CEMEX
Cement Maker Set To Sell Ohio Assets
MEXICO CITY -- Mexican cement and building- materials company
Cemex SAB took another step toward meeting its asset-divestment
target with a pact to sell a cement plant and terminal in Ohio to
Eagle Materials Inc. for about $400 million.
The sale, which is expected to close in the fourth quarter,
includes a cement plant in Fairborn and a distribution terminal in
Columbus, Cemex said Monday. The assets are expected to generate
$79 million this year in revenue, and $33 million in operating cash
flow measured by earnings before interest, taxes, depreciation and
amortization, or Ebitda.
Cemex said it would use the money from the sale to pay down debt
and for other purposes.The Monterrey company, one of the world's
largest cement makers, is selling assets to reduce its heavy debt
load as it seeks to recover the investment-grade ratings that it
lost in the 2008-2009 global crisis.
Cemex aims to sell assets for $1.5 billion to $2 billion in
2016-2017. The sales are part of the company's plans to lower debt
by between $3 billion and $3.5 billion in that two-year period. It
recently agreed to sell plants in Texas and New Mexico to Grupo de
Cementos Chihuahua SAB for $306 million.
Dallas-based Eagle Materials said the Fairborn cement plant has
capacity to grind nearly one million tons a year of clinker, and
will increase its cement-making capacity by about 20%. Eagle said
the acquisition will contribute to earnings as soon as the deal
closes, and that it expects around $50 million in tax benefits from
the transaction.
"Our strategy has been to grow the cement side of our business.
The Fairborn plant extends our U.S. cement system and connects but
does not overlap with the market reach of our existing plants,"
said Dave Powers, Eagle's president and chief executive in a
statement from the company.
Eagle, which makes cement and other building materials, said it
would use cash and bank credit to finance the acquisition without
raising its debt-to-Ebitda ratio to more than two times.
The sale is positive for Cemex even though it is in one of its
biggest and currently fastest-growing markets, analysts at Mexico's
Intercam brokerage said in a note to clients.
The assets are far from Cemex's main areas of operations in the
U.S., and don't produce concrete or aggregates. "Besides, it's core
for Eagle Materials so they could pay a higher multiple," they
added.
--Anthony Harrup
SASOL
Slump in Oil Prices Weighs on Results
South African petrochemical and energy producer Sasol Ltd.
reported a steep drop in net profit and vowed to cut costs further
in the face of a sustained slump in oil prices.
Sasol said on Monday that net profit fell 55% to 13.22 billion
South African rand ($914.4 million) in the year to end-September
from 29.72 billion rand in the previous fiscal year despite cost
reductions and an increase in oil output. Revenue fell 6.6% to
172.9 billion rand. Headline earnings per share, the company's
preferred profit measure that strips out certain exceptional and
one-off items, fell 17% to 41.40 rand, in line with expectations.
The company reduced its dividend by more than a fifth to 9.10 rand
a share.
Sasol, one of South Africa's biggest industrial enterprises,
said it now expects sustainable cash cost savings of 2.5 billion
rand through 2019, a billion rand more than it had previously
targeted.
Management would continue to focus on preserving cash to better
respond to the prospect that oil prices would remain "lower for
much longer," the company said.
The fall in crude prices is putting pressure on Sasol as it
pushes ahead with a $8.9 billion investment in a petrochemical
project in Louisiana. Sasol has said it expects the project to come
online in 2018, tripling its chemical production capacity in the
U.S.
Sasol is also the biggest taxpayer in South Africa, whose
economy and currency have been rocked by political turmoil. The
company's ability to employ thousands of South Africans and pay
taxes, despite suffering from a lower rand on top of low oil
prices, is important for the country's future, not least for being
home to Africa's most advanced economy.
Sasol shares were down 2% on the Johannesburg Stock Exchange in
volatile early trading.
Sasol's operations include six coal mines which provide the raw
material for its fuel refining and chemicals activities, fuel for
power generation, and exports. Sasol also explores for oil and gas
in southern and central Africa, Australia and Canada.
--Matina Stevis
TELENOR
VimpelCom Stake To Be Whittled
Telenor ASA said Monday that it had started selling part of its
33% stake in VimpelCom Ltd., one of Russia's largest telecom
carriers, which was hit earlier this year with a hefty fine by U.S.
and Dutch authorities as part of a corruption case.
Telenor, which is majority-owned by the Norwegian state, said it
had commenced a public offering of nearly a fourth of its VimpelCom
shares, which are listed on Nasdaq in the U.S., adding price had
not yet been determined. The offer is part of Telenor's plan to
divest its entire stake in VimpelCom, for which it has been seeking
potential buyers since October 2015.
