Cemex 2014 Annual Report Download

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This is a
great time
to be at
CEMEX
ANNUAL REPORT 2014
Building the

Table of contents

  • Page 1
    This is a great time to be at Building the CEMEX ANNUAL REPORT 2014

  • Page 2
    Global demand is on the rise In most of our markets, there is a growing need for our products and solutions. 1

  • Page 3
    We are evolving Today we are a simpler, more agile company, focused more than ever on our customers. 2

  • Page 4
    Our people are our advantage We are a dynamic organization that provides great development opportunities for our employees. 3

  • Page 5
    We are stronger We have improved our operational and financial performance. 4

  • Page 6
    Our future is promising We are evolving and well positioned to take advantage of opportunities ahead. 5

  • Page 7
    ...) to sales: 10.5%. CEMEX is a strategy-driven company. We create value by leveraging our global portfolio of integrated cement, ready-mix concrete, aggregates and related assets. As we execute that strategy, we have four priorities: Chief Executive Officer Rogelio Zambrano Chairman of the Board...

  • Page 8
    ... our markets. w We will continue to build Global CEMEX by developing networks that span our worldwide operations. These networks are tasked with finding, inside or outside the company, best practices and then implementing them throughout CEMEX. They are critical to how we are managing the company...

  • Page 9
    ... million. CEMEX's mission is to create sustainable value by providing industry-leading products and solutions to satisfy the construction needs of our customers around the world. We are a growing, global company, and we are confident that we are in the right markets with the right strategies and the...

  • Page 10
    ... end of each year using the end-of-year exchange rate of 14.74 MXN/US$ and 13.05 MXN/US$, respectively. 2 Based on an average of 1,256 and 1,170 million American Depositary Shares (ADSs) for 2014 and 2013, respectively. 3 2014, 2013, 2012, 2011, and 2010 figures are under IFRS, refer to page 27 for...

  • Page 11
    At CEMEX, our mission is to create sustainable value by providing industry-leading products and solutions to satisfy the construction needs of our customers around the world. 10

  • Page 12
    ... mission is to create value by building and managing a global portfolio of integrated cement, ready-mix concrete, aggregates, and related businesses. We accomplish this by ensuring we: People Value our people as our main competitive advantage Customers Help our customers succeed Sustainability...

  • Page 13
    ... for Life." With this in mind, we continued the implementation of our global Health and Safety Management System. Central to the prevention of future injuries, we are bolstering our communication about incidents, including key learning points and best practices. To date, our operations have shared...

  • Page 14
    ... Leader-to-Leader (L2L) programs. Through ACHIEVE, participating top-tier managers and newly appointed directors develop their leadership skills immersed in real-life projects selected by the Executive Committee that focus on capturing and creating value for our company and our stakeholders. In 2014...

  • Page 15
    ... our commercial teams to offer customers a full range of tailor-made concrete solutions and complementary products directly from their Value-added ready-mix concrete products Enhancing our ability to service our ready-mix concrete customers 1 Covers full Customer Relationship Management cycle...

  • Page 16
    ... products, innovative solutions, and great customer service across a wide range of complex infrastructure, commercial, and residential housing projects. In 2014, we participated in the construction of Heathrow International Airport's new Terminal 2-the Queen's Terminal-one of the most sustainable...

  • Page 17
    ...: our core cement, ready-mix concrete, aggregates, and related businesses. By managing our core operations as one vertically integrated business, we not only capture a greater portion of the cement value chain, but also get closer to our customers by offering comprehensive building solutions. This...

  • Page 18
    ... with Fisterra Energy and other private investors, we completed financing for the 252-MW Ventika Wind Project in northeast Mexico-one of the largest wind farm projects in Latin America. El Carmen Conservation Initiative CEMEX has a long history of preserving nature and sharing its wonder through El...

  • Page 19
    ... measurement across our company. In 2015, we will continue to work with our operations to minimize water-related risks through the creation of a holistic water management plan that prioritizes countries and sites where the risks are highest and the potential to impact our business is greatest. We...

  • Page 20
    ... Social Franchise and Building Materials Distribution UNGC 100 Index BASIC SERVICES Ecological Stoves and Other Ecotechnics CEMEX was the sole Mexican company selected for the United Nations Global Compact 100, a new global stock index that combines sustainability and financial performance. As part...

