Pat McKeough responds to many personal questions about specific stocks and other topics on investment and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

This week, an Inner Circle member wanted to know more about Mexico’s giant cement maker, Cemex. The company’s share price has rebounded and Pat looks at whether Cemex is in a position to gain further from a worldwide economic recovery.

Q: Pat: What is your recommendation on Cemex, the big Mexican cement maker? The stock is moving up again. Thank you.

A: Cemex S.A.B. de C.V. (ADRs), (symbol CX on New York; www.cemex.com) is the largest cement maker in North America and the world’s third-biggest, after Lafarge of France and Switzerland’s Holcim. The stock is down from a 2007 peak of $37. However, it’s up from its low of $2.18 in October 2011.

The Mexico-based company makes and sells cement, ready-mix concrete, aggregates (sand and gravel) and clinker (powdered cement). It gets 28% of its sales from northern Europe, followed by Mexico (23%), the U.S. (21%), South America, Central America and the Caribbean (14%), Southern Europe (10%), and Asia (4%).

In the three months ended December 31, 2012, Cemex’s sales were unchanged from a year earlier, at $3.7 billion (all amounts in U.S. dollars). If you adjust for foreign exchange rates and businesses that Cemex has sold in the past year, its sales would have fallen 1%. The company raised its prices, but that was offset by lower sales volumes in Europe.

Cemex lost $488.6 million, or $0.43 per ADR, which was an improvement over the $760.8 million, or $0.68 per ADR, that it lost a year earlier.

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Infrastructure and housing help sales rise in Central and South America

The company recently completed a major refinancing plan that cut its debt and gave it more time to pay back its loans. It also raised $960 million for debt repayments by setting up its Latin American operations (excluding Mexico) as a separate company and selling some shares to the public. Cemex still owns 73.35% of this firm.

Thanks to this refinancing, its long-term debt fell 5.4%, to $13.8 billion at the end of 2012 from $14.6 billion a year earlier. That’s still a high 1.03 times Cemex’s market cap. The company also held cash of $971.0 million, or $0.89 per ADR.

Cemex’s prospects are bright in South and Central America, where its sales rose 14% in the latest quarter. The company is doing particularly well in Colombia, Panama, Nicaragua and Brazil, thanks to new infrastructure projects and housing construction.

In the Inner Circle Q&A, Pat looks at whether Cemex’s recent success in Central and South America can offset the company’s high exposure to the European market and sluggish demand in the U.S. He concludes with his clear buy-hold-sell advice on the stock.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

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