 percent to $248 million. Cement volumes in Mexico dropped 13 percent in the quarter, while prices fell 3 percent.

Delays in public spending and losses at three publicly traded homebuilders have left Mexico’s construction industry “depressed,” Corporativo GBM SAB, a broker, said in a report this month.

“Mexico came in a little weaker than expected,” Carlos Hermosillo, an analyst at Grupo Financiero Banorte SAB in Mexico City who rates the shares buy. “The positive part is that the Europe operations are better than what I was estimating.”

To contact the reporter on this story: Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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