Cemex 2013 Annual Report Download - page 95
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Please find page 95 of the 2013 Cemex annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notes to the consolidated financial statements
AsofDecember31,2012,asdescribedinnote23C,CEMEXhadgrantedaguaranteeforanotionalamountofapproximatelyUS$360,
inconnectionwithputoptiontransactionsonCEMEX’sCPOsenteredintobyCitibankwithaMexicantrustthatCEMEXestablishedon
behalfofitsMexicanpensionfundandcertainofCEMEX’sdirectorsandcurrentandformeremployeesinApril2008,whichfairvalueasof
December31,2012,netofdepositsinmarginaccounts,representedaliabilityofapproximatelyUS$58($740).BetweenJanuaryandApril
2013,thenotionalamountoftheguaranteewasgraduallyunwound.Changesinfairvaluewererecognizedinthestatementsofoperations
within“Othernancialincome(expense),net,”representingagainofapproximatelyUS$22($284)in2013,againofapproximatelyUS$95
($1,198)in2012andalossofapproximatelyUS$92($1,145)in2011.AsofDecember31,2012,cashdepositsinmarginaccounts
associatedwiththistransactionwereapproximatelyUS$76($975).
16E) Risk management
Sincethebeginningof2009,withtheexceptionofthecappedcalltransactionsenteredintoinMarch2010andMarch2011inconnection
withCEMEX’s2015ConvertibleNotes,2016ConvertibleNotesand2018ConvertibleNotes(notes16B,16Dand26),CEMEXhasbeen
reducingtheaggregatenotionalamountofitsderivatives,therebyreducingtheriskofcashmargincalls.Thisinitiativehasincludedclosing
substantiallyallnotionalamountsofderivativeinstrumentsrelatedtoCEMEX’sdebt(currencyandinterestratederivatives),whichwas
nalizedduringApril2009.TheFacilitiesAgreementsignicantlyrestrictsCEMEX’sabilitytoenterintoderivativetransactions.
Interest rate risk
Interestrateriskistheriskthatthefairvalueorfuturecashowsofanancialinstrumentwilluctuatebecauseofchangesinmarketinterest
rates,whichonlyaffectsCEMEX’sresultsifthexed-ratelong-termdebtismeasuredatfairvalue.
AllofCEMEX’sxed-ratelong-termdebtiscarriedatamortizedcostandthereforeisnotsubjecttointerestraterisk.CEMEX’sexposureto
theriskofchangesinmarketinterestratesrelatesprimarilytoitslong-termdebtobligationswithoatinginterestrates.AsofDecember31,
2013and2012,CEMEXwassubjecttothevolatilityofoatinginterestrates,which,ifsuchratesweretoincrease,mayadverselyaffect
itsnancingcostandincreaseitsnetloss.CEMEXmanagesitsinterestrateriskbybalancingitsexposuretoxedandvariablerateswhile
attemptingtoreduceitsinterestcosts.
AsofDecember31,2013and2012,approximately38%and35%,respectively,ofCEMEX’slong-termdebtwasdenominatedinoating
ratesataweightedaverageinterestrateofLIBORplus458basispointsin2013and456basispointsin2012.AsofDecember31,2013
and2012,ifinterestratesatthatdatehadbeen0.5%higher,withallothervariablesheldconstant,CEMEX’snetlossfor2013and2012
wouldhaveincreasedbyapproximatelyUS$27($354)andUS$25($315),respectively,asaresultofhigherinterestexpenseonvariable
ratedenominateddebt.
Foreign currency risk
Foreigncurrencyriskistheriskthatthefairvalueoffuturecashowsofanancialinstrumentwilluctuatebecauseofchangesinforeign
exchangerates.CEMEX’sexposuretotheriskofchangesinforeignexchangeratesrelatesprimarilytoitsoperatingactivities.Duetoits
geographicdiversication,CEMEX’srevenuesandcostsaregeneratedandsettledinvariouscountriesandindifferentcurrencies.Forthe
yearendedDecember31,2013,approximately20%ofCEMEX’snetsales,beforeeliminationsresultingfromconsolidation,weregenerated
inMexico,20%intheUnitedStates,7%intheUnitedKingdom,7%inGermany,6%inFrance,6%intheRestofNorthernEuropegeographic
segment,2%inSpain,3%inEgypt,5%intheRestofMediterraneansegment,6%inColombia,7%intheRestofSouthAmericaandthe
Caribbeansegment,4%inAsiaand7%fromCEMEX’sotheroperations.
As of December 31, 2013, approximately 86% of CEMEX’s nancial debt was Dollar-denominated, approximately 13% was Euro-
denominated,approximately1%wasPeso-denominatedandimmaterialamountsweredenominatedinothercurrencies;therefore,CEMEX
hadaforeigncurrencyexposurearisingfromtheDollar-denominatednancialdebt,andtheEuro-denominatednancialdebt,versusthe
currenciesinwhichCEMEX’srevenuesaresettledinmostcountriesinwhichitoperates.CEMEXcannotguaranteethatitwillgenerate
sufcientrevenuesinDollarsandEurosfromitsoperationstoservicetheseobligations.AsofDecember31,2013and2012,CEMEXhad
notimplementedanyderivativenancinghedgingstrategytoaddressthisforeigncurrencyrisk.
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