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 July, 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 July 28, 2020 announcing second quarter 2020 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 2. | Second quarter 2020 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 3. | Presentation regarding second quarter 2020 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: July 27, 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 July 28, 2020 announcing second quarter 2020 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 2. | Second quarter 2020 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
| 3. | Presentation regarding second quarter 2020 results for CEMEX Holdings Philippines, Inc., an indirect subsidiary of CEMEX, S.A.B. de C.V. (NYSE:CX). | |
4
Exhibit 1
| Media Relations Erlinda Lizardo +632 8849 3600 erlinda.lizardo@cemex.com |
Investor Relations Pierre Co +632 8849 3600 pierre.co@cemex.com |
CHP REPORTS SECOND QUARTER 2020 RESULTS
MANILA, PHILIPPINES. JULY 28, 2020 – CEMEX HOLDINGS PHILIPPINES, INC. (“CHP”) (PSE: CHP), announced today that consolidated net sales decreased by 22%, reaching PHP 9.6 billion during the first six months of 2020, versus the comparable period in 2019. Sales decreased by 35% year-over-year in the second quarter, reaching about PHP 4.0 billion.
Domestic cement volumes decreased by 17% during the first half of 2020 versus the same period in 2019. For the quarter, domestic cement volumes declined by 31% year-over-year. CHP’s domestic cement prices during the second quarter and first half of the 2020 were 6% lower year-over-year, reflecting declines during the second half of 2019.
Operating EBITDA during the first six months of 2020 was at PHP 1.8 billion, a decrease of 22% versus the same period in 2019.
Operating EBITDA margin was flat year-over-year at 19% for the first half of 2020, impacted by lower volumes and prices, which were partially offset by cost reduction initiatives and lower absolute distribution expenses.
Net income was at PHP 135 million for the first six months of 2020 versus PHP 802 million in the same period last year. Operating earnings were adversely affected by lower activity due to COVID-19 quarantine measures.
Ignacio Mijares, CHP President and CEO, said: “The second quarter was very challenging for our company, with our volumes adversely impacted by quarantine measures nationwide. But we have seen construction activity gradually return with the easing of restrictions, starting the second half of May.
We remain committed to supplying the Philippines with high quality cement to build the country for many years to come. By acting safely always, working together as one team, and focusing on the tasks at hand, I am encouraged that we will be able to surmount the challenges that lie ahead.”
On June 30, CHP reached an agreement with BDO Unibank, Inc. amending the Term Loan Facility Agreement dated February 1, 2017, entered into by and between CHP, as the Borrower, and BDO Unibank, Inc., as the Lender, so that CHP is required to comply with certain financial covenants commencing on June 30, 2021. No other new or revised terms and conditions to the Facility Agreement were made.
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.
1
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, 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.
2
Exhibit 2
2020 SECOND QUARTER RESULTS Stock Listing Information Philippine Stock Exchange Ticker: CHP Investor Relations + 632 8849 3600 EMail: chp.ir@cemex.com
| Operating and Financial Highlights |
|
| January - June | Second Quarter | |||||||||||||||||||||||
| 2020 | 2019 | % var | 2020 | 2019 | % var | |||||||||||||||||||
| Net sales |
9,623 | 12,356 | (22 | %) | 3,993 | 6,119 | (35 | %) | ||||||||||||||||
| Gross profit |
3,784 | 5,081 | (26 | %) | 1,430 | 2,768 | (48 | %) | ||||||||||||||||
| as % of net sales |
39 | % | 41 | % | (2pp | ) | 36 | % | 45 | % | (9pp | ) | ||||||||||||
| Operating earnings before other expenses, net |
