6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February, 2019

Commission File Number: 001-14946

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

(Translation of Registrant’s name into English)

Avenida Ricardo Margáin Zozaya #325, Colonia Valle del Campestre,

San Pedro Garza García, Nuevo León 66265, México

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Contents

1. CEMEX, S.A.B. de C.V.’s (NYSE:CX) and its subsidiaries consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.

2. CEMEX, S.A.B. de C.V.’s (NYSE:CX) individual financial statements for the years ended December 31, 2018, 2017 and 2016.

CEMEX, S.A.B. de C.V.’s consolidated and individual financial statements are subject to approval by CEMEX, S.A.B. de C.V.’s shareholders at the Ordinary General Shareholders Meeting to be held on March 28, 2019.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, CEMEX, S.A.B. de C.V. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CEMEX, S.A.B. de C.V.
		(Registrant)
Date: February 28, 2019	By:	/s/ Rafael Garza Lozano
		Name: Rafael Garza Lozano
		Title:   Chief Comptroller

3

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
1.	CEMEX, S.A.B. de C.V.’s (NYSE:CX) and its subsidiaries consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.
2.	CEMEX, S.A.B. de C.V.’s (NYSE:CX) individual financial statements for the years ended December 31, 2018, 2017 and 2016.

4

EX-99.1

Exhibit 1

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

Consolidated Financial Statements

December 31, 2018, 2017 and 2016

(With Independent Auditor’s Report Thereon)

INDEX

CEMEX, S.A.B. de C.V. and Subsidiaries:
Consolidated Income Statements for the years ended December 31, 2018, 2017 and 2016	1
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016	2
Consolidated Statements of Financial Position as of December 31, 2018 and 2017	3
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016	5
Notes to the Consolidated Financial Statements	6
Independent Auditors’ Report – KPMG Cárdenas Dosal, S.C.	67

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

Consolidated Income Statements

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

			Years ended December 31,
	Notes		2018			2017			2016
Revenues		3	$	276,855			257,437			249,477
Cost of sales		2.16		(182,965	)		(168,858	)		(159,946	)
Gross profit				93,890			88,579			89,531
Operating expenses		2.16, 5		(60,694	)		(55,967	)		(53,913	)
Operating earnings before other expenses, net		2.1		33,196			32,612			35,618
Other expenses, net		6		(5,837	)		(3,815	)		(1,670	)
Operating earnings				27,359			28,797			33,948
Financial expense		16		(12,597	)		(19,301	)		(21,487	)
Financial income and other items, net		7		96			3,616			4,467
Share of profit of equity accounted investees		13.1		653			588			688
Earnings before income tax				15,511			13,700			17,616
Income tax		19		(4,467	)		(520	)		(3,125	)
Net income from continuing operations				11,044			13,180			14,491
Discontinued operations		4.2		212			3,461			713
CONSOLIDATED NET INCOME				11,256			16,641			15,204
Non-controlling interest net income				789			1,417			1,173
CONTROLLING INTEREST NET INCOME			$	10,467			15,224			14,031
Basic earnings per share		22	$	0.22			0.34			0.32
Basic earnings per share from continuing operations		22	$	0.22			0.26			0.30
Diluted earnings per share		22	$	0.22			0.34			0.32
Diluted earnings per share from continuing operations		22	$	0.22			0.26			0.30

The accompanying notes are part of these consolidated financial statements.

1

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

Consolidated Statements of Comprehensive Income

(Millions of Mexican pesos)

		Years ended December 31,
	Notes	2018			2017			2016
CONSOLIDATED NET INCOME		$	11,256			16,641			15,204
Items that will not be reclassified subsequently to the income statement
Net actuarial gains (losses) from remeasurements of defined benefit pension plans	18		3,404			3			(4,019	)
Income tax recognized directly in other comprehensive income	19		(530	)		(1	)		788
			2,874			2			(3,231	)
Items that are or may be reclassified subsequently to the income statement
Effects from available-for-sale investments and derivative financial instruments designated as cash flow hedges	13.2, 16.4		(2,285	)		275			36
Currency translation results of foreign subsidiaries	20.2		(1,700	)		(9,519	)		11,630
Income tax recognized directly in other comprehensive income	19		752			233			(696	)
			(3,233	)		(9,011	)		10,970
Total items of other comprehensive income, net			(359	)		(9,009	)		7,739
TOTAL COMPREHENSIVE INCOME			10,897			7,632			22,943
Non-controlling interest comprehensive income			9			1,928			5,164
CONTROLLING INTEREST COMPREHENSIVE INCOME		$	10,888			5,704			17,779

The accompanying notes are part of these consolidated financial statements.

2

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

Consolidated Statements of Financial Position

(Millions of Mexican pesos)

		December 31,
	Notes	2018		2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	8	$	6,068		13,741
Trade accounts receivable, net	9		29,248		30,588
Other accounts receivable	10		6,149		4,970
Inventories, net	11		21,248		18,852
Assets held for sale	12.1		2,100		1,378
Other current assets	12.2		2,447		1,946
Total current assets			67,260		71,475
NON-CURRENT ASSETS
Equity accounted investees	13.1		9,492		8,572
Other investments and non-current accounts receivable	13.2		5,271		5,758
Property, machinery and equipment, net	14		224,440		232,160
Goodwill and intangible assets, net	15		234,598		234,909
Deferred income tax assets	19.2		11,567		14,817
Total non-current assets			485,368		496,216
TOTAL ASSETS		$	552,628		567,691
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term debt	16.1	$	883		16,973
Other financial obligations	16.2		12,739		19,362
Trade payables			49,846		46,428
Income tax payable			4,169		5,129
Other current liabilities	17		22,200		24,396
Liabilities directly related to assets held for sale	12.1		314		—
Total current liabilities			90,151		112,288
NON-CURRENT LIABILITIES
Long-term debt	16.1		182,074		177,022
Other financial obligations	16.2		12,028		12,859
Employee benefits	18		18,937		23,653
Deferred income tax liabilities	19.2		14,900		15,801
Other non-current liabilities	17		15,005		15,649
Total non-current liabilities			242,944		244,984
TOTAL LIABILITIES			333,095		357,272
STOCKHOLDERS’ EQUITY
Controlling interest:
Common stock and additional paid-in capital	20.1		145,322		144,654
Other equity reserves	20.2		11,869		13,483
Retained earnings	20.3		20,992		6,179
Net income			10,467		15,224
Total controlling interest			188,650		179,540
Non-controlling interest and perpetual debentures	20.4		30,883		30,879
TOTAL STOCKHOLDERS’ EQUITY			219,533		210,419
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			552,628		567,691

The accompanying notes are part of these consolidated financial statements.

3

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

Consolidated Statements of Cash Flows

(Millions of Mexican pesos)

		Years ended December 31,
	Notes	2018			2017			2016
OPERATING ACTIVITIES
Consolidated net income		$	11,256			16,641			15,204
Discontinued operations			212			3,461			713
Net income from continuing operations		$	11,044			13,180			14,491
Non-cash items:
Depreciation and amortization of assets	5		16,070			15,988			15,987
Impairment losses	6		1,188			2,936			2,518
Share of profit of equity accounted investees	13.1		(653	)		(588	)		(688	)
Results on sale of subsidiaries, other disposal groups and others			(239	)		(4,340	)		(2,128	)
Financial income and other items, net			12,501			15,685			17,020
Income taxes	19		4,467			520			3,125
Changes in working capital, excluding income taxes			(1,062	)		8,039			11,017
Net cash flow provided by operating activities from continuing operations before financial expense, coupons on perpetual debentures and income taxes			43,316			51,420			61,342
Financial expense and coupons on perpetual debentures paid	20.4		(12,846	)		(15,759	)		(18,129	)
Income taxes paid			(3,935	)		(4,664	)		(5,183	)
Net cash flow provided by operating activities from continuing operations			26,535			30,997			38,030
Net cash flow provided by operating activities from discontinued operations			10			108			1,192
Net cash flows provided by operating activities			26,545			31,105			39,222
INVESTING ACTIVITIES
Property, machinery and equipment, net	14		(11,631	)		(10,753	)		(4,563	)
Acquisition and disposal of subsidiaries and other disposal groups, net	4.1, 13.1		(481	)		23,841			1,424
Intangible assets and other deferred charges	15		(3,627	)		(1,607	)		(1,427	)
Non-current assets and others, net			52			126			(914	)
Net cash flows provided by (used in) investing activities from continuing operations			(15,687	)		11,607			(5,480	)
Net cash flows provided by (used in) investing activities from discontinued operations			—			—			1
Net cash flows provided by (used in) investing activities			(15,687	)		11,607			(5,479	)
FINANCING ACTIVITIES
Sale of non-controlling interests in subsidiaries	20.4		—			(55	)		9,777
Derivative instruments			392			246			399
Repayment of debt, net	16.1		(9,260	)		(37,826	)		(41,044	)
Other financial obligations, net	16.2		(7,082	)		(1,473	)		(5,779	)
Share repurchase program	20.1		(1,520	)		—			—
Securitization of trade receivables			644			169			(999	)
Non-current liabilities, net			(2,716	)		(3,745	)		(1,972	)
Net cash flows used in financing activities			(19,542	)		(42,684	)		(39,618	)
Decrease in cash and cash equivalents from continuing operations			(8,694	)		(80	)		(7,068	)
Increase in cash and cash equivalents from discontinued operations			10			108			1,193
Cash conversion effect, net			1,011			2,097			2,169
Cash and cash equivalents at beginning of period			13,741			11,616			15,322
CASH AND CASH EQUIVALENTS AT END OF PERIOD	8	$	6,068			13,741			11,616
Changes in working capital, excluding income taxes:
Trade receivables, net		$	207			1,489			(4,386	)
Other accounts receivable and other assets			(1,670	)		1,120			(286	)
Inventories			(2,970	)		526			(1,239	)
Trade payables			4,680			3,635			13,729
Other accounts payable and accrued expenses			(1,309	)		1,269			3,199
Changes in working capital, excluding income taxes		$	(1,062	)		8,039			11,017

The accompanying notes are part of these consolidated financial statements.

4

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

Statements of Changes in Stockholders’ Equity

(Millions of Mexican pesos)

				Additional		Other						Total						Total
		Common		paid-in		equity			Retained			controlling			Non-controlling			stockholders’
	Notes	stock		capital		reserves			earnings			interest			interest			equity
Balance as of December 31, 2015		$	4,158		115,466		15,273			8,582			143,479			20,289			163,768
Net income			—		—		—			14,031			14,031			1,173			15,204
Total other items of comprehensive income	20.2		—		—		3,748			—			3,748			3,991			7,739
Capitalization of retained earnings	20.1		4		6,966		—			(6,970	)		—			—			—
Share-based compensation	21		—		742		—			—			742			—			742
Effects of perpetual debentures	20.4		—		—		(507	)		—			(507	)		—			(507	)
Changes in non-controlling interest	20.4		—		—		6,279			—			6,279			3,498			9,777
Balance as of December 31, 2016			4,162		123,174		24,793			15,643			167,772			28,951			196,723
Net income			—		—		—			15,224			15,224			1,417			16,641
Total other items of comprehensive income, net	20.2		—		—		(9,520	)		—			(9,520	)		511			(9,009	)
Capitalization of retained earnings	20.1		5		9,459		—			(9,464	)		—			—			—
Effects of early conversion of convertible subordinated notes	16.2		4		7,059		(1,334	)		—			5,729			—			5,729
Share-based compensation	21		—		791		26			—			817			—			817
Effects of perpetual debentures	20.4		—		—		(482	)		—			(482	)		—			(482	)
Balance as of December 31, 2017			4,171		140,483		13,483			21,403			179,540			30,879			210,419
Effects from adoption of IFRS 9 (note 2.1)										(411	)		(411	)		(5	)		(416	)
Balance as of January 1, 2018			4,171		140,483		13,483			20,992			179,129			30,874			210,003
Net income			—		—		—			10,467			10,467			789			11,256
Total other items of comprehensive income, net	20.2		—		—		421			—			421			(780	)		(359	)
Own shares purchased under share repurchase program	20.1		—		—		(1,520	)		—			(1,520	)		—			(1,520	)
Share-based compensation	21		—		668		38			—			706			—			706
Effects of perpetual debentures	20.4		—		—		(553	)		—			(553	)		—			(553	)
Balance as of December 31, 2018		$	4,171		141,151		11,869			31,459			188,650			30,883			219,533

The accompanying notes are part of these consolidated financial statements.

5

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

1) DESCRIPTION OF BUSINESS

CEMEX, S.A.B. de C.V., founded in 1906, 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, holding company (parent) of entities whose main activities are oriented to the construction industry, through the production, marketing, sale and distribution of cement, ready-mix concrete, aggregates and other construction materials and services. In addition, in order to facilitate the acquisition of financing and to run its operations in Mexico more efficiently, CEMEX, S.A.B. de C.V. carries out all businesses and operational activities of the cement, ready-mix concrete and aggregates sectors in Mexico.

The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican Stock Exchange (“MSE”) as Ordinary Participation Certificates (“CPOs”) under the symbol “CEMEXCPO”. 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.’s shares are listed on the New York Stock Exchange (“NYSE”) as American Depositary Shares (“ADSs”) under the symbol “CX.” Each ADS represents ten CPOs.

The terms “CEMEX, S.A.B. de C.V.” and/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. The issuance of these consolidated financial statements was authorized by the Board of Directors of CEMEX, S.A.B. de C.V. on January 30, 2019 considering the favorable recommendation of its Audit Committee. These financial statements will be submitted for authorization to the Annual General Ordinary Shareholders’ Meeting of the Parent Company on March 28, 2019.

2) SIGNIFICANT ACCOUNTING POLICIES

2.1) BASIS OF PRESENTATION AND DISCLOSURE

The consolidated financial statements as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Presentation currency and definition of terms

During the reported periods, the presentation currency of the consolidated financial statements was the Mexican peso. When reference is made to pesos or “$” it means Mexican pesos. The amounts in the financial statements and the accompanying notes are stated in millions, except when references are made to earnings per share and/or prices per share. When reference is made to “US$” or “dollars”, it means dollars of the United States of America (“United States”). When reference is made to “€” or “euros,” it means the currency in circulation in a significant number of European Union (“EU”) countries. When reference is made to “£” or “pounds”, it means British pounds sterling. When it is deemed relevant, certain amounts in foreign currency presented in the notes to the financial statements include between parentheses a convenience translation into dollars and/or into pesos, as applicable. Previously reported convenience translations of prior years are not restated unless the transaction is still outstanding, in which case those are restated using the closing exchange rates as of the reporting date. These translations should not be construed as representations that the amounts in pesos or dollars, as applicable, represent those peso or dollar amounts or could be converted into pesos or dollars at the rate indicated. As of December 31, 2018 and 2017, translations of pesos into dollars and dollars into pesos, were determined for statement of financial position amounts using the closing exchange rate of $19.65 for both years, and for statements of operations amounts, using the average exchange rates of $19.26, $18.88 and $18.72 pesos per dollar for 2018, 2017 and 2016, respectively. When the amounts between parentheses are the peso and the dollar, the amounts were determined by translating the euro amount into dollars using the closing exchange rates at year-end and then translating the dollars into pesos as previously described.

Amounts disclosed in the notes in connection with tax and/or legal proceedings (notes 19.4 and 24), which are originated in jurisdictions where currencies are different from the peso or the dollar, are presented in dollar equivalents as of the closing of the most recent year presented. Consequently, without any change in the original currency, such dollar amounts will fluctuate over time due to changes in exchange rates.

Newly issued IFRS adopted in 2018

IFRS 9, Financial Instruments: classification and measurement (“IFRS 9”) (note 2.6)

Effective beginning January 1, 2018, IFRS 9 sets forth the guidance relating to the classification and measurement of financial assets and financial liabilities, the accounting for expected credit losses of financial assets and commitments to extend credits, as well as the requirements for hedge accounting; and replaced IAS 39, Financial instruments: recognition and measurement (“IAS 39”). CEMEX applied IFRS 9 prospectively. The accounting policies were changed to comply with IFRS 9. The changes required by IFRS 9 are described as follows:

Among other aspects, IFRS 9 changed the classification categories for financial assets under IAS 39 and replaced them with categories that more closely reflect the measurement method, the contractual cash flow characteristics and the entity’s business model for managing the financial asset:

• Cash and cash equivalents, trade and other accounts receivable and other financial assets, which were classified as “Loans and receivables” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

6

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Newly issued IFRS adopted in 2018 - IFRS 9 - continued

• Investments and non-current accounts receivable that were classified as “Held to maturity” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

• Investments that were classified as “Held for trading” and measured at fair value through profit or loss under IAS 39, are now classified as “Other investments” under IFRS 9 and are measured at fair value through profit or loss.

• Certain investments that were classified as “Held for sale” and measured at fair value through other comprehensive income under IAS 39, are now considered as strategic investments under IFRS 9 and continue to be measured at fair value through other comprehensive income.

Debt instruments and other financial obligations continue to be classified as “Loans” and measured at amortized cost under IFRS 9 and derivative financial instruments continue to be measured at fair value through profit or loss under IFRS 9.

CEMEX assessed which business models applied to its financial assets and liabilities as of the date of initial application of IFRS 9 and classified its financial instruments into the appropriate IFRS 9 categories. As of January 1, 2018, the changes due to the classification and measurement requirements under IFRS 9 did not impact either the measurement or carrying amount of financial assets and liabilities and there was no effect on CEMEX´s retained earnings.

In addition, under the new impairment model under IFRS 9 based on expected credit losses, impairment losses for the entire lifetime of financial assets, including trade accounts receivable, are recognized on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, considering for their measurement past events and current conditions, as well as reasonable and supportable forecasts affecting collectability. CEMEX developed an expected credit loss model applicable to its trade accounts receivable that considers the historical performance and economic environment, as well as the credit risk and expected developments for each group of customers and applied the simplified approach upon adoption of IFRS 9. The effects of the adoption of IFRS 9 on January 1, 2018 related to the expected credit loss model represented an increase in the allowance for expected credit losses of $570 recognized against retained earnings, net of a deferred income tax asset of $154. The balances of such allowance and deferred tax assets increased from the reported amounts as of December 31, 2017 of $2,145 and $14,817, respectively, to $2,715 and $14,971 as of January 1, 2018, respectively, after the adoption effects.

In connection with hedge accounting under IFRS 9, among other changes, there is a relief for entities in performing: a) the retrospective effectiveness test at inception of the hedging relationship; and b) the requirement to maintain a prospective effectiveness ratio between 0.8 and 1.25 at each reporting date for purposes of sustaining the hedging designation, both requirements of IAS 39. Under IFRS 9, a hedging relationship can be established to the extent the entity considers, based on the analysis of the overall characteristics of the hedging and hedged items, that the hedge will be highly effective in the future and the hedge relationship at inception is aligned with the entity’s reported risk management strategy. IFRS 9 maintains the same hedge accounting categories of cash flow hedge, fair value hedge and hedge of a net investment established in IAS 39, as well as the requirement of recognizing the ineffective portion of a cash flow hedge immediately in the income statement. CEMEX performed an analysis of its derivative financial instruments upon adoption of IFRS 9 on January 1, 2018 and determined that the changes in hedge accounting described above did not impact either the measurement or carrying amount of the assets and liabilities related to its derivative financial instruments and there was no effect on CEMEX´s retained earnings.

IFRS 15, Revenues from contracts with customers (“IFRS 15”) (note 2.15)

Under IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five step model: Step 1: Identify the contract(s) with a customer (agreement that creates enforceable rights and obligations); Step 2: Identify the different performance obligations (promises) in the contract and account for those separately; Step 3: Determine the transaction price (amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services); Step 4: Allocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. A performance obligation may be satisfied at a point in time (typically for the sale of goods) or over time (typically for the sale of services and construction contracts). IFRS 15 also includes disclosure requirements to provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 was effective on January 1, 2018 and supersedes all existing guidance on revenue recognition.

After an extensive analysis of its contracts with customers, business practices and operating systems for all the reported periods in all the countries in which the Company operates in order to review the different performance obligations and other promises (discounts, loyalty programs, rebates, etc.) included in such contracts, aimed to determine the differences in the accounting recognition of revenue with respect to prior IFRS, CEMEX adopted IFRS 15 on January 1, 2018 using the retrospective approach, without any significant effects on its operating results and financial situation, and restated the previously reported amounts of revenues for 2017 and 2016, resulting in an initial reclassification of other provisions to contract liabilities of $660 as of January 1, 2016, and a subsequent net decrease in revenue of $2 in 2016 and a net decrease in revenue of $8 in 2017 related to IFRS 15 (note 3). These changes in revenues refer to certain discounts and rebates included in certain contracts and were recognized against deferred revenue as contract liabilities in the statement of financial position after IFRS 15 effects (note 17). Changes in equity upon adoption were not significant.

7

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Discontinued operations (note 4.2)

Considering the disposal of entire reportable operating segments, CEMEX’s income statements present in the single line item of “Discontinued operations,” the results of: a) its construction materials operations in Brazil sold on September 27, 2018 for the years 2016, 2017 and the period from January 1 to September 27, 2018; b) its Pacific Northwest Materials Business operations in the United States sold on June 30, 2017 for the year 2016 and the six-months ended June 30, 2017; c) its Concrete Pipe Business operations in the United States sold on January 31, 2017 for the year 2016 and the one-month ended January 31, 2017; and d) its operations in Bangladesh and Thailand sold on May 26, 2016 for the period from January 1 to May 26, 2016. Discontinued operations are presented net of income tax.

Income statements

CEMEX includes the line item titled “Operating earnings before other expenses, net” considering that it is a relevant operating measure for CEMEX’s management. The line item “Other expenses, net” consists primarily of revenues and expenses not directly related to CEMEX’s main activities, including impairment losses of long-lived assets, results on disposal of assets and restructuring costs, among others (note 6). Under IFRS, the inclusion of certain subtotals such as “Operating earnings before other expenses, net” and the display of the statement of operations vary significantly by industry and company according to specific needs.

Considering that it is an indicator of CEMEX’s ability to internally fund capital expenditures and to measure its ability to service or incur debt under its financing agreements, for purposes of notes 4.4 and 16, CEMEX presents “Operating EBITDA” (operating earnings before other expenses, net, plus depreciation and amortization). This is not an indicator of CEMEX’s financial performance, an alternative to cash flows, a measure of liquidity or comparable to other similarly titled measures of other companies. This indicator is used by CEMEX’s management for decision-making purposes.

Statements of cash flows

The statements of cash flows exclude the following transactions that did not represent sources or uses of cash:

Financing activities:

• In 2017 and 2016, in connection with the capitalization of retained earnings (note 20.1), the increases in common stock and additional paid-in capital associated against retained earnings for $9,464 and $6,970, respectively; and in connection with the CPOs issued as part of the executive share-based compensation programs (note 21), the total increases in equity for $706 in 2018, $817 in 2017 and $742 in 2016;

• In 2017, in connection with the early conversion of part of the 2018 optional convertible subordinated notes (note 16.2), the decrease in debt for $5,468, the net decrease in other equity reserves for $1,334, the increase in common stock for $4 and the increase in additional paid-in capital for $7,059; and

• In 2016, the increase in debt and in other current accounts receivable for $148, in connection with a structure pursuant to which CEMEX Colombia, S.A. (“CEMEX Colombia”) guarantees the debt of a trust committed to the development of housing projects in Colombia. CEMEX Colombia in turn holds a beneficial interest in the assets of such trust, which are comprised by titles to land (note 10).

Investing activities:

• In 2018, 2017 and 2016, in connection with the finance leases negotiated during the year, the increases in property, plant and equipment for $88, $2,096 and $7, respectively (note 14).

2.2) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include those of CEMEX, S.A.B. de C.V. and those of the entities in which the Parent Company exercises control, including structured entities (special purposes entities), by means of which the Parent Company is exposed, or has rights, to variable returns from its involvement with the investee, and has the ability to affect those returns through its power over the investee’s relevant activities. Balances and operations between related parties are eliminated in consolidation.

Investments are accounted for by the equity method when CEMEX has significant influence which is generally presumed with a minimum equity interest of 20%. The equity method reflects in the financial statements, the investee’s original cost and CEMEX’s share of the investee’s equity and earnings after acquisition. The financial statements of joint ventures, which relate to those arrangements in which CEMEX and other third-party investors have joint control and have rights to the net assets of the arrangements, are recognized under the equity method. During the reported periods, CEMEX did not have joint operations, referring to those cases in which the parties that have joint control of the arrangement have rights over specific assets and obligations for specific liabilities relating to the arrangements. The equity method is discontinued when the carrying amount of the investment, including any long-term interest in the investee or joint venture, is reduced to zero, unless CEMEX has incurred or guaranteed additional obligations of the investee or joint venture.

8

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.3) USE OF ESTIMATES AND CRITICAL ASSUMPTIONS

The preparation of financial statements in accordance with IFRS 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 items subject to significant estimates and assumptions by management include impairment tests of long-lived assets, recognition of deferred income tax assets, as well as the measurement of financial instruments at fair value, and the assets and liabilities related to employee benefits. Significant judgment is required by management to appropriately assess the amounts of these concepts.

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

Transactions denominated in foreign currencies are recorded in the functional currency at the exchange rates prevailing on the dates of their execution. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the statement of financial position date, and the resulting foreign exchange fluctuations are recognized in earnings, except for exchange fluctuations arising from: 1) foreign currency indebtedness associated with the acquisition of foreign entities; and 2) fluctuations associated with related parties’ balances denominated in foreign currency, whose settlement is neither planned nor likely to occur in the foreseeable future and as a result, such balances are of a permanent investment nature. These fluctuations are recorded against “Other equity reserves”, as part of the foreign currency translation adjustment (note 20.2) until the disposal of the foreign net investment, at which time, the accumulated amount is recycled through the statement of operations as part of the gain or loss on disposal.

The financial statements of foreign subsidiaries, as determined using their respective functional currency, are translated to pesos at the closing exchange rate for statement of financial position accounts and at the closing exchange rates of each month within the period for statements of operations accounts. The functional currency is that in which each consolidated entity primarily generates and expends cash. The corresponding translation effect is included within “Other equity reserves” and is presented in the statement of other comprehensive income for the period as part of the foreign currency translation adjustment (note 20.2) until the disposal of the net investment in the foreign subsidiary.

Considering its integrated activities, for purposes of functional currency, the Parent Company is considered to have two divisions, one related with its financial and holding company activities, in which the functional currency is the dollar for all assets, liabilities and transactions associated with these activities, and another division related with the Parent Company’s operating activities in Mexico, in which the functional currency is the peso for all assets, liabilities and transactions associated with these activities.

The most significant closing exchange rates and the approximate average exchange rates for statement of financial position accounts and statement of operations accounts as of December 31, 2018, 2017 and 2016, were as follows:

	2018				2017				2016
Currency	Closing		Average		Closing		Average		Closing		Average
Dollar		19.6500		19.2583		19.6500		18.8800		20.7200		18.7200
Euro		22.5169		22.7036		23.5866		21.4122		21.7945		20.6564
British Pound Sterling		25.0557		25.6059		26.5361		24.4977		25.5361		25.0731
Colombian Peso		0.0060		0.0065		0.0066		0.0064		0.0069		0.0062
Egyptian Pound		1.0943		1.0806		1.1082		1.0620		1.1234		1.8261
Philippine Peso		0.3737		0.3655		0.3936		0.3747		0.4167		0.3927

The financial statements of foreign subsidiaries are initially translated from their functional currencies into dollars and subsequently into pesos. Therefore, the foreign exchange rates presented in the table above between the functional currency and the peso represent the implied exchange rates resulting from this methodology. The peso to U.S. dollar exchange rate used by CEMEX is an average of free market rates available to settle its foreign currency transactions. No significant differences exist, in any case, between the foreign exchange rates used by CEMEX and those exchange rates published by the Central Bank of Mexico.

2.5) CASH AND CASH EQUIVALENTS (note 8)

The balance in this caption is comprised of available amounts of cash and cash equivalents, mainly represented by highly-liquid short-term investments, which are readily convertible into known amounts of cash, and which are not subject to significant risks of changes in their values, including overnight investments, which yield fixed returns and have maturities of less than three months from the investment date. These fixed-income investments are recorded at cost plus accrued interest. Accrued interest is included in the income statement as part of “Financial income and other items, net.”

The amount of cash and cash equivalents in the statement of financial position includes restricted cash and investments, comprised of deposits in margin accounts that guarantee certain of CEMEX’s obligations, to the extent that the restriction will be lifted in less than three months from the statement of financial position reporting date. When the restriction period is greater than three months, such restricted cash and investments are not considered cash equivalents and are included within short-term or long-term “Other accounts receivable,” as appropriate. When contracts contain provisions for net settlement, these restricted amounts of cash and cash equivalents are offset against the liabilities that CEMEX has with its counterparties.

9

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.6) FINANCIAL INSTRUMENTS

As mentioned in note 2.1, IFRS 9 was adopted prospectively by CEMEX for the period starting January 1, 2018. The accounting policies under IFRS 9 are described as follows:

Classification and measurement of financial instruments

The financial assets that meet both of the following conditions and are not designated as at fair value through profit or loss: a) are held within a business model whose objective is to hold assets to collect contractual cash flows, and b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are classified as “Held to collect” and measured at amortized cost. Amortized cost represents the net present value (“NPV”) of the consideration receivable or payable as of the transaction date. This classification of financial assets comprises the following captions:

• Cash and cash equivalents (notes 2.5 and 8).

• Trade receivables, other current accounts receivable and other current assets (notes 9 and 10). Due to their short-term nature, CEMEX initially recognizes these assets at the original invoiced or transaction amount less expected credit losses, as explained below.

• Trade receivables sold under securitization programs, in which certain residual interest in the trade receivables sold in case of recovery failure and continued involvement in such assets is maintained, do not qualify for derecognition and are maintained in the statement of financial position (notes 9 and 16.2).

• Investments and non-current accounts receivable (note 13.2). Subsequent changes in effects from amortized cost are recognized in the income statement as part of “Financial income and other items, net”.

Certain strategic investments are measured at fair value through other comprehensive income within “Other equity reserves” (note 13.2). CEMEX does not maintain financial assets “Held to collect and sell” whose business model has the objective of collecting contractual cash flows and then selling those financial assets.

The financial assets that are not classified as “Held to collect” or that do not have strategic characteristics fall into the residual category of held at fair value through the income statement as part of “Financial income and other items, net,” (note 13.2).

Debt instruments and other financial obligations are classified as “Loans” and measured at amortized cost (notes 16.1 and 16.2). Interest accrued on financial instruments is recognized within “Other accounts payable and accrued expenses” against financial expense. During the reported periods, CEMEX did not have financial liabilities voluntarily recognized at fair value or associated with fair value hedge strategies with derivative financial instruments.    

Derivative financial instruments are recognized as assets or liabilities in the statement of financial position at their estimated fair values, and the changes in such fair values are recognized in the income statement within “Financial income and other items, net” for the period in which they occur, except in the case of hedging instruments as described below (note 16.4).

Impairment of financial assets

Impairment losses of financial assets, including trade accounts receivable, are recognized using the expected credit loss model for the entire lifetime of such financial assets on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, considering for their measurement past events and current conditions, as well as reasonable and supportable forecasts affecting collectability.

Costs incurred in the issuance of debt or borrowings

Direct costs incurred in debt issuances or borrowings, as well as debt refinancing or non-substantial modifications to debt agreements that did not represent an extinguishment of debt by considering that the holders and the relevant economic terms of the new instrument are not substantially different to the replaced instrument, adjust the carrying amount of the related debt and are amortized as interest expense as part of the effective interest rate of each instrument over its maturity. These costs include commissions and professional fees. Costs incurred in the extinguishment of debt, as well as debt refinancing or modifications to debt agreements, when the new instrument is substantially different from the old instrument according to a qualitative and quantitative analysis, are recognized in the income statement as incurred.

10

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Finance leases

Finance leases are recognized as financing liabilities against a corresponding fixed asset for the lesser of the market value of the leased asset and the NPV of future minimum lease payments, using the contract’s implicit interest rate to the extent available, or the incremental borrowing cost. The main factors that determine a finance lease are: a) ownership title of the asset is transferred to CEMEX at the expiration of the contract; b) CEMEX has a bargain purchase option to acquire the asset at the end of the lease term; c) the lease term covers the majority of the useful life of the asset; and/or d) the NPV of minimum payments represents substantially all the fair value of the related asset at the beginning of the lease.

Financial instruments with components of both liabilities and equity (note 16.2)

Financial instruments that contain components of both liability and equity, such as notes convertible into a fixed number of the issuer’s shares and denominated its same functional currency, are accounted for by each component being recognized separately in the statement of financial position according to the specific characteristics of each transaction. In the case of instruments mandatorily convertible into shares of the issuer, the liability component represents the NPV of interest payments on the principal amount using a market interest rate, without assuming early conversion, and is recognized within “Other financial obligations,” whereas the equity component represents the difference between the principal amount and the liability component, and is recognized within “Other equity reserves”, net of commissions. In the case of instruments that are optionally convertible into a fixed number of shares, the liability component represents the difference between the principal amount and the fair value of the conversion option premium, which reflects the equity component (note 2.14). When the transaction is denominated in a currency different than the functional currency of the issuer, the conversion option is accounted for as a derivative financial instrument at fair value in the income statement.

Hedging instruments (note 16.4)

A hedging relationship is established to the extent the entity considers, based on the analysis of the overall characteristics of the hedging and hedged items, that the hedge will be highly effective in the future and the hedge relationship at inception is aligned with the entity’s reported risk management strategy (note 16.5). The accounting categories of hedging instruments are: a) cash flow hedge, b) fair value hedge of an asset or forecasted transaction, and c) hedge of a net investment in a subsidiary.

In cash flow hedges, the effective portion of changes in fair value of derivative instruments are recognized in stockholders’ equity within other equity reserves and are reclassified to earnings as the interest expense of the related debt is accrued, in the case of interest rate swaps, or when the underlying products are consumed in the case of contracts on the price of raw materials and commodities. In hedges of the net investment in foreign subsidiaries, changes in fair value are recognized in stockholders’ equity as part of the foreign currency translation result within other equity reserves (note 2.4), whose reversal to earnings would take place upon disposal of the foreign investment. During the reported periods, CEMEX did not have derivatives designated as fair value hedges. Derivative instruments are negotiated with institutions with significant financial capacity; therefore, CEMEX believes the risk of non-performance of the obligations agreed to by such counterparties to be minimal.

Embedded derivative financial instruments

CEMEX reviews its contracts to identify the existence of embedded derivatives. Identified embedded derivatives are analyzed to determine if they need to be separated from the host contract and recognized in the statement of financial position as assets or liabilities, applying the same valuation rules used for other derivative instruments.

Put options granted for the purchase of non-controlling interests and investees

Represent agreements by means of which a non-controlling interest has the right to sell, at a future date using a predefined price formula or at fair market value, its shares in a subsidiary of CEMEX. When the obligation should be settled in cash or through the delivery of another financial asset, CEMEX recognizes a liability for the NPV of the redemption amount as of the reporting date against the controlling interest within stockholders’ equity. A liability is not recognized under these agreements when the redemption amount is determined at fair market value at the exercise date and CEMEX has the election to settle using its own shares.

In respect of a put option granted for the purchase of an investee, CEMEX would recognize a liability against a loss in the statements of operations whenever the estimated purchase price exceeds the fair value of the net assets to be acquired by CEMEX, had the counterparty exercised its right to sell. As of December 31, 2018 and 2017, there were no written put options.

Fair value measurements (note 16.3)

Under IFRS, fair value represents an “Exit Value” which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, considering the counterparty’s credit risk in the valuation. The concept of Exit Value is premised on the existence of a market and market participants for the specific asset or liability. When there are no market and/or market participants willing to make a market, IFRS establishes a fair value hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

11

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Fair value measurements - continued

The three levels of the fair value hierarchy are as follows:

• Level 1.- represent quoted prices (unadjusted) in active markets for identical assets or liabilities that CEMEX has the ability to access at the measurement date. A quote price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available.

• Level 2.- are inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly, and are used mainly to determine the fair value of securities, investments or loans that are not actively traded. Level 2 inputs included equity prices, certain interest rates and yield curves, implied volatility and credit spreads, among others, as well as inputs extrapolated from other observable inputs. In the absence of Level 1 inputs, CEMEX determined fair values by iteration of the applicable Level 2 inputs, the number of securities and/or the other relevant terms of the contract, as applicable.

• Level 3.- inputs are unobservable inputs for the asset or liability. CEMEX used unobservable inputs to determine fair values, to the extent there are no Level 1 or Level 2 inputs, in valuation models such as Black-Scholes, binomial, discounted cash flows or multiples of Operative EBITDA, including risk assumptions consistent with what market participants would use to arrive at fair value.

2.7) INVENTORIES (note 11)

Inventories are valued using the lower of cost or net realizable value. The cost of inventories includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. CEMEX analyzes its inventory balances to determine if, as a result of internal events, such as physical damage, or external events, such as technological changes or market conditions, certain portions of such balances have become obsolete or impaired. When an impairment situation arises, the inventory balance is adjusted to its net realizable value, whereas, if an obsolescence situation occurs, the inventory obsolescence reserve is increased. In both cases, these adjustments are recognized against the results of the period. Advances to suppliers of inventory are presented as part of other current assets.

2.8) PROPERTY, MACHINERY AND EQUIPMENT (note 14)

Property, machinery and equipment are recognized at their acquisition or construction cost, as applicable, less accumulated depreciation and accumulated impairment losses. Depreciation of fixed assets is recognized as part of cost and operating expenses (note 5) and is calculated using the straight-line method over the estimated useful lives of the assets, except for mineral reserves, which are depleted using the units-of-production method.

As of December 31, 2018, the average useful lives by category of fixed assets were as follows:

	Years
Administrative buildings		32
Industrial buildings		29
Machinery and equipment in plant		16
Ready-mix trucks and motor vehicles		8
Office equipment and other assets		6

CEMEX capitalizes, as part of the related cost of fixed assets, interest expense from existing debt during the construction or installation period of significant fixed assets, considering CEMEX’s corporate average interest rate and the average balance of investments in process for the period.

All waste removal costs or stripping costs incurred in the operative phase of a surface mine in order to access the mineral reserves are recognized as part of the carrying amount of the related quarries. The capitalized amounts are further amortized over the expected useful life of exposed ore body based on the units of production method.

Costs incurred in respect of operating fixed assets that result in future economic benefits, such as an extension in their useful lives, an increase in their production capacity or in safety, as well as those costs incurred to mitigate or prevent environmental damage, are capitalized as part of the carrying amount of the related assets. The capitalized costs are depreciated over the remaining useful lives of such fixed assets. Periodic maintenance on fixed assets is expensed as incurred. Advances to suppliers of fixed assets are presented as part of other long-term accounts receivable.

The useful lives and residual values of property, machinery and equipment are reviewed at each reporting date and adjusted if appropriate.

2.9) BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS (notes 4.1 and 15)

Business combinations are recognized using the acquisition method, by allocating the consideration transferred to assume control of the entity to all assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. Intangible assets acquired are identified and recognized at fair value. Any unallocated portion of the purchase price represents goodwill, which is not amortized and is subject to periodic impairment tests (note 2.10). Goodwill may be adjusted for any correction to the preliminary assessment given to the assets acquired and/or liabilities assumed within the twelve-month period after purchase. Costs associated with the acquisition are expensed in the income statement as incurred.

12

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Business combinations, goodwill and other intangible assets - continued

CEMEX capitalizes intangible assets acquired, as well as costs incurred in the development of intangible assets, when probable future economic benefits associated are identified and there is evidence of control over such benefits. Intangible assets are recognized at their acquisition or development cost, as applicable. Indefinite life intangible assets are not amortized since the period in which the benefits associated with such intangibles will terminate cannot be accurately established. Definite life intangible assets are amortized on straight-line basis as part of operating costs and expenses (note 5).

Startup costs are recognized in the income statement as they are incurred. Costs associated with research and development activities (“R&D activities”), performed by CEMEX to create products and services, as well as to develop processes, equipment and methods to optimize operational efficiency and reduce costs are recognized in the operating results as incurred. Direct costs incurred in the development stage of computer software for internal use are capitalized and amortized through the operating results over the useful life of the software, which on average is approximately 5 years.

Costs incurred in exploration activities such as payments for rights to explore, topographical and geological studies, as well as trenching, among other items incurred to assess the technical and commercial feasibility of extracting a mineral resource, which are not significant to CEMEX, are capitalized when probable future economic benefits associated with such activities are identified. When extraction begins, these costs are amortized during the useful life of the quarry based on the estimated tons of material to be extracted. When future economic benefits are not achieved, any capitalized costs are subject to impairment.

CEMEX’s extraction rights have maximum useful lives that range from 30 to 100 years, depending on the sector and the expected life of the related reserves. As of December 31, 2018, except for extraction rights and/or as otherwise indicated, CEMEX’s intangible assets are amortized on a straight-line basis over their useful lives that range on average from 3 to 20 years.

2.10) IMPAIRMENT OF LONG-LIVED ASSETS (notes 14 and 15)

Property, machinery and equipment, intangible assets of definite life and other investments

These assets are tested for impairment upon the occurrence of a significant adverse event, changes in CEMEX’s operating business model or in technology that affect the asset, or expectations of lower operating results, to determine whether their carrying amounts may not be recovered. An impairment loss is recorded in the income statement for the period within “Other expenses, net,” for the excess of the asset’s carrying amount over its recoverable amount, corresponding to the higher of the fair value less costs to sell the asset, as determined by external appraiser, and the asset’s value in use, the latter represented by the NPV of estimated cash flows related to the use and eventual disposal of the asset. The main assumptions utilized to develop estimates of NPV are a discount rate that reflects the risk of the cash flows associated with the assets and the estimations of generation of future income. Those assumptions are evaluated for reasonableness by comparing such discount rates to available market information and by comparing to third-party expectations of industry growth, such as governmental agencies or industry chambers.

When impairment indicators exist, for each intangible asset, CEMEX determines its projected revenue streams over the estimated useful life of the asset. To obtain discounted cash flows attributable to each intangible asset, such revenue is adjusted for operating expenses, changes in working capital and other expenditures, as applicable, and discounted to NPV using the risk adjusted discount rate of return. The most significant economic assumptions are: a) the useful life of the asset; b) the risk adjusted discount rate of return; c) royalty rates; and d) growth rates. Assumptions used for these cash flows are consistent with internal forecasts and industry practices. The fair values of these assets are significantly sensitive to changes in such relevant assumptions. Certain key assumptions are more subjective than others. In respect of trademarks, CEMEX considers that the most subjective key assumption is the royalty rate. In respect of extraction rights and customer relationships, the most subjective assumptions are revenue growth rates and estimated useful lives. CEMEX validates its assumptions through benchmarking with industry practices and the corroboration of third-party valuation advisors. Significant judgment by management is required to appropriately assess the fair values and values in use of the related assets, as well as to determine the appropriate valuation method and select the significant economic assumptions.

Impairment of long-lived assets - Goodwill

Goodwill is tested for impairment when required due to significant adverse changes or at least once a year, during the last quarter of such year. CEMEX determines the recoverable amount of the group of cash-generating units (“CGUs”) to which goodwill balances were allocated, which consists of the higher of such group of CGUs fair value less cost to sell and its value in use, the latter represented by the NPV of estimated future cash flows to be generated by such CGUs to which goodwill was allocated, which are generally determined over periods of 5 years. However, in specific circumstances, when CEMEX considers that actual results for a CGU do not fairly reflect historical performance and most external economic variables provide confidence that a reasonably determinable improvement in the mid-term is expected in their operating results, management uses cash flow projections over a period of up to 10 years, to the point in which future expected average performance resembles the historical average performance, to the extent CEMEX has detailed, explicit and reliable financial forecasts and is confident and can demonstrate its ability, based on past experience, to forecast cash flows accurately over that longer period. If the value in use of a group of CGUs to which goodwill has been allocated is lower than its corresponding carrying amount, CEMEX determines the fair value of such group of CGUs using methodologies generally accepted in the market to determine the value of entities, such as multiples of Operating EBITDA and by reference to other market transactions. An impairment loss is recognized within “Other expenses, net”, if the recoverable amount is lower than the net book value of the group of CGUs to which goodwill has been allocated. Impairment charges recognized on goodwill are not reversed in subsequent periods.

13

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Impairment of long-lived assets - Goodwill - continued

The reportable segments reported by CEMEX (note 4.4), represent CEMEX’s groups of CGUs to which goodwill has been allocated for purposes of testing goodwill for impairment, considering: a) that after the acquisition, goodwill was allocated at the level of the reportable segment; b) that the operating components that comprise the reported segment have similar economic characteristics; c) that the reported segments are used by CEMEX to organize and evaluate its activities in its internal information system; d) the homogeneous nature of the items produced and traded in each operative component, which are all used by the construction industry; e) the vertical integration in the value chain of the products comprising each component; f) the type of clients, which are substantially similar in all components; g) the operative integration among components; and h) that the compensation system of a specific country is based on the consolidated results of the geographic segment and not on the particular results of the components. In addition, the country level represents the lowest level within CEMEX at which goodwill is monitored for internal management purposes.

Impairment tests are significantly sensitive to the estimation of future prices of CEMEX’s products, the development of operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets, as well as the discount rates and the growth rates in perpetuity applied. For purposes of estimating future prices, CEMEX uses, to the extent available, historical data plus the expected increase or decrease according to information issued by trusted external sources, such as national construction or cement producer chambers and/or in governmental economic expectations. Operating expenses are normally measured as a constant proportion of revenues, following experience. However, such operating expenses are also reviewed considering external information sources in respect of inputs that behave according to international prices, such as oil and gas. CEMEX uses specific pre-tax discount rates for each group of CGUs to which goodwill is allocated, which are applied to discount pre-tax cash flows. The amounts of estimated undiscounted cash flows are significantly sensitive to the growth rate in perpetuity applied. Likewise, the amounts of discounted estimated future cash flows are significantly sensitive to the weighted average cost of capital (discount rate) applied. The higher the growth rate in perpetuity applied, the higher the amount of undiscounted future cash flows by group of CGUs obtained. Conversely, the higher the discount rate applied, the lower the amount of discounted estimated future cash flows by group of CGUs obtained.

2.11) PROVISIONS

CEMEX recognizes provisions when it has a legal or constructive obligation resulting from past events, whose resolution would require cash outflows, or the delivery of other resources owned by the Company. As of December 31, 2018 and 2017, some significant proceedings that gave rise to a portion of the carrying amount of CEMEX’s other current and non-current liabilities and provisions are detailed in note 24.1.

Considering guidance under IFRS, CEMEX recognizes provisions for levies imposed by governments until the obligating event or the activity that triggers the payment of the levy has occurred, as defined in the legislation.

