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 February, 2020
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 66265, México
(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 ☒ 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
| 1. |
Press release issued by CEMEX Holdings Philippines in the Philippines dated February 13, 2020 announcing fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 2. | Fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 3. | Presentation regarding fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
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: February 12, 2020 | By: |
/s/ Rafael Garza Lozano | ||||
| Name: |
Rafael Garza Lozano | |||||
| Title: | Chief Comptroller | |||||
3
EXHIBIT INDEX
| Exhibit |
Description | |
| 1. | Press release issued by CEMEX Holdings Philippines in the Philippines dated February 13, 2020, announcing fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 2. | Fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 3. | Presentation regarding fourth quarter 2019 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
4
Exhibit 1
| Media Relations Chito Maniago +632 8849 3600 chito.maniago@cemex.com |
Investor Relations Pierre Co +632 8849 3600 pierre.co@cemex.com |
CHP REPORTS FOURTH QUARTER 2019 RESULTS
| • | Sales increased by 1% year-over-year in 2019, amounting to PHP 23.6 billion |
MANILA, PHILIPPINES. FEBRUARY 13, 2020– CEMEX HOLDINGS PHILIPPINES, INC.
(“CHP”) (PSE: CHP), announced today that sales increased by 1% in 2019, amounting to PHP 23.6 billion, versus the comparable period in 2018.
For the fourth quarter, net sales decreased by 3% year-over-year due to lower volumes, as adverse weather conditions in the month of December affected Luzon and Visayas.
Cost of sales, as a percentage of sales, decreased by 2 percentage points in 2019, compared with those in 2018.
Operating expenses, as a percentage of sales, were lower by 2 percentage points year-over-year in 2019. The decrease was due to lower distribution expenses resulting from supply-chain-optimization initiatives.
For the full year 2019, CHP posted an operating EBITDA of PHP 4.2 billion.
Ignacio Mijares, CHP President and CEO, said: “I am pleased with what we accomplished in 2019, as these were a result of our efforts to maintain efficiencies, optimize costs, and improve our customers’ experience.”
The company’s Stock Rights Offering (“SRO”) of 8,293,831,169 common shares of CHP with a par value of Php 1.00 per common share (the “Offer Shares) set at the price of Php 1.54 per share was successfully completed with the offer period ending last January 24, 2020. The listing date for the Offer Shares is expected to take place on or before March 4, 2020.
The total proceeds raised from the SRO amounted to PHP 12,772.5 million. After deducting estimated applicable taxes, professional fees and expenses, net proceeds are expected to be approximately Php 12,541 million, which would be used by CHP primarily to fund the expansion of its Solid Cement plant, including to pay outstanding amounts owed by (i) Solid Cement Corporation (“Solid”) under a credit facility agreement dated November 21, 2018, as amended and restated, between Solid, as the borrower, and Cemex Asia B.V. (“CABV”), as the lender, which facility agreement has been used to fund the expansion project, and (ii) APO Cement Corporation (“APO”) under a loan agreement dated October 1, 2014, as amended, between APO, as borrower, and CABV, as lender, and for other general corporate purposes.
CHP, a listed company at the Philippine Stock Exchange, is one of the leading cement producers in the Philippines, based on annual installed capacity. CHP produces and markets cement and cement products, such as ready-mix concrete and clinker, in the Philippines through direct sales using its extensive marine and land distribution network. Moreover, CHP’s cement manufacturing subsidiaries have been operating in the Philippines with well- established brands, such as “APO,” “Island,” and “Rizal,” all having a multi-decade history in the country.
CHP is an indirect subsidiary of CEMEX, S.A.B. de C.V., one of the largest cement companies in the world based on annual installed cement production capacity. The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican Stock Exchange and the New York Stock Exchange.
For more information on CHP, please visit website: www.cemexholdingsphilippines.com.
# # #
This press release may contain forward-looking statements and information that are necessarily subject to risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of CHP to be materially different from those expressed or implied in this release, including, among others, receiving any pending regulatory approval in connection with the Share Rights Offering, changes in general economic, political, governmental and business conditions globally and in the countries in which CHP does business, changes in interest rates, changes in inflation rates, changes in exchange rates, the level of construction generally, changes in cement demand and prices, changes in raw material and energy prices, changes in business strategy, changes derived from events affecting CEMEX, S.A.B de C.V. and subsidiaries (“CEMEX”) and various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. CHP assumes no obligation to update or correct the information contained in this press release.
