Good day ladies and gentlemen and welcome to the CEMEX third quarter 2010 results conference call. My name is Marcella and I’ll be your operator for today. At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. (Operators Instructions). I would now like to turn the conference over to your host for today Mr. Fernando Fernando González, Executive Vice President of Planning and Finance. Please proceed. Fernando González: Good day to everyone. Thank you for joining us for our third quarter conference call and video webcast. I have been asked to remind you that any forward-looking statements we make today are based on our current knowledge of the markets in which we operate and could change in the future due to a variety of factors beyond our control. I would like to start with four key messages. First, the leveraging continues to be the focus of our financial strategy. Second, we still believe that economic conditions in most of our markets have stabilized and are bottomed out with the fourth quarter likely to be an infection point on a consolidated basis. However, visibility remains low and the US is expected to take longer to recover than originally anticipated. Third, after the financing agreement last year, we took the following positive steps on equity offering, the sale of assets and issuance of bonds and compatible securities. We have seen a reduce in our exposure and our financing agreement ahead of schedule. However as slower than expected recovery has translated into lower than expected operating EBITDA generation. In light of the difficult operating environment and to ensure that we remained in compliance with our covenants, we had conversations with our banks and private placement noteholders that resulted in the amendment of some covenants and our financing…

(Operator Instructions). And your first question comes from the line of Vanessa Quiroga with Credit Suisse. Please proceed.

Hi. Thank you for taking my question. It is regarding the condition to issue equity or equity-linked instruments by September 2011. Could you just make it clear, so this is mandatory? It's not depending on any indebtedness level? This is something that you have to do next year? Thanks. Rodrigo Treviño: Yes Vanessa, thank you for your question. The consequence of not issuing equity or equity-linked securities similar to the convertible securities we issued a year ago and earlier this year will be an increase of 100 basis points on the financing agreement debt. And that increased margin will be reduced only when we have raised that billion dollars in equity or equity-linked securities.

And can you not issue the equity at any time? Rodrigo Treviño: The consequence would be the increase cost on the financing agreement debt and again it will not come down to the original margin until you have raised such equity proceeds.

And any other additional conditions in these amendments that you've reached with the banks regarding any certain other levels of debt payments? Rodrigo Treviño: No, the amortization schedule does not change. The amortization schedule that we have under financing agreement debt remains as is. There are of course economic incentives for us to make additional prepayments and thus avoid increased cost on the financing agreement debt, but those prepayments are voluntary and if we do them it is because it is in the best economic interest of both the company as well as the capital structure.

Your next question comes from the line of Gordon Lee with UBS. Please proceed.

A couple of questions, actually on the operating results. The first was, SG&A was actually flat for the year-on-year period and it was the first time in several quarters that that happened. Do you feel that you can continue to see declines in SG&A going forward, or do you think you've sort of reached the steady-state limit for the current size of the operation? And then the second question was on the South American/Central American operations. You noted in your release that Colombian volumes, cement volumes fell by 1% but the overall region was down by 7%. I was wondering if you could give us a bit more color on specifically what country drove that decline. Thank you. Fernando González: Let me start with the second one related to South America. We mentioned in some cases these volume declines are due to delays in projects like the ones in Panama and to some extent also to weather, so we do expect in the future these volumes to respond and not to continue declining.

Great, thanks. And on the SG&A? Fernando González: The SG&A expense, I don’t have a specific estimate particularly for next year but it will tend to continue being stable or flat for the rest of the year.

And if I could just have one quick follow-up. I think one of the positives in the report was that US prices were pretty steady Q-on-Q, although there's been a lot of sort of anecdotal evidence or concerns that across the industry you have seen some pressure. Is there anything that you could mention in terms of what you've seen thus far in the fourth quarter that could provide any color on US pricing? Thank you. Fernando González: Maybe what I can comment is that as you have practically mentioned as sequentially prices aren’t getting much more stable, year-to-date the figure and there is a price decline, but the sequential figure in the last few months and quarters have been getting now stable. So it’s almost already flat.

And would you say that that stability has continued into what we've seen thus far in the fourth quarter? Fernando González: I think it will.

Your next question comes from the line of Nick Sebrell with Morgan Stanley. Please proceed.

