July 22, 2011 / 11:46 AM / 6 years ago

UPDATE 4-Cemex misses estimates; U.S. demand still weak

4 Min Read

* Q2 net loss narrows but misses analysts' expectations

* U.S. operations remain a concern

* Says will meet debt obligations through end 2013

* Stock drops in Mexico, New York (Adds analyst and officer comments, stock fall)

By Gabriela Lopez and Cyntia Barrera Diaz

MONTERREY/MEXICO CITY, Mexico, July 22 (Reuters) - Mexican cement maker Cemex posted a smaller second-quarter loss but missed analysts' estimates, hurt by weak U.S. demand and restructuring and severance expenses.

Cemex (CX.N) (CMXCPO.MX) on Friday reported a net loss of $294 million for the April-June period, much worse than analysts' expectations for a loss of $64 million, according to a Reuters poll. [ID:nN1E76I0KX]

The company lost $306 million in the 2010 second quarter.

Its shares were down 4.6 percent to 8.69 pesos in Mexico, while its New York-traded shares dropped 5.1 percent to $7.44.

Second-quarter revenue rose 9 percent to $4.1 billion, in line with forecasts, driven by higher volumes in Northern Europe, Germany in particular.

But Cemex's sales in the United States dropped 9 percent as domestic gray, ready-mix and aggregates volumes decreased.

"Even in a seasonally strong quarter, the weakness of the U.S. construction sector has not allowed (Cemex) to generate a level of operation to reach at least break-even," said Banorte analyst Carlos Hermosillo.

Flooding in the U.S. Midwest, the restructuring of Cemex's Arizona business and heavy rains in California in June dented volumes in the quarter.

Weak employment in the United States, tight credit and high inventories hurt the residential sector.

"Uncertainty surrounding the Federal Highway Program continues to affect the performance from the infrastructure sector," Cemex added.

The company's second-quarter earnings before interest, tax, depreciation and amortization, or EBITDA, totaled $615 million, down 7 percent.

Bulky Expenses

Monterrey-based Cemex spent $202 million in the quarter related to its restructuring and severance payments. It cut its workforce worldwide by 6 percent as part of its reorganization.

Cemex said it ended June with a negative free cash flow of $16 million. But it assured analysts during a conference call on Friday that it did not see a significant change this year in its cost of debt.

Last year it convinced bankers to relax some of the covenants of the debt refinancing deal that saved it from defaulting on $15 billion of debt in August 2009.

Fernando Gonzalez, executive vice president of finance and administration, said on a conference call with reporters that Cemex has all the funds it needs to meet its debt obligations through December 2013.

"We are in a comfortable position," he said, adding that the company did not expect to tap debt markets at least for the rest of the year.

With operations in more than 50 countries, Cemex's ability to generate cash is key. The company has had to refinance its debt on several occasions to prevent interest payments from climbing further.

Cemex, once famed for buying rivals in developed countries, ran into deep trouble in 2007 when it bought Sydney-based Rinker just before the U.S. housing market collapsed and ensuing global recession erupted. (Reporting by Gabriela Lopez and Cyntia Barrera Diaz; Editing by Derek Caney and John Wallace)

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