Form 6-K CEMEX SAB DE CV For: Mar 11

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March 11, 2019 5:29 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2019

Commission File Number: 001-14946

CEMEX, S.A.B. de C.V.

(Translation of Registrant’s name into English)

Avenida Ricardo Margáin Zozaya #325, Colonia Valle del Campestre

San Pedro Garza García, Nuevo León, C.P. 66265, México

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

CONTENTS

We anticipate disclosing to prospective investors certain information that has not been previously publicly reported. This report is neither an offer to purchase nor a solicitation of an offer to sell any securities. We have elected to provide the information in this report for informational purposes.

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “assume,” “might,” “should,” “could,” “continue,” “would,” “can,” “consider,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “foresee,” “predict,” “potential,” “target,” “strategy,” “intend” or other similar words. These forward-looking statements reflect our current expectations and projections about future events based on our knowledge of present facts and circumstances and assumptions about future events. These statements necessarily involve risks and uncertainties that could cause actual results to differ materially from our expectations. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could have an impact on us or our subsidiaries, include:

●

the cyclical activity of the construction sector;

●

our exposure to other sectors that impact our business, such as but not limited to the energy sector;

●

competition;

●

availability of raw materials and related fluctuating prices;

●

general political, social, economic and business conditions in the markets in which we operate or that affect our operations and any significant economic, political or social developments in those markets, as well as any inherent risks to international operations;

●

the regulatory environment, including environmental, tax, antitrust, and acquisition-related rules and regulations;

●

our ability to satisfy our obligations under our material debt agreements, the indentures that govern our senior secured notes and our other debt instruments;

●

the availability of short-term credit lines, assisting in connection with market cycles;

●

the impact of our below investment grade debt rating on our cost of capital;

●

loss of reputation of our brands;

●

our ability to consummate asset sales, fully integrate newly acquired businesses, achieve cost-savings from our cost-reduction initiatives and implement our global pricing initiatives for our products;

●

the increasing reliance on information technology infrastructure for our sales invoicing, procurement, financial statements and other processes that can adversely affect our sales and operations in the event that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks;

●

changes in the economy that affect demand for consumer goods, consequently affecting demand for our products;

●

weather conditions, including disasters such as earthquakes and floods;

●

trade barriers, including tariffs or import taxes and changes in existing trade policies or changes to, or withdrawals from, free trade agreements, including the United States-Mexico-Canada Agreement (USMCA), if it comes into effect, and the North American Free Trade Agreement (NAFTA), both of which Mexico is a party to;

●

terrorist and organized criminal activities as well as geopolitical events;

●

declarations of insolvency or bankruptcy, or becoming subject to similar proceedings;

●

natural disasters and other unforeseen events; and

●

other risks and uncertainties described under “Item 3—Key Information—Risk Factors” of our 2017 annual report and under “Risk Factors” in this report.

Readers are urged to read this report and carefully consider the risks, uncertainties and other factors that affect our business. The information contained in this report is subject to change without notice, and we are not obligated to publicly update or revise forward-looking statements after the date hereof or to reflect the occurrence of anticipated or unanticipated events or circumstances. Readers should review future reports filed by us with the U.S. Securities and Exchange Commission.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, CEMEX, S.A.B. de C.V. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CEMEX, S.A.B. de C.V.
		(Registrant)

Date: March 11, 2019	By:	/s/ Rafael Garza Lozano
		Name: Rafael Garza Lozano
		Title: Chief Comptroller

EXHIBIT INDEX


EXHIBIT NO.		DESCRIPTION

1.		Certain information with respect to CEMEX, S.A.B. de C.V. (NYSE: CX) and its direct and indirect subsidiaries.

Exhibit 1

The following summarizes certain information, including financial information, that we may disclose to prospective investors. The disclosure set forth below updates the information contained in our annual report on Form 20-F for the year ended December 31, 2017 (the “2017 Annual Report”), filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 30, 2018, our report on Form 6-K, filed with the SEC on February 28, 2019, which includes our 2018 audited consolidated financial statements (the “February 28 6-K”) and any other documents that we have filed or furnished with the SEC, and should be read in conjunction therewith. Except as the context otherwise may require, references in this report to “CEMEX,” “we,” “us” or “our” refer to CEMEX, S.A.B. de C.V. and its consolidated entities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies” in this report and note 2 to our 2018 audited consolidated financial statements included in the February 28 6-K for a description of our significant accounting policies including our principles of consolidation. References in this report to “U.S.$” and “Dollars” are to U.S. Dollars, references to “€” are to Euros, references to “£” and “Pounds” are to British Pounds, and, unless otherwise indicated, references to “Ps,” “Mexican Pesos” and “Pesos” are to Mexican Pesos. References in this report to “CPOs” are to CEMEX, S.A.B. de C.V.’s Certificados de Participación Ordinarios. References in this report to the “February 28 6-K” refer only to Exhibit 99.1 (CEMEX, S.A.B. de C.V. and subsidiaries—Consolidated Financial Statements) thereto.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

●

the cyclical activity of the construction sector;

●

our exposure to other sectors that impact our business, such as, but not limited, to the energy sector;

●

competition;

●

availability of raw materials and related fluctuating prices;

●

the regulatory environment, including environmental, tax, antitrust and acquisition-related rules and regulations;

●

our ability to satisfy our obligations under our material debt agreements, the indentures that govern our Senior Secured Notes (as defined below) and our other debt instruments;

●

the availability of short-term credit lines, existing in connection with market prices;

●

the impact of our below investment grade debt rating on our cost of capital;

●

loss of reputation of our brands;

●

changes in the economy that affect demand for consumer goods, consequently affecting demand for our products;

●

weather conditions, including disasters such as earthquakes and floods;

●

trade barriers, including tariffs or import taxes and changes in existing trade policies or changes to, or withdrawals from, free trade agreements, including the United States-Mexico-Canada Agreement (“USMCA”), if it comes into effect, and the North American Free Trade Agreement (“NAFTA”), both of which Mexico is a party to;

●

terrorist and organized criminal activities as well as geopolitical events;

●

declarations of insolvency or bankruptcy, or becoming subject to similar proceedings;

●

natural disasters and other unforeseen events; and

●

other risks and uncertainties described under “Item 3—Key Information—Risk Factors” of our 2017 Annual Report and under “Risk Factors” below.

CERTAIN TECHNICAL TERMS

When used herein, the terms set forth below mean the following:

●

Aggregates are sand and gravel, which are mined from quarries. They give ready-mix concrete its necessary volume and add to its overall strength. Under normal circumstances, one cubic meter of fresh concrete contains two metric tons of gravel and sand.

●

Clinker is an intermediate cement product made by sintering limestone, clay, and iron oxide in a kiln at around 1,450 degrees Celsius. One metric ton of clinker is used to make approximately 1.1 metric tons of gray portland cement.

●

Gray portland cement, used for construction purposes, is a hydraulic binding agent with a composition by weight of at least approximately 95% clinker and up to 5% of a minor component (usually calcium sulfate) which, when mixed with sand, stone or other aggregates and water, produces either concrete or mortar.

●

Petroleum coke (pet coke) is a by-product of the oil refining coking process.

●

Ready-mix concrete is a mixture of cement, aggregates, and water.

●

Tons means metric tons. One metric ton equals 1.102 short tons.

●

White cement is a specialty cement used primarily for decorative purposes.

SUMMARY

This summary highlights information contained elsewhere in this report. Unless the context otherwise requires, references in this report to our sales and assets, including percentages, for a country or region are calculated before eliminations resulting from consolidation, and thus include intercompany balances between countries and regions. These intercompany balances are eliminated when calculated on a consolidated basis.

We also refer in various places within this report to non-International Financial Reporting Standards (“IFRS”) measures, including “Operating EBITDA.” “Operating EBITDA” equals operating earnings before other expenses, net, plus amortization and depreciation expenses, as more fully explained under “Selected Consolidated Financial Information” in this report. The presentation of these non-IFRS measures is not meant to be considered in isolation or as a substitute for operating earnings or other profitability metrics in our 2018 audited consolidated financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”).

We have approximated certain numbers in this report to their closest round numbers or a given number of decimal places. Due to rounding, figures shown as totals in tables may not be arithmetic aggregations of the figures preceding them.

CEMEX

CEMEX is one of the largest cement companies in the world, based on annual installed cement production capacity as of December 31, 2018, of approximately 92.6 million tons and 2018 cement sales volumes of 69.4 million tons. After the merger of Lafarge, S.A. (“Lafarge”) with Holcim Ltd. (“Holcim”) during 2015, which resulted in the company LafargeHolcim Ltd. (“LafargeHolcim”), we estimate we are the next largest ready-mix concrete company in the world with annual sales volumes of approximately 53.3 million cubic meters and one of the largest aggregates companies in the world with annual sales volumes of approximately 149.8 million tons, in each case, based on our annual sales volumes in 2018. We are also one of the world’s largest traders of cement and clinker, having traded approximately 10 million tons of cement and clinker in 2018. This information does not include discontinued operations. For information on our discontinued operations, see note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K. CEMEX, S.A.B. de C.V. is an operating and holding company engaged, directly or indirectly, through its subsidiaries, primarily in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates, clinker and other construction materials throughout the world. We provide reliable construction-related services to customers and communities and maintains business relationships, in more than 50 countries throughout the world.

We operate globally, with operations in Mexico, the United States, Europe, South America, Central America, the Caribbean, Asia, the Middle East and Africa. We had total assets of Ps552,628 million (U.S.$28,124 million) as of December 31, 2018, and an equity market capitalization of approximately Ps135,298 million (U.S.$6,942 million) as of March 8, 2019.

As of December 31, 2018, our cement production facilities were located in Mexico, the United States, the United Kingdom, Germany, Spain, Poland, Latvia, the Czech Republic, Croatia, Colombia, Panama, Costa Rica, the Dominican Republic, Puerto Rico, Nicaragua, Trinidad and Tobago, Jamaica, Barbados, Egypt, and the Philippines. As of December 31, 2018, our assets (after eliminations), cement plants and installed capacity, on an unconsolidated basis by region, were as set forth below. Installed capacity, which refers to theoretical annual production capacity, represents gray portland cement and white cement capacity and includes installed capacity of cement plants that have been temporarily closed.


	As of December 31, 2018
	Assets After Eliminations (in Billions of Mexican Pesos)		Number of Cement Plants		Installed Cement Production Capacity (Millions of Tons Per Annum)
Mexico⁽¹⁾	Ps	69		15		29.5
United States⁽²⁾		269		11		15.4
Europe
United Kingdom		32		2		2.4
France		17		—		—
Germany		8		1		2.4
Spain		25		7		10.4
Poland		6		2		3.0
Czech Republic		4		1		1.0
Rest of Europe⁽³⁾		11		4		4.7
South, Central America and the Caribbean
Colombia		25		2		4.0
Panama		7		1		2.1
Costa Rica		2		1		0.9
Caribbean TCL⁽⁴⁾		11		3		2.5
Dominican Republic		4		1		2.6
Rest of South, Central America and the Caribbean⁽⁵⁾		7		2		1.8
Asia, Middle East and Africa
Philippines		12		2		4.5
Egypt		5		1		5.4
Israel		10		—		—
Rest of Asia, Middle East and Africa(6)		4		—		—
Corporate and Other Operations		23		—		—

Continuing Operations		551		—		—
Assets held for sale		2		—		—

Total	Ps	553		56		92.6

“—” = Not Applicable

The above table includes our proportional interest in the installed capacity of companies in which we hold a non-controlling interest and reflects our organizational structure as of December 31, 2018.

(1)

“Number of cement plants” and “installed cement production capacity” includes two cement plants that were temporarily inactive with an aggregate annual installed capacity of 2.8 million tons of cement. “Installed cement production capacity” includes 0.5 million tons of cement representing our proportional interests through associates in three other cement plants.

(2)

“Number of cement plants” and “installed cement production capacity” includes two cement plants that were temporarily inactive with an aggregate annual installed capacity of 2.1 million tons of cement. “Installed cement production capacity” includes 0.8 million tons of cement representing our proportional interests through associates in seven other cement plants.

(3)	“Rest of Europe” refers mainly to our operations in Croatia, Latvia, Scandinavia and Finland. “Installed cement production capacity” includes 0.7 million tons of cement representing our proportional interest in a Lithuanian cement producer that operated one other cement plant.

(4)	“Caribbean TCL” refers to Trinidad Cement Limited’s (“TCL”) operations mainly in Trinidad and Tobago, Jamaica, Guyana and Barbados.

(5)	“Rest of South, Central America and the Caribbean” refers mainly to our operations in Puerto Rico, Nicaragua, Jamaica, the Caribbean, Guatemala and El Salvador, excluding the acquired operations of Caribbean TCL.

(6)	“Rest of Asia, Middle East and Africa” includes our operations in the United Arab Emirates (“UAE”).

Geographic Breakdown of Revenues for the Year Ended December 31, 2018

The following chart indicates the geographic breakdown of our revenues, before eliminations resulting from consolidation, for the year ended December 31, 2018:

LOGO

Breakdown of Revenues by Product for the Year Ended December 31, 2018

The following chart indicates the breakdown of our revenues by product, after eliminations resulting from consolidation, for the year ended December 31, 2018:

LOGO

Ratio of Operating EBITDA to Interest Expense

For the Year Ended December 31,

2016

2017

2018

Ratio of Operating EBITDA to interest expense⁽¹⁾

2.4

2.5

3.9

(1)

Operating EBITDA equals operating earnings before other expenses, net, plus amortization and depreciation expenses. Operating EBITDA is calculated and presented because we believe that it is widely accepted as a financial indicator of our ability to internally fund capital expenditures and service or incur debt, and the consolidated ratio of Operating EBITDA to interest expense is calculated and presented because it is used to measure our performance under certain of our financing agreements. Operating EBITDA and such ratio are non-IFRS measures and should not be considered as indicators of our financial performance as alternatives to cash flow, as measures of liquidity or as being comparable to other similarly titled measures of other companies. Under IFRS, while there are line items that are customarily included in income statements prepared pursuant to IFRS, such as revenues, operating costs and expenses and financial revenues and expenses, among others, the inclusion of certain subtotals, such as operating earnings before other expenses, net, and the display of such income statement varies significantly by industry and company according to specific needs. Our Operating EBITDA may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation. Operating EBITDA is reconciled below to operating earnings before other expenses, net, as reported in the income statements, and to net cash flows provided by operating activities before financial expense, coupons on Perpetual Debentures (as defined below) and income taxes, as reported in the statement of cash flows. Financial expense under IFRS does not include coupon payments of the Perpetual Debentures issued by consolidated entities of Ps507 million in 2016, Ps482 million in 2017 and Ps553 million in 2018, as described in note 20.4 to our audited consolidated financial statements included in the February 28 6-K.


	For the Year Ended December 31,
	2016			2017			2018
	(in millions of Mexican Pesos)
Reconciliation of Operating EBITDA to net cash flows provided by operations activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes
Operating EBITDA	Ps	51,605		Ps	48,600		Ps	49,266
Less:
Depreciation and amortization expense		15,987			15,988			16,070

Operating earnings before other expenses, net		35,618			32,612			33,196

Plus/minus:
Changes in working capital excluding income taxes		11,017			8,039			(1,062	)
Depreciation and amortization expense		15,987			15,988			16,070
Other items, net		(1,280	)		(5,219	)		(4,888	)

Net cash flow provided by operations activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes	Ps	61,342		Ps	51,420		Ps	43,316

RECENT DEVELOPMENTS

Recent Developments Relating to Our Assets Divestiture Plans

On February 20, 2019, CEMEX, S.A.B. de C.V. announced that it had signed an agreement for the sale of assets in the Baltics and Nordics to the German building materials group SCHWENK, for approximately €340 million. As of the date of this report, we expect for this transaction to close prior to March 31, 2019.

Recent Developments Relating to Our Shareholders

CEMEX, S.A.B. de C.V. to hold its Ordinary and Extraordinary General Shareholders’ Meeting on March 28, 2019

On February 28, 2019, CEMEX, S.A.B. de C.V. announced that it will hold its ordinary general shareholders’ meeting followed by its extraordinary general shareholders’ meeting on March 28, 2019. The agenda for the ordinary general shareholders’ meeting includes the approvals of (i) the Chairman of the Board of Directors’ report; (ii) the Chief Executive Officer’s report; (iii) the Board of Directors’ report; (iv) the Board of Directors’ opinion to the Chief Executive Officer’s report; (v) the audit committee’s report; (vi) the corporate practices and finance committee’s report; (vii) the accounting policies and guidelines report; (viii) the report on the revision of the tax situation; (ix) the proposal for allocation of profits (which includes the proposal to have CEMEX, S.A.B. de C.V. declare a cash dividend of U.S.$150 million payable in two equal installments in June and December of 2019); (x) the report to the Board of Directors on the procedures and agreements in which the repurchase program was instructed; (xi) the proposal for reserve for acquisition of shares (which includes the proposal to set the amount of U.S.$500 million, or its equivalent in Mexican Pesos, as the maximum amount of resources for the fiscal year of 2019 (and until the next general ordinary shareholders meeting of CEMEX, S.A.B. de C.V. is held) that CEMEX, S.A.B. de C.V. can use to purchase its own shares or securities that represent such shares); (xii) the proposal for changes in capital stock; (xiii) the proposal for composition of the Board of Directors and its committees (which includes the proposal to have Isabel Maria Aguilera Navarro appointed to CEMEX, S.A.B. de C.V.’s Board of Directors), as well as their compensation; and (xiv) the proposal for president, secretary and alternate secretary of the Board of Directors and its committees. The agenda for the extraordinary general shareholders’ meeting includes the approvals of (i) the proposal for CEMEX, S.A.B. de C.V. to enter into a merger deed as the surviving company in the context of mergers among our subsidiaries, including CEMEX México, S.A. de C.V. (“CEMEX México”); and (ii) the proposal to amend Articles 2 and 28 of CEMEX, S.A.B. de C.V.’s by-laws (which includes the proposal to restate the by-laws).

Recent Developments Relating to Our Board of Directors and Senior Management

Effective February 1, 2019, (i) Juan Romero Torres, then President of CEMEX México, was appointed Executive Vice President of Global Commercial Development; (ii) Ricardo Naya Barba, then President of CEMEX Colombia, S.A. (“CEMEX Colombia”), was appointed President of CEMEX México; (iii) Jaime Gerardo Elizondo Chapa, then President of CEMEX Europe, was appointed Executive Vice President of Global Supply Chain Development; and (iv) Sergio Mauricio Menendez Medina, then Distribution Channel Vice President for CEMEX México, was appointed President of CEMEX Europe.

Recent Development Relating to the 2017 Credit Agreement

We are currently seeking to amend the 2017 Credit Agreement (as defined below) in order to, among other things, (i) extend each of the July 2020 and January 2021 repayment installments by three years; (ii) delay the scheduled tightening of the consolidated financial leverage ratio limit by one year; and (iii) make adjustments for the implementation of IFRS 16 – Leases. As of the date of this report, the implementation of IFRS 16 does not breach the 2017 Credit Agreement. Although we believe we have good relations with our lenders and have successfully sought amendments in the past, we cannot assure you that the lenders under the 2017 Credit Agreement will consent to these or any other amendments, or as to what the final terms of any such amendments will be.

Recent Developments relating to our Regulatory Matters and Legal Proceedings

In connection with the ongoing proceedings related to the rejection by the Colombian Tax Authority of certain deductions taken by CEMEX Colombia in its 2012 year-end income tax return, CEMEX Colombia has appealed the Colombian Tax Authority’s decision. The Colombian Tax Authority has a year to respond to this appeal. See “Regulatory Matters and Legal Proceedings—Tax Matters—Colombia.”

In connection with the ongoing matters related to the IPPC Permit (as defined below) for part of our operations in Croatia, on February 6, 2019, CEMEX Croatia was provided with the High Administrative Courts’ decision, dated as of December 13, 2018, on a previously filed appeal. The High Administrative Court ruled in favor of CEMEX Croatia, whereby it (i) overruled the annulment of the IPPC Permit (restating the IPPC Permit); and (ii) rejected the claim of the City of Kastela. The High Administrative Court’s decision is final. See “Regulatory Matters and Legal Proceedings—Environmental Matters—Croatia.”

As of March 9, 2019, with respect to tariffs on imports of cement, clinker, slag cement and granulated slag into the United States from China and the increase of the existing tariffs that was scheduled to take place in early March of 2019, the decision to increase the tariffs has been delayed by the U.S. Government and no increase has been announced.

RISK FACTORS

We are subject to various risks mainly resulting from changing economic, environmental, political, industry, business, regulatory, financial and climate conditions, as well as risks related to ongoing legal proceedings and investigations. The following risk factors are not the only risks we face, and any of the risk factors described below could significantly and adversely affect our business, results of operations or financial condition.

Risks Relating to Our Business

Economic conditions in some of the countries where we operate and in other regions or countries may adversely affect our business, financial condition and results of operations.

The economic conditions in some of the countries where we operate have had and may continue to have a material adverse effect on our business, financial condition and results throughout our operations worldwide. Our results of operations are highly dependent on the results of our business. Accordingly, the economic conditions in some of the countries where we operate have had and may continue to have a material adverse effect on our business, financial condition and results throughout our operations worldwide.

As of December 31, 2018, we mostly had operations in Mexico, the United States, the United Kingdom, France, Germany, Spain, the Czech Republic, the Rest of Europe, Colombia, Panama, Costa Rica, Caribbean TCL, the Dominican Republic, the Rest of South, Central America and the Caribbean, the Philippines, Egypt, Israel and the Rest of Asia, Middle East and Africa (as described in “Business” below).

For a geographic breakdown of our revenues for the year ended December 31, 2018, see “CEMEX—Geographic Breakdown of Revenues for the Year Ended December 31, 2018.”

While upside and downside risks to the short-term global economic growth outlook seem to be broadly balanced, we believe the scenario is not risk free. We believe that as of the date of this report, the possible main downside concerns include risks of slowing global economic growth, particularly due to a shift toward protectionist policies in a context of growing trade tensions between the United States and China; a possibly sharp tightening of financial conditions and its impact on the global economy, highly indebted European countries, emerging markets, risk aversion, foreign exchange markets, volatility and financial markets; economic vulnerability of emerging market economies; elections in some Latin American countries and the newly formed governments; economic and political uncertainties in Europe; China’s economic performance; political uncertainty in the United States; and geopolitical risks in the Middle East and other regions experiencing political turmoil, including the current situation in Syria. The materialization of any of these concerns may have a material adverse effect on our business, financial condition and results of operations worldwide.

The cycle of trade restrictions and retaliation between the United States and China has weakened global trade and created global economic uncertainty and financial volatility. A worsening of trade conditions resulting from negotiations between the United States and China and the imposition of broader barriers to cross-border trade could not only have a direct impact on trade and investment but also on global economic growth and financial conditions.

The equity market correction in March 2018 following the U.S. tariff announcement on steel and aluminum and a range of Chinese products, as well as the announcement by China of retaliatory tariffs on imports from the U.S., are examples showing that asset prices can correct rapidly and trigger potentially disruptive portfolio adjustments. Financial conditions that exist of the date of this report could tighten sharply and expose vulnerabilities that have accumulated over the years, with potential adverse repercussions for economic growth. High asset valuations, both in emerging and advanced economies, and very compressed term premiums raise the possibility of a financial market correction, which could dampen growth and confidence.

The U.S. Federal Reserve System has increased short-term interest rates at a measured pace since December 2015. There is a risk that further interest rate hikes could cause Dollar appreciation, a manufacturing slowdown and economic deceleration on the back of a slower housing investment. However, a slower than warranted pace of increase in interest rates could result in inflation acceleration and the disanchoring of inflation expectations, possibly leading to swift monetary policy tightening and a potential recession in the U.S. The recently legislated tax code overhaul could further increase the persistent fiscal deficits and unsustainable debt dynamics over the next five years. Also, the current account deficit could increase given the projected impact of the fiscal stimulus on domestic demand in the U.S. High fiscal and current account deficits could affect both economic activity and exchange rates. The U.S. housing sector supply constraints, associated in part with labor shortages, could result in a slower pace of growth in housing starts in the U.S.

In the U.S., renewed federal budget disputes could lead to lesser than Fast Act-authorization spending levels for highways and streets. Global market volatility and uncertainty surrounding U.S. trade, such as imposing tariffs on Chinese products coming into the U.S., geopolitical concerns and immigration policy, could undermine consumer confidence and investment prospects in the U.S. In all, these uncertainties can have a material adverse impact not only on our financial condition, business and results of operations in the U.S., but also on our operations worldwide.

Many emerging market economies have gone through bouts of financial volatility over the past few years. Some large commodity exporters and other stressed economies also weathered substantial exchange rate movements. Though it proved short-lived for most countries, many countries in this group remain vulnerable to sudden shifts in global market sentiment. There is a risk of new episodes of market volatility, increased risk aversion and capital outflows from emerging markets, which could cause emerging markets currencies to further depreciate. The high level of U.S. Dollar denominated corporate indebtedness in emerging markets constitutes an additional source of instability. Emerging markets would face higher global risk premiums and substantial capital outflows, putting particular pressure on economies with domestic debt imbalances. The risk of contagion effect across emerging markets could be significant and have an adverse effect to our business.

In Mexico, the Mexican Central Bank recently cautioned about slowing economic growth for 2019 and for the first quarter of 2019. Slower economic growth in Mexico can have an adverse effect on demand for our products. Also, any deterioration in the growth perspectives of the U.S. or in the global financial conditions and risk perception could negatively affect Mexico. The USMCA, which is the result of the renegotiation of NAFTA, and

which is intended to supersede NAFTA, has already been executed but not ratified by all signatories, which is the reason why it is not yet in full force and effect. A failure to ratify the USMCA has the potential to erode Mexico’s access to the United States’ domestic market and could negatively affect investment, development and growth, foreign exchange rates and confidence in Mexico. Other risks that could negatively affect Mexico, include the inflation rate’s failure to decelerate towards the Central Bank of Mexico’s target range, continued decline in oil production in Mexico, manufacturing production not reacting positively to a global manufacturing boost, a contraction of the construction industry and higher than expected domestic demand deceleration for products in our industry.

As a result of a general election in Mexico that took place in 2018, a new federal government and chambers of the Mexican National Congress has been installed. As is the case in any change in administration, there is uncertainty regarding the impact of this new government’s economic and public policies and the impact any policies could have on the economy of Mexico, including on the Mexican Peso on the foreign exchange markets and in attracting or maintaining foreign investment in Mexico, which could affect our overall operations in Mexico and our results of operations, liquidity and financial position.

In China, the reliance on stimulus measures to maintain high rates of growth continues. External triggers, such as a shift toward protectionism in advanced economies or domestic shocks, could lead to a broader tightening of financial conditions in China, possibly exacerbated by capital outflow pressures, with an adverse impact on demand and output. Regulators in China have also taken important measures to reduce shadow banking and bring financial activity back onto bank balance sheets; however, when taking into consideration that total credit growth, particularly in the private sector, remains high, efforts to reform the financial sector are likely to stagnate until trade disputes are resolved. The consequences for emerging market economies of weaker economic performance and increased policy uncertainty in China could be significant and could affect our results of operations, liquidity and financial position.

In Colombia, the correction of macroeconomic imbalances, such as inflation, is making progress, but still needs to advance further and could be pressured by recent minimum wage increases. Consumer and producer expectations are gradually recovering. Supported by increased oil prices, economic activity is expected to improve slightly from the low levels seen in recent years; however, a reduction may affect future growth, which in turn could affect our results of operations in Colombia. Civil works investment, mainly with private financing, could be lower than anticipated, especially if additional sources of financing are not secured. The new government has also passed a fiscal reform plan that is expected to reduce the fiscal deficit; however, this too could be affected if oil prices fall. Migrant inflows coming from Venezuela are also likely to present challenges for the government.

In Nicaragua, what started as protests against social security reform in April 2018 has turned into calls for President Daniel Ortega’s ousting. Continued anti-government protests have resulted in regular outbreaks of violence, which have had and may continue to have a major negative impact on the economic activity of Nicaragua. In December of 2018, the President of the United States signed the Nicaragua Investment Conditionality Act (NICA), which could place conditions on foreign aid and financing to Nicaragua. In the same month, the Organization of American States (OAS) activated a legal proceeding that could lead to imposing sanctions on Nicaragua or suspending the country from the OAS. Prolonged social instability and political crisis in Nicaragua could cause a severe economic downturn and negatively affect our operations and results of operations in Nicaragua.

In Europe, the environment of negative deposit rates is distorting financial markets and creates uncertain consequences for the banking sector. There is a risk that negative rates would erode bank profitability and curb lending across Eurozone borders, creating other systemic risks to European economies. The economic activity in the Eurozone European Central Bank (ECB) is expected to continue decelerating after its peak in 2017. There is a risk that the European Central Bank will finish its easing policy too early. Uncertainty about the Euro’s performance remains, which could affect our operations in European Union member states, which could adversely affect our results of operations, liquidity and financial position.

The Eurozone’s economic growth and European integration are challenged by a number of uncertainties, including, but not limited to, delays in implementing the needed structural reforms in some European countries; uncertainty regarding the profitability of the European banking system in general and the Italian banking sector in

particular; the process of United Kingdom’s exit from the EU and Poland’s conflict with EU institutions due to its judicial reform. Further, the renewed popularity of nationalistic policies in Europe is another aftereffect of the financial crisis and its prolonged aftermath. All these factors could impact market confidence and could limit the benefit of the economic tailwinds and monetary policy stimulus for Europe and possibly worldwide, which in turn could adversely affect our results of operations, liquidity and financial position.

The United Kingdom’s expected departure from the European Union, and the uncertainty surrounding this process and the future relationship between them, is already having an impact on economic activity and financial conditions. The economy exhibited signals of a deceleration at the end of 2018, with business investment, consumer confidence and fixed investment growth showing signs of pessimism. A UK departure from the EU without a clear agreement governing their economic relationship not only has the potential to significantly disrupt trade relations and border management but also to affect the operations of broad sections of the UK economy, such as financial services companies, manufacturing and their supply chains, and aviation. The overall economic impact of the process surrounding the UK’s departure from the EU, which could increase in severity in the absence of a clear framework detailing the future relationship between the two, has the potential to impact our business conditions and the results of our operations in the United Kingdom.

In Spain, the Catalan region conflict resulted in social unrest, and although it seems to have a transitory impact in the local economy, an escalation of the conflict could affect the Spanish economy and performance of the construction sector. Alternatively, given that the Spanish national government is led by a minority in the parliament, depending on smaller parties, policy stagnation is likely to continue until the next election is held; although early elections cannot be ruled out. These factors could adversely affect our operations and results of operations in Spain.

Significant trade links with Western Europe render some of the Eastern European countries susceptible to economic and political pressures from Western Europe. Labor shortages in Central European countries are expected to become more acute, which could undercut competitiveness in the region. Additionally, Central European countries might experience a reduction in the proceeds they receive from the European Union’s structural funds over the coming years, which could hinder infrastructure investment in such countries and adversely affect our European operations and results of operations.

In the Middle East, political risk could impact economic growth and adversely affect construction investments. The U.S.’s recognition of Jerusalem as Israel’s capital has increased tensions between Israelis and Palestinians. The conflict between Israel and Palestine continues to generate instability and the overall situation in Syria could worsen. Any escalation of this conflict or social unrest in this region may affect our operations and results of operations in the region.

In Egypt, we cannot be certain if the new government that was elected in 2018 will continue to successfully implement the reforms needed to bring political and economic stability to the country. Any premature easing of monetary policy before inflation expectations are fully anchored, or opposition to reforms by vested interests, could undermine stabilization efforts in Egypt. External risks relate to a worsening of the security situation that could slow the recovery of tourism, a sustained rise of global oil prices, lower growth in Egypt’s main trading partners, or unexpected tightening of global financial conditions cannot be ruled out. If any materialize, it could adversely affect our operations and results of operations in Egypt.

In the Philippines, there are some factors, such as increased inflation over the past year, which has prompted interest rate increases, or a potential worsening of the security situation in Mindanao, that could adversely affect the country’s economy. The current government’s foreign policy and the potential change in the constitution towards federalism could have a negative political effect on the country. Such a change could jeopardize the country’s infrastructure development plan and eventually affect its economic growth, which would adversely affect our business and results of operations in the country.

In general, demand for our products and services is strongly related to construction levels and depends, in large part, on residential and commercial construction activity, as well as private and public infrastructure spending in almost all of the countries where we operate. Public and private infrastructure spending in countries dependent on revenue generated by the energy sector is exposed to decreases in energy prices. Therefore, decreases in energy prices could affect public and private infrastructure spending which, in turn, could affect the construction industry.

Declines in the construction industry are usually correlated with declines in general economic conditions. As a result, deterioration in economic conditions in the countries where we operate could have a material adverse effect on our business, financial condition and results of operations. In addition, we cannot assure you that growth in the gross domestic product of the countries where we operate will translate into a correlated increase in demand for our products.

We are subject to the effects of general global economic and market conditions that are beyond our control. If these conditions remain challenging or deteriorating, our business, financial condition and results of operations could be adversely affected. Possible consequences from macroeconomic global challenges could have an adverse impact on our business, financial condition and results of operations.

Political and social events and possible changes in governmental policies in some of the countries where we operate could have a material adverse effect on our business, financial condition and results of operations.

In recent years, some of the governments in the countries where we operate, such as in the United States, have implemented and may continue to implement significant changes in laws, public policy or regulations that could affect the political, economic and social conditions in the countries where we operate, as well as in other countries. Any such changes may have a material adverse effect on our business, financial condition and results of operations.

Furthermore, presidential, legislative, state and local elections have taken place or are scheduled to take place in 2019 in several of the countries where we operate, including El Salvador, Panama, the Philippines, Guatemala, Israel and Poland, as well as the elections for the European Parliament. For these countries, as is mostly the case when there is a change in governments, a change in federal government and the political party in control of the legislature could result in sharp changes to the countries’ economic, political or social conditions, and in changes in laws, regulations and public policies, which may contribute to economic uncertainty and could also materially impact our business, financial condition and results of operations. Similarly, if no political party wins a clear majority in the legislative bodies of these countries, legislative gridlock and political and economic uncertainty may occur.

We cannot assure you that political or social developments in the countries where we operate or elsewhere, such as the election of new administrations, changes in laws, public policy or regulations, political disagreements, civil disturbances and the rise in violence and perception of violence, will not have a corresponding material adverse effect on global financial markets, or on our business, financial condition and results of operations.

The 2017 Credit Agreement contains several restrictions and covenants. Our failure to comply with such restrictions and covenants could have a material adverse effect on our business and financial conditions.

The 2017 Credit Agreement requires us to comply with several financial ratios and tests, including (i) a minimum consolidated coverage ratio of EBITDA to interest expense (including interest accrued on Perpetual Debentures and cash payments on preferred stock) and (ii) a maximum consolidated leverage ratio of total debt (including Perpetual Debentures and guarantees, excluding convertible/exchangeable obligations, the principal amount of subordinated optional convertible securities and finance leases and plus or minus the mark-to-market amount of derivative financial instruments, among other adjustments) to EBITDA (in each case, as described in the 2017 Credit Agreement). The calculation and formulation of EBITDA, interest expense, total debt, the consolidated coverage ratio and the consolidated leverage ratio are set out in the 2017 Credit Agreement and may differ from the calculation and/or formulation of analogous terms in this report. Our ability to comply with these ratios may be affected by economic conditions and volatility in foreign exchange rates, by overall conditions in the financial and capital markets and the construction sector, and by any monetary penalties or fines we may have to pay as a result of any administrative or legal proceedings to which we may be exposed to. See “Regulatory Matters and Legal Proceedings” for more information on our regulatory matters and legal proceedings. The 2017 Credit Agreement requires us to comply with a minimum consolidated coverage ratio of EBITDA to interest expense (including interest accrued on Perpetual Debentures and cash payments on preferred stock), for the following periods, measured quarterly, of not less than (i) 2.50:1 for each 12-month period ending on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020 and (ii) 2.75:1 for the 12-month period ending on June 30, 2020 and on each subsequent quarterly date. In addition, the 2017 Credit Agreement

requires us to comply with a maximum consolidated leverage ratio of total debt (including Perpetual Debentures and guarantees, excluding convertible / exchangeable obligations, the principal amount of subordinated optional convertible securities and finance leases and plus or minus the fair value of derivative financial instruments, among other adjustments) to EBITDA for the following periods, measured quarterly, not to exceed (i) 4.75:1 for the 12-month period ending December 31, 2018 and the 12-month period ending March 31, 2019, (ii) 4.50:1 for each 12-month period ending June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020 and (iii) 4.25:1 for the 12-month period ending June 30, 2020 and on each subsequent quarterly date. For the period ended December 31, 2018, we reported to the lenders under the 2017 Credit Agreement a consolidated coverage ratio of 4.41 and a consolidated leverage ratio of 3.84, each as calculated pursuant to the 2017 Credit Agreement. See “Results of Operations—Liquidity and Capital Resources—Our Indebtedness.”

Pursuant to the 2017 Credit Agreement, we are limited in relation to making aggregate annual capital expenditures in excess of U.S.$1 billion in any financial year (excluding certain capital expenditures, joint venture investments and acquisitions to be made by each of CEMEX Latam Holdings, S.A. (“CLH”) and/or CEMEX Holdings Philippines, Inc. (“CHP”) and their respective subsidiaries, and those funded by Relevant Proceeds (as defined in the 2017 Credit Agreement)), which capital expenditures, joint venture investments and acquisitions at any time then incurred are subject to a separate aggregate limit of (a) U.S.$500 million (or its equivalent) for CLH and its subsidiaries and (b) U.S. $500 million (or its equivalent) for CHP and its subsidiaries. In addition, in each case, the amounts of which we and our subsidiaries are allowed for permitted acquisitions and investments in joint ventures cannot exceed certain thresholds as set out in the 2017 Credit Agreement.

