Table of Contents

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-161787

The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion, dated September 8, 2009

Preliminary prospectus supplement

(To prospectus dated September 8, 2009)

1,200,000,000 Ordinary Participation Certificates

CEMEX, S.A.B. de C.V.

directly or in the form of American Depositary Shares

We are offering 1,200,000,000 Ordinary Participation Certificates (Certificados de Participación Ordinaria), or CPOs, directly or in the form of American depositary shares, or ADSs. Each CPO represents two shares of our Series A common stock, with no par value, and one share of our Series B common stock, with no par value. Each ADS represents ten CPOs.

Of the CPOs that are being offered, 900,000,000 CPOs are being offered (directly or in the form of ADSs) in the United States and in other countries outside Mexico and 300,000,000 CPOs are being offered in a concurrent public offering in Mexico by means of a separate Spanish-language prospectus pursuant to Mexican law requirements that contains information that is substantially similar to the information included in this prospectus supplement. 595,000,000 of the CPOs being offered in this offering and in the concurrent offering in Mexico are being sold on our behalf by three of our subsidiaries, Petrocemex, S.A. de C.V., Centro Distribuidor de Cemento, S.A. de C.V. and Empresas Tolteca de México, S.A. de C.V.

Our ADSs are listed on the New York Stock Exchange, or NYSE, under the symbol “CX,” and our CPOs are listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.), or BMV, under the symbol “CEMEX.CPO.” On September 4, 2009, the last reported sales price of our ADSs on the NYSE was U.S.$12.43 per ADS and the last reported sales price of our CPOs on the BMV was Ps16.63 per CPO (U.S.$1.24 per CPO at an exchange rate of Ps13.38 per U.S. dollar).

 

		Per CPO		Per ADS		Total
Public offering price		U.S.$		U.S.$		U.S.$
Underwriting discounts and commissions		U.S.$		U.S.$		U.S.$
Proceeds to us, before expenses		U.S.$		U.S.$		U.S.$

We have granted options to the international and Mexican underwriters to purchase up to 180,000,000 additional CPOs (in the case of the international underwriters up to 135,000,000 additional CPOs directly or in the form of ADSs, and in the case of the Mexican underwriters up to 45,000,000 additional CPOs) to cover over-allotments, if any, within 30 days from the date of this prospectus supplement.

Investing in our CPOs and ADSs involves several risks. See “Risk factors” beginning on page S-14 of this prospectus supplement.

Our CPOs and the underlying shares are registered with the Mexican National Securities Registry (Registro Nacional de Valores), or RNV, maintained by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), or CNBV. Registration at the RNV does not imply a certification as to the investment quality of the securities, the solvency of the issuer or the accuracy or completeness of the information contained in this prospectus supplement and the accompanying prospectus, and such registration does not ratify or validate any acts or omissions, if any, undertaken in contravention of applicable law.

Neither the U.S. Securities and Exchange Commission, or SEC, nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.

We expect that delivery will be made to investors on or about             , 2009 in book-entry form, in the case of the ADSs through The Depository Trust Company and in the case of the CPOs through S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V.

Global Coordinators

 

J.P. Morgan		Citi		Santander Investment		BBVA

 

 

Joint Bookrunning Managers

 

J.P. Morgan				Citi				Santander Investment
BBVA		BNP PARIBAS				HSBC		RBS

 

 

BofA Merrill Lynch

Barclays Capital

Calyon Securities (USA) Inc.

ING Wholesale

Lazard Capital Markets

Scotia Capital

                    , 2009

---

Table of Contents

Table of contents

Prospectus supplement

 

Where you can find more information		S-ii
Incorporation by reference		S-ii
Cautionary statement regarding forward-looking statements		S-iii
Market data		S-iv
Summary		S-1
The offering		S-11
Risk factors		S-14
Use of proceeds		S-34
Mexican Peso exchange rates		S-35
Market price information		S-36
Capitalization		S-37
Selected consolidated financial information		S-38
Management’s discussion and analysis of financial condition and results of operations for the six month periods ended June 30, 2008 and 2009		S-43
Outlook for our major markets		S-81
Recent developments		S-84
Underwriting		S-102
Legal matters		S-110
Experts		S-110
Financial statements		F-1

Prospectus

 

About this prospectus		1
Where you can find more information		1
Incorporation by reference		2
Enforceability of civil liabilities		2
Cautionary statement regarding forward-looking statements		3
Market data		3
About CEMEX, S.A.B. de C.V.		3
Use of proceeds		5
Description of common stock		6
Description of CPOs		17
Description of ADSs		21
Validity of securities		31
Experts		31

 

S-i

---

Table of Contents

We have not authorized any dealer, salesperson or other person to give any information or to make any representations other than those contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. You should not rely on any unauthorized information. This prospectus supplement and the accompanying prospectus do not offer to sell or buy any securities in any jurisdiction in which it is unlawful. The information in this prospectus supplement is current as of the date on the cover.

CEMEX, S.A.B. de C.V. is incorporated as a publicly traded stock corporation with variable capital (sociedad anónima bursátil de capital variable) organized under the laws of the United Mexican States, or Mexico. Except as the context otherwise may require, references in this prospectus supplement to “CEMEX,” “we,” “us” or “our” are to CEMEX, S.A.B. de C.V., its consolidated subsidiaries and, except for accounting purposes, its non-consolidated affiliates.

References in this prospectus supplement to “U.S.$” and “Dollars” are to U.S. Dollars, references to “€” and “Euros” are to Euros, references to “Pounds” are to British Pounds, references to “Yen” are to Japanese Yen, references to “AUD$” are to Australian Dollars and, unless otherwise indicated, references to “Ps,” “Mexican Pesos” and “Pesos” are to Mexican Pesos. The Dollar amounts provided below and, unless otherwise indicated elsewhere in this prospectus supplement, are translations of Peso amounts at an exchange rate of Ps13.18 to U.S.$1.00, the CEMEX accounting rate as of June 30, 2009. However, in the case of transactions conducted in Dollars, we have presented the Dollar amount of the transaction and the corresponding Peso amount that is presented in our consolidated financial statements. These translations have been prepared solely for the convenience of the reader and should not be construed as representations that the Peso amounts actually represent those Dollar amounts or could be converted into Dollars at the rate indicated. From June 30, 2009 through September 4, 2009, the Peso depreciated by approximately 1% against the Dollar, based on the noon buying rate for Pesos as published by the U.S. Federal Reserve Bank of New York.

Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Where you can find more information

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available over the Internet at the SEC’s website at http://www.sec.gov. Our ADSs are listed on the New York Stock Exchange under the symbol “CX.” These reports and other information can also be read at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

Incorporation by reference

The SEC allows us to “incorporate by reference” information into this prospectus supplement. This means that we can disclose important information to you by referring you to another document filed by us with the SEC. Any information referenced this way is considered part of this

 

S-ii

---

Table of Contents

prospectus supplement, and any information that we file after the date of this prospectus supplement with the SEC will automatically update and supersede this information. We incorporate by reference into this prospectus supplement the following documents:

 

•

our annual report on Form 20-F for the year ended December 31, 2008, filed with the SEC on June 30, 2009;

 

•

our report on Form 6-K, filed with the SEC on July 7, 2009; and

 

•

the description of our ADSs, CPOs, series A shares and series B shares contained in Amendment No. 1 to our registration statement on Form 8-A/A (SEC File No. 1-14946), filed with the SEC on July 1, 2005, and any amendment or report filed for the purpose of updating such descriptions.

In addition, any future filings on Form 20-F made with the SEC under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, after the date of this prospectus supplement and prior to the termination of the offering of the securities made under this prospectus supplement, and any future reports on Form 6-K filed by us with the SEC during such period or portions thereof that are identified in such Forms 6-K as being incorporated into this prospectus supplement, shall be considered to be incorporated in this prospectus supplement by reference and shall be considered a part of this prospectus supplement from the date of filing of such documents.

We will provide, without charge upon written or oral request, a copy of any and all of the information that has been incorporated by reference in this prospectus supplement and that has not been delivered with this prospectus supplement. Requests should be directed to Eduardo Rendón, Investor Relations, CEMEX, S.A.B. de C.V., Av. Ricardo Margáin Zozaya #325, Colonia Valle del Campestre, Garza García, Nuevo León, México 66265, Tel: +52-81-8888-4292 or toll-free: 1-877-729-6973 (1-877-7CX-NYSE).

Cautionary statement regarding forward-looking statements

This prospectus supplement, including the information incorporated by reference, contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “should,” “could,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential” and “intend” or other similar words. These forward-looking statements reflect our current expectations and projections about future events based on our knowledge of present facts and circumstances and assumptions about future events. These statements necessarily involve risks and uncertainties that could cause actual results to differ materially from our expectations. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could have an impact on us or our subsidiaries, include:

 

•

the cyclical activity of the construction sector;

 

•

competition;

 

S-iii

---

Table of Contents

•

general political, economic and business conditions;

 

•

our ability to satisfy our obligations under the financing agreement recently entered into with our major creditors;

 

•

weather conditions;

 

•

natural disasters and other unforeseen events; and

 

•

the other risks and uncertainties described under “Risk Factors” in our most recent Annual Report on Form 20-F, which is incorporated by reference in this prospectus supplement.

Readers are urged to read the prospectus and this entire prospectus supplement, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect our business. The information contained or incorporated by reference in this prospectus supplement is subject to change without notice, and we are not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by us with the SEC.

Market data

This prospectus supplement and the documents incorporated in this prospectus supplement by reference also include statistical data regarding the production, distribution, marketing and sale of cement, ready-mix concrete, clinker and aggregates. We generated some of these data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified these data nor sought the consent of any organizations to refer to their reports in this prospectus supplement and the documents incorporated by reference.

 

S-iv

---

Table of Contents

 

S-1

---

Table of Contents

 

S-2

---

Table of Contents

 

S-3

---

Table of Contents

 

S-4

---

Table of Contents

 

S-5

---

Table of Contents

 

S-6

---

Table of Contents

 

S-7

---

Table of Contents

 

S-8

---

Table of Contents

 

S-9

---

Table of Contents

 

S-10

---

Table of Contents

 

S-11

---

Table of Contents

 

S-12

---

Table of Contents

 

S-13

---

Table of Contents

Risk factors

You should carefully consider the following risk factors and all the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus before making an investment decision regarding our securities. The following risks are not the only risks we face. The importance given to the following risk factors may change in the future, and other factors not disclosed below may have an impact on us in the future.

The financing agreement contains several restrictive covenants and limitations that could significantly affect our ability to operate our business.

The financing agreement requires us, beginning June 30, 2010, to comply with several financial ratios and tests, including a consolidated coverage ratio of EBITDA to consolidated interest expense of not less than (i) 1.75:1 for each semi-annual period through the period ending June 30, 2011, (ii) 2.00:1 for each semi-annual period through the period ending December 31, 2012 and (iii) 2.25:1 for the remaining semi-annual periods to December 31, 2013. In addition, the financing agreement allows us a maximum consolidated leverage ratio of total debt to EBITDA for each semi-annual period not to exceed 7.75:1 for the period ending June 30, 2010 and decreasing gradually for subsequent semi-annual periods to 3.50:1 for the period ending December 31, 2013. Pursuant to the financing agreement, we are also prohibited from making aggregate capital expenditures in excess of (i) U.S.$600 million (plus an additional U.S.$50 million contingency to account for currency fluctuations and certain additional costs and expenses) for the year ended December 31, 2009, (ii) U.S.$700 million for the year ended December 31, 2010 and (iii) U.S.$800 million for each year thereafter until the debt under the financing agreement has been repaid in full.

We are also subject to a number of negative covenants that, among other things, restrict our ability to: (i) create liens; (ii) incur additional debt; (iii) change our business or the business of any obligor or material subsidiary; (iv) enter into mergers; (v) enter into agreements that restrict our subsidiaries’ ability to pay dividends or repay intercompany debt; (vi) acquire assets; (vii) enter into or invest in joint venture agreements; (viii) dispose of certain assets, including those of CEMEX España, S.A. and its material operating subsidiaries; (ix) grant additional guarantees or indemnities; (x) declare or pay cash dividends and distributions to shareholders, or make other payments; (xi) issue shares; (xii) enter into certain derivatives transactions; and (xiii) exercise any call option on the perpetual debentures we issued through special purpose vehicles.

The financing agreement also contains a number of affirmative covenants that, among other things, require us to (i) provide periodic financial information to our lenders, (ii) issue common equity or equity-linked securities for net cash proceeds of at least U.S.$1 billion prior to June 30, 2010, or, if we are not able to issue such securities by that date and participating creditors representing at least 25% of all exposures under the financing agreement so demand at any time prior to December 31, 2010, issue equity and/or debt securities for a total amount of net cash proceeds equal to U.S.$1 billion less the amount of net cash proceeds received from any issuance prior to June 30, 2010, and (iii) subject to limited exceptions, restrict cash payment of dividends and share redemptions. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing—Covenants.” Pursuant to the financing agreement, however, a number of those covenants and restrictions will automatically cease to apply if (i) we receive an investment-grade rating from two of S&P, Moody’s and Fitch; (ii) we reduce the exposures under the financing agreement by at least 50.96% (approximately U.S.$7.6 billion) from current debt

 

S-14

---

Table of Contents

levels; (iii) our consolidated leverage ratio for the two most recently completed semi-annual testing periods is less than or equal to 3.5:1; and (iv) no default under the financing agreement is continuing. Restrictions that will cease to apply when we satisfy such conditions include the capital expenditure limitations mentioned above, any applicable margin increases that were due to a failure to meet amortization targets and several negative covenants, including limitations on our ability to declare or pay cash dividends and distributions to shareholders, limitations on our ability to repay existing financial indebtedness, certain asset sale restrictions, the quarterly free cash flow sweep, certain mandatory prepayment provisions and restrictions on exercising our perpetual debentures call options (provided that participating creditors will continue to receive the benefit of any restrictive covenants that other creditors receive relating to other financial indebtedness of ours in excess of U.S.$75 million). At such time, several baskets and caps relating to negative covenants will also increase, including permitted financial indebtedness, permitted guarantees and limitations on liens. However, there can be no assurance that we will be able to meet the conditions for these restrictions to cease to apply prior to the final maturity date under the financing agreement. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing—Covenant reset date.”

The financing agreement contains events of default, some of which may be outside our control; such events of default include defaults based on (i) non-payment of principal, interest, or fees when due; (ii) material inaccuracy of representations and warranties; (iii) breach of covenants; (iv) bankruptcy or insolvency of CEMEX, any borrower under an existing facility or any other of our material subsidiaries; (v) a cross-default in relation to financial indebtedness in excess of U.S.$50 million; (vi) a change to the ownership of any of our subsidiary obligors under the financing agreement, unless the proceeds of such disposal are used to prepay financing agreement debt; (vii) enforcement of the share security; (viii) final judgments or orders in excess of U.S.$50 million that are neither discharged nor bonded in full within 60 days thereafter; (ix) any material adverse change arising in the financial condition of CEMEX which greater than 66.67% of the participating creditors determine would result in our failure to perform payment obligations under the existing facilities or the financing agreement; (x) failure to comply with laws; and (xi) failure to satisfy the conditions subsequent contained in the financing agreement. If an event of default occurs and is continuing, upon the authorization of 66.67% of the participating creditors, the creditors have the ability to accelerate all outstanding amounts due under the existing facilities. Acceleration is automatic in the case of insolvency. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing—Events of default.”

Some of the restrictions and limitations contained in the financing agreement may limit our planning flexibility and our ability to react to changes in our business and the industry, and may place us at a competitive disadvantage compared to competitors who may have less restrictions or limitations. There can be no assurance that we will be able to comply with the restrictive covenants and limitations contained in the financing agreement. Further, there can be no assurances that, because of the existence of such limitations, particularly limitations in respect of the incurrence of capital expenditures, we will be able to maintain our operating margins and deliver financial results comparable to the results obtained in the past under similar economic conditions. Our failure to comply with such covenants and limitations could result in an event of default, which could materially and adversely affect our business and financial condition.

 

S-15

---

Table of Contents

The interest rate of our debt included in the financing agreement may increase if we do not comply with certain requirements or meet certain amortization targets.

Conditional interest rate increases that may occur with respect to our financial indebtedness included in the financing agreement could adversely affect our business. In general, our existing bank facilities that are included in the financing agreement bear interest at either a base rate plus an applicable margin, a LIBOR rate plus an applicable margin or a Euribor rate plus an applicable margin. The base rates, LIBOR rates and Euribor rates applicable to our existing bank facilities remain in place, and under the financing agreement the applicable margin for each bank facility is set at 4.5% per annum, which is subject to adjustment as follows:

 

•

If we do not issue common equity for net cash proceeds of at least U.S.$1 billion before June 30, 2010 we shall pay a fee in an amount equal to 0.75% of the amount of each participating creditor’s exposure as of August 14, 2009 and the applicable margin will increase by an additional 0.75% per annum thereafter.

 

•

If we are unable to repay at least 31.85%, approximately U.S.$4.8 billion, of the aggregate initial exposures of the participating creditors between the closing of the financing agreement and December 31, 2010, the applicable margin will increase by an additional 0.5% or 1.0% per annum, depending upon the difference between such target amortization and the actual amortizations paid as of December 31, 2010.

 

•

If we are unable to repay at least 50.96%, approximately U.S.$7.6 billion of the aggregate initial exposures of the participating creditors between the closing of the financing agreement and December 31, 2011, the applicable margin will increase by an additional 0.5% or 1.0% per annum, depending upon the difference between such target amortization and the actual amortizations paid as of December 31, 2011.

The new private placement debt included in the financing agreement bears interest at a rate of 8.91% (except for the debt denominated in Yen, which bears a corresponding rate of 6.625%) per annum. The interest rate on the new private placement debt is subject to the same adjustments as described above. Interest rate increases due to a failure to meet amortization targets will cease to apply on the Covenant Reset Date. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing—Covenant reset date.” There can be no assurance that we will be able to satisfy the requirements necessary to prevent these pricing increases.

We have a substantial amount of debt including a significant portion of debt not subject to the financing agreement.

As of June 30, 2009, we had approximately Ps253,715 million (U.S.$19,250 million) of total debt, not including approximately Ps39,856 million (U.S.$3,024 million) of perpetual debentures issued by special purpose vehicles, which are not accounted for as debt or included in our financial statements under MFRS but are considered to be debt under U.S. GAAP. Of our total debt as of June 30, 2009, approximately Ps57,320 million (U.S.$4,349 million) is not subject to the financing agreement and remains payable pursuant to original maturities, with an aggregate principal amount of approximately Ps9,898 million (U.S.$751 million) maturing in the second half of 2009, and Ps6,669 million (U.S.$506 million), Ps9,753 million (U.S.$740 million), Ps10,821 million

 

S-16

---

Table of Contents

(U.S.$821 million), Ps185 million (U.S.$14 million), Ps17,319 million (U.S.$1,314 million) and Ps2,675 million (U.S.$203 million) maturing during 2010, 2011, 2012, 2013, 2014 and after 2014, respectively.

The financing agreement includes semiannual amortization requirements, which we intend to meet using funds from a variety of sources, including free cash flow from our operations and net cash proceeds from asset sales as well as debt and/or equity security issuances, the receipt of which will trigger mandatory prepayments. Of our total debt as of June 30, 2009 (approximately pro forma Ps254,414 million (U.S.$19,303 million), which does not include our perpetual debentures), including our debt not subject to the financing agreement (approximately Ps57,320 million (U.S.$4,349 million)) and after giving pro forma effect to the extended amortization requirements contained in the financing agreement, we had debt with an aggregate principal amount of approximately Ps16,104 million (U.S.$1,222 million) maturing during the second half of 2009, Ps38,065 million (U.S.$2,888 million) maturing during 2010, Ps37,369 million (U.S.$2,835 million) maturing during 2011, Ps21,224 million (U.S.$1,610 million) maturing during 2012, Ps31,567 million (U.S.$2,395 million) maturing during 2013 and Ps110,085 million (U.S.$8,353 million) maturing during 2014 and thereafter.

Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt, and fund working capital and planned capital expenditures) with operating cash flow, borrowings under credit facilities, proceeds of debt and equity offerings and proceeds from asset sales. The global stock and credit markets in the last year and a half have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective and outstanding debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for financings materially less attractive, and at various times have resulted in the unavailability of certain types of financing. This volatility and illiquidity has materially and adversely affected a broad range of fixed income securities. As a result, the market for fixed income securities has experienced decreased liquidity, increased price volatility, credit downgrade events and increased defaults. Global equity markets have also been experiencing heightened volatility and turmoil, with issuers exposed to the credit markets being most seriously affected. These factors and the continuing market disruption have had, and may continue to have, an adverse effect on us, including on our ability to meet the amortization requirements under the financing agreement or to refinance indebtedness and future maturities of existing indebtedness.

If the global recession deepens and our operating results worsen significantly or if we are unable to complete our planned divestitures and our cash flow or capital resources prove inadequate, we could face liquidity problems and may not be able to comply with our upcoming principal payment maturities under our indebtedness.

If we or our subsidiaries are unable to comply with the provisions of our debt instruments (including the financing agreement), and are unable to obtain a waiver or amendment, the indebtedness outstanding under such debt instruments could be accelerated. Acceleration of these debt instruments would have a material adverse effect on our business and financial condition.

 

S-17

---

Table of Contents

As part of our financing agreement, we pledged the capital stock of the subsidiaries that represent substantially all of our business as collateral to secure our payment obligations under the financing agreement and under other financing arrangements.

As part of our financing agreement, we pledged or transferred to trustees under security trusts, as collateral, the capital stock of CEMEX México, S.A. de C.V., Centro Distribuidor de Cemento, S.A. de C.V., Mexcement Holdings S.A. de C.V., Corporación Gouda S.A. de C.V., Sunward Investments B.V., Sunward Acquisitions N.V., Sunward Holdings B.V., CEMEX Dutch Holdings B.V., New Sunward Holding B.V., CEMEX Trademarks Holdings Ltd. and CEMEX España, S.A. as collateral to secure our payment obligations under the financing agreement and under certain other financing arrangements with a principal amount of Ps63,772 million (U.S.$4,838 million) outstanding as of June 30, 2009. These subsidiaries collectively own, directly or indirectly, substantially all our operations worldwide. We also were required to grant equal and ratable security interests in such collateral to other creditors pursuant to negative pledge covenants in our other indebtedness and under our perpetual debentures, which are not accounted for as debt under MFRS. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing” for additional information on our financing agreement.

If we fail to service our payment obligations under our financing agreement or to comply with any of the financial and operating covenants included in the financing agreement, we would be in default. In this event, our creditors could accelerate our obligations under the financing agreement and foreclose upon the stock of our subsidiaries constituting collateral. If indebtedness under the financing agreement is accelerated and foreclosure remedies against the collateral are enforced, our current shareholders will lose control and our assets may be disposed of totally or in part, thus affecting the integrity of our business.

We are required to issue equity or equity-linked securities under the financing agreement and may need to issue additional equity in the future as a source to repay our indebtedness; our ability to raise equity capital may be limited, could adversely affect our liquidity and could dilute existing shareholders.

Pursuant to the financing agreement, we are required to privately place or publicly sell common equity or equity-linked securities for net cash proceeds of at least U.S.$1.0 billion prior to June 30, 2010. If we do not issue such securities prior to June 30, 2010, participating creditors representing at least 25% of all exposures under the financing agreement can require us, at any time prior to December 31, 2010, to issue equity and/or debt securities for a total amount of net cash proceeds equal to U.S.$1.0 billion less the amount of net cash proceeds received from any issuance of common equity or equity-linked securities prior to June 30, 2010, including from this offering.

The disruptions in the financial and credit markets may continue to adversely affect our credit rating and the market value of our common stock, our CPOs and our ADSs. If the current pressures on credit continue or worsen, and alternative sources of financing continue to be limited, we may be dependent on the issuance of equity as a source to repay our existing indebtedness, including meeting amortization requirements under the financing agreement. Recently, conditions in the capital markets have been such that traditional sources of capital, including equity capital, from time to time have not been available to us on reasonable terms or at all. As a result, there is no guarantee that we will be able to successfully raise additional equity

 

S-18

---

Table of Contents

capital at all or on terms that are favorable or otherwise not dilutive to existing shareholders. If we raise additional funds by issuing more common stock, CPOs or ADSs, or debt securities convertible into or exchangeable for our common stock, CPOs or ADSs, the percentage ownership of our shareholders at the time of the issuance would decrease and our common stock, CPOs or ADSs may be diluted. In addition, if the aforementioned conditions prevail, the price at which we sell our common stock may be such that existing shareholders may suffer a substantial dilution. Any additional funding we obtain through capital increases may dilute the ownership percentage held by investors who purchase our common stock, CPOs or ADSs, in this offering. In addition, any securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock, CPOs or ADSs. See “Recent developments—Recent developments relating to our indebtedness—Mandatorily convertible debt securities issuance.”

The current global economic recession is likely to continue to adversely affect our business, financial condition and results of operations.

The global recession has had and is likely to continue to have a material adverse impact on our business, financial condition and results of operations throughout our operations worldwide. Our results of operations are highly dependent on the results of our operating subsidiaries in the U.S., Mexico and Western Europe. This could be the deepest and longest global recession in many generations. Despite the aggressive measures taken by governments and central banks thus far, there is still a significant risk that these measures may not prevent the global economy from falling into an even deeper and longer lasting recession, and a depression. In the construction sector, declines in residential construction in all our markets have broadened and intensified in line with the spread and deterioration of the financial crisis. The adjustment process has been more severe in countries that experienced the largest housing market expansion during the years of high credit availability (such as the U.S., Spain, Ireland and the U.K.). Most recovery efforts focus on fostering growth in demand from infrastructure projects. The infrastructure plans announced to date by many countries, including the U.S. and Mexico, may not stimulate economic growth or yield the expected results because of delays in implementation and/or bureaucratic issues, among other obstacles. A worsening of the current economic crisis or delays in any such plans may adversely affect demand for our products.

In the U.S., the current recession is already longer and deeper than the previous two recessions during the 1990s and in early 2000. We expect the U.S. credit crunch to continue to adversely affect the housing market in the near future. Housing starts, which was the primary driver of cement demand in the residential sector, decreased by 33% in 2008 compared to 2007, according to the U.S. Census Bureau, and in 2009 has been running at historical lows – at an annual rate of 582,000 based on available data as of June 30, 2009. A housing recovery may not take place in the short term given the current market environment, tight credit conditions and housing oversupply. Uncertainty regarding public construction projects continues following the announcement of the U.S. government’s fiscal stimulus package. We cannot give any assurances that infrastructure plans announced in the U.S. would offset the expected decline in cement and ready-mix concrete demand as a result of current economic conditions. The uncertain economic environment and tight credit conditions also adversely affected the U.S. industrial and commercial sector during 2008, with contract awards—a leading indicator of construction activity—declining 27% in 2008 compared to 2007, according to FW Dodge. This combination of factors resulted in the worst decline in sales volumes that we have experienced in the United

 

S-19

---

Table of Contents

States in recent history. Our U.S. operations’ cement and ready-mix concrete sales volumes decreased approximately 14% and 13%, respectively, in 2008 compared to 2007 (approximately 21% and 30%, respectively, on a like-to-like basis taking into account the consolidation of Rinker’s U.S. operations for an additional six months in 2008 compared to 2007). Our U.S. operations’ cement and ready-mix concrete sales volumes decreased approximately 35% and 43%, respectively, in the six months ended June 30, 2009 compared to the comparable period in 2008.

The Mexican economy has also been significantly and adversely affected by the global financial crisis. The dependence on the U.S. economy remains very important, and therefore, any downside to the economic outlook in the United States may hinder any recovery in Mexico. The crisis has also adversely affected the local credit markets resulting in an increased cost of capital that may negatively impact companies’ ability to meet their financial needs. During 2008, the Mexican Peso depreciated by 26% against the Dollar and has remained at those levels. Moreover, further exchange rate depreciation and/or increasing volatility in the markets would adversely affect our operational and financial results. We cannot be certain that a more pronounced contraction of Mexican economic output will not take place, which would translate into a bleaker outlook for the construction sector and its impact on cement and concrete consumption. The Mexican Government’s plan to increase infrastructure spending could prove to be, as in other countries, difficult to implement in a timely manner and in the officially announced amounts. As a result of the current economic environment, our Mexican cement and ready-mix concrete sales volumes decreased approximately 4% and 6%, respectively, in 2008 compared to 2007. In the six months ended June 30, 2009, our Mexican cement sales volumes increased approximately 1% and our ready-mix concrete sales volumes decreased approximately 2%, compared to the six months ended June 30, 2008.

Many Western European countries, including the U.K., France, Spain and Germany, entered into recessions several months ago due to the global economic environment, the financial crisis and their impact on the economies of such countries, including the construction sectors. If this situation continues to deteriorate, our financial condition and results of operations could be materially and adversely affected. These risks are more pronounced in those countries with a higher degree of previous market distortions (especially the existence of real estate bubbles and durable goods overhangs prior to the crisis), such as Spain, or those more exposed to financial turmoil, such as the U.K. According to OFICEMEN, the Spanish cement trade organization, domestic cement demand in Spain declined 23.8% in 2008 compared to 2007 and 35.7% in the six months ended June 30, 2009 compared with the comparable period in 2008. Our Spanish domestic cement and ready-mix concrete sales volumes decreased approximately 48% and 51%, respectively, in the six months ended June 30, 2009 compared with the comparable period in 2008. In the U.K., according to the British Cement Association, domestic cement demand decreased approximately 14.8% in 2008 compared to 2007. Our U.K. domestic cement and ready-mix concrete sales volumes decreased approximately 23% and 28%, respectively, in the six months ended June 30, 2009 compared with the comparable period in 2008. In the construction sector, the residential adjustment could last longer than anticipated, while non-residential construction could experience a sharper decline than expected. Finally, the boost to infrastructure spending that is anticipated as a result of the stimulus packages that have been announced by most European countries could be lower than projected due to bureaucratic hurdles, delays in implementation or funding problems. If these risks materialize, our business, financial condition and results of operations may be adversely affected.

 

S-20

---

Table of Contents

The important trade links with Western Europe make some of the Eastern European countries susceptible to the Western European recession. Large financing needs in these countries pose a significant vulnerability. This issue is expected to be more critical in countries with fixed exchange rates regimes (such as Latvia) that could be forced to devalue. Central European economies could face delays in implementation of European Union Structural Funds (funds provided by the European Union to member states with lowest national incomes per capita) related projects due to logistical and funding problems, which could have a material adverse effect on cement and/or ready-mix concrete demand.

The Central and South American economies also pose a downside risk in terms of overall activity. The global financial downturn, lower exports to the U.S. and Europe, lower remittances and lower commodity prices represent an important negative risk for the region in the short term. This may translate into greater economic and financial volatility and lower growth rates, which could have a material adverse effect on cement and ready-mix concrete consumption and/or prices. Any significant political instability or economic volatility in the South American, Central American or the Caribbean countries in which we have operations may have an impact on cement prices and demand for cement and ready-mix concrete, which may adversely affect our business and results of operations.

The Asia-Pacific region will likely be affected by a further deterioration of the global economic landscape. An additional increase in country risk and/or decreased confidence among global investors would also limit capital flows and investments in the Asian region. Regarding the Middle East region, lower oil revenues and tighter credit conditions could moderate economic growth and adversely affect construction investments. In addition, the accumulated housing overhang, the rapid downfall in property prices and the radical change in the international financial situation could prompt a sudden adjustment of the residential markets in some of the countries in the region.

If the global economy were to continue to deteriorate and fall into an even deeper and longer lasting recession, or even a depression, our business, financial condition and results of operations would be adversely affected.

We may not be able to realize the expected benefits from acquisitions, some of which may have a material impact on our business, financial condition and results of operations.

Our ability to realize the expected benefits from acquisitions depends, in large part, on our ability to integrate acquired operations with our existing operations in a timely and effective manner. These efforts may not be successful. The acquisition of Rinker substantially increased our exposure to the United States, which has been experiencing a sharp downturn in the housing and construction sectors. The downturn in the United States has had adverse effects on Rinker’s U.S. operations, making it more difficult for us to achieve our goal of decreasing our acquisition-related leverage. We also may not be able to achieve all the anticipated cost savings from the Rinker acquisition. Our financial statements for the year ended December 31, 2008 include non-cash charges of approximately U.S.$1.5 billion for impairment losses in accordance with MFRS, of which approximately U.S.$1.3 billion relate to impairment of goodwill (mainly related to the Rinker acquisition). See notes 6, 9 and 10C to our audited financial statements included elsewhere or incorporated by reference in this prospectus supplement. Considering differences in the measurement of fair value, including the selection of economic variables, as well as the

 

S-21

---

Table of Contents

methodology for determining final impairment losses between MFRS and U.S. GAAP, our impairment losses in 2008 under U.S. GAAP amounted to approximately U.S.$4.9 billion, including the impairment losses determined under MFRS, of which approximately U.S.$4.7 billion refer to impairment of goodwill, as explained in note 25 to our audited financial statements included elsewhere or incorporated by reference in this prospectus supplement. During the six months ended June 30, 2008 and 2009, based on our assessments, there were no impairment charges under MFRS. Although we currently are seeking to dispose of assets to reduce our overall leverage, we may in the future acquire new operations and integrate such operations into our existing operations, and some of such acquisitions may have a material impact on our business, financial condition and results of operations. We cannot assure you that we will be successful in identifying or acquiring suitable assets in the future. If we fail to achieve the anticipated cost savings from any acquisitions, our business, financial condition and results of operations would be materially and adversely affected.

Our ability to repay debt and pay dividends depends on our subsidiaries’ ability to transfer income and dividends to us as well as contractual restrictions binding on us.

We are a holding company with no significant assets other than the stock of our subsidiaries and our holdings of cash and marketable securities. Our ability to repay debt and pay dividends depends on the continued transfer to us of dividends and other income from our subsidiaries. The ability of our subsidiaries to pay dividends and make other transfers to us is limited by various regulatory, contractual and legal constraints.

If we are unable to receive cash from our subsidiaries in the form of dividends or otherwise, our business, results of operations and financial condition could be materially adversely affected and we may not be able to service our debt, which could, in turn, adversely affect the market price of our CPOs and ADSs.

Our ability to receive funds from our subsidiaries may also be restricted by covenants in the debt instruments and other contractual obligations of those entities and applicable laws and regulations. We may also be subject to exchange controls on remittances by our subsidiaries from time to time in certain jurisdictions. Further, claims against our subsidiaries, their cash flows or their assets may further limit their ability to transfer funds. We cannot assure you that these subsidiaries will generate sufficient income to pay dividends to us, and without these dividends, we may be unable to service our debt.

Moreover, the ability of our subsidiaries to pay dividends may be restricted by the laws of the jurisdictions under which such subsidiaries are incorporated. For example, our subsidiaries in Mexico are subject to Mexican legal requirements, which provide that a corporation may declare and pay dividends only out of the profits reflected in the year-end financial statements that are approved by its stockholders after stockholders approve the payment of dividends. In addition, such payment can be approved by a subsidiary’s stockholders after the creation of a required legal reserve (equal to one-fifth of the relevant company’s capital) and satisfaction of losses, if any, incurred by such subsidiary in previous years. Therefore, our cash flows could be affected if we do not receive dividends or other payments from our subsidiaries.

As described above, the financing agreement effectively prohibits us from declaring and paying cash dividends or making other cash distributions to our shareholders. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing.”

 

S-22

---

Table of Contents

Our ability to comply with our upcoming debt maturities may depend in large part on making asset sales, and there is no assurance that we will be able to execute such sales on terms favorable to us or at all.

