During the past few months, an economic slowdown in China has led to a
series of economic headwinds for many of the country's key trading
partners. Indeed, for the first time in several years, economists have
raised the prospect of a possible recession in Asia and Latin America,
joining the ranks of major European economies already mired in a slump.
For Mexico's
Cemex (NYSE: CX),
the world's third-largest cement maker and producer of concrete, any
additional slowdown could cause real distress for its rebounding stock.
For investors who have managed to profit from this stock's heady
two-year rally, now is the time to book profits as shares could give
back those gains if cash flow doesn't improve.
Even
before the recent slowdown in China and elsewhere, Cemex was having a
tough time. Anemic levels of construction have hurt pricing and demand
for cement, leading this company to bleed cash. Cemex had -$639 million
in free cash flow in 2012, and is on track to post another -$410 million
loss in free cash flow this year. Negative free cash flow is a real
problem for any company carrying more than $15 billion in long-term
debt.
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