=======================================================================================================================================
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
_______________________
Date of
Report: December 16, 2008
CEMEX, S.A.B. de
C.V.
(Exact
name of Registrant as specified in its charter)
CEMEX
Corp.
(Translation
of Registrant's name into English)
United Mexican
States
(Jurisdiction
of incorporation or organization)
Av.
Ricardo Margáin Zozaya #325, Colonia Valle del Campestre
Garza García, Nuevo León,
México 66265
(Address
of principal executive offices)
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
|
X
|
Form
40-F
|
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
|
Yes
|
No
|
X
|
If "Yes"
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
N/A
================================================================================================================================================================================
Contents
|
1.
|
Translation
of information filed before the Mexican Securities Authority (Comision Nacional Bancaria y
de Valores) regarding CEMEX, S.A.B. de C.V.’s derivatives
exposure.
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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.
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CEMEX,
S.A.B. de C.V.
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||||||
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(Registrant)
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||||||
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Date:
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December
16, 2008
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By:
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/s/
Rafael Garza
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|||
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Name:
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Rafael
Garza
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|||||
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Title:
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Chief
Comptroller
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|||||
EXHIBIT
INDEX
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EXHIBIT
NO.
|
DESCRIPTION
|
|
1.
|
Translation
of information filed before the Mexican Securities Authority (Comision Nacional Bancaria y
de Valores) regarding CEMEX, S.A.B. de C.V.’s derivatives
exposure.
|
Exhibit
1
Qualitative
and Quantitative Information
i
In
accordance with the guidelines governing its Risk Committee, CEMEX uses
derivative financial instruments (“derivative instruments”) to modify the
profile of risks related to movements in the interest rates and currency
denominations of its debt, as a way of reducing financing cost; it also uses
them to hedge: (i) net investments in foreign subsidiaries, and (ii) executive
stock option programs.
The
Financial Risk Administration Committee, made up of seven senior-level
executives from the areas of the company involved, meets at least quarterly with
the purpose of coordinating the strategy, execution and oversight of the risk
coverage functions of CEMEX and its subsidiaries, and of aligning the foregoing
with the goals defined by the Board of Directors.
A minimum
quorum is required for proper functioning of the Committee. Decisions are
adopted by majority vote, except for the following maters, where unanimity is
required: Risk Policy proposal to be submitted to the Board of Directors;
definition of global risk limits and selection of risk indicators.
The
company has a written risk administration manual, as well as a host of specific
controls to ensure efficient processes to authorize, negotiate value, document
and register each derivative instrument making up the portfolio.
These
controls are managed by different responsible parties, in accordance with fixed
segregation of duties, and are evaluated at least annually by our internal and
external auditors. There is a specific procedure to achieve and follow-through
on remediation plans in the event deficiencies are detected.
Appointment
of calculation agents is contractual by nature and in all instances falls upon
the counterparty financial institutions. Nevertheless, CEMEX has
established a practice of periodically reviewing the valuation of its derivative
instruments using the company’s institutional systems.
The
market value of the company’s derivative instruments position is measured in
real time. Constant monitoring of thresholds is an integral part of
the company’s internal controls. In the event of margin calls, the
company may post collateral in the form of stand-by letters of credit,
marketable securities or cash; as a matter of procedure, the first option used
is bank guarantees (stand-by letters of
credit),
followed by cash.
We rely
on standardized “ISDA Master Agreements”, commonly used in international markets
to document financial derivative transactions.
ii.
CEMEX
records the reasonable estimated value of its derivative instruments either as
assets or liabilities in its balance sheet, and records their changes for each
period under the item “financial instruments results” of the income statement,
except for changes in the reasonable value of specified derivative instruments
that function as hedges against variations in the cash flow from assets or
liabilities in the balance sheet and/or from projected operations, which are
recorded as equity and are subsequently reclassified into the income statement
insofar as the effects of the underlying instruments or operations have an
impact on results.
The
reasonable estimated value represents the amount for which a financial asset
could be exchanged or a financial liability liquidated between willing and able
parties in a free market transaction. Sometimes, a reference market
will exist that provides a reasonable estimated value; where there is none, the
value is determined either by the net present value of the transaction’s
projected cash flows or through mathematical models. The reasonable estimated
values of derivative instruments determined by CEMEX and used for valuation,
recognition and disclosure in its financial statements are supported by
transaction confirmations received from the relevant financial
counterparties.
iii.
Liquidity
generated by CEMEX through internal and external sources is invested in
overnight money market instruments, readily available to satisfy operating and
financial requirements, including requirements relating to derivative
instruments. As of September 30, 2008, our cash and marketable securities
totaled US$1.390 billion.
In
connection with external liquidity sources, the company has a number of
available revolving lines of credit, in various currencies and with different
financial institutions. In order to have as much cash on hand as possible, as of
the end of the third quarter we had drawn upon almost the full amount of these
external lines of credit.
In
connection with internal liquidity sources, the company uses in-house banks to
consolidate and manage the daily flows from
operations
and to satisfy funding requirements of the company’s business units around the
world. After this daily sweep, available liquidity is reviewed along with
specific needs to satisfy requirements under derivative instruments and to pay
off debt maturities. Lastly, any remaining cash in in-house banks is invested in
overnight money-market funds.
iv.
