Cemex Spotlight – Tariffs, Hybrids and New CEO

• In this article, we update our view of Cemex’s (NR / BBB- / BBB-) Credit and RelVal profile after an eventful start to 2025 that has included a mixed set of 2024 results; the announcement of the CEO’s (Fernando Gonzales) retirement and succession by Jaime Muguiro; a succession of tariff announcements by the returning US President Trump; the receipt of the $950 mn of divestment proceeds from Cemex ‘s Dominican Republic sale; and a change in S&P’s treatment of so-called ” Sliding Step ” hybrids (of which Cemex has $2 bn).
• The FY24 financials were mixed in operating terms (with Cemex being cautious on FY25 prospects) but better in financial terms, with Cemex retaining a strong cash flow profile and low leverage (1.8x at YE24).
• In strategic terms the imminent change in CEO will not move the needle in the short to medium term in CreditSights’ view. We expect the company to continue with its focus on the cash cow of Mexico, the growth engine of the US and the centre of cement excellence Europe.
• In capital allocation terms, Cemex will be more active in M&A in 2025 and beyond, has restarted paying a dividend and will do share buybacks as appropriate. However, the company remains committed to an IG rating and has some flexibility from its recent $2.5 bn of divestments.
• While Cemex is one of the more exposed of our IG Cement-based Building Materials names to Trump 2.0 Tariff risks, our detailed analysis in this report concludes that Cemex is not as exposed as investors might think at first glance while there are a number of mitigants in CreditSights’ view.
• Finally, CreditSights is somewhat sanguine about S&P ‘s decision to remove equity credit for Sliding Scale Hybrids. There is an argument to say that Hybrids are not a necessary part of Cemex ‘s capital structure as a returned Investment Grade credit and holders of Cemex hybrids will have to factor in the risk that Cemex decides to disadvantage holders by exercising its 101 call, as opposed to the more benign option of a tender and refinance or an exchange. However in credit terms, the loss of equity credit for Cemex $2 bn of hybrid bonds is not impactful in our view.

Having completed a deep dive analysis of Cemex’s Credit and RelVal profile, we are retaining our constructive view of the credit. This is driven by Cemex’s senior USD bonds (29s, 30s, 31s) which trade at attractive levels versus their EM peers with USD paper (GCC of Meixco, Ultratech of India, Votorantim of Brazil), while Cemex also looks an attractive way of playing the US construction story which remains solid in our view driven by IIJA Infrastructure spending. The 29s and 30s are good vehicles for coupon clipping for those investors that might want to hold on to the bonds for a while. In contrast, the 31s are a lower entry point that could be a good vehicle for those investors that are seeking a spread tightening catalyst (for example, in the ST if an agreement between the US and Mexico on tariffs is reached, or as a more MT catalyst, if Cemex manages its corporate strategy successfully and navigates a weaker MX Peso successfully during 2025). The somewhat short duration CX 26s are trading to par at present and EUR investors may wish to wait for any potential REFI to get back into Cemex in that currency.