653 | 1,457 | (55 | %) | 132 | 832 | (84 | %) | ||||||||||||||||
| as % of net sales |
7 | % | 12 | % | (5pp | ) | 3 | % | 14 | % | (10pp | ) | ||||||||||||
| Controlling Interest Net Income (Loss) |
135 | 802 | (83 | %) | 46 | 634 | (93 | %) | ||||||||||||||||
| Operating EBITDA |
1,850 | 2,372 | (22 | %) | 767 | 1,276 | (40 | %) | ||||||||||||||||
| as % of net sales |
19.2 | % | 19.2 | % | 0.0pp | 19.2 | % | 20.9 | % | (1.7pp | ) | |||||||||||||
| Free cash flow after maintenance capital expenditures |
45 | 1,687 | (97 | %) | (267 | ) | 839 | N/A | ||||||||||||||||
| Free cash flow |
(1,908 | ) | 1,288 | N/A | (768 | ) | 505 | N/A | ||||||||||||||||
| Net debt1 |
8,409 | 16,887 | (50 | %) | 8,409 | 16,887 | (50 | %) | ||||||||||||||||
| Total debt1 |
13,681 | 21,162 | (35 | %) | 13,681 | 21,162 | (35 | %) | ||||||||||||||||
| Earnings per share2 |
0.01 | 0.15 | (92 | %) | 0.00 | 0.12 | (97 | %) | ||||||||||||||||
In millions of Philippine Pesos, except percentages and earnings per share
| 1 | U.S. dollar debt converted using end-of-period exchange rate. See Debt Information on page 4 and Exchange Rates on page 8 for more detail. |
| 2 | In Philippine Pesos |
| 2020 Second Quarter Results | Page 2 |
| Operating Results |
|
| Domestic Gray Cement | January - June | Second Quarter | Second Quarter 2020 | |||||||||
| 2020 vs. 2019 | 2020 vs. 2019 | vs. First Quarter 2020 | ||||||||||
| Volume |
(17 | %) | (31 | %) | (30 | %) | ||||||
| Price in PHP |
(6 | %) | (6 | %) | 1 | % | ||||||
The second quarter saw a significant slowdown in construction activity.
Our domestic cement volumes decreased by 31% year-over-year during the second quarter, and by 30% on a sequential basis. We have seen volume recovery month-on-month in May and June.
During the first six months of 2020, our domestic cement volumes decreased by 17% year-over-year. This decrease reflects the impact of quarantine measures nationwide and the Luzon Enhanced Community Quarantine from March 16 until May 31.
Our domestic cement prices during the second quarter and first half of the 2020 were 6% lower year-over-year, reflecting declines during the second half of 2019.
Sequentially, our prices remained stable, with the variation reflecting changes in geographic mix due to the temporary closure of Solid Plant.
| 2020 Second Quarter Results | Page 3 |
| Operating EBITDA, Free Cash Flow and Debt Information |
|
Operating EBITDA and Free Cash Flow
| January - June | Second Quarter | |||||||||||||||||||||||
| 2020 | 2019 | % var | 2020 | 2019 | % var | |||||||||||||||||||
| Operating earnings before other income, net |
653 | 1,457 | (55 | %) | 132 | 832 | (84 | %) | ||||||||||||||||
| + Depreciation and operating amortization |
1,197 | 915 | 636 | 443 | ||||||||||||||||||||
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| Operating EBITDA |
1,850 | 2,372 | (22 | %) | 767 | 1,276 | (40 | %) | ||||||||||||||||
| - Net financial expenses |
534 | 715 | 255 | 360 | ||||||||||||||||||||
| - Maintenance capital expenditures |
45 | 358 | (4 | ) | 268 | |||||||||||||||||||
| - Change in working capital |
1,019 | (637 | ) | 687 | (324 | ) | ||||||||||||||||||
| - Income taxes paid |
205 | 259 | 83 | 138 | ||||||||||||||||||||
| - Other cash items (net) |
1 | (10 | ) | 13 | (4 | ) | ||||||||||||||||||
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Free cash flow after maintenance capital expenditures |
45 | 1,687 | (97 | %) | (267 | ) | 839 | N/A | ||||||||||||||||
| - Strategic capital expenditures |
1,953 | 399 | 501 | 334 | ||||||||||||||||||||
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| Free cash flow |
(1,908 | ) | 1,288 | N/A | (768 | ) | 505 | N/A | ||||||||||||||||
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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 rate. 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 on June 30, 2021. |
| 2020 Second Quarter Results | Page 4 |
| Financial Results |
|
Income Statement & Balance Sheet Information
CEMEX Holdings Philippines, Inc.