In the short term, we intend to use our capital resources, cash flow from operations, proceeds from capital markets debt and equity offerings and proceeds from the sale of assets to repay debt in order to reduce our leverage, strengthen our capital structure and regain our financial flexibility. Our ability to comply with our payment obligations under the financing agreement and other indebtedness may depend in large part on asset sales, and there is no assurance that we will be able to execute such sales on terms favorable to us or at all.

In connection with our asset divestment initiatives, in 2008, we sold our Canary Islands operations in Spain (consisting of cement and ready-mix concrete assets in Tenerife and our 50% equity interest in two joint ventures) for approximately €162 million (U.S.$227 million). In addition, during 2008 we sold our Italian operations (consisting of four grinding mills with an installed aggregate capacity of approximately 2,420,000 tons per year) for approximately €148 million (U.S.$210 million). On June 15, 2009, we sold three quarries (located in Nebraska, Wyoming and Utah) and our 49% joint venture interest in the operations of a quarry located in Granite Canyon, Wyoming, to Martin Marietta Materials, Inc. for U.S.$65 million. On June 15, 2009, we announced our agreement to sell all our assets in Australia (consisting of 249 ready-mix concrete plants, 83 aggregate quarries, 16 concrete pipe and precast products plants, and our 25% stake in Cement Australia) for approximately AUD$2.02 billion (U.S.$1.64 billion, with an exchange rate of AUD$1.2324 per U.S. Dollar). The transaction is subject to regulatory approval, due diligence and other closing conditions and is currently expected to close during the fourth quarter of 2009. All the net proceeds from the sale of assets will be used to repay existing indebtedness.

As a result of the global economic recession and uncertain market conditions, we may not be able to complete our planned divestitures on terms that we find economically attractive or at all. The current volatility of the credit and capital markets can significantly affect us due to the limited availability of funds to potential acquiring parties. The lack of acquisition financing in the current economic environment and existing relatively high levels of indebtedness among many industry peers will likely make it difficult for potential interested acquirers to purchase our assets. In addition, high levels of consolidation in our industry in some jurisdictions may further limit potential assets sales to interested parties due to antitrust considerations. Given our current level of indebtedness, liquidity constraints, depressed cash flows and the difficulties to conduct asset sales in the current market, we may be forced to sell our assets at prices substantially lower than their estimated fair value.

If we are unable to complete our planned divestitures and as a result our cash flow or capital resources prove inadequate, we could face additional liquidity problems and may not be able to comply with payment obligations under our indebtedness.

Our use of derivative financial instruments may adversely affect our operations, especially in a volatile and uncertain market.

We have used, and may continue to use, derivative financial instruments to manage the risk profile associated with interest rates and currency exposure of our debt, to reduce our financing costs, to access alternative sources of financing and to hedge some of our financial risks.

 

S-23

---

Table of Contents

Nonetheless, as a result of our financing agreement, our use of derivative instruments is constrained. For the year ended December 31, 2008, we had a net loss of approximately Ps15,172 million (U.S.$1,323 million) from financial instruments as compared to a net gain of Ps2,387 million (U.S.$218 million) in 2007. For the six months ended June 30, 2009, we had a net loss of approximately Ps2,091 million (U.S.$150 million) from financial instruments as compared to a net loss of Ps204 million (U.S.$19 million) during the six months ended June 30, 2008. These losses resulted from a variety of factors, including losses related to changes in the fair value of equity derivative instruments attributable to the generalized decline in price levels in the capital markets worldwide, losses related to changes in the fair value of cross-currency swaps and other currency derivatives attributable to the appreciation of the Dollar against the Euro, and losses related to changes in the fair value of interest rate derivatives primarily attributable to the decrease in the five-year interest rates in Euros and Dollars.

Since the beginning of 2009, we have been reducing the aggregate notional amount of our derivatives, thereby reducing the risk of cash margin calls. This initiative has included closing a significant portion of notional amounts of derivative instruments related to our debt (currency and interest rate derivatives) and the settlement of our inactive derivative financial instruments (see notes 11C and D to our audited consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement), which we finalized during April 2009. As a result, we settled derivatives contracts resulting in an aggregate loss in the first six months of this year of approximately U.S.$1,093 million, which, after netting approximately U.S.$624 million of cash margin deposits previously posted in favor of our counterparties and cash payments of approximately U.S.$48 million, was documented through our issuance of promissory notes for approximately U.S.$421 million, which increased our outstanding debt. The financing agreement restricts our ability to enter into derivative transactions. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing.”

In addition, in order to eliminate our exposure to the Yen and to Yen interest rates, on May 22, 2009, we delivered the required notices under the documentation governing the dual-currency notes and the related perpetual debentures, informing the debenture holders of our decision to exercise our right to defer by one day the scheduled interest payment otherwise due and payable on June 30, 2009. As a result, during July 2009, the interest rate on the dual-currency notes converted from a Yen floating rate into a Dollar or Euro fixed rate, as applicable, as of June 30, 2009, and the associated Yen cross-currency swap derivatives were unwound, and the notes trustees received approximately U.S.$94 million that will be used to pay future coupons on the perpetual debentures. See “ Management’s discussion and analysis of financial condition and results of operations for the six month periods ended June 30, 2008 and 2009—Liquidity and capital resources—Our financial derivatives instruments.”

Most derivative financial instruments are subject to margin calls in case the threshold set by the counterparties is exceeded. In several scenarios, the cash required to cover margin calls may be substantial and may reduce the funds available to us for our operations or other capital needs. The mark-to-market changes in some of our derivative financial instruments are reflected in our income statement introducing volatility in our majority interest net income and our related ratios. In the current environment, the creditworthiness of our counterparties may deteriorate substantially, preventing them from honoring their obligations to us. We maintain equity derivatives that in a number of scenarios may require us to cover margin calls that could reduce our cash availability.

If we resume using derivative financial instruments, or with respect to our outstanding equity derivative positions, we may incur net losses from our derivative financial instruments. See

 

S-24

---

Table of Contents

“Management’s discussion and analysis of financial condition and results of operations for the six month periods ended June 30, 2008 and 2009—Liquidity and capital resources—Our financial derivatives instruments.”

A substantial amount of our total assets are intangible assets, including goodwill. We have recently recognized charges for goodwill impairment, and if market and industry conditions were to continue to deteriorate, further impairment charges may be required.

As of June 30, 2009 and December 31, 2008, approximately 34% of our total assets were intangible assets, of which, 78% on June 30, 2009 and 77% in 2008 corresponded to goodwill related primarily to our acquisitions of RMC and Rinker. Goodwill is recognized at the acquisition date based on the preliminary allocation of the purchase price. If applicable, goodwill is subsequently adjusted for any correction to the preliminary assessment given to the assets acquired and/or liabilities assumed within the twelve-month period following the purchase date.

Our consolidated financial statements have been prepared in accordance with MFRS, which differs significantly from U.S. GAAP with respect to the methodology used to determine the final impairment loss, when applicable, including the selection of key assumptions related to the determination of the assets’ fair value. Pursuant to our policy under MFRS, goodwill and other intangible assets of indefinite life are not amortized and are tested for impairment when impairment indicators exist or in the fourth quarter of each year, by determining the value of the reporting units in use (a unit that generates cash flow), which is the result of the discounted amount of estimated future cash flows expected to be generated by the reporting units to which those assets relate. An impairment loss is recognized under MFRS if the value in use is lower than the net book value of the reporting unit. We determine the discounted amount of estimated future cash flows over a period of five years, unless a longer period is justified in a specific country, considering the economic cycle of the reporting units and prevailing industry conditions. Impairment tests are sensitive to the projected future prices of our products, trends in operating expenses, local and international economic trends in the construction industry, as well as the long-term growth expectations in the different markets, among other factors. Likewise, the discount rates and the rates of growth in perpetuity used have an effect on such impairment tests. See note 2J to our financial statements for the six months ended June 30, 2009 included elsewhere in this prospectus supplement.

During the fourth quarter of 2008, the global economic crisis caused financing scarcity in almost all productive sectors, resulting in a decrease in economic activity in all our markets and a worldwide downturn in macroeconomic indicators. This effect has lowered the overall growth expectations within the countries in which we operate, particularly affecting the construction industry due to the cancellation or deferral of several investment projects. These conditions, which constitute an impairment indicator, coincided with our annual impairment tests under MFRS. For the year ended December 31, 2008, we recognized goodwill impairment losses under MFRS of approximately Ps18.3 billion (U.S.$1.3 billion), of which the impairment corresponding to the United States reporting unit was approximately Ps16.8 billion (U.S.$1.2 billion). The estimated impairment loss in the United States during 2008 is mainly related to the acquisition of Rinker in 2007 and overall is attributable to the negative economic situation expected in the markets during 2009 and 2010, particularly in the construction industry. Those factors significantly affected the variables included in the projections of estimated cash flows in comparison with valuations made at the end of 2007. See notes 2K and 10C to our audited

 

S-25

---

Table of Contents

consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement. During the periods ended June 30, 2008 and 2009, based on our analyses of impairment indicators and our determinations of the value in use valuations of our reporting units, we did not recognize goodwill impairment charges.

As mentioned above, differences between MFRS and U.S. GAAP with respect to the methodology used to determine the final impairment loss, when applicable, including the selection of key assumptions related to the determination of the assets’ fair value, has led to a materially greater impairment loss under U.S. GAAP, as compared to that recognized in our consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement under MFRS. For the year ended December 31, 2008, we recognized goodwill impairment losses under U.S. GAAP of approximately U.S.$4.7 billion (compared to U.S.$1.3 billion under MFRS), of which the impairment corresponding to the United States reporting unit was approximately U.S.$4.5 billion (compared to U.S.$1.2 billion of goodwill impairment losses recognized under MFRS).

Due to the important role that economic factors play in testing goodwill for impairment, a further downturn in the global economy in 2009 could necessitate new impairment tests and a possible downward readjustment of our goodwill for impairment under both MFRS and U.S. GAAP. Such an impairment test could result in additional impairment charges which could be material to our financial statements.

The announcement of the agreement for the sale our Australian assets for approximately AUD$2.02 billion (approximately $U.S.1.64 billion or Ps21.6 billion considering the exchange rates of AUD$1.2324 per U.S. Dollar and Ps13.18 per U.S. Dollar, respectively, at June 30, 2009) constitutes new evidence of fair value and represents, considering the related net assets’ carrying amount, an indicator of potential impairment. Under MFRS, for assets still in use, an impairment loss would arise if the carrying amount of the net assets exceeds both the estimated sale price and the value in use. The value in use corresponds to the net present value of the estimated cash flows related to such assets. We calculated the value in use of our Australian assets as of June 30, 2009, including variables that reflect the current economic conditions, and compared the value with the corresponding net assets’ carrying amount. As a result of our test, no impairment loss under MFRS was determined for the six months ended June 30, 2009. The net book value of our Australian assets was approximately Ps25,096 million (U.S.$1,826 million or AUD$2,570 million) and approximately Ps25,229 million (U.S.$1,914 million or AUD$2,359 million) as of December 31, 2008 and June 30, 2009, respectively.

Our independent auditors expressed substantial doubt about our ability to continue as a going concern in their report accompanying our audited consolidated financial statements included in our annual report on Form 20-F.

During the fourth quarter of 2008 and through the date of this prospectus supplement, our liquidity position and operating performance have been adversely affected by adverse economic and industry conditions as a result of the downturn in the global construction industry and the global credit market crisis.

In connection with the uncertainty related to the bank debt refinancing process and considering the facts and circumstances prevailing at the time as described in note 22 to our audited consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement, the independent auditors’ report accompanying our audited consolidated financial statements, included in our annual report on Form 20-F for the year ended December 31, 2008, filed with the SEC on June 30, 2009, contains a paragraph expressing substantial doubt as to our ability to continue as a going concern. Our audited consolidated

 

S-26

---

Table of Contents

financial statements for the year ended December 31, 2008 do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustment that might result from the outcome of this uncertainty.

We have to service our Dollar-denominated obligations with revenues generated in Pesos or other currencies, as we do not generate sufficient revenue in Dollars from our operations to service all our Dollar-denominated obligations. This could adversely affect our ability to service our obligations in the event of a devaluation or depreciation in the value of the Peso, or any of the other currencies of the countries in which we operate, compared to the Dollar. In addition, our consolidated results and outstanding indebtedness are significantly affected by fluctuations in exchange rates between the Peso and other currencies.

A substantial portion of our outstanding debt is denominated in Dollars. As of December 31, 2008 and June 30, 2009, our Dollar-denominated debt represented approximately 73% and 61%, respectively, of our total debt (after giving effect to our currency-related derivatives in 2008). Our existing Dollar-denominated debt, including the additional Dollar-denominated debt we incurred to finance the acquisition of Rinker, must be serviced with funds generated by our subsidiaries. Although the acquisition of Rinker increased our U.S. assets substantially, we nonetheless continue to rely on our non-U.S. assets to generate revenues to service our Dollar-denominated debt. Consequently, we have to use revenues generated in Pesos, Euros or other currencies to service our Dollar-denominated debt. See “Management’s discussion and analysis of financial condition and results of operations for the six month periods ended June 30, 2008 and 2009—Interest rate risk, foreign currency risk and equity risk—Foreign currency risk.” A devaluation or depreciation in the value of the Peso, Euro, Pound Sterling or any of the other currencies of the countries in which we operate, compared to the Dollar, could adversely affect our ability to service our debt. Mexico, Spain, the United Kingdom and the Rest of Europe region, our main non-Dollar-denominated operations, together generated approximately 52% during 2008 and 51% for the six months ended June 30, 2009 of our total net sales in Peso terms (approximately 17%, 7%, 8% and 20% during 2008; and 20%, 5%, 7% and 19% for the six months ended June 30, 2009, respectively), before eliminations resulting from consolidation. In 2008 and the six months ended June 30, 2009, approximately 21% and 18%, respectively, of our sales were generated in the United States. During 2008, the Peso depreciated approximately 26% against the Dollar, the Euro depreciated approximately 4% against the Dollar and the Pound Sterling depreciated approximately 36% against the Dollar. During the six months ended June 30, 2009, the Peso appreciated approximately 4% against the Dollar, the Euro appreciated approximately 0.4% against the Dollar and the Pound Sterling appreciated approximately 13% against the Dollar in each case, compared to December 31, 2008. Although we expect to enter into future currency hedges, they may not be effective in covering all our currency-related risks.

Our consolidated reported results for any period and our outstanding indebtedness as of any date are significantly affected by fluctuations in exchange rates between the Peso and other currencies, as those fluctuations influence the amount of our indebtedness when translated into Pesos and also result in foreign exchange gains and losses as well as gains and losses on derivative contracts we may have entered into to hedge our exchange rate exposure.

 

S-27

---

Table of Contents

We are subject to litigation proceedings that could harm our business if an unfavorable ruling were to occur.

From time to time, we may become involved in litigation and other legal proceedings relating to claims arising from our operations in the normal course of business. As described in, but not limited to, “Item 4—Information on the Company—Regulatory Matters and Legal Proceedings” of our annual report on Form 20-F for the year ended December 31, 2008 and “Recent developments—Recent developments relating to our regulatory matters and legal proceedings,” we are currently subject to a number of significant legal proceedings, including, but not limited to, tax matters in Mexico, a legal proceeding initiated by the Texas General Land Office in respect of mineral rights as well as antitrust investigations in the U.K. and Germany. Litigation is subject to inherent uncertainties, and unfavorable rulings may occur. We cannot assure you that these or other legal proceedings will not materially affect our ability to conduct our business in the manner that we expect or otherwise adversely affect us should an unfavorable ruling occur.

Our operations are subject to environmental laws and regulations.

Our operations are subject to laws and regulations relating to the protection of the environment in the various jurisdictions in which we operate, such as regulations regarding the release of cement dust into the air or emissions of greenhouse gases. Stricter laws and regulations, or stricter interpretation of existing laws or regulations, may impose new liabilities on us or result in the need for additional investments in pollution control equipment, either of which could result in a material decline in our profitability.

In addition, our operations in the United Kingdom, Spain and the Rest of Europe are subject to binding caps on carbon dioxide emissions imposed by Member States of the European Union as a result of the European Commission’s directive implementing the Kyoto Protocol on climate change. Under this directive, companies receive from the relevant Member States set limitations on the levels of carbon dioxide emissions from their industrial facilities. These allowances are tradable so as to enable companies that manage to reduce their emissions to sell their excess allowances to companies that are not reaching their emissions objectives. Failure to meet the emissions caps is subject to significant monetary penalties. For the years 2008 through 2012, the European Commission significantly reduced the overall availability of allowances. As a result of continuing uncertainty regarding final allowances, it is premature to draw conclusions regarding the overall position of all our European cement plants.

We believe we may be able to reduce the impact of any excess emissions by either reducing the level of carbon dioxide released in our facilities or by implementing clean development mechanism projects, or CDM projects, in emerging markets. If we are not successful in implementing emission reductions in our facilities or obtaining credits from CDM projects, we may have to purchase a significant amount of allowances in the market, the cost of which may have an impact on our operating results.

To date, the United States has pursued a voluntary greenhouse gas (GHG) emissions reduction program to meet its obligations as a signatory to the United Nations Framework Convention on Climate Change. As a result of increased attention to climate change in the U.S., numerous bills have been introduced in recent sessions of the U.S. Congress that would reduce GHG emissions in the U.S. and enactment of climate change legislation within the next several years now seems likely. However, there is still significant uncertainty about the cost of complying with any future GHG emission requirements. These costs will depend upon many factors, including the required

 

S-28

---

Table of Contents

levels of GHG emission reductions, the timing of those reductions, the impact on fuel prices, whether emission allowances will be allocated with or without cost to existing generators and whether flexible compliance mechanisms, such as a GHG offset program similar to those sanctioned under the Clean Air Act for conventional pollutants, will be part of the policy.

While debate continues at the national level over domestic climate policy and the appropriate scope and terms of any federal legislation, many states are developing state-specific measures or participating in regional legislative initiatives to reduce GHG emissions. At this point, we are unable to determine whether any of these proposals will be enacted into law or to estimate their potential effect on our operations.

Implementing regulations for such regional initiatives may be more stringent and costly than federal legislative proposals currently being debated in the U.S. Congress. It cannot yet be determined whether or to what extent any federal legislative system would preempt regional or state initiatives, although such preemption would greatly simplify compliance and eliminate regulatory duplication. If state and/or regional initiatives are allowed to stand together with federal legislation, generators could be required to purchase allowances to satisfy their state and federal compliance obligations.

Permits relating to some of Rinker’s largest quarries in Florida, which represent a significant part of Rinker’s business, are being challenged. A loss of these permits could adversely affect our business.

We are subject to restrictions due to minority interests in our consolidated subsidiaries.

We conduct our business through subsidiaries. In some cases, third-party shareholders hold minority interests in these subsidiaries. Various disadvantages may result from the participation of minority shareholders whose interests may not always coincide with ours. Some of these disadvantages may, among other things, result in our inability to implement organizational efficiencies and transfer cash and assets from one subsidiary to another in order to allocate assets most effectively.

Our operations can be affected by adverse weather conditions.

Construction activity, and thus demand for our products, decreases substantially during periods of cold weather, when it snows or during periods when heavy or sustained rainfalls occur. Consequently, demand for our products is significantly lower during the winter in temperate countries and during the rainy season in tropical countries. Winter weather in our European and North American operations significantly reduces our first quarter sales volumes, and to a lesser extent our fourth quarter sales volumes. Sales volumes in these and similar markets generally increase during the second and third quarters because of normally better weather conditions. However, high levels of rainfall can adversely affect our operations during these periods as well. Such adverse weather conditions can adversely affect our results of operations and profitability if they occur with unusual intensity, occur during abnormal periods, or last longer than usual in our major markets, especially during peak construction periods.

Higher energy and fuel costs may have a material adverse effect on our operating results.

Our operations consume significant amounts of energy and fuel, the cost of which has significantly fluctuated in recent years. To mitigate high energy and fuel costs and volatility, we

 

S-29

---

Table of Contents

have implemented the use of alternative fuels which has resulted in less vulnerability to price spikes. We have also implemented technical improvements in several facilities and entered into long-term supply contracts for petcoke and electricity to mitigate price volatility. Despite these measures, we cannot assure you that our business, financial condition and result of operations would not be materially adversely affected in the future if energy and fuel costs increase.

We are an international company and are exposed to risks in the countries in which we have significant operations or interests.

We are dependent, in large part, on the economies of the countries in which we market our products. The economies of these countries are in different stages of socioeconomic development. Consequently, like many other companies with significant international operations, we are exposed to risks from changes in foreign currency exchange rates, interest rates, inflation, governmental spending, social instability and other political, economic or social developments that may materially affect our results.

With the acquisitions of RMC in 2005 and Rinker in 2007, our geographic diversity has significantly increased. As of December 31, 2008 and June 30, 2009, we had operations in Mexico, the United States, the United Kingdom, Spain, the Rest of Europe region (including Germany and France), the South America, Central America and the Caribbean region, Africa and the Middle East, Australia and Asia. As of December 31, 2008 and June 30, 2009, our Mexican operations represented approximately 11% and 12%, respectively, of our total assets, our U.S. operations represented approximately 45% and 43%, respectively, of our total assets, our Spanish operations represented approximately 10% and 9%, respectively, of our total assets, our United Kingdom operations represented approximately 6% and 7%, respectively, of our total assets, our Rest of Europe operations represented approximately 10% and 10%, respectively, of our total assets, our South America, Central America and Caribbean operations represented approximately 5% and 5%, respectively, of our total assets, our Africa and the Middle East operations represented approximately 3% and 3%, respectively, of our total assets, our Australian and Asia operations represented approximately 7% and 8%, respectively, of our total assets and our other operations represented approximately 3% and 3%, respectively, of our total assets. For the year ended December 31, 2008 and the six months ended June 30, 2009, before eliminations resulting from consolidation, our Mexican operations represented approximately 17% and 20%, respectively, of our net sales, our U.S. operations represented approximately 21% and 18%, respectively, of our net sales, our Spanish operations represented approximately 7% and 5%, respectively, of our net sales, our United Kingdom operations represented approximately 8% and 7%, respectively, of our net sales, our Rest of Europe operations represented approximately 20% and 19%, respectively, of our net sales, our South America, Central America and Caribbean operations represented approximately 9% and 10%, respectively, of our net sales, our Africa and the Middle East operations represented approximately 5% and 7%, respectively, of our net sales, our Australian and Asia operations represented approximately 9% and 10%, respectively, of our net sales and our other operations represented approximately 4% and 4%, respectively, of our net sales. Adverse economic conditions in any of these countries or regions may produce a negative impact on our net income. For a geographic breakdown of our net sales for the year ended December 31, 2008 and the six months ended June 30, 2009, please see “Item 4—Information on the Company—Geographic Breakdown of Our 2008 Net Sales” of our annual report on Form 20-F for the year ended December 31, 2008 and “Summary—Geographic breakdown of net sales for the period ended June 30, 2009.”

 

S-30

---

Table of Contents

Our operations in South America, Central America and the Caribbean are faced with several risks that are more significant than in other countries. These risks include political instability and economic volatility. For example, on August 18, 2008, Venezuelan officials took physical control of the facilities of CEMEX Venezuela, S.A.C.A., or CEMEX Venezuela, following the issuance on May 27, 2008 of governmental decrees confirming the expropriation of all of CEMEX Venezuela’s assets, shares and business. The government of Venezuela has paid no compensation to the CEMEX affiliates, CEMEX Caracas Investments B.V. and CEMEX Caracas Investments II B.V. (together, “CEMEX Caracas”), which held a 75.7% interest in CEMEX Venezuela, or to any other former CEMEX Venezuela shareholder. On October 16, 2008, CEMEX Caracas filed a request for arbitration against the government of Venezuela before the International Centre for Settlement of Investment Disputes, or ICSID, pursuant to the bilateral investment treaty between the Netherlands and Venezuela, seeking relief for the expropriation of their interest in CEMEX Venezuela. The ICSID arbitral tribunal has been constituted. We are unable at this preliminary stage to estimate the likely range of potential recovery (if any) or to determine what position the government of Venezuela will take in these proceedings, the nature of the award that may be issued by the Tribunal, and the difficulties of collection of any possible monetary award issued to CEMEX Caracas, among other matters. See “Item 4—Information on the Company—Business of CEMEX—Regulatory Matters and Legal Proceedings—Tax Matters—Expropriation of CEMEX Venezuela and ICSID Arbitration” of our annual report on Form 20-F for the year ended December 31, 2008 and “Recent developments—Recent developments relating to our regulatory matters and legal proceedings.”

Our operations in Africa and the Middle East have faced instability as a result of, among other things, civil unrest, extremism, deterioration of Israeli-Palestinian relations and the war in Iraq. There can be no assurance that political turbulence in the Middle East will abate in the near future or that neighboring countries, including Egypt and the United Arab Emirates, will not be drawn into conflicts or experience instability.

There have been terrorist attacks in the United States, Spain and the United Kingdom, countries in which we maintain operations, and ongoing threats of future terrorist attacks in the United States and abroad. There can be no assurance that there will not be other attacks or threats in the United States or abroad that will lead to an economic contraction or erection of material barriers to trade in the United States or any other of our major markets. An economic contraction in the United States or any of our major markets could affect domestic demand for cement and have a material adverse effect on our operations.

It may be difficult to enforce civil liabilities against us or our directors, executive officers and controlling persons.

We are a publicly traded stock corporation with variable capital (sociedad anónima bursátil de capital variable) organized under the laws of Mexico. Substantially all our directors and officers and some of the experts named in this prospectus supplement reside in Mexico, and all or a significant portion of the assets of those persons may be, and the majority of our assets are, located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our General Counsel, Ramiro G. Villarreal, that there is doubt as to the enforceability in Mexico, of civil liabilities predicated on the United States federal securities laws, either in original actions or in actions for enforcement of judgments of United States courts.

 

S-31

---

Table of Contents

The protections afforded to minority shareholders in Mexico are different from those in the United States and may be more difficult to enforce.

Under Mexican law, the protections afforded to minority shareholders are different from those in the United States. In particular, the legal framework and case law pertaining to disputes between shareholders and us, our directors, our officers or our controlling shareholders, if any, are less developed under Mexican law than United States law, generally only permits shareholder derivative suits (i.e., suits for our benefit as opposed to the direct benefit of our shareholders) and there are different procedural requirements for bringing shareholder lawsuits, such as shareholder derivative suits, which differ from those you may be familiar with under U.S. and other laws. There is also a substantially less active plaintiffs’ bar dedicated to the enforcement of shareholders’ rights in Mexico than in the United States. As a result, in practice it may be more difficult for our minority shareholders to enforce their rights against us or our directors or controlling shareholders than it would be for shareholders of a United States company.

ADS holders may only vote the series B shares represented by the CPOs deposited with the ADS depositary through the ADS depositary and are not entitled to vote the series A shares represented by the CPOs deposited with the ADS depositary or to attend shareholders’ meetings.

Under the terms of the ADSs and our bylaws, a holder of an ADS has the right to instruct the ADS depositary to exercise voting rights only with respect to series B shares represented by the CPOs deposited with the depositary, but not with respect to the series A shares represented by the CPOs deposited with the depositary. An ADS holder may instruct the depositary to vote the series B shares represented by the CPOs deposited with the depositary. Otherwise, ADS holders will not be able to exercise their right to vote unless they withdraw the CPOs underlying their ADSs. However, an ADS holder may not receive voting materials in time to ensure that they are able to instruct the depositary to vote the CPOs underlying their ADSs or receive sufficient notice of a shareholders’ meeting to permit them to withdraw their CPOs to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send out voting instructions on time or carry them out in the manner an ADS holder has instructed. As a result, ADS holders may not be able to exercise their right to vote and they may lack recourse if the CPOs underlying their ADSs are not voted as they requested. In addition, ADS holders are not entitled to attend shareholders’ meetings. ADS holders will also not be permitted to vote the CPOs underlying the ADSs directly at a shareholders’ meeting or to appoint a proxy to do so without withdrawing the CPOs. If the ADS depositary does not receive voting instructions from a holder of ADSs in a timely manner such holder will nevertheless be treated as having instructed the ADS depositary to give a proxy to a person we designate to vote the B shares underlying the CPOs represented by your ADSs in his/her discretion. The ADS depositary or the custodian for the CPOs on deposit may represent the CPOs at any meeting of holders of CPOs even if no voting instructions have been received. The CPO trustee may represent the A shares and the B shares represented by the CPOs at any meeting of holders of A shares or B shares even if no voting instructions have been received. By so attending, the ADS depositary, the custodian or the CPO trustee, as applicable, may contribute to the establishment of a quorum at a meeting of holders of CPOs, A shares or B shares, as appropriate. See “Description of CPOs” and “Description of ADSs” in the accompanying prospectus for further discussion regarding the CPO trust agreement, the deposit agreement and your voting rights.

 

S-32

---

Table of Contents

Preemptive rights may not be available to ADS holders.

ADS holders may be unable to exercise preemptive rights granted to our shareholders, in which case ADS holders could be substantially diluted following future equity or equity-linked offerings. Under Mexican law, whenever we issue new shares for payment in cash or in kind, we are generally required to grant preemptive rights to our shareholders, except if the shares are issued in respect of a public offering or if the relevant shares underlie convertible securities. However, ADS holders may not be able to exercise these preemptive rights to acquire new shares unless both the rights and the new shares are registered in the United States or an exemption from registration is available. We cannot assure you that we would file a registration statement in the United States at the time of any rights offering.

 

S-33

---

Table of Contents

Use of proceeds

We estimate that the net proceeds from the global offering will be approximately U.S.$1,430 million (or approximately U.S.$1,645 million if the over-allotment options are exercised in full), after deducting estimated underwriting discounts and our expenses related to the global offering. These estimates are based on an assumed public offering price of U.S.$12.43 per ADS, or U.S.$1.24 per CPO, the last reported sales price of our ADSs on the NYSE on September 4, 2009, and an exchange rate of Ps13.38 per U.S. Dollar. We intend to use the net proceeds from the global offering to repay indebtedness as required under the financing agreement. See “Recent developments—Recent developments relating to our indebtedness—Global refinancing.”

 

S-34

---

Table of Contents

Mexican Peso exchange rates

Mexico has had no exchange control system in place since the dual exchange control system was abolished on November 11, 1991. The Mexican Peso has floated freely in foreign exchange markets since December 1994, when the Mexican Central Bank (Banco de México) abandoned its prior policy of having an official devaluation band. Since then, the Peso has been subject to substantial fluctuations in value. The Peso appreciated against the Dollar by approximately 1% and 5% in 2004 and 2005, respectively, depreciated against the Dollar by approximately 2% in 2006, depreciated against the Dollar by approximately 1% in 2007 and depreciated against the Dollar by approximately 26% in 2008. During the six months ended June 30, 2009, the Peso appreciated against the Dollar by approximately 4%. These percentages are based on the exchange rate that we use for accounting purposes, or the CEMEX accounting rate. CEMEX accounting rates represent the average of three different exchange rates that are provided to us by Banco Nacional de México, S.A., Integrante del Grupo Financiero Banamex, or Banamex. For any given date, the CEMEX accounting rate may differ from the noon buying rate for Pesos in New York City published by the U.S. Federal Reserve Bank of New York.

The following table sets forth, for the periods and dates indicated, the end-of-period, average and high and low points of the CEMEX accounting rate as well as the noon buying rate for Pesos, expressed in Pesos per U.S.$1.00.

 

		CEMEX accounting rate								Noon buying rate
		End of period		Average(1)		High		Low		End of period		Average(1)		High		Low
Year ended December 31,
2004		11.14		11.29		11.67		10.81		11.15		11.29		11.64		10.81
2005		10.62		10.85		11.38		10.42		10.63		10.89		11.41		10.41
2006		10.80		10.91		11.49		10.44		10.80		10.90		11.46		10.43
2007		10.92		10.93		11.07		10.66		10.92		10.93		11.27		10.67
2008		13.74		11.21		13.96		9.87		13.83		11.15		13.92		9.92
Monthly (2009)
January		14.35		13.89		14.36		13.37		14.31		13.89		14.31		13.35
February		15.26		14.64		15.25		14.20		15.09		14.61		15.09		14.13
March		14.17		14.66		15.57		13.96		14.21		14.65		15.41		14.02
April		13.80		13.43		14.05		13.02		13.80		13.39		13.89		13.05
May		13.14		13.21		13.86		12.97		13.18		13.19		13.82		12.88
June		13.18		13.98		13.62		13.17		13.17		13.33		13.64		13.04
July		13.21		13.37		13.74		13.13		13.20		13.37		13.80		13.10
August(2)		13.36		13.02		13.36		12.83		13.27		12.99		13.27		12.82

 

(1)

The average of the CEMEX accounting rate or the noon buying rate for Pesos, as applicable, on the last day of each full month during the relevant period.

(2)

The August noon buying rates are as of August 28, 2009.

On June 30, 2009, the CEMEX accounting rate was Ps13.18 to U.S.$1.00. Between June 30, 2009 and September 4, 2009, the Peso depreciated by 1% against the Dollar.

 

S-35

---

Table of Contents

Market price information

Our CPOs are listed on the BMV and trade under the symbol “CEMEX.CPO.” Our ADSs, each of which currently represents ten CPOs, are listed on the NYSE and trade under the symbol “CX.” The following table sets forth, for the periods indicated, the reported highest and lowest market quotations in nominal Pesos for CPOs on the BMV and the high and low market quotations in Dollars for ADSs on the NYSE. The information below gives effect to the two-for-one stock split in our CPOs and ADSs approved by our shareholders on April 27, 2006, which occurred on July 17, 2006, as well as prior stock splits.

 

Calendar period		CPOs(1)				ADSs
		High		Low		High		Low
Yearly
2004		Ps20.50		Ps14.57		U.S.$18.28		US$12.99
2005		33.25		18.88		30.99		17.06
2006		39.35		27.25		36.04		23.78
2007		44.50		27.23		41.34		24.81
2008		33.80		5.55		32.61		4.01
Quarterly
2008
First quarter		31.36		23.00		29.44		20.92
Second quarter		33.80		24.05		32.61		23.36
Third quarter		25.29		17.62		25.24		15.90
Fourth quarter		18.87		5.55		17.09		4.01
2009
First quarter		14.36		6.16		10.74		3.94
Second quarter		15.31		8.51		11.39		6.17
Monthly
2009
January		14.36		10.50		10.74		7.33
February		13.11		8.00		9.24		5.20
March		9.50		6.16		6.60		3.94
April		11.23		8.51		8.63		6.17
May		14.10		10.66		10.79		7.39
June		15.31		11.60		11.39		8.65
July		13.09		10.40		10.00		7.63
August		18.10		12.53		13.66		9.49

 

Source:

Based on data from the BMV and the NYSE.

 

(1)

As of June 30, 2009, approximately 97.2% of our outstanding share capital was represented by CPOs.

On September 4, 2009, the last reported closing price for CPOs on the BMV was Ps16.63 per CPO, and the last reported closing price for ADSs on the NYSE was U.S.$12.43 per ADS.

 

S-36

---

Table of Contents

Capitalization

The following table sets forth our indebtedness and capitalization as of June 30, 2009 (i) on an actual basis, (ii) as adjusted to give effect to the financing agreement assuming such agreement had been entered into on such date, and (iii) as further adjusted to give effect to the sale of 1,200,000,000 CPOs in the global offering and the application of the estimated net proceeds as described under “Use of proceeds,” assuming such sale and application had been completed on such date and no exercise by the underwriters of the over-allotment options. The as further adjusted information is based on an assumed public offering price of U.S.$12.43 per ADS, or U.S.$1.24 per CPO, the last reported sales price of our ADSs on the NYSE on September 4, 2009, and an exchange rate of Ps13.38 per U.S. Dollar.