  • Page 21
    Operating model We leverage our knowledge and scale to establish best practices and common processes worldwide in order to operate more effectively and achieve the greatest value. 20

  • Page 22
    ...-we have developed corporate guidelines for the use of alternative fuels that are compatible with those established by the Cement Sustainability Initiative to complement local regulation. We have also implemented a model of engagement to help community leaders understand the logistical, technical...

  • Page 23
    ... drive to create sustainable value-achieving the full potential of our business. Aggregates Grow the pie Value before volume GLOBAL NETWORKS Ready mix Ready mix - Our objective is to enable our ready-mix concrete operations to contribute to our company as a profitable, stand-alone business...

  • Page 24
    ... essence of our culture: they express who we are, how we behave and what we believe. Our values define all of us. We live by these values every day. The five values that reflect who we are as a company: Ensure safety Act with integrity Focus on customers Work as one CEMEX Pursue excellence 23

  • Page 25
    ... found in our collective strength-our ability to work as One CEMEX. Our ability to leverage our global knowledge for the benefit of our local markets is a key competitive advantage. The way we work is to share ideas and information globally to maximize our individual and collective contributions. As...

  • Page 26
    We may have diverse backgrounds, come from different countries, or have worked in other companies. But this diversity is what makes us stronger. At CEMEX, we all share the same vision. We see opportunities, we see growth, and we see a solid foundation upon which CEMEX stands. 25

  • Page 27
    ... financial information* CEMEX, S.A.B. de C.V. and subsidiaries in millions of US dollars, except ADSs and per-ADS amounts Operating results Net sales Cost of sales(1) Gross profit Operating expenses Operating earnings before other expenses, net Other expenses, net Financial expense Other financial...

  • Page 28
    ... financial information 1. Cost of sales includes depreciation, amortization and depletion of assets involved in production, expenses related to storage in production plants, and beginning in 2008, freight expenses of raw material in plants and delivery expenses of CEMEX's ready-mix concrete business...

  • Page 29
    Company overview Business CEMEX is a global building materials company that provides high-quality products and reliable service to customers and communities in more than 50 countries throughout the world. 28

  • Page 30
    ..., and markets cement, ready-mix concrete, aggregates, and related building materials to customers in over 50 countries, and we maintain trade relationships in over 100 nations. Mission Our mission is to create sustainable value by providing industry-leading products and solutions to satisfy...

  • Page 31
    ...challenges our customers are facing? What success means to them? What are the products Pursue markets that offer long-term profitability We do business in markets where we can add value for our employees, our customers, and our shareholders. We will operate only in those markets that offer long-term...

  • Page 32
    ... essential to better market our products and it is aligned with our strategy. Ensure sustainability is fully embedded in our business At CEMEX, we ensure sustainability is fully embedded in our business strategy and day-to-day operations. Our goal is to provide building solutions that meet the needs...

  • Page 33
    ... Employee stock-ownership plan To better align our executives' interests with those of our shareholders, we began offering executives a new stock-ownership program in 2005. The plan moves our company's long-term incentives from stock option grants to restricted stock awards. As of December 31, 2014...

  • Page 34
    ... by our Chief Executive Officer and our Chief Financial Officer of the information that we present in CEMEX's periodic reports to the U.S. Securities and Exchange Commission, as well as to the corresponding securities authorities in Mexico. Moreover, in compliance with applicable requirements under...

  • Page 35
    ... sales increased 3% to US$15.7 billion in 2014. The growth in consolidated net sales was the result of higher prices for our products in local currency terms in most of our operations, as well as higher volumes in our Mexico, U.S., and South, Central America and the Caribbean regions. Cost of sales...

  • Page 36
    ...Kingdom. 3 Includes operations in Croatia, Egypt, Israel, Spain, and the United Arab Emirates. 4 Includes operations in Arg entina, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Jamaica, Nicaragua, Panama, Peru, Puerto Rico, as well as other operations in the Caribbean region...

  • Page 37
    ...transfer of our ready-mix assets with Concrete Supply, both increased 7%, while our aggregates volumes declined by 2% for 2014. Our increased cement volumes for the year reflected improved demand in most of our markets. The industrial-and-commercial sector and the steady expansion of the residential...

  • Page 38
    ... and office construction in large cities. Mediterranean In the Mediterranean region, our operations' net sales increased 9% year over year to US$1.6 billion, while operating EBITDA improved 3% to US$333 million in 2014. As a whole, our regional operations' ready-mix concrete volumes increased...