A quick question again on the SG&A, you said that the higher transportation costs were part of the reason that the SG&A was maybe a little bit higher as a percentage of revenue than we might have expected. Is that due to consolidation of the ready-mix plants or is there something else in that? And then, looking at Europe, it seems like the weakness in Europe was predominantly due to Spain. We saw cement demand in Germany go up 7%, UK, 9%. I think French ready-mix also had an increase. Is the current trend in Europe sustainable? It seems like it should turn around and that as Spain becomes a smaller part of the mix, do you see Europe turning around next year and growing based on what we've seen in Germany and some of the core countries? And I'll leave it at those two questions. Thank you. Fernando González: Thanks for the questions. Let me start with Europe. I think as we have already mentioned the stability is not that high and we know there will be adjustments in Europe mainly because of fiscal reduction in expenses next year. What I can say is that what we have seen and seems we will continue seeing for the rest of the year is basically North Europe with some improvements in volumes north as well as the east part, while the south part, Spain in our case, Spain and Croatia are still declining in a significant way. Difficult to say for next year but most probably this trend will continue for the rest of the year.

I just thought it was an interesting observation that you said austerity measures could be an issue and, of course, we've all seen that in the papers. But Germany, despite austerity measures, seems to be growing and the cement demand seems to match the growth that we have seen in GB, and France is certainly not on-board with the austerity measures, right? They don't seem to be tightening the belt so much, and so we've seen growth there, too. So I was just sort of wondering how important those are in the mix overall. And if Spain keeps having issues next year, is that the dominant factor? Fernando González: Spain, as you know is our main business in Europe but the rest of Europe despite the potential impact of expense reduction programs, we do have certain structural issues. Remember that some countries in Europe like the UK or France, they do not have any sort of surplus in housing or there is investment in that sector that do have the stability of amendment, which is not the case in Spain as you know. The housing sector in Spain is completely different, it’s a completely different situation.

It's completely different, yes. And then on the transportation cost? Rodrigo Treviño: Going to your first question, part of the explanation was because increase in the percentage of sales is as a result of our rightsizing initiative as we have shutdown some of our ready mix plans and our product has to travel further to service our customers from the plans that remain in operation, you incur an higher transportation cost as a result of that.

Our next question will come from Michael (inaudible) from Wellington Management

What do you expect maintenance and growth CapEx to be for 2010 and 2011? Rodrigo Treviño: We still don’t have a figure for 2011 and the figure of 2010 will be around 500 million or so. It would be around 500 million, maintenance loss, other CapEx.

And for 2011? Rodrigo Treviño: You don’t have a figure yet?

Still working on the budget? Rodrigo Treviño: Yes still working in the budget, we will provide that information afterwards.

The next question comes from the line of Mike Betts with Jefferies. Please proceed.

Firstly maybe Rodrigo, just to clarify on the new covenants. You researched, obviously, the potential equity or equity-linked issue. Can the proceeds from that be used to repay the first element? You referred to where you needed to generate between US$500 million and US$1.5 billion, are those mutually exclusive? My second question was, I think you're talking about a US$100 million increase in Q4 EBITDA. But when I looked at your forecast for the year versus nine months, it’s a bit of an improvement in Mexico, not much in the US. Where are you expecting that improvement in Q4 to be driven from which regions? And then finally, you referred to a bit of additional cost cutting on the call that you've done in Q3. I presume that's over and above the US$150 million, which I think was a previous number for this year. Do you have a revised target for cost savings for this year, and do you have a number for any that you've done so at this point for 2011? Fernando González: Can I address the last one on cost cutting. The figure, the target figure is the same, it’s $150 and we have proportionately executed those savings during in the year. So we are quite confident to achieve the full figure by yearend and the main components of this program are, to some extent as we mentioned some additional rightsizing efforts in the US and Spain and also contributions of our cost cutting measures. One of them we have already mentioned, we have been reporting, is the use of alternative fuels which is supporting this 150 million saving problem for 2010. Rodrigo Treviño: Going to your first question Mike, the use of proceeds from an equity issuance, according to the financing agreement rules today would allow…

May be you could help me, Rodrigo, just remind me what the step it was in last year’s financing agreements in the 2010? Rodrigo Treviño: Yes, I am going to have to give you the exact amount but we have made prepayments of about $5.2 billion under the financing agreement. In order to avoid additional step-ups all together we would have to make additional prepayments of about $2.5 billion. If we make additional prepayments of about $1.3 billion, $1.2 billion, $1.3 billion from now until the end of next year, then the step-up would be 50 basis points, if we don’t make additional prepayments then the step up could be a 100 basis points. We will follow up on the exact levels.

