building a STRONGER foundation - Cemex

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Our Operating Network in Mexico During 2010, we operated 13 out of a total of 15 plants (two were temporarily shut down given market conditions) and 92 distribution centers (including seven marine terminals) located throughout Mexico. We operate modern plants on the Gulf of Mexico and Pacific coasts, allowing us to take advantage of low-land transportation costs to export to U.S., Caribbean, Central and South American markets. Products and Distribution Channels Cement. Our cement operations represented approximately 54% of net sales for our operations in Mexico before eliminations resulting from consolidation in 2010. Our domestic cement sales volume represented approximately 97% of our total cement sales volume in Mexico for 2010. As a result of the retail nature of the Mexican market, our operations in Mexico are not dependent on a limited number of large customers. The five most important distributors in the aggregate accounted for approximately 9% of our total cement sales in Mexico by volume in 2010. Ready-Mix Concrete. Our ready-mix operations represented approximately 22% of net sales for our operations in Mexico before eliminations resulting from consolidation in 2010. Our ready-mix operations in Mexico purchase all their cement requirements from our cement operations in Mexico. Ready-mix concrete is sold through our own internal sales force and facilities network. 42
Aggregates. Our aggregates operations represented approximately 3% of net sales for our operations in Mexico before eliminations resulting from consolidation in 2010. Exports. Our operations in Mexico export a portion of their cement production, mainly in the form of cement and to a lesser extent in the form of clinker. Exports of cement and clinker by our operations in Mexico represented approximately 3% of our total cement sales volume in Mexico for 2010. In 2010, approximately 18% of our cement and clinker exports from Mexico were to the United States, 68% to Central America and the Caribbean and 14% to South America. The cement and clinker exports by our operations in Mexico to the U.S. are marketed through subsidiaries of CEMEX Corp., the holding company of CEMEX, Inc. All transactions between CEMEX and the subsidiaries of CEMEX Corp., which act as our U.S. importers, are conducted on an arm’s-length basis. Our exports of Mexican gray cement from Mexico to the United States were subject to an anti-dumping order that was imposed by the Commerce Department on August 30, 1990. In March 2006, the Mexican and U.S. governments entered into an agreement to eliminate U.S. anti-dumping duties on Mexican cement imports following a three-year transition period beginning in 2006. In 2006, 2007 and 2008, Mexican cement imports into the U.S. were subject to volume limitations of 3 million tons, 3.1 million and 3.0 million tons per year, respectively. Quota allocations to Mexican companies that import cement into the U.S. are made on a regional basis. The transitional anti-dumping duty during the three-year transition period was lowered to U.S.$3.00 per ton, effective as of April 3, 2006, from the previous amount of approximately U.S.$26.00 per ton. Restrictions imposed by the United States on Mexican cement imports were eliminated in April 2009. For a more detailed description of the terms of the agreement between the Mexican and U.S. governments, please see “Item 4 — Information on the Company — Regulatory Matters and Legal Proceedings — Anti-Dumping.” Production Costs. Our cement plants in Mexico primarily utilize petcoke, but several are designed to switch to fuel oil and natural gas with minimum downtime. We have entered into two 20-year contracts with PEMEX pursuant to which PEMEX has agreed to supply us with a total of 1.75 million tons of petcoke per year, including TEG coke consumption, through 2022 and 2023. Petcoke is petroleum coke, a