(Thousands of Philippine Pesos in nominal terms, except per share amounts)
| January – June | Second Quarter | |||||||||||||||||||||||
| INCOME STATEMENT | 2020 | 2019 | % var | 2020 | 2019 | % var | ||||||||||||||||||
| Net sales |
9,623,042 | 12,355,927 | (22 | %) | 3,993,126 | 6,118,500 | (35 | %) | ||||||||||||||||
| Cost of sales |
(5,838,720 | ) | (7,274,695 | ) | 20 | % | (2,562,903 | ) | (3,350,450 | ) | 24 | % | ||||||||||||
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| Gross profit |
3,784,322 | 5,081,232 | (26 | %) | 1,430,223 | 2,768,050 | (48 | %) | ||||||||||||||||
| Selling and Administrative expenses |
(1,377,933 | ) | (1,546,207 | ) | 11 | % | (610,478 | ) | (810,611 | ) | 25 | % | ||||||||||||
| Distribution expenses |
(1,753,826 | ) | (2,078,096 | ) | 16 | % | (688,022 | ) | (1,125,146 | ) | 39 | % | ||||||||||||
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| Operating earnings before other expenses, net |
652,563 | 1,456,929 | (55 | %) | 131,723 | 832,293 | (84 | %) | ||||||||||||||||
| Other income (expenses), net |
(1,373 | ) | 10,478 | N/A | (13,467 | ) | 4,086 | N/A | ||||||||||||||||
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| Operating earnings (loss) |
651,190 | 1,467,407 | (56 | %) | 118,256 | 836,379 | (86 | %) | ||||||||||||||||
| Financial expenses, net |
(534,124 | ) | (714,803 | ) | 25 | % | (254,584 | ) | (359,567 | ) | 29 | % | ||||||||||||
| Foreign exchange gain (loss), net |
(305 | ) | 274,401 | N/A | 66,106 | 291,678 | (77 | %) | ||||||||||||||||
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| Net income (loss) before income taxes |
116,761 | 1,027,005 | (89 | %) | (70,222 | ) | 768,490 | N/A | ||||||||||||||||
| Income tax benefit (expenses) |
18,256 | (224,694 | ) | N/A | 116,117 | (134,818 | ) | N/A | ||||||||||||||||
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| Consolidated net income (loss) |
135,017 | 802,311 | (83 | %) | 45,895 | 633,672 | (93 | %) | ||||||||||||||||
| Non-controlling interest net income (loss) |
12 | 12 | 0 | % | 4 | 6 | (33 | %) | ||||||||||||||||
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| Controlling Interest net income (loss) |
135,029 | 802,323 | (83 | %) | 45,899 | 633,678 | (93 | %) | ||||||||||||||||
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| Operating EBITDA |
1,849,907 | 2,371,702 | (22 | %) | 767,471 | 1,275,767 | (40 | %) | ||||||||||||||||
| Earnings per share |
0.01 | 0.15 | (92 | %) | 0.00 | 0.12 | (97 | %) | ||||||||||||||||
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| as of June 30 | as of December 31 | |||||||||||||||||||
| BALANCE SHEET | 2020 | 2019 | % Var | 2019 | % Var | |||||||||||||||
| Total Assets |
63,348,718 | 59,446,204 | 7 | % | 58,806,177 | 8 | % | |||||||||||||
| Cash and Temporary Investments |
5,271,916 | 4,275,083 | 23 | % | 1,399,180 | 277 | % | |||||||||||||
| Derivative Asset |
0 | 10,946 | (100 | %) | 0 | |||||||||||||||
| Trade Accounts Receivables |
883,519 | 1,080,257 | (18 | %) | 892,951 | (1 | %) | |||||||||||||
| Other Receivables |
39,038 | 85,330 | (54 | %) | 92,993 | (58 | %) | |||||||||||||
| Insurance Claims and Premium Receivables |
359,821 | 512 | 70178 | % | 445,535 | (19 | %) | |||||||||||||
| Inventories |
2,380,727 | 3,452,902 | (31 | %) | 3,013,444 | (21 | %) | |||||||||||||
| Assets Held for Sale |
0 | 0 | 0 | |||||||||||||||||
| Other Current Assets |
1,778,188 | 1,353,796 | 31 | % | 1,672,392 | 6 | % | |||||||||||||
| Current Assets |
10,713,209 | 10,258,826 | 4 | % | 7,516,495 | 43 | % | |||||||||||||
| Fixed Assets |
21,248,850 | 17,615,197 | 21 | % | 19,937,723 | 7 | % | |||||||||||||
