Cemex Earnings Call Nuggets: Mexico’s Infrastructure Activity, Mediterranean Margins

On Monday, Cemex, S.A.B. de C.V. ADR (NYSE:CX) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Mexico’s Infrastructure Activity

Esteban Polidura – Deutsche Bank: I have two questions, if I may. The first one, could you please remind of the amounts and strike prices of the outstanding convertibles and which are optional and are mandatory? The second one in today’s press release, you mentioned lower than expected infrastructure activity in Mexico, especially in terms of cement intensity project. Do you expect this to prevail in the fourth quarter? Thank you.

Fernando A. Gonzalez – EVP of Finance and Administration: I think I’ll take the second one. I think we commented that we saw some delays in infrastructure projects in Mexico, but starting third quarter, we see they are picking up, so the expectation is for the fourth quarter to – for those projects to be developed. On the first one, I have part of the answer, the convertibles, the one on the ’15 is 12.09, ’16 and ’18 is 10.43 both.

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Maher Al-Haffar – IR: We have as you know four convertible transactions. We have three that are normal converts and one that is a mandatory convert. In order of maturity the convertibles are at 2015 the amount is about – it’s $715million and as Fernando said, the strike price is 12.09. Then we have the 2016 notes, the amount there is $977.5 million, the coupon is 3.25. I don’t know if you need that, but we can get you that amount and the strike price is as Fernando mentioned and then the third is a 2018 and that’s $690 million and then we have a mandatory convertible that we issued that matures in 2019 and that was sold in the Mexican market and that has a strike price of 21.27 pesos per CPO. Of course, the previous prices that Fernando gave were prices per ADS. I don’t know if that answers your question. The amount – I don’t know if that answers all the questions.

Esteban Polidura – Deutsche Bank: Yeah. Perfect. It is very clear. Thank you Maher and Fernando.

Mediterranean Margins

Gonzalo Fernandez – Santander: I have two questions. (Indiscernible) margin in the Mediterranean, despite a very sharp reduction in volumes, 28% which is very high, I don’t if that margin (indiscernible) any extraordinary items as, due to credits or anything related to the sub-contracting of IT or is that margin sustainable going forward? Second question, you mentioned changes in your guidance for Mexico and the U.S. I don’t know if you have any changes in your guidance for (indiscernible) in Colombia given what we have seen in the first nine months of the year?

Fernando A. Gonzalez – EVP of Finance and Administration: On the first one related to margins in the Mediterranean region, we don’t have an extraordinary thing. We have a combination of performance of the different variables like, lower fees costing in Spain and Egypt and also Croatia, we have also done rationalization of capacity. We have, as you know, lowering headcount and also freight optimization. You also know we have a lower energy costs and maintenance cost, so it is a combination of several reasons. The second question, I didn’t listen it properly.

Gonzalo Fernandez – Santander: I think your – Gonzalez was it on the changes in guidance in Mexico and in the U.S.?

Fernando A. Gonzalez – EVP of Finance and Administration: No, if there are any changes in the guidance (Gordon), Colombia.

Maher Al-Haffar – IR: For Colombia, yes. We reduced the volume guidance for cement from 7% to 5% and also we reduced the guidance on ready-mix from I believe about 29% to 15%, and then we trimmed back the aggregates from 40% to 31%. Now the aggregates and the ready-mix reduction is connected, obviously, it’s because of the connection of the business. Now in terms of – one thing that is very important to note is that, the first half of the of the year, as you saw, the improvement in operations in Colombia was extremely strong, and the reason for that is that, first we started with a relatively weaker first half 2011 and then things kind of picked up in the second half, so second half should be a slightly more difficult comparison. I don’t know Fernando you want to address the other changes in terms of Columbia, why we changed the guidance?

Fernando A. Gonzalez – EVP of Finance and Administration: There are in the case aggregates, we have some changes because we started few months ago increasing the trading of our aggregate business, so that is changing the results every quarter on – also our estimates. But I think the main points you have already addressed them, Maher.

Maher Al-Haffar – IR: The other thing Gonzalo, in terms of the cement guidance, okay, there were several issues that drove that. Number one is that we had two less business days in the quarter and that had the impact of a little bit of a reduction in volumes, about three percentage points. We also had a bit of a pre-buying or anticipation buying in the month of June, so some of the volumes moved from the third quarter to the second quarter because of the pricing situation. You know in some of the urban centers residential construction, which is in many instances is exposed to ready-mix was also slowed down because of maybe a little bit of a lag in terms of utilities being put into place. So, when you add all of those things together, we saw the performance is in the third quarter and it caused us to change our guidance for the year. But what’s very important is that despite this change in guidance for volumes, while we can’t provide guidance for the year for Colombia we continue to be in fact pretty much on target in terms of operating cash flow generation. So I don’t know if that addresses all of your questions Gonzalo. If there’s any follow-up please tell me.