Cemex Posts First Profit Since 2009 on U.S. Housing RallyNacha Cattan and Brendan Case
Cemex SAB, the largest cement maker in the Americas, reported its first quarterly profit since 2009 as a housing industry rebound in the U.S. boosted demand in the company’s biggest market.
The second-quarter results capped Cemex’s comeback from the brink of default five years ago, when U.S. homebuilding slumped amid the worst recession since the 1930s. They came too late for longtime Chief Executive Officer Lorenzo Zambrano, who died May 12 after running the Monterrey, Mexico-based company since 1985.
“The fact that you have net income gains could be positive for the market,” said Fernando Bolanos, a Monex Casa de Bolsa analyst who has a hold recommendation on the shares. “If they can continually post net gains for the next two or three quarters they could start looking at new investments.”
Net income was $76 million for the second quarter, after a loss of $152 million a year earlier, Cemex said today. Operating earnings before interest, taxes, depreciation and amortization rose 1 percent to $737 million. That trailed the $782.6 million average of 11 analyst estimates compiled by Bloomberg.
Cemex rose 2 percent, the most in five weeks, to 17.17 pesos at the close of trading in Mexico City. That brought it’s gain for the year to 16 percent, outpacing the 3.6 percent advance for Mexico’s benchmark IPC index.
The U.S. market started driving sales growth again after the housing collapse that followed the 2008-09 financial crisis, and Ebitda in the U.S. surged 49 percent. Companywide revenue rose 3.7 percent to $4.15 billion, trailing the average estimate of $4.24 billion.
“Pricing trends continue to be favorable,” CEO Fernando Gonzalez, 59, said on a conference call. “For 2014, we expect our consolidated cement, ready-mix, and aggregate volumes to grow in the mid-single digits.”
While U.S. housing starts fell in June to a nine-month low, the National Association of Home Builders/Wells Fargo sentiment measure, a gauge of optimism among homebuilders, reached a six-month high in July. Cemex’s U.S. cement volumes rose 7 percent from a year earlier, the most among major markets, and U.S. revenue soared 10 percent.
Sluggishness in Mexico’s construction industry weighed on Cemex in its home market, with revenue down 3.7 percent. Cemex cut its 2014 forecast for domestic cement volumes to percentage gains in the low single digits from an estimate of mid single digits in April after a 2 percent drop. Cemex raised 2014 projected capital spending by 3.9 percent to $670 million.
“There was some weakness on the informal construction side in Mexico, which isn’t helpful for sales or margins,” Todd Vencil, a Sterne, Agee & Leach Inc. analyst, said in a telephone interview. “While the magnitude of the growth of the quarter wasn’t as good as we hoped or thought it would be, things still seem to be moving in the right direction.”
Zambrano, who was 70 when he died, built Cemex with a two-decade, $29 billion acquisition spree including the $14.2 billion purchase of Rinker Group Ltd. in 2007. Two years later, Cemex was forced to refinance $15 billion of bank debt as U.S. housing starts shriveled, cutting demand for building materials.