  • Page 39
    ...and increased cement production capacity in the country. The informal residential sector was the main driver of demand in the country, supported by our alternative fuel strategy, while the formal residential sector experienced increased activity. South, Central America and the Caribbean In 2014, our...

  • Page 40
    ... new markets without the necessity of making immediate capital investments. Our worldwide network of strategically located marine terminals and broad third-party customer base also provide us with the added flexibility to fully place contracted supplies in an optimal way. In 2014, we enjoyed trading...

  • Page 41
    ... auditors' report 42 Consolidated statements of operations 43 Consolidated statements of comprehensive loss 44 Consolidated balance sheets 45 Consolidated statements of cash flows 46 Consolidated statements of changes in stockholders' equity 47 Notes to the consolidated financial statements 40

  • Page 42
    ... December 31, 2014, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information. The Board of Directors and Stockholders CEMEX, S.A.B. de C.V.: Management's Responsibility for the Consolidated Financial Statements Management is responsible...

  • Page 43
    Consolidated statements of operations Note 2014 Years ended December 31, 2013 2012 Net sales Cost of sales Gross profit 3 2R $ 210,023 (142,746) 195,661 (134,774) 60,887 (24,142) (17,241) (41,383) 19,504 (4,903) 14,601 (19,937) 1,706 ...

  • Page 44
    Consolidated statements of comprehensive loss Years ended December 31, Note 2014 2013 2012 CONSOLIDATED NET LOSS Items that will not be reclassified subsequently to profit or loss Actuarial losses Income tax recognized directly in other comprehensive income $ (5,680) (9,611) (11,338)...

  • Page 45
    Consolidated balance sheets Note December 31, 2014 2013 ASSETS CURRENT ASSETS Cash and cash equivalents Trade receivables less allowance for doubtful accounts Other accounts receivable Inventories, net Other current assets Total current assets NON-CURRENT ASSETS Investments in associates Other ...

  • Page 46
    ..., net Other accounts receivable and other assets Inventories Trade payables Other accounts payable and accrued expenses Changes in working capital, excluding income taxes The accompanying notes are part of these consolidated financial statements. 5 6 13A $ (5,680) 14,457 3,867 (297) (409...

  • Page 47
    ... 2012 Net loss Total other items of comprehensive loss Change in the Parent Company's functional currency Restitution of retained earnings Capitalization of retained earnings Stock-based compensation Effects of perpetual debentures Changes in non-controlling interest Balance at December 31, 2013 Net...

  • Page 48
    ... out all businesses and operational activities of the cement and aggregates sectors in Mexico. During the second phase beginning in 2015, CEMEX, S.A.B. de C.V. will integrate productive, commercial, marketing and administrative activities related to the sale of ready-mix concrete in Mexico. CEMEX...

  • Page 49
    ..., associated with the negotiation of capital leases during the year (note 16B); In 2013, the increase in investments in associates for $712, related to CEMEX´s joint arrangement in Concrete Supply Co., LLC. (note 13A). As part of the agreement CEMEX contributed cash of approximately US$4 million...

  • Page 50
    ...of inventories, recognition of deferred income tax assets, as well as the measurement of financial instruments at fair value, and the assets and liabilities related to employee benefits. Significant judgment is required by management to appropriately assess the amounts of these concepts. 2D) Foreign...

  • Page 51
    ... average exchange rates for balance sheet accounts and income statement accounts, as of December 31 2014, 2013 and 2012, were as follows: 2014 Currency Closing Average Closing 2013 Average Closing 2012 Average CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions...

  • Page 52
    ... are maintained on the balance sheet. CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) 2G) Inventories (note 11) Inventories are valued using the lower of cost and net realizable value. The cost of inventories includes expenditures incurred...

  • Page 53
    ... in plant Ready-mix trucks and motor vehicles Office equipment and other assets 34 33 18 7 6 CEMEX capitalizes, as part of the related cost of fixed assets, interest expense from existing debt during the construction or installation period of significant fixed assets, considering CEMEX's corporate...

  • Page 54
    ... cash flows related to the use and eventual disposal of the asset. Significant judgment by management is required to appropriately assess the fair values and values in use of these assets. The main assumptions utilized to develop these estimates are a discount rate that reflects the risk of the...

  • Page 55
    ... proportion of revenues, following past experience. However, such operating expenses are also reviewed considering external information sources in respect to inputs that behave according to international prices, such as gas and oil. CEMEX uses specific pre-tax discount rates for each group of CGUs...