We are also subject to a number of negative covenants under the 2017 Credit Agreement that, among other things, restrict or limit (subject to certain exceptions) our ability and the ability of each obligor (as defined in the 2017 Credit Agreement) to: (i) create liens, (ii) incur additional debt, (iii) change our business or the business of any obligor (as defined in the 2017 Credit Agreement, taken as a whole), (iv) enter into mergers, (v) enter into agreements that restrict our subsidiaries’ ability to pay dividends or repay intercompany debt, (vi) acquire assets, (vii) enter into or invest in joint venture agreements, (viii) dispose of certain assets, (ix) grant additional guarantees or indemnities, (x) declare or pay cash dividends or make share redemptions, and (xi) enter into certain derivatives transactions.

The 2017 Credit Agreement also contains a number of affirmative covenants that, among other things, require us to provide periodic financial information to our creditors. Pursuant to the 2017 Credit Agreement, a number of covenants and restrictions will, if CEMEX so elects, cease to apply (including the capital expenditure limitations mentioned above) or become less restrictive if (i) our consolidated leverage ratio for the two most recently completed quarterly testing periods is less than 3.75:1; or, for the three most recently completed quarterly testing periods, our consolidated leverage ratio for the first and third of those quarterly testing periods is 3.75:1 or less and in the second quarterly testing period would have been 3.75:1 or less but for the proceeds of certain permitted financial indebtedness being included in the calculation of debt and (ii) no default under the 2017 Credit Agreement is continuing. At that point, the existing consolidated coverage ratio and consolidated leverage ratio tests will be replaced by a requirement that the consolidated leverage ratio must not exceed 4.25:1 and consolidated coverage ratio must not be less than 2.75:1. However, we cannot assure you that we will be able to meet the conditions for these restrictions to cease to apply prior to the final maturity date under the 2017 Credit Agreement.

The 2017 Credit Agreement contains events of default, some of which may occur and are outside of our control. Such events of default include defaults (subject to certain exceptions) and grace periods, based on (i) non-payment, (ii) material inaccuracy of representations and warranties, (iii) breach of covenants, (iv) bankruptcy (quiebra) or insolvency (concurso mercantil) of CEMEX, S.A.B. de C.V., any other obligor under the 2017 Credit Agreement or any other of our material subsidiaries (as defined in the 2017 Credit Agreement), (v) inability to pay debts as they fall due or by reason of actual financial difficulties, suspension or threatened suspension of payments on debts exceeding U.S.$50 million or commencement of negotiations to reschedule debt exceeding U.S.$50 million, (vi) a cross-default in relation to financial indebtedness in excess of U.S.$50 million, (vii) certain changes to the ownership of any of the obligors under the 2017 Credit Agreement, (viii) enforcement of any security against an obligor or material subsidiary, (ix) any attachment, distress or execution affects any asset of an obligor or material subsidiary which is reasonably likely to cause a material adverse effect, (x) restrictions not in effect on July 19, 2017 are imposed that limit the ability of obligors to transfer foreign exchange for purposes of performing material obligations under the 2017 Credit Agreement, (xi) any material adverse change arising in the financial

condition of CEMEX, which creditors representing two thirds or more of the total commitments under the 2017 Credit Agreement determine would result in our failure, taken as a whole, to perform payment obligations under the 2017 Credit Agreement, and (xii) it becomes unlawful for us to comply with our obligations under the 2017 Credit Agreement where non-performance is reasonably likely to cause a material adverse effect. If an event of default occurs and is continuing, upon the authorization of creditors representing two thirds or more of the total commitments under the 2017 Credit Agreement, the agent has the ability to accelerate all outstanding amounts due under the 2017 Credit Agreement. Acceleration is automatic in the case of insolvency.

We cannot assure you that in the future we will be able to comply with the restrictive covenants and limitations contained in the 2017 Credit Agreement. Our failure to comply with such covenants and limitations could result in an event of default, which could materially and adversely affect our business, financial condition and results of operations.

Changes to, or Replacement of the LIBOR Benchmark Interest Rate, Could Adversely Affect Our Business, Financial Condition and Results of Operations.

In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the U.K., stated that they will plan for a phase out of regulatory oversight of LIBOR interest rate indices. The FCA has indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. LIBOR indices, in particular the U.S. Dollar LIBOR, are commonly used as a benchmark for our financing agreements and derivatives, which systematically catalogue relevant LIBOR provisions, including uniform trigger provisions intended to identify a test for when LIBOR no longer governs the agreement and/or uniform fallback provisions intended to identify an alternative reference rate, or there may be vast, or slight, differences in those provisions. It is uncertain at this time whether LIBOR will change or cease to exist or the extent to which those entering into financial agreements will transition to any other particular benchmark. Other benchmarks may perform differently than LIBOR or have other consequences that cannot currently be anticipated. A transition away from and/or changes to LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.

We pledged the capital stock of some of our subsidiaries that represent substantially all of our business as collateral to secure our payment obligations under the 2017 Credit Agreement, the indentures governing our outstanding Senior Secured Notes and other financing arrangements.

In connection with the 2017 Credit Agreement, we pledged under pledge agreements or transferred to trustees under a security trust, substantially all the shares of CEMEX México, Cemex Operaciones México, S.A. de C.V. (“Cemex Operaciones México”), CEMEX TRADEMARKS HOLDING Ltd. (“CTH”), New Sunward Holding B.V. (“New Sunward”) and CEMEX España, S.A. (“CEMEX España”), as collateral (together, the “Collateral”), and all proceeds of the Collateral, to secure our obligations under the 2017 Credit Agreement, our 4.375% Senior Secured Notes due 2023 (the “March 2023 Euro Notes”), 6.000% U.S. Dollar-Denominated Senior Secured Notes due 2024 (the “April 2024 U.S. Dollar Notes”), 4.625% Senior Secured Notes due 2024 denominated in Euros (the “June 2024 Euro Notes”), 5.700% Senior Secured Notes due 2025 (the “January 2025 U.S. Dollar Notes”), 6.125% Senior Secured Notes due 2025 (the “May 2025 U.S. Dollar Notes”), 7.75% Senior Secured Notes due 2026 (the “April 2026 U.S. Dollar Notes”) and 2.750% Euro-Denominated Senior Secured Notes due 2024 (the “December 2024 Euro Notes”) (collectively and including other series of senior secured notes issued by CEMEX, S.A.B. de C.V. or CEMEX Finance LLC (“CEMEX Finance”) outstanding at a given time, the “Senior Secured Notes”) and under a number of other financing arrangements for the benefit of the creditors and holders of debt and other obligations that benefit from provisions in their agreements or instruments requiring that their obligations be equally and ratably secured.

As of December 31, 2018, the Collateral and all proceeds of such Collateral secured (i) Ps172,617 million (U.S.$8,785 million) (principal amount Ps173,948 million (U.S.$8,852 million)) aggregate principal amount of debt under the 2017 Credit Agreement, our Senior Secured Notes and other financing arrangements and (ii) Ps8,729 million (U.S.$444 million) aggregate principal amount of Perpetual Debentures. These subsidiaries whose shares are part of the Collateral collectively own, directly or indirectly, substantially all of our operations worldwide. Provided that no default has occurred which is continuing under the 2017 Credit Agreement, the Collateral will be released automatically if we meet specified financial covenant targets in accordance with the terms

of the intercreditor agreement, dated September 17, 2012 among CEMEX, S.A.B. de C.V. and certain of its subsidiaries named therein, Citibank Europe PLC, UK Branch (formerly Citibank International plc), as facility agent, the financial institutions, noteholders and other entities named therein and Wilmington Trust (London) Limited, as security agent, as amended by an amendment agreement, dated October 31, 2014, and as amended and restated by an amendment and restatement agreement dated on or about July 23, 2015 and an amendment and restatement agreement dated July 19, 2017 (the “Intercreditor Agreement”).

We have a substantial amount of debt and other financial obligations maturing in the next several years. If we are unable to secure refinancing on favorable terms or at all, we may not be able to comply with our upcoming payment obligations. Our ability to comply with our principal maturities and financial covenants may depend on us implementing certain initiatives, which may include making asset sales, and there is no assurance that we will be able to implement any such initiatives or execute such sales, if needed, on terms favorable to us or at all.

As of December 31, 2018, our total debt plus other financial obligations were Ps 207,724 million (U.S.$10,571 million) (principal amount Ps209,153 million (U.S.$10,664 million)), which does not include Ps8,729 million (U.S.$444 million), which represents the nominal amount of Perpetual Debentures. Of such total debt plus other financial obligations amount, Ps 13,623 million (U.S.$ 693 million) (principal amount Ps13,605 million (U.S.$692 million)) matures during 2019; Ps22,530 million (U.S.$1,147 million) (principal amount Ps22,672 million (U.S.$1,154 million)) matures during 2020; Ps24,254 million (U.S.$1,234 million) (principal amount Ps24,254 million (U.S.$1,234 million)) matures during 2021; Ps30,524 million (U.S.$1,553 million) (principal amount Ps31,104 million (U.S.$1,583 million)) matures during 2022; and Ps116,794 million (U.S.$5,944 million) (principal amount Ps117,518 million (U.S.$5,981 million)) matures after 2022.

If we are unable to comply with our principal maturities under certain of our indebtedness, or refinance or extend maturities of certain of our indebtedness, substantially all of our debt could be accelerated. Acceleration of our debt would have a material adverse effect on our business, financial condition and results of operations. As a result of the restrictions under the 2017 Credit Agreement, the indentures that govern our outstanding Senior Secured Notes and other debt instruments, the current global economic environment and uncertain market conditions, we may not be able to, if we need to do so to repay our indebtedness, complete asset sales on terms that we find economically attractive or at all. Volatility in the credit and capital markets could significantly affect us due to its effect on the availability of funds to potential acquiring parties, including industry peers. In addition, high levels of consolidation in our industry in some jurisdictions may further limit potential assets sales to interested parties due to antitrust considerations. If we need to sell assets to repay our indebtedness but are unable to complete asset sales and our cash flow or capital resources prove inadequate, we could face liquidity problems and may not be able to comply with financial covenants and payment obligations under our indebtedness, which would have a material adverse effect on our business, financial condition and results of operations.

In addition, our levels of debt, contractual restrictions and our need to deleverage may limit our planning flexibility and our ability to react to changes in our business and the industry, and may place us at a competitive disadvantage compared to competitors who may have no need to deleverage or who may have lower leverage ratios and fewer contractual restrictions. There can also be no assurance that, because of our leverage ratio and contractual restrictions, we will be able to maintain our operating margins and deliver financial results comparable to the results obtained in the past under similar economic conditions. Also, there can be no assurance that we will be able to implement our business strategy and improve our results and sales, which could affect our ability to comply with our payment obligations under our debt agreements and instruments.

We may not be able to generate sufficient cash to service all of our indebtedness or satisfy our short-term liquidity needs, and we may be forced to take other actions to satisfy our obligations under our indebtedness and our short-term liquidity needs, which may not be successful.

Historically, we have addressed our liquidity needs, including funds required to make scheduled principal and interest payments, refinance debt, and fund working capital and planned capital expenditures, with operating cash flow, borrowings under credit facilities and receivables and inventory financing facilities, proceeds of debt and equity offerings and proceeds from asset sales.

As of December 31, 2018, we had U.S.$599 million funded under our securitization programs in Mexico, the United States, France and the United Kingdom. We cannot assure you that, going forward, we will be able to, if needed, roll over or renew these programs, which could adversely affect our liquidity.

The weakness of the global economic environment and its adverse effects on our operating results may negatively affect our credit rating and the market value of CEMEX, S.A.B. de C.V.’s CPOs and American Depositary Shares (“ADSs”). If current economic pressures continue or worsen, we may be dependent on the issuance of equity as a source to repay our existing indebtedness. Although we have been able to raise debt, equity and equity-linked capital in the recent past, conditions in the capital markets could be such that traditional sources of capital may not be available to us on reasonable terms or at all. As a result, we cannot assure you that we will be able to successfully raise additional debt and/or equity capital on terms that are favorable to us or at all.

We have historically, when needed, sought and obtained waivers and amendments to several of our debt instruments relating to a number of financial ratios. Our ability to comply with these ratios could be affected by global economic conditions and volatility in foreign exchange rates and the financial and capital markets, among other factors. If necessary, we may need to seek waivers or amendments to one or more of our debt agreement or debt instruments in the future. However, we cannot assure you that any future waivers or amendments, if requested, will be obtained. If we are unable to comply with the provisions of our debt agreements or debt instruments, and are unable to obtain a waiver or amendment, the indebtedness outstanding under such debt agreement and/or instruments could be accelerated. Acceleration of these debt agreements and/or instruments would have a material adverse effect on our business and financial condition.

If the global economic environment deteriorates and our operating results worsen significantly, if we are unable to complete debt or equity offerings or, if needed, any divestitures and/or our cash flow or capital resources prove inadequate, we could face liquidity problems and may not be able to comply with our principal payments under our indebtedness or refinance our indebtedness.

The indentures governing our outstanding Senior Secured Notes and the terms of our other indebtedness impose significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities and may impede our ability to refinance our debt and the debt of our subsidiaries.

As of December 31, 2018, there were U.S.$3,779 million and €1,600 million aggregate principal amount of then-outstanding Senior Secured Notes outstanding under the indentures governing such notes. Mostly all of the indentures governing our outstanding Senior Secured Notes and the other instruments governing our consolidated indebtedness impose significant operating and financial restrictions on us. These restrictions will limit our ability, among other things, to: (i) incur debt; (ii) pay dividends on stock; (iii) redeem stock or redeem subordinated debt; (iv) make investments; (v) sell assets, including capital stock of subsidiaries; (vi) guarantee indebtedness; (vii) enter into agreements that restrict dividends or other distributions from restricted subsidiaries; (viii) enter into transactions with affiliates; (ix) create or assume liens; (x) engage in mergers or consolidations; and (xi) enter into a sale of all or substantially all of our assets.

These restrictions could limit our ability to seize attractive growth opportunities for our businesses that are currently unforeseeable, particularly if we are unable to incur financing or make investments to take advantage of these opportunities.

These restrictions may significantly impede our ability to develop and implement refinancing plans in respect of our debt.

Most of the covenants are subject to a number of important exceptions and qualifications. The breach of any of these covenants could result in a default under the indentures governing our outstanding Senior Secured Notes, as well as certain other existing debt obligations, as a result of the cross-default provisions contained in the instruments governing such debt obligations. In the event of a default under any of the indentures governing our outstanding Senior Secured Notes, holders of our outstanding Senior Secured Notes could seek to declare all amounts outstanding under such Senior Secured Notes, together with accrued and unpaid interest, if any, to be immediately due and payable. If the indebtedness under our outstanding Senior Secured Notes, or certain other existing debt obligations were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full such accelerated indebtedness or our other indebtedness.

Furthermore, upon the occurrence of any event of default under the 2017 Credit Agreement, the indentures governing our outstanding Senior Secured Notes or any of our other debt, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. If the lenders accelerate payment of those amounts, we cannot assure you that our assets would be sufficient to repay in full those amounts or to satisfy our other liabilities.

In addition, in connection with the entry into new financings or amendments to existing financing arrangements and while our debt rating remains below investment grade, our financial and operational flexibility may be further reduced as a result of more restrictive covenants, requirements for security and other terms that are often imposed on sub-investment grade entities.

CEMEX, S.A.B. de C.V.’s ability to repay debt and pay dividends depends on our subsidiaries’ ability to transfer income and dividends to us.

Aside from operating certain assets in Mexico, CEMEX, S.A.B. de C.V. is a holding company that owns the stock of its direct subsidiaries and is the beneficial owner of the equity interests of its indirect subsidiaries and has holdings of cash and marketable securities. In general, CEMEX, S.A.B. de C.V.’s ability to repay debt and pay dividends, as well as to generally make other payments, depends on the continued transfer to it of dividends and other income and funds from its wholly-owned and non-wholly-owned subsidiaries. Even though our debt agreements and instruments restrict us from entering into any agreement or arrangement that limits the ability of any subsidiary of CEMEX, S.A.B. de C.V. to declare or pay dividends or repay or capitalize intercompany indebtedness, the ability of CEMEX, S.A.B. de C.V.’s subsidiaries to pay dividends and make other transfers to it is subject to various regulatory, contractual and legal constraints of the countries in which we operate, including the need to create legal reserves prior to transferring funds. The 2017 Credit Agreement restricts CEMEX, S.A.B. de C.V.’s ability to declare or pay cash dividends. In addition, the indentures governing our outstanding Senior Secured Notes also limit CEMEX, S.A.B. de C.V.’s ability to pay dividends.

The ability of CEMEX, S.A.B. de C.V.’s direct and indirect subsidiaries to pay dividends and make loans and other transfers to it is generally subject to various regulatory, legal and economic limitations. Depending on the jurisdiction of organization of the relevant subsidiary, such limitations may include solvency and legal reserve requirements, dividend payment restrictions based on interim financial results or minimum net worth and withholding taxes on loan interest payments. For example, our subsidiaries in Mexico are subject to Mexican legal requirements, which provide that a corporation may declare and pay dividends only out of the profits reflected in the year-end financial statements that are or have been approved by its stockholders. In addition, such payment can be approved by a subsidiary’s stockholders only after the creation of a required legal reserve (equal to one fifth of the relevant company’s capital) and compensation or absorption of losses, if any, incurred by such subsidiary in previous fiscal years.

CEMEX, S.A.B. de C.V. may also be subject to exchange controls on remittances by its subsidiaries from time to time in a number of jurisdictions. In addition, CEMEX, S.A.B. de C.V.’s ability to receive funds from these subsidiaries may be restricted by covenants in the debt instruments and other contractual obligations of those entities.

As of the date of this report, CEMEX, S.A.B. de C.V. does not expect that existing regulatory, legal and economic restrictions on its existing direct and indirect subsidiaries’ ability to pay dividends and make loans and other transfers to it will negatively affect its ability to meet its cash obligations. However, the jurisdictions of organization of CEMEX, S.A.B. de C.V.’s current direct or indirect subsidiaries, or of any future subsidiary, may impose additional and more restrictive regulatory, legal and/or economic limitations. In addition, CEMEX, S.A.B. de C.V.’s subsidiaries may not be able to generate sufficient income to pay dividends or make loans or other transfers to it in the future, or may not have access to Dollars in their respective countries, which, as of the date of this report, would be the preferred currency to be received by CEMEX, S.A.B. de C.V. to service the majority of its debt payments. Any material additional future limitations on our subsidiaries could adversely affect CEMEX, S.A.B. de C.V.’s ability to service our debt and meet its other cash obligations.

We are subject to restrictions due to non-controlling interests in our consolidated subsidiaries.

We conduct our business through subsidiaries. In some cases, third-party shareholders hold non-controlling interests in these subsidiaries, such as in the case of CLH, CHP, TCL and Caribbean Cement Company Limited (“CCCL”), among others. Various disadvantages may result from the participation of non-controlling shareholders whose interests may not always be aligned with ours. Some of these disadvantages may, among other things, result in our inability to implement organizational efficiencies and transfer cash and assets from one subsidiary to another in order to allocate assets most effectively.

We have to service our debt and other financial obligations denominated in Dollars with revenues generated in Mexican Pesos or other currencies, as we do not generate sufficient revenue in Dollars from our operations to service all our debt and other financial obligations denominated in Dollars. This could adversely affect our ability to service our obligations in the event of a devaluation or depreciation in the value of the Mexican Peso, or any of the other currencies of the countries in which we operate, compared to the U.S. Dollar. In addition, our consolidated reported results and outstanding indebtedness are significantly affected by fluctuations in exchange rates between the Mexican Peso and other currencies.

A substantial portion of our total debt plus other financial obligations is denominated in Dollars. As of December 31, 2018, our debt plus other financial obligations denominated in Dollars represented 64% of our total debt plus other financial obligations, which does not include U.S.$371 million of Dollar-denominated Perpetual Debentures. Our Dollar-denominated debt must be serviced with funds generated by CEMEX, S.A.B. de C.V.’s direct and indirect subsidiaries. Although we have substantial operations in the U.S., we continue to strongly rely on our non-U.S. assets to generate revenues to service our Dollar-denominated debt. Consequently, we have to use revenues generated in Mexican Pesos, Euros or other currencies to service our Dollar-denominated obligations. See “Results of Operations—Quantitative and Qualitative Market Disclosure—Interest Rate Risk, Foreign Currency Risk and Equity Risk—Foreign Currency Risk.” A devaluation or depreciation in the value of the Mexican Peso, Euro, British Pound, Colombian Peso, Philippine Peso or any of the other currencies of the countries in which we operate, compared to the U.S. Dollar, could adversely affect our ability to service our Dollar-denominated debt. In 2018, our operations in Mexico, the United Kingdom, France, Germany, Spain, Poland, the Czech Republic, the Rest of Europe (as described in “Business” below), Colombia, Costa Rica, Caribbean TCL, the Dominican Republic, Rest of South, Central America and the Caribbean (as described in “Business” below), the Philippines, Egypt, Israel, the Rest of Asia, Middle East and Africa (as described in “Business” below), which are our main non-Dollar-denominated operations, together generated 66% of our total revenues in Mexican Peso terms (21%, 7%, 6%, 4%, 3%, 2%, 1%, 2%, 3%, 1%, 2%, 1%, 3%, 3%, 2%, 4% and 1%, respectively) before eliminations resulting from consolidation. In 2018, 26% of our revenues in Mexican Peso terms were generated from our operations in the United States.

During 2018, the Mexican Peso remained flat against the U.S. Dollar, the Euro depreciated 4.5% against the U.S. Dollar and the British Pound depreciated 5.6% against the U.S. Dollar. Currency hedges that we may be a party to or may enter in the future may not be effective in covering all our currency-related risks. Our consolidated reported results for any period and our outstanding indebtedness as of any date are significantly affected by fluctuations in exchange rates between the Mexican Peso and other currencies, as those fluctuations influence the amount of our indebtedness when translated into Mexican Pesos and also result in foreign exchange gains and losses as well as gains and losses on derivative contracts, including those entered into to hedge our exchange rate exposure. For a description of these restrictions, see “—Our use of derivative instruments has negatively affected, and any new derivative financial instruments could negatively affect, our operations, especially in volatile and uncertain markets.”

In addition, as of December 31, 2018, our Euro-denominated total debt plus other financial obligations represented 26% of our total debt plus other financial obligations, which does not include the €64 million aggregate principal amount of Euro-denominated Perpetual Debentures.

Our use of derivative financial instruments has negatively affected, and any new derivative financial instruments could negatively affect, our operations, especially in volatile and uncertain markets.

We have used, and may continue to use, derivative financial instruments to manage the risk profile associated with interest rates and currency exposure of our debt, to reduce our financing costs, to access alternative sources of financing and to hedge some of our financial and operating risks. However, we cannot assure you that our use of such instruments will allow us to achieve these objectives due to the inherent risks in any derivatives transaction.

As of December 31, 2018, our derivative financial instruments consisted of equity forwards on third party shares, foreign exchange forward contracts, interest rate derivatives related to energy projects fuel price hedging and interest-rate swap instruments related to bank loans, which had an impact on our financial position. The fair value changes of our derivative financial instruments are reflected in our income statement, which could introduce volatility in our controlling interest net income and our related ratios. For the years ended December 31, 2017 and 2018, the recognition of changes in the fair value of derivative financial instruments during the applicable period represented net gains of Ps161 million (U.S.$9 million) and net gains of Ps760 million (U.S.$39 million), respectively.

For the majority of the last ten years, CEMEX has significantly decreased its use of derivatives instruments related to debt, both currency and interest rate derivatives, thereby reducing the risk of cash margin calls. However, with respect to our existing financial derivatives, we may incur net losses and be subject to margin calls that do not require a substantial amount of cash to cover such margin calls. If we enter into new derivative financial instruments, we may incur net losses and be subject to margin calls in which the cash required to cover margin calls may be substantial and may reduce the funds available to us for our operations or other capital needs. In addition, as with any derivative position, CEMEX assumes the creditworthiness risk of the counterparty, including the risk that the counterparty may not honor its obligations to us.

We are subject to the laws and regulations of the countries where we operate and any material changes in such laws and regulations and/or any significant delays in our assessing the impact and/or adapting to such changes may have an adverse effect on our business, financial condition and results of operations.

Our operations are subject to the laws and regulations of the countries where we operate and such laws and regulations, and/or governmental interpretations of such laws and regulations, may change. Any such change may have a material adverse effect on our business, financial condition and results of operations. Furthermore, changes in laws and regulations and/or governmental interpretations of such laws and regulations in the countries where we operate may require us to devote a significant amount of time and resources to assess and, if required, to adjust our operations to any such changes, which could have a material adverse effect on our business, financial condition and results of operations. In addition, any significant delays in assessing the impact and/or, if required, in adapting to changes in laws and regulations and/or governmental interpretations of such laws and regulations may also have a material adverse effect on our business, financial condition, results of operations and prospects.

We may fail to obtain or renew or may experience material delays in obtaining requisite governmental or other approvals, licenses and permits for the conduct of our business.

We require various approvals, licenses, permits and certificates in the conduct of our business. We cannot assure you that we will not encounter significant problems in obtaining new or renewing existing approvals, licenses, permits and certificates required in the conduct of our business, or that we will continue to satisfy the conditions to which such approvals, licenses, permits and certificates that we currently have or may be granted in the future. There may also be delays on the part of regulatory and administrative bodies in reviewing our applications and granting approvals. If previously obtained approvals, licenses, permits and certificates are revoked and/or if we fail to obtain and/or maintain the necessary approvals, licenses, permits and certificates required for the conduct of our business, we may be required to incur substantial costs or temporarily suspend or alter the operation of one or more of our operating units, production facilities, mineral extraction locations or of any relevant component of them, which could affect the general production of these units, facilities or locations, which in turn could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may fail to secure certain materials required to run our business.

We increasingly use in most of our business certain by-products of industrial processes produced by third parties, such as pet coke, fly-ash, slag and synthetic gypsum. While we are not dependent on our suppliers and while we try to secure the supply of the required materials through long-term renewable contracts and framework agreements, which allow us to better manage supplies, short-term contracts are however entered into in certain countries where we operate. Should existing suppliers cease operations or reduce or eliminate production of these by-products, or should laws and/or regulations in any region or country limit the access to these materials, sourcing costs for these materials could increase significantly or require us to find alternative sources for these materials, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Additionally, scarcity and quality of natural resources (such as water and aggregates reserves) in some of the countries where we operate could have a material adverse effect on our operations, costs and results of operations.

We may not be able to realize the expected benefits from acquisitions or joint ventures, some of which may have a material impact on our business, financial condition and results of operations.

Even though we have not made any major acquisitions in recent years or entered into significant joint ventures, our ability to realize the expected benefits from acquisitions or joint ventures depends, in large part, on our ability to integrate acquired operations with our existing operations in a timely and effective manner. These efforts may not be successful. Although we have had disposed of assets in the past and may continue to do so to reduce our overall leverage and rebalance our portfolio, the 2017 Credit Agreement and other debt instruments restrict our ability to acquire assets and enter into joint ventures, and we may in the future acquire new operations or enter into joint ventures and integrate such operations into our existing operations, and some of such acquisitions may have a material impact on our business, financial condition and results of operations. We cannot assure you that we will be successful in identifying or acquiring suitable assets in the future, or that the terms under which we may acquire any assets or enter into joint ventures in the future would be favorable to us. If we fail to achieve the anticipated cost savings from any acquisitions or joint ventures, our business, financial condition and results of operations could be materially and adversely affected.

High energy and fuel costs may have a material adverse effect on our operating results.

Electric energy and fuel costs represent an important part of our overall cost structure. The price and availability of electric energy and fuel are generally subject to market volatility and, therefore, may have an adverse impact on our costs and operating results. Furthermore, if third party suppliers fail to provide to us the required amounts of energy or fuel under existing agreements, we may need to acquire energy or fuel at an increased cost from other suppliers to fulfill certain contractual commitments. In addition, governments in several of the countries where we operate are working to reduce energy subsidies, introduce clean energy obligations or impose new excise taxes, which could further increase energy costs and have a material adverse effect on our business, financial condition and results of operations.

Furthermore, if our efforts to increase our use of alternative fuels are unsuccessful, due to their limited availability, price volatility or otherwise, we would be required to use traditional fuels, which may increase our energy and fuel costs and could have a material adverse effect on our business, financial condition and results of operations.

The introduction of substitutes for cement, concrete or aggregates into the market and the development of new construction techniques and technologies could have a material adverse effect on our business, financial condition and results of operations.

Materials such as plastic, aluminum, ceramics, glass, wood and steel can be used in construction as a substitute for cement, concrete or aggregates. In addition, other construction techniques, such as the use of dry wall, and the integration of new technologies in the construction industry, such as 3-D printing, mini-mills and mobile plants, and changes in housing preferences could adversely impact the demand and price for cement, concrete and/or aggregates. Furthermore, research aimed at developing new construction techniques and modern materials and digitalizing the construction industry may introduce new products and technologies in the future that could reduce the demand and prices for our products.

We operate in highly competitive markets and if we do not compete effectively, our results of operations will be harmed.

The markets in which we operate are highly competitive and are served by a variety of established companies with recognized brand names, as well as new market entrants and increasing imports. Companies in these markets compete based on a variety of factors, often employing aggressive pricing strategies to gain market share. Our ability to increase our revenues depends, in part, on our ability to compete effectively. We compete with different types of companies and based on different factors in each market. For example, in the relatively consolidated cement and ready-mix concrete industries, we generally compete based on quality and value proposition available to our clients. In the more fragmented market for aggregates, we generally compete based on capacity and price for our products. In certain areas of the markets in which we compete, some of our competitors may be more established, benefit from greater brand recognition or have greater manufacturing and distribution channels and other resources than we do. In addition, if our competitors were to combine, they may be able to compete more effectively with us and they may dispose of assets, which could lead to new market entrants that increase competition in our markets. For example, Lafarge and Holcim finalized their merger in 2015, and Ireland’s CRH plc (“CRH”) acquired the vast majority of the assets disposed by Lafarge and Holcim pursuant to the requirements of regulators. Another example is HeidelbergCement AG’s (“Heidelberg”) acquisition of Italcementi S.p.A., which was completed in July 2016. Also, as of the date of this report, some of our major competitors have announced they intend to divest assets in different parts of the world (Southeast Asia for example), which may lead to increased competition in the markets in which we operate.

If we are not able to compete effectively, we may lose substantial market share, our revenues could decline or grow at a slower rate and our business and results of operations would be harmed, which could have a material adverse effect on our business, financial condition and results of operations.

A substantial amount of our total assets consists of intangible assets, including goodwill. We have recognized charges for goodwill impairment in the past, and if market or industry conditions deteriorate further, additional impairment charges may be recognized.

Our 2018 audited consolidated financial statements included in the February 28 6-K, have been prepared in accordance with IFRS as issued by the IASB, under which goodwill is not amortized and is tested for impairment when impairment indicators exist or at least once a year during the fourth quarter of each year, by determining the recoverable amount of the groups of cash-generating units to which goodwill balances have been allocated, which consists of the higher of such groups of cash-generating units fair value, less cost to sell, and their corresponding value in use, represented by the discounted amount of estimated future cash flows expected to be generated by such groups of cash-generating units to which goodwill has been allocated. An impairment loss is recognized under IFRS if the recoverable amount is lower than the net book value of the groups of cash-generating units to which goodwill has been allocated within other expenses, net. We determine the discounted amount of estimated future cash flows over periods of five years. In specific circumstances, when, according to our experience, actual results for a given cash-generating unit do not fairly reflect historical performance and most external economic variables provide us with confidence that a reasonably determinable improvement in the mid-term is expected in their operating results, management uses cash flow projections over a period of up to ten years, to the point in which future expected average performance resembles the historical average performance and to the extent we have detailed, explicit and reliable financial forecasts and is confident and can demonstrate its ability, based on past experience, to forecast cash flows accurately over that longer period. If the value in use of a group of cash-generating units to which goodwill has been allocated is lower than its corresponding carrying amount, we determine its corresponding fair value using methodologies generally accepted in the markets to determine the value of entities, such as multiples of Operating EBITDA and/or by reference to other market transactions, among others. Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of our products, trends in operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets, as well as the discount rates and the growth rates in perpetuity applied, among others. We use specific pre-tax discount rates for each group of cash-generating units to which goodwill is allocated, which are applied to pre-tax cash flows. The amounts of estimated undiscounted cash flows are significantly sensitive to the growth rates in perpetuity applied. Likewise, the amounts of discounted future cash flows are significantly sensitive to the weight average cost of capital (discount rate) applied. The higher the growth rate in perpetuity applied, the higher the amount of undiscounted future cash flows by group of cash-generating units obtained. Conversely, the

higher the discount rate applied, the lower the amount of discounted estimated future cash flows by group of cash-generating units obtained. During the last quarters of each of 2016, 2017 and 2018, we performed our annual goodwill impairment test. For the year ended as of December 31, 2016, we did not determine any goodwill impairments. During 2017, in connection with our operating segment in Spain and considering the uncertainty over the improvement indicators affecting the country’s construction industry (and consequently the expected consumption of cement, ready-mix concrete and aggregates), partially a result of the country’s complex prevailing political environment, which results in limited expenditure in infrastructure projects, as well as the uncertainty in the expected price recovery and the effects of increased competition and imports, our management considered a future reduction of the related cash flows projections from 10 to five years and determined that the net book value of our operating segment in Spain exceeded the amount of the net present value of projected cash flows by Ps1,920 million (U.S.$98 million). As a result, we recognized a goodwill impairment in the aforementioned amount as part of “Other expenses, net” in the income statement against the related goodwill balance. For the year ended as of December 31, 2018, we did not determine any goodwill impairments. See note 15.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Considering the important role that economic factors play in testing goodwill for impairment, we cannot assure that an eventual downturn in the economies where we operate will not necessitate further impairment tests and a possible downward readjustment of our goodwill for impairment under IFRS. Such an impairment test could result in impairment charges which could be material to our financial statements, which could have a material adverse effect on our financial condition.

We are subject to litigation proceedings, including a federal securities class action, government investigations relating to corruption related matters and antitrust proceedings, that could harm our business if an unfavorable ruling were to occur.

From time to time, we are and may become involved in litigation and other legal or administrative proceedings relating to claims arising from our operations, either in the normal course of business or not. As described in, but not limited to, “Regulatory Matters and Legal Proceedings,” we are currently subject to a number of significant legal proceedings, including, but not limited to, a federal securities class action alleging false and misleading statements in connection with alleged misconduct relating to the Maceo Project (as defined below) and the potential regulatory or criminal actions that might arise as a result, those relating to an SEC investigation concerning a new cement plant being built by CEMEX Colombia in the Antioquia department of the Municipality of Maceo, Colombia, as well as an investigation from the U.S. Department of Justice (the “DOJ”) mainly relating to our operations in Colombia and other jurisdictions, and antitrust investigations in countries in which we operate, including by the DOJ in the territorial United States. In addition, our main operating subsidiary in Egypt, Assiut Cement Company (“ACC”), is involved in certain Egyptian legal proceedings relating to the acquisition of ACC. Investigations and litigation, and in general any legal or administrative proceeding, are subject to inherent uncertainties, and unfavorable rulings may occur. We cannot assure you that these or any of our other regulatory matters and legal proceedings will not materially affect our ability to conduct our business in the manner that we expect or otherwise materially adversely affect us should an unfavorable ruling occur, which could have a material adverse effect on our business, financial condition and results of operations.

We have concluded that our internal control over financial reporting was not effective as of December 31, 2017, and our remediation efforts are ongoing. As a result, our ability to report our results of operations accurately, including our ability to make required filings with government authorities, may be adversely affected if our remediation efforts are not adequate. In addition, the trading price of our securities may be adversely affected by a related negative market reaction.

We have identified a material weakness in our internal control over financial reporting. Our management, including CEMEX, S.A.B. de C.V.’s Chief Executive Officer and Executive Vice President of Finance and Chief Financial Officer, has concluded that our disclosure controls and procedures were not effective as of December 31, 2017 to achieve their intended objectives. We have identified the following material weakness in our internal control over financial reporting: our risk assessment process did not operate effectively to implement controls that would prevent, or detect and correct, misstatements resulting from apparent collusion or management override of controls in relation to significant unusual transactions. In addition, we did not design and operate effective monitoring controls to detect non-compliance with our policies related to the financial reporting of significant unusual transactions. This material weakness relates, in part, to the previously disclosed irregular payments to a non-governmental individual made in connection with the construction by CEMEX Colombia of a new integrated cement plant in the Antioquia department near the municipality of Maceo, Colombia (the “Maceo Project”). As of

December 31, 2017, the implementation of our remediation plan to address this material weakness was not far enough advanced to provide a sufficient level of assurance that such circumvention or override of controls and misuse of funds by management would be prevented. As of the date of this report, we are finalizing the validation of the remedial measures related to the material weakness. For more information, see “Item 15—Controls and Procedures” of our 2017 Annual Report. If our efforts to remediate this material weakness are not successful, we may be unable to report our results of operations accurately and make our required filings with government authorities, including the SEC. Furthermore, our business and operating results and the price of our securities may be adversely affected by related negative market reactions. We cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered.

Our operations are subject to environmental laws and regulations.

Our operations are subject to a broad range of environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose stringent environmental protection standards regarding, among other things, air emissions, wastewater discharges, the use and handling of hazardous waste or materials, waste disposal practices and the remediation of environmental damage or contamination. These laws and regulations expose us to the risk of substantial environmental costs and liabilities, including fines and other sanctions, the payment of compensation to third parties, remediation costs and damage to reputation. Moreover, the enactment of stricter laws and regulations, stricter interpretation of existing laws or regulations, or new enforcement initiatives, may impose new risks or costs on us or result in the need for additional investments in pollution control equipment, which could result in a material decline in our profitability.

