CEMEX gain increased synergies from Rinker acquisition

13 March, 2008

AT last week’s CEMEX Investor and Analyst Conference, the company announced that it had identified and was now capturing recurring cost synergies worth approximately US$400 million (£200 million) from the integration of Rinker Group Ltd.

At the time of the acquisition, CEMEX estimated that they would achieve $130 million (£65million) in annual synergies after the first three years, but now expect to exceed $200 million (£100 million) in 2008 alone. In addition, the company originally anticipated that the average cost of funding the Rinker acquisition would be 6%, but now expects the average cost for 2008 will be closer to 4%.

Moreover, CEMEX say they will produce cost savings to improve efficiency that, coupled with post-merger integration savings, will reduce the ratio of selling, general and administrative expenses to sales by around 150 basis points this year.

‘At CEMEX, consistently generating solid returns for our shareholders has always been a top priority,’ said Lorenzo Zambrano, chairman and CEO of CEMEX. ‘We believe we have the right operating and financial strategies in place and the right people to execute on those strategies to ensure the continued success of the company.’

Over the past two years CEMEX have invested almost $2.2 billion (£1.1 billion) in growth capital expenditure projects, including increasing cement capacity by 13.5 million tonnes in Mexico, the US, Panama, Spain and Latvia. Additionally, the company is increasing cement grinding capacity by 3.2 million tonnes in Spain, the UK and the United Arab Emirates.

In 2008, CEMEX say they plan to invest more than half of their expected $3.0 billion (£1.5 billion) in free cash flow in growth capital expenditures, primarily to complete projects already under way. These projects are expected to produce a return on capital employed in excess of 10% by 2010.

As previously announced, the company expects to generate EBITDA of about $5.6 billion (£2.8 billion) in 2008, compared to $4.6 billion (£2.3 billion) last year.