Boston, MA 04/11/2014 (wallstreetpr) –One of the world’s cement giants, Cemex SAB de CV (ADR) (NYSE:CX) can afford to finance projects like wind power generation like it did for two plants recently. The company announced the completion of $650 million financing agreement for the development of two wind plants in Nuevo Leon. These are part of the cement company’s efforts to acquire cheaper electricity. Work on the two 126-megawatts wind power farms will begin in the second quarter of 2014. However, the company’s spending abilities are currently limited, and it can only make small spending.
Bloated debt position
The trouble with the company is its heady debt position. At the end of 2013, the company had $16.3 billion net debt, and its net debt to EBITDA is well ahead of the industry average at 6.2. Financial problems at Cemex SAB de CV (ADR) (NYSE:CX) started when the company went in on a spending spree ahead of the 2008 financial meltdown. For example, the company staked out $16 billion to purchase Rinker, an Australian cement company. The purchase plunged Cemex further deep in debts.
Big buys opportunity
Currently soaked in debts, Cemex SAB de CV (ADR) (NYSE:CX) is likely to miss the big and cheap buy opportunity that is looming due to the planned merger of two European cement giants. France’s Lafarge and Holicm of Switzerland are seeking to merge, and they are required to divest some of their assets to gain regulatory approval for the deal. The forced divestment means that they are likely to give away their assets below the market prices.
The divestment presents opportunity for Cemex to snap the assets cheaply and also improve its foreign operations. However, the company is limited in the value of purchases it can make under its prevailing debt terms. Although the company is witnessing improving business, it is unlikely to pay down its present bloated debt position soon to allow hefty spending. In that case, it is likely to lose the opportunity to acquire assets in the looming $5 million euros divestment by the two European cement producers.