In late 2010, the U.S. Environmental Protection Agency (“EPA”) issued the final Portland Cement National Emission Standard (“Portland Cement NESHAP”) for Hazardous Air Pollutants under the federal Clean Air Act (“CAA”). This rule required Portland cement plants to limit mercury emissions, total hydrocarbons, hydrochloric acid and particulate matter by September 2013. The rule was challenged in federal court, and in December 2011, the D.C. Circuit Court of Appeals remanded the Portland Cement NESHAP to EPA and directed the agency to recompute the standards. In February 2013, EPA issued a revised final Portland Cement NESHAP rule that relaxed emissions limits for particulate matter and moved the compliance deadline to September 2015. In April 2013, environmental groups again challenged the revised Portland Cement NESHAP rule in federal court. In April 2014, the D.C. Circuit issued a ruling upholding both the revised particulate matter emission limits and the September 2015 compliance deadline. As of the day of this report, Portland Cement NESHAP compliance-related work continues in several of our plants. While we expect to meet all emissions standards imposed by the Portland Cement NESHAP, failure to do so could have a material adverse impact on our business operations, liquidity and financial condition; however, we expect that such impact would be consistent with the impact on the cement industry as a whole.

In February 2013, EPA issued revised final emissions standards under the CAA for commercial and industrial solid waste incinerators (“CISWI”). Under the CISWI rule, if a material being used in a cement kiln as an alternative fuel is classified as a solid waste, the plant must comply with CISWI standards. The CISWI rule covers nine pollutants, and imposes potentially more stringent emissions limits on certain pollutants that also are regulated under the Portland Cement NESHAP. EPA received petitions to further reconsider certain provisions of the 2013 CISWI rule. EPA granted reconsideration on four specific issues and finalized the reconsideration of the CISWI rule in June 2016. The 2013 CISWI rule was also challenged by both industrial and environmental groups in federal court. In July 2016, the D.C. Circuit issued a ruling upholding most of the rule and remanding several portions to EPA for further consideration. EPA has not issued a revised final rule after remand but the portions of the rule upheld on appeal are final and in effect. The final CISWI rule established a compliance date of February 2018, which was not impacted by the appeal. If kilns at CEMEX plants in the U.S. are determined to be CISWI kilns due to the use of certain alternative fuels, the emissions standards imposed by the CISWI rule could have a material impact on our business operations.

Under certain environmental laws and regulations, liability associated with investigation or remediation of hazardous substances can arise at a broad range of properties, including properties currently or formerly owned or operated by CEMEX, as well as facilities to which we sent hazardous substances or wastes for treatment, storage or disposal, or any areas affected while we transported any hazardous substances or wastes. Such laws and regulations may apply without regard to causation or knowledge of contamination. We occasionally evaluate various

alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities (or ongoing operational or construction activities) may lead to hazardous substance releases or discoveries of historical contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. While compliance with these laws and regulations has not materially adversely affected our operations in the past, we cannot assure you that these requirements will not change and that compliance will not adversely affect our operations in the future. Furthermore, we cannot assure you that existing or future circumstances or developments with respect to contamination will not require us to make significant remediation or restoration expenditures, which could have a material adverse effect on our business, financial condition and results of operations.

The cement manufacturing process requires the combustion of large amounts of fuel and creates carbon dioxide (“CO₂”) as a by-product of the calcination process. Therefore, efforts to address climate change through federal, state, regional, EU and international laws and regulations requiring reductions in emissions of greenhouse gases (“GHGs”) can create economic risks and uncertainties for our business. Such risks could include the cost of purchasing allowances or credits to meet GHG emission caps, the cost of installing equipment to reduce emissions to comply with GHG limits or required technological standards, decreased profits or losses arising from decreased demand for our goods and higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls. To the extent that financial markets view climate change and GHG emissions as a financial risk, this could have a material adverse effect on our cost of and access to capital. Given the uncertain nature of the actual or potential statutory and regulatory requirements for GHG emissions at the federal, state, regional, EU and international levels, we cannot predict the impact on our operations or financial condition or make a reasonable estimate of the potential costs to us that may result from such requirements. However, the impact of any such requirements, whether individually or cumulatively, could have a material economic impact on our operations in the United States and in other countries. For more information on certain laws and regulations addressing climate change that we are, or could become, subject to, and the impacts to our operations arising therefrom, see “Regulatory Matters and Legal Proceedings—Environmental Matters.”

Cement production raises a number of health and safety issues. As is the case with other companies in our industry, some of our aggregate products contain varying amounts of crystalline silica, a common mineral. Also, some of our construction and material processing operations release, as dust, crystalline silica that is in the materials being handled. Excessive, prolonged inhalation of very small-sized particles of crystalline silica has allegedly been associated with respiratory disease (including silicosis). As part of our annual due diligence, we work with our stakeholders to verify that certain health and safety protocols are in place as regards the management of silica and its health effects, as well as in relations to other substances and products. Nonetheless, under various laws we may be subject to future claims related to exposure to these or other substances or products.

Other health and safety issues related to our business include: burns arising from contact with hot cement kiln dust or dust on preheater systems; air borne hazards related to our aggregates mining activities; noise, including from chutes and hoppers, milling plants, exhaust fans and blowers; the potential for dioxin formation if chlorine-containing alternative fuels are introduced into kilns; plant cleaning and maintenance activities involving working at height or in confined or other awkward locations, and the storage and handling of coal, pet coke and certain alternative fuels, which, in their finely ground state, can pose a risk of fire or explosion; and health hazards associated with operating ready-mix concrete trucks. While we actively seek to minimize the risk posed by these issues, personal injury claims may be made, and substantial damages awarded, against us. We may also be required to change our operational practices, involving material capital expenditure.

As part of our insurance-risk governance approach, from time to time we evaluate the need to address the financial consequences of environmental laws and regulations through the purchase of insurance. As a result, we do arrange certain types of environmental impairment insurance policies for both site-specific, as well as multi-site locations. We also organize non-specific environmental impairment insurance as part of the provision of a broader corporate insurance strategy. These latter insurance policies are designed to offer some assistance to our financial flexibility to the extent that the specifics of an environmental incident could give rise to a financial liability. However, we cannot assure you that a given environmental incident will be covered by the environmental insurance we have in place, or that the amount of such insurance will be sufficient to offset the liability arising from the incident. Any such liability may be deemed to be material to us and could have a material adverse effect on our business, financial condition and results of operations.

We are an international company and are exposed to risks in the countries in which we have operations or interests.

We are dependent, in large part, on the economies of the countries in which we market our products and services. The economies of these countries are in different stages of socioeconomic and political development. Consequently, like many other companies with significant international operations, we are exposed to risks from changes in economic growth, foreign currency exchange rates, interest rates, inflation, trade policy, government spending, regulatory framework, social instability and other political, economic or social developments that may materially affect our business, financial condition and results of operations.

For a geographic breakdown of our revenues for the year ended December 31, 2018, see “CEMEX—Geographic Breakdown of Revenues for the Year Ended December 31, 2018.”

In recent years, concerns over global economic conditions, protectionist trade policies, energy costs, geopolitical issues, political uncertainty, social instability, the availability and cost of credit and the international financial markets have contributed to economic uncertainty and reduced expectations for the global economy.

Our operations in Egypt, the UAE and Israel have experienced instability as a result of, among other things, civil unrest, terrorism, extremism, deterioration of general diplomatic relations and changes in the geopolitical dynamics in the region. There can be no assurances that political turbulence in Egypt, Iran, Iraq, Syria, Libya, Yemen and other countries in Africa, the Middle East and Asia will abate in the near future or that neighboring countries will not be drawn into conflict or experience instability. In addition, some of our operations are or may be subject to political risks, such as confiscation, expropriation and/or nationalization, as for example was the case of our past operations in Venezuela and is currently the case in Egypt. See “Regulatory Matters and Legal Proceedings—Other Legal Proceedings—Egypt Share Purchase Agreement.”

Our operations in Egypt have since 2011 been exposed political and social turmoil in the country. In March 2018, Egypt held a new presidential election and President Abdel Fattah el-Sisi was re-elected for a second term (2018 – 2022). CEMEX’s operations in Egypt have been adversely affected by the turbulence in Egypt and CEMEX continues with its cement production, dispatch and sales activities as of the date of this report. We cannot assure you that the reelected regime will be able to avoid further political and social turbulence. Risks to CEMEX’s operations in Egypt include a potential reduction in overall economic activity, exchange rate volatility, increased cost of energy, cement oversupply and threat of terrorist attacks which could have a material adverse effect on our operations in the country.

Our operations are also exposed to the Israeli-Palestinian conflict. Confrontations between Israeli Defense Force and Palestinians in the Gaza have continued generating sporadic events of violence in the region. Progress on peace is stalled, as neither side has shown intentions for making concessions. If the conflicts escalate, it could have a negative impact on the geopolitics and economy in the region, which in turn could adversely affect our operations, financial condition and results of operations.

Military activities in Ukraine and on its borders, including Russia effectively taking control of Crimea, followed by Crimea’s independence vote and absorption by Russia, have combined with Ukraine’s weak economic conditions to create uncertainty in Ukraine and the global markets. In response to the annexation of the Crimean region of Ukraine by Russia and in response to Russia’s intervention in the conflicts in Syria, Russia has been subject to sanctions from other countries, including the U.S., which may continue to impose economic sanctions on Russia. While not directly impacting territories in which we had operations as of December 31, 2018, this dispute could negatively affect the economies of the countries in which we operate and their access to Russian energy supplies, and could negatively impact the global economy. Furthermore, potential responses by Russia to those sanctions could adversely affect European economic conditions, which could have a material adverse effect on our operations mainly in Europe. If conflicts with Russia escalate to military conflict, it could also have a material adverse effect on our business, financial condition and results of operations.

In the Middle East region, during 2017, the Gulf Cooperation Council split in a way not seen since its foundation in 1981, after Saudi Arabia, the UAE and Bahrain launched a boycott of Qatar in June 2017, alleging Qatar’s support to Islamist groups. The end of the conflict does not appear to be imminent, as Qatar refuses to accept demands from Gulf Cooperation Council countries. The Qatar-Gulf crisis may have a negative economic impact on the region. Additionally, as previously mentioned, the civil war in Syria could escalate tensions between the U.S. and Russia, Israel and Iran, and their corresponding allies. Increased tensions among these countries could lead to a risk of a military action that could potentially have a material adverse effect on our business, financial condition and results of operations.

In Asia, there is geopolitical tension related to Taiwan’s status in relation to China and in South Korea related to its disputes with North Korea, which also include the disputes between the U.S. and North Korea. Similarly, mutually exclusive territorial disputes among several Southeast Asian countries in the South China Sea amplify the potential for an outbreak of hostilities. A major outbreak of hostilities or other political upheaval in China, Taiwan, North Korea or South Korea could adversely affect the global economy, which could have a material adverse effect on our business, financial condition or results of operations. A potential sharp and unexpected reduction of economic growth in China, or an economic contraction of this country, could affect the global economy to an extent that could have a material adverse effect on our business, financial condition and results of operations.

Other regions are also exposed to political turmoil, including the continued political unrest in Venezuela and Nicaragua, which may similarly affect the results of our operations in those regions.

There have been terrorist attacks and ongoing threats of future terrorist attacks in countries in which we maintain operations. We cannot assure you that there will not be other attacks or threats that will cause any damage to our operating units and facilities or locations, or harm any of our employees, including members of CEMEX, S.A.B. de C.V.’s board of directors or senior management, or lead to an economic contraction or erection of material barriers to trade in any of our markets. An economic contraction in any of our major markets could affect domestic demand for cement, which could have a material adverse effect on our business, financial condition and results of operations.

As part of our risk governance approach, from time to time we evaluate the need to address the financial consequences of political or social risk through the purchase of insurance. As a result, we purchase certain types of political risk insurance policies for selected countries where we operate and which are exposed to political turmoil, geopolitical issues or political uncertainty. These insurance policies are designed to offer some assistance to our financial flexibility to the extent that the specifics of a political incident could give rise to a financial liability. However, we cannot assure you that a given social or political event and possible changes in government policies will be covered by the political risk insurance policies we have in place, or that the amount of such insurance will be sufficient to offset the liability arising from such applicable events. Any such liability could have a material adverse effect on our business, financial condition and results of operation.

Our operations can be affected by adverse weather conditions and natural disasters.

Construction activity, and thus demand for our products, decreases substantially during periods of cold weather, when it snows or when heavy or sustained rainfalls occur, or in general any rainy and snowy weather. Consequently, demand for our products is significantly lower during the winter or raining and snowing seasons in temperate countries and during the rainy season in tropical countries. Generally, winter weather in our European and North American operations significantly reduces our first quarter sales volumes, and to a lesser extent our fourth quarter sales volumes. Sales volumes in these and similar markets generally increase during the second and third quarters because of normally better weather conditions. However, high levels of rainfall and/or snow can adversely affect our operations during these periods as well, such as was the case in 2018 for our operations in the Philippines. Natural disasters, like the earthquake in Mexico and Hurricanes Harvey and Irma in the United States in 2017, could also have a negative impact on our sales volumes, which could also be material. This decrease in sales volumes is usually compensated by the increase in the demand of our products during the reconstruction phase, unless any of our operating units or facilities are impacted because of the natural disaster. Such adverse weather conditions and natural disasters can have a material adverse effect on our business, financial condition and results of operations if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major markets, especially during peak construction periods.

We will be adversely affected by any significant or prolonged disruption to our production facilities.

Any prolonged and/or significant disruption to our production facilities, whether due to repair, maintenance or servicing, governmental actions, regulatory issues, industrial accidents, unavailability of raw materials such as energy, mechanical equipment failure, human error, natural disaster or otherwise, will disrupt and adversely affect our operations. Additionally, any major or sustained disruptions in the supply of utilities such as water or electricity or any fire, flood or other natural calamities or communal unrest or acts of terrorism may disrupt our operations or damage our production facilities or inventories and could have a material adverse effect on our business, financial condition and results of operations.

We typically shut down our facilities to undertake maintenance and repair work at scheduled intervals. Although we schedule shut downs such that not all our facilities are shut down at the same time, the unexpected shut down or closure of any facility may nevertheless materially affect our business, financial condition and results of operations from one period to another.

We are increasingly dependent on information technology and our systems and infrastructure, as well as those provided by third-party service providers, face certain risks, including cyber security risks.

We increasingly rely on a variety of information technology and automated operating systems to manage and support our operations, as well as to offer our products to our customers. The proper functioning of this technology and these systems is critical to the efficient operation and management of our business, as well as for the sales generated by our business. Our systems and technologies may require modifications or upgrades as a result of technological changes, growth in our business and to enhance our business security. These changes may be costly and disruptive to our operations, and could impose substantial demands on our systems and increase system outage time. Our systems and technology, as well as those provided by our third-party service providers, may be vulnerable to damage, disruption or intrusion caused by circumstances beyond our control, such as physical or electronic break-ins, catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, unauthorized access and cyber-attacks. For example, our digital solutions to improve sales, customer experience, enhance our operations and increase our business efficiencies could be impeded by such damages, disruptions or intrusions. To try to minimize such risks, we safeguard our systems and electronic information through a set of cybersecurity controls, processes and a proactive monitoring service to attend potential breaches. In addition, we also have disaster recovery plans in case of incidents that could cause major disruptions to our business. However, these measures may not be sufficient, and our systems have in the past been subject to certain minor intrusions. As of December 31, 2018, we have not detected, and our third-party service providers have not informed us of, any relevant event that has materially damaged, disrupted or resulted in an intrusion of our systems. Any significant information leakages or theft of information, or any unlawful processing of personal data, could affect our compliance with data privacy laws and make us subject to regulatory action, including substantial fines, and private litigation with potentially large costs, as well as damage our relationship with our employees, customers and suppliers, which could have a material adverse impact on our business, financial condition and results of operations. As of December 31, 2018, our insurance did not cover any risk associated with cybersecurity risks. Nevertheless, our insurance has limited coverage for physical loss or damage to insured property, data or equipment such as: introduction of malware to destroy data, Distributed Denial of Service (DDOS) attack against network and attacks on an industrial control system resulting in damage to equipment and/or property. In addition, any significant disruption to our systems could have a material adverse effect on our business, financial condition and results of operations.

Activities in our business can be hazardous and can cause injury to people or damage to property in certain circumstances.

Most of our production facilities and units, as well as mineral extractions locations, require individuals to work with chemicals, equipment and other materials that have the potential to cause harm and injury when used without due care. An accident or injury that occurs at our facilities could result in disruptions to our business and operations and have legal and regulatory consequences and we may be required to compensate such individuals or incur other costs and liabilities, any and all of which could have a material adverse impact on our reputation, business, financial condition, results of operations and prospects.

Labor activism and unrest, or failure to maintain satisfactory labor relations, could adversely affect our results of operations.

Labor activism and unrest may adversely affect our operations and thereby adversely affect our business, financial condition, results of operations and prospects. Although most of our significant operations have not been affected by any significant labor dispute in the past, we cannot assure you that we will not experience labor unrest, activism, disputes or actions in the future, some of which may be significant and could adversely affect our business, financial condition, results of operations and prospects. The activity of labor unions in Mexico is expected to increase, as a result of law that permits unions to actively seek sponsorship of collective bargaining agreements.

Increases in liabilities related to our pension plans could adversely affect our results of operations.

We have obligations under defined benefit pension and other benefit plans in certain countries in which we operate, mainly in North America and Europe. Our actual funding obligations will depend on benefit plan changes, government regulations and other factors, including changes in longevity and mortality statistics. Due to the large number of variables and assumptions that determine pension liabilities and funding requirements, which are difficult to predict because they change continuously as demographics evolve despite the fact that we support our projections with studies by external actuaries, our net projected liability recognized in the statement of financial position of Ps18,937 million (U.S.$964 million) as of December 31, 2018 and the future cash funding requirements for our defined benefit pension plans and other postemployment benefit plans could significantly differ from the amounts estimated as of December 31, 2018. If so, these funding requirements, as well as our possible inability to properly fund such pension plans if we are unable to deliver the cash or equivalent funding requirements, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our insurance coverage may not cover all the risks to which we may be exposed.

We face the risks of loss and damage to our products, injury to our employees, property and machinery due to, among others, fire, theft and natural disasters such as floods, and also face risks related to cyber security related matters. Such events may cause a disruption to or cessation of our operations and business. While we believe that we have adequate and sufficient coverage, in line with industry practices, in some instances our insurance coverage may not be sufficient to cover all of our potential unforeseen losses and liabilities. In addition, our insurance coverage may not cover all the risks to which we may be exposed, such as cyber security risks. If our losses exceed our insurance coverage, or if we are not covered by the insurance policies we have taken up, we may be liable to cover any shortfall or losses. Our insurance premiums may also increase substantially because of such claims. In such circumstances, our financial results may be materially adversely affected.

Our success depends on the leadership of CEMEX, S.A.B. de C.V.’s board of directors and on key members of our management.

Our success depends largely on the efforts and strategic vision of CEMEX, S.A.B. de C.V.’s board of directors and of our executive management team. The loss of the services of some or all of the members of CEMEX, S.A.B. de C.V.’s board of directors or our executive management could have a material adverse effect on our business, financial condition and results of operations.

The execution of our business strategy also depends on our ongoing ability to attract and retain additional qualified employees. For a variety of reasons, particularly with respect to the competitive environment and the availability of skilled labor, we may not be successful in attracting and retaining the personnel we require. If we are unable to hire, train and retain qualified employees at a reasonable cost, we may be unable to successfully operate our business or capitalize on growth opportunities and, as a result, our business, financial condition and results of operations could be adversely affected.

We are subject to anti-corruption, anti-bribery, anti-money laundering and antitrust laws and regulations in the countries in which we operate. Any violation of any such laws or regulations could have a material adverse impact on our reputation and results of operations and financial condition.

We are subject to anti-corruption, anti-bribery, anti-money laundering, antitrust and other international laws and regulations and are required to comply with the applicable laws and regulations of the countries in which we operate. In addition, we are subject to regulations on economic sanctions that restrict our dealings with certain sanctioned countries, individuals and entities. Given the large number of contracts that we are a party to around the world, the geographic distribution of our operations and the great variety of actors that we interact within the course of business, we are subject to the risk that our affiliates, employees, directors, officers, partners, agents and service providers may misappropriate our assets, manipulate our assets or information, make improper payments or engage in corruption, bribery, money laundering or other illegal activity, for such person’s personal or business advantage.

There can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of law by our affiliates, employees, directors, officers, partners, agents and service providers or that any such persons will not take actions in violation of our policies and procedures. If we fail to fully comply with applicable laws and regulations, the relevant government authorities of the countries where we operate have the power and authority to impose fines and other penalties. Any violations by us of anti-bribery and anti-corruption laws or sanctions regulations could have a material adverse effect on our business, reputation, results of operations and financial condition.

For further information regarding our ongoing proceedings with respect to anti-corruption laws, see “—We are subject to litigation proceedings, including a federal securities class action, government investigations relating to corruption related matters and antitrust proceedings, that could harm our business if an unfavorable ruling were to occur” and “Regulatory Matters and Legal Proceedings.”

Certain tax matters may have an adverse effect on our cash flow, financial condition and net income.

We are subject to certain tax matters, mainly in Mexico, Colombia and Spain, that, if adversely resolved, may have a material adverse effect on our cash flow, financial condition and net income. See notes 2.13 and 19.4 to our 2018 audited consolidated financial statements included in the February 28 6-K, “Regulatory Matters and Legal Proceedings—Tax Matters—Mexico,” “Regulatory Matters and Legal Proceedings—Tax Matters—Colombia,” and “Regulatory Matters and Legal Proceedings—Tax Matters—Spain” for a description of the legal proceedings regarding these Mexican, Colombian and Spanish tax matters, all included elsewhere in this report.

It may be difficult to enforce civil liabilities against us or the members of CEMEX, S.A.B. de C.V.’s board of directors, our executive officers and controlling persons.

CEMEX, S.A.B. de C.V. is a publicly traded variable stock corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico. Substantially all members of CEMEX, S.A.B. de C.V.’s board of directors and the majority of the members of our senior management reside in Mexico, and all or a significant portion of the assets of those persons may be, and the majority of our assets are, located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon such persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our General Counsel, Roger Saldaña Madero, that there is doubt as to the enforceability in Mexico, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the U.S. federal securities laws.

The protections afforded to non-controlling shareholders in Mexico are different from those in the United States and may be more difficult to enforce.

Under Mexican law, the protections afforded to non-controlling shareholders are different from those in the United States and countries in continental Europe. In particular, the legal framework and case law pertaining to directors’ duties and disputes between shareholders and us, the members of CEMEX, S.A.B. de C.V.’s board of directors, our officers or CEMEX, S.A.B. de C.V.’s controlling shareholders, are less developed under Mexican law

than under U.S. and continental European law. Mexican law only permits shareholder derivative suits (i.e., suits for our benefit as opposed to the direct benefit of our shareholders) and there are procedural requirements for bringing shareholder derivative lawsuits, such as minimum holdings, which differ from those in effect in other jurisdictions. There is also a substantially less active plaintiffs’ bar dedicated to the enforcement of shareholders’ rights in Mexico than in the United States. As a result, in practice it may be more difficult for our non-controlling shareholders to initiate an action against us or our directors or controlling shareholders or obtain direct remedies than it would be for shareholders of a U.S. company.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The financial data set forth below as of and for each of the five years ended December 31, 2018 have been derived from our audited consolidated financial statements. The financial data set forth below as of December 31, 2017 and 2018 and for each of the three years ended December 31, 2016, 2017 and 2018 have been derived from, and should be read in conjunction with, and are qualified in their entirety by reference to, our 2018 audited consolidated financial statements included in the February 28 6-K. Our 2018 audited consolidated financial statements prepared under IFRS for the year ended December 31, 2018 remain subject to the approval of our shareholders at the ordinary general shareholders’ meeting to be held on March 28, 2019. See “Recent Developments—Recent Developments Relating to Our Shareholders—CEMEX, S.A.B. de C.V. to hold its Ordinary and Extraordinary General Shareholders’ Meeting on March 28, 2019.”

The operating results of newly acquired businesses are consolidated in our financial statements beginning on the acquisition date. Therefore, all periods presented do not include operating results corresponding to newly acquired businesses before we assumed control. As a result, the financial data for the years ended December 31, 2016, 2017 and 2018 may not be comparable to that of prior periods.

Our 2018 audited consolidated financial statements included in the February 28 6-K, have been prepared in accordance with IFRS, which differ in significant respects from U.S. GAAP. The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS (as published by the IASB) to reconcile such financial statements to U.S. GAAP.

Non-Mexican Peso amounts included in the consolidated financial statements are first translated into Dollar amounts, in each case at a commercially available or an official government exchange rate for the relevant period or date, as applicable, and those Dollar amounts are then translated into Mexican Peso amounts at the exchange rate that we use for accounting purposes (the “CEMEX accounting rate”). The CEMEX accounting rate on any given date is determined based on the closing exchange rate reported by certain sources, such as Reuters. For any given date, the CEMEX accounting rate may differ from the noon buying rate for Mexican Pesos in New York City published by the U.S. Federal Reserve Bank of New York.

The Dollar amounts provided below, unless otherwise indicated elsewhere in this report, are translations of Mexican Peso amounts at an exchange rate of Ps19.65 to U.S.$1.00, the CEMEX accounting rate as of December 31, 2018. However, in the case of transactions conducted in Dollars, we have presented the U.S. Dollar amount of the transaction and the corresponding Mexican Peso amount that is presented in our 2018 audited consolidated financial statements included in the February 28 6-K. These translations have been prepared solely for the convenience of the reader and should not be construed as representations that the Mexican Peso amounts actually represent those Dollar amounts or could be converted into Dollars at the rate indicated. The noon buying rate for Mexican Pesos on December 31, 2018 was Ps19.64 to U.S.$1.00. Between January 1, 2019 and March 11, 2019, the Mexican Peso appreciated by approximately 2% against the U.S. Dollar, based on the noon buying rate for Mexican Pesos.

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Selected Consolidated Financial Information


	As of and For the Year Ended December 31,
	2014			2015			2016			2017			2018
	(in millions of Mexican Pesos, except ratios and share and per share amounts)
Income Statement Information:
Revenues	Ps	199,942		Ps	219,299		Ps	249,477		Ps	257,437		Ps	276,855
Cost of sales⁽¹⁾		(134,742	)		(144,513	)		(159,946	)		(168,858	)		(182,965	)
Gross profit		65,200			74,786			89,531			88,579			93,890
Operating expenses		(43,347	)		(47,910	)		(53,913	)		(55,967	)		(60,694	)
Operating earnings before other expenses, net⁽²⁾		21,853			26,876			35,618			32,612			33,196
Other, net		(5,045	)		(3,032	)		(1,670	)		(3,815	)		(5,837	)
Operating earnings⁽²⁾		16,808			23,844			33,948			28,797			27,359
Financial items⁽³⁾		(18,952	)		(21,117	)		(17,020	)		(15,685	)		(12,501	)
Share of profit of equity accounted investees		294			737			688			588			653
Earnings (loss) before income tax		(1,850	)		3,464			17,616			13,700			15,511
Discontinued operations⁽⁴⁾⁽⁵⁾		90			1,028			713			3,461			212
Non-controlling interest net income		1,103			923			1,173			1,417			789
Controlling interest net income (loss)		(6,783	)		1,201			14,031			15,224			10,467
Basic earnings (loss) per share⁽⁶⁾⁽⁷⁾		(0.16	)		0.03			0.32			0.34			0.22
Diluted earnings (loss) per share⁽⁶⁾⁽⁷⁾		(0.16	)		0.03			0.32			0.34			0.22
Basic earnings (loss) per share from continuing operations⁽⁶⁾⁽⁷⁾		(0.16	)		0.01			0.30			0.26			0.22
Diluted earnings (loss) per share from continuing operations⁽⁶⁾⁽⁷⁾		(0.16	)		0.01			0.30			0.26			0.22
Number of shares outstanding^(6)(8)(9)		37,370			49,124			48,668			48,439			48,015
Statement of Financial Position Information:
Cash and cash equivalents		12,589			15,322			11,616			13,741			6,068
Assets held for sale⁽⁴⁾⁽⁵⁾		—			1,945			21,029			1,378			2,100
Property, machinery and equipment, net		202,928			216,694			230,134			232,160			224,440
Total assets		514,961			542,264			599,728			567,691			552,628
Short-term debt		14,507			223			1,222			16,973			883
Long-term debt		191,327			229,125			235,016			177,022			182,074
Liabilities directly related to assets held for sale		—			—			815			—			314
Non-controlling interest and Perpetual Debentures⁽¹⁰⁾		17,068			20,289			28,951			30,879			30,883
Total controlling interest		131,103			143,479			167,774			179,540			188,650
Other Financial Information:
Net working capital⁽¹¹⁾		20,757			16,806			7,920			3,012			650
Book value per share^(6)(9)(12)		3.51			2.92			3.45			3.71			3.93
Operating margin before other expense, net		10.9%			12.3%			14.2%			12.6%			11.9%
Operating EBITDA from continuing operations⁽¹³⁾		35,556			41,534			51,605			48,600			49,266
Ratio of Operating EBITDA to interest expense⁽¹³⁾		1.7			2.1			2.4			2.5			3.9
Capital expenditures		9,486			12,313			13,279			12,419			12,969
Depreciation and amortization		13,703			14,658			15,987			15,988			16,070
Net cash flow provided by operating activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes		35,445			43,441			61,342			51,420			43,316
Basic earnings (loss) per CPO of continuing operations⁽⁶⁾⁽⁷⁾		(0.48	)		0.03			0.90			0.78			0.66
Basic earnings (loss) per CPO⁽⁶⁾⁽⁷⁾		(0.48	)		0.09			0.96			1.02			0.66
Total debt plus other financial obligations		244,429			268,203			273,868			226,216			207,724

(1)

Cost of sales includes depreciation, amortization and depletion of assets involved in production, expenses related to storage in production plants, freight expenses of raw materials in plants and delivery expenses of our ready-mix concrete business. Our cost of sales excludes (i) expenses related to personnel and equipment comprising our selling network and those expenses related to warehousing at the points of sale and (ii) freight expenses of finished products from our producing plants to our points of sale and from our points of sale to our customers’ locations, which are all included as part of the line item titled “Operating expenses.”

(2)

In the income statements, CEMEX includes the line item titled “Operating earnings before other expenses, net” considering that is a relevant measure for CEMEX’s management as explained in note 2.1 to our 2018 audited consolidated financial statements included in the February 28 6-K. Under IFRS, while there are line items that are customarily included in the income statements, such as revenues, operating costs and expenses and financial revenues and expenses, among others, the inclusion of certain subtotals such as “Operating earnings before other expenses, net” and the display of such income statements varies significantly by industry and company according to specific needs.

(3)

Financial items include financial expenses and our financial income and other items, net, which includes our results in the sale of associates and remeasurement of previously held interest before change in control of associates, financial income, results from financial instruments, net (derivatives, fixed-income investments and other securities), foreign exchange results and effects of net present value on assets and liabilities and others, net. See notes 7 and 16 to our 2018 audited consolidated financial statements included in the February 28 6-K.

(4)

On October 31, 2015, after all agreed upon conditions precedent were satisfied, we completed the sale of our operations in Austria and Hungary to the Rohrdorfer Group for €165 million (U.S.$179 million or Ps3,090 million) after final adjustments for changes in cash and working capital balances as of the transfer date. Our combined operations in Austria and Hungary consisted of 29 aggregates quarries and 68 ready-mix plants. The operations in Austria and Hungary for the ten-month period ended October 31, 2015, included in our consolidated income statements, were reclassified to the single line item “Discontinued operations.” As per IFRS, our statement of financial position as of December 31, 2014 was not restated as a result of the sale of our operations in Austria and Hungary. On May 26, 2016, we closed the sale of our operations in Bangladesh and Thailand to Siam City Cement Public Company Ltd. (“SIAM Cement”) for U.S.$70 million. As per IFRS, our statement of financial position as of December 31, 2015 was not restated as a result of the sale of our operations in Thailand and Bangladesh. The operations in Bangladesh and Thailand for the period from January 1, 2016 to May 26, 2016 and the year 2015, included in our consolidated statement of operations, were reclassified to the single line item “Discontinued operations”. In addition, as of December 31, 2016, the Concrete Pipe Business was reclassified to assets held for sale and directly related liabilities on our consolidated statement of financial position, including U.S.$260 million (Ps5,369 million) of goodwill associated with the reporting segment in the United States that was proportionally allocated to these net assets based on their relative fair values. On January 31, 2017, one of CEMEX, S.A.B. de C.V.’s subsidiaries in the U.S. closed the sale of our U.S. Reinforced Concrete Pipe Manufacturing Business (the “Concrete Pipe Business”) to Quikrete Holdings, Inc. (“Quikrete”) for U.S.$500 million plus an additional U.S.$40 million contingent consideration based on future performance. Considering that we disposed of our entire concrete pipe division, the operations of the Concrete Pipe Business, as included in our consolidated income statements for the years ended December 31, 2015 and 2016 and for the one-month period ended January 31, 2017, were reclassified to the single line item “Discontinued Operations.” On June 30, 2017, one of our subsidiaries in the U.S. closed the divestment of its Pacific Northwest Materials Business (the “Pacific Northwest Materials Business”), consisting of aggregates, asphalt and ready-mix concrete operations in Oregon and Washington to Cadman Materials, Inc. (“Cadman Materials”), a Lehigh Hanson Inc. company and a subsidiary of HeidelbergCement Group, for U.S.$150 million. Considering the disposal of our Pacific Northwest Materials Business, these operations, as included in our consolidated income statements for the years ended December 31, 2015, 2016 and 2017, were reclassified to the single line item “Discontinued Operations.” On September 27, 2018, we concluded the sale of our construction materials operations in Brazil (the “Brazilian Operations”) through the sale to Votorantim Cimentos N/NE S.A. of all shares of our Brazilian subsidiary Cimento Vencemos Do Amazonas Ltda, consisting of a fluvial cement distribution terminal located in Manaus, Amazonas province, as well as the related operating license. The sale price was U.S.$31 million (Ps54 million). Our Brazilian Operations for the period from January 1 to September 27, 2018 and the years 2017 and 2016 were reclassified to the single line item “Discontinued Operations.” See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K. The information related to our consolidated income statement for the year ended December 31, 2015 has not been reclassified to present the financial result of that year of our Brazilian Operations in a single line item as discontinued operations. Also, the information related to our consolidated income statement for the year ended December 31, 2014 has not been reclassified to present the financial result of that year of our Brazilian Operations and the Pacific Northwest Materials Business in a single line item as discontinued operations.

(5)

On August 12, 2015, we entered into an agreement for the sale of our operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia, to Duna-Dráva Cement Kft. for €231 million (U.S.$243 million or Ps5,032 million). Those operations mainly consist of three cement plants with aggregate annual production capacity of approximately 2.4 million tons of cement, two aggregates quarries and seven ready-mix plants. On April 5, 2017, we announced that the European Commission issued a decision that restricted completion of the sale. Therefore, the sale of our operations in Croatia did not close, and we maintained our operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia (our “Croatian Operations”). As of December 31, 2016 and 2017 and for the years ended December 31, 2017, 2016 and 2015, the Croatian Operations are consolidated line-by-line in the financial statements. The information related to our consolidated financial statements for the year ended December 31, 2014 in which we previously reported the Croatian Operations as “Discontinued Operations” and “Assets held for sale,” has not been reclassified to present the Croatian Operations as part of continuing operations in our consolidated income statements or line-by-line in our consolidated statements of financial position. We believe that the effects are not significant. See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

(6)

CEMEX, S.A.B. de C.V.’s capital stock consists of Series A shares and Series B shares. Each CPO represents two Series A shares and one Series B share. As of December 31, 2018, approximately 99.1% of CEMEX, S.A.B. de C.V.’s outstanding share capital was represented by CPOs. Each ADS represents ten CPOs.

(7)

Earnings (loss) per share is calculated based upon the weighted average number of shares outstanding during the year, as described in note 22 to our 2018 audited consolidated financial statements included in the February 28 6-K. Basic earnings (loss) per CPO is determined by multiplying the basic earnings (loss) per share for each period by three (the number of shares underlying each CPO). Basic earnings (loss) per CPO is presented solely for the convenience of the reader and does not represent a measure under IFRS. As shown in notes 4.2 and 22 to our 2018 audited consolidated financial statements included in the February 28 6-K, and in connection with the sale of our operations in Austria, Hungary, Thailand, Bangladesh and the sales of Concrete Pipe Business and Pacific Northwest Materials Business, and the sale of our Brazilian Operations, for the year ended December 31, 2016, “Basic earnings per share” includes Ps0.30 from “Continuing operations,” for the year ended December 31, 2017, “Basic earnings per share” includes Ps0.26 from “Continuing operations” and for the year ended December 31, 2018, “Basic earnings per share” includes Ps0.22 from “Continuing operations.” In addition, for the years ended December 31, 2016 and 2017, “Basic earnings per share” includes Ps0.02 and Ps0.08, respectively, from “Discontinued operations.” Likewise, for the year ended December 31, 2016, “Diluted earnings per share” includes Ps0.30 from “Continuing operations,” for the year ended December 31, 2017, “Diluted earnings per share” includes Ps0.26 from “Continuing operations” and for the year ended December 31, 2018, “Diluted earnings per share” includes Ps0.22 from “Continuing operations.” In addition, for the years ended December 31, 2016, and 2017, “Diluted earnings per share” includes Ps0.02 and Ps0.08, respectively, from “Discontinued operations.” See note 22 to our 2018 audited consolidated financial statements included in the February 28 6-K. ¹

¹	NTD: CX to confirm that disclosure as of year-end 2016 and 2017 is sufficient and that disclosure as of December 31, 2018 is not relevant in this paragraph.

