Cemex Reaches First-Quarter Profit Milestone as U.S. Sales Climbby
Construction gains boosted U.S. cement and concrete volumes
Company avoided a first-quarter loss for first time since 2009
Cemex SAB, bolstered by cost cuts and U.S. sales gains, ended a streak of first-quarter losses that began as the global economic crisis pushed the cement maker to the brink of default.
Net income was $35 million, its first profit for the period since 2009, the company said in a statement Thursday. Earnings before interest, taxes, depreciation and amortization climbed to $583 million, exceeding the $575 million average of eight dollar-based forecasts compiled by Bloomberg.
Stepped-up building activity is helping Cemex boost U.S. sales even as the company raises prices. The largest cement maker in the Americas is also benefiting from cost cuts that have shored up profit margins despite sales declines in major markets such as Mexico and South America.
“Cemex reported strong first-quarter results fueled once again by construction activity in the United States and relative strength in Mexico,” Rafael Elias, the head of emerging-markets strategy at Cantor Fitzgerald, said in a note to clients. “The company continues to show that its cost-cutting policies have been effective.”
Shares advanced 3.1 percent to 13.47 pesos at 10:24 a.m. in Mexico City, the biggest gain on the benchmark IPC index. Cemex has climbed 43 percent this year, six times the increase of the IPC.
“We had strong fundamentals in most of our operations,” Chief Executive Officer Fernando Gonzalez said on a conference call with investors and analysts. “We expect these favorable trends to continue for the rest of this year.”
Free cash flow after maintenance capital expenditures turned positive for the first time since 2009 in the first quarter. Sales fell 3.5 percent to $3.2 billion, the Monterrey, Mexico-based company said. Analysts had anticipated $3.29 billion.
Cemex’s “control of costs and expenses showed in the report with better profitability,” Jose Espitia, an analyst at Grupo Financiero Banorte SAB, said in a report. Leverage indicators were slightly better and the outlook for the year is positive, he said.
While sales in Mexico tumbled 17 percent to $633 million, the company continued raising prices as it pursued a strategy of charging more even if that means losing market share. Cemex said its Mexican cement prices climbed 18 percent in local currency terms during the first quarter. The peso dropped 12 percent against the dollar in the year ending March 31.
Revenue dropped 10 percent in the South America, Central America and Caribbean region, and fell about 3 percent in Europe.