  • Page 56
    ... expense of the related debt is accrued, in the case of interest rate swaps, or when the underlying products are consumed in the case of contracts on the price of raw materials and commodities. Likewise, in hedges of the net investment in foreign subsidiaries, changes in fair value are recognized in...

  • Page 57
    ...in valuation models such as Black-Scholes, binomial, discounted cash flows or multiples of Operative EBITDA, including risk assumptions consistent with what market participants would use to arrive at fair value. CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions...

  • Page 58
    ... the costs associated with employees' benefits for: a) defined benefit pension plans; and b) other postretirement benefits, basically comprised of health care benefits, life insurance and seniority premiums, granted by CEMEX and/or pursuant to applicable law, are recognized as services are rendered...

  • Page 59
    ...of the position are recognized. CEMEX's policy is to recognize interest and penalties related to unrecognized tax benefits as part of the income tax in the consolidated statements of operations. CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos...

  • Page 60
    ...the translation of foreign subsidiaries' financial statements, net of: a) exchange results from foreign currency debt directly related to the acquisition of foreign subsidiaries; and b) exchange results from foreign currency related parties balances that are of a long-term investment nature (note 2D...

  • Page 61
    ... expenses. Cost of sales includes freight expenses of raw material in plants and delivery expenses of CEMEX's ready-mix concrete business, but excludes freight expenses of finished products between plants and points of sale and freight expenses between points of sales and the customers' facilities...

  • Page 62
    ...the construction industry, with no specific geographic concentration within the countries in which CEMEX operates. As of and for the years ended December 31, 2014, 2013 and 2012, no single customer individually accounted for a significant amount of the reported amounts of sales or in the balances of...

  • Page 63
    ...minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability, and includes a category of financial assets at fair value through other...

  • Page 64
    ... involved in providing information technology solutions and services. Refers mainly to revenues generated by subsidiaries not individually significant operating in different lines of business. CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican...

  • Page 65
    ..., the United Arab Emirates and Israel; c) "Rest of South America and the Caribbean" or "Rest of SAC" is mainly comprised of CEMEX's operations in Costa Rica, Panama, Puerto Rico, the Dominican Republic, Nicaragua, Jamaica and other countries in the Caribbean, Guatemala, and small ready-mix concrete...

  • Page 66
    ... with those described in note 2. CEMEX recognizes sales and other transactions between related parties based on market values. Selected information of the consolidated statements of operations by geographic operating segment for the years ended December 31, 2014, 2013 and 2012 was as follows: Net...

  • Page 67
    ...As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) Mexico $ 40,932 United States 42,582 Northern Europe United Kingdom 14,368 Germany 13,715 France 13,393 Rest of Northern Europe 12,250 Mediterranean Spain 3,856 Egypt 6,162 Rest of Mediterranean 9,517 South America and the Caribbean...

  • Page 68
    ... by segment Additions to fixed assets 1 CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South America...

  • Page 69
    ... consolidated financial statements Net sales by product and geographic segment for the years ended December 31, 2014, 2013 and 2012 were as follows: 2014 Cement Concrete Aggregates Others Eliminations Net sales CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions...

  • Page 70
    Notes to the consolidated financial statements 2012 Cement Concrete Aggregates Others Eliminations Net sales CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) Mexico United States Northern Europe United Kingdom Germany France Rest of ...

  • Page 71
    ... sale exclude amounts over certain days past due or concentrations over certain limits to any one customer, according to the terms of the programs. The portion of the accounts receivable sold maintained as reserves amounted to $1,775 in 2014 and $1,516 in 2013. Therefore, the funded amount to CEMEX...

  • Page 72
    ...-term portion of a restricted investment related to coupon payments under CEMEX's perpetual debentures (note 20D). 11) Inventories As of December 31, 2014 and 2013, the consolidated balance of inventories was summarized as follows: 2014 2013 Finished goods Work-in-process Raw materials Materials...

  • Page 73
    ...financial statements 12) Other current assets As of December 31, 2014 and 2013, consolidated other current assets consisted of: 2014 2013 Advance payments Assets held for sale $ $ 2,791 6,115 8,906 2,296 1,610 3,906 CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012...

  • Page 74
    ... LLC was formed for the purpose of engaging in the production, sale and distribution of ready-mix concrete within North and South Carolina, United States. Equity in net income (loss) of associates by geographic operating segment in 2014, 2013 and 2012 is detailed as follows: 2014 2013 1 2012 CEMEX...