(8)

CEMEX, S.A.B. de C.V. did not declare a dividend for fiscal years 2014, 2015, 2016 and 2017. For the fiscal year 2018, CEMEX, S.A.B. de C.V. has proposed that a cash dividend be authorized at CEMEX, S.A.B. de C.V.’s general ordinary shareholders meeting to be held on March 28, 2019. At each of CEMEX, S.A.B. de C.V.’s 2014, 2015, 2016 and 2017 annual general ordinary shareholders’ meetings, held on March 26, 2015, March 31, 2016, March 30, 2017 and April 5, 2018, respectively, CEMEX, S.A.B. de C.V.’s shareholders approved a recapitalization of retained earnings. New CPOs issued pursuant to each such recapitalization were allocated to shareholders on a pro-rata basis. As a result, shares equivalent to approximately 500 million CPOs, approximately 539 million CPOs, approximately 562 million CPOs and approximately 250 million were allocated to shareholders on a pro-rata basis in connection with the 2014, 2015, 2016 and 2017 recapitalizations, respectively. In each case, CPO holders received one new CPO for each 25 CPOs held and ADS holders received one new ADS for each 25 ADSs held. There was no cash distribution and no entitlement to fractional shares.

(9)	Based upon the total number of shares outstanding at the end of each period, expressed in millions of shares, and includes shares subject to financial derivative transactions, but does not include shares held by our subsidiaries.

(10)

As of December 31, 2014, 2015, 2016, 2017 and 2018, non-controlling interest includes U.S.$466 million (Ps6,869 million), U.S.$440 million (Ps7,581 million), U.S.$438 million (Ps9,075 million), U.S.$447 million (Ps8,784 million) and U.S.$444 million (Ps8,729 million), respectively, that represents the nominal amount of Perpetual Debentures, denominated in Dollars and Euros, issued by consolidated entities. In accordance with IFRS, these securities qualify as equity due to their perpetual nature and the option to defer the coupons.

(11)	Net working capital equals trade receivables, less allowance for doubtful accounts plus inventories, net, less trade payables.

(12)	Book value per share is calculated by dividing the total controlling interest by the number of shares outstanding.

(13)

Operating EBITDA equals operating earnings before other expenses, net, plus amortization and depreciation expenses. Operating EBITDA is calculated and presented because we believe that it is widely accepted as a financial indicator of our ability to internally fund capital expenditures and service or incur debt, and the consolidated ratio of Operating EBITDA to interest expense is calculated and presented because it is used to measure our performance under certain of our financing agreements. Operating EBITDA and such ratio are non-IFRS measures and should not be considered as indicators of our financial performance as alternatives to cash flow, as measures of liquidity or as being comparable to other similarly titled measures of other companies. Under IFRS, while there are line items that are customarily included in income statements prepared pursuant to IFRS, such as revenues, operating costs and expenses and financial revenues and expenses, among others, the inclusion of certain subtotals, such as operating earnings before other expenses, net, and the display of such income statement varies significantly by industry and company according to specific needs. Our Operating EBITDA may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation. Operating EBITDA is reconciled below to operating earnings before other expenses, net, as reported in the income statements, and to net cash flows provided by operating activities before financial expense, coupons on Perpetual Debentures and income taxes, as reported in the statement of cash flows. Financial expense under IFRS does not include coupon payments of the Perpetual Debentures issued by consolidated entities of Ps420 million in 2014, Ps432 million in 2015, Ps507 million in 2016, Ps482 million in 2017 and approximately Ps553 million in 2018, as described in note 20.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.


	For the Year Ended December 31,
	2014			2015			2016			2017			2018
	(in millions of Mexican Pesos)
Reconciliation of Operating EBITDA to net cash flows provided by operations activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes
Operating EBITDA	Ps	35,556		Ps	41,534		Ps	51,605		Ps	48,600		Ps	49,266
Less:
Depreciation and amortization expense		13,703			14,658			15,987			15,988			16,070

Operating earnings before other expenses, net		21,853			26,876			35,618			32,612			33,196

Plus/minus:
Changes in working capital excluding income taxes		1,475			3,596			11,017			8,039			(1,062	)
Depreciation and amortization expense		13,703			14,658			15,987			15,988			16,070
Other items, net		(1,586	)		(1,689	)		(1,280	)		(5,219	)		(4,888	)

Net cash flow provided by operations activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes	Ps	35,445		Ps	43,441		Ps	61,342		Ps	51,420		Ps	43,316

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview

The following discussion and analysis should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements for the years ended as of December 31, 2017 and 2018, and for each of the three years ended December 31, 2016, 2017 and 2018, included in the February 28 6-K.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements based on IFRS (as published by IASB) to reconcile such financial statements to U.S. GAAP.

The percentage changes in cement sales volumes described in this report for our operations in a particular country or region include the number of tons of cement and/or the number of cubic meters of ready-mix concrete sold to our operations in other countries and regions. Likewise, unless otherwise indicated, the financial information of revenues presented in this report for our operations in each country or region includes the Mexican Peso amount of sales derived from sales of cement and ready-mix concrete to our operations in other countries and regions, which have been eliminated in the preparation of our 2018 audited consolidated financial statements included in the February 28 6-K.

Newly-Issued IFRS Adopted as of December 31, 2018

IFRS 9, Financial Instruments: classification and measurement (“IFRS 9”)

Effective January 1, 2018, IFRS 9 sets forth the guidance relating to the classification and measurement of financial assets and financial liabilities, the accounting for expected credit losses of financial assets and commitments to extend credits, as well as the requirements for hedge accounting; IFRS 9 replaced IAS 39, Financial instruments: recognition and measurement (“IAS 39”). We applied IFRS 9 prospectively. The accounting policies were changed to comply with IFRS 9. The changes required by IFRS 9 are described as follows:

Among other aspects, IFRS 9 changed the classification categories for financial assets under IAS 39 and replaced them with categories that more closely reflect the measurement method, the contractual cash flow characteristics and the entity’s business model for managing the financial asset:

●

Cash and cash equivalents, trade and other accounts receivable and other financial assets, which were classified as “Loans and receivables” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

●

Investments and non-current accounts receivable that were classified as “Held to maturity” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

●

Investments that were classified as “Held for trading” and measured at fair value through profit or loss under IAS 39, are now classified as “Other investments” under IFRS 9 and are measured at fair value through profit or loss.

●

Certain investments that were classified as “Held for sale” and measured at fair value through other comprehensive income under IAS 39, are now considered as strategic investments under IFRS 9 and continue to be measured at fair value through other comprehensive income.

Debt instruments and other financial obligations continue to be classified as “Loans” and measured at amortized cost under IFRS 9 and derivative financial instruments continue to be measured at fair value through profit or loss under IFRS 9.

We assessed which business models applied to our financial assets and liabilities as of the date of initial application of IFRS 9 and classified our financial instruments into the appropriate IFRS 9 categories. As of January 1, 2018, the changes due to the classification and measurement requirements under IFRS 9 did not impact either the measurement or carrying amount of financial assets and liabilities and there was no effect on our retained earnings.

In addition, under the new impairment model under IFRS 9 based on expected credit losses, impairment losses for the entire lifetime of financial assets, including trade accounts receivable, are recognized on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, accounting for their measurement, past events and current conditions, as well as reasonable and supportable forecasts affecting collectability. We developed an expected credit loss model applicable to our trade accounts receivable that considers the historical performance and economic environment, as well as the credit risk and expected developments for each group of customers and applied the simplified approach upon adoption of IFRS 9. The effects of the adoption of IFRS 9 on January 1, 2018, related to the expected credit loss model represented an increase in our allowance for expected credit losses of Ps570 million recognized against retained earnings, net of a deferred income tax asset of Ps154 million. The balances of such allowance and deferred tax assets increased from the reported amounts as of December 31, 2017, of Ps2,145 million and Ps14,817 million, respectively, to Ps2,715 million and Ps14,971 million as of January 1, 2018, respectively, after the adoption effects.

In connection with hedge accounting under IFRS 9, among other changes, there is a relief for entities in performing: a) the retrospective effectiveness test at inception of the hedging relationship and b) the requirement to maintain a prospective effectiveness ratio between 0.8 and 1.25 at each reporting date for purposes of sustaining the hedging designation, both requirements of IAS 39. Under IFRS 9, a hedging relationship can be established to the extent the entity considers, based on the analysis of the overall characteristics of the hedging and hedged items, that the hedge will be highly effective in the future and the hedge relationship at inception is aligned with the entity’s reported risk management strategy. IFRS 9 maintains the same hedge accounting categories of cash flow hedge, fair value hedge and hedge of a net investment established in IAS 39, as well as the requirement of recognizing the ineffective portion of a cash flow hedge immediately in the income statement. We performed an analysis of our derivative financial instruments upon adoption of IFRS 9 on January 1, 2018 and determined that the changes in hedge accounting described above did not impact either the measurement or carrying amount of the assets and liabilities related to our derivative financial instruments and there was no effect on our retained earnings.

IFRS 15, Revenues from contracts with customers (“IFRS 15”)

Under IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five-step model: Step 1: Identify the contract(s) with a customer (agreement that creates enforceable rights and obligations); Step 2: Identify the different performance obligations (promises) in the contract and account for those separately; Step 3: Determine the transaction price (amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services); Step 4: Allocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. A performance obligation may be satisfied at a point in time (typically for the sale of goods) or over time (typically for the sale of services and construction contracts). IFRS 15 also includes disclosure requirements to provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 became effective on January 1, 2018 and supersedes all existing guidance on revenue recognition.

After an extensive analysis of our contracts with customers, business practices and operating systems for all the reported periods in all the countries in which we operate in order to review the different performance obligations and other promises (discounts, loyalty programs, rebates, etc.) included in such contracts, aimed to determine the differences in the accounting recognition of revenue with respect to prior IFRS, we adopted IFRS 15 on January 1, 2018, using the retrospective approach, without any significant effects on our operating results and financial situation, and restated our previously reported amounts of revenues for 2017 and 2016, resulting in an initial reclassification of other provisions to contract liabilities of Ps660 million as of January 1, 2016, and a subsequent net decrease in revenue of Ps2 million in 2016 and a net decrease in revenue of Ps8 million in 2017 related to IFRS 15. See note 3 to our 2018 audited consolidated financial statements included in the February 28 6-K. These changes in revenues refer to certain discounts and rebates included in certain contracts and were recognized against deferred revenue as contract liabilities in the statement of financial position after IFRS 15 effects. See note 17 to our 2018 audited consolidated financial statements included in the February 28 6-K. Changes in equity upon adoption were not significant.

Critical Accounting Policies

The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. These assumptions are reviewed on an ongoing basis using available information. Actual results could differ from these estimates.

The main items subject to estimates and assumptions by management include impairment tests of long-lived assets, recognition of deferred income tax assets, as well as the measurement of financial instruments at fair value and assets, liabilities related to employee benefits and revenue recognition. Significant judgment by management is required to appropriately assess the amounts of these assets and liabilities.

As of December 31, 2017 and 2018 and for the years ended December 31, 2016, 2017 and 2018, identified below are the accounting policies we have applied under IFRS that are critical to understanding our overall financial reporting.

Income Taxes

Our operations are subject to taxation in many different jurisdictions throughout the world. The effects reflected in the income statement for income taxes include the amounts incurred during the period and the amounts of deferred income taxes, determined according to the income tax law applicable to each subsidiary. Consolidated deferred income taxes represent the addition of the amounts determined in each subsidiary by applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable values of assets and liabilities, considering tax loss carryforwards as well as other recoverable tax credits, to the extent that it is probable that future taxable profits will be available against which they can be utilized. The measurement of deferred income taxes at the reporting period reflects the tax consequences that follow the manner in which CEMEX expects to recover or settle the carrying amount of its assets and liabilities. Deferred income taxes for the period represent the difference between balances of deferred income taxes at the beginning and the end of the period. Deferred income tax assets and liabilities relating to different tax jurisdictions are not offset. According to IFRS, all items charged or credited directly in stockholders’ equity or as part of other comprehensive income or loss for the period are recognized net of their current and deferred income tax effects. The effect of a change in enacted statutory tax rates is recognized in the period in which the change is officially enacted. Our worldwide tax position is highly complex and subject to numerous laws that require interpretation and application and that are not consistent among the countries in which we operate. Significant judgment is required to appropriately assess the amounts of tax assets and liabilities.

Deferred tax assets, mainly related to tax loss carryforwards, are reviewed at each reporting date and are reduced when it is not deemed probable that the related tax benefit will be realized, considering the aggregate amount of self-determined tax loss carryforwards that we believe will not be rejected by the tax authorities based on available evidence and the likelihood of recovering them prior to their expiration through an analysis of estimated future taxable income. If it is probable that the tax authorities would reject a self-determined deferred tax asset, we would decrease such asset. When it is considered that a deferred tax asset will not be recovered before its expiration, we would not recognize such deferred tax asset. Both situations would result in additional income tax expense for the period in which such determination is made. In order to determine whether it is probable that deferred tax assets will ultimately be recovered, we take into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, tax planning strategies, future reversals of existing temporary differences. Likewise, we analyze our actual results versus our estimates, and adjust, as necessary, our tax asset valuations. If actual results vary from our estimates, the deferred tax asset and/or valuations may be affected, and necessary adjustments will be made based on relevant information in our income statement for such period.

The income tax effects from an uncertain tax position are recognized when it is probable that the position will be sustained based on its technical merits and assuming that the tax authorities will examine each position and have full knowledge of all relevant information, and they are measured using a cumulative probability model. Each position has been considered on its own, regardless of its relation to any other broader tax settlement. The probability threshold represents a positive assertion by management that we are entitled to the economic benefits of a tax position. If it is improbable for a tax position to be sustained, no benefits of the position are recognized. Our policy is to recognize interest and penalties related to unrecognized tax benefits as part of the income tax in the consolidated income statements.

Our overall tax strategy is to structure our worldwide operations to reduce or defer the payment of income taxes on a consolidated basis. Many of the activities we undertake in pursuing this tax reduction strategy are highly complex and involve interpretations of tax laws and regulations in multiple jurisdictions and are subject to review by the relevant taxing authorities. It is possible that the taxing authorities could challenge our application of these regulations to our operations and transactions. The taxing authorities have in the past challenged interpretations that we have made and have assessed additional taxes. Although we have, from time to time, paid some of these additional assessments, in general, we believe that these assessments have not been material and that we have been successful in sustaining our positions. No assurance can be given, however, that we will continue to be as successful as we have been in the past or that pending appeals of current tax assessments will be judged in our favor.

Our effective income tax rate is determined by dividing the line item “Income tax” in our consolidated income statements into the line item “Earnings before income tax.” This effective tax rate is further reconciled to our statutory tax rate applicable in Mexico and is presented in note 19.3 to our 2018 audited consolidated financial statements included in the February 28 6-K. A significant effect on our effective tax rate, and consequently in the reconciliation of our effective tax rate, relates to the difference between the statutory income tax rate in Mexico of 30% against the applicable income tax rates of each country where we operate. For the years ended December 31, 2016, 2017 and 2018, the statutory tax rates in our main operations were as follows:


Country	2016			2017			2018
Mexico		30.0	%		30.0	%		30.0	%
United States		35.0	%		35.0	%		21.0	%
United Kingdom		20.0	%		19.3	%		19.3	%
France		34.4	%		34.4	%		34.4	%
Germany		28.2	%		28.2	%		28.2	%
Spain		25.0	%		25.0	%		25.0	%
Philippines		30.0	%		30.0	%		30.0	%
Colombia		40.0	%		40.0	%		37.0	%
Egypt		22.5	%		22.5	%		22.5	%
Others		7.8% - 39.0%			7.8% - 39.0%			7.8% - 39.0%

Our current and deferred income tax amounts included in our consolidated income statements are highly variable, and are subject, among other factors, to the amounts of taxable income determined in each jurisdiction in which we operate. Such amounts of taxable income depend on factors such as sale volumes and prices, costs and expenses, exchange rates fluctuations and interest on debt, among others, as well as on the estimated tax assets at the end of the period due to the expected future generation of taxable gains in each jurisdiction. See our discussion of operations included elsewhere in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Derivative financial instruments

In compliance with the guidelines established by our Risk Management Committee, the restrictions in our debt agreements and our hedging strategy, we use derivative financial instruments with the objectives of: (a) changing the risk profile or setting a fixed the price of fuels and electric energy; (b) foreign exchange hedging; (c) hedging forecasted transactions; and (d) accomplishing other corporate objectives.

Derivative financial instruments are recognized as assets or liabilities in the balance sheet at their estimated fair values, and changes in such fair values are recognized in the income statements within “Financial income and other items, net” for the period in which they occur, except for changes in the fair value of derivative instruments associated with cash flow hedges, in which case, such changes in fair value are recognized in stockholders’ equity, and are reclassified to earnings as the interest expense of the related debt is accrued, in the case of interest rate swaps, or when the underlying products are consumed in the case of contracts on the price of raw materials, fuel and commodities. Likewise, in hedges of the net investment in foreign subsidiaries, changes in fair value are recognized in stockholders’ equity as part of the foreign currency translation result, which reversal to earnings would take place upon disposal of the foreign investment. During the reported periods, we have not designated any derivative instruments in fair value hedges. Derivative instruments are negotiated with institutions with significant financial capacity; therefore, we believe the risk of non-performance of the obligations agreed to by such counterparties to be minimal. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

The estimated fair value under IFRS represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, considering the counterparty’s credit risk in the valuation, that is, an exit price or a market-based measurement.

The concept of exit value is premised on the existence of a market and market participants for the specific asset or liability. When there is no market and/or market participants willing to make a market, IFRS establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

●

Level 1—It represents quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. A quoted price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available.

●

Level 2—These are inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly, and are used mainly to determine the fair value of securities, investments or loans that are not actively traded. Level 2 inputs included equity prices, certain interest rates and yield curves, implied volatility, credit spreads and other market corroborated inputs, including inputs extrapolated from other observable inputs. In the absence of Level 1 inputs, we determined fair values by iteration of the applicable Level 2 inputs, the number of securities and/or the other relevant terms of the contract, as applicable.

●

Level 3—These are unobservable inputs for the asset or liability. We use unobservable inputs to determine fair values, to the extent there are no Level 1 or Level 2 inputs, in valuation models such as Black-Scholes, binomial, discounted cash flows or multiples of Operating EBITDA, including risk assumptions consistent with what market participants would use to arrive at fair value.

Significant judgment and estimates by management are required to appropriately identify the corresponding level of fair value applicable to each derivative financing transaction, as well as to assess the amounts of the resulting assets and liabilities, mainly in respect of Level 2 and Level 3 fair values, in order to account for the effects of derivative financial instruments in the financial statements. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Impairment of financial assets

Impairment losses of financial assets, including trade accounts receivable, are recognized using the expected credit loss model for the entire lifetime of such financial assets on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, considering for their measurement past events and current conditions, as well as reasonable and supportable forecasts affecting collectability.

Allowances for credit losses were established until December 31, 2017 based on incurred loss analyses over delinquent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. Beginning in 2018, such allowances are determined and recognized upon origination of the trade accounts receivable based on a model that calculates the expected credit loss (“ECL”) of the trade accounts receivable. See note 2.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Under this ECL model, we segment our accounts receivable in a matrix by country, type of client or homogeneous credit risk and days past due and determine for each segment an average rate of ECL, considering actual credit loss experience over the last 24 months and analyses of future delinquency, that is applied to the balance of accounts receivable. The average ECL rate increases in each segment of days past due until the rate is 100% for the segment of 365 days or more past due. See note 9 to our 2018 audited consolidated financial statements included in the February 28 6-K. Significant judgment and estimates by management are required to appropriately assess expected credit losses under IFRS 9.

Impairment of long-lived assets

Our statement of financial position reflects significant amounts of long-lived assets (including property, machinery and equipment, goodwill, intangible assets of definite life and other investments) associated with our operations throughout the world. Many of these amounts have resulted from past acquisitions, which have required us to reflect these assets at their fair market values at the dates of acquisition. According to their characteristics and the specific accounting rules related to them, we assess the recoverability of our long-lived assets at least once a year, normally during the fourth quarter, as is the case for goodwill, or whenever events or circumstances arise that we believe trigger a requirement to review such carrying values, as is the case with property, machinery and equipment and intangible assets of definite life.

Property, machinery and equipment, intangible assets of definite life and other investments are tested for impairment upon the occurrence of factors such as the occurrence of a significant adverse event, changes in our operating environment, changes in projected use or in technology, as well as expectations of lower operating results for each cash generating unit, in order to determine whether their carrying amounts may not be recovered. In such cases, an impairment loss is recorded in the income statements for the period when such determination is made within “Other expenses, net.” The impairment loss of an asset results from the excess of the asset’s carrying amount over its recoverable amount, corresponding to the higher of the fair value of the asset, less costs to sell such asset, and the asset’s value in use, the latter represented by the net present value of estimated cash flows related to the use and eventual disposal of the asset.

We do not have intangible assets of indefinite life other than goodwill. As mentioned above, goodwill is tested for impairment when required due to significant adverse changes or at least once a year, during the last quarter of such year, by determining the recoverable amount of the group of cash-generating units (“CGUs”) to which goodwill balances have been allocated, which consists of the higher of such group of CGUs fair value, less cost to sell and its value in use, represented by the discounted amount of estimated future cash flows to be generated by such CGUs to which goodwill has been allocated. Other intangible assets of indefinite life may be tested at the CGU or group of CGUs level, depending on their allocation. We determine discounted cash flows generally over periods of five years. In specific circumstances, when, according to our experience, actual results for a given cash-generating unit do not fairly reflect historical performance and most external economic variables provide us with confidence that a reasonably determinable improvement in the mid-term is expected in their operating results, management uses cash flow projections over a period of up to ten years, to the point in which future expected average performance resembles the historical average performance and to the extent we have detailed, explicit and reliable financial forecasts and is confident and can demonstrate its ability, based on past experience, to forecast cash flows accurately over that longer period. If the value in use of a group of CGUs to which goodwill has been allocated is lower than its corresponding carrying amount, we determine the fair value of our reporting units using methodologies generally accepted in the market to determine the value of entities, such as multiples of Operating EBITDA and by reference to other market transactions, among others. An impairment loss under IFRS is recognized within other expenses, net, if the recoverable amount is lower than the net book value of the group of CGUs to which goodwill has been allocated. Impairment charges recognized on goodwill are not reversed in subsequent periods.

For the years ended December 31, 2016, 2017 and 2018, the reportable segments we presented in note 4.4 to our 2018 audited consolidated financial statements included in the February 28 6-K represent our groups of CGUs to which goodwill has been allocated for purposes of testing goodwill for impairment. In arriving at this conclusion, we considered: (a) that after the acquisition, goodwill was allocated at the level of the reportable operating segment; (b) that the operating components that comprise the reported segment have similar economic characteristics; (c) that the reported segments are used by us to organize and evaluate its activities in its internal information system; (d) the homogenous nature of the items produced and traded in each operative component, which are all used by the construction industry; (e) the vertical integration in the value chain of the products comprising each component; (f) the type of clients, which are substantially similar in all components; (g) the operative integration among components; and (h) whether the compensation system of the specific country is based on the consolidated results of the reportable segment and not on the particular results of the components. In addition, the country level represents the lowest level within us at which goodwill is monitored for internal management purposes.

Significant judgment by management is required to appropriately assess the fair values and values in use of these assets. Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of our products, the development of operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets as well as the discount rates and the growth rates in perpetuity applied. For purposes of estimating future prices, we use, to the extent available, historical data plus the expected increase or decrease according to information issued by trusted external sources, such as national construction or cement producer chambers and/or in governmental economic expectations. Operating expenses are normally measured as a constant proportion of revenues, following past experience. However, such operating expenses are also reviewed considering external information sources in respect to inputs that behave according to international prices, such as gas and oil. We use specific pre-tax discount rates for each group of CGUs to which goodwill is allocated, which are applied to pre-tax cash flows. The amounts of estimated undiscounted cash flows are significantly sensitive to the growth rate in perpetuity applied. Likewise, the amounts of discounted estimated future cash flows are significantly sensitive to the weighted average cost of capital (discount rate) applied. The higher the growth rate in perpetuity applied, the higher the amount obtained of undiscounted future cash flows by group of CGUs obtained. Conversely, the higher the discount rate applied, the lower the amount obtained of discounted estimated future cash flows by group of CGUs obtained. Additionally, we monitor the useful lives assigned to these long-lived assets for purposes of depreciation and amortization, when applicable. This determination is subjective and is integral to the determination of whether impairment has occurred.

During the last quarter of each of 2016, 2017 and 2018, we performed our annual goodwill impairment test. Based on these analyses, during 2017, in connection with the operating segment in Spain, considering the uncertainty over the improvement indicators affecting the country’s construction industry, and consequently in the expected consumption of cement, ready-mix concrete and aggregates, partially a result of the country’s complex prevailing political environment, which has limited expenditure in infrastructure projects, as well as the uncertainty in the expected price recovery and the effects of increased competition and imports, our management determined that the net book value of such operating segment in Spain exceeded the amount of the net present value of projected cash flows by Ps1,920 million (U.S.$98 million). As a result, we recognized an impairment loss of goodwill in 2017 for the aforementioned amount as part of “Other expenses, net” in the income statement against the related goodwill balance. During 2018 and 2016, we did not determine impairment losses of goodwill. See note 15.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Pretax discount rates and long-term growth rates used to determine the discounted cash flows in the group of CGUs with the main goodwill balances in 2016, 2017 and 2018 are as follows:


	Discount rates									Growth rates
Operating segments	2016			2017			2018			2016			2017			2018
United States		8.6	%		8.8	%		8.5	%		2.5	%		2.5	%		2.5	%
Spain		9.5	%		9.5	%		8.8	%		1.6	%		1.7	%		1.7	%
Mexico		9.8	%		10.2	%		9.4	%		2.9	%		2.7	%		3.0	%
Colombia		10.0	%		10.5	%		9.5	%		4.0	%		3.7	%		3.6	%
France		9.1	%		9.0	%		8.4	%		1.8	%		1.8	%		1.6	%
United Arab Emirates		10.2	%		10.4	%		11.0	%		3.4	%		3.1	%		2.9	%
United Kingdom		8.8	%		9.0	%		8.4	%		1.9	%		1.7	%		1.6	%
Egypt		11.4	%		11.8	%		10.8	%		6.0	%		6.0	%		6.0	%
Range of discount rates in other countries		9.1% - 12.8%			9.1% - 11.7%			8.5% - 13.3%			2.2% - 7.0%			2.3% - 6.8%			2.5% - 6.9%

As of December 31, 2018, the discount rates we used in our cash flows projections in the countries with the most significant goodwill balances decreased slightly, in most cases, within the range of 0.3% up to 1 percentage point, except for the United Arab Emirates and the Caribbean, as compared to the values determined in 2017. This reduction was mainly attributable to a decrease in CEMEX, S.A.B. de C.V.’s stock volatility (beta) and general decreases in the country-specific sovereign yields in the majority of the countries where we operate and the weighing of debt in the calculation effects that were partially offset for increases during 2018 in the funding cost observed in the industry that changed from 6.1% in 2017 to 7.3% in 2018 and the risk free rate associated with us which increased from 2.8% in 2017 to 2.9% in 2018. As of December 31, 2017, the discount rates we used in our cash flow projections increased slightly in countries with the most significant goodwill balances as compared to the values determined in 2016. During the year, the funding cost observed in the industry decreased from 6.2% in 2016 to 6.1% in 2017, and the risk multiple attributed to us also decreased from approximately 1.29 in 2016 to 1.26 in 2017. Nonetheless, these decreases were offset by an increase in the risk-free rate from 2.70% in 2016 to 2.76% in 2017, as well as by overall increases in the sovereign risk rates of certain major countries. As of December 31, 2016, the discount rates remained almost flat in most cases as compared to the values determined in 2015. Among other factors, the funding cost observed in the industry decreased from 6.9% in 2015 to 6.2% in 2016, and the risk-free rate also decreased from approximately 3.2% in 2015 to 2.7% in 2016. Nonetheless, these increases were offset by reductions in 2016 in the country-specific sovereign yields for the majority of the countries where CEMEX operates. With respect to long-term growth rates, following general practice under IFRS, CEMEX uses country-specific rates, which are mainly obtained from the Consensus Economics, a compilation of analysts’ forecasts worldwide, or from the International Monetary Fund when the first are not available for a specific country.

In connection with our assumptions included in the table above, we performed sensitivity analyses to changes in assumptions, affecting the value in use of all groups of cash-generating units with an independent reasonably possible increase of 1% in the pre-tax discount rate and an independent possible decrease of 1% in the long-term growth rate. In addition, we performed cross-check analyses for reasonableness of our results using multiples of Operating EBITDA. In order to arrive at these multiples, which represent a reasonableness check of our discounted cash flow models; we determined a weighted average of multiples of Operating EBITDA to enterprise value observed in the industry and/or in recent mergers and acquisitions in the industry. The average multiple was then applied to a stabilized amount of Operating EBITDA and the result was compared to the corresponding carrying amount for each group of cash-generating units to which goodwill has been allocated. We considered an industry weighted average Operating EBITDA multiple of 9.0 times for each of 2016 and 2017 and 11.1 times for 2018. The lowest multiple observed in our benchmark as of December 31, 2016, 2017 and 2018, was 5.9 times, 6.5 times and 6.7 times, respectively, and the highest was 18.3 times, 18.9 times and 14.9 times, respectively.

As of December 31, 2016, 2017 and 2018, except for our operating segment in Spain described above, in which we determined an impairment loss of goodwill in 2017, none of our sensitivity analyses resulted in a potential impairment risk in our operating segments. Nonetheless, we continually monitor the evolution of the specific cash-generating units to which goodwill has been allocated and, in the event that the relevant economic variables and the related cash flows projections would be negatively affected, it may result in a goodwill impairment loss in the future.

As of December 31, 2017 and 2018, goodwill allocated to the United States accounted in both years for 78% of our total amount of consolidated goodwill. In connection with our determination of value in use relative to our groups of CGUs in the United States in the reported periods, we have considered several factors, such as the historical performance of such operating segment, including operating results in recent years, the long-term nature of our investment, the recent signs of recovery in the construction industry, the significant economic barriers for new potential competitors considering the high investment required and the lack of susceptibility of the industry to technology improvements or alternate construction products, among other factors. We have also considered recent developments in our operations in the United States, such as the decrease in ready-mix concrete volumes of approximately 1% in 2017, affected by the hurricanes occurred in Texas and Florida during the year, and the increase of 1% in 2016, and the increases in ready-mix concrete prices of approximately 2% in 2018, 1% in 2017 and 1% in 2016, which are key drivers for cement consumption and our profitability, and which trends are expected to continue over the next few years, as anticipated in our cash flow projections.

As a result of impairment tests conducted on several cash-generating units considering certain triggering events, mainly: a) the closing and/or reduction of operations of cement and ready-mix concrete plants resulting from adjusting our supply to current demand conditions, such as the situation in Puerto Rico in the last quarter of 2016 due to the adverse outlook and the overall uncertain economic conditions in such country, b) the transferring of installed capacity to more efficient plants, such as the change in operating model of a cement mill to distribution center in Colombia and c) the recoverability of certain investments in Colombia, we recognized impairment losses on property, plant and equipment, for an aggregate amount of Ps1,899 million (U.S.$101 million), Ps984 million (U.S.$52 million) and Ps445 million (U.S.$23 million) in 2016, 2017 and 2018, respectively, and adjusted the related fixed assets to their estimated value in use in those circumstances in which the assets would continue in operation based on estimated cash flows during their remaining useful life, or to their realizable value, in case of permanent shut down.

During 2016, 2017 and 2018, the breakdown of impairment losses of fixed assets by country was as follows:


	For the Year Ended December 31,
	2016		2017		2018
	(in millions of Mexican Pesos)
United States		Ps277		Ps153		Ps252
Poland		—		—		94
Colombia		454		—		37
Spain		—		452		35
Mexico		46		45		25
Czech Republic		—		157		—
Panama		—		56		—
France		—		50		—
Latvia		—		46		—
Puerto Rico		1,087		—		—
Others		25		25		2

		Ps 1,899		Ps 984		Ps 445

See note 14 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Assets and liabilities related to employee benefits

The costs associated with our employees’ benefits for: (a) defined benefit pension plans and (b) other post-employment benefits, primarily comprised of health care benefits, life insurance and seniority premiums, granted by us and/or pursuant to applicable law, are recognized as services rendered, based on actuarial estimations of the benefits’ present value with the advice of external actuaries. For certain pension plans, we have created irrevocable trust funds to cover future benefit payments (“plan assets”). These plan assets are valued at their estimated fair value at the statement of financial position date. The actuarial assumptions and accounting policy consider: (a) the use of nominal rates; (b) a single rate is used for the determination of the expected return on plan assets and the discount of the benefits obligation to present value; (c) a net interest is recognized on the net defined benefit liability (liability minus plan assets); and (d) all actuarial gains and losses for the period, related to differences between the projected and real actuarial assumptions at the end of the period, as well as the difference between the expected and real return on plan assets, are recognized as part of “Other items of comprehensive income, net” within stockholders’ equity.

The service cost, corresponding to the increase in the obligation for additional benefits earned by employees during the period, is recognized within operating costs and expenses. The net interest cost, resulting from the increase in obligations for changes in net present value (NPV) and the change during the period in the estimated fair value of plan assets, is recognized within “Financial income and other items, net.”

The effects from modifications to the pension plans that affect the cost of past services are recognized within operating costs and expenses over the period in which such modifications become effective to the employees or without delay if changes are effective immediately. Likewise, the effects from curtailments and/or settlements of obligations occurring during the period, associated with events that significantly reduce the cost of future services and/or reduce significantly the population subject to pension benefits, respectively, are recognized within operating costs and expenses.

Revenue Recognition

As previously mentioned, we adopted IFRS 15 on January 1, 2018, using the retrospective approach. Our policies under IFRS 15 are as follows:

Revenue is recognized at a point in time or over time in the amount of the price, before tax on sales, expected to be received by our subsidiaries for goods and services supplied as a result of their ordinary activities, as contractual performance obligations are fulfilled, and control of goods and services passes to the customer. Revenues are decreased by any trade discounts or volume rebates granted to customers. Transactions between related parties are eliminated in consolidation.

We recognize variable consideration when it is highly probable that a significant reversal in the amount of cumulative revenue recognized for the contract will not occur and is measured using the expected value or the most likely amount method, whichever is expected to better predict the amount based on the terms and conditions of the contract.

Revenue from trading activities, in which we acquire finished goods from a third party and subsequently sell the goods to another third-party, are recognized on a gross basis, considering that we assume the total risk on the goods purchased, not acting as agent or broker.

When revenue is earned over time as contractual performance obligations are satisfied, which is the case of construction contracts, we apply the stage of completion method to measure revenue, which represents: (i) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs; (ii) the surveys of work performed; or (iii) the physical proportion of the contract work completed, whichever better reflects the percentage of completion under the specific circumstances. Revenue and costs related to construction contracts are recognized in the period in which the work is performed by reference to the contract’s stage of completion at the end of the period, considering that the following have been defined: (a) each party’s enforceable rights regarding the asset under construction; (b) the consideration to be exchanged; (c) the manner and terms of settlement; (d) actual costs incurred and contract costs required to complete the asset are effectively controlled; and (e) it is probable that the economic benefits associated with the contract will flow to the entity. Progress payments and advances received from customers do not reflect the work performed and are recognized as a short or long-term advanced payments, as appropriate.

Newly-Issued IFRS not Adopted as of December 31, 2018

There are a number of IFRS that were issued but not adopted as of December 31, 2018.

IFRS 16, Leases (“IFRS 16”)

IFRS 16 defines leases as any contract or part of a contract that conveys to the lessee the right to use an asset for a period of time in exchange for consideration and the lessee directs the use of the identified asset throughout that period. In summary, IFRS 16 introduces a single lessee accounting model, and requires a lessee to recognize, for all leases, allowing exemptions in case of the leases with a term of less than 12 months or when the underlying asset is of low value, assets for the right-of-use the underlying asset against a corresponding financial liability, representing the net present value of estimated lease payments under the contract, with a single income statement model in which a lessee recognizes amortization of the right-of-use asset and interest on the lease liability. A lessee shall present either in the statement of financial position, or disclose in the notes, right-of-use assets separately from other assets, as well as lease liabilities separately from other liabilities. IFRS 16 became effective as of January 1, 2019 and supersedes all their current standards and interpretations related to lease accounting.

As of December 31, 2018, by means of analyses of our outstanding lease contracts and other contracts that may have embedded the use of an asset and the assessment of the most relevant characteristics of such contracts (types of assets, committed payments, maturity dates, renewal clauses, etc.), we had substantially concluded the inventory and measurement of our leases for purposes of adopting IFRS 16 that is in our final review. Moreover, we defined our accounting policy under IFRS 16 and will apply the recognition exception for short-term leases and low-

value assets, as well as the practical expedient to not separate the non-lease component from the lease component included in the same contract. We adopted IFRS 16 effective January 1, 2019 using the full retrospective approach pursuant to which prior periods will be restated. Upon adoption of IFRS 16, we estimated a range for our opening statement of financial position effects as of January 1, 2017, as follows:


	As of January 1, 2017
	Low		High
	(in millions of U.S. dollars)
Assets for the right-of-use	$	920	$	942
Financial liabilities		(1,030)		(1,060)
Retained earnings¹	$	(110)	$	(118)

(1)

The effect refers to a timing difference between depreciation expense of the assets calculated under the straight-line method and the interest expense from the liability determined under the effective interest rate method since the beginning of the contracts. This difference will reverse over the remaining life of the contracts.

In addition to IFRS 16, there are several amendments or new IFRS that were issued but not yet effective as of December 31, 2018. See note 2.20 to our audited consolidated financial statements included in the February 28 6-K.

RESULTS OF OPERATIONS

Consolidation of Our Results of Operations

Our 2018 audited consolidated financial statements included in the February 28 6-K include those subsidiaries in which we hold a controlling interest or which we otherwise control. Control exists when we have the power, directly or indirectly, to govern the administrative, financial and operating policies of an entity in order to obtain benefits from its activities.

