By Kylie Madry
MEXICO CITY (Reuters) -Mexican cement maker Cemex on Thursday posted a slight rise in second-quarter net profit, helped by double-digit price hikes and a strong peso.
Net profit was $272 million, up 2% from a year ago, Cemex said, with revenue up 13% at $4.57 billion. The increased revenue was dragged down by financial expenses and higher income taxes.
Cemex holds around three-fourths of its debt in U.S. dollars, which have depreciated some 13% against the Mexican peso so far this year
However, Cemex also predicted its cost of debt will increase by some $100 million, slightly above the $70 million it previously estimated for the year.
The company earned an extra $49.21 million on the exchange rate alone, compared to a hit of $29.57 million in the year-ago quarter. It also brought its total debt down 12% to $7.67 million.
Operating earnings before interest, taxes, depreciation and amortization (EBITDA), or core earnings, rose 34% to $961 million on growth in all four regions the company serves, as inflationary pressures on input costs began to cool.
CEO Fernando Gonzalez said in a statement Cemex is “getting very close” to recovering 2021 margins.
“The results were positive, especially regarding U.S and Europe margins and while we were expecting guidance to be revised upwards, it was above our expectations,” analysts at J.P. Morgan said in a note.
The company forecast an EBITDA of around $3.25 billion and a 10% rise in energy cost per ton of cement produced for 2023, both in line with previous estimates.
In the U.S, Cemex’s largest market in the quarter by sales, revenues climbed 10% year-on-year as price increases compensated for a drop in cement and ready-mix volumes on poor weather and weak residential demand.
The U.S. will see price increases in the third quarter as well, Cemex said.
Higher prices offset a drop in volumes across product categories in other markets including Europe, Middle East, Africa and Asia.
Sales and volumes grew in Mexico on the formal sector’s performance. Cement volumes edged up 1% year-over-year, “the first sign of demand recovery in two years,” Cemex said.
(Reporting by Kylie Madry, Natalia Siniawski and Valentine Hilaire; Editing by Varun H K and Bernadette Baum)
