The experience has made it a specialist company in crisis. The Mexican cement company was involved in a storm that seemed unpleasant: the construction industry in Mexico is experiencing its longest decline on record, the pandemic hit its main markets and uncertainty about the future infected its investors at the beginning 2020.
But the combination of obstacles activated the lessons the company learned in 2008; “The subprime crisis to which they were very exposed due to their operations in the United States came. It brought them complications due to a high level of indebtedness and they found it necessary to restructure the organization to face the complex financial situation, ”explains María Concepción del Alto, director of the master’s degree in finance at Egade Business School in Nuevo León.
The situation marked a strategy similar to the one implemented in September 2020: Operation Resilience, a plan focused on increasing the profitability of the business, divestment of non-strategic assets, reduction of the level of indebtedness and priority to ESG standards (Socially Responsible Investment for its acronym in English).
Commercialized cement volumes began to decline in March, reaching their lowest point in April, resulting in a loss of $ 44 million in net income in the second quarter of the year. Later came a recovery in ‘V’ and for the fourth quarter of 2020 it grew 9% in sales and reduced the loss of net profit of 238 million dollars, obtained in 4Q19, to 70 million dollars.
“As part of this strategy, we identified a cost reduction of $ 280 million for all of 2020, compared to our $ 230 million program previously announced in July 2020, which includes initiatives from the previous ‘Stronger CEMEX’ plan and containment initiatives. of costs related to COVID-19 ”, adds the company.
One day after announcing the strategy on September 10, Cemex saw a 16% jump in the value of its shares on the Mexican Stock Exchange (BMV) compared to September 9, and almost 79% compared to its worst level. that reached in March, 4.21 pesos per paper. At that time, the price did not reflect the real value of the company, according to the Egade academic and refers that in the first quarter of 2021 the price was adjusted with an increase of more than 66% from the day of the announcement.
“The flexibility that companies had to be able to adjust their costs, manage their variable expenses and be able to keep their variable structure to a minimum, combined with the ability to adjust and control expenses, was the key to returning to the market in an agile way”, says Luis Miranda, senior executive director of Corporate HR Ratings, regarding the resilience of companies during the pandemic.
The sample of these virtues in Cemex and the effectiveness to control the crisis built a firm floor to continue with expansion and growth plans, “currently we estimate that our volumes of cement (sold) will grow between 7% and 9% in 2021. From the same Therefore, we currently anticipate that our concrete volumes could grow between 8% and 12% during the year, ”says Cemex.
The Mexican Chamber of the Construction Industry (Cmic) supports the growth. Francisco Solares Alemán, its president, considers that although pre-pandemic production will not be reached, it is expected to grow 25% compared to last year, driven by the COVID-19 vaccine, the economic recovery and the increase in the investment of public works, after having been an element that hit the sector since 2018.
Cemex also makes complementary strategic investments in its four important businesses to offer an important contribution to the short-term operating flow and seeks to strengthen its presence abroad; “In the cases of recently announced investments in Europe, such as in the metropolitan areas of Paris and Berlin, they are part of the strategy to strengthen vertically integrated positions near growing metropolises,” said the Mexican company in a document provided to Expansión.
The largest single investment in a Cemex gravel plant in the last decade was made in the German capital. The acquisition consists of a floating quarry dredger that has a capacity to transport 400 tons of material per hour, which represents 50 more than its predecessor, a unit that became obsolete after 27 years of operation.
In France, the cement company agreed to acquire assets in the north of the Paris metropolitan area. The assets – two aggregates quarries and a railway platform – will be acquired from the company Eqiom Granulats and will allow it to integrate and complement its European portfolio, although they have not specified details on production capacity.
Throughout this year and until 2023 there will also be reinforcements in the United States, since its implementation of divestments and strategic reinvestments will focus on this country and the “old continent”.