  • Page 75
    ... $16 in 2014, and the United States of approximately $14 in 2013 and $90 in 2012. This line item includes an investment in CPOs of Axtel, S.A.B. de C.V. ("Axtel"). This line item refers to investments in private funds. In 2014 and 2013, no contributions were made to such private funds. 2 CEMEX...

  • Page 76
    Notes to the consolidated financial statements 2013 Land and mineral reserves 1 Machinery and equipment 2 Construction in progress Building 1 Total 2012 CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) Cost at beginning of period ...

  • Page 77
    ... of cement and ready-mix concrete plants resulting from adjusting the supply to current demand conditions; and b) the transferring of installed capacity to more efficient plants, for the years ended December 31, 2014, 2013 and 2012, CEMEX adjusted the related fixed assets to their estimated value in...

  • Page 78
    ... to the consolidated financial statements Goodwill Changes in consolidated goodwill in 2014, 2013 and 2012 were as follows: 2014 2013 2012 Balance at beginning of period Disposals and cancellations 1 Reclassification to assets held for sale 2 Foreign currency translation effects Balance at end...

  • Page 79
    ... aggregates quarries and 79 ready-mix plants for approximately â,¬171 (US$207 or $3,047), while CEMEX maintained its operations in the north, east and south of the country; and c) in Spain, CEMEX acquired from Holcim one cement plant in the southern part of the country with a production capacity of...

  • Page 80
    ...to the consolidated financial statements In Germany, the operations of the net assets sold by CEMEX to Holcim on January 5, 2015 were consolidated by CEMEX line-by-line for all the periods presented. CEMEX measured the materiality of such net assets using a threshold of 5% of consolidated net sales...

  • Page 81
    ... As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) United States Mexico Northern Europe United Kingdom France Czech Republic Mediterranean Spain United Arab Emirates Egypt SA&C Colombia Dominican Republic Rest of SA&C 1 Asia Philippines Others Other reporting segments 2 $ 125,447...

  • Page 82
    ... to the consolidated financial statements CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) CEMEX is engaged in the production, marketing, distribution and sale of cement, ready-mix concrete, aggregates and other construction materials. The...

  • Page 83
    ... 31, 2012 Recognized impairment charges Discount rate + 1pt Sensitivity analysis Long-term growth rate - 1pt Multiples of Operating EBITDA CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) (Amounts in millions) Spain United Arab Emirates US...

  • Page 84
    ... or alternate construction products, among other factors. CEMEX has also considered recent developments in its operations in the United States, such as the increases in ready-mix concrete volumes of approximately 2% in 2014, 8% in 2013 and 20% in 2012, and the increases in ready-mix concrete prices...

  • Page 85
    Notes to the consolidated financial statements As of December 31, 2014 and 2013, CEMEX´s consolidated debt summarized by type of instrument, was as follow: 2014 Shortterm Longterm 2013 Shortterm Longterm Bank loans Loans in foreign countries, 2015 to 2018 Syndicated loans, 2015 to 2019 $ 7...

  • Page 86
    ... Asia, B.V., CEMEX Corp., CEMEX Egyptian Investments, B.V., CEMEX Egyptian Investments II, B.V., CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG, CEMEX Shipping B.V. and CEMEX UK. Includes all outstanding notes held by CEMEX's subsidiaries. On October 1, 2014, expired a cash tender offer to...

  • Page 87
    ... the exchanged or repurchased notes, were recognized in the statement of operations in each year within financial expense. In addition, approximately US$65 ($871) in 2014, US$45 ($578) in 2013 and US$120 ($1,583) in 2012, corresponding to the portion of the combined premiums, fees and issuance costs...

  • Page 88
    ..., at annual interest rates ranging between 2.24% and 7.20%, depending on the negotiated currency: Lines of credit Available Other lines of credit in foreign subsidiaries Other lines of credit from banks $ $ CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions...

  • Page 89
    ...the consolidated financial statements CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) On August 14, 2009, CEMEX entered into a financing with its major creditors, as amended from time to time during 2009, 2010, 2011 and 2012 (the "Financing...

  • Page 90
    ... an event of default, which could materially and adversely affect CEMEX's business and financial condition. Financial Covenants The Credit Agreement and the Facilities Agreement requires CEMEX the compliance with financial ratios, which mainly include: a) the consolidated ratio of debt to Operating...

