Cemex 2001 Annual Report Download

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Trust is a dynamic, living
thing. It calls for truthfulness
and commitments honored.
Trust frees us to think for
ourselves, to forge lasting
relationships, and opens the
way to new possibilities.

Table of contents

  • Page 1
    Trust is a dynamic, living thing. It calls for truthfulness and commitments honored. Trust frees us to think for ourselves, to forge lasting relationships, and opens the way to new possibilities.

  • Page 2
    ... allows us to maintain a sound balance sheet. Financial highlights In m illions of US dollars*, except per-share data CEMEX, S.A. DE C.V . AND SUBSIDIARIES, AS OF DECEMBER 31, 2001 2001 2000 % change Net Sales EBITDA Consolidated Net Income Earnings per ADS** Free Cash Flow Cash Earnings...

  • Page 3
    ...holding company, closes a three-year EUR800 million revolving credit facility, after an unprecedented over-subscription rate. Consolidated net income MILLIONS OF US DOLLARS 1,331 November - CEMEX completes the post-merger integration of U.S.-based Southdown, Inc. in record time, identifying value...

  • Page 4
    Lorenzo H. Zambrano Chairman of the Board and CEO "We must remain flexible so that we are responsive to new opportunities and new challenges, and we must foster a culture that embraces constant change." 4

  • Page 5
    ... about; the distinct way CEMEX wor ks to build confidence among our customer s, employees and, ultimately, you. We recognize that a compelling value proposition is founded upon results. Hence, we manage and position the company to cr eate value in down and up mar kets, to pr oduce consistent r etur...

  • Page 6
    ... Egypt Philippines Others Our distinctive approach - the CEMEX Way - is a culmination of nearly a centur y of exper ience a nd under scor es our dr a ma tic evolution fr om a Mexica n-ba sed compa ny to one of the la r gest globa l enter pr ises in our industr y. The fact that our business was well...

  • Page 7
    ... and cement products in the world's second-largest cement market, U.S.-based CEMEX Inc. Mor eover, the integration of Southdown into our global network took a record four months, an impressive feat by any measure. Ultimately, our goal is to gr ow pr ofitably; no other kind of gr owth is sustainable...

  • Page 8
    ...24 -hour self-ser vice, which CEMEX is uniquely positioned to meet. We initially offered this convenient and cost-effective ser vice at two of our Spanish factories, but demand was so great that we expanded it to a third plant in 2001 . Now, customers no longer have to spend valuable time waiting in...

  • Page 9
    ... to develop our online presence - and engender brand loyalty - across key markets. "From account balances to new products and services, CEMEX's electronic storefront gives me access to the information I need, when I need it. It also offers me tools to better manage my business, including online...

  • Page 10
    ... distributors to compete more effectively, we started a program in 2001 through which we share a common bond and brand: Construrama. We provide certified Construrama distributors a full range of high-volume wholesale cementing and other construction products, as well as the support - accounting, IT...

  • Page 11
    ..., a complementary initiative, Arkio, is satisfying the product and service needs of Mexico' s construction professionals throughout the life of their projects with an innovative one-stop shopping approach. Developed and managed by CxNetworks, Arkio offers the best and broadest selection of finishing...

  • Page 12
    ...a new online environment, we created an "e-culturization expo" to educate our worldwide suppliers and employees about the benefits of electronic procurement. For our suppliers, working online offers improved coordination and better response time. Our employees are able to purchase necessary supplies...

  • Page 13
    ... profits, and stay ahead of the game with superior customer service. 11:15 AM . M iami, U.S. In 2001 Neoris , CxNetworks ' bus ines s s olutions provider, partnered with Ryder System, Inc., a global leader in supply chain and fleet management solutions, to develop ActiveTrac TM. ActiveTrac TM is...

  • Page 14
    ... just innovate business practices; we work to streamline internal processes as well. In collaboration with i2 Technologies, we are implementing a new global supply chain management system that will transform our supply chain and logistics processes into an agile, scalable, high-velocity model, which...

