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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report: July 25, 2006
CEMEX, S.A.B. de C.V.
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(Exact name of Registrant as specified in its charter)
CEMEX Corp.
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(Translation of Registrant's name into English)
United Mexican States
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(Jurisdiction of incorporation or organization)
Av. Ricardo Margain Zozaya # 325, Colonia Valle del Campestre
Garza Garcia, Nuevo Leon, Mexico 66265
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(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 X Form 40-F
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
N/A
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Contents
1. Press release, dated July 25, 2006, announcing CEMEX's second quarter
results of 2006 (attached hereto as exhibit 1).
2. CEMEX's 2006 second quarter earnings report (attached hereto as exhibit 2).
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 25, 2006 By: /s/ Rodrigo Trevino
-------------------------------- -------------------------------
Name: Rodrigo Trevino
Title: Chief Financial
Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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1. Press release, dated July 25, 2006, announcing CEMEX's second
quarter results of 2006.
2 CEMEX's 2006 second quarter earnings report.
Exhibit 1
Media Relations Investor Relations Analyst Relations
Jorge Perez Abraham Rodriguez Ricardo Sales
(52 81) 8888-4334 (52 81) 8888-4262 (212) 317-6008
[CEMEX GRAPHIC OMITTED]
CEMEX'S SECOND QUARTER 2006
EBITDA UP 16%; SALES INCREASE 5%
MONTERREY, MEXICO, July 25, 2006 - CEMEX, S.A.B. de C.V. (NYSE: CX) announced
today that EBITDA increased 16% in the second quarter of 2006 to US$1.14
billion. Consolidated net sales in the second quarter of 2006 grew 5% to US$4.6
billion.
CEMEX Consolidated Second-Quarter Financial and Operational Highlights
----------------------------------------------------------------------
o EBITDA (operating income plus depreciation and amortization) increased to
US$1.14 billion, an increase of 16% over US$989 million achieved in the
second quarter of 2005.
o Free cash flow after maintenance capital expenditures was US$779 million,
an increase of 5% over the second quarter of last year.
o Increased sales in the majority of CEMEX's markets were the result of to
higher demand for cement, ready-mix, and aggregates. Public infrastructure
and housing continue to be the main drivers of cement and ready-mix demand
in the majority of CEMEX's markets.
o Operating income for the second quarter increased 15% to US$861 million
over US$751 million in the comparable period in 2005.
o CEMEX's consolidated cement volume increased 3% to 22.4 million metric
tons, while consolidated ready-mix and aggregates volumes fell 6% and 9%
respectively.
Hector Medina, Executive Vice President of Planning and Finance, said: "We
continue to be encouraged by our post-consolidation performance. Our solid
performance during the first half of the year resulted primarily from the
strength of our operations in most of our core markets, as well as from the
realization of the RMC synergies that further enhanced this growth. As we look
forward to the second half of the year, we remain optimistic about our ability
to continue to drive solid returns for our shareholders."
Consolidated Corporate Results
------------------------------
During the second quarter of 2006, majority net income decreased 21% to US$579
million. The decrease in majority net income for the quarter comes mainly from
non-cash intercompany foreign-exchange and financial-instrument losses.
Net debt at the end of the second quarter of 2006 was US$8.1 billion,
representing reductions of US$343 million during the quarter, and US$2.3 billion
since the end of the first quarter of 2005. The net-debt-to-EBITDA ratio
decreased to 2.1 times from 2.3 times at the end of the first quarter of 2006.
Interest coverage reached 7.7 times during the quarter, up from 6.5 times a year
ago.
Major Markets Second-Quarter Highlights
---------------------------------------
CEMEX's Mexican operations had net sales of $883 million, up 11% in the quarter
versus the second quarter of 2005, while EBITDA increased 6% to US$350 million.
Mexican cement and ready-mix volumes increased 6% and 20% respectively during
the quarter.
Net sales in the United States decreased 3% to US$1.12 billion in the second
quarter of 2006. EBITDA grew 23% over the prior year period to US$349 million.
On a like-to-like basis for ongoing operations, cement, ready-mix and aggregates
volumes decreased 3%, 16% and 21%, respectively during the quarter compared with
second quarter 2005. For the first six months of the year and on a like-to-like
basis, cement volumes increased 6%, ready-mix volumes decreased 8%, and
aggregates volumes decreased 11% versus the first six months of 2005.
CEMEX's Spanish operations reported net sales of US$476 million in the second
quarter of 2006, up 10% versus the second quarter of 2005. EBITDA increased 26%
to US$154 million in the quarter. Domestic cement volume increased 6% during the
second quarter of 2006 over the same period in 2005. Ready-mix volumes, when
adjusted for the integration of the Readymix Asland assets after the termination
of the joint venture with Lafarge, increased 6%.
The Company's operations in the United Kingdom experienced a decrease in net
sales and EBITDA of 5% to US$478 million, and 29% to US$41 million,
respectively.
Rest of Europe
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During the second quarter of 2006, net sales in the other European markets were
US$953 million, up 8%. EBITDA increased 7% to US$147 million.
South/Central America and the Caribbean
---------------------------------------
CEMEX's operations in South/Central America and the Caribbean reported net sales
of US$371 million during the second quarter of 2006, an increase of 10% over the
second quarter of 2005. EBITDA increased 19% to US$105 million versus the prior
year period.
Africa and the Middle East
--------------------------
Second quarter net sales in Africa and the Middle East were US$176 million, up
23% as compared to the same quarter of 2005. EBITDA increased 38% to US$45
million.
Asia
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CEMEX's Asia-based operations experienced an increase in net sales of US$88
million, an increase of 16% over the second quarter of 2005. EBITDA increased
64% to US$23 million for the region, over the prior year period.
CEMEX is a growing global building solutions company that provides high quality
products and reliable service to customers and communities in more than 50
countries throughout the world. Commemorating its 100th anniversary in 2006,
CEMEX has a rich history of improving the well-being of those it serves through
its efforts to pursue innovative industry solutions and efficiency advancements
and to promote a sustainable future. For more information, visit www.cemex.com.
###
Exhibit 2
[CEMEX GRAPHIC OMITTED]
2006
SECOND QUARTER RESULTS
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Second quarter Second quarter
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2006 2005 % Var. 2006 2005
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Net sales 4,614 4,376 5% % of Net Sales
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Gross profit 1,753 1,790 (2%) 38.0% 40.9%
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Operating income 861 751 15% 18.7% 17.2%
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Majority net income 579 733 (21%) 12.5% 16.8%
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EBITDA 1,143 989 16% 24.8% 22.6%
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Free cash flow after 779 742 5% 16.9% 17.0%
maintenance capital expenditures
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Net debt 8,120 9,624 (16%)
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Net debt/EBITDA 2.1 2.9
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Interest coverage 7.7 6.5
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Earnings per ADR 0.81 1.08 (25%)
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Average ADRs outstanding 712.0 679.1 5%
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In millions of US dollars, except ratios and per-ADR amounts.