Okay and just as I want to know about which regions are you looking for the increase in Q4? Rodrigo Treviño: Yes it’s basically Egypt, its North Europe, UK, Columbia and Mexico. Those are the countries in which we are expecting those additional volumes compared to same quarter last year.

Do you have any measure what your energy cost might do in 2011 or is too early to make that estimate? Fernando González: We are still not providing estimates for 2011, we are starting or in the middle of our budgeting process as soon as we are ready to provide that information we will gladly share it.

Your next question comes from the line of Dan McGoey with Citigroup.

First, on the operations in Mexico. Mexico saw volumes positive year-on-year as well as pricing flat to positive, yet there was significantly lower margins. Could you talk a little bit about what pressured margins in Mexico? And then, just a clarification as well on the covenant amendments. The increase of 100 basis points if there's not an equity issuance. Does that consist of US$10 billion of refinancing, or what is the amount that that additional step-up in cost would be applied to? Fernando González: I am taking your first question on margins. Several reasons, the first one is lower economies of scale, a reduction of 6% in sales. There is a second reason which is slightly higher cost of fuel in Mexico and also some higher maintenance works of third quarter compared to second quarter and also as mentioned it’s a 1% decline in price compared to second quarter, so those are the main reasons for the decline of the margins from 35 to 33%. Rodrigo Treviño: Yes, going to your first question then the most of the debt under the financing agreement is floating rates and based on LIBOR. And the existing margin is 450 basis points, so LIBOR plus 450 basis points is the current cost of more then 90% of the debt under the financing agreement, that of course is an all in cost carry of less than 5% and that is a debt that would go out by 100 basis points if we have not issued equity or equity-linked securities by the end of September of next year and so bringing the cost up, from levels of 450 to levels of 550. The current debt in the financing agreement, I believe the exposure is under $10 billion, something in that range.

It's not applied to other debt that has since been refinanced? Rodrigo Treviño: It applies to the financing agreement debt which is the debt that is subject to the covenants that were recently amended. I guess only to that debt.

And your next question comes from the webcast.

Can you please repeat the numbers regarding the fixed additional payments to the financing agreement orders? How much of the financing agreement needs to be paid, I guess prepaid? Additionally, can you provide more details about the debt pay down during the third quarter and how much of the financing agreement is currently outstanding? We paid about 300 million during the quarter of debt under the financing agreement and other debt. However as a result of the negative conversion effect as we convert our Euro debt into US dollar, our debt increase during the quarter, pretty much reversing the positive conversion effects we reported during the second quarter. The outstanding under the financing agreement today is that little under $10 billion is close to $9.7 billion. And the increase cost, well I just explained that in the previous answer that I gave to the previous question.

Your next question comes from the line of Jamie Nicholson of Credit Suisse. Please proceed.

Just a little more clarification again on your financing strategy. As I gather your comments regarding the strong incentives that you have to prepay an additional US$2 billion or US$2.5 billion of debt, does that signal that you plan to tap the public markets for debt as well as equity? And if so, do you have any sense of what timing strategy you might have? Would you wait till later when there's maybe more visibility on your earnings or come to market as they're open? If you can give a little clarity on what your financing strategy from a timing perspective, both debt and equity would be helpful. Rodrigo Treviño: Well currently we don’t have any maturity coming due for the remainder of this year or the early part of next year that will require us to go to market sooner rather than later. It is important also to highlight that we currently do not have shares that have been authorized by our shareholders to be issued in connection with either an equity or an equity-linked transaction. And so most likely the market would know the timing well before we intend to go to market because we will require to ask for approval from our shareholders for the share capital increase that would be required for that. Going to your question of whether or not we will tap the fixed income capital markets from now until the end of next year, I think the answer to that is that if we have made prepayments under the financing agreement debt already during the rest of this year and the early part of next year and the amount that you need to prepay in order to avoid the increased cost as a result of the step ups that have been agreed to is relatively small, then yes, you are incentivated economically to go to the fixed income capital markets even if it is more expensive than the bank debt to make those additional prepayments and avoid the step up on the entire balance of the financing agreement debt. And that most likely would happen in the latter part of next year when we know what is the short fall to avoid the step ups.

