Cemex announced on Thursday the structure of “Operation Resilience”, its medium-term strategy that incorporates the challenges of the Covid-19 pandemic and presents a plan to improve the growth of its operating flow in the next three years.
The company is one of the largest cement companies in the world, based on the annual installed cement production capacity. At the end of 2019, Cemex had 93.1 million tons of annual installed cement production capacity and its cement sales volumes in 2019 were 62.8 million tons.
Cemex reported that, despite the significant distortions caused by Covid-19, it anticipates that the operating flow for the entire year 2020 will grow approximately 4%, on the same basis of comparison for the exchange rate, with respect to the previous year.
The company estimates that it is one of the largest ready-mix concrete and aggregates companies in the world with annual sales volumes of 50.1 million cubic meters and 135.1 million tons, respectively, in each case, based on its annual sales volumes in 2019.
It is also one of the largest cement and clinker traders in the world, having sold 9.2 million tons of cement and clinker in 2019.
“This performance is the result of the decisive initiatives implemented by the company, as well as better-than-anticipated market conditions,” he said in a statement.
Operation Resilience consists of the following components:
- Improve EBITDA margin through operational performance and disciplined cost containment: New cost reduction target of $ 280 million by 2020, with additional savings in 2021-2023. Aiming for a consolidated EBITDA margin of at least 20% based on a current portfolio.
- Optimization of the company’s portfolio for higher growth with lower risk: Carry out strategic divestments to optimize the portfolio and deleveraging, identifying attractive investment opportunities in the company’s geographies; build a portfolio with a greater presence in the United States and Europe; focus on vertically integrated positions in attractive metropolises, and develop urban solutions as a core business.
- Achieve investment grade capital structure to promote future growth: Use increased operating flow, free cash flow, and divestment income to improve capital structure and achieve at least 3.0 times net leverage by 2023.
- Recognize sustainability as a competitive advantage: With a proactive Climate Action strategy, advance towards the goal of reducing CO2 emissions by 2030 and the company’s long-term vision of a carbon-neutral economy.
Cemex anticipates implementing the following changes to its 2017 Credit Agreement:
- Extend the maturities of 1,100 million dollars until 2025 and the maturity of the revolving credit line until 2023, with terms similar to those that currently exist.
- The inclusion of sustainability metrics that would result in one of the largest sustainability-linked credit agreements in the world when completed.
- Redenominate 300 million dollars of existing participations 2 in US dollars in term loans, to Mexican pesos; as well as 80 million dollars to euros.
As a result, this should mean that Cemex has no significant debt maturities until mid-2023.