Earnings per ADR and average ADRs outstanding reflect the two-for-one ADR split
effective July 24, 2006.
Average ADRs outstanding are presented in millions.
Consolidated net sales grew to US$4,614 million, representing an increase of 5%
over those of second quarter 2005. Sales increased in most of our markets due to
higher cement, ready-mix, and aggregates volumes and a better pricing
environment. Public infrastructure and housing continue to be the main drivers
of cement and ready-mix demand in most of our markets.
Operating income increased 15% during the quarter, from US$751 million in the
second quarter of last year to US$861 in the second quarter of 2006.
Similarly, EBITDA increased 16% in the quarter compared to the same period last
year, reaching US$1,143 million. EBITDA as a percentage of sales increased 2.2
percentage points, from 22.6% in second quarter 2005 to 24.8% in second quarter
2006. Improved operating income and EBITDA margins are due to synergies realized
as a result of RMC-integration initiatives, and better supply-demand dynamics in
most markets, which more than offset higher energy and transportation costs.
Foreign-exchange gain (loss) and gain (loss) on financial instruments for the
quarter resulted in losses of US$48 million and US$93 million, respectively. The
entire losses are the result of intercompany transactions and are due to the
depreciation of the Mexican peso during the quarter.
Majority net income decreased 21% to US$579 million in the second quarter of
2006 from US$733 million in the same period a year ago. The decrease in majority
net income for the quarter comes mainly from higher foreign-exchange and
financial-instrument losses partially mitigated by stronger operating
performance, as described above.
Net debt at the end of the second quarter was US$8,120 million, representing
reductions of US$343 million during the quarter and US$2,315 million since the
end of first quarter 2005. The net-debt-to-EBITDA ratio decreased to 2.1 times
from 2.3 times at the end of first quarter 2006. Interest coverage reached 7.7
times during the quarter, up from 6.5 times a year ago.
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Stock Listing Information
NYSE (ADR)
Ticker:CX
MEXICAN STOCK EXCHANGE
Ticker: CEMEX.CPO
Ratio of CEMEX.CPO to CX=10.1
Investor Relations
In the United States
1 877 7CX NYSE
In Mexico
52 (81) 8888 4292
E-Mail
ir@cemex.com
www.cemex.com
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US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
EBITDA and Free Cash Flow((1))
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Second quarter January - June
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2006 2005 % Var. 2006 2005 % Var.
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Operating income 861 751 15% 1,425 1,189 20%
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+ Depreciation and operating amortization 282 238 548 430
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EBITDA 1,143 989 16% 1,973 1,619 22%
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- Net financial expense 112 144 224 242
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- Maintenance capital expenditures 192 123 291 185
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- Change in working capital (21) (86) 105 42
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- Taxes paid 104 63 177 80
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- Other cash items (net) (23) 3 (20) 5
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Free cash flow after maintenance capital expenditures 779 742 5% 1,194 1,065 12%
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- Expansion capital expenditures 124 49 204 79
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Free cash flow 654 693 (6%) 990 986 0%
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In millions of US dollars.
Results for year-to-date 2005 include the effect of the RMC acquisition starting
in March.
During the quarter, free cash flow of US$654 was used as follows: US$473 million
to reduce debt, however, net debt was reduced by US$343 million as a result of
foreign-exchange conversion effects in the amount of US$130 million; US$13
million to pay cash dividends; US$39 million for integration efforts in our RMC
operations; US$40 million in interest payments in excess of accrued interest;
and the balance for other uses, primarily other investments.
Debt-Related Information
Second quarter First quarter Second quarter
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2006 2005 % Var. 2006 2006 2005
--------------------------------------------------------------------------------- --------------------------------------------
Total debt (2) 8,957 11,036 (19%) 9,370 Currency denomination
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Short-term 13% 15% 11% US dollar 68% 71%
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Long-term 87% 85% 89% Euro 27% 18%
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Cash and cash equivalents 708 1,265 (44%) 688 British pound 0% 5%
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Fair value of cross-currency swaps (2) 129 147 220 Yen 5% 6%
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Net debt (2) 8,120 9,624 (16%) 8,463 Other 0% 0%
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Interest expense 119 153 (22%) 120 Interest rate
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Interest coverage 7.7 6.5 6.9 Fixed 45% 58%
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Net debt/EBITDA 2.1 2.9 2.3 Variable 55% 42%
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In millions of US dollars, except ratios.
During the second quarter, CEMEX, under its Medium-Term Promissory Notes Program
("Certificados Bursatiles"), issued notes for MXN1.5 billion with a maturity of
five years at an interest rate equal to the 91-day Mexican treasury (CETES) plus
53 basis points. CEMEX also issued various short-term notes under its Short-Term
Promissory Notes Program ("Certificados Bursatiles"), having an outstanding
amount of MXN927 at the end of the quarter. All notes issued were swapped to US
dollars at rates lower than LIBOR.
In addition, CEMEX and some of its subsidiaries amended various credit
facilities totaling US$4.7 billion, extending their maturities and reducing
their cost.
----------------------------------
(1) EBITDA and free cash flow (calculated as set forth above) are presented
herein because CEMEX believes that they are widely accepted as financial
indicators of its ability to internally fund capital expenditures and to
service or incur debt. EBITDA and free cash flow should not be considered
as indicators of CEMEX's financial performance, as alternatives to cash
flow, as measures of liquidity, or as being comparable to other similarly
titled measures of other companies. EBITDA is reconciled above to operating
income, which CEMEX considers to be the most comparable measure as
determined under generally accepted accounting principles in Mexico
(Mexican GAAP). Free cash flow is reconciled to EBITDA. CEMEX is not
required to prepare a statement of cash flows under Mexican accounting
principles and, as such, does not have such Mexican-GAAP cash-flow measures
to present as comparable to EBITDA or free cash flow.