Investments in associates are accounted for by the equity method, when we have significant influence, which is generally presumed with a minimum equity interest of 20% unless it is proven that we have significant influence with a lower percentage. Under the equity method, after acquisition, the investment’s original cost is adjusted for the proportional interest of the holding company in the associate’s equity and earnings, considering the effects of inflation.

All balances and transactions between the group subsidiaries have been eliminated in consolidation.

Discontinued operations

Considering the disposal of entire reportable operating segments, our income statements present in the single line item of “Discontinued operations,” the results of: (a) our construction materials operations in Brazil sold on September 27, 2018, for the years 2016, 2017 and the period from January 1 to September 27, 2018; (b) our Pacific Northwest Materials Business operations in the United States sold on June 30, 2017, for the year 2016 and the six-months ended June 30, 2017; (c) our Concrete Pipe Business operations in the United States sold on January 31, 2017, for the year 2016 and the one-month ended January 31, 2017; and (d) our operations in Bangladesh and Thailand sold on May 26, 2016, for the period from January 1 to May 26, 2016. Discontinued operations are presented net of income tax. See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Significant transactions

For the years ended December 31, 2016, 2017 and 2018, our consolidated results reflect the following transactions:

●

In August 2018, a subsidiary of CEMEX, S.A.B. de C.V. in the United Kingdom acquired the shares of the ready-mix producer Procon Readymix Ltd (“Procon”) for an amount in Pounds Sterling equivalent to U.S.$22 million, considering the Pound Sterling to Dollar exchange rate as of August 31, 2018. See note 4.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

●

On September 27, 2018, a subsidiary of CEMEX, S.A.B. de C.V. concluded the sale of our Brazilian Operations through the sale to Votorantim Cimentos N/NE S.A. of all the shares of our Brazilian subsidiary Cimento Vencemos Do Amazonas Ltda, consisting of a fluvial cement distribution terminal located in Manaus, Amazonas province, as well as the related operating license. The sale price was U.S.$31 million (Ps54 million). See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

●

On September 29, 2017, one of our subsidiaries in the U.S. closed the divestment of the Block USA Materials Business, consisting of concrete block, architectural block, concrete pavers, retaining walls and building material operations in Alabama, Georgia, Mississippi and Florida, to Oldcastle APG South, Inc. (“Oldcastle”) for U.S.$38 million. The proceeds obtained from this sale were used mainly for debt reduction and general corporate purposes.

●

On September 28, 2017, CEMEX, S.A.B. de C.V. sold its then remaining direct interest in Grupo Cementos de Chihuahua, S.A.B. de C.V. (“GCC”), consisting of 31,483,332 shares of common stock of GCC, representing 9.47% of the equity capital of GCC for U.S.$168 million (Ps3,012 million), which was used for debt reduction and general corporate purposes. Following this sale of shares, we no longer held a direct interest in GCC but continued to hold an indirect share of 20% in GCC through our minority interest in CAMCEM, S.A. de C.V. (“CAMCEM”).

●

On June 30, 2017, one of our subsidiaries in the U.S. closed the divestment of the Pacific Northwest Materials Business, consisting of aggregates, asphalt and ready-mix concrete operations in Oregon and Washington to Cadman Materials for U.S.$150 million. The proceeds obtained from this sale were used mainly for debt reduction and general corporate purposes.

●

On February 15, 2017, we sold 45,000,000 shares of common stock of GCC, representing 13.53% of the equity capital of GCC, at a price of Ps95 per share in a public offering to investors in Mexico authorized by the Comisión Nacional Bancaria y de Valores (Mexican National Banking and Securities Commission) (the “CNBV”) and in a concurrent private placement to eligible investors outside of Mexico. Prior to the offerings, CEMEX, S.A.B. de C.V. owned a 23% direct interest in GCC and a minority interest in CAMCEM, an entity which owns a majority interest in GCC. After the GCC offerings, CEMEX, S.A.B. de C.V. owned a 9.47% direct interest in GCC and a minority interest in CAMCEM. Proceeds from the sale were Ps4,094 million (U.S.$210 million). The proceeds from the GCC shares offerings were used for general corporate purposes.

●

On February 10, 2017, one of our subsidiaries in the United States sold its Fairborn, Ohio cement plant and cement terminal in Columbus, Ohio to Eagle Materials for U.S.$400 million. The proceeds obtained from this transaction were used mainly for debt reduction and for general corporate purposes.

●

On January 31, 2017, one of CEMEX, S.A.B. de C.V.’s subsidiaries in the U.S. closed the sale of the Concrete Pipe Business to Quikrete for U.S.$500 million plus an additional U.S.$40 million contingent consideration based on future performance.

●

On December 5, 2016, Sierra Trading (“Sierra”), one of CEMEX, S.A.B. de C.V.’s indirect subsidiaries, presented the Offer to all shareholders of TCL, a company then publicly listed in Trinidad and Tobago, Jamaica and Barbados, to acquire up to 132,616,942 ordinary shares in TCL, pursuant to which Sierra offered the Offer Price payable, at the option of shareholders of TCL except for shareholders of TCL in Barbados, in either TT$ or U.S.$ in Trinidad, and Jamaican Dollars or U.S.$ in Jamaica TCL. The Offer Price represented a premium of 50% over the December 1, 2016 closing price of TCL’s shares on the Trinidad and Tobago Stock Exchange. The total number of TCL shares tendered and accepted in response to the Offer was 113,629,723 which, together with Sierra’s pre-existing shareholding in TCL (147,994,188 shares), represent 69.83% of the outstanding TCL shares. The total cash payment by Sierra for the tendered shares was U.S.$86 million. CEMEX started consolidating TCL for financial reporting purposes on February 1, 2017. In March 2017, TCL de-listed from the Jamaica and Barbados stock exchanges. TCL’s subsidiaries include, but are not limited to CCCL, a publicly listed company in Jamaica, and Arawak, which, as of December 31, 2018, owned cement plants in Jamaica and Barbados, respectively;

●

On December 2, 2016, we agreed to the sale of our assets and operations related to our ready-mix concrete pumping business in Mexico to Mexico of Pumping Team S.L.L. (“Pumping Team”), a specialist in the supply of ready-mix concrete pumping services based in Spain, for Ps1,649 million. This agreement included the sale of fixed assets upon closing of the transaction for Ps309 million plus administrative and client and market development services. Under this agreement, we will also lease facilities in Mexico to Pumping Team over a period of ten years with the possibility to extend for three additional years, for an aggregate initial amount of Ps1,340 million, plus a contingent revenue subject to results for up to Ps557 million linked to annual metrics beginning in the first year and up to the fifth year of the agreement. On April 28, 2017, after receiving the approval by the Mexican authorities, we concluded the sale.

●

On November 18, 2016, after all conditions precedent were satisfied, CEMEX, S.A.B. de C.V. announced that it had closed the sale of certain assets in the U.S. to GCC for U.S.$306 million (Ps6,340 million). The assets were sold by an affiliate of CEMEX to an affiliate of GCC in the U.S., and mainly consisted of CEMEX’s cement plant in Odessa, Texas, two cement terminals and the building materials business in El Paso, Texas and Las Cruces, New Mexico.

●

On July 18, 2016, CHP closed its initial public offering of 45% of its common shares in the Philippines, and 100% of CHP’s common shares started trading on the Philippine Stock Exchange under the ticker “CHP.” As of December 31, 2017, CASE, an indirect subsidiary of CEMEX, S.A.B. de C.V., directly owned 55% of CHP’s outstanding common shares. The net proceeds to CHP from its initial public offering were U.S.$507 million after deducting estimated underwriting discounts and commissions, and other estimated offering expenses payable by CHP. CHP used the net proceeds from the initial public offering to repay existing indebtedness owed to BDO Unibank and to an indirect subsidiary of CEMEX, S.A.B. de C.V.

●

On May 26, 2016, we closed the sale of our operations in Bangladesh and Thailand to SIAM Cement for U.S.$70 million. The proceeds from this transaction were used mainly for debt reduction and for general corporate purposes. See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Selected Consolidated Income Statements Data

The following table sets forth our selected consolidated income statements data for each of the three years ended December 31, 2016, 2017 and 2018, expressed as a percentage of revenues.


	Year Ended December 31,
	2016		2017		2018
Revenues		100%		100%		100%
Cost of sales		(64.1)		(65.6)		(66.1)
Gross profit		35.9		34.4		33.9
Operating expenses		(21.6)		(21.7)		(21.9)
Operating earnings before other expenses, net		14.3		12.7		12.0
Other expenses, net		(0.7)		(1.5)		(2.1)
Operating earnings		13.6		11.2		9.9
Financial expense		(8.6)		(7.5)		(4.6)
Financial income and other items, net		1.8		1.4		0.03
Share of profit on equity accounted investees		0.3		0.2		0.3
Earnings before income tax		7.1		5.3		5.6
Income tax		(1.3)		(0.2)		(1.6)
Net income from continuing operations		5.8		5.1		4.0
Discontinued operations		0.3		1.4		0.1
Consolidated net income		6.1		6.5		4.1
Non-controlling interest net income		0.5		0.6		0.3
Controlling interest net income		5.6		5.9		3.8

Year Ended December 31, 2017 Compared to Year Ended December 31, 2018

Summarized in the table below are the percentage (%) increases (+) and decreases (-) for the year ended December 31, 2018, compared to the year ended December 31, 2017, in our domestic cement and ready-mix concrete sales volumes, as well as export sales volumes of cement and domestic cement and ready-mix concrete average sales prices for each of our reportable segments.

Reportable segments represent the components of CEMEX that engage in business activities from which we may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s top management to make decisions about resources to be allocated to the segments and assess their performance, and for which discrete financial information is available. We operate geographically and by line of business on a regional basis. For the reported periods, our operations were organized in five geographical regions, each under the supervision of a regional president, as follows: 1) Mexico, 2) United States, 3) Europe, 4) South, Central America and the Caribbean (“SCA&C”) and 5) Asia, Middle East and Africa. The accounting policies applied to determine the financial information by reportable segment are consistent with those described in note 2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Considering similar regional and economic characteristics and/or materiality, certain countries have been aggregated and presented as single line items as follows: (a) “Rest of Europe” refers mainly to our operations and activities in Croatia, Latvia, Scandinavia and Finland; (b) “Rest of South, Central America and the Caribbean” refers mainly to our operations and activities in Puerto Rico, Nicaragua, Jamaica, the Caribbean, Guatemala and El Salvador, excluding the acquired operations of the Caribbean TCL; (c) “Caribbean TCL” refers to TCL’s operations mainly in Trinidad and Tobago, Jamaica, Guyana and Barbados; and (d) “Rest of Asia, Middle East and Africa” refers mainly to our operations in the United Arab Emirates. The segment “Others” refers to: (1) cement trade maritime operations, (2) Neoris N.V., our subsidiary involved in the business of information technology solutions, (3) CEMEX, S.A.B. de C.V., other corporate entities and finance subsidiaries and (4) other minor subsidiaries with different lines of business.

The table below and the other volume data presented by reportable segment in this “—Year Ended December 31, 2018 Compared to Year Ended December 31, 2017” section are presented before eliminations resulting from consolidation (including those shown in note 4.4 to our 2018 audited consolidated financial statements included in the February 28 6-K).

Domestic Sales Volumes

Export Sales
Volumes

Average Domestic Sales
Prices in Local Currency(1)

Reportable Segment

Cement

Ready-Mix
Concrete

Cement

Ready-Mix
Concrete

Mexico

+1%

+10%

+51%

+3%

+8%

United States

+5%

+8%

—

+3%

+2%

Europe

United Kingdom

-4%

-5%

—

-1%

Flat

France

—

Flat

—

+4%

Germany

-1%

-9%

-24%

+2%

+6%

Spain

+4%

+34%

-30%

+5%

+2%

Poland

+7%

+4%

-60%

+6%

+10%

Czech Republic

+6%

-1%

-5%

+3%

+4%

Rest of Europe

-4%

-9%

-1%

+1%

+3%

South, Central America and the Caribbean

Colombia

-6%

-11%

—

+2%

Flat

Panama

-18%

-15%

—

-1%

-7%

Costa Rica

+1%

+6%

-19%

+3%

+5%

Caribbean TCL

+6%

+10%

+22%

+2%

-11%

Dominican Republic

-1%

-8%

-10%

+11%

+4%

Rest of South, Central America and the Caribbean

+3%

-21%

-84%

Flat

-3%

Asia, Middle East and Africa

Philippines

+7%

Flat

+4%

+1%

Flat

Egypt

Flat

-21%

—

+18%

+33%

Israel

—

+4%

—

+2%

Rest of Asia, Middle East and Africa

-20%

+4%

-28%

Flat

-1%

“—” = Not Applicable

(1) Represents the average change in domestic cement and ready-mix concrete prices in local currency terms. For purposes of a reportable segment consisting of a region, the average prices in local currency terms for each individual country within the region are first translated into Dollar terms (except for the Rest of Europe, in which they are translated first into Euros) at the exchange rates in effect as of the end of the reporting period. Variations for a region represent the weighted average change of prices in Dollar terms (except for the Rest of Europe, in which they represent the weighted average change of prices in Euros) based on total sales volumes in the region.

On a consolidated basis, our cement sales volumes increased 2%, from 68.2 million tons in 2017 to 69.4 million tons in 2018, and our ready-mix concrete sales volumes increased 3%, from 51.7 million cubic meters in 2017 to 53.3 cubic meters in 2018. Our revenues increased 8%, from Ps257,437 million in 2017 to Ps276,855 million in 2018, and our operating earnings before other expenses, net increased 2%, from Ps32,612 million in 2017 to Ps33,196 million in 2018.

The following tables present selected financial information of revenues and operating earnings before other expenses, net for each of our reportable segments for the years ended December 31, 2017 and 2018. The information of revenues in the table below is presented before eliminations resulting from consolidation (including those shown in note 4.4 to our 2018 audited consolidated financial statements included in the February 28 6-K). Variations in revenues determined on the basis of Mexican Pesos include the appreciation or depreciation which occurred during the period between the local currencies of the countries in the regions vis-à-vis the Mexican Peso; therefore, such variations differ substantially from those based solely on the countries’ local currencies:

Reportable Segment

Variation in
Local
Currency(1)

Approximate
Currency
Fluctuations

Variation in
Mexican Pesos

Revenues
For the Year Ended

2017

2018

(in millions of Mexican Pesos)

Mexico

+9%

—

+9%

Ps 58,442

Ps 63,543

United States

+8%

+2%

+10%

65,536

72,345

Europe

United Kingdom

-4%

+5%

+1%

20,179

20,431

France

+7%

+6%

+13%

16,162

18,308

Germany

+1%

+7%

+8%

10,056

10,836

Spain

+4%

+7%

+11%

6,870

7,627

Poland

+20%

+6%

+26%

5,552

6,989

Czech Republic

+1%

+9%

+10%

3,450

3,796

Rest of Europe

+4%

+2%

+6%

5,989

6,365

South, Central America and the Caribbean

Colombia

-7%

+1%

-6%

10,685

10,088

Panama

-17%

+5%

-12%

5,112

4,490

Costa Rica

-5%

—

-5%

2,805

2,674

Caribbean TCL

+10%

+3%

+13%

4,332

4,893

Dominican Republic

+10%

-2%

+8%

3,913

4,218

Rest of South, Central America and the Caribbean

-1%

+1%

—

7,803

7,781

Asia, Middle East and Africa

Philippines

+6%

-2%

+4%

8,296

8,612

Egypt

+17%

+2%

+19%

3,862

4,586

Israel

+5%

+2%

+7%

11,377

12,128

Rest of Asia, Middle East and Africa

+4%

+2%

+6%

2,139

2,263

Others

+13%

—

+13%

21,820

24,667

Revenues from continuing operations before eliminations resulting from consolidation

+8%

Ps 274,380

Ps 296,640

Eliminations resulting from consolidation

(16,943)

(19,785)

Revenues from continuing operations

+8%

Ps 257,437

Ps 276,855


	Variation in Local Currency⁽¹⁾		Approximate Currency Fluctuations		Variation in Mexican Pesos		Operating Earnings Before Other Expenses, Net For the Year Ended December 31,
	Variation in Local Currency⁽¹⁾		Approximate Currency Fluctuations		Variation in Mexican Pesos		2017		2018
Reportable Segment	(in millions of Mexican Pesos)
Mexico		+5%		—		+5%		Ps 18,969		Ps 20,006
United States		+30%		+8%		+38%		4,452		6,152
Europe
United Kingdom		-47%		+4%		-43%		1,766		1,007
France		+105%		+22%		+127%		306		695
Germany		-20%		+13%		-7%		234		217
Spain		+20%		+30%		+50%		(294)		(442)
Poland		+37%		—		+37%		286		393
Czech Republic		+10%		+8%		+18%		482		567
Rest of Europe		+19%		+8%		+27%		293		372
South, Central America and the Caribbean
Colombia		-21%		—		-21%		1,659		1,312
Panama		-47%		+2%		-45%		1,688		921
Costa Rica		-14%		+1%		-13%		901		782
Caribbean TCL		-2%		+59%		+57%		449		705
Dominican Republic		+14%		-4%		+10%		882		973
Rest of South, Central America and the Caribbean		-4%		+3%		-1%		1,271		1,257
Asia, Middle East and Africa
Philippines		-21%		-3%		-24%		866		660
Egypt		-24%		+1%		-23%		295		226
Israel		+5%		+1%		+6%		1,182		1,256
Rest of Asia, Middle East and Africa		-15%		—		-15%		310		264
Others		+5%		+17%		+22%		(3,385)		(4,127)

Operating earnings before other expenses, net from continuing operations						+2%		Ps 32,612		Ps 33,196

“—” = Not Applicable

(1)

Represents the variation in local currency terms. For purposes of a reportable segment consisting of a region, the variation in local currency terms for each individual country within the region are first translated into Dollar terms (except for the Rest of Europe, in which they are translated first into Euros) at the exchange rates in effect as of the end of the reporting period. Variations for a region represent the change in Dollar terms (except for the Rest of Europe region, in which they represent the change in Euros), net, in the region.

Revenues. Our consolidated revenues increased 8%, from Ps257,437 million in 2017 to Ps276,855 million in 2018. The increase was due to higher local currency prices for our products in all of our regions, as well as higher volumes mainly in the ready-mix and aggregates businesses in Mexico and the U.S. and higher cement volumes in the United States. Set forth below is a quantitative and qualitative analysis of the various factors affecting our revenues on a reportable segment basis. The discussion of volume data and revenues information below is presented before eliminations resulting from consolidation as described in note 4.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Mexico

Our domestic cement sales volumes from our operations in Mexico increased 1% in 2018 compared to 2017, and ready-mix concrete sales volumes increased 10% over the same period. Our revenues from our operations in Mexico represented 21% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Cement volumes during the year were supported by increased demand from the formal residential and industrial-and-commercial sector mitigated by lower infrastructure activity. In the formal residential sector, investment in mortgages for new home acquisitions continued to grow as INFONAVIT surpassed its 2018 target. In the industrial-and-commercial sector, favorable dynamics continued in tourism, office-space and manufacturing-related construction. Our cement export volumes from our operations in Mexico, which represented 6% of our Mexican cement sales volumes for the year ended December 31, 2018, increased 51% in 2018 compared to 2017. Of our total cement export volumes from our operations in Mexico during 2018, 63% was shipped to the United States, 1% to Costa Rica and 36% to our Rest of South, Central America and the Caribbean region. Our average sales price of domestic cement from our operations in Mexico increased 3%, in Mexican Peso terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 8%, in Mexican Peso terms, over the same period. For the year ended December 31, 2018, cement represented 57%, ready-mix concrete 22% and our aggregates and other businesses 21% of our revenues in Mexican Peso terms from our operations in Mexico before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales prices and domestic cement and ready-mix concrete sales volumes, our revenues in Mexico, in Mexican Peso terms, increased 9% in 2018 compared to 2017.

United States

Our domestic cement sales volumes from our operations in the United States increased 5% in 2018 compared to 2017, and ready-mix concrete sales volumes increased 8% over the same period. Residential and infrastructure activity were the main drivers of volume growth. In the industrial-and-commercial sector, construction spending was driven by offices, lodging and commercial activity. Regarding infrastructure, street-and-highway spending continued to grow in 2018. Contract awards in our key states are growing in the double-digits and in excess of the national average, driven by specific state infrastructure funding initiatives. Our operations in the United States represented 24% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average domestic cement sales prices of our operations in the United States increased 3%, in Dollar terms, in 2018 compared to 2017, and our average ready-mix concrete sales price increased 2%, in Dollar terms, over the same period. For the year ended December 31, 2018, cement represented 32%, ready-mix concrete 42% and our aggregates and other businesses 26% of revenues in Mexican Peso terms from our operations in the United States before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of the increases in domestic cement and ready-mix concrete sales volumes and domestic cement and ready-mix concrete sales prices, revenues from our operations in the United States, in Dollar terms, increased 8% in 2018 compared to 2017.

Europe

In 2018, our operations in the Europe region consisted of our operations in the United Kingdom, France, Germany, Spain, Poland and the Czech Republic, which represent the most significant operations in this region, in addition to the Rest of Europe, which refers primarily to operations in Croatia, Latvia, Scandinavia and Finland. Our revenues from our operations in the Europe region represented 25% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. As of December 31, 2018, our operations in the Europe region represented 20% of our total assets. Set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our revenues for our main operations in the Europe region.

United Kingdom

Our domestic cement sales volumes from our operations in the United Kingdom decreased 4% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 5% over the same period. The decreases in domestic cement and ready-mix concrete sales volumes reflect continued uncertainty around Brexit. Our operations in the United Kingdom represented 7% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in the United Kingdom decreased 1%, in Pound terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete remained flat, in Pound terms, over the same period. For the year ended December 31, 2018, cement represented 17%, ready-mix concrete 26% and our aggregates and other businesses 57% of revenues in Mexican Peso terms from our operations in the United Kingdom before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of decreases in domestic cement and ready-mix concrete sales volumes and domestic cement sales prices, revenues from our operations in the United Kingdom, in Pound terms, decreased 4% in 2018 compared to 2017.

France

Our ready-mix concrete sales volumes from our operations in France remained flat in 2018 compared to 2017. Infrastructure activity was the main driver of volume, including the “Grand Paris” project, as well as demand from the industrial-and-commercial sector. Our operations in France represented 6% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of ready-mix concrete of our operations in France increased 4%, in Euro terms, in 2018 compared to 2017. For the year ended December 31, 2018, ready-mix concrete represented 67% and our aggregates and other businesses 33% of revenues in Mexican Peso terms from our operations in France before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of the increases in ready-mix concrete sales prices, revenues from our operations in France, in Euro terms, increased 7% in 2018 compared to 2017.

Germany

Our domestic cement sales volumes from our operations in Germany decreased 1% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 9% over the same period. The decrease in ready-mix concrete volumes reflected, in part, continued supply constraints in the construction industry. This also resulted in lower domestic cement volumes supplied to our ready-mix concrete operations. Our operations in Germany represented 4% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in Germany, which represented 25% of our Germany cement sales volumes for the year ended December 31, 2018, decreased 24% in 2018 compared to 2017. Of our total cement export volumes from our operations in Germany during 2018, 21% were to Poland, 2% were to the Czech Republic and 77% were to our Rest of Europe region. Our average sales price of domestic cement from our operations in Germany increased 2%, in Euro terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 6%, in Euro terms, over the same period. For the year ended December 31, 2018, cement represented 27%, ready-mix concrete 36% and our aggregates and other businesses 37% of revenues in Mexican Peso terms from our operations in Germany before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of the increases in domestic cement and ready-mix concrete sales prices, partially offset by decreases in domestic cement and ready-mix concrete sales volumes, revenues from our operations in Germany, in Euro terms, increased 1% in 2018 compared to 2017.

Spain

Our domestic cement sales volumes from our operations in Spain increased 4% in 2018 compared to 2017, while ready-mix concrete sales volumes increased 34% over the same period. The increase in domestic cement and ready-mix concrete volumes reflected in part the introduction of ten new ready-mix concrete plants and three new aggregates quarries. Activity from the residential and industrial-and-commercial sectors continued to be favorable. The residential sector continued to benefit from favorable credit conditions, low interest rates, positive income perspectives and pent-up housing demand, with double-digit growth in both housing permits and mortgages. Our operations in Spain represented 3% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in Spain, which represented 38% of our Spain cement sales volumes for the year ended December 31, 2018, decreased 30% in 2018 compared to 2017. Of our total cement export volumes from our operations in Spain during 2018, 9% were to the South, Central America and the Caribbean region, 24% were to the United States, 25% were to the United Kingdom, 3% were to Poland, 10% were to the Rest of Europe region and 29% were to the Rest of Asia, Middle East and Africa region. Our average sales price of domestic cement of our operations in Spain increased 5%, in Euro terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 2%, in Euro terms, over the same period. For the year ended December 31, 2018, cement represented 72%, ready-mix concrete 16% and our aggregates and other businesses 12% of revenues in Mexican Peso terms from our operations in Spain before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales volumes and sales prices, revenues from our operations in Spain, in Euro terms, increased 4% in 2018 compared to 2017.

Poland

Our domestic cement sales volumes from our operations in Poland increased 7% in 2018 compared to 2017, while ready-mix concrete sales volumes increased 4% over the same period. The increases in domestic cement volumes during the year were mainly due to our participation in large infrastructure projects including the S-17 expressway and solid residential activity. Our operations in Poland represented 2% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in Poland, which represented less than 1% of our Poland cement sales volumes for the year ended December 31, 2018, decreased 60% in 2018 compared to 2017. Of our total cement export volumes from our operations in Poland during 2018, all were to our Rest of Europe region. Our average sales price of domestic cement of our operations in Poland increased 6%, in Polish Zloty terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 10%, in Polish Zloty terms, over the same period. For the year ended December 31, 2018, cement represented 47%, ready-mix concrete 37% and our aggregates and other businesses 16% of revenues in Mexican Peso terms from our operations in Poland before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales volumes and sales prices, revenues from our operations in Poland, in Polish Zloty terms, increased 20% in 2018 compared to 2017.

Czech Republic

Our domestic cement sales volumes from our operations in the Czech Republic increased 6% in 2018 compared to 2017, while ready-mix concrete sales volumes decreased 1% over the same period. Our operations in the Czech Republic represented 1% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in the Czech Republic, which represented 3% of our Czech Republic cement sales volumes for the year ended December 31, 2018, decreased 5% in 2018 compared to 2017. Of our total cement export volumes from our operations in the Czech Republic during 2018, 14% were to Germany, 62% were to Poland and 24% were to our Rest of Europe region. Our average sales price of domestic cement from our operations in the Czech Republic increased 3%, in Czech Koruna terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 4%, in Czech Koruna terms, over the same period. For the year ended December 31, 2018, our operations in the Czech Republic cement represented 30%, ready-mix concrete 46% and our aggregates and other businesses 24% of revenues in Mexican Peso terms from our operations in the Czech Republic before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement sales volumes and sales prices, and ready-mix concrete sales prices, partially offset by decreases in ready-mix concrete sales volumes, revenues from our operations in the Czech Republic, in Czech Koruna terms, increased 1% in 2018 compared to 2017.

Rest of Europe

Our domestic cement sales volumes from our operations in the Rest of Europe decreased 4% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 9% over the same period. Our cement export volumes from our operations in the Rest of Europe segment, which represented 36% of our Rest of Europe cement sales volumes for the year ended December 31, 2018, decreased 1% in 2018 compared to 2017. Of our total cement export volumes from our operations in Rest of Europe during 2018, 21% were to Germany, 5% were to Poland, 60% were within the region, 12% were to the Asia, Middle East and Africa region and 2% were to our Rest of South, Central America and the Caribbean region. Our revenues from our operations in the Rest of Europe represented 2% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in the Rest of Europe increased 1%, in Euro terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 3%, in Euro terms, over the same period. For the year ended December 31, 2018, cement represented 87%, ready-mix concrete 9% and our aggregates and other businesses 4% of revenues in Mexican Peso terms from our operations in the Rest of Europe before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales prices, partially offset by decreases in domestic cement and ready-mix concrete sales volumes, revenues in the Rest of Europe, in Euro terms, increased 4% in 2018 compared to 2017.

South, Central America and the Caribbean

In 2018, our operations in the South, Central America and the Caribbean region consisted of our operations in Colombia, Panama, Costa Rica, the Dominican Republic, as well as our Caribbean TCL operations, which refers to TCL’s operations mainly in Trinidad and Tobago, Jamaica, Guyana and Barbados, which represent our most significant operations in this region, and the Rest of South, Central America and the Caribbean, which refers primarily to operations in Puerto Rico, Nicaragua, Jamaica, the Caribbean, Guatemala and El Salvador, excluding the acquired operations of the Caribbean TCL. Our revenues from our operations in the South, Central America and the Caribbean region represented 12% of our total revenues in Mexican Peso terms for the year ended December 31, 2018, before eliminations resulting from consolidation. As of December 31, 2018, our operations in the South, Central America and the Caribbean region represented 9% of our total assets. Set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our revenues for our main operations in the South, Central America and the Caribbean region.

Colombia

Our domestic cement sales volumes from our operations in Colombia decreased 6% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 11% over the same period. The decreases in domestic cement sales volumes and in ready-mix concrete sales volumes were primarily due to a general industry downturn and an aggressive pricing strategy carried out by our competitors. Our revenues from our operations in Colombia represented approximately 3% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in Colombia increased 2%, in Colombian Peso terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete remained flat, in Colombian Peso terms, over the same period. For the year ended December 31, 2018, cement represented 51%, ready-mix concrete 27% and our aggregates and other businesses 22% of our revenues in Mexican Peso terms from our operations in Colombia before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of decreases in domestic cement and ready-mix concrete sales volumes, partially offset by an increase in domestic cement sales prices, revenues of our operations in Colombia, in Colombian Peso terms, decreased 7% in 2018 compared to 2017.

Panama

Our domestic cement sales volumes from our operations in Panama decreased 18% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 15% over the same period. The decreases in domestic cement and ready-mix concrete sales volumes reflected the market slowdown and slow execution of infrastructure projects. Our revenues from our operations in Panama represented 2% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in Panama decreased 1% in Dollar terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete decreased 7%, in Dollar terms, over the same period. For the year ended December 31, 2018, cement represented 60%, ready-mix concrete 25% and our aggregates and other businesses 15% of our revenues in Mexican Peso terms from our operations in Panama before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of decreases in domestic cement and ready-mix concrete sales volumes and sales prices, revenues of our operations in Panama, in Dollar terms, decreased 17% in 2018 compared to 2017.

Costa Rica

Our domestic cement sales volumes from our operations in Costa Rica increased 1% in 2018 compared to 2017, and ready-mix concrete sales volumes increased 6% over the same period. The increases in domestic cement and ready-mix concrete sales volumes were mainly due to our participation in commercial projects. Our cement export volumes from our operations in Costa Rica, which represented 22% of cement sales volumes from our operations in Costa Rica for the year ended December 31, 2018, decreased 19% in 2018 compared to 2017. All of our total cement exports from our operations in Costa Rica during 2018 were to the Rest of South, Central America and the Caribbean region. Our revenues from our operations in Costa Rica represented approximately 1% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in Costa Rica increased 3%, in Costa Rican Colones terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 5%, in Costa Rican Colones terms, over the same period. For the year ended December 31, 2018, cement represented 76%, ready-mix concrete 15% and our aggregates and other businesses 9% of our revenues from our operations in Mexican Peso terms before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of decreases in exports sales volumes partially offset by increases in domestic cement and ready-mix concrete sales volumes and sales prices, revenues of our operations in Costa Rica, in Costa Rican Colones terms, decreased 5% in 2018 compared to 2017.

Caribbean TCL

Our domestic cement sales volumes from our operations in Caribbean TCL increased 6% in 2018 compared to 2017, while ready-mix concrete sales volumes increased 10% over the same period. As mentioned in note 4.1 to our 2018 audited consolidated financial statements included in the February 28 6-K, CEMEX acquired a controlling interest in Caribbean TCL in February 2017. Our revenues from our operations in Caribbean TCL represented 2% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in Caribbean TCL segment represented 19% of our Caribbean TCL cement sales volumes for the year ended December 31, 2018, increased 22% in 2018 compared to 2017. All of our total cement exports from our operations in Caribbean TCL during 2018 were to the Rest of South, Central America and the Caribbean region. Our average sales price of domestic cement of our operations in Caribbean TCL increased 2%, in Trinidad and Tobago Dollar terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete decreased 11%, in Trinidad and Tobago Dollar terms, over the same period. For the year ended December 31, 2018, cement represented 70%, ready-mix concrete 3% and our other businesses 27% of revenues in Mexican Peso terms from our operations in Caribbean TCL before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales volumes and domestic cement sales prices, partially offset by decreases in ready-mix concrete sales prices, revenues of our operations in Caribbean TCL, in Trinidad and Tobago Dollar terms, increased 10% in 2018 compared to 2017.

Dominican Republic

Our domestic cement sales volumes from our operations in the Dominican Republic decreased 1% in 2018 compared to 2017, while ready-mix concrete sales volumes decreased 8% over the same period. The decreases in our domestic cement and ready-mix concrete sales volumes in our Dominican Republic region were mainly driven by lower consumption from the private sector, fewer government projects and delays of state permits to initiate. Our operations in the Dominican Republic represented 1% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our cement export volumes from our operations in the Dominican Republic, which represented 14% of our Dominican Republic cement sales volumes for the year ended December 31, 2018, decreased 10% in 2018 compared to 2017. Of our total cement export volumes from our operations in the Dominican Republic during 2018, all were to our Rest of South, Central America and the Caribbean region. Our average sales price of domestic cement of our operations in the Dominican Republic increased 11%, in Dominican Peso terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 4%, in Dominican Peso terms, over the same period. For the year ended December 31, 2018, in

our operations in the Dominican Republic cement represented 75%, ready-mix concrete 11% and our aggregates and other businesses 14% of revenues in Mexican Peso terms from our operations in the Dominican Republic before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement and ready-mix concrete sales prices, partially offset by decreases in domestic cement and ready-mix concrete sales volumes, revenues from our operations in the Dominican Republic, in Dominican Peso terms, increased 10% in 2018 compared to 2017.

Rest of South, Central America and the Caribbean

Our domestic cement volumes from our operations in the Rest of South, Central America and the Caribbean increased 3% in 2018 compared to 2017, and ready-mix concrete sales volumes decreased 21% over the same period. Our cement export volumes from our operations in the Rest of South, Central America and the Caribbean segment, which represented less than 1% of our Rest of South, Central America and the Caribbean cement sales volumes for the year ended December 31, 2018, decreased 84% in 2018 compared to 2017. Of our total cement export volumes from our operations in Rest of South, Central America and the Caribbean during 2018, 96% were within the same region and 4% were to the Rest of Europe region. Our revenues from our operations in the Rest of South, Central America and the Caribbean represented 3% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in the Rest of South, Central America and the Caribbean remained flat in Dollar terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete decreased 3%, in Dollar terms, over the same period. For the year ended December 31, 2018, cement represented 88%, ready-mix concrete 9% and our other businesses 3% of revenues in Mexican Peso terms from our operations in the Rest of South, Central America and the Caribbean before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of decreases in ready-mix concrete sales volumes and sales prices, partially offset by an increase in domestic cement sales volumes, revenues of our operations in the Rest of South, Central America and the Caribbean, in Dollar terms, decreased 1% in 2018 compared to 2017.

Asia, Middle East and Africa

For the year ended December 31, 2018, our operations in the Asia, Middle East and Africa region consisted of our operations in the Philippines, Egypt and Israel, which represent the most significant operations in this region, in addition to the Rest of Asia, Middle East and Africa, which refers primarily to operations in the UAE. Our revenues from our operations in the Asia, Middle East and Africa region represented 10% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. As of December 31, 2018, our operations in the Asia, Middle East and Africa region represented 6% of our total assets. Set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our revenues for our main operations in the Asia, Middle East and Africa region.

The Philippines

Our domestic cement sales volumes from our operations in the Philippines increased 7% in 2018 compared to 2017, and ready-mix concrete sales volumes remained flat over the same period. The increase in domestic cement volumes were supported by the infrastructure and residential sectors, coupled with operational and logistics debottlenecking efforts. Our cement export volumes from our operations in the Philippines, which represented less than 1% of our Philippines cement sales volumes for the year ended December 31, 2018, increased 4% in 2018 compared to 2017. All of our total cement exports from our operations in Philippines during 2018 were to the Rest of Asia, Middle East and Africa region. Our revenues from our operations in the Philippines represented 3% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement from our operations in the Philippines increased 1% in Philippine Peso terms, in 2018 compared to 2017 and our average sales price of ready-mix concrete remained flat, in Philippine Peso terms, over the same period. For the year ended December 31, 2018, cement represented 99% and our ready-mix concrete and other businesses 1% of our revenues in Mexican Peso terms from our operations in the Philippines before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in domestic cement sales volumes and sales prices, revenues of our operations in the Philippines, in Philippine Peso terms, increased 6% in 2018 compared to 2017.

Egypt

Our domestic cement sales volumes from our operations in Egypt remained flat in 2018 compared to 2017, while ready-mix concrete sales volumes decreased 21% over the same period. The ready-mix concrete sales volume decline was mainly due to weaker market demand and our focus on our most profitable markets. Our revenues from our operations in Egypt represented 2% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement increased 18%, in Egyptian Pound terms, in 2018 compared to 2017, and our average sales price of ready-mix concrete increased 33%, in Egyptian Pound terms, over the same period. For the year ended December 31, 2018, cement represented 84%, ready-mix concrete 11% and our aggregates and other businesses 5% of revenues in Mexican Peso terms from our operations in Egypt before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of the increase in domestic cement and ready-mix concrete sales prices, partially offset by a decrease in ready-mix concrete sales volumes, our revenues in Egypt, in Egyptian Pound terms, increased 17% in 2018 compared to 2017.

