Analysts have begun to predict that Cemex could see a return to profitability as early as next year. Since the US housing crash in 2008, the company has withstood consistent losses. But this year saw what many called the beginning of a turnaround as the company posted its 1Q12 results in April, a 4% increase in net sales being one of the key figures. Since then, the company’s shares have gained 60%, and it is little wonder; the recovery measures that have been implemented have been almost as aggressive as the company’s pre-2008 expansion.
The measures also include a commitment to repay US$1 billion in March of next year and an agreed debt swap. When considered alongside the listing of Cemex Latam Holdings on the Colombian stock market, which raised US$1.1 billion and cut another 6% from the company’s total debt, it is clear that Cemex are working hard to achieve profitability once more.
As the company gains some breathing room from September’s refinancing deal, which pushing back US$6.7 of debt by 4 years, Analysts from the Monex brokerage, Mexico City commented that they expect to see the company “generating positive flows in the next 2 – 3 quarters. A report from Reuters also showed a positive outlook, with four of the six analysts contacted by the news agency predicting annual earnings for 2013 of anywhere between US$28 million and US$235 million. The remaining two foresaw a return to profitability in 2014.
One might think, with results showing continuous improvements and recovering demand in the company’s key markets, that Cemex is now in a more comfortable position to ride out the storm. However, analysts are not ruling out the possibility that the company will continue with its programme of asset sales and refinancing. There is still plenty of scope for the company to lower its financial costs. That said; the company is now much better placed to take advantage of the increased demand from recent improvements in the US housing market.
By easing pressure on its debt payments, analysts hope Cemex's management will now focus efforts on improving operations and piggy backing on increased US cement demand. As with any company enjoying the currents of improvement in the US economy, the fiscal cliff still beetles over Cemex, but the company could see significant increases in its sales as an effect of the US highways funding bill. The bill, passed earlier this year, is unlikely to be affected by fiscal negotiations in Washington.
Written by Jack Davidson.