Cemex outlook: growth delayed

Mexico’s cement producer and economic bellwether Cemex held a New York investor day Tuesday that provided two bullet points: profit growth is getting pushed into 2017, and near-term cost-cutting is on the rise.

Mexico’s economy is closely tied to US strength, and the construction business is a proxy for economies in Mexico and the United States. Of Cemex’s Tuesday meeting, Sterne Agee analysts Todd Vencil and Kevin Bennett note that in US and Mexico, Cemex’s two most important geographies, prices have been strengthening. Of this week’s meeting, they said:

“Guidance was notably lighter, to our eye, but the company continued to refer to the mid-term Ebitda goal of $4.7 billion. Two years ago that was the 2016 guidance, and last year it potentially applied to 2017 [now] the company could hit that level in 2018. That $4.7 billion number would require 16% year over year growth in 2018.

There was also little talk of getting back to the company’s growth-by-acquisition DNA, discussed in prior years Instead, the company is focused on a significant reduction in leverage and the recovery of its investment grade credit rating. Management detailed plans for divestitures free cash flow programs and now expects to reduce its costs by $150 million this year, as management works to offset the negative impact of the strong dollar.”

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