The world was not a happy place Friday for Mexico-based CEMEX
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
Elsewhere, CEMEX's largest U.S. competitors include Texas Industries
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.
For related Foolishness:
Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He does, however, welcome your questions or comments. CEMEX is a Motley Fool Global Gains recommendation and a Motley Fool Stock Advisor recommendation. Vulcan Materials is a Motley Fool Inside Value selection. The Fool owns shares of CEMEX. Try any of our Foolish newsletters today, free for 30 days. The Fool has a concrete disclosure policy.