Cemex rating likely to fall into investment category

Cemex's conservative operating approach (BB / - / BB-), geographically focused on just a few emerging markets, enhances the company's business profile. In our view, the company's long-term drivers and catalysts, including various government financial incentive programs, are supportive for the company's business. The company's management promises to conduct another round of divestitures in Latin America and Asia, which will allow the company to strengthen its debt profile.

The management's new forecast for EBITDA margin growth in 2023 to over 20% may lead to an increase in the credit rating to investment grade, since already at the end of this year, a steady growth in demand for cement is recorded in the main regions of the company's presence. Importantly, Cemex optimizes debt repayment schedules, softens credit covenants and adds ESG criteria to the debt service history, which are positive factors for investors' perception of the company's credit risk. We are highlighting the Cemex Eurobond due June 2027 (USP2253TJP59). The notes with a duration of 4.9 years offer investors a yield of 2% per annum.

You certainly couldn't accuse CEMEX of being stuck in the mud. The building materials company is the number two cement maker in the world (after Lafarge Holcim). The majority of its sales come from cement; the company has about 55 cement plants and an annual production capacity of about 95 million tons. It also produces, markets and distributes ready-mix concrete, aggregates, and clinker (an intermediate product used to make cement). CEMEX operates in North America (through CEMEX Inc.), as well as in Africa, Asia, Europe, the Middle East, and South America. The US, Mexico, and Europe each account for a quarter of sales.