Restructuring

CEMEX recognizes provisions for restructuring when the restructuring detailed plans have been properly finalized and authorized by management and have been communicated to the third parties involved and/or affected by the restructuring prior to the statement of financial position’s date. These provisions may include costs not associated with CEMEX’s ongoing activities.

Asset retirement obligations (note 17)

Unavoidable obligations, legal or constructive, to restore operating sites upon retirement of long-lived assets at the end of their useful lives are measured at the NPV of estimated future cash flows to be incurred in the restoration process and are initially recognized against the related assets’ book value. The increase to the assets’ book value is depreciated during its remaining useful life. The increase in the liability related to adjustments to NPV by the passage of time is charged to the line item “Financial income and other items, net.” Adjustments to the liability for changes in estimations are recognized against fixed assets, and depreciation is modified prospectively. These obligations are related mainly to future costs of demolition, cleaning and reforestation, so that quarries, maritime terminals and other production sites are left in acceptable condition at the end of their operation.

Costs related to remediation of the environment (notes 17 and 24)

Provisions associated with environmental damage represent the estimated future cost of remediation, which are recognized at their nominal value when the time schedule for the disbursement is not clear, or when the economic effect for the passage of time is not significant; otherwise, such provisions are recognized at their discounted values. Reimbursements from insurance companies are recognized as assets only when their recovery is practically certain. In that case, such reimbursement assets are not offset against the provision for remediation costs.

Contingencies and commitments (notes 23 and 24)

Obligations or losses related to contingencies are recognized as liabilities in the statement of financial position only when present obligations exist resulting from past events that are probable to result in an outflow of resources and the amount can be measured reliably. Otherwise, a qualitative disclosure is included in the notes to the financial statements. The effects of long-term commitments established with third parties, such as supply contracts with suppliers or customers, are recognized in the financial statements on an incurred or accrued basis, after taking into consideration the substance of the agreements. Relevant commitments are disclosed in the notes to the financial statements. The Company recognizes contingent revenues, income or assets only when their realization is virtually certain.

14

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.12) PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS (note 18)

Defined contribution pension plans

The costs of defined contribution pension plans are recognized in the operating results as they are incurred. Liabilities arising from such plans are settled through cash transfers to the employees’ retirement accounts, without generating future obligations.

Defined benefit pension plans and other post-employment benefits

The costs associated with employees’ benefits for: a) defined benefit pension plans; and b) other post-employment benefits, basically comprised of health care benefits, life insurance and seniority premiums, granted by CEMEX and/or pursuant to applicable law, are recognized as services are rendered, based on actuarial estimations of the benefits’ present value with the advice of external actuaries. For certain pension plans, CEMEX has created irrevocable trust funds to cover future benefit payments (“plan assets”). These plan assets are valued at their estimated fair value at the statement of financial position date. The actuarial assumptions and accounting policy consider: a) the use of nominal rates; b) a single rate is used for the determination of the expected return on plan assets and the discount of the benefits obligation to present value; c) a net interest is recognized on the net defined benefit liability (liability minus plan assets); and d) all actuarial gains and losses for the period, related to differences between the projected and real actuarial assumptions at the end of the period, as well as the difference between the expected and real return on plan assets, are recognized as part of “Other items of comprehensive income, net” within stockholders’ equity.

The service cost, corresponding to the increase in the obligation for additional benefits earned by employees during the period, is recognized within operating costs and expenses. The net interest cost, resulting from the increase in obligations for changes in NPV and the change during the period in the estimated fair value of plan assets, is recognized within “Financial income and other items, net.”

The effects from modifications to the pension plans that affect the cost of past services are recognized within operating costs and expenses over the period in which such modifications become effective to the employees or without delay if changes are effective immediately. Likewise, the effects from curtailments and/or settlements of obligations occurring during the period, associated with events that significantly reduce the cost of future services and/or reduce significantly the population subject to pension benefits, respectively, are recognized within operating costs and expenses.

Termination benefits

Termination benefits, not associated with a restructuring event, which mainly represent severance payments by law, are recognized in the operating results for the period in which they are incurred.

2.13) INCOME TAXES (note 19)

The effects reflected in the income statement for income taxes include the amounts incurred during the period and the amounts of deferred income taxes, determined according to the income tax law applicable to each subsidiary. Consolidated deferred income taxes represent the addition of the amounts determined in each subsidiary by applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable values of assets and liabilities, considering tax assets such as loss carryforwards and other recoverable taxes, to the extent that it is probable that future taxable profits will be available against which they can be utilized. The measurement of deferred income taxes at the reporting period reflects the tax consequences that follow the way in which CEMEX expects to recover or settle the carrying amount of its assets and liabilities. Deferred income taxes for the period represent the difference between balances of deferred income taxes at the beginning and the end of the period. Deferred income tax assets and liabilities relating to different tax jurisdictions are not offset. According to IFRS, all items charged or credited directly in stockholders’ equity or as part of other comprehensive income or loss for the period are recognized net of their current and deferred income tax effects. The effect of a change in enacted statutory tax rates is recognized in the period in which the change is officially enacted.

Deferred tax assets are reviewed at each reporting date and are reduced when it is not deemed probable that the related tax benefit will be realized, considering the aggregate amount of self-determined tax loss carryforwards that CEMEX believes will not be rejected by the tax authorities based on available evidence and the likelihood of recovering them prior to their expiration through an analysis of estimated future taxable income. If it is probable that the tax authorities would reject a self-determined deferred tax asset, CEMEX would decrease such asset. When it is considered that a deferred tax asset will not be recovered before its expiration, CEMEX would not recognize such deferred tax asset. Both situations would result in additional income tax expense for the period in which such determination is made. In order to determine whether it is probable that deferred tax assets will ultimately be recovered, CEMEX takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, tax planning strategies, future reversals of existing temporary differences. Likewise, CEMEX analyzes its actual results versus the Company’s estimates, and adjusts, as necessary, its tax asset valuations. If actual results vary from CEMEX’s estimates, the deferred tax asset and/or valuations may be affected, and necessary adjustments will be made based on relevant information in CEMEX’s income statement for such period.

The income tax effects from an uncertain tax position are recognized when is probable that the position will be sustained based on its technical merits and assuming that the tax authorities will examine each position and have full knowledge of all relevant information, and they are measured using a cumulative probability model. Each position has been considered on its own, regardless of its relation to any other broader tax settlement. The high probability threshold represents a positive assertion by management that CEMEX is entitled to the economic benefits of a tax position. If a tax position is considered not probable of being sustained, no benefits of the position are recognized. Interest and penalties related to unrecognized tax benefits are recorded as part of the income tax in the consolidated income statements.

15

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Income taxes - continued

The effective income tax rate is determined dividing the line item “Income Tax” by the line item “Earnings before income tax.” This effective tax rate is further reconciled to CEMEX’s statutory tax rate applicable in Mexico (note 19.3). A significant effect in CEMEX’s effective tax rate and consequently in the reconciliation of CEMEX’s effective tax rate, relates to the difference between the statutory income tax rate in Mexico of 30% against the applicable income tax rates of each country where CEMEX operates.

For the years ended December 31, 2018, 2017 and 2016, the statutory tax rates in CEMEX’s main operations were as follows:

Country	2018		2017		2016
Mexico		30.0%		30.0%		30.0%
United States		21.0%		35.0%		35.0%
United Kingdom		19.3%		19.3%		20.0%
France		34.4%		34.4%		34.4%
Germany		28.2%		28.2%		28.2%
Spain		25.0%		25.0%		25.0%
Philippines		30.0%		30.0%		30.0%
Colombia		37.0%		40.0%		40.0%
Egypt		22.5%		22.5%		22.5%
Others		7.8% - 39.0%		7.8% - 39.0%		7.8% - 39.0%

CEMEX’s current and deferred income tax amounts included in the income statement for the period are highly variable, and are subject, among other factors, to taxable income determined in each jurisdiction in which CEMEX operates. Such amounts of taxable income depend on factors such as sale volumes and prices, costs and expenses, exchange rates fluctuations and interest on debt, among others, as well as to the estimated tax assets at the end of the period due to the expected future generation of taxable gains in each jurisdiction.

2.14) STOCKHOLDERS’ EQUITY

Common stock and additional paid-in capital (note 20.1)

These items represent the value of stockholders’ contributions, and include increases related to the capitalization of retained earnings and the recognition of executive compensation programs in CEMEX, S.A.B. de C.V.’s CPOs as well as decreases associated with the restitution of retained earnings.

Other equity reserves (note 20.2)

Groups the cumulative effects of items and transactions that are, temporarily or permanently, recognized directly to stockholders’ equity, and includes the comprehensive income, which reflects certain changes in stockholders’ equity that do not result from investments by owners and distributions to owners. The most significant items within “Other equity reserves” during the reported periods are as follows:

Items of “Other equity reserves” included within other comprehensive income:

• Currency translation effects from the translation of foreign subsidiaries, net of: a) exchange results from foreign currency debt directly related to the acquisition of foreign subsidiaries; and b) exchange results from foreign currency related parties’ balances that are of a non-current investment class (note 2.4);

• The effective portion of the valuation and liquidation effects from derivative instruments under cash flow hedging relationships, which are recorded temporarily in stockholders’ equity (note 2.6);

• Changes in fair value of other investments in strategic securities (note 2.6); and

• Current and deferred income taxes during the period arising from items whose effects are directly recognized in stockholders’ equity.

Items of “Other equity reserves” not included in comprehensive income:

• Effects related to controlling stockholders’ equity for changes or transactions affecting non-controlling interest stockholders in CEMEX’s consolidated subsidiaries;

• Effects attributable to controlling stockholders’ equity for financial instruments issued by consolidated subsidiaries that qualify for accounting purposes as equity instruments, such as the interest expense paid on perpetual debentures;

• The equity component of securities which are mandatorily or optionally convertible into shares of the Parent Company (notes 2.6 and 16.2). Upon conversion, this amount will be reclassified to common stock and additional paid-in capital; and

• The cancellation of the Parent Company’s shares held by consolidated entities.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Retained earnings (note 20.3)

Retained earnings represent the cumulative net results of prior years, net of: a) dividends declared; b) capitalization of retained earnings; c) restitution of retained earnings when applicable; and d) cumulative effects from adoption of new IFRS.

Non-controlling interest and perpetual debentures (note 20.4)

This caption includes the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. This caption also includes the nominal amounts of financial instruments (perpetual notes) issued by consolidated entities that qualify as equity instruments considering that there is: a) no contractual obligation to deliver cash or another financial asset; b) no predefined maturity date; and c) a unilateral option to defer interest payments or preferred dividends for indeterminate periods.

2.15) REVENUE RECOGNITION (note 3)

As mentioned in note 2.1, CEMEX adopted IFRS 15 on January 1, 2018 using the retrospective approach. CEMEX policies under IFRS 15 are as follows:

Revenue is recognized at a point in time or over time in the amount of the price, before tax on sales, expected to be received by CEMEX’s subsidiaries for goods and services supplied as a result of their ordinary activities, as contractual performance obligations are fulfilled, and control of goods and services passes to the customer. Revenues are decreased by any trade discounts or volume rebates granted to customers. Transactions between related parties are eliminated in consolidation.

Variable consideration is recognized when it is highly probable that a significant reversal in the amount of cumulative revenue recognized for the contract will not occur and is measured using the expected value or the most likely amount method, whichever is expected to better predict the amount based on the terms and conditions of the contract.

Revenue and costs from trading activities, in which CEMEX acquires finished goods from a third party and subsequently sells the goods to another third-party, are recognized on a gross basis, considering that CEMEX assumes ownership risks on the goods purchased, not acting as agent or broker.

When revenue is earned over time as contractual performance obligations are satisfied, which is the case of construction contracts, CEMEX apply the stage of completion method to measure revenue, which represents: a) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs; b) the surveys of work performed; or c) the physical proportion of the contract work completed, whichever better reflects the percentage of completion under the specific circumstances. Revenue and costs related to such construction contracts are recognized in the period in which the work is performed by reference to the contract’s stage of completion at the end of the period, considering that the following have been defined: a) each party’s enforceable rights regarding the asset under construction; b) the consideration to be exchanged; c) the manner and terms of settlement; d) actual costs incurred and contract costs required to complete the asset are effectively controlled; and e) it is probable that the economic benefits associated with the contract will flow to the entity.

Progress payments and advances received from customers do not reflect the work performed and are recognized as a short-term or long-term advanced payments, as appropriate.

2.16) COST OF SALES AND OPERATING EXPENSES (note 5)

Cost of sales represents the production cost of inventories at the moment of sale. Such cost of sales includes depreciation, amortization and depletion of assets involved in production, expenses related to storage in production plants and freight expenses of raw material in plants and delivery expenses of CEMEX’s ready-mix concrete business.

Administrative expenses represent the expenses associated with personnel, services and equipment, including depreciation and amortization, related to managerial activities and back office for the Company’s management.

Sales expenses represent the expenses associated with personnel, services and equipment, including depreciation and amortization, involved specifically in sales activities.

Distribution and logistics expenses refer to expenses of storage at points of sales, including depreciation and amortization, as well as freight expenses of finished products between plants and points of sale and freight expenses between points of sales and the customers’ facilities.

2.17) EXECUTIVE SHARE-BASED COMPENSATION (note 21)

Share-based payments to executives are defined as equity instruments when services received from employees are settled by delivering shares of the Parent Company and/or a subsidiary; or as liability instruments when CEMEX commits to make cash payments to the executives on the exercise date of the awards based on changes in the Parent Company and/or subsidiary’s own stock (intrinsic value). The cost of equity instruments represents their estimated fair value at the date of grant and is recognized in the income statement during the period in which the exercise rights of the employees become vested. In respect of liability instruments, these instruments are valued at their estimated fair value at each reporting date, recognizing the changes in fair value through the operating results.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.18) EMISSION RIGHTS

In certain countries where CEMEX operates, such as EU countries, mechanisms aimed at reducing carbon dioxide emissions (“CO2”) have been established by means of which, the relevant environmental authorities have granted certain number of emission rights (“certificates”) free of cost to the different industries releasing CO2, which must submit to such environmental authorities at the end of a compliance period, certificates for a volume equivalent to the tons of CO2 released. Companies must obtain additional certificates to meet deficits between actual CO2 emissions during the compliance period and certificates received, or they can dispose of any surplus of certificates in the market. In addition, the United Nations Framework Convention on Climate Change (“UNFCCC”) grants Certified Emission Reductions (“CERs”) to qualified CO2 emission reduction projects. CERs may be used in specified proportions to settle emission rights obligations in the EU. CEMEX actively participates in the development of projects aimed to reduce CO2 emissions. Some of these projects have been awarded with CERs.

CEMEX does not maintain emission rights, CERs and/or enter into forward transactions with trading purposes. CEMEX accounts for the effects associated with CO2 emission reduction mechanisms as follows:

• Certificates received for free are not recognized in the statement of financial position. Revenues from the sale of any surplus of certificates are recognized by decreasing cost of sales. In forward sale transactions, revenues are recognized upon physical delivery of the emission certificates.

• Certificates and/or CERs acquired to hedge current CO2 emissions are recognized as intangible assets at cost and are further amortized to cost of sales during the compliance period. In the case of forward purchases, assets are recognized upon physical reception of the certificates.

• CEMEX accrues a provision against cost of sales when the estimated annual emissions of CO2 are expected to exceed the number of emission rights, net of any benefit obtained through swap transactions of emission rights for CERs.

• CERs received from the UNFCCC are recognized as intangible assets at their development cost, which are attributable mainly to legal expenses incurred in the process of obtaining such CERs.

During 2018, 2017 and 2016, there were no sales of emission rights to third parties. In addition, in certain countries, the environmental authorities impose levies per ton of CO2 or other greenhouse gases released. Such expenses are recognized as part of cost of sales as incurred.

2.19) CONCENTRATION OF CREDIT

CEMEX sells its products primarily to distributors in the construction industry, with no specific geographic concentration within the countries in which CEMEX operates. As of and for the years ended December 31, 2018, 2017 and 2016, no single customer individually accounted for a significant amount of the reported amounts of sales or in the balances of trade receivables. In addition, there is no significant concentration of a specific supplier relating to the purchase of raw materials.

2.20) NEWLY ISSUED IFRS NOT YET ADOPTED

IFRS issued as of the date of issuance of these financial statements which have not yet been adopted are described as follow:

IFRS 16, Leases (“IFRS 16”)

IFRS 16 defines leases as any contract or part of a contract that conveys to the lessee the right to use an asset for a period in exchange for consideration and the lessee directs the use of the identified asset throughout that period. IFRS 16 introduces a single lessee accounting model, and requires a lessee to recognize, for all leases, allowing exemptions in case of the leases with a term of less than 12 months or when the underlying asset is of low value, assets for the right-of-use the underlying asset against a corresponding financial liability, representing the NPV of estimated lease payments under the contract, with a single income statement model in which a lessee recognizes amortization of the right-of-use asset and interest on the lease liability. A lessee shall present either in the statement of financial position, or disclose in the notes, right-of-use assets separately from other assets, as well as, lease liabilities separately from other liabilities. IFRS 16 is effective beginning January 1, 2019 and will supersede all current standards and interpretations related to lease accounting.

As of December 31, 2018, by means of analyses of its outstanding lease contracts and other contracts that may have embedded the use of an asset and the assessment of the most relevant characteristics of such contracts (types of assets, committed payments, maturity dates, renewal clauses, etc.), CEMEX has substantially concluded the inventory and measurement of its leases for purposes of adopting IFRS 16 and is in its final review. Moreover, CEMEX has defined its accounting policy under IFRS 16 and will apply the recognition exception for short-term leases and low-value assets, as well as the practical expedient to not separate the non-lease component from the lease component included in the same contract. CEMEX will adopt IFRS 16 using the full retrospective approach pursuant to which prior periods will be restated. Upon adoption of IFRS 16 beginning on January 1, 2019, CEMEX has estimated a range for its opening statement of financial position effects as of January 1, 2017, as follows:

		As of January 1, 2017
		Low			High
Assets for the right-of-use	US$		920			942
Financial liabilities			(1,030	)		(1,060	)
Retained earnings 1	US$		(110	)		(118	)

1 The effect refers to a timing difference between depreciation expense of the assets calculated under the straight-line method and the interest expense from the liability determined under the effective interest rate method since the beginning of the contracts. This difference will reverse over the remaining life of the contracts.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Newly issued IFRS not yet adopted - continued

In addition to IFRS 16, there are several amendments or new IFRS issued but not yet effective which are under analysis and the Company’s management expects to adopt in their specific effective dates considering preliminarily without any significant effect in the Company’s financial position or operating results, and which are summarized as follows:

Standard	Main topic	Effective date
Amendments to IFRS 9	Prepayment features with negative compensation do not automatically preclude amortized cost accounting.	January 1, 2019
IFRIC 23, Uncertainty over income tax treatments	When an entity concludes that it is not probable that a particular tax treatment is accepted, the decision should be based on which method provides better predictions of the resolution of the uncertainty.	January 1, 2019
Amendments to IAS 28, Long-term interests in associates and joint ventures (“IAS 28”)	The amendment clarifies that IFRS 9, including its impairment requirements, applies to long-term interests.	January 1, 2019
Amendments to IAS 12, Income taxes	Clarify that an entity should recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized the transactions that generated the distributable profits.	January 1, 2019
Amendments to IAS 23, Borrowing costs	Clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.	January 1, 2019
Amendments to IFRS 3, Business combinations	Clarify that when an entity obtains control of a business that is a joint operation, the entity applies the requirements for a business combination achieved in stages, including remeasuring its previously held interest in the joint operation at fair value.	January 1, 2019
Amendments to IAS 19, Employee benefits	Clarify that the past service cost (or of the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated assumptions and comparing benefits offered and plan assets before and after the plan amendment (or curtailment or settlement) but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus position).	January 1, 2019
Amendments to IFRS 10, Consolidated financial statements and IAS 28	Clarify the recognition of gains or losses in the Parent’s financial statements for the sale or contribution of assets between an investor and its associate or joint venture	Has yet to be set
IFRS 17, Insurance contracts	The new Standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4, Insurance Contracts. The Standard outlines a General Model, which is modified for insurance contracts with direct participation features, described as the Variable Fee Approach. The General Model is simplified if certain criteria are met by measuring the liability for remaining coverage using the Premium Allocation Approach.	January 1, 2021

3) REVENUE AND CONSTRUCTION CONTRACTS

CEMEX’s revenues are mainly originated from the sale and distribution of cement, ready-mix concrete, aggregates and other construction materials and services. CEMEX grants credit for terms ranging from 15 to 90 days depending of the type and risk of each customer. For the years ended December 31, 2018, 2017 and 2016, revenue, after eliminations between related parties resulting from consolidation, is as follows:

	2018		2017		2016
From the sale of goods associated to CEMEX’s main activities 1	$	265,584		246,135		239,230
From the sale of services 2		3,064		3,313		3,110
From the sale of other goods and services 3		8,207		7,989		7,137
	$	276,855		257,437		249,477

1 Includes in each period revenue generated under construction contracts that are presented in the table below.

2 Refers mainly to revenue generated by Neoris N.V. and its subsidiaries, involved in providing information technology solutions and services.

3 Refers mainly to revenues generated by subsidiaries not individually significant operating in different lines of business.

Information of revenues by reportable segment and line of business for the years 2018, 2017 and 2016 is presented in note 4.4

19

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Revenues and construction contracts - continued

As of December 31, 2018 and 2017, amounts receivable for progress billings to customers of construction contracts and/or advances received by CEMEX from these customers were not significant. For 2018, 2017 and 2016, revenues and costs related to construction contracts in progress were as follows:

	Accrued 1			2018			2017			2016
Revenue from construction contracts included in consolidated revenues 2	$	1,063			1,383			992			1,033
Costs incurred in construction contracts included in consolidated cost of sales 3		(1,055	)		(1,312	)		(1,205	)		(1,133	)
Construction contracts gross operating profit (loss)	$	8			71			(213	)		(100	)

1 Revenues and costs recognized from inception of the contracts until December 31, 2018 in connection with those projects still in progress.

2 Revenues from construction contracts during 2018, 2017 and 2016, were mainly obtained in Mexico and Colombia.

3 Refers to actual costs incurred during the periods.

Under IFRS 15, some commercial practices of CEMEX, in the form of certain promotions and/or discounts and rebates offered as part of the sale transaction, result in that a portion of the transaction price should be allocated to such commercial incentives as separate performance obligations, recognized as contract liabilities with customers, and deferred to the income statement during the period in which the incentive is exercised by the customer or until it expires. For the years ended December 31, 2018, 2017 and 2016 changes in the balance of contract liabilities with customers are as follows:

	2018			2017			2016
Opening balance of contract liabilities with customers	$	770			645			660
Increase during the period for new transactions		1,070			1,156			1,040
Decrease during the period for exercise or expiration of incentives		(890	)		(1,148	)		(1,038	)
Currency translation effects		(175	)		117			(17	)
Closing balance of contract liabilities with customers	$	775			770			645

For the years 2018, 2017 and 2016, CEMEX did not identify any costs required to be capitalized as contract fulfilment assets and released over the contract life according to IFRS 15.

4) BUSINESS COMBINATIONS, DISCONTINUED OPERATIONS, SALE OF OTHER DISPOSAL GROUPS AND SELECTED FINANCIAL INFORMATION BY REPORTABLE SEGMENT AND LINE OF BUSINESS

4.1) BUSINESS COMBINATIONS

On December 5, 2016, through its subsidiary Sierra Trading (“Sierra”), CEMEX presented an offer and take-over bid, which was amended on January 9, 2017 (the “Offer”), to all shareholders of Trinidad Cement Limited (“TCL”), a company publicly listed in Trinidad and Tobago, to acquire up to 132,616,942 ordinary shares in TCL (equivalent to approximately 30.2% of TCL’s common stock). TCL’s main operations are in Trinidad and Tobago, Jamaica and Barbados. TCL shares deposited in response to the Offer together with Sierra’s then existing 39.5% shareholding in TCL represented approximately 69.8% of the outstanding shares of TCL. The total consideration paid by Sierra for the TCL shares under the Offer was US$86 ($1,791). CEMEX started consolidating TCL on February 1, 2017. CEMEX determined a fair value of TCL’s assets as of February 1, 2017 of US$531 ($11,061), which considered a price of TT$5.07 per share for the percentage acquired in the Offer and TT$4.15 per share, or the market price before the Offer, for the remaining shares, and US$113 ($2,354) of debt assumed, among other effects. The purchase of TCL represented a step acquisition. As a result, the remeasurement of CEMEX’s previous held ownership interest in TCL of 39.5% generated a gain of US$32 ($623) in 2017 as part of “Financial income and other items, net.” All convenience translations to pesos above consider an exchange rate of 20.83 pesos per dollar as of February 1, 2017.

After concluding in 2018 the allocation of TCL’s fair value to the assets acquired and liabilities assumed, the statement of financial position of TCL at the acquisition date of February 1, 2017 was as follows:

		As of February 1, 2017
Current assets	US$		84
Property, machinery and equipment			331
Intangible assets and other non-current assets (include goodwill of US$106)			116
Total assets			531
Current liabilities (includes debt of US$47)			122
Non-current liabilities (includes debt of US$97 and deferred tax liabilities of US$19)			160
Total liabilities			282
Net assets	US$		249
Non-controlling interest net assets			70
Controlling interest net assets	US$		179

20

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Business combinations - continued

In addition, in August 2018, a subsidiary of CEMEX in the United Kingdom acquired all the shares of the ready-mix producer Procon Readymix Ltd (“Procon”) for an amount in pounds sterling equivalent to US$22, considering the pound sterling to dollar exchange rate as of August 31, 2018. As of December 31, 2018, based on the preliminary valuation of the fair values of the assets acquired and liabilities assumed, the net assets of Procon amount to US$10 ($196) and goodwill was determined in the amount of US$12 ($244).

4.2) DISCONTINUED OPERATIONS

On September 27, 2018, CEMEX concluded the sale of the its construction materials operations in Brazil (the “Brazilian Operations”) through the sale to Votorantim Cimentos N/NE S.A. of all the shares of CEMEX’s Brazilian subsidiary Cimento Vencemos Do Amazonas Ltda, consisting of a fluvial cement distribution terminal located in Manaus, Amazonas province, as well as the operation license. The sale price was US$31 ($54). CEMEX determined a net gain on sale of US$12 ($234), including a withholding tax expense of US$3 and the reclassification of a foreign currency translation loss accrued in equity of US$7 ($140). CEMEX’s Brazilian Operations for the period from January 1 to September 27, 2018 and the years 2017 and 2016 were reclassified to the single line item “Discontinued Operations.”

On June 30, 2017, CEMEX concluded the sale of its Pacific Northwest Materials Business consisting of aggregate, asphalt and ready-mix concrete operations in Oregon and Washington to Cadman Materials, Inc., a subsidiary of HeidelbergCement Group, for US$150. CEMEX determined a net gain on disposal of these assets of US$22 ($399), which included a proportional allocation of goodwill of US$73 ($1,324). Considering the disposal of its Pacific Northwest Materials Business, the operations of that business for the six-month period ending June 30, 2017 and for the year 2016 were reclassified to the single line item “Discontinued Operations.”

On January 31, 2017, CEMEX concluded the sale of its Concrete Reinforced Pipe Manufacturing Business (“Concrete Pipe Business”) in the United States to Quikrete Holdings, Inc. for US$500 plus an additional US$40 contingent consideration based on future performance. CEMEX determined a net gain on disposal of these assets for US$148 ($3,083), which included a proportional allocation of goodwill of US$260 ($5,369). Considering the disposal of the entire Concrete Pipe Business, its operations for the one-month period ending January 31, 2017 and the year 2016 were reclassified to the single line item “Discontinued Operations.”

On May 26, 2016, CEMEX closed the sale of its operations in Bangladesh and Thailand to Siam City Cement Public Company Ltd. for US$70 ($1,450). CEMEX determined a gain on sale of US$24 ($424) net of the reclassification of foreign currency translation gains accrued in equity of US$7 ($122). The operations in Bangladesh and Thailand for the period from January 1 to May 26, 2016, included in CEMEX’s income statements, were reclassified to the single line item “Discontinued operations.”

The following table presents condensed combined information of the statement of operations of CEMEX’s discontinued operations in Brazil for the period from January 1 to September 27, 2018 and for the years 2017 and 2016, in the Pacific Northwest Materials Business in the United States for the six-months period ended June 30, 2017 and for the year 2016; the Concrete Pipe Business operations in the United States for the one-month period ended January 31, 2017 and for the year 2016, and the operations in Bangladesh and Thailand for the period from January 1 to May 26, 2016:

	2018			2017			2016
Sales	$	503			2,235			9,445
Cost of sales and operating expenses		(495	)		(2,257	)		(8,983	)
Other products (expenses), net		(1	)		14			(3	)
Financial expenses, net and others		(5	)		—			(32	)
Earnings before income tax		2			(8	)		427
Income tax		(6	)		(1	)		(102	)
Result of discontinued operations		(4	)		(9	)		325
Disposal result, withholding taxes and reclassification of currency translation effects		216			3,470			388
Net result of discontinued operations	$	212			3,461			713

As of December 31, 2017, the condensed information of the statement of financial position of the Brazilian Operations was as follows:

	2017
Current assets	$	148
Property, machinery and equipment, net and other non-current assets		140
Total assets		288
Current liabilities		66
Non-current liabilities		—
Total liabilities		66
Net assets	$	222

21

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

4.3) OTHER DISPOSAL GROUPS

As of December 31, 2018, CEMEX is in negotiations for the sale of its ready-mix and aggregates business in the central region of France. The transaction is subject to several customary authorizations and CEMEX expects to conclude this sale in the short-term. The assets and liabilities of this business are presented as assets held for sale and liabilities directly related in the statement of financial position as of December 31, 2018, including a proportional allocation of goodwill related to this reporting segment of US$22 ($439).

On November 18, 2016, a subsidiary of CEMEX in the United States closed the sale to an affiliate of Grupo Cementos de Chihuahua, S.A.B. de C.V. (“GCC”) of certain assets consisting of CEMEX’s cement plant in Odessa, Texas, two cement terminals and the building materials business in El Paso, Texas and Las Cruces, New Mexico, for an amount of US$306 ($6,340). The Odessa plant had an annual production capacity of approximately 537 thousand metric tons (unaudited). The transfer of control was effective on November 18, 2016. As a result of the sale of these assets, CEMEX recognized in 2016 a gain of US$104 ($2,159) as part of “Other expenses, net” in the income statement of 2016, net of an expense for the proportional write-off of goodwill associated to CEMEX’s reporting segment in the United States based on their relative fair values for US$161 ($3,340) and the reclassification of proportional foreign currency translation gains associated with these net assets accrued in equity until disposal for US$65 ($1,347).

On September 12, 2016, CEMEX announced that one of its subsidiaries in the United States signed a definitive agreement for the sale of its Fairborn, Ohio cement plant and cement terminal in Columbus, Ohio to Eagle Materials Inc. (“Eagle Materials”) for US$400 ($8,288). Fairborn plant had an annual production capacity of approximately 730 thousand metric tons (unaudited). On February 10, 2017, CEMEX closed the divestment of these assets, and recognized in 2017 a gain on disposal for US$188 ($3,694) as part of “Other expenses, net” in the income statement, net of an expense for the proportional write-off of goodwill associated to CEMEX’s reporting segment in the United States based on their relative fair values for US$211 ($4,365).

The operations of the net assets in the central region of France and those sold to GCC and Eagle Materials, mentioned above, did not represent discontinued operations and were consolidated by CEMEX line-by-line in the income statements for the year 2018, 2017 and 2016, until their disposal. In arriving at this conclusion, CEMEX evaluated: a) the Company’s ongoing operations in France and cement operations of its CGUs in Texas and the Mid-West; and b) the relative size of the net assets sold and held for sale in respect to the Company’s remaining overall ongoing operations in France and the United States. Moreover, as a reasonability check, CEMEX measured the materiality of such net assets as a percentage of consolidated net sales, operating earnings before other expenses, net, net income and total assets. The percentage was not material in any case.

For the year 2018, 2017 and 2016, selected combined income statement information of the net assets in the central region of France and those sold to GCC and Eagle Materials, until their disposal, was as follows:

	2018			2017			2016
Net sales	$	1,169			1,194			4,544
Operating costs and expenses		(1,205	)		(1,201	)		(4,064	)
Operating earnings (losses) before other expenses, net	$	(36	)		(7	)		480

As of December 31, 2018, the condensed balance sheet of the net assets expected to be sold in the central region of France was as follows:

	2018
Current assets	$	189
Non-current assets		763
Total assets of the disposal group		952
Current liabilities		211
Non-current liabilities		103
Total liabilities directly related to disposal group		314
Total net assets of disposal group	$	638

In addition, on April 28, 2017, CEMEX concluded the sale of its assets and activities related to the ready-mix concrete pumping business in Mexico to Cementos Españoles de Bombeo, S. de R.L., subsidiary in Mexico of Pumping Team S.L.L. (“Pumping Team”), specialist in the supply of ready-mix concrete pumping services based in Spain, for an aggregate price of $1,649, which included the sale of fixed assets for $309, plus administrative and client and market development services, as well as the lease of facilities in Mexico that CEMEX will supply to Pumping Team over a period of ten years with the possibility to extend for three additional years, for an aggregate initial amount of $1,340, which are recognized each period as services are rendered. There is the possibility of a contingent revenue subject to results for up to $557 linked to annual metrics beginning in the first year and up to the fifth year of the agreement. For the first year of operation under the agreements from May 2017 to April 2018, CEMEX received $25 of this contingent revenue.

22

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

4.4) SELECTED FINANCIAL INFORMATION BY REPORTABLE SEGMENT AND LINE OF BUSINESS

Reportable segments represent the components of CEMEX that engage in business activities from which CEMEX may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s top management to make decisions about resources to be allocated to the segments and assess their performance, and for which discrete financial information is available. CEMEX operates geographically and by business on a regional basis. For the reported periods, the Company’s operations were organized in five geographical regions, each under the supervision of a regional president, as follows: 1) Mexico, 2) United States, 3) Europe, 4) South, Central America and the Caribbean (“SCA&C”), and 5) Asia, Middle East and Africa (“AMEA”). The accounting policies applied to determine the financial information by reportable segment are consistent with those described in note 2.

Considering similar regional and economic characteristics and/or materiality, certain countries have been aggregated and presented as single line items as follows: a) “Rest of Europe” refers mainly to CEMEX’s operations and activities in Croatia, Latvia, Scandinavia and Finland; b) “Rest of South, Central America and the Caribbean” refers mainly to CEMEX’s operations and activities in Puerto Rico, Nicaragua, Jamaica, the Caribbean, Guatemala and El Salvador, excluding the acquired operations of TCL; c) “Caribbean TCL” refers to TCL’s operations mainly in Trinidad and Tobago, Jamaica Guyana and Barbados; and d) “Rest of Asia, Middle East and Africa” refers mainly to CEMEX’s operations in the United Arab Emirates and Malaysia. The segment “Others” refers to: 1) cement trade maritime operations, 2) Neoris N.V., CEMEX’s subsidiary involved in the business of information technology solutions, 3) the Parent Company, other corporate entities and finance subsidiaries, and 4) other minor subsidiaries with different lines of business.

Selected information of the consolidated income statements by reportable segment for the years 2018, 2017 and 2016, excluding the share of profits of equity accounted investees by reportable segment that is included in the note 13.1., was as follows:

2018	Revenues (including intragroup transactions)		Less: Intragroup transactions			Revenues		Operating EBITDA			Less: Depreciation and amortization		Operating Earnings before other expenses, net			Other expenses, net			Financial expense			Other financing items, net
Mexico	$	63,543		(1,759	)		61,784		22,204			2,198		20,006			(626	)		(469	)		(29	)
United States		72,345		—			72,345		12,069			5,917		6,152			(362	)		(571	)		(217	)
Europe
United Kingdom		20,431		—			20,431		2,071			1,064		1,007			133			(67	)		(406	)
France		18,308		—			18,308		1,272			577		695			(959	)		(62	)		(3	)
Germany		10,836		(1,450	)		9,386		748			531		217			(152	)		(14	)		(79	)
Spain		7,627		(898	)		6,729		220			662		(442	)		(303	)		(43	)		58
Poland		6,989		(80	)		6,909		783			390		393			8			(4	)		7
Czech Republic		3,796		(31	)		3,765		867			300		567			16			(2	)		(36	)
Rest of Europe		6,365		(869	)		5,496		747			375		372			(447	)		(10	)		(10	)
SCA&C
Colombia 1		10,088		—			10,088		1,845			533		1,312			(251	)		(132	)		(483	)
Panama 1		4,490		(226	)		4,264		1,234			313		921			(52	)		(4	)		3
Costa Rica 1		2,674		(274	)		2,400		873			91		782			(5	)		(2	)		148
Caribbean TCL 3		4,893		(99	)		4,794		1,080			375		705			(316	)		(48	)		(28	)
Dominican Republic		4,218		(310	)		3,908		1,153			180		973			(17	)		(7	)		(64	)
Rest of SAC 1		7,781		(393	)		7,388		1,427			170		1,257			(128	)		(15	)		70
AMEA
Philippines 2		8,612		—			8,612		1,183			523		660			54			(20	)		(50	)
Egypt		4,586		—			4,586		529			303		226			(176	)		(29	)		(70	)
Israel		12,128		—			12,128		1,548			292		1,256			8			(36	)		(8	)
Rest of AMEA		2,263		—			2,263		352			88		264			(4	)		(3	)		(5	)
Others		24,667		(13,396	)		11,271		(2,939	)		1,188		(4,127	)		(2,258	)		(11,059	)		1,298
Continuing operations		296,640		(19,785	)		276,855		49,266			16,070		33,196			(5,837	)		(12,597	)		96
Discontinued operations		503		—			503		11			3		8			(1	)		—			(5	)
Total	$	297,143		(19,785	)		277,358		49,277			16,073		33,204			(5,838	)		(12,597	)		91

23

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Selected information of the income statements by reportable segment - continued

2017	Revenues (including intragroup transactions)		Less: Intragroup transactions			Revenues		Operating EBITDA			Less: Depreciation and amortization		Operating earnings before other expenses, net			Other expenses, net			Financial expense			Other financing items, net
Mexico	$	58,442		(1,075	)		57,367		21,215			2,246		18,969			(687	)		(409	)		(534	)
United States		65,536		—			65,536		10,652			6,200		4,452			3,202			(631	)		(177	)
Europe
United Kingdom		20,179		—			20,179		2,763			997		1,766			450			(77	)		(397	)
France		16,162		—			16,162		855			549		306			(129	)		(61	)		18
Germany		10,056		(1,339	)		8,717		743			509		234			(11	)		(14	)		(63	)
Spain		6,870		(990	)		5,880		344			638		(294	)		(711	)		(34	)		12
Poland		5,552		(74	)		5,478		647			361		286			(140	)		(30	)		(8	)
Czech Republic		3,450		(33	)		3,417		815			333		482			37			44			53
Rest of Europe		5,989		(831	)		5,158		648			355		293			(168	)		(68	)		18
SCA&C
Colombia 1		10,685		—			10,685		2,166			507		1,659			(642	)		(129	)		(36	)
Panama 1		5,112		(98	)		5,014		2,007			319		1,688			(20	)		(5	)		7
Costa Rica 1		2,805		(379	)		2,426		1,000			99		901			—			(5	)		29
Caribbean TCL 3		4,332		(49	)		4,283		1,059			610		449			(139	)		(215	)		(25	)
Dominican Republic		3,913		(339	)		3,574		1,073			191		882			(23	)		(10	)		(5	)
Rest of SAC 1		7,803		(533	)		7,270		1,529			258		1,271			(1,046	)		(13	)		(7	)
AMEA
Philippines 2		8,296		—			8,296		1,394			528		866			89			(3	)		(24	)
Egypt		3,862		—			3,862		594			299		295			(210	)		(60	)		574
Israel		11,377		—			11,377		1,469			287		1,182			(15	)		3			21
Rest of AMEA		2,139		—			2,139		386			76		310			(159	)		(31	)		(9	)
Others		21,820		(11,203	)		10,617		(2,759	)		626		(3,385	)		(3,493	)		(17,553	)		4,169
Continuing operations		274,380		(16,943	)		257,437		48,600			15,988		32,612			(3,815	)		(19,301	)		3,616
Discontinued operations		2,235		—			2,235		39			61		(22	)		14			—			—
Total	$	276,615		(16,943	)		259,672		48,639			16,049		32,590			(3,801	)		(19,301	)		3,616
2016
Mexico	$	53,579		(848	)		52,731		19,256			2,390		16,866			(608	)		(339	)		2,695
United States		66,554		—			66,554		10,973			6,400		4,573			2,919			(487	)		(212	)
Europe
United Kingdom		21,153		—			21,153		3,606			1,047		2,559			711			(63	)		(393	)
France		14,535		—			14,535		669			484		185			(110	)		(53	)		2
Germany		9,572		(1,385	)		8,187		553			464		89			(64	)		(15	)		(85	)
Spain		6,563		(841	)		5,722		814			663		151			(112	)		(37	)		(9	)
Poland		4,799		(88	)		4,711		579			330		249			6			(11	)		123
Czech Republic		3,027		(30	)		2,997		622			328		294			(117	)		(4	)		2
Rest of Europe		4,908		(511	)		4,397		519			332		187			14			(29	)		75
SCA&C
Colombia 1		12,415		(1	)		12,414		3,975			489		3,486			(575	)		46			38
Panama 1		4,906		(124	)		4,782		2,170			340		1,830			(7	)		(27	)		5
Costa Rica 1		2,818		(351	)		2,467		1,127			116		1,011			(23	)		(11	)		27
Dominican Republic		4,223		(525	)		3,698		1,210			199		1,011			(67	)		(6	)		34
Rest of SAC 1		7,155		(253	)		6,902		1,665			238		1,427			(1,159	)		(22	)		(216	)
AMEA
Philippines 2		9,655		—			9,655		2,687			530		2,157			21			(1	)		(24	)
Egypt		6,950		(5	)		6,945		2,454			539		1,915			(213	)		(78	)		(253	)
Israel		9,650		—			9,650		1,346			232		1,114			5			(24	)		6
Rest of AMEA		2,208		(12	)		2,196		271			67		204			(117	)		(3	)		21
Others		18,381		(8,600	)		9,781		(2,891	)		799		(3,690	)		(2,174	)		(20,323	)		2,631
Continuing operations		263,051		(13,574	)		249,477		51,605			15,987		35,618			(1,670	)		(21,487	)		4,467
Discontinued operations		9,652		(207	)		9,445		1,159			697		462			(3	)		(10	)		(22	)
Total	$	272,703		(13,781	)		258,922		52,764			16,684		36,080			(1,673	)		(21,497	)		4,445

1 CEMEX Latam Holdings, S.A. (“CLH”), a company incorporated in Spain, trades its ordinary shares on the Colombian Stock Exchange. CLH is the indirect holding company of CEMEX’s operations in Colombia, Panama, Costa Rica, Guatemala, Nicaragua and El Salvador. At year end 2018 and 2017, there is a non-controlling interest in CLH of approximately 26.75% and 26.72%, respectively, of its ordinary shares, excluding shares held in CLH’s treasury (note 20.4).

2 CEMEX’s operations in the Philippines are mainly conducted through CEMEX Holdings Philippines, Inc. (“CHP”), a Philippine company whose shares trade on the Philippines Stock Exchange. As of December 31, 2018 and 2017, there is a non-controlling interest in CHP of 45.0% of its ordinary shares (note 20.4).

3 As mentioned in note 4.1, in February 2017, CEMEX’s acquired a controlling interest in TCL, whose shares trade on the Trinidad and Tobago Stock Exchange. As of December 31, 2018 and 2017, there is a non-controlling interest in TCL of approximately 30.2% of its ordinary shares in both years (note 20.4).

24

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Debt by reportable segment is included in note 16. As of December 31, 2018 and 2017, selected statement of financial position information by reportable segment was as follows:

2018	Equity accounted investees		Other segment assets		Total assets		Total liabilities		Net assets by segment			Additions to fixed assets 1
Mexico	$	—		68,449		68,449		17,906		50,543			2,285
United States		2,485		267,011		269,496		33,756		235,740			4,611
Europe
United Kingdom		118		32,248		32,366		19,220		13,146			908
France		927		16,316		17,243		7,111		10,132			441
Germany		85		8,350		8,435		6,546		1,889			314
Spain		6		25,134		25,140		2,957		22,183			499
Poland		8		5,523		5,531		2,605		2,926			564
Czech Republic		157		4,195		4,352		1,224		3,128			169
Rest of Europe		—		11,299		11,299		2,250		9,049			226
South, Central America and the Caribbean
Colombia		—		24,514		24,514		8,721		15,793			428
Panama		—		7,156		7,156		1,187		5,969			231
Costa Rica		—		1,640		1,640		580		1,060			61
Caribbean TCL		—		11,230		11,230		4,954		6,276			535
Dominican Republic		—		4,010		4,010		1,182		2,828			150
Rest of South, Central America and the Caribbean		29		6,430		6,459		2,621		3,838			183
Asia, Middle East and Africa
Philippines		6		12,235		12,241		2,929		9,312			544
Egypt		1		4,795		4,796		1,906		2,890			176
Israel		—		9,592		9,592		6,712		2,880			412
Rest of Asia, Middle East and Africa		—		3,991		3,991		1,451		2,540			103
Others		5,670		16,918		22,588		206,963		(184,375	)		129
Continuing operations		9,492		541,036		550,528		332,781		217,747			12,969
Assets held for sale and related liabilities (note 12.1)		29		2,071		2,100		314		1,786			—
Total	$	9,521		543,107		552,628		333,095		219,533			12,969
2017	Equity accounted investees		Other segment assets		Total assets		Total liabilities		Net assets by segment			Additions to fixed assets 1
Mexico	$	241		71,280		71,521		23,574		47,947			2,133
United States		1,573		266,769		268,342		32,366		235,976			3,498
Europe
United Kingdom		107		34,774		34,881		24,160		10,721			1,010
France		1,055		18,481		19,536		7,360		12,176			372
Germany		85		9,010		9,095		6,848		2,247			441
Spain		—		25,731		25,731		3,543		22,188			553
Poland		9		5,477		5,486		3,086		2,400			230
Czech Republic		149		4,867		5,016		1,338		3,678			157
Rest of Europe		9		11,256		11,265		2,289		8,976			164
South, Central America and the Caribbean
Colombia		—		24,406		24,406		11,307		13,099			1,178
Panama		—		7,232		7,232		1,029		6,203			152
Costa Rica		—		1,869		1,869		646		1,223			42
Caribbean TCL		—		11,004		11,004		4,917		6,087			584
Dominican Republic				4,362		4,362		1,132		3,230			172
Rest of South, Central America and the Caribbean		31		6,936		6,967		3,234		3,733			185
Asia, Middle East and Africa
Philippines		6		11,548		11,554		2,617		8,937			518
Egypt		1		4,602		4,603		1,776		2,827			418
Israel		—		9,760		9,760		6,838		2,922			391
Rest of Asia, Middle East and Africa		—		3,911		3,911		1,189		2,722			58
Others		5,306		24,466		29,772		218,023		(188,251	)		163
Continuing operations		8,572		557,741		566,313		357,272		209,041			12,419
Assets held for sale and related liabilities (note 12.1)		—		1,378		1,378		—		1,378			—
Total	$	8,572		559,119		567,691		357,272		210,419			12,419

1 In 2018 and 2017, the column “Additions to fixed assets” includes capital expenditures of $12,141 and $9,514, respectively (note 14).