  • Page 91
    ... in foreign exchange rates, as well as by overall conditions in the financial and capital markets. For the compliance periods ended as of December 31, 2014, 2013 and 2012, taking into account the Credit Agreement, the Facilities Agreement and the Financing Agreement, as applicable, CEMEX, S.A.B. de...

  • Page 92
    Notes to the consolidated financial statements CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) I. Optional convertible subordinated notes due in 2016 and 2018 On March 15, 2011, CEMEX, S.A.B. de C.V. closed the offering of US$978 ($11,632) ...

  • Page 93
    Notes to the consolidated financial statements On October 3, 2014, in connection with the 2015 Convertible Notes and pursuant to a private offer, the Parent Company issued US$200 ($2,948) Contingent Convertible Units ("CCUs"), by means of which, in exchange for monthly payments by CEMEX to the ...

  • Page 94
    ... discounting future cash flows using market-based interest rates currently available to CEMEX. As of December 31, 2014 and 2013, the carrying amounts of financial assets and liabilities and their respective fair values were as follows: 2014 Carrying amount Fair value Carrying amount 2013 Fair value...

  • Page 95
    ..., CEMEX will receive a fixed rate of 5.4% and will pay LIBOR. Changes in the fair value of this interest rate swap generated losses of US$1 ($3) in 2014, US$16 ($207) in 2013 and US$2 ($35) in 2012, recognized in the statements of operations for each year. II. Equity forwards in third party shares...

  • Page 96
    ... on behalf of its Mexican pension fund and certain of CEMEX's directors and current and former employees in April 2008, which fair value as of December 31, 2012, net of deposits in margin accounts, represented a liability of US$58 ($740). Between January and April 2013, the notional amount of the...

  • Page 97
    ... and originates mainly from trade accounts receivable. As of December 31, 2014 and 2013, the maximum exposure to credit risk is represented by the balance of financial assets. Management has developed policies for the authorization of credit to customers. The exposure to credit risk is monitored...

  • Page 98
    ..., and are recorded in the consolidated statements of operations, except for exchange fluctuations associated with foreign currency indebtedness directly related to the acquisition of foreign entities and related parties' long-term balances denominated in foreign currency, for which the resulting...

  • Page 99
    ... cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowing under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. CEMEX is exposed to risks from changes in foreign currency exchange rates, prices...

  • Page 100
    ...Provisions for asset retirement include future estimated costs for demolition, cleaning and reforestation of production sites at the end of their operation, which are initially recognized against the related assets and are depreciated over their estimated useful life. Provisions for legal claims and...

  • Page 101
    ... 31, 2014, 2013 and 2012 were approximately $497, $455 and $528, respectively. CEMEX contributes periodically the amounts offered by the pension plan to the employee's individual accounts, not retaining any remaining liability as of the balance sheet date. Defined benefit pension plans Actuarial...

  • Page 102
    ... to the consolidated financial statements The reconciliations of the actuarial benefits obligations, pension plan assets, and liabilities recognized in the balance sheet as of December 31, 2014 and 2013 are presented as follows: Pensions 2014 2013 Other benefits 2014 2013 2014 Total 2013 Change in...

  • Page 103
    ..., CEMEX has established health care benefits for retired personnel limited to a certain number of years after retirement. As of December 31, 2014 and 2013, the projected benefits obligation related to these benefits was approximately $842 and $908, respectively. The medical inflation rates used...

  • Page 104
    ... to CEMEX UK. Any future profit distribution from the limited partnership to the pension fund will be considered as an employer contribution to plan assets in the period in which they occur. On February 29, 2012, CEMEX UK agreed with the trustees of its employees' defined benefits pension plans to...

  • Page 105
    ...Sensitivity Pension Increase Rate Sensitivity $ (2,725) 90 1,951 3,059 (78) (1,778) (60) 15 - 65 (14) - (2,785) 105 1,951 3,124 (92) (1,778) 19) Income taxes 19A) Income taxes for the period The amounts for income taxes (expense) income to the statements of operations in 2014, 2013 and 2012...

  • Page 106
    ... in consolidated deferred income taxes during 2014, 2013 and 2012 were as follows: 2014 2013 2012 Deferred income tax (charged) credited to the statements of operations Deferred income tax (charged) credited to stockholders' equity Reclassification to other captions in the balance sheet 3 Change...

