Global building materials company Cemex S.A.B. de C.V. (CX)on Tuesday reported a 40% decline in profit for the third quarter from last year, hurt by lower volumes mainly from its U.S. and Spanish operations, in addition to the exclusion of its Venezuelan operations and the sale of assets in the Canary Islands. Net sales for the quarter declined 27%, but increased about 1% from the preceding second quarter. Cemex also said that leading indicators in several of its markets are showing signs of improvement.
For the third quarter, the company said that majority net income was a gain of US$121 million, down compared to a gain of US$200 million in the prior-year quarter, due to lower operating income.
Net sales for the quarter decreased 27% to US$4.2 billion from US$5.8 billion in the same quarter last year. On a sequential basis, net sales increased about 1% from the preceding second quarter. Adjusting for the exclusion of the company's Venezuelan operations, the sale of its assets in the Canary Islands, and currency fluctuations, net sales declined 19%.
On average, five analysts polled by Thomson Reuters expected the company to report revenues of US$4.29 billion for the third quarter.
Hector Medina, Executive Vice President of Finance and Legal, Cemex said, "Despite the continuing effects of the global economic slowdown, we are encouraged by the quarter to quarter stability exhibited by our results. Leading indicators in several of our markets are showing signs of improvement, and we have made important steps towards regaining our financial flexibility. With the successful completion of our refinancing this quarter, we now have a solid foundation for continued profitable growth."
Net sales in Cemex's Mexico operations decreased 27% from a year ago to US$761 million, while the company's sales in the United States dipped 28% to US$751 million in the third quarter.
The United Kingdom operations' net sales dropped 26% to US$330 million. In Spain, net sales for the quarter fell 41% to US$217 million, while net sales in the rest of Europe decreased 17% to US$986 million.
Cemex's operations in South/Central America and the Caribbean reported net sales of US$360 million during the quarter, representing a decline of 29% over the same period of 2008. Third-quarter net sales in Africa and the Middle East slipped 13% to US$256 million, and sales in Asia and Australia declined 15% to US$479 million from a year earlier.
At the end of the third quarter, Cemex had net debt of US$17.1 billion, representing a decrease of US$1.2 billion during the quarter. Cemex is struggling under a heavy debt load following its acquisition of Australia's Rinker last year. The company's credit crisis and a decline in demand for its products has added to its woes.
In early October, Cemex said it completed the sale of its Australian operations to Switzerland-based building materials group, Holcim Group, for about A$2.02 billion or about US$ 1.7 billion. The sale, which includes Cemex's 25% stake in Cement Australia, is part of the company's efforts to save costs and reduce debt.
According to Cemex, the deal is part of its overall strategy to improve its financial flexibility, which includes refinancing of US$15 billion of debt and the global offering of 1.495 billion ordinary participation certificates, including the over-allotment option, with estimated net proceeds of US$1.782 billion.
CX closed Tuesday's regular trading session on the NYSE at US$11.33, down US$0.57 or 4.79% on a volume of 18.31 million shares.
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