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Construction and Housebuilding
Cemex Q2 results slightly ahead; Europe volume guidance cut, US guidance raised
23 July 2012
Robert Gardiner
FACTS: Cemex reported Q2 EBITDA of $702m (+11% yoy, +22% yoy like-for-like), ahead of the consensus estimate of $680m. Q2 sales rose 1% on a like-for-like basis to $3.9bn versus the street estimate of $4.06bn. On a reported basis, sales fell 7.2% due to negative foreign exchange movements. The improved result was driven by higher prices across all regions and better volumes in the US, Colombia and the Philippines which were partially offset by weakness in Northern Europe.
ANALYSIS: The results illustrate the contrasting performance of construction markets in Europe and North America in the second quarter. Northern Europe was weak. Q2 like-for-like sales and EBITDA in the region fell 8% year-on-year (EBITDA margins were flat). Volumes fell with like-for-like cement down 14% yoy, RMC down 8%, aggregates down 7%. All the group's major markets saw sharp declines. Cement shipments fell 8% yoy in the UK, 13% yoy in Germany and 15% yoy in Poland. Management cited poor weather and lower public spending for the weakness. Pricing was up yoy across all three products, but large price declines were registered sequentially. In the US, like-for-like cement, RMC and aggregates volumes rose 19%, 15% and 5% respectively in the quarter. With prices also up yoy, Cemex swung from a loss of $17m in Q2 2011 to a profit of $27m. The group referenced better residential, industrial and commercial markets for the improved result. The overall Q2 result was strongest in the group's South and Central American businesses, boosted by a sharp improvement in both price and volume in Colombia. The group also saw significant increases in EBITDA margins in Asia and Mexico.
DAVY VIEW: While the results were well received, Cemex cut its overall cement volume guidance. From an expected 2% increase, shipments are expected to rise just 1% in 2012. The volume outlook has improved in the US but was cut across the board in Europe. The results will likely set the tone for the cement sector in Q2 with weakness in Europe, improved trading in North America and a resilient performance in the emerging markets.