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CEMEX cost-containment efforts pay off

Fernando A. González

‘Operation Resilience’ translates into higher margins in quarter beset by COVID-19 disruptions

CEMEX announced today that in a second quarter marked by significant disruption from the COVID-19 pandemic, sales declined 10% year over year while EBITDA for the quarter fell by 6%, largely due to lockdown measures in much of the company’s footprint.

EBITDA margin, however, was higher by 0.7 percentage points due to proactive initiatives under ‘Operation Resilience’, where the company undertook significant cost-containment efforts across its businesses and geographies.

The decline in quarterly consolidated net sales was due to lower volumes of CEMEX’s three core products in almost all regions and was highly correlated to government COVID-19 restrictions. The US was the one exception with cement volumes growing 6%.

Net operating earnings before other expenses decreased 17% to US$279 million on a like-for-like basis, whilst net income saw a loss of US$44 million, compared with a net income of US$155 million in the same quarter of 2019.

Operating EBITDA on a like-for-like basis decreased 6% during the quarter to US$554 million, compared with the same period in 2019, whilst operating EBITDA margin increased by 0.7%, from 18.3% in the second quarter of 2019 to 19.0% this quarter.

Free cash flow after maintenance capital expenditures for the second quarter was US$140 million, whilst net debt saw a marginal increase of US$51 million during the quarter.

Fernando A. González, chief executive officer of CEMEX, said: ‘Despite the unprecedented conditions in which we are operating due to the pandemic, I am pleased with our second-quarter performance and our quick reaction to implement cost-containment measures across all geographies.

‘In the quarter, we saw a rapid V-shaped volume recovery in our core products from trough levels in April, reaching slightly below pre-COVID-19 volumes in June. Importantly, our health initiatives have helped protect our employees, customers, suppliers and communities, and allowed us and our customers to continue operating in most markets.

‘Our digitalization efforts have also paid off as usage continues to expand on our digital platforms and our sales force has leveraged new tools to connect with our customers virtually.

‘We expect that COVID-19 will continue to challenge our operations in new ways over the next few quarters. We will continue to prioritize the safety of our employees and customers, improve our customer experience, and protect the future of our company.’

In Mexico, net sales decreased 10% on a like-for-like basis to US$568 million, whilst operating EBITDA decreased 10% to US$183 million in the second quarter, versus the same period last year.

Operations in the US reported net sales of US$1.0 billion, an increase of 1% from the same period in 2019, whilst operating EBITDA increased by 16% to US$198 million versus the same quarter of 2019.

In CEMEX’s Europe, Middle East, Africa and Asia region, net sales decreased by 13% on a like-for-like basis, compared with the same period of 2019, reaching US$987 million, whilst operating EBITDA was US$147 million for the quarter, 20% lower than the same period last year.

Operations in South, Central America and the Caribbean region reported net sales of US$279 million, a decline of 30% on a like-for-like basis over the same period of 2019, whilst operating EBITDA decreased by 25% to US$66 million in the second quarter.

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