  • Page 15
    "...and offer them the advantages of doing business with a growing, global corporation..." "We are very proud to work with CEMEX, which is not only a leader in the global cement industry, but is also widely recognized as an innovator in the application of information technology to its core business...

  • Page 16
    ... - a standard way of doing business - that enables us to work more efficiently and effectively with our colleagues around the world. It also requires talented and broadminded people who are knowledgeable in their res pective fields , open to new idea s , and experts in our diverse local markets. 16

  • Page 17
    ... models, practices and knowledge that we share, develop and disseminate, we continuously improve the way we do business, freeing our people to innovate and spend more time on their customers' and their own professional development. In 2001, for example, we initiated the deployment of our Internet...

  • Page 18
    ... needed to succeed in a diverse, international marketplace..." It is the pride and responsibility our employees take in the company that allows us to succeed. Their knowledge platform enabled our post-merger team to integrate U.S. based Southdown into CEMEX' s global network in only four months. In...

  • Page 19
    ..., groups of regional professionals have the opportunity to work with colleagues outside of their home market in order to learn about countries and cultures other than their own. In 2001 three groups of employees from Bangladesh, Indonesia, Malaysia, the Philippines, Thailand, and Singapore embraced...

  • Page 20
    ... us to take care of and manage their savings until they are ready to start home building. Then, we not only provide them with the products they need, but we also offer them technical assistance - including a n a rchitect who helps des ign their houses with an eye to future growth - so they can...

  • Page 21
    "...we embrace an unwavering commitment ..." Our dedication to social and environmental responsibility is an integral part of our business philosophy. From state-of-the-art environmental, health and safety practices at our global network of plants, to medical and dental care for our neighboring ...

  • Page 22
    ..., the essential balance between profitability and social responsibility. "All of CEMEX's accomplishments taken together have set a standard for the cement industry and for industry in general, and will serve as a seminal example for responsible growth and sustainable development worldwide." The...

  • Page 23
    ... species our Earth is rapidly losing. More importa ntly, The Red Book - the la tes t in a s eries of ecologica l books that CEMEX has helped to produce - is a call to action for industr y, governments, educators, and the general public to work together in order to preser ve biological diversity. 23

  • Page 24
    ... Balance sheet information Cash and Temporar y Investments Net Working Capital(13) Total Assets Short-Term Debt Long-Term Debt Total Liabilities Minority Interest (4)(5)(6) Stockholders' Equity excluding Minority Interest Total Stockholders' Equity Book V alue per CPO(8)(9)(12) Other financial data...

  • Page 25
    ... of CEMEX from a fixed to a variable capital company, and an increase in the variable portion of its capital stock, CEMEX issued a new share of variable capital of like series for every eight shares (after making the stock split effective). All Ordinary Participation Certificates ("CPO") and per-CPO...

  • Page 26
    ... or mission st atem ent ; it is a prom ise w e m ake to our custom ers to deliver out st anding service and top qualit y product s. "...a compelling value proposition is founded upon results ..." CEMEX's business model is to: • Focus on its core cement and ready-mix concrete franchise in the...

  • Page 27
    Balanced business model CEMEX, led by an innovative and entr epr eneur ial management team, is a global Sales & EBITDA distribution PERCENTAGE gr owth company that combines a deep knowledge of its local mar kets with a global networ k and systems to pr ovide customer s with wor ld-class pr oducts ...

  • Page 28
    In keeping with its CEMEX Way values, the company is implementing a str ategic fr amewor k that utilizes the Balanced Scorecard to drive CEMEX's management process. The approach establishes a set of metrics that align operations and staff with CEMEX's overall operating, customer service and growth ...

  • Page 29
    ... for 2002 . Lower net debt, financial expenses and capital expenditur es, as compar ed to 2001 , should help to achieve this gr owth. CEMEX expects to use its fr ee cash flow for accr etive acquisitions that will add to the company's natur al gr owth or for r educing net debt. Everyday people, like...

