building a STRONGER foundation - Cemex

Our comprehensive financing result in 2010 was a loss of approximately Ps15.6 billion, an increase from the loss of
approximately Ps15.1 billion in 2009. The components of the change are shown above. Our financial expense increased approximately
21%, from approximately Ps13.5 billion in 2009 to approximately Ps16.3 billion in 2010. The increase was primarily attributable to
interest rates, partially offset by lower debt levels. Our financial income increased 14%, from Ps385 million in 2009 to Ps439 million
in 2010. Our results from financial instruments improved approximately 55%, from a loss of approximately Ps2.1 billion in 2009 to a
loss of approximately Ps1.0 billion in 2010. This loss resulted primarily from negative valuations of equity derivatives related to
CEMEX and Axtel shares, as discussed below. Our net foreign exchange result improved from a loss of approximately Ps266 million
in 2009 to a gain of approximately Ps926 million in 2010, mainly due to the appreciation of the Mexican Peso against the Dollar
during 2010. Our monetary position result (generated by the recognition of inflation effects over monetary assets and liabilities)
decreased approximately 36%, from a gain of Ps415 million during 2009 to a gain of Ps266 million during 2010, primarily attributable
to our operations in Egypt.
During 2010 and 2009, certain financing costs associated with the Financing Agreement were capitalized under MFRS as
deferred financing costs. For the years ended December 31, 2010 and 2009 some of these financing costs were expensed as incurred in
our income reconciliation to U.S. GAAP.
In connection with the 2010 Optional Convertible Subordinated Notes, the portion of the issuance costs associated with the
equity component that were recognized within other equity reserves under MFRS, were reclassified and treated as deferred financing
costs in our reconciliation to U.S. GAAP as of December 31, 2010.
Derivative Financial Instruments. For the years ended December 31, 2009 and 2010, our derivative financial instruments that
had a potential impact on our comprehensive financing result consisted of equity forward contracts, a forward instrument over the
Total Return Index of the Mexican Stock Exchange and interest rate derivatives related to energy projects as discussed in note 12C to
our consolidated financial statements included elsewhere in this annual report.
For the year ended December 31, 2010, we had a net loss of approximately Ps956 million in the item “Results from financial
instruments” as compared to a net loss of approximately Ps2,127 million in 2009. The loss in 2010 is mainly attributable to changes in
the fair value of derivative instruments related to our own and Axtel shares.
Income Taxes. Our income tax effect in the statement of operations, which is primarily comprised of current income taxes plus
deferred income taxes, decreased from an income of approximately Ps10.6 billion in 2009 to an expense of Ps4.5 billion in 2010,
mainly attributable to an increase in taxable earnings in our Mexican, South American and Egyptian operations. Our current income
tax expense decreased 8%, from approximately Ps8.7 billion in 2009 to Ps8.0 billion in 2010. Our deferred tax benefit decreased from
approximately Ps19.3 billion in 2009 to Ps3.5 billion in 2010. The decrease was primarily attributable to the utilization of tax loss
carryforwards during the period in certain countries, such as Spain, as well as to the increase in valuation allowances relating to tax
loss carryforwards. For the years ended December 31, 2009 and 2010, our statutory income tax rate was 28% and 30%, respectively.
Our effective tax rate in 2009 resulted in a tax rate of 227.7% considering a loss before income tax of approximately Ps4.6 billion,
while our effective tax rate in 2010 resulted in a negative tax rate of 37.6%, considering a loss before income tax of approximately
Ps12.0 billion. See “Item 3 — Key Information — Risk Factors — The Mexican tax consolidation regime may have an adverse effect
on cash flow, financial condition and net income.”
Consolidated Net Income (Loss). For the reasons described above, our consolidated net income (loss) (before deducting the
portion allocable to non-controlling interest) for 2010 decreased significantly, from a consolidated net income of approximately Ps1.7
billion in 2009 to a consolidated net loss of approximately Ps16.5 billion.
Controlling Interest Net Income (Loss). Controlling interest net income (loss) represents the difference between our consolidated
net income (loss) and non-controlling interest net income (loss), which is the portion of our consolidated net income (loss) attributable
to those of our subsidiaries in which non-associated third parties hold interests. Controlling interest net income (loss) decreased
significantly, from a net income of approximately Ps1.4 billion in 2009 to a controlling interest net loss of approximately Ps16.5
billion in 2010. As a percentage of revenues, controlling interest net income represented 1% in 2009.
Non-controlling Interest Net Income. Changes in non-controlling interest net income (loss) in any period reflect changes in the
percentage of the stock of our subsidiaries held by non-associated third parties as of the end of each month during the relevant period
and the consolidated net income (loss) attributable to those subsidiaries. Non-controlling interest net income decreased approximately
89%, from Ps240 million in 2009 to Ps27 million in 2010, mainly as a result of a significant decrease in the net income of the
consolidated entities in which others have a non-controlling interest. As a result, the percentage of our consolidated net income (loss)
allocable to non-controlling interests decreased from 15% in 2009 to 0.2% in 2010.
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