VimpelCom, which is registered in the Netherlands, in February
admitted to having paid more than $114 million in bribes to an
Uzbekistan official, and agreed to pay more than $795 million in
civil and criminal penalties to U.S. and Dutch authorities.
In April, two Telenor executives agreed to resign over the
company's handling of its ownership stake in VimpelCom after a
review by the law firm Deloitte. Telenor said the review hadn't
uncovered any corruption at the company but had pointed to
weaknesses in organizational structure, communication and
leadership relating to its role as VimpelCom owner.
In July, Telenor reported that its second-quarter net profit
fell by two-thirds compared with the year-earlier period, hit by a
2.5 billion Norwegian kroner ($303 million) impairment loss related
to its stake in VimpelCom, which has more than 200 million
subscribers and offers mobile services in 14 countries.
At the time, the company said, "VimpelCom will continue to be
classified as an associated company until it is highly probable
that a sale within 12 months will occur."
The news also comes just less than a week after former chief
executive of VimpelCom's Russia unit, Mikhail Slobodin, was put on
a federal wanted list after being declared a person of interest in
a bribery investigation.
Mr. Slobodin resigned late last Monday following the declaration
by Russia's Investigative Committee, the country's chief
investigative body. Being on a federal wanted list means that Mr.
Slobodin can be arrested if he is found on Russian territory. Mr.
Slobodin could not be reached for comment.
--Matthias Verbergt and Olga Razumovskaya
ASSOCIATED BRITISH FOODS
Pound's Tumble Makes Impact
LONDON -- The British pound's post-Brexit tumble benefited the
Primark discount fashion chain's recent results, but the
disadvantages resulting from the currency's fall also have
grown.
Associated British Foods PLC, the food and ingredients company
that owns Primark, said on Monday that the weaker pound after the
U.K.'s June 23 vote to leave the European Union would bolster its
results for fiscal 2016, ending Saturday. But it warned that the
currency move would hurt profit margins in fiscal 2017, because it
has many expenses in dollars and earns much of its revenue in
pounds and euros, and would turn its modest pension surplus into a
GBP200 million ($265.4 million) deficit.
AB Foods shares plunged in London trading on Monday, down 10.8%
to GBP28.15.
The London-based company blamed the pension deficit on a marked
decline in U.K. long-term bond yields following the EU referendum.
The company uses bond yields to value its pension obligations.
AB Foods Finance Director John Bason said the company's pension
plan is well funded and he expects several other U.K. companies to
report pension deficits due to falling bond yields.
The company vowed to maintain Primark's rock-bottom prices
despite the squeeze in margins and said the brand has been well
received in the world's largest clothing market, the U.S.
"All of our U.S. stores are growing in sales," Mr. Bason said,
adding that the stores are meeting sales expectations set by the
company. He declined to provide specific sales figures for the U.S.
stores.
Primark, popular in the U.K. and much of Europe, is expanding
gradually in the U.S. It opened its first store there a year ago,
in the former Boston location of the original Filene's Basement
discount store, and since has opened four more elsewhere in the
U.S. Northeast.
The chain now plans to expand selling space at the
77,000-square-foot Boston store by 20%, and it aims to have five
more U.S. stores in operation by fiscal 2018. That is a slower pace
than it planned a year ago, when it forecast nine U.S. stores by
the end of calendar 2016.
"There has been some slippage in phasing and delay in handling
over the stores" to Primark, Mr. Bason said. The company is poised
to open all of the U.S. stores as soon as it can, he added.
Kate Ormrod, an analyst at retail research agency Verdict
Retail, said a "more aggressive" expansion plan would be required
to fully seize Primark's U.S. potential and drive the volume
required for success.
"A Primark that trades well in the U.S. will have vast growth
potential, but if the brand fails to gain traction in the
notoriously competitive U.S. apparel sector, then a lot of hopes
will have been dashed," said George Salmon, an equity analyst at
Hargreaves Lansdown.
AB Foods said Primark's operating profit margin for fiscal 2016
would be close to the 11.7% it achieved in the first half. It said
it expects Primark's same-store sales to fall by 2%, citing adverse
weather conditions.
The company said the weak pound would help its sugar unit's
profit margins in the coming fiscal year, as well as delivering a
benefit on its profit earned outside the U.K.
--Tapan Panchal
(END) Dow Jones Newswires
September 13, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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