  • Page 30
    ... Colombia Egypt Philippines Others Effective tax rate (including employees' statutor y pr ofit shar ing) was 12.7%, compar ed to 15.6% for 2000 . CEM EX's geographically diverse port folio of asset s offers t he com pany profit able and sust ainable grow t h. Across four cont inent s, custom ers...

  • Page 31
    ...Fuel oil Pet coke Coal Gas Alternative Sales 2000 2001 % Change 2000 EBITDA 2001 % Change 2000 Asset s 2001 % Change Mexico U.S. V enezuela & Dominican Republic Colombia Centr al Amer ica & Car ibbean Spain Egypt Philippines Other s / eliminations Consolidated Millions of US dollars. 2,702 769...

  • Page 32
    ... st able public w orks sector. a like-to-like basis, net sales incr eased 8%, and EBITDA decr eased 2% fr om the pr evious year. CEMEX completed the expansion of its V ictor ville cement plant, adding one million metric tons of production capacity in Southern California. This new capacity, which...

  • Page 33
    ...the use of alter native fuels, and mor e efficient distr ibution should also help to r educe pr oduction and logistics costs. In the fir st half of 2002 , all of the company's mainland plants ar e scheduled to r eceive ISO 14001 cer tification. Venezuela / Dominican Republic Domestic cement volumes...

  • Page 34
    ... Philippines, CEM EX's product s are used for needed urban developm ent. CEMEX consolidated seven data center s in South Amer ica into a single one in V enezuela. This has helped to r educe the r egion 's back office costs and has dramatically increased the timeliness of the data needed to manage...

  • Page 35
    ...on-time delivery; opening additional sales offices and cr eating an infr astr uctur e of affiliated bank br anches; increasing delivery to small retailers; consolidating sales of value-added SRC 13.5 13.2 6.9 6.3 7.5 2.6 10.1 11.0 6.2 13.2 cement; and intr oducing El Mohandes, a new pr emium...

  • Page 36
    ... of Thailand's Saraburi Cement On May 11, 2001, CEMEX announced its acquisition of 99% of Sar abur i Cement Company for an enter pr ise value of appr oximately US$73 million, including US$10 Ltd., of which institutional investors own 23% and CEMEX owns 77%. Located north of Bangkok, Saraburi's plant...

  • Page 37
    ...oup of insur ance companies and pension funds. The pr oceeds of the pr iva te pla cement, in tr a nches of five a nd seven yea r s, wer e ma inly a pplied to r efina nce short-term debt incurred in conjunction with the Southdown acquisition and to extend the company's debt matur ity pr ofile. M XP5...

  • Page 38
    ...from the new variable plan, equivalent in number to the time value of their redeemed options at the exchange date, determined by the appropriate valuation model for each particular executive. The new variable program of CEMEX CPO shares has an escalating dollar strike price set at US$4.93 per CPO as...

  • Page 39
    financial statements 40 Auditors' report 41 Management responsibility for internal control 42 Consolidated balance sheets 44 Consolidated statements of income 45 Consolidated statements of changes in financial position 46 Balance sheets (parent company only) 48 Statements of income (parent company ...

  • Page 40
    ...disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable...

  • Page 41
    ... prevented or detected in the normal course of business. The management of Cemex, S.A. de C.V . is responsible for the preparation and integrity of the accompanying consolidated financial statements and for maintaining a system of internal control to provide reasonable assurance to shareholders, to...

  • Page 42
    Consolidated balance sheets (Millions of constant Mexican pesos as of December 31, 2001) CEMEX, S.A. DE C.V. AND SUBSIDIARIES DECEMBER 31, ASSETS CURRENT ASSETS Cash and investm ents (note 3) Trade accounts receivable, less allow ance for doubtful accounts of $460.8 in 2001 and $432.3 in 2000 ...

