The world was not a happy place Friday for Mexico-based CEMEX (NYSE:CX), the big, global manufacturer of cement and related products. When it became apparent that its regular quarterly outlook, which had been expected that day, wouldn't be published, its New York-traded shares slid by 13% to $5.04.
CEMEX has been looking for new financing, only to discover that an issue of bonds would cost it sky-high interest rates in today's market. The company then moved to talking with its banks, but Friday's lack of expected guidance may mean that those conversations are going more slowly -- or more expensively -- than anticipated.
CEMEX is lugging around nearly $18 billion in debt -- about five times its earnings before interest, taxes, depreciation, and amortization (EBITDA). Much of that amount results from the $15 billion-plus it spent two years ago on the acquisition of Australia's Rinker Materials.
Despite Rinker being the largest cement producer Down Under, a slug of its revenues are generated in the United States. Before being acquired by CEMEX, Rinker chalked up 56% of its sales from Florida and 16% more from Arizona. CEMEX now dwarfs other producers in Florida, such as Vulcan (NYSE:VMC), but the Mexican company's supremacy in the depressed Sunshine State hardly puts it in the catbird seat in the industry these days.
Elsewhere, CEMEX's largest U.S. competitors include Texas Industries (NYSE:TXI), which concentrates in Texas and California, and Eagle Materials (NYSE:EXP), with four plants stretching from Nevada to Illinois. Both Texas Industries and Eagle Materials are also suffering from the current slowdown, with share-price declines of approximately 80% and 40% respectively from their 52-week highs.
All in all, CEMEX, whose shares have dropped by 85% in a year, will need to solve its debt dilemma quickly -- it has $4.1 billion in maturities coming due this year. And since it's surpassed in size globally only by LaFarge and Holcim and operates in 50 countries, its economic challenges are many and varied.
My inclination is to temporarily avoid CEMEX shares until the company issues some guidance. After that, if your patience is giant-sized, a small position for an extended investment time horizon would almost certainly be justified.
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