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Revenues by line of business and reportable segment for the years ended December 31, 2018, 2017 and 2016 were as follows:

2018	Cement		Concrete		Aggregates		Others		Eliminations			Revenues
Mexico	$	44,295		17,277		4,051		12,358		(16,197	)		61,784
United States		30,518		40,249		16,393		7,581		(22,396	)		72,345
Europe
United Kingdom		4,837		7,441		8,139		8,102		(8,088	)		20,431
France		—		15,092		7,321		176		(4,281	)		18,308
Germany		3,608		4,841		2,353		2,732		(4,148	)		9,386
Spain		6,010		1,365		377		609		(1,632	)		6,729
Poland		3,864		3,066		960		299		(1,280	)		6,909
Czech Republic		1,555		2,377		835		362		(1,364	)		3,765
Rest of Europe		5,263		565		221		24		(577	)		5,496
South, Central America and the Caribbean
Colombia		6,792		3,631		1,065		1,769		(3,169	)		10,088
Panama		3,285		1,368		445		355		(1,189	)		4,264
Costa Rica		2,126		427		120		114		(387	)		2,400
Caribbean TCL		4,712		199		91		1,716		(1,924	)		4,794
Dominican Republic		3,441		526		171		470		(700	)		3,908
Rest of South, Central America and the Caribbean		7,668		782		150		122		(1,334	)		7,388
Asia, Middle East and Africa
Philippines		8,549		4		59		43		(43	)		8,612
Egypt		3,993		511		14		225		(157	)		4,586
Israel		—		10,026		3,061		2,127		(3,086	)		12,128
Rest of Asia, Middle East and Africa		943		1,763		—		—		(443	)		2,263
Others		—		—		—		24,667		(13,396	)		11,271
Continuing operations		141,459		111,510		45,826		63,851		(85,791	)		276,855
Discontinued operations		503		—		—		—		—			503
Total	$	141,962		111,510		45,826		63,851		(85,791	)		277,358
2017	Cement		Concrete		Aggregates		Others		Eliminations			Revenues
Mexico	$	42,195		14,672		3,416		11,211		(14,127	)		57,367
United States		27,804		35,400		14,436		6,235		(18,339	)		65,536
Europe
United Kingdom		4,879		7,459		7,758		8,067		(7,984	)		20,179
France		—		13,367		6,373		205		(3,783	)		16,162
Germany		3,595		4,668		2,134		2,335		(4,015	)		8,717
Spain		5,499		944		259		676		(1,498	)		5,880
Poland		3,230		2,532		701		226		(1,211	)		5,478
Czech Republic		1,287		2,148		880		334		(1,232	)		3,417
Rest of Europe		4,949		567		175		128		(661	)		5,158
South, Central America and the Caribbean
Colombia		7,043		4,024		1,224		1,960		(3,566	)		10,685
Panama		3,876		1,725		452		180		(1,219	)		5,014
Costa Rica		2,095		386		122		120		(297	)		2,426
Caribbean TCL		4,097		29		19		215		(77	)		4,283
Dominican Republic		3,193		564		191		117		(491	)		3,574
Rest of South, Central America and the Caribbean		7,534		744		77		190		(1,960	)		6,585
Asia, Middle East and Africa
Philippines		8,093		67		159		52		(75	)		8,296
Egypt		3,347		479		16		173		(153	)		3,862
Israel		—		9,400		2,875		2,146		(3,045	)		11,376
Rest of Asia, Middle East and Africa		928		1,678		—		2		(468	)		2,140
Others		—		—		—		22,505		(11,203	)		11,302
Continuing operations		133,644		100,853		41,267		57,077		(75,404	)		257,437
Discontinued operations		686		525		340		687		(3	)		2,235
Total	$	134,330		101,378		41,607		57,764		(75,407	)		259,672

26

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Information related to revenue by line of business and reportable segment - continued

2016	Cement		Concrete		Aggregates		Others		Eliminations			Revenues
Mexico	$	37,647		13,664		3,156		11,773		(13,509	)		52,731
United States		28,585		35,843		14,565		7,107		(19,546	)		66,554
Europe
United Kingdom		5,267		7,830		8,195		7,889		(8,028	)		21,153
France		—		11,883		5,640		278		(3,266	)		14,535
Germany		3,416		4,539		2,112		2,262		(4,142	)		8,187
Spain		5,478		823		196		472		(1,247	)		5,722
Poland		2,811		2,237		579		219		(1,135	)		4,711
Czech Republic		1,118		1,871		796		336		(1,124	)		2,997
Rest of Europe		4,168		383		115		2		(271	)		4,397
South, Central America and the Caribbean
Colombia		8,814		4,522		1,364		1,761		(4,047	)		12,414
Panama		3,794		1,577		413		139		(1,141	)		4,782
Costa Rica		2,144		390		179		126		(372	)		2,467
Dominican Republic		3,255		620		210		124		(511	)		3,698
Rest of South, Central America and the Caribbean		7,276		906		112		174		(2,032	)		6,436
Asia, Middle East and Africa
Philippines		9,405		143		164		70		(127	)		9,655
Egypt		6,076		943		26		217		(317	)		6,945
Israel		—		8,016		2,519		1,372		(2,258	)		9,649
Rest of Asia, Middle East and Africa		961		1,519		—		7		(290	)		2,197
Others		—		—		—		18,849		(8,602	)		10,247
Continuing operations		130,215		97,709		40,341		53,177		(71,965	)		249,477
Discontinued operations		889		1,366		785		6,665		(260	)		9,445
Total	$	131,104		99,075		41,126		59,842		(72,225	)		258,922

5) OPERATING EXPENSES, DEPRECIATION AND AMORTIZATION

Consolidated operating expenses during 2018, 2017 and 2016 by function are as follows:

	2018		2017		2016
Administrative expenses 1	$	22,387		21,053		20,733
Selling expenses		6,315		6,429		6,945
Distribution and logistics expenses		31,992		28,485		26,235
	$	60,694		55,967		53,913

1 All significant R&D activities are executed by several internal areas as part of their daily activities. In 2018, 2017 and 2016, total combined expenses of these departments recognized within administrative expenses were $758 (US$38), $754 (US$38) and $712 (US$38), respectively.

Depreciation and amortization recognized during 2018, 2017 and 2016 are detailed as follows:

	2018		2017		2016
Included in cost of sales	$	14,181		14,143		14,177
Included in administrative, selling and distribution and logistics expenses		1,889		1,845		1,810
	$	16,070		15,988		15,987

6) OTHER EXPENSES, NET

The detail of the line item “Other expenses, net” in 2018, 2017 and 2016 was as follows:

	2018			2017			2016
Results from the sale of assets and others, net 1	$	(2,994	)		91			1,719
Restructuring costs 2		(1,382	)		(843	)		(778	)
Impairment losses 3		(1,188	)		(2,936	)		(2,518	)
Remeasurement of pension liabilities 4		(168	)		—			—
Charitable contributions		(105	)		(127	)		(93	)
	$	(5,837	)		(3,815	)		(1,670	)

1 In 2018, includes $1,080 in connection with property damages and natural disasters. In 2017, includes an expense of $491 (US$25) related to a penalty in connection with a market investigation in Colombia (note 24.2).

27

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Other expenses, net - continued

2 In 2018, 2017 and 2016, restructuring costs mainly refer to severance payments and the definite closing of operating sites.

3 In 2018, 2017 and 2016, among others, includes impairment losses of fixed assets for $445, $984 and $1,899, respectively, as well in 2018 losses in the valuation of assets held for sale of $439 and impairment losses of goodwill in 2017 of $1,920 (notes 13.2, 14 and 15).

4 Refers to a remeasurement of the employee benefits liability in connection with CEMEX’s defined benefit plan in the United Kingdom determined in 2018 as a result of a recently enacted gender parity law.

7) FINANCIAL INCOME AND OTHER ITEMS, NET

The detail of financial income and other items, net in 2018, 2017 and 2016 was as follows:

	2018			2017			2016
Results in the sale of associates and remeasurement of previously held interest before change in control of associates (notes 4.1 and 13.1)	$	(204	)		4,164			—
Financial income		355			338			402
Results from financial instruments, net (notes 13.2 and 16.4)		692			161			113
Foreign exchange results		341			(26	)		4,982
Effects of amortized cost on assets and liabilities and others, net		(1,088	)		(1,021	)		(1,030	)
	$	96			3,616			4,467

8) CASH AND CASH EQUIVALENTS

As of December 31, 2018 and 2017, consolidated cash and cash equivalents consisted of:

	2018		2017
Cash and bank accounts	$	5,071		9,292
Fixed-income securities and other cash equivalents		997		4,449
	$	6,068		13,741

Based on net settlement agreements, the balance of cash and cash equivalents excludes deposits in margin accounts that guarantee several obligations of CEMEX of $234 in 2018 and $196 in 2017, which were offset against the corresponding obligations of CEMEX with the counterparties, considering CEMEX’s right, ability and intention to settle the amounts on a net basis.

9) TRADE ACCOUNTS RECEIVABLE, NET

As of December 31, 2018 and 2017, consolidated trade accounts receivable consisted of:

	2018			2017
Trade accounts receivable	$	31,584			32,733
Allowances for expected credit losses		(2,336	)		(2,145	)
	$	29,248			30,588

As of December 31, 2018 and 2017, trade accounts receivable include receivables of $13,048 (US$664) and $12,713 (US$647), respectively, sold under outstanding trade receivables securitization programs and/or factoring programs with recourse, established in Mexico, the United States, France and the United Kingdom, in which CEMEX effectively surrenders control associated with the trade accounts receivable sold and there is no guarantee or obligation to reacquire the assets; nonetheless, in such programs, CEMEX retains certain residual interest in the programs and/or maintains continuing involvement with the accounts receivable. Therefore, the trade accounts receivable sold were not removed from the statement of financial position and the funded amounts to CEMEX of $11,770 (US$599) in 2018 and $11,313 (US$576) in 2017, were recognized within the line item of “Other financial obligations,” the difference in each year against the trade receivables sold was maintained as reserves. Trade accounts receivable qualifying for sale exclude amounts over certain days past due or concentrations over certain limits to any one customer, according to the terms of the programs. The discount granted to the acquirers of the trade accounts receivable is recorded as financial expense and amounted to $446 in 2018, $308 in 2017 and $258 in 2016. CEMEX’s securitization programs are negotiated for periods of one to two years and are usually renewed at their maturity.

Allowances for doubtful accounts were established until December 31, 2017 based on incurred loss analyses over delinquent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. Beginning in 2018 such allowances are determined and recognized upon origination of the trade accounts receivable based on a model that calculates the expected credit loss (“ECL”) of the trade accounts receivable (note 2.1).

Under this ECL model, CEMEX segments its accounts receivable in a matrix by country, type of client or homogeneous credit risk and days past due and determines for each segment an average rate of ECL, considering actual credit loss experience over the last 24 months and analyses of future delinquency, that is applied to the balance of the accounts receivable. The average ECL rate increases in each segment of days past due until the rate is 100% for the segment of 365 days or more past due.

28

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Trade accounts receivable, net - continued

As of December 31, 2018, the balances of trade accounts receivable and the allowance for ECL were as follows:

	Accounts receivable		ECL allowance		ECL average rate
Mexico	$	5,185		717		13.8	%
United States		8,432		78		0.9	%
Europe		9,087		618		6.8	%
South, Central America and the Caribbean		2,817		550		19.5	%
Asia, Middle East and Africa		5,327		272		5.1	%
Others		736		101		13.7	%
	$	31,584		2,336

Changes in the allowance for expected credit losses in 2018, 2017 and 2016, were as follows:

	2018			2017			2016
Allowances for expected credit losses at beginning of period	$	2,145			2,196			2,152
Adoption effects of IFRS 9 charged to retained earnings (note 2.1)		570			—			—
Charged to selling expenses		156			252			556
Additions through business combinations		—			141			—
Deductions		(385	)		(449	)		(867	)
Foreign currency translation effects		(150	)		5			355
Allowances for expected credit losses at end of period	$	2,336			2,145			2,196

10) OTHER ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, consolidated other accounts receivable consisted of:

	2018		2017
Non-trade accounts receivable 1	$	2,712		1,918
Interest and notes receivable 2		895		1,125
Current portion of valuation of derivative financial instruments		8		1,056
Loans to employees and others		243		233
Refundable taxes		2,291		638
	$	6,149		4,970

1 Non-trade accounts receivable are mainly attributable to the sale of assets.

2 In 2018 and 2017, includes CEMEX Colombia’s residual interest in a trust oriented to promote housing projects, which its only asset is land in the municipality of Zipaquira, Colombia and its only liability is a bank credit for $129 and $141, respectively, obtained to purchase the land, guaranteed by CEMEX Colombia. The estimated realizable value of the land as determined by external appraiser covers the amount of the loan. Related to this structure, on December 17, 2018, CEMEX Colombia and the other partner in the project accepted the binding offer of a local construction firm, pending of execution, whom, pursuant to the agreements, will join the trust as beneficiary and joint obligor of the debt and will acquire the project through the full repayment of the trust’s debt by means of a repayment of approximately 50% during 2019 and the remaining portion in November 2020. Once the respective agreements are formalized in 2019, the construction firm will sign promissory notes to CEMEX Colombia securing its obligations and additionally the firm and the other partner will pledge their beneficial interest in the trust in favor of CEMEX Colombia.

11) INVENTORIES, NET

As of December 31, 2018 and 2017, the consolidated balance of inventories was summarized as follows:

	2018		2017
Finished goods	$	6,777		5,933
Work-in-process		3,818		3,814
Raw materials		3,813		3,237
Materials and spare parts		5,964		4,996
Inventory in transit		876		872
	$	21,248		18,852

For the years ended December 31, 2018, 2017 and 2016, CEMEX recognized within “Cost of sales” in the income statement, inventory impairment losses of $114, $23 and $52, respectively.

29

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

12) ASSETS HELD FOR SALE AND OTHER CURRENT ASSETS

12.1) ASSETS HELD FOR SALE

As of December 31, 2018 and 2017, assets held for sale, which are measured at the lower of their estimated realizable value, less costs to sell, and their carrying amounts, as well as liabilities directly related with such assets are detailed as follows:

	2018						2017
	Assets		Liabilities		Net assets		Assets		Liabilities		Net assets
Assets in the central region of France (note 4.3)	$	952		314		638	$	—		—		—
Idle assets in Spain 1		—		—		—		580		—		580
Other assets held for sale		1,148		—		1,148		798		—		798
	$	2,100		314		1,786	$	1,378		—		1,378

1 During December 2018, considering the withdrawal of potential buyers and the absence of new offers, CEMEX reclassified these assets to fixed assets.

12.2) OTHER CURRENT ASSETS

As of December 31, 2018 and 2017, other current assets are mainly comprised of advance payments.

In addition, as of December 31, 2018, the balance of other current assets includes cash for US$12 ($236) of CEMEX Colombia subject to a temporary restriction on its availability due to a seizure order issued by a civil court in Colombia within an executory proceeding initiated by a supplier in connection with a commercial dispute over an amount being claimed of approximately US$2 ($39). CEMEX Colombia considers that such seizure order was excessive in relation to the amount claimed, and as of the reporting date, because of the nature of the proceeding, CEMEX Colombia’s defense arguments that were put forth in its negotiations with the supplier have not yet been evaluated. As of the issuance date of these consolidated financial statements, CEMEX Colombia is following required legal procedures in the civil court and considers probable that the cash amounts will be released in 2019.

13) EQUITY ACCOUNTED INVESTEES, OTHER INVESTMENTS AND NON-CURRENT ACCOUNTS RECEIVABLE

13.1) EQUITY ACCOUNTED INVESTEES

As of December 31, 2018 and 2017, the investments in common shares of associates were as follows:

	Activity		Country		%		2018		2017
Camcem, S.A. de C.V.		Cement		Mexico		40.1	$	4,087		3,618
Concrete Supply Co. LLC		Concrete		United States		40.0		1,306		1,192
Lehigh White Cement Company		Cement		United States		36.8		1,172		375
Akmenes Cementas AB		Cement		Lithuania		37.8		527		585
ABC Capital, S.A. Institución de Banca Múltiple		Financing		Mexico		—		—		228
Société Méridionale de Carrières		Aggregates		France		33.3		318		367
Société d’Exploitation de Carrières		Aggregates		France		50.0		306		318
Cemento Interoceánico S.A.		Cement		Panama		25.0		160		168
Other companies		—		—		—		1,616		1,721
							$	9,492		8,572
Out of which:
Book value at acquisition date							$	7,218		6,957
Changes in stockholders’ equity							$	2,274		1,615

In April 2018, CEMEX entered into an agreement for the sale of its 33.9% equity interest to the controlling shareholders of ABC Capital, S.A. Institución de Banca Múltiple for $105, recognizing a loss of $157 as part of “Financial income and other items, net”. The transaction is pending authorization of the Mexican authorities. As of December 31, 2018, the investment is presented within assets held for sale in the statement of financial position (note 12.1).

During 2018, a subsidiary of CEMEX in the United States invested a total of US$36 ($707) and increased the Company’s ownership over the Lehigh White Cement Company investee from 24.5% to 36.8%. This deal also includes an agreement in which the Company contributed all of its rights, title and interest in the white cement business in Florida to the investee and entered into an agreement in which a Company’s terminal will receive and pack white cement for Lehigh White Cement Company to sell and distribute in the Florida market.

30

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Equity accounted investees - continued

On January 25, 2017, in a public offering to investors in Mexico conducted through the BMV and in a concurrent private placement to eligible investors outside of Mexico, the Parent Company and Grupo Cementos de Chihuahua, S.A.B. de C.V. (“GCC”) announced the offering of up to 76,483,332 shares (then all the shares of GCC owned by CEMEX). During 2017, after conclusion of the public offering and the private placement, CEMEX sold 45 million shares, 13.53% of the common stock of GCC, at a price of 95.00 pesos per share receiving $4,094 after deducting commissions and offering expenses and recognized a gain on sale in 2017 of $1,859 as part of “Financial income and other items, net” in the income statement.

In addition, on September 28, 2017, CEMEX announced the definitive sale to two financial institutions of the remaining 31,483,332 shares of GCC, which represented approximately 9.47% of the equity capital of GCC. Proceeds from the sale were $3,012 and generated a gain on sale of $1,682 in 2017 recognized as part of “Financial income and other items, net” in the income statement. CEMEX continues to have an approximate 20% indirect interest in GCC through Camcem, S.A. de C.V., GCC’s parent company.

Combined condensed statement of financial position information of CEMEX’s associates as of December 31, 2018 and 2017 is set forth below:

	2018		2017
Current assets	$	16,677		21,527
Non-current assets		32,901		32,071
Total assets		49,578		53,598
Current liabilities		5,685		10,863
Non-current liabilities		17,272		17,730
Total liabilities		22,957		28,593
Total net assets	$	26,621		25,005

Combined selected information of the statements of operations of CEMEX’s associates in 2018, 2017 and 2016 is set forth below:

	2018		2017		2016
Sales	$	28,487		28,158		29,791
Operating earnings		4,401		4,458		4,730
Income before income tax		2,182		2,451		3,111
Net income		1,711		1,891		1,860

The share of equity accounted investees by reportable segment in the income statements for 2018, 2017 and 2016 is detailed as follows:

	2018			2017			2016
Mexico	$	254			269			452
United States		297			266			253
Europe		134			108			54
Corporate and others		(32	)		(55	)		(71	)
	$653			588			688

13.2) OTHER INVESTMENTS AND NON-CURRENT ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, consolidated other investments and non-current accounts receivable were summarized as follows:

	2018		2017
Non-current accounts receivable 1	$	4,329		4,248
Investments at fair value through the income statement 2		428		441
Non-current portion of valuation of derivative financial instruments (note 16.4)		297		794
Investments in strategic equity securities 3		217		275
	$5,271		5,758

1 Includes, among other items: a) accounts receivable from investees and joint ventures of $1,273 in 2018 and $1,301 in 2017, b) advances to suppliers of fixed assets of $886 in 2018 and $55 in 2017, c) employee prepaid compensation of $114 in 2018 and $112 in 2017, d) refundable taxes of $263 in 2018 and $261 in 2017, and e) warranty deposits of $246 in 2018 and $240 in 2017.

2 Refers to investments in private funds and investments related to employee’ savings funds. In 2018 and 2017, no contributions were made to such private funds.

3 This line item refers mainly to a strategic investment in CPOs of Axtel, S.A.B. de C.V. (“Axtel”). This investment is recognized at fair value through other comprehensive income.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

14) PROPERTY, MACHINERY AND EQUIPMENT, NET

As of December 31, 2018 and 2017, consolidated property, machinery and equipment, net and the changes in such line item during 2018, 2017 and 2016, were as follows:

	2018
	Land and						Machinery
	mineral						and			Construction
	reserves 1			Building 1			equipment 2			in progress		Total
Cost at beginning of period	$	95,495			53,927			242,636			19,457		411,515
Accumulated depreciation and depletion		(16,842	)		(26,225	)		(136,288	)		—		(179,355	)
Net book value at beginning of period		78,653			27,702			106,348			19,457		232,160
Capital expenditures		525			578			11,038			—		12,141
Additions through capital leases		—			—			88			—		88
Stripping costs		740			—			—			—		740
Total capital expenditures		1,265			578			11,126			—		12,969
Disposals 4		(258	)		(116	)		(597	)		—		(971	)
Reclassifications 5		(353	)		(45	)		(81	)		580		101
Business combinations		83			—			133			—		216
Depreciation and depletion for the period		(3,618	)		(2,001	)		(8,400	)		—		(14,019	)
Impairment losses		(121	)		(33	)		(291	)		—		(445	)
Foreign currency translation effects		210			(349	)		(5,733	)		301		(5,571	)
Cost at end of period		94,692			53,292			242,740			20,338		411,062
Accumulated depreciation and depletion		(18,831	)		(27,556	)		(140,235	)		—		(186,622	)
Net book value at end of period	$	75,861			25,736			102,505			20,338		224,440

	2017
	Land and						Machinery
	mineral						and			Construction
	reserves 1			Building 1			equipment 2			in progress			Total			2016 3
Cost at beginning of period	$	97,218			51,740			229,717			17,247			395,922			360,089
Accumulated depreciation and depletion		(16,301	)		(24,224	)		(125,263	)		—			(165,788	)		(143,395	)
Net book value at beginning of period		80,917			27,516			104,454			17,247			230,134			216,694
Capital expenditures		547			802			8,165			—			9,514			12,676
Additions through capital leases		—			—			2,096			—			2,096			7
Capitalization of financial expense		—			—			—			—			—			175
Stripping costs		809			—			—			—			809			421
Total capital expenditures		1,356			802			10,261			—			12,419			13,279
Disposals 4		(347	)		(223	)		(1,274	)		—			(1,844	)		(1,841	)
Reclassifications 5		(784	)		(82	)		(768	)		—			(1,634	)		(4,549	)
Business combinations		2,179			749			3,136			428			6,492			—
Depreciation and depletion for the period		(2,571	)		(1,967	)		(9,413	)		—			(13,951	)		(14,037	)
Impairment losses		(202	)		(1	)		(763	)		(18	)		(984	)		(1,899	)
Foreign currency translation effects		(1,895	)		908			715			1,800			1,528			22,487
Cost at end of period		95,495			53,927			242,636			19,457			411,515			395,922
Accumulated depreciation and depletion		(16,842	)		(26,225	)		(136,288	)		—			(179,355	)		(165,788	)
Net book value at end of period	$	78,653			27,702			106,348			19,457			232,160			230,134

1 Includes corporate buildings and related land sold to financial institutions in previous years, which were leased back. The aggregate carrying amount of these assets as of December 31, 2018 and 2017 was $1,602 and $1,690, respectively.

2 Includes assets, mainly mobile equipment, acquired through finance leases, which carrying amount as of December 31, 2018 and 2017 was $88 and $2,096, respectively.

3 In 2016, CEMEX Colombia concluded the construction of a cement plant in the municipality of Maceo in the Antioquia department in Colombia with an annual capacity of approximately 1.1 million tons. The plant has not initiated commercial operations. As of the reporting date, the works related to the access road to the plant, the works remain suspended and the beginning of commercial operations is subject to the successful conclusion of several ongoing processes related to certain operating permits and other legal proceedings (note 24.1). As a result internal audits of the project, in 2016, CEMEX Colombia reduced construction in progress for $483 (US$23), of which, $295 (US$14) were recognized as impairment losses against “Other expenses, net” in connection with the write off of certain advances for the purchase of land through a representative have low probability for their recoverability due to deficiencies in the legal processes, and $188 (US$9) were decreased against “Other accounts payable” in connection with the cancellation of the portion payable of such assets (note 24.1). As of December 31, 2018, the carrying amount of the plant, net of adjustments, is for an amount in Colombian pesos equivalent to US$280 ($5,502).

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Property, machinery and equipment, net - continued

4 In 2018, includes sales of non-strategic fixed assets in the United States, Spain and Mexico for $371, $158 and $125, respectively. In 2017, includes sales of non-strategic fixed assets in Mexico, the United States, and Spain for $343, $223 and $220, respectively. In 2016, includes sales of non-strategic fixed assets in the United States, Mexico, and France for $317, $281 and $165, respectively.

5 In 2018, refers mainly to the reclassification of the assets in Spain (note 12.1) for $580. In 2017, refers mainly to those assets of the Pacific Northwest Materials Business in the United States for $1,634 (note 4.2). In 2016, refers mainly to those assets of the Concrete Pipe Business in the United States for $2,747, as well as other disposal groups in the United States reclassified to assets available for sale for $1,386.

As a result of impairment tests conducted on several CGUs considering certain triggering events, mainly: a) the closing and/or reduction of operations of cement and ready-mix concrete plants resulting from adjusting the supply to current demand conditions, such as the situation in Puerto Rico in the last quarter of 2016 due to the adverse outlook and the overall uncertain economic conditions in such country; b) the transferring of installed capacity to more efficient plants, such as the change in operating model of a cement mill to distribution center in Colombia; as well as c) the recoverability of certain investments in Colombia as described above, for the years ended December 31, 2018, 2017 and 2016, CEMEX adjusted the related fixed assets to their estimated value in use in those circumstances in which the assets would continue in operation based on estimated cash flows during the remaining useful life, or to their realizable value, in case of permanent shut down, and recognized impairment losses within the line item of “Other expenses, net” (notes 2.10 and 6).

During the years ended December 31, 2018, 2017 and 2016 impairment losses of fixed assets by country are as follows:

	2018		2017		2016
United States	$	252		153		277
Poland		94		—		—
Colombia		37		—		454
Spain		35		452		—
Mexico		25		45		46
Czech Republic		—		157		—
Panama		—		56		—
France		—		50		—
Latvia		—		46		—
Puerto Rico		—		—		1,087
Others		2		25		35
	$	445		984		1,899

15) GOODWILL AND INTANGIBLE ASSETS, NET

15.1) BALANCES AND CHANGES DURING THE PERIOD

As of December 31, 2018 and 2017, consolidated goodwill, intangible assets and deferred charges were summarized as follows:

	2018							2017
			Accumulated			Carrying				Accumulated			Carrying
	Cost		amortization			Amount		Cost		amortization			Amount
Intangible assets of indefinite useful life:
Goodwill	$	194,779		—			194,779	$	195,474		—			195,474
Intangible assets of definite useful life:
Extraction rights		38,881		(7,017	)		31,864		39,603		(6,480	)		33,123
Industrial property and trademarks		864		(397	)		467		929		(364	)		565
Customer relationships		3,859		(3,859	)		—		3,859		(3,852	)		7
Mining projects		834		(107	)		727		797		(96	)		701
Others intangible assets		18,048		(11,287	)		6,761		14,941		(9,902	)		5,039
	$	257,265		(22,667	)		234,598	$	255,603		(20,694	)		234,909

The amortization of intangible assets of definite useful life was $2,051 in 2018, $2,037 in 2017 and $1,950 in 2016, and was recognized within operating costs and expenses.

Goodwill

Changes in consolidated goodwill in 2018, 2017 and 2016, were as follows:

	2018			2017			2016
Balance at beginning of period	$	195,474			206,319			184,156
Business combinations		309			1,965			—
Disposals, net (note 4.3)		—			—			(3,340	)
Reclassification to assets held for sale and other current assets (notes 4.2, 4.3 and 12)		(439	)		(1,804	)		(9,734	)
Impairment losses		—			(1,920	)		—
Foreign currency translation effects		(565	)		(9,086	)		35,237
Balance at end of period	$	194,779			195,474			206,319

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Intangible assets of definite life

Changes in intangible assets of definite life in 2018, 2017 and 2016, were as follows:

	2018
				Industrial
	Extraction			property and			Customer			Mining
	rights			trademarks			relations			projects			Others 1			Total
Balance at beginning of period	$	33,123			565			7			701			5,039			39,435
Additions (disposals), net 1		(219	)		(32	)		—			120			2,913			2,782
Reclassifications (notes 4.1, 4.2 and 12)		(223	)		—			—			—			6			(217	)
Amortization for the period		(626	)		(93	)		(7	)		(12	)		(1,313	)		(2,051	)
Impairment losses		(186	)		—			—			—			—			(186	)
Foreign currency translation effects		(5	)		27			—			(82	)		116			56
Balance at the end of period	$	31,864			467			—			727			6,761			39,819

	2017
				Industrial
	Extraction			property and			Customer			Mining
	rights			trademarks			relations			projects			Others 1			Total			2016
Balance at beginning of period	$	35,047			357			259			877			4,648			41,188			36,566
Additions (disposals), net 1		278			(783	)		—			(148	)		424			(229	)		(598	)
Business combinations (note 4.1)		—			—			—			4			72			76			—
Reclassifications (notes 4.1, 4.2 and 12)		—			—			(27	)		—			—			(27	)		—
Amortization for the period		(716	)		(110	)		(225	)		(12	)		(974	)		(2,037	)		(1,950	)
Impairment losses		(38	)		—			—			—			(12	)		(50	)		(25	)
Foreign currency translation effects		(1,448	)		1,101			—			(20	)		881			514			7,195
Balance at the end of period	$	33,123			565			7			701			5,039			39,435			41,188

1 As of December 31, 2018 and 2017, “Others” includes the carrying amount of internal-use software of $4,459 and $2,981, respectively. Capitalized direct costs incurred in the development stage of internal-use software, such as professional fees, direct labor and related travel expenses, amounted to $2,583 in 2018, $1,422 in 2017 and $769 in 2016.

15.2) ANALYSIS OF GOODWILL IMPAIRMENT

As of December 31, 2018 and 2017, goodwill balances allocated by operating segment were as follows:

	2018		2017
Mexico	$	7,371		7,371
United States		152,486		152,486
Europe
Spain		10,270		10,000
United Kingdom		6,367		6,335
France		4,154		4,796
Czech Republic		589		709
South, Central America and the Caribbean
Colombia		5,874		6,146
Dominican Republic		264		279
TCL		2,042		2,027
Others South, Central America and the Caribbean 1		972		985
Asia, Middle East and Africa
Philippines		1,751		1,817
United Arab Emirates		1,885		1,769
Egypt		232		232
Others
Other reporting segments 2		522		522
	$	194,779		195,474

1 This caption refers to the operating segments in the Caribbean, Costa Rica and Panama.

2 This caption is primarily associated with Neoris N.V., CEMEX’s subsidiary involved in the sale of information technology and services.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Analysis of goodwill impairment - continued

For purposes of goodwill impairment tests, all cash-generating units within a country are aggregated, as goodwill is allocated at that level. Considering materiality for disclosure purposes, certain balances of goodwill were presented for Rest of South, Central America and the Caribbean, but this does not represent that goodwill was tested at a higher level than for operations in an individual country.

During the last quarter of each year, CEMEX performs its annual goodwill impairment test. Based on these analyses, during 2017, in connection with the operating segment in Spain, considering the uncertainty over the improvement indicators affecting the country’s construction industry, and consequently in the expected consumption of cement, ready-mix and aggregates, partially a result of the then country’s complex prevailing political environment, which had limited expenditure in infrastructure projects, as well as the uncertainty in the expected price recovery and the effects of increased competition and imports, CEMEX’s management determined that the net book value of such operating segment in Spain, exceeded in $1,920 (US$98) the amount of the net present value of projected cash flows. As a result, CEMEX recognized an impairment loss of goodwill for such amount as part of “Other expenses, net” in the income statement on 2017 against the related goodwill balance.

During 2018 and 2016, CEMEX did not determine impairment losses of goodwill.

Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of CEMEX’s products, the development of operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets, as well as the discount rates and the long-term growth rates applied. CEMEX’s cash flow projections to determine the value in use of its CGUs to which goodwill has been allocated considering the use of long-term economic assumptions. CEMEX believes that its discounted cash flow projections and the discount rates used reasonably reflect current economic conditions at the time of the calculations, considering, among other factors that: a) the cost of capital reflects current risks and volatility in the markets; and b) the cost of debt represents the average of industry specific interest rates observed in recent transactions. Other key assumptions used to determine CEMEX’s discounted cash flows are volume and price increases or decreases by main product during the projected periods. Volume increases or decreases generally reflect forecasts issued by trustworthy external sources, occasionally adjusted based on CEMEX’s actual backlog, experience and judgment considering its concentration in certain sectors, while price changes normally reflect the expected inflation in the respective country. Operating costs and expenses during all periods are maintained as a fixed percent of revenues considering historic performance.

CEMEX’s pre-tax discount rates and long-term growth rates used to determine the discounted cash flows in the group of CGUs with the main goodwill balances were as follows:

	Discount rates									Growth rates
Groups of CGUs	2018			2017			2016			2018			2017			2016
United States		8.5	%		8.8	%		8.6	%		2.5	%		2.5	%		2.5	%
Spain		8.8	%		9.5	%		9.5	%		1.7	%		1.7	%		1.6	%
Mexico		9.4	%		10.2	%		9.8	%		3.0	%		2.7	%		2.9	%
Colombia		9.5	%		10.5	%		10.0	%		3.6	%		3.7	%		4.0	%
France		8.4	%		9.0	%		9.1	%		1.6	%		1.8	%		1.8	%
United Arab Emirates		11.0	%		10.4	%		10.2	%		2.9	%		3.1	%		3.4	%
United Kingdom		8.4	%		9.0	%		8.8	%		1.6	%		1.7	%		1.9	%
Egypt		10.8	%		11.8	%		11.4	%		6.0	%		6.0	%		6.0	%
Range of rates in other countries		8.5% - 13.3	%		9.1% - 11.7	%		9.1% - 12.8	%		2.5% - 6.9	%		2.3% - 6.8	%		2.2% - 7.0	%

As of December 31, 2018, the discount rates used by CEMEX in its cash flows projections in the countries with the most significant goodwill balances decreased slightly in most cases in a range of 0.3% up to 1 percentage point, except for United Arab Emirates and the Caribbean, as compared to the values determined in 2017. This reduction was mainly attributable to a decrease in the Parent Company’s stock volatility (beta) and general decreases in the country specific sovereign yields in the majority of the countries where CEMEX operates and the weighing of debt in the calculation, effects that were partially offset for increases during 2018 in the funding cost observed in the industry that changed from 6.1% in 2017 to 7.3% in 2018 and the risk free rate associated with CEMEX which increased from 2.8% in 2017 to 2.9% in 2018. As of December 31, 2017, the discount rates increased slightly in most cases as compared to the values determined in 2016. Among other factors, the funding cost observed in industry decreased from 6.2% in 2016 to 6.1% in 2017 and the risk-free rate increased from approximately 2.7% in 2016 to 2.8% in 2017. Nonetheless, these decreases were offset by increases in 2017 in the country specific sovereign yields in most of the countries where CEMEX operates. As of December 31, 2016, the discount rates remained almost flat in most cases as compared to the values determined in the previous year. With respect to long-term growth rates, following general practice under IFRS, CEMEX uses country specific rates, which are mainly obtained from Consensus Economics, a compilation of analysts’ forecasts worldwide, or from the International Monetary Fund when the former is not available for a specific country.

35

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Analysis of goodwill impairment - continued

In connection with the assumptions included in the table above, CEMEX performed sensitivity analyses to changes in assumptions, affecting the value in use of all groups of CGUs with an independent reasonably possible increase of 1% in the pre-tax discount rate, and an independent possible decrease of 1% in the long-term growth rate. In addition, CEMEX performed cross-check analyses for reasonableness of its results using multiples of Operating EBITDA. To arrive at these multiples, which represent a reasonableness check of the discounted cash flow models, CEMEX determined a weighted average multiple of Operating EBITDA to enterprise value observed in the industry and/or in recent mergers and acquisitions in the industry. The average multiple was then applied to a stabilized amount of Operating EBITDA and the result was compared to the corresponding carrying amount for each group of CGUs to which goodwill has been allocated. CEMEX considered an industry weighted average Operating EBITDA multiple of 11.1 times in 2018 and multiple of 9.0 times in 2017 and 2016. The lowest multiple observed in CEMEX’s benchmark was 6.7 times in 2018, 6.5 times in 2017 and 5.9 times in 2016, and the highest being 14.9 times in 2018, 18.9 times in 2017 and 18.3 times in 2016.

As of December 31, 2018, 2017 and 2016, except for the operating segment in Spain described above, in which CEMEX determined an impairment loss of goodwill in 2017, none of the other CEMEX’s sensitivity analyses resulted in a potential impairment risk in CEMEX’s operating segments. CEMEX continually monitors the evolution of the specific CGUs to which goodwill has been allocated that have presented relative goodwill impairment risk in any of the reported periods and, in the event that the relevant economic variables and the related cash flows projections would be negatively affected, it may result in a goodwill impairment loss in the future.

As of December 31, 2018 and 2017, goodwill allocated to the United States accounted in both years for approximately 78%, of CEMEX’s total amount of consolidated goodwill. In connection with CEMEX’s determination of value in use relative to its groups of CGUs in the United States in the reported periods, CEMEX has considered several factors, such as the historical performance of such operating segment, including the operating results in recent years, the long-term nature of CEMEX’s investment, the signs of recovery in the construction industry over the last years, the significant economic barriers for new potential competitors considering the high investment required, and the lack of susceptibility of the industry to technology improvements or alternate construction products, among other factors. CEMEX has also considered recent developments in its operations in the United States, such as the decrease in ready-mix concrete volumes of approximately 1% in 2017, affected by the hurricanes occurred in Texas and Florida during the year, and the increase of 1% in 2016, and the increases in ready-mix concrete prices of approximately 2% in 2018, 1% in 2017 and 1% in 2016, which are key drivers for cement consumption and CEMEX’s profitability, and which trends are expected to continue over the next few years, as anticipated in CEMEX’s cash flow projections.

16) FINANCIAL INSTRUMENTS

16.1) SHORT-TERM AND LONG-TERM DEBT

As of December 31, 2018 and 2017, CEMEX’s consolidated debt summarized by interest rates and currencies, was as follows:

	2018								2017
	Short-term			Long-term			Total		Short-term			Long-term			Total
Floating rate debt	$	262			66,819			67,081	$	7,282			53,389			60,671
Fixed rate debt		621			115,255			115,876		9,691			123,633			133,324
	$	883			182,074			182,957	$	16,973			177,022			193,995
Effective rate 1
Floating rate		7.8	%		3.6	%				6.1	%		3.0	%
Fixed rate		4.2	%		5.6	%				4.8	%		5.7	%

	2018									2017
	Short-term		Long-term		Total		Effective rate 1			Short-term		Long-term		Total		Effective rate 1
Dollars		589		114,696		115,285		5.8	%		6,206		107,508		113,714		5.9	%
Euros		12		52,368		52,380		3.3	%		9,705		54,906		64,611		3.5	%
Pounds		—		8,631		8,631		2.9	%		—		9,141		9,141		2.6	%
Philippine pesos		52		5,041		5,093		4.6	%		—		5,408		5,408		4.6	%
Other currencies		230		1,338		1,568		5.9	%		1,062		59		1,121		6.2	%
		883		182,074		182,957					16,973		177,022		193,995

1 In 2018 and 2017, represents the weighted-average nominal interest rate of the related debt agreements.

36

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

As of December 31, 2018 and 2017, CEMEX´s consolidated debt summarized by type of instrument, was as follow:

2018	Short-term		Long-term			2017	Short-term		Long-term
Bank loans						Bank loans
Loans in foreign countries, 2019 to 2024	$	614		6,436		Loans in foreign countries, 2018 to 2022	$	910		5,439
Syndicated loans, 2020 to 2022		—		62,460		Syndicated loans, 2018 to 2022		—		50,132
		614		68,896				910		55,571
Notes payable						Notes payable
Medium-term notes, 2023 to 2026		—		110,157		Medium-term notes, 2018 to 2026		224		133,949
Other notes payable, 2019 to 2025		140		3,150		Other notes payable, 2018 to 2025		154		3,187
		140		113,307				378		137,136
Total bank loans and notes payable		754		182,203		Total bank loans and notes payable		1,288		192,707
Current maturities		129		(129	)	Current maturities		15,685		(15,685	)
	$	883		182,074			$	16,973		177,022

As of December 31, 2018 and 2017, discounts, fees and other direct costs incurred in the issuance of CEMEX’s outstanding notes payable and bank loans for US$65 and US$84, respectively, reduce the balance of notes payable and are amortized to financing expense over the maturity of the related debt instruments under the amortized cost method.

As of December 31, 2018 and 2017, from total debt of $182,957 and $193,995, respectively, approximately 79% in 2018 and 80% in 2017 was held in the Parent Company, 15% in 2018 and 15% in 2017 was in finance subsidiaries in the Netherlands and the United States, and 6% in 2018 and 5% in 2017 was in other countries.

Changes in consolidated debt for the years ended December 31, 2018, 2017 and 2016 were as follows:

	2018			2017			2016
Debt at beginning of year	$	193,995			236,238			229,343
Proceeds from new debt instruments		43,765			93,620			48,748
Debt repayments		(53,025	)		(131,446	)		(89,792	)
Foreign currency translation and accretion effects		(1,778	)		(4,417	)		47,939
Debt at end of year	$	182,957			193,995			236,238

As of December 31, 2018 and 2017, as presented in the table above of debt by type of instrument, approximately 38% and 29%, respectively, of CEMEX’s total indebtedness, was represented by bank loans, of which the most significant portion corresponded to those balances under CEMEX’s facilities agreement entered into with 20 financial institutions on July 19, 2017 for an amount in different currencies equivalent to approximately US$4,050 at the origination date (the “2017 Credit Agreement”), as described elsewhere in this note.

As of December 31, 2018 and 2017, non-current notes payable for $113,307 and $137,136, respectively, was detailed as follows:

Description	Date of issuance	Issuer 1, 2	Currency	Principal amount		Rate 1			Maturity Date	Repurchased amount US$			Outstanding amount 3 US$		2018		2017
April 2026 Notes 8	16/Mar/16	CEMEX, S.A.B. de C.V.	Dollar		1,000		7.75	%	16/Apr/26		—			1,000	$	19,575		19,568
July 2025 Notes	02/Apr/03	CEMEX Materials LLC	Dollar		150		7.70	%	21/Jul/25		—			150		3,042		3,061
March 2025 Notes	03/Mar/15	CEMEX, S.A.B. de C.V.	Dollar		750		6.125	%	05/May/25		—			750		14,696		14,691
January 2025 Notes	11/Sep/14	CEMEX, S.A.B. de C.V.	Dollar		1,100		5.70	%	11/Jan/25		(29	)		1,071		20,994		20,988
December 2024 Notes 7	05/Dec/17	CEMEX, S.A.B. de C.V.	Euro		650		2.75	%	05/Dec/24		—			745		14,572		15,257
June 2024 Notes 8	14/Jun/16	CEMEX Finance LLC	Euro		400		4.625	%	15/Jun/24		—			458		8,968		9,390
April 2024 Notes	01/Apr/14	CEMEX Finance LLC	Dollar		1,000		6.00	%	01/Apr/24		(10	)		990		18,995		18,924
March 2023 Notes	03/Mar/15	CEMEX, S.A.B. de C.V.	Euro		550		4.375	%	05/Mar/23		—			630		12,356		12,938
October 2022 Notes 6	12/Oct/12	CEMEX Finance LLC	Dollar		1,500		9.375	%	12/Oct/22		(1,500	)		—		—		—
January 2022 Notes 4	11/Sep/14	CEMEX, S.A.B. de C.V.	Euro		400		4.75	%	11/Jan/22		(480	)		—		—		9,434
April 2021 Notes 8	01/Apr/14	CEMEX Finance LLC	Euro		400		5.25	%	01/Apr/21		(480	)		—		—		—
January 2021 Notes 5, 8	02/Oct/13	CEMEX, S.A.B. de C.V.	Dollar		1,000		7.25	%	15/Jan/21		(1,000	)		—		—		6,606
December 2019 Notes 6, 8	12/Aug/13	CEMEX, S.A.B. de C.V.	Dollar		1,000		6.50	%	10/Dec/19		(1,000	)		—		—		—
October 2018 Variable Notes 5, 8	02/Oct/13	CEMEX, S.A.B. de C.V.	Dollar		500		L+475bps		15/Oct/18		(500	)		—		—		6,154
Other notes payable																109		125
															$	113,307		137,136

1 The letter “L” included above refers to LIBOR, which represents the London Inter-Bank Offered Rate, variable rate used in international markets for debt denominated in U.S. dollars. As of December 31, 2018 and 2017, 3-Month LIBOR rate was 2.8076% and 1.6943%, respectively. The contraction “bps” means basis points. One hundred basis points equal 1%.

37

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Consolidated debt - continued

2 Unless otherwise indicated, all issuances are fully and unconditionally guaranteed by CEMEX, S.A.B. de C.V., CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding B.V., CEMEX España, S.A., CEMEX Asia B.V., CEMEX Corp., CEMEX Africa & Middle East Investments B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG and CEMEX UK. In March 2018, CEMEX Egyptian Investments B.V. changed its legal name to CEMEX Africa & Middle East Investments B.V.

3 Presented net of all outstanding notes repurchased and held by CEMEX’s subsidiaries.

4 On January 10, 2018, CEMEX completed the purchase of the outstanding amount of the January 2022 Notes for an aggregate principal amount of €400 using available funds from the issuance of the December 2024 Notes by means of an offer communicated on November 28, 2017.