| Investments in an Associate and Other Investments |
14,097 | 14,097 | 0 | % | 14,097 | 0 | % | |||||||||||||
| Other Assets and Noncurrent Accounts Receivables |
873,674 | 985,872 | (11 | %) | 837,151 | 4 | % | |||||||||||||
| Advances to Contractors |
1,378,280 | 1,988,045 | (31 | %) | 1,606,397 | (14 | %) | |||||||||||||
| Deferred Income Taxes—net |
1,260,914 | 724,473 | 74 | % | 1,034,620 | 22 | % | |||||||||||||
| Goodwill |
27,859,694 | 27,859,694 | 0 | % | 27,859,694 | 0 | % | |||||||||||||
| Other Assets |
31,386,659 | 31,572,181 | (1 | %) | 31,351,959 | 0 | % | |||||||||||||
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| Total Liabilities |
21,131,517 | 30,188,770 | (30 | %) | 29,140,690 | (27 | %) | |||||||||||||
| Current Liabilities |
7,511,370 | 9,887,544 | (24 | %) | 10,136,812 | (26 | %) | |||||||||||||
| Long-Term Liabilities |
11,123,722 | 17,684,969 | (37 | %) | 16,549,640 | (33 | %) | |||||||||||||
| Deferred Tax Liability |
1,453 | 13,954 | (90 | %) | 1,587 | (8 | %) | |||||||||||||
| Other Liabilities |
2,494,972 | 2,602,303 | (4 | %) | 2,452,651 | 2 | % | |||||||||||||
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| Consolidated Stockholders’ Equity |
42,217,201 | 29,257,434 | 44 | % | 29,665,487 | 42 | % | |||||||||||||
| Non-controlling Interest |
158 | 181 | (13 | %) | 170 | (7 | %) | |||||||||||||
| Stockholders’ Equity Attributable to Controlling Interest |
42,217,043 | 29,257,253 | 44 | % | 29,665,317 | 42 | % | |||||||||||||
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| 2020 Second Quarter Results | Page 5 |
| Financial Results |
|
Income Statement & Balance Sheet Information
CEMEX Holdings Philippines, Inc.
(Thousands of U.S. Dollars, except per share amounts)
| January - June | Second Quarter | |||||||||||||||||||||||
| INCOME STATEMENT | 2020 | 2019 | % var | 2020 | 2019 | % var | ||||||||||||||||||
| Net sales |
190,354 | 237,747 | (20 | %) | 79,418 | 118,038 | (33 | %) | ||||||||||||||||
| Cost of sales |
(115,496 | ) | (139,977 | ) | 17 | % | (50,973 | ) | (64,637 | ) | 21 | % | ||||||||||||
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| Gross profit |
74,858 | 97,770 | (23 | %) | 28,445 | 53,401 | (47 | %) | ||||||||||||||||
| Selling and Administrative expenses |
(27,257 | ) | (29,752 | ) | 8 | % | (12,142 | ) | (15,639 | ) | 22 | % | ||||||||||||
| Distribution expenses |
(34,693 | ) | (39,986 | ) | 13 | % | (13,684 | ) | (21,706 | ) | 37 | % | ||||||||||||
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| Operating earnings before other expenses, net |
12,908 | 28,032 | (54 | %) | 2,619 | 16,056 | (84 | %) | ||||||||||||||||
| Other income (expenses), net |
(27 | ) | 202 | N/A | (268 | ) | 79 | N/A | ||||||||||||||||
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| Operating earnings (loss) |
12,881 | 28,234 | (54 | %) | 2,351 | 16,135 | (85 | %) | ||||||||||||||||
| Financial expenses, net |
(10,566 | ) | (13,754 | ) | 23 | % | (5,063 | ) | (6,937 | ) | 27 | % | ||||||||||||
| Foreign exchange gain (loss), net |
(6 | ) | 5,280 | N/A | 1,315 | 5,627 | (77 | %) | ||||||||||||||||
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| Net income (loss) before income taxes |
2,309 | 19,760 | (88 | %) | (1,397 | ) | 14,825 | N/A | ||||||||||||||||
| Income tax benefit (expenses) |
361 | (4,323 | ) | N/A | 2,309 | (2,601 | ) | N/A | ||||||||||||||||
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| Consolidated net income (loss) |
2,670 | 15,437 | (83 | %) | 912 | 12,224 | (93 | %) | ||||||||||||||||
| Non-controlling interest net income (loss) |
0 | 0 | 0 | 0 | ||||||||||||||||||||
