About Us - Press Release - CEMEX's second quarter 2005 sales increase 125%; EBITDA grows 56%
July 20, 2005
CEMEX, S.A. de C.V. (NYSE: CX) announced today that consolidated net revenues in the second quarter of 2005 grew 125% to $4.4 billion compared to the same quarter of 2004. This increase is primarily a result of the effect of the incorporation of RMC into CEMEX's consolidated results, reflected for the first time in CEMEX's quarterly earnings results.
CEMEX Second Quarter Financial and Operational Highlights
- Sales improved in the majority of CEMEX's markets due to higher cement and ready-mix volumes in the Company's core markets and a stronger Mexican peso.
- CEMEX's consolidated cement volume increased 30% to 22 million metric tons while consolidated ready-mix volume grew 243% to 21 million cubic meters. The Company's consolidated aggregates volume increased to 50 million metric tons, 329% higher over the second quarter of 2004.
- Operating income for the period rose 60% over the same period of 2004 to US$751 million.
- Free cash flow grew 56% versus the same quarter a year ago, reaching US$693 million.
- EBITDA (operating income plus depreciation and amortization) was US$989 million, up 56% over the second quarter of 2004. This increase is due to effect of EBITDA contribution from RMC and higher domestic cement and ready-mix volumes, which offset higher energy and transportation costs.
- EBITDA margin decreased to 22.6% from 32.6% in second quarter 2004. Margins were positively affected by strong demand in CEMEX's core markets, but were offset significantly by the consolidation of RMC and higher energy costs.
Hector Medina, Executive Vice President of Planning and Finance, said: "We are very pleased with our results for the quarter, which reflect strong contributions from RMC and good underlying growth in our core markets. We continue to experience strong demand in all our markets, particularly residential, which continues to be the strongest driver of cement and ready-mix consumption in our markets."
Consolidated Corporate Results, Including the Effect of RMC from March 1, 2005
Cost of goods sold and selling, general, and administrative expenses (SG&A) increased 140% and 158%, respectively, versus the second quarter of last year due mainly to the effect of RMC. CEMEX is in the preliminary stages of incorporating its standardized financial and operational practices into the newly acquired operations, designed to reduce costs and expenses and improve efficiencies. In most of the Company's markets, energy and transportation costs have risen due to the widespread increase of these costs.
Majority net income for the second quarter of 2005 rose 197%, to US$733 million. This increase is due to strong consolidated operating performance and gains resulting from CEMEX's derivative positions.
Net debt at the end of the second quarter 2005 was US$9.62 billion, a reduction of US$811 million during the quarter. The net-debt-to-EBITDA ratio improved to 2.9 times from 3.2 times at the end of first quarter 2005. Interest coverage decreased from 6.8 times and the end of first quarter 2005 to 6.5 times and the end of the second quarter, but increased from 6.2 times a year ago.
During the quarter, all of the Company's free cash flow was used to pay down debt and pay cash dividends. CEMEX's net debt - in US dollar terms - was further reduced by favorable exchange rate movements during the quarter, despite other investments and expenses related to the acquisition of RMC, partially funded with divestitures such as the Company's minority stake in Cementos Bio Bio.
The following summarizes results in CEMEX's major markets:
CEMEX's Mexican operations reported net sales of US$793 million, 15% higher than in the second quarter 2004, and EBITDA of US$329 million, an increase of 4% over the prior year period. Cement volumes grew 5% during the quarter, while ready mix volumes increased 17%. On a quarter-over-quarter basis, adjusting for the difference in business days during second quarter 2004, cement volumes remained flat. Cement demand was sustained mainly by government infrastructure spending and, to a lesser extent, by low- and middle-income housing, both of which partially offset a weak self-construction sector. Cement demand from this sector is expected to remain flat or to slightly decline for the year, primarily due to continued volatility in the price of building materials, although the trend is downwards.
In the United States, net sales for the quarter were US$1.2 billion, 131% higher, while EBITDA reached US$284 million, an increase of 161%. US operations reported a 9% increase of cement volume. On a quarter-over-quarter basis for the ongoing operations, cement volumes increased 12% for the quarter over 2004. Ready-mix volumes rose 227% during the quarter. On a quarter-over-quarter basis for the ongoing operations, ready-mix volumes increased 6%. Cement demand remains strong as all segments have increased their cement consumption during the year; construction activity continues to rely heavily on robust growth from the residential sector, supported by a favorable interest-rate environment while the infrastructure - particularly streets and highways - and industrial sectors remain strong and growing.
CEMEX's operations in Spain reported net sales of US$431 million in the second quarter of 2005, up 34%. EBITDA reached US$122 million, representing an increase of 22%. Domestic cement volume increased 13% while ready-mix volume grew 83% in the quarter. The residential sector continues to be one of the main drivers of demand, with housing starts up 7% for the first 4 months of the year. Public-works spending is also growing, but at a slower rate during this quarter as the government updates its infrastructure plan for the coming years. The sector's primary growth catalyst continues to be Spain's infrastructure modernization.
Net sales and EBITDA of the Company's operations in the United Kingdom was US$504 and US$58 million, respectively. Cement volumes were up 5% during the second quarter versus the comparable period in 2004. Ready-mix volumes increased 3% during the quarter. Cement demand during the quarter was mainly driven by infrastructure projects and residential construction. Second quarter volumes also benefited from delayed construction during the first quarter of the year due to adverse weather. Commercial building has benefited from low inflation and a lower unemployment rate.
Rest of Europe
During the second quarter of 2005, net sales of the Rest of Europe were US$886 million and EBITDA was US$138 million.
In France, ready-mix volumes increased 11% in second quarter 2005 and aggregates volumes were up 6% in the second quarter. These increases are due mainly to a strong housing sector supported by low interest rates, tax incentives to promote housing construction and the launch of a new social housing program.
The German economy remains weak with high unemployment, slow disposable income growth and political uncertainty, which in turn has dampened construction activity. Cement sales volumes for the quarter declined 12% versus the same period of 2004.
South/Central America and Caribbean
Net sales of South/Central America and Caribbean grew 18% during the second quarter of 2005 versus same period a year ago to US$339 million, while EBITDA decreased 30% to US$88 million. Domestic cement volumes in the region increased 19% in the quarter, while ready-mix volumes were 20% higher.
The Venezuelan economy continues to recover, with higher oil revenues driving public spending and increased activity from the private sector. Unemployment continues to decline, while bank financing for the first five months of the year increased 84% versus last year's level. While all sectors of the economy show increased spending, the self-construction sector has been the main driver of cement demand during the quarter. Cement volumes in Venezuela increased 34% versus second quarter 2004.
In Colombia, cement volumes continue to grow due mainly to demand from the self-construction sector, as unemployment has declined and wages have increased. The housing and public works sectors have increased their cement and ready- mix consumption versus last year's levels. The increase in cement volumes has offset the decrease in prices, resulting in flat net sales for the first six months of the year versus the same period last year. Cement volumes grew 50%.
Africa and Middle East
Second quarter net sales of Africa and Middle East were US$143 million, up 204% as compared to the same quarter of 2004. EBITDA increased 45% to US$33 million. Construction activity in the Middle East is currently running at a high level, with increased housing requirements and oil revenues driving public and private investments.
Asia region reported 57% increase in net sales to US$76 million, while EBITDA decreased to US$14 million, down 6%.
CEMEX is a growing global building solutions company that provides products of consistently high quality and reliable service to customers and communities in more than 50 countries throughout the world. The company improves the well-being of those it serves through its relentless focus on continuous improvement and efforts to promote a sustainable future. For more information, visit www.cemex.com.