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Storytelling del caso CEMEX-RINKERCEMEX, Rinker caseCEMEX is founded in 1906 with the opening of “Cementos Hidalgo” plant in northern Mexico (Cement cluster). It becomes “Cementos Mexicanos” in 1960. Acquiring more plants through Mexico grew significantly until 1982 with the purchase of three plants from “Cementos Guadalajara”, opening the seas for the this little big one. Lorenzo Zambrano, has been president of CEMEX since 1985. He managed to take the company to become one of the largest companies in the sector worldwide, with significant market power in regions such as Asia, Europe, Africa and Latin America.For more than a decade CEMEX acquired a firm per year, reflecting in their sales and assets, the exponential growth it had in the decades of the 90's. Its profit went from 5,000 million to 12,000 million dollars.The company had an economic strength that allowed the reinvestment of profits, reporting an increasing flow that enable him to continue planning mergers and acquisitions to large scale.This growth model was known as the “CEMEX way”, and it had a diversified funding sources and reinvested profits. Also listed on the Mexican stock exchange and NYC, opening doors to new sources of funding for mass movements reported per year.CEMEX took advantage of the liquidity from large Spanish banks in the first half of the 2000’s to fund much of its operations. Among these operations, CEMEX diversified its value chain by acquiring or developing assets, from mines extraction to final marketing.Its Economic strength and its “continued growth”, allowed the international consulting retain its investment grade, easing access to international loans and credits. This strategy allowed CEMEX to acquire or merge at least, once per year, pay part of its debts and continue to expand through other credits. Process standardization and implementation of information technology in the acquired companies, improved the performance of the internal processes of CEMEX. With improvements of the acquired companies, improved cash flow and assured reinvestment, CEMEX was provided with a major economic flexibility.For over fifteen years Zambrano's leadership led to a national cement industry to globalize and become an international firm, but it was the aggressive growth strategy through acquisitions, which led the company to face debt problems, the greatest weakness of CEMEX way.The last three acquisitions, left a mark, not easy o erase in the history of CEMEX. MMD in 2001 (2.500), RMC corporation in 2005 and Rinker in 2007. This last one, Rinker, would bring CEMEX to the top, opening the U.S. market, confirming CEMEX as the second largest cement producer in the world. For 2006, Rinker has had business in three different countries, mainly Australia and U.S.CEMEX was About to Consolidate ITS Presence in 5 continents. All that it needs to do was to acquire 68% of Rinker, an Australian company with strong presence in the US market. Nobody watched the crisis that was brewing in the American union that later quake to the ground the Mexican cement.The Katrina and Rita hurricanes hit the American country, leaving thousands of people homeless. This opened talks between American and Mexican authorities allowing for additional supply for cement for the strong domestic demand following the devastation of the Katrina and Rita hurricanesSince early 2007, things started to go wrong in the US and Europe due to lower housing construction and mortgage crisis. CEMEX salts Decreased Substantially triggering a domino effect in their debts.Banks lobbied CEMEX to pay their debts forcing him to sell its assets in Australia, which were recently acquired. This sale included more than 200 resorts in Oceania.The worst came up to the year 2009. Sales were down nearly 30%. CEMEX was in a crisis that jeopardized its free cash flow.Zambrano, CEMEX Chairman, was in trouble. With banks pushing for a debt he could not pa
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CEMEX, Rinker case
CEMEX is founded in 1906 with the opening of “Cementos Hidalgo” plant in northern Mexico (Cement cluster). It becomes “Cementos Mexicanos” in 1960. Acquiring more plants through Mexico grew significantly until 1982 with the purchase of three plants from “Cementos Guadalajara”, opening the seas for the this little big one.
Lorenzo Zambrano, has been president of CEMEX since 1985. He managed to take the company to become one of the largest companies in the sector worldwide, with significant market power in regions such as Asia, Europe, Africa and Latin America.
For more than a decade CEMEX acquired a firm per year, reflecting in their sales and assets, the exponential growth it had in the decades of the 90's. Its profit went from 5,000 million to 12,000 million dollars.
The company had an economic strength that allowed the reinvestment of profits, reporting an increasing flow that enable him to continue planning mergers and acquisitions to large scale.
This growth model was known as the “CEMEX way”, and it had a diversified funding sources and reinvested profits. Also listed on the Mexican stock exchange and NYC, opening doors to new sources of funding for mass movements reported per year.
CEMEX took advantage of the liquidity from large Spanish banks in the first half of the 2000’s to fund much of its operations. Among these operations, CEMEX diversified its value chain by acquiring or developing assets, from mines extraction to final marketing.
Its Economic strength and its “continued growth”, allowed the international consulting retain its investment grade, easing access to international loans and credits. This strategy allowed CEMEX to acquire or merge at least, once per year, pay part of its debts and continue to expand through other credits.
Process standardization and implementation of information technology in the acquired companies, improved the performance of the internal processes of CEMEX. With improvements of the acquired companies, improved cash flow and assured reinvestment, CEMEX was provided with a major economic flexibility.
