Cemex misses estimates on demand

Mexican cement maker Cemex posted a smaller second-quarter loss but missed analysts’ estimates, hurt by weak US demand and restructuring and severance expenses. Cemex has reported a net loss of $294 million for the April-June period, much worse than analysts’ expectations for a loss of $64 million, according to a Reuters poll. The company lost $306 million in the 2010 second quarter. Its shares were down 4.6 per cent to 8.69 pesos in Mexico, while its New York-traded shares dropped 5.1 per cent to $7.44. Second-quarter revenue rose 9 per cent to $4.1 billion, in line with forecasts, driven by higher volumes in Northern Europe, Germany in particular. But Cemex’s sales in the United States dropped 9 per cent as domestic gray, ready-mix and aggregates volumes decreased. “Even in a seasonally strong quarter, the weakness of the US construction sector has not allowed (Cemex) to generate a level of operation to reach at least break-even,” said Banorte analyst Carlos Hermosillo. Flooding in the US Midwest, the restructuring of Cemex’s Arizona business and heavy rains in California in June dented volumes in the quarter. Weak employment in the United States, tight credit and high inventories hurt the residential sector. “Uncertainty surrounding the Federal Highway Program continues to affect the performance from the infrastructure sector,” Cemex added. The company’s second-quarter earnings before interest, tax, depreciation and amortization, or EBITDA, totaled $615 million, down 7 per cent. Monterrey-based Cemex spent $202 million in the quarter related to its restructuring and severance payments. It cut its workforce worldwide by 6 per cent as part of its reorganisation. Cemex said it ended June with a negative free cash flow of $16 million. But it assured analysts during a conference call on Friday that it did not see a significant change this year in its cost of debt. Last year it convinced bankers to relax some of the covenants of the debt refinancing deal that saved it from defaulting on $15 billion of debt in August 2009. Fernando Gonzalez, executive vice president of finance and administration, said on a conference call with reporters that Cemex has all the funds it needs to meet its debt obligations through December 2013. From / Gulf today