solid or fixed carbon substance that remains after the distillation of hydrocarbons in petroleum and that may be used as fuel in the production of cement. The PEMEX petcoke contracts have reduced the volatility of our fuel costs. In addition, since 1992, our operations in Mexico have begun to use alternative fuels, to further reduce the consumption of residual fuel oil and natural gas. These alternative fuels represented approximately 9% of the total fuel consumption for our operations in Mexico in 2010. In 1999, we reached an agreement with the TEG consortium for the financing, construction and operation of a 230 megawatt (“MW”) energy plant in Tamuin, San Luis Potosí, Mexico. We entered into this agreement in order to reduce the volatility of our energy costs. The total cost of the project was approximately U.S.$360 million. The power plant commenced commercial operations in April 2004. In February 2007, the original members of the consortium sold their participations in the project to a subsidiary of The AES Corporation. As part of the original agreement, we committed to supply the energy plant with all fuel necessary for its operations, a commitment that has been hedged through a 20-year agreement we entered into with PEMEX. These agreements were reestablished under the same conditions in 2007 with the new operator and the term was extended until 2027. The agreement with PEMEX, however, was not modified and terminates in 2024. Consequently, for the last 3 years of the agreement, we intend to purchase the required fuel in the market. For the years ended December 31, 2008, 2009 and 2010, the power plant has supplied approximately 65%, 74% and 73%, respectively, of our overall electricity needs during such years for our cement plants in Mexico. In April 2007, we and Acciona formed an alliance to develop a wind farm project for the generation of 250 MW in Juchitan, Oaxaca, Mexico. We acted as sponsors of the project, which was named EURUS. Acciona provided the required financing, constructed the facility and currently operates the wind farm. The installation of 167 wind turbines in the farm was finished on November 15, 2009. The agreements between us and Acciona establish that our cement plants in Mexico should acquire a portion of the energy generated by the wind farm for a period of at least 20 years, which began in February 2010, when EURUS reached the committed limit capacity. The power plant had a cost of approximately U.S.$550 million. We have, from time to time, purchased hedges from third parties to reduce the effect of volatility in energy prices in Mexico. See “Item 5 — Operating and Financial Review and Prospects — Liquidity and Capital Resources.” Description of Properties, Plants and Equipment. As of December 31, 2010, we had 15 wholly-owned cement plants located throughout Mexico, with a total installed capacity of 29.3 million tons per year. We have exclusive access to limestone quarries and clay reserves near each of our plant sites in Mexico. We estimate that, as of December 31, 2010, the limestone and clay permitted proven and probable reserves of our operations in Mexico had an average remaining life of approximately 70 and 89 years, respectively, assuming 2006-2010 average annual cement production levels. As of December 31, 2010, all our production plants in Mexico utilized the dry process. As of December 31, 2010, we had a network of 85 land distribution centers in Mexico, which are supplied through a fleet of our own trucks and rail cars, as well as leased trucks and rail facilities, and operated seven marine terminals. In addition, we had 325 ready-mix concrete plants throughout 79 cities in Mexico, more than 2,600 ready-mix concrete delivery trucks and 16 aggregates quarries. 43
Page 1: CEMEX 2010 20F REPORT building a ST
Page 4 and 5: Securities registered or to be regi
Page 6 and 7: Qualitative and Quantitative Market
Page 9 and 10: INTRODUCTION CEMEX, S.A.B. de C.V.