(2) During 2004, the Mexican Institute of Public Accountants issued Bulletin
C-10, "Derivative Financial Instruments and Hedging Activities", which
became effective beginning January 1, 2005. Bulletin C-10 details and
supplements issues related to the accounting of derivative financial
instruments. Among other aspects, Bulletin C-10 precludes the presentation
of two financial instruments as if they were a single instrument (synthetic
presentation). For this reason, starting in 2005, CEMEX recognizes the
assets and liabilities resulting from the fair value of cross-currency
swaps ("CCS") separately from the financial debt, and such debt is
presented in the currencies originally negotiated. Starting in 2001, CEMEX
has effectively changed the original profile of interest rates and
currencies of financial debt associated to CCS, and accordingly, until
December 31, 2004, financial debt subject to these instruments was
presented in the currencies negotiated in the CCS, through the recognition
within debt of a portion of the assets or liabilities resulting from the
fair value of such CCS. This reclassification has no impact on
stockholders' equity or net income. For presentation purposes in the table
above, net debt includes the fair value of CCS associated with debt.
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US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
Equity-Related Information
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One CEMEX ADR represents ten CEMEX CPOs. The following amounts are expressed in
CPO terms and reflect the two-for-one CPO split effective July 17, 2006, and the
two-for-one ADR split effective July 24, 2006.
Beginning-of-quarter CPO-equivalent units outstanding 7,049,659,842
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CPOs issued due to stock dividend 211,875,714
Exercise of stock options not hedged 327,764
Less increase (decrease) in the number of CPOs held in subsidiaries (4,771,334)
----
End-of-quarter CPO-equivalent units outstanding 7,266,634,654
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Outstanding units equal total shares issued by CEMEX less shares held in
subsidiaries.
Employee long-term compensation plans (1) (2)
As of June 30, 2006, executives had outstanding options on a total of
111,932,026 CPOs, with a weighted-average strike price of US$1.45 per CPO
(equivalent to US$14.50 per ADR). Starting in 2005, CEMEX began offering
executives a stock-ownership program. As of June 30, 2006, our executives held
188,820,818 restricted CPOs, representing 2.6% of our total CPOs outstanding.
Derivative Instruments
--------------------------------------------------------------------------------
CEMEX periodically utilizes derivative financial instruments such as
interest-rate and currency swaps, currency forwards and options, and equity
derivatives in order to execute its corporate financing strategy and to hedge
other obligations as they arise. The following table shows the notional amount
for each type of derivative instrument and the aggregate fair market value for
all of CEMEX's derivative instruments as of the last day of each quarter
presented.
Second quarter First quarter
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Notional amounts 2006 2005 2005
--------------------------------------------------------------------------------
Equity (not prepaid) (1) 0 1,280 0
Foreign-Exchange 5,240 3,643 5,904
Interest-rate 3,578 3,489 3,489
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Estimated aggregate fair
market value (3) 166 149 399
--------------------------------------------------------------------------------
In millions of US dollars.
The estimated aggregate fair market value represents the approximate settlement
result as of the valuation date, based upon quoted market prices and estimated
settlement costs, which fluctuate over time. Fair market values and notional
amounts do not represent amounts of cash currently exchanged between the
parties; cash amounts will be determined upon termination of the contracts
considering the notional amounts and quoted market prices as well as other
derivative items as of the settlement date. Fair market values should not be
viewed in isolation but rather in relation to the fair market values of the
underlying hedge transactions and the overall reduction in CEMEX's exposure to
the risks being hedged.
Note: Mexican GAAP ("Bulletin C-2") requires companies to recognize all
derivative financial instruments in the balance sheet as assets or liabilities,
at their estimated fair market value, with changes in such fair market values
recorded on the income statement. The exceptions to the general rule until
December 31, 2004, as they pertained to CEMEX, occurred when transactions were
entered into for cash-flow hedging purposes. In such cases, changes in the fair
market value of the related derivative instruments were recognized temporarily
in equity and were reclassified into earnings as the inverse effects of the
underlying hedged items flowed through the income statement. Beginning in 2005,
new Bulletin C-10, "Derivative Financial Instruments and Hedging Activities",
establishes the framework for hedge accounting and overrides Bulletin C-2 in
this respect; however, in respect to cash-flow hedges, the new rules are the
same as those applied by CEMEX since 2001. CEMEX has recognized increases in
assets and liabilities, which resulted in a net asset of US$165 million, arising
from the fair market value recognition of its derivatives portfolio as of June
30, 2006. The notional amounts of derivatives substantially match the amounts of
underlying assets, liabilities, or equity transactions on which the derivatives
are being entered into.
--------------------------------
(1) Until September 27, 2005, the date of pricing of our nondilutive equity
offering and the liquidation of the equity forward contracts that hedged
our executive stock-option programs, CEMEX accrued a liability representing
the intrinsic value of the stock options. Resulting from the elimination of
the economic hedge and given that the potential future appreciation of the
stock options is currently not hedged through equity forwards, CEMEX has
decided, for purposes of determining its obligations under the stock-option
programs, to move from intrinsic value to fair value.
(2) As of June 30, 2006, CEMEX had recognized a net liability related to its
stock-option programs of approximately US$101 million. This liability
includes the fair value of the options for US$237 million, net of an
investment in a derivative financial instrument of approximately US$136
million that guarantees us the receipt of cash equivalent to the
appreciation of our CPO market price over 48 million CPOs (considering the
effect of the two-for-one CPO split effective July 17, 2006), in order to
meet our obligations under our executive stock-option programs.
(3) Estimated aggregate fair market value as of July 24, 2006, is US$381
million.
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US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
Other Activities
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CEMEX CPO and ADS two-for-one split
On July 11, 2006, CEMEX announced that beginning on July 17, 2006, trading in
its Ordinary Participation Certificates ("CPOs") and beginning on July 24, 2006,
trading in its American Depositary Shares ("ADSs") started reflecting its
previously announced two-for-one stock split.
In connection with the stock split, which was approved by CEMEX's shareholders
on April 27, 2006, each of CEMEX's existing series A shares was surrendered in
exchange for two new series A shares, and each of CEMEX's existing series B
shares was surrendered in exchange for two new series B shares. Each CPO, which
represented two existing series A shares and one existing series B share, was
surrendered in exchange for two new CPOs. Each new CPO represents two new series
A shares and one new series B share.
Beginning on July 24, 2006, trading on the New York Stock Exchange started
reflecting the stock split as each ADS holder received one additional ADS for
every existing ADS, each representing ten new CPOs. During the period between
July 17 and July 21, 2006, the number of CEMEX's existing ADSs, each of which
previously represented ten CPOs, did not change; instead it included the right
to receive an additional ADS on July 24, 2006.
The proportional equity interest participation of existing shareholders in both
CPOs and ADSs does not change as a result of the stock split.
