Cemex, Grupo México and Alfa Each Earmark Over $1B for Investments This Year

Inflation and an imminent interest rate rise could play against the three Mexican companies’ plans, however

The amount of investment reveals the companies’ available resources to return profits to shareholders through dividends and share buyback programs.
February 18, 2022 | 04:59 PM

Mexico City — Three of Mexico’s largest companies have announced their investment plans for 2022, with each planning to disburse more than $1 billion to grow their businesses.

Mining and transportation company Grupo México, Alfa, a conglomerate of petrochemical, IT and food companies, and cement giant Cemex have all set their sights on increasing their investments by more than double digits this year.

However, telecommunications giant América Móvil will maintain its annual investment budget practically unchanged, but which still exceeds the amount allocated by its peers.

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These resources will go toward new productive projects, infrastructure deployment, but also acquisitions and the maintenance of their assets, the companies have said.

Capex is pretty much the beginning of everything,” said Brian Rodriguez, an analyst at Monex, in reference to the companies’ investment plans.

The market follows the capital expenditure or capex guide closely, as it provides insight into the solvency of companies to generate business, the generation of profits for the companies themselves, but also to create jobs and get the economy moving in the countries in which they operate.

In 2022, inflation and the imminent rise in benchmark interest rates in Mexico and the U.S. will be variables that will be closely monitored by analysts, as they will have a bearing on the costs at which companies could borrow to finance part of their investments.

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Read More: Mexico’s Inflation Seen Dropping Below 5% in 2022

This is key, since the four companies have established, along with their investments, goals to reduce their debt levels, something they have been able to achieve in the last two years despite the uncertainty caused by Covid-19.

The amount of investment and capital management also offer clues about the companies’ available resources to, for example, return profits to shareholders through dividends and share buyback programs.

Grupo México Prepares its Next Stage of Mining Projects

Grupo México, a conglomerate with interests in mining, rail transport and infrastructure, plans to invest $2.27 billion this year, 67% more than in 2021. The resources will be destined “to different projects that will be sources of economic growth, job creation and the welfare of the countries where we operate,” Grupo México said in its fourth-quarter 2021 report.

The company, one of the largest copper producers in the world, currently has seven mining projects under development, five in Mexico and two in Peru, and its mining division is the main recipient of investments within the company.

Among the most advanced projects, and which it expects to put into operation in the second half of 2022, are the construction of 25m of roads, and a quicklime plant, both projects are located in the state of Sonora, in the northwest of the country.

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But the funds will also be for the implementation of its next stage of investment projects, which include the large-scale mining projects of El Arco and Empalme, part of an investment plan of more than $7.7 billion over the next 10 years.

Cemex, Between Growth and Debt Reduction

The cement company, which for years was very reserved in the management of its capital as part of its efforts to recover its investment grade, will increase its investments this year by 19% over the 2021 total.

In 2022, the company, which has an international presence, has a budget of $1.3 billion for investments, which are distributed in maintenance and strategic initiatives, focused on increasing the company’s profitability.

This year, Cemex’s strategic initiatives budget, of $600 million, will be 58% higher than last year’s.

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Cemex outlined last year an investment strategy of $925 million by 2023: $425 million in cement production projects, and the remaining $500 million on complementary and margin improvement projects, mainly in the U.S. and Europe.

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“It is important to highlight that our growth strategy is paying off, resulting in $100 million of incremental EBITDA in 202,1 and an estimated $100 million by 2022,″ Cemex CEO Fernando Gonzalez Olivieri said during a recent conference call with analysts and investors.

Monex’s Rodriguez noted that Cemex currently has its highest level of liquidity in the last 10 years.

América Móvil: Five Years of Investment Toward 5G

Telecommunications is one of the most investment-dependent industries. América Móvil, the largest company in the sector in Latin America, has allocated around $8 billion in annual investments during the last five years, with the exception of 2020, marked by the pandemic.

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“We have exercised $8 billion for a long time,” said Daniel Hajj, CEO of América Móvil, in a recent conference call with analysts and investors.

Read More: How América Móvil’s Brazil and Mexico Markets Differ

Those resources have been used to pay for spectrum and fiber optic deployment, but also for the virtualization and digitization of operations, and which have allowed the company to reduce its costs.

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The company, established by Mexican billionaire Carlos Slim, will continue to deploy this budget amount in 2022, when it expects to be able to deploy the 5G network in 90% of its markets, leveraged by the investments made in recent years.

Alfa Doubles Investment Budget Amid Alpek Growth

Alfa plans to increase its investments and acquisitions by 129% in 2022, with almost half of its $1.20 billion budget channeled to finance the purchase by its petrochemical subsidiary Alpek of Octal Holding, a PET sheet manufacturer, with manufacturing centers in Oman, Saudi Arabia and the U.S.

Another part of the resources will go towards projects of its subsidiaries, such as food processor Sigma, the sausage manufacturer Fud, and the innovation and deployment of a plant-based food offering.

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