October 24, 2019 / 12:40 PM / 21 days ago

UPDATE 3-Weak Mexico construction crimps Cemex's sales, shares dive

(Adds background on Mexican construction)

MEXICO CITY, Oct 24 (Reuters) - Mexican cement maker Cemex SAB de CV on Thursday posted a 4% decline in net sales for the third quarter as it grappled with a slowdown in Mexico’s construction market, and the company’s shares tumbled even though net profit jumped 11%.

Lower financial costs helped boost profits, but those gains were overshadowed by the drop in sales, led by a 16% decrease in Mexico, the sharpest drop by far of the markets where Cemex operates.

The Monterrey-based company’s shares were down 7% on Thursday and have shed more than 20% of their value so far this year.

Mexico’s construction sector, which represents 7.5% of gross domestic product, has seen output contract for 14 straight months, according to official figures available through August.

Cemex’s operating EBITDA, a closely watched measure of profitability, dropped by 24% in Mexico during the quarter.

The transition to the administration of President Andres Manuel Lopez Obrador, who took office in December, has affected infrastructure activity, Cemex said.

“In Mexico, we believe demand for our products is bottoming out and we are cautiously optimistic on renewed activity going forward, given the expected announcement of a new infrastructure program,” Cemex Chief Executive Officer Fernando Gonzalez said in a statement.

Cemex lowered its guidance for sales volumes of cement, concrete and aggregates for the rest of the year but said it was still too early to offer a projection for 2020.

When adjusted for foreign exchange fluctuations, net sales contracted by 1%, Cemex said.

The company saw net sales of $3.5 billion in the quarter as volumes also fell in Asia, the Middle East and Africa. Price increases eased the blow, Cemex said in a report accompanying its results.

The company’s performance in the United States was a bright spot, with net sales jumping 5%. Though hurricane preparations hit volumes in the southeast, strong state transportation spending and a flurry of residential activity boosted sales, Cemex said.

The company’s subsidiary Cemex Latam Holdings said in a filing to Colombia’s financial regulator it had made a net loss of $4 million in the third quarter, compared to a net profit of $19 million in the same period last year, because of lower sales and larger costs.

Cemex Latam said its sales were down 12% between July and September, compared with the third quarter of 2018, to $245 million. (Reporting by Julia Love, Noe Torres and Sharay Angulo in Mexico City, additional reporting by Nelson Bocanegra in Bogota; Editing by Bernadette Baum, Chizu Nomiyama and David Gregorio)

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