By Kylie Madry
MEXICO CITY (Reuters) -Mexican cement producer Cemex posted a double-digit increase in second-quarter profit on Thursday, despite a dip in sales, as its new management rolled out a restructuring program that included thousands of layoffs.
Cemex's profit climbed 38% to $318 million, a bright spot as sales sagged 5% to $4.13 billion, and core earnings measured by EBITDA dropped 11% to $823 million. All figures were largely in line with estimates from analysts polled by LSEG.
The cement producer, one of the world's largest, saw fewer volumes in two of its top markets, Mexico and the United States.
In Mexico, record rainfall and a slowdown in public infrastructure projects under the new administration weighed on performance. In the U.S., the decline was driven by heavy rains and a subtle residential construction sector.
Volumes in the Middle East and Africa surged amid new housing and infrastructure projects. CEO Jaime Muguiro told analysts that Israel could provide an earnings boost on “pent-up demand.”
At home, Cemex has faced boycotts and calls to divest from the market since Israel launched its offense on the Gaza Strip.
M&A, DIVESTMENTS ON THE TABLE
Leadership has outlined plans to refocus on its core markets, primarily the U.S., Mexico and Europe.
More small-to-mid-size acquisitions in the U.S. are on the table, Muguiro said, pointing to the aggregates business.
“That can contribute immediately to earnings,” analysts at Scotiabank wrote, with such assets in high demand and as “prices of aggregates have been overperforming prices of cement in the U.S.”
Divestments in South and Central America are also planned by the end of next year, the chief executive said. Cemex has exited markets from Guatemala to the Dominican Republic in recent years, with Colombia also reportedly on the table.
Shares in the firm rose as much as 6.2% mid-morning before settling up around 4%.
LAY-OFFS, COST-CUTTING MEASURES
The results mark the first quarterly report under Muguiro's leadership, after previously heading Cemex's U.S. operations.
Muguiro detailed progress on Cemex's previously announced cost-saving program, saying “difficult decisions” had been taken in the quarter as headcount would come down further.
Cemex's workforce shrank 5% year-over-year to around 43,000 employees in the quarter. Further cuts could happen in Europe, Muguiro said, where labor consultations are ongoing.
Now, the cement and concrete maker expects a $200 million boost to its EBITDA this year from the cost cuts, up from a previously forecast $150 million. For the full year, Cemex expects its EBITDA to remain flat, though it does see potential for the metric to come in slightly higher.
