When I profiled the third-largest cement producer in the world as my "Stocks for Dad" selection last June, it was selected as the least-compelling stock idea in a poll of readers.
That's actually kinda the way I like it. So when Cemex
OK, enough smirking. It leads to bad things, most importantly it leads to complacency and accepting things at face value. We should never do this with financial statements. We should never, ever do this with press releases about financial statements. We should never, ever, ever do this with press releases about financial statements from companies in countries with substantially lower levels of regulatory oversight than the United States.
But I'll tell you this much: Cemex financial statements contain more clearly presented information than most any other company that I've ever come across -- on par with clear-as-a-bell reporters such as Costco
Cemex's rise came with increasing construction in nearly every one of the 30 markets internationally that it serves, including a 16% rise in the United States, where it is the second-largest producer. Globally, only Holcim and Lafarge
Cemex has been acquisitive in the past, snapping up cement companies in Thailand, Indonesia, and Latin America. However, in the past two years the company has been quieter on the merger front. As has been its most recent tendency, Cemex used a large amount of its free cash to pay down debt, which sits at about $5 billion. The company's interest coverage (its ability to cover service costs on its debt) has continued to improve, hitting 5.7 times this quarter, up from 5.0 a year ago. The raw amount of debt is still quite high (much of it inherited from a previous management), but the trend continues to be encouraging.
Cemex management does not seem to concern itself too much with raw trends -- do not be surprised if its continued search for opportunistic acquisitions causes it to lever up its balance sheet in the short term. As long as the company continues to commit to aggressively paying down its debt when it can and keeps its coverage ratio high, this should not be a huge concern.
Cemex was also Bill Mann's selection in Stocks 2003. Bill owns shares of Cemex and Costco. Please view hisprofilefor other holdings.