CEMEX Espana to consider next step after EUR456 tax fine

CEMEX has announced that its subsidiary, CEMEX España, will pay approximately EUR456m in fines as a result of a tax audit in Spain that commenced in July 2011 and covered the years 2006-09. According to a company press release, the tax authorities questioned some of the tax losses that Cemex España reported during those years. These losses were not used by Cemex España and have not been shown in its financial statements since 2012. 

CEMEX evaluating next steps
According to the company statement, the subsidiary strongly disagrees with the resolution and is considering next steps, including possibly filing an appeal with Spain's Constitutional Court. In terms of the financial impact, the parent company will expense and accrue a liability of ~US$500m in 4Q23 and expects to pay the fines in the 1H24. Moreover, an additional tax expense provision and a liability of US$111m is expected to be recorded in the 4Q23 in connection with the other previously disclosed tax assessment by the Spanish authorities relating to the years 2010-14.

The potential impact
The company ended the 3Q23 with US$6.9bn in net debt and US$3.2bn in EBITDA, leading to a ratio of 2.15x. According to UBS's calculations, the unexpected tax expense can increase CEMEX's leverage to 2.35x (+0.2x). Moreover, the combined expense accounts for approximately 19 per cent of CEMEX guided EBITDA for 2023 and represents close to six per cent of the company's market capital.