97.4% of shareholders to receive CPOs or ADSs under CEMEX's stock dividend
program
On June 5, 2006, CEMEX announced the completion of its stock dividend program
determined at the Shareholders Meeting on April 27, 2006. A total of 105,937,857
CPOs, including CPOs in the form of ADSs (one ADS represents ten CPOs), were
issued on June 5, 2006, and were distributed to 97.4% of shareholders; the
remaining 2.6%, consisting of CPO holders, received a cash payment of MXN1.4887
per CPO in lieu of the stock dividend, for a total of approximately MXN144
million (US$13 million) paid by CEMEX.
Under this stock dividend program, CEMEX shareholders received one new CPO for
each 35.2895 CPOs held (each representing two series A shares and one series B
share), and ADS holders received one new ADS for each 35.2895 ADSs held.
CPO holders had the option to receive a cash payment in lieu of the stock
dividend. ADS holders were entitled to receive a stock dividend only. ADS
holders were entitled to instruct the ADS Depositary to sell all or a portion of
the additional stock received as a result of the stock dividend into the market
and receive the net cash proceeds from such sales.
(CPO amounts and cash payment per CPO do not reflect the two-for-one CPO split
effective July 17, 2006, nor do they reflect the two-for-one ADR split effective
July 24, 2006).
CEMEX to divest stake in Semen Gresik
On May 4, 2006, CEMEX announced that it agreed to sell 24.9% of PT Semen Gresik
to Indonesia-based Rajawali Group. PT Semen Gresik is a publicly traded company
on the Jakarta Stock Exchange and trades under the ticker symbol "SMGR".
According to the terms of the agreement, Rajawali Group will pay CEMEX US$337
million, or US$2.28 per share. As of July 25, all conditions precedent prior to
closing have been met. We expect to receive the proceeds from this sale during
July 2006 and we intend to use such proceeds to accelerate the pace of debt
reduction.
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US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
Operating Results
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Mexico
Our Mexican operations' cement volumes increased 6% during the quarter versus
second quarter 2005, and ready-mix volumes increased 20% over the same period.
For the first six months of the year, cement and ready-mix volumes increased 8%
and 23%, respectively, versus the comparable periods a year ago. Cement prices
were 2% higher in US-dollar terms during the quarter versus the same period a
year ago and have increased 5% year to date versus the first half of 2005.
Ready-mix prices, in US-dollar terms, were 4% higher during the first half of
the year versus the same period in 2005.
Government infrastructure projects, including street and highways, state
infrastructure, and rebuilding efforts, are driving cement consumption. The
formal residential sector continues to benefit from credit availability from
commercial banks and noncommercial sources such as Infonavit. Cement demand from
the self-construction sector showed a slight recovery during the quarter due to
increased disposable income, despite the fact that the formal sector attracted
customers through government-financed mortgages.
United States
In CEMEX's US operations, on a like-to-like basis for the ongoing operations,
cement volumes decreased 3%, ready-mix volumes decreased 16%, and aggregates
volumes decreased 21%, during the second quarter compared with the second
quarter 2005.
The decline during the second quarter was driven mainly by a weaker residential
sector and unfavorable weather conditions in the western region. It was also
affected by a shift in consumption from the second quarter to the first quarter
due to favorable weather conditions in the first three months of the year.
For the first six months of the year and on a like-to-like basis, cement volumes
increased 6%, ready-mix volumes decreased 8%, and aggregates volumes decreased
11% versus the first six months of 2005.
Construction spending in the residential sector was up 6% for the first five
months of the year while housing starts decreased by 2% in the same period.
Public-sector construction spending put in place was up 10% for the first five
months of 2006, with spending for streets and highways up 15% as well.
Construction put in place in the industrial-and-commercial sector increased 14%
during the first five months of the year.
Cement prices increased 16% during the second quarter versus the same quarter
last year. Ready-mix and aggregate prices, on a like-to-like basis for the
ongoing operations, increased 19% and 37%, respectively, during the quarter
versus the second quarter of 2005.
Spain
Domestic cement volume increased 6% during the second quarter of 2006 over the
same quarter in 2005. Ready-mix volumes, adjusted for the integration of the
Readymix Asland assets after the termination of the joint venture with Lafarge
in December 2005, increased 6% during the second quarter versus the comparable
period a year ago. For the first half of the year, cement volumes increased 9%
and adjusted ready-mix volumes increased 13%.
The infrastructure and residential sectors continue to drive cement demand in
Spain. There are new projects from the government's infrastructure program, and
public spending continues in anticipation of next year's local elections. The
residential sector showed strong performance during the first half of the year.
Prices for domestic cement increased 10% in US-dollar terms and 8% in euro terms
for the second quarter versus the comparable period in 2005.
United Kingdom
Cement and ready-mix volumes in the United Kingdom decreased 14% and 5%,
respectively, for the second quarter of 2006 versus the comparable period in
2005. For the first six months of the year, cement volumes decreased 7% while
ready-mix volumes remained flat versus the first half of 2005. Cement prices, on
a like-to-like basis for the ongoing operations, increased 7% in US-dollar terms
and 10% in British-pound terms during the first half of this year versus the
comparable period in 2005.
Cement volume sales were affected by enhancements that were made at the Rugby
plant and that resulted in below-average kiln output for the quarter.
Unfavorable weather conditions also affected cement consumption during the month
of May. Favorable activity in public housing and industrial-and-commercial
sectors has partly mitigated the slowdown in infrastructure, private new
housing, and repair-and-maintenance work.
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US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
Operating Results
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Rest of Europe
In France, ready-mix and aggregates volumes decreased 1% and 2%, respectively,
during the second quarter versus the same quarter of last year. For the first
six months of the year, ready-mix and aggregates volumes increased 5% and 4%,
respectively versus the same period of 2005. Prices for ready mix and aggregates
in euro terms increased 5% and 4%, respectively, during the first half of the
year. The residential sector, including private and public housing, continues to
be the main driver of consumption.
In Germany, domestic cement volumes increased 11%, both in the second quarter
and in the first half of 2006 versus the comparable periods of last year.
Domestic cement prices increased 5% in euro terms during the first half of the
year. Residential permits increased 25% in the January-April period due to new
house owners planning ahead in order to take advantage of the home-owner subsidy
that was cancelled in December 2005 as well as to avoid the 3% value-added-tax
rate increase, which becomes effective in 2007. Permits for nonresidential
construction started to increase in February, benefiting from the economic
upswing and in response to a favorable business climate. The public-works sector
is starting to show a positive trend as a result of the government's new
transportation-infrastructure program.
