Mexican cement company Cemex (NYSE:CX) offered up another solid performance for the third quarter. Though the company didn't officially report earnings, it did provide a fairly detailed preannouncement that seemed more or less in line with mean expectations.
Sales for the period rose about 115% to $4.4 billion, with the vast majority of the growth coming from the inclusion of acquisition of concrete maker RMC Group. Sequentially, sales appear to have been more or less flat. Management sees earnings before interest, taxes, depreciation, and amortization (EBITDA) growing 50% for the quarter, with operating income coming in 52% higher than during the year-ago period.
It also appears that the company is doing well in relation to its cash flow and balance sheet targets. Company executives are now looking for free cash of about $1.9 billion for the full year. Looking at the balance sheet, they stated that they have achieved their targeted net debt-to-EBITDA ratio a bit sooner than anticipated.
The company has also announced a large, albeit non-traditional, share offering. Under the terms of the deal, up to 30.99 million American Depository Shares will be offered. The number of shares outstanding, though, will not increase.
How is that possible? Well, the company had previously entered into forward agreements with several banks as part of its stock option plans. Under these agreements, the banks agreed to sell Cemex a certain number of its own shares at specified times in the future. With this transaction, though, all of the forward agreements will go away, assuming they sell all the shares they intend to sell. As a result, the company will reduce its derivatives exposure and the capital structure will be much simpler.
There should still be pretty good days ahead for cement makers. While cement is an economically sensitive product (better economy equals more building equals more cement demand), the demands of the Katrina rebuilding effort and new budgets for roads and highways could offer a little boost. And of course, there's the possibility of an upswing in commercial building projects, though that is a pretty economically susceptible event.
Cemex doesn't have the industry all to itself -- competitors such as CRH (NASDAQ:CRHCY), Hanson (NYSE:HAN), Florida Rock (NYSE:FRK), Lafarge North America (NYSE:LAF), and numerous others are also in the game -- but it's the largest player in an industry where size can certainly be a meaningful asset.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