Israel

Our ready-mix concrete sales volumes from our operations in Israel increased 4% in 2018 compared to 2017. The increase in the ready-mix concrete sales volumes was mainly driven by an increase in market demand, as well as projects in the south and center regions. Our operations in Israel represented 4% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of ready-mix concrete of our operations in Israel increased 2%, in Israeli New Shekel terms, in 2018 compared to 2017. For the year ended December 31, 2018, in our operations in Israel ready-mix concrete represented 66% and our aggregates and other businesses 34% of revenues, in Mexican Peso terms, from our operations in Israel before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in ready-mix concrete sales volumes and sales prices, revenues from our operations in Israel, in Israeli New Shekel terms, increased 5% in 2018 compared to 2017.

Rest of Asia, Middle East and Africa

Our domestic cement sales volumes from our operations in the Rest of Asia, Middle East and Africa decreased 20% in 2018 compared to 2017, and ready-mix concrete sales volumes increased 4% over the same period. Our cement export volumes from our operations in Rest of Asia, Middle East and Africa, which represented 13% of our Rest of Asia, Middle East and Africa cement sales volumes for the year ended December 31, 2018, decreased 28% in 2018 compared to 2017. All of our total cement exports from our operations in the region during 2018 were within the same operations region. Our revenues from our operations in our Rest of Asia, Middle East and Africa segment represented 1% of our total revenues for the year ended December 31, 2018, in Mexican Peso terms, before eliminations resulting from consolidation. Our average sales price of domestic cement remained flat, in Dollar terms, in 2018 compared to 2017, and the average sales price of ready-mix concrete decreased 1%, in Dollar terms, over the same period. For the year ended December 31, 2018, cement represented 35% and ready-mix concrete 65% of revenues from our operations in the Rest of Asia, Middle East and Africa before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable.

As a result of increases in ready-mix concrete sales volumes, partially offset by a decrease in domestic cement sales volumes and ready-mix concrete sales prices, revenues from our operations in Rest of Asia, Middle East and Africa, in Dollar terms, increased 4% in 2018 compared to 2017.

Others

Our Others segment refers to: (i) cement trade maritime operations, (ii) our information technology solutions business (Neoris N.V.), (iii) CEMEX, S.A.B. de C.V. and other corporate entities and (iv) other minor subsidiaries with different lines of business. Revenues from our Others segment increased 13% before intra-sector eliminations within the segment and before eliminations resulting from consolidation, as applicable, in 2018 compared to 2017, in Dollar terms. The increase resulted primarily from an increase in our worldwide cement volume of our trading operations and a sales increase in our information technology solutions company. For the year ended December 31, 2018, our information technology solutions company represented 20% and our trading operations represented 50% of our revenues in our Others segment, in Dollar terms.

Cost of Sales. Our cost of sales, including depreciation, increased 8% from Ps168,858 million in 2017 to Ps182,965 million in 2018. As a percentage of revenues, cost of sales increased from 65.6% in 2017 to 66.1% in 2018. The increase in cost of sales as a percentage of revenues was mainly driven by higher energy costs, as well as higher volumes of purchased cement and clinker. Our cost of sales includes freight expenses of raw materials used in our producing plants.

Gross Profit. For the reasons explained above, our gross profit increased 6% from Ps88,579 million in 2017 to Ps93,890 million in 2018. As a percentage of revenues, gross profit decreased from 34.4% in 2017 to 33.9% in 2018. In addition, our gross profit may not be directly comparable to those of other entities that include all their freight expenses in cost of sales. As described below, we include freight expenses of finished products from our producing plants to our points of sale and from our points of sale to our customers’ locations within operating expenses as part of distribution and logistics expenses.

Operating expenses. Our operating expenses, which are represented by administrative, selling and distribution and logistics expenses, increased 8%, from Ps55,967 million in 2017 to Ps60,694 million in 2018. As a percentage of revenues, operating expenses increased from 21.7% in 2017 to 21.9% in 2018. Our operating expenses include expenses related to personnel, equipment and services involved in sales activities and storage of product at points of sale, which are included as part of the operating expenses, as well as freight expenses of finished products between plants and points of sale and freight expenses between points of sale and the customers’ facilities, which are included as part of the line item “Distribution and logistics expenses.” For the years ended December 31, 2017 and 2018, selling expenses included as part of the line item “Operating expenses” amounted to Ps6,429 million and Ps6,315 million, respectively. As discussed above, we include freight expenses of finished products from our producing plants to our points of sale and from our points of sale to our customers’ locations within distribution and logistics expenses, which in aggregate represented costs of Ps28,485 million in 2017 and Ps31,992 million in 2018. As a percentage of revenues, distribution and logistics expenses increased from 11.1% in 2017 to 11.6% in 2018.

Operating Earnings Before Other Expenses, Net

For the reasons mentioned above, our operating earnings before other expenses, net increased 2% from Ps32,612 million in 2017 to Ps33,196 million in 2018. As a percentage of revenues, operating earnings before other expenses, net decreased from 12.7% in 2017 to 12.0% in 2018. Additionally, set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our operating earnings before other expenses, net on a reportable segment basis.

Mexico

Our operating earnings before other expenses, net, from our operations in Mexico increased 5% in 2018 compared to 2017, in Mexican Peso terms, from operating earnings before other expenses, net, of Ps18,969 million in 2017 to operating earnings before other expenses, net, of Ps20,006 million in 2018. Our operating earnings before other expenses from our operations in Mexico represented 60% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase resulted primarily from the increase in our revenues, partially offset by higher maintenance cost.

United States

Our operating earnings before other expenses, net, from our operations in the United States increased 30% in 2018 compared to 2017, in Dollar terms. Our operating earnings before other expenses from our operations in the United States represented 19% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in operating earnings before other expenses, net resulted primarily from an increase in our revenues.

Europe

United Kingdom. Our operating earnings before other expenses, net, from our operations in the United Kingdom decreased 47% in 2018 compared to 2017 in Pound terms. Our operating earnings before other expenses from our operations in the United Kingdom represented 3% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from a decrease in our revenues, as well as higher production cost.

France. Our operating earnings before other expenses, net, from our operations in France increased 105% in 2018 compared to 2017 in Euro terms. Our operating earnings before other expenses from our operations in France represented 2% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in our operating earnings before other expenses, net in France resulted primarily from an increase in our revenues and due to our cost reduction efforts.

Germany. Our operating earnings before other expenses, net, from our operations in Germany decreased 20% in 2018 compared to 2017 in Euro terms. Our operating earnings before other expenses from our operations in Germany represented 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from an increase in our operational costs partially offset by an increase in our revenues.

Spain. Our operating earnings before other expenses, net, from our operations in Spain increased 20% in 2018 compared to 2017, in Euro terms. Our operating loss before other expenses from our operations in Spain represented a loss of Ps442 million, which was a negative impact of 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in the operating earnings before other expenses, net, resulted primarily from an increase in our revenues, partially offset by an increase in our production and operational costs.

Poland. Our operating earnings before other expenses, net, from our operations in Poland increased 37% in 2018 compared to 2017, in Polish Zloty terms. Our operating earnings before other expenses from our operations in Poland represented 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in the operating earnings before other expenses, net, resulted primarily from an increase in our revenues partially offset by an increase in our production cost.

Czech Republic. Our operating earnings before other expenses, net, from our operations in the Czech Republic increased 10% in 2018 compared to 2017, in Czech Koruna terms. Our operating earnings before other expenses from our operations in the Czech Republic represented 2% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in the operating earnings before other expenses, net, resulted primarily from an increase in our revenues, as well as a reduction in our operational costs.

Rest of Europe. Our operating earnings before other expenses, net, from our operations in the Rest of Europe increased 19% in 2018 compared to 2017, in Euro terms. Our operating earnings before other expenses from our operations in the Rest of Europe region represented 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase resulted primarily from an increase in our revenues.

South, Central America and the Caribbean

Colombia. Our operating earnings before other expenses, net, from our operations in Colombia decreased 21% in 2018 compared to 2017, in Colombian Peso terms. Our operating earnings before other expenses from our operations in Colombia represented 4% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from a decrease in revenues, as well as an increase in our production cost due to lower demand.

Panama. Our operating earnings before other expenses, net, from our operations in Panama decreased 47% in 2018 compared to 2017 in Dollar terms. Our operating earnings before other expenses from our operations in Panama represented 3% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from a decrease in our revenues, as well as an increase in our energy cost.

Costa Rica. Our operating earnings before other expenses, net, from our operations in Costa Rica decreased 14% in 2018 compared to 2017, in Costa Rican Colones terms. Our operating earnings before other expenses from our operations in Costa Rica represented 2% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from a decrease in revenues and an increase in production and transportation costs.

Caribbean TCL. Our operating earnings before other expenses, net, from our operations in Caribbean TCL decreased 2% in 2018 compared to 2017, in Trinidad and Tobago Dollar terms. Our operating earnings before other expenses from our Caribbean TCL operations represented 2% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from an increase in production and energy costs, partially offset by an increase in our revenues.

Dominican Republic. Our operating earnings before other expenses, net, from our operations in the Dominican Republic increased 14% in 2018 compared to 2017 in Dominican Peso terms. Our operating earnings before other expenses from our operations in the Dominican Republic represented 3% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in the operating earnings before other expenses, net, resulted primarily from an increase in our revenues, partially offset by an increase in production cost.

Rest of South, Central America and the Caribbean. Our operating earnings before other expenses, net, from our operations in the Rest of South, Central America and the Caribbean decreased 4% in 2018 compared to 2017, in Dollar terms. Our operating earnings before other expenses from our operations in the Rest of South, Central America and the Caribbean region represented 4% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from a decrease in our revenues.

Asia, Middle East and Africa

The Philippines. Our operating earnings before other expenses, net, from our operations in the Philippines decreased 21% in 2018 compared to 2017 in Philippine Peso terms. Our operating earnings before other expenses from our operations in the Philippines represented 2% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from an increase in our energy costs, partially offset by an increase in revenues.

Egypt. Our operating earnings before other expenses, net, from our operations in Egypt decreased 24% in 2018 compared to 2017 in Egyptian Pound terms. Our operating earnings before other expenses from our operations in Egypt represented 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from higher fuel and electricity costs, partially offset by an increase in our revenues.

Israel. Our operating earnings before other expenses, net, from our operations in Israel increased 5% in 2018 compared to 2017, in Israeli New Shekel terms. Our operating earnings before other expenses from our operations in Israel represented 4% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The increase in the operating earnings before other expenses, net, resulted primarily from an increase in our revenues.

Rest of Asia, Middle East and Africa. Our operating earnings before other expenses, net, from our operations in the Rest of Asia, Middle East and Africa decreased 15% in 2018 compared to 2017 in Dollar terms. Our operating earnings before other expenses from our operations in the Rest of Asia, Middle East and Africa region represented 1% of our total operating earnings before other expenses for the year ended December 31, 2018, in Mexican Peso terms. The decrease resulted primarily from an increase in our production cost, partially offset by an increase in our revenues.

Others. Our operating loss before other expenses, net, from our operations in our Others segment increased 22% in 2018 compared to 2017, in Mexican Peso terms. Our operating loss before other expenses increased from Ps3,385 million in 2017 to Ps4,127 million in 2018. The increase in our operating loss resulted primarily from an increase in our operating cost from our other segment, partially offset by an increase in our revenues.

Other Expenses, Net. Our other expenses, net, increased 53%, in Mexican Peso terms, from an expense of Ps3,815 million in 2017 to an expense of Ps5,837 million in 2018. The increase in 2018 resulted primarily from the losses from the sale of assets and others, net, which includes a loss of Ps1,080 million in connection with property damages and natural disasters, partially offset by a decrease in impairment losses in 2017 compared to 2018. See notes 6, 14, 15 and 24.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

The most significant items included under this caption for the years ended December 31, 2017 and 2018, are as follows:


	For the Year Ended December 31,
	2017			2018
	(in millions of Mexican Pesos)
Impairment losses		Ps (2,936	)		Ps (1,188	)
Restructuring costs		(843	)		(1,382	)
Charitable contributions		(127	)		(105	)
Results from the sale of assets and others, net		91			(2,994	)
Remeasurement of pension liabilities		–			(168	)

		Ps (3,815	)		Ps (5,837	)

Financial expense. Our financial expense decreased 35%, from Ps19,301 million in 2017 to Ps12,597 million in 2018, primarily attributable to lower interest rates on our financial debt as well as a decrease in our financial debt during 2018 compared to 2017. See note 16.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Financial income and other items, net. Our financial income and other items, net, in Mexican Peso terms, decreased significantly, from Ps3,616 million in 2017 to Ps96 million in 2018, mainly as a result of the sale of associates and the remeasurement of previously held interest before change in control of associates, which decreased significantly, from a gain of Ps4,154 million in 2017 to a loss of Ps204 million in 2018, primarily attributable to the gain from the sale of GCC’s common stock during 2017. See notes 13.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

The most significant items included under this caption for the years ended December 31, 2017 and 2018, are as follows:


	For the Year Ended December 31,
	2017			2018
	(in millions of Mexican Pesos)
Financial income and other items, net:
Results from sale of associates and re-measurement of previously held interest before change in control of associates		4,164			(204	)
Financial income		338			355
Results from financial instruments		161			692
Foreign exchange results		(26	)		341
Effects of net present value on assets and liabilities and others, net		(1,021	)		(1,088	)

		Ps 3,616			Ps 96

Income Taxes. Our income tax effect in the income statements, which is primarily comprised of current income taxes plus deferred income taxes, increased significantly from an expense of Ps520 million in 2017 to an expense of Ps4,467 million in 2018.

The increase in the income tax expense is mainly attributable to an increase in our deferred income tax expense during the period, which decreased from a deferred income tax revenue of Ps2,938 million in 2017, mainly associated with the recognition of deferred tax assets related to tax loss carryforwards from our operations in the United States in 2017, to a deferred tax expense of Ps2,569 million in 2018 that includes the derecognition of deferred income tax assets for Ps1,770 million recognized in prior years. Such increase in our deferred income tax expense during 2018 was partially offset by a decrease in our current income tax expense, which decreased from Ps3,458 million in 2017 to Ps1,898 million in 2018. The decrease in our current income tax expense in 2018 was mainly attributable to lower taxable income in certain operations, such as Central and South America, as well as a reduction in our uncertain tax positions during the period for Ps624 million. See notes 19.1, 19.2 and 19.3 to our 2018 audited consolidated financial statements included in the February 28 6-K.

For each of the years ended December 31, 2017 and 2018, our statutory income tax rate in Mexico was 30%. Our average effective tax rate in 2017, which is determined as described below, resulted in an income tax rate of 3.8%, considering earnings before income tax of Ps13,700 million, and our average effective tax rate in 2018 resulted in an income tax rate of 28.8%, considering earnings before income tax of Ps15,511 million. Our average effective tax rate equals the net amount of income tax expense divided by earnings before income taxes, as these line items are reported in our consolidated income statements. See “Item 3—Key Information—Risk Factors—Risks Relating to Our Business—Certain tax matters may have an adverse effect on our cash flow, financial condition and net income” and note 19.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Net Income from continuing operations. For the reasons described above, our net income from continuing operations for 2018 decreased 16% from a net income from continuing operations of Ps13,180 million in 2017 to a net income from continuing operations of Ps11,044 million in 2018. As a percentage of revenues, net income from continuing operations represented 5.1% for the year ended as of December 31, 2017 and 4.0% for the year ended as of December 31, 2018.

Discontinued operations. For the years ended December 31, 2017 and 2018, our discontinued operations included in our consolidated income statements amounted to Ps3,461 million and Ps212 million, respectively. As a percentage of revenues, discontinued operations, net of tax, represented 1.3% for the year ended as of December 31, 2017 and 0.1% for the year ended as of December 31, 2018. See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Consolidated Net Income. For the reasons described above, our consolidated net income (before deducting the portion allocable to non-controlling interest) for 2018 decreased 32%, from a consolidated net income of Ps16,641 million in 2017 to a consolidated net income of Ps11,256 million in 2018. As a percentage of revenues, consolidated net income represented 6.5% for the year ended as of December 31, 2017, and 4.1% for the year ended as of December 31, 2018.

Non-controlling Interest Net Income. Changes in non-controlling interest net income in any period reflect changes in the percentage of the stock of our subsidiaries held by non-associated third parties as of the end of each month during the relevant period and the consolidated net income attributable to those subsidiaries. Non-controlling

interest net income decreased 44%, from an income of Ps1,417 million in 2017 to an income of Ps789 million in 2018, primarily attributable to a decrease in the net income of the consolidated entities in which others have a non-controlling interest. As a percentage of revenues, non-controlling interest net income represented 0.6% for the year ended as of December 31, 2017, and 0.3% for the year ended as of December 31, 2018. See note 20.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Controlling Interest Net Income. Controlling interest net income represents the difference between our consolidated net income and non-controlling interest net income, which is the portion of our consolidated net income attributable to those of our subsidiaries in which non-associated third parties hold interests. For the reasons described above, our controlling interest net income decreased 31%, from a controlling interest net income of Ps15,224 million in 2017 to Ps10,467 million in 2018. As a percentage of revenues, controlling interest net income, represented 5.9% for the year ended as of December 31, 2017, and 3.8% for the year ended as of December 31, 2018.

Liquidity and Capital Resources

Operating Activities

We have satisfied our operating liquidity needs primarily through operations of our subsidiaries and expect to continue to do so for both the short and long-term. Although cash flow from our operations has historically met our overall liquidity needs for operations, servicing debt and funding capital expenditures and acquisitions, our subsidiaries are exposed to risks from changes in foreign currency exchange rates, price and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments in the countries in which we operate, any one of which may materially decrease our net income and decrease cash from operations. Consequently, in order to meet our liquidity needs, we also rely on cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowing under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. Our consolidated net cash flows provided by operating activities from continuing operations before financial expense and coupons on Perpetual Debentures and income taxes paid in cash were Ps61,342 million in 2016, Ps51,420 million in 2017 and Ps43,316 million in 2018. See our statements of cash flows included elsewhere in this report. CEMEX management is of the opinion that working capital is sufficient for our present requirements.

Sources and Uses of Cash

Our review of sources and uses of resources below refers to nominal amounts included in our statement of cash flows for 2016, 2017 and 2018.

Our primary sources and uses of cash during the years ended December 31, 2016, 2017 and 2018 were as follows:


	Year Ended December 31,
	2016			2017			2018
	(in millions of Mexican Pesos)
Operating Activities
Consolidated net income		15,204			16,641			11,256
Discontinued operations		713			3,461			212

Net income from continuing operations		14,491			13,180			11,044
Non-cash items		35,834			30,201			33,334
Changes in working capital, excluding income taxes		11,017			8,039			(1,062	)

Net cash flows provided by operating activities from continuing operations before financial expense, coupons on Perpetual Debentures and income taxes		61,342			51,420			43,316
Financial expense and coupons on Perpetual Debentures and income taxes paid		(23,312	)		(20,423	)		(16,781	)

Net cash flows provided by operating activities from continuing operations		38,030			30,997			26,535
Net cash flows provided by operating activities from discontinued operations		1,192			108			10

Net cash flows provided by operating activities		39,222			31,105			26,545
Investing Activities
Property, machinery and equipment, net		(4,563	)		(10,753	)		(11,631	)
Acquisition and disposal of subsidiaries and other disposal groups, net		1,424			23,841			(481	)
Intangible assets, other deferred charges and other non-current assets, net		(2,341	)		(1,481	)		(3,575	)


	Year Ended December 31,
	2016			2017			2018
	(in millions of Mexican Pesos)
Net cash flows (used in) provided by investing activities from continuing operations		(5,480	)		11,607			(15,687	)
Net cash flows (used in) provided by investing activities from discontinued operations		1			—			—

Net cash flows (used in) provided by investing activities		(5,479	)		11,607			(15,687	)
Financing Activities
Sale of non-controlling interest in subsidiaries		9,777			(55	)		—
Derivative instruments		399			246			392
Repayment of debt, net		(41,044	)		(37,826	)		(9,260	)
Other financial obligations, net		(5,779	)		(1,473	)		(7,082	)
Share repurchase program		—			—			(1,520	)
Securitization of trade receivables		(999	)		169			644
Non-current liabilities, net		(1,972	)		(3,745	)		(2,716	)

Net cash flows used in financing activities		(39,618	)		(42,684	)		(19,542	)

Decrease in cash and cash equivalents from continuing operations		(7,068	)		(80	)		(8,694	)
Increase in cash and cash equivalents from discontinued operations		1,193			108			10
Cash conversion effect, net		2,169			2,097			1,011
Cash and cash equivalents at beginning of period		15,322			11,616			13,741

Cash and cash equivalents at end of period		11,616			13,741			6,068

2018. During 2018, excluding the positive foreign currency effect of our initial balances of cash and cash equivalents generated during the period of Ps1,011 million, there was a decrease in cash and cash equivalents from continuing operations of Ps8,694 million. This decrease was the result of our net cash flows used in financing activities of Ps19,542 million and our net cash flows used in investing activities from continuing operations of Ps15,687 million, partially offset by our net cash flows provided by operating activities from continuing operations, which, after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps16,781 million, amounted to Ps26,535 million.

For the year ended December 31, 2018, our net cash flows provided by operating activities included cash flows applied in working capital of Ps1,062 million, which was primarily comprised of other accounts receivable and other assets, inventories and other accounts payable and accrued expenses, for an aggregate amount of Ps5,949 million, partially offset by trade payables and trade receivables, net for an aggregate amount of Ps4,887 million.

During 2018, our net cash flows provided by operating activities from continuing operations after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps26,535 million were mainly disbursed in connection with (i) our net cash flows used in financing activities of Ps19,542 million, which include repayment of our debt, net, other financial obligations, net, share repurchase program and non-current liabilities, net, for an aggregate amount of Ps20,578 million, partially offset by derivative instruments and securitization of trade receivables for an aggregate amount of Ps1,036 million and (ii) our net cash flows used in the investing activities from continuing operations of Ps15,687 million, which was primarily comprised of investment in property, machinery and equipment, net, intangible assets, other deferred charges and other non-current assets, net and by acquisition and disposal of subsidiaries and other disposal groups, net.

2017. During 2017, excluding the positive foreign currency effect of our initial balances of cash and cash equivalents generated during the period of Ps2,097 million, there was a decrease in cash and cash equivalents from continuing operations of Ps80 million. This decrease was the result of our net cash flows used in financing activities of Ps42,684 million, partially offset by our net cash flows provided by operating activities from continuing operations, which, after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps20,423 million, amounted to Ps30,997 million, and by our investing activities from continuing operations of Ps11,607 million.

For the year ended December 31, 2017, our net cash flows provided by operating activities included cash flows generated in working capital of Ps8,039 million, which was primarily comprised of trade receivables, net, other accounts receivable and other assets, inventories, trade payables and other accounts payable and accrued expenses.

During 2017, our net cash flows provided by operating activities from continuing operations after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps30,997 million and our net cash flows provided by investing activities from continuing operations of Ps11,607 million, which include acquisition and disposal of subsidiaries and other disposal groups, net for an amount of Ps23,841 million, partially offset by investment in property, machinery and equipment, net and intangible assets, other deferred charges and other non-current assets, net for an aggregate amount of Ps12,234 million, were disbursed in connection with our net cash flows used in financing activities of Ps42,684 million, which include repayment of our debt, net, other financial obligations, net, non-current liabilities and sale of non-controlling interest in subsidiaries for an aggregate amount of Ps43,099 million, partially offset by derivative instruments and securitization of trade receivables for an aggregate amount of Ps415 million.

2016. During 2016, excluding the positive foreign currency effect of our initial balances of cash and cash equivalents generated during the period of Ps2,169 million, there was a decrease in cash and cash equivalents from continuing operations of Ps7,068 million. This decrease was the result of our net cash flows used in financing activities of Ps39,618 million and our net cash flows used in investing activities from continuing operations of Ps5,479 million, partially offset by our net cash flows provided by operating activities from continuing operations, which, after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps23,312 million, amounted to Ps38,030 million.

For the year ended December 31, 2016, our net cash flows provided by operating activities included cash flows generated in working capital of Ps11,017 million, which was primarily comprised of trade payables and other accounts payable and accrued expenses, for an aggregate amount of Ps16,928 million, partially offset by trade receivable, net, other accounts receivable and other assets and inventories for an aggregate amount of Ps5,911 million.

During 2016, our net cash flows provided by operating activities from continuing operations after financial expense and coupons on Perpetual Debentures and income taxes paid in cash of Ps38,030 million were mainly disbursed in connection with (i) our net cash flows used in financing activities of Ps39,618 million, which include repayment of our debt, net, other financial obligations, net, securitization of trade receivables and non-current liabilities for an aggregate amount of Ps49,794 million, partially offset by derivative instruments and sale of non-controlling interest in subsidiaries for an aggregate amount of Ps10,176 million and (ii) our net cash flows used in the investing activities from continuing operations of Ps5,479 million, which include investment in property, machinery and equipment, net and intangible assets, other deferred charges and other non-current assets, net for an aggregate amount of Ps6,904 million, partially offset by acquisition and disposal of subsidiaries and other disposal groups, net for an amount of Ps1,424 million.

As of December 31, 2018, we had the following lines of credit, of which the only commited portion refers to the revolving credit facility under the 2017 Credit Agreement, at annual interest rates ranging between 0.75% and 8.50%, depending on the negotiated currency:


	Lines of Credit		Available
	(in millions of Mexican Pesos)
Other lines of credit in foreign subsidiaries		9,440		7,286
Other lines of credit from banks		11,294		8,956
Revolving credit facility		22,303		16,211

		43,037		32,453

In addition, as of December 31, 2018, we had available committed lines of credit under the 2017 Credit Agreement, which include a revolving credit facility and an undrawn term loan trance of the 2017 Credit Agreement for a combined amount of Ps16,211 million (U.S.$825 million). This, in addition to our proven capacity to continually refinance and replace short-term obligations, will enable us to meet any liquidity risk in the short term.

Capital Expenditures

Our capital expenditures incurred for the years ended December 31, 2017 and 2018, and our expected capital expenditures during 2019, which include an allocation to 2019 of a portion of our total future committed amount, are as follows:


	Actual for the Year Ended December 31, Actual				Estimated in 2019
	2017		2018		Estimated in 2019
	(in millions of U.S. Dollars)
Mexico		113		117		157
United States		185		239		236
Europe
United Kingdom		53		47		44
France		20		23		39
Germany		23		16		18
Spain		29		26		14
Poland		12		29		25
Czech Republic		8		9		8
Rest of Europe		9		11		13
South, Central America and the Caribbean
Colombia		62		22		22
Panama		8		12		9
Costa Rica		2		3		3
Caribbean TCL		31		27		16
Dominican Republic		9		8		8
Rest of South, Central America and the Caribbean		9		8		17
Asia, Middle East and Africa
Philippines		28		28		152
Egypt		22		9		10
Israel		21		21		19
Rest of Asia, Middle East and Africa		3		5		9
Others		5		5		30

Total consolidated		653		668		850

Of which:
Expansion capital expenditures		137		160		550
Base capital expenditures		516		508		300

For the years ended December 31, 2017 and 2018, we recognized U.S.$656 million and U.S.$668 million in capital expenditures from our continuing operations, respectively. As of December 31, 2018, in connection with our significant projects, we had contractually committed capital expenditures of approximately U.S.$130 million, including our capital expenditures estimated to be incurred during 2019. This amount is expected to be incurred during 2019, based on the evolution of the related projects. Pursuant to the 2017 Credit Agreement, we are prohibited from making aggregate annual capital expenditures in excess of U.S.$1 billion in any financial year (excluding certain capital expenditures, joint venture investments and acquisitions by each of CLH and CHP and their respective subsidiaries and those funded by Relevant Proceeds (as defined in the 2017 Credit Agreement)), which capital expenditures, joint venture investments and acquisitions at any time then incurred are subject to a separate aggregate limit of (a) U.S.$500 million (or its equivalent) for CLH and its subsidiaries and (b) U.S. $500 million (or its equivalent) for CHP and its subsidiaries. In addition, the amounts of which we and our subsidiaries are allowed for permitted acquisitions and investments in joint ventures cannot exceed certain thresholds as set out in the 2017 Credit Agreement.

Our Indebtedness

As of December 31, 2018, we had Ps207,724 million (U.S.$10,571 million) (principal amount Ps209,153 million (U.S.$10,644 million), excluding deferred issuance costs) of total debt plus other financial obligations in our statement of financial position, which does not include Ps8,729 million (U.S.$444 million) of Perpetual Debentures. Of our total debt plus other financial obligations, 7% were short-term (including current maturities of long-term debt) and 93% were long-term. As of December 31, 2018, 64% of our total debt plus other financial obligations was Dollar-denominated, 26% was Euro-denominated, 5% was Pound Sterling-denominated, 3% was Philippine Peso-denominated and immaterial amounts were denominated in other currencies. See notes 16.1, 16.2 and 20.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

On August 14, 2009, CEMEX, S.A.B. de C.V. and certain of its subsidiaries entered into a financing agreement (the “2009 Financing Agreement”), which extended the final maturities of U.S.$15 billion in syndicated and bilateral loans and private placement notes to February 14, 2014. On July 5, 2012, CEMEX, S.A.B. de C.V. and

certain of its subsidiaries launched an exchange offer and consent request (the “2012 Exchange Offer and Consent Request”) to eligible creditors under the 2009 Financing Agreement pursuant to which eligible creditors were requested to consent to certain amendments to the 2009 Financing Agreement (together, the “2012 Amendment Consents”). In addition, CEMEX, S.A.B. de C.V. and certain of its subsidiaries offered to exchange the indebtedness owed to such creditors under the 2009 Financing Agreement that were eligible to participate in the 2012 Exchange Offer and Consent Request (the “Participating Creditors”) for (i) new loans (or, in the case of the private placement notes, new private placement notes) or (ii) up to U.S.$500 million of our 9.50% Senior Secured Notes due 2018 issued on September 17, 2012 (the “June 2018 U.S. Dollar Notes”), in each case, in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). On September 17, 2012, CEMEX, S.A.B. de C.V. and certain of its subsidiaries successfully completed the refinancing transactions contemplated by the 2012 Exchange Offer and Consent Request (collectively, the “2012 Refinancing Transaction”), and CEMEX, S.A.B. de C.V. and certain of its subsidiaries entered into (a) an amendment and restatement agreement, dated September 17, 2012, pursuant to which the 2012 Amendment Consents with respect to the 2009 Financing Agreement were given effect, and (b) a facilities agreement, dated September 17, 2012 (as amended from time to time, the “2012 Facilities Agreement”), pursuant to which CEMEX, S.A.B. de C.V. and certain of its subsidiaries were deemed to borrow loans from those Participating Creditors participating in the 2012 Exchange Offer and Consent Request in principal amounts equal to the principal amounts of indebtedness subject to the 2009 Financing Agreement that was extinguished by such Participating Creditors. As a result of the 2012 Refinancing Transaction, Participating Creditors received (i) U.S.$6,155 million in aggregate principal amount of new loans and new private placement notes and (ii) U.S.$500 million aggregate principal amount of the June 2018 U.S. Dollar Notes. In addition, U.S.$525 million aggregate principal amount of loans and private placement notes, which had remained outstanding under the 2009 Financing Agreement as of September 17, 2012, were subsequently repaid in full, as a result of prepayments made in accordance with the 2012 Facilities Agreement.

On September 29, 2014, CEMEX, S.A.B. de C.V. and certain of its subsidiaries entered into a facilities agreement, as amended and restated (the “2014 Credit Agreement”), for U.S.$1.35 billion with nine of the main lending banks from its 2012 Facilities Agreement. On November 3, 2014, five additional banks joined the 2014 Credit Agreement as lenders with aggregate commitments of U.S.$515 million, increasing the total amount of the 2014 Credit Agreement from U.S.$1.35 billion to U.S.$1.87 billion (increasing the revolving tranche of the 2014 Credit Agreement proportionally to U.S.$746 million).

On July 30, 2015, CEMEX, S.A.B. de C.V. repaid in full the total amount outstanding of U.S.$1.94 billion under the 2012 Facilities Agreement with new funds from 17 financial institutions, which joined new tranches under the 2014 Credit Agreement.

On November 30, 2016, CEMEX, S.A.B. de C.V. prepaid U.S.$373 million outstanding under the 2014 Credit Agreement and corresponding to the September 2017 amortization thereunder. In addition to this prepayment, and as part of an agreement reached with a group of lenders under the 2014 Credit Agreement, U.S.$664 million (Ps13,758 million) of funded commitments under the 2014 Credit Agreement maturing in 2018 were exchanged into a revolving facility, maintaining their original amortization schedule and the same terms and conditions.

On July 19, 2017, CEMEX, S.A.B. de C.V. and certain of its subsidiaries entered into the 2017 Credit Agreement for an amount in different currencies equivalent to U.S.$4.1 billion (in aggregate), the proceeds of which were used to refinance in full the indebtedness incurred under the 2014 Credit Agreement and other debt repayment obligations, allowing us to increase the average life of our syndicated bank debt to approximately 4.3 years with a final maturity in July 2022. The indebtedness incurred under the 2017 Credit Agreement ranks equally in right of payment with certain of our other existing and future indebtedness, pursuant to the terms of the Intercreditor Agreement.

As of July 19, 2017, total commitments initially available under the 2017 Credit Agreement included (i) €741 million, (ii) £344 million and (iii) U.S.$2,746 million, out of which U.S.$1,135 million were in the revolving credit facility tranche of the 2017 Credit Agreement. As of December 31, 2018, the 2017 Credit Agreement had an amortization profile, considering all commitments of U.S.$4.1 billion under the 2017 Credit Agreement, of U.S.$580 million in 2020, U.S.$1,159 million in 2021 and U.S.$1,440 million in 2022. See note 16.1 to our 2018 audited consolidated financial statements included in the February 28 6-K.

CEMEX, S.A.B. de C.V. and certain of its subsidiaries have pledged the Collateral and all proceeds of the Collateral, to secure our payment obligations under the 2017 Credit Agreement, our outstanding Senior Secured Notes and under several other of our financing arrangements. These subsidiaries whose shares were pledged or transferred as part of the Collateral collectively own, directly or indirectly, substantially all our operations worldwide. See “Risk Factors—We pledged the capital stock of some of our subsidiaries that represent substantially all of our business as collateral to secure our payment obligations under the 2017 Credit Agreement, the indentures governing our outstanding Senior Secured Notes and other financing arrangements.”

As of December 31, 2018, we reported an aggregate amount of outstanding debt of Ps62,460 million (U.S.$3,179 million) under the 2017 Credit Agreement. As of December 31, 2018, we had U.S.$825 million available under the U.S.$1,135 million revolving credit facility tranche of the 2017 Credit Agreement. If we are unable to comply with our upcoming principal maturities under our indebtedness, or are not able to refinance or extend maturities of our indebtedness, our debt could be accelerated. Acceleration of our debt would have a material adverse effect on our financial condition. See “Risk Factors—We have a substantial amount of debt and other financial obligations maturing in the next several years. If we are unable to secure refinancing on favorable terms or at all, we may not be able to comply with our upcoming payment obligations. Our ability to comply with our principal maturities and financial covenants may depend on us implementing certain initiatives which may include making asset sales, and there is no assurance that we will be able to execute such sales on terms favorable to us or at all.”

For a discussion of restrictions and covenants under the 2017 Credit Agreement, see “Risk Factors—Risks Relating to Our Business—The 2017 Credit Agreement contains several restrictions and covenants. Our failure to comply with such restrictions and covenants could have a material adverse effect on our business and financial conditions” of our 2017 Annual Report and under “Risk Factors” in this report.

For a description of the Senior Secured Notes, see “Summary of Material Contractual Obligations and Commercial Commitments—Senior Secured Notes.”

Some of our subsidiaries and special purpose vehicles (“SPVs”) have issued and/or provided guarantees of certain of our indebtedness, as indicated in the table below.


	The Notes	Senior Secured Notes	2017 Credit Agreement	Perpetual Debentures
Amount outstanding as of December 31, 2018⁽¹⁾		U.S.5,606 million (Ps110,157 million) (principal amount U.S.$5,644 million (Ps110,907 million))	U.S.$3,179 million (Ps62,460 million) (principal amount U.S.$3,208 million (Ps63,040 million))	U.S.$444 million (Ps8,729 million)
CEMEX Finance LLC	✓	✓	✓
CEMEX, S.A.B. de C.V.	✓	✓	✓	✓
CEMEX México, S.A. de C.V.	✓	✓	✓	✓
CEMEX Concretos, S.A. de C.V.	✓	✓	✓
Empresas Tolteca de México, S.A. de C.V.	✓	✓	✓
New Sunward Holding B.V.	✓	✓	✓	✓
CEMEX España, S.A.	✓	✓	✓
Cemex Asia B.V.	✓	✓	✓
CEMEX Corp.	✓	✓	✓
Cemex Africa & Middle East Investments B.V.	✓	✓	✓
CEMEX France Gestion (S.A.S.)	✓	✓	✓
Cemex Research Group AG	✓	✓	✓
CEMEX UK	✓	✓	✓

(1)	Includes Senior Secured Notes and Perpetual Debentures held by CEMEX, as applicable.

In addition, as of December 31, 2018, (i) CEMEX Materials LLC is a borrower of Ps3,042 million (U.S.$155 million) (principal amount Ps2,945 million (U.S.$150 million)) under an indenture, which is guaranteed by CEMEX Corp.; and (ii) several of our other operating subsidiaries were borrowers under debt facilities aggregating Ps6,728 million (U.S.$342 million).