  • Page 43
    ...liabilities LONG-TERM DEBT (note 11) Bank loans Notes payable Current m aturities of long-term debt 21,518.5 37,335.6 22,472.5 23,283.8 (5,913.9) 12,222.0 17,742.8 (4,164.1) Total long-term debt OTHER NONCURRENT LIABILITIES Pension, seniority prem ium and other postretirem ent benefits (note 13...

  • Page 44
    ... (659.0) (369.0) Total income tax, business assets tax and employees' statutory profit sharing Income before equity in income of affiliates (1,746.3) 12,018.2 (1,845.2) 10,018.9 (1,028.0) 9,676.0 Equity in incom e of affiliates 188.2 240.9 239.8 Consolidated net income Minority interest net...

  • Page 45
    ... reinvestm ent of dividends Issuance of com m on stock under stock option plan Issuance (repurchase) of preferred stock by subsidiaries Acquisition of shares under repurchase program Other financing activities, net Resources (used in) provided by financing activities Investing activities Properties...

  • Page 46
    Balance sheets (Millions of constant Mexican pesos as of December 31, 2001) CEMEX, S.A. DE C.V. DECEMBER 31, ASSETS CURRENT ASSETS Cash and investm ents Other receivables (note 4) Related parties receivables (note 12) $ 2001 2000 154.8 1,404.4 13,206.1 57.3 686.7 5,899.3 Total current assets...

  • Page 47
    ... 31, LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank loans (note 10) Notes payable (note 10) Current m aturities of long-term debt (notes 10 and 11) Other accounts payable and accrued expenses Related parties payable (note 12) $ 2001 2000 271.0 1,650.6 4,126.8 927.8 1,503.6 3,450...

  • Page 48
    ... e tax benefit and business assets tax, net (note 17) 1,266.5 890.9 73.9 Net income $ 10,800.5 9,517.3 9,372.7 Basic earnings per share (see notes 2A and 20) Diluted earnings per share (see notes 2A and 20) $ $ 2.53 2.51 2.31 2.30 2.48 2.48 See accompanying notes to financial statements...

  • Page 49
    ....1 (7,582.6) Net resources used in operating activities Financing activities Proceeds from bank loans (repaym ents), net Notes payable Dividends paid Issuance of com m on stock from reinvestm ent of dividends Issuance of com m on stock under stock option plan Acquisition of shares under repurchase...

  • Page 50
    Statements of changes in stockholders' equity (Millions of constant Mexican pesos as of December 31, 2001) CEMEX, S.A. DE C.V. AND CEMEX, S.A. DE C.V. AND SUBSIDIARIES Common stock Additional paid-in capital Balances at December 31, 1998 Dividends ($0.45 pesos per share) Issuance of com m on ...

  • Page 51
    ... Cumulative initial deferred income tax effects Retained earnings Total majority interest Minority interest Total stockholders' equity (43,903.5) - - - - - - - 60,688.3 (1,912.6) - - 39,041.5 2.2 100.5 264.3 12,563.5 - - - 51,605.0 2.2 100.5 264.3 - 4,783.9 (3,624.8) - - - - - 9,372...

  • Page 52
    ... industry, through the production and marketing of cement and ready-mix concrete. 2. SIGNIFICANT ACCOUNTING POLICIES A) BASIS OF PRESENTATION AND DISCLOSURE The accompanying Parent Company-only financial statements have been prepared in order to comply with legal requirements in Mexico as...

  • Page 53
    ...which the Company holds 100% of the economic benefits, related to a financial transaction (see note 16A). 3 . Cemex, Inc. was created as a result of a merger between the operations of Southdown, Inc. and Cemex USA, Inc. (see note 7A). 4 . In October 2001, V alenciana made a capital contribution to...

  • Page 54
    ... at the time of sale, expressed in constant pesos as of the date of the latest balance sheet. G) INVESTMENTS AND NONCURRENT RECEIVABLES (note 7) Investments in affiliated companies are accounted for by the equity method, when the Company holds between 10% and 50% of the issuer's capital stock, and...