And then for the JV put option, how do you plan to finance that? Do you anticipate that coming out of equity proceeds? Fernando González: Well I think we have the time to explore this in ways, different options. As you know we will be paying for that excision in September next year so there's plenty of time to explore different ways.

And then one final question if I may, just a detail. On your press release regarding your derivative transactions you mentioned cash collateral of about US$200 million. Can you just clarify, is that included in your cash balance or excluded? And are there any cash liabilities from some of these derivative transactions that you have footnoted here that you anticipate having to pay in the coming quarters? Thanks. Rodrigo Treviño: No, it is not included in the cash balance and yes as the stock prices of both CEMEX and Axtel recover, we will recover some of that cash posted on margins on those contracts.

Your next question comes from the line of Gonzalo Fernandez with Santander. Please proceed.

My question is, I don't know if you can repeat the guidance for free cash flow for this year and for volumes in Mexico? And the second question is regarding the exercise of the put option on Ready Mix. And if I remember correctly this, you have a maximum CapEx including expansion of $700 million for next year. Do you think that with that CapEx you can finance the acquisition of Ready Mix or would you need to exceed that CapEx? More precisely, what is your CapEx estimate for next year including the exercise of the put option? Rodrigo Treviño: As Fernando mentioned, just an answer to the previous question, we are analyzing all of the options to fund the payment for that put obligation. Clearly we don’t want to increase the level of our debt, we don’t like the level of leverage and our financing strategy is aimed at de-leveraging our balance sheet. So that is not the preferred option. Clearly also, aim with it by issuing equity would be very expensive because equity today is the most expensive source of funds for given both operating and financial leverage that we have. And so clearly we have to explore the other option which is to sell assets. You have to sell other assets in order to pay for the assets that you are acquiring. But we don’t see the payment of the put option as part of our CapEx. Clearly is an obligation that we have and we have to find the best way which to fund it. But we have time to explore that from now until the middle of next year. Going to your question on volumes for Mexico, gray cement there remain for the full year at minus 4 in line with what we guided during the second quarter teleconference so that hasn’t changed.

Sir, on the free cash flow? Fernando González: Yes, there was another one. Rodrigo Treviño: Free cash flow is related to $500 million. Fernando González: $500 million after maintenance CapEx. Rodrigo Treviño: And an important component of that free cash flow for the full year is the fact that we do expect that as we have in previous years given the seasonality of our working capital, we expect to recover more than half of the investment in working capital that we have made during the first nine months of the year and that is an important source of the free cash flow during the fourth quarter, that contributes to the full year of course.

And your next question comes from the webcast.

What countries are you exporting to from Spain and how many times? Fernando González: We are exporting mainly to Africa and volumes are slightly higher than $1 million, about $1.2 billion or something.

The next question comes from the line of Eduardo Couto with Goldman Sachs.

Just to make sure that I understood the terms of the FA. If you don't issue equity by September and don't prepay the $2.5 billion of the FA, your cost of debt will go up by 200 basis points? Is that correct? Rodrigo Treviño: Well lets put it this way, if you don’t issue equity or equity-linked securities of the type that we issued recently then you have a step up of a 100 basis points starting on October 1st of next year until you have raised those proceeds from those securities. In addition to that, if you have not made prepayments under the financing agreement by December of next year, you may save a 50 or 100 basis point increase in the margin. You're right, it could be anywhere between a 150 to 200 basis point increase in the cost of debt if we have done neither additional prepayments for issuance of equity or equity-linked securities.

And for the additional 50 bips you need to prepay 1.3 billion? Is that right? Rodrigo Treviño: We have to get to the exact number, expressed as a percentage of the financing agreement, it’s disclosed in our 20-F, so the information is public, but we'll get the exact figure for you and if it varies of course depending on exchange rates.