5 In March 2018, CEMEX early redeemed the outstanding amount of the October 2018 Variable Notes and the January 2021 Notes for US$313 and US$341, respectively.

6 In December 2017, CEMEX repurchased the outstanding amount of the December 2019 Notes for an aggregate principal amount of US$611. During September and October 2017, CEMEX repurchased US$1,044 aggregate principal amount of the October 2022 Notes that remained outstanding.

7 On December 5, 2017, CEMEX issued €650 of 2.75% senior secured notes due December 5, 2024 (the “December 2024 Notes”). The proceeds were used to repay other indebtedness.

8 In May 2017, CEMEX redeemed the remaining €400 of aggregate principal amount of the April 2021 Notes. Moreover, in February 2017, CEMEX repurchased US$385 aggregate principal amount of the January 2021 Notes. In addition, during 2016, using available funds from the issuance of the April 2026 Notes, the June 2024 Notes, the sale of assets and cash flows provided by operating activities, CEMEX completed the purchase of US$178 principal amount of the October 2018 Variable Notes and US$242 principal amount of the January 2021 Notes, among other debt repurchases incurred that year with those resources.

During 2018, 2017 and 2016, as a result of the debt transactions incurred including exchange offers and tender offers to replace and/or repurchase existing debt instruments, CEMEX paid premiums, fees and issuance costs for a combined amount of US$51 ($1,006), US$251 ($4,930) and US$196 ($4,061), respectively, of which US$51 ($1,006) in 2018, US$212 ($4,160) in 2017 and US$151 ($3,129) in 2016, associated with the extinguished portion of the exchanged or repurchased notes, were recognized in the income statement in each year within “Financial expense”. In addition, US$39 ($770) in 2017 and US$45 ($932) in 2016, corresponding to issuance costs of new debt and/or the portion of the combined premiums, fees and issuance costs treated as a refinancing of the old instruments, adjusted the carrying amount of the new debt instruments, and are amortized over the remaining term of each instrument. Moreover, proportional fees and issuance costs related to the extinguished debt instruments for US$4 ($87) in 2018, US$16 ($310) in 2017 and US$37 ($767) in 2016 that were pending for amortization were recognized in the income statement of each year as part of “Financial expense.”

The maturities of consolidated long-term debt as of December 31, 2018, were as follows:

	2018
2020	$	11,523
2021		23,603
2022		30,175
2023		15,342
2024 and thereafter		101,431
	$	182,074

As of December 31, 2018, CEMEX had the following lines of credit, of which, the only commited portion referes to the revolving credit facility, at annual interest rates ranging between 0.75% and 8.50%, depending on the negotiated currency:

	Lines of credit		Available
Other lines of credit in foreign subsidiaries	$	9,440		7,286
Other lines of credit from banks		11,294		8,956
Revolving credit facility		22,303		16,211
	$	43,037		32,453

2017 Credit Agreement and 2014 Credit Agreement

On July 19, 2017, the Parent Company and certain subsidiaries entered into the 2017 Credit Agreement with 20 financial institutions for an amount in different currencies equivalent to US$4,050 at the origination date, the proceeds from which were used to refinance in full the US$3,680 then outstanding under the 2014 Credit Agreement and other debt repayments, allowing CEMEX to increase the average life of its syndicated bank debt with a final maturity in July 2022. All tranches under the 2017 Credit Agreement have substantially the same terms, including an applicable margin over the benchmark interest rate of between 125 to 350 basis points, depending on CEMEX’s consolidated debt leverage ratio; and the tranches share the same guarantors and collateral package as the original tranches under the 2014 Credit Agreement and other secured debt obligations of CEMEX. As of December 31, 2018 and 2017, total commitments under the 2017 Credit Agreement included US$2,746, €741 and £344, in both years, out of which about US$1,135 in both years were in a revolving credit facility. All tranches under the 2017 Credit Agreement amortize in five equal semi-annual payments beginning in July 2020, except for the commitments under the revolving credit which have a five-year maturity.

38

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2017 Credit Agreement, 2014 Credit Agreement and Facilities Agreement - continued

All tranches under the 2017 Credit Agreement have substantially the same terms, including an applicable margin over LIBOR or EURIBOR, as applicable, of between 125 to 350 basis points, depending on the leverage ratio (as defined below) of CEMEX, as follows:

Consolidated leverage ratio	Applicable margin
> = 5.50x	350 bps
< 5.00x > 4.50x	300 bps
< 4.50x > 4.00x	250 bps
< 4.00x > 3.50x	212.5 bps
< 3.50x > 3.00x	175 bps
< 3.00x > 2.50x	150 bps
< 2.50x	125 bps

The 2017 Credit Agreement also modified the consolidated leverage ratio and consolidated coverage ratio limits as described below in the financial covenants section.

The balance of debt under the 2017 Credit Agreement and previously under the 2014 Credit Agreement is guaranteed by CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding B.V., CEMEX España, S.A., CEMEX Asia B.V., CEMEX Corp., CEMEX Africa & Middle East Investments B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG and CEMEX UK. In addition, the debt under these agreements (together with all other senior capital markets debt issued or guaranteed by CEMEX, and certain other preceding facilities) is also secured by a first-priority security interest in: (a) substantially all the shares of CEMEX México, S.A. de C.V., CEMEX Operaciones México, S.A. de C.V, New Sunward Holding B.V., CEMEX Trademarks Holding Ltd. and CEMEX España, S.A. (the “Collateral”); and (b) all proceeds of such Collateral.

For the years ended December 31, 2018, 2017 and 2016, under both the 2017 Credit Agreement and the 2014 Credit Agreement, CEMEX was required to comply with the following thresholds: (a) the aggregate amount allowed for capital expenditures cannot exceed US$1,000 per year excluding certain capital expenditures, and, joint venture investments and acquisitions by CHP and its subsidiaries and CLH and its subsidiaries, which capital expenditures, joint venture investments and acquisitions at any time then incurred are subject to a separate aggregate limit for each of CHP and CLH of US$500 (or its equivalent); and (b) the amounts allowed for permitted acquisitions and investments in joint ventures cannot exceed US$400 per year. Nonetheless, such limitations do not apply if capital expenditures or acquisitions do not exceed free cash flow generation or are funded with proceeds from equity issuances or asset disposals.

In addition to the restrictions mentioned above, and subject in each case to the permitted negotiated amounts and other exceptions, CEMEX is also subject to a number of negative covenants that, among other things, restrict or limit its ability to: (i) create liens; (ii) incur additional debt; (iii) change CEMEX’s business or the business of any obligor or material subsidiary (in each case, as defined in the 2017 Credit Agreement); (iv) enter into mergers; (v) enter into agreements that restrict its 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; (ix) grant additional guarantees or indemnities; (x) declare or pay cash dividends or make share redemptions while the Leverage Ratio remains above 4.0 times; and (xi) enter into speculative derivatives transactions. The 2017 Credit Agreement contains several affirmative covenants that, among other things, require CEMEX to provide periodic financial information to its lenders. However, a number of those covenants and restrictions will automatically cease to apply or become less restrictive if CEMEX so elects when: (i) CEMEX’s Leverage Ratio (as defined hereinafter) for the two most recently completed quarterly testing periods is less than or equal to 3.75 times; and (ii) no default under the 2017 Credit Agreement is continuing. At that point the Leverage Ratio must not exceed 3.75 times. Restrictions that will cease to apply when CEMEX satisfies such conditions include the capital expenditure limitations mentioned above and several negative covenants, including limitations on CEMEX’s ability to declare or pay cash dividends and distributions to shareholders, limitations on CEMEX’s ability to repay existing financial indebtedness, certain asset sale restrictions, and restrictions on exercising call options in relation to any perpetual bonds CEMEX issues. 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, CEMEX cannot assure that it will be able to meet the conditions for these restrictions to cease to apply prior to the final maturity date under the 2017 Credit Agreement.

In addition, the 2017 Credit Agreement, and previously the 2014 Credit Agreement, contains events of default, some of which may occur and are outside of CEMEX’s control such as expropriation, sequestration and availability of foreign exchange. As of December 31, 2018 and 2017, CEMEX was not aware of any event of default. CEMEX cannot assure that in the future it will be able to comply with the restrictive covenants and limitations contained in the 2017 Credit Agreement. CEMEX’s failure to comply with such covenants and limitations could result in an event of default, which could materially and adversely affect CEMEX’s business and financial condition.

39

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Financial Covenants

The 2017 Credit Agreement and previously the 2014 Credit Agreement requires CEMEX to comply with financial ratios, which mainly include: a) the consolidated ratio of debt to Operating EBITDA (the “Leverage Ratio”); and b) the consolidated ratio of Operating EBITDA to interest expense (the “Coverage Ratio”). These financial ratios are calculated according to the formulas established in the debt contracts using the consolidated amounts under IFRS.

As of December 31, 2018, CEMEX must comply with a Coverage Ratio and a Leverage Ratio for each period of four consecutive fiscal quarters as follows:

Period	Coverage ratio	Period	Leverage ratio
For the period ending on December 31, 2018 up to and including the period ending on March 31, 2020	> = 2.50	For the period ending on December 31, 2018 up to and including the period ending on March 31, 2019	< = 4.75
		For the period ending on June 30, 2019 up to and including the period ending on March 31, 2020	< = 4.50
For the period ending on June 30, 2020 and each subsequent reference period	> = 2.75	For the period ending on June 30, 2020 and each subsequent reference period	< = 4.25

CEMEX’s ability to comply with these ratios may be affected by economic conditions and volatility in foreign exchange rates, as well as by overall conditions in the financial and capital markets. For the compliance periods ended as of December 31, 2018, 2017 and 2016, under the 2017 Credit Agreement and the 2014 Credit Agreement, as applicable, the main consolidated financial ratios were as follows:

		Consolidated financial ratios
		2018		2017		2016
Leverage ratio 1, 2	Limit		< = 4.75		< = 5.25		< = 6.00
	Calculation		3.84		3.85		4.22
Coverage ratio 3	Limit		> = 2.50		> = 2.50		> = 1.85
	Calculation		4.41		3.46		3.18

1 The leverage ratio is calculated in pesos by dividing “Funded debt” by pro forma Operating EBITDA for the last twelve months as of the calculation date. Funded debt equals debt, as reported in the statement of financial position, excluding finance leases, components of liability of convertible subordinated notes, plus perpetual debentures and guarantees, plus or minus the fair value of derivative financial instruments, as applicable, among other adjustments.

2 Pro forma Operating EBITDA represents, all calculated in pesos, Operating EBITDA for the last twelve months as of the calculation date, plus the portion of Operating EBITDA referring to such twelve-month period of any significant acquisition made in the period before its consolidation in CEMEX, minus Operating EBITDA referring to such twelve-month period of any significant disposal that had already been liquidated.

3 The coverage ratio is calculated in pesos using the amounts from the financial statements, by dividing the pro forma Operating EBITDA by the financial expense for the last twelve months as of the calculation date. Financial expense includes interest accrued on the perpetual debentures.

CEMEX will classify all of its outstanding debt as current debt in its statement of financial position if: 1) as of any measurement date CEMEX fails to comply with the aforementioned financial ratios; or 2) the cross default clause that is part of the 2017 Credit Agreement is triggered by the provisions contained therein; 3) as of any date prior to a subsequent measurement date CEMEX expects not to be in compliance with such financial ratios in the absence of: a) amendments and/or waivers covering the next succeeding 12 months; b) high probability that the violation will be cured during any agreed upon remediation period and be sustained for the next succeeding 12 months; and/or c) a signed refinancing agreement to refinance the relevant debt on a long-term basis. Moreover, concurrent with such classification of debt as short-term, the noncompliance of CEMEX with the financial ratios agreed upon pursuant to the 2017 Credit Agreement or, in such event, the absence of a waiver of compliance or a negotiation thereof, after certain procedures upon CEMEX’s lenders’ request, they would call for the acceleration of payments due under the 2017 Credit Agreement. That scenario would have a material adverse effect on CEMEX’s operating results, liquidity or financial position.

40

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

16.2) OTHER FINANCIAL OBLIGATIONS

As of December 31, 2018 and 2017, other financial obligations in the consolidated statement of financial position are detailed as follows:

		2018						2017
		Short-term		Long-term		Total		Short-term		Long-term		Total
I.	Convertible subordinated notes due 2020	$	—		10,097		10,097	$	—		9,985		9,985
II.	Convertible subordinated notes due 2018		—		—		—		7,115		—		7,115
III.	Mandatorily convertible securities due 2019		374				374		323		371		694
IV.	Liabilities secured with accounts receivable		11,770				11,770		11,313		—		11,313
V.	Finance leases		595		1,931		2,526		611		2,503		3,114
		$	12,739		12,028		24,767	$	19,362		12,859		32,221

Financial instruments convertible into CEMEX’s shares contain components of liability and equity, which are recognized differently depending upon the currency in which the instrument is denominated and the functional currency of the issuer (note 2.6).

I. Optional convertible subordinated notes due 2020

During 2015, the Parent Company issued US$521 aggregate principal amount of 3.72% convertible subordinated notes due in March 2020 (the “2020 Convertible Notes”) as a result of exchanges or settlements of other convertible notes. The 2020 Convertible Notes, which are subordinated to all of CEMEX’s liabilities and commitments, are convertible into a fixed number of the Parent Company’s ADSs at any time at the holder’s election and are subject to antidilution adjustments. The aggregate fair value of the conversion option as of the issuance dates which amounted to $199 was recognized in other equity reserves. As of December 31, 2018 and 2017, the conversion price per ADS for the 2020 Convertible Notes was approximately 11.01 dollars in both years. After antidilution adjustments, the conversion rate for the 2020 Convertible Notes as of December 31, 2018 and 2017 was 90.8592 ADS per each 1 thousand dollars principal amount of such notes in both years.

II. Optional convertible subordinated notes due in 2018

On March 15, 2011, the Parent Company closed the offering of US$690 principal amount of 3.75% convertible subordinated notes due in 2018 (the “2018 Convertible Notes”). The notes were subordinated to all of CEMEX’s liabilities and commitments. The notes were convertible into a fixed number of the Parent Company ADSs and are subject to antidilution adjustments. On June 19, 2017, the Parent Company agreed with certain institutional holders on the early conversion of US$325 of the 2018 Convertible Notes in exchange for the issuance of approximately 43 million ADSs, which included the number of additional ADSs issued to the holders as non-cash inducement premiums. As a result of the early conversion, the liability component of the converted notes of $5,468 was reclassified from other financial obligations to other equity reserves. In addition, the Parent Company increased common stock for $4 and additional paid-in capital for $7,059 against other equity reserves, and recognized expense for the inducement premiums paid in shares of $769, recognized within “Financial income and other items, net” in the income statement for 2017. After the early conversion of notes described above, the US$365 of the 2018 Convertible Notes that remained outstanding, were repaid in cash at their maturity on March 15, 2018. Concurrent with the offering of the 2018 Convertible Notes, a portion of the net proceeds from this transaction was used to fund the purchase of capped call options, which, when purchased, were generally expected to reduce the potential dilution cost to CEMEX upon the potential conversion of such notes (note 16.4).

III. Mandatorily convertible securities due in 2019

In December 2009, the Parent Company exchanged debt into US$315 principal amount of 10% mandatorily convertible securities in pesos with maturity in 2019 (the “2019 Mandatorily Convertible Securities”). Reflecting antidilution adjustments, the notes will be converted at maturity or earlier if the price of the CPO reaches $26.22 into approximately 236 million CPOs at a conversion price of $17.48 per CPO. Holders have an option to voluntarily convert their securities on any interest payment date into CPOs. The conversion option embedded in these securities is treated as a stand-alone derivative liability at fair value through the statement of operations (note 16.4).

IV. Liabilities secured with accounts receivable

As mentioned in note 9, as of December 31, 2018 and 2017, in connection with CEMEX’s sale of trade accounts receivable under securitization programs and/or factoring programs with recourse, the funded amounts of such receivables sold are recognized in “Other financial obligations” in the statement of financial position.

V. Finance leases

CEMEX has several operating and administrative assets, including buildings and mobile equipment, under finance lease contracts. Future payments associated with these contracts are presented in note 23.5.

41

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

16.3) FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets and liabilities

The carrying amounts of cash, trade accounts receivable, other accounts receivable, trade accounts payable, other accounts payable and accrued expenses, as well as short-term debt, approximate their corresponding estimated fair values due to the short-term maturity and revolving nature of these financial assets and liabilities.

The estimated fair value of CEMEX´s long-term debt is level 2 and is either based on estimated market prices for such or similar instruments, considering interest rates currently available for CEMEX to negotiate debt with the same maturities, or determined by discounting future cash flows using market-based interest rates currently available to CEMEX.

The fair values determined by CEMEX for its derivative financial instruments are level 2. There is no direct measure for the risk of CEMEX or its counterparties in connection with the derivative instruments. Therefore, the risk factors applied for CEMEX’s assets and liabilities originated by the valuation of such derivatives were extrapolated from publicly available risk discounts for other public debt instruments of CEMEX and its counterparties.

The estimated fair value of derivative instruments fluctuates over time and is determined by measuring the effect of future relevant economic variables according to the yield curves shown in the market as of the reporting date. These values should be analyzed in relation to the fair values of the underlying transactions and as part of CEMEX’s overall exposure attributable to fluctuations in interest rates and foreign exchange rates. The notional amounts of derivative instruments do not represent amounts of cash exchanged by the parties, and consequently, there is no direct measure of CEMEX’s exposure to the use of these derivatives. The amounts exchanged are determined on the basis of the notional amounts and other terms included in the derivative instruments.

As of December 31, 2018 and 2017, the carrying amounts of financial assets and liabilities and their respective fair values were as follows:

	2018				2017
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Derivative instruments (notes 13.2 and 16.4)	$	297		297	$	794		794
Other investments and non-current accounts receivable (note 13.2)		4,974		4,974		4,964		4,964
	$	5,271		5,271	$	5,758		5,758
Financial liabilities
Long-term debt (note 16.1)	$	182,074		179,740	$	177,022		184,220
Other financial obligations (note 16.2)		12,028		11,924		12,859		13,381
Derivative instruments (notes 16.4 and 17)		406		406		402		402
	$	194,508		192,070	$	190,283		198,003

Fair Value Hierarchy

As of December 31, 2018 and 2017, assets and liabilities carried at fair value in the consolidated statements of financial position are included in the following fair value hierarchy categories:

2018	Level 1		Level 2		Level 3		Total
Assets measured at fair value
Derivative instruments (notes 13.2 and 16.4)	$	—		297		—		297
Investments in strategic equity securities (note 13.2)		217		—		—		217
Other investments at fair value through earnings (note 13.2)		—		428		—		428
	$	217		725		—		942
Liabilities measured at fair value
Derivative instruments (notes 16.4 and 17)	$	—		406		—		406
2017	Level 1		Level 2		Level 3		Total
Assets measured at fair value
Derivative instruments (notes 13.2 and 16.4)	$	—		794		—		794
Investments in strategic equity securities (note 13.2)		275		—		—		275
Other investments at fair value through earnings (note 13.2)		—		441		—		441
	$	275		1,231		—		1,510
Liabilities measured at fair value
Derivative instruments (notes 16.4 and 17)	$	—		402		—		402

42

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

16.4) DERIVATIVE FINANCIAL INSTRUMENTS

During the reported periods, in compliance with the guidelines established by its Risk Management Committee, the restrictions set forth by its debt agreements and its hedging strategy (note 16.5), CEMEX held derivative instruments, with the objectives of, as the case may be of: a) changing the risk profile or fixed the price of fuels and electric energy; b) foreign exchange hedging; c) hedge of forecasted transactions; and d) other corporate purposes.

As of December 31, 2018 and 2017, the notional amounts and fair values of CEMEX’s derivative instruments were as follows:

	2018					2017
	Notional amount		Fair value			Notional amount		Fair value
I.   Net investment hedge	US$	1,249		2			1,160		47
II. Foreign exchange forwards related to forecasted transactions		—		—			381		3
III.  Equity forwards on third party shares		111		2			168		7
IV.  Interest rate swaps		1,126		(8	)		137		16
V. Fuel price hedging		122		(14	)		72		20
VI.  2019 Mandatorily Convertible Securities		—		(1	)		—		(20	)
	US$	2,608		(19	)		1,918		73

The caption “Financial income and other items, net” includes gains and losses related to the recognition of changes in fair values of the derivative instruments during the applicable period and that represented net gains of US$38 ($692) in 2018, net gains of US$9 ($161) in 2017 and net gains of US$17 ($317) in 2016, respectively.

I. Net investment hedge

As of December 31, 2018 and 2017, there are US$/MXP foreign exchange forward contracts under a program planned to be up to US$1,250, with monthly revolving settlement dates from 1 to 24 months. The average life of these contracts is approximately one year. For accounting purposes under IFRS, CEMEX has designated this program as a hedge of CEMEX’s net investment in Mexican pesos, pursuant to which changes in fair market value of these instruments are recognized as part of other comprehensive income in equity. For the years 2018 and 2017, these contracts generated losses of US$59 ($1,157) and gains of US$6 ($110), respectively.

II. Foreign exchange forwards related to forecasted transactions

As of December 31, 2017, CEMEX held US$/Euro foreign exchange forward contracts maturing on January 10, 2018, negotiated to maintain the Euro value of a portion of proceeds from debt issuances maintained in U.S. dollars that were used to repurchase debt denominated in euros (note 16.1). In addition, in February 2017 CEMEX settled US$/MXP foreign exchange forward contracts negotiated to hedge the U.S. dollar value of the proceeds from the expected sale of pumping assets in Mexico (note 4.3). For the years 2018, 2017 and 2016, the aggregate results of these instruments, including the effects resulting from positions entered and settled during the year, generated losses of US$1 ($21) in 2018, losses of US$17 ($337) in 2017 and gains of US$10 ($186) in 2016, recognized within “Financial income and other items, net” in the income statement.

III. Equity forwards on third party shares

As of December 31, 2018 and 2017, CEMEX maintained equity forward contracts with cash settlement in March 2020 and March 2019, respectively, over the price of 20.9 million shares of GCC in 2018 and 31.5 million in 2017, in connection with the sale of CEMEX’s remaining GCC shares in September 2017 (note 13.1). During 2018, CEMEX early settled a portion of these contracts for 10.6 million shares. Changes in the fair value of these instruments and early settlement effects generated gains of US$25 ($436) in 2018 and losses of US$24 ($463) in 2017 recognized within “Financial income and other items, net” in the income statement.

In addition, until October 2016, CEMEX maintained a forward contract over the price of 59.5 million CPOs of Axtel in connection with the Company’s investment at fair value through the income statement (note 13.2). Changes in the fair value of this instrument generated a loss of US$2 ($30) in 2016 recognized within “Financial income and other items, net” in the income statement.

IV. Interest rate swap contracts

As of December 31, 2018, CEMEX held interest rate swaps for a notional amount of US$1,000 the fair value of which represented a liability of US$19 ($373), negotiated in June 2018 to fix interest payments of existing bank loans bearing floating rates. The contracts mature in June 2023. For accounting purposes under IFRS, CEMEX designated these contracts as cash flow hedges, pursuant to which, changes in fair value are initially recognized as part of other comprehensive income in equity and are subsequently recycled through financial expense as interest expense on the related bank loans is accrued. For the year 2018, changes in fair value of these contracts generated losses of US$19 ($364) in the income statement.

As of December 31, 2018 and 2017, CEMEX had an interest rate swap maturing in September 2022 associated with an agreement entered by CEMEX for the acquisition of electric energy in Mexico, the fair value of which represented assets of US$11 ($216) and US$16 ($314), respectively. Pursuant to this instrument, during the tenure of the swap and based on its notional amount, CEMEX receives fixed rate of 5.4% and pays LIBOR. Changes in the fair value of this interest rate swap generated losses of US$6 ($114) in 2018, US$6 ($114) in 2017 and US$6 ($112) in 2016, recognized in the income statement for each period.

43

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Derivative financial instruments - continued

V. Fuel price hedging

As of December 31, 2018 and 2017, CEMEX maintained forward contracts negotiated to hedge the price of certain fuels, including diesel, gas and coal, as solid fuel, in several operations for aggregate notional amounts of US$122 ($2,398) and US$72 ($1,415), respectively, with an estimated aggregate fair value representing liabilities of US$14 ($275) in 2018 and assets of US$20 ($394) in 2017. By means of these contracts, for its own consumption only, CEMEX fixed the price of these fuels over certain volumes representing a portion of the estimated consumption of such fuels in several operations. These contracts have been designated as cash flow hedges of diesel, gas or coal consumption, and as such, changes in fair value are recognized temporarily through other comprehensive income and are recycled to operating expenses as the related fuel volumes are consumed. For the years 2018, 2017 and 2016, changes in fair value of these contracts recognized in other comprehensive income represented losses of US$35 ($697), gains of US$4 ($76) and gains of US$15 ($311), respectively.

VI. 2019 Mandatorily Convertible Securities and options on the Parent Company’s own shares

In connection with the 2019 Mandatorily Convertible Securities (note 16.2); considering that the securities are denominated in pesos and the functional currency of the Parent Company’s division that issued the securities is the dollar (note 2.4), CEMEX separated the conversion option embedded in such instruments and recognized it at fair value through the income statement, which as of December 31, 2018 and 2017, resulted in a liability of US$1 ($20) and US$20 ($393), respectively. Changes in fair value generated a gain of US$20 ($391) in 2018, a gain of US$19 ($359) in 2017 and a loss of US$29 ($545) in 2016.

In addition, on March 15, 2011, the Parent Company entered into a capped calls, considering antidilution adjustments, over 80 million CEMEX’s ADSs maturing in March 2018 in connection with the 2018 Convertible Notes, by means of which, at maturity of the notes, originally CEMEX would receive in cash the excess between the market price and the strike price of approximately 8.57 dollars per ADS, with a maximum appreciation per ADS of 5.27 dollars. CEMEX paid aggregate premiums of US$104. During August 2016, CEMEX amended 58.3% of the total notional amount of the capped calls to lower the exercise price in exchange for reducing the number of underlying options. As a result, CEMEX retained capped calls over 71 million ADSs. Changes in the fair value of these instruments generated gains of US$37 ($725) in 2017 and gains of US$44 ($818) in 2016, recognized within “Financial income and other items, net” in the income statement. During 2017, CEMEX unwound and settled all its capped calls receiving in exchange US$103 in cash.

16.5) RISK MANAGEMENT

Enterprise risks may arise from any of the following situations: i) the potential change in the value of assets owned or reasonably anticipated to be owned, ii) the potential change in value of liabilities incurred or reasonably anticipated to be incurred, iii) the potential change in value of services provided, purchase or reasonably anticipated to be provided or purchased in the ordinary course of business, iv) the potential change in the value of assets, services, inputs, products or commodities owned, produced, manufactured, processed, merchandised, leased or sell or reasonably anticipated to be owned, produced, manufactured, processed, merchandising, leasing or selling in the ordinary course of business, or v) any potential change in the value arising from interest rate or foreign exchange rate exposures arising from current or anticipated assets or liabilities.

In the ordinary course of business, CEMEX is exposed to commodities risk, including the exposure from inputs such as fuel, coal, petcoke, fly-ash, gypsum and other industrial materials which are commonly used by CEMEX in the production process, and expose CEMEX to variations in prices of the underlying commodities. To manage this and other risks, such as credit risk, interest rate risk, foreign exchange risk, equity risk and liquidity risk, considering the guidelines set forth by the Parent Company’s Board of Directors, which represent CEMEX’s risk management framework and that are supervised by several Committees, CEMEX’s management establishes specific policies that determine strategies oriented to obtain natural hedges to the extent possible, such as avoiding customer concentration on a determined market or aligning the currencies portfolio in which CEMEX incurred its debt, with those in which CEMEX generates its cash flows.

As of December 31, 2018 and 2017, these strategies are sometimes complemented with the use of derivative financial instruments as mentioned in note 16.4, such as the commodity forward contracts on fuels negotiated to fix the price of these underlying commodities.

The main risk categories are mentioned below:

Credit risk

Credit risk is the risk of financial loss faced by CEMEX if a customer or counterparty to a financial instrument does not meet its contractual obligations and originates mainly from trade accounts receivable. As of December 31, 2018 and 2017, the maximum exposure to credit risk is represented by the balance of financial assets. Management has developed policies for the authorization of credit to customers. Exposure to credit risk is monitored constantly according to the payment behavior of debtors. Credit is assigned on a customer-by-customer basis and is subject to assessments which consider the customers’ payment capacity, as well as past behavior regarding due dates, balances past due and delinquent accounts. In cases deemed necessary, CEMEX’s management requires guarantees from its customers and financial counterparties with regard to financial assets.

44

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Credit risk - continued

The Company’s management has established a policy of low risk tolerance which analyzes the creditworthiness of each new client individually before offering the general conditions of payment terms and delivery. The review includes external ratings, when references are available, and in some cases bank references. Thresholds of purchase limits are established for each client, which represent the maximum purchase amounts that require different levels of approval. Customers that do not meet the levels of solvency requirements imposed by CEMEX can only carry out transactions by paying cash in advance. As of December 31, 2018, considering CEMEX’s best estimate of potential expected losses based on the ECL model developed by CEMEX (note 9), the allowance for expected credit losses was $2,336.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, which only affects CEMEX’s results if the fixed-rate long-term debt is measured at fair value. All of CEMEX’s fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk. CEMEX’s accounting exposure to the risk of changes in market interest rates relates primarily to its long-term debt obligations with floating interest rates, which, if such rates were to increase, may adversely affect its financing cost and the results for the period.

Nonetheless, it is not economically efficient to concentrate on fixed rates at a high point when the interest rates market expects a downward trend. That is, there is an opportunity cost for continuing to pay a determined fixed interest rate when the market rates have decreased and the entity may obtain improved interest rate conditions in a new loan or debt issuance. CEMEX manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to reduce its interest costs. In addition, when the interest rate of a debt instrument has turned relatively high as compared to current market rates, CEMEX intends to renegotiate the conditions or repurchase the debt, to the extent the net present value of the expected future benefits from the interest rate reduction would exceed the cost and commissions that would have to be paid in such renegotiation or repurchase of debt.

As of December 31, 2018 and 2017, approximately 37% and 31%, respectively, of CEMEX’s long-term debt was denominated in floating rates at a weighted-average interest rate of LIBOR plus 241 basis points in 2018 and 268 basis points in 2017. As of December 31, 2018 and 2017, if interest rates at that date had been 0.5% higher, with all other variables held constant, CEMEX’s net income for 2018 and 2017 would have reduced by US$19 ($366) and US$18 ($353), respectively, as a result of higher interest expense on variable rate denominated debt. This analysis does not include the effect of interest rate swaps held by CEMEX during 2018 and 2017.

Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. CEMEX’s exposure to the risk of changes in foreign exchange rates relates primarily to its operating activities. Due to its geographic diversification, CEMEX’s revenues and costs are generated and settled in various countries and in different currencies. For the year ended December 31, 2018, approximately 22% of CEMEX’s net sales, before eliminations resulting from consolidation, were generated in Mexico, 26% in the United States, 8% in the United Kingdom, 6% in France, 4% in Germany, 2% in Spain, 2% in Poland, 2% in the Rest of Europe region, 4% in Colombia, 2% in Panama, 1% in Costa Rica, 1% Caribbean TCL, 2% in the Rest of South, Central America and the Caribbean region, 2% in Philippines, 1% in Egypt, 1% in the Rest of Asia, Middle East and Africa and 7% in CEMEX’s other operations.

Foreign exchange gains and losses occur through monetary assets or liabilities in a currency different from its functional currency, and are recorded in the consolidated income statements, except for exchange fluctuations associated with foreign currency indebtedness directly related to the acquisition of foreign entities and exchange fluctuations in related parties’ long-term balances denominated in foreign currency that are not expected to be settled in the foreseeable future, which are reported in the statement of other comprehensive income. As of December 31, 2018 and 2017, excluding from the sensitivity analysis the impact of translating the net assets of foreign operations into CEMEX’s reporting currency, considering a hypothetic 10% strengthening of the dollar against the Mexican peso, with all other variables held constant, CEMEX’s net income for 2018 and 2017 would have decreased by US$63 ($1,240) and US$119 ($2,343), respectively, as a result of higher foreign exchange losses on CEMEX’s dollar-denominated net monetary liabilities held in consolidated entities with other functional currencies. Conversely, a hypothetic 10% weakening of the U.S. dollar against the Mexican peso would have the opposite effect.

As of December 31, 2018, approximately 63% of CEMEX’s financial debt was Dollar-denominated, 29% was Euro-denominated, 5% was Pound-denominated and 3% was Philippine peso-denominated. Therefore, CEMEX had a foreign currency exposure arising mainly from the Dollar-denominated and Euro-denominated financial debt versus the several currencies in which CEMEX’s revenues are settled in most countries in which it operates. The amounts of Pound-denominated financial debt and Philippine peso-denominated financial debt outstanding as of December 31, 2018, are closely related to the amount of revenues generated in such currencies and/or, in the case of the Euro-denominated financial debt, the amount of CEMEX’s net assets denominated in such currencies; therefore, CEMEX considers that the foreign currency risk related to these amounts of debt is low. Nonetheless, CEMEX cannot guarantee that it will generate sufficient revenues in Dollars, Euros, Pounds and Philippine pesos from its operations to service these obligations. As of December 31, 2018 and 2017, CEMEX had not implemented any derivative financing hedging strategy to address this foreign currency risk. Nonetheless, CEMEX may enter into derivative financing hedging strategies in the future if either of its debt portfolio currency mix, interest rate mix, market conditions and/or expectations changes.

45

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Foreign currency risk - continued

As of December 31, 2018 and 2017, CEMEX’s consolidated net monetary assets (liabilities) by currency are as follows:

	2018
	Mexico			United States			Europe			South, Central America and the Caribbean			Asia, Middle East and Africa			Others 1			Total
Monetary assets		8,400			9,961			13,163			6,046			10,216			2,997			50,783
Monetary liabilities		19,798			33,464			40,153			10,841			12,223			200,731			317,210
Net monetary assets (liabilities) 2		(11,398	)		(23,503	)		(26,990	)		(4,795	)		(2,007	)		(197,734	)		(266,427	)
Out of which:
Dollars		(560	)		(23,507	)		153			(947	)		22			(117,677	)		(142,516	)
Pesos		(10,838	)		4			—			(6	)		—			(5,469	)		(16,309	)
Euros		—			—			(10,571	)		13			40			(52,942	)		(63,460	)
Pounds		—			—			(18,241	)		—			—			(8,609	)		(26,850	)
Other currencies		—			—			1,669			(3,855	)		(2,069	)		(13,037	)		(17,292	)
		(11,398	)		(23,503	)		(26,990	)		(4,795	)		(2,007	)		(197,734	)		(266,427	)
	2017
	Mexico			United States			Europe			South, Central America and the Caribbean			Asia, Middle East and Africa			Others 1			Total
Monetary assets	$	11,798			9,453			14,182			7,347			9,780			5,163			57,723
Monetary liabilities		17,505			32,158			45,675			12,016			11,522			221,579			340,455
Net monetary assets (liabilities) 2	$	(5,707	)		(22,705	)		(31,493	)		(4,669	)		(1,742	)		(216,416	)		(282,732	)
Out of which:
Dollars	$	(1,097	)		(22,710	)		39			(126	)		221			(133,530	)		(157,203	)
Pesos		(4,610	)		4			24			—			—			(7,745	)		(12,327	)
Euros		—			—			(10,155	)		2			—			(58,452	)		(68,605	)
Pounds		—			—			(19,358	)		—			—			(9,119	)		(28,477	)
Other currencies		—			1			(2,043	)		(4,545	)		(1,963	)		(7,570	)		(16,120	)
	$	(5,707	)		(22,705	)		(31,493	)		(4,669	)		(1,742	)		(216,416	)		(282,732	)

1 Includes the Parent Company, CEMEX’s financing subsidiaries, as well as Neoris N.V., among other entities.

2 Includes assets held for sale and liabilities directly related with these assets considering that such items will be realized in the short term.

In addition, considering that the Parent Company’s functional currency for all assets, liabilities and transactions associated with its financial and holding company activities is the dollar (note 2.4), there is foreign currency risk associated with the translation of subsidiaries’ net assets denominated in different currencies (peso, euro, pounds and other currencies) into dollars. When the dollar appreciates, the value of CEMEX’s net assets denominated in other currencies decreases in terms of dollars, generating negative foreign currency translation and reducing stockholders’ equity. Conversely, when the dollar depreciates, the value of CEMEX’s net assets denominated in other currencies would increase in terms of dollars generating the opposite effect. As mentioned in note 16.4, CEMEX has implemented a long-term program for up to US$1,250 to hedge foreign currency translation in connection with its net assets denominated in pesos.

Equity risk

Equity risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market price of CEMEX, S.A.B. de C.V.’s and/or third party’s shares. As described in note 16.4, considering specific objectives, CEMEX has entered into equity forward contracts on third-party shares, as well as capped calls based on the price of CEMEX, S.A.B. de C.V.’s own ADSs. Under these equity derivative instruments, there is a direct relationship from the change in the fair value of the derivative with the change in price of the underlying share. All changes in fair value of such derivative instruments are recognized in the income statement as part of “Financial income and other items, net.” During 2017, all outstanding capped calls based on the price of CEMEX, S.A.B. de C.V.´s own ADSs were early settled.

As of December 31, 2018 and 2017, the potential change in the fair value of CEMEX’s forward contracts in GCC shares that would result from a hypothetical, instantaneous decrease of 10% in the market price of GCC shares in dollars, with all other variables held constant, CEMEX’s net income would have reduced by US$11 ($210) in 2018 and US$14 ($283) in 2017, as a result of additional negative changes in fair value associated with these forward contracts. A 10% hypothetical increase in the price of GCC shares would have generated approximately the opposite effect.

46

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Equity risk - continued

In addition, even though the changes in fair value of CEMEX’s embedded conversion option in the Mandatorily Convertible Notes 2019 denominated in a currency other than the functional issuer’s currency affect the income statement, this do not imply any risk or variability in cash flows, considering that through their exercise, CEMEX will settle a fixed amount of debt with a fixed number of shares. As of December 31, 2018 and 2017, the potential change in the fair value of the embedded conversion options in the Mandatorily Convertible Notes 2019 that would result from a hypothetical, instantaneous increase of 10% in the market price of CEMEX’s CPOs, with all other variables held constant, would have decreased CEMEX’s net income by US$1 ($16) in 2018 and decreased by US$9 ($180) in 2017 as a result of additional negative changes in fair value associated with this option. A 10% hypothetical decrease in the CEMEX CPO price would generate approximately the opposite effect.

Liquidity risk

Liquidity risk is the risk that CEMEX will not have sufficient funds available to meet its obligations. In addition to cash flows provided by its operating activities, in order to meet CEMEX’s overall liquidity needs for operations, servicing debt and funding capital expenditures and acquisitions, CEMEX relies on cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowing under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. CEMEX is exposed to risks from changes in foreign currency exchange rates, prices and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments in the countries in which it operates, any one of which may materially affect CEMEX’s results and reduce cash from operations. The maturities of CEMEX’s contractual obligations are included in note 23.5.

As of December 31, 2018, current liabilities, which included $13,622 of current maturities of debt and other financial obligations, exceed current assets by $22,891. For the year ended December 31, 2018, CEMEX generated net cash flows provided by operating activities from continuing operations of $26,545, after payments of interest and income taxes. The Company’s management considers that CEMEX will generate sufficient cash flows from operations. In addition, as of December 31, 2018, CEMEX has committed available lines of credit under its 2017 Credit Agreement, which includes the revolving credit facility and an undrawn tranche for a combined amount of $16,211 (US$825), as well as CEMEX’s proven capacity to continually refinance and replace its short-term obligations, will enable CEMEX to meet any liquidity risk in the short term.

As of December 31, 2018 and 2017, the potential requirement for additional margin calls under our different commitments is not significant.

17) OTHER CURRENT AND NON-CURRENT LIABILITIES

As of December 31, 2018 and 2017, consolidated other current liabilities were as follows:

	2018		2017
Provisions 1	$	10,509		12,121
Interest payable		1,856		2,496
Advances from customers		3,838		3,886
Other accounts payable and accrued expenses 2		5,222		5,123
Contract liabilities with customers (note 3)		775		770
	$	22,200		24,396

1 Current provisions primarily consist of accrued employee benefits, insurance payments, accruals for legal assessments and others. These amounts are revolving in nature and are expected to be settled and replaced by similar amounts within the next 12 months.

2 In 2017, includes an account payable in Colombian pesos equivalent to $491 (US$25) settled on January 5, 2018 related to a penalty imposed by the Commerce and Industry Superintendence in Colombia in connection with a market investigation (note 24.2).

As of December 31, 2018 and 2017, consolidated other non-current liabilities were as follows:

	2018		2017
Asset retirement obligations 1	$	8,013		7,906
Accruals for legal assessments and other responsibilities 2		879		1,599
Non-current liabilities for valuation of derivative instruments		406		402
Environmental liabilities 3		573		991
Other non-current liabilities and provisions 4		5,134		4,751
	$	15,005		15,649

1 Provisions for asset retirement include future estimated costs for demolition, cleaning and reforestation of production sites at the end of their operation, which are initially recognized against the related assets and are depreciated over their estimated useful life.

47

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Other non-current liabilities - continued

2 Provisions for legal claims and other responsibilities include items related to tax contingencies.

3 Environmental liabilities include future estimated costs arising from legal or constructive obligations, related to cleaning, reforestation and other remedial actions to remediate damage caused to the environment. The expected average period to settle these obligations is greater than 15 years.

4 As of December 31, 2018 and 2017, includes $981 and $1,498, respectively, of the non-current portion of taxes payable in Mexico recognized in connection with the termination of the tax consolidation regime in 2014. As of December 31, 2018 and 2017, $590 and $958, respectively, were included within current taxes payable.

Changes in consolidated other current and non-current liabilities for the years ended December 31, 2018 and 2017, were as follows:

	2018
	Asset retirement obligations			Environmental liabilities			Accruals for legal proceedings			Valuation of derivative instruments			Other liabilities and provisions			Total			2017
Balance at beginning of period	$	7,906			991			1,599			421			17,623			28,540			28,937
Business combinations		—			—			—			—			—			—			345
Additions or increase in estimates		1,355			11			136			275			25,379			27,156			41,137
Releases or decrease in estimates		(916	)		(4	)		(807	)		—			(26,841	)		(28,568	)		(41,700	)
Reclassifications		(22	)		(384	)		—			(96	)		124			(378	)		(1,148	)
Accretion expense		(186	)		—			—			—			(902	)		(1,088	)		(1,021	)
Foreign currency translation		(124	)		(41	)		(49	)		78			763			627			1,990
Balance at end of period	$	8,013			573			879			678			16,146			26,289			28,540
Out of which:
Current provisions	$	297			—			—			272			10,715			11,284			12,891

18) PENSIONS AND POST-EMPLOYMENT BENEFITS

Defined contribution pension plans

The consolidated costs of defined contribution plans for the years ended December 31, 2018, 2017 and 2016 were $863, $922 and $865, respectively. CEMEX contributes periodically the amounts offered by the pension plan to the employee’s individual accounts, not retaining any remaining liability as of the financial statements´ date.

Defined benefit pension plans

Most of CEMEX’s defined benefit plans have been closed to new participants for several years. Actuarial results related to pension and other post-retirement benefits are recognized in earnings and/or in “Other comprehensive income” for the period in which they are generated, as appropriate. For the years ended December 31, 2018, 2017 and 2016, the effects of pension plans and other post-employment benefits are summarized as follows:

	Pensions								Other benefits							Total
Net period cost (income):	2018			2017			2016		2018		2017			2016		2018			2017			2016
Recorded in operating costs and expenses
Service cost	$	193			221			151		35		33			25		228			254			176
Past service cost		168			(55	)		8		—		—			—		168			(55	)		8
		361			166			159		35		33			25		396			199			184
Recorded in other financial expenses
Net interest cost		691			693			711		84		74			57		775			767			768
Recorded in other comprehensive income
Actuarial (gains) losses for the period		(3,415	)		20			3,985		11		(23	)		34		(3,404	)		(3	)		4,019
	$	(2,363	)		879			4,855		130		84			116		(2,233	)		963			4,971

For the years 2018, 2017 and 2016, actuarial (gains) losses for the period were generated by the following main factors as follows:

	2018			2017			2016
Actuarial (gains) losses due to experience	$	(1,110	)		121			(511	)
Actuarial (gains) losses due to demographic assumptions		(1,104	)		(46	)		(231	)
Actuarial (gains) losses due financial assumptions		(1,190	)		(78	)		4,761
	$	(3,404	)		(3	)		4,019

48

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Pensions and post-employment benefits - continued

In 2018, net actuarial gains due to financial assumptions were mainly generated by a general increase in the discounts rates applied for the calculation of the pension benefit obligations in the United Kingdom, Germany, United States and Mexico, among others, resulting from the increase in market interest rates after several years in which such rates reached historically low levels. In 2017, net actuarial gains due to financial assumptions were mainly driven by an increase in the discount rates applicable to the benefits’ obligations in Germany and Mexico and by actual returns higher than estimated in the United States, partially offset by a decrease in the discount rate in the United Kingdom. Net actuarial losses due to financial assumptions during 2016 were mainly generated by a significant reduction in the discount rates applicable to the benefit obligations in the United Kingdom, Germany and other European countries, considering macroeconomic and political uncertainty prevailing at that time, partially offset by an increase in the discount rate in Mexico. These actuarial losses originated by the reduction in the discount rates in 2016 were also partially offset by actual returns higher than estimated in some of the plan assets related to CEMEX’s defined benefit plans.

