Cemex sees double-digit U.S. price hikes as supply chain snags weigh

2:02 pm Thursday, October 07th, 2021

By Daina Beth Solomon and Cassandra Garrison

MEXICO CITY (Reuters) -Mexican concrete giant Cemex said on Thursday that supply chain snags and project delays will squeeze its full-year operating profit, even as it plans double-digit U.S. price hikes to offset higher costs.

Together with inflation and foreign exchange effects, the snags and delays could hit earnings this year by around $100 million, its chief executive said in a presentation for investors and analysts.

“What has changed is inflation. We thought we were going to have inflation, but not as much as we’ve seen, particularly fuels, electricity, maritime transportation in particular,” Chief Executive Fernando Gonzalez said.

“We are increasing prices on a much more frequent basis.”

Cemex will report third-quarter results at the end of the month with more detailed information on the impact to earnings before interest, taxes, depreciation and amortization (EBITDA), Gonzalez said, adding that the company was also aiming to delay costs and some investments.

“There is a scarcity of certain goods,” he said. “We’ve needed to buy at spot prices… that’s more expensive than we’re prepared to spend.”

Jaime Muguiro, president of Cemex’s U.S. operations, said the company would hike U.S. prices by double-digits throughout the coming year, in part to offset higher energy and shipping costs.

He praised a $1 trillion bipartisan infrastructure bill under consideration by U.S. lawmakers, saying the $550 billion increase in funding for projects such as bridges, highways and transportation would have a positive impact on demand.

Cemex also projected spending $410 million in capital expenditures in the United States, one of its key markets, over the next three-to-four years, Muguiro said.

In Mexico, Cemex’s third-biggest market, the company is analyzing the potential implications of a proposed electricity reform https://www.reuters.com/world/americas/mexico-president-says-electricity-reform-has-been-sent-congress-2021-10-01 and how it could impact Cemex’s climate goals.

The bill would boost state control of the electricity market and set limits on private sector involvement, including companies that produce renewable energy.

Ricardo Naya, the head of Cemex’s Mexico unit, said Cemex currently sources just 30% of its energy from the state-run Comision Federal de Electricidad (CFE).

Naya also noted that cement exports to the United States are on track to hit a record this year, outdoing the past high from 2006.

(Reporting by Daina Beth Solomon and Cassandra Garrison; Editing by Marguerita Choy, Christian Plumb and Dan Grebler)