Subject category:
Finance, Accounting and Control
Published by:
IBS Research Center
Length: 12 pages
Data source: Published sources
Topics:
Cemex; Mexico; Cement industry; Global cement production; World cement demand; The major players in the world cement industry; Weighted average cost of capital; Valenciana and Sanson; Investment grade country; Diverse funding sources; Southdown; Financial leverage and operating leverage; Operating free cash flow; Post merger integration (PMI); Systematic risk
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Abstract
After having secured its leadership in Mexico, Cemex began to look for opportunities beyond Mexican borders. By the end of 2000 Cemex became the third largest cement company in the world. The growth of Cemex may be attributed to its inorganic growth strategy. Geographical diversification made Cemex reduce its volatility of cash flow, manage its capital from the diverse source of finance and reduce its borrowing cost by investing in investment grade countries. All these helped Cemex manage its overall risk very efficiently and reduce its cost of capital. On the flip side, its risk and cost of capital due to cross border business activities were difficult to ascertain. So the question remained whether Cemex could insulate risk by the way of geographical diversification and thus reduce the cost of capital?
About
Abstract
After having secured its leadership in Mexico, Cemex began to look for opportunities beyond Mexican borders. By the end of 2000 Cemex became the third largest cement company in the world. The growth of Cemex may be attributed to its inorganic growth strategy. Geographical diversification made Cemex reduce its volatility of cash flow, manage its capital from the diverse source of finance and reduce its borrowing cost by investing in investment grade countries. All these helped Cemex manage its overall risk very efficiently and reduce its cost of capital. On the flip side, its risk and cost of capital due to cross border business activities were difficult to ascertain. So the question remained whether Cemex could insulate risk by the way of geographical diversification and thus reduce the cost of capital?