Cemex’s cash-flow gains convince investors’ sentiments



Cemex SAB is staging its biggest rally in four years as the largest cement maker in the Americas gets a boost from cost cuts, U.S. sales gains and a rebound in the Mexican peso.
Lower interest rates and taxes also will help the company boost free cash flow by $350 million this year, more than the previously targeted increase of $200 million, Chief Executive Fernando Gonzalez told analysts and investors on March 17. The increased forecast prompted Credit Suisse Group AG and BB&T Corp. to recommend buying the shares.
Cemex is bouncing back after the peso’s tumble stymied plans to pare debt last year and fueled concern over the cost of servicing the company’s dollar-denominated borrowing. While the cement maker may need a few more years to regain an investment-grade credit rating, Cemex has reduced its interest expenses and cut cash-flow needs, Gonzalez said.
Cemex shares gained 27 percent this year through March 23, after tumbling about a third in 2015. Analysts who track the stock are bullish. All seven who cover the shares traded in Mexico recommend buying them. Of the 19 who follow the company’s American depositary receipts, 13 recommend buying, six say hold and none suggest selling.
Vanessa Quiroga, a Credit Suisse analyst, raised her recommendation on the ADRs to buy on March 18 about three months after cutting it to neutral.
The company is on “on a roll,” she said, and is benefiting from the recent recovery in oil prices and as currencies in Mexico, Colombia and Europe rebound against the dollar. That makes Cemex’s dollar-denominated liabilities easier to repay. About 83 percent of the company’s debt was in dollars at the end of last year, while the U.S. accounted for 28 percent of sales, the company said Feb. 4. Cemex’s rating from Standard & Poor’s is B+, or four steps lower than investment grade.
As much as 85 percent of the growth in Cemex’s earnings before interest, depreciation, taxes and amortization this year will come from the U.S. New-home construction in the U.S. rose more than economists forecast in February, led by the strongest single-family building in more than eight years.

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