As of December 31, 2018 and 2017, the reconciliation of the actuarial benefits’ obligations and pension plan assets, are presented as follows:

	Pensions						Other benefits						Total
	2018			2017			2018			2017			2018			2017
Change in benefits obligation:
Projected benefit obligation at beginning of the period	$	54,910			51,055			1,436			1,164			56,346			52,219
Service cost		193			221			35			33			228			254
Interest cost		1,608			1,625			87			76			1,695			1,701
Actuarial (gains) losses		(5,126	)		727			8			(24	)		(5,118	)		703
Additions through business combinations		—			2,801			111			271			111			3,072
Reduction from disposal of assets		(9	)		—			—			—			(9	)		—
Plan amendments		168			(55	)		—			—			168			(55	)
Benefits paid		(2,807	)		(2,920	)		(102	)		(81	)		(2,909	)		(3,001	)
Foreign currency translation		(2,226	)		1,456			(30	)		(3	)		(2,256	)		1,453
Projected benefit obligation at end of the period		46,711			54,910			1,545			1,436			48,256			56,346
Change in plan assets:
Fair value of plan assets at beginning of the period		32,665			28,828			28			26			32,693			28,854
Return on plan assets		917			932			3			2			920			934
Actuarial (gains) losses		(1,711	)		707			(3	)		(1	)		(1,714	)		706
Employer contributions		1,562			1,494			102			81			1,664			1,575
Additions through business combinations		—			2,841			—			—			—			2,841
Reduction for disposal of assets		—			(4	)		—			—			—			(4	)
Benefits paid		(2,807	)		(2,920	)		(102	)		(81	)		(2,909	)		(3,001	)
Foreign currency translation		(1,335	)		787			—			1			(1,335	)		788
Fair value of plan assets at end of the period		29,291			32,665			28			28			29,319			32,693
Net projected liability in the statement of financial position	$	17,420			22,245			1,517			1,408			18,937			23,653

As of December 31, 2018 and 2017, based on the hierarchy of fair values, plan assets are detailed as follows:

	2018								2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	701		—		—		701	$	579		—		—		579
Investments in corporate bonds		131		6,720		—		6,851		144		6,067		1		6,212
Investments in government bonds		1,649		6,786		—		8,435		1,701		9,407		—		11,108
Total fixed-income securities		2,481		13,506		—		15,987		2,424		15,474		1		17,899
Investment in marketable securities		5,089		1,557		—		6,646		6,212		1,735		—		7,947
Other investments and private funds		973		4,172		1,541		6,686		991		3,279		2,577		6,847
Total variable-income securities		6,062		5,729		1,541		13,332		7,203		5,014		2,577		14,794
Total plan assets	$	8,543		19,235		1,541		29,319	$	9,627		20,488		2,578		32,693

The most significant assumptions used in the determination of the benefit obligation were as follows:

	2018												2017
	Mexico			United States			United Kingdom			Range of rates in other countries			Mexico			United States			United Kingdom			Rates ranges in other countries
Discount rates		10.8	%		4.5	%		2.9	%		1.3% – 7.5	%		9.3	%		3.9	%		2.4	%		1.3% – 6.3	%
Rate of return on plan assets		10.8	%		4.5	%		2.9	%		1.3% – 7.5	%		9.3	%		3.9	%		2.4	%		1.3% – 6.3	%
Rate of salary increases		4.0	%		—			3.3	%		2.3% – 6.0	%		4.0	%		—			3.2	%		1.5% – 6.0	%

49

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Pensions and post-employment benefits - continued

As of December 31, 2018, estimated payments for pensions and other post-employment benefits over the next 10 years were as follows:

	2018
2019	$	2,904
2020		2,663
2021		2,641
2022		2,662
2023 - 2028		15,714

As of December 31, 2018 and 2017, the aggregate projected benefit obligation (“PBO”) for pension plans and other post-employment benefits and the plan assets by country were as follows:

	2018						2017
	PBO		Assets		Deficit		PBO		Assets		Deficit
Mexico	$	3,300		582		2,718	$	3,213		840		2,373
United States		5,619		3,428		2,191		6,378		4,031		2,347
United Kingdom 1		28,771		20,775		7,996		35,602		23,145		12,457
Germany		3,973		195		3,778		4,362		213		4,149
Other countries		6,593		4,339		2,254		6,791		4,464		2,327
	$	48,256		29,319		18,937	$	56,346		32,693		23,653

1 Applicable regulation in the United Kingdom requires to maintain plan assets at a level similar to that of the obligations. Beginning in 2012, the pension fund receives annual dividends of approximately US$20, increasing at a 5% rate per year, from a limited partnership (the “Partnership”), whose assets transferred by CEMEX UK of an approximate value of US$553, are leased back to CEMEX UK. The Partnership is owned, controlled and consolidated by CEMEX UK. In 2037, on expiry of the arrangement, the Partnership will be terminated and under the terms of the agreement, the remaining assets will be distributed to CEMEX UK. Distributions from the Partnership to the pension fund are considered as employer contributions to plan assets in the period in which they occur.

In some countries, CEMEX has established health care benefits for retired personnel limited to a certain number of years after retirement. As of December 31, 2018 and 2017, the projected benefits obligation related to these benefits was $1,133 and $1,080, respectively. The medical inflation rates used to determine the projected benefits obligation of these benefits in 2018 and 2017 for Mexico were 7.0% in both years, for Puerto Rico 6.2% and 6.9%, respectively, and for the United Kingdom were 6.8% and 6.7%, respectively. In connection with the acquisition of TCL (note 4.1), CEMEX integrated TCL’s consolidated health care benefits into its operations. For 2018 and 2017, the medical inflation rate used to determine the projected benefits obligation was 5.0% in both years.

Significant events related to employees’ pension benefits and other post-employment benefits during the reported periods

During 2017, CEMEX in Spain removed certain increases in pension benefits which resulted in an adjustment to past service cost generating gains of $99 (US$5) in 2017, recognized in the income statement for the year. In addition, due to the acquisition of TCL (note 4.1), CEMEX integrated its consolidated pensions plans, which were fully funded, as well as TCL’s consolidated health care benefits which represented an increase in the net projected liability of $271 (US$14) in 2017 and $111 (US$6) in 2018 upon conclusion of the purchase price allocation.

Sensitivity analysis of pension and other post-employment benefits

For the year ended December 31, 2018, CEMEX performed sensitivity analyses on the most significant assumptions that affect the PBO, considering reasonable independent changes of plus or minus 50 basis points in each of these assumptions. The increase (decrease) that would have resulted in the PBO of pensions and other post-employment benefits as of December 31, 2018 are shown below:

	Pensions						Other benefits						Total
Assumptions:	+50 bps			-50 bps			+50 bps			-50 bps			+50 bps			-50 bps
Discount Rate Sensitivity	$	(3,074	)		3,303			(71	)		83			(3,145	)		3,386
Salary Increase Rate Sensitivity		205			(177	)		46			(37	)		251			(214	)
Pension Increase Rate Sensitivity		1,902			(1,698	)		—			—			1,902			(1,698	)

50

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

19) INCOME TAXES

19.1) INCOME TAXES FOR THE PERIOD

The amounts of income tax expense in the statements of operations for 2018, 2017 and 2016 are summarized as follows:

	2018			2017			2016
Current income taxes	$	(1,898	)		(3,458	)		(3,456	)
Deferred income tax revenue (expense)		(2,569	)		2,938			331
	$	(4,467	)		(520	)		(3,125	)

19.2) DEFERRED INCOME TAXES

As of December 31, 2018 and 2017, the main temporary differences that generated the consolidated deferred income tax assets and liabilities are presented below:

	2018			2017
Deferred tax assets:
Tax loss carryforwards and other tax credits	$	13,796			15,900
Accounts payable and accrued expenses		6,638			7,083
Intangible assets and deferred charges, net		2,794			4,175
Total deferred tax assets, gross		23,228			27,158
Presentation offset regarding same legal entity		(11,661	)		(12,341	)
Total deferred tax assets, net in the statement of financial position		11,567			14,817
Deferred tax liabilities:
Property, machinery and equipment		(25,972	)		(27,268	)
Investments and other assets		(589	)		(874	)
Total deferred tax liabilities, gross		(26,561	)		(28,142	)
Presentation offset regarding same legal entity		11,661			12,341
Total deferred tax liabilities, net in the statement of financial position		(14,900	)		(15,801	)
Net deferred tax liabilities	$	(3,333	)		(984	)
Out of which:
Net deferred tax asset (liability) in Mexican entities 1	$	(4,414	)		(3,978	)
Net deferred tax asset (liability) in Foreign entities 2		1,081			2,994
Net deferred tax liabilities	$	(3,333	)		(984	)

1 Net deferred tax liabilities in Mexico mainly refer to a temporary difference resulting when comparing at the reporting date the carrying amount of property, machinery and equipment, as per IFRS, and their corresponding tax values (remaining tax-deductible amount), partially offset by certain deferred tax assets from tax loss carryforwards that are expected to be recovered in the future against taxable income. When the book value is greater than the related tax value results in a deferred tax liability. In 2011, upon transition to IFRS, CEMEX elected to measure its fixed assets at fair value, which resulted in a significant increase in book value, mainly associated with the revaluation of mineral reserves. Such restated amounts are depleted to the income statement in a period over 35 years, generating accounting expense that is not tax-deductible; hence the temporary difference will gradually reverse over time but does not represent a payment obligation to the tax authority at the reporting date.

2 Net deferred tax assets in foreign entities are mainly related to tax loss carryforwards recognized in recent years, mainly in the United States, that are expected to be recovered in the future against taxable income.

As of December 31, 2018 and 2017, balances of the deferred tax assets and liabilities included in the statement of financial position are located in the following entities:

	2018								2017
	Asset		Liability			Net			Asset		Liability			Net
Mexican entities	$	3,079		(7,493	)		(4,414	)	$	3,212		(7,190	)		(3,978	)
Foreign entities		8,488		(7,407	)		1,081			11,605		(8,611	)		2,994
	$	11,567		(14,900	)		(3,333	)	$	14,817		(15,801	)		(984	)

51

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Deferred income taxes - continued

The breakdown of changes in consolidated deferred income taxes during 2018, 2017 and 2016 was as follows:

	2018			2017			2016
Deferred income tax (charged) credited to the income statement 1	$	(2,569	)		2,938			331
Deferred income tax (charged) credited to stockholders’ equity 2		193			200			514
Reclassification to other captions in the statement of financial position and in the income statement 3		27			(560	)		531
Change in deferred income tax during the period	$	(2,349	)		2,578			1,376

1 In 2017, includes net income tax revenue related to the recognition of deferred income tax assets in CEMEX’s operations in the United States (note 19.4).

2 In 2018, includes a deferred income tax revenue of $154 in connection with the adoption of IFRS 9 on January 1, 2018.

3 In 2018, 2017 and 2016, includes the effects of business combinations (note 4.2).

Current and/or deferred income tax relative to items of other comprehensive income during 2018, 2017 and 2016 were as follows:

	2018			2017			2016
Tax effects relative to foreign exchange fluctuations from debt (note 20.2)	$	—			—			(410	)
Tax effects relative to foreign exchange fluctuations from intercompany balances (note 20.2)		29			32			(12	)
Tax effects relative to actuarial (gains) and losses (note 20.2)		(530	)		(1	)		788
Foreign currency translation and other effects		723			201			(274	)
	$	222			232			92

As of December 31, 2018, consolidated tax loss and tax credits carryforwards expire as follows:

	Amount of carryforwards		Amount of unrecognized carryforwards		Amount of recognized carryforwards
2019	$	1,809		1,636		173
2020		8,749		8,483		266
2021		3,984		3,170		814
2022		6,576		6,389		187
2023 and thereafter		276,089		222,179		53,910
	$	297,207		241,857		55,350

As of December 31, 2018, in connection with CEMEX’s deferred tax loss carryforwards presented in the table above, in order to realize the benefits associated with such deferred tax assets that have not been reserved, before their expiration, CEMEX would need to generate $55,350 in consolidated pre-tax income in future periods. Based on the same forecasts of future cash flows and operating results used by CEMEX’s management to allocate resources and evaluate performance in the countries in which CEMEX operates, along with the implementation of feasible tax strategies, CEMEX believes that it will recover the balance of its tax loss carryforwards that have been recognized before their expiration. In addition, CEMEX concluded that, the deferred tax liabilities that were considered in the analysis of recoverability of its deferred tax assets will reverse in the same period and tax jurisdiction of the related recognized deferred tax assets. Moreover, a certain amount of CEMEX’s deferred tax assets refers to operating segments and tax jurisdictions in which CEMEX is currently generating taxable income or in which, according to CEMEX’s management cash flow projections, will generate taxable income in the relevant periods before the expiration of the deferred tax assets.

The Parent Company does not recognize a deferred income tax liability related to its investments in subsidiaries considering that CEMEX controls the reversal of the temporary differences arising from these investments and management is satisfied that such temporary differences will not reverse in the foreseeable future.

19.3) RECONCILIATION OF EFFECTIVE INCOME TAX RATE

For the years ended December 31, 2018, 2017 and 2016, the effective consolidated income tax rates were as follows:

	2018			2017			2016
Income before income tax	$	15,511			13,700			17,616
Income tax expense		(4,467	)		(520	)		(3,125	)
Effective consolidated income tax rate 1		(28.8	)%		(3.8	)%		(17.7	)%

1 The average effective tax rate equals the net amount of income tax revenue or expense divided by income or loss before income taxes, as these line items are reported in the income statement.

52

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Effective tax rate - continued

Differences between the financial reporting and the corresponding tax basis of assets and liabilities and the different income tax rates and laws applicable to CEMEX, among other factors, give rise to permanent differences between the statutory tax rate applicable in Mexico, and the effective tax rate presented in the consolidated statements of operations, which in 2018, 2017 and 2016 were as follows:

	2018						2017						2016
	%			$			%			$			%			$
Mexican statutory tax rate		(30.0	)		(4,653	)		(30.0	)		(4,110	)		(30.0	)		(5,285	)
Non-taxable dividend income		0.8			124			0.1			14			0.2			32
Difference between accounting and tax expenses, net		(15.4	)		(2,394	)		(20.8	)		(2,855	)		82.3			14,507
Unrecognized effects during the year related to applicable tax consolidation regimes		(0.7	)		(109	)		0.9			123			(3.6	)		(632	)
Non-taxable sale of equity securities and fixed assets		4.6			713			15.0			2,049			3.7			650
Difference between book and tax inflation		(19.5	)		(3,024	)		(31.1	)		(4,261	)		(11.0	)		(1,932	)
Differences in the income tax rates in the countries where CEMEX operates 1		16.0			2,482			21.8			2,991			11.0			1,932
Changes in deferred tax assets 2		14.7			2,286			39.6			5,433			(69.9	)		(12,320	)
Changes in provisions for uncertain tax positions		1.8			279			(0.4	)		(55	)		0.7			123
Others		(1.1	)		(171	)		1.1			151			(1.1	)		(200	)
Effective consolidated tax rate		(28.8	)		(4,467	)		(3.8	)		(520	)		(17.7	)		(3,125	)

1 Refers mainly to the effects of the differences between the statutory income tax rate in Mexico of 30% against the applicable income tax rates of each country where CEMEX operates. In 2018 and 2017, includes the effect related to the change in statutory tax rate in Colombia and the United States, respectively (note 19.4).

2 Refers to the effects in the effective income tax rate associated with changes during the period in the amount of deferred income tax assets related to CEMEX’s tax loss carryforwards.

The following table compares variations between the line item “Changes in deferred tax assets” as presented in the table above against the changes in deferred tax assets in the statement of financial position for the years ended December 31, 2018 and 2017:

	2018						2017
	Changes in the statement of financial position			Amounts in reconciliation			Changes in the statement of financial position			Amounts in reconciliation
Tax loss carryforwards generated and not recognized during the year	$	—			2,676			—			6,092
Derecognition related to tax loss carryforwards recognized in prior years		(1,770	)		(56	)		(5,221	)		(5,221	)
Recognition related to unrecognized tax loss carryforwards		98			98			9,694			9,694
Foreign currency translation and other effects		(432	)		(432	)		(6,087	)		(5,132	)
Changes in deferred tax assets	$	(2,104	)		2,286			(1,614	)		5,433

19.4) UNCERTAIN TAX POSITIONS AND SIGNIFICANT TAX PROCEEDINGS

Uncertain tax positions

As of December 31, 2018 and 2017, as part of short-term and long-term provisions and other liabilities (note 17), CEMEX has recognized provisions related to unrecognized tax benefits in connection with uncertain tax positions taken, in which it is deemed probable that the tax authority would differ from the position adopted by CEMEX. As of December 31, 2018, the tax returns submitted by some subsidiaries of CEMEX located in several countries are under review by the respective tax authorities in the ordinary course of business. CEMEX cannot anticipate if such reviews will result in new tax assessments, which would, should any arise, be appropriately disclosed and/or recognized in the financial statements.

A summary of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016, excluding interest and penalties, is as follows:

	2018			2017			2016
Balance of tax positions at beginning of the period	$	1,571			1,132			1,190
Additions for tax positions of prior periods		119			663			200
Additions for tax positions of current period		15			16			90
Reductions for tax positions related to prior periods and other items		(44	)		(32	)		(131	)
Settlements and reclassifications		(129	)		(119	)		(163	)
Expiration of the statute of limitations		(624	)		(138	)		(126	)
Foreign currency translation effects		(49	)		49			72
Balance of tax positions at end of the period	$	859			1,571			1,132

53

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Uncertain tax positions - continued

During 2017, considering recoverability analyses and cash flow projections, CEMEX recognized deferred income tax assets related to its operations in the United States for US$700 considering the then applicable income tax rate of 35%. However, regarding the Tax Cuts and Jobs Act (the “Act”) enacted on December 22, 2017, the U.S. statutory federal tax rate was reduced from 35% to 21%. For this reason, CEMEX reduced its net deferred tax assets by US$124. The reduction in the U.S. statutory federal tax rate is expected to positively impact CEMEX’s future after-tax earnings in the United States.

Tax examinations can involve complex issues, and the resolution of issues may span multiple years, particularly if subject to negotiation or litigation. Although CEMEX believes its estimates of the total unrecognized tax benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation could affect the amount of total unrecognized tax benefits in future periods. It is difficult to estimate the timing and range of possible changes related to uncertain tax positions, as finalizing audits with the income tax authorities may involve formal administrative and legal proceedings. Accordingly, it is not possible to reasonably estimate the expected changes to the total unrecognized tax benefits over the next 12 months, although any settlements or statute of limitations expirations may result in a significant increase or decrease in the total unrecognized tax benefits, including those positions related to tax examinations being currently conducted.

Significant tax proceedings

As of December 31, 2018, the Company’s most significant tax proceedings are as follows:

• As part of an audit process, the tax authorities in Spain have challenged part of the tax loss carryforwards reported by CEMEX España covering the tax years from and including 2006 to 2009. During 2014, the tax authorities in Spain notified CEMEX España of fines in the aggregate amount of US$547 ($10,755). CEMEX España filed appeals against such resolution. On September 20, 2017, CEMEX España was notified about an adverse resolution to such appeals. CEMEX España challenged this decision and applied for the suspension of the payment before the National Court (Audiencia Nacional) until the case is finally resolved. On November 6, 2018 CEMEX España obtained a favorable resolution to this request from the National Court through the pledge of certain fixed assets. As of December 31, 2018, CEMEX believes an adverse resolution in this proceeding is not probable and no accruals have been created in connection with this proceeding. Nonetheless, as of December 31, 2018, is difficult to assess with certainty the likelihood of an adverse result, and the appeals that CEMEX España has filed could take an extended amount of time to be resolved, but if adversely resolved, this proceeding could have a material adverse impact on CEMEX’s results of operations, liquidity or financial position.

• On April 6, 2018, CEMEX Colombia received a special proceeding from the Colombian Tax Authority (the “Tax Authority”), where certain deductions included in the 2012 income tax return were rejected. The Tax Authority assessed an increase in the income tax payable by CEMEX Colombia and imposed an inaccuracy penalty for amounts in Colombian pesos equivalent to approximately US$38 ($747) of income tax and US$38 ($747) of penalty. On June 22, 2018, CEMEX Colombia filed a response to the special proceeding within the legal term. On December 28, 2018, CEMEX Colombia received an official review settlement ratifying the rejected deductible items and amounts. CEMEX Colombia will file a reconsideration request within the next two months. If the proceeding would be adversely resolved in the final stage, CEMEX Colombia must pay the amounts determined in the official settlement plus interest accrued on the amount of the income tax adjustment until the payment date. As of December 31, 2018, in this stage of the proceeding, CEMEX believes an adverse resolution in this proceeding after conclusion of all available defense procedures is not probable, however, it is difficult to assess with certainty the likelihood of an adverse result in the proceeding; but if adversely resolved, CEMEX believes this proceeding should not have a material adverse impact on the operating results, liquidity or financial position of CEMEX.

• In September 2012, the Tax Authority requested CEMEX Colombia to amend its income tax return for the year 2011 in connection with several deductible expenses including the amortization of goodwill. CEMEX Colombia rejected the arguments of the ordinary request and filed a motion requesting the case to be closed. The 2011 income tax return was under audit of the Tax Authority from August 2013 until September 5, 2018, when CEMEX Colombia was notified of a special requirement in which the Tax Authority rejects certain deductions included in such income tax return of the year 2011 and determined an increase in the income tax payable and imposed a penalty for amounts in Colombian pesos equivalent to approximately US$26 ($511) of income tax and US$26 ($511) of penalty. CEMEX Colombia filed a response to the special requirement on November 30, 2018. If the proceeding would be adversely resolved in its final stage, CEMEX Colombia would have to pay the amounts determined in the official settlement plus interest accrued on the amount of the income tax adjustment until the date of payment. As of December 31, 2018, in this stage of the proceeding, CEMEX believes an adverse resolution in this proceeding after conclusion of all available defense procedures is not probable, however, it is difficult to assess with certainty the likelihood of an adverse result in the proceeding; but if adversely resolved, CEMEX believes this proceeding should not have a material adverse impact on the operating results, liquidity or financial position of CEMEX.

• In April 2011, the Tax Authority notified CEMEX Colombia of a special proceeding rejecting certain deductions taken by CEMEX Colombia in its 2009 tax return considering they are not linked to direct revenues recorded in the same fiscal year, and assessed an increase in taxes to be paid by CEMEX Colombia and imposed a penalty for amounts in Colombian pesos equivalent to US$28 ($550) of income tax and US$28 ($550) of penalty, considering changes in law that reduced the original penalty. After several appeals of CEMEX Colombia to the Colombian Tax Authority’s special proceeding in the applicable courts in which CEMEX Colombia obtained negative resolutions in each case over the years, in July 2014, CEMEX Colombia filed an appeal against this resolution before the Colombian State Council (Consejo de Estado). If the proceeding would be adversely resolved in the final stage, CEMEX Colombia must pay the amounts determined in the official settlement plus interest accrued on the amount of the income tax adjustment until the payment date. As of December 31, 2018, in this stage of the proceeding, CEMEX believes an adverse resolution in this proceeding after conclusion of all available defense procedures is not probable, however, it is difficult to assess with certainty the likelihood of an adverse result in the proceeding; but if adversely resolved, CEMEX Believes this proceeding should not have a material adverse impact on the operating results, liquidity or financial position of CEMEX.

54

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

20) STOCKHOLDERS’ EQUITY

As of December 31, 2018 and 2017, stockholders’ equity excludes investments in CPOs of the Parent Company held by subsidiaries of $194 (20,541,277 CPOs) and $301 (20,541,277 CPOs), respectively, which were eliminated within “Other equity reserves.”

20.1) COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

As of December 31, 2018 and 2017, the breakdown of common stock and additional paid-in capital was as follows:

	2018		2017
Common stock	$	4,171		4,171
Additional paid-in capital		141,151		140,483
	$	145,322		144,654

As of December 31, 2018 and 2017 the common stock of CEMEX, S.A.B. de C.V. was presented as follows:

	2018				2017
Shares 1	Series A 2		Series B 2		Series A 2		Series B 2
Subscribed and paid shares		30,002,628,318		15,001,314,159		30,214,469,912		15,107,234,956
Unissued shares authorized for executives’ stock compensation programs		936,375,524		468,187,762		531,739,616		265,869,808
Repurchased shares 3		307,207,506		153,603,753		—		—
Shares that guarantee the issuance of convertible securities 4		4,529,603,200		2,264,801,600		4,529,605,020		2,264,802,510
Shares authorized for the issuance of stock or convertible securities 5		302,144,720		151,072,360		—		—
		36,077,959,268		18,038,979,634		35,275,814,548		17,637,907,274

1 As of December 31, 2018 and 2017, 13,068,000,000 shares correspond to the fixed portion, and 41,048,938,902 shares in 2018 and 39,845,721,822 shares in 2017, correspond to the variable portion.

2 Series “A” or Mexican shares must represent at least 64% of CEMEX’s capital stock; meanwhile, Series “B” or free subscription shares must represent at most 36% of CEMEX’s capital stock.

3 Shares repurchased under the share repurchase program authorized by the Company’s shareholders (note 20.2).

4 Refers to those shares that guarantee the conversion of both the outstanding voluntary and mandatorily convertible securities and new securities issues (note 16.2).

5 Shares authorized for issuance in a public offer or private placement and/or by issuance of new convertible securities.

On April 5, 2018, stockholders at the annual ordinary shareholders’ meeting approved: (i) a resolution to increase the variable common stock by issuing up to 750 million shares (250 million CPOs), which will be kept in the Parent Company’s treasury and used to be subscribed and paid pursuant to the terms and conditions of CEMEX’s long-term compensation stock program, and (ii) the amount of a reserve of up to US$500 or its equivalent in pesos for the year ending December 31, 2018 and until the next ordinary shareholders meeting to be held in 2019 for purposes of a Parent Company’s share repurchase program. On April 5, 2018, stockholders at the extraordinary shareholders’ meeting approved a resolution to increase the variable common stock by issuing up to 453 million shares (151 million CPOs), which will be kept in the Parent Company’s treasury for their subscription by means of issuance in a public offer or private placement and/or by issuance of new convertible securities. This authorization expires on April 4, 2023.

On March 30, 2017, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,687 million shares (562 million CPOs), which shares were issued, representing an increase in common stock of $5, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of $9,459; (ii) increase the variable common stock by issuing up to 258 million shares (86 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16.2).

On March 31, 2016, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,616 million shares (539 million CPOs), which shares were issued, representing an increase in common stock of $4, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of $6,966; (ii) increase the variable common stock by issuing up to 297 million shares (99 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16.2).

In connection with the long-term executive share-based compensation programs (note 21) in 2018, 2017 and 2016, CEMEX issued approximately 49.3 million CPOs, 53.2 million CPOs and 53.9 million, respectively, generating an additional paid-in capital of $706 in 2018, $817 in 2017 and $742 in 2016 associated with the fair value of the compensation received by executives.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

20.2) OTHER EQUITY RESERVES

As of December 31, 2018 and 2017 other equity reserves are summarized as follows:

	2018			2017
Cumulative translation effect, net of effects from perpetual debentures and deferred income taxes recognized directly in equity (notes 19.2 and 20.4)	$	17,683			21,288
Cumulative actuarial losses		(7,527	)		(10,931	)
Treasury shares repurchased under share repurchase program (note 20.1)		(1,520	)		—
Effects associated with the Parent Company´s convertible securities 1		3,427			3,427
Treasury shares held by subsidiaries		(194	)		(301	)
	$	11,869			13,483

1 Represents the equity component upon the issuance of CEMEX, S.A.B. de C.V.’s convertible securities described in note 16.2, as well as the effects associated with such securities in connection with the change in the Parent Company’s functional currency (note 2.4). Upon conversion of these securities, the balances have been correspondingly reclassified to common stock and/or additional paid-in capital (note 16.1).

For the years ended December 31, 2018, 2017 and 2016, the translation effects of foreign subsidiaries included in the statements of comprehensive

income were as follows:

	2018			2017			2016
Foreign currency translation result 1	$	(3,713	)		(3,116	)		20,648
Foreign exchange fluctuations from debt 2		2,438			(4,160	)		1,367
Foreign exchange fluctuations from intercompany balances 3		(425	)		(2,243	)		(10,385	)
	$	(1,700	)		(9,519	)		11,630

1 These effects refer to the result from the translation of the financial statements of foreign subsidiaries and include the changes in fair value of foreign exchange forward contracts designated as hedge of a net investment (note 16.4).

2 Generated by foreign exchange fluctuations over a notional amount of debt in CEMEX, S.A.B. de C.V., associated with the acquisition of foreign subsidiaries and designated as a hedge of the net investment in foreign subsidiaries (note 2.4).

3 Refers to foreign exchange fluctuations arising from balances with related parties in foreign currencies that are of a long-term investment nature considering that their liquidation is not anticipated in the foreseeable future and foreign exchange fluctuations over a notional amount of debt of a subsidiary of CEMEX España identified and designated as a hedge of the net investment in foreign subsidiaries.

20.3) RETAINED EARNINGS

The Parent Company’s net income for the year is subject to a 5% allocation toward a legal reserve until such reserve equals one fifth of the common stock. As of December 31, 2018, the legal reserve amounted to $1,804.

20.4) NON-CONTROLLING INTEREST AND PERPETUAL DEBENTURES

Non-controlling interest

Non-controlling interest represents the share of non-controlling stockholders in the equity and results of consolidated subsidiaries. As of December 31, 2018 and 2017, non-controlling interest in equity amounted to $22,154 and $23,298, respectively. In addition, in 2018, 2017 and 2016, non-controlling interests in consolidated net income were $789, $1,417 and $1,173, respectively. These non-controlling interests arise mainly from the following CEMEX’s subsidiaries:

• In February 2017, as described in note 4.1, CEMEX acquired a controlling interest in TCL, whose shares trade in the Trinidad and Tobago Stock Exchange. As of December 31, 2018 and 2017, there is a non-controlling interest in TCL of approximately 30.2% of its common shares (see note 4.4 for certain relevant condensed financial information).

• In July 2016, CHP, an indirect wholly-owned subsidiary of CEMEX España, S.A., closed its initial offering of 2,337,927,954 new common shares, or 45% of CHP’s common shares, at a price of 10.75 Philippine pesos per common share. The net proceeds from the offering of US$507 (considering an exchange rate of 46.932 Philippine pesos per U.S. dollar on June 30, 2016), after deducting commissions and other offering expenses, were used by CEMEX for general corporate purposes, including the repayment of existing debt. CHP’s assets consist primarily of CEMEX’s cement manufacturing assets in the Philippines. As of December 31, 2018 and 2017, there is a non-controlling interest in CHP of approximately 45% of its common shares in both years (see note 4.4 for certain relevant condensed financial information).

• In November 2012, pursuant to a public offering in Colombia and an international private placement, CLH, a direct subsidiary of CEMEX España, S.A., concluded its initial offering of common shares. CLH’s assets include substantially all of CEMEX’s assets in Colombia, Panama, Costa Rica, Brazil, Guatemala and El Salvador. The Brazilian Operations were sold in 2018. As of December 31, 2018, there is a non-controlling interest in CLH of approximately 26.75% and 26.72%, respectively, of CLH’s outstanding common shares, excluding shares held in treasury (see note 4.4 for certain relevant condensed financial information).

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Perpetual debentures

As of December 31, 2018 and 2017, the balances of the non-controlling interest included US$444 ($8,729) and US$440 ($7,581), respectively, representing the notional amounts of perpetual debentures, which exclude any perpetual debentures held by subsidiaries.

Interest expense on the perpetual debentures, was included within “Other equity reserves” and amounted to $553 in 2018, $482 in 2017 and $507 in 2016, excluding in all the periods the amount of interest accrued by perpetual debentures held by subsidiaries.

CEMEX’s perpetual debentures have no fixed maturity date and there are no contractual obligations for CEMEX to exchange any series of its outstanding perpetual debentures for financial assets or financial liabilities. As a result, these debentures, issued entirely by Special Purpose Vehicles (“SPVs”), qualify as equity instruments and are classified within non-controlling interest, as they were issued by consolidated entities. In addition, subject to certain conditions, CEMEX has the unilateral right to defer indefinitely the payment of interest due on the debentures. The classification of the debentures as equity instruments was made under applicable IFRS. The different SPVs were established solely for purposes of issuing the perpetual debentures and were included in CEMEX’s consolidated financial statements.

As of December 31, 2018 and 2017, the detail of CEMEX’s perpetual debentures, excluding the perpetual debentures held by subsidiaries, was as follows:

		2018		2017		Repurchase option	Interest rate
Issuer	Issuance date	Nominal amount		Nominal amount
C10-EUR Capital (SPV) Ltd	May 2007	€	64	€	64	Tenth anniversary		EURIBOR+4.79%
C8 Capital (SPV) Ltd	February 2007	US$	135	US$	135	Eighth anniversary		LIBOR+4.40%
C5 Capital (SPV) Ltd 1	December 2006	US$	61	US$	61	Fifth anniversary		LIBOR+4.277%
C10 Capital (SPV) Ltd	December 2006	US$	175	US$	175	Tenth anniversary		LIBOR+4.71%

1 Under the 2017 Credit Agreement, and previously under the 2014 Credit Agreement, CEMEX is not permitted to call these debentures.

21) EXECUTIVE SHARE-BASED COMPENSATION

CEMEX has long-term restricted share-based compensation programs providing for the grant of the Parent Company’s CPOs to a group of eligible executives, pursuant to which, new CPOs are issued under each annual program over a service period of four years (the “ordinary program”). The Parent Company’s CPOs of the annual grant (25% of each annual ordinary program) are placed at the beginning of the service period in the executives’ accounts to comply with a one-year restriction on sale. Under the ordinary programs, the Parent Company issued new shares for approximately 49.3 million CPOs in 2018, 53.2 million CPOs in 2017 and 53.9 million CPOs in 2016, that were subscribed and pending for payment in the Parent Company’s treasury. As of December 31, 2018, there are approximately 69.5 million CPOs associated with these annual programs that are potentially expected to be issued in the following years as the executives render services.

Beginning in 2017, with the approval of the Parent Company’s Board of Directors, for a group of key executives, the conditions of the program were modified for new awards by reducing the service period from four to three years and implementing tri-annual internal and external performance metrics, which depending on their weighted achievement, may result in a final payment of the Parent Company’s CPOs at the end of the third year between 0% and 200% of the target for each annual program (the “key executives program”). During 2018 and 2017, no CPOs of the Parent Company were issued under the key executives’ program.

Beginning January 1, 2013, those eligible executives belonging to the operations of CLH and subsidiaries ceased to receive Parent Company CPOs and instead started receiving shares of CLH, sharing significantly the same conditions of CEMEX’s plan also over a service period of four years. During 2018, 2017 and 2016, CLH physically delivered 258,511 shares, 172,981 shares and 271,461 shares, respectively, corresponding to the vested portion of prior years’ grants, which were subscribed and held in CLH’s treasury. As of December 31, 2018, there are 1,162,186 shares of CLH associated with these annual programs that are expected to be delivered in the following years as the executives render services.

In addition, beginning in 2018, those eligible executives belonging to the operations of CHP and subsidiaries ceased to receive Parent Company CPOs and instead started receiving shares of CHP, sharing significantly the same conditions of CEMEX’s plan. During 2018, CHP did not issue shares in connection with this program, for this year, CHP purchased 871,189 of its own shares in the market on behalf of and for delivery to the elegible executives.

The combined compensation expense related to the programs described above as determined considering the fair value of the awards at the date of grant in 2018, 2017 and 2016, was recognized in the operating results against other equity reserves and amounted to $706, $817 and $742, respectively, including in 2018 the cost of the CHP’s shares acquired in the market. The weighted-average price per Parent Company CPO granted during the period was approximately 13.61 pesos in 2018, 14.28 pesos in 2017 and 13.79 pesos in 2016. Moreover, the weighted-average price per CLH share granted during the period was 12,347 Colombian pesos in 2018, 13,077 Colombian pesos in 2017 and 13,423 Colombian pesos in 2016. As of December 31, 2018 and 2017, there were no options or commitments to make payments in cash to the executives based on changes in the market price of the Parent Company’s CPO or CLH’s shares.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

22) EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income attributable to ordinary equity holders of the Parent Company (the numerator) by the weighted-average number of shares outstanding (the denominator) during the period. Shares that would be issued depending only on the passage of time should be included in the determination of the basic weighted-average number of shares outstanding. Diluted earnings per share should reflect in both the numerator and denominator the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions, to the extent that such assumption would lead to a reduction in basic earnings per share or an increase in basic loss per share. Otherwise, the effects of potential shares are not considered because they generate antidilution.

The amounts considered for calculations of earnings per share in 2018, 2017 and 2016 were as follows:

	2018		2017		2016
Denominator (thousands of shares)
Weighted-average number of shares outstanding 1		45,569,180		43,107,457		42,211,409
Capitalization of retained earnings 2		—		1,687,295		1,687,295
Effect of dilutive instruments – mandatorily convertible securities (note 16.2) 3		708,153		708,153		708,153
Weighted-average number of shares – basic		46,277,333		45,502,905		44,606,857
Effect of dilutive instruments – share-based compensation (note 21) 3		316,970		237,102		226,972
Effect of potentially dilutive instruments – optionally convertible securities (note 16.2) 3		1,420,437		2,698,600		3,834,458
Weighted-average number of shares – diluted		48,014,740		48,438,607		48,668,287
Numerator
Net income from continuing operations	$	11,044		13,180		14,491
Less: non-controlling interest net income		789		1,417		1,173
Controlling interest net income from continuing operations		10,255		11,763		13,318
Plus: after tax interest expense on mandatorily convertible securities		61		91		119
Controlling interest net income from continuing operations – for basic earnings per share calculations		10,316		11,854		13,437
Plus: after tax interest expense on optionally convertible securities		436		903		1,079
Controlling interest net income from continuing operations – for diluted earnings per share calculations	$	10,752		12,757		14,516
Net income from discontinued operations	$	212		3,461		713

	2018		2017		2016
Basic earnings per share
Controlling interest basic earnings per share	$	0.22		0.34		0.32
Controlling interest basic earnings per share from continuing operations		0.22		0.26		0.30
Controlling interest basic earnings per share from discontinued operations		0.00		0.08		0.02
Controlling interest diluted earnings per share 4
Controlling interest diluted earnings per share	$	0.22		0.34		0.32
Controlling interest diluted earnings per share from continuing operations		0.22		0.26		0.30
Controlling interest diluted earnings per share from discontinued operations		0.00		0.08		0.02

1 The weighted-average number of shares outstanding in 2017 and 2016 reflects the shares issued as a result of the capitalization of retained earnings declared in March 2017 and March 2016, as applicable (note 20.1).

2 According to resolution of the Parent Company’s shareholders’ meeting on March 30, 2017. There was no capitalization of retained earnings in 2018.

3 The number of Parent Company CPOs to be issued under the executive share-based compensation programs, as well as the total amount of Parent Company CPOs committed for issuance in the future under the mandatorily and optionally convertible securities, are computed from the beginning of the reporting period. The number of shares resulting from the executives’ stock option programs is determined under the inverse treasury method.

4 For 2018, 2017 and 2016, the effects on the denominator and numerator of potential dilutive shares generate antidilution; therefore, there is no change between the reported basic earnings per share and diluted earnings per share.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

23) COMMITMENTS

23.1) GUARANTEES

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V., had guaranteed loans of certain subsidiaries for US$1,493 ($29,331) and US$1,506 ($29,601), respectively.

23.2) PLEDGED ASSETS

CEMEX transferred to a guarantee trust the shares of its main subsidiaries, including, among others, CEMEX México, S.A. de C.V., New Sunward Holding B.V. and CEMEX España, S.A., and entered into pledge agreements in order to secure payment obligations under the 2017 Credit Agreement (formerly under the 2014 Credit Agreement and the Facilities Agreement) and other debt instruments entered into prior and after the date of these agreements (note 16.1).

As of December 31, 2018 and 2017, there are no liabilities secured by property, machinery and equipment.

23.3) OTHER COMMITMENTS

As of December 31, 2018 and 2017, CEMEX was party to other commitments for several purposes, including the purchase of fuel and energy, the estimated future cash flows over maturity of which are presented in note 23.5. A description of the most significant contracts is as follows:

• Beginning in April 2016, in connection with the Ventika S.A.P.I. de C.V. and the Ventika II S.A.P.I. de C.V. wind farms (jointly “Ventikas”) located in the Mexican state of Nuevo Leon with a combined generation capacity of 252 Megawatts (“MW”), CEMEX agreed to acquire a portion of the energy generated by Ventikas for its overall electricity needs in Mexico for a period of 20 years. The estimated annual cost of this agreement is US$25 (unaudited) assuming that CEMEX receives all its energy allocation. Nonetheless, energy supply from wind is variable in nature and final amounts are determined considering the final MW per hour (“MWh”) effectively received at the agreed prices per unit.

• On July 27, 2012, CEMEX signed a 10-year strategic agreement with International Business Machines Corporation (“IBM”) pursuant to which IBM provides, among others, data processing services (back office) in finance, accounting and human resources; as well as Information Technology (“IT”) infrastructure services, support and maintenance of IT applications in the countries in which CEMEX operates.

• Beginning in February 2010, for its overall electricity needs in Mexico CEMEX agreed with EURUS the purchase a portion of the electric energy generated for a period of no less than 20 years. EURUS is a wind farm with an installed capacity of 250 MW operated by ACCIONA in the Mexican state of Oaxaca. The estimated annual cost of this agreement is US$71 (unaudited) assuming that CEMEX receives all its energy allocation. Nonetheless, energy supply from wind source is variable in nature and final amounts will be determined considering the final MWh effectively received at the agreed prices per unit.

• CEMEX maintains a commitment initiated in April 2004 to purchase the energy generated by Termoeléctrica del Golfo (“TEG”) until 2027 for its overall electricity needs in Mexico. The estimated annual cost of this agreement is US$132 (unaudited) assuming that CEMEX receives all its energy allocation. Nonetheless, final amounts will be determined considering the final MWh effectively received at the agreed prices per unit.

• In regards with the above, CEMEX also committed to supply TEG and another third-party electrical energy generating plant adjacent to TEG all fuel necessary for their operations until the year 2027, equivalent to approximately 1.2 million tons of petroleum coke per year. CEMEX covers its commitments under this agreement acquiring the aforementioned volume of fuel from sources in the international markets and Mexico.

• CEMEX OstZement GmbH (“COZ”), CEMEX’s subsidiary in Germany, held a long-term energy supply contract until 2023 with STEAG - Industriekraftwerk Rüdersdorf GmbH (“SIKW”) in connection with the overall electricity needs of CEMEX’s Rüdersdorf plant. Based on the contract, each year COZ has the option to fix in advance the volume of energy in terms of MW that it will acquire from VEN SIKW, with the option to adjust the purchase amount one time on a monthly and quarterly basis. The estimated annual cost of this agreement is approximately US$15 (unaudited) assuming that CEMEX receives all its energy allocation.

23.4) COMMITMENTS FROM EMPLOYEE BENEFITS

In some countries, CEMEX has self-insured health care benefits plans for its active employees, which are managed on cost plus fee arrangements with major insurance companies or provided through health maintenance organizations. As of December 31, 2018, in certain plans, CEMEX has established stop-loss limits for continued medical assistance derived from a specific cause (e.g., an automobile accident, illness, etc.) ranging from 23 thousand dollars to 400 thousand dollars. In other plans, CEMEX has established stop-loss limits per employee regardless of the number of events ranging from 100 thousand dollars to 2.5 million dollars. The contingency for CEMEX if all employees qualifying for health care benefits required medical services simultaneously is significantly. However, CEMEX believes this scenario is remote. The amount expensed through self-insured health care benefits was US$62 in 2018, US$64 in 2017 and US$69 in 2016.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

23.5) CONTRACTUAL OBLIGATIONS

As of December 31, 2018 and 2017, CEMEX had the following contractual obligations:

Obligations	2018										2017
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Total
Long-term debt	US$	7		1,788		2,347		5,197		9,339		9,892
Finance lease obligations 1		36		87		19		1		143		175
Convertible notes 2		19		514		—		—		533		906
Total debt and other financial obligations 3		62		2,389		2,366		5,198		10,015		10,973
Operating leases 4		186		351		231		439		1,207		494
Interest payments on debt 5		508		960		777		535		2,780		3,073
Pension plans and other benefits 6		148		270		270		664		1,352		1,587
Acquisition of property, plant and equipment 7		87		43		—		—		130		—
Purchases of raw materials, fuel and energy 8		702		955		1,230		2,270		5,157		4,326
Total contractual obligations	US$	1,693		4,968		4,874		9,106		20,641		20,453
	$	33,267		97,621		95,774		178,933		405,595		401,901

1 Represent nominal cash flows. As of December 31, 2018, the NPV of future payments under such leases was US$122 ($2,396), of which, US$74 ($1,450) refers to payments from 1 to 3 years and US$14 ($276) refer to payments from 3 to 5 years. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.20).

2 Refers to the components of liability of the convertible notes described in note 16.2 and assumes repayment at maturity and no conversion of the notes.

3 The schedule of debt payments, which includes current maturities, does not consider the effect of any refinancing of debt that may occur during the following years. In the past, CEMEX has replaced its long-term obligations for others of a similar nature.

4 The amounts represent nominal cash flows. CEMEX has operating leases, primarily for operating facilities, cement storage and distribution facilities and certain transportation and other equipment, under which annual rental payments are required plus the payment of certain operating expenses. Rental expense was US$185 ($3,493) in 2018, US$115 ($2,252) in 2017 and US$121 ($2,507) in 2016. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.20).

5 Estimated cash flows on floating rate denominated debt were determined using the floating interest rates in effect as of December 31, 2018 and 2017.

6 Represents estimated annual payments under these benefits for the next 10 years (note 18), including the estimate of new retirees during such future years.

7 Refers mainly to the expansion of a cement-production line in the Philippines.

8 Future payments for the purchase of raw materials are presented on the basis of contractual nominal cash flows. Future nominal payments for energy were estimated for all contractual commitments on the basis of an aggregate average expected consumption per year using the future prices of energy established in the contracts for each period. Future payments also include CEMEX’s commitments for the purchase of fuel.

24) LEGAL PROCEEDINGS

24.1) PROVISIONS RESULTING FROM LEGAL PROCEEDINGS

CEMEX is involved in various significant legal proceedings, the resolutions of which are deemed probable and imply the incurrence of losses and/or cash outflows or the delivery of other resources owned by CEMEX. As a result, certain provisions or losses have been recognized in the financial statements, representing the best estimate of the amounts payable or the amount of impaired assets. Therefore, CEMEX believes that it will not make significant expenditure or incur significant losses in excess of the amounts recorded. As of December 31, 2018, the details of the most significant events giving effect to provisions or losses are as follows:

• In connection with the construction of the cement plant in the municipality of Maceo in Colombia (note 13), in August, 2012, CEMEX Colombia signed a memorandum of understanding (“MOU”) with the representative of CI Calizas y Minerales S.A. (“CI Calizas”), for the acquisition of assets consisting of land, the mining concession and environmental permit, the shares of Zona Franca Especial Cementera del Magdalena Medio S.A.S. (“Zomam”) (holder of the free trade zone concession) and the rights to develop the cement plant. After the signing of the MOU, a former shareholder of CI Calizas, who presumptively transferred its shares of CI Calizas two years before the signing of the MOU, was linked to a process of expiration of property initiated by Colombia’s Attorney General (the “Attorney General”). Amongst other measures, the Attorney General ordered the seizure and consequent suspension of the right to dispose the assets subject to the MOU, including the shares of Zomam acquired by CEMEX Colombia before the beginning of such process. As a third party acting in good faith and free of guilt, CEMEX Colombia joined the expiration of property process and fully cooperates with the Attorney General. As of December 31, 2018, it is estimated that it may take between five and ten years for a final resolution to be issued on the aforementioned process, which is in the investigatory stage, waiting for the legal counsels of the defendants appointed by the Attorney General to assume functions, which opens the evidentiary stage.

