Cemex Goes for Secondary Issue - Analyst Blog

CEMEX, S.A.B. de C.V. (CX), one of the largest cement makers, made an issue of 634.6 million new Ordinary Participation Certificates (CPO) to its existing shareholders. Out of the above, 384.6 million CPOs were issued instead of cash dividend where every holder of 25 Cemex CPOs will receive 1 new CPO. In April, Cemex announced the issue of 750 million Series A and Series B shares (3 ordinary shares=1 CPO and 10 CPO=1 ADS), to maintain the debt-equity ratio.
 
The holder of 25 Cemex CPOs will receive 1 new CPO, 3 new shares per 75 shares currently outstanding, and holders of CEMEX American Depositary Shares (ADS) will receive 1 newly issued ADS per 25 ADSs held.
 
Recently, Cemex declared the issue price at MXN$ 14.246 per CPO, which means MXN$4.7487 per share. Out of which the company has decided to capitalize MXN$4.7459 per share from retained earnings, which would enhance shareholder’s confidence to a large extent, particularly for the debt laden company like Cemex.
 
Cemex with a net debt of US$15,005 million is making genuine efforts to reduce net debt.  However, the continued weak cement volumes in Spain and the U.S. remain a problem. Moreover, the overall economic situation is still uncertain.
 
Recent economic news and activity might have suggested a technical end to the recession, but the conditions facing the construction industry are likely to remain weak for another year, causing a drag on cement consumption, according to the most recent economic forecast from the Portland Cement Association (PCA).
 
PCA expects United States’ total cement consumption to increase only 5% in 2010. However, a significant growth in consumption is expected in 2011 and beyond.
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