building a STRONGER foundation - Cemex

Our domestic cement volumes from our operations in the Philippines increased approximately 8% in 2010 compared to 2009.
Our sales volumes from our operations in the Philippines increased primarily as a result of an increase in the demand in the residential
construction sector, supported by the growth in remittances from overseas workers. Infrastructure spending moderated after mid-year
elections, with spending projects in this sector expected to improve during 2011. For the year ended December 31, 2010, the
Philippines represented approximately 2% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our
average domestic sales price of cement from our operations in the Philippines increased approximately 2% in Philippine Peso terms in
2010 compared to 2009. As a result, net sales of our operations in the Philippines, in Philippine Peso terms, increased approximately
5% in 2010 compared to 2009. For the year ended December 31, 2010, cement represented approximately 99%, and our other
businesses approximately 1%, of net sales for our operations in the Philippines before intra-sector eliminations within the segment and
before eliminations from consolidation, as applicable.
Our ready-mix concrete sales volumes in our operations in the Rest of Asia, which include our operations in Malaysia and China
(representing nearly all our ready-mix concrete sales volumes in the Rest of Asia region), decreased approximately 2% in 2010
compared to 2009. Our domestic cement volumes in the region increased 13% in 2010 compared to 2009. For the year ended
December 31, 2010, the Rest of Asia represented approximately 2% of our total net sales in Peso terms, before eliminations resulting
from consolidation. The average sales price of ready-mix concrete increased approximately 7% in Dollar terms during 2010, and our
average sales price of domestic cement increased 1% in Dollar terms during 2010. For the reasons mentioned above, net sales of our
operations in the Rest of Asia, in Dollar terms, increased approximately 5% in 2010 compared to 2009. For the year ended
December 31, 2010, cement represented approximately 30%, ready-mix concrete approximately 57% and our other businesses
approximately 13% of net sales for our operations in the Rest of Asia before intra-sector eliminations within the segment and before
eliminations from consolidation, as applicable.
For the reasons described above, our net sales for our operations in the Rest of Asia before eliminations resulting from
consolidation, in Dollar terms, increased approximately 9% in 2010 compared to 2009.
Others
Our Others segment includes our worldwide cement, clinker and slag trading operations, our information technology solutions
company and other minor subsidiaries. Net sales of our Others segment decreased approximately 9% before eliminations resulting
from consolidation in 2010 compared to 2009 in Dollar terms, primarily as a result of a decrease of approximately 8% in our
worldwide cement, clinker and slag trading operations. For the year ended December 31, 2010, our trading operations’ net sales
represented approximately 44%, and our information technology solutions company 34%, of our Others segment’s net sales.
Cost of Sales. Our cost of sales, including depreciation, decreased approximately 8%, from Ps139.7 billion in 2009 to Ps128.3
billion in 2010, primarily due to lower sales volumes. As a percentage of net sales, cost of sales increased from 71% in 2009 to 72% in
2010, mainly as a result of lower economies of scale due to lower volumes and higher fuel prices. In our cement and aggregates
business, we have several producing plants and many selling points. Our cost of sales includes freight expenses of raw materials used
in our producing plants. However, our costs of sales excludes (i) expenses related to personnel and equipment comprising our selling
network and those expenses related to warehousing at the points of sale, which were included as part of our administrative and selling
expenses line item in the amount of approximately Ps9.3 billion in 2009 and Ps7.9 billion in 2010; and (ii) freight expenses of finished
products from our producing plants to our points of sale and from our points of sale to our customers’ locations, which were included
as part of our distribution expenses line item (except for distribution or delivery expenses related to our ready-mix concrete business,
which are included in our cost of sales), and which, for the years ended December 31, 2009 and 2010, represented Ps13.7 billion and
Ps13.2 billion, respectively.
Gross Profit. For the reasons explained above, our gross profit decreased approximately 14%, from approximately Ps58.1
billion in 2009 to approximately Ps50.0 billion in 2010. As a percentage of net sales, gross profit decreased from approximately 29%
in 2009 to 28% in 2010. In addition, our gross profit may not be directly comparable to those of other entities that include all their
freight expenses in cost of sales. As described above, we include freight expenses of finished products from our producing plants to
our points of sale and from our points of sale to our customers’ locations within distribution expenses, which in aggregate represented
costs of approximately Ps13.7 billion in 2009 and approximately Ps13.2 billion in 2010.
Operating Expenses. Our operating expenses decreased approximately 8%, from approximately Ps42.3 billion in 2009 to
approximately Ps39.1 billion in 2010, mainly as a result of savings from cost reduction initiatives. As a percentage of net sales, our
operating expenses increased from approximately 21% in 2009 to 22% in 2010, as a result of lower economies of scale due to lower
volumes and higher transportation cost, partially mitigated by savings from our cost-reduction initiatives. Operating expenses include
administrative, selling and distribution expenses. See note 2Q to our consolidated financial statements included elsewhere in this
annual report.
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