Cemex SAB de CV (ADR)(NYSE:CX) reduced debt along with its increased profitability has helped the company to achieve a healthier balance sheet. It stated that the currency exposure is manageable provided the lucrative returns in the U.S. operations. Insufficient capacity for peers in Mexico has enabled company to regain a part of the industry share lost in recent times.
Markets are purchasing the firm’s strategy to minimize leverage and exposure to U.S. dollar. It seems now that markets are looking into company’s businesses, as it strategy to minimize debt have achieved positive results so far.
Cemex has a long way to go in reducing its debt considering just 20% of its EBITDA is dollar-denominated and almost 80% of its debt exists in that same currency. The operations in the American market are showing signs of growth with EBITDA margins close to 15%. Dollar exposure continues to be a big concern for company.
In 2Q2016, interest expenses came at $343 million and EBITDA from the U.S. operations stood at $172 million. Considering 80% of the stated interest payments were paid in dollar and 20% of S,A&C EBITDA remains in U.S. dollar, the firm had an exposure of almost $45 million in the last quarter.
Cemex has delivered in terms of asset divestments and debt reduction; leverage ratios are declining led by higher profitability. The plan to minimize debt continued to yield results in the last quarter with Cemex Philippines IPO and a cash reserve of $270 million formed with the release of 8-year senior secured notes. As for asset sales, the company sold assets of its U.S. businesses to GCC worth $400 million.
Cemex’s balance sheet appears better now and a big credit of its goes to increasing profitability, especially from the U.S. businesses, and also from the debt reduction of 12% in last quarter.