Cemex Latam Drops Most on Record Amid Misconduct Probe at Plantby and
Probe reveals $20 million payments to non-government person
Chairman Jaime Muguiro to take over as Cemex Latam CEO
Cemex Latam Holdings SA, a unit of the largest cement maker in the Americas, dropped the most on record after saying it found about $20 million in irregular payments in the construction of its new cement plant, prompting its chief executive officer to resign.
The shares of CLH, as the company is known, dropped 6.9 percent to 12,220 pesos at 9:59 a.m. in Bogota, trimming an earlier 9.6 percent decline, the steepest on record. Cemex Latam announced late on Friday that it terminated two senior officials and that its CEO resigned to “facilitate investigations” after an internal probe found payments related to a cement plant being built in Antioquia province in Colombia didn’t adhere to company policy.
Cemex found payments of about $20 million to a non-government third party as it acquired land and mining rights and benefits related to a tax-free area where the Maceo cement plant is being constructed, according to a regulatory filing posted Friday on the Colombian financial regulator’s website. The company says it immediately terminated the vice president of planning and the general counsel for its Latin American and Colombian units.
“There is serious reputational risk involved and plenty of questions left unanswered,” BTG Pactual analysts led by Gordon Lee wrote in a report. “At a minimum, this news will inflict some reputational damage on both Cemex and CLH; and, for the latter, even though the amounts thus far disclosed are relatively small, there is the risk of greater operational disruption if the reaction to this news impacts the timely roll-out of Maceo.”
Banco Santander SA analysts said they were cutting the shares to hold from buy after the departure of the CEO, whom analysts saw as an asset, and because of questions among investors about the company’s governance and control procedures. Colombian brokerage Corredores Davivienda said it was removing the shares from their top picks for the year amid uncertainty over the impact on the company’s financials.
Cemex has informed Colombian prosecutors of results of its internal probe, according to the statement. Cemex Latam Chairman Jaime Muguiro, who’s been with the company for about 20 years, will take over CEO duties in the coming days. While the statement doesn’t provide officials’ names, Carlos Jacks was the CEO of Cemex Latam and Colombia.
The company reported second-quarter net income of $55 million, up 43 percent from a year ago. When Cemex Latam announced in August 2014 that it would build the plant in northwestern Antioquia province, it said the facility would cost around $340 million and would increase cement production by about 1 million metric ton to 5.5 million tons.