CEMEX: 'Operation Resilience paves road to a better future'

Mexican building materials giant CEMEX has revealed the framework of 'Operation Resilience', its medium-term strategy, that incorporates the challenges of the COVID-19 pandemic and lays out a plan to enhance EBITDA growth over the next three years.
September 11, 2020
By Guy Woodford
CEMEX CEO Fernando A. Gonzalez
CEMEX CEO Fernando A. Gonzalez

During an open dialogue with top management, CEMEX announced that despite significant COVID-19 disruptions, it expects EBITDA for the full year 2020 to grow approximately 4%, on a like-for-like basis for foreign exchange, over the prior year. This performance results from the decisive management actions as well as better than anticipated market conditions.

With increased visibility and higher EBITDA expectations, CEMEX says it is comfortable in rolling out its medium-term strategy.

Operation Resilience consists of the following components:

• Enhancing EBITDA margin through operational performance and disciplined cost containment: New 2020 cost reduction target of $280 million while targeting additional savings in 2021-2023. Targeting a consolidated EBITDA margin of at least 20% on an "as is" portfolio basis.

• Optimising the company's portfolio for higher growth with lower risk: Undertake strategic divestments to streamline portfolio and deliver while seeking attractive, bolt-on investment opportunities in the company's footprint; construct a portfolio more weighted towards the USA and Europe; focus on vertically integrated positions in attractive metropolises and develop Urbanisation Solutions as a core business.

• Achieving investment grade capital structure to promote future growth: Utilise EBITDA growth, free cash flow, and divestiture proceeds to improve capital structure and achieve a target net leverage of at least 3.0X by 2023.

• Recognising sustainability as a competitive advantage: With a proactive Climate Action strategy, advance towards its 2030 carbon reduction goal and the company's ultimate vision of a carbon-neutral economy.

CEMEX also expects to implement the following changes to its Facilities Agreement dated 2017:

  1. Extend US$1.1 billion of maturities to 2025 and the maturity of the revolver facility to 2023, under similar terms as currently exist.
  2. The inclusion of sustainability metrics that would result in one of the world's largest sustainability-linked loans when completed.
  3. Redenominating $300 million of previous U.S. Dollar exposure under the terms loan to Mexican Pesos, as well as $80 million to Euros.

As a result, this should translate into no significant debt maturities for CEMEX until mid-2023.

"Operation Resilience lays the foundation for our future. It allows CEMEX to optimise its portfolio for profitable growth while securing its position as a leading vertically integrated heavy building materials company with a focus on four core businesses: cement, ready-mix [concrete], aggregates, and urbanisation solutions," said Fernando A. Gonzalez, CEMEX's CEO. "We will concentrate on developing sustainable urbanisation solutions which meet the needs of growing metropolises while we ourselves progress towards achieving our long-term decarbonisation goals.

"Finally, I am confident that the virtuous circle of enhanced EBITDA, increased free cash flow generation and asset divestitures will allow us to achieve our long-sought investment grade capital structure," added Gonzalez.

Fernando A. Gonzalez was joined in yesterday's open dialogue by Maher Al-Haffar, CEMEX's chief financial officer, and EVP of Strategic Planning and Business Development, José Antonio González.

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