You are on page 1of 4

Corporate Finance Project

CEMEX S.A.B. de C.V.

CEMEX, S.A.B. de C.V. is a Mexican corporation, a holding


company (parent) of entities which main activities are oriented
to the construction industry, through the production,
marketing, distribution and sale of cement, ready-mix concrete,
aggregates and other construction materials. CEMEX is a public Index
stock corporation with variable capital (S.A.B. de C.V.) organized
under the laws of the United Mexican States, or Mexico. CONSOLIDATED FINANCIAL
ACCOUNTS
CEMEX, S.A.B. de C.V. was founded in 1906 and was registered
with the Mercantile Section of the Public Register of Property
Balance Sheet 2-5
and Commerce in Monterrey, N.L., Mexico in 1920 for a period
of 99 years. In 2002 this period was extended to the year 2100.
Income Statement 6
The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican
Stock Exchange (“MSE”) as Ordinary Participation Certificates
Cash-flow Statement 7
(“CPOs”). Each CPO represents two series “A” shares and one
series “B” share of common stock of CEMEX, S.A.B. de C.V. In
addition, CEMEX, S.A.B. de C.V. shares are listed on the New
York Stock Exchange (“NYSE”) as American Depositary Shares or
"ADSs" under the symbol “CX.” Each ADS represents ten CPOs.
FINANCIAL STATEMENTS
CEMEX have over 50,000 employees worldwide. They divided
ANALYSIS
their production mainly in the next areas: Mexico, United
States, Spain, United Kingdom, Europe; South/Central America
and Caribbean; Africa & Middle East; Asia & Australia Liquidity 3

CEMEX global operations include 64 cement plants (with


Asset Management 3
minority participation in a further 15), over 2,200 ready-mix
concrete plants, 493 aggregate quarries, 253 land-distribution
Debt Management 7
centers and 88 marine terminals. Last year they sold their
assets in the Canary Islands and ceased operations in
Profitability & market valuation 8
Venezuela, following the nationalization of the cement industry,
and in the middle of this year they sold their operations in
Australia.
The financial statements are prepared in accordance with
Mexican Financial Reporting Standards (MFRS) issued by the
Mexican Board for Research and Development of Financial
Reporting Standards (CINIF), which recognized the effects of
inflation on the financial information until December 31, 2007.
2

Balance sheet

Current Assets (Short term Assets) are divided as follows:


 20% Cash and reinvestments. Where three quarters are cash and bank
accounts, and the rest are fixed-income securities and investments in
marketable securities. Comparing year 2008 to 2007 CEMEX doubled
bank and cash accounts, and significantly (3.5 times) increased
investments in marketable securities. The balance in this caption is
comprised of available amounts of cash and cash equivalents,
represented by investments held for trading purposes, which are
easily convertible into cash and have maturities of less than three
months from the investment date. Those investments in fixed-income
securities are recorded at cost plus accrued interest. Investments in
marketable securities, such as shares of public companies, are

“Tough times call for tough actions. We are intensely focusing our efforts on the variables we
can control”.
recorded at market value. Gains or losses resulting from changes in market values, accrued interest and the
effects of inflation arising from these investments are included in the income statements as part of the
Comprehensive Financing Result.
 27% Trade receivables less allowance for doubtful accounts, which are established according to the credit
history and risk profile of each customer. During 2008 was taken in count the allowances for doubtful accounts
at the beginning of the period of 2007.
 15% Other accounts receivable. Non-trade accounts receivable are mainly attributable to the sale of assets.
 33% Inventories, net. Index of inventory in 2008 is 1.14 times higher than in 2007 which is good as inventory is
a very important part of the balance sheet of the company. Until 2007, inventories were valued using the lower
between their replacement cost and market value. Production cost may correspond to the latest purchase
price, the average price of the last purchases or the last production cost CEMEX analyzes its inventory balances
to determine if, as a result of internal events, such as physical damage, or external events, such as
technological changes or market conditions, certain portions of such balances have become obsolete or
impaired When an impairment situation arises, the inventory balance is adjusted to its net realizable value,
whereas, if an obsolescence situation occurs, the inventory obsolescence reserve is increased. In both cases,
these adjustments are recognized against the results of the period.
 5% Other current assets. Assets held for sale are stated at their estimated realizable value.