  • Page 55
    ... by the financial risk management department, the Company uses derivative financial instruments such as interest rate and currency swaps, currency and stock forward contracts, options and futures, in order to reduce risks associated with changes in interest rates and foreign exchange rates of debt...

  • Page 56
    ..., anti-dumping duties, results from the sale of fixed assets, impairment charges and, in 2001, the costs related to the restructuring of the executive stock option programs (see note 15). U) IMPAIRMENT OF LONG LIVED ASSETS The Company continually evaluates the physical state and performance...

  • Page 57
    ...-term, and that are stated at their estimated realizable value. These assets include securities and assets not oriented to the Company's main activity, mainly originated from (i) noncement related assets acquired in the purchase of foreign subsidiaries, (ii) diverse assets received from customers...

  • Page 58
    .... The consolidated financial statements include the balance sheets of the acquired companies as of December 31, 2001 and the results of operations of such entities for the periods from the acquisition date to year-end. Inc. ("Southdown") and Cemex USA, Inc. were merged into Cemex, Inc., a new entity...

  • Page 59
    ..., the percentage of equity interest held by their direct holding company, as well as the investment accounted for under the equity method in the consolidated balance sheet were as follows: % OF EQUITY INTEREST 2001 2000 PT Sem en Gresik (persero),Tbk. Control Adm inistrativo Mexicano, S.A. de...

  • Page 60
    ...elect, at maturity of the options and on market conditions, to receive from the Company a fixed rate and pay the Company a variable rate for a fiveyear period starting on the rate exchange date. As of December 31, 2001, premiums received, as well as the estimated fair value of these contracts, which...

  • Page 61
    ... Basis Points ("bps"), are decimals of interest rate. A) Interest Rate Swap Contracts As of December 31, 2001 and 2000, the information on interest rate swap contracts related to the long-term financial debt, which have been negotiated in order to reduce the financial cost and, in some cases, to...

  • Page 62
    ... are originated for the interest rates periodic cash flows exchange, and were recognized in the consolidated balance sheet as an offset of the related financing interest payable. The remaining assets were recognized in the consolidated balance sheet in other long-term assets. As of December 31, 2001...

  • Page 63
    ... instruments used for the exchange of interest rates and/or currencies may fluctuate over time and will be determined by future interest rates and currency prices. These values should be viewed in relation to the fair values of the underlying transactions, and as part of the overall Company...

  • Page 64
    ... of financial ratios. The Company obtains waivers prior to the occurrence of events of default. 12. BALANCES AND TRANSACTIONS WITH RELATED PARTIES The main balances receivable and payable with related parties as of December 31, 2001 and 2000 are: PARENT COMPANY ASSETS SHORT-TERM LONG-TERM 2001...

  • Page 65
    ...plan benefits. The estimated service life for pension plans is between 21.2 and 26.2 years, and for seniority premium 11.3 years (only in Mexico). As of December 31, 2001 and 2000, the plan assets are mainly composed of fixed return instruments and stock of companies traded on formal stock exchanges...

  • Page 66
    ... translation adjustment includes foreign exchange results from financing related to the acquisition of foreign subsidiaries generated by the subsidiary of the Company in Spain of $(41.0), $(604.5) and $(1,902.0), in 2001, 2000 and 1999, respectively. E) PREFERRED STOCK In November 2000, a Dutch...

  • Page 67
    ... increases in the market price of the Company's CPO above the strike price, which originally was U.S.$6.20 per warrant, within certain limits and subject to technical adjustments. The benefit, should any exist, will be paid in CPOs of the Company. The warrants were issued for a term of three years...

  • Page 68
    ..., stock option rights to subscribe up to 72,100,000 CPOs. In November 2001, the Company offered to the executives participating in the plan a voluntary exchange program oriented to modify the structure of the fixed plan, in which at the grant date, the exercise price of the CPO subject to the option...

  • Page 69
    ...exercise of the options granted under the variable executive stock option plan (see note 15). Starting in 2001, the estimated fair value of these contracts is recognized in the balance sheet as an asset or liability against the income statement, offsetting the costs under the option plans, which the...

