Cemex reports jump in net profit
Cemex reported a jump in net profit to US$336m in the 1Q17 from an income of US$35m in the same period of last year, as the Mexican major as the cement maker continued to sell assets and reduce debt.
On a like-for-like (LFL) basis for the ongoing operations and adjusting for currency fluctuations, consolidated net sales increased by six per cent during the 1Q17 to US$3.1bn versus the comparable period in 2016. Operating EBITDA on a LFL basis increased by two per cent during the quarter to US$559m versus the same period in 2016.
Cemex said the increase in quarterly consolidated net sales was due to higher prices of its products, in local currency terms, in most of its operations, as well as higher volumes in Mexico and the company’s Europe and South, Central America and the Caribbean regions.
Fernando A Gonzalez, CEO, said: “We continued to see favourable results from our value-before-volume strategy during the quarter. Sequential and year-over-year pricing increased in the low- to mid-single digits for our three core products. This, together with favourable volume dynamics in Mexico and our Europe and South, Central America and Caribbean regions led to solid growth in consolidated sales and operating EBITDA, on a like-to-like basis. In addition, net income increased close to a ten-fold during the quarter."
During the quarter, Cemex reduced its total debt by US$470m. This debt level is more than US$2.7bn lower than that at the end of 2015, representing a reduction of close to 18 per cent. The company also has about US$230m of announced asset sales pending to close. “This, plus free cash flow generation during the rest of the year should help us continue to de-lever, reach our debt reduction target for this year, and bring us closer to an investment-grade capital structure,” Mr Gonzalez added.
Regional highlights
Net sales from Cemex’s home market of Mexico increased 28 per cent on a comparative basis in the first quarter of 2017 to US$725n. Operating EBITDA rose by 31 per cent on a LFL to US$267m versus the same period of last year. First-quarter cement volumes rose 10 per cent, reflecting a positive performance from all sectors, as well as a low comparison base. Prices for Cemex’s three core products rose on a YoY and sequential basis in local currency terms. In the industrial and commercial sector, private investment projects were supported by consumption growth. The self-construction sector was favoured by remittances, job creation and consumption credit. In the formal residential sector, private bank mortgage lending supported more cement-intensive home investment and compensated for a decline in affordable housing.
Cemex’s operations in the United States reported net sales of US$83m in the 1Q17, up two per cent LFL. Operating EBITDA increased by 32 per cent on a LFL basis to US$118m in the quarter. Cement volumes remained flat reflecting a difficult comparison base and unfavourable weather conditions in Cemex’s western states during the quarter. Cement prices on a LFL basis increased by two per cent sequentially. Improved prices reflect the implementation of January price increases in Florida, Colorado and the North Atlantic regions. Housing starts increased by eight per cent during the quarter, with both single and multi-family activity driving growth. In the industrial and commercial sector, construction spending rose by eight per cent YtD February.
Operations in South, Central America and the Caribbean saw a decline in net sales of of one per cent to US$480m during 1Q17. Operating EBITDA decreased 15 per cent on a LFL basis to US$133m in the first quarter of 2017. Pro-forma regional cement and aggregates volumes increased by two and four per cent respectively, while ready-mix volumes remained flat. The company achieved higher prices for its three core products in local currency terms on a sequential basis. In Colombia, cement volumes were affected by macro challenges. Meanwhile in Panama, cement volumes increased by 13 per cent during the quarter.
Sales in Europe rose by five per cent to US$711m. Operating EBITDA was US$33m in the quarter, 30 per cent lower than the same period of last year. In the UK a decline in cement volumes reflects a high 1Q16 comparison base when the company recorded some non-recurring industry sales. In Spain volume growth mainly reflected continued strong activity in the residential sector, as well as a reactivation of projects in the industrial and commercial sector. In Germany participation in infrastructure projects like the A100 motorway in Berlin and the Bremerhaven Port Tunnel supported Cemex’s volume growth. Polish cement volume growth resulted from favourable weather conditions and participation in infrastructure projects such as the Expressway S7 and the Turow power plant. Cement prices increased by two per cent YoY in Poland during the quarter.
In Africa and Middle East, Cemex saw an eight per cent decline in net sales for 1Q17 to US$326m. Operating EBITDA for the quarter was US$64m, down 26 per cent on a LFL basis. Cemex said an increase in quarterly regional ready-mix and aggregate volumes reflects a positive performance from its operations in Israel. In the Philippines quarterly volumes were affected by tough weather conditions, a high comparison base and slower execution of infrastructure projects. In Egypt quarter volumes mainly reflect a high comparison base and reduced purchasing power due to high inflation. Cement prices increased 16 per cent on a YoY basis.
Management's guidance is for volumes in cement, ready-mix concrete and aggregates to increase by 1-3, 1-3 and 0-3 per cent, respectively.
