Wharton School of Business

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Wharton School of Business Global Alumni Forum
Rio 2006
Mexican Companies in Latin America
Hector Medina A. August 10, 2006Rio de Janeiro,
Brazil
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Acquisitions have played an important role in
CEMEXs growth over the last two decades

• CEMEX sustainable growth in excess of 20 in
  Sales EBITDA from1985 to 2005
• From a regional producer in the 80s to a global
  industry today
• Strong organic growth and multiple acquisitions
• 36 acquisitions, US12 billion
• Acquisitions and organic growth in Latin America
  have played an important role

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Late 80s Definition of Strategic Objectives
Global Environment
CEMEX
National presence Geographic diversification,
reduce dependency on any single market Compete
with international peers in relevant
markets Position CX as a global player
Cement industry entering consolidation
phase México Latin America attractive
markets México Opening of the Economy (GATT ?
TLC)
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CEMEX strengthened its position in Mexico

• Anahuac (1987) - CEMEX becomes a national
  producer
• Tolteca (1989) - consolidates the Mexican market,
  becomes global Top Ten
• On the same year, CEMEX enters the Southern US
  market

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Strategic Parameters ? Geographic diversification
Priority Level
High Priority
Look for Attractive Opportunities
Close
PROXIMITY
Opportunistic Acquisitions
Distant
IGNORE
Low
High
ATTRACTIVENESS
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Priority early 90s America the Caribbean
Priority Level
Caribbean
California
Texas
Venezuela Rest of USA
Close
Colombia
Spain Brazil
Japan
PROXIMITY
Chile
South Korea Taiwan
Argentina Thailand Malaysia Indonesia Eastern
Europe India
Distant
United Kingdom Germany France
Greece Italy
Low
High
ATTRACTIVENESS
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Spain Latin America were the cornerstones in
our growth strategy

• Acquisition of Valenciana Sanson in 1992
• Expansion in Latin America
• Venezuela (1994)
• Panama (1994)
• Dominican Republic (1995)
• Caribbean (1995)
• Colombia (1996)
• Costa Rica (1999)
• Puerto Rico (2002)
• ? Diversification target No market to represent
  more than 1/3 of the business

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Latin America continues to present growth
opportunities

• Residential and infrastructure needs characterize
  the region
• Positive drivers support its growth potential
• Favorable demographics
• Significant housing deficits
• High level of infrastructure needs
• Low penetration level in road building

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Latin America remains a region with significant
growth potential
National Cement Consumption
Spain
Per capita cement consumption (kg)
Puerto Rico
Thailand
Germany
Egypt
Panama / Costa Rica
Mexico
France
USA
Brazil
UK
Argentina
Venezuela
Colombia
Philippines
GDP per capita (USD)
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With low construction spending vs. industrialized
countries
2005 Construction Spending as a of GDP
Source Global Insight, IMF
Residential
Non-Residential
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Current Growth Strategy

• Overall Long-term Objective ? Value Creation
• Geographic Diversification
• Vertical Integration
• Profitable growth

• Discipline in Applying Acquisition Criteria
• Return in excess of our cost of capital
• Benefit from CEMEX management turnaround
  expertise
• Maintain solid capital structure

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CEMEX Today
CEMEX Capacity Cement 97 MM tons Ready-Mix
76 MM m3 Aggregates 175 MM tons

• With the RMC acquisition in 05, CEMEX solidifies
  its position as an industry leader
• Operations in over 50 countries

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CX has leading positions in the value chain
HOL Holcim CX CEMEX LFG Lafarge HEI
Heidelberg ITA Italcementi
Source JP Morgan, company reports CEMEX
includes RMC proforma 2004
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and strong financial results
Sales Billions USD 2005
ROCE 2004
EBITDA Millions USD 2005
18.9
3.9
3.6
15.3
3.5
14.1
9.2
1.8
5.9
1.3
HOL Holcim LFG Lafarge CX CEMEX HEI
Heidelberg ITA Italcementi
JP Morgan research. CEMEX RMC proforma 2004.
Holcims excludes proforma 2004 Aggregate
Industries Ambuja Cement in India. Return on
capital (ROCE) includes intangible assets and
cancelled differed charges.
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Track Record
Sales EBITDA
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