Cemex to divest its Dominican Republic Operations for $950 Million
Portfilio Optimization
On August 5, 2024, Cemex announced the sale of its operations in the Dominican Republic to Cementos Progreso and its strategic partners for approximately $950 million. Cemex expects to finalize the transaction during the fourth quarter of 2024. The assets to be divested include a cement plant in the Dominican Republic with two integrated production lines and related cement, concrete, aggregates, and marine terminal assets. The transaction also includes export businesses in Haiti.
In the announcement, Cemex’s CEO remarked that the transaction significantly advances the company’s portfolio rebalancing strategy, focusing on reducing its exposure to Emerging Markets and redeploying capital into growth investments in priority markets, primarily the U.S. Consequently, most of the proceeds from the divestment are expected to fund the company’s bolt-on investment growth strategy in key markets, particularly the U.S.
Impact on the Credit
One of Cemex’s strategic priorities has been to optimize its portfolio for growth by undertaking strategic divestments, particularly in selected Emerging Markets, to streamline its portfolio and drive additional investment in the US, Mexico, and Europe, mainly through bolt-on opportunities.
By selling its operations in the Dominican Republic, Cemex is divesting a plant with a cement capacity of 2.4 million tons per year, along with 12 ready-mix concrete plants (9 inactive), 1 inactive aggregate quarry, and 2 distribution centers. For perspective, the company has a total annual cement capacity of 89.7 million tons annually. As of December 2023, Cemex’s operations in the Dominican Republic represented 2.1% of consolidated revenues, 4.2% of consolidated EBITDA, and 1% of its total assets.
According to our calculations, the transaction is valued at approximately 6.8x 2023 EBITDA, or $396/ton, which we consider a good price given that Cemex currently trades at 5.5x LTM EBITDA, or $208/ ton. With this divestment, the company should focus on growing its key markets through bolt-on acquisition while maintaining its commitment to a healthy balance sheet. We view Cemex’s divestments of its Dominican Republic assets as a positive credit event that aligns with its strategic priorities.
It is worth noting that in 2022, Cemex announced reopening its second line at the San Pedro Macoris plant in the Dominican Republic. The investment was part of the company’s growth strategy, increasing production capacity by more than 500,000 metric tons annually and raising the plant's total production capacity to 2.5 million metric tons of cement and clinker annually. At the time, Cemex stated that the investment would enable the company better to serve its customers in high-growth markets in the Caribbean.