Thousands of working-class families, hoping to escape urban congestion and pollution, move out of city apartments and buy comfortable, affordable new houses built in large tracts in the greener pastures of the suburbs. If it sounds a lot like the American dream, that's because it is -- that is, if by America you mean Mexico.
A recent New York Times article details the growing success of Mexico's housing program. Increasing the number of government-supported mortgage loans has been a major part of President Vicente Fox's reform agenda, and his goal of granting 750,000 such loans a year by 2006, compared with 350,000 a year in 2000, is reportedly on track. New housing developments have been springing up in Mexico as lower interest loans make ownership possible for more citizens.
That's where Cemex (NYSE: CX ) comes in. Last week, the cement and concrete giant reported that cement volumes in its main market, Mexico, are projected to grow 3% in the fourth quarter versus the same period last year, thanks to an increase in public works and housing developments. For Cemex, the higher activity is expected to translate into a 10% jump in earnings before interest, taxes, depreciation, and amortization, or EBITDA, to $560 million.
In addition to the upturn in the working-class housing, Cemex has worked hard to reach as many customers as possible. Cement and concrete aren't cutting-edge products, but that fact hasn't stopped Cemex from innovating. The company has developed an in-depth understanding of the poorer part of the Mexican market, traditionally a harder segment to penetrate. Using this knowledge, Cemex launched "Patrimonio Hoy" in 1998, a program that caters to poorer customers with a combination of tailored sales and marketing, specialized services, and reasonable financing.
Nor are Mexicans the only potential drivers for Cemex. More retirees in the U.S. are reportedly considering Mexico as a retirement destination, and new communities are rising to meet their needs. With all these factors working in the company's favor, the outlook for Cemex looks good.
For more on Cemex, check out these articles:
Fool contributor Brian Gorman is a freelance writer living in Chicago. He does not own shares of any companies mentioned here.
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