Exhibit 2
2019 FOURTH QUARTER RESULTS Stock Listing Information Philippine Stock Exchange Ticker: CHP Investor Relations + 6328849 3600 E-Mail: chp.ir@cemex.com
Operating and Financial Highlights
January -
December Fourth Quarter
2019 2018 % var 2019 2018 % var
Net sales 23,596
23,418 1% 5,372 5,513 (3%) Gross profit 9,683 9,190 5% 2,177 1,918 14% as % of net sales 41% 39% 2pp 41% 35% 6pp Operating earnings before other expenses, net 2,342 1,521 54% 257 83 211% as % of net sales 10% 7% 3pp 5% 2% 3pp Controlling Interest
Net Income (Loss) 1,280 (971) N/A 405 (307) N/A Operating EBITDA 4,227 3,376 25% 781 526 49% as % of net sales 18% 14% 4pp 15% 10% 5pp Free cash flow after maintenance capital expenditures 2,481 1,460 70% (411) (463) 11% Free cash flow (719) 1,165
N/A (1,570) (526) (199%)
1 18,664 17,923 4% 18,664 17,923 4% Net debt
1
20,063 19,737 2% 20,063 19,737 2% Total debt
2 0.25 (0.19) N/A 0.08 (0.06) N/A
Earnings per share
In millions of Philippine Pesos, except percentages and
earnings per share
1 U.S. dollar debt converted using end-of-period exchange rates.
See Debt Information on page 4 and Exchange Rates on page 8 for more detail.
2 In Philippine Pesos
Net sales in the fourth quarter of 2019 decreased by 3% compared with the fourth quarter of 2018 due to lower volumes.
Cost of sales was at 59% of sales during the quarter, 6 pp lower on a year-over-year basis. The fourth quarter of 2018 was impacted by higher input costs due to the September
landslide in Naga City, Cebu, near APO Cement plant.
For 2019, cost of sales was at 59% of sales compared with 61% in 2018. Fuel costs remained flat at 21% of cost
of sales, benefitting from the use of a new coal mix and hedged coal inventory at the start of the year carried over from 2018. Power costs, as a percentage of cost of sales, was at 19%, 2 pp lower on a year-over-year basis, reflecting savings from
lower electricity rates.
Operating expenses, as a percentage of sales, decreased by 2 pp in 2019 compared with 2018. The decrease was due to lower distribution
expenses resulting from reduced double-handling, and supply-chain-optimization initiatives.
Distribution expenses during the fourth quarter increased by 2 pp
year-over-year, from 19% in 2018 to 21% in 2019, mainly due to one-off costs associated with the termination of a bulk vessel charter contract, in line with the company’s initiative to further optimize
logistics assets.
For 2019, distribution expenses were at 18% compared with 20% in 2018.
Selling and administrative expenses, as a percentage of sales, were flat on a year-over-year basis at 13%.
Operating EBITDA increased by 25% year-over-year in 2019, and by 49% during the fourth quarter.
Operating EBITDA margin was at 18% for 2019, and 15% for the fourth quarter.
Controlling interest net income for 2019 was around PHP 1.3 billion due to higher operating earnings, foreign exchange gains, and lower income tax expenses.
Total debt, including leases, at the end of December 2019 stood at PHP 20,063 million, of which PHP 11,427 million pertained to long-term debt owed to
BDO Unibank, Inc.
Operating Results
Domestic Gray Cement January -
December Fourth Quarter Fourth Quarter 2019
2019 vs. 2018 2019 vs. 2018 vs. Third Quarter 2019
Volume (3%) (3%) (7%)
Price in PHP 4% 0% (2%)
Our domestic cement volumes decreased by 3% year-over-year during the fourth quarter. Despite an improvement in activity early in the quarter, adverse weather conditions in
December negatively impacted our operations.
For 2019, our domestic cement volumes decreased by 3%, reflecting a slowdown in construction activity due to the
delayed approval of the national budget and mid-term elections held in May. Our first quarter volumes also reflected the impact of the September 2018 landslide in Naga City, Cebu, near our APO Cement plant.
Our domestic cement prices increased by 4% year-over-year in 2019, reflecting price adjustments implemented in 2018.
