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Cemex to save $1 billion in 10 years with IBM deal

Jul, 31 2012

(Mexico) -- Mexican cement and building materials company Cemex SAB said Monday it expects to save $1 billion over the next decade in a strategic agreement with International Business Machines Corp. (IBM) to outsource business process and information technology services.

The agreement marks another step in Cemex's long-running efforts to cut costs and increase efficiency since the 2008 global crisis that brought about a drop in earnings and forced the company to rescheduled $15 billion in bank debt.

Cemex said the $1 billion services contract with IBM includes finance and accounting, human resources back-office services, as well as IT infrastructure, application development, and maintenance.

Roberto Chaverri, Cemex's former vice president for corporate information technology, and recently named vendor management office vice president, said Cemex had estimated that the services included in the agreement would have cost the company $2 billion over 10 years to carry out in-house, "so we're saving practically half."

Savings will begin in 2013 with a little over $50 million, with additional annual savings estimated at slightly over $100 million in subsequent years, Mr. Chaverri said in a telephone interview. The switch will involve some layoffs at Cemex, although how many is as yet undetermined, and IBM could take on a number of Cemex employees, the official added.

Cemex cut the size of its global workforce by about 6% in 2011.

The savings are in addition to the roughly $1 billion in cost reductions that Cemex has achieved in the past three years.

Chief Executive Lorenzo Zambrano said in a release that the agreement reinforces Cemex's commitment to become a more "flexible, agile, and competitive global company."

Cemex, which is seeing a turnaround in earnings this year with its U.S. operations generating positive operating cash flow in the second quarter for the first time in several years, is in the process of rescheduling around $7 billion in 2014 debt maturities under its 2009 refinancing agreement with banks.

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