Cemex, one of the world’s biggest cement producers, has confirmed that it aims to nearly double the amount raised from asset sales to more than $2bn this year and use the proceeds to pay down its hefty debt.
Lorenzo Zambrano, chairman and chief executive, told the Financial Times that the Mexico-based company would step up an existing programme of divesting $1.1bn in non-core assets to help meet total debt repayment obligations for 2009 of $5.7bn.
Much of that debt is linked to Cemex’s purchase of Rinker, the Australian building materials supplier, which it bought in 2007 for $14.2bn.
In the run-up to the company’s 2008 results, analysts have become increasingly concerned about the outlook for Cemex as the sharp downturn in the US housing market and turmoil on international financial markets take their toll.
Last week, Standard & Poor’s, the rating agency, downgraded Cemex’s credit rating to BB+, or junk status, on expectations that Cemex’s financial performance would “come under greater pressure in 2009 from the weakening growth perspectives in its main market and the rest of the world”.
S&P added that Cemex’s rating could be cut even further following a review.
Mr Zambrano accepted that 2009 would be “a challenging year – it is a fact and we can’t ignore it”. However, he also said he had “a lot of hope” for the US stimulus package, which would be beneficial for Cemex.
Mr Zambrano said he felt “very comfortable” with what the cement producer had achieved in terms of efforts to refinance its 2009 debt obligations.
In December, the company announced that it had reached a preliminary agreement with banks to refinance $3.7bn – about 60 per cent – of this year’s obligations.
Furthermore, Mr Zambrano confirmed that a plan announced last year to achieve $500m in operational savings this year was “85 per cent in place”.
“I don’t think we are particularly vulnerable,” he concluded.
Mr Zambrano would not go into detail about what assets his company planned to sell this year. However, Cemex confirmed in December that it had completed the sale of operations in the Canary Islands for the equivalent of $227m.
The company has also signed an agreement to sell assets in Austria.