Fitch Affs CEMEX's FC, LC Ratings at 'BBB'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 29, 2004

Fitch Ratings has affirmed its senior unsecured foreign currency and local currency ratings of CEMEX, S.A. de C.V. (CEMEX) at 'BBB'. Fitch also rates CEMEX's program of domestic medium-term notes at 'AA+' (mex) and short-term notes at 'F1+'(mex) on the national scale rating. All the ratings have a Stable Rating Outlook.

The investment-grade credit ratings of CEMEX are supported by the company's strong global business position, ability to earn robust cash flows and solid financial profile. In recent years, CEMEX has mitigated operational risks by reducing exposure to individual markets and increasing the percentage of cash flows earned from investment-grade countries. CEMEX is the largest producer of cement in Mexico, Spain and the United States, markets that together account for more than 85% of consolidated EBITDA.

The diversity and scale of operations allows the company to weather cyclical downturns in individual countries and provide worldwide market intelligence to transfer cement and clinker from areas with excess capacity to those with a shortage. In CEMEX's markets with the exception of the U.S. and Spain, sales of cement are primarily made in bag form to small contractors, which is highly profitable compared to bulk form. As a result of these competitive advantages, CEMEX's profit margins are among the highest in the cement industry.

CEMEX's favorable performance in 2003 was an important turnaround from 2002, when weak economic activity affected several of the company's markets. During the year, revenues increased by 9% primarily due to volume gains in Mexico and Spain, the appreciation of the Euro against the dollar, the incorporation of the Puerto Rican operations and the recovery of exports from Venezuela. In the United States, the cement market was affected by weak spending on public works and lower private investment. However, demand began to improve during the second half of the year driven by the recovery of public infrastructure spending.

Revenues and EBITDA should grow in 2004 due to volume gains in most of CEMEX's markets, profitability gains on cost reductions and optimization, higher capacity utilization and lower energy costs. Importantly, in 2003 CEMEX completed a conversion of energy sources in Mexico from fuel oil to pet coke, a by-product of petroleum processing with lower cost and price volatility, and which now accounts for close to 90% of all energy needs in Mexico. At a consolidated level, pet coke now accounts for 40% of all of CEMEX's energy needs, compared to 23% in 2000.

In recent years, CEMEX has focused on strengthening its capital structure through the reduction of debt and funding costs and the extension of the debt maturity profile. Financing flexibility has also been enhanced via a continued access to a diverse range of funding sources worldwide in various currencies and markets. Several refinancing transactions took place during 2003, helping CEMEX strengthen and simplify its capital structure. These transactions included a $1.15 billion equivalent loan in multi-currency tranches and a non-dilutive equity offering for $660 million, which proceeds were applied to unwind certain forward contracts with banks, to purchase approximately 87% of Cemex's appreciation warrants and to repay the outstanding $650 million of preferred equity. Cemex also issued medium-term notes in the domestic market equivalent to a total of $317 million and CEMEX Spain privately-placed dollar-denominated notes for $400 million.

Refinancing activity should continue to lower borrowing costs and to extend the debt maturity profile. CEMEX will also continue to focus on using free cash flow to deleverage its capital structure to the extent potential acquisitions do not present an attractive alternative for the use of cash. At Dec. 31, 2003, CEMEX had $1.3 billion of short-term debt, $4.5 billion of long-term debt and $66 million of debt like obligations (puttable capital securities). The maturity schedule is well spread out from now until 2015 at CEMEX Holding as well as at CEMEX Spain. At Dec. 31, 2003, CEMEX's liquidity was strong with $291 million of cash and marketable securities and approximately $800 million of committed credit lines.

CEMEX has remained committed to maintaining or enhancing credit-protection measures. Credit-protection measures improved in 2003 driven by higher EBITDA as well as by debt-reduction. In 2003, CEMEX earned $2.1 billion of EBITDA and US$1.1 billion in free cash flow, of which approximately two-thirds of it (before foreign exchange conversion effects) was used for the reduction of net debt. Correspondingly, in 2003 the ratio of net debt to EBITDA improved to 2.7 times (x) from 3.4x in 2002 and the ratio of EBITDA to interest expense plus preferred dividends reached 5.3x, allowing the company to meet its target net debt-to-EBITDA ratio of 2.7x and reach an EBITDA-to-interest expense ratio of 5x or greater.

CEMEX will continue to earn strong free cash flow from operations as maintenance capital expenditure requirements are relatively small. Fitch believes that this will allow the company to continue to participate in the consolidation of the cement industry without jeopardizing its investment-grade credit rating. Any cash flow that is not needed for acquisitions or to keep debt levels in line with pre-established targets is expected to be distributed through dividends or used to repurchase shares.

The foreign currency credit rating of Cemex exceeds the sovereign foreign currency rating of Mexico ('BBB-' by Fitch Ratings) because debt obligations at the Mexican holding company level can be supported by excess cash flows from its indirect subsidiary, Cemex Spain, in the event of foreign currency transfer restrictions in Mexico. Cemex Spain is an operating company in Spain and also serves as a holding company for the remaining of CEMEX's international operations. During 2003, Cemex Spain's consolidated free cash flow was approximately US$475 million while interest expense obligations reached US$140 million. Thus, significant operating free cash remained as potential support of the interest expense obligations of US$241 million at the Mexican holding company level.

Fitch Ratings deems Cemex and Cemex Spain as equivalent credits, since the financial strength, operating liquidity and financing structure of both entities would allow them to support each other in the event of a stress scenario. As a result, debt obligations of Cemex Spain are also rated 'BBB' by Fitch Ratings.

CEMEX, S.A. de C.V is a Mexican controlling entity or holding company with operating subsidiaries in four continents, whose principal activity is the production, distribution, marketing and sale of cement, ready-mix aggregates and clinker. With operations 32 countries and 81 million metric tons of production capacity, CEMEX is the world's third-largest producer of cement and one of the largest traders of cement. Cemex Spain is an operating company in Spain and also serves as a holding company for most of CEMEX's non-Mexican operations.