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Cemex lowers 2009 outlook

World Cement,

Cemex has reduced its 2009 operating cashflow outlook, following the sale of its Australian assets, which sent its shares down sharply. According to Executive Vice President Hector Medina, Cemex now estimates earnings before interest, tax, depreciation and amortisation to be US$ 2.9 billion this year, down from its earlier forecast of US$ 3.1 billion and far below 2008's US$ 4.3 billion.

Cemex bought Australia's Rinker in 2007 in one of the biggest emerging market takeovers at the time, however, since then, Cemex has suffered as a result of the US housing crisis and from a collapse in sales in Europe. This forced it to sell its Australian operations to Holcim in October for US$ 1.7 billion.

The company’s net income fell almost 40% in the Q3, with a 27% drop in sales. Profits fell to US$ 121 million in July - September, compared to US$ 200 million in the same period of 2008. Sales declined to US$ 4.2 billion from US$ 5.8 billion last year. However, the fall in net profit was not large as in previous quarters and Cemex said it saw signs of improvement in some markets, particularly the UK.

Cemex expects to generate US$ 1.2 billion in free cash flow in 2009, lower than the US$ 1.6 billion estimate in July. In addition, it expects its US cement volumes to fall 30% this year. However, the company says that it is safe as a result of this year’s free cash flow, plus the income from the Australian sale and almost US$ 1.8 billion raised in an equity offering in September.

According to Medina, Cemex's US cement sales could start to improve in early 2010 as public works pick up, driven by the US government's stimulus programme, however this is uncertain at this stage. In addition, the company has said it will have enough money to cover its debt through mid-2011. Medina has been quoted saying: ‘Our (debt) maturities from here until 2011 are now history. They are not maturities... we've already pre-paid them’.

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