  • Page 107
    ...,228 in consolidated pre-tax income in future periods. For the years ended December 31, 2014, 2013 and 2012, CEMEX has reported pre-tax losses on a worldwide consolidated basis. Nonetheless, based on the same forecasts of future cash flows and operating results used by CEMEX's management to allocate...

  • Page 108
    ... consolidated statements of operations, which in 2014, 2013 and 2012 were as follows: 2014 % 2013 % 2012 % Consolidated statutory tax rate Non-taxable dividend income Expenses and other non-deductible items 1 Unrecognized tax benefits in the year Non-taxable sale of marketable securities and fixed...

  • Page 109
    ... effect in its financial statements. On July 7, 2011, the tax authorities in Spain notified CEMEX España, S.A. of a tax audit process in Spain covering the tax years from and including 2006 to 2009. The tax authorities in Spain have challenged part of the tax losses reported by CEMEX España for...

  • Page 110
    ... the Parent Company's tax payable associated with the aforementioned elimination of the tax consolidation regime in Mexico during 2014, 2013 and 2012 were as follows: 2014 2013 2012 CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2014, 2013 and 2012 (Millions of Mexican pesos) Balance at...

  • Page 111
    ...2008, respectively, representing the official conclusion of this proceeding. On February 9, 2014, the Egyptian Ministry of Finance's Appeals Committee (the "Appeals Committee") notified a resolution to Assiut Cement Company ("ACC"), CEMEX's subsidiary in Egypt, requiring the payment of a development...

  • Page 112
    ... 31, 2014 and 2013, the breakdown of common stock and additional paid-in capital was as follows: 2014 2013 Common stock Additional paid-in capital $ $ 4,151 101,216 105,367 4,143 84,800 88,943 During December 2013, the Company's management approved restitution to the consolidated line item of...

  • Page 113
    Notes to the consolidated financial statements On March 21, 2013, stockholders at the annual ordinary shareholders' meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,312.3 million shares (437.4 million CPOs), ...

  • Page 114
    ... in Colombia, Panama, Costa Rica, Brazil, Guatemala and El Salvador. After the offering, CEMEX España, S.A., maintained 73.35% of CEMEX Latam's outstanding common shares, excluding shares held in treasury. CEMEX Latam's common shares are listed on the Colombian Stock Exchange (Bolsa de Valores de...

  • Page 115
    ... years as the executives render services. In addition, in 2012, CEMEX initiated a stock-based compensation program for a group of executives which was linked to both, internal performance conditions (increase in Operating EBITDA) and market conditions (increase in the price of CEMEX's CPO), over...

  • Page 116
    ..., with exercise prices denominated in dollars increasing annually at a 7% rate. B) Special program Until 2005, a subsidiary in the United States granted to a group of its employees a stock option program to purchase CEMEX ADSs. The options granted have a fixed exercise price denominated in dollars...

  • Page 117
    ...issuance in the future under the mandatorily and optionally convertible securities, are computed from the beginning of the reporting period. The number of shares resulting from the executives' stock option programs is determined under the inverse treasury method. For 2014, 2013 and 2012, the effects...

  • Page 118
    ...health care benefits plans for its active employees, which are managed on cost plus fee arrangements with major insurance companies or provided through health maintenance organizations. As of December 31, 2013, in certain plans, CEMEX has established stop-loss limits for continued medical assistance...

  • Page 119
    ... 5 years Total 2013 Total Long-term debt US$ 984 Capital lease obligations 1 32 Convertible notes 2 216 Total debt and other financial obligations 3 1,232 Operating leases 4 97 Interest payments on debt 5 910 Pension plans and other benefits 6 151 Purchases of raw materials, fuel and energy 7 334...

  • Page 120
    ... intends to purchase the required fuel in the market. For the years ended December 31, 2014, 2013 and 2012, TEG supplied (unaudited) approximately 64.8%, 70.9% and 67.8%, respectively, of CEMEX's overall electricity needs during such year for its cement plants in Mexico. In regards with the above...

  • Page 121
    ... Office alleged that there was an agreement between all cement producers in Poland regarding prices, market quotas and other sales conditions of cement, and that the producers exchanged confidential information, all of which limited competition in the Polish cement market. In January 2007, CEMEX...

  • Page 122
    ... investigation of the Spanish cement, ready-mix concrete and related products industry regarding alleged anticompetitive practices, inspected one of CEMEX's facilities in Spain. CEMEX España believes that it has not breached any applicable laws. As of December 31, 2014, considering the early stage...