Operating EBITDA, Free Cash Flow and Debt Information
Operating EBITDA and Free Cash Flow
In millions of Philippine Pesos
Debt Information
In millions of Philippine Pesos, except percentages
(1) U.S. dollar debt converted using end-of-period exchange rates. See Exchange Rates on page 8 for
more detail.
(2) Includes leases, in accordance with Philippine Financial Reporting Standards (PFRS).
(3) Based on BDO Loan Facility financial covenants which we are required to comply commencing in June 2020.
January - December Fourth Quarter 2019 2018 % var 2019 2018 % var Operating earnings before other expenses, net 2,342 1,521 54% 257 83 211% + Depreciation and operating
amortization 1,886 1,856 524 443 Operating EBITDA 4,227 3,376 25% 781 526 49% Net financial expenses 1,305 1,114 237 314- Maintenance capital expenditures 659 1,145 273 652- Change in working capital (561) (886) 579 (108)- Income taxes paid 352 500
78 80- Other cash items (net) (9) 43 24 51 Free cash flow after maintenance capital expenditures 2,481 1,460 70% (411) (463) 11%- Strategic capital expenditures 3,199 295 1,159 62 Free cash flow (719) 1,165 N/A (1,570) (526) (199%) 1 -17% -201%
Conversion Rate
Fourth Quarter Third Quarter Fourth Quarter 2019 2018 % var 2019 2019 2018 (1)(2) 20,063 19,737 2% 20,235 Currency denomination Total debt Short
term 9% 8% 9% U.S. dollar 30% 17% Long term 91% 92% 91% Philippine peso 70% 83% Cash and cash equivalents 1,399 1,814 (23%) 2,592 Interest rate Net debt 18,664 17,923 4% 17,643 Fixed 43% 45% (3) 3.47 4.04 Variable 57% 55% Leverage Ratio (3) 3.73
3.40 Coverage Ratio
Financial Results
Income Statement &
Balance Sheet Information
CEMEX Holdings Philippines, Inc.
(Thousands of
Philippine Pesos in nominal terms, except per share amounts)
January - December Fourth Quarter
INCOME STATEMENT 2019 2018 % var 2019 2018 % var
Net sales 23,595,877 23,417,697 1% 5,372,359
5,512,576 (3%) Cost of sales (13,913,316) (14,227,211) 2% (3,195,374) (3,594,853) 11%
Gross profit 9,682,561 9,190,486 5% 2,176,985 1,917,723 14%
Selling and Administrative expenses (3,111,531) (2,999,236) (4%) (804,531) (804,301) (0%) Distribution expenses (4,229,410) (4,670,626) 9% (1,115,482) (1,030,668) (8%)
Operating earnings before other expenses, net 2,341,620 1,520,624 54% 256,972 82,754 211%
Other income (expenses), net 8,544 (42,653) N/A (23,615) (50,891) 54%
Operating earnings (loss) 2,350,164 1,477,971 59% 233,357 31,863 632%
Financial expenses, net (1,304,539) (1,113,511) (17%) (237,304) (314,131) 24% Foreign exchange gain (loss), net 453,125 (381,443) N/A 325,204 164,287 98%
Net income (loss) before income taxes 1,498,750 (16,983) N/A 321,257 (117,981) N/A
Income tax benefit (expenses) (219,174) (953,704) 77% 83,637 (189,273) N/A
Consolidated net
income (loss) 1,279,576 (970,687) N/A 404,894 (307,254) N/A
Non-controlling interest net income (loss) 23 28 (18%) 5 7 (29%)
Controlling Interest net income (loss) 1,279,599 (970,659) N/A 404,899 (307,247) N/A
Operating
EBITDA 4,227,133 3,376,299 25% 780,929 525,861 49% Earnings per share 0.25 (0.19) N/A 0.08 (0.06) N/A
as of December 31
BALANCE SHEET 2019 2018 % Var
Total Assets 58,790,125 58,058,770 1%
Cash and Temporary Investments 1,399,180 1,813,665 (23%) Derivative Asset 0 12,875 (100%) Trade Accounts Receivables 892,951 708,906 26% Other Receivables 92,993 103,396 (10%)
Insurance Claims and Premium Receivables 445,535 949,983 (53%) Inventories 3,013,444 3,488,178 (14%) Assets Held for Sale 0 0 Other Current Assets 1,672,392 1,677,671 (0%) Current Assets 7,516,495 8,754,674 (14%) Fixed Assets 19,937,723 17,768,023
12% Investments in an Associate and Other Investments 14,097 14,097 (0%) Other Assets and Noncurrent Accounts Receivables 821,098 818,247 0% Advances to Contractors 1,606,397 2,069,601 (22%) Deferred Income Taxes - net 1,034,620 774,434 34% Goodwill
27,859,694 27,859,694 0% Other Assets 31,335,906 31,536,073 (1%)
Total Liabilities 29,124,637 29,332,804 (1%)
Current Liabilities 10,136,812 10,534,046 (4%) Long-Term Liabilities 16,533,587 16,009,642 3% Deferred Tax Liability 1,587 147,387 (99%) Other Liabilities 2,452,651 2,641,729 (7%)
Consolidated Stockholders’ Equity 29,665,487 28,725,966 3%
Non-controlling Interest 170 193 (12%) Stockholders’ Equity Attributable to Controlling Interest 29,665,317 28,725,773 3%
Financial Results
Income Statement &
Balance Sheet Information
CEMEX Holdings Philippines, Inc.
