Cemex planning to put $600 million toward debt reduction in 2010

By Jennifer Lanning Drey

Portland, Ore., Jan. 27 - Cemex SAB de CV plans to use about $600 million of its free cash flow to reduce debt in 2010, Rodrigo Treviņo, chief financial officer of Cemex, said Wednesday during the company's fourth-quarter and year-end conference call.

The planned debt reduction aims to keep Cemex in compliance with its total-funded-debt-to-EBITDA ratio covenant of 6.75 times at the end of the year, he said.

Based on the expected debt reduction and EBITDA generation for the year, Cemex believes that it will be able to maintain covenant compliance, he said.

Treviņo added, "In order to improve the margin for compliance, we will be implementing a number of initiatives aimed at further strengthening our capital structure.

"Our priority in the short term continues to be to pay down debt."

Cemex will also look to improve its working capital management and continue to implement global cost-reduction and right-sizing initiatives in order to meet the debt-reduction goal, he said.

The company expects to generate about $1.0 billion of free cash flow after maintenance expenses in 2010, nearly flat with the $1.2 billion generated in 2009 after adjusting for the sale of its Australia assets for $1.7 billion in 2009.

Cemex expects higher interest expense and maintenance capital in 2010, partially mitigated by lower investments in working capital.

The $1.2 billion of free cash flow after maintenance capital expenditures generated in 2009 was down from $2.6 billion in the year before.

Full-year 2009 EBITDA of $2.7 billion was down 35% from the prior year's $4.1 billion of EBITDA.

Cemex expects EBITDA of about $2.9 billion in 2010.

The company had net debt of $15.1 billion at the end of the fourth quarter, reflecting a $2.0 billion decrease during the quarter.

During 2009, Cemex refinanced $15 billion of debt, issued nearly $2.3 billion in fixed-income notes and raised $2.2 billion in equity and equity-like capital.

Cemex is a Monterrey, Mexico-based building materials company.

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