Cemex Earnings Call INSIGHTS: Asset Sale Process, Positive USA Performance
On Friday, Cemex, S.A.B. de C.V. ADR (NYSE:CX) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Asset Sale Process
Esteban Polidura – Deutsche Bank: I have two questions if I may. The first one, which region should contribute the most to your expected incremental improvement of $200 million in EBITDA this year, mainly if you could give us some rough percentages that would be fine? Second one is, how is the asset sale process going, and how much should we expect to see this year?
Fernando A. Gonzalez – EVP of Finance and Administration: On the first one, which regions, I think as we have commented the effort – it’s a global effort, the transformation effort is a global effort, and all regions are contributing. Not only regions, we have significant reduction in corporate expenses for instance for slightly more than 7%, we have things like I think we have commented before, unfortunately we needed to let go about 6% of our employees, and for instance just to give you an example in the case of Mexico it was 10%. So, there are slightly different on one of the region or country basis, but difficult to point specifically if there is one particular provided most of the incremental savings. Regarding assets sales, for the first half of the year, we sold slightly higher than $50 million of assets. If you remember in previous conversation we restated, we started lowering our asset sale target and we guide on a range from $200 million to $300 million. So, we have already executed slightly above $50 million and we are confident that we will do the rest in the second half of the year.
Positive USA Performance
Vanessa Quiroga – Credit Suisse: My question is regarding the USA, if you could help us understand better than a strong performance, with a 19% increase year-over-year in cement volumes. We understand that the breakdown is about 60% of the consumption driven by infrastructure spending and at least 20% from housing. If we take that 26% year-over-year growth in housing starts and about 4% increase in infra spending, we can’t get to 19% year-over-year growth, so if you could explain, give us more color, please?
Maher Al-Haffar – IR: Vanessa, thank you, that’s a very good observation and the reason that we’re outperforming or getting that very positive performance is depending on where we’re getting that growth. Most of the states that we are operating in are outperforming the overall U.S. market, and in particular the two most important states that are driving that growth is California and Texas. So you may see a little bit of the skewness compared to the general national statistics. Just to give you an example for instance, the housing starts as you said are up by 27%. If you take a look at our markets, for instance, in April and May we were close to 46% in permit growths of course, right? So that gives you an idea of the differential between ourselves and the national market. It has to do a lot with footprint; it has to do specifically with the accelerated growth in California and Texas. Now in terms of the weights, residential is close to a quarter; that’s our expectations in terms of the growth, and of course, it could be a little bit higher in the first half of the year. Industrial and commercial, which is also doing well, is about 16% of the pie, and we’re increasing our expectations. As you recall, originally, we were expecting between 6% to 7% growth, and now we’re expecting close to 11% growth. Now on the public infrastructure side, which represents close to about 60% of our volumes, we also are encouraged by the growth that we have seen so far. I mean we were a little bit cautious in the beginning of the year, and as you remember, we were kind of flattish to minus 2 for the full year, and now our expectation is probably a growth of about 2%. We think the passage of MAP-21 is going to be very important, not because the bill itself is going to represent a huge increase in expenditure, but because it encourages states to feel comfortable with funding and it also likely to translate to increase in the Federal Highway lending program that was announced along that. I don’t know if that answers your question, Vanessa.
Vanessa Quiroga – Credit Suisse: So, would you be able to give an outlook for housing starts in your markets for 2012?
Fernando A. Gonzalez – EVP of Finance and Administration: An outlook of what?
Maher Al-Haffar – IR: Housing starts. We really haven’t. What we’ve done, as Fernando mentioned, we have done is we’ve given an expectation for the national market, which is about a 23% increase. I think, Fernando mentioned…
Fernando A. Gonzalez – EVP of Finance and Administration: 750.
Maher Al-Haffar – IR: Yeah. But beyond that, I think that if you – there are sources where you can actually go to, Vanessa, and we could certainly work offline with you to get you public numbers, obviously, not our own expectations by state.
Vanessa Quiroga – Credit Suisse: If I could continue with that question about Mexico, so, you mentioned that tough comparison base, but also there is slower than expected performance from formal housing, and if you were to see that this is sustained that the homebuilders continued to have difficulty in funding their working capital and this slower performance continues, would you implement strategies to move your mix towards infrastructure?
Fernando A. Gonzalez – EVP of Finance and Administration: Well, as you know, particularly in the case of Mexico, since several years now we have a very formal and specific effort on developing infrastructure projects. So we will continue doing it and we will do even more than that. Again, I think as commented before, second quarter 2011 is – is or was a very tough base of comparison. So, moving forward, we will have an easier base given that the second half last year in Mexico is softer-based comparison. We have seen also some infrastructure projects (reactivating) and formal construction is also strong. So, the only part pending is to see how formal housing will evolve in the rest of the year.