Fitch Ratings: Latin America cement sector outlook stable, ratings negative

In its new report on the 2016 outlook for the Latin American cement sector, Fitch Ratings said the outlook for the regional cement sector is stable in 2016, however, the outlook on ratings is negative for next year.

Further weakening sales volumes in Brazil are expected to be only slightly offset by stable demand growth in countries such as Colombia, Mexico, and Peru, according to Fitch Ratings.

"Brazilian cement volumes will likely decline in the high single digits as lower investment activity and weak consumer confidence persist in 2016' according to Phillip Wrenn, Associate Director at Fitch. 'Production capacity coming on line in 2016 will result in lower utilization levels and ultimately in lower pricing power. Furthermore, high inflation, high energy costs, and increased unemployment will continue to negatively impact profitability metrics during 2016.'

Companies with diversified global operations such as, Votorantim Cimentos S.A. and InterCement Participacoes S.A. will lean more on their operations outside of Brazil to partially offset lost volumes in Brazil. Small, local producers in Brazil will continue to be most vulnerable in 2016'.

Colombia, Mexico, and Peru are expected to experience low single digit increases in cement volumes as infrastructure projects commence and also due to increased residential activity. Companies such as Cemex and Cementos Pacasmayo are expected to see modest volume increases across these markets.