The financial information set forth below is based on information derived from our financial statements, which have been prepared in accordance with MFRS, which differ in significant respects from U.S. GAAP. For further information about our financial presentation, see “Selected consolidated financial information.”

 

		As of June 30, 2009
		Actual		As adjusted		As further adjusted
		(Unaudited)
		(in millions of Pesos)
Short-term debt(1)
Payable in Dollars		Ps  60,809		Ps  14,545		Ps    7,495
Payable in Euros		8,120		3,101		839
Payable in British Pounds		766		766		766
Payable in Japanese Yen		681		8		0
Payable in Mexican Pesos		4,927		1,795		1,533
Payable in other currencies		899		899		899
Total short-term debt		76,203		21,115		11,531
Long-term debt
Payable in Dollars		93,291		141,991		134,970
Payable in Euros		55,653		60,735		58,481
Payable in British Pounds		63		63		63
Payable in Japanese Yen		833		154		146
Payable in Mexican Pesos		27,656		30,340		30,079
Payable in other currencies		16		16		16
Total long-term debt		177,512		233,300		223,755
Total debt		253,715		254,414		235,286
Stockholders’ equity
Minority interest(2)		43,776		43,776		43,776
Majority interest		183,235		183,235		202,364
Total stockholders’ equity		227,011		227,011		246,140
Total capitalization		Ps480,726		Ps481,425		Ps481,426

 

(1)

Includes current portion of long-term debt.

 

(2)

Minority interest includes the principal amounts of the perpetual debentures (approximately Ps39,856 million (U.S.$3,024 million) as of June 30, 2009) issued by special purpose vehicles in December 2006, and February and May 2007, because they are treated as equity in accordance with MFRS since they do not have a specified maturity date. Accordingly, interest payments on such debentures are treated as a component of other comprehensive income within majority interest stockholders’ equity. However, for purposes of our U.S. GAAP reconciliation, we record such debentures as debt and related interest payments as part of financial expenses in our income statement.

Except as disclosed above, there has been no material change in our capitalization since June 30, 2009.

 

S-37

---

Table of Contents

Selected consolidated financial information

The financial data set forth below as of and for each of the five years ended December 31, 2008 have been derived from, should be read in conjunction with, and are qualified in their entirety by reference to our audited consolidated financial statements and the notes thereto included elsewhere or incorporated by reference in this prospectus supplement. The financial data set forth below as of December 31, 2008 and 2007 and for each of the three years ended December 31, 2008, have been derived from, and should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and the notes thereto included elsewhere or incorporated by reference in this prospectus supplement. Our audited consolidated financial statements for the year ended December 31, 2008 were approved by our shareholders at the annual general meeting of shareholders held on April 23, 2009.

The financial data set forth below as of and for the six months ended June 30, 2008 and 2009 have been derived from, and should be read in conjunction with, and are qualified in their entirety by reference to, our unaudited consolidated financial statements as of and for the six months ended June 30, 2008 and 2009 and the notes thereto included elsewhere in this prospectus supplement. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring items) that are necessary to present a fair statement of the results for the interim periods. The interim results of operations for the six months ended June 30, 2009 are not indicative of operating results to be expected for the entire year.

The operating results of newly acquired businesses are consolidated in our financial statements beginning on the acquisition date. Therefore, none of the periods presented include operating results corresponding to newly acquired businesses before we assumed operating control. As a result, the financial data for the years ended December 31, 2004, 2005, 2006, 2007 and 2008 may not be comparable to that of prior periods.

The acquisition date of RMC was March 1, 2005. Our consolidated financial information for the year ended December 31, 2005 includes RMC’s results of operations for the ten-month period ended December 31, 2005.

The acquisition date of Rinker was July 1, 2007. Our consolidated financial information for the year ended December 31, 2007 includes Rinker’s results of operations for the six month period ended December 31, 2007.

Our consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement have been prepared in accordance with MFRS, which differ in significant respects from U.S. GAAP. See note 25 to our audited consolidated financial statements, included elsewhere or incorporated by reference in this prospectus supplement, for a description of the principal differences between MFRS and U.S. GAAP as they relate to us.

Beginning on January 1, 2008, according to new MFRS B-10, inflationary accounting will only be applied in a high-inflation environment, defined by the MFRS B-10 as existing when the cumulative inflation for the preceding three years equals or exceeds 26%. Until December 31, 2007, inflationary accounting was applied to all our subsidiaries regardless of the inflation level in their respective countries. Beginning in 2008, only the financial statements of those subsidiaries whose functional currency corresponds to a country under high inflation will be restated to take account of inflation. Designation of a country as a high or low inflation

 

S-38

---

Table of Contents

environment takes place at the end of each year and inflation is applied prospectively. As of December 31, 2007, except for Venezuela and Costa Rica, all of our subsidiaries operated in low-inflation environments; therefore, restatement of their historical cost financial statements to take account of inflation was suspended starting on January 1, 2008.

Beginning in 2008, MFRS B-10 eliminates the restatement of financial statements for the period as well as the comparative financial statements for prior periods into constant values as of the date of the most recent balance sheet. Beginning in 2008, the amounts of the income statement, statement of cash flow and statement of changes in stockholders’ equity are presented in nominal values; meanwhile, amounts of financial statements for prior years are presented in constant Pesos as of December 31, 2007, the last date in which inflationary accounting was applied. Until such date, the restatement factors for current and prior periods were calculated considering the weighted average inflation of the countries in which we operate and the changes in the exchange rates of each of these countries relative to the Mexican Peso, weighted according to the proportion that our assets in each country represent of our total assets.

The following table reflects the factors that have been used to restate the originally reported Pesos to Pesos of constant purchasing power as of December 31, 2007:

 

		Annual weighted average factor		Cumulative weighted average factor to December 31, 2007
2004		0.9590		1.1339
2005		1.0902		1.1824
2006		1.0846		1.0846

Non-Peso amounts included in the financial statements are first translated into Dollar amounts, in each case at a commercially available or an official government exchange rate for the relevant period or date, as applicable, and those Dollar amounts are then translated into Peso amounts at the CEMEX accounting rate, described under “Mexican Peso exchange rates,” as of the relevant period or date, as applicable.

The Dollar amounts provided below and, unless otherwise indicated elsewhere in this prospectus supplement, are translations of Peso amounts at an end-of-period exchange rate of Ps13.18 to U.S.$1.00, the CEMEX accounting rate as of June 30, 2009. However, in the case of transactions conducted in Dollars, we have presented the Dollar amount of the transaction and the corresponding Peso amount that is presented in our consolidated financial statements. These translations have been prepared solely for the convenience of the reader and should not be construed as representations that the Peso amounts actually represent those Dollar amounts or could be converted into Dollars at the rate indicated. The noon end-of-period buying rate for Pesos on June 30, 2009 was Ps13.17 to U.S.$1.00. From June 30, 2009 through September 4, 2009, the Peso depreciated by approximately 1% against the Dollar, based on the noon buying rate for Pesos.

 

S-39

---

Table of Contents

CEMEX, S.A.B. de C.V. and subsidiaries

Selected consolidated financial information

 

		As of and for the year ended December 31,															As of and for the six months ended June 30,
		2004			2005			2006			2007			2008			2008			2009
		(in millions of Pesos, except ratios and share and per share amounts)															(Unaudited)
Income Statement Information:
Net sales		Ps102,945			Ps 192,392			Ps 213,767			Ps 236,669			Ps 243,201			Ps123,367			Ps109,396
Cost of sales(1)		(57,936	)		(116,422	)		(136,447	)		(157,696	)		(166,214	)		(84,581	)		(77,013	)
Gross profit		45,009			75,970			77,320			78,973			76,987			38,786			32,383
Operating expenses		(21,617	)		(44,743	)		(42,815	)		(46,525	)		(49,103	)		(24,549	)		(22,137	)
Operating income		23,392			31,227			34,505			32,448			27,884			14,237			10,246
Other expense, net(2)		(6,487	)		(3,976	)		(580	)		(3,281	)		(21,496	)		1,570			(1,897	)
Comprehensive financing result(3)		1,683			3,076			(505	)		1,087			(28,725	)		(4,483	)		(8,474	)
Equity in income of associates		506			1,098			1,425			1,487			1,098			411			66
Income before income tax		19,094			31,425			34,845			31,741			(21,239	)		11,736			(59	)
Minority interest		265			692			1,292			837			45			272			116
Majority interest net income		16,512			26,519			27,855			26,108			2,278			9,614			2,535
Basic earnings per share(4)(5)		0.82			1.28			1.29			1.17			0.10			1.07			(0.21	)
Diluted earnings per share(4)(5)		0.82			1.27			1.29			1.17			0.10			1.07			(0.21	)
Dividends per share(4)(6)(7)		0.25			0.27			0.28			0.29			N/A			N/A			N/A
Number of shares outstanding(4)(8)		20,372			21,144			21,987			22,297			22,985			22,585			23,393
Balance Sheet Information:
Cash and temporary investments		4,324			7,552			18,494			8,670			13,604			7,340			12,890
Net working capital(9)		6,633			15,920			10,389			16,690			18,091			19,540			19,747
Property, machinery and equipment, net		121,439			195,165			201,425			262,189			281,858			256,976			273,362
Total assets		219,559			336,081			351,083			542,314			623,622			535,243			599,037
Short-term debt		13,185			14,954			14,657			36,257			95,270			37,568			76,203
Long-term debt		61,731			104,061			73,674			180,654			162,824			154,067			177,512
Minority interest and perpetual debentures(11)		4,913			6,637			22,484			40,985			46,575			49,962			43,776
Total majority stockholders’ equity		98,919			123,381			150,627			163,168			190,692			170,110			183,235
Book value per share(4)(8)(12)		4.86			5.84			6.85			7.32			8.30			7.53			7.83
Other Financial Information:
Operating margin		22.7%			16.2%			16.1%			13.7%			11.5%			11.5%			9.4%
Operating EBITDA(13)		32,064			44,672			48,466			49,859			48,748			24,356			21,242
Ratio of Operating EBITDA to interest expense, capital securities dividends and preferred equity dividends(13)		6.82			6.76			8.38			5.66			4.77			4.59			3.66
Investment in property, machinery and equipment, net		5,483			9,862			16,067			21,779			21,248			9,922			4,128
Depreciation and amortization		10,830			13,706			13,961			17,666			20,864			10,133			11,006
Net cash flow provided by operating activities(14)		27,915			43,080			47,845			45,625			31,272			13,189			10,858

 

S-40

---

Table of Contents

		As of and for the year ended December 31,
		2004		2005		2006		2007		2008
		(in millions of Pesos, except per share amounts)
U.S. GAAP(15):
Income Statement Information:
Net sales		Ps100,163		Ps172,632		Ps203,660		Ps235,258		Ps242,341
Operating income (loss)(10)		18,442		27,038		32,804		29,844		(40,504	)
Majority interest net income(loss)		20,027		23,933		26,384		21,367		(61,886	)
Basic earnings (loss) per share(4)(5)		1.01		1.15		1.23		0.96		2.69
Diluted earnings (loss) per share		1.00		1.14		1.23		0.96		2.69
Balance Sheet Information:
Total assets		230,027		317,896		351,927		563,565		605,081
Perpetual debentures(11)		—		—		14,037		33,470		41,495
Long-term debt(11)		48,645		89,402		69,375		164,515		162,829
Minority interest		5,057		6,200		7,581		8,010		5,105
Total majority stockholders’ equity		103,257		120,539		153,239		172,217		151,294

 

(1)

Includes depreciation and excludes freight expenses of finished products from our producing plants to our selling points, the expenses related to personnel and equipment comprising our selling network and those expenses related to warehousing at the points of sale, which are included as part of our administrative and selling expenses line item. Likewise, cost of sales excludes freight expenses from the points of sale to the customers’ locations, which are included as part of our distribution expenses line item on our consolidated income statements.

 

(2)

Beginning in 2007, current and deferred Employees’ Statutory Profit Sharing (“ESPS”) is included within “Other expense, net.” Until December 31, 2006, ESPS was presented in a specific line item within the income taxes section of the consolidated income statement. The “Selected consolidated financial information” data for 2004, 2005 and 2006 were reclassified to conform to the presentation required beginning in 2007.

 

(3)

Includes financial expenses, financial income, results from financial instruments, including derivatives and marketable securities, foreign exchange result and monetary position result.

 

(4)

Our capital stock consists of series A shares and series B shares. Each of our CPOs represents two series A shares and one series B share. As of June 30, 2009, approximately 97.2% of our outstanding share capital was represented by CPOs. Each of our ADSs represents ten CPOs.

 

(5)

Earnings per share are calculated based upon the weighted average number of shares outstanding during the year, as described in note 18 to the consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement. Basic earnings per CPO is determined by multiplying the basic earnings per share for each period by three (the number of shares (two shares of our Series A common stock and one share of our Series B common stock) underlying each CPO). Basic earnings per CPO is presented solely for the convenience of the reader and does not represent a measure under MFRS.

 

(6)

Dividends declared at each year’s annual shareholders’ meeting are reflected as dividends of the preceding year.

 

(7)

Except in respect of 2008, in recent years, our board of directors has proposed, and our shareholders have approved, dividend proposals, whereby our shareholders have had a choice between stock dividends or cash dividends declared in respect of the prior year’s results, with the stock issuable to shareholders who receive the stock dividend being issued at a 20% discount from then current market prices. The dividends declared per share or per CPO in these years, expressed in Pesos, were as follows: 2004, Ps0.69 per CPO (or Ps0.23 per share); 2005, Ps0.75 per CPO (or Ps0.25 per share); 2006, Ps0.81 per CPO (or Ps0.27 per share); 2007, Ps0.84 per CPO (or Ps0.28 per share); and 2008, Ps0.87 per CPO (or Ps0.29 per share). As a result of dividend elections made by shareholders, in 2004, Ps191 million in cash was paid and approximately 300 million additional CPOs were issued in respect of dividends declared for the 2003 year; in 2005, Ps449 million in cash was paid and approximately 266 million additional CPOs were issued in respect of dividends declared for the 2004 year; in 2006, Ps161 million in cash was paid and approximately 212 million additional CPOs were issued in respect of dividends declared for the 2005 year; in 2007, Ps147 million in cash was paid and approximately 189 million additional CPOs were issued in respect of dividends declared for the 2006 year; and in 2008, Ps214 million in cash was paid and approximately 284 million additional CPOs were issued in respect of dividends declared for the 2007 year. For purposes of the table, dividends declared at each year’s annual shareholders’ meeting for each period are reflected as dividends for the preceding year. We did not declare a dividend for year 2008. At the shareholders’ meeting held on April 23, 2009, our shareholders approved a recapitalization of retained earnings. New CPOs issued pursuant to the recapitalization have been allocated to shareholders on a pro-rata basis. As of June 3, 2009, a total of 334,415,200 CPOs, representing 99.97% of all CPOs authorized for issuance at the shareholders’ meeting, had been issued. CPO holders received one new CPO for each 25 CPOs held and ADS holders received one new ADS for each 25 ADSs held. There was no cash distribution and no entitlement to fractional shares.

 

(8)

Based upon the total number of shares outstanding at the end of each period, expressed in millions of shares, and includes shares subject to financial derivative transactions, but does not include shares held by our subsidiaries.

 

(9)

Equals trade receivables, less allowance for doubtful accounts plus inventories, net, less trade payables.

 

(10)

Operating loss under U.S. GAAP for the year ended December 31, 2008 includes impairment losses of approximately Ps67,202 million (U.S.$4,891 million). See note 25 to our audited consolidated financial statements for the year ended December 31, 2008, included elsewhere or incorporated by reference in this prospectus supplement.

 

S-41

---

Table of Contents

(11)

Minority interest, as of December 31, 2006, 2007 and 2008 and June 30, 2008 and 2009, includes U.S.$1,250 million (Ps14,642 million), U.S.$3,065 million (Ps33,470 million), U.S.$3,020 million (Ps41,495 million), U.S.$3,150 million (Ps32,475 million) and U.S.$3,024 million (Ps39,856 million), respectively, that represents the nominal amount of the fixed-to-floating rate callable perpetual debentures, denominated in Dollars and Euros, issued by consolidated entities. In accordance with MFRS, these securities are accounted for as equity due to the fact that they do not have a specified maturity date and our option to defer payment of interest. However, for purposes of our U.S. GAAP reconciliation, we record these debentures as debt and interest payments thereon as part of financial expenses in our consolidated income statement.

 

(12)

Calculated by dividing the total majority stockholders’ equity by the number of shares outstanding.

 

(13)

Equals operating income before operating amortization expense and depreciation. Under MFRS, until December 31, 2004, amortization of goodwill was recognized as part of other expense, net. Commencing January 1, 2005, MFRS ceased amortization of goodwill and we assess goodwill for impairment annually unless events occur that require more frequent reviews. Discounted cash flow analyses are used to assess goodwill impairment, as described in note 10C to our audited consolidated financial statements, included elsewhere or incorporated by reference in this prospectus supplement. Operating EBITDA and the ratio of Operating EBITDA to interest expense are presented herein because we believe that they are widely accepted as financial indicators of our ability to internally fund capital expenditures and service or incur debt. Operating EBITDA and such ratios should not be considered as indicators of our financial performance, as alternatives to cash flow, as measures of liquidity or as being comparable to other similarly titled measures of other companies. Operating EBITDA is reconciled below to operating income under MFRS before giving effect to any minority interest, which we consider to be the most comparable measure as determined under MFRS. Interest expense under MFRS does not include coupon payments and issuance costs of the perpetual debentures issued by consolidated entities of approximately Ps152 million for 2006, approximately Ps1,847 million for 2007 and approximately Ps2,596 million for 2008, as described in note 15D to our consolidated financial statements. For the periods ended June 30, 2008 and 2009, coupon payments on the perpetual debentures amounted to approximately Ps1,070 million and Ps1,370 million, respectively.

 

		For the year ended December 31,															For the six months ended June 30,
		2004			2005			2006			2007			2008			2008			2009
		(in millions of Pesos)
Reconciliation of Operating EBITDA to operating income
Operating EBITDA		Ps 32,064			Ps44,672			Ps48,466			Ps49,859			Ps48,748			Ps24,356			Ps21,242
Less:
Depreciation and amortization expense		8,672			13,445			13,961			17,411			20,864			10,119			10,996
Operating income		Ps 23,392			Ps31,227			Ps34,505			Ps32,448			Ps27,884			Ps14,237			Ps10,246
Plus / minus:
Changes in working capital, net of monetary position result, excluding interest expense and income taxes		(2,175	)		2,448			6,830			7,685			825			(3,386	)		(4,451	)
Depreciation and amortization expense		8,672			13,445			13,961			17,411			20,864			10,119			10,996
Other cash expenses, net		3,414			4,156			761			943			(4,725	)		351			(827	)
Interest expense paid		(3,963	)		(5,557	)		(4,560	)		(8,268	)		(9,951	)		(5,882	)		(4,117	)
Income taxes paid		(1,425	)		(2,639	)		(3,652	)		(4,594	)		(3,625	)		(2,250	)		(989	)
Net cash flows provided by operating activities after interest expense and income taxes		Ps27,915			Ps43,080			Ps47,845			Ps45,625			Ps31,272			Ps13,189			Ps10,858

 

(14)

For the four years ended December 31, 2007, statements of cash flows were not required under MFRS; therefore, net cash flow provided by operating activities included in this item for such years refer to our consolidated statements of changes in financial position and represent majority interest net income plus items not affecting cash flow, plus investment in working capital, and excluding effects from acquisitions and including inflation effects and unrealized foreign exchange effects. See note 2A to our audited consolidated financial statements, included elsewhere or incorporated by reference in this prospectus supplement.

 

(15)

We have restated the information at and for the years ended December 31, 2004, 2005 and 2006 under U.S. GAAP using the inflation factor derived from the national consumer price index, or NCPI, in Mexico, as required by Regulation S-X under the Exchange Act instead of using the weighted average restatement factors used by us until December 31, 2007 according to MFRS and applied to the information presented under MFRS of prior years. These figures are presented in constant Pesos as of December 31, 2007, the last date on which inflationary accounting was applied (see note 2A to our audited consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement). The amounts for the year ended December 31, 2008 are presented in nominal Pesos.

 

S-42

---

Table of Contents

Management’s discussion and analysis of

financial condition and results of operations

for the six month periods ended June 30, 2008 and 2009

The following discussion and analysis should be read in conjunction with, and are qualified in their entirety by reference to, our unaudited consolidated financial statements as of and for the six month periods ended June 30, 2008 and 2009 included elsewhere in this prospectus supplement. Our significant accounting policies are described in note 2 to our audited consolidated financial statements included in our annual report on Form 20-F, which is incorporated by reference in this prospectus supplement. The following discussion, which follows the same MFRS accounting policies, should also be read in conjunction with such financial statements and the notes thereto.

The percentage changes in cement and ready-mix concrete sales volumes described in this prospectus supplement for our operations in a particular country or region include the number of tons of cement and/or the number of cubic meters of ready-mix concrete sold intercompany to our operations in other countries and regions. Likewise, unless otherwise indicated, the net sales financial information presented in this prospectus supplement for our operations in each country or region includes the Mexican Peso equivalent amount of revenues derived from intercompany sales of cement and ready-mix concrete to our operations in other countries and regions, which have been eliminated in the preparation of our unaudited consolidated financial statements for the six months ended June 30, 2008 and 2009 included elsewhere or incorporated by reference in this prospectus supplement.

On July 28, 2009, we announced our results for the six months ended June 30, 2009. The interim results of operations for the six months ended June 30, 2009 are not indicative of operating results to be expected for the entire year. The following is a discussion of our results for the six months ended June 30, 2009.

Results of operations

Consolidation of our results of operations

Our unaudited consolidated financial statements for the six month periods ended June 30, 2008 and 2009 included elsewhere in this prospectus supplement include those subsidiaries in which we hold a majority interest or which we otherwise control. All material intercompany balances and transactions have been eliminated as part of the consolidation.

For the six months ended June 30, 2008 and 2009, our consolidated results reflect the following transactions:

 

•

On December 26, 2008, we sold our Canary Islands operations (consisting of cement and ready-mix concrete assets in Tenerife and our 50% equity interest in two joint-ventures, Cementos Especiales de las Islas, S.A. (CEISA) and Inprocoi, S.L.) to several Spanish subsidiaries of Cimpor Cimentos de Portugal SGPS, S.A. for €162 million (approximately U.S.$227 million).

 

•

During 2008, we sold in several transactions our operations in Italy consisting of four cement grinding mill facilities for an aggregate amount of approximately €148 million (approximately U.S.$210 million).

 

•

On June 15, 2009, we sold three quarries (located in Nebraska, Wyoming and Utah) and our 49% joint venture interest in the operations of a quarry located in Granite Canyon, Wyoming, to Martin Marietta Materials, Inc. for approximately U.S.$65 million.

 

S-43

---

Table of Contents

Six months ended June 30, 2008 compared to six months ended June 30, 2009

Summarized in the table below are the percentage increases and decreases for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 in our domestic cement and ready-mix concrete sales volumes as well as export sales volumes of cement and domestic cement in addition to ready-mix concrete average prices for each of our geographic segments.

 

		Domestic sales volumes				Export sales volumes		Average domestic prices in local currency(1)
Geographic segment		Cement		Ready-mix concrete		Cement		Cement		Ready-mix concrete
North America
Mexico		1%		(2)%		(67)%		4 %		1 %
United States		(35)%		(43)%		100 %		(5)%		(4)%
Europe
Spain		(48)%		(51)%		32 %		(7)%		(6)%
U.K.		(23)%		(28)%		N/A		11 %		5 %
Rest of Europe		(23)%		(21)%		N/A		5 %		3 %
South/Central America and the Caribbean(2)
Venezuela		N/A		N/A		N/A		N/A		N/A
Colombia		(11)%		(18)%		N/A		16 %		(2)%
Rest of South/Central America and the Caribbean(3)		(20)%		(24)%		N/A		15 %		12 %
Africa and the Middle East(4)
Egypt		19 %		8 %		N/A		16 %		21 %
Rest of Africa and the Middle East(5)		N/A		(16)%		N/A		N/A		Flat
Australia and Asia(6)
Australia		N/A		(21)%		N/A		N/A		9 %
Philippines		7 %		N/A		(26)%		11 %		N/A
Rest of Asia(7)		(34)%		(15)%		N/A		(1)%		10 %

N/A = Not Applicable

 

(1)

Represents the average change in domestic cement and ready-mix concrete prices in local currency terms. For purposes of a geographic segment consisting of a region, the average prices in local currency terms for each individual country within the region are first translated into Dollar terms (except for the Rest of Europe region, where average prices are translated first into Euros) at the exchange rates in effect as of the end of the reporting period. Variations for a region represent the weighted average change of prices in Dollar terms (except for the Rest of Europe region, which represent the weighted average change of prices in Euros) based on total sales volumes in the region.

 

(2)

Includes our operations in Venezuela, Colombia and the operations listed in note 3 below; however, in the above table, our operations in Venezuela and Colombia are presented separately from our other operations in the segment for purposes of the presentation of our operations in the region. Our consolidated financial statements for the six months ended June 30, 2008 include the results from our Venezuelan operations for the entire period while our consolidated financial statements for the six months ended June 30, 2009 do not include CEMEX Venezuela due to its expropriation.

 

(3)

Includes our operations in Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico, Jamaica and Argentina and our trading activities in the Caribbean.

 

(4)

Includes our operations in Egypt and the operations listed in note 5 below.

 

(5)

Includes the operations in the United Arab Emirates and Israel.

 

(6)

Includes the operations in Australia as well as limited operations in China we acquired as a result of the Rinker acquisition, our operations in the Philippines and the operations described in note 7 below. On June 15, 2009, we announced the sale of our Australian operations to Holcim for approximately AUD$2.02 billion (approximately U.S.$1.64 billion or Ps21.6 billion considering the exchange rates of AUD$1.2324 per U.S. Dollar and Ps13.18 per U.S. Dollar, respectively, at June 30, 2009). See “Recent developments—Recent developments relating to our planned divestitures of assets.”

 

(7)

Includes our operations in Malaysia, Thailand, Bangladesh and other assets in the Asian region.

 

S-44

---

Table of Contents

On a consolidated basis, our cement sales volumes decreased approximately 22%, from 41.5 million tons in the six months ended June 30, 2008 to 32.3 million tons in the comparable period of 2009, and our ready-mix concrete sales volumes decreased approximately 26%, from 39.7 million cubic meters in the six months ended June 30, 2008 to 29.5 million cubic meters in the six months ended June 30, 2009. Our net sales decreased approximately 11%, from Ps123,367 million in the six months ended June 30, 2008 to Ps109,396 million in the comparable period of 2009, and our operating income decreased approximately 28%, from Ps14,237 million in the six months ended June 30, 2008 to Ps10,246 million in the comparable period in 2009.

The following tables present selected condensed financial information of net sales and operating income for each of our geographic segments for the six months ended June 30, 2008 and 2009. Variations in net sales determined on the basis of Mexican Pesos include the appreciation or depreciation between the local currencies of the countries in the regions vis-à-vis the Mexican Peso which occurred during the period; therefore, such variations differ substantially from those based solely on the countries’ local currencies:

 

		Net sales
Geographic segment		Variations in local currency(1)		Approximate currency fluctuations, net of inflation effects		Variations in Mexican Pesos		For the six months ended June 30,
								2008			2009
		(in millions of Pesos)
North America
Mexico		8 %		—		8 %		Ps  21,002			Ps  22,705
United States		(41)%		21%		(20)%		25,712			20,561
Europe
Spain		(51)%		8%		(43)%		10,312			5,861
United Kingdom		(23)%		2%		(21)%		10,139			7,980
Rest of Europe		(23)%		11%		(12)%		24,818			21,748
South/Central America and the Caribbean(2)
Venezuela		(100)%		—		(100)%		3,394			—
Colombia		(6)%		10%		4 %		3,138			3,276
Rest of South/Central America and the Caribbean(3)		(11)%		39%		28 %		5,817			7,428
Africa and Middle East(4)
Egypt		37 %		44%		81 %		2,241			4,057
Rest of Africa and the Middle East(5)		(13)%		29%		16 %		3,008			3,488
Australia and Asia(6)
Australia(7)		(9)%		1%		(8)%		8,828			8,127
Philippines		15 %		31%		46 %		1,378			2,011
Rest of Asia(8)		(19)%		30%		11 %		1,184			1,309
Others(9)		(56)%		20%		(36)%		6,930			4,457
						(12)%		127,901			113,008
Eliminations from consolidation								(4,534	)		(3,612	)
Consolidated net sales						(11)%		Ps123,367			Ps109,396

 

S-45

---

Table of Contents

		Operating income
Geographic segment		Variations in local currency(1)		Approximate currency fluctuations, net of inflation effects		Variations in Mexican Pesos		For the six months ended June 30,
								2008			2009
								(in millions of Pesos)
North America
Mexico		10 %		—		10 %		Ps  6,903			Ps  7,588
United States		(659)%		(208)%		(867)%		432			(3,313	)
Europe
Spain		(81)%		3 %		(78)%		2,548			554
United Kingdom		13 %		(3)%		10 %		(237	)		(213	)
Rest of Europe		(60)%		4 %		(56)%		1,934			846
South/Central America and the Caribbean(2)
Venezuela		(100)%		—		(100)%		698			—
Colombia		3 %		11 %		14 %		1,082			1,235
Rest of South/Central America and the Caribbean(3)		(4)%		33 %		29 %		1,279			1,649
Africa and Middle East(4)
Egypt		35 %		44 %		79 %		943			1,684
Rest of Africa and the Middle East(5)		112 %		66 %		178 %		180			501
Australia and Asia(6)
Australia(7)		(9)%		1 %		(8)%		839			771
Philippines		57 %		41 %		98 %		340			674
Rest of Asia(8)		9 %		39 %		48 %		25			37
Others(9)		(1)%		36 %		35 %		(2,729	)		(1,767	)
Consolidated operating income						(28)%		Ps14,237			Ps10,246

 

(1)

For purposes of a geographic segment consisting of a region, the net sales and operating income data in local currency terms for each individual country within the region are first translated into Dollars at the exchange rates in effect as of the end of the reporting period. Variations for a region represent the weighted average change in Dollar terms based on net sales and operating income for the region.

 

(2)

Includes our operations in Venezuela, Colombia and the operations listed in note 3 below; however, in the above table, our operations in Venezuela and Colombia are presented separately from our other operations in the segment for purposes of the presentation of our operations in the region. Our consolidated financial statements for the six months ended June 30, 2008 include the results from operations relating to Venezuela for the entire period while our consolidated financial statements for the six months ended June 30, 2009 do not include CEMEX Venezuela due to its expropriation.

 

(3)

Includes our operations in Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico, Jamaica and Argentina and our trading activities in the Caribbean.

 

(4)

Includes our operations in Egypt and the operations listed in note 5 below.

 

(5)

Includes our operations in the United Arab Emirates and Israel.

 

(6)

Includes our operations in Australia described in note 7 below, our operations in the Philippines and the operations described in note 8 below.

 

(7)

Includes our operations in Australia acquired in the Rinker transaction. On June 15, 2009, we announced our agreement to sell our Australian operations to Holcim for approximately AUD$2.02 billion (approximately U.S.$1.64 billion or Ps21.6 billion considering the exchange rates of AUD$1.2324 per U.S. Dollar and Ps13.18 per U.S. Dollar, respectively, at June 30, 2009). See “Recent developments—Recent developments relating to our planned divestitures of assets.”

 

(8)

Includes our operations in Malaysia, Thailand, Bangladesh and other assets in the Asian region.

 

(9)

Our Others segment includes our worldwide maritime trade operations, our information solutions company and other minor subsidiaries.

 

S-46

---

Table of Contents

Net sales.    Our consolidated net sales decreased approximately 11%, from Ps123,367 million in the six months ended June 30, 2008 to Ps109,396 million in the comparable period of 2009. The decrease in net sales was primarily attributable to lower volumes, mainly from our U.S. and Spanish operations and the consolidation of CEMEX Venezuela and our Canary Islands operations for the six months ended June 30, 2008, neither of which was included in our operations during the six months ended June 30, 2009. This decrease was partially mitigated by price resiliency in many of our markets. The infrastructure sector was the main driver of demand in most of our markets despite the fact that we have not yet seen the anticipated positive impact of stimulus packages around the world. Set forth below is a quantitative and qualitative analysis of the effects of the various factors affecting our net sales on a geographic segment basis.

Mexico

Our Mexican operations’ net sales represented approximately 20% of our total net sales in the six months ended June 30, 2009, in Peso terms, before eliminations resulting from consolidation. Cement sales volumes in our Mexican operations increased approximately 1% in the six months ended June 30, 2009 compared to the comparable period of 2008, and ready-mix concrete sales volumes decreased approximately 2% in the six months ended June 30, 2009 compared to the comparable period of 2008. During the six months ended June 30, 2009, the infrastructure sector was the most active sector as a result of continuing federal and local government spending. State and local elections also had a positive effect on construction activity during the six months ended June 30, 2009. In addition, the self-construction trend remained stable, while the formal residential, industrial-and-commercial sectors continued to deteriorate, the former as a result of overall tighter credit conditions and the latter as a result of the challenging macroeconomic environment. Our Mexican operations’ cement export volumes, which represented approximately 3% of our Mexican cement sales volumes in the six months ended June 30, 2009, decreased approximately 67% in the six months ended June 30, 2009 compared to the comparable period of 2008, primarily as a result of lower export volumes to the United States. Of our Mexican operations’ total cement export volumes during the six months ended June 30, 2009, 14% was shipped to the United States, 79% to Central America and the Caribbean and 7% to South America. Our Mexican operations’ average domestic sales price of cement increased approximately 4% in Peso terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average sales price of ready-mix concrete increased approximately 1% in Peso terms over the comparable period. For the six months ended June 30, 2009, cement represented approximately 55%, ready-mix concrete approximately 22% and our aggregates and other businesses approximately 23% of our Mexican operations’ net sales before eliminations resulting from consolidation.

As a result of the increases in cement sales volumes and average sales prices, partially offset by the decrease in the ready-mix concrete sales volumes, our Mexican net sales, in Peso terms, increased approximately 8% in the six months ended June 30, 2009 compared to the comparable period of 2008.

United States

Our United States operations represented approximately 18% of our total net sales in the six months ended June 30, 2009 in Peso terms, before eliminations resulting from consolidation. Our U.S. operations’ domestic cement sales volumes, which include cement purchased from our other operations, decreased approximately 35% in the six months ended June 30, 2009 compared to

 

S-47

---

Table of Contents

the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 43% during the comparable period. The decreases in our U.S. operations’ domestic cement and ready-mix concrete sales volumes resulted primarily from significantly weaker demand in all our U.S. markets, as decreased confidence and lower activity across all sectors resulted in lower demand. Overall construction activity continued to worsen as the macroeconomic situation deteriorated. All our markets and regions were adversely affected by the challenging economic downturn, as evidenced by the sharp decline in our volumes during the six months ended June 30, 2009. Average sales price of domestic cement for our U.S. operations decreased approximately 5% in Dollar terms in the six months ended June 30, 2009 compared to the comparable period of 2008, and the average sales price of ready-mix concrete decreased approximately 4% in Dollar terms over the comparable period. The decreases in average prices were primarily due to decreased demand as a result of recessionary economic conditions and tight credit availability. For the six months ended June 30, 2009, cement represented approximately 28%, ready-mix concrete approximately 29% and our aggregates and other businesses approximately 43% of our United States operations’ net sales before eliminations resulting from consolidation.

