Cemex Projects Low Q4 Amid Overall Tightening in Global Markets

CEMEX (NYSE:CX), a Mexico based cement manufacturer, announced in its December guiding that the EBITDA for the fourth quarter ending 31^st December could decrease by 27%, compared to the same period last year due to currency fluctuations and sale of assets in Venezuela and Gran Canarias.

Sales are expected to decline 10% on a year-on-year basis from fourth quarter 2007, but taken into consideration the currency fluctuations this estimate may exacerbate to 23%. CFO, Mr. Rodrigo Treviño said:

During this fourth quarter, our results reflect the overall tightening in the global credit markets. Our volumes have been affected by decreased consumer confidence and lower activity across all sectors in most of our markets. In addition, foreign-exchange fluctuations have also had a negative impact on our results.

CEMEX is taking measures contra the disfavoring conditions and has started to initiate a refinancing plan in order to provide the company with more financial flexibility and improve the current leverage ratio. Although governmental economic stimulus packages are in the process of being introduced both in the USA and Spain, the company’s expectations remains weak in both markets as well as most of its other geographical environments.

What is more, the stock price has had a tremendous downturn since its 52 week high in 2008 of $31 and is trading at $10.56 as of writing, which implies a decline of almost 70% in a little more than half a year. Also, earnings per ADR have been on a decline since 2005, and are likely to decrease further in 2008 considering that the earnings per ADR for the three first quarters of the year is $1.48, entailing that earnings per ADR will be less than 2007.

Moreover, it is significant to note that the CEMEX ADR is historically on a low level (i.e. $10.56 as of writing) and has not been this low since the beginning of 2003. On November 21, the stock price touched $4.10, which is the historical low point for the ADR listed as NYSE:CX. Thus, for an investor seeking capital growth, CEMEX may be an opportunity, but one has to be conscious of the volatility that characterizes the current market conditions.

The company's latest interim statements can be found in our download section.