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Cemex: mastering the art of acquisitions.

Mexico's love for building things with concrete could have kept Cementos Mexicanos quite content in its role as the top producer of cement products in a burgeoning national market. Instead, the Monterrey-based Cemex went global. And it went global in a big way.

So big, in fact, that it blossomed into the third-largest cement company in the world, and the largest producer of ready mix, the product containing all the ingredients needed for concrete. With facilities in 50 countries, Cemex holds far and away the strongest international presence of any home-grown, non-state (i.e. not Pemex) Mexican company in existence.

That presence just got stronger. With the US$4.1 billion acquisition of UK cement giant RMC officially in effect as of March of this year, Cemex has increased its profit potential and its international reach (as well as its by no means modest debt, cautious observers point out).

Before the RMC deal, Cemex cash flow was essentially split 50-50 between Mexico and the rest of the world. Now some two-thirds of it is expected to come from non-Mexican soil.

The RMC merger also upped Cemex's profile in Europe, where RMC did two-thirds of its business. While Cemex was already No. 1 in Spain, its presence across Europe was mostly via trading.

"We were patient," says Hector Medina, executive vice-president of planning and finance. "But now we have good positions on into Eastern Europe."

"Patient" is not exactly the first word that comes to mind when describing the aggressive acquisition policy that has catapulted Cemex to world-class status. Taking off with a US$1.8 billion move into Spain in 1992, company President Lorenzo Zambrano refused to succumb to the then-prominent stereotype of the stay-at-home, too-risky Mexican company.

He soon moved into South America and the Caribbean. In 2000, he stunned the world by purchasing Houston-based Southdown, making Cemex the top cement producer in the United States. Asia and North Africa were next.

Making It Work Globally

Going global is one thing. Making it work is another. Observers agree that Cemex proved itself worthy by having mastered the basic efficiencies--inventory management, cultural sensitivity, just-in-time delivery, to name a few--that are make-or-break in a competitive international market.

Also, Cemex leaders like to point out that their geographic diversification isn't haphazard; rather, their international presence is strategically situated to take full advantage of economic cycles that vary from region to region.

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But what probably sets Cemex apart from the second-tier global players is the centralized structure of its sprawling empire.

"We run all our global operations as one," Medina says. "It's a back office company. We have one treasury for the world."

Connectivity and universal standards dominate the big picture. Immediate post-merger integration ensures any newly acquired company gets melded into the operations network quickly.

The eventual result, Cemex spokespersons say, is a quicker payoff of the synergies that helped drive the merger process in the first place. Both the newly acquired company and Cemex as a whole improve in efficiency and profitability. And that, in a nutshell, is the payoff of global expansion.

So what might be next for Cemex? Well, India and China are sitting there with a couple of billion people to serve. Cemex hasn't indicated any plans for those two countries, but as Medina says: "They're too big to ignore."

Kelly Arthur Garrett (kellyg@prodigy.net.mx) is a former U.S. magazine executive editor who lives and writes in Mexico City.
COPYRIGHT 2005 American Chamber of Commerce of Mexico A.C.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:COVER
Author:Garrett, Kelly Arthur
Publication:Business Mexico
Geographic Code:4EUUK
Date:Apr 1, 2005
Words:576
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