As a result of the decreases in cement and ready-mix concrete sales volumes and average sales prices, net sales from our United States operations, in Dollar terms, decreased approximately 41% in the six months ended June 30, 2009 compared to the comparable period in 2008.

Spain

Our Spanish operations’ net sales during the six months ended June 30, 2009 represented approximately 5% of our total net sales in Peso terms, before eliminations resulting from consolidation. Cement sales volumes in our Spanish operations decreased approximately 48% in the six months ended June 30, 2009 compared to the comparable period in 2008, while ready-mix concrete sales volumes decreased approximately 51% during the comparable period. The decreases in domestic cement and ready-mix concrete sales volumes were the result the continued challenging economic environment in Spain as well as reflecting the disposition of our Canary Islands operations, which had been included in our consolidated results for the six months ended June 30, 2008 (before their disposal in the fourth quarter of 2008). Overall construction activity continues to deteriorate as a result of the economic downturn. Volumes were affected by the ongoing decline in the residential sector, which has affected all demand segments and regions. No particular segment in the construction sector is experiencing growth. Additionally, infrastructure projects continue to be on hold given the lack of liquidity and overall tighter credit conditions. Our Spanish operations’ cement export volumes, which represented approximately 13% of our Spanish cement sales volumes in the six months ended June 30, 2009, increased by approximately 32% in the six months ended June 30, 2009 compared to the comparable period in 2008, primarily as a result of higher exports to the African region. Of our Spanish operations’ total cement export volumes in the six months ended June 30, 2009, 2% was shipped to Europe and the Middle East and 98% to Africa. Our Spanish operations’ average domestic sales price of cement decreased approximately 7% in Euro terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average price of ready-mix concrete decreased approximately 6% in Euro terms over the comparable period. For the six months ended June 30, 2009, cement represented approximately 58%, ready-mix concrete approximately 22% and our other businesses approximately 20% of our Spanish operations’ net sales before eliminations resulting from consolidation.

 

S-48

---

Table of Contents

As a result of the decreases in domestic cement and ready-mix concrete sales volumes, and in average domestic cement and ready-mix concrete sales prices, our Spanish net sales, in Euro terms, decreased approximately 51% in the six months ended June 30, 2009 compared to the comparable period in 2008.

United Kingdom

Our United Kingdom operations’ net sales in the six months ended June 30, 2009 represented approximately 7% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our United Kingdom operations’ domestic cement sales volumes decreased approximately 23% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 28% during the comparable period. The decreases in domestic cement and ready-mix concrete sales volumes resulted primarily from a deteriorating business environment in the United Kingdom. Construction activity was affected by the tight credit atmosphere that continues to prevail, as well as by lower consumer confidence. Activity across all sectors and regions continues to weaken. Our United Kingdom operations’ average domestic sales price of cement increased approximately 11% in Pound terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average price of ready-mix concrete increased approximately 5% in Pound terms over the comparable period. For the six months ended June 30, 2009, cement represented approximately 16%, ready-mix concrete approximately 28% and our aggregates and other businesses approximately 56% of our United Kingdom operations’ net sales before eliminations resulting from consolidation.

As a result of the decreases in domestic cement and ready-mix concrete sales volumes, partially offset by increases in average domestic cement and ready-mix concrete sales prices, net sales from our United Kingdom operations, in Pound terms, decreased approximately 23% in the six months ended June 30, 2009 compared to the comparable period in 2008.

Rest of Europe

Our Rest of Europe operations’ net sales for the six months ended June 30, 2009 represented approximately 19% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our operations in our Rest of Europe segment in the six months ended June 30, 2009 consisted of our operations in Germany, France, Croatia, Poland, Latvia, the Czech Republic, Ireland, Italy, Austria, Hungary, Portugal, Denmark, Finland, Norway and Sweden. Our Rest of Europe operations’ domestic cement sales volumes decreased approximately 23% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 21% during the comparable period. The decrease in domestic cement and ready-mix concrete sales volumes resulted primarily from a general decline in activity in the residential, non-residential and infrastructure sectors. Our Rest of Europe operations’ average domestic sales price of cement increased approximately 5% in Euro terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average price of ready-mix concrete increased approximately 3% in Euro terms over the comparable period. For the six months ended June 30, 2009, cement represented approximately 22%, ready-mix concrete approximately 49% and our other businesses approximately 29% of our Rest of Europe operations’ net sales before eliminations resulting from consolidation.

As a result of the decreases in cement and ready-mix concrete sales volumes, partially offset by increases in average domestic cement and ready-mix concrete sales prices, net sales in the Rest of

 

S-49

---

Table of Contents

Europe, in Euro terms, decreased approximately 23% in the six months ended June 30, 2009 compared to the comparable period in 2008. Set forth below is a discussion of sales volumes in Germany and France, the most significant countries in our Rest of Europe segment, based on net sales.

In Germany, domestic cement sales volumes decreased approximately 21% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes in those operations decreased approximately 11% during the comparable period. The decrease in domestic cement and ready-mix concrete sales volumes resulted primarily from a continued recessionary environment that translated into a sharp decline in cement consumption. Our German operations’ average domestic sales price of cement increased approximately 9% in Euro terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average price of ready-mix concrete increased approximately 29% in Euro terms over the comparable period. As a result of the decreases in domestic cement and ready-mix concrete sales volumes, partially offset by increases in average domestic cement and ready-mix concrete sales prices, net sales in Germany, in Euro terms, decreased approximately 13% in the six months ended June 30, 2009 compared to the comparable period in 2008.

In France, ready-mix concrete sales volumes decreased approximately 18% in the six months ended June 30, 2009 compared to the comparable period in 2008, primarily as a result of weaker economic conditions due to a decline of demand in all sectors. Our French operations’ average sales price of ready-mix concrete increased approximately 5% in Euro terms in the six months ended June 30, 2009 compared to the comparable period in 2008. As a result of the decrease in ready-mix concrete sales volumes, partially offset by the increase in the average ready-mix concrete sales price, net sales in France, in Euro terms, decreased approximately 14% in the six months ended June 30, 2009 compared to the comparable period in 2008.

South America, Central America and the Caribbean

Our operations in South America, Central America and the Caribbean in the six months ended June 30, 2009 consisted of our operations in Colombia, Costa Rica, the Dominican Republic, Panama, Nicaragua, Puerto Rico, Jamaica and Argentina, as well as several cement terminals and other assets in other Caribbean countries and our trading operations in the Caribbean region. Most of these trading operations consist of the resale in the Caribbean region of cement produced by our operations in Mexico.

On August 18, 2008, Venezuelan officials took physical control of the facilities of CEMEX Venezuela, S.A.C.A., or CEMEX Venezuela, following the issuance on May 27, 2008 of governmental decrees confirming the expropriation of all of CEMEX Venezuela’s assets, shares and business. The government of Venezuela has paid no compensation to CEMEX Caracas, which held a 75.7% interest in CEMEX Venezuela, or to any other former CEMEX Venezuela shareholder. On October 16, 2008, CEMEX Caracas filed a request for arbitration against Venezuela before the International Centre for Settlement of Investment Disputes, or ICSID, pursuant to the bilateral investment treaty between the Netherlands and Venezuela, seeking relief for the expropriation of its interest in CEMEX Venezuela. The ICSID arbitral tribunal has been constituted. We are unable at this preliminary stage to estimate the likely range of potential recovery (if any) or to determine what position the government of Venezuela will take in these proceedings, any nature of the award that may be issued by the tribunal, and the difficulties of collection of any possible monetary award issued to CEMEX Caracas. See “Item 4—Information on the Company—Business of CEMEX—Regulatory Matters and Legal Proceedings— Tax Matters—Expropriation of CEMEX Venezuela and ICSID Arbitration” of our annual report on

 

S-50

---

Table of Contents

Form 20-F for the year ended December 31, 2008 and “Recent developments—Recent developments relating to our regulatory matters and legal proceedings.”

For the six months ended June 30, 2009, our South America, Central America and Caribbean operations represented approximately 10% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our South America, Central America and Caribbean operations’ domestic cement sales volumes decreased approximately 41% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 40% over the comparable period. The decrease in domestic cement and ready-mix concrete sales volumes is primarily attributable to the absence of our Venezuelan operations in the six months ended June 30, 2009 as compared to the consolidation of CEMEX Venezuela for the six months ended June 30, 2008 (before its expropriation) and lower economic activity in the region. Our South America, Central American and Caribbean operations’ average domestic sales price of cement increased approximately 10% in Dollar terms in the six months ended June 30, 2009 compared to the comparable period in 2008, while the average sales price of ready-mix concrete decreased approximately 10% in Dollar terms over the comparable period. For the reasons mentioned above, net sales in our South America, Central America and Caribbean operations, in Dollar terms, decreased approximately 37% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the year six months ended June 30, 2009, cement represented approximately 69%, ready-mix concrete approximately 22% and our aggregates and other businesses approximately 9% of our South and Central America and Caribbean operations’ net sales before eliminations resulting from consolidation. Set forth below is a discussion of sales volumes in Colombia, the most significant country in our South America, Central American and Caribbean segment, based on net sales.

For the six months ended June 30, 2009, Colombia represented approximately 3% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Colombian operations’ cement volumes decreased approximately 11% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 18% during the comparable period. The decreases in sales volumes resulted primarily from the decline in the industrial and commercial sector partially mitigated by an increase in low-income housing and infrastructure spending. The government’s role in reactivating the economy has spurred the initiation of new infrastructure projects around the country, while the self-construction sector continued its downward trend. Our Colombian operations’ average domestic sales price of cement increased approximately 16% in Colombian Peso terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average price of ready-mix concrete decreased approximately 2% in Colombian Peso terms over the comparable period. As a result of the decreases in domestic cement, ready-mix concrete sales volumes and in the average sales price of ready-mix concrete, partially offset by the increase in the average domestic cement sales price, net sales of our Colombian operations, in Colombian Peso terms, decreased approximately 2% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, cement represented approximately 61%, ready-mix concrete approximately 24% and our aggregates and other businesses approximately 15% of our Colombian operations’ net sales before eliminations resulting from consolidation.

For the six months ended June 30, 2009, the Rest of South and Central America and the Caribbean represented approximately 7% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Rest of South and Central America and Caribbean operations’

 

S-51

---

Table of Contents

cement volumes decreased approximately 20% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 24% during the comparable period. Our Rest of South and Central America and Caribbean operations’ average domestic sales price of cement increased approximately 15% in Dollar terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and the average sales price of ready-mix concrete increased approximately 12% in Dollar terms over the comparable period. As a result of the decreases in domestic cement, ready-mix concrete sales volumes, partially offset by the increase in the average domestic cement sales price and in the average sales price of ready-mix concrete, net sales of our Rest of South and Central America and Caribbean operations, in Dollar terms, decreased approximately 13% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, cement represented approximately 73%, ready-mix concrete approximately 21% and our other businesses approximately 6% of our Rest of South and Central America and Caribbean operations’ net sales before eliminations resulting from consolidation.

For the reasons mentioned above, net sales before eliminations resulting from consolidation in our South and Central America and Caribbean operations, in Dollar terms, decreased approximately 40% in the six months ended June 30, 2009 compared to the comparable period in 2008.

Africa and the Middle East

For the six months ended June 30, 2009, Africa and the Middle East represented approximately 7% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our operations in Africa and the Middle East consist of our operations in Egypt, the United Arab Emirates (UAE) and Israel. Our Africa and Middle East operations’ domestic cement sales volumes increased approximately 19% in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales volumes decreased approximately 13% during the comparable period. The increases in domestic cement and sales volumes were primarily as a result of the demand in the informal housing and infrastructure sectors. Our Africa and the Middle East operations’ average domestic sales price of cement increased approximately 12% in Dollar terms in the six months ended June 30, 2009, and the average price of ready-mix concrete increased approximately 1% in Dollar terms over the comparable period. For the six months ended June 30, 2009, cement represented approximately 45%, ready-mix concrete approximately 38% and our other businesses approximately 17% of our African and the Middle East operations’ net sales before eliminations resulting from consolidation.

For the six months ended June 30, 2009, Egypt represented approximately 4% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Egyptian operations’ domestic cement sales volumes increased approximately 19% in the six months ended June 30, 2009 compared to the comparable period in 2008, and Egyptian ready-mix concrete sales volumes increased approximately 8% during the comparable period. The increases in volumes resulted primarily from lower steel prices which had a positive effect on cement consumption. The high-income housing sector started to slow down in response to the macroeconomic situation, while the self-construction sector maintained its stability. The average domestic sales price of cement increased approximately 16% in Egyptian pound terms in the six months ended June 30, 2009 compared to the comparable period in 2008, and ready-mix concrete sales prices increased approximately 22% in Egyptian pound terms. As a result of increases in domestic cement sales volumes and sales prices, net sales of our Egyptian operations, in Egyptian pound terms,

 

S-52

---

Table of Contents

increased approximately 37% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, cement represented approximately 89%, ready-mix concrete approximately 9% and our other businesses approximately 2% of our Egyptian operations’ net sales before eliminations resulting from consolidation.

For the six months ended June 30, 2009, the UAE and Israel represented approximately 3% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Rest of Africa and the Middle East operations’ ready-mix concrete sales volumes decreased approximately 16% in the six months ended June 30, 2009 compared to the comparable period in 2008 primarily as a result of lower ready-mix concrete sales volumes in the UAE, while the average ready-mix concrete sales price remained flat, in Dollar terms, in the six months ended June 30, 2009 compared to the comparable period in 2008. As a result of a decrease of 22% in net sales in Israel, net sales of our Rest of Africa and the Middle East operations, in Dollar terms, decreased approximately 13% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, ready-mix concrete represented approximately 66% and our other businesses approximately 34% of our Rest of Africa and the Middle East operations’ net sales before eliminations resulting from consolidation.

As a result of increases in average ready-mix concrete sales volumes and domestic cement and ready-mix concrete sales prices, net sales before eliminations resulting from consolidation in our Africa and the Middle East operations, in Dollar terms, increased approximately 7% in the six months ended June 30, 2009 compared to the comparable period in 2008.

Australia and Asia

For the six months ended June 30, 2009, Australia and Asia represented approximately 10% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our operations in Australia and Asia consist of (i) our Rinker Australian operations, which we have recently agreed to sell to Holcim, and (ii) our operations in the Philippines, Thailand, Bangladesh, Taiwan, Malaysia, and the operations in China we acquired with the Rinker acquisition. Our Australian and Asian operations’ domestic cement sales volumes decreased approximately 6% in the six months ended June 30, 2009 compared to the comparable period in 2008. Our Australian and Asian operations’ ready-mix concrete sales volumes decreased approximately 19% in the six months ended June 30, 2009 compared to the comparable period in 2008, primarily due to weaker demand in most of our markets as a result of the economic downturn. In addition, adverse weather conditions, mainly in the eastern region of Australia, affected sales during the quarter. During the quarter, demand was driven by the public sector, while the residential and the industrial-and-commercial sectors remained weak. The average sales price of ready-mix concrete in our Australian and Asian operations decreased by approximately 15% in Dollar terms in the six months ended June 30, 2009 compared to the comparable period in 2008. For the reasons described above, our Australian and Asian operations’ net sales in Dollar terms decreased approximately 25% in the six months ended June 30, 2009 compared to the comparable period in 2008.

Our Asian operations’ cement export volumes, which represented approximately 21% of our Asian operations’ cement sales volumes in the six months ended June 30, 2009, decreased approximately 26% in the six months ended June 30, 2009 compared to the comparable period in 2008 primarily due to decreased cement demand in the European region. Of our Asian operations’ total cement export volumes during the six months ended June 30, 2009,

 

S-53

---

Table of Contents

approximately 48% was shipped to Africa and Middle East, 26% was shipped to Europe and 26% to the Southeast Asia region. For the six months ended June 30, 2009, cement represented approximately 18%, ready-mix concrete approximately 43% and our other businesses approximately 39% of our Australian and Asian operations’ net sales before eliminations resulting from consolidation.

Our Australian operations’ net sales for the six months ended June 30, 2009 represented approximately 7% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Australian operations’ ready-mix concrete sales volumes represented 8% in the six months ended June 30, 2009 of our total ready-mix concrete sales volumes. The main drivers of ready-mix concrete demand in Australia are the commercial and infrastructure sectors. For the six months ended June 30, 2009, ready-mix concrete represented approximately 49%, aggregates represented approximately 34% and our other businesses approximately 17% of our Australian operations’ net sales before eliminations resulting from consolidation. On June 15, 2009, we announced our agreement to sell our Australian operations to Holcim for approximately AUD$2.02 billion (approximately U.S.$1.64 billion or Ps21.6 billion considering the exchange rates of AUD$1.2324 per U.S. Dollar and Ps13.18 per U.S. Dollar, respectively, at June 30, 2009). See “Recent developments—Recent developments relating to our planned divestitures of assets.”

For the six months ended June 30, 2009, the Philippines represented approximately 2% of our total net sales in Peso terms, before eliminations resulting from consolidation. Our Philippines operations’ domestic cement volumes increased approximately 7% in the six months ended June 30, 2009 compared to the comparable period in 2008. Our Philippines operations’ average domestic sales price of cement increased approximately 11% in Philippine Peso terms in the six months ended June 30, 2009 compared to the comparable period in 2008. As a result of the increase in domestic cement volumes, partially offset by the decrease in our domestic cement sales price, net sales of our Philippines operations, in Philippine Peso terms, increased approximately 23% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, cement represented 100% of our Philippine operations’ net sales before eliminations resulting from consolidation.

Our Rest of Asia operations’ ready-mix concrete sales volumes, which include our Malaysian operations (representing nearly all our ready-mix concrete sales volumes in the Rest of Asia region), decreased approximately 15% in the six months ended June 30, 2009 compared to the comparable period in 2008. The average sales price of ready-mix concrete increased approximately 10%, in Dollar terms, during the six months ended June 30, 2009. For the reasons mentioned above, net sales of our Rest of Asia operations, in Dollar terms, decreased approximately 4% in the six months ended June 30, 2009 compared to the comparable period in 2008. For the six months ended June 30, 2009, cement represented approximately 26%, ready-mix concrete approximately 60% and our other businesses approximately 14% of our Rest of Asia operations’ net sales before eliminations resulting from consolidation.

Others

Our Others segment includes our worldwide cement, clinker and slag trading operations, our information technology solutions company and other minor subsidiaries. Net sales of our Others segment decreased approximately 56% before eliminations resulting from consolidation in the six months ended June 30, 2009 compared to the comparable period in 2008 in Dollar terms, primarily as a result of a decrease of approximately 56% in our worldwide cement, clinker and

 

S-54

---

Table of Contents

slag trading operations and a decrease of approximately 20% in our information technology solutions company. For the six months ended June 30, 2009, our trading operations’ net sales represented approximately 47% and our information technology solutions company represented approximately 31% of our Others segment’s net sales.

Cost of sales.    Our cost of sales, including depreciation, decreased approximately 9%, from Ps84,581 million in the six months ended June 30, 2008 to Ps77,013 million in the six months ended June 30, 2009, primarily due to the decrease in sales volumes and the absence of our Venezuelan and Canary Islands operations, which were included in our consolidated results for the six months ended June 30, 2008. These decreases in cost were partially offset by increases in energy costs. As a percentage of net sales, cost of sales increased from 69% in the six months ended June 30, 2008 to 70% in the six months ended June 30, 2009. In our cement and aggregates business, we have several producing plants and many points of sale. Our cost of sales excludes freight expenses of finished products from our producing plants to our selling points, the expenses related to personnel and equipment comprising our selling network and those expenses related to warehousing at the points of sale, which were included as part of our administrative and selling expenses line item in the amount of approximately Ps7,091 million in the six months ended June 30, 2008 and Ps7,135 million in the comparable period in 2009. Cost of sales includes the expenses related to warehousing at the producing plants as well as transfer costs within our producing plants.

Gross profit.    For the reasons explained above, our gross profit decreased approximately 17%, from Ps38,786 million in the six months ended June 30, 2008 to Ps32,383 million in the six months ended June 30, 2009. As a percentage of net sales, gross profit decreased from approximately 31% in the six months ended June 30, 2008 to 30% in the six months ended June 30, 2009. In addition, our gross profit may not be directly comparable to those of other entities that include in cost of sales freight expenses of finished products from the producing plants to their selling points, and the costs related to their sales force and warehousing at the point of sale, which in our financial statements are included within administrative and selling expenses, and the cost associated with freight to the customers’ locations, which in our financial statements are included as part of our distribution expenses, and which in aggregate represented costs of approximately Ps7,091 million in the six months ended June 30, 2008 and Ps7,135 million in the comparable period in 2009.

Operating expenses.    Our operating expenses decreased approximately 10%, from Ps24,549 million in the six months ended June 30, 2008 to Ps22,137 million in the six months ended June 30, 2009, mainly as a result of our cost-reduction initiatives and the absence of CEMEX Venezuela (as a result of its expropriation) and our Canary Islands operations. As a percentage of net sales, our operating expenses remained flat in the six months ended June 30, 2009 compared to the comparable period in 2008, reflecting our cost-reduction efforts. Operating expenses include administrative, selling and distribution expenses.

Operating income.    For the reasons mentioned above, our operating income decreased approximately 28% from Ps14,237 million in the six months ended June 30, 2008 to Ps10,246 million in the six months ended June 30, 2009. As a percentage of net sales, operating income decreased from approximately 12% in the six months ended June 30, 2008 to 9% in the six months ended June 30, 2009. Additionally, set forth below is a quantitative and qualitative analysis of the effects of the various factors over our operating income on a geographic segment basis.

 

S-55

---

Table of Contents

Mexico

Our Mexican operations’ operating income increased approximately 10%, from Ps6,903 million in the six months ended June 30, 2008 to Ps7,588 million in the six months ended June 30, 2009 in Peso terms. The increase in operating income was primarily attributable to the increase in cement sales volumes and average sales prices, and to our cost control initiatives, partially offset by the decrease in ready-mix concrete sales volumes and the increase in energy costs.

United States

Our U.S. operations’ operating income decreased substantially, from an operating income of Ps432 million in the six months ended June 30, 2008 to an operating loss of Ps3,313 million in the six months ended June 30, 2009 in Peso terms. As mentioned above, the decrease in operating results was primarily attributable to the significant reduction in cement, ready-mix concrete and aggregates sales volumes, partially offset by our cost control initiatives.

Spain

Our Spanish operations’ operating income decreased approximately 78%, from Ps2,548 million in the six months ended June 30, 2008 to Ps554 million in the six months ended June 30, 2009 in Peso terms, and 81% in Euro terms. The decrease in operating income resulted primarily from the significant decline in cement and ready-mix concrete sales volumes and the decrease in average sales prices, partially mitigated by our cost control initiatives.

United Kingdom

Our United Kingdom operations’ operating loss improved approximately 10%, from an operating loss of Ps237 million in the six months ended June 30, 2008 compared to an operating loss of Ps213 million in the six months ended June 30, 2009 in Peso terms. In Pound terms, the decrease in the operating loss was approximately 13%. The decrease in the operating loss of our United Kingdom operations during the six months ended June 30, 2009 compared to the comparable period in 2008 primarily resulted from our cost control initiatives and the increase in average sales prices, partially offset by the significant reduction in cement and ready-mix concrete sales volumes.

Rest of Europe

Our Rest of Europe operations’ operating income decreased approximately 56%, from Ps1,934 million in the six months ended June 30, 2008 to Ps846 million in the six months ended June 30, 2009 in Peso terms, and 60% in Euro terms. The decrease in our Rest of Europe operations’ operating income resulted from significant decreases in our sales volumes of cement and ready-mix concrete throughout the region and energy and transportation costs, partially offset by our cost control initiatives.

In Germany, our operating loss improved from a loss of Ps28 million in the six months ended June 30, 2008 to a loss of Ps14 million in the six months ended June 30, 2009 in Peso terms. The decrease in the operating loss in Germany resulted primarily from our cost control initiatives and the increase in average sales prices, partially offset by the significant decreases in cement and ready-mix concrete sales volumes and the increase in energy and transportation costs.

 

S-56

---

Table of Contents

In France, operating income decreased approximately 11%, from Ps796 million in the six months ended June 30, 2008 to Ps712 million in the six months ended June 30, 2009 in Peso terms. In Euro terms, operating income decreased by 12%. The decrease in operating income in France resulted primarily from the decrease in ready-mix concrete sales volumes, partially offset by our cost control initiatives.

South America, Central America and the Caribbean

Our South America, Central America and Caribbean operations’ operating income decreased approximately 6%, from Ps3,059 million in the six months ended June 30, 2008 to Ps2,884 million in the six months ended June 30, 2009 in Peso terms. In Dollar terms, operating income decreased by approximately 30% for the comparable period. The decrease in operating income was primarily attributable to the absence of CEMEX Venezuela in the consolidated results for the six months ended June 30, 2009, partially offset by our cost control initiatives.

In Colombia, during the six months ended June 30, 2009, operating income increased approximately 3% in Colombian Pesos and approximately 14% in Pesos, from Ps1,082 million in the six months ended June 30, 2008 to Ps1,235 million in the six months ended June 30, 2009. The increase resulted primarily from our cost reduction initiatives and the increase in the average sales prices of cement and ready-mix concrete, partially offset by the reduction in cement and ready-mix concrete sales volumes.

Africa and the Middle East

Our Africa and the Middle East operations’ operating income increased approximately 94%, from Ps1,123 million in the six months ended June 30, 2008 to Ps2,185 million in the six months ended June 30, 2009 in Peso terms. In Dollar terms, the increase in operating income was approximately 43% during the comparable period. The increase in operating income resulted primarily from increases in ready-mix concrete sales volumes and average domestic cement and ready-mix concrete sales prices.

Operating income from our Egyptian operations increased approximately 79%, from Ps943 million in the six months ended June 30, 2008 to Ps1,684 million in the six months ended June 30, 2009 in Peso terms and increased 30% in Dollar terms, primarily as a result of the significant increase in sales volumes and average sales prices. Our Rest of Africa and the Middle East operations increased from an operating income of Ps180 million in the six months ended June 30, 2008 to Ps501 million in the six months ended June 30, 2009 in Peso terms. In Dollar terms, operating income in the Rest of Africa and Middle East increased 112%. The increase resulted primarily from cost reduction programs implemented in the UAE and Israel in 2009.

Australia and Asia

Our Australia and Asia operations’ operating income increased approximately 23%, from Ps1,204 million in the six months ended June 30, 2008 to Ps1,482 million in the six months ended June 30, 2009 in Peso terms, and decreased 9% in Dollar terms. The decrease in operating income in Dollar terms resulted primarily from the reduction in cement and ready-mix concrete sales volumes.

In Australia, operating income decreased 8%, from Ps839 million in the six months ended June 30, 2008 to Ps771 million in the six months ended June 30, 2009 in Peso terms. In Dollar terms, the decrease in operating income for the comparable period was approximately 31%. The decrease resulted primarily from the reduction in ready-mix concrete and aggregates sales volumes.

 

S-57

---

Table of Contents

Our Philippines operating income increased approximately 98%, in Peso terms, from Ps340 million in the six months ended June 30, 2008 to Ps674 million in the six months ended June 30, 2009, in Peso terms. In Dollar terms, operating income increased 39% in the comparable period.

Others

Operating loss in our Others segment improved by approximately 35%, from a loss of Ps2,729 million in the six months ended June 30, 2008 to a loss of Ps1,767 million in the six months ended June 30, 2009, in Peso terms. The decrease in the operating loss can be primarily explained by our cost reduction initiatives.

Other expenses, net.    Our other expenses, net, increased from other income, net of Ps1,570 million in the six months ended June 30, 2008 to other expenses, net of Ps1,897 million in the six months ended June 30, 2009. The increase in other expenses, net during the period is primarily due to the recognition of restructuring costs during the six months ended June 30, 2009 and the recognition of gains on the sale of assets during the six months ended June 30, 2008.

The most significant items included under this caption in the six months ended June 30, 2008 and 2009 are as follows:

 

		For the six months ended June 30,
		2008			2009
		(in millions of Pesos) (unaudited)
Impairment losses		Ps  (310	)		Ps       (8	)
Restructuring costs		(7	)		(134	)
Non-operational donations		(144	)		(112	)
Current and deferred ESPS		(99	)		(3	)
Antidumping duties		(11	)		(7	)
Results in sales of assets and others, net		2,141			(1,633	)
		Ps1,570			Ps(1,897	)

Comprehensive financing result.    Pursuant to MFRS, the comprehensive financing result should measure the real cost (gain) of an entity’s financing, net of the foreign currency fluctuations and the inflationary effects on monetary assets and liabilities. In periods of high inflation or currency depreciation, significant volatility may arise and is reflected under this caption. Comprehensive financing income (expense) includes:

 

•

financial or interest expense on borrowed funds;

 

•

financial income on cash and temporary investments;

 

•

appreciation or depreciation resulting from the valuation of financial instruments, including derivative instruments and marketable securities, as well as the realized gain or loss from the sale or liquidation of such instruments or securities;

 

•

foreign exchange gains or losses associated with monetary assets and liabilities denominated in foreign currencies; and

 

•

beginning in 2008, gains and losses resulting from having monetary liabilities or assets exposed to inflation (monetary position result) in countries under high inflation environments. Until

 

S-58

---

Table of Contents

December 31, 2007, monetary position results were calculated on each country’s net monetary position despite the level of inflation.

 

		For the six months ended June 30,
		2008			2009
		(in millions of Pesos) (unaudited)
Comprehensive financing result:
Financial expense		Ps(5,304	)		Ps(5,806	)
Financial income		205			182
Results from financial instruments		(204	)		(2,091	)
Foreign exchange result		483			(937	)
Monetary position result		337			178
Comprehensive financing result		Ps(4,483	)		Ps(8,474	)

Our comprehensive financing result deteriorated from a loss of Ps4,483 million in the six months ended June 30, 2008 to a loss of Ps8,474 million in the six months ended June 30, 2009. The components of the change are shown above. Our financial expense increased approximately 9% due to higher debt levels. Our financial income decreased 11%. The decrease was primarily attributable to the reduction in interest rates. The increase in our loss from financial instruments was primarily attributable to the settlement of a significant portion of our derivative instruments portfolio during the first six months of 2009. Our net foreign exchange result deteriorated mainly due to the appreciation of the Mexican Peso during the six months ended June 30, 2008. Our monetary position result (generated by the recognition of inflation effects over monetary assets and liabilities) in the six months ended June 30, 2009 decreased approximately 47% due to the absence of our Venezuelan operations, which had been part of consolidated results during the six months ended June 30, 2008.

Derivative financial instruments.    For the six months ended June 30, 2008 and 2009, our derivative financial instruments that had a potential impact on our comprehensive financing result consisted of foreign exchange derivative instruments (excluding our foreign exchange forward contracts designated as hedges of our net investment in foreign subsidiaries), interest rate swaps, cross-currency swaps, including our derivative instruments related to the issuance of perpetual debentures by consolidated entities, equity forward contracts and interest rate derivatives related to energy projects.

As required in the context of our renegotiation of maturities with our bank lenders, during the six months ended June 30, 2009, we closed a significant portion of our derivative instruments. Furthermore, during July 2009, we closed the Yen cross-currency swap derivatives associated with our perpetual debentures. See note 11 to our selected consolidated financial statements included elsewhere in this prospectus supplement.

Income taxes.    Income taxes decreased from an income tax expense of Ps1,849 million in the six months ended June 30, 2008 to an income tax revenue of Ps2,710 million in the six months ended June 30, 2009. The decrease is mainly attributable to higher operating losses in several countries during the six months ended June 30, 2009 as compared to taxable income in the six months ended June 30, 2008, as well as the increase in our deferred tax assets during the six months ended June 30, 2009.

 

S-59

---

Table of Contents

Consolidated net income.    For the reasons described above, our consolidated net income (before deducting the portion allocable to minority interest) for the six months ended June 30, 2009 decreased approximately 73%, from Ps9,886 million in the six months ended June 30, 2008 to Ps2,651 million in the six months ended June 30, 2009. As a percentage of net sales, consolidated net income decreased from 8% in the six months ended June 30, 2008 to 2% in the comparable period in 2009.

Majority interest net income.    Majority interest net income represents the difference between our consolidated net income and minority interest net income, which is the portion of our consolidated net income attributable to those of our subsidiaries in which non-affiliated third parties hold interests. Changes in minority interest net income in any period reflect changes in the percentage of the stock of our subsidiaries held by non-affiliated third parties as of the end of each month during the relevant period and the consolidated net income attributable to those subsidiaries.

Minority interest net income decreased approximately 57%, from Ps272 million in the six months ended June 30, 2008 to Ps116 million in the comparable period in 2009, mainly as a result of the absence of CEMEX Venezuela and our Canary Islands operations, which were included in our consolidated results in the six months ended June 30, 2008. Majority interest net income decreased by approximately 74%, from Ps9,614 million in the six months ended June 30, 2008 to Ps2,535 million in the comparable period in 2009. As a percentage of net sales, majority interest net income decreased from 8% in the six months ended June 30, 2008 to 2% in the comparable period in 2009.

Liquidity and capital resources

Operating activities

In the past, we have satisfied our operating liquidity needs primarily through operations of our subsidiaries, and we expect to continue to do so for both the short and long term. Although cash flow from our operations has overall historically met our liquidity needs for operations, by servicing debt and funding capital expenditures and acquisitions, our subsidiaries are exposed to risks from changes in foreign currency exchange rates, price and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments in the countries in which they operate, any one of which may materially reduce our net income and cash from operations. Consequently, in order to meet our overall liquidity needs we also rely on cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowings under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. Our consolidated net cash flows provided by operating activities were approximately Ps12,608 million in the six months ended June 30, 2008 and Ps10,742 million in the comparable period in 2009. See our statement of cash flows for the six month periods ended June 30, 2008 and 2009 included elsewhere in this prospectus supplement.

Sources and uses of cash

Beginning in 2008, the new MFRS B-2, Statement of Cash Flows, or MFRS B-2, establishes the incorporation of a new cash flow statement, included elsewhere in this prospectus supplement, which presents cash inflows and outflows in nominal currency as part of the basic financial statements, replacing the statement of changes in financial position, which included inflation effects and foreign exchange effects not realized.

 

S-60

---

Table of Contents

Our review of sources and uses of resources presented below refers to nominal amounts included in our statement of cash flows for the six month periods ended June 30, 2008 and 2009.

