Business context and reporting period
Cemex, S.A.B. de C.V. filed this Form 20-F annual report for the fiscal year ended December 31, 2022. It is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide a clear set of Q4-only financial results. Financial statements are prepared under IFRS as issued by the IASB. Cemex produces and sells cement, ready-mix concrete, aggregates and urbanization solutions across Mexico, the United States, EMEAA and SCA&C.
Key financial metrics
Amounts are in U.S. dollars unless noted. Operating EBITDA is a non-IFRS measure defined by Cemex.
| Metric | 2022 | 2021 | Change/comment |
|---|---|---|---|
| Revenue | $15.577 billion | $14.379 billion | Up 8%; chiefly higher prices across regions |
| Gross profit / margin | $4.822 billion / 31.0% | $4.636 billion / 32.2% | Profit up 4%; margin narrowed |
| Operating earnings before other expenses, net / margin | $1.561 billion / 10.0% | $1.719 billion / 12.0% | Down 9%; higher costs pressured performance |
| Operating EBITDA / margin | $2.681 billion / 17.2% | $2.839 billion / 19.7% | Down about 6%; management reported 17.2% margin |
| Operating earnings | $1.094 billion | $1.637 billion | Down; includes higher other expenses |
| Net income attributable to controlling interest | $858 million | $753 million | Up 14%; includes $324 million from discontinued operations |
| Net income from continuing operations | $561 million | $817 million | Down 31% |
| Operating cash flow from continuing operations, before interest and taxes paid | $2.150 billion | $2.500 billion | Down 14% |
| Net cash from operating activities, after interest and taxes paid | $1.475 billion | $1.806 billion | Down 18% |
| Capital expenditures | $1.362 billion | $1.094 billion | Higher investment; $474 million of 2022 strategic capital expenditures |
| Total debt plus other financial obligations | $8.825 billion | $9.157 billion | Down $332 million; excludes $1.000 billion of subordinated notes classified as equity under IFRS |
At year-end, cash and cash equivalents were $495 million. Current liabilities exceeded current assets by $1.020 billion; Cemex reported $1.450 billion available under its committed revolving credit facility. Its credit-agreement leverage ratio was 2.84x, up 0.11x from 2021. Debt plus other financial obligations was 11% current and 89% non-current. Interest expense declined $45 million year over year; financial expense fell 39% to $401 million, including a $104 million gain on debt repurchases and other market transactions.
Material changes versus the prior comparable period
- Price increases drove revenue growth, while consolidated cement sales volumes fell 5% to 63.4 million tons and ready-mix volumes rose 2% to 50.1 million cubic meters. Aggregates sales volumes were 139.2 million tons.
- Cost of sales rose 10% to $10.755 billion; as a share of revenue it increased from 67.8% to 69.0%. Cemex cited inflation and higher energy, fuel, raw-material and freight costs. Pricing and cost mitigation offset much, but not all, of the pressure.
- Other expenses, net increased to $467 million from $82 million. They included $365 million of non-cash goodwill impairment ($273 million in the United States and $92 million in Spain) and $77 million of fixed-asset impairment. In 2021, other expenses included a $600 million gain from sale of CO2 allowances.
- Discontinued operations contributed $324 million of net income, compared with a $39 million loss in 2021. 2022 included gains on sale of $240 million for Costa Rica and El Salvador and $117 million for Neoris.
- Cemex repurchased notes with an aggregate notional amount of $1.172 billion during 2022. It also entered a €500 million, three-year sustainability-linked term loan, using proceeds to repay or refinance other debt.
Outlook, management commentary, risks and unusual items
- Outlook and capital allocation: Management emphasized EBITDA growth, free-cash-flow generation, debt reduction and selective divestments. Cemex expected 2023 capital expenditures of $1.250 billion, including $400 million of expansion and $850 million of base capital expenditures. It did not provide a clear consolidated 2023 revenue or earnings forecast in the supplied filing text. The Portland Cement Association forecast a 3.5% decline in U.S. cement demand in 2023; Cemex said it could not assess whether U.S. demand would decline.
- Balance sheet and financing: Cemex aims to maintain an investment-grade capital structure and ultimately regain an investment-grade rating. Its credit agreements require a maximum leverage ratio of 3.75x and minimum interest coverage ratio of 2.75x. Management said free cash flow would be used mainly for debt reduction and bolt-on investments. Debt refinancing, covenant compliance and access to financing remain material risks.
- Climate targets: Cemex reported a 29.9% reduction in net CO2 emissions per ton of cementitious product versus its 1990 baseline. Its 2030 targets include a 47% reduction in cement emissions, more than 55% alternative fuels, a 68% clinker factor and 65% clean electricity; its ambition is net-zero CO2 concrete by 2050. About 42% of debt was linked to sustainability KPIs at the report date. Failure to meet targets could increase financing costs and harm reputation.
- Operational priorities: Urbanization Solutions Operating EBITDA grew 21% year over year. Cemex estimated its growth strategy contributed $100 million of incremental Operating EBITDA in 2022. Working Smarter service-provider contracts totaling $500 million over five to seven years support a stated goal of $100 million in annual savings once implementation is complete.
- Projects and contingencies: The Maceo cement plant in Colombia was reported 90% complete, but road construction and permits remained unresolved; management could not determine when access-road work would be completed. The Philippines expansion line was expected to be completed by March 2024, with operations potentially beginning in April 2024, following termination of the original contractor and replacement contracting.
- Key risks: High inflation, energy costs and interest rates; construction-market cyclicality and possible recession; foreign-exchange exposure (77% of debt plus other financial obligations was dollar-denominated and 13% euro-denominated); Russia-Ukraine war impacts; climate regulation and carbon costs; competition; cyber and supply-chain disruption; weather and natural disasters; and environmental, tax and legal matters.
- Legal and tax matters: Cemex disclosed ongoing SEC and DOJ investigations relating mainly to Colombia and the Maceo project, and Colombian proceedings involving former employees. Tax disputes in Spain and Colombia could be material if resolved adversely. The company said it considered a final adverse outcome not probable in several matters, while noting uncertainty and, for some cases, that potential losses could not be estimated clearly.
- Audit and controls: KPMG issued unqualified opinions on the IFRS consolidated financial statements and internal control over financial reporting. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022.
Most important facts an investor should verify
- Reconcile the $858 million controlling-interest net income with the $561 million from continuing operations and the $324 million from discontinued operations; assess how much of reported profit depends on divestiture gains.
- Review the IFRS-to-non-IFRS reconciliation and calculation of Operating EBITDA, including the effects of impairments, the prior-year emissions-allowance gain and debt-repurchase gains.
- Confirm liquidity and refinancing capacity against the $987 million of 2023 debt maturities, the $1.450 billion committed revolver availability and the negative working-capital position.
- Track leverage, interest costs and covenant headroom, and confirm how the €500 million loan and 2023 subordinated-note issuance affect debt, liquidity and reported equity.
- Assess whether pricing can continue to offset inflation and whether volumes, particularly in the United States and Europe, support margins and cash generation.
- Monitor the Maceo road and permit status, the Philippines plant-expansion schedule, and developments in the Colombia investigations and Spain and Colombia tax disputes.
- Verify progress toward climate targets and the potential impact of emissions regulations and sustainability-linked financing adjustments on costs and capital expenditure.