Fitch Ratings has assigned 'BB-/RR3' ratings to Cemex's proposed floating rate senior secured notes due in 2018 and senior secured notes due in 2021.
The 2018 and 2021 notes will be guaranteed by Cemex Mexico, Cemex Concretos, Empresas Tolteca de Mexico, Cemex Espana, New Sunward Holding BV, Cemex Asia BV, Cemex Corp, Cemex Egyptian Investments BV, Cemex Egyptian Investments II BV, Cemex France Gestion, Cemex Research Group AG; Cemex Shipping BV and Cemex UK.
The rating outlook for Cemex is Stable.
Key ratings drivers
Strong business positions
The ratings of Cemex and its subsidiaries reflect the company's strong and diversified business position, Fitch said in a statement. "The company's product and geographic diversification offset some of the volatility associated with the building product industry." Cemex's main markets during 2012 in terms of EBITDA were Mexico (43 per cent), Central and South America (25 per cent), the Mediterranean (13 per cent), and Northern Europe (14 per cent).
High leverage - set to continue
Cemex's Issuer Default Ratings (IDRs) are constrained at 'B+' due to the company's high leverage. Cemex had US$16.947bn of total debt and US$746m of cash and marketable securities as of June 30. During the 12 months ending 30 June 2013, the company generated US$2.6bn of EBITDA, which is an improvement from US$2.4bn in the 12 months ending 30 June 2012. The increase in Cemex's EBITDA during the past 12 months, along with a US$817m reduction in net debt, resulted in an improvement in the company's net leverage ratio to 6.3x from 7.0x.
Fitch expects Cemex's leverage to remain high through the end of 2014. The ratings projects that Cemex will generate about US$2.8bn of EBITDA in 2013, US$3.1bn in 2014, and US$3.3bn in 2015. Cemex's net debt is not projected to change materially in the next two years despite the projected upturn in EBITDA due to rising working capital needs associated with growth, increasing capex, and higher taxes. Absent asset sales in excess of US$100m per year, Fitch projects Cemex's net leverage ratio will be 6.0x in 2013 and 5.1x in 2014. The projected conversion of Cemex's US$715m subordinated convertible notes due in 2015 will be a key factor in net leverage reaching 4.4x in 2015.
US remains key to recovery
The US market has historically been the company's strongest market, highlights Fitch. In 2012, operations in this regional division were very weak, generating only US$25m of EBITDA. Fitch is forecasting an improvement in the EBITDA Cemex generates in the U. to US$300m in 2013, US$500m in 2014, and US$600m in 2015. A key contributor to the projected growth in EBITDA is the gradual rebound in the US housing sector. For 2013, Fitch is projecting a 20 per cent increase in housing starts to 940,000 units and in 2015 is forecasting an additional eight per cent increase in housing starts to 1.1 million units. Cemex's high operating leverage should drive EBITDA growth in excess of sales volumes growth, Fitch forecasts.
