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Cemex S.A. (CX) Outlook Raised to Positive by S&P

March 5, 2015 3:31 PM EST

(S&P Noted: In the original article published Jan. 16, 2015, we inadvertently omitted three criteria articles in the related criteria section. A corrected version follows.)

  • In the next 12 months, CEMEX's financial performance will continue to benefit from solid growth prospects in the U.S. construction industry, and an expected recovery in public-sector spending in Mexico.
  • The company's investment strategy and financial results remain in line with our expectations for the rating. We continue to anticipate active liability management that will extend debt maturities and reduce borrowing costs.
  • We are therefore revising our outlook on CEMEX to positive from stable, and affirming our global scale and national scale corporate credit ratings at 'B+' and 'mxBBB/mxA-2', respectively. At the same time, we are assigning our '3' recovery rating to CEMEX's national scale rated senior debt.
  • The positive outlook reflects our expectation that CEMEX will channel the improvements in operating performance toward achieving stronger credit-protection metrics, deleveraging its capital structure, and protecting liquidity.

Standard & Poor's Ratings Services revised its outlook on CEMEX S.A.B. de C.V. (CEMEX) (NYSE: CX) to positive from stable. At the same time, we affirmed our 'B+' global scale and 'mxBBB' national scale ratings on CEMEX and its subsidiaries, CEMEX EspaƱa S.A., CEMEX Mexico S.A. de C.V., and CEMEX Inc. We are keeping our recovery rating at '3', which indicates that bondholders can expect a meaningful (50% to 70%) recovery in the event of a payment default.

"The outlook revision reflects our view that CEMEX has the capacity to capitalize on the positive industry momentum in its key markets, which could improve credit metrics in the next 12 months closer to an aggressive financial risk profile," said Standard & Poor's credit analyst Luis Manuel Martinez. In our view, a sustained recovery and positive economic growth prospects in the U.S. market, and expected increased public-sector spending in Mexico, amid mid-term elections in 2015, and the development of key infrastructure projects throughout Latin America will support top-line growth. Additionally, we expect CEMEX to maintain its cost discipline and raise capacity utilization, which could gradually increase operating margins and boost cash flow generation. We also expect the company to engage in active liability management to further extend its debt maturity profile and reduce its borrowing costs. The rating action incorporates a revision to our treatment of "surplus cash" (as defined in our criteria), which, in particular, will have a positive effect on the company's leverage metrics.



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