PAVE THE WAY

Mexico 2013 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Juan Romero, President of CEMEX Mexico, on the construction materials sector and reflections on global market trends.

How did CEMEX grow to become the global leader in cement production that it is today?

We have to go back to 1906 to a town called Hidalgo, in Nuevo León, where we built our first local cement production plant. During the first 80 years of CEMEX's history, the company was mostly active in the local market, and it expanded activities across the country. In 1985, when Lorenzo Zambrano took over as CEO of the company, CEMEX started focusing on cement production and it implemented a very aggressive business strategy to achieve growth. At the end of the 1980s, the company went from being a local producer to the leading company in terms of production in the entire country after acquiring Cementos Anáhuac and Cementos Tolteca. By that time, CEMEX had also started operating in the southern markets of the US. This completely changed the profile of the company for the better. Between 1991 and 1995, CEMEX started its real international expansion. In 1992 we acquired business activities in Spain, which represented our first steps in the European market. We also entered Central and South American markets such as Venezuela, where we acquired Vencemos, Panama, where we acquired Bayano, and some other Caribbean operations including the Dominican Republic. Around that time, CEMEX also entered the Asian market through the Philippines, where we acquired two companies. In this regard, I would like to stress the importance of two events in the mid-1990s that consolidated our operations worldwide: the acquisition of Balcones, a cement plant in the US, and the acquisition of Colombia's Cementos Diamante and Samper. After these acquisitions, CEMEX became the third largest cement company in the world. In the following years up until the early 2000s, the company kept focusing on expanding its activities in foreign markets, especially in Central and South America. We consolidated our activities in Asia, and we also entered the Egyptian market. In 2005, CEMEX doubled its size with the acquisition of British RMC, adding mainly 15 European markets to its portfolio. After that, in 2007, CEMEX acquired Rinker, which significantly expanded our activities in the US. In the last stage of our long journey, the company also diversified its product portfolio, adding concrete and aggregate production to its cement activity. Today, CEMEX is a global company that holds a leading position in the cement, concrete, and aggregate production and commercialization industries. We have direct operations in over 50 countries, and other commercial ties with more than 100 countries. CEMEX currently employs 44,000 people.

What role does Mexico continue to play in CEMEX's extensive global operations?

It still remains a very important part of our business activity. During the first six months of 2012, Mexico represented 23% of our overall sales activity. Mexico is the largest country we operate in. Mexico, the US, Northern Europe, and South America are the main areas of activity for CEMEX at the moment. Mexico is also an important base of operations to supply materials to neighboring countries such as Guatemala, Belize, El Salvador, as well as Paraguay, Peru, Ecuador, Chile, and even the US.

“CEMEX will keep its market-oriented focus, while trying to develop mechanisms that strengthen the position of our clients."

What role has the construction materials sector played in widening Mexico's base as an industrial hub?

The construction materials sector currently represents around 5% of Mexico's GDP. Investment in infrastructure in Mexico, which is still deficient, has played a vital role in the economic and social development of the country, and it has also attracted many foreign investors. Therefore, the construction materials sector has contributed to leveraging industrial production capacities in the country, generating job opportunities for the local population and industrializing the production of housing. However, the country still lags behind in both infrastructure and housing development.

What are the main infrastructure projects CEMEX is currently involved in, and what kind of trends have you observed in terms of project demand?

There are three main projects CEMEX has been working on, including the development and professionalization of our distribution network, as well as the development of new products that facilitate the construction process. Therefore, we have evolved into a company providing full and integral construction solutions. We have professionalized our network, especially the retail stores, via marketing, operations, and management technique training. The other main project had to do with the special emphasis we put on developing infrastructure projects through providing integral solutions to our clients. For example, last year we completed over 7.8 million sqm of road paving in Mexico, and we are trying to export this business model to other countries as well. Finally, we complemented these activities with the development of housing projects. We aim to introduce more industrialized techniques into the construction of housing. In addition, we have also focused on diversifying our product portfolio in order to provide our customers with more detailed and appropriate products for their needs. CEMEX has R&D centers in Mexico and Switzerland that constantly work to develop more efficient products from an energy and environmental point of view.

How will the new kiln at the cement plant in Puebla assist your operations?

At the moment, we are halfway through this investment project, and I believe it will contribute to expanding the company's business activity, for it will produce 10,000 tons of clinker a day. We expect to have it finished within 16 to 18 months, and the new kiln will increase the total production capacity of the Tepeac plant in Puebla to 7.4 million metric tons of cement per year. Its development also depends on the evolution of the market.

How important is it for the company to have sustainable practices in place?

Sustainability is a key issue for CEMEX, and we have always committed ourselves to having the best international standards, such as ISO 14000, when it comes to environmentally friendly practices. We constantly look for ways to reduce our CO2 emissions across the production chain through, for example, the use of alternative fuels. In fact, around 25% of CEMEX's energy consumption comes from alternative fuels, and we aim to increase this figure to up to 35% by 2015. Our Eurus project, a 250-MW wind farm, supplies approximately 25% of our Mexican plants' annual electricity needs. In other words, we have reduced CO2 emissions by 23% for each ton of cement. These are just some examples of our sustainable practices. We have also reduced lost-time injury rates from 7% in 2006 to 2.3% in 2011. We have cut CO2 emissions per cement ton and we aim to increase the use of alternative raw materials up to 12% by 2015.

What are the main growth strategies of the company at the global level?

The company will maintain its focus on developing and expanding its business in its three main areas of activity: cement, ready-mix concrete, and aggregate. CEMEX will keep its market-oriented focus, while trying to develop mechanisms that strengthen the position of our clients. In the next couple of years, we expect to experience organic growth while taking advantage of the potential opportunities the market might offer. In addition, we will continue promoting the development of infrastructure projects not only in Mexico, but at the international level too. Finally, CEMEX is committed to continue implementing a value-before-volume business strategy worldwide, as well as environmentally friendly practices.

What's your general outlook for the economy of Mexico in 2013?

There will be some changes at the political and economic level in Mexico as the new government takes over. We are optimistic about the future ahead, and we believe that the newly elected government is committed to implementing the policies and structural reforms the country needs. For example, Mexico needs to introduce structural changes and reforms in the energy sector, as well as in the fiscal and labor framework. We expect the newly elected government will find the ground to introduce such reforms and put the country on the right path to grow and develop at a faster pace. Mexico has a bright and promising future ahead, as proved by the strong position of our economy at the moment.

© The Business Year - January 2013