South/Central America and Caribbean
Domestic cement volumes in the region increased 10% during the quarter and 14%
for the first six months of the year versus the same periods of 2005. Average
prices in US-dollar terms remained flat for the quarter compared with the same
period of last year.
The main drivers of cement consumption in Venezuela continue to be the
residential sector - including formal and self-construction housing - and
infrastructure spending, which continues to benefit from increased oil revenues.
Cement volumes in the country increased 32% during the first half of 2006 versus
the same period in 2005.
In Colombia, cement volumes decreased 7% during the second quarter and remained
flat in the first half of the year versus the comparable periods of last year.
The main drivers of cement in the country are public infrastructure and
nonresidential construction. The self-construction sector is starting to level
off after a significant increase last year. Cement prices increased 16% in
US-dollar terms during the quarter compared with the second quarter of last
year.
Africa and Middle East
The region's domestic cement volumes for the second quarter and for the first
half of 2006 increased 8% and 11%, respectively, versus the comparable periods
of last year. Average prices in US-dollar terms increased 21% during the quarter
versus second quarter 2005.
Domestic cement volumes for our operations in Egypt increased 8% during the
second quarter compared with the same quarter in 2005. The favorable economic
environment in the country translates into higher construction spending and
cement consumption. Higher remittances into the country are also having a
positive impact on the self-construction sector.
Asia
In aggregate, our cement volumes in the region decreased 4% during both the
quarter and the first half of the year versus the comparable periods of last
year. Average prices in US-dollar terms increased 10% during the quarter
compared with second quarter 2005.
Domestic cement volume in the Philippines decreased 10% during the second
quarter and 8% during the first half of 2006 versus the comparable periods in
2005. The Philippine Congress did not approve the 2006 national budget, delaying
public infrastructure spending. The main drivers of demand continued to be the
residential, commercial, and self-construction sectors.
--------------------------------------------------------------------------------
Please refer to the end of this report for definitions of terms, Page 6
US-dollar translation methodology, and other important disclosures.
Consolidated Income Statement & Balance Sheet
Includes the results of RMC begining March 1, 2005.
CEMEX S.A. de C.V. AND SUBSIDIARIES
(Thousands of U.S. Dollars, except per ADR amounts)
January - June Second quarter
INCOME STATEMENT 2006 2005 % Var. 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Net Sales 8,595,315 6,947,578 24% 4,613,517 4,375,937 5%
Cost of Sales (5,409,588) (4,116,099) 31% (2,860,137) (2,585,820) 11%
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 3,185,727 2,831,479 13% 1,753,380 1,790,117 (2%)
Selling, General and Administrative Expenses (1,760,770) (1,642,130) 7% (891,948) (1,038,681) (14%)
------------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,424,957 1,189,349 20% 861,432 751,436 15%
Financial Expenses (240,869) (257,969) (7%) (118,891) (153,115) (22%)
Financial Income 16,383 15,995 2% 6,536 8,981 (27%)
Exchange Gain (Loss), Net (98,964) (57,187) 73% (48,003) (18,461) 160%
Monetary Position Gain (Loss) 242,948 193,887 25% 135,069 143,222 (6%)
Gain (Loss) on Financial Instruments (113,217) 269,987 N/A (93,182) 88,703 N/A
Total Comprehensive Financing (Cost) Income (193,720) 164,712 N/A (118,472) 69,329 N/A
Other Expenses, Net 70,449 (10,534) N/A (57,646) 18,115 N/A
------------------------------------------------------------------------------------------------------------------------------------
Net Income Before Income Taxes 1,301,687 1,343,527 (3%) 685,314 838,880 (18%)
Income Tax (203,063) (169,284) 20% (106,909) (105,699) 1%
Employees' Statutory Profit Sharing (6,709) (5,172) 30% (3,435) (2,475) 39%
Total Income Tax & Profit Sharing (209,772) (174,457) 20% (110,344) (108,174) 2%
------------------------------------------------------------------------------------------------------------------------------------
Net Income Before Participation
of Uncons. Subs. and Ext. Items 1,091,915 1,169,070 (7%) 574,971 730,706 (21%)
Participation in Unconsolidated Subsidiaries 46,186 26,875 72% 37,315 20,635 81%
Consolidated Net Income 1,138,101 1,195,945 (5%) 612,286 751,342 (19%)
Net Income Attributable to Min. Interest 47,286 21,689 118% 33,449 18,681 79%
MAJORITY INTEREST NET INCOME 1,090,815 1,174,257 (7%) 578,837 732,661 (21%)
------------------------------------------------------------------------------------------------------------------------------------
EBITDA 1,972,528 1,619,228 22% 1,143,109 989,357 16%
Earnings per ADR (1) 1.54 1.73 (11%) 0.81 1.08 (25%)
------------------------------------------------------------------------------------------------------------------------------------
As of June 30
BALANCE SHEET 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Total Assets 27,817,159 26,267,538 6%
Cash and Temporary Investments 707,945 1,264,807 (44%)
Trade Accounts Receivables 1,644,998 1,870,546 (12%)
Other Receivables 982,251 609,973 61%
Inventories 1,170,277 1,116,917 5%
Other Current Assets 151,604 175,715 (14%)
Current Assets 4,657,075 5,037,957 (8%)
Fixed Assets 15,915,601 13,289,809 20%
Other Assets 7,244,483 7,939,772 (9%)
-------------------------------------------------------------------------------------------
Total 16,192,138 16,878,682 (4%)
Liabilities
Current 4,318,407 4,882,472 (12%)
Liabilities
Long-Term Liabilities 7,749,034 9,342,974 (17%)
Other 4,124,698 2,653,236 55%
Liabilities
-------------------------------------------------------------------------------------------
Consolidated Stockholders' Equity 11,625,020 9,388,857 24%
Stockholders' Equity Attributable to Minority 591,258 531,141 11%
Interest
Stockholders' Equity Attributable to Majority 11,033,762 8,857,715 25%
Interest
------------------------------------------------------------------------------------------------------------------------------------
1) Earnings per ADR reflects the two-for-one ADR split effective July 24, 2006.
--------------------------------------------------------------------------------
Please refer to the end of this report for definitions of terms, Page 7
US-dollar translation methodology, and other important disclosures.
Consolidated Income Statement & Balance Sheet
Includes the results of RMC begining March 1, 2005.