As of
October 14, the estimated fair market value of our derivative instruments
(excluding derivative instruments entered into by financial institutions with
certain Special Purpose Entities (“SPEs”) created under our perpetual notes
programs, because the only situation under our control where such SPVs could pay
or receive any amounts under such derivative instruments would be if we were to
decide to defer interest payments under the notes, which would be counter to our
existing dividend policy, or under specified events of default) was a loss of
US$711 million. Including derivatives entered into by financial institutions
with certain SPEs created under various series of our perpetual notes, the loss
as of such date was US$647 million.
The fair
market value loss as of October 14 includes a loss of approximately US$366
million of mark-to-market related to the closing out of US$2,909 notional amount
of foreign-exchange derivatives related to our net asset position in our foreign
subsidiaries and has no further downside.
As of
October 14, 2008, US$385 million was held as cash collateral by banks with
respect to our estimated aggregate fair market value. Cash collateral amounts
are recognized within cash and temporary investments when we have the election
to release such amounts through the use of stand-by letters of credit. There is
an additional US$70 million in cash collateral that has been posted as margin,
but is not part of our cash on hand.
During
the third quarter there were four margin calls totaling US$136
million.
v.
TABLE
1
Derivative
Instruments Summary
Amounts
in Thousands of Pesos as of September 30, 2008
|
Type
of derivative, security or contract (1)
|
Purpose
of hedge or other goals (e.g. negotiation)
|
Notional
Amount or Value
|
Value
of Underlying Asset / Reference Variable
|
Reasonable
Estimated
Value
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Maturities
per Year
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Cash
Collateral / Stand-by LOCs / Securities Collateral
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||||||
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Current
Quarter
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Previous
Quarter
|
Current
Quarter
|
Previous
Quarter
|
Current
Quarter
|
Previous
Quarter
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2008
|
2009
|
2010
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2011
and later
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|||
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Equity
derivatives
|
Economic
hedge
|
10,514,634
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10,503,476
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3,519,460
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5,062,210
|
(3,241,755)
|
(625,693)
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(2,218,903)
|
263,971
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257,561
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(1,544,384)
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1,791,040
|
|
FX
derivatives
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Accounting
hedge
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38,408,020
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40,495,650
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38,408,020
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38,198,550
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(661,647)
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555,073
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(506,988)
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(87,644)
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(67,015)
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0
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0
|
|
FX
derivatives
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Economic
hedge
|
57,493,740
|
57,835,869
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39,566,600
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39,930,630
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1,727,374
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3,123,852
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337,099
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637,000
|
51,684
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701,592
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0
|
|
Interest
rate derivatives
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Accounting
hedge
|
4,372,000
|
4,372,000
|
4,372,000
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4,124,000
|
(82,248)
|
(26,228)
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0
|
0
|
0
|
(82,248)
|
0
|
|
Interest
rate derivatives
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Economic
hedge
|
158,791,124
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74,539,573
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158,791,040
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70,314,200
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2,014,736
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1,238,993
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0
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274,572
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383,920
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1,356,245
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0
|
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269,579,518
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187,746,569
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244,657,120
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157,629,590
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(243,540)
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4,265,997
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(2,388,792)
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1,087,897
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626,150
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431,204
|
1,791,040
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||
Sensitivity
Analysis
The
methodology used was a sensitivity analysis through calculation of changes in
the reasonable estimated value, based on percentage variations of each
individual reference variable (holding all other reference variables
fixed.)
i.
The
sensitivity analysis used three different scenarios for each of the four main
derivative instrument risk factors of the company as of September 30, which are
identified as reference variables in the analysis.
As of
September 30, the main risks which could result in losses for the company,
categorized by type of derivative instrument were:
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-
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Equity
derivatives:
|
|
o
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Decline
in CEMEX’s stock price
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|
o
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Decline
in AXTEL’s stock price
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|
-
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Foreign-exchange
derivatives:
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o
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Depreciation
of the peso-dollar exchange rate; decline of US dollar interest
rates
|
|
-
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Interest
rate derivatives
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o
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Decline
of US dollar interest rates
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ii.
The three
scenarios analyzed were:
|
1.
|
Probable:
10% shock on each of the main risk
factors
|
|
2.
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Possible:
25% shock on each of the main risk
factors
|
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3.
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Stress:
50% shock on each of the main risk
factors
|
iii.
Cash flow
impact was estimated based on margin call requirements for each
scenario
As of
September 30, 2008, the main risk factors relating to our derivative instruments
were our exposure to depreciation of the Mexican peso relative to the US dollar
and the decline in market value of our shares. During this fourth quarter of
2008, we undertook several measures to decrease by over 80% the exposure of our
derivative instruments to depreciation of the Mexican peso. We think it is
important to point out that the market value of our CPOs in the Mexican Stock
Exchange has declined by over 40% from September 30 to December 15, 2008. The
negative effect of this decline on our derivative instruments has already been
covered through posted collateral on margin calls, and was discussed during our
conference call for third-quarter results on October 16, 2008. We estimate that
the risk scenarios discussed in this section do not give rise to material
potential losses in the reasonable estimated value of our derivative
instruments, considering our total net debt and cash flow
generation.