Lower expenses, higher forex gains boost Cemex Q3 profit

Cement-maker Cemex Holdings saw a 761-percent improvement in its third quarter net profit to P623 million, from P72 million in the same period last year, as foreign exchange gains as well as lower operational and financial expenses made up for sluggish cement sales amid the prolonged coronavirus pandemic.

For the nine-month period, Cemex recorded a net income of P758.15 million, down by 13 percent year-on-year. Consolidated net sales declined by 17 percent year-on-year to P15.1 billion as the pandemic continued to temper construction activities.

“As the country takes steps towards reopening the economy, the impact of the pandemic remains a concern. We must continue to adapt to the challenges and limitations brought about by COVID-19. Full execution of the government’s infrastructure plan can help accelerate economic recovery. Nevertheless, we continue to be optimistic on the long-term growth prospects of the Philippines,” Cemex president Ignacio Mijares said in a statement on Thursday.

In the third quarter alone, the decline in net sales was smaller at 6 percent year-on-year to P5.5 billion. Cement sales volumes declined by 3 percent year-over-year. Compared to the second quarter, cement sales volume increased by 38 percent while cement prices improved by 1 percent as the government moved to reopen the economy.

Net profit surged in the third quarter as the company’s selling and administrative expenses declined by 1 percent while distribution expenses eased by 10 percent. More significantly, financial expenses declined by 51 percent. On the other hand, Cemex realized a foreign exchange gain of P133.31 million in the third quarter, a reversal of the foreign exchange loss of P146.48 million in the same period last year.

For the first nine months, the company’s domestic cement volume decreased by 12 percent year-on-year as cement prices fell by 5 percent year-over-year, reflecting declines which began in the second half of 2019.

In its report, Cemex noted that activity in the residential sector was lower during the third quarter due to persisting COVID-19 risks and effects on the country.

“Some developers have revised expansion plans, likely to safeguard their balance sheets amid challenging market conditions,” Cemex reported.

Improved remittances, together with supportive monetary policy and a controlled inflation environment, could help support the weak demand in the sector.

Meanwhile, Cemex said the nonresidential sector remained challenging during the quarter amid uncertainties, especially in the retail, tourism and hospitality segments. Rising interest in the logistics segment due to e-commerce, third party logistics operations and fast moving consumer goods could help temper the weak demand in the sector, it added.

Within the public sector, infrastructure disbursements during the first two months of the third quarter declined by 28 percent year-on-year to P96.6 billion due to muted construction activity amid the pandemic.