Non-current assets (Long term assets) are 89% of the total assets, and are presented as follows:
 3% Investments in associates ; correspond to book value at acquisition date and interest of changes of
stockholder’s equity, which over the period 2007-2008 showed the increase.
 4% Other investments and non-current accounts receivable. Over the period other investments and non-
current accounts receivable have increased by 2.17 times. Include CEMEX’s collection rights with maturities of
more than twelve months as of the balance sheet date. Non-current assets resulting from the valuation of
derivative financial instruments, as well as investments in private funds and other investments are recognized
at their estimated fair value as of the balance sheet date, and their changes in valuation are included in the
income.
 51% Property, machinery and equipment, net. Consist of land and mineral reserves, buildings, machinery and
equipment, construction in progress, accumulated depreciation and depletion.
3

Liquidity & Asset


Management
Analyzing current assets and current
liabilities of CEMEX, we need to
calculate current ratio. Current ratio is
an indication of a company's ability to
meet short-term debt obligations; the
higher the ratio, the more liquid the
company is.

Liquidity Current Ratio


=Current Assets/
Current Liabilities
=68,195/152,737
=.4464

In our case, current liabilities exceed


Here we have increase too, it means that over the period CEMEX current assets; it means the company
build new plants, utilized new mineral reserves, and bought new may have problems meeting its short-
equipment. This account is recognized at their acquisition or term obligations. CEMEX has not good
construction cost and amounts are restated considering guidelines short-term financial strength.
from MFRS B-10. Starting on January 1, 2008, when inflationary
accounting is applied only during periods of high inflation, such Asset Management
assets should be restated using the factors derived from the general
Inventory Turnover Ratio
price index of the countries where the assets are held. Until = Sales/Inventories
December 31, 2007, property, machinery and equipment were = $243,201/$22,358
presented at their restated value, using the inflation index of each = 10.8776 times
country, except for those foreign assets which are restated using the
inflation index of the fixed assets’ origin country and the variation in Days Sales Outstanding DSO
the foreign exchange rate between the country of origin currency =Receivables/Average sales
and the functional currency of the country holding the asset. per day
Depreciation of fixed assets is recognized within “Cost of sales” and = 28,221/(243,201/365)
=42.3548
“Administrative and selling expenses,” depending on the utilization
of the respective assets, and is calculated using the straight-line
method over the estimated useful lives of the assets, except for Fixed Assets Turnover Ratio
mineral reserves, which are depleted using the units-of-production =Sales/Net fixed assets
method. The maximum average useful lives by category of assets are = $243,201/281,858
as follows: administrative buildings – 32 years, industrial buildings – =0.8628
26 years, machinery and equipment in plant – 19 years, ready-mix
trucks and motor vehicles – 8 years, office equipment and other
assets – 7 years.
 42% Goodwill, intangible assets and deferred charges, net. Goodwill
and other intangible assets of indefinite life are tested for
impairment when needed or at least once a year, during the last
quarter of the period, by determining the value in use of the
reporting units, which consists in the discounted amount of
estimated future cash flows to be generated by the reporting units
to which those assets relate.
8

Profitability and Market Valuation

Basic Earning Power ratio (BEP) = EBIT/Total Assets


= 27,884/623,622
= 4.47%
www.cemex.com
Return on Total Assets (ROA) = Net income available to common
stockholders/Total Assets
= $2,278/$623,622
= 0.36 %
Return on Common Equity (ROE) = Net income available to common
stockholders/Common Equity
= $2,278/$237,267
=0.9601%
Price/Earnings (P/E) Ratio = Price per share/Earnings per share
=$4.91/$0.10
**Price per share in fixed program, for 0.8 years with 266,385 options per
exercise price