Here's one way for a building materials company to negotiate a U.S. housing collapse and look solid in the process: Simply buy a competitor with big assets in North America, thereby sending your year-over-year comparisons through the roof.
That clearly wasn't Mexico-based Cemex's
Cemex improved its operating results in most of its widespread geographic locations. Its net sales were up slightly in Mexico and Spain, hit double-digit growth across most of its other locations, and -- drumroll please -- were up 386% year over year in Asia and Australia. But lest you assume the last-named area must be undergoing an unbelievable building boom, keep in mind the bulk of that increase is largely attributable to the newly acquired Rinker operations.
During the conference call following the company's release, Hector Medina, Cemex's EVP for planning and finance, predicted, "For the full year 2008 we expect EBITDA of about $5.6 billion ... This represents an increase of approximately $525 million over pro forma 2007 EBITDA ..."
Nevertheless, the management of Cemex expects the U.S. residential sector to continue to decline throughout this year. According to the company, the result could be a nearly 24% drop in housing-related demand for cement. The negative sentiment was echoed by wallboard giant USG
All in all, however, I can't for the life of me justify a forward 2008 P/E of just 11 for Cemex. I rarely suggest that Fools back up a truck and haul away a load of any stock, but I'll make an exception here.