Page 11 and 12: As a result of the foregoing transa
Page 13 and 14: In the U.S., the recession was long
Page 15 and 16: The Financing Agreement contains ev
Page 17 and 18: The Financing Agreement restricts u
Page 19 and 20: During 2009, we reduced the aggrega
Page 21 and 22: The instruments governing our debt
Page 23 and 24: On the legislative front, during th
Page 25 and 26: Our operations in South America, Ce
Page 27 and 28: the depositary to vote the CPOs und
Page 29 and 30: Beginning in 2008, MFRS B-10 has el
Page 31 and 32: (1) Cost of sales includes deprecia
Page 33 and 34: Item 4 - Information on the Company
Page 35 and 36: As a condition to closing the RMC a
Page 37 and 38: Provide our customers with the best
Page 39 and 40: In connection with the implementati
Page 41 and 42: In 2010, as a result of our efforts
Page 43 and 44: In addition, we are one of the worl
Page 45 and 46: (2) Our cement raw materials operat
Page 47 and 48: Our Corporate Structure We are a ho
Page 49: Cement in Mexico is sold principall
Page 53 and 54: Beginning on June 30, 2008, Ready M
Page 55 and 56: Products and Distribution Channels
Page 57 and 58: On December 26, 2008, we sold our C
Page 59 and 60: Ready-Mix Concrete. Our ready-mix c
Page 61 and 62: Aggregates. In 2010, we reduced fix
Page 63 and 64: Our Operating Network in France Des
Page 65 and 66: In April 2006, we initiated an expa
Page 67 and 68: Our Operating Network in Colombia P
Page 69 and 70: Our Operations in Nicaragua Overvie
Page 71 and 72: Our Operations in the United Arab E
Page 73 and 74: Our Trading Operations In 2010, we
Page 75 and 76: On December 10, 2010, after receivi
Page 77 and 78: To prevent, control and remediate e
Page 79 and 80: As required by the directive, each
Page 81 and 82: For the 2010 fiscal year, CEMEX wil
Page 83 and 84: Separately, the government of Venez
Page 85 and 86: and CEMEX was required by August 11
Page 87 and 88: January 1, 2008, however, under MFR
Page 89 and 90: foreign subsidiaries. These instrum
Page 91 and 92: Valuation reserves on accounts rece
Page 93 and 94: Stage 1. Communication to the organ
Page 95 and 96: Year Ended December 31, 2010 Compar
Page 97 and 98: Geographic Segment 89 Variations in
Page 99 and 100: United Kingdom Our domestic cement
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ended December 31, 2010, Africa and
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Operating Income. For the reasons m
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Our comprehensive financing result
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The following tables present select
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Mexico Our domestic cement sales vo
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As a result of the decreases in dom
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For the year ended December 31, 200
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South America, Central America and
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On August 14, 2009, we entered into
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As of December 31, 2010, we had U.S
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Our Perpetual Debentures As of Dece
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The Financing Agreement, as amended
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In 1999, CEMEX entered into an agre
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Our Equity Derivative Forward Contr
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As of December 31, 2009 and 2010, C
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In addition, we have entered into f
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Private Cash Tender Offer to Holder
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Name, Position (Age) Experience Jai
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Name, Position (Age) Experience Ram
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Tomás Milmo Santos (46) Has been a
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Set forth below are the names of th
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Consolidated ESOP Information Stock
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Item 7 - Major Shareholders and Rel
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The following table sets forth the
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Item 10 - Additional Information Ar
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exempt from registration pursuant t
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Our board of directors shall prepar
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Under our by-laws, shareholders rep
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On June 2, 2008, CEMEX, through one
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Exchange Controls See “Item 3 —
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The gross amount of any dividends p
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We have agreed to pay some of the o
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Item 16G - Corporate Governance Sec
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Item 17 - Financial Statements Not
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4.17 Debenture Purchase Agreement,
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4.27.3 Amendment No. 1 to U.S.$525,
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4.41.4 Accession Letter, dated Janu
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4.57 Amended and Restated Dealer Ma
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SIGNATURES CEMEX, S.A.B. de C.V. he
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The Board of Directors and Stockhol
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CEMEX, S.A.B. DE C.V. AND SUBSIDIAR
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1. DESCRIPTION OF BUSINESS CEMEX, S
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C) USE OF ESTIMATES CEMEX, S.A.B. D
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J) IMPAIRMENT OF LONG LIVED ASSETS
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Contingencies and commitments (note
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V) CONCENTRATION OF CREDIT CEMEX, S
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Net sales by product and geographic
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4. CASH AND INVESTMENTS CEMEX, S.A.
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II. Equity forwards in third party
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14. EMPLOYEE BENEFITS Defined contr
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17. EXECUTIVE STOCK-BASED COMPENSAT
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18. EARNINGS (LOSS) PER SHARE CEMEX
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D) CONTRACTUAL OBLIGATIONS CEMEX, S
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Reconciliation of stockholders’ e
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(k) Other U.S. GAAP Adjustments Def
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