CEMEX, S.A.B. de C.V. (CX) announced its full year 2010 guidance at its Investor and Analyst Conference on Thursday. The company trimmed its earnings before interest, taxes, depreciation and amortization (EBITDA) forecast by 5% to $2.75 billion and free cash flow (FCF) by 20% to $800 million.
The 5% cut from the previous EBITDA forecast of $2.9 billion was ascribed to the decline of the euro and the Mexican peso relative to the U.S. Dollar since the company issued its forecast on Apr 27, 2010. CEMEX, however, confirmed that the EBITDA forecast remains unchanged in local currency terms. The EBITDA estimate for full year 2010 of $2.75 billion projects a 3.4% increase over $2.66 billion reported in 2009.
Out of the currently projected FCF of $800 million, CEMEX has assigned $450 million for debt payback. On Apr 27, 2010, CEMEX had projected FCF to reach close to $1 billion with $600 million allocated toward debt reduction. CEMEX had generated FCF of $1.2 billion in 2009.
CEMEX cited the impact of currency translation on its total debt as favorable, as debt declined about $550 million from Mar 31, 2010. Moreover, CEMEX reduced its debt by $437 million during the current quarter through the recently completed exchange of its outstanding perpetual debentures for U.S. Dollar-denominated and Euro-denominated notes. Consequently, CEMEX’s total debt has slashed down by nearly $1 billion since Mar 31, 2010. Net debt plus perpetual securities was approximately $18 billion as of Mar 31, 2010.
CEMEX continues to strive toward a leaner debt structure, but stated no major asset sales were planned and divulged that non-core assets in countries like Malaysia and Austria could be divested.
This apart, CEMEX expects high single-digit growth in cement sales volumes in the U.S. in 2010. Moreover, the company expects consolidated domestic cement volumes to increase by approximately 3%, ready-mix volumes to decline slightly and aggregates volumes to increase by approximately 1%.
CEMEX competes globally with France’s Lafarge SA (LFRGY) and Switzerland’s Holcim Ltd. (HCMLY) and has been struggling with a sluggish U.S. housing market, weakness in Spain and substantial debt. However, following its debt refinancing, equity capital issuance, sale of Australian operations, and through cost-reduction efforts it is strategically aligning itself as a leaner and more agile company. Looking forward, the company will remain focused on paying down debt and regaining its financial flexibility.
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