For over fifteen years Zambrano's leadership led to a national cement industry to globalize and become an international firm, but it was the aggressive growth strategy through acquisitions, which led the company to face debt problems, the greatest weakness of CEMEX way.
The last three acquisitions, left a mark, not easy o erase in the history of CEMEX. MMD in 2001 (2.500), RMC corporation in 2005 and Rinker in 2007. This last one, Rinker, would bring CEMEX to the top, opening the U.S. market, confirming CEMEX as the second largest cement producer in the world.
For 2006, Rinker has had business in three different countries, mainly Australia and U.S.
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CEMEX was About to Consolidate ITS Presence in 5 continents. All that it needs to do was to acquire 68% of Rinker, an Australian company with strong presence in the US market.
Nobody watched the crisis that was brewing in the American union that later quake to the ground the Mexican cement.
The Katrina and Rita hurricanes hit the American country, leaving thousands of people homeless. This opened talks between American and Mexican authorities allowing for additional supply for cement for the strong domestic demand following the devastation of the Katrina and Rita hurricanes
Since early 2007, things started to go wrong in the US and Europe due to lower housing construction and mortgage crisis. CEMEX salts Decreased Substantially triggering a domino effect in their debts.
Banks lobbied CEMEX to pay their debts forcing him to sell its assets in Australia, which were recently acquired. This sale included more than 200 resorts in Oceania.The worst came up to the year 2009. Sales were down nearly 30%. CEMEX was in a crisis that jeopardized its free cash flow.
Zambrano, CEMEX Chairman, was in trouble. With banks pushing for a debt he could not pay, he needed to make a decision. To top it off, the peso devalued, and the shares went from $ 19 pesos to just under $ 9 pesos. Simultaneously Venezuela was expropriating the assets of the company, on its territory.
The outlook was getting worse. The global financial crisis and economic slowdown became the backdrop of the cement company.
The company then began a period of austerity which reduced its maintenance and expansion. It also reduced its staff in Rinker, a company that had put in a state of fragility to CEMEX.
Years passed and Zambrano crisis renew its vision. It was in 2011 that the payment of the expropriated assets in Venezuela allowed CEMEX to make a prepayment unsolicited by creditor banks, seeking to restore its worldwide economic reputation.
CEMEX, through 2012, it has faced a number of challenges and processes including financial restructuring to refinance its liabilities reinvent and prepare for the future. The company has developed its business concept to go from being merely a cement manufacturer to become a total solutions provider for the construction industry, as well as a generator and developer infrastructure.
The crisis not only took actives. Lorenzo Zambrano was one of the victims, who died of natural causes in Spain on 12 May 2014. After his death, Rogelio Zambrano, cousin of the
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deceased takes over the presidency of the company, and defined the business strategy as the same as Lorenzo used
Reaching consensus with banks after the restructuring and evolution, Rogelio Zambrano seeks to invest in improving the efficiency, slowing the expansion that decades before took place, and recover the lost investment grade after the 2008 crisis. CEMEX now faces the merger of Holcim and Lafarge, joining forces that have created the world's largest cement company.
In the last year, CEMEX choose to sell assets in Europe to cope with the debt that is pending. Investors did not see with good eyes and the low share price. CEMEX remains firm with the new vision he has.The recovery of the US market poses a great window of opportunity to pay off their debts and continue with its expansion plans.
CEMEX measured the risk when acquiring Rinker, but incertitude marked their business model. The decision of CEMEX was backed by the expectations of the business world of the years 2006-2007.
Bibliography
CEMEX. "Adressing the urbanization challenge." N.p., Web. <http://www.cemex.com/SustainableDevelopment/files/CemexSustainableDevelopmentReport2013.pdf>.
Donald R. Lessard and Cate Reavis. "The cemex Way." N.p., Web. <https://mitsloan.mit.edu/LearningEdge/CaseDocs/09%20039%20CEMEX%20%20Lessard.pdf>.
Dr. Gustavo Vargas Mtro. Albino Luna. "Cemex Way." N.p., Web. <http://ntu.ac.uk/nbs/document_uploads/108669.pdf>.
Gustavo Vargas y Albino Luna. "El papel de la incertidumbre de CEMEX." N.p., Web. <http://www.economia.unam.mx/publicaciones/econinforma/372/04vargasyalbino.pdf>.
"Informe Anual 2009." N.p., Web. <http://www.cemex.com/ES/Inversionistas/files/2009/InformeAnual.pdf>.
"Informe anual 2014." N.p., Web. <http://www.cemex.com/ES/Inversionistas/files/2014/CemexInformeAnual2014.pdf>.
INITE. "Caso CEMEX." N.p., Web. <http://gc.initelabs.com/recursos/files/r144r/w189w/img/Caso_Cemex_1.pdf>.
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"Tras la crisis, Cemex afina una nueva etapa | El Economista." N.p., Web. <http://eleconomista.com.mx/columnas/apuntes-corporativos/2011/11/27/tras-crisis-cemex-afina-nueva-etapa>.
