building a STRONGER foundation - Cemex

Operating Expenses. Our operating expenses decreased approximately 7%, from Ps45.6 billion in 2008 to Ps42.3 billion in
2009, mainly as a result of cost reduction initiatives. As a percentage of revenues, our operating expenses decreased approximately
1%, reflecting our cost reduction initiatives, partially mitigated by lower volumes in our operations year over year. Operating expenses
include administrative, selling and distribution expenses. See note 2Q to our consolidated financial statements included elsewhere in
this annual report.
Operating Income. For the reasons mentioned above, our operating income decreased approximately 39%, from Ps26.1 billion
in 2008 to Ps15.8 billion in 2009. As a percentage of revenues, operating income decreased from approximately 12% in 2008 to 8% in
2009. Additionally, set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our operating
income on a geographic segment basis.
Mexico
Our operating income from our operations in Mexico decreased approximately 2%, from Ps14.3 billion in 2008 to Ps14.0 billion
in 2009 in Peso terms. The decrease in operating income was primarily attributable to the decreases in domestic cement and ready-mix
concrete sales volumes explained above.
United States
Our operating loss from our operations in the U.S. increased substantially, from an operating loss of Ps461 million in 2008 to an
operating loss of Ps7.3 billion in 2009 in Peso terms. As mentioned above, the decrease in operating income resulted primarily from a
significantly weaker demand in all our U.S. markets, as decreased confidence and lower activity across all sectors resulted in lower
volumes. Overall construction activity weakened further as economic conditions continued to worsen and credit availability became
extremely scarce.
Spain
Our operating income from our operations in Spain decreased approximately 61%, from Ps4.3 billion in 2008 to Ps1.7 billion in
2009 in Peso terms. The decrease in operating income resulted primarily from the country’s continued challenging economic
environment. Overall economic activity continues to worsen and has negatively affected overall cement demand. No particular
segment in the construction sector is experiencing growth. Additionally, infrastructure projects continue to be on hold given the lack
of liquidity and overall tighter credit conditions.
United Kingdom
Our operating loss from our operations in the United Kingdom decreased approximately 39%, from a loss of Ps1.4 billion in
2008 to a loss of Ps859 million in 2009 in Peso terms. The decrease in the operating loss of our operations in the United Kingdom
during 2009 compared to 2008 resulted primarily from a decrease in cost of sales (variable and fixed) of 21% in Pound terms (from
£716 million in 2008 to £564 million in 2009). Also in 2009, operating expenses decreased 17% in Pound terms as a result of cost and
expense reductions to adjust our operations to the current market conditions.
Germany
Our operating income from our operations in Germany increased approximately 52%, from Ps434 million in 2008 to Ps658
million in 2009 in Peso terms. The increase resulted primarily from a decrease in cost of sales of 12% in Euro terms. Additionally, in
2009, operating expenses decreased 11% in Euro terms, primarily as a result of our cost reduction efforts to adjust our operations to
then current market conditions.
France
Our operating income from our operations in France increased approximately 56%, from Ps505 million in 2008 to Ps786 million
in 2009 in Peso terms. The increase resulted primarily from our cost reduction efforts.
Rest of Europe
Our operating income from our operations in the Rest of Europe decreased approximately 51%, from Ps2.0 billion in 2008 to
Ps976 million in 2009 in Peso terms. The decrease in our operating income of our operations in the Rest of Europe resulted from
lower domestic cement and ready-mix concrete sales volumes and average sales prices, especially in our Poland operations.
106