  • Page 123
    ... a material adverse impact on CEMEX's results of operations, liquidity or financial condition. In connection with a lawsuit submitted to a first instance court in Assiut, Egypt and notified on May 23, 2011 to Assiut Cement Company ("ACC"), a subsidiary of CEMEX in Egypt. On September 13, 2012, the...

  • Page 124
    ...or financial condition. On January 20, 2012, the United Kingdom Competition Commission (the "UK Commission"), commenced a market investigation ("MIR") into the supply or acquisition of cement, ready-mix concrete and aggregates. The referral to the UK Commission was made by the Office of Fair Trading...

  • Page 125
    ...October 26, 2010, CEMEX, Inc., one of CEMEX's subsidiaries in the United States, received an Antitrust Civil Investigative Demand from the Office of the Florida Attorney General, which seeks documents and information in connection with an antitrust investigation in the ready-mix concrete industry in...

  • Page 126
    ... system in Bogotá in which ready-mix concrete and flowable fill supplied by CEMEX Colombia and other ASOCRETO members was used. The plaintiffs alleged that the base material supplied for the road construction failed to meet the quality standards offered by CEMEX Colombia and the other ASOCRETO...

  • Page 127
    ... of the consolidated financial statements. These balances with related parties resulted primarily from: (i) the sale and purchase of goods between group entities; (ii) the sale and/or acquisition of subsidiaries' shares within the CEMEX group; (iii) the invoicing of administrative services, rentals...

  • Page 128
    ...and construction companies in Mexico. In the ordinary course of business, CEMEX extends financing to Empresas ICA in connection with the purchase of CEMEX's products, on the same credit conditions that CEMEX awards to other customers. Mr. Lorenzo H. Zambrano was a member of the board of directors of...

  • Page 129
    Notes to the consolidated financial statements 26) Subsequent events On January 5, 2015, as mentioned in note 15B, CEMEX and Holcim closed the series of related transactions pursuant to which, with retroactive effects as of January 1, 2015, CEMEX acquired all of Holcim's assets in the Czech ...

  • Page 130
    ...9 10 11 Mexico Spain United States Spain Costa Rica Nicaragua Egypt Colombia Panama Dominican Republic Puerto Rico France Philippines Philippines Thailand Malaysia United Kingdom Germany Austria Croatia Czech Republic Poland Hungary Ireland Israel Latvia United Arab Emirates Norway Brazil Argentina...

  • Page 131
    ...on the Mexican Stock Exchange. pp equals percentage points. Strategic capital expenditures CEMEX defines it as 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...

  • Page 132
    ... Sostmann Finance Committee Rogelio Zambrano Lozano President Tomás Milmo Santos Rodolfo García Muriel Francisco Javier Fernández Carbajal As of December 31, 2014. (1) Independence status to be determined as per applicable laws in the 2014 Annual General Meeting scheduled for March 26, 2015...

  • Page 133
    Executive Committee From left to right, standing: Luis Hernández, Jaime Elizondo, Juan Romero, Fernando A. González, Karl Watson Jr., José Antonio González, Ramiro Villarreal and Juan Pablo San Agustín; seated: Mauricio Doehner, Ignacio Madridejos, Jaime Muguiro, Joaquín Estrada and Maher Al-...

  • Page 134
    ...CEMEX in 1996 and has held several executive positions in areas such as Strategic Planning and Enterprise Risk Management for Europe, Asia, the Middle East, South America and Mexico. He is currently in charge of Corporate Affairs and Enterprise Risk Management. Mauricio has also worked in the public...

  • Page 135
    ... 1996 and after holding management positions in the Strategic Planning area, he headed CEMEX operations in Egypt, Spain, and Western Europe. He is currently President of CEMEX Northern Europe, and is also responsible for the company's global Energy and Sustainability area. Ignacio graduated with an...

  • Page 136
    ... New York office 590 Madison Ave. 41st floor New York, NY 10022 USA Phone: (212) 317-6000 Fax: (212) 317-6047 Exchange listings Bolsa Mexicana de Valores (BMV) Mexico Ticker symbol: CEMEXCPO Share series: CPO (representing two A shares and one B share) New York Stock Exchange (NYSE) United States...

  • Page 137
    ... Mexican Stock Exchange and/or Mexican Banking and Securities Commission in Mexico and/or the Securities and Exchange Commission in the U.S. This annual report also contains informational stats related to the production, distribution, commercialization and sale of cement, ready-mix concrete, clinker...