CEMEX, S.A.B. de C.V. — FY 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide clear Q4-only financial results. Financial statements are prepared under IFRS as issued by the IASB. Amounts below are U.S. dollars unless noted.
Business context and financial performance
CEMEX produces and sells cement, ready-mix concrete, aggregates and urbanization solutions across Mexico, the United States, EMEAA and SCA&C. Its 2021 strategy, “Operation Resilience,” emphasized growth investment, portfolio optimization, cost control, debt reduction and sustainability.
| Metric | FY 2021 | FY 2020 | Change / context |
|---|---|---|---|
| Revenue | $14.548 billion | $12.814 billion | Up 14%; higher volumes and local-currency pricing were the main drivers. |
| Operating EBITDA (non-IFRS) | $2.861 billion | $2.421 billion | Up 18%; margin increased to 19.7% from 18.9%. |
| Operating earnings before other expenses, net | $1.734 billion | $1.311 billion | Up 32%; margin rose to 11.9% from 10.2%. |
| Operating earnings (loss) | $1.618 billion | $(456) million | Improved from a loss, reflecting substantially lower other expenses. |
| Consolidated net income (loss) | $778 million | $(1.446) billion | Controlling-interest net income was $753 million; 2020 included substantial impairment charges. |
| Cash flows from operating activities | $2.517 billion before interest and taxes paid; $1.855 billion net cash provided | $2.368 billion before interest and taxes paid; $1.613 billion net cash provided | Net cash provided increased. |
| Capital expenditures | $1.094 billion | $795 million | Increased with higher investment, including $380 million of strategic capital expenditures. |
| Cash and cash equivalents | $613 million | $950 million | Cash declined during the year. |
| Total debt plus other financial obligations | $9.157 billion | $11.185 billion | Down $2.028 billion; excludes $1 billion of subordinated notes classified as equity under IFRS. |
Cost of sales was 67.9% of revenue versus 67.8% in 2020; gross margin was 32.1% versus 32.2%. Operating expenses declined to 20.2% of revenue from 21.9%, supporting operating margin improvement before other expenses.
Material changes and financing
- Consolidated cement and ready-mix concrete sales volumes each rose 6% year over year. CEMEX reported higher local-currency selling prices across its regions, while input, fuel and freight costs also increased.
- The company repaid or refinanced $7.6 billion of debt and reduced net debt, as defined under the 2021 Credit Agreement, by $2.3 billion using free cash flow and asset-sale proceeds. Its credit-agreement leverage ratio fell by 1.4x to 2.73x. Interest expense declined to $662 million from $777 million.
- CEMEX refinanced its 2017 Facilities Agreement with a $3.25 billion sustainability-linked credit agreement: a $1.5 billion term loan and a $1.75 billion committed revolving facility, both with November 2026 final maturity. The agreement has a maximum leverage covenant of 3.75x and a minimum interest coverage covenant of 2.75x. The revolving facility was undrawn at year-end.
- At year-end, 10% of total debt plus other financial obligations was current and 90% non-current. The filing reports that current liabilities exceeded current assets by $1.155 billion; management says it operates with negative working capital. The company also had $426 million of other uncommitted credit lines, subject to lender availability.
- On June 8, 2021, CEMEX issued $1 billion of 5.125% subordinated notes with no fixed maturity and deferrable interest. IFRS classifies them as equity; they are not included in the reported $9.157 billion debt-and-other-obligations figure.
Unusual items, outlook, risks and contingencies
- Other expenses, net, fell to $116 million from $1.767 billion. FY 2021 included a $600 million gain from selling 12.3 million EU emissions allowances, partially offset by $440 million of non-cash goodwill impairment ($317 million Spain, $96 million UAE and $27 million IT), $53 million of intangible-asset impairment and $43 million of fixed-asset impairment. These items affected reported earnings but, according to the company, the impairment charges did not affect liquidity, Operating EBITDA or cash taxes payable.
- FY 2020 included $1.020 billion of goodwill impairment, $194 million of other intangible-asset impairment and $306 million of fixed-asset impairment. The swing in impairment charges and the 2021 emissions-allowance sale are important when assessing the comparability of reported profit.
- CEMEX’s Costa Rica and El Salvador operations were classified as discontinued operations and held for sale. A $335 million sale was agreed in December 2021, subject to closing conditions and regulatory approvals; management expected completion in the first half of 2022. The white-cement business sale in Spain generated a $67 million loss in discontinued operations.
- Management targets an Operating EBITDA margin of at least 20% by 2023 and reported a 2021 margin of 19.7%. The company also aims to maintain an investment-grade capital structure and ultimately regain an investment-grade rating. Its 2030 climate targets include reducing cement CO2 emissions by more than 40% against the 1990 baseline; its ambition is net-zero CO2 concrete globally by 2050.
- Management estimated 2022 capital expenditures of $1.3 billion, including $700 million for expansion and $600 million for base expenditures. These are estimates, not a revenue or earnings forecast, and the filing says they may change.
- Working Smarter service-provider contracts signed in early 2022 total $500 million over five to seven years. CEMEX estimates the initiative, once implemented, should contribute to a $100 million annual savings goal.
- Key risks include inflation and high energy, fuel and freight costs; supply-chain disruption; construction-market cyclicality; currency exposure; COVID-19 and geopolitical uncertainty, including the Russia-Ukraine war; environmental regulation and carbon costs; cyber risk; and debt refinancing and covenant compliance. CEMEX also disclosed investigations and litigation, including SEC and DOJ investigations related mainly to Colombia, Colombian and Spanish tax disputes, antitrust matters, and the delayed Maceo plant project. The filing describes several potential exposures as not probable or says outcomes cannot be assessed with certainty; some proceedings have no clear estimated loss.
- The Solid Cement expansion in the Philippines was delayed after termination of the original construction contract. Replacement contractors were engaged; completion was expected no earlier than March 2024, with operations potentially beginning in April 2024.
Most important facts for investors to verify
- Reconcile the reported debt reduction and 2.73x leverage ratio to the credit agreement’s definitions; distinguish debt and other financial obligations from the $1 billion subordinated notes classified as equity.
- Assess whether pricing and volume growth can continue to offset inflation in fuel, energy, freight and other inputs, and whether the targeted 20% EBITDA margin remains achievable.
- Review the assumptions behind goodwill valuations, particularly the U.S. and Spain sensitivity analyses, and the likelihood of further impairment.
- Confirm the status and proceeds of the Costa Rica and El Salvador sale, and the permitting, road-access and commissioning timetable for the Maceo and Philippines projects.
- Track the outcomes and potential financial effects of material tax, antitrust, corruption-related and other legal proceedings; the filing does not provide a clear value for some potential exposures.
- Confirm whether the estimated $1.3 billion of 2022 capital expenditures and the $100 million annual Working Smarter savings goal are delivered as planned.