CEMEX S.A. de C.V. AND SUBSIDIARIES
(Thousands of Mexican Pesos in real terms as of June 30, 2006
except per ADR amounts)
January - June Second quarter
INCOME STATEMENT 2006 2005 % Var. 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Net Sales 96,783,246 81,049,753 19% 51,948,201 51,049,244 2%
Cost of Sales (60,911,964) (48,017,998) 27% 32,205,142) (30,165,915) 7%
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 35,871,282 33,031,755 9% 19,743,059 20,883,328 (5%)
Selling, General and Administrative Expenses (19,826,266) (19,156,929) 3% 10,043,332) (12,117,152) (17%)
------------------------------------------------------------------------------------------------------------------------------------
Operating Income 16,045,016 13,874,826 16% 9,699,727 8,766,176 11%
Financial Expenses (2,712,190) (3,009,445) (10%) (1,338,714) (1,786,226) (25%)
Financial Income 184,473 186,593 (1%) 73,593 104,775 (30%)
Exchange Gain (Loss), Net (1,114,333) (667,133) 67% (540,518) (215,369) 151%
Monetary Position Gain (Loss) 2,735,595 2,261,864 21% 1,520,872 1,670,815 (9%)
Gain (Loss) on Financial Instruments (1,274,829) 3,149,636 N/A (1,049,226) 1,034,795 N/A
Total Comprehensive Financing (Cost) Income (2,181,284) 1,921,514 N/A (1,333,994) 808,789 N/A
Other Expenses, Net 793,259 (122,894) N/A (649,093) 211,330 N/A
------------------------------------------------------------------------------------------------------------------------------------
Net Income Before Income Taxes 14,656,991 15,673,446 (6%) 7,716,640 9,786,296 (21%)
Income Tax (2,286,484) (1,974,853) 16% (1,203,796) (1,233,072) (2%)
Employees' Statutory Profit Sharing (75,549) (60,339) 25% (38,673) (28,875) 34%
Total Income Tax & Profit Sharing (2,362,033) (2,035,192) 16% (1,242,469) (1,261,947) (2%)
------------------------------------------------------------------------------------------------------------------------------------
Net Income Before Participation
of Uncons. Subs. and Ext. Items 12,294,959 13,638,253 (10%) 6,474,171 8,524,349 (24%)
Participation in Unconsolidated Subsidiaries 520,055 313,527 66% 420,168 240,728 75%
Consolidated Net Income 12,815,013 13,951,780 (8%) 6,894,340 8,765,077 (21%)
Net Income Attributable to Min. Interest 532,436 253,019 110% 376,638 217,926 73%
MAJORITY INTEREST NET INCOME 12,282,578 13,698,761 (10%) 6,517,701 8,547,150 (24%)
------------------------------------------------------------------------------------------------------------------------------------
EBITDA 22,210,667 18,889,752 18% 12,871,413 11,541,737 12%
Earnings per ADR (1) 17.34 18.59 (7%) 9.15 11.60 (21%)
------------------------------------------------------------------------------------------------------------------------------------
As of June 30
BALANCE SHEET 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Total Assets 313,221,206 306,434,472 2%
Cash and Temporary Investments 7,971,459 14,755,112 (46%)
Trade Accounts Receivables 18,522,676 21,821,599 (15%)
Other Receivables 11,060,145 7,115,884 55%
Inventories 13,177,323 13,029,838 1%
Other Current Assets 1,707,056 2,049,870 (17%)
Current Assets 52,438,659 58,772,303 (11%)
Fixed Assets 179,209,668 155,037,588 16%
Other Assets 81,572,878 92,624,581 (12%)
-------------------------------------------------------------------------------------------
Total 182,323,475 196,905,019 (7%)
Liabilities
Current 48,625,259 56,958,425 (15%)
Liabilities
Long-Term Liabilities 87,254,119 108,994,204 (20%)
Other 46,444,097 30,952,391 50%
Liabilities
-------------------------------------------------------------------------------------------
Consolidated Stockholders' Equity 130,897,731 109,529,462 20%
Stockholders' Equity Attributable to Minority 6,657,569 6,196,242 7%
Interest
Stockholders' Equity Attributable to Majority 124,240,162 103,333,220 20%
Interest
------------------------------------------------------------------------------------------------------------------------------------
1) Earnings per ADR reflects the two-for-one ADR split effective July 24, 2006.
--------------------------------------------------------------------------------
Please refer to the end of this report for definitions of terms, Page 8
US-dollar translation methodology, and other important disclosures.
Operating Summary per Country
Includes the results of RMC begining March 1, 2005.
In thousands of U.S. dollars
January - June Second quarter
----------------------------- ---------------------------
NET SALES 2006 2005 % Var. 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Mexico 1,668,680 1,502,314 11% 882,785 793,255 11%
U.S.A. 2,162,601 1,807,789 20% 1,124,907 1,156,616 (3%)
Spain 910,433 761,403 20% 476,325 431,419 10%
United Kingdom 958,231 675,019 42% 478,174 504,117 (5%)
Rest of Europe 1,561,470 1,100,267 42% 953,085 885,631 8%
South / Central America and Caribbean 708,198 633,902 12% 371,432 338,852 10%
Africa and Middle East 338,623 233,607 45% 176,018 143,111 23%
Asia 167,246 136,036 23% 88,083 75,835 16%
------------------------------------------------------------------------------------------------------------------------------------
Others and intercompany eliminations 119,833 97,243 23% 62,708 47,102 33%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 8,595,315 6,947,578 24% 4,613,517 4,375,937 5%
------------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT
------------------------------------------------------------------------------------------------------------------------------------
Mexico 882,161 827,586 7% 470,852 443,523 6%
U.S.A. 779,445 669,805 16% 421,602 446,633 (6%)
Spain 347,453 272,936 27% 181,488 148,520 22%
United Kingdom 322,022 239,361 35% 167,249 195,692 (15%)
Rest of Europe 380,138 286,932 32% 277,776 251,761 10%
South / Central America and Caribbean 264,219 216,662 22% 139,536 110,682 26%
Africa and Middle East 105,226 75,166 40% 54,425 39,097 39%
Asia 62,294 46,408 34% 34,013 23,984 42%
------------------------------------------------------------------------------------------------------------------------------------
Others and intercompany eliminations 42,768 196,623 (78%) 6,440 130,226 (95%)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 3,185,727 2,831,479 13% 1,753,380 1,790,117 (2%)
------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME
------------------------------------------------------------------------------------------------------------------------------------
Mexico 591,591 542,413 9% 313,958 290,985 8%
U.S.A. 480,246 314,171 53% 277,870 228,076 22%
Spain 252,411 189,634 33% 134,131 101,825 32%
United Kingdom (968) 42,606 N/A 3,384 33,869 (90%)
Rest of Europe 49,249 95,927 (49%) 99,282 104,873 (5%)
South / Central America and Caribbean 130,707 116,292 12% 77,694 55,907 39%
Africa and Middle East 68,103 48,033 42% 37,369 21,648 73%
Asia 29,368 20,227 45% 18,824 8,686 117%
------------------------------------------------------------------------------------------------------------------------------------
Others and intercompany eliminations (175,750) (179,954) (2%) (101,080) (94,432) 7%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,424,957 1,189,349 20% 861,432 751,436 15%
------------------------------------------------------------------------------------------------------------------------------------
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Please refer to the end of this report for definitions of terms, Page 9
US-dollar translation methodology, and other important disclosures.
