MEXICO: Cemex to post fourth quarter loss but operating growth returns

For the first time in two years, Mexican cement maker Cemex is expected to post operating growth in the fourth quarter, but weak sales and a heavy debt mean it will still report a net loss, analysts say.

Seven analysts polled by Reuters expect Cemex, the world's No. 3 cement maker, to post a net loss of $132 million in the October to December period of last year.

However, that is a smaller amount than the net loss of $209 million in the same period of 2009.

In a sign that Cemex, one of Latin America's biggest companies, is pulling out of the worst crisis in its century-long history, earnings before interest, taxes, depreciation and amortization, or EBITDA, likely grew nearly 17 percent year-on-year to $553 million, the first growth since the second quarter of 2008.

"The fourth quarter should have marked a turning point in operational performance and finally put Cemex back on a growth path," Credit Suisse analysts' Vanessa Quiroga and Alan Solis said in a report.

Cemex, once an emerging market darling famed for buying up rivals in developed economies, has been struggling through a deep slump ever since it bought Australia's Rinker with short-term bank debt just before the U.S. housing crisis.

But an improving U.S. economy and both a stronger Mexican peso and euro appear to be helping Cemex, which reports in U.S. dollars. Drastic cuts in operating costs also seem to be helping make the company more profitable and drive up EBITDA.

Investors are still cautious because of weak sales in Europe, particularly in Spain, one of Cemex's top markets, while the company is juggling its debt maturities to avoid a payments bottleneck in 2012 and faces higher financial costs.

Analysts say Cemex ended 2010 with a net debt of $15 billion, a similar level to that of 2009, and many investors say it is still not clear how long it will take the company to reach a more reasonable level.

Cemex's debt plus its perpetual bonds is currently more than seven times its annual EBITDA, when a more reasonable level that could allow it to regain its investment grade rating would be three times EBITDA, analysts say.