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Provisions resulting from legal proceedings - continued

In July 2013, CEMEX Colombia signed with the provisional depository appointed by the Drugs National Department (Dirección Nacional de Estupefacientes or the “DNE”) (then depository of the affected assets), which functions after its liquidation were assumed by the Administration of Special Assets (Sociedad de Activos Especiales S.A.S. or the “SAE”), a lease contract for a period of five years, by means of which CEMEX Colombia was duly authorized to build and operate the plant (the “Lease Contract”). Moreover, in 2014, the provisional depository granted a mandate to CEMEX Colombia for the same purposes.

On July 15, 2018, the initial term of the Lease Contract signed by CEMEX Colombia with the DNE expired. Notwithstanding the expiry, CEMEX Colombia is entitled to continue to build and use the plant pursuant to the terms of an accompanying mandate until the conclusion of the expiration of property proceeding. As of December 31, 2018, CEMEX Colombia maintains negotiations with the SAE in order to enter into a new long term lease contract that would replace precedent agreements and would allow CEMEX Colombia to continue the construction and operation of the plant during a term of 21 years from the signing date with a potential extension of 10 additional years.

In addition, in 2012, CEMEX Colombia also engaged the same representative of CI Calizas to represent in the name and on behalf of CEMEX Colombia in the acquisition of land adjacent to the plant, signing a new memorandum of understanding (the “Land MOU”).

During 2016, through an investigation and internal audit in accordance with the corporate governance policies and code of ethics of CEMEX and CLH considering reports of deficiencies in the purchasing process received in CEMEX’s anonymous reporting line, and after confirming the irregularities, in September, 2016, CLH and CEMEX Colombia terminated the employment relationship with the Vice President of Planning of CLH and CEMEX Colombia; with the Vice President of Legal Counsel of CLH and CEMEX Colombia; and accepted the resignation of the Chief Executive Officer of CLH and President of CEMEX Colombia. In order to strengthen the levels of leadership, management and best practices of corporate governance, in October 2016, the Parent Company’s Board of Directors separated the roles of Chairman of the Board of Directors, Chief Executive Officer of CLH and President of CEMEX Colombia, and made the corresponding appointments. Moreover, the Parent Company’s Audit Committee and CLH’s Audit Commission performed an independent investigation of the Maceo project through experts in forensic audit. Additionally, the management of CEMEX Colombia and CLH engaged legal advisors for the required collaboration with the Attorney General and other purposes.

The investigation and internal audit initiated during 2016 found that under the MDE and the Land MDE, CEMEX Colombia made deposits in the representative’s bank account for advances and paid interests, settled in kind following its instructions, for amounts in Colombian pesos equivalent to approximately US$13.4 and US$1.2, respectively, considering the exchange rate as of December 31, 2016. These payments were made in breach of CEMEX’s and CLH’s policies. As a result, both, CLH and CEMEX Colombia reported these facts to the Attorney General, providing the findings on hand. In December 2016, CEMEX Colombia filed a claim in the civil courts aiming that all property rights of the land acquired under de Land MOU, some of which were assigned to the representative, would be transferred to CEMEX Colombia. As of September 30, 2018, due to the process of expiration of property of the assets under the MDE and the deficient formalization of the acquisitions under the Land MDE, CEMEX Colombia is not the rightful owner of the aforementioned assets.

As a result, considering the legal opinions available and low probability of recovering such advances, in December 2016, the Company reduced investments in process for a net amount in Colombian pesos equivalent to approximately US$14.1 ($264), which included: a) a reduction of US$14.3 ($295) for impairment of assets against “Other expenses, net,” including approximately US$2.3 ($43) of impairment losses not related with the MOU or the Land MOU; b) a reduction of US$9.1 ($188) against “Other accounts payable” for the cancellation of the remaining account payable to CI Calizas under the MOU; and c) an increase in investments in process for US$9.2 ($191) recognized against VAT accounts payable related with certain purchases of equipment installed outside the polygon of the free zone that were not exempted from this tax. All these amounts considering the exchange rate as of December 31, 2016. During 2017, CEMEX Colombia further determined an adjustment and payment of additional VAT in the free zone for approximately US$5.

Moreover, there is an ongoing criminal investigation by the Attorney General which is in its second investigatory stage. The hearing for indictments was held between June 12 and 29, 2018, whereas charges were brought against two of the former executives of CEMEX Colombia and the representative of CI Calizas, and pretrial detention of the defendants was determined. CEMEX cannot predict the actions that the General Attorney could implement or the possibility and degree in which any of these actions could have a material adverse effect on CEMEX’s results of operation, liquidity or financial position. Under the presumption that CEMEX Colombia acted in good faith, CEMEX considers that it will retain ownership of the plant (note 14) and that the rest of its investments are protected by Colombian law, under which, if a person builds on the property of a third party, with full knowledge of such third party, this third party may: a) take ownership of the plant paying indemnity to CEMEX Colombia, or otherwise, b) oblige CEMEX Colombia to purchase the land. Nonetheless, had this not be the case, CEMEX Colombia would take all necessary actions to safeguard the project in Maceo. At this respect, in the event that the expiration of property over the assets subject to the MOU is ordered in favor of the State, the SAE may decide not to sell the assets to CEMEX Colombia, or, the SAE may elect to maintain ownership of the assets and not extend the Lease Contract. In both cases, under Colombian law, CEMEX Colombia would be entitled to an indemnity for the amount of its incurred investments. Nonetheless, although as of December 31, 2018, CEMEX Latam cannot estimate if the expiration of property of the assets subject to the MDE would be declared in favor of the State, or as the case may be, if the SAE would determine to sell or not those assets to CEMEX Colombia or if a new Lease Contract would be negotiated or not, CEMEX Colombia does not consider probable that any of these adverse results may occur, but would any of these adverse results occur upon which an adverse resolution is received, such adverse resolution could have a material adverse effect on CEMEX’s results of operations, liquidity or financial condition.

61

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Provisions resulting from legal proceedings - continued

As of December 31, 2018, the start-up of the Maceo plant and the construction of the access road remain suspended, mainly considering certain permits required to finalize the access road, as well as ongoing requests and procedures with the relevant authorities oriented to: a) resolve any overlap of the project with an Integrated Management District (“IMD”), b) modify the land use where the project is located to harmonize it with industrial and mining use, c) modify the environmental license to increase the permitted production up to 950 thousand tons per year, d) obtain the extension of the free zone to cover the entire plant, and e) resolve the ownership of the environmental license and the mining title which transfer to a subsidiary of CEMEX Colombia was revoked by the regional environmental authority; until progress is achieved in these processes. CEMEX Colombia continues working to address these issues as soon as possible. In October 2017, CEMEX Colombia presented the initial request for the partial subtraction of the Maceo project from the IMD to test the feasibility of achieving the proposed expansion of the activity in the project and comments were received in May 2018. In this regard, on October 11, 2018, CEMEX Colombia submitted a response to the latest request for information in connection with such subtraction process. This process of partial subtraction of the Maceo project, would allow the removal of the cement operation productive area from the DMI. This request requires evidence of the viability to develop the proposed activity of the cement project in said area. Meanwhile, CEMEX Colombia will limit its activities to those on which it has the relevant authorizations.

• On December 11, 2017, in the context of a market investigation opened in 2013 against five cement companies and 14 executives of those companies, including two former executives of CEMEX Colombia for purported practices that limited free competition, and after several processes over the years, the Colombian Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio or the “SIC”) imposed a final fine to CEMEX Colombia for an amount equivalent to US$25 ($491). As a result, CEMEX Colombia recognized a provision for this amount against “Other expenses, net” in 2017. This fine was paid on January 5, 2018. On June 7, 2018, CEMEX Colombia filed an annulment and reestablishment of right claim before the Administrative Court seeking for the annulment of the charges brought forth by the SIC and the restitution of the fine paid, with any adjustments provided by Colombian Law. This claim could take up to six years to be resolved. As of December 31, 2018, CEMEX is not able to assess the likelihood for the recovery of the fine imposed by the SIC.

• In January 2007, the Polish Competition and Consumers Protection Office (the “Protection Office”) initiated an antitrust proceeding against all cement producers in the country, including CEMEX Polska Sp. Z.o.o.(“CEMEX Polska”) and another subsidiary in Poland, arguing that there was an agreement between all cement producers in Poland regarding prices, market quotas and other sales conditions; and that the producers exchanged information, all of which limited competition in the Polish cement market. In December 2009, the Protection Office issued a resolution imposing fines on a number of Polish cement producers, including CEMEX Polska for the period of 1998 to 2006. The original fine imposed on CEMEX Polska was for an amount in Polish Zloty equivalent to US$31 ($609). After a resolution of December 2013 to an appeal filed against the Protection Office’s fine before the Polish Court of Competition and Consumer Protection (the “First Instance Court”) that reduced the fine and a resolution of March 2018 to an appeal of CEMEX Polska filed before the Appeals Courts in Warsaw against the resolution of the First Instance Court, the fine was further reduced to a final amount in Polish Zloty equivalent to US$18 ($354). This final amount was paid in 2018. On November 19, 2018, CEMEX Polska filed before the Polish Supreme Court an appeal against the Appeal Court’s judgment seeking the reduction of the imposed fine. As of December 31, 2018, CEMEX Polska expects that, during the first half of 2019, the Polish Supreme Court will issue a decision regarding acceptance of the cassation appeal for its study.

• As of December 31, 2018, CEMEX had accrued environmental remediation liabilities in the United Kingdom pertaining to closed and current landfill sites for the confinement of waste, representing the NPV of such obligations for an amount in pounds sterling equivalent to US$167 ($3,282). Expenditure was assessed and quantified over the period in which the sites have the potential to cause environmental harm, which was accepted by the regulator as being up to 60 years from the date of closure. The assessed expenditure included the costs of monitoring the sites and the installation, repair and renewal of environmental infrastructure.

• As of December 31, 2018, CEMEX had accrued environmental remediation liabilities in the United States for US$33 ($648), related to: a) the disposal of various materials in accordance with past industry practice, which might currently be categorized as hazardous substances or wastes, and b) the cleanup of sites used or operated by CEMEX, including discontinued operations, regarding the disposal of hazardous substances or waste, either individually or jointly with other parties. Most of the proceedings are in the preliminary stages and a final resolution might take several years. CEMEX does not believe that it will be required to spend significant sums on these matters in excess of the amounts previously recorded. The ultimate cost that may 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.

62

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

24.2) OTHER CONTINGENCIES FROM LEGAL PROCEEDINGS

CEMEX is involved in various legal proceedings, which have not required the recognition of accruals, considering that the probability of loss is less than probable or remote. In certain cases, a negative resolution may represent a decrease in future revenues, an increase in operating costs or a loss. Nonetheless, until all stages in the procedures are exhausted in each proceeding, CEMEX cannot assure the achievement of a final favorable resolution. As of December 31, 2018, the most significant events with a quantification of the potential loss, when it is determinable and would not impair the outcome of the relevant proceeding, were as follows:

• On September 20, 2018, triggered by heavy rainfall, a landslide causing damages and fatalities (the “Landslide”) occurred in a site located within an area covered by mining rights of APO Land & Quarry Corporation (“ALQC”) in Naga City, Cebu, Philippines. ALQC is a principal raw material supplier of APO Cement Corporation (“APO”), a wholly-owned subsidiary of CHP. CEMEX indirectly owns a minority 40% stake in ALQC. On November 19, 2018, CHP and APO were served summons concerning an environmental class action lawsuit filed by 40 individuals and one legal entity (on behalf of 8,000 individuals allegedly affected by the Landslide) at the Regional Trial Court of Talisay, Cebu, against CHP, ALQC, APO, the Mines and Geosciences Bureau of the Department of Environment and Natural Resources, the City Government of Naga, and the Province of Cebu. In the complaint, (i) among other allegations, plaintiffs claim that the Landslide occurred as a result of the defendants’ gross negligence; and (ii) seek, among other relief, (a) monetary damages for an amount in Philippine Pesos equivalent to US$82 ($1,611), (b) the establishment of a rehabilitation fund for an amount in Philippine Pesos equivalent to US$10 ($197), and (c) the issuance of a Temporary Environment Protection Order against ALQC aiming to prevent ALQC from performing further quarrying activities while the case is still pending. As of December 31, 2018, CHP, APO and ALQC (collectively, the “Private Defendants”) hold and will defend its position that the Landslide occurred due to natural causes and deny any liability. In the event a final adverse resolution is issued in this matter, plaintiffs will have the option to proceed against any one of ALQC, APO or CHP for satisfaction of the entirety of the potential judgement award, without the need to proceed against any other Private Defendant beforehand. Thus, ALQC’s, APO’s or CHP’s assets alone could be exposed to execution proceedings. As of December 31, 2018, CEMEX is not able to assess the likelihood of an adverse result to this lawsuit; and, because of its current status and its preliminary nature, CEMEX is neither able to assess if a final adverse result in this lawsuit would have a material adverse impact on its results of operations, liquidity and financial position.

• On June 12, 2018, the Authority for Consumer Protection and Competition Defense of Panama (the “Panama Authority”) carried out an administrative investigation against CEMEX and other competitors for the alleged commission of monopolistic practices in relation to the gray cement and the ready-mix concrete markets. From the administrative investigation, the Panama Authority considered there were elements that serve as a basis to consider the possible existence of monopolistic or anticompetitive practices consisting of: (i) price fixing and/or production restriction of gray cement sold to ready-mix concrete producers in Panama; and (ii) unilateral and/or joint predatory acts and/or cross subsidies in the ready-mix concrete market. On October 16, 2018, the Panama Authority notified CEMEX of a new information request in order to continue their investigation. The Panama Authority is gathering facts necessary to make an informed decision about whether violations of Panamanian law have occurred. CEMEX is cooperating with the Panama Authority. As of December 31, 2018, given the status of the investigation, CEMEX is not able to assess if this investigation will lead to any fines, penalties or remedies, or if such fines, penalties or remedies, if any, would have a material adverse effect on the Company’s results of operations, liquidity or financial position.

• Certain of CEMEX’s subsidiaries in the United States were notified of a grand jury subpoena dated March 29, 2018 issued by the United States Department of Justice (“DOJ”) related to an investigation of possible antitrust law violations in connection with CEMEX’s sales (and related sales practices) of gray Portland cement and slag in the United States and its territories. The objective of this subpoena is to gather facts necessary to make an informed decision about whether violations of U.S. law have occurred. CEMEX has been cooperating with the DOJ and is complying with the subpoena. As of December 31, 2018, given the status of the investigation, CEMEX is not able to assess if this investigation will lead to any fines, penalties or remedies, or if such fines, penalties or remedies, if any, would have a material adverse effect on the Company’s results of operations, liquidity or financial position.

• On March 16, 2018, a putative securities class action complaint was filed against CEMEX and one of its members of the board of directors (CEO) and certain of its officers (CEO and CFO) in the U.S. District Court for the Southern District of New York, on behalf of investors who purchased or otherwise acquired securities of CEMEX between August 14, 2014 to March 13, 2018, inclusive. The complaint alleges that CEMEX purportedly issued press releases and SEC filings that included materially false and misleading statements in connection with alleged misconduct relating to the Maceo Project and the potential regulatory or criminal actions that might arise as a result. On September 14, 2018, CEMEX filed a motion to dismiss this lawsuit. During the fourth quarter of 2018, plaintiffs filed an opposition brief to this motion to dismiss. CEMEX denies liability and intends to vigorously defend the case. As of December 31, 2018, given the status of the lawsuit, CEMEX is not able to assess the likelihood of an adverse result to this lawsuit, and for the same reasons, CEMEX is not able to assess if a final adverse result in this lawsuit would have a material adverse impact on its results of operations, liquidity and financial position.

• In December 2016, the Parent Company received subpoenas from the United States Securities and Exchange Commission (“SEC”) seeking information to determine whether there have been any violations of the U.S. Foreign Corrupt Practices Act stemming from the Maceo project. These subpoenas do not mean that the SEC has concluded that the Parent Company or any of its affiliates violated the law. The Parent Company has been cooperating with the SEC and intends to continue cooperating fully with the SEC. The DOJ also opened an investigation into this matter. In this regard, on March 12, 2018, the DOJ issued a grand jury subpoena to the Parent Company relating to its operations in Colombia and other jurisdictions. The Parent Company intends to cooperate fully with the SEC, the DOJ and any other investigatory entity. As of December 31, 2018, the Parent Company is unable to predict the duration, scope, or outcome of either the SEC investigation or the DOJ investigation, or any other investigation that may arise, or, because of the current status of the SEC investigation and the preliminary nature of the DOJ investigation, the potential sanctions which could be borne by the Parent Company, or if such sanctions, if any, would have a material adverse impact on CEMEX results of operations, liquidity or financial position.

63

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Other contingencies from legal proceedings - continued

• In September 2016, CEMEX España Operaciones, S.L.U. (“CEMEX España Operaciones”), a subsidiary of CEMEX in Spain, in the context of a market investigation initiated in 2014 for alleged anticompetitive practices in 2009 for the cement market and the years 2008, 2009, 2012, 2013 and 2014 for the ready-mix market, was notified of a resolution by the National Markets and Competition Commission (Comisión Nacional de los Mercados y la Competencia or the “CNMC”) requiring the payment of a fine for €6 (US$7 or $138). CEMEX España Operaciones appealed the fine and requested the suspension of payment before the National Court (Audiencia Nacional), which granted the requested suspension; subject to issuance of a bank guarantee for the principal amount of the sanction. The CNMC was notified. As of December 31, 2018, CEMEX do not expect that an adverse resolution to this matter would have a material adverse impact on our results of operations, liquidity and financial condition.

• In February 2014, the Egyptian Tax Authority requested Assiut Cement Company (“ACC”), a subsidiary of CEMEX in Egypt, the payment of a development levy on clay used in the Egyptian cement industry in amounts equivalent as of December 31, 2018 to US$18 ($354) for the period from May 5, 2008 to November 30, 2011. In March 2014, ACC appealed the levy and obtained a favorable resolution from the Ministerial Committee for Resolution of Investment Disputes, which instructed the Egyptian Tax Authority to cease claiming from ACC the aforementioned payment of the levy on clay. It was further decided that the levy on clay should not be imposed on imported clinker. Nonetheless, in May 2016, the Egyptian Tax Authority challenged ACC´s right to cancel the levy on clay before the North Cairo Court, which referred the cases to Cairo’s Administrative Judiciary Court. These cases have been adjourned by the Commissioners of the Cairo Administrative Judiciary Court to February 4, 2019 for submission of documents by the attorney for the State pertaining to this dispute. CEMEX does not expect that such referral will prejudice ACC’s favorable legal position in this dispute. As of December 31, 2018, CEMEX does not expect a material adverse impact due to this matter in its results of operations, liquidity or financial position.

• In September 2012, in connection with a lawsuit submitted to a first instance court in Assiut, Egypt in 2011, the first instance court of Assiut issued a resolution in order to nullify the Share Purchase Agreement (the “SPA”) pursuant to which CEMEX acquired in 1999 a controlling interest in Assiut Cement Company (“ACC”). In addition, during 2011 and 2012, lawsuits seeking, among other things, the annulment of the SPA were filed by different plaintiffs, including 25 former employees of ACC, before Cairo’s State Council. After several appeals, hearings and resolutions over the years, the cases are held in Cairo’s 7th Circuit State Council Administrative Judiciary Court awaiting the High Constitutional Court to pronounce in regard to the challenges against the constitutionality of Law 32/2014 filed by the plaintiffs, which protects CEMEX’s investments in Egypt. These matters are complex and take several years to be resolved. As of December 31, 2018, CEMEX is not able to assess the likelihood of an adverse resolution regarding these lawsuits nor is able to assess if the Constitutional Court will dismiss Law 32/2014, but, regarding the lawsuits, if adversely resolved, CEMEX does not believe the resolutions in the first instance would have an immediate material adverse impact on CEMEX’s operations, liquidity and financial condition. However, if CEMEX exhausts all legal recourses available, a final adverse resolution of these lawsuits, or if the Constitutional Court dismisses Law 32/2014, this could adversely impact the ongoing matters regarding the SPA, which could have a material adverse impact on CEMEX’s operations, liquidity and financial condition.

• In 2012, in connection with a contract entered into in 1990 (the “Quarry Contract”) by CEMEX Granulats Rhône Méditerranée (“CEMEX GRM”), one of CEMEX’s subsidiaries in France, with SCI La Quinoniere (“SCI”) pursuant to which CEMEX GRM has drilling rights in order to extract reserves and do quarry remediation at a quarry in the Rhône region of France, SCI filed a claim against CEMEX GRM for breach of the Quarry Contract, requesting the rescission of such contract and damages plus interest for a revised amount in euros equivalent to US$77 ($1,513), arguing that CEMEX GRM partially filled the quarry allegedly in breach of the terms of the Quarry Contract. After many hearings, resolutions and appeals over the years, on March 13, 2018, the court of appeals issued an enforceable resolution ordering the rescission of the Quarry Contract and designated a judicial expert to: a) determine the volume of both excavated and backfilling materials, and b) give his opinion on the potential damages suffered by SCI. CEMEX GRM appealed this resolution with the court of cassation, which will advance in parallel to the judicial expert’s process. As of December 31, 2018, as the likelihood of an adverse final resolution cannot be assured with certainty, CEMEX believes that an adverse resolution upon conclusion of all defense instances is not probable. However, in case of an adverse resolution, CEMEX considers that it should not have a material adverse impact on CEMEX’s results of operations, liquidity and financial condition.

• In June 2012, one of CEMEX’s subsidiaries in Israel and three other companies were notified about a class action suit filed by a homeowner who built his house with concrete supplied by the defendants in October 2010. The class action argues that the concrete supplied to him did not meet with the Israeli ready-mix strength standard requirements and that as a result CEMEX acted unlawfully toward all of its customers who received concrete that did not comply with such standard requirements, causing financial and non-financial damages to those customers, including the plaintiff. CEMEX presumes that the class action would represent the claim of all the clients who purchased the alleged non-conforming concrete from its subsidiary in Israel during the past 7 years, the limitation period according to applicable laws in Israel. The damages that could be sought are equivalent to US$74 ($1,454). After several hearings to present evidence from all parties over the years and the resolution of the court to join together all claims against all four companies in order to simplify and shorten court proceedings. An abandonment of action has been submitted to the court with regards to two of the four defendant companies, but CEMEX’s subsidiary and another company remain as defendants. All parties have finished presenting their positions. There are pending resolutions regarding the class action and the abandonment of action of the two defendants. As of December 31, 2018, CEMEX’s subsidiary in Israel is not able to assess the likelihood of the class action application being approved or, if approved, of an adverse result, such as an award for damages in the full amount that could be sought, but if adversely resolved CEMEX considers that an adverse resolution on this matter would not have a material adverse impact on its results of operations, liquidity or financial condition.

64

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Other contingencies from legal proceedings - continued

• In June 2010, the District of Bogota’s Environmental Secretary (the “District Secretary”), ordered the suspension of CEMEX Colombia’s mining activities at El Tunjuelo quarry, located in Bogota, sealed off the mine to machinery and prohibited the removal of aggregates inventory, as well as those of other aggregates producers in the same area. The Environmental Secretary alleged that during the past 60 years at that time, CEMEX Colombia and the other companies illegally changed the course of the Tunjuelo River, have used the percolating waters without permission and improperly used the edge of the river for mining activities. CEMEX Colombia requested from the beginning the revocation of the order considering that its mining activities at El Tunjuelo quarry were supported by the authorizations required by the applicable environmental laws and that its environmental impact studies were reviewed and authorized by the Ministry of Environment and Sustainable Development. Since June 2010 the local authorities closed the quarry and prohibited the removal of aggregates inventory. On July 11, 2018, considering that CEMEX Colombia incurred in risk of having provoked affectation or harm in the use of the underground waters in the Tunjuelo river’s middle basin without the corresponding permit issued by the environmental authority, the District Secretary imposed a penalty for an amount in Colombian pesos equivalent to US$0.4 as of August 1, 2018, the date it was settled. CEMEX Colombia was exonerated of incurring negligent or willful misconduct. With this penalty, all procedures and possible claims against CEMEX Colombia related to this matter were finalized.

In connection with the legal proceedings presented in notes 24.1 and 24.2, the exchange rates as of December 31, 2018 used by CEMEX to convert the amounts in local currency to their equivalents in dollars were the official closing exchange rates of 3.75 Polish zloty per dollar, 0.87 Euro per dollar, 0.78 British pounds sterling per dollar, 3,250 Colombian pesos per dollar and 3.75 Israelite shekel per dollar.

In addition to the legal proceedings described above in notes 24.1 and 24.2, as of December 31, 2018, CEMEX is involved in various legal proceedings of minor impact that have arisen in the ordinary course of business. These proceedings involve: 1) product warranty claims; 2) claims for environmental damages; 3) indemnification claims relating to acquisitions or divestitures; 4) claims to revoke permits and/or concessions; and 5) other diverse civil, administrative, commercial and lawless actions. CEMEX considers that in those instances in which obligations have been incurred, CEMEX has accrued adequate provisions to cover the related risks. CEMEX believes these matters will be resolved without any significant effect on its business, financial position or results of operations. In addition, in relation to certain ongoing legal proceedings, CEMEX is sometimes able to make and disclose reasonable estimates of the expected loss or range of possible loss, as well as disclose any provision accrued for such loss, but for a limited number of ongoing legal proceedings, CEMEX may not be able to make a reasonable estimate of the expected loss or range of possible loss or may be able to do so but believes that disclosure of such information on a case-by-case basis would seriously prejudice CEMEX’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases, CEMEX has disclosed qualitative information with respect to the nature and characteristics of the contingency but has not disclosed the estimate of the range of potential loss.

25) RELATED PARTIES

All significant balances and transactions between the entities that constitute the CEMEX group have been eliminated in the preparation of the consolidated financial statements. These balances with related parties resulted primarily from: (i) the sale and purchase of goods between group entities; (ii) the sale and/or acquisition of subsidiaries’ shares within the CEMEX group; (iii) the invoicing of administrative services, rentals, trademarks and commercial name rights, royalties and other services rendered between group entities; and (iv) loans between related parties. Transactions between group entities are conducted on arm’s length terms based on market prices and conditions. When market prices and/or market conditions are not readily available, CEMEX conducts transfer pricing studies in the countries in which it operates to assure compliance with regulations applicable to transactions between related parties.

The definition of related parties includes entities or individuals outside the CEMEX group, which, due to their relationship with CEMEX, may take advantage of being in a privileged situation. Likewise, this applies to cases in which CEMEX may take advantage of such relationships and obtain benefits in its financial position or operating results. CEMEX’s transactions with related parties are executed under market conditions.

For the years ended December 31, 2018, 2017 and 2016, in ordinary course of business, CEMEX has entered into transactions with related parties for the sale and/or purchase of products, sale and/or purchase of services or the lease of assets, all of which are not significant for CEMEX and to the best of CEMEX’s knowledge are not significant to the the related party, are incurred for non-significant amounts for CEMEX and are executed under market terms and conditions following the same commercial principles and authorizations applied to other third parties. These identified transactions, as applicable, are approved at least annually by the Parent Company’s Board of Directors. For CEMEX, none of these transactions are material to be disclosed separately.

In addition, for the years ended December 31, 2018, 2017 and 2016, the aggregate amount of compensation of CEMEX, S.A.B. de C.V. board of directors, including alternate directors, and CEMEX’s top management executives was US$38 ($732), US$47 ($887) and US$43 ($802), respectively. Of these amounts, US$29 ($559) in 2018, US$35 ($661) in 2017, US$32 ($595) in 2016, was paid as base compensation plus performance bonuses, including pension and post-employment benefits. In addition, US$9 ($173) in 2018, US$12 ($227) in 2017 and US$11 ($207) in 2016 of the aggregate amounts in each year, corresponded to allocations of Parent Company CPOs under CEMEX’s executive share-based compensation programs.

65

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

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

26) MAIN SUBSIDIARIES

As mentioned in note 4.4 and 20.4, as of December 31, 2018 and 2017, there are non-controlling interests on certain consolidated entities that are in turn holding companies of relevant operations. The main subsidiaries as of December 31, 2018 and 2017, which ownership interest is presented according to the interest maintained by their direct holding company, were as follows:

		% Interest
Subsidiary	Country	2018		2017
CEMEX México, S. A. de C.V. 1	Mexico		100.0		100.0
CEMEX España, S.A. 2	Spain		99.9		99.9
CEMEX, Inc.	United States of America		100.0		100.0
CEMEX Latam Holdings, S.A. 3	Spain		73.2		73.2
CEMEX (Costa Rica), S.A.	Costa Rica		99.1		99.1
CEMEX Nicaragua, S.A.	Nicaragua		100.0		100.0
Assiut Cement Company	Egypt		95.8		95.8
CEMEX Colombia S.A. 4	Colombia		99.9		99.9
Cemento Bayano, S.A. 5	Panama		100.0		100.0
CEMEX Dominicana, S.A.	Dominican Republic		100.0		100.0
Trinidad Cement Limited	Trinidad and Tobago		69.8		69.8
Caribbean Cement Company Limited 6	Jamaica		79.0		79.0
CEMEX de Puerto Rico Inc.	Puerto Rico		100.0		100.0
CEMEX France Gestion (S.A.S.)	France		100.0		100.0
CEMEX Holdings Philippines, Inc. 7	Philippines		55.0		55.0
Solid Cement Corporation 7	Philippines		100.0		100.0
APO Cement Corporation 7	Philippines		100.0		100.0
CEMEX U.K.	United Kingdom		100.0		100.0
CEMEX Deutschland, AG.	Germany		100.0		100.0
CEMEX Czech Republic, s.r.o.	Czech Republic		100.0		100.0
CEMEX Polska sp. Z.o.o.	Poland		100.0		100.0
CEMEX Holdings (Israel) Ltd.	Israel		100.0		100.0
CEMEX SIA	Latvia		100.0		100.0
CEMEX Topmix LLC, CEMEX Supermix LLC and CEMEX Falcon LLC 8	United Arab Emirates		100.0		100.0
Neoris N.V. 9	The Netherlands		99.8		99.8
CEMEX International Trading LLC 10	United States of America		100.0		100.0
Transenergy, Inc. 11	United States of America		100.0		100.0

1 CEMEX México, S.A. de C.V. is the indirect holding company of CEMEX España, S.A. and subsidiaries.

2 CEMEX España, S.A is the indirect holding company of most of CEMEX’s international operations.

3 The interest reported excludes own shares held in CLH’s treasury. CLH, entity incorporated in Spain, trades its ordinary shares in the Colombian Stock Exchange under the symbol CLH, and is the indirect holding company of CEMEX’s operations in Colombia, Panama, Costa Rica, Guatemala, Nicaragua, El Salvador and Brazil (note 20.4).

4 Represents our 99.7% and 98.9% interest in ordinary and preferred shares, respectively.

5 Includes a 0.515% interest held in Cemento Bayano’s treasury.

6 The aggregate ownership interest of CEMEX in this entity of 79.04% includes TCL’s direct and indirect 74.08% interest and the Parent Company’s indirect 4.96% interest.

7 Represents CHP direct and indirect interest. CEMEX’s operations in the Philippines are conducted through CHP, subsidiary incorporated in the Philippines which since July 2016 trades its ordinary shares on the Philippines Stock Exchange under the symbol CHP (note 20.4).

8 CEMEX owns a 49% equity interest in each of these entities and holds the remaining 51% of the economic benefits, through agreements with other shareholders.

9 Neoris N.V. is the holding company of the entities involved in the sale of information technology solutions and services.

10 CEMEX International Trading, LLC is involved in the international trading of CEMEX’s products.

11 Formerly named Gulf Coast Portland Cement Co., it is engaged in the procurement and trading of fuels, such as coal and petroleum coke, used in certain operations of CEMEX.

66

KPMG Cárdenas Dosal, S.C. Manuel Ávila Camacho 176 P1, Reforma Social, Miguel Hidalgo, C.P. 11650, Ciudad de México. Teléfono: + 01 (55) 5246 8300 kpmg.com.mx

Independent auditors’ report

To the Board of Directors and Stockholders

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

Opinion

We have audited the consolidated financial statements of CEMEX, S.A.B. de C.V. and subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at December 31, 2018 and 2017, the consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2018, 2017 and 2016, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2018, 2017 and 2016 in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Mexico and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

“D.R.” © KPMG Cárdenas Dosal, S.C., la firma mexicana miembro de la red de firmas miembro de KPMG afiliadas a KPMG International Cooperative (“KPMG International”), una entidad suiza. Impreso en México. Todos los derechos reservados. Aguascalientes, Ags. Cancún, Q. Roo. Ciudad de México. Ciudad Juárez, Chih. Culiacán, Sin. Chihuahua, Chih. Guadalajara, Jal. Hermosillo, Son. León, Gto. Mérida, Yuc. Mexicali, B.C. Monterrey, N.L. Puebla, Pue. Querétaro, Qro. Reynosa, Tamps. Saltillo, Coah. San Luis Potosi, S.L.P. Tijuana, B.C.

Evaluation of goodwill impairment
See Note 15.2 to the consolidated financial statements
The key audit matter	How the matter was addressed in our audit
The Group’s balance sheet includes a significant amount of goodwill arising mainly from historic acquisitions which requires conducting an annual evaluation of its recoverability. We consider this a key audit matter because of the materiality of the goodwill balance and because it involves significant judgments by the Group regarding long-term sales growth rates, costs and projected operating margins in the different countries where the Group operates, discount rates used to discount future cash flows, as well as comparisons to publicly available information such as multiples of EBITDA in recent market transactions.	Our audit procedures included considering the consistency and appropriateness of the allocation of goodwill to groups of CGUs, as well as testing the Group’s methodology and assumptions used in preparing discounted cash flow models through the involvement of our valuation specialists. We compared the Group’s assumptions to data obtained from external sources in relation to key inputs such as discount rates and projected economic growth and compared the latter with reference to historical forecasting accuracy, considering the potential risk of management bias. We compared the sum of the discounted cash flows to the Group’s market capitalization to assess the reasonableness of those cash flows. In addition we performed sensitivity analysis using multiples of EBITDA. We challenged the overall results of the calculations and performed our own sensitivity analysis, including a reasonably probable reduction in assumed growth rates and cash flows. We also assessed whether the group’s disclosures about the sensitivity of the outcome of the impairment assessment to changes in key assumptions such as discount rates and growth rates reflected the risks inherent in the valuation of goodwill.
Recoverability of deferred tax assets related to tax loss carry forwards
See Note 19.2 and 19.4 to the consolidated financial statements
The key audit matter	How the matter was addressed in our audit
The group has significant deferred tax assets in respect of tax losses mainly in Mexico.	Our audit procedures included considering historical levels of taxable profits and comparing the assumptions used in respect of future taxable profit forecasts to those used in the Group’s long-term forecasts, such as the forecasts prepared in relation to goodwill impairment evaluations.

There is inherent uncertainty involved in forecasting future taxable profits, which determines the extent to which deferred tax assets are or are not recognized.   The periods over which the deferred tax assets are expected to be recovered can be extensive.   As a result of the above, we consider this to be a key audit matter. With the assistance of our tax specialists we evaluated the reasonableness of key tax assumptions, timing of reversal of temporary differences and expiration of tax loss carry forwards, as well as the reasonableness of any tax strategies proposed by the Group based on our knowledge of the tax, legal and operating environments in which the Group operates.   We also assessed the adequacy of the Group’s disclosures setting out the basis of the deferred tax asset balances and the level of estimation involved.

Tax and legal contingencies
See Notes 19.4 and 24 to the consolidated financial statements
The key audit matter	How the matter was addressed in our audit
The Group is involved in certain significant tax and legal proceedings. Compliance with tax regulations is a complex matter within the Group because of the different tax laws in the jurisdictions where the Group operates, the application of which requires the use of significant expertise and judgment, making this area a key audit matter. Also, because of the diversity and complexity of the different laws and regulations applicable to the Group’s operations, exposure to legal claims, is a risk that requires management’s attention. Resolution of tax and legal proceedings may span multiple years, and may involve negotiation or litigation and therefore, making judgments of potential outcomes is a complex issue in the Group. Management applies judgment in estimating the likelihood of the future outcome in each case and records a provision for uncertain tax positions or settlement of legal claims where applicable. We focused on this area due to the inherent complexity and judgment in estimating the amount of provision required.	Our audit procedures included assessment of the adequacy of the level of provision established, or lack thereof, in relation to significant uncertain tax positions and legal contingencies, primarily in respect of cases in Mexico (Corporate), Spain, France, Egypt, and Colombia. We discussed the status of each significant case with management, including in-house counsel, and critically assessed their responses. We read the latest correspondence between the Group and the various tax authorities or plaintiffs and attorneys where applicable. We also obtained written responses from the Group’s legal advisors where those have been appointed, containing their views on material exposures and any related litigation. In relation to tax matters, we also met with the Group’s tax officers to assess their judgments on significant cases, their views and strategies, as well as the related technical grounds to their position based on applicable tax laws by involving our tax specialists. We assessed whether the Group’s disclosures about legal and tax contingencies provided sufficient information to readers of the financial statements in light of the significance of these cases.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended December 31, 2018, to be filed with the National Banking and Securities Commission (Mexico) (Comisión Nacional Bancaria y de Valores) and the Mexican Stock Exchange (Bolsa Mexicana de Valores) (“the Annual Report”) but does not include the consolidated financial statements and our auditors’ report thereon. The Annual Report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

/s/ Joaquín Alejandro Aguilera Dávila

C.P.C. Joaquín Alejandro Aguilera Dávila

KPMG Cárdenas Dosal, S.C.

Monterrey, N.L.,

January 30, 2019

EX-99.2

Exhibit 2

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

Separate Financial Statements

December 31, 2018, 2017 and 2016

(With Independent Auditor’s Report Thereon)

INDEX TO THE PARENT COMPANY-ONLY FINANCIAL STATEMENTS

CEMEX, S.A.B. de C.V. (Parent Company-only):
Income Statements for the years ended December 31, 2018, 2017 and 2016	1
Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016	2
Statements of Financial Position as of December 31, 2018 and 2017	3
Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	4
Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016	5
Notes to the Financial Statements	6
Independent Auditors’ Report - KPMG Cárdenas Dosal, S.C.	36

CEMEX, S.A.B. DE C.V. (PARENT COMPANY-ONLY)

Income Statements

(Millions of Mexican pesos)

			Years ended December 31,
	Notes		2018			2017			2016
Revenues		2.1, 2.13	$	64,705			58,543			53,297
Cost of sales		2.14		(28,928	)		(25,287	)		(23,073	)
Operating expenses		2.14, 4		(21,621	)		(19,305	)		(17,959	)
Operating earnings before other income (expenses), net				14,156			13,951			12,265
Other income (expenses), net		5		38			(1,391	)		530
Operating earnings				14,194			12,560			12,795
Financial expense		16		(12,464	)		(15,126	)		(15,430	)
Financial income and other items, net		6		4,348			3,772			801
Foreign exchange results				2,850			(4,593	)		5,833
Share of profit of equity accounted investees		12		1,926			17,873			13,431
Net income before income tax				10,854			14,486			17,430
Income tax		18		(387	)		738			(3,399	)
NET INCOME			$	10,467			15,224			14,031

The accompanying notes are part of these Parent Company-only financial statements.

1

CEMEX, S.A.B. DE C.V. (PARENT COMPANY-ONLY)

Statements of Comprehensive Income

(Millions of Mexican pesos)

			Years ended December 31,
	Notes		2018		2017			2016
NET INCOME			$	10,467		15,224			14,031
Items that will not be reclassified subsequently to the income statement
Currency translation effects		2.3		193		(9,263	)		10,263
Derivative financial instruments designated as net investment hedge		16.4		—		110			—
Income tax recognized directly in other comprehensive income		18.2		381		(33	)		—
Total items of other comprehensive income for the period				574		(9,186	)		10,263
TOTAL COMPREHENSIVE INCOME			$	11,041		6,038			24,294

The accompanying notes are part of these Parent Company-only financial statements.

2

CEMEX, S.A.B. DE C.V. (PARENT COMPANY-ONLY)

Statements of Financial Position

(Millions of Mexican pesos)

	Notes		2018		2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents		7	$	670		667
Trade accounts receivable, net		8		3,981		3,993
Other accounts receivable		9		1,075		1,342
Inventories		10		4,183		3,488
Accounts receivable from related parties		17.1		1,724		1,200
Other current assets		11		24		68
Total current assets				11,657		10,758
NON-CURRENT ASSETS
Equity accounted investees		12		418,417		414,951
Other investments and non-current accounts receivable		13		1,577		2,077
Accounts receivable from related-parties long term		17.1		42		—
Property, machinery and equipment, net		14		3,599		3,523
Deferred income tax assets		18.2		812		828
Total non-current assets				424,447		421,379
TOTAL ASSETS			$	436,104		432,137
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term debt		16.1	$	570		15,844
Other financial obligations		16.2		2,179		9,110
Trade payables				8,648		7,437
Accounts payable to related parties		17.1		73,210		60,141
Other current liabilities		15		5,410		6,015
Total current liabilities				90,017		98,547
NON-CURRENT LIABILITIES
Long-term debt		16.1		144,650		140,208
Other financial obligations		16.2		10,213		10,515
Long-term accounts payable to related parties		17.1		218		373
Tax payable and other long-term liabilities		18.1		2,356		2,954
Total non-current liabilities				157,437		154,050
TOTAL LIABILITIES				247,454		252,597
STOCKHOLDERS’ EQUITY
Common stock and additional paid-in capital		19.1		145,322		144,654
Other equity reserves		2.12		11,869		13,483
Retained earnings		19.2		20,992		6,179
Net income				10,467		15,224
TOTAL STOCKHOLDERS’ EQUITY				188,650		179,540
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				436,104		432,137

The accompanying notes are part of these Parent Company-only financial statements.

3

CEMEX, S.A.B. DE C.V. (PARENT COMPANY-ONLY)

Statements of Cash Flows

(Millions of Mexican pesos)

			Years ended December 31,
	Notes		2018			2017			2016
OPERATING ACTIVITIES
Net income			$	10,467			15,224			14,031
Non-cash items:
Depreciation of property, machinery and equipment		4, 14		65			269			491
Share of profit of equity accounted investees		12		(1,926	)		(17,873	)		(13,431	)
Financial items, net				5,266			15,947			8,796
Income taxes		18.1		387			(738	)		3,399
Results from the sale of assets		5		(36	)		(41	)		(319	)
Changes in working capital				16,422			7,524			61,768
Net cash flow provided by operating activities before financial expense and income taxes				30,645			20,312			74,735
Financial expense paid				(12,065	)		(12,287	)		(12,802	)
Income taxes paid		18.1		(989	)		(636	)		(929	)
Net cash flows provided by operating activities				17,591			7,389			61,004
INVESTING ACTIVITIES
Equity accounted investees		12		(374	)		(375	)		(36,964	)
Disposal of investments in associates		12		11			7,106			—
Financial instruments		16.1		—			(942	)		435
Property, plant and equipment		14		106			(216	)		—
Net cash flows (used in) provided by investing activities				(257	)		5,573			(36,529	)
FINANCING ACTIVITIES
Long-term related parties, net		17.1		(198	)		(429	)		867
Derivative financial instruments		16.4		392			1,489			180
Repayment of debt, net		16		(8,885	)		(12,180	)		(22,707	)
Other financial obligations, net		16.2		(6,665	)		—			—
Repurchase of shares under program		19.1		(1,520	)		—			—
Securitization of trade accounts receivable		16.2		128			1,100			(745	)
Other financial expenses paid in cash		16		(583	)		(2,627	)		(2,026	)
Net cash flows used in financing activities				(17,331	)		(12,647	)		(24,431	)
Increase in cash and cash equivalents				3			315			44
Cash and cash equivalents at beginning of period				667			352			308
CASH AND CASH EQUIVALENTS AT END OF PERIOD		7	$	670			667			352
Changes in working capital:
Trade accounts receivable, net		8	$	12			(264	)		(257	)
Other accounts receivable		9		267			(395	)		142
Inventories		10		(695	)		250			(897	)
Short-term related parties, net		17.1		16,232			6,161			59,191
Trade payables				1,211			1,796			2,068
Other current liabilities		15		(605	)		(24	)		1,521
Changes in working capital, excluding income taxes			$	16,422			7,524			61,768

The accompanying notes are part of these Parent Company-only financial statements.

4

CEMEX, S.A.B. DE C.V. (PARENT COMPANY-ONLY)

Statements of Changes in Stockholders’ Equity

(Millions of Mexican pesos)

	Notes	Common stock		Additional paid-in capital		Other equity reserves			Retained earnings			Total stockholders’ equity
Balance as of December 31, 2015		$	4,158		115,466		15,273			8,582			143,479
Comprehensive income, net			—		—		10,263			14,031			24,294
Capitalization of retained earnings	19.1		4		6,966		—			(6,970	)		—
Share-based compensation	19.1		—		742		(742	)		—			—
Balance as of December 31, 2016		$	4,162		123,174		24,794			15,643			167,773
Comprehensive income, net			—		—		(9,186	)		15,224			6,038
Capitalization of retained earnings	19.1		5		9,459		—			(9,464	)		—
Effects of early conversion of convertible subordinated notes	16.2		4		7,059		(1,334	)		—			5,729
Share-based compensation	19.1		—		791		(791	)		—			—
Balance as of December 31, 2017		$	4,171		140,483		13,483			21,403			179,540
Effects from adoption of IFRS 9	2.1, 8		—		—		—			(411	)		(411	)
Balance as of January 1, 2018			4,171		140,483		13,483			20,992			179,129
Comprehensive income, net			—		—		574			10,467			11,041
Share-based compensation	19.1		—		668		(668	)		—			—
Share repurchase program	19.1		—		—		(1,520	)		—			(1,520	)
Balance as of December 31, 2018		$	4,171		141,151		11,869			31,459			188,650

The accompanying notes are part of these Parent Company-only financial statements.

5

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

1) DESCRIPTION OF BUSINESS

CEMEX, S.A.B. de C.V., founded in 1906, 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, holding company (parent) of entities whose main activities are oriented to the construction industry, through the production, marketing, sale and distribution of cement, ready-mix concrete, aggregates and other construction materials and services. In addition, in order to facilitate the acquisition of financing and run its operations in Mexico more efficiently, CEMEX, S.A.B. de C.V. carries out all business and operational activities of the cement, ready-mix concrete and aggregates sectors in Mexico.

The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican Stock Exchange (“MSE”) as Ordinary Participation Certificates (“CPOs”) under the symbol “CEMEXCPO”. 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.’s shares are listed on the New York Stock Exchange (“NYSE”) as American Depositary Shares (“ADSs”) under the symbol “CX.” Each ADS represents ten CPOs.

The terms “CEMEX, S.A.B. de C.V.” and/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. The issuance of these consolidated financial statements was authorized by the Board of Directors of CEMEX, S.A.B. de C.V. on January 30, 2019 considering the favorable recommendation of its Audit Committee. These financial statements will be submitted for authorization to the Annual General Ordinary Shareholders’ Meeting of the Parent Company on March 28, 2019.

