Wednesday, February 4, 2009

Cement Industry Really Stuck To Bottom Of River

First HeidelbergCement, now Cemex. In line with our post from several weeks ago, cautioning investors with a Cemex stake, the company came out today with a statement that its EBITDA would plummet 20% this year, from $4.3 billion in 2008 to $3.6 billion for 2009, according to CEO Lorenzo Zambrano. According to Bloomberg:

The Monterrey, Mexico-based company is slashing costs and plans to sell assets to pay debt and “cope” with a slump in construction-materials demand that caught Cemex by surprise with the “speed of the deterioration,” Zambrano said.

“We plan to do much more than survive,” he said. “We expect to emerge from the present crisis ready for the next chapter of Cemex’s long-running growth story.”

Cemex fired 7,500 employees in 2008, or 11 percent of its workforce, and trimmed operations by shutting 27 kilns, 300 ready-mix concrete plants and 50 aggregate sites as part of a $700 million cost-cutting plan, Zambrano said.

The company expects to sell assets and use its profits to lower net debt to $14.3 billion at the end of 2009 from $17.9 billion at the end of last year. Free cash flow -- or profit after paying all expenses that can be used to reduce debt, pay dividends or acquire companies -- will fall to $1.9 billion to $2.1 billion in 2009 from $2.6 billion last year, he said.

“The economic news is going to get worse before it gets better,” Zambrano said. Cemex plans to pay an annual dividend, said Zambrano, who declined to provide an amount. Cemex will give shareholders incentive to take the dividend payment in shares, as it has in the past, to minimize cash outlays, he said.

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