(Thousands of U.S.
Dollars, except per share amounts)
Supplemental Information
Newly issued PFRS
effective in 2019
PFRS 16, Leases (“PFRS 16”)
In summary, beginning
January 1, 2019, PFRS 16 introduces a single lessee accounting model and requires a lessee to recognize, for all leases, allowing exemptions in case of leases with a term of less than 12 months or when the underlying asset is of low value,
assets for the right-of-use of 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. After concluding
the inventory and measurement of its leases, CEMEX Holdings Philippines, Inc. and Subsidiaries adopted PFRS 16 using the full retrospective approach by means of which it determined an opening cumulative effect in its statement of financial position
as of January 1, 2017 as follows:
SELECTED INFORMATION INCOME STATEMENT
December 31, 2017 As originally
(Thousands of Philippine Pesos) reported As
modified Revenues 21,784,450 21,784,450 Cost of sales (12,400,901) (12,325,087) Operating expenses (7,396,982) (7,345,047) Other income (expenses), net (226,179) (226,179) Financial expenses and others, net (962,033) (1,119,030) Earnings before
income tax 798,355 769,107 Income tax (139,544) (130,770) Net income (loss) 658,811 638,337
SELECTED INFORMATION INCOME STATEMENT As originally reported As
modified December 31, 2018 Fourth Fourth (Thousands of Philippine Pesos) Jan-Dec Quarter Jan-Dec Quarter Revenues 23,417,697 5,512,576 23,417,697 5,512,576 Cost of sales (14,307,126) (3,614,866) (14,227,211) (3,594,853) Operating expenses
(7,744,129) (1,854,840) (7,669,862) (1,834,969) Other income (expenses), net (42,653) (50,891) (42,653) (50,891) Financial expenses and others, net (1,282,954) (135,936) (1,494,954) (149,844) Earnings before income tax 40,835 (143,957) (16,983)
(117,981) Income tax (970,993) (181,476) (953,704) (189,273) Net income (loss) (930,158) (325,433) (970,687) (307,254)
(Thousands of Philippine Pesos) As of
January 1, 2017 Assets for the right-of-use 2,187,292 Deferred income tax assets 33,509 Deferred income tax liability (3,053) Lease liabilities 2,309,165 1Retained earnings (85,311)
1 The initial effect in retained earnings refers to a temporary difference between the straight-line amortization expense of the right-of-use asset and the amortization of the financial liability under the effective interest rate method since origination of the contracts. This difference will reverse over the remaining term of the
contracts.
CEMEX Holdings Philippines, Inc. and Subsidiaries modified the previously reported income statement for the year ended December 31, 2018 and 2017
to give effect to the retrospective adoption of PFRS 16, as follows:
As of December 31, 2019, 2018 and 2017, assets for the right-of-use amounted to PHP 1,962 million, PHP 2,151 million and PHP 2,167 million, respectively.
In addition, financial liabilities related to lease contracts amounted to PHP 2,163 million as of December 31, 2019, PHP 2,360 million as of December 31, 2018 and PHP 2,318 million as of December 31, 2017. These amounts
of financial liabilities as of December 31, 2019 and December 31, 2018 are included in the “Debt Information” section appearing on page 4.