Operating Summary per Country
Includes the results of RMC begining March 1, 2005.
EBITDA in thousands of US dollars. EBITDA margin as a percentage of net sales
January - June Second quarter
----------------------------- ---------------------------
EBITDA 2006 2005 % Var. 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Mexico 661,872 620,542 7% 349,843 329,467 6%
U.S.A. 613,633 415,464 48% 349,202 284,435 23%
Spain 291,163 229,805 27% 153,794 121,969 26%
United Kingdom 74,611 74,491 0% 40,620 57,602 (29%)
Rest of Europe 145,343 139,509 4% 147,250 138,026 7%
South / Central America and Caribbean 188,526 180,427 4% 104,586 87,603 19%
Africa and Middle East 83,786 67,660 24% 44,881 32,521 38%
Asia 37,763 30,764 23% 23,040 14,064 64%
------------------------------------------------------------------------------------------------------------------------------------
Others and intercompany eliminations (124,170) (139,435) (11%) (70,107) (76,331) (8%)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,972,528 1,619,228 22% 1,143,109 989,357 16%
------------------------------------------------------------------------------------------------------------------------------------
EBITDA MARGIN
------------------------------------------------------------------------------------------------------------------------------------
Mexico 39.7% 41.3% 39.6% 41.5%
U.S.A. 28.4% 23.0% 31.0% 24.6%
Spain 32.0% 30.2% 32.3% 28.3%
United Kingdom 7.8% 11.0% 8.5% 11.4%
Rest of Europe 9.3% 12.7% 15.4% 15.6%
South / Central America and Caribbean 26.6% 28.5% 28.2% 25.9%
Africa and Middle East 24.7% 29.0% 25.5% 22.7%
Asia 22.6% 22.6% 26.2% 18.5%
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED MARGIN 22.9% 23.3% 24.8% 22.6%
------------------------------------------------------------------------------------------------------------------------------------
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Please refer to the end of this report for definitions of terms, Page 10
US-dollar translation methodology, and other important disclosures.
Volume Summary
Includes the results of RMC begining March 1, 2005.
Consolidated volume summary
Cement and aggregates: Thousands of metric tons
Ready-mix: Thousands of cubic meters
January - June Second quarter
----------------------------- -----------------------------
2006 2005 % Var. 2006 2005 % Var.
------------------------------------------------------------------------------------------------------------------------------------
Consolidated cement volume 42,313 38,249 11% 22,448 21,851 3%
Consolidated ready-mix volume 36,336 30,680 18% 19,459 20,761 -6%
Consolidated aggregates volume 81,250 70,280 16% 45,138 49,792 -9%
------------------------------------------------------------------------------------------------------------------------------------
Per-country volume summary (1)
January - June Second quarter Second quarter 2006 Vs.
DOMESTIC CEMENT VOLUME 2006 Vs. 2005 2006 Vs. 2005 First quarter 2006
------------------------------------------------------------------------------------------------------------------------------------
Mexico 8% 6% 7%
U.S.A. 6% (3%) 10%
Spain 9% 6% 10%
United Kingdom 33% (14%) (4%)
Rest of Europe 23% 1% 133%
South / Central America and Caribbean 14% 10% 2%
Africa and Middle East 11% 8% (1%)
Asia (4%) (4%) 5%
------------------------------------------------------------------------------------------------------------------------------------
READY-MIX VOLUME
------------------------------------------------------------------------------------------------------------------------------------
Mexico 23% 20% 12%
U.S.A. (1%) (25%) 2%
Spain 1% (15%) 6%
United Kingdom 42% (5%) 3%
Rest of Europe 30% (3%) 52%
South / Central America and Caribbean 30% 21% 4%
Africa and Middle East 31% (6%) 3%
Asia 27% (9%) 17%
------------------------------------------------------------------------------------------------------------------------------------
AGGREGATES VOLUME
------------------------------------------------------------------------------------------------------------------------------------
Mexico 9% 8% 20%
U.S.A. (3%) (25%) 5%
Spain 10% (4%) 27%
United Kingdom 45% (1%) 6%
Rest of Europe 26% (5%) 56%
South / Central America and Caribbean 20% 19% 9%
Africa and Middle East N/A N/A N/A
Asia (18%) (38%) 9%
------------------------------------------------------------------------------------------------------------------------------------
1) Includes only the month of March in first quarter 2005 for RMC operations.
--------------------------------------------------------------------------------
Please refer to the end of this report for definitions of terms, Page 11
US-dollar translation methodology, and other important disclosures.
Price Summary
Includes the results of RMC begining March 1, 2005.
Variation in US Dollars (1)
January - June Second quarter Second quarter 2006 Vs.
DOMESTIC CEMENT PRICE 2006 Vs. 2005 2006 Vs. 2005 First quarter 2006
------------------------------------------------------------------------------------------------------------------------------------
Mexico 5% 2% (2%)
U.S.A. 16% 16% 3%
Spain 6% 10% 6%
United Kingdom 6% 8% 7%
Rest of Europe (2) 14% 16% 4%
South / Central America and Caribbean (2) (4%) 0% 3%
Africa and Middle East (2) 19% 21% 6%
Asia (2) 10% 10% 3%
------------------------------------------------------------------------------------------------------------------------------------
READY-MIX PRICE
------------------------------------------------------------------------------------------------------------------------------------
Mexico 4% 2% (3%)
U.S.A. 19% 20% 2%
Spain 1% 6% 7%
United Kingdom 1% 3% 4%
Rest of Europe (2) 4% 6% 0%
South / Central America and Caribbean (2) 8% 9% (1%)
Africa and Middle East (2) 12% 13% 5%
Asia (2) 9% 11% 3%
------------------------------------------------------------------------------------------------------------------------------------
AGGREGATES PRICE
------------------------------------------------------------------------------------------------------------------------------------
Mexico 19% 25% (11%)
U.S.A. 38% 45% 10%
Spain (11%) (10%) 5%
United Kingdom 4% 7% 4%
Rest of Europe (2) 6% 7% (1%)
South / Central America and Caribbean (2) 23% 23% (6%)
Africa and Middle East (2) N/A N/A N/A
Asia (2) 19% 19% 2%
------------------------------------------------------------------------------------------------------------------------------------
1) Includes only the month of March in first quarter 2005 for RMC operations.