Most of our outstanding indebtedness has been incurred to finance our acquisitions and to finance our capital expenditure programs. Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt, and fund working capital and planned capital expenditures) with operating cash flow, securitizations, borrowings under credit facilities, proceeds of debt and equity offerings and proceeds from asset sales.

If the global economic environment deteriorates and our operating results worsen significantly, if we were unable to complete debt or equity offerings or if the proceeds of any divestitures and/or our cash flow or capital resources prove inadequate, we could face liquidity problems and may not be able to comply with our upcoming principal payments under our indebtedness or refinance our indebtedness. If we are unable to comply with our upcoming principal maturities under our indebtedness, or refinance or extend maturities of our indebtedness, our debt could be accelerated. Acceleration of our debt would have a material adverse effect on our business and financial condition.

We and our subsidiaries have sought and obtained waivers and amendments to several of our debt instruments relating to a number of financial ratios in the past. Our ability to comply with these ratios may be affected by current global economic conditions and volatility in foreign exchange rates and the financial and capital markets. We may need to seek waivers or amendments in the future. However, we cannot assure you that any future waivers or amendments, if requested, will be obtained. If we or our subsidiaries are unable to comply with the provisions of our debt instruments, and are unable to obtain a waiver or amendment, the indebtedness outstanding under such debt instruments could be accelerated. Acceleration of these debt instruments would have a material adverse effect on our financial condition.

Relevant Transactions Related to Our Indebtedness in 2018

As of December 31, 2018, we had Ps207,724 million (U.S.$10,571 million) (principal amount Ps209,153 million (U.S.$10,644 million), excluding deferred issuance costs) of total debt plus other financial obligations in our statement of financial position, which does not include Ps8,729 million (U.S.$444 million) of Perpetual Debentures. As of December 31, 2018, 64% of our total debt plus other financial obligations was Dollar-denominated, 26% was Euro-denominated, 5% was Pound Sterling-denominated, 3% was Philippine Peso-denominated and immaterial amounts were denominated in other currencies. The following is a description of our most important transactions related to our indebtedness in 2018:

●

On January 10, 2018, we redeemed the remaining €400 million aggregate principal amount of the 4.750% Senior Secured Notes due 2022 (the “January 2022 Euro Notes”).

●

On February 14, 2018, we drew down U.S.$377 million aggregate principal amount under the previously undrawn term loan tranche of the 2017 Credit Agreement.

●

On February 14, 2018, we agreed, through one of our subsidiaries in the United States, to increase our ownership interest in Lehigh White Cement Company from 24.5% to 36.75%. On March 29, 2018, we closed the acquisition and paid a total of U.S.$36 million.

●

On March 15, 2018, we redeemed the remaining U.S.$365 million aggregate principal amount of the 3.750% Convertible Subordinated Notes due 2018 (the “March 2018 Optional Convertible Subordinated U.S. Dollar Notes”).

●

On March 15, 2018, we redeemed the remaining U.S.$341 million aggregate principal amount of the 7.25% Senior Secured Notes due 2021 (the “January 2021 U.S. Dollar Notes”).

●

During March 2018, we renewed the securitization programs outstanding in the United States, France and the United Kingdom. As a result of such renewals, each program is now scheduled to mature in March 2019.

●

During June 2018, we renewed the securitization progam outstanding in Mexico. As a result of such renewal, the program is now scheduled to mature in June 2019.

●

In July 2018, we redeemed the remaining U.S.$313 million aggregate principal amount of the L + 4.75% Senior Secured Notes due 2018 (the “October 2018 U.S. Dollar Notes”).

●

During 2018, we conducted drawdowns and repayments under the revolving tranche of the 2017 Credit Agreement, resulting in a principal outstanding amount under the revolving tranche of the 2017 Credit Agreement of Ps6,092 million (U.S.$310 million) as of December 31, 2018. In addition, as of December 31, 2018, we had an aggregate amount of Ps16,211 million (U.S.$825 million) available under the revolving tranche of the 2017 Credit Agreement.

We used a substantial portion of the proceeds from these transactions to repay and refinance indebtedness, to improve our liquidity position and for general corporate purposes. Through these and prior refinancing transactions, we addressed all maturities under the 2009 Financing Agreement, the 2012 Facilities Agreement and the 2014 Credit Agreement. For a description of the 2017 Credit Agreement, see “—Our Indebtedness.”

Our Other Financial Obligations

Other financial obligations in the consolidated statement of financial position as of December 31, 2017 and 2018 are detailed as follows:


	December 31, 2017						December 31, 2018
	Short- term		Long- term		Total		Short- term		Long- term		Total
March 2020 Optional Convertible Subordinated U.S. Dollar Notes		—		9,985		9,985		—		10,097		10,097
March 2018 Optional Convertible Subordinated U.S. Dollar Notes		7,115		—		7,115		—		—		—
November 2019 Mandatory Convertible Mexican Peso Notes		323		371		694		374		—		374
Liabilities secured with accounts receivable		11,313		—		11,313		11,770		—		11,770
Finance leases		611		2,503		3,114		595		1,931		2,526

		19,362		12,859		32,221		12,739		12,028		24,767

As mentioned in note 2.6 to our 2018 audited consolidated financial statements included in the February 28 6-K, which is incorporated by reference in this report, financial instruments convertible into CEMEX, S.A.B. de C.V.’s CPOs and/or ADSs contain components of both liability and equity, which are recognized differently depending on whether the instrument is mandatorily convertible, or is optionally convertible by election of the note holders, as well as upon the currency in which the instrument is denominated and the functional currency of the issuer.

March 2020 Optional Convertible Subordinated U.S. Dollar Notes

During 2015, CEMEX, S.A.B. de C.V. issued U.S.$521 million aggregate principal amount of 3.72% convertible subordinated notes due in March 2020 (the “March 2020 Optional Convertible Subordinated U.S. Dollar Notes”) as a result of exchanges or settlements of other convertible notes. The March 2020 Optional Convertible Subordinated U.S. Dollar Notes, which are subordinated to all of CEMEX’s liabilities and commitments, are convertible into a fixed number of CEMEX, S.A.B. de C.V.’s ADSs at any time at the holder’s election and are subject to antidilution adjustments. The aggregate fair value of the conversion option as of the issuance dates, which amounted to Ps199 million, was recognized in other equity reserves. As of December 31, 2017 and 2018, the conversion price per ADS for the March 2020 Optional Convertible Subordinated U.S. Dollar Notes was approximately U.S.$11.01 in both years. After antidilution adjustments, the conversion rate for the March 2020 Optional Convertible Subordinated U.S. Dollar Notes as of December 31, 2017 and 2018 was 90.8592 ADSs per each U.S.$1,000 principal amount of such notes in both years. See note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

March 2018 Optional Convertible Subordinated U.S. Dollar Notes

On March 15, 2011, CEMEX, S.A.B. de C.V. closed the offering of U.S.$690 million principal amount of 3.75% convertible subordinated notes due in 2018 (the “March 2018 Optional Convertible Subordinated U.S. Dollar Notes”). The notes were subordinated to all of CEMEX’s liabilities and commitments. The notes were convertible into a fixed number of CEMEX, S.A.B. de C.V. ADSs and are subject to antidilution adjustments. On June 19, 2017, CEMEX, S.A.B. de C.V. agreed with certain institutional holders on the early conversion of U.S.$325 million of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes in exchange for the issuance of approximately 43 million ADSs, which included the number of additional ADSs issued to the holders as non-cash inducement premiums. As a result of the early conversion, the liability component of the converted notes of Ps5,468 million was reclassified from “Other financial obligations” to “Other equity reserves”. In addition, CEMEX, S.A.B. de C.V. increased common stock for Ps4 million and additional paid-in capital for Ps7,059 million against other equity reserves, and recognized expense for the inducement premiums paid in shares of Ps769 million, recognized within “Financial income and other items, net” in the income statement for 2017. After the early conversion of notes described above, the U.S.$365 million of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes that remained outstanding, were repaid in cash at their maturity on March 15, 2018. Concurrent with the offering of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes, a portion of the net proceeds from this transaction was used to fund the purchase of capped call options, which, when purchased, were had generally expected to reduce the potential dilution cost to CEMEX upon the potential conversion of such notes. See notes 16.2 and 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

November 2019 Mandatory Convertible Mexican Peso Notes

In December 2009, CEMEX, S.A.B. de C.V. exchanged debt into U.S.$315 million principal amount of 10% mandatorily convertible securities denominated in Mexican Pesos with maturity in 2019 (the “November 2019 Mandatory Convertible Mexican Peso Notes”). Reflecting antidilution adjustments, the notes will be converted at maturity or earlier if the price of the CPO reaches Ps26.22 into approximately 236 million CPOs at a conversion price of Ps17.48 per CPO. Holders have an option to voluntarily convert their securities on any interest payment date into CPOs. Considering the currency in which the notes are denominated and the functional currency of CEMEX, S.A.B. de C.V.’s financing division, the conversion option embedded in these securities is treated as a stand-alone derivative liability at fair value in the income statements. Changes in fair value of the conversion option generated losses of U.S.$29 million (Ps545 million) in 2016, gains of U.S.$19 million (Ps359 million) in 2017, and gains of U.S.$20 million (Ps391 million) in 2018. The March 2018 Optional Convertible Subordinated U.S. Dollar Notes did not convert, and were redeemed upon maturity on March 15, 2018. See notes 2.4, 16.2 and 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Our Receivables Financing Arrangements

Our subsidiaries in Mexico, the United States, France and the United Kingdom are parties to sales of trade accounts receivable programs with financial institutions, referred to as securitization programs. As of December 31, 2017 and 2018, trade accounts receivable included receivables of U.S.$647 million (Ps12,713 million) and U.S.$664 million (Ps13,048 million), respectively. Under these programs, our subsidiaries effectively surrender control associated with the trade accounts receivable sold and there is no guarantee or obligation to reacquire the assets; nonetheless, in such programs, our subsidiaries retain certain residual interest in the programs and/or maintain continuing involvement with the accounts receivable; therefore, the trade accounts receivable sold were not removed from the statement of financial position and the funded amounts were recognized within the line item of “Other financial obligations,” and the difference in each year against the trade receivables sold was maintained as reserves. Trade accounts receivable qualifying for sale exclude amounts over certain days past due or concentrations over certain limits to any customer, according to the terms of the programs. The portion of the accounts receivable sold maintained as reserves amounted to U.S.$71 million (Ps1,400 million) and U.S.$65 million (Ps1,278 million) as of December 31, 2017 and 2018, respectively. Therefore, the funded amount to us was U.S.$576 million (Ps11,313 million) in 2017 and U.S.$599 million (Ps11,770 million) as of December 31, 2018. The discount granted to the acquirers of the trade accounts receivable is recorded as financial expense and amounted to U.S.$16 million

(Ps308 million) and U.S.$23 million (Ps446 million) in 2017 and 2018, respectively. Our securitization programs are negotiated for periods of one year and are usually renewed at their maturity. See notes 9 and 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Finance Leases

As of December 31, 2017 and 2018, we held several operating buildings and mainly mobile equipment, under finance lease contracts for a total of U.S.$158 million (Ps3,114 million) and U.S.$129 million (Ps2,526 million), respectively. See note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K. Future payments associated with these contracts are presented in note 23.5 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Perpetual Debentures

We define the “Perpetual Debentures” as, collectively, (i) U.S. Dollar-Denominated 6.196% Fixed-to-Floating Rate Callable Perpetual Debentures issued by C5 Capital (SPV) Limited, (ii) U.S. Dollar-Denominated 6.640% Fixed-to-Floating Rate Callable Perpetual Debentures issued by C8 Capital (SPV) Limited, (iii) U.S. Dollar-Denominated 6.722% Fixed-to-Floating Rate Callable Perpetual Debentures issued by C10 Capital (SPV) Limited and (iv) Euro-Denominated 6.277% Fixed-to-Floating Rate Callable Perpetual Debentures issued by C10-EUR Capital (SPV) Limited.

As of December 31, 2016, 2017 and 2018, non-controlling interest stockholders’ equity included U.S.$438 million (Ps9,075 million), U.S.$447 million (Ps8,784 million) and U.S.$444 million (Ps8,729 million), respectively, representing the notional amount of Perpetual Debentures, which exclude any perpetual debentures held by subsidiaries. The Perpetual Debentures have no fixed maturity date and do not represent contractual obligations to exchange any series of its outstanding Perpetual Debentures for financial assets or financial liabilities. Based on their characteristics, the Perpetual Debentures, issued through SPVs, qualify as equity instruments and are classified within non-controlling interest as they were issued by consolidated entities, and, if the conditions to interest deferred are satisfied, we have the unilateral right to defer indefinitely the payment of interest due on the Perpetual Debentures. Issuance costs, as well as the interest expense, which is accrued based on the principal amount of the Perpetual Debentures, are included within “Other equity reserves” and represented expenses of Ps507 million, Ps482 million and Ps553 million in 2016, 2017 and 2018, respectively. The different SPVs were established solely for purposes of issuing the Perpetual Debentures and are included in our 2018 audited consolidated financial statements included in the February 28 6-K. As of December 31, 2017, the Perpetual Debentures were as follows:


Issuer	Issuance Date	Nominal Amount at Issuance Date (in millions)	Nominal Amount Outstanding as of December 31, 2018 (in millions)	Repurchase Option	Interest Rate
C10-EUR Capital (SPV) Ltd.⁽³⁾	May 2007	€730	€64	Tenth anniversary	EURIBOR + 4.79%
C8 Capital (SPV) Ltd.⁽²⁾	February 2007	U.S.$750	U.S.$135	Eighth anniversary	LIBOR + 4.40%
C5 Capital (SPV) Ltd.⁽¹⁾⁽²⁾	December 2006	U.S.$350	U.S.$61	Fifth anniversary	LIBOR + 4.277%
C10 Capital (SPV) Ltd.⁽²⁾	December 2006	U.S.$900	U.S.$175	Tenth anniversary	LIBOR + 4.71%

(1)	Under the 2017 Credit Agreement, and previously under the 2014 Credit Agreement, we are not permitted to call the Perpetual Debentures.

(2)	“LIBOR” above refers to the London Inter-Bank Offered Rate. As of December 31, 2017 and 2018, 3-month LIBOR was approximately 1.6943% and 2.8076%, respectively.

(3)	“EURIBOR” above refers to the Euro Interbank Offered Rate. As of December 31, 2017 and 2018, 3-month EURIBOR was approximately – 0.329% and –0.309%, respectively.

Stock Repurchase Program

Under Mexican law, CEMEX, S.A.B. de C.V.’s shareholders are the only ones authorized to approve the maximum amount of resources that can be allocated to the stock repurchase program at any annual general ordinary shareholders’ meeting. Unless otherwise instructed by CEMEX, S.A.B. de C.V.’s shareholders, we are not required to purchase any minimum number of shares pursuant to such program.

In connection with CEMEX, S.A.B. de C.V.’s 2015 and 2016 annual general ordinary shareholders’ meetings held on March 31, 2016 and March 30, 2017, respectively, no maximum amount of resources was proposed for a stock repurchase program. In connection with CEMEX, S.A.B. de C.V.’s 2017 annual general ordinary shareholders’ meeting held on April 5, 2018, a proposal was approved to set the amount of U.S.$500 million or its equivalent in Mexican Pesos as the maximum amount of resources for the year ending on December 31, 2018, and until the next ordinary shareholders meeting to be held in 2019, which reviews the 2018 financial year, that CEMEX, S.A.B. de C.V. can use to repurchase its own shares or securities that represent such shares. The board of directors of CEMEX, S.A.B. de C.V. approved the policy and procedures for the operation of the stock repurchase program, and is authorized to determine the basis on which the repurchase and placement of such shares is made, appoint the persons who will be authorized to make the decision of repurchasing or replacing such shares and appoint the persons responsible to make the transaction and furnish the corresponding notices to authorities. The board of directors and/or attorneys-in-fact or delegates designated in turn, or the persons responsible for such transactions, will determine in each case, if the repurchase is made with a charge to stockholders’ equity as long as the shares belong to CEMEX, S.A.B. de C.V., or with a charge to share capital if it is resolved to convert the shares into non-subscribed shares to be held in treasury. We remain subject to certain restrictions regarding the repurchase of shares of our capital stock under the 2017 Credit Agreement and the indentures governing the outstanding Senior Secured Notes.

On November 27, 2018, CEMEX, S.A.B. de C.V. initiated its stock repurchase program as per the resolutions approved at CEMEX, S.A.B. de C.V.’s 2017 annual general ordinary shareholders’ meeting held on April 5, 2018. As of December 31, 2018, a total of 153,603,753 CPOs were repurchased at an average price of approximately Ps 9.90 per CPO, for a total amount of Ps 1,520 million (U.S.$75 million).

The following table sets out information concerning repurchases by CEMEX, S.A.B. de C.V. of its CPOs in 2018. We did not repurchase CPOs other than through the stock repurchase program.


Period	Total Number of CPOs Purchased		Average Price per CPO		Total Number of CPOs Purchases as Part of Publicly Announced Plans or Programs		Approximate Peso Value of CPOs that May Yet Be Purchased Under Plans
January 1 to January 31		-		-		-		-
February 1 to February 28		-		-		-		-
March 1 to March 31		-		-		-		-
April 1 to April 30		-		-		-		9,309,800,000.00
May 1 to May 31		-		-		-		9,309,800,000.00
June 1 to June 30		-		-		-		9,309,800,000.00
July 1 to July 31		-		-		-		9,309,800,000.00
August 1 to August 31		-		-		-		9,309,800,000.00
September 1 to September 30		-		-		-		9,309,800,000.00
October 1 to October 31		-		-		-		9,309,800,000.00
November 1 to November 30		37,743.252		9.9481		37,743.252		8,934,326,030.80
December 1 to December 31		115,860,501		9.8780		115,860,501		7,789,859,079.81
Total		153,603,753				153,603,753

Research and Development, Patents and Licenses, etc.

Headed by CEMEX Research and Development Centers in Switzerland (“CEMEX Research Center”), R&D is increasingly assuming a key role as it is recognized as an important contributor to CEMEX’s comprehensive pricing strategy for CEMEX’s products. Through the development of innovative technologies, services, and commercial models, CEMEX is leveraging its know-how based assets to create an important differentiation in its offerings to customers in a broad range of markets with unique challenges. Focus is placed on creating tangible value for our customers by making their business more profitable, but more importantly, as leaders in the industry, there is an underlying mission for CEMEX to elevate and accelerate the industry’s evolution in order to achieve greater sustainability, increase engagement in social responsibility and provoke an important leap in its technological advancement.

CEMEX’s R&D initiatives are globally led, coordinated and managed by CEMEX Research Center, which encompasses the areas of Product Development & Construction Trends, Cement Production Technology, Sustainability, Business Process & IT, Innovation, and Commercial & Logistics. CEMEX’s interaction and engagement with customers is growing and evolving through the exploration of novel interaction methodologies. CEMEX’s R&D continues to develop and evolve in the area of customer centricity, but with complementary emphases on digitalization, development of digital-based business models, socio-urban dynamics, processes and technologies to mitigate CO2, and evaluating, adopting, and proposing methodologies to engage specific types of customers, whom are key decision makers in the very early stages of a construction project. Such methodologies are defining innovative approaches to involve and expose existing, potential, and future customers (e.g. Engineering & Architectural students) to our value added products (cement, aggregates, ready-mix, and admixtures) and constructions solutions. In other words, we aspire to create a unique customer experience in which the customer can see, touch, interact, and even stimulate the modification of our technologies. The areas of Product Development & Construction Trends and Cement Production Technology are responsible for, among others, developing new products for our cement, ready-mix concrete, aggregate and admixture businesses as well as introduce novel and/or improved processing and manufacturing technology for all of CEMEX’s core businesses The aforementioned areas also address energy efficiency of buildings, comfort, novel and more efficient construction systems. Additionally, the Product Development & Construction Trends and Sustainability areas collaborate to develop and propose construction solutions through consulting and the integration of the aforementioned technologies. The Cement Production Technology and Sustainability areas are dedicated to, among others, operational efficiencies leading to cost reductions and enhancing our CO2 footprint and overall environmental impact through the usage of alternative or biomass fuels, the use of supplementary materials in substitution of clinker as well as by managing our CO2 footprint, mitigating it and processing it in the context of a circular economy. For example, we have developed processes and products that allow us to reduce heat consumption in our kilns, which in turn reduces energy costs. Special emphasis is placed on defining parameters by which we communicate our efforts to preserve resources for the future, reduce our CO2 footprint, and become more resilient. On the energy front, the R&D team is taking on the topic of energy storage, which represents the largest and most near-term opportunity to accelerate renewable energy deployments and bring us closer to replacing fossil fuels as the primary resource to meet the world’s continual growth in energy demand. Global products/brands have been conceptualized and engineered to positively impact the jobsite safety, promote efficient construction practices, sensibly preserve natural resources vital to life, lower carbon foot-print and improve the quality of life in rapidly transforming cities. Underlying CEMEX’s R&D philosophy is a growing culture of global collaboration and coordination, where the Innovation Team identifies and promotes novel collaboration practices and mobilizes its adoption within CEMEX. Getting closer and understanding our customers is a fundamental transformation within CEMEX, and consequently the Commercial & Logistics area is carrying out research initiatives to better attend the needs of customers as well as identify key changes in our supply chain management that should enable us to bring products, solutions, and services to our customers in the most cost-effective and efficient manner, using what we believe to be the best available technologies to design a new standard in digital commercial models.

There are nine laboratories supporting CEMEX’s R&D efforts under a collaboration network. The laboratories are strategically located in close proximity to our plants, and assist the operating subsidiaries with troubleshooting, optimization techniques and quality assurance methods. The laboratory located in Switzerland is continually improving and consolidating our research and development efforts in the areas of cement, concrete, aggregates, admixtures, mortar and asphalt technology, sustainability as well as in energy management. In addition, CEMEX Research Center actively generates as well as registers patents and pending applications in many of the countries in which CEMEX operates. Patents and trade secrets are managed strategically in order for us to achieve important technology lock-ins associated with CEMEX technology.

Our Information Technology divisions develop information management systems and software relating to cement and ready-mix concrete operational practices, automation and maintenance. These systems have helped us to better serve our clients with respect to purchasing, delivery and payment. More importantly, thanks to the activities of the Business Process and IT departments, CEMEX is continuously improving and innovating its business processes to adapt them to the dynamically evolving markets, and better serve CEMEX’s needs. The launch of CEMEX GO and its deployment in our operations is a testament to our commitment to evolve our digital commercial model to better serve the market and our customers especially.

R&D activities comprise part of the daily routine of the departments and divisions mentioned above; therefore, the costs associated with such activities are expensed as incurred. However, the costs incurred in the development of software for internal use are capitalized and amortized in operating results over the estimated useful life of the software, which is approximately five years.

In 2016, 2017 and 2018 the total combined expense of the CEMEX technology and energy departments, which includes all significant R&D activities, amounted to Ps712 million (U.S.$38 million), Ps754 million (U.S.$38 million) and Ps758 million (U.S.$38 million), respectively.

Trend Information

Other than as disclosed elsewhere in this report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2018 that are reasonably likely to have a material and adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.

Summary of Material Contractual Obligations and Commercial Commitments

The 2017 Credit Agreement

On July 19, 2017, CEMEX, S.A.B. de C.V. and certain of its subsidiaries entered into a facilities agreement for an amount in different currencies equivalent to U.S.$4.1 billion (in aggregate), the proceeds of which were used to refinance indebtedness incurred under a then-existing credit agreement and other debt repayment obligations. As of December 31, 2017, the outstanding indebtedness incurred under the 2017 Credit Agreement was U.S.$2.5 billion.

As of December 31, 2018, we reported an aggregate principal amount of outstanding debt of Ps63,040 million (U.S.$3,208 million) under the 2017 Credit Agreement. The 2017 Credit Agreement is secured by a first-priority security interest over the Collateral and all proceeds of such Collateral. As of July 19, 2017, commitments initially available under the 2017 Credit Agreement included (i) €741 million, (ii) £344 million and (iii) U.S.$2,746 million, out of which U.S.$1,135 million were in the revolving credit facility tranche of the 2017 Credit Agreement. As of December 31, 2018, the 2017 Credit Agreement had an amortization profile, considering all commitments of U.S.$4.1 billion under the 2017 Credit Agreement, of U.S.$580 million in 2020, U.S.$1,159 million in 2021 and U.S.$1,440 million in 2022.

Our failure to comply with restrictions and covenants under the 2017 Credit Agreement could have a material adverse effect on our business and financial conditions.

For a discussion of restrictions and covenants under the 2017 Credit Agreement, see “Item 3—Key Information—Risk Factors—The 2017 Credit Agreement contains several restrictions and covenants. Our failure to comply with such restrictions and covenants could have a material adverse effect on our business and financial conditions” of our 2017 Annual Report and under “Risk Factors” in this report.

Senior Secured Notes

The indentures governing our outstanding Senior Secured Notes impose significant operating and financial restrictions on us. These restrictions will limit our ability, among other things, to: (i) create liens; (ii) incur in additional debt; (iii) change CEMEX’s business or the business of any obligor or material subsidiary (in each case, as defined in the 2017 Credit Agreement); (iv) enter into mergers; (v) enter into agreements that restrict our subsidiaries’ ability to pay dividends or repay intercompany debt; (vi) acquire assets; (vii) enter into or invest in joint venture agreements; (viii) dispose certain assets; (ix) grant additional guarantees or indemnities; (x) declare or pay cash dividends or make share redemptions; (xi) enter into certain derivatives transactions and (xii) exercise any call option in relation to any perpetual bonds issues unless the exercise of the call options does not have a materially negative impact on our cash flow.

January 2021 U.S. Dollar Notes and October 2018 U.S. Dollar Notes. On October 2, 2013, CEMEX, S.A.B. de C.V. issued the October 2018 U.S. Dollar Notes, in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX México, CEMEX España, New Sunward, CEMEX Asia B.V. (“CEMEX Asia”), CEMEX Concretos, S.A. de C.V. (“CEMEX Concretos”), CEMEX Corp., CEMEX Finance, CEMEX Africa & Middle East Investments B.V. (“CEMEX Africa & Middle East Investments”), CEMEX France Gestion (S.A.S.) (“CEMEX France”), CEMEX Research Group AG (“CEMEX Research Group”), CEMEX UK and Empresas Tolteca de México, S.A. de C.V. (“Empresas Tolteca”) have fully and unconditionally guaranteed the performance of all obligations of CEMEX, S.A.B. de C.V. under the January 2021 U.S. Dollar Notes and October 2018 U.S. Dollar Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral. On May 12, 2016, CEMEX, S.A.B. de C.V. completed the purchase of U.S.$178.5 million aggregate principal amount of the October 2018 U.S. Dollar Notes through a cash tender offer in May 2016 (the “May 2016 Tender Offer”). All such October 2018 U.S. Dollar Notes purchased in the May 2016 Tender Offer were immediately canceled. Following the settlement of the May 2016 Tender Offer, U.S.$319.5 million aggregate principal amount of the October 2018 U.S. Dollar Notes remained outstanding. In addition, we repurchased U.S.$6.1 million principal amount of the October 2018 U.S. Dollar Notes in open market purchases in 2016, all of which have been canceled. The remaining U.S.$313 million aggregate principal amount of the October 2018 U.S. Dollar Notes were redeemed in July 2018. CEMEX, S.A.B. de C.V. completed the purchase of U.S.$241.9 million and U.S.$385.1 million aggregate principal amount of the January 2021 U.S. Dollar Notes through a cash tender offer in October 2016 and a cash tender offer in March 2017. All such January 2021 U.S. Dollar Notes purchased in the tender offers were immediately canceled. Following the settlement of both tender offers, U.S.$341.7 million aggregate principal amount of the January 2021 U.S. Dollar Notes remained outstanding. In addition, we repurchased U.S.$31.4 million principal amount of the January 2021 U.S. Dollar Notes in open market purchases in 2016, all of which have been canceled. In addition, we repurchased U.S.$8.5 million principal amount of the January 2021 U.S. Dollar Notes in an open market purchase in 2017, all of which have been cancelled. On March 15, 2018, we redeemed all of the outstanding January 2021 U.S. Dollar Notes.

April 2024 U.S. Dollar Notes. On April 1, 2014, CEMEX Finance issued the April 2024 U.S. Dollar Notes in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX, S.A.B. de C.V., CEMEX México, CEMEX España, New Sunward, CEMEX Asia, CEMEX Concretos, CEMEX Corp., CEMEX Africa & Middle East Investments, CEMEX France, CEMEX Research Group, CEMEX UK and Empresas Tolteca have fully and unconditionally guaranteed the performance of all obligations of CEMEX Finance under the April 2024 U.S. Dollar Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral.

January 2025 U.S. Dollar Notes and January 2022 Euro Notes. On September 11, 2014, CEMEX, S.A.B. de C.V. issued the January 2025 U.S. Dollar Notes and the January 2022 Euro Notes, in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX México, CEMEX Concretos, Empresas Tolteca, New Sunward, CEMEX España, CEMEX Asia, CEMEX Corp., CEMEX Finance, Cemex Africa & Middle East Investments, CEMEX France, CEMEX Research Group and CEMEX UK have fully and unconditionally guaranteed the performance of all obligations of CEMEX, S.A.B. de C.V. under the January 2025 U.S. Dollar Notes and January 2022 Euro Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral. On January 10, 2018, we redeemed all of the outstanding January 2022 Euro Notes.

May 2025 U.S. Dollar Notes and March 2023 Euro Notes. In March 2015, CEMEX, S.A.B. de C.V. issued the May 2025 U.S. Dollar Notes and the March 2023 Euro Notes in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX México, CEMEX Concretos, Empresas Tolteca, New Sunward, CEMEX España, CEMEX Asia, CEMEX Corp., CEMEX Finance, Cemex Africa & Middle East Investments, CEMEX France, CEMEX Research Group and CEMEX UK, have fully and unconditionally guaranteed the performance of all obligations of CEMEX, S.A.B. de C.V. under the May 2025 U.S. Dollar and March 2023 Euro Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral.

April 2026 U.S. Dollar Notes. On March 16, 2016, CEMEX, S.A.B. de C.V. issued the April 2026 U.S. Dollar Notes, in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX México, CEMEX España, New Sunward, CEMEX Asia, CEMEX Concretos, CEMEX Corp., CEMEX Finance, CEMEX Africa & Middle East Investments, CEMEX France, CEMEX Research Group and CEMEX UK and Empresas Tolteca have fully and unconditionally guaranteed the performance of all obligations of CEMEX, S.A.B. de C.V. under the April 2026 U.S. Dollar Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral.

June 2024 Euro Notes. On June 14, 2016, CEMEX Finance issued the June 2024 Euro Notes in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX, S.A.B. de C.V., CEMEX México, CEMEX Concretos, Empresas Tolteca, New Sunward, CEMEX España, CEMEX Asia, CEMEX Corp., Cemex Africa & Middle East Investments, CEMEX France, Cemex Research Group and CEMEX UK have fully and unconditionally guaranteed the performance of all obligations of CEMEX Finance under the June 2024 Euro Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral.

December 2024 Euro Notes. On December 5, 2017, CEMEX, S.A.B. de C.V. issued the 2.750% Euro-Denominated Senior Secured Notes due 2024 (the “December 2024 Euro Notes”), in transactions exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act. CEMEX México, CEMEX España, New Sunward, CEMEX Asia, CEMEX Concretos, CEMEX Corp., CEMEX Finance, CEMEX Africa & Middle East Investments, CEMEX France, CEMEX Research Group, CEMEX UK and Empresas Tolteca have fully and unconditionally guaranteed the performance of all obligations of CEMEX, S.A.B. de C.V. under the December 2024 Euro Notes. The payment of principal, interest and premium, if any, on such notes is secured by a first-priority security interest over the Collateral and all proceeds of the Collateral.

Convertible Notes

March 2020 Optional Convertible Subordinated U.S. Dollar Notes. During 2015, CEMEX, S.A.B. de C.V. issued U.S.$521 million aggregate principal amount of its March 2020 Optional Convertible Subordinated U.S. Dollar Notes. The March 2020 Optional Convertible Subordinated U.S. Dollar Notes were issued: (a) U.S.$200 million as a result of the exercise on March 13, 2015 of U.S.$200 million notional amount of CCUs, and (b) U.S.$321 million as a result of private exchanges with certain institutional investors on May 28, 2015, which together with early conversions, resulted in a total of U.S.$626 million aggregate principal amount of our 3.250% Convertible Subordinated Notes due 2016 issued in March 2011 (the “March 2016 Optional Convertible Subordinated U.S. Dollar Notes”) held by such investors being paid and the issuance and delivery by CEMEX of an estimated 42 million ADSs, which included a number of additional ADSs issued to the holders as non-cash inducement premiums. The March 2020 Optional Convertible Subordinated U.S. Dollar Notes, which are subordinated to all of CEMEX’s liabilities and commitments, are convertible into a fixed number of CEMEX, S.A.B. de C.V.’s ADSs at any time at the holder’s election and are subject to antidilution adjustments. The difference at the exchange date between the fair value of the March 2016 Optional Convertible Subordinated U.S. Dollar Notes and the 42 million ADSs against the fair value of the March 2020 Optional Convertible Subordinated U.S. Dollar Notes, represented a loss of Ps365 million recognized in 2015 as part of “Financial income and other items, net”. The aggregate fair value of the conversion option as of the issuance dates which amounted to Ps199 million was recognized in other equity reserves. As of December 31, 2017 and 2018, the conversion price per ADS for the March 2020 Optional Convertible Subordinated U.S. Dollar Notes was approximately U.S.$11.01 in both years. After antidilution adjustments, the conversion rate for the March 2020 Optional Convertible Subordinated U.S. Dollar Notes as of December 31, 2018 and 2018 was 90.8592 ADS per each U.S.$1,000 principal amount of such notes in both years. See note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

November 2019 Mandatory Convertible Mexican Peso Notes. In December 2009, CEMEX, S.A.B. de C.V. completed an exchange offer of debt into mandatorily convertible securities in Pesos for approximately U.S.$315 million principal amount of the November 2019 Mandatory Convertible Mexican Peso Notes. Reflecting antidilution adjustments, the notes will be converted at maturity or earlier if the price of the CPO reaches Ps26.22 into approximately 236 million CPOs at a conversion price of Ps17.48 per CPO. The conversion rate under the November 2019 Mandatory Convertible Mexican Peso Notes is 509.1077 CPOs per each convertible obligation. During their tenure, holders have an option to voluntarily convert their securities on any interest payment date into CPOs. Considering the currency in which the notes are denominated and the functional currency of CEMEX, S.A.B.

de C.V.’s financing division, the conversion option embedded in these securities is treated as a stand-alone derivative liability at fair value in the income statements. Changes in fair value generated a gain of U.S.$20 million (Ps391 million) in 2018, a gain of U.S.$19 million (Ps359 million) in 2017 and a loss of U.S.$29 million (Ps545 million) in 2016. See note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

March 2018 Optional Convertible Subordinated U.S. Dollar Notes. On March 15, 2011, CEMEX, S.A.B. de C.V. closed the offering of U.S.$690 million aggregate principal amount of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes. The notes are subordinated to all of CEMEX’s liabilities and commitments. The notes are convertible into a fixed number of CEMEX, S.A.B. de C.V.’s ADSs, at the holder’s election, and are subject to antidilution adjustments. On June 19, 2017, the CEMEX, S.A.B. de C.V. agreed to, with certain institutional holders, the early conversion of approximately U.S.$325 in aggregate principal amount of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes in exchange for approximately 43 million ADSs, which included the number of additional ADSs issued to the holders as non-cash inducement premiums. As a result of the early conversion agreements, the liability components of the converted notes of Ps5,468 million was reclassified from other financial obligations to other equity reserves. In addition, considering the issuance of shares, CEMEX, S.A.B. de C.V. increased common stock for Ps4 million and additional paid-in capital for Ps7,059 million against other equity reserves, and recognized expense for the inducement premiums paid in shares of Ps769 million, recognized within “Financial income and other items, net” in the 2017 income statement. After the early conversion of notes described above, the U.S.$365 million of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes that remained outstanding, were repaid in cash at their maturity on March 15, 2018. Concurrent with the offering of the March 2018 Optional Convertible Subordinated U.S. Dollar Notes, a portion of the net proceeds from this transaction was used to fund the purchase of capped call options, which, when purchased, were generally expected to reduce the potential dilution cost to CEMEX upon the potential conversion of such notes See note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Commercial Commitments

On July 27, 2012, we entered into a Master Professional Services Agreement with IBM. This agreement provides the framework for the services IBM provides to us on a global scale, including: information technology, application development and maintenance, finance and accounting outsourcing, human resources administration and contact center services. The term of the agreement began on July 27, 2012 and will end on August 31, 2022, unless earlier terminated. Our minimum required payments to IBM under the agreement are approximately U.S.$50 million per year. We have the right to negotiate a reduction of service fees every two years if, as a result of a third party’s benchmarking assessment, it is determined that IBM’s fees are greater than those charged by other providers for services of similar nature. We may terminate the agreement (or a portion of it) at our discretion and without cause at any time by providing at least six-months’ notice to IBM and paying termination charges consisting of IBM’s unrecovered investment and breakage and wind-down costs. In addition, we may terminate the agreement (or a portion of it) for cause without paying termination charges. Other termination rights may be available to us for a termination charge that will vary with the reason for termination. IBM may terminate the agreement if we (i) fail to make payments when due or (ii) become bankrupt and do not pay in advance for the services.

On April 28, 2017, we completed the sale of the assets and activities related to the ready-mix concrete pumping business in Mexico to Cementos Españoles de Bombeo, S. de R.L., which is a Mexican subsidiary of Pumping Team specializing in the supply of ready-mix concrete pumping services, for an aggregate price of Ps1,649 million, which included the sale of fixed assets for Ps309 million, plus administrative and client and market development services, as well as the lease of facilities in Mexico that we will supply to Pumping Team over a period of ten years with the possibility to extend for three additional years, for an aggregate initial amount of Ps1,340 million. The proceeds are recognized each period as services are rendered. There is a possibility of contingent revenue, subject to results, of up to Ps557 million linked to annual metrics beginning in the first year and through the fifth year of the agreement. For the first year of operation under the agreements from May 2017 to April 2018, we received Ps25 million of such contingent revenue.