Definitions of Terms and Disclosures
Methodology for
translation, consolidation, and presentation of results
CEMEX Holdings Philippines, Inc. (“CHP”) reports its consolidated financial statements under
Philippine Financial Reporting Standards (“PFRS”). When reference is made in 2019 and 2018 to consolidated financial statements, it means CHP financial information together with its subsidiaries.
For the purpose of presenting figures in U.S. dollars, the consolidated balance sheet as of December 31, 2019 has been converted at the end of period exchange rate of 50.64
Philippine pesos per US dollar while the consolidated income statement for the whole year period ended December 31, 2019 has been converted at the January to December 2019 average exchange rate of 51.57 Philippine pesos per US dollar. On the
other hand, the consolidated income statement for the three-month period ended December 31, 2019 has been converted at the October to December, 2019 average exchange rate of 50.73 Philippine pesos per US dollar.
Definition of terms
PHP refers to Philippine Pesos.
pp equals percentage points.
Prices all references to pricing initiatives, price increases or
decreases, refer to our prices for our products.
Operating EBITDA equals operating earnings before other expenses, net, plus depreciation and operating
amortization.
Free cash flow equals operating EBITDA minus net interest expense, maintenance and strategic capital expenditures, change in working capital, taxes
paid, and other cash items (net other expenses less proceeds from the disposal of obsolete and/or substantially depleted operating fixed assets that are no longer in operation).
Maintenance capital expenditures investments incurred for the purpose of ensuring the company’s operational continuity. These include capital expenditures on projects required
to replace obsolete assets or maintain current operational levels, and mandatory capital expenditures, which are projects required to comply with governmental regulations or company policies.
Strategic capital expenditures investments incurred with the purpose of increasing the company’s profitability. These include capital expenditures on projects designed to
increase profitability by expanding capacity, and margin improvement capital expenditures, which are projects designed to increase profitability by reducing costs.
Change in Working capital in the Free cash flow statements only include trade receivables, trade payables, receivables and payables from and to related parties,
other current receivables, inventories, other current assets, and other accounts payable and accrued expense.
Net debt equals total debt (debt plus leases) minus
cash and cash equivalents.
Amounts provided in units of local currency per US dollar
Exchange Rates January - December Fourth Quarter January - December 2019 2018 2019 2018 2019 2018 average average average average End of period End of period Philippine peso 51.57
52.69 50.73 52.86 50.64 52.58
Amounts provided in units of local currency per US dollar
4Q 2019 Results February 13, 2020 Exhibit 3
This presentation contains forward-looking statements. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “should,” “could,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential” and “intend” or other similar words. These forward-looking statements reflect current expectations and projections about future events of CEMEX Holdings Philippines, Inc. ("CHP") based on CHP’s 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 CHP’s expectations. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could have an impact on CHP or its subsidiaries, include, but are not limited to, the cyclical activity of the construction sector; CHP’s exposure to other sectors that impact CHP’s business, such as the energy sector; competition; general political, economic and business conditions in the markets in which CHP operates; the regulatory environment, including environmental, tax, antitrust and acquisition-related rules and regulations; CHP’s ability to satisfy its debt obligations and the ability of CEMEX, S.A.B. de C.V. (“CEMEX”), the ultimate parent company of the major shareholder of CHP, to satisfy CEMEX’s obligations under its material debt agreements, the indentures that govern CEMEX’s senior secured notes and CEMEX’s other debt instruments; expected refinancing of CEMEX’s existing indebtedness; the impact of CEMEX’s below investment grade debt rating on CHP’s and CEMEX’s cost of capital; CEMEX’s ability to consummate asset sales and fully integrate newly acquired businesses; achieve cost-savings from CHP’s cost-reduction initiatives and implement CHP’s pricing initiatives for CHP’s products; the increasing reliance on information technology infrastructure for CHP’s invoicing, procurement, financial statements and other processes that can adversely affect operations in the event