CEMEX recently announced the framework of “Operation Resilience,” its medium-term strategy, that incorporates the challenges of the COVID-19 pandemic and lays out a plan to enhance EBITDA (earnings before interest, taxes, depreciation and amortization) growth over the next three years.
During a dialogue with top management, CEMEX announced that despite significant COVID-19 disruptions, it expects EBITDA for the full year 2020 to grow about 4%, on a like-to-like basis for foreign exchange, over the prior year. This performance results from management actions and better than anticipated market conditions.
“Operation Resilience” consists of the following components:
- Enhancing EBITDA margin through operational performance and disciplined cost containment: New 2020 cost reduction target of $280 million while targeting additional savings in 2021-2023. Targeting a consolidated EBITDA margin of at least 20% on an “as is” portfolio basis.
- Optimizing the company´s portfolio for higher growth with lower risk: Undertake strategic divestments to streamline portfolio and delever while seeking bolt-on investment opportunities in the company´s footprint; construct a portfolio more weighted towards the U.S. and Europe; focus on vertically integrated positions in attractive metropolises and develop Urbanization Solutions as a core business.
- Achieving investment grade capital structure to promote future growth: Utilize EBITDA growth, free cash flow, and divestiture proceeds to improve capital structure and triple net leverage by 2023.
- Recognizing sustainability as a competitive advantage: With a proactive climate action strategy, advance towards its 2030 carbon reduction goal and the company´s ultimate vision of a carbon-neutral economy.
CEMEX also expects to implement the following changes to its facilities agreement dated 2017: (i) extend U.S.$1.1 billion of maturities to 2025 and the maturity of the revolver facility to 2023, under similar terms as currently exist; (ii) the inclusion of sustainability metrics that would result in one of the world's largest sustainability-linked loans when completed; (iii) redenominating U.S.$300 million of previous exposure under the terms loan to Mexican Pesos, as well as U.S.$80 million to Euros. As a result, this should translate into no significant debt maturities for CEMEX until mid-2023.
“Operation Resilience lays the foundation for our future. It allows CEMEX to optimize its portfolio for profitable growth while securing its position as a leading vertically-integrated heavy building materials company with a focus on four core businesses: cement, ready-mix, aggregates, and urbanization solutions,” says Fernando A. Gonzalez, CEMEX´s CEO. “We will concentrate on developing sustainable urbanization solutions, which meet the needs of growing metropolises while we ourselves progress toward achieving our long-term decarbonization goals.”
“Finally, I am confident that the virtuous circle of enhanced EBITDA, increased free cash flow generation and asset divestitures will allow us to achieve our long-sought investment grade capital structure,” Gonzalez added.