A Global Business Icon – Cemex Cement of Mexico
Often, news about Mexico in our part of the world does not evoke excitement and is treated with scant regard, following the regular stereotype of negativity.
Nevertheless, it is little known that Mexico is one of the economic powerhouses in the world, with a GDP of US$4.047 trillion in 2024 and a significant industrial and agricultural capacity.
Mexican exports comprise vehicles, steel, electronic and electrical products, petroleum and agricultural produce and it is the 13th largest economy in the world.
One Mexican company which has achieved prominence in international business is the cement company, Cemex.
Origins of Cemex
Cemex was founded in 1906 as a family business with its headquarters in Monterrey, Mexico and got listed on the Mexican Stock Exchange in 1976.
Cemex initially focused on building additional plants and acquiring other cement plants in Mexico as its expansion strategy.
Its most influential CEOs have been Lorenzo Zambrano, a grandson of the founder, Lorenzo Zambrano Gutteriez, Fernando Gonzalez, with the current CEO being Jaime Muguiro.
Cemex’s expansion
During the tenure of Lorenzo Gonzalez, Cemex embarked on a course of expansion, first within Mexico and around the globe.
Its first expansion drive through the acquisition of cement plants in the US did not prove a success.
This was due to being hit with the full force of US antitrust or competition law, due to advocacy by US cement manufacturers of the fear of Cemex capturing a disproportionate share of the US market.
Cemex restricted itself in the US with the sale of cement, using its shipping facilities in the Gulf of Mexico due to its proximity to the US and the presence of production facilities in the area.
Cemex first expanded in Mexico itself with its acquisition of local Mexican cement companies, Anahuac in 1987 and Tolteca in 1989, which made it the second largest cement producer in Mexico at the time.
Outside Mexico
With the acquisitions in Mexico of Anahuac and Tolteca, events unfolding in the Mexican economic space goaded Cemex to embark on an accelerated investment drive outside Mexico.
The first factor which influenced the expansion of Cemex outside Mexico, leading it to become a global business, was the liberalisation of the Mexican economy from around the mid-1980s.
With the influx of mega cement manufacturers into Mexico and also a flurry of mergers and acquisitions by major cement players around the world, leading to the consolidation of cement manufacturers, Cemex found the necessity of expanding. It acquired cement plants from around the world beginning in Spain.
Cemex felt the prospect staring at it to the effect that it had to go global or suffer being swallowed up.
The expansion drive of Cemex outside Mexico was inspired by Cemex taking advantage of the construction boom in developing countries.
Cemex believed that it had a better appreciation of the construction industry in developing countries than the dominant cement manufacturers from the developed world.
Cemex also believed in its value proposition of being worthwhile to acquire inefficient cement factories, especially in the developing world and turning them around based on its business model.
Business strategy
The business strategy of Cemex, dubbed the “Cemex Way”, which anchored its success, was borne out of thoughtful strategies first developed in Mexico.
“Cemex Way” meant “company-wide effort to manage our global knowledge base efficiently, identify and disseminate best business practices, standardise our business processes, implement key information and internet technologies and foster innovation.”
Anchored on the “Cemex Way,” Cemex began its expansion drive by first testing its business model in Mexico through such innovative strategies such as segmenting the market with product offerings to suit local Mexican needs in proportion to financial capacity.
Having failed to penetrate the US market, Cemex turned its strategy to expanding abroad. Its first outlet for expansion was to Spanish-speaking countries with which Mexico had the same cultural affinity, with acquisitions in Spain, Venezuela, Colombia and the Philippines.
Other significant acquisitions of Cemex included the acquisition of cement plants in the Middle East, Egypt, Dominican Republic, the Caribbean, Israel, Colombia, Germany and other countries.
It is very significant to note the acquisition by Cemex of the major English cement manufacturing firm, RMC, in 2004 for US$5.86bn.
The significance of the acquisition of RMC by a company from a country officially classified by the World Bank as an upper-middle-income country was ground-breaking.
This is due to the fact of the pedigree of RMC, itself a major global business at the time with operations in 20 countries, including several European countries and generating sales of US$8bn at the time of its acquisition.
Cemex extended into Russia, where it established a joint venture in 2009 with TVA Group by forming Cemex Baltic Cement.
Cemex also briefly entered the Brazilian and Indian markets but exited in 2016 and 2018, respectively.
Cemex’s footprints also extended to mighty China, where it operated six concrete factories in Tianjin and Qingdao.
Cemex also entered into a strategic alliance with the Chinese firm, Glodon and Interdream Ventures. Another significant acquisition by Cemex was the mega Australian company, Rinker, which generated more than 80 per cent of its sales in the US in 2007.
Post-integration strategies
It must be noted that Cemex’s expansion outside Mexico into an international conglomerate was through the acquisition of existing plants, which were troubled and inefficient, rather than creating subsidiaries or through any of the market entry modes such as licensing, franchising, farm-ins, joint ventures, etc.
Upon acquisition, Cemex integrated its business model with the acquired plants to create seamless operations with an interconnection of all its plants worldwide.
Cemex’s acquisition strategy was through offers to only troubled companies with the right cash offer.
This did not bloat its cash book as all the acquisitions were at a fair valuation.
An overriding consideration for acquisition by Cemex is its ability to integrate the management and operations of the acquisitions into its structure.
The acquisition should also not negatively affect Cemex’s financial benchmarks, and should that be the case, any such negative performance should only be temporary.
Furthermore, any new acquisitions should lead to an increase in earnings per share.
Recounting success story
It is remarkable that Cemex does not reflect the stereotyping of Mexican society and is now in the league of global business icons.
It is ranked among the top five cement producers in the world with operations in more than 50 countries.
Its annual production of cement is close to 90 million metric tons, with an estimated sales revenue assessed in 2020 at US$13bn.
It has total assets of US$28bn with more than 41,000 employees around the world. Its plants straddle across the world with 25 per cent of its sales volume generated in Mexico, 33 per cent in the US, 30 per cent in Europe, North Africa, the Middle East, with the rest from other parts of the world.
The success story of Cemex in international business attests to the tenacity and foresight of its managers over the years.
Cemex chose acquisitions solely as its method of expansion around the world based on its business model.
With the success of Cemex in its expansion drive across the world, it may not be out of place to propose to Ghanaian entrepreneurs whose businesses are troubled, stemming from a myriad of problems, to consider opening up to successful foreign businesses in any form of strategic alliance to shore up their fortunes.