As of December 31, 2018, we did not depend on any of our suppliers of goods or services to conduct our business.

Contractual Obligations

As of December 31, 2017 and 2018, we had material contractual obligations as set forth in the table below.


	As of December 31, 2017		As of December 31, 2018
Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(in millions of U.S. Dollars)
Long-term debt	U.S.$	9,892		7		1,788		2,347		5,197		9,339
Finance lease obligations⁽¹⁾		175		36		87		19		1		143
Convertible notes⁽²⁾		906		19		514		–		–		533

Total debt and other financial obligations⁽³⁾		10,973		62		2,389		2,366		5,198		10,015
Interest payments on debt⁽⁴⁾		3,073		508		960		777		535		2,780
Pension plans and other benefits⁽⁵⁾		1,587		148		270		270		664		1,352
Acquisition of property, plant and equipment⁽⁶⁾		—		87		43		–		–		130
Purchases of raw material, fuel and energy⁽⁷⁾		4,326		702		955		1,230		2,270		5,157

Total contractual obligations	U.S.$	20,453		1,693		4,968		4,874		9,106		20,641

Total contractual obligations (Mexican Pesos)⁽⁸⁾	Ps	401,901		33,267		97,621		95,774		178,933		405,595

(1)

Represents nominal cash flows. As of December 31, 2018, the net present value of future payments under such leases was U.S.$122 million (Ps2,396 million), of which, U.S.$74 million (Ps1,450 million) refers to payments from 1 to 3 years and U.S.$14 million (Ps276 million) refers to payments from 3 to 5 years. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect on the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018. See note 2.20 to our 2018 audited consolidated financial statements included in the February 28 6-K.

(2)	Refers to the components of liability of the convertible notes described in note 16.2 and 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K. and assumes repayment at maturity and no conversion of such convertible notes.

(3)	The schedule of debt payments, which includes current maturities, does not consider the effect of any refinancing of debt that may occur during the following years. In the past, CEMEX has replaced its long-term obligations for others of a similar nature.

(4)	Estimated cash flows on floating rate denominated debt were determined using the floating interest rates in effect as of December 31, 2017 and 2018.

(5)	Represents estimated annual payments under these benefits for the next 10 years (see note 18 to our 2018 audited consolidated financial statements included in the February 28 6-K), including the estimate of new retirees during such future years.

(6)	Refers mainly to the expansion of a cement-production line in the Philippines.

(7)

Future payments for the purchase of raw materials are presented on the basis of contractual nominal cash flows. Future nominal payments for energy were estimated for all contractual commitments on the basis of an aggregate average expected consumption per year using the future prices of energy established in the contracts for each period. Future payments also include CEMEX’s commitments for the purchase of fuel.

(8)

Additionally to the contractual obligations mentioned in the table above, as of December 31, 2018 there is a contractual obligation for an amount of US$ 1,207 million regarding operating leases, for which maturities are U.S.$186 million in less than 1 year, U.S.$351 million after 1 through 3 years, U.S.$231 million after 3 through 5 years and U.S.$439 million after more than 5 years. The amounts represent nominal cash flows. CEMEX has operating leases, primarily for operating facilities, cement storage and distribution facilities and certain transportation and other equipment, under which annual rental payments are required plus the payment of certain operating expenses. Rental expense was U.S.$121 million (Ps2,507 million) in 2016, U.S.$115 million (Ps2,252 million) in 2017 and U.S.$185 million (Ps3,493 million) in 2018. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect on the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018.

As of December 31, 2016, 2017 and 2018, in connection with the commitments for the purchase of fuel and energy included in the table above, a description of the most significant contracts is as follows:

In connection with the beginning of full commercial operations of Ventika, S.A.P.I. de C.V. and Ventika II S.A.P.I. de C.V. wind farms (jointly “Ventikas”) located in the Mexican state of Nuevo Leon with a combined generation capacity of 252 MW, we agreed to acquire a portion of the energy generated by Ventikas for our overall electricity needs in Mexico for a period of 20 years, which began in April 2016. As of December 31, 2018, the estimated annual cost of this agreement was U.S.$24.7 million, assuming energy generation at full capacity (energy supply from wind sources is variable in nature and final amounts can be determined only based on energy ultimately received at the agreed prices per unit).

In September 2006, in order to take advantage of the high wind potential in the “Tehuantepec Isthmus,” we and ACCIONA formed an alliance to develop a wind farm project for the generation of 250 MW in the Mexican state of Oaxaca. We acted as promoter of the project, which was named EURUS. ACCIONA provided the required financing, constructed the facility and currently owns and operates the wind farm. The operation of the 167 wind turbines on the farm commenced on November 15, 2009. The agreements between us and ACCIONA established that our plants in Mexico will acquire a portion of the energy generated by the wind farm for a period of at least 20 years, which began in February 2010, when EURUS reached the committed limit capacity. For the years ended December 31, 2015, 2016, 2017 and 2018, EURUS supplied approximately 28.0%, 22.9%, 20.6% and 21.0%, respectively, of our overall electricity needs in Mexico during such years.

In 1999, we entered into agreements with an international partnership, which financed, built and operated TEG, an electrical energy generating plant in Mexico. In 2007, the original operator was replaced. Pursuant to the agreement, we would purchase the energy generated from TEG for a term of not less than 20 years, which started in April 2004 and that was further extended until 2027 with the change of operator. In addition, we committed to supply TEG and another third-party electrical energy generating plant adjacent to TEG all fuel necessary for their operations, a commitment that has been hedged through four 20-year agreements entered with PEMEX, which terminates in 2024. Consequently, for the last three years, CEMEX intends to purchase the required fuel in the market. For the years ended December 31, 2015, 2016, 2017 and 2018, TEG supplied approximately 69.3%, 66.3%, 68.4% and 64.9%, respectively, of our overall electricity needs during such year for our cement plants in Mexico.

In regards with the above, in March 1998 and July 1999, we signed contracts with PEMEX providing that beginning in April 2004 PEMEX’s refineries in Cadereyta and Madero City would supply us with a combined volume of approximately 1.75 million tons of pet coke per year. As per the pet coke contracts with PEMEX, 1.2 million tons of the contracted volume will be allocated to TEG and the other energy producer and the remaining volume will be allocated to our operations in Mexico. By entering into the pet coke contracts with PEMEX, we expect to have a consistent source of pet coke throughout the 20-year term.

In 2007, CEMEX Zement GmbH (“CXZ”), our subsidiary in Germany, entered into a long-term energy supply contract with Vattenfall Europe New Energy Ecopower (“VENEE”), pursuant to which VENEE committed to supply energy to our Rüdersdorf plant for a period of 15 years starting on January 1, 2008. Since 2017 the new owner of the power plant and the contract is the STEAG—Industriekraftwerk Rüdersdorf GmbH (“SIKW”). Based on the contract, each year CXZ has the option to fix in advance the volume of energy that it will acquire from SIKW, with the option to adjust the purchase amount one time on a monthly and quarterly basis. According to this agreement, CXZ has acquired 27 MW for 2018 and 28 MW for 2019 and CXZ expects to acquire between 26 and 28 MW for the following years starting in 2018 and thereafter. The estimated annual cost of this agreement is approximately U.S.$12 million assuming that CEMEX receives all its energy allocation. The contract, which establishes a price mechanism for the energy acquired, based on the price of energy future contracts quoted on the European Energy Exchange, did not require initial investments and was expected to be performed at a future date. Based on its terms, this contract qualified as a financial instrument under IFRS. However, as the contract is for CEMEX’s own use and CEMEX sells any energy surplus as soon as actual energy requirements are known, regardless of changes in prices and thereby avoiding any intention of trading in energy, such contract is not recognized at its fair value.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, operating results and liquidity or capital resources.

Quantitative and Qualitative Market Disclosure

Our Derivative Financial Instruments

For the year ended December 31, 2017, we had net gains related to the recognition of changes in fair values of derivative financial instruments of Ps161 million (U.S.$9 million). For the year ended December 31, 2018, we had a net gain related to the recognition of changes in fair values of derivative financial instruments of Ps692 million (U.S.$38 million). See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

In the ordinary course of business, we are exposed to credit risk, interest rate risk, foreign exchange risk, equity risk, commodities risk and liquidity risk, considering the guidelines set forth by the CEMEX, S.A.B. de C.V. board of directors, which represent our risk management framework and are supervised by several of our committees. Our management establishes specific policies that determine strategies focused on obtaining natural hedges or risk diversification to the extent possible, such as avoiding customer concentration on a determined market or aligning the currencies portfolio in which we incur our debt with those in which we generate our cash flows. As of December 31, 2017 and 2018, these strategies were sometimes complemented by the use of derivative financial instruments. See note 16.4 and 16.5 to our 2018 audited consolidated financial statements included in the February 28 6-K.

During the reported periods, in compliance with the guidelines established by our Risk Management Committee, and in line with any restrictions set forth by our debt agreements, our hedging strategy and risk management framework, we held derivative financial instruments with the objectives of: (a) hedging foreign exchange risk of our net assets in foreign subsidiaries; (b) changing the risk profile associated with changes in the interest rates of our debt agreements; (c) hedging of forecasted transactions; (d) changing the risk profile or fixing the price of fuels and electric energy; and (e) accomplishing other corporate objectives.

For the majority of the last ten years, we significantly decreased our use of derivatives instruments related to debt, both currency and interest rate derivatives, thereby reducing the risk of cash margin calls.

Since February 2017, we began a U.S.$/MXN Forward program to hedge some of our foreign exchange exposures, with a planned notional amount up to $1.25 billion. As of December 31, 2018, we have forwards in place for approximately U.S.$1,249 million. These instruments have a negative pay-out when Mexican Peso is strengthening and vice-versa. For accounting purposes under IFRS, this program has been designated as a hedge of our net investment in Mexican Pesos, pursuant to which changes in the fair market value of these instruments are recognized as part of other comprehensive income in equity.

In June 2018 we entered into U.S.$1 billion of interest rate swaps to hedge interest payments of existing bank loans referenced to U.S. floating rates. These interest rate swaps, effective in June 2019, will mature in June 2023. For accounting purposes under IFRS, these contracts have been designated as cash flow hedges, pursuant to which, changes in fair value are initially recognized as part of other comprehensive income in equity and are subsequently recycled through financial expense as interest expense on the related bank loans accrues.

We maintain forward contracts negotiated to hedge the price of certain fuels, including diesel, gas and coal, as solid fuel, in several of our operations. By means of these contracts, for our own consumption only, we fixed the price of these fuels over certain volumes representing a portion of the estimated consumption of such fuels in several of our operations. These contracts have been designated as cash flow hedges of diesel, gas or coal consumption, and as such, changes in fair value are recognized temporarily through other comprehensive income and are recycled to operating expenses as the related fuel volumes are consumed.

With respect to our existing financial derivatives, we may incur net losses and be subject to margin calls that will require cash. If we enter into new derivative financial instruments, we may incur net losses and be subject to margin calls in which the cash required to cover margin calls may be substantial and may reduce the funds available to us for our operations or other capital needs.

As with any derivative financial instrument, we assume the creditworthiness risk of the counterparty, including the risk that the counterparty may not honor its obligations to us. Before entering into any derivative financial instrument, we evaluate, by reviewing credit ratings and our business relationship according to our policies, the creditworthiness of the financial institutions and corporations that are prospective counterparties to our derivative financial instruments. We select our counterparties to the extent we believe that they have the financial capacity to meet their obligations in relation to these instruments. Under current financial conditions and volatility, we cannot assure that risk of non-compliance with the obligations agreed to with such counterparties is minimal. See note 16.4 and 16.5 to our 2018 audited consolidated financial statements included in the February 28 6-K.

The fair value of derivative financial instruments is based on estimated settlement costs or quoted market prices and supported by confirmations of these values received from the counterparties to these financial instruments. The notional amounts of derivative financial instrument agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss.


	At December 31, 2017				At December 31, 2018
(in millions of U.S. Dollars)	Notional Amount		Estimated Fair value		Notional Amount		Estimated Fair value		Maturity Date
Net investment hedge		1,160		47		1,249		2		December 2020
Foreign exchange forwards related to forecasted transactions		381		3		–		–		–
Equity forwards on third party shares		168		7		111		2		March 2020
Interest Rate Swaps		137		16		1,126		(8)		September 2022/June 2023
Fuel price hedging		72		20		122		(14)		December 2023
November 2019 Mandatory Convertible Mexican Peso Notes		—		(20)		–		(1)		November 2019

		1,918		73		2,608		(19)

Our Net Investment Hedge. As of December 31, 2017 and 2018, we negotiated foreign exchange forwards contracts (U.S.$/Mexican Peso) under a program for up to U.S.$1,250 million, with monthly revolving settlement dates from 1 to 24 months to hedge our exposure to currency translation effects arising from certain investments in foreign subsidiaries. The average life of these contracts is approximately one year. For accounting purposes under IFRS, we have designated this program as a hedge of CEMEX’s net investment in Mexican Pesos, pursuant to which changes in fair market value of these instruments are recognized as part of other comprehensive income in stockholders’ equity. For the years 2017 and 2018, changes in the fair value of these foreign exchange forward contracts generated gains of U.S.$6 million (Ps110 million) and losses of U.S.$59 million (Ps1,157 million), respectively. As of December 31, 2017 and 2018, the fair value of the foreign exchange forward represented an asset of U.S.$47 million (Ps923 million) and U.S.$2 million (Ps39 million), respectively. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Our Foreign exchange forwards related to forecasted transactions. As of December 31, 2017, we held U.S.$/Euro foreign exchange forwards contracts maturing on January 10, 2018, negotiated to maintain the Euro value of a portion of proceeds from debt issuances maintained in U.S. dollars that were used to repurchase debt denominated in euros (See note 16.1 to our 2018 audited consolidated financial statements included in the February 28 6-K). In addition, in February 2017 we settled U.S.$/Mexican Peso foreign exchange forwards contracts negotiated to hedge the U.S. dollar value of the proceeds from the expected sale of pumping assets in Mexico (See note 4.3 to our 2018 audited consolidated financial statements included in the February 28 6-K). For the years 2016, 2017 and 2018, the aggregate results of these instruments, including the effects resulting from positions entered and settled during the year, generated gains of U.S.$10 million (Ps186 million) in 2016, losses of U.S.$17 million (Ps337 million) in 2017 and losses of U.S.$1 million (Ps21 million) in 2018, recognized within “Financial income and other items, net” in the income statement. As of December 31, 2017, the fair value of the foreign exchange forward represented an asset of U.S.$3 million (Ps59 million). See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Our Equity Forwards on Third-Party Shares. As of December 31, 2017 and 2018, in connection with the definitive sale of our GCC shares in September 2017 to two financial institutions that acquired all corporate rights and control under the aforementioned shares (see note 13.1 to our 2018 audited consolidated financial statements included in the February 28 6-K), we negotiated equity forward contracts to be settled in cash maturing in March 2019 and March 2020, respectively, over the price of 31.5 million GCC shares in 2017 and 20.9 million GCC shares in 2018. During 2018, we settled a portion of these contracts early for 10.6 million shares. During 2017 and 2018, changes in the fair value of these instruments and early settlement effects generated losses of U.S.$24 million (Ps463 million) in 2017 and gains of U.S.$25 million (Ps436 million) in 2018, recognized within “Financial income and other items, net” in the income statement. GCC is a Mexican construction company listed on the Mexican Stock Exchange. As of December 31, 2017 and 2018, the fair value of the equity forwards represented an asset of U.S.$7 million (Ps138 million) and U.S.$2 million (Ps39 million), respectively, net of cash collateral. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Our Interest Rate Swaps. As of December 31, 2018, we held interest rate swaps in the amount of U.S.$1,000 million, the fair value of which represented a liability of U.S.$19 million (Ps373 million). They were negotiated in June 2018 to fix interest payments of existing bank loans bearing floating rates. The contracts mature in June 2023. For accounting purposes under IFRS, we designated these contracts as cash flow hedges, pursuant to which changes in fair value are initially recognized as part of other comprehensive income in equity and are subsequently recycled through financial expense as interest expense on the related bank loans accrues. For the year 2018, changes in the fair value of these contracts generated losses of U.S.$19 million (Ps364 million) as reflected in the income statement.

As of December 31, 2017 and 2018, we had an interest rate swap maturing in September 2022 associated with an agreement entered into by us for the acquisition of electric energy in Mexico, the fair value of which represented assets of U.S.$16 million (Ps314 million) and U.S.$11 million (Ps216 million), respectively. Pursuant to this instrument, during the tenure of the swap and based on its notional amount, we received a fixed rate of 5.4% and pay LIBOR. Changes in the fair value of this interest rate swap generated losses of U.S.$6 million (Ps112 million) in 2016, U.S.$6 million (Ps114 million) in 2017 and U.S.$6 million (Ps114 million) in 2018, recognized in the income statement for each period. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Fuel price hedging. As of December 31, 2017 and 2018, we maintained forward contracts negotiated to hedge the price of certain fuels, including diesel, gas and coal in several countries for aggregate notional amounts of U.S.$72 million (Ps1,415 million) and U.S.$122 million (Ps2,398 million), respectively, with an estimated aggregate fair value representing assets of U.S.$20 million (Ps394 million) in 2017 and liabilities of U.S.$14 million (Ps275 million) in 2018. By means of these contracts, for our own consumption only, we fixed the price of these fuels over certain volumes representing a portion of the estimated consumption of such fuels in several operations. These contracts have been designated as cash flow hedges of diesel, gas or coal consumption, and as such, changes in fair value are recognized temporarily through other comprehensive income and are recycled to operating expenses as the related fuel volumes are consumed. For the years 2016, 2017 and 2018, changes in fair value of these contracts recognized in other comprehensive income represented gains of U.S.$15 million (Ps311 million), gains of U.S.$4 million (Ps76 million) and losses of U.S.$35 million (Ps697 million), respectively. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Our November 2019 Mandatory Convertible Mexican Peso Notes. In connection with the November 2019 Mandatory Convertible Mexican Peso Notes (see note 16.2 to our 2018 audited consolidated financial statements included in the February 28 6-K), considering that the securities are denominated in pesos and the functional currency of CEMEX, S.A.B. de C.V.’s division that issued the securities is the dollar (See note 2.4 to our 2018 audited consolidated financial statements included in the February 28 6-K), we separated the conversion option embedded in such instruments and recognized it at fair value through the income statement, which as of December 31, 2017 and 2018, resulted in a liability of U.S.$20 million (Ps393 million) and U.S.$1 million (Ps20 million), respectively. Changes in fair value generated a loss of U.S.$29 million (Ps545 million) in 2016, a gain of U.S.$19 million (Ps359 million) in 2017 and gain of U.S.$20 million (Ps391 million) in 2018.

In addition, on March 15, 2011, CEMEX, S.A.B. de C.V. entered into capped calls, considered antidilution adjustments, for over 80 million ours ADSs that matured in March 2018 in connection with the March 2018 Optional Convertible Subordinated U.S. Dollar Notes, by means of which, at maturity of the notes, we would receive in cash the excess between the market price and the strike price of approximately U.S.$8.57 per ADS, with a maximum appreciation per ADS of U.S.$5.27 . We paid aggregate premiums of U.S.$104 million. In August 2016, we amended 58.3% of the total notional amount of the capped calls to lower the exercise price in exchange for reducing the number of underlying options. As a result, we retained capped calls on over 71 million ADSs. Changes in the fair value of these instruments generated gains of U.S.$44 million (Ps818 million) in 2016 and gains of U.S.$37 (Ps725 million) in 2017 and, recognized within “Financial income and other items, net” in the income statement. During 2017, CEMEX unwound and settled all its capped calls receiving in exchange U.S.$103 million in cash. See note 16.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Interest Rate Risk, Foreign Currency Risk and Equity Risk

Interest Rate Risk. The table below presents tabular information of our fixed and floating rate long-term foreign currency-denominated debt as of December 31, 2018. Average floating interest rates are calculated based on forward rates in the yield curve as of December 31, 2018. Future cash flows represent contractual principal payments. The fair value of our floating rate long-term debt is determined by discounting future cash flows using borrowing rates available to us as of December 31, 2018 and is summarized as follows:


	Expected maturity dates as of December 31, 2018
Long-Term Debt(1)	2019		2020		2021		2022		After 2023		Total		Fair Value
					(In millions of U.S. Dollars, except percentages)
Variable rate		U.S.$ 5		585		1,200		1,497		118		U.S.$ 3,405		U.S.$ 3,252
Average interest rate		4.51%		3.62%		3.68%		3.35%		4.15%
Fixed rate		U.S.$ 2		1		1		38		5,825		U.S.$ 5,867		U.S.$ 5,902
Average interest rate		6.58%		5.55%		5.58%		5.62%		5.60%

(1)

The information above includes the current maturities of the long-term debt. Total long-term debt as of December 31, 2018 does not include our other financial obligations and the Perpetual Debentures for an aggregate amount of U.S.$444 million (Ps8,729 million) issued by consolidated entities. See notes 16.2 and 20.4 to our 2018 audited consolidated financial statements included in the February 28 6-K.

As of December 31, 2018, we were subject to the volatility of floating interest rates, which, if such rates were to increase, may adversely affect our financing cost and our net income. As of December 31, 2017, 31% of our foreign currency-denominated long-term debt bears floating rates at a weighted average interest rate of LIBOR plus 268 basis points. As of December 31, 2018, 37% of our foreign currency-denominated long-term debt bears floating rates at a weighted average interest rate of LIBOR plus 241 basis points. As of December 31, 2017 and 2018, if interest rates at that date had been 0.5% higher, with all other variables held constant, CEMEX’s net income for 2017 and 2018 would have been reduced by approximately U.S.$18 million (Ps353 million) and U.S.$19 million (Ps366 million), respectively, as a result of higher interest expense on variable-rate debt. However, this analysis does not include the interest rate swaps held by CEMEX during 2017 and 2018. See note 16.5 to our 2018 audited consolidated financial statements included in the February 28 6-K.

Foreign Currency Risk. Due to our geographic diversification, our revenues are generated in various countries and settled in different currencies. However, some of our production costs, including fuel and energy, and some of our cement prices, are periodically adjusted to take into account fluctuations in the U.S. Dollar/Mexican Peso exchange rate. For the year ended December 31, 2018, approximately 21% of our revenues, before eliminations resulting from consolidation, were generated in Mexico, 24% in the United States, 7% in the United Kingdom, 6% in France, 4% in Germany, 3% in Spain, 2% in Poland, 1% in the Czech Republic, 2% in the Rest of Europe, 3% in Colombia, 2% in Panama, 1% in Costa Rica, 2% in Caribbean TCL, 1% in the Dominican Republic, 3% in the Rest of South, Central America and the Caribbean region, 3% in Philippines, 2% in Egypt, 4% in Israel, 1% in the Rest of Asia, Middle East and Africa region and 8% from our Other operations.

Foreign exchange gains and losses occur by monetary assets or liabilities in a currency different from its functional currency, and are recorded in the consolidated income statements, except for exchange fluctuations associated with foreign currency indebtedness directly related to the acquisition of foreign entities and related parties’ long-term balances denominated in foreign currency, for which the resulting gains or losses are reported in other comprehensive income. As of December 31, 2017 and 2018, excluding from the sensitivity analysis the impact of translating the net assets of foreign operations into our reporting currency and considering a hypothetical 10% strengthening of the U.S. Dollar against the Mexican Peso, with all other variables held constant, our net income for 2017 and 2018 would have increased by approximately U.S.$119 million (Ps2,343 million) and U.S.$63 million (Ps1,240 million), respectively, as a result of higher foreign exchange losses on our dollar-denominated net monetary liabilities held in consolidated entities with other functional currencies. Conversely, a hypothetical 10% weakening of the U.S. Dollar against the Mexican Peso would have had the opposite effect.

As of December 31, 2018, 64% of our total debt plus other financial obligations was U.S. Dollar-denominated, 29% was Euro-denominated, 5% was British Pounds-denominated, 2% was Philippine Peso-denominated and immaterial amounts were denominated in other currencies, which does not include Ps8,729 million (U.S.$444 million) of Perpetual Debentures; therefore, we had a foreign currency exposure arising from the debt

plus other financial obligations denominated in U.S. Dollars, and the debt and other financial obligations denominated in Euros, versus the currencies in which our revenues are settled in most countries in which we operate. We cannot guarantee that we will generate sufficient revenues in U.S. Dollars and Euros from our operations to service these obligations. As of December 31, 2017 and 2018, CEMEX had not implemented any derivative financing hedging strategy to address this foreign currency risk.

Equity Risk. As described above, we have entered into equity forward contracts on GCC shares. Under these equity forward contracts, there is a direct relationship in the change in the fair value of the derivative with the change in price of the underlying share. Upon liquidation, the equity forward contracts provide for cash settlement and the effects are recognized in the income statements as part of “Financial income and other items, net” in our 2018 audited consolidated financial statements included in the February 28 6-K.

As of December 31, 2018, the potential change in the fair value of CEMEX’s forward contracts in GCC shares that would result from a hypothetical, instantaneous decrease of 10% in the market price of GCC shares in dollars, with all other variables held constant, CEMEX’s net income for 2017 and 2018 would have been reduced by U.S.$14 million (Ps283 million) and U.S.$11 million (Ps210 million), as a result of additional negative changes in fair value associated with these forward contracts. A 10% hypothetical increase in the price of GCC shares in 2017 would have generated approximately the opposite effect, respectively.

In addition, even though the changes in fair value of our embedded conversion option in the November 2019 Mandatory Convertible Mexican Peso Notes that are denominated in a currency other than the functional issuer’s currency affect the income statement, they do not imply any risk or variability in cash flows, considering that through their exercise, we will settle a fixed amount of debt with a fixed amount of shares. As of December 31, 2017 and 2018, the potential change in the fair value of the embedded conversion options in the November 2019 Mandatory Convertible Mexican Peso Notes that would result from a hypothetical, instantaneous increase of 10% in the market price of our CPOs, with all other variables held constant, would have decreased our net income by U.S.$9 million (Ps180 million) in 2017 and decreased by U.S.$1 million (Ps16 million) in 2018 as a result of additional negative changes in fair value associated with this option. A 10% hypothetical decrease in our CPO price would generate approximately the opposite effect.

Liquidity Risk. We are exposed to risks from changes in foreign currency exchange rates, prices and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments in the countries in which we operate, any one of which may materially affect our results and reduce cash from operations.

As of December 31, 2018, current liabilities, which included Ps13,622 million of current maturities of debt and other financial obligations, exceeded current assets by Ps22,891 million. For the year ended December 31, 2018, we generated net cash flows provided by operating activities from continuing operations of Ps26,545 million, after payments of interest and income taxes. Our management believes that we will generate sufficient cash flows from operations. In addition, as of December 31, 2018, we have committed available lines of credit under the 2017 Credit Agreement, which include the revolving credit facility and an undrawn tranche for a combined amount of Ps16,211 million (U.S.$825 million). This, in addition to our proven capacity to continually refinance and replace our short-term obligations, will enable us to meet any liquidity risk in the short term. See notes 16.1 and 23.5 to our 2018 audited consolidated financial statements included in the February 28 6-K.

As of December 31, 2017 and 2018, the potential requirement for additional margin calls under our different commitments is not significant.

Investments, Acquisitions and Divestitures

The transactions described below represent our principal investments, acquisitions and divestitures completed during 2016, 2017 and 2018.

Investments and Acquisitions

In August 2018, our subsidiary in the United Kingdom acquired the shares of the ready-mix producer Procon for an amount in Pounds Sterling equivalent to U.S.$22 million, considering the Pound Sterling to Dollar exchange rate as of August 31, 2018. As of December 31, 2018, based on the preliminary valuation of the fair values of the assets acquired and liabilities assumed, the net assets of Procon amount to U.S.$10 million (Ps196 million) and goodwill was determined in the amount of U.S.$12 million (Ps244 million).

On January 24, 2017, Sierra, which is a wholly-owned CEMEX España subsidiary, announced that, having received a foreign investment license from the Trinidad and Tobago Ministry of Finance, all terms and conditions had been complied with or waived and the Offer to all shareholders that took place on December 5, 2016, had accordingly been declared unconditional. In addition, such Offer closed in Jamaica on February 7, 2017. Sierra acquired all TCL shares deposited pursuant to the Offer up to the maximum number of the offered shares. TCL shares deposited in response to the Offer together with Sierra’s existing shareholding in TCL represented 69.83% of the outstanding TCL shares. The total consideration paid by Sierra for the TCL shares was U.S.$86 million. After conclusion of the Offer, CEMEX consolidates TCL and its subsidiaries, including CCCL, for financial reporting purposes beginning February 1, 2017.

Divestitures

On September 27, 2018, a subsidiary of CEMEX, S.A.B. de C.V. concluded the sale of our Brazilian Operations through the sale to Votorantim Cimentos N/NE S.A. of all shares of our Brazilian subsidiary Cimento Vencemos Do Amazonas Ltda, consisting of a fluvial cement distribution terminal located in Manaus, Amazonas province, as well as the related operating license. See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

During 2016, 2017 and 2018, we made divestitures of U.S.$1,045 million, U.S.$1,514 million and U.S.$84 million, respectively (which included fixed assets of U.S.$121 million, U.S.$93 million and U.S.$69 million, respectively).

On July 18, 2016, CHP closed its initial public offering of 45% of its common shares in the Philippines, and 100% of CHP’s common shares started trading on the Philippine Stock Exchange under the ticker “CHP.” As of December 31, 2017, CASE, an indirect subsidiary of CEMEX España, directly owned 55% of CHP’s outstanding common shares. The net proceeds to CHP from its initial public offering were U.S.$507 million after deducting estimated underwriting discounts and commissions, and other estimated offering expenses payable by CHP. CHP used the net proceeds from the initial public offering to repay existing indebtedness owed to BDO Unibank and to an indirect subsidiary of CEMEX, S.A.B. de C.V. CHP’s assets consist primarily of CEMEX’s cement manufacturing assets in the Philippines.

On August 29, 2016, we announced that we would be participating in the corporate restructuring of GCC, which resulted in CEMEX owning 23% of the outstanding share capital of GCC and, additionally, a minority interest in CAMCEM, an entity which in turn owns a majority interest in GCC. On the same day, we also announced that we reached an agreement with GCC on the terms and conditions regarding the sale to GCC of certain assets in the U.S. On November 18, 2016, after all conditions precedent were satisfied, CEMEX announced that it had closed the sale of certain assets in the U.S. to GCC for U.S.$306 million. The assets were sold by an affiliate of CEMEX to an affiliate of GCC in the U.S., and mainly consisted of CEMEX’s cement plant in Odessa, Texas, two cement terminals and the building materials business in El Paso, Texas and Las Cruces, New Mexico. On February 15, 2017, we sold 45,000,000 shares of common stock of GCC, representing 13.53% of the equity capital of GCC, at a price of Ps95 per share in a public offering to investors in Mexico authorized by the CNBV and in a concurrent private placement to eligible investors outside of Mexico. After the offerings, CEMEX, S.A.B. de C.V. owned a 9.47% direct interest in GCC and the minority interest in CAMCEM. Proceeds from the sale were Ps4,094 million (U.S.$210 million). On September 28, 2017, CEMEX, S.A.B. de C.V. announced the final sale of the remaining

9.47% direct interest in GCC previously held by CEMEX, S.A.B. de C.V. for U.S.$168 million (Ps3,012 million). Following this sale of shares, we no longer held a direct interest but continued to hold an indirect share of 20% in GCC through our minority interest in CAMCEM. The proceeds of this transaction were mainly used for debt reduction and for general corporate purposes.

On December 2, 2016, we agreed to the sale of our assets and operations related to our ready-mix concrete pumping business in Mexico to Pumping Team, a specialist in the supply of ready-mix concrete pumping services based in Spain, for Ps1,649 million. This agreement included the sale of fixed assets upon closing of the transaction for Ps309 million plus administrative and client and market development services. Under this agreement, we will also lease facilities in Mexico to Pumping Team over a period of ten years with the possibility to extend for three additional years, for an aggregate initial amount of Ps1,340 million, plus a contingent revenue subject to results for up to Ps557 million linked to annual metrics beginning in the first year and up to the fifth year of the agreement. On April 28, 2017, after receiving the approval by the Mexican authorities, we concluded the sale.

On January 31, 2017, one of our subsidiaries in the U.S. closed the sale of our Concrete Pipe Business to Quikrete for U.S.$500 million plus an additional U.S.$40 million contingent consideration based on future performance.

On September 29, 2017, one of our subsidiaries in the U.S. closed the divestment of the Block USA Materials Business, consisting of concrete block, architectural block, concrete pavers, retaining walls and building material operations in Alabama, Georgia, Mississippi and Florida, to Oldcastle for approximately U.S.$38 million. The proceeds obtained from this sale were used mainly for debt reduction and general corporate purposes.

BUSINESS

CEMEX, S.A.B. de C.V. is a publicly traded variable stock corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico, with its principal executive offices located at Avenida Ricardo Margáin Zozaya #325, Colonia Valle del Campestre, San Pedro Garza García, Nuevo León, 66265, Mexico. Our main phone number is +52 81 8888-8888. Our website is www.cemex.com. The information on our website is not incorporated by reference in this report and you should not consider it a part of this report.

CEMEX, S.A.B. de C.V. started doing business in 1906 and was registered with the Mercantile Section of the Public Registry of Property and Commerce in Monterrey, Nuevo León, Mexico, on June 11, 1920 for a period of 99 years. At CEMEX, S.A.B. de C.V.’s 2002 ordinary general shareholders’ meeting, this period was extended to the year 2100 and in 2015 this period changed to be indefinite. Beginning April 2006, CEMEX’s full legal and commercial name is CEMEX, Sociedad Anónima Bursátil de Capital Variable.

holding company engaged, directly or indirectly, through its operating subsidiaries, primarily in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates, clinker and other construction materials throughout the world. We provide reliable construction-related services to customers and communities and maintains business relationships in more than 50 countries throughout the world.

During the majority of the last 28 years, we embarked on a major geographic expansion program to diversify our cash flows and enter markets whose economic cycles within the cement industry largely operate independently from those of Mexico and which offer long-term growth potential. We have built an extensive network of marine and land-based distribution centers and terminals that gives us marketing access around the world. As part of our strategy, we also periodically review and reconfigure our operations in implementing our post-merger integration process, and we also divest assets that we believe are less important to our strategic objectives. The following are our significant acquisitions and our most significant divestitures and reconfigurations that we have announced or closed since 2015:

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On October 31, 2015, after all conditions precedent were satisfied, we completed the sale of our operations in Austria and Hungary to the Rohrdorfer Group for €165 million (U.S.$179 million or Ps3,090 million) after final adjustments for changes in cash and working capital balances as of the transfer date. Our combined operations in Austria and Hungary consisted of 29 aggregates quarries and 68 ready-mix plants. The operations in Austria and Hungary for the ten-month period ended October 31, 2015, included in our consolidated income statements, were reclassified to the single line item “Discontinued operations,” which includes, in 2015, a gain on sale of U.S.$45 million (Ps741 million). Such gain on sale includes the reclassification to the income statement of foreign currency translation effects accrued in equity until October 31, 2015 for an amount of U.S.$10 million (Ps215 million). See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

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On May 26, 2016, we closed the sale of our operations in Bangladesh and Thailand to SIAM Cement for U.S.$70 million (Ps1,450 million). Our operations in Bangladesh and Thailand for the period from January 1, 2016 to May 26, 2016 and the year ended December 31, 2015 included in our consolidated income statements were reclassified to the single line item “Discontinued operations,” which includes, in 2016, a gain on sale of U.S.$24 million (Ps424 million). See note 4.2 to our 2018 audited consolidated financial statements included in the February 28 6-K.

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On November 18, 2016, after all conditions precedent were satisfied, we announced that we had closed the sale of certain assets in the U.S. to GCC for U.S.$306 million (Ps6,340 million). The assets were sold by an affiliate of ours to an affiliate of GCC in the U.S., and mainly consisted of our cement plant in Odessa, Texas, two cement terminals and the building materials business in El Paso, Texas and Las Cruces, New Mexico.

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On December 2, 2016, we agreed to the sale of our assets and operations related to our ready-mix concrete pumping business in Mexico to Cementos Españoles de Bombeo, S. de R.L., subsidiary in Pumping Team, a specialist in the supply of ready-mix concrete pumping services based in Spain, for Ps1,649 million. This agreement included the sale of fixed assets upon closing of the transaction for Ps309 million plus administrative, client and market development services. Under this agreement, we will also lease facilities in Mexico to Pumping Team over a period of ten years with the possibility to extend such term for three additional years, for an aggregate initial amount of Ps1,340 million, plus a contingent revenue subject to results for up to Ps557 million linked to annual metrics beginning in the first year and up to the fifth year of the agreement. On April 28, 2017, after receiving the approval by the Mexican authorities, we concluded the sale.

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On December 5, 2016, Sierra, one of CEMEX, S.A.B. de C.V.’s indirect subsidiaries, presented an offer to all shareholders of TCL (as amended, the “Offer”), a company then publicly listed in Trinidad and Tobago, Jamaica and Barbados, to acquire up to 132,616,942 ordinary shares in TCL, pursuant to which Sierra offered a certain offer price payable (the “Offer Price”), at the option of shareholders of TCL, except for shareholders of TCL in Barbados, in either TT$ or U.S.$ in Trinidad, and Jamaican Dollars or U.S.$ in Jamaica TCL. The Offer Price represented a premium of 50% over the December 1, 2016 closing price of TCL’s shares on the Trinidad and Tobago Stock Exchange. The total number of TCL shares tendered and accepted in response to the Offer was 113,629,723 which, together with