  • Page 70
    ... U.S.$215 million, negotiated to exchange floating for fixed interest rates. This contract was executed in relation to the agreements entered into by the Company for the acquisition of electric energy for a 20-year period starting in 2003 (see note 21F). During the life of the contract and over...

  • Page 71
    ... other tax credits Accounts payable and accrued expenses Trade accounts receivable Property, plant and equipm ent Inventories Others Total deferred tax liabilities Less - Valuation allow ance Net deferred tax liabilities Net deferred tax Less - Deferred IT of acquired subsidiaries at the acquisition...

  • Page 72
    ... in the consolidated income statement, as follows: DECEMBER 31, 2001 % 2000 % 1999 % Approxim ated consolidated statutory tax rate Utilization of tax loss carryforw ards Additional deductions and tax credits for incom e tax purposes Expenses and other non-deductible item s Non-taxable sale of...

  • Page 73
    ...management, selected condensed financial information of the Company by geographic area for the years ended December 31, 2001, 2000 and 1999: NET SALES OPERATING INCOME 2001 2000 1999 2001 2000 1999 Mexico Spain United States Venezuela Colom bia Caribbean and Central Am erica Philippines Egypt...

  • Page 74
    ... diluted number of shares in 2001, 2000 and 1999 is attributable to the additional shares to be issued under the Company's executive stock option plans (see note 15). 21. CONTINGENCIES AND COMMITMENTS A) GUARANTEES As of December 31, 2001, Cemex, S.A. de C.V . has signed as guarantor of loans made...

  • Page 75
    ...-dumping case involving imported gray Portland cement and clinker from the Philippines and Korea. In J uly 2001, the MOF informed the petitioners and the producers that a formal investigation had been initiated. Among the producers are APO Cement Corporation, Rizal Cement Co., Inc and Solid Cement...

  • Page 76
    ...CONTINGENCIES As of December 31 2001, Cemex Inc (formerly Southdown (see note 7)) a U.S. subsidiary of the Company acquired in 2000 has accrued liabilities specifically relating to environmental matters in the aggregate amount of U.S.$28.9 million. The environmental matters relate to a) in the past...

  • Page 77
    ... water, produces concrete or mortar. Today, our research and development focuses on blended cements. These specialty cements not only meet our customers' more stringent demands, but they also reduce our energy consumption. Installed capacity is the theoretical annual production capacity of a plant...

  • Page 78
    ...management team Board of Directors Directors Lorenzo H. Zambrano Marcelo Zambrano Hellion ( †) Eduardo Brittingham Sumner Lorenzo Milmo Zambrano Armando J . Garc ía Segovia Rodolfo Garc ía Muriel Rogelio Zambrano Lozano Roberto Zambrano... Zambrano Villarreal Examiner Luis Santos De la Garza ...

  • Page 79
    ... ibbean, the Dominican Republic, Haiti, Costa Rica, Nicar agua, and Chile. Univer sity. He is r esponsible for the company's finance, r epor ting, capital mar kets, tr easur y, and investor r elations. Juan Pablo San Agustín, 33 President of CxNetworks Mr. Sa n Agustín, who joined CEMEX in 1997...

  • Page 80
    ... Nars City, Cairo, Egypt Phone: (202) 497.8600 Fax: (202) 260.3325 Thailand 2034/132-161 Ital-Thai Tower Floor 34 Bangkapi, Huaykwang, Bangkok 10320 Thailand Phone: (622) 716.0003 Fax: (622) 716.1555 Indonesia J akarta Stock Exchange Building Tower II, 24th Floor Sudirman Central Business District...

  • Page 81
    ... alores (BMV), Mexico New Y ork Stock Exchange (NYSE), U.S. Share series: [email protected] From the U.S.: 1 877 7CX NYSE From other countries: (212) 317.6000 Fax: (212) 317.6047 Media relations contact: CPO (representing two A shares and one B share) BMV ticker symbol: [email protected] Phone: (5281) 8152...