that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks; weather conditions; natural disasters and other unforeseen events; and the other risks and uncertainties described in CHP’s public filings such as but not limited to receiving any pending regulatory approval in connection with the Share Rights Offering. Readers are urged to read these presentations and carefully consider the risks, uncertainties and other factors that affect CHP’s business. The information contained in these presentations is subject to change without notice, and CHP is not obligated to publicly update or revise forward-looking statements. Unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases, refer to CHP’s prices for products sold or distributed by CHP or its subsidiaries. Copyright CEMEX Holdings Philippines, Inc. and its subsidiaries
2019 Full Year Highlights 2pp year-over-year reduction in distribution costs, as a percentage to sales CEMEX Go client-adoption rate above 90% Operative efficiency above 90% for all kilns (Solid Cement and APO Cement) Record clinker production for APO Cement APO Cement and Solid Cement ranked as one of the best-in-class cement plants in quality within CEMEX. APO Cement consistently ranked # 1 in Analytical Reliability Evaluation (ARE) in CEMEX USA and Philippines Cluster of cement plants
Domestic Cement Volumes and Prices Domestic cement volumes decreased by 3% year-over-year during the fourth quarter. Adverse weather conditions in the month of December affected Luzon and Visayas. For 2019, domestic cement volumes decreased by 3% compared to 2018. Slowdown in construction activity related to the delayed approval of the national budget and mid-term elections held in May. Ramp-up in sales volumes during 1Q19 after the impact of the September 2018 landslide in Naga City, Cebu, near our APO Cement plant. Domestic cement prices increased by 4% year-over-year in 2019, reflecting price adjustments implemented in 2018.
Net Sales Net sales increased by 1% in 2019 compared to 2018. For the fourth quarter, net sales decreased by 3% year-over-year due to lower volumes. Net Sales1 +1% -3% 1 Millions of Philippine Pesos
Private Sector Total approved building permits grew by 1.3% year-over-year during the third quarter of 2019 due to a decline in approvals of residential buildings and a slowdown in approvals in the industrial and commercial building segments. Construction employment increased by 8% year-over-year during the fourth quarter. Residential sector activity was lower-than-expected despite favorable macro-fundamentals such as lower inflation, lower borrowing rates, and strong remittances. The non-residential sector slightly recovered but continued to be challenged by issues such as pending tax reforms, resulting in lower net foreign direct investment (FDI) inflows totaling US$ 6.4 billion as of November 2019, 30% lower than those in the same period in 2018. Source: Philippine Statistics Authority Employment in Construction (M Persons) YoY % +13.5% +5.2% +3.6% +7.9% Approved Building Permits (YoY % Growth)
Public Sector Infrastructure and Capital Outlay was lower by 3% year-over-year during the first eleven months of 2019. Improvement in infrastructure cash disbursements was observed in September, when the government caught-up on spending programs for the month. The government expects faster disbursements in December 2019, despite a month-on-month decline in October and November, as agencies tried to speed up implementation of projects and programs. Disbursements on Infrastructure and Capital Outlays (in PHP billion) Refers to year-over-year growth % Source: Department of Budget and Management
Cost of Sales 2019 cost of sales, as a percentage of sales, decreased by 2 pp year-over-year. Fuel costs benefitted from the use of a new coal mix. Realized savings in power costs due to lower electricity rates. 4Q19 cost of sales, as a percentage of sales, reached 59%. 4Q18 costs were affected by higher input costs due to the September landslide in Naga, Cebu. Cost of Sales (% of net sales) Fuel and Power (% of cost of sales)
Operating Expenses Distribution expenses, as a percentage of sales, decreased by 2 pp year-over-year resulting from lower double-handling, and supply-chain-optimization initiatives. For the fourth quarter, distribution expenses increased by 2 pp year-over-year mainly due to one-off costs associated with the termination of a bulk vessel charter contract. Selling and administrative expenses, as a percentage of sales, remained flat on a year-over-year basis at 13%. Distribution (% of net sales) Selling and Administrative (% of net sales)
Operating EBITDA and Operating EBITDA Margin Operating EBITDA for the fourth quarter increased by 49% year-over-year with an operating EBITDA margin of 15%. Operating EBITDA for 2019 increased by 25% year-over-year with an operating EBITDA margin of 18%. Operating EBITDA Variation1 10% 15% 14% 18% Refers to operating EBITDA margin % 1 Millions of Philippine Pesos