Our primary sources and uses of cash during the six month periods ended June 30, 2008 and 2009 were as follows:

 

		Six months ended June 30,
		2008			2009
		(in millions of Pesos) (Unaudited)
OPERATING ACTIVITIES
Majority net income		Ps  9,614			Ps  2,535
Non-cash items:
Depreciation and amortization of assets		10,133			11,006
Impairment of assets		310			8
Equity in income of associates		(411	)		(66	)
Minority interest		272			116
Other expenses, net		(1,880	)		874
Comprehensive financing result		4,483			8,474
Income taxes		1,849			(2,710	)
Changes in working capital, excluding financial expense and income taxes		(3,049	)		(4,273	)
Net cash flows provided by operating activities before comprehensive financing results and income taxes		21,321			15,964
Financial expense paid in cash		(5,882	)		(4,117	)
Income taxes paid in cash		(2,250	)		(989	)
Net cash flows provided by operating activities		Ps13,189			Ps10,858
INVESTING ACTIVITIES
Property, machinery and equipment, net		Ps (9,922	)		Ps (4,128	)
Disposal of subsidiaries and associates, net		5,315			952
Investment derivatives		110			—
Intangible assets and other deferred charges		226			(1,301	)
Long-term assets, net		198			558
Others, net		(400	)		490
Net cash flows used in investing activities		Ps (4,473	)		Ps (3,429	)
FINANCING ACTIVITIES
Issuance of common stock		Ps        1			Ps        5
Financing derivatives		(609	)		(8,051	)
Dividends paid		(213	)		—
Repayment of debt, net		(18,705	)		3,683
Issuance of perpetual debentures, net of interest paid		10,039			—
Non-current liabilities, net		237			(139	)
Net cash flows used in financing activities		(9,250	)		(4,502	)
Cash and investments currency translation effect		(797	)		(3,641	)
Decrease in cash and investments		(1,331	)		(714	)
Cash and investments at beginning of year		8,671			13,604
CASH AND INVESTMENTS AT END OF YEAR		Ps  7,340			Ps12,890
Changes in working capital:
Trade receivables, net		Ps (1,938	)		Ps    649
Other accounts receivable and other assets		783			(221	)
Inventories		(1,830	)		3,364
Trade payables		906			(3,229	)
Other accounts payable and accrued expenses		(970	)		(4,836	)
		Ps (3,049	)		Ps (4,273	)

 

S-61

---

Table of Contents

June 30, 2008.    During the six months ended June 30, 2008, our cash and temporary investments decreased by Ps1,331 million after giving effect to the cash and investments currency translation effect of approximately Ps797 million, which is the currency translation effect that our cash and investments in currencies, other than the Mexican Peso, at the beginning of the period, generate at the end of the period as a result of exchange rate fluctuations. This decrease was due to our net cash flows used in investing and financing activities of approximately Ps4,473 million and Ps9,250 million, respectively, which were partially offset by our net cash flows provided by operating activities of approximately Ps13,189 million (after interest expense and income taxes of approximately Ps8,132 million paid in cash).

For the six months ended June 30, 2008, our net cash flows provided by operating activities included a net increase in working capital of approximately Ps3,049 million, which resulted primarily from increases in trade receivables and inventories and decreases in other accounts payable and accrued expenses for an aggregate amount of approximately Ps4,738 million. This amount was partially offset by decreases in other accounts receivable and other assets and increases in trade payables, which amounted to approximately Ps1,689 million.

During the six months ended June 30, 2008, our net cash flows provided by operating activities of approximately Ps13,189 million, after interest expense and income taxes paid, coupled with amounts of cash and investments at the beginning of the period, new borrowings of approximately Ps18,695 million, the issuance of perpetual obligations, net of interest paid, of approximately Ps10,039 million and funds obtained from the sale of subsidiaries and affiliates of approximately Ps5,315 million, were used, among other minor uses of cash flows, mainly to: (a) fund net capital expenditures of approximately Ps9,922 million; (b) repay debt of approximately Ps37,400 million; and (c) pay for net losses of approximately Ps499 million realized in derivative financial instruments.

The sale of subsidiaries and affiliates, which generated funds of approximately Ps5,315 million, consisted mainly of the sale of a 9.5% interest in Axtel, S.A.B. de C.V., or AXTEL, and the sale of assets obtained through the acquisition of Rinker to our associate, Ready Mix USA, LLC, which was completed in 2008. For additional information, see notes 8A and 10A to our consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement.

June 30, 2009.    During the six months ended June 30, 2009, our cash and temporary investments decreased by approximately Ps714 million after giving effect to the cash and investments conversion effect of Ps3,641 million. Our net cash flows provided by operating activities (after interest expense and income taxes paid in cash of approximately Ps5,106 million) of approximately Ps10,858 million were offset by net cash flow used in investing activities of approximately Ps3,429 million and by net cash flows used in financing activities for approximately Ps4,502 million.

For the six months ended June 30, 2009, our net cash flows provided by operating activities included a net increase in working capital of approximately Ps4,273 million, which resulted primarily from increases in trade receivables, other accounts receivable and other assets, and decreases in trade payables and other accounts payable, for an aggregate amount of approximately Ps7,637 million. This amount was partially offset by a decrease in inventories of approximately Ps3,364 million.

During the six months ended June 30, 2009, our net cash flows provided by operating activities, after interest expense and income taxes paid, of approximately Ps10,858 million, coupled with new borrowings of approximately Ps58,402 million and several other minor sources of cash flows,

 

S-62

---

Table of Contents

including the sale of subsidiaries and affiliates of approximately Ps952 million, were used, among other minor uses of cash flows, mainly to: (a) repay debt of approximately Ps54,719 million; (b) fund net capital expenditures of approximately Ps4,128 million; and (c) pay for net losses of Ps8,051 million realized in derivative financial instruments.

The disposals of subsidiaries and affiliates, which generated funds of approximately Ps952 million during the six months ended June 30, 2009, consisted mainly of the sale of some of our aggregates quarries in the United States and a lime operation in Mexico and are detailed in notes 8A and 10A to our consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement.

Capital expenditures

At June 30, 2009, in connection with our significant projects, we had contractually committed capital expenditures of approximately U.S.$635 million, including our base capital expenditures expected to be incurred during the second half of 2009. This amount is now expected to be incurred over the next 2.5 years, according to the evolution of the related projects. Our capital expenditures incurred for the six months ended June 30, 2008 and 2009 and our expected capital expenditures during the second half of 2009, which include an allocation to 2009 of a portion of our total future committed amount, are as follows:

 

		Six months ended June 30,				Estimated in second half of
		2008		2009		2009
		(in millions of U.S. dollars)
North America(1)		U.S.$   552		U.S.$  85		U.S.$  52
Europe(2)		364		170		104
Central and South America and the Caribbean(3)		78		61		36
Africa and the Middle East		52		10		15
Asia and Australia		43		9		10
Others(4)		67		42		6
Total consolidated		U.S.$1,156		U.S.$377		U.S.$223
Of which:
Expansion capital expenditures(5)		925		287		125
Base capital expenditures(6)		231		90		98

 

(1)

In North America, our estimated capital expenditures during the second half of 2009 include amounts related to the expansion of the Yaqui and Tepeaca plants in Mexico, and the expansion of the Balcones and Brooksville South plants in the U.S.

 

(2)

In Europe, our estimated capital expenditures during the second half of 2009 include amounts related to the construction of the new cement production facility in Teruel, Spain, the new grinding mill and blending facility at the Port of Tilbury in the United Kingdom and the expansion of our cement plants in Poland and Latvia.

 

(3)

In Central and South America and the Caribbean, our estimated capital expenditures during the second half of 2009 include the construction of the new kiln in Panama.

 

(4)

Our “Others” capital expenditures expected during the second half of 2009 include expenditures for our trading activities as well as our corporate requirements.

 

(5)

Expansion capital expenditures refer to the acquisition or construction of new assets intended to increase our current operating infrastructure and which are expected to generate additional amounts of operating cash flows.

 

(6)

Base capital expenditures refer to the acquisition or construction of new assets that would replace portions of our operating infrastructure and which are expected to maintain our operating continuity.

As reflected in the prior table, during the six months ended June 30, 2009, in response to the continued severe deterioration of the economic environment, we have substantially reduced our

 

S-63

---

Table of Contents

capital expenditures budget. We may revise our planned capital expenditures if conditions deteriorate further during the second half of 2009 in order to stay within the capital expenditure limitations set forth in the financing agreement. These limitations require that we cannot make aggregate capital expenditures in excess of (i) U.S.$600 million (plus an additional U.S.$50 million contingency to account for currency fluctuations and certain additional costs and expenses) for the year ended December 31, 2009, (ii) U.S.$700 million for the year ended December 31, 2010 and (iii) U.S.$800 million for each year thereafter until the debt under the financing agreement has been repaid in full.

Our indebtedness

As of June 30, 2009, we had approximately U.S.$19.2 billion (Ps253.7 billion) of total debt, of which approximately 30% was short-term (including current maturities of long-term debt) and 70% was long-term. As of June 30, 2009, before giving effect to our cross-currency swap arrangements, approximately 61% of our consolidated debt was Dollar-denominated, approximately 13% was Peso-denominated, approximately 25% was Euro-denominated, approximately 1% was Japanese Yen-denominated, and immaterial amounts were denominated in other currencies. The weighted average interest rates of our debt as of June 30, 2009 in our main currencies were 2.3% on our Dollar-denominated debt, 6.7% on our Peso-denominated debt, 3.0% on our Euro-denominated debt, and 1.9% on our Yen-denominated debt. The foregoing debt information does not include the Ps39,856 million (U.S.$3,024 million) of perpetual debentures issued by C5 Capital (SPV) Limited, C8 Capital (SPV) Limited, C10 Capital (SPV) Limited and C10-EUR Capital (SPV) Limited in December 2006 and February and May 2007 described below. See “—Our perpetual debentures.”

Most of our outstanding indebtedness has been incurred to finance acquisitions and capital expenditure programs. CEMEX México, S.A. de C.V. and Empresas Tolteca de México, S.A. de C.V., two of our principal Mexican subsidiaries, have provided guarantees of our indebtedness in the amount of approximately U.S.$7,037 million (Ps92,747 million) and U.S.$4,130 million (Ps54,429 million), respectively, as of June 30, 2009. After giving effect to the financing agreement, however, all of the financing agreement debt obligors and guarantors (other than CEMEX, Inc. and CEMEX Australia Holdings Pty Ltd.) have provided cross-guarantees over all the financing agreement debt.

Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt, and fund working capital and planned capital expenditures) with operating cash flow, borrowings under credit facilities, bank loans, credit facilities, sale-leaseback transactions, forward contracts, forward lending facilities and equity swap transactions, proceeds from of debt offerings (including notes, commercial paper, bonds, preferred equity and putable capital securities), equity offerings and proceeds from asset sales. The global stock and credit markets in the last year and a half have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective and outstanding debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for financings materially less attractive, and at various times have resulted in the unavailability of certain types of financing. This volatility and illiquidity has negatively impacted a broad range of fixed income securities. As a result, the market for fixed income securities has experienced decreased liquidity, increased price volatility, credit downgrade events, and increased defaults. Global equity markets have also been experiencing heightened volatility

 

S-64

---

Table of Contents

and turmoil, with issuers exposed to the credit markets most seriously affected. These factors and the continuing market disruption have had, and may continue to have, an adverse effect on us, including on our ability to refinance future maturities, in part because we, like many public companies, from time to time raise capital in debt and equity capital markets.

In addition, continued uncertainty in the stock and credit markets may adversely impact our ability to access additional short-term and long-term financing, including accounts receivable securitizations, on reasonable terms or at all, which would negatively impact our liquidity and financial condition. See “—Our receivables financing arrangements.”

On October 31, 2008 and January 21, 2009, Fitch and S&P respectively downgraded our credit rating from BBB- (investment grade) to BB+ (below investment grade). On March 10, 2009, both agencies further downgraded our rating, S&P to B- and Fitch to B. These ratings actions have materially and adversely affected and will continue to adversely affect the availability of financing to us and our subsidiaries and the terms on which we could refinance our debt, including the imposition of more restrictive covenants and higher interest rates on our existing debt. The disruptions in the financial and credit markets may continue to adversely affect our credit rating and the market value of our common stock. If the current pressures on credit continue or worsen, we may not be able to refinance, if necessary, our outstanding debt when due, which could have a material adverse effect on our business and financial condition. On August 10, 2009, S&P revised its outlook on us from negative to developing, and again on August 27, 2009 from developing to positive. Fitch also revised its outlook on August 17, 2009, from negative to stable.

We and our subsidiaries have sought and obtained, through the financing agreement, amendments to our debt instruments that contain financial ratios. Testing of financial covenants has been suspended and will resume again June 30, 2010 at revised ratio levels, but we may need to seek waivers or amendments in the future. We cannot assure you that any future waivers, if requested, will be obtained. If we or our subsidiaries are unable to comply with the provisions of our debt instruments, and are unable to obtain a waiver or amendment, the indebtedness outstanding under such debt instruments could be accelerated. Acceleration of these debt instruments would have a material adverse effect on our financial condition.

In connection with our consolidated financial statements for the year ended December 31, 2008, included in our annual report on Form 20-F, filed with the SEC on June 30, 2009, we included our assessment of factors present at that time, as further described in Note 22 to those consolidated financial statements, relative to our ability to comply with debt maturities due in the next 12 months and hence our ability to continue as a going concern, which were dependent on the completion of the refinancing described therein, proceeds from asset sales or otherwise obtaining additional debt or equity financial resources to pay our obligations as they became due. On August 14, 2009, we completed our global refinancing and substantially reduced the amount of our debt coming due during the remainder of 2009 and extended our overall debt amortization schedule. Our current assessment is that the factors that gave rise to the uncertainty about our ability to continue as a going concern at June 30, 2009, have been resolved. See “Recent developments—Recent developments related to our indebtedness— Global refinancing” for further details.

On August 14, 2009, we entered into a financing agreement that extends the maturities of approximately U.S.$15.0 billion in syndicated and bilateral bank and private placement obligations and provides for a semi-annual amortization schedule, with a final maturity of

 

S-65

---

Table of Contents

approximately U.S.$6.8 billion on February 14, 2014. We intend to meet such semi-annual amortization requirements prior to maturity using funds from a variety of sources, including from free cash flow and net cash proceeds from asset sales and debt and/or equity security issuances, the receipt of which will trigger mandatory prepayments. Free cash flow used to prepay the debt, for any period for which it is being calculated, is the aggregate amount of cash we have on hand and the amount of any unutilized commitments under any liquidity facility permitted by the financing agreement in excess of U.S.$650 million. In addition, under the financing agreement, we are required to privately place or publicly sell common equity or, with the prior approval of participating creditors representing greater than 66.67% of the exposures under the financing agreement, equity-linked securities for net cash proceeds of at least U.S.$1.0 billion. If we do not issue such securities prior to June 30, 2010, participating creditors representing at least 25% of all exposures under the financing agreement can require us upon written notice between May 1, 2010 and September 1, 2010, at any time prior to December 31, 2010, to issue equity and/or debt securities for a total amount of net cash proceeds equal to U.S.$1.0 billion less the amount of net cash proceeds received from any issuance prior to June 30, 2010. In addition, the debt subject to the financing agreement is now secured by pledges of the stock of certain of our subsidiaries and guaranteed by us and certain of our subsidiaries.

The financing agreement also includes tighter covenants and restrictions on our ability to do certain things, including but not limited to, incurring debt, granting security, engaging in acquisitions and joint ventures, granting guarantees, declaring and paying cash dividends and distributions to shareholders, making capital expenditures and issuing shares (subject to negotiated baskets and exceptions and carve-outs). See “Risk factors—The financing agreement contains several restrictive covenants and limitations that could significantly affect our ability to operate our business.” In addition, we pledged or transferred to trustees under security trusts the capital stock of several of our major subsidiaries as collateral to secure our payment obligations under the financing agreement and under a number of other financing arrangements for the benefit of the participating creditors and holders of debt and other obligations that benefit from provisions in their debt instruments requiring that their obligations be equally and ratably secured. The guarantors under our existing bank facilities (other than CEMEX, Inc. (our subsidiary in the United States) and CEMEX Australia Holdings Pty Ltd.) provided guarantees guaranteeing the obligations to the participating creditors under the financing agreement.

Of our total debt as of June 30, 2009 (approximately pro forma Ps254,414 million (U.S.$19,303 million), which does not include our perpetual debentures), including our debt not subject to the financing agreement (approximately Ps57,320 million (U.S.$4,349 million)) and after giving pro forma effect to the extended amortization requirements contained in the financing agreement, we had debt with an aggregate principal amount of approximately Ps16,104 million (U.S.$1,222 million) maturing during the second half of 2009, and Ps38,065 million (U.S.$2,888 million) maturing during 2010, Ps37,369 million (U.S.$2,835 million) maturing during 2011, Ps21,224 million (U.S.$1,610 million) maturing during 2012, Ps31,567 million (U.S.$2,395 million) maturing during 2013 and Ps110,085 million (U.S.$8,353 million) maturing during 2014 and thereafter. See “Recent developments—Recent developments relating to our indebtedness—Global financing.”

Financing activities

As of June 30, 2009, we had approximately U.S.$19.2 billion of total outstanding debt, not including approximately U.S.$3 billion of perpetual debentures issued by special purpose vehicles, which are not accounted for as debt under MFRS but are considered to be debt for purposes of U.S. GAAP. Our financing activities through December 31, 2008 are described in our previous

 

S-66

---

Table of Contents

annual report on Form 20-F. The following is a description of our financings for the six months ended June 30, 2009:

During the first half of 2009, we issued various short-term notes under our Short-Term Bond Program (“Certificados Bursátiles de Corto Plazo”), with the partial guarantee of Nacional Financiera S.N.C., or NAFIN, having an outstanding amount of Ps863 million at June 30, 2009.

See “Recent developments—Recent developments relating to our indebtedness—Global refinancing.”

Our equity forward arrangements

In connection with the sale of shares of AXTEL and in order to benefit from a future increase in the prices of shares of such entity, on March 31, 2008, we entered into forward contracts with net cash settlement covering 119 million CPOs (each for 59.5 million CPOs) of AXTEL with maturity in April 2011. The fair value of such contracts as of June 30, 2009 was a gain of approximately U.S.$12 million (Ps158 million). Changes in the fair value of these instruments generated a loss in our income statement for the six months ended June 30, 2009 of approximately Ps119 million (U.S.$9 million). These contracts mature in October 2009.

Our perpetual debentures

As of June 30, 2008 and 2009, minority interest stockholders’ equity includes approximately Ps32,477 million (U.S.$3,150 million) and Ps39,856 million (U.S.$3,024 million), respectively, representing the principal amount of perpetual debentures. These debentures have no fixed maturity date and do not represent a contractual payment obligation for us. In connection with the issuance of these debentures, New Sunward Holding Financial Ventures B.V., an indirect, wholly-owned subsidiary of ours, issued dual-currency notes to the debenture issuers, which were unconditionally and irrevocably guaranteed by us and two of our subsidiaries, CEMEX México, S.A. de C.V. and New Sunward Holding B.V. Based on their characteristics, these debentures, issued through special purpose vehicles, or SPVs, qualify as equity instruments under MFRS and are classified within minority interest as they were issued by consolidated entities. Considering that there is no contractual obligation to deliver cash or any other financial asset, the debentures do not have any maturity date, meaning that they were issued to perpetuity, and we, at our sole discretion, have the right to defer indefinitely the payment of interest due on the debentures subject to, among other things, certain dividend restrictions on our common stock. The classification of the debentures as equity instruments for accounting purposes under MFRS was made under applicable International Financial Reporting Standards, or IFRS, which were applied to these transactions in compliance with the supplementary application of IFRS in Mexico. Issuance costs, as well as the interest expense, which is accrued based on the principal amount of the perpetual debentures outstanding, are included within “Other equity reserves” on our consolidated balance sheets and represented expenses of approximately Ps1,370 million in the six months ended June 30, 2009 and Ps1,070 million in the six months ended June 30, 2008. The different SPVs were established solely for purposes of issuing the perpetual debentures and are included in our consolidated financial statements. As of June 30, 2009, our perpetual debentures are as follows:

 

Issuer		Issuance date		Nominal amount (in millions)		Option to Redeem		Interest rate
C10-EUR Capital (SPV) Ltd.		May 2007		€730		December 2017		6.3%
C8 Capital (SPV) Ltd.		February 2007		U.S.$750		December 2014		6.6%
C5 Capital (SPV) Ltd.		December 2006		U.S.$350		December 2011		6.2%
C10 Capital (SPV) Ltd.		December 2006		U.S.$900		December 2016		6.7%

 

S-67

---

Table of Contents

Under U.S. GAAP, these perpetual debentures are recognized as debt and interest payments are included as financing expense, as part of the comprehensive financial result in the income statement.

As described below and in note 11C to our audited financial statements included elsewhere or incorporated by reference in this prospectus supplement, there have been derivative instruments associated with the debentures issued by C5 Capital (SPV) Limited, C8 Capital (SPV) Limited, C10 Capital (SPV) Limited and C10-EUR Capital (SPV) Limited through which we had changed the risk profile associated with interest rates and currency in respect of these debentures. In order to eliminate our exposure to Yen and to Yen interest rates, on May 22, 2009, we delivered the required notices under the documentation governing the dual-currency notes and the related perpetual debentures, informing debenture holders our decision to exercise our right to defer by one day the scheduled interest payment otherwise due and payable on June 30, 2009, the then next scheduled interest payment date under the dual-currency notes and the related perpetual debentures. As a result, the interest rate on the dual-currency notes converted from a Yen floating rate into a Dollar or Euro fixed rate, as applicable, as of June 30, 2009, and the associated Yen cross-currency swap derivatives were unwound on July 15, 2009.

Our receivables financing arrangements

We have established sales of trade accounts receivable programs with financial institutions, referred to as securitization programs. These programs were originally negotiated by our subsidiary in Spain during 2000, our subsidiary in the United States during 2001, our subsidiaries in Mexico during 2002, and our subsidiary in France during 2006. Through the securitization programs, our subsidiaries effectively surrender control, risks and the benefits associated with the accounts receivable sold; therefore, the amount of receivables sold is recorded as a sale of financial assets and the balances are removed from the balance sheet at the moment of sale, except for the amounts that the counterparties have not paid, which are reclassified to other accounts receivable. See notes 4 and 5 to our consolidated financial statements included elsewhere or incorporated by reference in this prospectus supplement. The balances of receivables sold pursuant to these securitization programs as of June 30, 2008 and 2009 were Ps13,834 million (U.S.$1,342 million) and Ps9,254 million (U.S.$701 million), respectively. The accounts receivable qualifying for sale do not include amounts over specified days past due or concentrations over specified limits to any one customer, according to the terms of the programs. Expenses incurred under these programs, originated by the discount granted to the acquirers of the accounts receivable, are recognized in the income statements as financial expense and were approximately Ps346 million (U.S.$33 million) in the six months ended June 30, 2008 and Ps334 million (U.S.$24 million) in the comparable period in 2009. The proceeds obtained through these programs have been used primarily to reduce net debt. On June 24, 2009, the securitization program in France was extended until May 24, 2010. On June 26, 2009, we entered into a one-year accounts receivable securitization program for our U.S. operations for up to U.S.$300 million in funded amounts, replacing our prior program.

 

S-68

---

Table of Contents

Our financial derivatives instruments

As required in the context of our renegotiation of maturities with our bank lenders, since the beginning of 2009, we have been reducing our aggregate derivatives notional amount, thereby reducing our risk to cash margin calls. During April 2009, we closed out a significant portion of our active and inactive derivative financial instruments held as of December 31, 2008. By means of this termination, we realized an aggregate loss of approximately U.S.$1,093 million, which after netting approximately U.S.$624 million of cash margin deposits already posted in favor of our counterparties and cash payments of approximately U.S.$48 million, was documented through promissory notes for approximately U.S.$421 million, which increased our outstanding debt. Most of these promissory notes are included in the financing agreement entered into on August 14, 2009. A comparison of our derivative instruments portfolio between December 31, 2008 and June 30, 2009 is as follows:

 

		December 31, 2008					June 30, 2009
		Nominal		Fair value(1)			Nominal		Fair value(1)
		(in millions of U.S. dollars)
Active positions
Derivative financial instruments related to debt		U.S.$16,416		(4	)		—		—
Other derivative financial instruments		877		(36	)		298		42
Derivative financial instruments related to equity instruments(2)		3,520		222			3,884		122
		20,813		182			4,182		164
Inactive positions(3)
Short-term and long-term cross-currency swaps		—		(113	)		—		—
Short-term and long-term foreign exchange forwards		—		(272	)		—		—
		—		(385	)		—		—
		U.S.$20,813		(203	)		4,182		164

 

(1)

At December 31, 2008 and June 30, 2009, the fair value of our derivative instruments is presented net of cash margin deposits of approximately U.S.$570 million and U.S.$50 million, respectively, and excludes approximately U.S.$193 million in 2008 and U.S.$176 million in June 2009, of cash margin deposits related with our obligations under put option transactions on our CPOs.

 

(2)

At June 30, 2009, the nominal amount of “Derivative financial instruments related to equity instruments” includes approximately U.S.$360 million of put options on our CPOs mentioned above. These instruments at such date represent an estimated fair value loss of approximately U.S.$175 million, which net of cash margin deposits of approximately U.S.$176 million results in a net asset of approximately U.S.$1 million. At December 31, 2008, these instruments were recognized at fair value and disclosed as a guarantee obligation rather than as a derivative instrument.

 

(3)

The nominal amounts of the original derivative positions and the opposite derivative positions at December 31, 2008 are not aggregated considering that the effects of one instrument are proportionally inverse to the effects of the other instrument, and therefore, eliminated.

As a result of this initiative, our outstanding debt profile as of June 30, 2009 reflects the original contractual conditions of our obligations. As of June 30, 2009, our total debt was approximately U.S.$19,250 million, not including our perpetual debentures, of which approximately 61% was Dollar-denominated, approximately 25% was denominated in Euros, approximately 13% was denominated in Pesos, approximately 1% was Yen-denominated and approximately 1% was denominated in other currencies. As of such date, approximately 87% of our total debt was at

 

S-69

---

Table of Contents

floating rates and 13% at fixed interest rates, and approximately U.S.$5,782 million was short term and U.S.$13,468 million was long term. On July 15, 2009, we concluded the unwinding process of the last tranche of the Yen cross-currency swap derivatives. See “—Liquidity and capital resources—Recent developments—Our financial derivatives instruments.”

Stock repurchase program

Under Mexican law, our shareholders may authorize a stock repurchase program at our annual shareholders’ meeting. Unless otherwise instructed by our shareholders, we are not required to purchase any minimum number of shares pursuant to such program.

In connection with our 2006 and 2007 annual shareholders’ meetings held on April 26, 2007, and April 24, 2008, respectively, our shareholders approved stock repurchase programs in an amount of up to Ps6,000 million (nominal amount) to be implemented between April 2007 and April 2009. No shares were purchased under these programs, and no stock repurchase program is outstanding as of the date of this prospectus supplement. Under the financing agreement, we are subject to contractual limitations on our ability to repurchase stock.

Research and development, patents and licenses, etc.

Our research and development, or R&D, efforts help us in achieving our goal of increasing market share in the markets in which we operate. The department of the Vice President of Technology is responsible for developing new products for our cement and ready-mix concrete businesses that respond to our clients’ needs. The department of the Vice President of Energy has the responsibility for developing new processes, equipment and methods to optimize operational efficiencies and reduce our costs. For example, we have developed processes and products that allow us to reduce heat consumption in our kilns, which in turn reduces energy costs. Other products have also been developed to provide our customers a better and broader offering of products in a sustainable manner. We believe this has helped us to keep or increase our market share in many of the markets in which we operate.

We have ten laboratories dedicated to our R&D efforts. Nine of these laboratories are strategically located in close proximity to our plants to assist our operating subsidiaries with troubleshooting, optimization techniques and quality assurance methods. One of our laboratories is located in Switzerland, where we are continually improving and consolidating our research and development efforts in the areas of cement, concrete, aggregates, admixtures, mortar and asphalt technology, as well as in information technology and energy management. We have several patent registrations and pending applications in many of the countries in which we operate. These patent registrations and applications relate primarily to different materials used in the construction industry and the production processes related to them, as well as processes to improve our use of alternative fuels and raw materials.

Our Information Technology divisions have developed information management systems and software relating to cement and ready-mix concrete operational practices, automation and maintenance. These systems have helped us to better serve our clients with respect to purchasing, delivery and payment.

R&D activities comprise part of the daily routine of the departments and divisions mentioned above; therefore, the costs associated with such activities are expensed as incurred. However, the

 

S-70

---

Table of Contents

costs incurred in the development of software for internal use are capitalized and amortized in operating results over the estimated useful life of the software, which is approximately four years.

During the six months ended June 30, 2008 and 2009, the combined total expense of the departments of the Vice President of Energy and the Vice President of Technology, which includes R&D activities, amounted to approximately U.S.$16.8 million and U.S.$12.5 million, respectively. In addition, in the six months ended June 30, 2008, we capitalized approximately U.S.$37 million related to internal use software development; no amount was capitalized during the six months ended June 30, 2009. The items capitalized refer to direct costs incurred in the development phase of the software and relate mainly to professional fees, direct labor and related travel expenses.

Summary of material contractual obligations and commercial commitments

As of June 30, 2009, we had commitments for the purchase of raw materials for an approximate amount of U.S.$130 million.

Starting on June 30, 2008, Ready Mix USA has had the right to require us to acquire Ready Mix USA’s interest in CEMEX Southeast, LLC and Ready Mix USA, LLC at a price equal to the greater of (a) eight times the companies’ EBITDA during the fiscal year immediately preceding the date the option is exercised, (b) eight times the average of the companies’ EBITDA for the previous three years minus the companies’ debt on the date the option is exercised or (c) the adjusted book value of the combined companies’ assets. We estimate this price would have been approximately U.S.$490 million as of June 30, 2009. This option will expire on July 1, 2030.

In March 1998, we entered into a 20-year contract with PEMEX providing that PEMEX’s refinery in Cadereyta would supply us with 0.9 million tons of petcoke per year, commencing in 2003. In July 1999, we entered into a second 20-year contract with PEMEX providing that PEMEX’s refinery in Madero would supply us with 0.85 million tons of petcoke per year, commencing in 2002. We expect the PEMEX petcoke contracts to reduce the volatility of our fuel costs and provide us with a consistent source of petcoke throughout their 20-year terms (which expire in July 2023 for Cadereyta’s refinery contract and October 2022 for the Madero’s refinery contract).

In 1999, we reached an agreement with ABB Alstom Power and Sithe Energies, Inc. (currently Excelon Generation Company LLC) requiring Alstom and Sithe to finance, build and operate “Termoeléctrica del Golfo,” a 230 megawatt energy plant in Tamuin, San Luis Potosi, Mexico and to supply electricity to us for a period of 20 years. Pursuant to the agreement, we are obligated to purchase the full electric capacity generated by the power plant during the 20-year period. We are also obligated to supply Alstom and Sithe with 1.2 million tons of petcoke per year for the 20-year period for the consumption of this power plant and another power plant built and operated by Alstom and Sithe for Peñoles, a Mexican mining company. We expect to meet our petcoke delivery requirements through several petcoke supply agreements, including our petcoke supply contract with PEMEX. Pursuant to the agreement, we may be obligated to purchase the Termoeléctrica del Golfo plant upon the occurrence of specified material defaults or events, such as failure to pay when due, bankruptcy or insolvency, and revocation of permits necessary to operate the facility, and upon termination of the 20-year period, we will have the right to purchase the assets of the power plant. We expect this arrangement to reduce the volatility of our energy costs. The power plant commenced commercial operations on April 29, 2004. In February 2007, ABB Alstom Power and Excelon Generation Company LLC sold their

 

S-71

---

Table of Contents

participations in the project to a subsidiary of The AES Corporation. For the years ended December 31, 2007 and 2008, TEG supplied 59.7% and 60.4%, respectively, of our electricity needs in Mexico during such years.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, operating results, liquidity or capital resources.

CEMEX Venezuela

As of and for the periods ended December 31, 2007 and July 31, 2008, measured in Pesos, our Venezuelan operations accounted for approximately 2.9% and 3.0% of our consolidated revenues, respectively, and 2.1% in both periods of our consolidated total assets. In the event certain of our affiliates receive compensation as a result of proceedings they have initiated against Venezuela for the expropriation of their investment in CEMEX Venezuela, it is expected that the award of such relief will enable us to reduce consolidated debt and/or to expand total installed capacity. Accordingly, we believe that the expropriation of our affiliates’ investment in CEMEX Venezuela will not have a material impact on our consolidated financial position, liquidity or results of operations. At the present time, however, it is not possible to predict the timing or amount of any award of restitution and/or compensation, the extent to which any order of restitution can be enforced, or the extent to which any monetary relief can be collected following an award. Until restitution and/or compensation is received, we will be adversely affected, although we do not expect such adverse effect to be significant in light of our overall consolidated financial position.

We consolidated the income statement of CEMEX Venezuela in our results of operations for the seven-month period ended July 31, 2008. For balance sheet purposes, as of December 31, 2008, our investment in Venezuela was presented within “Other investments and non current accounts receivable.” As of June 30, 2008 and 2009, the net book value of our investment in Venezuela was approximately Ps7,168 million and Ps6,327 million, respectively, corresponding to the interest of our affiliates of approximately 75.7%.

See “Item 4—Information on the Company—Business of CEMEX—Regulatory Matters and Legal Proceedings—Tax Matters—Expropriation of CEMEX Venezuela and ICSID Arbitration” of our annual report on Form 20-F for the year ended December 31, 2008 and “Recent developments—Recent developments relating to our regulatory matters and legal proceedings.”

 

S-72

---

Table of Contents

Qualitative and quantitative market disclosure

Our derivative financial instruments

We use derivative financial instruments in order to change the risk profile associated with changes in interest rates and foreign exchange rates of debt agreements, as a vehicle to reduce financing costs, as an alternative source of financing, and as hedges of: (i) highly probable forecasted transactions, (ii) our net assets in foreign subsidiaries and (iii) future exercises of options under our executive stock option programs. Before entering into any transaction, we evaluate, by reviewing its credit ratings and our business relationship according to our policies, the creditworthiness of the financial institutions and corporations that are prospective counterparties to our derivative financial instruments. We select our counterparties to the extent we believe that they have the financial capacity to meet their obligations in relation to these instruments. Under current financial conditions and volatility, we can not assure that risk of non-compliance with the obligations agreed to with such counterparties is minimal.

The fair value of derivative financial instruments is based on estimated settlement costs or quoted market prices and supported by confirmations of these values received from the counterparties to these financial instruments. The notional amounts of derivative financial instrument agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss.

 

		At June 30, 2008					At June 30, 2009
Derivative instruments		Notional amount		Estimated fair value			Notional amount		Estimated fair value			Maturity date
		(in millions of U.S. dollars)
Equity forward contracts		U.S.$   461		U.S.$ (45	)		U.S.$     53		U.S.$   12			Oct-2009
Other forward contracts		—		—			40		(1	)		Oct-2009
Other equity derivatives		500		(16	)		860		(72	)		Apr-2013
Foreign exchange forward contracts		3,705		54			—		—
Derivatives related to perpetual debentures		3,150		37			3,024		194			Jul-2009	*
Interest rate swaps		7,009		103			—		—
Cross-currency swaps		5,291		211			—		—
Derivatives related to energy		211		15			205		30			Sep-2022

 

*

See “—Liquidity and capital resources—Our financial derivatives instruments.”

Our equity derivative forward contracts.    As of June 30, 2008, in order to hedge future exercises of options under our executive stock option programs, we had an equity forward contract covering approximately 81 million CPOs for a notional amount of U.S.$203 million and a fair value of a loss of U.S.$2 million. During October 2008, a significant decrease in the price of CPOs accelerated the anticipated settlement of these contracts, which generated a loss of approximately U.S.$153 million (Ps2,102 million), recognized during the fourth quarter of 2008.

