Cemex divesting Dom Rep operations

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Cemex is set to divest its operations in the Dominican Republic for US$950 million.

Cemex, SAB de CV is set to sell its Dominican Republic operations for US$950 million ($155.93 billion) to Cementos Progreso Holdings, S.L. and its strategic partners as the Mexican cement giant continues its divestment of emerging/non-core markets and reallocates capital to key markets in North America and Europe.

The deal which was announced on Monday would see Cemex divest asset in the Dominican Republic including one cement plant with an installed capacity of 2.4 million tonnes, two integrated production lines and related cement, concrete, aggregates and marine terminal assets. The deal also includes export businesses to Haiti and is set to close in the fourth quarter of 2024 subject to closing conditions. CEMEX Dominicana, SA is Cemex’s operating subsidiary in the Dominican Republic and falls under its South, Central America and the Caribbean (SC&C) segment.

Cemex Dominicana grew its revenue by five per cent in 2023 to US$360 million and had an operating profit of US$130 million (J$19.97 billion). Its EBITDA (earnings before interest, tax, depreciation and amortisation) improved to US$139 million. It was the second-largest market in the SC&C segment in terms of revenue behind Colombia which reported US$458 million, but Cemex Dominicana was the most profitable market.

Cemex Dominicana’s had US$233 million in total assets and US$138 million in equity/net assets at the end of 2023. It invested US$16 million in capital expenditure during 2023 and was set to spend an extra US$20 million in its operations during 2024. This is crucial as informal cement demand has been weak while formal construction in tourism and infrastructure remains robust.

Cemex Dominicana is the second largest producer of Cement in the Dominican Republic, just behind Domicen which is the largest player in a market that had 5.4 million tonnes of cement consumption. Domicen is the 70 per cent parent company of Buying House Cement Limited, a cement distributor based in St. James, Jamaica.

“This transaction advances us significantly in our portfolio rebalancing strategy which is focused on reducing our exposure in Emerging Markets and redeploying capital into growth investments in priority markets, primarily the US,” said Cemex Chief Executive Officer Fernando A González Olivieri in the press release.

The acquisition of Cemex’s Dominican Republic operations continues to serve as the growth platform for Cementos Progreso. The Guatemalan construction company acquired Cemex’s Costa Rican and El Salvador operations in August 2022 for US$325 million, a deal which recording a US$240-million gain on disposal. This acquisition will serve as Cementos’ eighth market and further improve its cement production capacity which currently sits at six million tonnes.

This is the second announced divestment for Cemex in 2024 following its April announcement to sell its operations and assets in the Philippines to DACON Corporation, DMCI Holdings, Inc and Semirara Mining & Power Corporation for an estimated US$305 million. Its last major divestment was in March 2021 for the sale of 24 concrete plants and one aggregates quarry in Lyon, France to LafargeHolcim for US$44 million.

Cemex achieved an investment grade credit rating of BBB- from S&P Global Ratings and Fitch Ratings earlier in 2024. The company has also cut its leverage ratio to 2.13 times at the end of June 2024 and is currently aiming to bring that figure down to 1.5 times over the next three years. It also restarted its dividend programme where it will pay US$120 million over the next year with the next payment set to September 17.

This improved financial position is reflected in the second quarter results as it generated US$4.49 billion in net sales and US$238.58 million in consolidated net profit, with US$230.39 million being attributable to owners. The SC&C segment’s net sales improved by three per cent to US$457 million with the operating EBITDA at US$110 million. The strong growth in the Jamaican tourism sector was noted as a reason for higher volumes while Panama saw volume growth related to infrastructure projects such as the metro and fourth bridge over the canal.

The positive contribution from the Jamaican market is expected to continue climbing steadily as its subsidiary Caribbean Cement Company Limited (CCC) looks to spend about J$4 billion this year for its capacity expansion. CCC has already spent J$2.32 billion in capital expenditure for the first six months of 2024 as it seeks to improve its capacity by 30 per cent to about 1.5 million tonnes. This additional capacity will not only allow for the company to satisfy domestic demand, but also better serve export markets in the Caribbean. CCC has been exporting cement to Turks & Caicos in recent times.

However, with the expansion to be completed in the first quarter of 2025 and the company to shutdown the plant for maintenance in the third quarter, CCC might be importing cement in the coming months from one of the other regional Cemex plants to satisfy the market. The length of the shutdown and demand from the local market will dictate the cost of the shutdown and associated imports. This won’t be a major problem for the company which has accumulated J$9.46 billion in cash and has parked J8.7 billion (US$56 million) with Cemex Innovations Holdings Limited.

CCC’s second quarter sales increased to J$7.67 billion with operating profit coming in at J$2.76 billion. Due to the additional financial income and lower taxes, CCC’s net profit grew nine per cent to J$2.35 billion.

For the overall six months, CCC’s revenue was up seven per cent to J$15.28 billion with operating profit 68 per cent to J$5.39 billion due to the prior period having a general shutdown. Net profit grew 75 per cent to J$4.28 billion and was slightly behind the J$5.58 billion earned in all of 2023.

CCC shareholders are set to receive a J$1.9655 dividend totalling J$1.67 billion to be paid on September 3. Its parent company Trinidad Cement Limited (TCL) will receive J$1.24 billion while Cemex collects J$82.92 million. TCL shareholders are to receive a TT$0.08 dividend on September 9 totalling TT$29.97 million. Sierra Trading (Cemex SA de CV) will receive TT$20.93 million.

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Cemex divesting Dom Rep operations

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