Cemex's snags could mean better balance sheet

Anthony Harrup, Dow Jones, Mexico City

Cemex SA's expansion into Asia is taking a little longer than expected, but with world economies slowing down, the Mexican company could end up using spare cash to pay down debt.

This week, Monterrey-based Cemex, the world's third-largest cement producer with annual capacity approaching 78 million metric tons, granted two postponements on planned Asian acquisitions.

Creditors of Thailand's TPI Polene PCL asked for, and were given, more time to consider Cemex's US$300 million offer for a 72.5 percent stake in TPI which would require them to write off parts of remaining debt.

At the same time, Cemex agreed to the Indonesian government's request to extend to the end of the year a put option for 51 percent of PT Semen Gresik, which would give Cemex control of the company.

Analysts agree there are two sides to the delays.

On the one hand, Cemex can't realize its potential in the region as long as it is kept from boosting its position. On the other, if the company can't spend its bountiful cash supply, it can lower its debt load.

The company reported net debt of $6.55 billion at the end of the second quarter, and expects to lower that by $300 million in the second half of the year.

The Semen Gresik delay means Cemex will take longer to extract value from the $300 million it has already put into the Indonesian concern without obtaining control of the company, of which it owns 25 percent, analyst Dan McGoey of Deutsche Bank said.

Cemex expects to have $2.5 billion to spend on acquisitions next year, but that doesn't mean it will splash out carelessly as the specter of a global recession grows in the wake of Sept. 11 terrorist attacks on the U.S.

Either TPI Polene or Semen Gresik going through in the near- term would be positive, as it would boost Cemex's position in Asia, Gonzalo Fernandez of Santander Investment said.

But Asian economies are also weak at present, Fernandez noted.

"And that's another question. In the current economic environment, there is no hurry," he said.