In addition, in connection with the sale of shares of AXTEL and in order to benefit from a future increase in the prices of such entity, on March 31, 2008, we entered into forward contracts with net cash settlement covering 119 million CPOs (each for 59.5 million CPOs) of AXTEL with maturity in April 2011. The notional amount as of June 30, 2008 was U.S.$258 million, and the fair value of such contract was a loss of approximately U.S.$43 million. During 2009, we carried out an early settlement of a portion of these contracts and the notional amount as of June 30, 2009 was U.S.$53 million. The fair value of such contracts as of June 30, 2009 was a gain of

 

S-73

---

Table of Contents

approximately U.S.$12 million (Ps158 million). Changes in the fair value of these instruments generated a loss in our income statement for the six months ended June 30, 2009 of approximately U.S.$9 million (Ps119 million). These contracts mature in October 2009. For accounting purposes, our equity forward contracts have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

Our other forward contracts.    During 2008, we negotiated a forward contract over the TRI (Total Return Index) of the Mexican Stock Exchange, maturing in October 2009, through which we maintain exposure to increases or decreases of such index. TRI expresses the market return on stock based on market capitalization of the issuers comprising the index. For accounting purposes our other forward contracts have been designated as trading instruments and the changes in the fair value are recognized directly in the income statement.

Our other equity derivative contracts.    These derivatives are described as options over the CPO price. In June 2008, we entered into a structured transaction, under which we issued debt for U.S.$500 million (Ps6,870 million) paying an interest expense of LIBOR plus 132.5 basis points (1.325%), which includes options over the price of our CPOs. In case the CPO price exceeds U.S.$32, the net interest rate under the debt is considered to be zero. This rate increases as the price of the CPO decreases, with a maximum rate of 12% when the CPO price is lower than U.S.$23. We measure the option over the price of the CPO at fair value, recognizing the amount in the income statement. As of June 30, 2008, the fair value of these derivatives was a loss of U.S.$16 million. As of June 30, 2009, the fair value was a loss of U.S.$71 million, including a deposit in margin accounts of U.S.$50 million, which is presented within net liabilities as a result of an offsetting agreement with the counterparty.

In addition, as of June 30, 2009, our other equity derivative contracts included approximately U.S.$360 million in connection with a guarantee we gave under a financial transaction of our employee’s pension fund trust involving put options on our CPOs. This financial guarantee presented an estimated fair value loss of approximately U.S.$176 million, which net of cash margin deposits of approximately U.S.$175 million results in a net liability of approximately U.S.$1 million. At June 30, 2009, this guarantee was recognized at fair value and disclosed in the notes to the unaudited financial statements included elsewhere in this prospectus supplement as a guarantee obligation rather than as a derivative instrument.

In connection with the guarantee described above, in April 2008, Citibank entered into put option transactions on our CPOs with a Mexican trust that we established on behalf of our Mexican pension fund and certain of our directors and current and former employees (the “participating individuals”). The transaction was structured with two main components. Under the first component, the trust sold, for the benefit of our Mexican pension fund, put options to Citibank in exchange for a premium of approximately U.S.$38 million. The premium was deposited into the trust and was used to purchase, on a prepaid forward basis, securities that track the performance of the Mexican Stock Exchange. Under the second component, the trust sold, on behalf of the participating individuals, additional put options to Citibank in exchange for a premium of approximately U.S.$38 million, which was used to purchase prepaid forward CPOs. These prepaid forward CPOs, together with additional CPOs representing an equal amount in U.S. dollars, were deposited into the trust by the participating individuals as security for their obligations, and represent the maximum exposure of the participating individuals under this transaction. The put options gave Citibank the right to require the trust to purchase, in April 2013, approximately 112 million CPOs at a price of U.S.$3.2086 per CPO (120% of the initial CPO price in dollars). If the value of the assets held in the trust (28.6 million CPOs and the securities

 

S-74

---

Table of Contents

that track the performance of the Mexican Stock Exchange) is insufficient to cover the obligations of the trust, a guarantee will be triggered and we will be required to purchase in April 2013 all of the CPOs at a price per CPO equal to the difference between U.S.$3.2086 and the market value of the assets of the trust. The purchase price per CPO in Dollars and the corresponding number of CPOs under this transaction are subject to dividend and anti-dilutive adjustments. For accounting purposes, our other equity derivative contracts have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

Our foreign exchange forward contracts.    As of June 30, 2008, in order to hedge financial risks associated with variations in foreign exchange rates versus the Peso of certain net investments in foreign countries denominated in Euros and Dollars, and consequently reducing volatility in the value of stockholders’ equity in our reporting currency, we negotiated foreign exchange forward contracts with different maturities until 2010. Changes in the estimated fair value of these instruments were recorded in stockholders’ equity as part of the foreign currency translation effect. In October 2008, as part of the closing process of positions exposed to fluctuations in exchange rates vis-à-vis the Peso previously described, we entered into foreign exchange forward contracts with opposite exposure to the original contracts. As a result of these new positions, changes in the fair value of the original instruments will be offset in results by an equivalent opposite amount generated by these new derivative positions. The designation of original positions as hedges of our net exposure over investment in foreign subsidiaries in stockholders’ equity ended when the contracts of new offsetting derivative positions ended in October 2008. Therefore, changes in fair value of original positions and new offsetting derivative positions were recognized in the income statement within the inactive derivative financial instruments. Valuation effects were registered within comprehensive income until the accounting hedge was revoked, adjusting for the cumulative effect for translation of foreign subsidiaries. Between January and April 2009, we settled these positions. For the six months ended June 30, 2009, the income statement includes a loss of approximately U.S.$1 million related to changes in fair value of these positions. For accounting purposes, our foreign exchange forward contracts have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

Our cross-currency swaps.    As of June 30, 2008, we held cross-currency swap contracts related to our short-term and long-term financial debt portfolio. Through these contracts, we carried out the exchange of the originally contracted currencies and interest rates, over a determined amount of underlying debt. During the life of these contracts, the cash flows originated by the exchange of interest rates under the cross-currency swap contracts matched the interest payment dates and conditions of the underlying debt. Likewise, at maturity of the contracts and the underlying debt, we would exchange with the counterparty notional amounts provided by the contracts so that we would receive an amount of cash flow equal to cover our primary obligation under the underlying debt. In exchange, we would pay the notional amount in the exchanged currency. As a result, we effectively exchanged the risks related to interest rates and foreign exchange variations of the underlying debt to the rates and currencies negotiated in the cross-currency swap contracts. Between January and April 2009, we settled these positions.

The periodic cash flows on the cross-currency swap instruments arising from the exchange of interest rates were recorded in comprehensive financing result as part of the effective interest rate of the related debt. We recognized the estimated fair value of our cross-currency swap contracts as assets or liabilities in the balance sheet, with changes in the estimated fair value

 

S-75

---

Table of Contents

being recognized through the income statement. All financial assets and liabilities with the same maturity, for which our intention is to simultaneously realize or settle, were offset for presentation purposes, in order to reflect the cash flows that we expect to receive or pay upon settlement of the financial instruments.

In respect of the estimated fair value recognition of the cross-currency swap contracts, as of June 30, 2008, we recognized net assets of U.S.$303 million. For the six month periods ended June 30, 2008 and 2009, changes in the fair value of cross-currency swaps generated losses of U.S.$83 million (Ps856 million) and U.S.$74 million (Ps975 million), respectively.

The periodic interest rate cash flows under the cross-currency swaps were recognized within financial expense as part of the effective interest rate of the related debt. For accounting purposes our other cross-currency swaps have been designated as trading instruments and the changes in the fair value are recognized directly in the income statement.

Our interest rate swaps.    As of June 30, 2008, we held interest rate swaps for notional amounts of approximately U.S.$7,009 million entered into in order to hedge contractual cash flows (interest payments) of underlying debt negotiated at floating rates. Although these interest rate swap contracts are part of, and complement, our financial strategy, they generally do not meet the accounting hedge criteria. Consequently, changes in the estimated fair value of these instruments were recognized in earnings. Between January and April 2009, we settled these positions. For the six months in the period ended June 30, 2009, changes in the estimated fair value of these instruments were recognized in earnings representing a gain of approximately U.S.$27 million. For accounting purposes, our interest rate swaps have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

Our derivatives related to energy projects.    As of June 30, 2008 and 2009, we had an interest rate swap maturing in September 2022, for notional amounts of U.S.$211 million and U.S.$205 million, respectively, negotiated to exchange floating for fixed interest rates, in connection with agreements we entered into for the acquisition of electric energy for a 20-year period commencing in 2003. During the life of the derivative contract and over its notional amount, we will pay LIBOR rates and receive a 5.4% fixed rate until maturity in September 2022. As of June 30, 2008 and 2009, the fair value of the swap represented a gain of U.S.$15 million (Ps155 million) and U.S.$30 million (Ps395 million), respectively. For the six month periods ended June 30, 2008 and 2009, changes in the fair value of these derivatives generated a gain of approximately U.S.$1.0 million (Ps10 million) and a loss of approximately U.S.$24 million (Ps316 million), respectively. For accounting purposes, our derivatives contracts related to energy projects have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

Our derivative instruments related to perpetual equity instruments.    In connection with the issuance of the debentures by C5 Capital (SPV) Limited and C10 Capital (SPV) Limited in December 2006 described above, pursuant to which we paid a fixed Dollar rate of 6.196% on a notional amount of U.S.$350 million and a fixed Dollar rate of 6.722% on a notional amount of U.S.$900 million, respectively, we decided to change the foreign exchange exposure on the coupon payments from Dollars to Yen. In order to do so, we contemporaneously entered into two cross-currency swaps: a U.S.$350 million notional amount cross-currency swap, pursuant to which, for a five-year period, we were to receive a fixed rate in Dollars of 6.196% of the notional amount and pay six month Yen LIBOR multiplied by a factor of 4.3531, and a U.S.$900 million notional

 

S-76

---

Table of Contents

amount cross-currency swap, pursuant to which, for a ten-year period, we were to receive a fixed rate in Dollars of 6.722% of the notional amount and pay six month Yen LIBOR multiplied by a factor of 3.3878. Each cross-currency swap included an extinguishable swap, which provided that if the relevant debentures are extinguished for certain stated conditions but before the maturity of the cross-currency swap, such cross-currency swap would be automatically extinguished, with no amounts payable by the swap counterparties. In addition, in order to eliminate variability during the first two years in the Yen-denominated payments due under the cross-currency swaps, we entered into foreign exchange forwards for a notional amount of U.S.$89 million, under which we paid Dollars and received payments in Yen. Changes in fair value of all the derivative instruments associated with the perpetual debentures were recognized in the income statement as part of the comprehensive financing result.

In connection with the issuance of the debentures by C8 Capital (SPV) Limited and C10-EUR Capital (SPV) Limited in February and May 2007 described above, pursuant to which we paid a fixed Dollar rate of 6.640% on a notional amount of U.S.$750 million and a fixed Euro rate of 6.277% on a notional amount of €730 million, respectively, we decided to change the foreign exchange exposure on the coupon payments from Dollars and Euros to Yen. In order to do so, we contemporaneously entered into two cross-currency swaps: a U.S.$750 million notional amount cross-currency swap, pursuant to which, for an eight-year period, we received a fixed rate in Dollars of 6.640% of the notional amount and paid six month Yen LIBOR multiplied by a factor of 3.55248, and a €730 million notional amount cross-currency swap, pursuant to which, for a ten-year period, we received a fixed rate in Euros of 6.277% of the notional amount and paid twelve-month Yen LIBOR multiplied by a factor of 3.1037. Each cross-currency swap included an extinguishable swap, which provided that if the relevant debentures are extinguished for certain stated conditions but before the maturity of the cross-currency swap, such cross-currency swap would be automatically extinguished, with no amounts payable by the swap counterparties. In addition, in order to eliminate variability during the first two years in the Yen-denominated payments due under the cross-currency swaps, we entered into foreign exchange forwards for notional amounts of U.S.$273 million, under which we paid Dollars and received payments in Yen. Changes in fair value of all the derivative instruments associated with the perpetual debentures were recognized in the income statement as part of the comprehensive financing result. For accounting purposes, our derivatives instruments related to perpetual equity instruments have been designated as trading instruments and the changes in their fair value are recognized directly in the income statement.

The above described derivative instruments related to the perpetual debentures have been terminated. See “—Liquidity and capital resources—Our financial derivatives instruments.”

During the six month period ended June 30, 2009, we significantly decreased the volatility in our derivatives strategy. The notional amount (in Dollars) of our foreign exchange forward derivatives, and of our equity and rates derivatives, decreased 100%, 26% and 99% respectively, compared to the six month period ended June 30, 2008.

Interest rate risk, foreign currency risk and equity risk

Interest rate risk.    The table below presents tabular information of our fixed and floating rate long-term foreign currency-denominated debt as of June 30, 2009. It includes the effects generated by the interest rate swaps and the cross-currency swap contracts that we have entered into, covering a portion of our financial debt originally negotiated in Pesos and Dollars. Average floating interest rates are calculated based on forward rates in the yield curve as of June 30,

 

S-77

---

Table of Contents

2009. Future cash flows represent contractual principal payments. The fair value of our floating rate long-term debt is determined by discounting future cash flows using borrowing rates available to us as of June 30, 2009 and is summarized as follows:

 

		Expected maturity dates as of June 30, 2009																				Fair value
Long-term debt(1)		2009			2010			2011			2012			2013			After 2014			Total
		(millions of dollar equivalents of debt denominated in foreign currencies)
Variable rate		4,013			2,090			7,696			1,214			3			51			15,068		14,918
Average interest rate		2.49	%		2.61	%		3.07	%		4.23	%		8.35	%		8.60	%
Fixed rate		62			169			163			115			106			1,861			2,475		2,651
Average interest rate		5.51	%		5.41	%		5.52	%		5.42	%		5.05	%		5.39	%

 

(1)

Total debt does not include U.S.$3,024 million (approximately Ps39,856 million) of perpetual debentures, issued by consolidated entities.

Foreign currency risk.    Due to our geographic diversification, our revenues are generated in various countries and settled in different currencies. However, some of our production costs, including fuel and energy, and some of our cement prices, are periodically adjusted to take into account fluctuations in the Dollar/Peso exchange rate. For the six month period ended June 30, 2009, approximately 20% of our net sales, before eliminations resulting from consolidation, were generated in Mexico, 18% in the United States, 5% in Spain, 7% in the United Kingdom, 19% in our Rest of Europe segment, 10% in South America, Central America and the Caribbean, 7% in Africa and the Middle East, 10% in Australia and Asia and 4% from other regions and our cement and clinker trading activities. As of June 30, 2009, our debt amounted to Ps253,715 million (approximately U.S.$19,250 million), of which approximately 61% was Dollar-denominated, 13% was Peso-denominated, 25% was Euro-denominated, 1% was Yen-denominated and immaterial amounts were denominated in other currencies; therefore, we had foreign currency exposure arising from the Dollar-denominated debt, the Euro-denominated debt and the Yen-denominated debt, versus the currencies in which our revenues are settled in most countries in which we operate. See “—Liquidity and capital resources—Our indebtedness,” and “Risk factors—We have to service our Dollar-denominated obligations with revenues generated in Pesos or other currencies, as we do not generate sufficient revenue in Dollars from our operations to service all our Dollar-denominated obligations. This could adversely affect our ability to service our obligations in the event of a devaluation or depreciation in the value of the Peso, or any of the other currencies of the countries in which we operate, compared to the Dollar. In addition, our consolidated reported results and outstanding indebtedness are significantly affected by fluctuations in exchange rates between the Peso and other currencies.” Although we also have a small portion of our debt in other currencies, we have generated enough cash flow in those currencies to service that debt. Therefore, we believe there is no material foreign currency risk exposure with respect to that debt. As previously mentioned, we entered into cross-currency swap contracts, designed to change the original profile of interest rates and currencies over a portion of our financial debt, which affected our financial results for the six month periods ended June 30, 2008 and 2009. However, as of June 30, 2009, we had no such swap contracts in effect. See “—Liquidity and capital resources—Our derivative financial instruments.”

Equity risk.    As described above, we have entered into equity forward contracts on our own stock. Upon liquidation and at our option, the equity forward contracts provide for physical settlement or net cash settlement of the estimated fair value and the effects are recognized in the income statement. At maturity, if these forward contracts are not settled or replaced, or if

 

S-78

---

Table of Contents

we default on these agreements, our counterparties may sell the shares underlying the contracts. Such sales may have an adverse effect on our stock market price. Under our equity forward contracts, there is a direct relationship in the change in the fair value of the derivative with the change in value of the underlying asset.

Investments, acquisitions and divestitures

The transactions described below represent our principal investments, acquisitions and divestitures completed during 2008 and the six months ended June 30, 2009.

Investments and acquisitions

Our net investment in property, machinery and equipment, as reflected in our consolidated financial statements, excluding acquisitions of equity interests in subsidiaries and associates, was approximately U.S.$1,156 million and U.S.$377 million in the six months ended June 30, 2008 and 2009, respectively. This net investment in property, machinery and equipment has been applied to the construction and upgrade of plants and equipment, to the maintenance of plants and equipment, including environmental controls and technology updates.

Divestitures

On June 15, 2009, we announced our agreement to sell all our Australian operations to Holcim for approximately AUD$2.02 billion (approximately U.S.$1.64 billion using the exchange rate of AUD$1.2324 per U.S. Dollar at June 30, 2009). All the net proceeds of the sale will be used to reduce debt. The transaction is subject to regulatory approval, due diligence and other closing conditions. Our facilities in Australia include 249 ready-mix concrete plants, 83 aggregate quarries, 16 concrete pipe and precast products plants, and our 25% stake in Cement Australia.

On June 12, 2009, we sold three quarries (located in Nebraska, Wyoming and Utah) and our 49% joint venture interest in the operations of a quarry located in Granite Canyon, Wyoming, to Martin Marietta Materials, Inc. for U.S.$65 million.

On December 26, 2008, we sold our Canary Islands operations (consisting of cement and ready-mix concrete assets in Tenerife and 50% of the shares in two joint-ventures, Cementos Especiales de las Islas, S.A. (CEISA) and Inprocoi, S.L.) to several Spanish subsidiaries of Cimpor Cimentos de Portugal SGPS, S.A. for €162 million (approximately U.S.$227 million using the exchange rate of 1.4028 per Dollar at December 26, 2008).

On July 31, 2008, we agreed to sell our operations in Austria (consisting of 26 aggregates and 41 ready-mix concrete plants) and Hungary (consisting of six aggregates, 29 ready-mix concrete and four paving stone plants) to Strabag SE, one of Europe’s leading construction and building materials groups, for €310 million (approximately U.S.$433 million using the exchange rate of 0.7154 per U.S. Dollar at December 31, 2008). On February 11, 2009, the Hungarian Competition Commission (HCC) approved the sale subject to the condition that the purchaser sell the ready-mix concrete plant operating in Salgótarján to a third party within the next year. On April 28, 2009, the Austrian Cartel Court (Kartellgericht) approved the sale subject to the implementation of certain remedies. On June 9, 2009, Strabag SE filed an appeal against the decision of the Austrian Cartel Court. As a result of this appeal, the merger control proceeding was extended. On June 8, 2009, the Austrian Competition Authority also filed an appeal against the same decision. On July 1, 2009, we received notice from Strabag SE of its withdrawal from the Share Purchase Agreement since merger control approval could not be obtained by June 30,

 

S-79

---

Table of Contents

2009. On July 8, 2009, Strabag SE withdrew its appeal against the decision of the Austrian Cartel Court. Since then we have provided Strabag SE written notice that we consider its withdrawal from the Share Purchase Agreement invalid due to Strabag SE’s continued breach of the Share Purchase Agreement. We believe the Share Purchase Agreement still is valid and enforceable and are considering taking appropriate legal action.

During 2008, we sold in a series of transactions our operations in Italy consisting of four cement grinding mill facilities for an aggregate amount of approximately €148 million (approximately U.S.$210 million or Ps2,447 million).

 

S-80

---

Table of Contents

Outlook for our major markets

Outlook

The following discussion contains forward-looking statements that reflect our current expectations and projections about future events based on our knowledge of present facts and circumstances and assumptions, including sales volumes expected for the full year. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the discussion herein, or otherwise. The information set forth below is subject to change without notice, and we are not obligated to publicly update or revise forward-looking statements.

Our four major markets (excluding Australia) are the United States, Mexico, Spain and the United Kingdom, which together generated approximately 53% and 50% of our net sales before eliminations from consolidations in 2008 and the six months ended June 30, 2009, respectively.

The demand for our products (cement, ready-mix concrete and aggregates) is mainly driven by residential and non-residential (commercial and industrial) construction activities in the private sector and public investment in infrastructure in the markets in which we operate.

United States

The residential construction sector has continued to contract during the six months ended June 30, 2009. According to the U.S. Census Bureau, housing starts decreased 48% during the six months ended June 30, 2009, and the public nominal residential construction spending decreased 33% compared to the comparable period in 2008.

The current U.S. administration has adopted several actions intended to reactivate the U.S. economy, including approving a stimulus package of approximately U.S.$787 billion, of which approximately U.S.$85 billion is earmarked for infrastructure spending. Overall, we believe an economic recovery in the second half of 2009 and in 2010 will be driven by a combination of low interest rates and the federal government’s stimulus plan (complemented by demand from state and local governments).

As a result of the federal government’s stimulus package and infrastructure needs, we expect that the demand for cement and related building material products in the U.S. will increase as consumer confidence, residential demand, industrial production and access to credit start to recover, supplementing the increased spending on infrastructure that is now underway.

Given our leading position in the U.S. market, we believe we are poised to benefit from any turnaround in construction and infrastructure spending and to maintain and expand our current market share in the U.S. market.

Mexico

Mexico has suffered a greater impact from the current global economic crisis than other Latin American countries, primarily as a result of its close relationship with the U.S. economy.

 

S-81

---

Table of Contents

Nevertheless, given measures adopted by the Mexican government, such as a substantial credit facility from the International Monetary Fund, or IMF, an aggressive stimulus package and currency swap arrangements with the U.S. Federal Reserve, we expect that to a significant extent the Mexican economy should recover as the U.S. economy recovers.

According to the Mexican Housing Authority, CONAVI, investment in the overall formal residential sector is expected to increase by about 6% from Ps281 billion in 2008 to Ps297 billion in 2009. Investment in new housing is expected to decline by approximately 12% in 2009, as more spending is directed toward the purchase and renovation of existing homes. According to CONAVI and INFONAVIT, the number of residential mortgages granted by INFONAVIT decreased by 17% during the six months ended June 30, 2009 versus the comparable period in 2008.

Historically, Mexico has suffered from low levels of investment in infrastructure as compared to other countries. The Mexican government estimates that approximately U.S.$38 billion of its national infrastructure investment program for the period from 2007 to 2012 will be allocated to projects in the highway, railway, port, airports, water supply, sanitation, irrigation and flood control sectors, where our products are a critical input.

Given our leading position in the production of cement, ready-mix concrete and aggregates in Mexico, we believe that our business and operational results will benefit from any increase in the overall construction and infrastructure investment in Mexico.

Spain

The severe economic recession in Spain is expected to reduce GDP in 2009 and 2010 despite the Spanish government’s efforts to address the economic problems that have arisen as a result of the deflation of the housing bubble and the global economic crisis. We expect overall construction activity will deteriorate further in the short term as a result of the economic crisis and continued tight credit conditions affecting construction spending.

The Spanish housing market continues to deteriorate, with housing starts expected to fall by approximately 60% to 70% in 2009. Despite currently low interest rates, we do not foresee a recovery in the housing market in the medium term given the stricter conditions in place for mortgage concessions as well as the overhang of the existing housing stock, which may take over three years to be absorbed.

We believe that the fiscal stimulus package adopted by the Spanish government will increase the demand for cement in the medium term, particularly as a result of the expected increase in infrastructure projects.

Economic recovery in Spain is expected to be slow as investors are uncertain as to whether the economic cycle has bottomed out. We will continue to strategically position our business in Spain to help improve our pricing conditions.

United Kingdom

The U.K. economy, along with Spain’s, was one of the most affected by the global economic downturn and the financial crisis. The U.K. economy has been severely affected by the global financial crisis, with the virtual disappearance of credit and a sharp decline in residential property prices. Although all sectors have been shrinking since 2007, the housing sector has been the most adversely impacted, suggesting this sector will remain depressed for a longer period than the

 

S-82

---

Table of Contents

overall economy. The number of housing transactions and constructions declined considerably in 2008 and are not expected to improve until credit conditions become more favorable and property prices recover.

We do not expect that public funding resulting from the stimulus plan approved in the U.K. will have a significant impact on the construction sector. Only approximately U.S.$4.3 billion of the U.S.$29 billion economic stimulus package was allocated to infrastructure work.

We expect continued weakness across all of our U.K. businesses in 2009 and do not expect any recovery in the construction sector until at least 2011.

 

S-83

---

Table of Contents

Recent developments

Recent developments relating to our indebtedness

Global refinancing

On August 14, 2009, we entered into a financing agreement that extends the maturities of approximately U.S.$15.0 billion in syndicated and bilateral bank and private placement obligations and provides for the following semi-annual amortization schedule, with a final maturity of approximately U.S.$6.8 billion on February 14, 2014:

 

Repayment Date		Cumulative repayment amount %		Repayment amount %		Approximate required payment (in millions)
December 2009		3.18%		3.18%		U.S.$   476
June 2010		4.77%		1.59%		U.S.$   238
December 2010		19.10%		14.33%		U.S.$2,144
June 2011		20.69%		1.59%		U.S.$   238
December 2011		33.11%		12.42%		U.S.$1,858
June 2012		35.75%		2.64%		U.S.$   395
December 2012		38.39%		2.64%		U.S.$   395
June 2013		46.35%		7.96%		U.S.$1,191
December 2013		54.31%		7.96%		U.S.$1,191
February 2014		100.00%		45.69%		U.S.$6,835

We intend to meet such requirements using funds from a variety of sources, including from free cash flow and net cash proceeds from asset sales and debt and/or equity security issuances, the receipt of which will trigger mandatory prepayments. Free cash flow used to prepay the debt, for any period for which it is being calculated, is the aggregate of the amount of cash we have on hand and the amount of any unutilized commitments under any liquidity facility permitted by the financing agreement in excess of U.S.$650 million.

Under the financing agreement, we are required to privately place or publicly sell common equity or, with the prior approval of participating creditors representing greater than 66.67% of the exposures under the financing agreement, equity-linked securities for net cash proceeds of at least U.S.$1.0 billion. If we do not issue such securities prior to June 30, 2010, participating creditors representing at least 25% of all exposures under the financing agreement can require us, upon written notice between May 1, 2010 and September 1, 2010, at any time prior to December 31, 2010, to issue equity and/or debt securities or convertibles for a total amount of net cash proceeds equal to U.S.$1.0 billion less the amount of net cash proceeds previously received by a participating auditor from any issuance prior to June 30, 2010. The net cash proceeds of the offering contemplated in this prospectus supplement will be applied to satisfy this requirement under the financing agreement.

The financing agreement also includes, until the time that we satisfy certain requirements described below (see “—Covenant reset date”), covenants and certain restrictions on our ability to do certain things, including but not limited to, incurring debt, granting security, engaging in acquisitions and joint ventures, granting guarantees, declaring and paying cash dividends and distributions to shareholders, making capital expenditures and issuing shares (subject, in each case, to negotiated baskets and customary exceptions and carve-outs). In addition, we agreed to

 

S-84

---

Table of Contents

pledge or transfer to security trustees the shares of certain of our subsidiaries as collateral for the equal and ratable benefit of the participating creditors and the holders of certain other obligations (including holders of publicly-placed certificados bursatiles) that contain provisions requiring holders that they be equally and ratably secured.

Guarantees and security.    We and certain of our subsidiaries were obligors as borrowers or guarantors under our various credit facilities and other indebtedness prior to the effectiveness of the financing agreement. These obligations continue to be in full force and effect under the financing agreement. In addition, those obligors, other than CEMEX, Inc. (our subsidiary in the United States) and CEMEX Australia Holdings Pty Ltd., as well as certain additional subsidiaries provided cross guarantees to all or part of the debt under the financing agreement.

We have also granted security interests in the shares of our material operating subsidiaries in Mexico as well as the shares of all the entities with material direct or indirect ownership interests in CEMEX España S.A. CEMEX España S.A. holds our operating assets in Spain and owns, directly or indirectly, all our operating assets outside of Mexico. Specifically, we granted security interests in the shares of CEMEX México, S.A. de C.V., Centro Distribuidor de Cemento, S.A. de C.V., Mexcement Holdings S.A. de C.V., Corporación Gouda S.A. de C.V., Sunward Investments B.V., Sunward Acquisitions N.V., Sunward Holdings B.V., CEMEX Dutch Holdings B.V., New Sunward Holding B.V., CEMEX Trademarks Holdings Ltd. and CEMEX España, S.A. The share security is to secure the financing agreement debt, as well as certain of our indebtedness placed in different markets with existing contractual terms that require that the relevant holders will share equally and ratably in such security. The secured parties will share pro rata in the proceeds from the sale of the shares subject to security on enforcement.

The share security may be enforced if: (i) an Event of Default has occurred and is continuing under the financing agreement; (ii) the debt has been accelerated under the financing agreement (which requires a 66.67% majority decision of the participating creditors); and (iii) 75% by exposure of creditors participating in the financing agreement and those that have provided funds to refinance the debt of participating creditors and 66.67% by exposure of participating creditors, determine to enforce.

Provided that no default has occurred which is continuing, the share security shall be released automatically in the following circumstances:

 

•

collateral consisting of shares issued by entities incorporated in Mexico shall be released if debt representing 41.4% (approximately U.S.$6.2 billion) of exposures of the participating creditors is repaid and total debt to EBITDA is 3.5:1 for at least one semi-annual testing period; and

 

•

remainder of collateral shall be released if debt representing 50.96%, approximately U.S.$7.6 billion, of exposures of the participating creditors is repaid and total debt to EBITDA is 3.5:1 for at least two consecutive semi-annual testing periods.

The guarantee package and security package may be shared with lenders/holders of new debt, to the extent that the proceeds of such new debt are used to refinance the exposures of the participating creditors, subject to specified conditions.

In addition, participating creditors have agreed to share the benefits of the security package with (i) holders of our securities constituting capital markets debt with the benefit of an equal and ratable (or similar) provision and (ii) lenders/holders of new debt, to the extent that the proceeds of such new debt are used to refinance specified capital markets debt, in each case subject to the terms of the financing agreement.

 

S-85

---

Table of Contents

Interest rate.    In general, our existing bank facilities bear interest at a base rate plus an applicable margin, a LIBOR rate plus an applicable margin or a Euribor rate plus an applicable margin. The base rates, LIBOR rates and Euribor rates applicable to our existing facilities remain in place, and under the financing agreement the applicable margin for each facility is set at 4.5% per annum, which is subject to adjustment as follows:

 

•

If we do not issue common equity for net cash proceeds of at least U.S.$1 billion before June 30, 2010, we shall pay a fee in an amount equal to 0.75% of the amount of each participating creditor’s exposure as of August 14, 2009 and the applicable margin will increase by an additional 0.75% per annum thereafter.

 

•

If we are unable to repay at least 31.85%, approximately U.S.$4.8 billion, of the aggregate initial exposures of the participating creditors between the closing of the financing agreement and December 31, 2010, the applicable margin will increase by an additional 0.5% or 1.0% per annum, depending upon the difference between such target repayment amount and the actual repayment amounts paid as of December 31, 2010.

 

•

If we are unable to repay at least 50.96%, approximately U.S.$7.6 billion of the aggregate initial exposures of the participating creditors between the closing of the financing agreement and December 31, 2011, the applicable margin will increase by an additional 0.5% or 1.0% per annum, depending upon the difference between such target repayment amount and the actual repayment amounts paid as of December 31, 2011.

The adjustments in the second and third bullets above to the applicable margin are canceled on the Covenant Reset Date.

The facility fee and utilization fee requirements in our existing financing agreement facilities have been canceled.

The new private placement debt bears interest at a rate of 8.91% (except for the debt denominated in Yen, which bears a corresponding rate of 6.625%). The interest rate on the new private placement debt is subject to the same adjustments as described above, on the same terms.

Maturity.    The maturity of all our financing agreement facilities has been extended until February 14, 2014. Any further extension of the maturity date will require the consent of all participating creditors.

Mandatory prepayments.    Under the financing agreement, we must comply with certain mandatory prepayment requirements to pay down the exposures of participating creditors. Specifically, we must prepay the financing agreement debt with proceeds from disposals in the aggregate exceeding U.S.$50 million, subject to certain exceptions, and free cash flow in excess of U.S.$650 million. In addition, proceeds from equity or debt issuances, or other fundraising, will trigger mandatory prepayments. Generally, we must make mandatory prepayments pro rata to all participating creditors. However, if we dispose of all the shares of a particular borrower or issuer under the financing agreement, the exposures of the participating creditors under relevant facilities of that borrower or issuer must be paid before we prepay any other exposures. The same requirements apply if we dispose of all the shares in a holding company of a particular borrower or issuer.

Other than with respect to disposals of all the shares of a borrower (or holding company thereof), the financing agreement requires that we apply mandatory prepayments to reduce the

 

S-86

---

Table of Contents

base currency exposures of all participating creditors ratably, and that such mandatory prepayments be applied towards amortization payments due on or before December 31, 2011, in order of those amortizations. After December 31, 2011, any additional amounts must be applied pro rata across all remaining amortization payments. We must make mandatory prepayments from disposal proceeds, permitted fundraising proceeds and permitted securitization proceeds promptly upon (and in any event within 30 days of) receipt of those proceeds, or promptly upon (and in any event within 30 days) the receipt of cash from those proceeds.

Covenants.    The financing agreement contains financial conditions that require us, beginning June 30, 2010, to satisfy, on a consolidated basis, specified semi-annual tests, including:

 

•

a minimum consolidated coverage ratio of EBITDA to consolidated interest expense of not less than (i) 1.75:1 for each semi-annual period through the period ending June 30, 2011, (ii) 2.00:1 for each semi-annual period through the period ending December 31, 2012 and (iii) 2.25:1 for the remaining semi-annual periods through the period ending 31 December 2013; and

 

•

a maximum consolidated leverage ratio for each semi-annual period not to exceed 7.75:1 for the period ending June 30, 2010 and decreasing incrementally for subsequent semi-annual periods to 3.50:1 for the period ending December 31, 2013.

Furthermore, pursuant to the financing agreement we cannot make aggregate capital expenditures in excess of (i) U.S.$600 million (plus an additional U.S.$50 million contingency to account for currency fluctuations and certain additional costs and expenses) for the year ended December 31, 2009, (ii) U.S.$700 million for the year ended December 31, 2010 and (iii) U.S.$800 million for each year thereafter until the debt under the financing agreement has been repaid in full.

The financing agreement contains a number of negative covenants (subject to certain exceptions, customary carve-outs and agreed baskets) that, among other things, restrict our ability, and the ability of our subsidiaries, under certain circumstances to:

 

•

create or incur any liens on any of its property or assets;

 

•

incur additional debt;

 

•

change the general nature of our business or the business of any obligor or material subsidiary;

 

•

enter into mergers;

 

•

enter into agreements that restrict our subsidiaries’ ability to pay dividends or repay intercompany debt;

 

•

acquire assets or any shares or securities;

 

•

enter into or invest in joint venture agreements;

 

•

dispose of certain assets;

 

•

grant additional guarantees or indemnities;

 

•

declare or pay cash dividends and distributions to shareholders, or make other payments;

 

•

issue shares;

 

•

enter into certain derivatives transactions, other than certain transactions for hedging purposes;

 

S-87

---

Table of Contents

•

exercise any call option on the perpetual debentures issued by special purpose vehicles that are consolidated; and

 

•

transfer assets from subsidiaries or more than ten percent of our shares in subsidiaries into or out of CEMEX España or its subsidiaries.