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| Controlling Interest net income (loss) |
2,670 | 15,437 | (83 | %) | 912 | 12,224 | (93 | %) | ||||||||||||||||
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| Operating EBITDA |
36,593 | 45,635 | (20 | %) | 15,264 | 24,612 | (38 | %) | ||||||||||||||||
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| as of June 30 | as of December 31 | |||||||||||||||||||
| BALANCE SHEET | 2020 | 2019 | % Var | 2019 | % Var | |||||||||||||||
| Total Assets |
1,271,297 | 1,160,153 | 10 | % | 1,161,259 | 9 | % | |||||||||||||
| Cash and Temporary Investments |
105,798 | 83,433 | 27 | % | 27,630 | 283 | % | |||||||||||||
| Derivative Asset |
0 | 214 | (100 | %) | 0 | |||||||||||||||
| Trade Accounts Receivables |
17,731 | 21,082 | (16 | %) | 17,633 | 1 | % | |||||||||||||
| Other Receivables |
783 | 1,665 | (53 | %) | 1,836 | (57 | %) | |||||||||||||
| Insurance Claims and Premium Receivables |
7,221 | 10 | 72110 | % | 8,798 | (18 | %) | |||||||||||||
| Inventories |
47,777 | 67,387 | (29 | %) | 59,507 | (20 | %) | |||||||||||||
| Assets Held for Sale |
0 | 0 | 0 | |||||||||||||||||
| Other Current Assets |
35,685 | 26,421 | 35 | % | 33,025 | 8 | % | |||||||||||||
| Current Assets |
214,995 | 200,212 | 7 | % | 148,429 | 45 | % | |||||||||||||
| Fixed Assets |
426,427 | 343,778 | 24 | % | 393,715 | 8 | % | |||||||||||||
| Investments in an Associate and Other Investments |
283 | 275 | 3 | % | 278 | 2 | % | |||||||||||||
| Other Assets and Noncurrent Accounts Receivables |
17,533 | 19,240 | (9 | %) | 16,532 | 6 | % | |||||||||||||
| Advances to Contractors |
27,660 | 38,799 | (29 | %) | 31,722 | (13 | %) | |||||||||||||
| Deferred Income Taxes—net |
25,304 | 14,139 | 79 | % | 20,431 | 24 | % | |||||||||||||
| Goodwill |
559,095 | 543,710 | 3 | % | 550,152 | 2 | % | |||||||||||||
| Other Assets |
629,875 | 616,163 | 2 | % | 619,115 | 2 | % | |||||||||||||
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| Total Liabilities |
424,071 | 589,164 | (28 | %) | 575,448 | (26 | %) | |||||||||||||
| Current Liabilities |
150,739 | 192,965 | (22 | %) | 200,174 | (25 | %) | |||||||||||||
| Long-Term Liabilities |
223,233 | 345,140 | (35 | %) | 326,810 | (32 | %) | |||||||||||||
| Deferred Tax Liability |
29 | 272 | (89 | %) | 31 | (6 | %) | |||||||||||||
| Other Liabilities |
50,070 | 50,787 | (1 | %) | 48,433 | 3 | % | |||||||||||||
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| Consolidated Stockholders’ Equity |
847,225 | 570,988 | 48 | % | 585,811 | 45 | % | |||||||||||||
| Non-controlling Interest |
3 | 4 | (25 | %) | 3 | 0 | % | |||||||||||||
| Stockholders’ Equity Attributable to Controlling Interest |
847,222 | 570,984 | 48 | % | 585,808 | 45 | % | |||||||||||||
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| 2020 Second Quarter Results | Page 6 |
| Other Information |
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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:
| (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 | |||
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| Retained earnings 1 |
(85,311 | ) | ||
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| 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. |
As of June 30, 2020 and 2019, assets for the right-of-use amounted to PHP 2,070 million and PHP 1,932 million, respectively. In addition, financial liabilities related to lease contracts amounted to PHP 2,324 million as of June 30, 2020 and PHP 2,112 million as of June 30, 2019. These amounts of financial liabilities as of June 30, 2020 and 2019 are included in the “Debt Information” section appearing on page 4.
