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Puerto Rican Cement To Be Sold To CEMEX, Mexican Cement Producer To Pay $160 Million
by LIDA ESTELA RUAÑO
September 28, 2000
Puerto Rican Cement Co. Inc. (NYSE:PRN), the islands largest cement plant, is rumored to either have been sold, or to be in the final stages of negotiations to be sold, allegedly for $160 million to CEMEX, S.A. de C. V. from Mexico, the third largest cement manufacturer in the world.
CARIBBEAN BUSINESS has learned from industry sources of the possible purchase by the Mexican giant, which this year had annual sales of $2.6 billion, operations in 30 countries, and trade relations with more than 60 nations.
As of December 31, 1999, Puerto Rican Cement had stockholders equity of $161.8 million on total assets of $304.5 million.
The locally owned public company had 1999 consolidated sales of $173.3 million, $25 million or 17% higher than the previous year. The companys Securities and Exchange Commission 10K filing attributes the increase to the vigorous local construction industry resulting in a 21 percent increase in gross cement sales and a 22 percent increase in ready mix concrete last year. Puerto Rican Cement has approximately 60 percent of the local market.
Still, despite a sustained growth in sales during the last 5 years, the companys net income has dropped from $15.7 million in 1995 to $12.0 million last year, bringing net income per share down from 2.90 to 2.29 during the period.
Among the reasons for selling the lucrative business, local industry sources speculated, was that the companys principal stockholders, Antonio Luis Ferre and his family, who own no less than 80%, were more interested in developing their media conglomerate, whose flagship is the daily newspaper El Nuevo Dia.
Another possible reason for selling is the derogation, earlier this year, by the Department of Consumers Affairs of a local regulation that imposed on imported cement the same quality standards applicable to stateside cement. Even though the Commonwealth legislature subsequently approved a law to reinstate the regulation, the legislation was pocket vetoed by Gov. Pedro Rossello. Critics argue that without this protectionist law the island could be inundated with cheap cement, mainly from Venezuela, which would mean stiff price competition for Puerto Rican Cement products.
In its latest SEC filing on Sept.12, the company mentions an agreement reached at its July board meeting for a severance compensation package to its seven top officers "in the event of a takeover or change in control of ownership or if the executive is laid off or forced to resign."
The company, founded in 1938 by former Gov. Luis A. Ferre and his brothers, was embroiled in a bitter lawsuit against the Rossello government, which was settled earlier this year after written agreements were reached.
CEMEX, was founded in 1906 in Mexico, has a production capacity nearing 65 million metric tons. Through its subsidiaries in four continents, CEMEX is engaged in the production, distribution, marketing and sale of cement, ready mix concrete, aggregates and clinker. In addition to Mexico, CEMEX is market leader in Colombia, Costa Rica, Dominican Republic, Egypt, the Philippines, Spain and Venezuela. It has a significant presence in southwestern U.S., Indonesia and the Caribbean.
In FY 2000, CEMEX had $2.6 billion in sales, a 14% increase over the previous year, $2.3 billion. The company had a gross profit of $1.2 billion in FY 2000 and a net income of $480 million. CEMEX, which also trades in the NYSE, just announced the establishment of a new subsidiary, CxNetworks, at a cost of $200 million over the next two years. With expected revenue in 2001 of $100 million, the new subsidiary will house its business-to-business Web projects and other cybernetic ventures. The new company is expected to generate CEMEX savings of $120 million.
CB chief economist Jeffry Valentin Mari contributed to this report.
This Caribbean Business article appears courtesy of Casiano Communications.