The financing agreement restricts the payment of dividends, distributions and/or share redemptions except that the following payments are permissible:

 

•

on or in respect of share capital to us or our subsidiaries;

 

•

a recapitalization of earnings on or in respect of our share capital pursuant to which we issue additional share capital to our existing shareholders on a pro rata basis, or by way of the issuance of common equity securities or the right to subscribe for such common equity securities to our existing shareholders on a pro rata basis, provided that we may not make cash payments or transfer assets outside of CEMEX;

 

•

interest on the perpetual debentures, or certain other permitted transactions;

 

•

payments to minority shareholder of our subsidiaries on a pro rata basis, provided that all other shareholders of the relevant subsidiaries receive their equivalent pro rata share of such payment;

 

•

pursuant to a disposal required, financial indebtedness incurred, guarantee, indemnity or security given, or other transaction arising under the financing agreement;

 

•

pursuant to the solvent liquidation or reorganization of any of our subsidiaries that are not obligors under the financing agreement, so long as payments or assets distributed as a result of such liquidation or reorganization are distributed among us or our subsidiaries; or

 

•

pursuant to certain transactions conducted in the ordinary course of trading on arm’s length terms.

Covenant reset date.    If we satisfy all the following conditions:

 

•

we receive an investment-grade rating from two of S&P, Moody’s and Fitch;

 

•

we reduce the exposures under the financing agreement by at least an amount equal to at least 50.96% of the aggregate exposures or, approximately, U.S.$7.6 billion;

 

•

our consolidated leverage ratio for the two most recently completed semi-annual testing periods is less than or equal to 3.50:1; and

 

•

no default under the financing agreement is continuing,

then, certain basket limits under the financing agreement will be increased and the following restrictive covenants will automatically cease to apply:

 

•

any applicable margin step-ups that were applicable due to a failure to meet amortization targets;

 

•

certain asset sale restrictions;

 

•

capital expenditure limits;

 

•

quarterly free cash flow sweep;

 

S-88

---

Table of Contents

•

certain mandatory prepayment provisions; and

 

•

dividend restrictions, share issuance restrictions, capital raise obligations and certain other restrictions.

However, the participating creditors will continue to receive the benefit of any restrictive covenants that other creditors receive relating to other financial indebtedness of ours in excess of U.S.$75 million.

Events of default.    The financing agreement contains events of default, including defaults based on:

 

•

non-payment of principal, interest, or fees when due;

 

•

material inaccuracy of representations and warranties;

 

•

breach of financial covenants;

 

•

bankruptcy, concurso mercantil, or insolvency of CEMEX, any borrower under an existing facility or any other of our material subsidiaries;

 

•

inability to pay debts as they fall due or by reason of actual financial difficulties suspends or threatens to suspend payments on debts exceeding U.S.$50 million or commences negotiations to reschedule debt exceeding U.S.$50 million;

 

•

a cross default in relation to financial indebtedness in excess of U.S.$50 million;

 

•

a change to the ownership of any of our subsidiary obligors, unless the proceeds of such disposal are used to prepay financing agreement debt;

 

•

enforcement of the share security;

 

•

final judgments or orders in excess of U.S.$50 million that are neither discharged nor bonded in full within 60 days thereafter;

 

•

any restrictions not already in effect as of August 14, 2009 limiting transfers of foreign exchange by any obligor for purposes of performing material obligations under the financing agreement;

 

•

any material adverse change arises in the financial condition of CEMEX, which greater than 66.67% of the participating creditors reasonably determine would result in our failure to perform payment obligations under the existing facilities or the financing agreement;

 

•

failure to comply with laws or our obligations under the financing agreement cease to be legal; and

 

•

failure to satisfy the conditions subsequent to the financing agreement.

If an event of default occurs and is continuing, upon the authorization of 66.67% of the participating creditors, the creditors have the ability to accelerate all amounts (a) then outstanding under the existing facilities. Acceleration is automatic in the case of insolvency. In addition, upon a vote of 75% of those participating in the financing agreement and those that have provided funds to refinance the debt of participating creditors and (b) 66.67% of the participating creditors, the security agent may foreclose on the collateral. Each existing facility

 

S-89

---

Table of Contents

that is part of the financing agreement contains a cross-default provision which provides that upon acceleration by the requisite number of participating creditors, creditors under that existing facility may also accelerate any amounts due under that existing facility.

Change of control.    The change of control provisions in the financing agreement make it an event of default if:

 

•

any borrower or guarantor under the financing agreement ceases to be a wholly owned subsidiary of CEMEX (or, the percentage indirect shareholding in CEMEX España is reduced from the percentage as at the date of the financing agreement) unless the proceeds of such disposal are used to prepay financing agreement debt;

 

•

the beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act) of 20% or more in voting power of CEMEX outstanding voting stock is acquired by any person, provided that the acquisition of beneficial ownership of such capital stock by Lorenzo H. Zambrano or any member of his immediate family shall not constitute a change of control; or

 

•

all or substantially all of the assets of CEMEX and its consolidated subsidiaries are sold, whether in a single transaction or a series of related transactions.

Conditions subsequent.    The following are conditions subsequent to our financing agreement:

 

•

CEMEX Australia Holdings Pty Ltd must become an additional guarantor under the financing agreement if we do not complete the sale of our Australian business unit, CEMEX Australia Holdings Pty Ltd, by January 1, 2010 (or, if the parties elect to extend the termination date of that share purchase agreement to January 31, 2010, then by February 1, 2010);

 

•

CEMEX shall on or prior to October 15, 2009, or if the security agent has not confirmed its availability in that time period, within ten days of the date on which the security agent confirms its availability and the administrative agent confirms the availability of at least 25 participating creditors (or all remaining participating creditors who have not yet taken the necessary actions if fewer than 25) to appear and enter into the necessary documents:

 

•

procure that the share pledge over shares in CEMEX España, S.A. is granted and that each person (other than a participating creditor) required to take any action in order to execute and accept such share pledge before a notary in Madrid has taken such action;

 

•

with at least ten days notice, upon the request of the administrative agent under the financing agreement, appear before a notary in Madrid to notarize the financing agreement or raise it to the status of a public document and to execute before a notary in Madrid the transaction security governed by the laws of Spain and the irrevocable powers of attorney and procure that each obligor as the administrative agent may reasonably require do so as well;

 

•

CEMEX shall enter into the Mexican security trust (and cause related opinions to be rendered) within 30 days from the date of the financing agreement under which certain shares of CEMEX Mexico, S.A. de C.V., Centro Distribuidor de Cemento, S.A. de C.V., Corporation Gouda, S.A. de C.V. and Mexcement Holdings, S.A. de C.V. that we and some of our subsidiaries own will be transferred to the trustee; and

 

•

Within 30 days after the execution of the financing agreement (or, if the security agent has not confirmed its availability in that time, within ten days of its confirmation), CEMEX Trademarks

 

S-90

---

Table of Contents

Holding Ltd must accede to the financing agreement as an additional security provider and pledge its shares in Sunward Acquisitions N.V. and New Sunward Holdings B.V. as security in the financing agreement. On September 4, 2009, this condition was satisfied.

Failure to satisfy any of these conditions subsequent, regardless of whether satisfaction of such conditions is within our control, will result in a default under the financing agreement.

Bancomext debt extension

On August 5, 2009 we completed the refinancing of a U.S.$250 million (Ps3,295 million) credit facility with Bancomext, which originally was scheduled to begin amortizing in July 2009, and has been extended until February 2014 with an amortization schedule similar to that contained in the financing agreement.

Mandatorily convertible debt securities issuance

Within six months following the consummation of the offering contemplated in this prospectus supplement, we intend to issue mandatorily convertible debt securities, that will be convertible into up to 400 million CPOs and will be fungible with our currently outstanding CPOs. We expect to place these securities with Mexican Pension Funds (Sociedades de Inversión Especializadas en Fondos para el Retiro, or SIEFORES) and other investors that are non-U.S. persons in transactions exempt from registration under the Securities Act in exchange for outstanding debt securities (Certificados Bursátiles) previously issued by us in the Mexican capital markets, which we intend to cancel, once the exchange offer is effective. This transaction is not expected to result in additional cash proceeds to us or any of our subsidiaries, but it is expected to extend some of our debt maturities in the next few years. The amount, interest rate, exchange terms and other terms and conditions of the mandatorily convertible debt securities, as well as the terms of the exchange offer will be determined in due course. The offering of these debt securities mandatorily convertible into our CPOs will be exempted from the lock-up provisions described in “Underwriting” in this prospectus supplement. However, these securities will not be convertible into CPOs, or other equity securities, for a period of at least one year following their issuance. Furthermore, these convertible debt securities will be subject to transfer restrictions (and related hedging restrictions, to the extent applicable) limiting their subsequent transfer for a period of at least six months from the closing of the offering contemplated by this prospectus supplement. No assurance can be given that this transaction will take place; if this transaction is consummated, conversion of these debt securities to our CPOs may result in dilution to existing holders of our CPOs, including the ADSs and CPOs offered hereby.

Recent developments relating to our receivables financing arrangements

On July 16, 2009, we placed securities in an amount of Ps2.2 billion (approximately U.S.$160 million) through the securitization of accounts receivables of the company’s CEMEX Mexico and CEMEX Concretos units. To fund the transaction, a trust (at HSBC Mexico) issued receivables-backed bonds maturing on December 29, 2011. This transaction does not represent new debt for us as it is a sale of receivables on a nonrecourse basis. Most of these proceeds were used to replace the previous accounts receivables program. The bonds were priced at a spread of 250 bps over the 28-day TIIE interbank rate and were assigned an “mxAAA” rating by S&P and “HRAAA” by HR Ratings. The issuance was oversubscribed 1.3 times.

 

S-91

---

Table of Contents

Recent developments relating to our planned divestitures of assets

On June 12, 2009, we sold three quarries (located in Nebraska, Wyoming and Utah) and our 49% joint venture interest in the operations of a quarry located in Granite Canyon, Wyoming, to Martin Marietta Materials, Inc. for U.S.$65 million. On June 15, 2009, we announced our agreement to sell our Australian operations to Holcim for approximately AUD$2.02 billion (approximately U.S.$1.64 billion or Ps21.6 billion considering the exchange rates of AUD$1.2324 per U.S. Dollar and Ps13.18 per U.S. Dollar, respectively, at June 30, 2009). The transaction with Holcim includes the sale of all our facilities in Australia. These include 249 ready-mix concrete plants, 83 aggregate quarries, 16 concrete pipe and precast products plants, and our 25% stake in Cement Australia. As of the date of this prospectus supplement, considering changes in foreign exchange rates among other factors, we cannot reasonably estimate the final result from the sale of these assets. For accounting purposes under MFRS upon conclusion of the sale, our Australian operations will be presented as discontinued operations. Under MFRS, the result from the sale of these assets will represent the difference between the carrying amount of the net assets as of the specific date of the sale and the final selling price plus or minus any cumulative foreign currency translation effects recognized in equity. All the net proceeds of the sale will be used to reduce debt. The transaction is subject to regulatory approval, due diligence and other closing conditions and is currently expected to close during the fourth quarter of 2009. See “Risk factors—Our ability to comply with our upcoming debt maturities may depend in large part on making asset sales, and there is no assurance that we will be able to execute such sales on terms favorable to us or at all.”

Condensed balance sheet information of our operations in Australia as of June 30, 2009 is as follows:

 

		June 30, 2009
Total assets		Ps31,441
Total liabilities		6,212
Total net assets		Ps25,229

The following table presents condensed selected income statement information for our operations in Australia for the six months ended June 30, 2008 and 2009:

 

		Six months ended June 30,
		2008		2009
Sales		Ps8,828		Ps8,127
Operating income		839		771

Recent developments relating to our perpetual debentures

On July 15, 2009, we concluded the unwinding process of the last tranche of the Yen cross-currency swap derivatives. As a result of the unwinding, a total of approximately U.S.$85.5 million and €6.3 million, as applicable, was credited by the relevant bank counterparties to the conversion credits sub-accounts that the relevant swap counterparties held in The Bank of New York, as debentures trustee under each of the tranches of perpetual debentures. These amounts

 

S-92

---

Table of Contents

will be retained by the relevant special purpose vehicles and applied to fund future coupon payments on the debentures.

Recent developments relating to our regulatory matters and legal proceedings

The following information updates the information contained in “Item 4—Information of the Company—Regulatory Matters and Legal Proceedings” of our annual report on Form 20-F for the year ended December 31, 2008 and should be read in conjunction therewith and with our consolidated financial statements for the six month periods ended June 30, 2008 and 2009 included elsewhere in this prospectus supplement.

Environmental matters

United States.    As of July 31, 2009, our operations in the United States had accrued liabilities relating to environmental matters of approximately U.S.$38.6 million. The environmental matters relate to (i) the disposal of various materials, in accordance with past industry practice, which might be categorized as hazardous substances or wastes, and (ii) the cleanup of sites used or operated by us, including discontinued operations, regarding the disposal of hazardous substances or wastes, either individually or jointly with other parties. Most of the proceedings are in the preliminary stage, and a final resolution might take several years. For purposes of recording a provision in our financial statements related to these liabilities, we consider that it is probable that a liability has been incurred and the amount of the liability is reasonably estimable, whether or not claims have been asserted, and without giving effect to any possible future recoveries. Based on information developed to date, we do not believe we will be required to spend significant sums on these matters, in excess of the amounts previously recorded. The ultimate cost that might be incurred to resolve these environmental issues cannot be assured until all environmental studies, investigations, remediation work, and negotiations with, or litigation against, potential sources of recovery have been completed.

CEMEX Construction Materials Florida, LLC (formerly Rinker Materials of Florida, Inc.), one of our subsidiaries, holds one federal quarry permit and is the beneficiary of one of ten other federal quarrying permits granted for the Lake Belt area in South Florida. The permit held by CEMEX Florida covers CEMEX Florida’s SCL and FEC quarries. CEMEX Florida’s Krome quarry is operated under one of the other federal quarry permits. The FEC quarry is the largest of CEMEX Florida’s quarries measured by volume of aggregates mined and sold. CEMEX Florida’s Miami cement mill is located at the SCL quarry and is supplied by that quarry. A ruling was issued on March 22, 2006 by a judge of the U.S. District Court for the Southern District of Florida in connection with litigation brought by environmental groups concerning the manner in which the permits were granted. Although not named as a defendant, CEMEX Florida has intervened in the proceedings to protect its interests. The judge ruled that there were deficiencies in the procedures and analysis undertaken by the relevant governmental agencies in connection with the issuance of the permits. The judge remanded the permits to the relevant governmental agencies for further review. As part of this review, on May 1, 2009, the Army Corps of Engineers issued a Final Supplemental Environmental Impact Statement and stated it would be accepting public comments until June 23, 2009.

The judge also conducted further proceedings to determine the activities to be conducted during the remand period. Previously, in July 2007, the judge issued a ruling that halted certain quarrying operations at three non-CEMEX Florida quarries. The judge left in place CEMEX Florida’s Lake Belt permits until the relevant government agencies complete their review. In a

 

S-93

---

Table of Contents

May 2008 ruling, the federal appellate court determined that the district court judge did not apply the proper standard of review to the permit issuance decision of the governmental agency, vacated the district court’s prior order, and remanded the proceeding to the district court to apply the proper standard of review. In January 2009, the district court judge issued an order withdrawing the extraction permits of the three CEMEX quarries as well as the other federal quarry permits subject of the litigation. The order does not limit the processing of the materials previously excavated, which will be processed throughout the following months. We are appealing this ruling. A hearing on the appeal has been scheduled for October 21, 2009.

We are also continuing the ongoing process with the Army Corps of Engineers to obtain new permits that would allow mining for 10-15 years, depending on demand. This process is well under way, and, if and when issued, we believe the new permits would allow all mining activities to resume in the newly permitted areas. If the Lake Belt permits were ultimately permanently set aside or quarrying operations under them permanently restricted, CEMEX Florida would need to source aggregates, to the extent available, from other locations in Florida or import aggregates. This would likely affect profits from our Florida operations. Any adverse impacts on the Florida economy arising from the cessation or significant restriction of quarrying operations in the Lake Belt could also have a material adverse effect on our financial results.

Europe.    In 2003, the European Union adopted a directive in order to help it fulfill its commitments under the Kyoto Protocol on climate change. This directive defines and establishes a greenhouse gas emissions allowance trading scheme within the European Union. For example, it caps carbon dioxide emissions from installations involved in energy activities, the production and processing of ferrous metals, the cement and lime industries and the pulp, paper or board production businesses. Installations in these sectors have to monitor their emissions of carbon dioxide (CO2) and surrender every year allowances (the right to emit one metric ton of CO2) that cover their emissions. Allowances are issued by European Union member states according to their National Allocation Plans, or NAPs. The NAPs not only set the total number of allowances for a given phase, but also define how they are allocated among participating installations. To date, most allowances have been allocated without charge, but some member states sell up to 10% of their total allowance volume in auctions or exchanges. Allowances are tradable so as to enable companies that manage to reduce their emissions to sell their excess allowances to companies that exceed their allocated quota. Failure to meet the emission cap is subject to heavy penalties.

Companies can also use credits issued under the flexible mechanisms of the Kyoto protocol to fulfill their European Union obligations. Credits for emission reduction projects obtained under these mechanisms are recognized, up to a certain level, under the European emission trading scheme as substitutes for allowances. The main source of those credits are projects registered under the so-called Clean Development Mechanism, or CDM, but Joint Implementation, or JI, credits are also eligible. The difference CDM projects and JI projects is mainly the host country: CDM projects are implemented in developing countries, JI projects in developed ones.

As required by the European Union directive, each of the member states established a NAP that defines the free allocation to each industrial facility for Phase II (2008 through 2012). Although the overall yearly volume of allowances in Phase II is significantly lower than that during Phase I of the European Union emissions trading system (2005-2007) we do not see any significant risk that we will be short of allowances in Phase II; this is the result of various factors, notably a reasonable allocation policy in some countries, our efforts to reduce emissions per unit of clinker, reduced demand for our products, and the use of certain risk-free financial instruments. We expect to be a net seller of allowances over Phase II. In addition, we are actively pursuing a

 

S-94

---

Table of Contents

strategy aimed at generating additional emission credits through the implementation of CDM projects in Latin America, Northern Africa and South-East Asia. Despite having already sold a substantial amount of allowances for Phase II, we believe the overall volume of transactions is justified by our most conservative emissions forecast, meaning that the risk of having to buy allowances in the market in the remainder of Phase II is very low. As of July 31, 2009, the value of carbon dioxide allowances for Phase II on the spot market was approximately €13.68 per ton. We are taking appropriate measures to minimize our exposure to this market while assuring the supply of our products to our customers.

Croatia is also in the process of implementing an emissions trading scheme that will be compatible to and linked with the one in force in the European Union. The planned starting date is 2010, and the final NAP was published in July 2009. We do not expect the inclusion of our Croatian operations in the European Union emissions trading system to substantially affect our overall position, particularly as the allocation to CEMEX Croatia is larger than previously estimated.

The Club of Environmental Protection, a Latvian environmental protection organization (the “Applicant”), has initiated a Latvian court administrative proceeding against the decision made by the Latvian Environmental State Bureau (the “Defendant”) in order to amend the environmental pollution permit (the “Permit”) our Broceni cement plant in Latvia, held by CEMEX SIA (the “Disputed Decision”). CEMEX SIA was invited to participate in the court proceedings as a third party, since its rights and legal interest may be infringed by the relevant administrative act. On June 5, 2008, the court rendered its judgment, granting the Applicant’s claim and revoking the Disputed Decision, declaring it illegal because Defendant failed to perform a public inquiry in accordance with legal regulations. The judgment was appealed by both the Defendant and CEMEX SIA before the court of appeals, and on May 20, 2009, the court of appeals decided that the Defendant must supplement the Permit with the applicable requirements as of January 1, 2008 on the emission limits of hard particles for clinker melting-on stove. This amendment to the Permit will not adversely affect CEMEX SIA’s operations in the existing plant, unless the competent authorities decide to lower the emission limit. The rest of the Applicant’s claims were rejected by the court. The judgment could have been appealed by Applicant before the Senate of the Supreme Court before June 19, 2009; however, none of the parties appealed the judgment.

Anti-Dumping/Anti-Trust

Antitrust investigations in Mexico.    In January and March 2009, we were notified of two findings of presumptive responsibility against us issued by the Mexican competition authority (Comisión Federal de Competencia), alleging certain violations of Mexican antitrust laws. We believe these findings have several procedural errors and are unfounded on the merits. We filed our responses to these findings on February 27, 2009 and May 19, 2009. For one of the cases we have obtained a favorable first level ruling that if sustained on appeal, will terminate the investigation. The proceedings for the second case have continued and the case is currently in the discovery stage. We expect this procedure to continue for several months before resolution.

Polish antitrust investigation.    During the period from May 31, 2006 to June 2, 2006, officers of the Polish Competition and Consumer Protection Office, or the Protection Office, assisted by police officers, conducted a search in the Warsaw office of CEMEX Polska, one of our indirect subsidiaries in Poland, and in offices of other cement producers in Poland. The search took place as a part of the exploratory investigation that the head of the Polish Competition and Consumer

 

S-95

---

Table of Contents

Protection Office started on April 26, 2006. On January 2, 2007, CEMEX Polska received a notification from the Protection Office informing about the formal initiation of an antitrust proceeding against all cement producers in Poland, including CEMEX Polska and another of our indirect subsidiaries in Poland. In the notification it was assumed that there was an agreement between all cement producers in Poland regarding prices and other sales conditions of cement, an agreed division of the market with respect to the sale and production of cement, and the exchange of confidential information, all of which limited competition in the Polish market with respect to the production and sale of cement.

On January 22, 2007, CEMEX Polska filed its response to the notification, denying that it committed the practices listed by the Protection Office in the notification. In its response, CEMEX Polska also included various formal comments and objections gathered during the proceeding, as well as facts supporting its position and intended to prove that its activities were in line with competition law. On April 29, 2009, the Protection Office notified CEMEX Polska of its decision to extend the antitrust proceeding until June 20, 2009. Further extension of the proceeding is expected due to the complexity of the case and the fact that participants continue to add statements to the files and appeals in connection with minor issues are still being conducted.

German antitrust investigation.    On August 5, 2005, Cartel Damages Claims, SA, or CDC, filed a lawsuit in a District Court in Düsseldorf, Germany against CEMEX Deutschland AG and other German cement companies. CDC is seeking €102 million (approximately U.S.$142.6 million) in respect of damage claims by 28 entities relating to alleged price and quota fixing by German cement companies between 1993 and 2002, which entities had assigned their claims to CDC. CDC is a Belgian company established by two lawyers in the aftermath of the German cement cartel investigation that took place from July 2002 to April 2003 by Germany’s Federal Cartel Office, with the express purpose of purchasing potential damages claims from cement consumers and pursuing those claims against the alleged cartel participants. In January 2006, another entity assigned alleged claims to CDC, and the amount of damages being sought by CDC increased to €113.5 million plus interest (approximately U.S.$158.6 million plus interest). On February 21, 2007, the District Court decided to allow this lawsuit to proceed without going into the merits of this case by issuing an interlocutory judgment. All defendants appealed, but the appeal was dismissed on May 14, 2008. The lawsuit will proceed in a court of first instance. As of July 31, 2009, only one defendant had filed a complaint before the Federal High Court, which was dismissed in April 2009.

In the meantime, CDC has acquired new claims by assignment and announced an increase in the claim to €131 million (approximately U.S.$183.1 million). As of July 31, 2009, we had accrued liabilities regarding this matter for a total amount of approximately €20 million (approximately U.S.$27.9 million).

Tax matters

Philippines.    The Philippine Bureau of Internal Revenue, or BIR, issued a tax assessment against Solid Cement Corporation, or SCC, one of our operating indirect subsidiaries in the Philippines, for deficiency taxes covering taxable year 1997, amounting to a total of approximately 72.954 million Philippine Pesos (approximately U.S.$1.52 million as of July 31, 2009, based on an exchange rate of 48.09 Philippine Pesos to U.S.$1.00, which was the Philippine Peso/Dollar exchange rate on July 31, 2009 as published by the Bangko Sentral ng Pilipinas, the Central Bank of the Republic of the Philippines), exclusive of 20% interest counted from February 17, 2000 until payment in full of the taxes.

 

S-96

---

Table of Contents

SCC appealed the unfavorable decision issued by the BIR with the Court of Tax Appeals when the BIR declared SCC liable for the above-mentioned deficiency taxes. The case pending with the Court of Tax Appeals, or CTA, docketed as CTA Case No. 6248, resulted primarily from the disallowance of SCC’s expenses due to its failure to present supporting documents. In addition, the BIR assessed SCC for its failure to withhold taxes on some of the expenses.

During the pendency of the present case before the Court of Tax Appeals, SCC availed itself of the tax amnesty under Republic Act No. 9480 or the Tax Amnesty Law. This tax amnesty was made on 12 February 2008. SCC’s availment of the tax amnesty made SCC immune from any alleged tax liability for taxable year 2005 and prior years; thus the subject tax deficiencies of SCC in CTA Case No. 6248 are extinguished. As to the withholding tax issue, SCC is coordinating with the BIR for the immediate issuance of the termination letter in relation to its availment of abatement under RR 15-2006 for its alleged deficiency expanded withholding tax and final withholding tax for the taxable year 1997. As a result, we expect the dismissal of the tax assessment case against SCC which is pending with the CTA. On the basis of the above, we believe that this outstanding Philippine tax assessment should not have a material adverse effect on us.

Other legal proceedings

On August 5, 2005, a lawsuit was filed against a subsidiary of CEMEX Colombia, claiming that it was liable along with the other members of the Asociación Colombiana de Productores de Concreto, or ASOCRETO, a union formed by all the ready-mix concrete producers in Colombia, for the premature distress of the roads built for the mass public transportation system of Bogotá using ready-mix concrete supplied by CEMEX Colombia and other ASOCRETO members. The plaintiffs allege that the base material supplied for the road construction failed to meet the quality standards offered by CEMEX Colombia and the other ASOCRETO members and/or that they provided insufficient or inaccurate information in connection with the product. The plaintiffs seek the repair of the roads in a manner which guarantees their service during the 20-year period for which they were originally designed, and estimate that the cost of such repair will be approximately U.S.$45 million. The lawsuit was filed within the context of a criminal investigation of two ASOCRETO officers and other individuals, alleging that the ready-mix concrete producers were liable for damages if the ASOCRETO officers were criminally responsible. The court completed the discovery stage, and on August 17, 2006 dismissed the charges against the members of ASOCRETO. The other defendants (one ex-director of the Distrital Institute of Development, the legal representative of the constructor and the legal representative of the contract auditor) were formally accused. The decision was appealed, and on December 11, 2006, the decision was reversed and the two ASOCRETO officers were formally accused as participants (determiners) in the execution of a state contract without fulfilling all legal requirements thereof. The first public hearing took place on November 20, 2007. In this hearing, the judge dismissed an annulment petition filed by the ASOCRETO officers. The petition was based on the fact that the officers were formally accused of a different crime from the one for which they were being investigated. This decision was appealed, but the decision was confirmed by the Superior Court of Bogotá. On January 21, 2008, CEMEX Colombia was subject to a judicial order, issued by the court, sequestering a quarry called El Tujuelo, as security for a possible future money judgment to be rendered against CEMEX Colombia in these proceedings. The court determined that in order to lift this attachment and prevent further attachments, CEMEX Colombia was required within a period of ten days to deposit with the court in cash $337,800 million Colombian Pesos (approximately U.S.$167 million as of August 11, 2009, based

 

S-97

---

Table of Contents

on an exchange rate of 2.022 Colombian Pesos to U.S.$1.00, which was the Colombian Peso/Dollar exchange rate on August 11, 2009, as published by the Banco de la República de Colombia, the Central Bank of Colombia), instead of being allowed to post an insurance policy to secure such recovery. CEMEX Colombia asked for reconsideration, and the court allowed us to present an insurance policy. We have appealed this decision in order to reduce the amount of the insurance policy, and have also requested that the guarantee be covered by all defendants in the case. On March 9, 2009, the Superior Court of Bogotá reversed this decision, allowing us to offer a security in the amount of U.S.$8 million. We gave the aforementioned security, and on July 27, 2009 the Superior Court of Bogota lifted the attachment. At this stage, we are not able to assess the likelihood of an adverse result or the potential damages which could be borne by CEMEX Colombia.

In November 2008, AMEC/Zachry, the general contractor for the Brooksville South expansion project in Florida, filed a lawsuit against CEMEX Construction Materials Florida, LLC, alleging delay damages and seeking an equitable adjustment to the contract and payment of change orders. In its claim, AMEC/Zachry is seeking U.S.$60 million as compensation. CEMEX Construction Materials Florida, LLC filed a counterclaim against AMEC. In February 2009, AMEC/Zachry filed an amended complaint asserting a claim by AMEC E&C Services, Inc. against CEMEX Materials, LLC as the guarantor of the Design/Build contract. We answered the suit, denying any breach of contract and asserting affirmative defenses and counterclaims against AMEC/Zachry for breach of contract. We also asserted third-party claims against AMEC, plc and FLSmidth. We brought a claim against AMEC, plc for breach of contract, and brought claims for breach of contract, negligent misrepresentation, and various indemnity claims against FLSmidth. In March 2009, FLSmidth filed a motion to dismiss our third-party complaint. In May 2009, after filing a motion for leave, AMEC/Zachry was permitted to file its Second Amended Complaint joining FLSmidth as a co-defendant in the lawsuit and asserting claims for negligence and negligent misrepresentation directly against FLSmidth.

As a result of AMEC/Zachry joining FLSmidth as a co-defendant, we filed a First Amended Complaint converting our previously filed third-party claims into cross-claims against FLSmidth, including each claim previously asserted against FLSmidth, but also adding a claim for tortuous interference. This activity mooted FLSmidth’s motion to dismiss. In July 2009, FLSmidth filed a motion for summary judgment seeking dismissal of AMEC/Zachry’s claims for negligence and negligent misrepresentation arguing that the economic loss rule precludes such claims due to the absence of privity, personal injuries or damage to other property. The court recently conducted a status conference at which it issued an order that FLSmidth will participate in re-discovery despite its motion for protection and issued an informal directive requiring monthly conferences with the court so that it may monitor the discovery process. Since discovery is in preliminary stages, we are not able to assess the likelihood of an adverse result or the potential damages which could be borne by CEMEX Construction Materials Florida, LLC or CEMEX Materials, LLC.

On July 30, 2008, the Panamanian Autoridad de Aeronáutica Civil denied a request by Cemento Bayano, S.A. to erect structures above the permitted imaginary line applicable to the surroundings of the Calzada Larga Airport. This imaginary line is set according to applicable legal regulations and reaches the construction area of the cement plant’s second line. According to design plans, ten of the planned structures to be constructed surpass the permitted imaginary line. Cemento Bayano has formally requested the above-mentioned authority to reconsider its denial. On October 14, 2008, The Panamanian Autoridad de Aeronáutica Civil granted a permission for constructing the tallest building of the second line, under the following conditions: (a) Cemento

 

S-98

---

Table of Contents

Bayano, S.A. assumes any liability arising out of any incident or accident caused by the construction of such building; and (b) no further permissions for additional structures. Cemento Bayano, S.A. filed an appeal with respect to the second condition and has submitted a request for permission in respect to the rest of the structures. On March 13, 2009, the Autoridad de Aeronáutica Civil issued a ruling stating that (a) should an accident occur in the perimeter of the Calzada Larga Airport, an investigation shall be conducted in order to determine the cause and further responsibility; and (b) there will be no further permissions for additional structures of the same height as the tallest structure already granted. Therefore, additional permits may be obtained as long as the structures are lower than the tallest building, on a case-by-case analysis to be conducted by the authority. On June 11, 2009, the Panamanian Autoridad de Aereonáutica Civil issued a ruling denying a permit for additional structures above the permitted imaginary line applicable to the surroundings of the Calzada Larga Airport. On June 16, 2009, Cemento Bayano, S.A. requested the abovementioned Authority to reconsider its denial.

On August 12, 2007, the Australian Takeovers Panel published a declaration of unacceptable circumstances, namely, that our May 7, 2007 announcement that we would allow Rinker shareholders to retain the final dividend of U.S.$0.25 per Rinker share contradicted our announcement on April 10, 2007 that our offer of U.S.$15.85 per share (which excludes U.S.$0.25 Rinker shares) was its “best and final offer.” On September 27, 2007, the Panel ordered us to pay compensation of U.S.$0.25 per share to Rinker shareholders for the net number of Rinker shares they disposed of a beneficial interest during the period from April 10, 2007 to May 7, 2007. We believe that the market was fully informed by its announcements on April 10, 2007, and notes that the Takeovers Panel has made no finding that we breached any law. On September 27, 2007, the Review Panel made an order staying the operation of the orders until further notice pending our application for judicial review of the Panel’s decision. We applied to the Federal Court of Australia for such a judicial review. That application was dismissed on October 23, 2008. Our appeal to the Full Court of the Federal Court of Australia was dismissed in June 2009 and we did not seek to appeal to the High Court. Accordingly, the Takeover Panel’s orders came into effect and we are required to invite all affected shareholders to make claims for the compensation ordered by the Panel within a limited time. We have deposited AUD$15 million into a bank account against which payments to claimants will be made. It is estimated that payouts of up to some AUD$12.7 million could be made. Upon conclusion of the process, the remaining funds will be returned to us.

The State of Texas by and through the Texas General Land Office (“GLO”) is alleging that CEMEX Construction Materials South, LLC failed to pay approximately U.S.$550 million in royalties related to mining of minerals by us and our predecessors since the 1940s on lands that, when transferred originally by the State of Texas, contained reservation of mineral rights. The petition filed by the GLO also seeks injunctive relief to prevent us from continuing to mine minerals from the land. We have filed our answer, denying each and every allegation. We intend to vigorously defend the claim.

On August 18, 2008, Venezuelan officials took physical control of the facilities of CEMEX Venezuela, following the issuance of several governmental decrees purporting to authorize the take over by the government of Venezuela of all of CEMEX Venezuela’s assets, shares and business. At around the same time, the Venezuelan government removed the board of directors of CEMEX Venezuela and replaced its senior management. The government of Venezuela has paid no compensation to CEMEX Venezuela’s shareholders for such action. On October 16, 2008, CEMEX Caracas, which held a 75.7% interest in CEMEX Venezuela, filed a request for arbitration against the government of Venezuela before the International Centre for Settlement of

 

S-99

---

Table of Contents

Investment Disputes (“ICSID”) seeking relief for the expropriation of their interest in CEMEX Venezuela. In the ICSID proceedings against Venezuela, CEMEX Caracas is seeking: (a) a declaration that the government of Venezuela is in breach of its obligations under a bilateral investment treaty, or the Treaty, between the Netherlands and Venezuela, the Venezuelan Foreign Investment Law and customary international law; (b) an order that the government of Venezuela restore to CEMEX Caracas their interest in, and control over, CEMEX Venezuela; (c) in the alternative, an order that the government of Venezuela pay CEMEX Caracas full compensation with respect to its breaches of the Treaty, the Venezuelan Foreign Investment Law and customary international law, in an amount to be determined in the arbitration, together with interest at a rate not less than LIBOR, compounded until the time of payment; and (d) an order that the government of Venezuela pay all costs of and associated with the arbitration, including CEMEX Caracas’s legal fees, experts’ fees, administrative fees and the fees and expenses of the arbitral tribunal. The ICSID arbitral tribunal has been constituted. We are unable at this preliminary stage to estimate the likely range of potential recovery or to determine what position Venezuela will take in these proceedings, the nature of the award that may be issued by the Tribunal or the likely extent of collection of any possible monetary award issued to CEMEX Caracas.

