About Us - Press Release - CEMEX's second quarter 2004 operating income grows 20%; free cash flow increases 14%
July 16, 2004
CEMEX, S.A. de C.V. (NYSE: CX) announced today that its consolidated net sales for the second quarter of 2004 were US$1.9 billion, 5% higher than those during the same period of 2003. The global economic expansion has led to strong residential building and infrastructure spending in most of our markets, while average cement and ready-mix prices continue to recover. In real peso terms, net sales increased 4% to MXP 22.4 billion.
Consolidated cement sales volumes for the quarter remained flat at 16.8 million metric tons while ready-mix volumes grew 9% to 6.1 million cubic meters.
During second quarter 2004, free cash flow reached US$444 million, up 14% versus second quarter 2003. EBITDA (operating income plus depreciation and amortization) increased 15% to US$635 million. The consolidated EBITDA margin improved by 2.8 percentage points, to 32.6% from 29.8% in the second quarter of 2003. These increases are due mainly to higher domestic cement and ready-mix volumes, a lower cost structure, and a marginal recovery in cement prices. In real peso terms, EBITDA grew 14% to MXP 7.3 billion.
Operating income was US$469 million, 20% higher than second quarter 2003. In real peso terms, operating income grew 19% to MXP 5.4 billion.
Hector Medina, Executive Vice President of Planning and Finance, said: "We are encouraged by our better-than-planned consolidated performance for the quarter. In the absence of acquisitions that meet our strict investment criteria, we will continue in our bias towards de-leveraging throughout the year".
As a percentage of net sales, selling, general, and administrative expenses (SG&A) decreased 0.8 percentage points versus second quarter 2003. Our ongoing cost reduction initiatives, which have produced significant savings at the corporate and operating levels, have more than offset higher overall transportation costs.
For the second quarter, majority net income was US$247 million versus US$309 million during second quarter 2003 (which included extraordinary gains of US$66 million in marketable securities and US$48 million in foreign exchange). Majority net income for the first half of the year increased 42%, reaching US$557 million, versus US$392 million in the same period of 2003.
At the end of the second quarter net debt was US$4,969 million, US$383 million lower than that at the first quarter of 2004 and US$672 million lower than that at the beginning of the year. Our net-debt-to-EBITDA ratio was 2.2 times at the end of the second quarter, versus 2.4 times three months ago and 3.0 times a year ago.
Interest coverage (EBITDA divided by interest expense plus preferred dividends, all for the last twelve months) ratio was 6.2 times, versus 4.9 times a year ago.
Our Mexican operations reported net sales of US$691 million, 3% lower than second quarter 2003, and EBITDA of US$316 million, a reduction of 3%. Domestic cement sales volumes were down 1% versus second quarter 2003. While construction spending continues to be strong - fueled primarily by the housing and infrastructure sectors - cement volumes for the quarter were slightly lower than those during the second quarter of last year due to strong pre-electoral spending during the April-June period of 2003. The self construction sector continues to show a moderate recovery, while the industrial-and-commercial sector of the economy remains a stable source of cement and ready-mix demand.
In the United States, net sales were US$500 million, 11% higher than second quarter 2003, while EBITDA reached US$109 million, an increase of 19%. Domestic cement and ready-mix sales volumes for the quarter grew 9% and 7%, respectively, versus second quarter 2003. The recovery of the economy in the United States is driving construction activity in both the private and public sectors. The residential sector continues to be strong, with record single-family home sales in May and strong building-permit issues. Cement and ready-mix demand from the public-works sector has also been robust due to the improved fiscal condition of the states.
Our operations in Spain reported net sales of US$321 million for the second quarter of 2004, up 10% from the year-earlier period. EBITDA reached US$100 million, an increase of 24% versus second quarter 2003. Domestic cement sales volumes remained flat, while ready-mix volumes increased 1%, compared to second quarter 2003. The main drivers of cement demand continue to be the Spanish infrastructure program and residential construction.
In Venezuela, second-quarter net sales grew 4% to US$83 million, while EBITDA decreased 6% to US$39 million versus the same period of 2003. Domestic cement sales volumes increased 16%, while ready-mix volumes grew 11% compared to second quarter 2003. Economic activity during the quarter was significantly stronger than that in the same period of 2003, with strong cement demand from the public sector as new projects commenced, and an upward trend in cement consumption from the self-construction sector.
Our Colombian operation's net sales were US$58 million, up 17% versus second quarter 2003, while EBITDA increased 15% to US$34 million. Cement sales volumes were up 11%, while ready-mix volumes grew 24% versus second quarter 2003. The industrial-and-commercial sectors, and residential building have been the main drivers of demand. The self-construction sector continues to grow at a moderate pace, while infrastructure construction is now stable as new projects are underway.
Our operations in Central America and the Caribbean reported net sales of US$155 million, up 1% from second quarter 2003, while EBITDA grew 59% reaching US$52 million. Cement and ready-mix sales volumes in the region decreased 5% and 7%, respectively, versus second quarter 2003.
In Egypt, net sales increased 54% to US$47 million, and EBITDA grew 46%, reaching US$22 million. Domestic cement sales volumes grew 1% versus second quarter 2003. The improved economic climate in Egypt is attributable in part to a jump in tourism revenues, which has slightly increased employment and, in turn, translates into higher cement demand from the self-construction sector.
Our Asian operations, which include the Philippines, Thailand, Taiwan, and Bangladesh, reported net sales of US$50 million, 4% higher than second quarter 2003, while EBITDA increased 212% to US$15 million. Domestic cement sales volume declined 8% compared to second quarter 2003.
CEMEX is a leading global producer and marketer of cement and ready-mix products, with operations concentrated in the world's most dynamic cement markets across four continents. CEMEX combines a deep knowledge of the local markets with its global network and information technology systems to provide world-class products and services to its customers, from individual homebuilders to large industrial contractors. For more information, visit www.cemex.com.