Net Income Net income for 2019 benefited from higher operating earnings and foreign exchange gains. Higher financial expenses due to increases in debt level and benchmark rates. Net Income1 1 Millions of Philippine Pesos
Free Cash Flow & Guidance 4q 2019
Free cash flow after maintenance CAPEX for 2019 reached PHP 2.5 billion. Benefit from working capital was due to a one-time collection of insurance claims and lower inventories of materials and spare parts. Strategic CAPEX for 2019 reached almost PHP 3.2 billion as spending increases for our Solid Cement Plant Expansion project. Free Cash Flow PENDING
Civil works continue, as we start to build the different structures of the project. Reception of main equipment and components are ongoing. New line expected to start operations in the second quarter of 2021. Expected total investment of US$235 million Solid Cement Plant Capacity Expansion
2020 Guidance Cement volumes 3-7% Capital expenditures PHP 1,000 million PHP 6,400 million PHP 7,400 million Maintenance CAPEX Solid Cement Plant Expansion CAPEX Total CAPEX
Update regarding the Stock Rights Offering Stock Rights Offering (“SRO”) of 8,293,831,169 common shares with a par value of Php 1.00 per common share (the “Offer Shares”) set at the price of Php 1.54 per share was successfully completed with the offer period ending last January 24, 2020. Currently in the process of securing regulatory approvals in preparation for listing. Offer Shares are expected to be listed on or before March 4, 2020. SRO proceeds, currently deposited in an escrow account with BDO, will be released upon listing. After the expected listing and release of proceeds, CHP will take the necessary steps to prepay the Solid Cement and APO Cement loans with CEMEX Asia B.V., and use the remaining proceeds as previously disclosed
Q&A SESSION 4Q 2019 RESULTS
4Q 2019 appendix
Debt Maturity Profile Total Debt: PHP 20,063 Avg. life of debt2: 5.1 years Net Debt to EBITDA3: 4.4x All amounts in millions of Philippine Pesos 1 Related Party Loans pertain to loans with CEMEX Asia B.V. (“CABV”) 2 Based on weighted average life of debt 3 Last 12 months Consolidated EBITDA 1
Total Debt: PHP 13,590 Avg. life of debt2: 5.6 years Net Debt to EBITDA3: 1.4x All amounts in millions of Philippine Pesos 1 Using a portion of the expected proceeds from the Stock Rights Offering (“SRO”) to prepay the Solid Cement and APO Cement loans with CEMEX Asia B.V. (“CABV”) 2 Based on weighted average life of debt 3 Last 12 months Consolidated EBITDA; includes estimated remaining cash from net SRO proceeds after prepaying Solid Cement and APO Cement loans with CABV Pro-forma1 Debt Maturity Profile
Additional Debt Information Note: All amounts in millions of Philippine Pesos, except percentages and ratios 1 U.S. dollar debt converted using end-of-period exchange rates 2 Includes leases, in accordance with Philippine Financial Reporting Standards (PFRS). 3 Based on BDO Loan Facility financial covenants which we are required to comply commencing in June 2020
Definitions PHP Philippine Pesos Pp Percentage points Prices All references to pricing initiatives, price increases or decreases, refer to our prices for our products. Operating EBITDA Operating earnings before other expenses, net, plus depreciation and operating amortization. Free Cash Flow Operating EBITDA minus net interest expense, maintenance and strategic capital expenditures, change in working capital, taxes paid, and other cash items (net other expenses less proceeds from the disposal of obsolete and/or substantially depleted operating fixed assets that are no longer in operation), Maintenance Capital Expenditures Investments incurred for the purpose of ensuring the company’s operational continuity. These include capital expenditures on projects required to replace obsolete assets or maintain current operational levels, and mandatory capital expenditures, which are projects required to comply with governmental regulations or company policies, Strategic capital expenditures investments incurred with the purpose of increasing the company’s profitability. These include capital expenditures on projects designed to increase profitability by expanding capacity, and margin improvement capital expenditures, which are projects designed to increase profitability by reducing costs. Change in Working capital in the Free cash flow statements Only include trade receivables, trade payables, receivables and payables from and to related parties, other current receivables, inventories, other current assets, and other accounts payable and accrued expense. Net Debt Total debt (debt plus leases) minus cash and cash equivalents.
Contact Information Stock Information PSE: CHP Investor Relations In the Philippines +632 8849 3600 chp.ir@cemex.com