2) SIGNIFICANT ACCOUNTING POLICIES

2.1) BASIS OF PRESENTATION AND DISCLOSURE

CEMEX, S.A.B. de C.V.’s financial statements as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Presentation currency and definition of terms

During the reported periods, the presentation currency of the financial statements was the Mexican peso. When reference is made to pesos or “$” it means Mexican pesos. The amounts in the financial statements and the accompanying notes are stated in millions, except when references are made to earnings per share and/or prices per share. When reference is made to “US$” or “dollars”, it means dollars of the United States of America (“United States”). When reference is made to “€” or “euros,” it means the currency in circulation in a significant number of European Union (“EU”) countries. When reference is made to “£” or “pounds”, it means British pounds sterling. When it is deemed relevant, certain amounts in foreign currency presented in the notes to the financial statements include between parentheses a convenience translation into dollars and/or into pesos, as applicable. Previously reported convenience translations of prior years are not restated unless the transaction is still outstanding, in which case those are restated using the closing exchange rates as of the reporting date. These translations should not be construed as representations that the amounts in pesos or dollars, as applicable, represent those peso or dollar amounts or could be converted into pesos or dollars at the rate indicated. As of December 31, 2018 and 2017, translations of pesos into dollars and dollars into pesos, were determined for statement of financial position amounts using the closing exchange rate of $19.65 for both years, and for statements of operations amounts, using the average exchange rates of $19.26, $18.88 and $18.72 pesos per dollar for 2018, 2017 and 2016, respectively. When the amounts between parentheses are the peso and the dollar, the amounts were determined by translating the euro amount into dollars using the closing exchange rates at year-end and then translating the dollars into pesos as previously described.

Newly issued IFRS adopted in 2018

IFRS 9, Financial Instruments: classification and measurement (“IFRS 9”) (note 2.5)

Effective beginning January 1, 2018, IFRS 9 sets forth the guidance relating to the classification and measurement of financial assets and financial liabilities, the accounting for expected credit losses of financial assets and commitments to extend credits, as well as the requirements for hedge accounting; and replaced IAS 39, Financial instruments: recognition and measurement (“IAS 39”). CEMEX, S.A.B. de C.V. applied IFRS 9 prospectively. The accounting policies were changed to comply with IFRS 9. The changes required by IFRS 9 are described as follows:

Among other aspects, IFRS 9 changed the classification categories for financial assets under IAS 39 and replaced them with categories that more closely reflect the measurement method, the contractual cash flow characteristics and the entity’s business model for managing the financial asset:

• Cash and cash equivalents, trade and other accounts receivable and other financial assets, which were classified as “Loans and receivables” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

• Investments and non-current accounts receivable that were classified as “Held to maturity” and measured at amortized cost under IAS 39, are now classified as “Held to collect” under IFRS 9 and continue to be measured at amortized cost.

• Investments that were classified as “Held for trading” and measured at fair value through profit or loss under IAS 39, are now classified as “Other investments” under IFRS 9 and are measured at fair value through profit or loss.

6

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Newly issued IFRS adopted in 2018 - IFRS 9 - continued

• Certain investments that were classified as “Held for sale” and measured at fair value through other comprehensive income under IAS 39, are now considered as strategic investments under IFRS 9 and continue to be measured at fair value through other comprehensive income.

Debt instruments and other financial obligations continue to be classified as “Loans” and measured at amortized cost under IFRS 9 and derivative financial instruments continue to be measured at fair value through profit or loss under IFRS 9.

CEMEX, S.A.B. de C.V. assessed which business models applied to its financial assets and liabilities as of the date of initial application of IFRS 9 and classified its financial instruments into the appropriate IFRS 9 categories. As of January 1, 2018, the changes due to the classification and measurement requirements under IFRS 9 did not impact either the measurement or carrying amount of financial assets and liabilities and there was no effect on CEMEX, S.A.B. de C.V.´s retained earnings.

In addition, under the new impairment model under IFRS 9 based on expected credit losses, impairment losses for the entire lifetime of financial assets, including trade accounts receivable, are recognized on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, considering for their measurement past events and current conditions, as well as reasonable and supportable forecasts affecting collectability. CEMEX, S.A.B. de C.V. developed an expected credit loss model applicable to its trade accounts receivable that considers the historical performance and economic environment, as well as the credit risk and expected developments for each group of customers and applied the simplified approach upon adoption of IFRS 9. The effects of the adoption of IFRS 9 on January 1, 2018 related to the expected credit loss model represented an increase in the allowance for expected credit losses of $111 recognized against retained earnings, net of a deferred income tax asset of $33. The balances of such allowance and deferred tax assets increased from the reported amounts as of December 31, 2017 of $256 and $828, respectively, to $367 and $861 as of January 1, 2018, respectively, after the adoption effects.

In connection with hedge accounting under IFRS 9, among other changes, there is a relief for entities in performing: a) the retrospective effectiveness test at inception of the hedging relationship; and b) the requirement to maintain a prospective effectiveness ratio between 0.8 and 1.25 at each reporting date for purposes of sustaining the hedging designation, both requirements of IAS 39. Under IFRS 9, a hedging relationship can be established to the extent the entity considers, based on the analysis of the overall characteristics of the hedging and hedged items, that the hedge will be highly effective in the future and the hedge relationship at inception is aligned with the entity’s reported risk management strategy. IFRS 9 maintains the same hedge accounting categories of cash flow hedge, fair value hedge and hedge of a net investment established in IAS 39, as well as the requirement of recognizing the ineffective portion of a cash flow hedge immediately in the income statement. CEMEX, S.A.B. de C.V. performed an analysis of its derivative financial instruments upon adoption of IFRS 9 on January 1, 2018 and determined that the changes in hedge accounting described above did not impact either the measurement or carrying amount of the assets and liabilities related to its derivative financial instruments and there was no effect on CEMEX, S.A.B. de C.V.’s retained earnings.

IFRS 15, Revenues from contracts with customers (“IFRS 15”)

Under IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five step model: Step 1: Identify the contract(s) with a customer (agreement that creates enforceable rights and obligations); Step 2: Identify the different performance obligations (promises) in the contract and account for those separately; Step 3: Determine the transaction price (amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services); Step 4: Allocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. A performance obligation may be satisfied at a point in time (typically for the sale of goods) or over time (typically for the sale of services and construction contracts). IFRS 15 also includes disclosure requirements to provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 was effective on January 1, 2018 and supersedes all existing guidance on revenue recognition.

After an extensive analysis of its contracts with customers, business practices and operating systems for all the reported periods, in order to review the different performance obligations and other promises (discounts, loyalty programs, rebates, etc.) included in such contracts, aimed to determine the differences in the accounting recognition of revenue with respect to prior IFRS, CEMEX, S.A.B. de C.V. adopted IFRS 15 on January 1, 2018 using the retrospective approach, without any significant effects on its operating results and financial situation, and restated the previously reported amounts of revenues for 2017 and 2016, resulting in an initial reclassification of other provisions to contract liabilities of $116 as of January 1, 2016, and a subsequent net decrease in revenues of $3 for each year, relate to IFRS 15 (note 3). These changes in revenues refer to certain discounts and rebates included in certain contracts and were recognized against deferred revenue as contract liabilities in the statement of financial position after IFRS 15 effects. Changes in equity upon adoption were not significant.

Income Statements

CEMEX, S.A.B. de C.V. includes the line item titled “Operating earnings before other income (expenses), net” considering that it is a relevant operating measure for CEMEX, S.A.B. de C.V.’s management. The line item “Other income (expenses), net” consists primarily of revenues and expenses not directly related to CEMEX, S.A.B. de C.V.’s main activities, including impairment losses of long-lived assets, results on disposal of assets and restructuring costs, among others (note 5). Under IFRS, the inclusion of certain subtotals such as “Operating earnings before other income (expenses), net” and the display of the income statement vary significantly by industry and company according to specific needs.

7

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Income Statements - continued

Considering that it is an indicator of CEMEX, S.A.B. de C.V.’s ability to internally fund capital expenditures and to measure its ability to service or incur debt under its financing agreements, for purposes of note 16.1, CEMEX, S.A.B. de C.V. presents “Operating EBITDA” (operating earnings before other income (expenses), net, plus depreciation and amortization). This is not an indicator of CEMEX, S.A.B. de C.V.’s financial performance, an alternative to cash flows, a measure of liquidity or comparable to other similarly titled measures of other companies. This indicator is used by CEMEX, S.A.B. de C.V.’s management for decision-making purposes.

Statements of cash flows

The statements of cash flows exclude the following transactions that did not represent sources or uses of cash:

Financing activities:

• In 2017 and 2016, in connection with the capitalization of retained earnings, the increases in common stock and additional paid-in capital associated against retained earnings for $9,464 and $6,970, respectively; and in connection with the CPOs issued as part of the executive share-based compensation programs, the total increases in equity for $668 in 2018, $791 in 2017 and $742 in 2016; (note 19.1); and

• In 2017, in connection with the early conversion of part of the 2018 optional convertible subordinated notes, the decrease in debt for $5,468, the net decrease in other equity reserves for $1,334, the increase in common stock for $4 and the increase in additional paid-in capital for $7,059; (note 19.1);

2.2) USE OF ESTIMATES AND CRITICAL ASSUMPTIONS

The preparation of financial statements in accordance with IFRS 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 items subject to significant estimates and assumptions by management include impairment tests of long-lived assets, recognition of deferred income tax assets, as well as the measurement of financial instruments at fair value. Significant judgment is required by management to appropriately assess the amounts of these concepts.

2.3) FOREIGN CURRENCY TRANSACTIONS

Transactions denominated in foreign currencies are recorded in the functional currency at the exchange rates prevailing on the dates of their execution. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the statement of financial position date, and the resulting foreign exchange fluctuations are recognized in earnings, except for exchange fluctuations arising from: 1) foreign currency indebtedness associated with the acquisition of foreign entities; and 2) fluctuations associated with related parties’ balances denominated in foreign currency, whose settlement is neither planned nor likely to occur in the foreseeable future and as a result, such balances are of a permanent investment nature. These fluctuations are recorded against “Other equity reserves”, as part of the foreign currency translation adjustment (note 2.12) until the disposal of the foreign net investment, at which time, the accumulated amount is recycled through the income statement as part of the gain or loss on disposal.

The financial statements of foreign subsidiaries, as determined using their respective functional currency, are translated to pesos at the closing exchange rate for statement of financial position accounts and at the closing exchange rates of each month within the period for statements of operations accounts. The functional currency is that in which each entity primarily generates and expends cash. The corresponding translation effect is included within “Other equity reserves” and is presented in the statement of other comprehensive income for the period as part of the foreign currency translation adjustment (note 2.12) until the disposal of the net investment in the foreign subsidiary.

Considering its integrated activities, for purposes of functional currency, the Parent Company is considered to have two divisions, one related with its financial and holding company activities, in which the functional currency is the dollar for all assets, liabilities and transactions associated with these activities, and another division related with the Parent Company’s operating activities in Mexico, in which the functional currency is the peso for all assets, liabilities and transactions associated with these activities.

The most significant closing exchange rates and the approximate average exchange rates for statement of financial position accounts and income statement accounts as of December 31, 2018, 2017 and 2016, were as follows:

	2018				2017				2016
Currency	Closing		Average		Closing		Average		Closing		Average
Dollar		19.6500		19.2583		19.6500		18.8800		20.7200		18.7200
Euros		22.5169		22.7036		23.5866		21.4122		21.7945		20.6564
British Pound Sterling		25.0557		25.6059		26.5361		24.4977		25.5361		25.0731

The peso to U.S. dollar exchange rate used by CEMEX, S.A.B. de C.V. is an average of free market rates available to settle its foreign currency transactions. No significant differences exist, in any case, between the foreign exchange rates used by CEMEX, S.A.B. de C.V. and those exchange rates published by the Central Bank of Mexico.

8

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.4) CASH AND CASH EQUIVALENTS (note 7)

The balance in this caption is comprised of available amounts of cash and cash equivalents, mainly represented by highly-liquid short-term investments, which are readily convertible into known amounts of cash, and which are not subject to significant risks of changes in their values, including overnight investments, which yield fixed returns and have maturities of less than three months from the investment date. These fixed-income investments are recorded at cost plus accrued interest. Accrued interest is included in the income statement as part of “Financial income and other items, net.” The amount of cash and cash equivalents in the statement of financial position includes restricted cash and investments, comprised of deposits in margin accounts that guarantee certain of CEMEX, S.A.B. de C.V.’s obligations, to the extent that the restriction will be lifted in less than three months from the statement of financial position reporting date. When the restriction period is greater than three months, such restricted cash and investments are not considered cash equivalents and are included within short-term or long-term “Other accounts receivable,” as appropriate. When contracts contain provisions for net settlement, these restricted amounts of cash and cash equivalents are offset against the liabilities that CEMEX, S.A.B. de C.V. has with its counterparties.

2.5) FINANCIAL INSTRUMENTS

As mentioned in note 2.1, IFRS 9 was adopted prospectively by CEMEX, S.A.B. de C.V. for the period starting January 1, 2018. The accounting policies under IFRS 9 are described as follows:

Classification and measurement of financial instruments

The financial assets that meet both of the following conditions and are not designated as at fair value through profit or loss: a) are held within a business model whose objective is to hold assets to collect contractual cash flows, and b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are classified as “Held to collect” and measured at amortized cost. Amortized cost represents the net present value (“NPV”) of the consideration receivable or payable as of the transaction date. This classification of financial assets comprises the following captions:

• Cash and cash equivalents (notes 2.4 and 7).

• Trade receivables, other current accounts receivable and other current assets (notes 8, 9 and 11). Due to their short-term nature, CEMEX, S.A.B. de C.V. initially recognizes these assets at the original invoiced or transaction amount less expected credit losses, as explained below.

• Trade receivables sold under securitization programs, in which certain residual interest in the trade receivables sold in case of recovery failure and continued involvement in such assets is maintained, do not qualify for derecognition and are maintained in the statement of financial position (notes 8 and 16.2).

• Investments and non-current accounts receivable (notes 12 and 13). Subsequent changes in effects from amortized cost are recognized in the income statement as part of “Financial income and other items, net”.

Certain strategic investments are measured at fair value through other comprehensive income within “Other equity reserves”. CEMEX, S.A.B. de C.V. does not maintain financial assets “Held to collect and sell” whose business model has the objective of collecting contractual cash flows and then selling those financial assets.

The financial assets that are not classified as “Held to collect” or that do not have strategic characteristics fall into the residual category of held at fair value through the income statement as part of “Financial income and other items, net,” (note 6).

Debt instruments and other financial obligations are classified as “Loans” and measured at amortized cost (notes 16.1 and 16.2). Interest accrued on financial instruments is recognized within “Other accounts payable and accrued expenses” against financial expense. During the reported periods, CEMEX, S.A.B. de C.V. did not have financial liabilities voluntarily recognized at fair value or associated with fair value hedge strategies with derivative financial instruments.

Derivative financial instruments are recognized as assets or liabilities in the statement of financial position at their estimated fair values, and the changes in such fair values are recognized in the income statement within “Financial income and other items, net” for the period in which they occur, except in the case of hedging instruments as described below (note 6).

Impairment of financial assets

Impairment losses of financial assets, including trade accounts receivable, are recognized using the expected credit loss model for the entire lifetime of such financial assets on initial recognition, and at each subsequent reporting period, even in the absence of a credit event or if a loss has not yet been incurred, considering for their measurement past events and current conditions, as well as reasonable and supportable forecasts affecting collectability.

Costs incurred in the issuance of debt or borrowings

Direct costs incurred in debt issuances or borrowings, as well as debt refinancing or non-substantial modifications to debt agreements that did not represent an extinguishment of debt by considering that the holders and the relevant economic terms of the new instrument are not substantially different to the replaced instrument, adjust the carrying amount of the related debt and are amortized as interest expense as part of the effective interest rate of each instrument over its maturity. These costs include commissions and professional fees. Costs incurred in the extinguishment of debt, as well as debt refinancing or modifications to debt agreements, when the new instrument is substantially different from the old instrument according to a qualitative and quantitative analysis, are recognized in the income statement as incurred.

9

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Finance leases

Finance leases are recognized as financing liabilities against a corresponding fixed asset for the lesser of the market value of the leased asset and the NPV of future minimum lease payments, using the contract’s implicit interest rate to the extent available, or the incremental borrowing cost. The main factors that determine a finance lease are: a) ownership title of the asset is transferred to CEMEX, S.A.B. de C.V. at the expiration of the contract; b) CEMEX, S.A.B. de C.V. has a bargain purchase option to acquire the asset at the end of the lease term; c) the lease term covers the majority of the useful life of the asset; and/or d) the NPV of minimum payments represents substantially all the fair value of the related asset at the beginning of the lease.

Financial instruments with components of both liabilities and equity (note 16.2)

Financial instruments that contain components of both liability and equity, such as notes convertible into a fixed number of the issuer’s shares and denominated in its same functional currency, are accounted for by each component being recognized separately in the statement of financial position according to the specific characteristics of each transaction. In the case of instruments mandatorily convertible into shares of the issuer, the liability component represents the NPV of interest payments on the principal amount using a market interest rate, without assuming early conversion, and is recognized within “Other financial obligations,” whereas the equity component represents the difference between the principal amount and the liability component, and is recognized within “Other equity reserves”, net of commissions. In the case of instruments that are optionally convertible into a fixed number of shares, the liability component represents the difference between the principal amount and the fair value of the conversion option premium, which reflects the equity component (note 16.2). When the transaction is denominated in a currency different than the functional currency of the issuer, the conversion option is accounted for as a derivative financial instrument at fair value in the income statement.

Hedging instruments (note 16.4)

A hedging relationship is established to the extent the entity considers, based on the analysis of the overall characteristics of the hedging and hedged items, that the hedge will be highly effective in the future and the hedge relationship at inception is aligned with the entity’s reported risk management strategy (note 16.4). The accounting categories of hedging instruments are: a) cash flow hedge, b) fair value hedge of an asset or forecasted transaction, and c) hedge of a net investment in a subsidiary.

In cash flow hedges, the effective portion of changes in fair value of derivative instruments are recognized in stockholders’ equity within other equity reserves and are reclassified to earnings as the interest expense of the related debt is accrued, in the case of interest rate swaps, or when the underlying products are consumed in the case of contracts on the price of raw materials and commodities. In hedges of the net investment in foreign subsidiaries, changes in fair value are recognized in stockholders’ equity as part of the foreign currency translation result within other equity reserves (note 16.4), whose reversal to earnings would take place upon disposal of the foreign investment. During the reported periods, CEMEX, S.A.B. de C.V. did not have derivatives designated as fair value hedges. Derivative instruments are negotiated with institutions with significant financial capacity; therefore, CEMEX, S.A.B. de C.V. believes the risk of non-performance of the obligations agreed to by such counterparties to be minimal.

Embedded derivative financial instruments

CEMEX, S.A.B. de C.V. reviews its contracts to identify the existence of embedded derivatives. Identified embedded derivatives are analyzed to determine if they need to be separated from the host contract and recognized in the statement of financial position as assets or liabilities, applying the same valuation rules used for other derivative instruments.

Put options granted for the purchase of non-controlling interests and investees

Represent agreements by means of which a non-controlling interest has the right to sell, at a future date using a predefined price formula or at fair market value, its shares in a subsidiary of CEMEX, S.A.B. de C.V. When the obligation should be settled in cash or through the delivery of another financial asset, CEMEX, S.A.B. de C.V. recognizes a liability for the NPV of the redemption amount as of the reporting date against the controlling interest within stockholders’ equity. A liability is not recognized under these agreements when the redemption amount is determined at fair market value at the exercise date and CEMEX, S.A.B. de C.V. has the election to settle using its own shares.

In respect of a put option granted for the purchase of an investee, CEMEX, S.A.B. de C.V. would recognize a liability against a loss in the statements of operations whenever the estimated purchase price exceeds the fair value of the net assets to be acquired by CEMEX, S.A.B. de C.V., had the counterparty exercised its right to sell. As of December 31, 2018 and 2017, there were no written put options.

Fair value measurements (note 16.3)

Under IFRS, fair value represents an “Exit Value” which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, considering the counterparty’s credit risk in the valuation. The concept of Exit Value is premised on the existence of a market and market participants for the specific asset or liability. When there are no market and/or market participants willing to make a market, IFRS establishes a fair value hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

10

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Fair value measurements - continued

The three levels of the fair value hierarchy are as follows:

• Level 1.- represent quoted prices (unadjusted) in active markets for identical assets or liabilities that CEMEX, S.A.B. de C.V. has the ability to access at the measurement date. A quote price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available.

• Level 2.- are inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly, and are used mainly to determine the fair value of securities, investments or loans that are not actively traded. Level 2 inputs included equity prices, certain interest rates and yield curves, implied volatility and credit spreads, among others, as well as inputs extrapolated from other observable inputs. In the absence of Level 1 inputs, CEMEX, S.A.B. de C.V. determined fair values by iteration of the applicable Level 2 inputs, the number of securities and/or the other relevant terms of the contract, as applicable.

• Level 3.- inputs are unobservable inputs for the asset or liability. CEMEX, S.A.B. de C.V. used unobservable inputs to determine fair values, to the extent there are no Level 1 or Level 2 inputs, in valuation models such as Black-Scholes, binomial, discounted cash flows or multiples of Operative EBITDA, including risk assumptions consistent with what market participants would use to arrive at fair value.

2.6) INVENTORIES (note 10)

Inventories are valued using the lower of cost or net realizable value. The cost of inventories includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. CEMEX, S.A.B. de C.V. analyzes its inventory balances to determine if, as a result of internal events, such as physical damage, or external events, such as technological changes or market conditions, certain portions of such balances have become obsolete or impaired. When an impairment situation arises, the inventory balance is adjusted to its net realizable value, whereas, if an obsolescence situation occurs, the inventory obsolescence reserve is increased. In both cases, these adjustments are recognized against the results of the period. Advances to suppliers of inventory are presented as part of other current assets.

2.7) EQUITY ACCOUNTED INVESTEES (note 12)

Investments in controlled entities and associates, which are not classified as held for sale, are measured using the equity method.

2.8) PROPERTY, MACHINERY AND EQUIPMENT (note 14)

Property, machinery and equipment are recognized at their acquisition or construction cost, as applicable, less accumulated depreciation and accumulated impairment losses. Depreciation of fixed assets is recognized as part of cost and operating expenses (note 4) and is calculated using the straight-line method over the estimated useful lives of the assets, except for mineral reserves, which are depleted using the units-of-production method. As of December 31, 2018, the average useful lives by category of property, machinery and equipment, were as follows:

	Years
Administrative and industrial buildings		68
Machinery and equipment in plant		25
Ready-mix trucks and motor vehicles		10

CEMEX, S.A.B. de C.V. capitalizes, as part of the related cost of fixed assets, interest expense from existing debt during the construction or installation period of significant fixed assets, considering CEMEX, S.A.B. de C.V.’s corporate average interest rate and the average balance of investments in process for the period.

All waste removal costs or stripping costs incurred in the operative phase of a surface mine in order to access the mineral reserves are recognized as part of the carrying amount of the related quarries. Capitalized amounts are further amortized over the expected useful life of exposed ore body based on the units of production method.

Costs incurred in respect of operating fixed assets that result in future economic benefits, such as an extension in their useful lives, an increase in their production capacity or in safety, as well as those costs incurred to mitigate or prevent environmental damage, are capitalized as part of the carrying amount of the related assets. Capitalized costs are depreciated over the remaining useful lives of such fixed assets. Periodic maintenance on fixed assets is expensed as incurred. Advances to suppliers of fixed assets are presented as part of other long-term accounts receivable.

The useful lives and residual values of property, machinery and equipment are reviewed at each reporting date and adjusted if appropriate.

2.9) IMPAIRMENT OF LONG-LIVED ASSETS (notes 12 and 14)

Property, machinery and equipment and other investments

These assets are tested for impairment upon the occurrence of a significant adverse event, changes in CEMEX, S.A.B. de C.V.’s operating business model or in technology that affect the asset, or expectations of lower operating results, to determine whether their carrying amounts may not be recovered. An impairment loss is recorded in the income statement for the period within “Other income (expenses), net,” for the excess of the asset’s carrying amount over its recoverable amount, corresponding to the higher of the fair value less costs to sell the asset, as determined by external appraiser, and the asset’s value in use, the latter represented by the NPV of estimated cash flows related to the use and eventual disposal of the asset.

11

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Property, machinery and equipment and other investments - continued

The main assumptions utilized to develop estimates of NPV are a discount rate that reflects the risk of the cash flows associated with the assets and the estimations of generation of future income. Those assumptions are evaluated for reasonableness by comparing such discount rates to available market information and by comparing to third-party expectations of industry growth, such as governmental agencies or industry chambers.

Equity accounted investees

Equity accounted investees are tested for impairment when required due to significant adverse changes, by determining the recoverable amount of such investment, which consists of the higher of the investment in subsidiaries and associates’ fair value, less cost to sell and value in use, represented by the discounted amount of estimated future cash flows to be generated to which those net assets relate. CEMEX, S.A.B. de C.V. determines initially its discounted cash flows over periods of 5 to 10 years, depending on the economic cycle. If the value in use of the equity accounted investees is lower than its corresponding carrying amount, the Parent Company determines the fair value of its investment using methodologies generally accepted in the market to determine the value of entities, such as multiples of Operating EBITDA and by reference to other market transactions. An impairment loss is recognized within “Other income (expenses), net”, if the recoverable amount is lower than the net book value of the investment.

2.10) PROVISIONS (note 15)

CEMEX, S.A.B. de C.V. recognizes provisions when it has a legal or constructive obligation resulting from past events, whose resolution would require cash outflows, or the delivery of other resources owned by the Company. As of December 31, 2018 and 2017, some significant proceedings that gave rise to a portion of the carrying amount of CEMEX, S.A.B. de C.V.’s other current and non-current liabilities and provisions are detailed in note 15.

Considering guidance under IFRS, CEMEX, S.A.B. de C.V. recognizes provisions for levies imposed by governments until the obligating event or the activity that triggers the payment of the levy has occurred, as defined in the legislation.

Contingencies and commitments (note 20)

Obligations or losses related to contingencies are recognized as liabilities in the statement of financial position only when present obligations exist resulting from past events that are probable to result in an outflow of resources and the amount can be measured reliably. Otherwise, a qualitative disclosure is included in the notes to the financial statements. The effects of long-term commitments established with third parties, such as supply contracts with suppliers or customers, are recognized in the financial statements on an incurred or accrued basis, after taking into consideration the substance of the agreements. Relevant commitments are disclosed in the notes to the financial statements. CEMEX, S.A.B. de C.V. recognizes contingent revenues, income or assets only when their realization is virtually certain.

2.11) INCOME TAXES (note 18)

The effects reflected in the income statement for income taxes include the amounts incurred during the period and the amounts of deferred income taxes, determined according to the income tax law applicable to each subsidiary. Deferred income taxes is the result of applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable values of assets and liabilities, considering tax assets such as loss carryforwards and other recoverable taxes, to the extent that it is probable that future taxable profits will be available against which they can be utilized. The measurement of deferred income taxes at the reporting period reflects the tax consequences that follow the way in which CEMEX, S.A.B. de C.V. expects to recover or settle the carrying amount of its assets and liabilities. Deferred income taxes for the period represent the difference between balances of deferred income taxes at the beginning and the end of the period. Deferred income tax assets and liabilities relating to different tax jurisdictions are not offset. According to IFRS, all items charged or credited directly in stockholders’ equity or as part of other comprehensive income or loss for the period are recognized net of their current and deferred income tax effects. The effect of a change in enacted statutory tax rates is recognized in the period in which the change is officially enacted.

Deferred tax assets are reviewed at each reporting date and are reduced when it is not deemed probable that the related tax benefit will be realized, considering the aggregate amount of self-determined tax loss carryforwards that CEMEX, S.A.B. de C.V. believes will not be rejected by the tax authorities based on available evidence and the likelihood of recovering them prior to their expiration through an analysis of estimated future taxable income. If it is probable that the tax authorities would reject a self-determined deferred tax asset, CEMEX, S.A.B. de C.V. would decrease such asset. When it is considered that a deferred tax asset will not be recovered before its expiration, CEMEX, S.A.B. de C.V. would not recognize such deferred tax asset. Both situations would result in additional income tax expense for the period in which such determination is made.

In order to determine whether it is probable that deferred tax assets will ultimately be recovered, CEMEX, S.A.B. de C.V. takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, tax planning strategies, future reversals of existing temporary differences. Likewise, CEMEX, S.A.B. de C.V. analyzes its actual results versus the Company’s estimates, and adjusts, as necessary, its tax asset valuations. If actual results vary from CEMEX, S.A.B. de C.V.’s estimates, the deferred tax asset and/or valuations may be affected, and necessary adjustments will be made based on relevant information in CEMEX, S.A.B. de C.V.’s income statement for such period.

The income tax effects from an uncertain tax position are recognized when is probable that the position will be sustained based on its technical merits and assuming that the tax authorities will examine each position and have full knowledge of all relevant information, and they are measured using a cumulative probability model. Each position has been considered on its own, regardless of its relation to any other broader tax settlement. The high probability threshold represents a positive assertion by management that CEMEX, S.A.B. de C.V. is entitled to the economic benefits of a tax position. If a tax position is considered not probable of being sustained, no benefits of the position are recognized. Interest and penalties related to unrecognized tax benefits are recorded as part of the income tax in the income statements.

12

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Income taxes - continued

The effective income tax rate is determined dividing the line item “Income Tax” by the line item “Earnings before income tax.” This effective tax rate is further reconciled to CEMEX, S.A.B. de C.V.’s statutory tax rate applicable in Mexico (note 18). A significant effect in CEMEX, S.A.B. de C.V.’s effective tax rate and consequently in the reconciliation of CEMEX, S.A.B. de C.V.’s effective tax rate, relates to the difference between the statutory income tax rate in Mexico of 30% against the effective tax rates.

CEMEX, S.A.B. de C.V.’s current and deferred income tax amounts included in the income statement for the period are highly variable, and are subject, among other factors, to taxable income. Such amounts of taxable income depend on factors such as sale volumes and prices, costs and expenses, exchange rates fluctuations and interest on debt, among others, as well as to the estimated tax assets at the end of the period due to the expected future generation of taxable gains.

2.12) STOCKHOLDERS’ EQUITY

Common stock and additional paid-in capital (note 19.1)

These items represent the value of stockholders’ contributions, and include increases related to the capitalization of retained earnings and the recognition of executive compensation programs in CEMEX, S.A.B. de C.V.’s CPOs as well as decreases associated with the restitution of retained earnings.

Other equity reserves

Groups the cumulative effects of items and transactions that are, temporarily or permanently, recognized directly to stockholders’ equity, and includes the comprehensive income, which reflects certain changes in stockholders’ equity that do not result from investments by owners and distributions to owners. The most significant items within “Other equity reserves” during the reported periods are as follows:

Items of “Other equity reserves” included within other comprehensive income:

• The effective portion of the valuation and liquidation effects from derivative instruments under cash flow hedging relationships, which are recorded temporarily in stockholders’ equity (note 19.1);

• Changes in fair value of other investments in strategic securities (note 2.5); and

• Current and deferred income taxes during the period arising from items whose effects are directly recognized in stockholders’ equity.

Items of “Other equity reserves” not included in comprehensive income:

• The equity component of securities which are mandatorily or optionally convertible into shares of the Parent Company (note 16.2). Upon conversion, this amount will be reclassified to common stock and additional paid-in capital; and

• The items recognized by the subsidiaries in “Other equity reserves”, which are recognized through the equity method.

Retained earnings (note 19.2)

Retained earnings represent the cumulative net results of prior years, net of: a) dividends declared; b) capitalization of retained earnings; c) restitution of retained earnings when applicable; and d) cumulative effects from adoption of new IFRS.

2.13) REVENUE RECOGNITION (note 3)

As mentioned in note 2.1, CEMEX, S.A.B. de C.V. adopted IFRS 15 on January 1, 2018 using the retrospective approach. CEMEX, S.A.B. de C.V. policies under IFRS 15 are as follows:

Revenue is recognized at a point in time or over time in the amount of the price, before tax on sales, expected to be received by CEMEX, S.A.B. de C.V.’s for goods and services supplied as a result of their ordinary activities, as contractual performance obligations are fulfilled, and control of goods and services passes to the customer. Revenues are decreased by any trade discounts or volume rebates granted to customers.

Variable consideration is recognized when it is highly probable that a significant reversal in the amount of cumulative revenue recognized for the contract will not occur and is measured using the expected value or the most likely amount method, whichever is expected to better predict the amount based on the terms and conditions of the contract.

Revenue and costs from trading activities, in which CEMEX, S.A.B. de C.V. acquires finished goods from a third party and subsequently sells the goods to another third-party, are recognized on a gross basis, considering that CEMEX, S.A.B. de C.V. assumes ownership risks on the goods purchased, not acting as agent or broker.

When revenue is earned over time as contractual performance obligations are satisfied, which is the case of construction contracts, CEMEX, S.A.B. de C.V. apply the stage of completion method to measure revenue, which represents: a) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs; b) the surveys of work performed; or c) the physical proportion of the contract work completed, whichever better reflects the percentage of completion under the specific circumstances. Revenue and costs related to such construction contracts are recognized in the period in which the work is performed by reference to the contract’s stage of completion at the end of the period, considering that the following have been defined: a) each party’s enforceable rights regarding the asset under construction; b) the consideration to be exchanged; c) the manner and terms of settlement; d) actual costs incurred and contract costs required to complete the asset are effectively controlled; and e) it is probable that the economic benefits associated with the contract will flow to the entity.

Progress payments and advances received from customers do not reflect the work performed and are recognized as a short-term or long-term advanced payments, as appropriate.

13

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2.14) COST OF SALES AND OPERATING EXPENSES (note 4)

Cost of sales represents the production cost of inventories at the moment of sale. Such cost of sales includes depreciation, amortization and depletion of assets involved in production, expenses related to storage in production plants and freight expenses of raw material in plants and delivery expenses of CEMEX, S.A.B. de C.V.’s ready-mix concrete business.

Administrative expenses represent the expenses associated with personnel, services and equipment, including depreciation and amortization, related to managerial activities and back office for the Company’s management.

Sales expenses represent the expenses associated with personnel, services and equipment, including depreciation and amortization, involved specifically in sales activities.

Distribution and logistics expenses refer to expenses of storage at points of sales, including depreciation and amortization, as well as freight expenses of finished products between plants and points of sale and freight expenses between points of sales and the customers’ facilities.

2.15) CONCENTRATION OF BUSINESS AND CREDIT

CEMEX, S.A.B. de C.V. sells its products primarily to distributors in the construction industry. As of and for the years ended December 31, 2018, 2017 and 2016, no single customer individually accounted for a significant amount of the reported amounts of sales or in the balances of trade receivables. In addition, there is no significant concentration of a specific supplier relating to the purchase of raw materials.

2.16) NEWLY ISSUED IFRS NOT YET ADOPTED

IFRS issued as of the date of issuance of these financial statements which have not yet been adopted are described as follow:

IFRS 16, Leases (“IFRS 16”)

IFRS 16 defines leases as any contract or part of a contract that conveys to the lessee the right to use an asset for a period in exchange for consideration and the lessee directs the use of the identified asset throughout that period. IFRS 16 introduces a single lessee accounting model, and requires a lessee to recognize, for all leases, allowing exemptions in case of the leases with a term of less than 12 months or when the underlying asset is of low value, assets for the right-of-use over the underlying asset against a corresponding financial liability, representing the NPV of estimated lease payments under the contract, with a single income statement model in which a lessee recognizes amortization of the right-of-use asset and interest on the lease liability. A lessee shall present either in the statement of financial position, or disclose in the notes, right-of-use assets separately from other assets, as well as, lease liabilities separately from other liabilities. IFRS 16 is effective beginning January 1, 2019 and will supersede all current standards and interpretations related to lease accounting.

As of December 31, 2018, by means of analyses of its outstanding lease contracts and other contracts that may have embedded the use of an asset and the assessment of the most relevant characteristics of such contracts (types of assets, committed payments, maturity dates, renewal clauses, etc.), CEMEX, S.A.B. de C.V. has substantially concluded the inventory and measurement of its leases for purposes of adopting IFRS 16 and is in its final review. Moreover, CEMEX, S.A.B. de C.V. has defined its accounting policy under IFRS 16 and will apply the recognition exception for short-term leases and low-value assets, as well as the practical expedient to not separate the non-lease component from the lease component included in the same contract. CEMEX, S.A.B. de C.V. will adopt IFRS 16 using the full retrospective approach pursuant to which prior periods will be restated. Upon adoption of IFRS 16 beginning on January 1, 2019, CEMEX, S.A.B. de C.V. has estimated a range for its opening statement of financial position effects, which includes leases with related and third parties (note 17.2 and 20.4), as of January 1, 2017, as follows:

		As of January 1, 2017
		Low			High
Assets for the right-of-use	US	$	721			882
Financial liabilities			803			982
Retained earnings 1	US	$	(82	)		(100	)

1 Refers to a timing difference between depreciation expense of the assets calculated under the straight-line method and the interest expense from the liability determined under the effective interest rate method since the beginning of the contracts. This difference will reverse over the remaining life of the contracts.

14

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Newly issued IFRS not yet adopted - continued

In addition to IFRS 16, there are several amendments or new IFRS issued but not yet effective which are under analysis and CEMEX, S.A.B. de C.V.’s management expects to adopt in their specific effective dates considering preliminarily without any significant effect in CEMEX, S.A.B. de C.V.’s financial position or operating results, and which are summarized as follows:

Standard	Main topic	Effective date
Amendments to IFRS 9	Prepayment features with negative compensation do not automatically preclude amortized cost accounting.	January 1, 2019
IFRIC 23, Uncertainty over income tax treatments	When an entity concludes that it is not probable that a particular tax treatment is accepted, the decision should be based on which method provides better predictions of the resolution of the uncertainty.	January 1, 2019
Amendments to IAS 28, Long-term interests in associates and joint ventures (“IAS 28”)	The amendment clarifies that IFRS 9, including its impairment requirements, applies to long-term interests.	January 1, 2019
Amendments to IAS 12, Income taxes	Clarify that an entity should recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized the transactions that generated the distributable profits.	January 1, 2019
Amendments to IAS 23, Borrowing costs	Clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.	January 1, 2019
Amendments to IFRS 3, Business combinations	Clarify that when an entity obtains control of a business that is a joint operation, the entity applies the requirements for a business combination achieved in stages, including remeasuring its previously held interest in the joint operation at fair value.	January 1, 2019
Amendments to IFRS 10, Consolidated financial statements and IAS 28	Clarify the recognition of gains or losses in the Parent’s financial statements for the sale or contribution of assets between an investor and its associate or joint venture	Has yet to be set
IFRS 17, Insurance contracts	The new Standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4, Insurance Contracts. The Standard outlines a General Model, which is modified for insurance contracts with direct participation features, described as the Variable Fee Approach. The General Model is simplified if certain criteria are met by measuring the liability for remaining coverage using the Premium Allocation Approach.	January 1, 2021

3) REVENUES

CEMEX, S.A.B. de C.V.’s revenues are mainly originated from the sale and distribution of cement, ready-mix concrete, aggregates and other construction materials and services. CEMEX, S.A.B. de C.V. grants credit for terms ranging from 15 to 90 days depending of the type and risk of each customer. For the years ended December 31, 2018, 2017 and 2016, revenues are as follows:

	2018		2017		2016
From the sale of goods associated to CEMEX, S.A.B. de C.V.’s main activities	$	62,444		56,854		51,904
From the sale of other goods and services		1,415		953		586
	$	63,859		57,807		52,490

In addition to the revenues from sale, distribution and services related to the construction, the revenues from Parent Company-only activities as of December 31, 2018, 2017 and 2016, consisted of the following:

	2018		2017		2016
Rental income	$	72		65		63
License fees and administrative services		774		671		744
	$	846		736		807

Under IFRS 15, some commercial practices of CEMEX, S.A.B. de C.V., in the form of certain promotions and/or discounts and rebates offered as part of the sale transaction, result in a portion of the transaction price being allocated to such commercial incentives as separate performance obligations, recognized as contract liabilities with customers, and deferred to the income statement during the period in which the incentive is exercised by the customer or until it expires.

15

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Revenues - continued

For the years ended December 31, 2018, 2017 and 2016 changes in the balance of contract liabilities with customers are as follows:

	2018			2017			2016
Opening balance of contract liabilities with customers	$	218			201			116
Increase during the period for new transactions		424			444			271
Decrease during the period for exercise or expiration of incentives		(376	)		(427	)		(186	)
Closing balance of contract liabilities with customers	$	266			218			201

For the years 2018, 2017 and 2016, CEMEX, S.A.B. de C.V. did not identify any costs required to be capitalized as contract fulfilment assets and released over the contract life according to IFRS 15.

4) OPERATING EXPENSES, DEPRECIATION AND AMORTIZATION

CEMEX, S.A.B. de C.V.’s operating expenses during 2018, 2017 and 2016 by function are as follows:

	2018		2017		2016
Administrative expenses	$	11,942		10,933		10,046
Selling expenses		882		845		952
Distribution and logistics expenses		8,797		7,527		6,961
	$	21,621		19,305		17,959

Depreciation and amortization expense recognized during 2018, 2017 and 2016 are detailed as follows:

	2018		2017		2016
Depreciation and amortization expense included in cost of sales	$	56		231		423
Depreciation and amortization expense included in operating expenses		9		38		68
	$	65		269		491

5) OTHER INCOME (EXPENSES), NET

The detail of the line item “Other income (expenses), net” in 2018, 2017 and 2016 was as follows:

	2018		2017			2016
Results from the sale of assets, net	$	36		41			319
Miscellaneous fees		1		(730	)		—
Others		1		(702	)		211
	$	38		(1,391	)		530

For the year ended as of December 31, 2017, the miscellaneous fees are related to the resources paid in relation to the assets sale in some of our subsidiaries. Moreover, for the year 2016, the Results from the sale of assets, net, include a gain of the divestment of equity interest in associates from $293 (US$14) (note 12).

6) FINANCIAL INCOME AND OTHER ITEMS, NET

For the years ended December 31, 2018, 2017 and 2016, the detail of “Financial income and other items, net” is as follows:

	2018			2017		2016
Results in the sale of associates and remeasurement of previously held interest before change in control of associates (note 12)	$	(25	)		3,541		—
Financial income		3,575			58		453
Results from financial instruments, net (notes 13 and 16.4)		798			173		348
	$	4,348			3,772		801

For the period ended as of December 31, 2017, the caption Result in the sale of associates and remeasurement of previously held interest before change in control of associates, represents the gain on the sale of GCC shares (note 12).

7) CASH AND CASH EQUIVALENTS

As of December 31, 2018 and 2017, cash and cash equivalents include cash and bank accounts of $670 and $667, respectively.

16

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

8) TRADE ACCOUNTS RECEIVABLE, NET

As of December 31, 2018 and 2017, trade accounts receivable, net consisted of:

	2018			2017
Trade accounts receivable	$	4,298			4,249
Allowances for expected credit losses		(317	)		(256	)
	$	3,981			3,993

As of December 31, 2018 and 2017, trade accounts receivable include receivables of $2,214 (US$113) and $2,234 (US$114), respectively, sold under outstanding trade receivables securitization programs and/or factoring programs with recourse, established in Mexico, in which CEMEX, S.A.B. de C.V., effectively surrenders control associated with the trade accounts receivable sold and there is no guarantee or obligation to reacquire the assets; nonetheless, in such programs, CEMEX, S.A.B. de C.V., retains certain residual interest in the programs and/or maintains continuing involvement with the accounts receivable. Therefore, the trade accounts receivable sold were not removed from the statement of financial position and the funded amounts to CEMEX, S.A.B. de C.V., of $1,762 (US$90) in 2018 and $1,634 (US$83) in 2017, were recognized within the line item of “Other financial obligations,” the difference in each year against the trade receivables sold was maintained as reserves. Trade accounts receivable qualifying for sale exclude amounts over certain days past due or concentrations over certain limits to any one customer, according to the terms of the programs. The discount granted to the acquirers of the trade accounts receivable is recorded as financial expense and amounted to $168 (US$9) in 2018, $93 (US$5) in 2017 and $70 (US$3) in 2016. CEMEX, S.A.B. de C.V., securitization programs are negotiated for periods of one to two years and are usually renewed at their maturity.

Allowances for doubtful accounts were established until December 31, 2017 based on incurred loss analyses over delinquent accounts considering aging of balances, the credit history and risk profile of each customer and legal processes to recover accounts receivable. Beginning in 2018 such allowances are determined and recognized upon origination of the trade accounts receivable based on a model that calculates the expected credit loss (“ECL”) of the trade accounts receivable (note 2.1). For the years ended as of December 31, 2018, 2017 and 2016, the expense related with the allowances of accounts were $35, $78 and $144, respectively, which were recognized as part of the operating expense.

Under this ECL model, CEMEX, S.A.B. de C.V. segments its accounts receivable in a matrix by type of client or homogeneous credit risk and days past due and determines for each segment an average rate of ECL, considering actual credit loss experience over the last 24 months and analyses of future delinquency, that is applied to the balance of the accounts receivable. The average ECL rate increases in each segment of days past due until the rate is 100% for the segment of 365 days or more past due.

Changes for the expected credit losses in 2018, 2017 and 2016, were as follows:

	2018			2017			2016
Allowances for expected credit losses at beginning of period	$	256			219			77
Adoption effects of IFRS 9 charged to retained earnings (note 2.1)		111			—			—
Charged to selling expenses		35			78			144
Deductions		(85	)		(41	)		(2	)
Allowances for expected credit losses at end of period	$	317			256			219

9) OTHER ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, other accounts receivable include the following:

	2018		2017
Other refundable taxes	$	327		57
Derivative financial instruments (note 16.4)		9		1,056
Non-trade accounts receivable 1		739		229
	$	1,075		1,342

1 Non-trade accounts receivable are mainly attributable to the sale of assets.

10) INVENTORIES

As of December 31, 2018 and 2017, the balance of inventories was summarized as follows:

	2018		2017
Finished goods	$	890		689
Work-in-process		605		656
Raw materials		636		528
Materials and spare parts		1,816		1,244
Inventory in transit		236		371
	$	4,183		3,488

For the years ended December 31, 2018 and 2017, CEMEX, S.A.B. de C.V., recognized in the income statement, inventory obsolescence of $44 and $77, respectively.

