Cemex 1997 Annual Report Download - page 44

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38
Net debt
millions of dollars
Total debt plus derivative financing
minus cash.
The fourth quarter of 1997
marks the third consecutive
quarterly reduction of CEMEXÕ
net debt.
The Interest Coverage ratio improved to 2.41
times in 1997, as compared to 1.67 times for
1996. This coverage is calculated by dividing the
operating cash flow before lease payments and
cost of sales restatement by financial expenses.
The interest coverage ratio including taxes paid
in cash is important because it reflects the compa-
ny’s capacity to meet its obligations to third par-
ties. As of December 31, 1997, the interest cover-
age ratio including cash tax payments was 2.35
times.
INVESTMENTS AND ACQUISITIONS
In October, CEMEX announced the acquisition of
a 30% minority interest in the Philippine compa-
ny Rizal Cement Inc. for a total of US$93 million,
through its Spanish subsidiary, and signed an
agreement in which CEMEX will provide technical
assistance and consulting services to Rizal.
This investment has been recorded on the bal-
ance sheet as an investment in subsidiaries at the
end of 1997, while the return on this investment
will be reflected at the beginning of 1998.
Through its Spanish subsidiary, CEMEX orga-
nized a new subsidiary in Singapore called
CEMEX Investment Holdings Asia Pte. Ltd.,
through which this and other potential acquisi-
tions will be performed. CEMEX shall initially con-
tribute the venture capital for CEMEX Investment
Holdings, although other investors are expected to
contribute approximately 75% of the capital.
RELEVANT FINANCING AND EVENTS
During 1997, the following relevant financial
transactions were realized:
• In May, CEMEX concluded negotiating a three-
year Committed Revolving Credit Facility in the
amount of US$600 million which effectively
eliminates the risk of refinancing this amount in
the short-term. This line’s availability is com-
mitted for one year, and may be renewed at
market conditions and at the option of each
creditor for another year. As a result of this pro-
gram, the company has been able to get better
spreads in debt issues and re-negotiation.
• In August, CEMEX concluded the syndication of
Strategic investment
Rizal plant, Philippines.
This acquisition leverages the
companyÕs operational expertise,
enhances consolidated cash flow and
offers higher long-term returns.