Separately, the government of Venezuela claims that three cement transportation vessels, which the former CEMEX Venezuela transferred to a third party before the expropriation, continue to be the property of the former CEMEX Venezuela. The government of Venezuela successfully petitioned a Panamanian court, which is the country where the vessels are flagged, to enforce an interim measure it had obtained in a Venezuelan court barring further transfer or disposition of the vessels. We believe that the government of Venezuela’s position that the vessels continue to be the property of the former CEMEX Venezuela is without merit, and our appropriate affiliates will continue to resist efforts by the government of Venezuela to assert ownership rights over the vessels. On September 1, 2009, CEMEX Caracas filed a request for provisional measures asking ICSID arbitral tribunal to enjoin the government of Venezuela from further pursuing the vessels. Expropriation of the vessels, if upheld, would adversely affect our trading operations in clinker and cement in the Caribbean region.

On July 31, 2008, we agreed to sell our operations in Austria (consisting of 26 aggregates and 41 ready-mix concrete plants) and Hungary (consisting of six aggregates, 29 ready-mix concrete and four paving stone plants) to Strabag SE, one of Europe’s leading construction and building materials groups, for €310 million (approximately U.S.$433 million). On February 11, 2009, the Hungarian Competition Commission (HCC) approved the sale subject to the condition that the purchaser sell the ready-mix concrete plant operating in Salgótarján to a third party within the next year. On April 28, 2009, the Austrian Cartel Court (Kartellgericht) approved the sale subject to the implementation of certain remedies. Contrary to its duties under the Share Purchase Agreement, Strabag SE filed on June 9, 2009 an appeal against the decision of the Austrian Cartel Court. This appeal had the effect of extending the merger control proceeding. On June 8, 2009 the Austrian Competition Authority also filed an appeal. On July 1, 2009, we received notice from Strabag SE of its intention to withdraw from the Share Purchase Agreement entered into between RMC Holdings B.V. and Dorda Bruger Jordis Rechtsanwälte GmbH, as sellers, and Strabag SE and Austria Asphalt GmbH, as purchasers, since merger control approval could not be obtained by June 30, 2009. On July 8, 2009, Strabag SE withdrew from its appeal against the decision of the Austrian Cartel Court. Since then we have provided Strabag SE written notice that we consider its withdrawal from the Share Purchase Agreement invalid due to Strabag SE’s breach of the Share Purchase Agreement. We believe the Share Purchase Agreement is still valid and enforceable and are considering taking appropriate legal recourse.

 

S-100

---

Table of Contents

Extraordinary general shareholders’ meeting

On September 4, 2009, we held an extraordinary general shareholders’ meeting in which our shareholders approved an increase in the variable portion of our capital stock of up to 4.8 billion shares (equivalent to 1.6 billion CPOs or 160 million ADSs). Pursuant to the resolution approved by our shareholders, the subscription and payment of the new shares represented by CPOs may occur through a public offer of CPOs and/or issuance of convertible bonds within a period of 24 months.

 

S-101

---

Table of Contents

Underwriting

J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Santander Investment Securities Inc. are acting as representatives of the international underwriters in this offering and, together with Banco Bilbao Vizcaya Argentaria, S.A., as joint global coordinators for the global offering. The global offering consists of the international offering of 900,000,000 CPOs, directly or in the form of ADSs, in the United States and in other countries outside Mexico and a concurrent public offering of 300,000,000 CPOs in Mexico by means of a separate Spanish-language prospectus. The number of CPOs to be offered pursuant to each of the offerings is subject to reallocation among the international and Mexican underwriters at the pricing of the global offering. 595,000,000 of the CPOs being offered in this offering and in the concurrent offering in Mexico are being sold on our behalf by three of our subsidiaries, Petrocemex, S.A. de C.V., Centro Distribuidor de Cemento, S.A. de C.V. and Empresas Tolteca de México, S.A. de C.V.

Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the international underwriters named below, and each international underwriter has severally agreed to purchase from us, the following respective number of CPOs, directly or in the form of ADSs:

 

Name		Number of CPOs
J.P. Morgan Securities Inc.
Citigroup Global Markets Inc.
Santander Investment Securities Inc.
Banco Bilbao Vizcaya Argentaria, S.A.
BNP PARIBAS
HSBC Securities (USA) Inc.
RBS Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Barclays Capital Inc.
Calyon Securities (USA) Inc.
ING Financial Markets LLC
Lazard Capital Markets LLC
Scotia Capital (USA) Inc.
Total

Certain non-U.S. underwriters may place CPOs and ADSs directly or through their respective U.S. broker-dealer affiliates.

The underwriting agreement provides that the obligations of the international underwriters are subject to certain conditions precedent, including the absence of any material adverse change in our business and the receipt of certain certificates, opinions and letters from us, our counsel and the independent auditors. The international underwriters are committed to purchase all the CPOs offered by us hereunder if they purchase any CPOs. The underwriting agreement also provides that if an international underwriter defaults, the purchase commitments of non-defaulting international underwriters may be increased or the offering may be terminated.

We have agreed to indemnify the international underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the international underwriters may be required to make in respect of those liabilities.

 

S-102

---

Table of Contents

Mexican offering

We have also entered into a Mexican underwriting agreement with the lead Mexican underwriters providing for the concurrent public offer and sale of CPOs in Mexico, under a public offering approved by the CNBV, by means of a separate Spanish-language prospectus pursuant to Mexican law requirements that contains information that is substantially similar to the information included in this prospectus supplement, and on similar terms as the terms of the international offering. Furthermore, the Mexican lead underwriters have entered into syndication agreements with each of the members of the Mexican underwriting syndicate, setting forth the terms for the distribution of the CPOs in Mexico. The closing of the international offering and the Mexican offering are conditioned upon each other.

The international and Mexican underwriters have entered into an agreement in which they agree to restrictions on where and to whom they and any dealer purchasing from them may offer CPOs and ADSs. Under this agreement, subject to limited exceptions, the international underwriters may not offer or sell securities to Mexican investors and the Mexican underwriters may not offer or sell securities to non-Mexican investors, in each case, until the distribution of the securities in the global offering has been completed. The international and Mexican underwriters have also agreed that each of them may transfer CPOs and ADSs between their respective underwriting syndicates.

Over-allotment option

We have granted options to the international and Mexican underwriters to purchase up to 180,000,000 additional CPOs (in the case of the international underwriters up to 135,000,000 additional CPOs directly or in the form ADSs, and in the case of the Mexican underwriters up to 45,000,000 additional CPOs) to cover over-allotments, if any. The international and Mexican underwriters have 30 days from the date of this prospectus supplement to exercise these over-allotment options. The international and Mexican over-allotment options shall be exercised in a coordinated manner but may be exercised independently of each other. If any additional securities are purchased, the underwriters will offer the additional securities on the same terms as described herein. If any CPOs (directly or in the form of ADSs) are purchased by the international underwriters pursuant to the over-allotment option, they will purchase CPOs in approximately the same proportion as shown in the table above.

Underwriting discounts and commissions

The international underwriters propose to offer the ADSs and CPOs directly to the public at the public offering price set forth on the cover page of this prospectus supplement and to certain dealers at that price less a concession not in excess of U.S.$             per CPO, or U.S.$             per ADS. The international underwriters may allow, and such dealers may reallow, a concession not in excess of U.S.$             per CPO, or U.S.$             per ADS, to certain other dealers. After the public offering of the ADSs and CPOs, the offering price and other selling terms may be changed by the international underwriters.

The following table shows the per CPO, per ADS and total underwriting discounts and commissions we will pay to the international underwriters. Such amounts are shown assuming both no exercise and full exercise of the international underwriters’ over-allotment option to

 

S-103

---

Table of Contents

purchase additional CPOs. The table does not include underwriting discounts and commissions we will pay to the Mexican underwriters.

 

		Without over- allotment exercise		With over- allotment exercise
Per CPO		U.S.$		U.S.$
Per ADS		U.S.$		U.S.$
Total		U.S.$		U.S.$

We estimate that the total expenses of the global offering, excluding underwriting discounts and commissions, will be approximately U.S.$2.2 million.

No sale of similar securities

For a period of 90 days after the date of this prospectus supplement, we will not, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, or file with the SEC a registration under the Securities Act or with the CNBV a prospectus under Mexican securities laws relating to, any of our ADSs, CPOs or shares of common stock or any securities convertible into or exercisable or exchangeable for our ADSs, CPOs or common stock, or publicly disclose the intention to make the offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our ADSs, CPOs or common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of our ADSs, CPOs or common stock or such other securities, in cash or otherwise, without the prior written consent of J.P. Morgan Securities, Inc., other than (i) our ADSs, CPOs and common stock offered in the global offering, (ii) convertible securities publicly placed in the Mexican securities market with, among others, Mexican pension funds (SIEFORES), as described in “Recent Developments” or (iii) any ADSs, CPOs or shares of our common stock issued upon the exercise of options outstanding as of the date hereof.

All our directors and executive officers have entered into lock-up agreements with the international underwriters pursuant to which each of them, for a period of 90 days after the date of this prospectus supplement, may not, without the prior written consent of J.P. Morgan Securities, Inc. (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of our ADSs, CPOs or shares of common stock or any securities convertible into or exercisable or exchangeable for our ADSs, CPOs or shares of common stock (including ADSs, CPOs or shares of common stock which may be deemed to be beneficially owned by such persons in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our ADSs, CPOs or shares of common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of our common stock or such other securities, in cash or otherwise, or (iii) make any demand for or exercise any right with respect to the registration in the United States, Mexico or elsewhere of any of our ADSs, CPOs or shares of common stock or any security convertible into or exercisable or exchangeable for our ADSs, CPOs or shares of common stock, in the case of each of the clauses (i), (ii) and (iii) above, other than (A) transfers of shares of our ADSs, CPOs or shares of common stock as a bona fide gift or gifts, (B) transfers to any immediate family member of such person or

 

S-104

---

Table of Contents

trust for the direct or indirect benefit of such person and/or any immediate family member of such person and (C) upon the death of such person, transfers of our ADSs, CPOs or shares of common stock by the estate of such person; provided that, in the case of any transfer or distribution pursuant to clause (A), (B) or (C) above, each donee or transferee executes a lock-up letter to the foregoing effect; and provided, further, that, in the case of any transfer or distribution pursuant to clause (A), (B) or (C) above, no filing by any party (donor, donee, transferor or transferee) under the Exchange Act or other public announcement shall be required or shall be made voluntarily in connection with such transfer or distribution.

Notwithstanding the foregoing paragraphs, if (a) during the last 17 days of the 90-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs or (b) prior to the expiration of the 90-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions on us and our directors and executive officers regarding the sale of similar securities will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Listings

Our ADSs are listed on the New York Stock Exchange under the symbol “CX.” Our CPOs are listed on the Mexican Stock Exchange under the symbol “CEMEX.CPO.”

Price stabilization and short positions

In connection with this offering, J.P. Morgan Securities Inc. on behalf of the international and Mexican underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling CPOs and ADSs in the open market for the purpose of preventing or retarding a decline in the market price of the ADSs and CPOs while the global offering is in progress. Stabilization transactions, if conducted, will be required to be conducted pursuant to applicable law. These stabilizing transactions may include making short sales of the CPOs and ADSs, which involves the sale by underwriters of a greater number of CPOs and ADSs than they are required to purchase in the global offering, and purchasing CPOs and ADSs on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over-allotment options referred to above, or may be “naked” shorts, which are short positions in excess of that amount, provided that naked shorts are not permissible in respect of transactions carried out in the Mexican market. The underwriters may close out any covered short position either by exercising their over-allotment options, in whole or in part, or by purchasing shares in the open market. In making this determination, J.P. Morgan Securities Inc. will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment options. A naked short position is more likely to be created if J.P. Morgan Securities Inc. is concerned that there may be downward pressure on the price of the CPOs and ADSs in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position. The Mexican underwriters, however, are not permitted to make “naked” short sales of CPOs.

These activities may have the effect of raising or maintaining the market price of the CPOs or ADSs or preventing or retarding a decline in the market price of the CPOs or ADSs, and, as a result, the price of the CPOs or ADSs may be higher than the price that otherwise might exist in

 

S-105

---

Table of Contents

the open market. If J.P. Morgan Securities Inc. commences these activities, they may discontinue them at any time. J.P. Morgan Securities Inc. may carry out these transactions on the New York Stock Exchange, the Mexican Stock Exchange, in the over-the-counter market or otherwise.

Our relationships

The international underwriters and/or their affiliates (and affiliates of Lazard Ltd) have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In particular, affiliates of each of the Mexican underwriters and certain of the international underwriters have participated in, and have agreed to refinance portions of our and our subsidiaries’ outstanding indebtedness under, the financing agreement recently entered into with our creditors and will receive a portion of the net proceeds from this offering, all of which will be used to repay indebtedness outstanding under the financing agreement. Because more than 10% of the net proceeds of this offering may be paid to affiliates of the international underwriters pursuant to the financing agreement, this offering will be made in compliance with Rule 5110(h) of the Financial Industry Regulatory Authority. See “Use of proceeds.”

An affiliate of Lazard Ltd referred this transaction to Lazard Capital Markets LLC and will receive a referral fee from Lazard Capital Markets LLC in connection therewith.

In addition, from time to time, certain of the international underwriters and/or their affiliates may effect transactions for their own account or the accounts of their customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

Selling restrictions

No action has been taken in any jurisdiction (except in the United States and, with respect to the Mexican offering, in Mexico) that would permit a public offering of our CPOs and ADSs, or the possession, circulation or distribution of this prospectus supplement, the accompanying prospectus, the Spanish-language prospectus used in the Mexican offering or any other material relating to us or our CPOs and ADSs where action for that purpose is required. Accordingly, our CPOs and ADSs may not be offered or sold, directly or indirectly, and none of this prospectus supplement, the accompanying prospectus, the Spanish-language prospectus used in the Mexican offering or any other offering material or advertisements in connection our CPOs and ADSs may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter has agreed that with effect from and including the date on which the European Union Prospectus Directive (the “EU Prospectus Directive”) is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the securities which has been approved by the competent authority in that Relevant Member State or, where

 

S-106

---

Table of Contents

appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of securities to the public in that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

•

to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

 

•

to any legal entity which has two or more of (1) an average of at least 250 employees during the last year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

 

•

to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive) subject to obtaining the prior consent of the book-running manager for any such offer; or

 

•

in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of the shares shall result in a requirement for the publication by company or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of securities to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

France

This prospectus supplement has not been prepared in the context of a public offering of securities in France (appel public à l’épargne) within the meaning of Article L.411-1 and seq. of the French Code monétaire et financier and Articles 211-1 and seq. of the Autorité des marchés financiers (“AMF”) regulations and has therefore not been submitted to the AMF for prior approval or otherwise. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France and neither this prospectus supplement nor any other offering material relating to the securities has been distributed or caused to be distributed, will be distributed or caused to be distributed to the public in France, or used in connection with any offer for subscription, exchange or sale of the international shares to the public in France. Any such offers, sales and distributions may be made in France only to persons licensed to provide the investment service of portfolio management for the account of third parties and/or to “qualified investors” (as defined in Article L.411-2, D.411-1 and D.411-2 of the French Code monétaire et financier) and/or to a limited circle of investors (as defined in Article L.411-2, D.411-4 of the French Code monétaire et financier) on the condition that no such prospectus supplement nor any other offering material relating to the securities shall be delivered by then to any person nor reproduced (in whole or in part). Such “qualified investors” are notified that they must act in that connection for their own account in accordance with the terms set out by Article L.411-2 of the French Code monétaire et financier and by Article 211-4 of the AMF Regulations and may not re-transfer, directly or indirectly, the securities in France, other than in compliance with applicable laws and

 

S-107

---

Table of Contents

regulations and in particular those relating to a public offering (which are, in particular, embodied in Articles L.411-1, L.412-1 and L.621-8 and seq. of the French Code monétaire et financier). Investors in France and any persons into whose possession offering material comes must inform themselves about and observe any such restrictions.

United Kingdom

Each of the underwriters has agreed that this document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

Germany

Any offer or solicitation of the securities within Germany must be in full compliance with the German Securities Prospectus Act (Wertpapierprospektgesetz—WpPG). The offer and solicitation of securities to the public in Germany requires the approval of the prospectus by the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht—BaFin). This prospectus supplement has not been and will not be submitted for approval to the BaFin. This prospectus does not constitute a public offer under the German Securities Prospectus Act (Wertpapierprospektgesetz). This prospectus supplement and any other document relating to the securities as well as any information contained therein, must therefore not be supplied to the public in Germany or used in connection with any offer for subscription of the securities to the public in Germany, any public marketing of the securities or any public solicitation for offers to subscribe for or otherwise acquire the securities. The prospectus supplement and other offering materials relating to the offer of the securities are strictly confidential and may not be distributed to any person or entity other than the designated recipients hereof.

Italy

The offering of the securities has not been registered with the Commissione Nazionale per le Società e la Borsa (“CONSOB”), in accordance with Italian securities legislation. Accordingly, the securities may not be offered or sold, and copies of this offering document or any other document relating to the ADSs or CPOs may not be distributed in Italy except to Qualified Investors, as defined in Article 2, paragraph 2, letter e), (i), (ii) and (iii) of EU Directive 2003/71/EC or in any other circumstance where an express exemption to comply with public offering restrictions provided by Legislative Decree no. 58 of February 24, 1998 (the “Consolidated Financial Act”) or CONSOB Regulation no. 11971 of May I4, 1999, as amended (the “Issuers’ Regulation”) applies, including those provided for under Article 100 of the Finance Law and Article 33 of the Issuers Regulation, and provided, however, that any such offer or sale of the securities or distribution of copies of this offering document or any other document relating to the securities in Italy must (i) be made in accordance with all applicable Italian laws and regulations, (ii) be conducted in accordance with any relevant limitations or procedural requirements that CONSOB may impose upon the offer or sale of the securities, and (iii) be made

 

S-108

---

Table of Contents

only by (a) banks, investment firms or financial companies enrolled in the special register provided for in Article 107 of Legislative Decree no. 385 of September 1, 1993, as amended, to the extent duly authorized to engage in the placement and/or underwriting of financial instruments in Italy in accordance with the Consolidated Financial Act and the relevant implementing regulations; or (b) foreign banks or financial institutions (the controlling shareholding of which is owned by one or more banks located in the same EU Member State) authorized to place and distribute securities in the Republic of Italy pursuant to Articles 15, 16 and 18 of the Banking Act, in each case acting in compliance with all applicable laws and regulations.

Any investor purchasing the securities is solely responsible for ensuring that any offer or resale of the securities it purchases occurs in compliance with applicable laws and regulations. This prospectus supplement and the information contained herein are intended only for the use of its recipient and are not to be distributed to any third party resident or located in Italy which is not a “qualified investor” for any reason. No person resident or located in Italy other than the original recipients of this document may rely on its contents.

Spain

The securities may only be offered in Spain in accordance with law 24/1988, of July 28, 1998, as amended, and Royal Decree 1310/2005, of November 4, 2005, and any regulation issued thereunder.

The Netherlands

The securities may not, directly or indirectly, be offered or acquired in the Netherlands and this offering memorandum may not be circulated in the Netherlands, as part of an initial distribution or any time thereafter, other than to individuals or (legal) entities who or which qualify as qualified investors within the meaning of Article 1:1 of the Financial Supervision Act (Wet op het financieel toezicht) as amended from time to time.

Switzerland

This document does not constitute a prospectus within the meaning of Art. 652a or 1156 of the Swiss Code of Obligations nor is it a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. The securities may not be sold directly or indirectly in or into Switzerland except in a manner which will not result in a public offering within the meaning of the Swiss Code of Obligations. Neither this document nor any other offering materials relating to the securities may be distributed, published or otherwise made available in Switzerland except in a manner which will not constitute a public offer of the securities in Switzerland.

Luxembourg

The securities may not be offered or sold in the Grand Duchy of Luxembourg, except for the securities which are offered in circumstances that do not require the approval of a prospectus by the Luxembourg financial regulatory authority and the publication of such prospectus pursuant to the law of July 10, 2005 on prospectuses for securities. The securities are offered to a limited number of investors or to institutional investors, in all cases under circumstances designed to preclude a distribution that would be other than a private placement. This document may not be reproduced or used for any purposes, or furnished to any persons other than those to whom copies have been sent.

 

S-109

---

Table of Contents

Legal matters

Certain legal matters in connection with this offering will be passed upon for CEMEX by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and for the international underwriters by Simpson Thacher & Bartlett LLP, New York, New York. The validity of the CPOs underlying the ADSs will be passed upon for CEMEX by Lic. Ramiro G. Villarreal, General Counsel of CEMEX, and for the underwriters by Ritch Mueller, S.C. Mr. Villarreal, our General Counsel and secretary of our board of directors, is a holder of our securities, and is a participant in our stock option programs.

Experts

Our consolidated financial statements and schedules as of December 31, 2008 and 2007, and for each of the years in the three-year period ended December 31, 2008, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2008 have been incorporated by reference into this prospectus supplement in reliance upon the reports of KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm, incorporated by reference herein and appearing in our annual report on Form 20-F for the year ended December 31, 2008, and upon the authority of that firm as experts in accounting and auditing.

The audit report covering the December 31, 2008 consolidated financial statements contains an explanatory paragraph that states that the Company’s ability to fulfill its short and long-term debt obligations that mature in 2009 is dependent on successfully completing its refinancing, which raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

S-110

---

Table of Contents

INDEX TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

		Page
CEMEX, S.A.B. de C.V. and subsidiaries:
Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		F-2
Consolidated Income Statements for the six-month periods ended June 30, 2009 and 2008		F-3
Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2009 and 2008		F-4
Notes to the Consolidated Financial Statements as of June 30, 2009 and December  31, 2008 and the six-month periods ended June 30, 2009 and 2008		F-5

 

F-1

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of Mexican pesos)

 

		Notes						June 30, 2009 (unaudited)		December 31, 2008
ASSETS
CURRENT ASSETS
Cash and temporary investments		3				Ps		12,890		13,604
Trade receivables less allowance for doubtful accounts		4						20,576		18,276
Other accounts receivable		5						9,310		9,945
Inventories, net		6						19,888		22,358
Other current assets		7						3,448		4,012
Total current assets								66,112		68,195
NON-CURRENT ASSETS
Investments in associates		8A						14,064		14,200
Other investments and non-current accounts receivable		8B						22,543		24,633
Property, machinery and equipment, net		9						273,362		281,858
Goodwill, intangible assets and deferred charges, net		10						222,956		234,736
Total non-current assets								532,925		555,427
TOTAL ASSETS						Ps		599,037		623,622
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term debt including current maturities of long-term debt		11A				Ps		76,203		95,270
Other financial obligations		11B						–		3,462
Trade payables								20,717		22,543
Other accounts payable and accrued expenses		12						28,469		31,462
Total current liabilities								125,389		152,737
NON-CURRENT LIABILITIES
Long-term debt		11A						177,512		162,824
Other financial obligations		11B						–		1,823
Employee benefits								7,409		6,788
Deferred income tax liability								38,443		38,439
Other non-current liabilities		12						23,273		23,744
Total non-current liabilities								246,637		233,618
TOTAL LIABILITIES								372,026		386,355
STOCKHOLDERS’ EQUITY
Majority interest:
Common stock		13A						4,120		4,117
Additional paid-in capital		13A						74,145		70,171
Other equity reserves		13B						14,761		28,730
Retained earnings		13B						87,674		85,396
Net income								2,535		2,278
Total majority interest								183,235		190,692
Minority interest and perpetual debentures		13C						43,776		46,575
TOTAL STOCKHOLDERS’ EQUITY								227,011		237,267
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY						Ps		599,037		623,622

The accompanying notes are part of these consolidated financial statements.

 

F-2

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Income Statements

(Millions of Mexican pesos, except for earnings per share)

 

								For the six-month periods ended June 30,
								2009			2008
		Notes						(unaudited)
Net sales		2P				Ps		109,396			123,367
Cost of sales		2Q						(77,013	)		(84,581	)
Gross profit								32,383			38,786
Administrative and selling expenses								(15,002	)		(17,458	)
Distribution expenses								(7,135	)		(7,091	)
Total operating expenses		2Q						(22,137	)		(24,549	)
Operating income								10,246			14,237
Other income (expenses), net		2S						(1,897	)		1,570
Operating income after other expenses, net								8,349			15,807
Comprehensive financing result:
Financial expense		11						(5,806	)		(5,304	)
Financial income								182			205
Results from financial instruments		11						(2,091	)		(204	)
Foreign exchange results		2D						(937	)		483
Monetary position result		2A						178			337
Comprehensive financing result								(8,474	)		(4,483	)
Equity in income of associates								66			411
Income (loss) before income tax								(59	)		11,735
Income tax								2,710			(1,849	)
Consolidated net income								2,651			9,886
Minority interest net income								116			272
MAJORITY INTEREST NET INCOME						Ps		2,535			9,614
BASIC EARNINGS PER SHARE FOR THE PERIOD		16				Ps		0.11			0.43
DILUTED EARNINGS PER SHARE FOR THE PERIOD		16				Ps		0.11			0.43

The accompanying notes are part of these consolidated financial statements.

 

F-3

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statement of Cash Flows

(Millions of Mexican pesos)

 

						For the six-month periods ended June 30,
								2009			2008
		Notes						(unaudited)
OPERATING ACTIVITIES
Majority interest net income						Ps		2,535			9,614
Non-cash items:
Depreciation and amortization of assets		9 and 10						11,006			10,133
Impairment of assets		6, 9 and 10						8			310
Equity in income of associates		8A						(66	)		(411	)
Minority interest								116			272
Other expenses, net								874			(1,880	)
Comprehensive financing result								8,474			4,483
Income taxes								(2,710	)		1,849
Changes in working capital, excluding financial expense and income taxes								(4,273	)		(3,049	)
Net cash flows provided by operating activities before comprehensive financing results and income taxes								15,964			21,321
Financial expense paid in cash								(4,117	)		(5,882	)
Income taxes paid in cash								(989	)		(2,250	)
Net cash flows provided by operating activities								10,858			13,189
INVESTING ACTIVITIES
Property, machinery and equipment, net		9						(4,128	)		(9,922	)
Disposal of subsidiaries and associates, net		8A and 10						952			5,315
Investment derivative instruments								–			110
Intangible assets and other deferred charges		10						(1,301	)		226
Long-term assets, net								558			198
Others, net								490			(400	)
Net cash flows used in investing activities								(3,429	)		(4,473	)
FINANCING ACTIVITIES
Issuance of common stock		13A						5			1
Financing derivative instruments								(8,051	)		(609	)
Dividends paid		13A						–			(213	)
Repayment of debt, net		11A						3,683			(18,705	)
Issuance of perpetual debentures, net of interest paid		13C						–			10,039
Non-current liabilities, net								(139	)		237
Net cash flows used in financing activities								(4,502	)		(9,250	)
Cash and temporary investments currency translation effect								(3,641	)		(797	)
Decrease in cash and temporary investments								(714	)		(1,331	)
Cash and temporary investments at beginning of period								13,604			8,671
CASH AND INVESTMENTS AT END OF PERIOD		3				Ps		12,890			7,340
Changes in working capital:
Trade receivables, net						Ps		649			(1,938	)
Other accounts receivable and other assets								(221	)		783
Inventories								3,364			(1,830	)
Trade payables								(3,229	)		906
Other accounts payable and accrued expenses								(4,836	)		(970	)
						Ps		(4,273	)		(3,049	)

The accompanying notes are part of these consolidated financial statements.

 

F-4

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of June 30, 2009 and December 31, 2008 and for the six-month periods ended

June 30, 2009 and 2008

(Millions of Mexican pesos)

 

1.	DESCRIPTION OF BUSINESS

CEMEX, S.A.B. de C.V. is a Mexican corporation, a holding company (parent) of entities whose main activities are oriented to the construction industry, through the production, marketing, distribution and sale of cement, ready-mix concrete, aggregates and other construction materials. CEMEX is a public stock corporation with variable capital (S.A.B. de C.V.) organized under the laws of the United Mexican States, or Mexico.

CEMEX, S.A.B. de C.V. was founded in 1906 and was registered with the Mercantile Section of the Public Register of Property and Commerce in Monterrey, N.L., Mexico in 1920 for a period of 99 years. In 2002 this period was extended to the year 2100. The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican Stock Exchange (“MSE”) as Ordinary Participation Certificates (“CPOs”). Each CPO represents two series “A” shares and one series “B” share of common stock of CEMEX, S.A.B. de C.V. In addition, CEMEX, S.A.B. de C.V. shares are listed on the New York Stock Exchange (“NYSE”) as American Depositary Shares or “ADSs” under the symbol “CX.” Each ADS represents ten CPOs.

The terms “CEMEX, S.A.B. de C.V.” or the “Parent Company” used in these accompanying notes to the financial statements refer to CEMEX, S.A.B. de C.V. without its consolidated subsidiaries. The terms the “Company” or “CEMEX” refer to CEMEX, S.A.B. de C.V. together with its consolidated subsidiaries.

 

2.	SIGNIFICANT ACCOUNTING POLICIES

 

A)	BASIS OF PRESENTATION AND DISCLOSURE

The financial statements are prepared in accordance with Mexican Financial Reporting Standards (“MFRS”) issued by the Mexican Board for Research and Development of Financial Reporting Standards (“CINIF”), which recognized the effects of inflation on the financial information until December 31, 2007. The accompanying balance sheet as of June 30, 2009, as well as the income statements and cash flow statements for the periods ended June 30, 2009 and 2008, and their related disclosures included in these notes to the financial statements for the same interim periods are unaudited.

 

Inflationary

accounting

Beginning January 1, 2008, according to new MFRS B-10, “Inflation Effects” (“MFRS B-10”), inflationary accounting will only be applied in a high-inflation environment, defined by the MFRS B-10 as existing when the cumulative inflation for the preceding three years equals or exceeds 26%. Until December 31, 2007, inflationary accounting was applied to all CEMEX subsidiaries regardless of the inflation level of their respective countries. Beginning in 2008, only the financial statements of those subsidiaries whose functional currency corresponds to a country under high inflation will be restated to take account for inflation. Designation of a country as a high inflation environment takes place at the end of each year, and inflation restatement is applied prospectively. As of December 31, 2008, except for subsidiaries in Egypt, Nicaragua, Latvia and Costa Rica, CEMEX subsidiaries operated in low-inflation environments.

Beginning in 2008, MFRS B-10 eliminates the restatement of the financial statements for the period as well as the comparative financial statements for prior periods into constant amounts as of the most recent balance sheet date. Therefore, beginning in 2008, all financial statements are presented in nominal pesos.

Under MFRS, B-10, the restatement adjustments as of the date that the inflationary accounting was discontinued should prevail as part of the assets’ carrying amounts. Beginning in 2008, when moving from a low-inflation to a high-inflation environment, the initial restatement factor should consider the cumulative inflation since the last time inflationary accounting was applied.

Upon adoption of new MFRS B-10, on January 1, 2008, the accumulated result for holding non-monetary assets as of December 31, 2007, was reclassified from “Deficit in equity restatement” (note 13B) to “Retained earnings,” representing a decrease in this caption of approximately Ps97,722.

 

Definition

of terms

When reference is made to “pesos” or “Ps,” it means Mexican pesos. Except when specific references are made to “earnings per share” and “prices per share,” the amounts in these notes are stated in millions. When reference is made to “US$” or “dollars,” it means millions of dollars of the United States of America (“United States”). When reference is made to “£” or “pounds sterling,” it means millions of British pounds sterling; when reference is made to “€” or “Euros,” it means millions of Euros, the currency in circulation in a significant number of European Union countries.

 

F-5

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of June 30, 2009 and December 31, 2008 and for the six-month periods ended

June 30, 2009 and 2008

(Millions of Mexican pesos)

 

When it is deemed relevant, certain amounts presented in the notes to the financial statements include between parentheses a translation into dollars, into pesos, or both, as applicable. These translations are informative data and should not be construed as representations that the amounts in pesos actually represent those dollar amounts or could be converted into dollars at the rate indicated. The translation procedures used are detailed as follows:

 

•

When the amount between parentheses is in dollars, the amount was originated in pesos or other currencies. For balance sheet amounts as of June 30, 2009 and December 31, 2008, such dollar translations were calculated using the closing exchange rates of Ps13.18 and Ps13.74 per dollar, respectively. For income statement amounts for the six-month periods ended June 30, 2009 and 2008, such dollar translations were calculated using the average exchange rates of Ps13.98 and Ps10.55 pesos per dollar, respectively. Translations into pesos were calculated using the closing exchange rates for balance sheet amounts and the average exchange rates of the respective periods for income statement amounts.

 

•

When the amounts between parentheses are the peso and the dollar, it means the disclosed amount was originated in other currencies. For balance sheets as of June 30, 2009 and December 31, 2008, foreign currency amounts were translated into dollars and subsequently into pesos using the closing exchange rates of the respective period.

 

B)	PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include those of CEMEX, S.A.B. de C.V. and the entities in which the Parent Company holds, directly or through subsidiaries, more than 50% of their common stock and/or has control. Control exists when CEMEX has the power, directly or indirectly, to govern the administrative, financial and operating policies of an entity in order to obtain benefits from its activities. Balances and transactions between related parties have been eliminated in consolidation.

The financial statements of joint ventures, which are those entities in which CEMEX and third-party investors have agreed to exercise joint control, are consolidated through the proportional integration method considering CEMEX’s interest in the results of operations, assets and liabilities of such entities, based on International Accounting Standard No. 31, “Interests in Joint Ventures.” CEMEX applies the full consolidation or the equity method, as applicable, for those joint ventures in which one of the venture partners controls the entity’s administrative, financial and operating policies.

Investments in associates are accounted for by the equity method, when CEMEX holds between 20% and 50% and has significant influence unless it is proven that CEMEX has significant influence with a lower percentage. Under the equity method, after acquisition, the investment’s original cost is adjusted for the proportional interest of the holding company in the associate’s equity and earnings, considering, when applicable, the effects of inflation.

 

C)	USE OF ESTIMATES

The preparation of financial statements in accordance with MFRS requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. These assumptions are reviewed on an ongoing basis using available information. Actual results could differ from these estimates.

The main captions subject to estimates and assumptions include, among others, long-lived assets, allowances for doubtful accounts, inventories, deferred income tax assets, the fair market values of financial instruments and the assets and liabilities related to employee benefits.

 

D)	FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS

Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the dates of their execution. Monetary assets and liabilities denominated in foreign currencies are translated into pesos at the exchange rates prevailing at the balance sheet date, and the resulting foreign exchange fluctuations are recognized in earnings, except for the exchange fluctuations arising from: 1) foreign currency indebtedness directly related to the acquisition of foreign entities; and 2) fluctuations associated with related parties’ balances denominated in foreign currency that are of a long-term investment nature. These fluctuations are recorded against stockholders’ equity, as part of the foreign currency translation adjustment of foreign subsidiaries.

The financial statements of foreign subsidiaries, which are determined using the functional currency applicable in each country, are translated into pesos at the closing exchange rate for balance sheet accounts and at the average exchange rate of each month for income statement accounts. The corresponding translation adjustment is included within “Other equity reserves” in the balance sheet.

 

F-6

---

Table of Contents

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of June 30, 2009 and December 31, 2008 and for the six-month periods ended

June 30, 2009 and 2008

(Millions of Mexican pesos)

 

The closing and average exchange rates used to translate the balance sheets and income statements, respectively, of the Company’s main foreign subsidiaries, are the following:

 

		As of June 30, 2009				As of December 31, 2008		As of June 30, 2008
Currency		Closing		Average		Closing		Average
United States Dollars		13.18		13.98		13.74		10.55
Euro		18.4956		18.6702		19.2060		16.2973
British Pound Sterling		21.6919		20.9389