Davy V. Bui

Cement 75% Gains With Cemex - Barron's

I'll probably thumb through the Barron's story later this week but I'd be curious to see if they discuss operating income as opposed to sales in the article. I posted my research report on Cemex sometime last year (you can find it here).

Cemex has major operating leverage in its domestic and US markets. When I did my report, Mexico & the US accounted for 20% and 23% of revenues, respectively but the two combined for 67% of total operating income, with Mexico at 38% of that total.

I admit that those figures may be slightly outdated now but it seems unlikely that they could have shifted their operating income mix that much this fast so the numbers above probably aren't too far off.

I also mentioned in a separate post some of the headwinds the Mexican economy may face as it becomes a net oil importer. Pemex tax revenues accounts for 40% of Mexican GDP. That's a crazy number. As the money flow from Pemex slows, government may not be able to fund the housing and infrastructure programs currently on the books, which would due to their operating leverage in Mexico could really hit the Cemex bottom line.

That was my last line of thinking on this stock. I'd be interested to read what insights others may have on it.