| 2020 Second Quarter Results | Page 7 |
| Definitions of Terms and Disclosures |
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| Exchange Rates | January - June | Second Quarter | January - June | |||||||||||||||||||||
| 2020 average |
2019 average |
2020 average |
2019 average |
2020 End of period |
2019 End of period |
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| Philippine peso |
50.55 | 51.97 | 50.28 | 51.84 | 49.83 | 51.24 | ||||||||||||||||||
Amounts provided in units of local currency per US dollar
| 2020 Second Quarter Results | Page 8 |
1Q19 Results 2Q 2020 Results July 28, 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, as of the date such statements are made, 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; general political, economic, health and business conditions in the markets in which CHP operates; competition in the markets in which we offer our products and services; 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; changes in the economy that affect demand for consumer goods, consequently affecting demand for our products and services; the impact of pandemics, epidemics or outbreaks of infectious diseases and the response of governments and other third parties, including with respect to COVID-19, which have affected and may continue to adversely affect, among other matters, supply chains, international operations, availability of liquidity, investor confidence and consumer spending, as well as availability of, and demand for, our products and services; weather conditions, including but not limited to, excessive rain and snow, and disasters such as earthquakes and floods; weather conditions; natural disasters and other unforeseen events (including global health hazards such as COVID-19); and the other risks and uncertainties described in CHP’s public filings. 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
COVID-19 Pandemic Solid Cement Plant suspended production and delivery of cement products in the third week of March and resumed operations on May 20, in compliance with government regulations. APO Cement Plant remains operational, complying with all government regulations and the necessary hygiene and safety measures. Our second quarter volumes were adversely impacted by quarantine measures nationwide.
Protect the health and safety of our employees and their families, customers, suppliers, and communities We implemented new hygiene and safety protocols to minimize the risk of COVID-19 threats in our operations, in adherence to local health regulations. Intensified internal information campaigns, as the number of COVID-19 cases in the country continues to increase. We continue assisting local government units through manpower support, food, medical and sanitation supplies for front liners and community members.
Serve our customers safely and leverage CEMEX Go Our safety protocols apply not only within our facilities, but also to the trucks and vessels that deliver our products. Our CEMEX Go platform allows us to continue our sales and customer service in a virtual and safe manner. Enabled additional online channels to promote engagement, manage communications, and facilitate transactions with our customers amidst this “new normal”.
Prudently manage our costs and expenses Cost management remains an essential lever within our control during this time of pandemic. Reduce capital expenditures, and budgeted operating expenses for the remainder of 2020. On June 30, 2020, CHP reached an agreement with BDO Unibank, Inc. amending the Term Loan Facility Agreement dated February 1, 2017, entered by and between CHP, as the Borrower, and BDO Unibank, Inc., as the Lender, so that CHP is required to comply with certain financial covenants commencing on June 30, 2021. No other new or revised terms and conditions to the Facility Agreement were made.
Domestic Cement Volumes and Prices Domestic cement volumes decreased by 31% year-over-year during the second quarter and by 30% on a sequential basis. Volume recovery month-on-month in May and June of 2020. On a year-to-date basis, domestic cement volumes decreased by 17% year-over-year, reflecting the impact of nationwide quarantine measures and the Luzon Enhanced Community Quarantine (ECQ) from March 16 until May 31. Domestic cement prices were 6% lower year-over-year during the second quarter and first half of 2020, reflecting declines during the second half of 2019. Sequential change in price reflects changes in geographic mix due to temporary closure of Solid Plant.