2) In constant Mexican pesos as of June 30, 2006.
--------------------------------------------------------------------------------
Please refer to the end of this report for definitions of terms, Page 12
US-dollar translation methodology, and other important disclosures.
Price Summary
Includes the results of RMC begining March 1, 2005.
Variation in Local
Currency (1)
January - June Second quarter Second quarter 2006 Vs.
DOMESTIC CEMENT PRICE 2006 Vs. 2005 2006 Vs. 2005 First quarter 2006
------------------------------------------------------------------------------------------------------------------------------------
Mexico (2) 0% 1% 3%
U.S.A. 16% 16% 3%
Spain 9% 8% 0%
United Kingdom 9% 8% 1%
------------------------------------------------------------------------------------------------------------------------------------
READY-MIX PRICE
------------------------------------------------------------------------------------------------------------------------------------
Mexico (2) 0% 2% 3%
U.S.A. 19% 20% 2%
Spain 4% 4% 1%
United Kingdom 3% 3% (1%)
------------------------------------------------------------------------------------------------------------------------------------
AGGREGATES PRICE
------------------------------------------------------------------------------------------------------------------------------------
Mexico (2) 14% 25% (6%)
U.S.A. 38% 45% 10%
Spain (10%) (12%) (1%)
United Kingdom 7% 7% (1%)
------------------------------------------------------------------------------------------------------------------------------------
1) Includes only the month of March in first quarter 2005 for RMC operations.
2) In constant Mexican pesos as of June 30, 2006.
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Please refer to the end of this report for definitions of terms, Page 13
US-dollar translation methodology, and other important disclosures.
[CEMEX GRAPHIC OMITTED]
Definition of Terms and Disclosures
--------------------------------------------------------------------------------
Methodology for consolidation and presentation of results
CEMEX consolidates its results in Mexican pesos under Mexican generally accepted
accounting principles (GAAP). For the reader's convenience, US dollar amounts
for the consolidated entity are calculated by converting the constant Mexican
peso amounts at the end of each quarter using the period-end MXN/USD exchange
rate for each quarter. The exchange rates used to convert results for second
quarter 2006, first quarter 2006, and second quarter 2005 are 11.26, 10.88, and
10.75 Mexican pesos per US dollar, respectively. CEMEX's weighted-average
inflation factor between June 30, 2005, and June 30, 2006, was 8.52%.
Per-country/region figures are presented in US dollars for the reader's
convenience. In the consolidation process, each country's figures (except those
of CEMEX Mexico) are converted to US dollars and then to Mexican pesos under
Mexican GAAP. Figures presented in US dollars for Mexico, Spain, and the United
Kingdom as of June 30, 2006, and June 30, 2005, can be converted into their
original local currency amount by multiplying the US-dollar figure by the
corresponding exchange rate provided below.
To convert June 30, 2005, US-dollar figures for Mexico to constant Mexican pesos
as of June 30, 2006, it is necessary to first convert the June 30, 2005,
US-dollar figure to Mexican pesos using the exchange rate provided below, and
then multiply the resulting amount by 1.0328, the inflation-rate factor between
June 30, 2005, and June 30, 2006.
June 30
-----------------------------
Exchange rate 2006 2005
---------------------------------------------------------
Mexican peso 11.26 10.75
Euro 0.782 0.826
British pound 0.541 0.555
---------------------------------------------------------
Amounts provided in units of local currency per US dollar.
Breakdown of regions
The South/Central America and Caribbean region includes CEMEX's operations in
Argentina, Colombia, Costa Rica, the Dominican Republic, Jamaica, Nicaragua,
Panama, Puerto Rico, and Venezuela, as well as our trading operations in the
Caribbean region.
Rest of Europe includes operations in Austria, Croatia, Czech Republic, Denmark,
Finland, France, Germany, Hungary, Ireland, Latvia, Norway, Poland, and Sweden.
Africa and Middle East includes operations in Egypt, Israel, and the United Arab
Emirates.
The Asia region includes operations in Bangladesh, Malaysia, the Philippines,
Taiwan, and Thailand.
Definition of terms
EBITDA equals operating income plus depreciation and operating amortization.
Free cash flow equals EBITDA minus net interest expense, maintenance and
expansion 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 consist of maintenance spending on our cement,
ready-mix, and other core businesses in existing markets.
Expansion capital expenditures consist of expansion spending on our cement,
ready-mix, and other core businesses in existing markets.
Working capital equals operating accounts receivable (including other current
assets received as payment in kind) plus historical inventories minus operating
payables.
Net debt equals total debt minus the fair value of cross-currency swaps
associated with debt minus cash and cash equivalents (please refer to footnote 2
on the second page of this report for further details).
Interest coverage is calculated by dividing EBITDA for the last twelve months by
interest expense for the last twelve months.
Net debt/EBITDA is calculated by dividing net debt at the end of the quarter by
EBITDA for the last twelve months (please refer to footnote 2 on the second page
of this report for further details).
Earnings per ADR
The number of average ADRs outstanding used for the calculation of earnings per
ADR was 712.0 million for second quarter 2006, 708.5 million for year-to-date
2006, 679.1 million for second quarter 2005, and 679.2 million for year-to-date
2005.
--------------------------------------------------------------------------------
Page 14
[CEMEX GRAPHIC OMITTED]
Definition of Terms and Disclosures
--------------------------------------------------------------------------------
Effect of the purchase of RMC on our financial statements
The acquisition of RMC concluded on March 1, 2005. The process of allocating the
purchase price paid for RMC's shares of approximately US$4.2 billion, including
other direct purchase costs net of the proceeds from the sale of some assets, to
the fair value of the assets acquired and liabilities assumed began during March
2005 and continued through the year and the first quarter of 2006. As of June,
30, 2006, CEMEX considers that the difference between the purchase price paid
and the fair value of RMC's net assets as of March 1, 2005, which represented
goodwill of approximately US$1.4 billion, is a reasonable estimate of the final
allocation process. At this stage, CEMEX does not consider the existence of any
material pending issues with respect to the purchase-price allocation.
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