Mexican concrete maker, Cemex (NYSE:CX) said on Monday it has created a debt exchange, in an effort to save hundreds of millions of dollars. It plans on exchanging some its existing short-term debt, for longer and riskier maturities directly resulting in significant savings over the next few years. This news, when announced boosted the price of the stock on the NYSE.
The architecture behind the deal is pretty straight forward: short-term bonds directly exchanged for longer-term bonds, however things get a little tricky once the bonds on denominated in both dollars and euros. Currently, short-term bond holders are due for a maturity during the second half of 2014.
According to the terms of the exchange, holders of $1.19B (US Dollars) in Eurobonds issued by Cemex Finance Europe BV and $147M euros of debentures can now exchange those debentures for two separate types of notes both due for maturity in 2019. The first of these is a dollar-denominated senior note at a rate of 9.875%, and the second a euro-denominated note at a rate of 9.875%.
Cemex recently announced earnings that were better than expected and hinted that guidance in the coming quarters could result in a breakthrough year. According to a recent press release, several factors drove the positive results. These factors included, but were not limited to, a higher demand for Cemex's products and solutions in both the residential and infrastructure sectors.
In late January, Cemex announced its newest brand of concrete, Hidratium. Hidratium is a self-curing concrete that cuts the timeframe of most jobs by 30% and is also maintenance-free. "As a global leader in ready-mix concrete, CEMEX offers an innovative concrete technology that is designed to enable our customers to avoid extra investment of time as well as money to maintain adequate levels of moisture and attain the maximum performance of the concrete," said Davide Zampini, Head of the CEMEX Research Group. Are US based contractors, construction companies and home builders more likely to go with a brand like Hidratium? Considered to be one of more cost-effective CEMEX solutions, these three industries would not only benefit from the products composition, but from the time it saves them to complete jobs.
So what could this mean in the long run for CX shareholders and those looking to invest? Let's consider this, if current earnings increased due to a higher demand in both the residential and commercial sectors, and the introduction of Hidratium would reduce the time table for most jobs. Direct sales and output would create not only a higher demand for the new maintenance-free concrete but positively affect the bottom line moving forward.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.