2Q14 Quarterly Results: Cemex Latam Holdings - Underperform
EBITDA declined 14.2% due to lower margins, despite a slight increase in cement production
Price: COP 18,580; Target Price: COP 15,287
July 18, 2014 (www.investorideas.com newswire) CemexLatam Holdings posted revenues of USD441.2 mn (+2.5% y/y) due to higher cement shipments in Colombia and Costa Rica, in line with our forecasts. EBITDA fell to USD142.1 mn (14.2 y/y) due to higher than expected COGS and SG&A led by an increase in maintenance costs.
- CLH's activities were concentrated in Colombia, where revenues and EBITDA represented 58.8% (+346bps y/y) and 62.1% (+8bps y/y) of consolidated revenues and EBITDA in 2Q14, respectively.
- Consolidated cement shipments grew during 2Q14 to 1,964k MT (+2%y/y) due to higher sales in Colombia (+9% y/y), Costa Rica (+1% y/y), despite the decline in Panama (-20% y/y) and the rest of units (-1% y/y).
- Additionally, consolidated concrete sales rose to 851k m3 (+3% y/y) during the quarter due to higher sales in Colombia (+13% y/y). In contrast, sales in Panama and Costa Rica contracted in 22% y/y and 21% y/y, respectively.
- Financial expenses fell to USD 23.2 mn as fore casted, since the company has been amortizing its debt with Cemex according to schedule. We expect that this debt will be paid off by 2018.
- Finally, consolidated net income fell to USD 66.7 mn (-42.1% y/y) due to the combined effect of: i) higher income tax expense, ii) lower net financial expenses, and iii) higher COGS and SG&A.
- We maintain our Uperf recommendation on shares, as price seems to exceed the company's value. We continue to believe that capacity expansions will be limited until 2018, when debt with Cemex S.A.B. is paid off. We forecast sales to grow by 2.1% in 2014.
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