Just because we are talking about 500, 550, 650 basis points plus LIBOR, which is still something significant below your cost of equity, so do you think that it makes sense for you to raise this equity, even with this lower cost of that? Rodrigo Treviño: Well, it’s a fine balance. We still don’t like the leverage that we have today. We know that our financial leverage will down as the recovery takes place and as we get closure to middle of the cycle EBITDA cash flow generation for the existing assets we have on our balance sheet. But, the recovery has been delayed in the US and there is still no visibility, so that we want to just wait until recovery or should we perhaps lower the risk of our capital structure by some means before the recovery gets here and that is a decision that we and our board and the shareholders will have to make during the course of the coming months.

After this 100 basis point increase, there's no additional increase on the top of that if you don't do anything? It's just your 100 basis additional, right? Rodrigo Treviño: Yes, but if you don’t do anything whatsoever, you are in the next 12 to 18 months and you went to sit down and negotiate something again with the banks in 1.5 year time is going to become more difficult. You have to consider not only what is the agreement today, but the ongoing relationship with the banking community and we cannot ignore that.

And this upfront payment that you're doing, it's basically 25 basis points over the $10 billion under the FA, like $25 million? Is that right? Rodrigo Treviño: That’s correct and because we have more than three years still outstanding on our financing agreement that, you can do the math but it means that the cost of borrowing under the financing agreement debt will go up on a per annum basis by 11.1%.

In relation to your free cash this quarter, you had this gain of around US$100 million. This is non-recurrent, right? What is that exactly, these other non-cash items that you had this gain of US$100 million? Rodrigo Treviño: I think it’s primarily to do with a tax rebate we received but we can follow-up on that.

But its non-recurrent, right? Rodrigo Treviño: It is non-recurrent because it’s a tax rebate that we would cover during the quarter. I think it was in the US.

Your next question comes from the line of Eric Ollom with Jefferies. Please proceed.

Was there anything in the covenant change or the recent negotiation with the banks regarding your ability to make coupon payments on the perps? And also, given the linkage, if you will, between the coupon payments on the perps and dividends on the equity and the need to raise equity, is there anything you can comment on dividend policy over the next year? Thank you. Rodrigo Treviño: Yes we are not prohibited from making payments on the coupons, on the perps under the financing agreement debt. We are strained in order to pay cash dividend on our common equity and if fact, we haven’t been mostly in the form of stock, even before the financing agreement debt. Close to 97% of our shareholders elected to receive stock instead of cash dividends in the past. Most of our shareholders by and large have not bought CEMEX because of the cash dividends that it was paying in the past but most likely until we have delevered and refinanced the existing financing agreement that we are not going to be making common, payment of dividend on common equity.

So just to extrapolate from that, you should expect no change in the dividend payment? Obviously, that would hurt stock price if it did. And we should expect no change in the policy of paying the coupons on the perps over the next year? Rodrigo Treviño: Well that is something we will have to decide as the situation evolves.

And your final question comes from the line of Aaron Holsberg with Santander. Please proceed.

Further to what you were saying on Gonzalo's question about asset sales, are you actively reviewing possible asset sales? Do you think it's likely that you will be making a significant asset sale in 2011? Fernando González: We have not stopped on our efforts on divesting non-strategic assets. Lets say in the intensive we have today is different to the one we use to have it last year. Meaning divesting assets will not significantly reduce our leverage ratio. So although there are always good reasons to divest from assets because they are now strategically really needed, we are looking for possibilities exploring all of them but taken into account that the price to be paid to be the right one.

Right. And again, that would be in addition to free cash flow debt and equity or equity-linked securities. I guess my other question is if you would reconsider either opening the perp exchange or offering another exchange for the perps which didn't tender the first time? Rodrigo Treviño: To do that it would have to be based on reverse inquiry. If there was interest on the part of significant holders of the perps to reconsider an exchange, certainly we consider it. But by and large the people who wanted to exchange and the people that wanted to hold on, held on, and so we would be surprised if there is significant interest for another exchange but of course we remain open to reverse inquiries.

At this time I would like to turn the call back over to Mr. Fernando González for final remarks. Please proceed, sir. Fernando González: Thank you very much. In closing, I would like to thank you all for your time and attention and we look forward to your continued participation in CEMEX. Please feel free to contact us directly or visit our website at anytime. Thank you and good day.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.