-35% Net Sales As a result of lower volumes and prices, net sales decreased, year-over-year, by 35% during the second quarter and by 22% during the first half of 2020. Net Sales1 1 Millions of Philippine Pesos -22%
Private Sector Construction employment significantly declined year-over-year during the second quarter due to COVID-19 quarantine measures. The ban on construction works imposed during the start of the Luzon ECQ and eventual decline in business activity led to the drop in employment. Residential sector demand was lower during the quarter as remittances were stifled by global disruptions from COVID-19. Cuts in the key interest rate and stable inflation may offer support but altered consumer behavior and higher unemployment may continue to affect the sector. The non-residential sector was heavily challenged during the period with small businesses filing for temporary and permanent closure as activity significantly slowed down during the ECQ. The retail, hospitality, and tourism sectors were greatly affected by the pandemic, while manufacturing operations and output were subdued. The potential passing of the Corporate Recovery and Tax Incentives for Enterprise Act (CREATE), which aims to reduce corporate income tax from 30% to 25%, could aid businesses on their way to recovery. Sources: Colliers, Department of Trade and Industry, Leechiu Property Consultants, Philippine Statistics Authority Employment in Construction (M Persons) YoY % +13.1% +5.2% +3.6% +7.9% -2.6% -33.8%
Public Sector During April and May of 2020, infrastructure cash disbursements reached Php 79.1 B, representing an 11.9% contraction year-over-year. The decline is mainly attributed to the prolonged ECQ in Luzon and the implementation of stricter quarantine measures in other areas in the country, which likewise affected project implementation of the government. Meanwhile, infrastructure budget for the year was reduced by 22% to Php 775 B to intensify COVID-19 response. Despite the budget cut and bottlenecks in execution, the government remains firm on their stance to use infrastructure formation in supporting economic recovery of the country given its strong multiplier effects. In the last three months, Fitch Ratings, Standard & Poor’s, and Moody’s Investors Services have affirmed their stable outlook, while the Japan Credit Rating agency upgraded their rating for the Philippines. Disbursements on Infrastructure and Capital Outlays (in PHP billion) Refers to year-over-year growth % Sources: Department of Budget and Management, National Economic and Development Authority
Cost of Sales Cost of sales was at 61% of sales during the first six months of 2020, compared with 59% in the same period of 2019. Postponed all major kiln maintenance to the second half of 2020. Optimized operations of our kilns in APO Plant, as part of working capital initiatives. Total fuel cost was 7% lower year-over-year, while total power cost declined by 24% year-over-year during the first half of 2020 mainly due to the temporary stoppage of Solid Cement Plant and our APO Plant kiln optimization. Power costs also benefitted from lower electricity prices and a one-off rebate from the wholesale electricity spot market in the first quarter of the year. Cost of Sales (% of net sales) Fuel and Power (% of cost of sales)
Operating Expenses Distribution expenses, as a percentage of sales, was at 18% for 6M20. Measures to control distribution expenses limited the increase in our cost to 1.4 percentage points of sales year-over-year despite the significant reduction in sales volumes. Selling and administrative expenses, as a percentage of sales, was at 14% for 6M20. Total cost lower by 11% year-over-year for the first half of 2020. Distribution (% of net sales) Selling and Administrative (% of net sales)
Operating EBITDA and Operating EBITDA Margin Operating EBITDA for the first six months of 2020 decreased by 22% year-over-year. 2Q20 was adversely affected by lower activity due to COVID-19 quarantine measures, as operating EBITDA decreased by 40%. Operating EBITDA margin was at 19% for the first half of 2020, impacted by lower volumes and prices, which were partially offset by cost reduction initiatives and lower absolute distribution expenses. 1 Millions of Philippine Pesos Refers to operating EBITDA margin % Operating EBITDA Variation1 21% 19% 19% 19%
Net Income Net income was at PHP 135 million for the first six months of 2020. Operating earnings were adversely affected by lower activity due to COVID-19 quarantine measures. Income tax during the first half of the year reflects an increase in deferred tax assets related to Net Operating Loss Carry-Over (NOLCO) and Minimum Corporate Income Tax (MCIT) credits. 1 Millions of Philippine Pesos Net Income1
Free Cash Flow & Guidance 1q19 Free Cash Flow 2Q 2020
Free cash flow after maintenance CAPEX for the first six months of 2020 was at PHP 45 million. Working capital reflected the use of cash as we continued to make payments to suppliers, while payables were lower due to reduced purchases from lower production. Strategic CAPEX for the first half of the year was at PHP 1.95 billion due to our Solid Cement Plant Expansion project. Free Cash Flow
Implemented strict health and safety protocols, and preventive measures to reduce the risk of COVID-19 in our project site. Civil works started again in mid-May, after the easing of Community Quarantine measures in Antipolo, Rizal. Our contractors continue to work on the different buildings and structures of the new line. Expected start of operations under evaluation. Estimated total investment of US$235 million Solid Cement Plant Capacity Expansion
Q&A SESSION 2Q 2020
1Q19 appendix APPENDIX 2Q 2020
Debt Maturity Profile Total Debt: PHP 13,681 Avg. life of debt1: 5.1 years Net Debt to EBITDA2: 2.3x All amounts in millions of Philippine Pesos 1 Based on weighted average life of debt 2 Last 12 months Consolidated EBITDA
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 on June 30, 2021
Definitions 6M20 / 6M19 Results for the first six months of the years 2020 and 2019, respectively 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