17

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

11) OTHER CURRENT ASSETS

As of December 31, 2018 and 2017, other current assets consisted of:

	2018		2017
Advance payments	$	2		46
Assets held for sale		22		22
	$	24		68

12) EQUITY ACCOUNTED INVESTEES

As of December 31, 2018 and 2017 equity accounted investees, include the following:

	Activity		Country		%		2018			2017
CEMEX México, S.A. de C.V		Cement		Mexico		100.0	$	309,447			301,364
CEMEX Trademarks Holding Ltd		Holding		Switzerland		49.2		57,889			55,129
CEMEX Operaciones México, S.A. de C.V.		Holding		Mexico		21.3		37,516			46,861
CEMEX Central, S.A. de C.V.		Administrative Services		Mexico		100.0		8,819			7,357
CAMCEM , S.A. de C.V.		Cement		Mexico		40.1		4,087			3,618
Other companies		—		—		—		659			622
							$	418,417			414,951
Out of which:
Book value							$	533,222			533,163
Changes in stockholders’ equity							$	(114,805	)		(118,212	)

On January 25, 2017, in a public offering to investors in Mexico conducted through the BMV and in a concurrent private placement to eligible investors outside of Mexico, the Parent Company and Grupo Cementos de Chihuahua, S.A.B. de C.V. (“GCC”) announced the offering of up to 76,483,332 shares (then all the shares of GCC owned by CEMEX, S.A.B. de C.V.). During 2017, after conclusion of the public offering and the private placement, CEMEX, S.A.B. de C.V. sold 45 million shares, 13.53% of the common stock of GCC, at a price of 95.00 pesos per share receiving $4,094 after deducting commissions and offering expenses and recognized a gain on sale in 2017 of $1,859 as part of “Financial income and other items, net” in the income statement.

In addition, on September 28, 2017, CEMEX, S.A.B. de C.V. announced the definitive sale to two financial institutions of the remaining 31,483,332 shares of GCC, which represented approximately 9.47% of the equity capital of GCC. Proceeds from the sale were $3,012 and generated a gain on sale of $1,682 in 2017 recognized as part of “Financial income and other items, net” in the income statement. CEMEX, S.A.B. de C.V. continues to have an approximate 20% indirect interest in GCC through CAMCEM, S.A. de C.V., GCC’s parent company. In addition, CEMEX, S.A.B. de C.V. entered into equity forward contracts on GCC’s stock price, with net cash settlements (note 16.4).

During 2017 and 2016, CEMEX, S.A.B. de C.V. made stockholders’ equity contributions to subsidiaries of $418 and $37,039, respectively. In connection with such contributions in 2017 and 2016, CEMEX, S.A.B. de C.V. made a contribution to CEMEX, Inc and CEMEX Research Group AG, respectively, subsidiaries of CEMEX Mexico, S.A. de C.V. for $407 and $36,228, respectively. For 2016, CEMEX, S.A.B. de C.V. increased its investment in shares of CEMEX Trademarks Holding Ltd in approximately 0.5% through a contribution of $811. In addition, during 2016, CEMEX, S.A.B. de C.V. sold its interest in Ventikas to Infraestructura Energética Nova S.A.B. de C.V., current owner of 100% of Ventikas, for US$15 ($311). CEMEX, S.A.B. de C.V. will remain as the manager of the Ventikas facilities in exchange for a management fee.

During 2016, CEMEX, S.A.B. de C.V., participated as shareholder in a share restructuring executed by CAMCEM, S.A. de C.V. (“CAMCEM ”), indirect Parent Company of Control Administrativo Mexicano, S.A. de C.V. (“CAMSA”) and GCC, aimed to simplify its corporate structure, by means of which, Imin de México, S.A. de C.V., intermediate holding company, CAMSA and GCC were merged, with GCC as the surviving entity. As a result of the share restructuring, CEMEX, S.A.B. de C.V.’s 10.3% interest in CAMCEM and 49% interest in Camsa, both before the restructuring, were exchanged and transformed on equivalent basis into a 40.1% interest in CAMCEM and 23% interest in GCC, whose shares trade on the MSE.

The combined condensed financial information presented below, refers only to CAMCEM and other minor associates in which CEMEX, S.A.B. de C.V., possess significant influence. Combined condensed statement of financial position information of CEMEX, S.A.B. de C.V.’s associates as of December 31, 2018 and 2017 is set forth below:

	2018		2017
Current assets	$	11,424		9,773
Non-current assets		27,794		26,986
Total assets		39,218		36,759
Current liabilities		3,315		3,413
Non-current liabilities		15,998		15,670
Total liabilities		19,313		19,083
Total net assets	$	19,905		17,676

18

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Equity accounted investees - continued

Combined selected information of the income statement of CEMEX, S.A.B. de C.V.’s associates in 2018, 2017 and 2016 is set forth below:

	2018		2017		2016
Sales	$	16,967		16,243		12,931
Operating earnings		3,215		2,828		2,311
Income before income tax		972		1,107		1,577
Net income		559		659		604

13) OTHER INVESTMENTS AND NON-CURRENT ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, other investments and non-current accounts receivable include the following:

	2018		2017
Investments at fair value with changes recognized through the income statement	$	61		71
Non-current portion of valuation of derivative financial instruments (note 16.4)		297		794
Investments in strategic equity securities 1		177		225
Other non-current investments 2		1,042		987
	$1,577		2,077

1 This line item refers mainly to a strategic investment in CPOs of Axtel, S.A.B. de C.V. (“Axtel”). This investment is recognized at fair value through other comprehensive income, until its disposal.

2 This line item refers mainly to investments in Emission Allowances (“EUAs”). This investment is recognized at acquisition cost.

14) PROPERTY, MACHINERY AND EQUIPMENT, NET

As of December 31, 2018 and 2017, property, machinery and equipment, net include the following:

	2018			2017
Lands	$	3,118			2,876
Buildings		685			649
Machinery and equipment		1,189			1,140
Investments in progress		24			210
Accumulated depreciation		(1,417	)		(1,352	)
	$3,599			3,523

Changes in property, machinery and equipment, net for the year ended December 31, 2018 and 2017, were as follows:

	2018
						Machinery and			Investments in
	Land		Building			equipment			progress			Total
Cost at beginning of period	$	2,876		649			1,141			210			4,876
Accumulated depreciation		—		(404	)		(949	)		—			(1,353	)
Net book value at beginning of period		2,876		245			192			210			3,523
Capital expenditures		97		—			313			224			634
Disposals		—		—			(330	)		(410	)		(740	)
Depreciation for the period		—		(5	)		(60	)		—			(65	)
Foreign currency translation effects		145		36			66			—			247
Cost at end of period		3,118		685			1,189			24			5,016
Accumulated depreciation		—		(409	)		(1,008	)		—			(1,417	)
Net book value at end of period	$	3,118		276			181			24			3,599

19

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Property, machinery and equipment, net - continued

	2017
						Machinery and			Investments in
	Land		Building			equipment			progress			Total
Cost at beginning of period	$	2,837		640			1,026			54			4,557
Accumulated depreciation		—		(399	)		(685	)		—			(1,084	)
Net book value at beginning of period		2,837		241			341			54			3,473
Capital expenditures		—		—			308			216			524
Disposals		—		—			(209	)		(60	)		(269	)
Depreciation for the period		—		(5	)		(264	)		—			(269	)
Foreign currency translation effects		39		9			16			—			64
Cost at end of period		2,876		649			1,141			210			4,876
Accumulated depreciation		—		(404	)		(949	)		—			(1,353	)
Net book value at end of period	$	2,876		245			192			210			3,523

15) OTHER CURRENT LIABILITIES

As of December 31, 2018 and 2017, other current liabilities are shown below:

	2018		2017
Interest payable	$	1,383		2,031
Advances from customers		1,862		1,901
Taxes payable		712		1,315
Provisions 1		346		329
Accounts payable and accrued expenses		841		221
Contract liabilities with customers (note 3)		266		218
	$	5,410		6,015

1 The caption refers mainly to insurances and fees.

16) FINANCIAL INSTRUMENTS

16.1) SHORT-TERM AND LONG-TERM DEBT

CEMEX, S.A.B. de C.V.’s debt summarized as of December 31, 2018 and 2017, by interest rates and currencies was as follows:

	2018								2017
	Short-term			Long-term			Total		Short-term			Long-term			Total
Floating rate debt	$	—			62,457			62,457		6,186			50,090			56,276
Fixed rate debt		570			82,193			82,763		9,658			90,118			99,776
	$	570			144,650			145,220		15,844			140,208			156,052
Effective rate 1
Floating rate		—			3.5	%				6.1	%		2.9	%
Fixed rate		4.1	%		5.5	%				4.8	%		5.6	%

	2018									2017
							Effective									Effective
Currency	Short-term		Long-term		Total		rate 1			Short-term		Long-term		Total		rate 1
Dollars	$	570		92,641		93,211		5.8	%		6,186		85,554		91,740		5.8	%
Euros		—		43,400		43,400		3.0	%		9,658		45,536		55,194		3.3	%
Pounds		—		8,609		8,609		2.9	%		—		9,118		9,118		2.6	%
	$	570		144,650		145,220					15,844		140,208		156,052

1 Represents the weighted-average nominal interest rate of the related debt agreements.

20

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Short-term  and long-term debt - continued

2018	Short-term		Long-term		2017	Short-term		Long-term
Bank loans					Bank loans
Loans in foreign countries, 2019 to 2024	$	570		—	Loans in foreign countries, 2018 to 2022	$	—		32
Syndicated loans, 2020 to 2022		—		62,457	Syndicated loans, 2018 to 2020		—		50,090
	570		62,457			—		50,122
Notes payable					Notes payable
Medium-term notes, 2023 to 2026		—		82,193	Medium-term notes, 2018 to 2026		224		105,706
	—		82,193			224		105,706
Total bank loans and notes payable		570		144,650	Total bank loans and notes payable		224		155,828
Current maturities		—		—	Current maturities		15,620		(15,620	)
	$	570		144,650		$	15,844		140,208

As of December 31, 2018 and 2017, discounts, fees and other direct costs incurred in the issuance of CEMEX, S.A.B. de C.V.’s outstanding notes payable for US$43 ($836) and US$54 ($1,055), respectively, adjusted the balance of notes payable and are amortized to financing expense over the maturity of the related debt instruments.

Changes in debt for the years ended December 31, 2018, 2017 and 2016 were as follows:

	2018			2017			2016
Debt at beginning of year	$	156,052			172,664			163,237
Proceeds from new debt instruments		47,633			82,070			41,999
Debt repayments		(56,518	)		(94,250	)		(64,706	)
Foreign currency translation effects		(1,947	)		(4,432	)		32,134
Debt at end of year	$	145,220			156,052			172,664

As of December 31, 2018 and 2017, as presented in the table above of debt by type of instrument, approximately 43% and 32%, respectively, of CEMEX, S.A.B. de C.V.’s total indebtedness, was represented by bank loans, of which the most significant portion corresponded to those balances under CEMEX, S.A.B. de C.V.’s facilities agreement entered into with 20 financial institutions on July 19, 2017 for an amount in different currencies equivalent to approximately US$4,050 at the origination date (the “2017 Credit Agreement”), as described elsewhere in this note.

As of December 31, 2018 and 2017, non-current notes payable for $82,193 and $105,706, respectively, was detailed as follows:

																	Balances as of December 31,
Description2	Date of issuance		Currency		Principal amount		Rate 1			Maturity date		Repurchased amount US$ 3			Outstanding amount US$		2018		2017
April 2026 Notes 8		16/Mar/16		Dollar		1,000		7.75	%		16/Apr/26		—			1,000	$	19,575		19,568
March 2025 Notes		03/Mar/15		Dollar		750		6.125	%		05/May/25		—			750		14,696		14,691
January 2025 Notes		11/Sep/14		Dollar		1,100		5.70	%		11/Jan/25		(29	)		1,071		20,994		20,988
December 2024 Notes 7		05/Dec/17		Euro		650		2.75	%		05/Dec/24		—			745		14,572		15,257
March 2023 Notes		03/Mar/15		Euro		550		4.375	%		05/Mar/23		—			630		12,356		12,938
January 2022 Notes 4		11/Sep/14		Euro		400		4.75	%		11/Jan/22		(480	)		—		—		9,434
January 2021 Notes 5, 8		02/Oct/13		Dollar		1,000		7.25	%		15/Jan/21		(1,000	)		—		—		6,606
December 2019 Notes 6, 8		12/Aug/13		Dollar		1,000		6.50	%		10/Dec/19		(1,000	)		—		—		—
October 2018 Variable Notes 5, 8		02/Oct/13		Dollar		500		L+475bps			15/Oct/18		(500	)		—		—		6,154
Other notes payable																—		—		70
																	$	82,193		105,706

1 The letter “L” included above refers to LIBOR, which represents the London Inter-Bank Offered Rate, variable rate used in international markets for debt denominated in U.S. dollars. As of December 31, 2018 and 2017, the 3-Month LIBOR rate was 2.80763% and 1.6943%, respectively. The contraction “bps” means basis points. One hundred basis points equal 1%.

2 Unless otherwise indicated, all issuances are fully and unconditionally guaranteed by CEMEX, S.A.B. de C.V., CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding B.V., CEMEX España, S.A., CEMEX Asia B.V., CEMEX Corp., CEMEX Africa & Middle East Investments B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG and CEMEX UK. In March 2018, CEMEX Egyptian Investments B.V. changed its legal name to CEMEX Africa & Middle East Investments B.V.

3 Presented net of all outstanding notes repurchased and held by CEMEX, S.A.B. de C.V.’s subsidiaries.

4 On January 10, 2018, CEMEX, S.A.B. de C.V. completed the purchase of the outstanding amount of the January 2022 Notes for an aggregate principal amount of €400 using available funds from the issuance of the December 2024 Notes by means of an offer communicated on November 28, 2017.

5 In March 2018, CEMEX, S.A.B. de C.V. early redeemed the outstanding amount of the October 2018 Variable Notes and the January 2021 Notes for US$313 and US$341, respectively.

6 In December 2017, CEMEX, S.A.B. de C.V. repurchased the outstanding amount of the December 2019 Notes for an aggregate principal amount of US$611.

21

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Short-term and long-term debt - continued

7 On December 5, 2017, CEMEX, S.A.B. de C.V. issued €650 of 2.75% senior secured notes due December 5, 2024 (the “December 2024 Notes”). The proceeds were used to repay other indebtedness.

8 In February 2017, CEMEX, S.A.B. de C.V. repurchased US$385 aggregate principal amount of the January 2021 Notes. In addition, during 2016, using available funds from the issuance of the April 2026 Notes, the June 2024 Notes, the sale of assets and cash flows provided by operating activities, CEMEX, S.A.B. de C.V. completed the purchase of US$178 principal amount of the October 2018 Variable Notes and US$242 principal amount of the January 2021 Notes, among other debt repurchases incurred that year with those resources.

During 2018, 2017 and 2016, as a result of the debt transactions incurred, including exchange offers and tender offers to replace and/or repurchase existing debt instruments, some of which are mentioned above and the Credit Agreement 2017, CEMEX, S.A.B. de C.V. paid combined premiums, fees and issuance costs for US$46 ($902), US$181 ($3,550) and US$111 ($2,300), respectively, of which US$46 ($902) in 2018, US$142 ($2,786) in 2017 and US$76 ($1,575) in 2016, are associated with the extinguished portion of the exchanged or repurchased debt and were recognized in the income statement in each year within “Financial expense”. In addition, US$39 ($770) in 2017 and US$35 ($752) in 2016, corresponding to issuance costs of new debt and/or the portion of the combined premiums, fees and issuance costs treated as a refinancing of the old instruments by considering that: a) the relevant economic terms of the old and new notes were not substantially different; and b) the final holders of the new notes were the same of such portion of the old notes; adjusted the carrying amount of the new debt instruments, and are amortized over the remaining term of each instrument. Moreover, proportional fees and issuance costs related to the extinguished debt instruments for US$4 ($87) in 2018, US$10 ($196) in 2017 and US$30 ($622) in 2016 that were pending for amortization were recognized in the income statement of each year as part of “Financial expense”.

Long-term debt maturities as of December 31, 2018, are as follows:

	2018
2020	$	11,390
2021		22,780
2022		28,288
2023		12,356
2024		69,836
	$	144,650

As of December 31, 2018, CEMEX, S.A.B. de C.V. had the following lines of credit, of which, the only committed portion refers to the revolving credit facility, at annual interest rates ranging between 0.75% and 8.50%, depending on the negotiated currency:

	Lines of credit		Available
Other lines of credit from banks	$	11,294		8,956
Revolving credit facility		22,303		16,211
	$	33,597		25,167

2017 Credit Agreement, 2014 Credit Agreement and Facilities Agreement

On July 19, 2017, the Parent Company and certain subsidiaries entered into the 2017 Credit Agreement with 20 financial institutions for an amount in different currencies equivalent to US$4,050 at the origination date, the proceeds from which were used to refinance in full the US$3,680 then outstanding under the 2014 Credit Agreement and other debt repayments, allowing CEMEX, S.A.B. de C.V. to increase the average life of its syndicated bank debt with a final maturity in July 2022. All tranches under the 2017 Credit Agreement have substantially the same terms, including an applicable margin over the benchmark interest rate of between 125 to 350 basis points, depending on CEMEX, S.A.B. de C.V.’s consolidated debt leverage ratio; and the tranches share the same guarantors and collateral package as the original tranches under the 2014 Credit Agreement and other secured debt obligations of CEMEX, S.A.B. de C.V.. As of December 31, 2018 and 2017, total commitments under the 2017 Credit Agreement included US$2,746, €741 and £344, in both years, out of which about US$1,135 in both years were in a revolving credit facility. All tranches under the 2017 Credit Agreement amortize in five equal semi-annual payments beginning in July 2020, except for the commitments under the revolving credit which have a five-year maturity.

All tranches under the 2017 Credit Agreement have substantially the same terms, including an applicable margin over LIBOR or EURIBOR, as applicable, of between 125 to 350 basis points, depending on the leverage ratio (as defined below) of CEMEX, S.A.B. de C.V., as follows:

Consolidated leverage ratio	Applicable margin
> = 5.50x	350 bps
< 5.00x > 4.50x	300 bps
< 4.50x > 4.00x	250 bps
< 4.00x > 3.50x	212.5 bps
< 3.50x > 3.00x	175 bps
< 3.00x > 2.50x	150 bps
< 2.50x	125 bps

The 2017 Credit Agreement also modified the consolidated leverage ratio and consolidated coverage ratio limits as described below in the financial covenants section.

22

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2017 Credit Agreement, 2014 Credit Agreement and Facilities Agreement - continued

The balance of debt under the 2017 Credit Agreement and previously under the 2014 Credit Agreement is guaranteed by CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding B.V., CEMEX España, S.A., CEMEX Asia B.V., CEMEX Corp., CEMEX Africa & Middle East Investments B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG and CEMEX UK. In addition, the debt under these agreements (together with all other senior capital markets debt issued or guaranteed by CEMEX, and certain other preceding facilities) is also secured by a first-priority security interest in: (a) substantially all the shares of CEMEX México, S.A. de C.V., CEMEX Operaciones México, S.A. de C.V, New Sunward Holding B.V., CEMEX Trademarks Holding Ltd. and CEMEX España, S.A. (the “Collateral”); and (b) all proceeds of such Collateral.

For the years ended December 31, 2018, 2017 and 2016, under both the 2017 Credit Agreement and the 2014 Credit Agreement, CEMEX, S.A.B. de C.V. was required to comply with the following thresholds: (a) the aggregate amount allowed for capital expenditures cannot exceed US$1,000 per year excluding certain capital expenditures, and, joint venture investments and acquisitions by CHP and its subsidiaries and CLH and its subsidiaries, which capital expenditures, joint venture investments and acquisitions at any time then incurred are subject to a separate aggregate limit for each of CHP and CLH of US$500 (or its equivalent); and (b) the amounts allowed for permitted acquisitions and investments in joint ventures cannot exceed US$400 per year. Nonetheless, such limitations do not apply if capital expenditures or acquisitions do not exceed free cash flow generation or are funded with proceeds from equity issuances or asset disposals.

In addition to the restrictions mentioned above, and subject in each case to the permitted negotiated amounts and other exceptions, CEMEX, S.A.B. de C.V. is also subject to a number of negative covenants that, among other things, restrict or limit its ability to: (i) create liens; (ii) incur additional debt; (iii) change CEMEX, S.A.B. de C.V.’s business or the business of any obligor or material subsidiary (in each case, as defined in the 2017 Credit Agreement); (iv) enter into mergers; (v) enter into agreements that restrict its 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; (ix) grant additional guarantees or indemnities; (x) declare or pay cash dividends or make share redemptions while the Leverage Ratio remains above 4.0 times; and (xi) enter into speculative derivatives transactions. The 2017 Credit Agreement contains several affirmative covenants that, among other things, require CEMEX, S.A.B. de C.V. to provide periodic financial information to its lenders. However, a number of those covenants and restrictions will automatically cease to apply or become less restrictive if CEMEX, S.A.B. de C.V. so elects when: (i) CEMEX, S.A.B. de C.V.’s Leverage Ratio (as defined hereinafter) for the two most recently completed quarterly testing periods is less than or equal to 3.75 times; and (ii) no default under the 2017 Credit Agreement is continuing. At that point the Leverage Ratio must not exceed 3.75 times. Restrictions that will cease to apply when CEMEX, S.A.B. de C.V. satisfies such conditions include the capital expenditure limitations mentioned above and several negative covenants, including limitations on CEMEX, S.A.B. de C.V.’s ability to declare or pay cash dividends and distributions to shareholders, limitations on CEMEX, S.A.B. de C.V.’s ability to repay existing financial indebtedness, certain asset sale restrictions, and restrictions on exercising call options in relation to any perpetual bonds CEMEX, S.A.B. de C.V. issues. 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, CEMEX, S.A.B. de C.V. cannot assure that it will be able to meet the conditions for these restrictions to cease to apply prior to the final maturity date under the 2017 Credit Agreement.

In addition, the 2017 Credit Agreement, and previously the 2014 Credit Agreement, contains events of default, some of which may occur and are outside of CEMEX, S.A.B. de C.V.’s control such as expropriation, sequestration and availability of foreign exchange. As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. was not aware of any event of default. CEMEX, S.A.B. de C.V. cannot assure that in the future it will be able to comply with the restrictive covenants and limitations contained in the 2017 Credit Agreement. CEMEX, S.A.B. de C.V.’s failure to comply with such covenants and limitations could result in an event of default, which could materially and adversely affect CEMEX, S.A.B. de C.V.’s business and financial condition.

Financial Covenants

The 2017 Credit Agreement and previously the 2014 Credit Agreement requires CEMEX, S.A.B. de C.V. to comply with financial ratios, which mainly include: a) the consolidated ratio of debt to Operating EBITDA (the “Leverage Ratio”); and b) the consolidated ratio of Operating EBITDA to interest expense (the “Coverage Ratio”). These financial ratios are calculated according to the formulas established in the debt contracts using the consolidated amounts under IFRS. As of December 31, 2018, CEMEX, S.A.B. de C.V. must comply with a Coverage Ratio and a Leverage Ratio for each period of four consecutive fiscal quarters as follows:

Period	Coverage ratio	Period	Leverage ratio
For the period ending on December 31, 2018 up to and including the period ending on March 31, 2020	> = 2.50	For the period ending on December 31, 2018 up to and including the period ending on March 31, 2019	< = 4.75
		For the period ending on June 30, 2019 up to and including the period ending on March 31, 2020	< = 4.50
For the period ending on June 30, 2020 and each subsequent reference period	> = 2.75	For the period ending on June 30, 2020 and each subsequent reference period	< = 4.25

CEMEX, S.A.B. de C.V.’s ability to comply with these ratios may be affected by economic conditions and volatility in foreign exchange rates, as well as by overall conditions in the financial and capital markets.

23

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

2017 Credit Agreement, 2014 Credit Agreement and Facilities Agreement - continued

For the compliance periods ended as of December 31, 2018, 2017 and 2016, under the 2017 Credit Agreement and the 2014 Credit Agreement, as applicable, the main consolidated financial ratios as of December 31, 2018, 2017 and 2016 were as follows:

		Consolidated financial ratios
		2018		2017		2016
Leverage ratio 1, 2	Limit		< = 4.75		< = 5.25		< = 6.00
	Calculation		3.84		3.85		4.22
Coverage ratio 3	Limit		> = 2.50		> = 2.50		> = 1.85
	Calculation		4.41		3.46		3.18

1 The leverage ratio is calculated in pesos by dividing “Funded debt” by pro forma Operating EBITDA for the last twelve months as of the calculation date. Funded debt equals debt, as reported in the statement of financial position, excluding finance leases, components of liability of convertible subordinated notes, plus perpetual debentures and guarantees, plus or minus the fair value of derivative financial instruments, as applicable, among other adjustments.

2 Pro forma Operating EBITDA represents, all calculated in pesos, Operating EBITDA for the last twelve months as of the calculation date, plus the portion of Operating EBITDA referring to such twelve-month period of any significant acquisition made in the period before its consolidation in CEMEX, S.A.B. de C.V., minus Operating EBITDA referring to such twelve-month period of any significant disposal that had already been liquidated.

3 The coverage ratio is calculated in pesos using the amounts from the financial statements, by dividing the pro forma Operating EBITDA by the financial expense for the last twelve months as of the calculation date. Financial expense includes interest accrued on the perpetual debentures.

CEMEX, S.A.B. de C.V. will classify all of its outstanding debt as current debt in its statement of financial position if: 1) as of any measurement date CEMEX, S.A.B. de C.V. fails to comply with the aforementioned financial ratios; or 2) the cross default clause that is part of the 2017 Credit Agreement is triggered by the provisions contained therein; 3) as of any date prior to a subsequent measurement date CEMEX, S.A.B. de C.V. expects not to be in compliance with such financial ratios in the absence of: a) amendments and/or waivers covering the next succeeding 12 months; b) high probability that the violation will be cured during any agreed upon remediation period and be sustained for the next succeeding 12 months; and/or c) a signed refinancing agreement to refinance the relevant debt on a long-term basis. Moreover, concurrent with such classification of debt as short-term, the noncompliance of CEMEX, S.A.B. de C.V. with the financial ratios agreed upon pursuant to the 2017 Credit Agreement or, in such event, the absence of a waiver of compliance or a negotiation thereof, after certain procedures upon CEMEX, S.A.B. de C.V.’s lenders’ request, they would call for the acceleration of payments due under the 2017 Credit Agreement. That scenario would have a material adverse effect on CEMEX, S.A.B. de C.V.’s operating results, liquidity or financial position.

16.2) OTHER FINANCIAL OBLIGATIONS

Other financial obligations in the statement of financial position of CEMEX, S.A.B. de C.V. as of December 31, 2018 and 2017, are as follows:

	2018						2017
	Short-term		Long-term		Total		Short-term		Long-term		Total
I.   Convertible subordinated notes due 2020	$	—		10,097		10,097	$	—		9,985		9,985
II. Convertible subordinated notes due 2018		—		—		—		7,115		—		7,115
III.  Mandatorily convertible securities due 2019		374		—		374		323		371		694
IV.  Liabilities secured with accounts receivable		1,762		—		1,762		1,634		—		1,634
V. Finance leases		43		116		159		38		159		197
	$	2,179		10,213		12,392	$	9,110		10,515		19,625

Financial instruments convertible into CEMEX, S.A.B. de C.V.’s shares contain components of liability and equity, which are recognized differently depending upon the currency in which the instrument is denominated and the functional currency of the issuer (note 2.5).

I. Optional convertible subordinated notes due 2020

During 2015, the Parent Company issued US$521 aggregate principal amount of 3.72% convertible subordinated notes due in March 2020 (the “2020 Convertible Notes”) as a result of exchanges or settlements of other convertible notes. The 2020 Convertible Notes, which are subordinated to all of CEMEX, S.A.B. de C.V.’s liabilities and commitments, are convertible into a fixed number of the Parent Company’s ADSs at any time at the holder’s election and are subject to antidilution adjustments. The aggregate fair value of the conversion option as of the issuance dates which amounted to $199 was recognized in other equity reserves. As of December 31, 2018 and 2017, the conversion price per ADS for the 2020 Convertible Notes was approximately 11.01 dollars in both years. After antidilution adjustments, the conversion rate for the 2020 Convertible Notes as of December 31, 2018 and 2017 was 90.8592 ADS per each 1 thousand dollars principal amount of such notes in both years.

24

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

II. Optional convertible subordinated notes due in 2016 and 2018

On March 15, 2011, the Parent Company closed the offering of US$690 principal amount of 3.75% convertible subordinated notes due in 2018 (the “2018 Convertible Notes”). The notes were subordinated to all of CEMEX, S.A.B. de C.V.’s liabilities and commitments. The notes were convertible into a fixed number of the Parent Company ADSs and are subject to antidilution adjustments. On June 19, 2017, the Parent Company agreed with certain institutional holders on the early conversion of US$325 of the 2018 Convertible Notes in exchange for the issuance of approximately 43 million ADSs, which included the number of additional ADSs issued to the holders as non-cash inducement premiums. As a result of the early conversion, the liability component of the converted notes of $5,468 was reclassified from other financial obligations to other equity reserves. In addition, the Parent Company increased common stock for $4 and additional paid-in capital for $7,059 against other equity reserves, and recognized expense for the inducement premiums paid in shares of $769, recognized within “Financial income and other items, net” in the income statement for 2017. After the early conversion of notes described above, the US$365 of the 2018 Convertible Notes that remained outstanding, were repaid in cash at their maturity on March 15, 2018. Concurrent with the offering of the 2018 Convertible Notes, a portion of the net proceeds from this transaction was used to fund the purchase of capped call options, which, when purchased, were generally expected to reduce the potential dilution cost to CEMEX, S.A.B. de C.V. upon the potential conversion of such notes (note 16.2).

III. Mandatorily convertible securities due in 2019

In December 2009, the Parent Company exchanged debt into US$315 principal amount of 10% mandatorily convertible securities in pesos with maturity in 2019 (the “2019 Mandatorily Convertible Securities”). Reflecting antidilution adjustments, the notes will be converted at maturity or earlier if the price of the CPO reaches $26.22 into approximately 236 million CPOs at a conversion price of $17.48 per CPO. Holders have an option to voluntarily convert their securities on any interest payment date into CPOs. The conversion option embedded in these securities is treated as a stand-alone derivative liability at fair value through the income statement (note 16.2).

IV. Liabilities secured with accounts receivable

As mentioned in note 8, as of December 31, 2018 and 2017, in connection with CEMEX, S.A.B. de C.V.’s sale of trade accounts receivable under securitization programs and/or factoring programs with recourse, the funded amounts of such receivables sold are recognized in “Other financial obligations” in the statement of financial position.

V. Finance leases

CEMEX, S.A.B. de C.V. has several operating and administrative assets under finance lease contracts. Future payments associated with these contracts are presented in notes 17.2 and 20.4.

16.3) FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets and liabilities

The carrying amounts of cash, trade accounts receivable, other accounts receivable, trade accounts payable, other accounts payable and accrued expenses, as well as short-term debt, approximate their corresponding estimated fair values due to the short-term maturity and revolving nature of these financial assets and liabilities.

The estimated fair value of CEMEX, S.A.B. de C.V.´s long-term debt is level 2 and is either based on estimated market prices for such or similar instruments, considering interest rates currently available for CEMEX, S.A.B. de C.V. to negotiate debt with the same maturities, or determined by discounting future cash flows using market-based interest rates currently available to CEMEX, S.A.B. de C.V.

The fair value hierarchy determined by CEMEX, S.A.B. de C.V. for its derivative financial instruments are level 2. There is no direct measure for the risk of CEMEX, S.A.B. de C.V. or its counterparties in connection with the derivative instruments. Therefore, the risk factors applied for CEMEX, S.A.B. de C.V.’s assets and liabilities originated by the valuation of such derivatives were extrapolated from publicly available risk discounts for other public debt instruments of CEMEX, S.A.B. de C.V. and its counterparties.

The estimated fair value of derivative instruments fluctuates over time and is determined by measuring the effect of future relevant economic variables according to the yield curves shown in the market as of the reporting date. These values should be analyzed in relation to the fair values of the underlying transactions and as part of CEMEX, S.A.B. de C.V.’s overall exposure attributable to fluctuations in interest rates and foreign exchange rates. The notional amounts of derivative instruments do not represent amounts of cash exchanged by the parties, and consequently, there is no direct measure of CEMEX, S.A.B. de C.V.’s exposure to the use of these derivatives. The amounts exchanged are determined on the basis of the notional amounts and other terms included in the derivative instruments.

25

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Financial assets and liabilities - continued

As of December 31, 2018 and 2017, the carrying amounts of financial assets and liabilities and their respective fair values were as follows:

	2018				2017
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Investments available-for-sale (note 13)	$	1,200		1,200	$	1,192		1,192
Non-current portion of valuation of derivative financial instruments (note 13)		297		297		794		794
	$	1,497		1,497	$	1,986		1,986
Financial liabilities
Long-term debt (note 16.1)	$	144,650		173,306	$	140,208		145,557
Other financial obligations (note 16.2)		10,213		11,924		10,515		11,037
Derivative financial instruments (note 16.4)		406		406		402		402
Long-term accounts payable with related parties (note 17.1)		218		216		373		368
	$	155,487		185,852	$	151,498		157,364

16.4) DERIVATIVE FINANCIAL INSTRUMENTS

During the reported periods, in compliance with the guidelines established by its Risk Management Committee, the restrictions set forth by its debt agreements and its hedging strategy (note 2.5), CEMEX, S.A.B. de C.V. held derivative instruments, with the objectives of, as the case may be of: a) changing the risk profile or fixed the price of fuels and electric energy; b) foreign exchange hedging; c) hedge of forecasted transactions; and d) other corporate purposes.

As of December 31, 2018 and 2017, the notional amounts and fair values of CEMEX, S.A.B. de C.V.’s derivative instruments were as follows:

			2018						2017
(Millions of U.S. dollars)			Notional amount		Fair value				Notional amount		Fair value
I.	Net investment hedge	US	$	1,249		3		US	$	1,160		47
II.	Foreign exchange forwards related to forecasted transactions			—		—				381		3
III.	Equity forwards on third party shares			111		2				168		7
IV.	Interest rate swaps			1,126		(8	)			137		16
V.	Fuel price hedging			122		(15	)			72		20
VI.	2019 Mandatorily Convertible Securities and options on own shares			—		(1	)			—		(20	)
		US	$	2,608		(19	)	US	$	1,918		73

The caption “Financial income and other items, net” includes gains and losses related to the recognition of changes in fair values of the derivative instruments during the applicable period and that represented net gains of US$38 ($692) in 2018, net gains of US$9 ($161) in 2017 and net gains of US$17 ($317) in 2016, respectively.

I. Net investment hedge

As of December 31, 2018 and 2017, there are US$/MXP foreign exchange forward contracts under a program planned to be up to US$1,250, with monthly revolving settlement dates from 1 to 24 months. The average life of these contracts is approximately one year. For accounting purposes under IFRS, CEMEX, S.A.B. de C.V. has designated this program as a hedge of CEMEX, S.A.B. de C.V.‘s net investment in Mexican pesos, pursuant to which changes in fair market value of these instruments are recognized as part of other comprehensive income in equity. For the years 2018 and 2017, these contracts generated losses of US$59 ($1,157) and gains of US$6 ($110), respectively.

II. Foreign exchange forwards related to forecasted transactions

As of December 31, 2017, CEMEX, S.A.B. de C.V. held US$/Euro foreign exchange forward contracts maturing on January 10, 2018, negotiated to maintain the Euro value of a portion of proceeds from debt issuances maintained in U.S. dollars that were used to repurchase debt denominated in euros (note 16.2). In addition, in February 2017 CEMEX, S.A.B. de C.V. settled US$/MXP foreign exchange forward contracts negotiated to hedge the U.S. dollar value of the proceeds from the expected sale of pumping assets in Mexico (note 20.3). For the years 2018, 2017 and 2016, the aggregate results of these instruments, including the effects resulting from positions entered and settled during the year, generated losses of US$1 ($21) in 2018, losses of US$17 ($337) in 2017 and gains of US$10 ($186) in 2016, recognized within “Financial income and other items, net” in the income statement.

26

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

III. Equity forwards on third party shares

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. maintained equity forward contracts with cash settlement in March 2020 and March 2019, respectively, over the price of 20.9 million shares of GCC in 2018 and 31.5 million in 2017, in connection with the sale of CEMEX, S.A.B. de C.V.’s remaining GCC shares in September 2017 (note 12). During 2018, CEMEX, S.A.B. de C.V. early settled a portion of these contracts for 10.6 million shares. Changes in the fair value of these instruments and early settlement effects generated gains of US$25 ($436) in 2018 and losses of US$24 ($463) in 2017 recognized within “Financial income and other items, net” in the income statement.

In addition, until October 2016, CEMEX, S.A.B. de C.V. maintained a forward contract over the price of 59.5 million CPOs of Axtel in connection with the Company’s investment at fair value through the income statement (note 2.5). Changes in the fair value of this instrument generated a loss of US$2 ($30) in 2016 recognized within “Financial income and other items, net” in the income statement.

IV. Interest rate swap contracts

As of December 31, 2018, CEMEX, S.A.B. de C.V. held interest rate swaps for a notional amount of US$1,000 the fair value of which represented a liability of US$19 ($373), negotiated in June 2018 to fix interest payments of existing bank loans bearing floating rates. The contracts mature in June 2023. For accounting purposes under IFRS, CEMEX, S.A.B. de C.V. designated these contracts as cash flow hedges, pursuant to which, changes in fair value are initially recognized as part of other comprehensive income in equity and are subsequently recycled through financial expense as interest expense on the related bank loans is accrued. For the year 2018, changes in fair value of these contracts generated losses of US$19 ($364) in the income statement.

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. had an interest rate swap maturing in September 2022 associated with an agreement entered by CEMEX, S.A.B. de C.V. for the acquisition of electric energy in Mexico, the fair value of which represented assets of US$11 ($216) and US$16 ($314), respectively. Pursuant to this instrument, during the tenure of the swap and based on its notional amount, CEMEX, S.A.B. de C.V. receives fixed rate of 5.4% and pays LIBOR. Changes in the fair value of this interest rate swap generated losses of US$6 ($114) in 2018, US$6 ($114) in 2017 and US$6 ($112) in 2016, recognized in the income statement for each period.

V. Fuel price hedging

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. maintained forward contracts negotiated to hedge the price of certain fuels, including diesel, gas and coal, as solid fuel, in several operations for aggregate notional amounts of US$122 ($2,398) and US$72 ($1,415), respectively, with an estimated aggregate fair value representing liabilities of US$14 ($275) in 2018 and assets of US$20 ($394) in 2017. By means of these contracts, for its own consumption only, CEMEX, S.A.B. de C.V. fixed the price of these fuels over certain volumes representing a portion of the estimated consumption of such fuels in several operations. These contracts have been designated as cash flow hedges of diesel, gas or coal consumption, and as such, changes in fair value are recognized temporarily through other comprehensive income and are recycled to operating expenses as the related fuel volumes are consumed. For the years 2018, 2017 and 2016, changes in fair value of these contracts recognized in other comprehensive income represented losses of US$35 ($697), gains of US$4 ($76) and gains of US$15 ($311), respectively.

VI. 2019 Mandatorily Convertible Securities and options on the Parent Company’s own shares

In connection with the 2019 Mandatorily Convertible Securities (note 2.5 ); considering that the securities are denominated in pesos and the functional currency of the Parent Company’s division that issued the securities is the dollar (note 2.3), CEMEX, S.A.B. de C.V. separated the conversion option embedded in such instruments and recognized it at fair value through the income statement, which as of December 31, 2018 and 2017, resulted in a liability of US$1 ($20) and US$20 ($393), respectively. Changes in fair value generated a gain of US$20 ($391) in 2018, a gain of US$19 ($359) in 2017 and a loss of US$29 ($545) in 2016.

In addition, on March 15, 2011, the Parent Company entered into a capped calls, considering antidilution adjustments, over 80 million CEMEX, S.A.B. de C.V.’s ADSs maturing in March 2018 in connection with the 2018 Convertible Notes, by means of which, at maturity of the notes, originally CEMEX, S.A.B. de C.V. would receive in cash the excess between the market price and the strike price of approximately 8.57 dollars per ADS, with a maximum appreciation per ADS of 5.27 dollars. CEMEX, S.A.B. de C.V. paid aggregate premiums of US$104. During August 2016, CEMEX, S.A.B. de C.V. amended 58.3% of the total notional amount of the capped calls to lower the exercise price in exchange for reducing the number of underlying options. As a result, CEMEX, S.A.B. de C.V. retained capped calls over 71 million ADSs. Changes in the fair value of these instruments generated gains of US$37 ($725) in 2017 and gains of US$44 ($818) in 2016, recognized within “Financial income and other items, net” in the income statement. During 2017, CEMEX, S.A.B. de C.V. unwound and settled all its capped calls receiving in exchange US$103 in cash.

16.5) RISK MANAGEMENT

Enterprise risks may arise from any of the following situations: i) the potential change in the value of assets owned or reasonably anticipated to be owned, ii) the potential change in value of liabilities incurred or reasonably anticipated to be incurred, iii) the potential change in value of services provided, purchase or reasonably anticipated to be provided or purchased in the ordinary course of business, iv) the potential change in the value of assets, services, inputs, products or commodities owned, produced, manufactured, processed, merchandised, leased or sell or reasonably anticipated to be owned, produced, manufactured, processed, merchandising, leasing or selling in the ordinary course of business, or v) any potential change in the value arising from interest rate or foreign exchange rate exposures arising from current or anticipated assets or liabilities.

27

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Risk management - continued

In the ordinary course of business, CEMEX, S.A.B. de C.V. is exposed to commodities risk, including the exposure from inputs such as fuel, coal, petcoke, fly-ash, gypsum and other industrial materials which are commonly used by CEMEX, S.A.B. de C.V. in the production process, and expose CEMEX, S.A.B. de C.V. to variations in prices of the underlying commodities. To manage this and other risks, such as credit risk, interest rate risk, foreign exchange risk, equity risk and liquidity risk, considering the guidelines set forth by the Board of Directors, which represent CEMEX, S.A.B. de C.V.’s risk management framework and that are supervised by several Committees, CEMEX, S.A.B. de C.V.’s management establishes specific policies that determine strategies oriented to obtain natural hedges to the extent possible, such as avoiding customer concentration on a determined market or aligning the currencies portfolio in which CEMEX, S.A.B. de C.V. incurred its debt, with those in which CEMEX, S.A.B. de C.V. generates its cash flows.

As of December 31, 2018 and 2017, these strategies are sometimes complemented with the use of derivative financial instruments as mentioned in note 16.4, such as the commodity forward contracts on fuels negotiated to fix the price of these underlying commodities.

The main risk categories are mentioned below.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates which only affect CEMEX, S.A.B. de C.V.’s results if the fixed rate long-term debt is measured a fair value. All of our fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk. CEMEX, S.A.B. de C.V.’s accounting exposure to the risk of changes in market interest rates relates primarily to its long-term debt obligations with floating interest rates., which, if such rates were to increase, may adversely affect its financing cost and the results for the period.

Nonetheless, it is not economically efficient to concentrate in fixed rates in a high point when the interest rates market expects a downward trend, this is, there is an opportunity cost for remaining long periods paying a determined fixed interest rate when the market rates have decreased and the entity may obtain improved interest rate conditions in a new loan or debt issuance. CEMEX, S.A.B. de C.V. manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to reduce its interest costs. In addition, when the interest rate of a debt instrument has turned relatively high as compared to current market rates, CEMEX, S.A.B. de C.V. intents to renegotiate the conditions or repurchase the debt, to the extent the net present value of the expected future benefits from the interest rate reduction would exceed the incentives that would have to be paid in such renegotiation or repurchase of debt.

As of December 31, 2018 and 2017, approximately 43 % and 32% of the long-term debt of CEMEX, S.A.B. de C.V. bears floating rates at a weighted average interest rate of LIBOR plus 242 and 270 basis points, respectively. As of December 31, 2018 and 2017, if interest rates at that date had been 0.5% higher, with all other variables held constant, the net income of CEMEX, S.A.B. de C.V. for 2018 and for 2017 would have decreased by US$18 ($348 ) and US$14 ($274), as a result of higher interest expense on variable rate denominated debt. This analysis does not include the interest rate swaps held in 2018 and 2017.

Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. CEMEX, S.A.B. de C.V.’s exposure to the risk of changes in foreign exchange rates relates primarily to its financing activities. As of December 31, 2018, approximately 64 % of the financial debt was Dollar-denominated, approximately 30 % was Euro-denominated, and approximately 6 % was Pound-denominated; therefore, CEMEX, S.A.B. de C.V. had a foreign currency exposure arising from the Dollar-denominated financial debt, the Euro-denominated financial debt and the Pound-denominated financial debt, versus the currency in which CEMEX, S.A.B. de C.V.’s revenues are settled. CEMEX, S.A.B. de C.V. cannot guarantee that it will generate sufficient revenues in Dollars, Euro and Pounds from its operations to service these obligations. As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. had not implemented any derivative financial instrument hedging strategy to address this risk. Nonetheless, CEMEX, S.A.B. de C.V. may enter into derivative financing hedging strategies in the future if either of its debt portfolio currency mix, interest rate mix, market conditions and/or expectations changes.

Monetary position by currency

As of December 31, 2018 and 2017, the net monetary assets (liabilities) by currency are as follows:

	2018			2017
Short-term:
Monetary assets	$	7,925			7,575
Monetary liabilities		(89,995	)		(98,558	)
Net monetary liabilities		(82,070	)		(90,983	)
Long-term:
Monetary assets		3,548			1,986
Monetary liabilities		(157,888	)		(154,347	)
Net monetary liabilities	$	(154,340	)		(152,361	)
Out of which:
Dollars		(149,361	)		(145,760	)
Pesos		(34,551	)		(32,584	)
Euros		(43,886	)		(55,879	)
Pounds		(8,612	)		(9,121	)
	$	(236,410	)		(243,344	)

28

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Credit risk

Credit risk is the risk of financial loss faced by CEMEX, S.A.B. de C.V. if a customer or counterpart of a financial instrument does not meet its contractual obligations and originates mainly from trade accounts receivable. As of December 31, 2018 and 2017, the maximum exposure to credit risk is represented by the balance of financial assets. Management has developed policies for the authorization of credit to customers. The accounting exposure to credit risk is monitored constantly according to the behavior of payment of the debtors. Credit is assigned on a customer-to-customer basis and is subject to assessments which consider the customers’ payment capacity, as well as past behavior regarding due dates, balances past due and delinquent accounts. In cases deemed necessary, CEMEX, S.A.B. de C.V.’s management requires guarantees from its customers and financial counterparties with regard to financial assets.

The Company’s management has established a policy of low risk tolerance which analyzes the creditworthiness of each new client individually before offering the general conditions of payment terms and delivery. The review includes external ratings, when references are available, and in some cases bank references. Thresholds of purchase limits are established for each client, which represent the maximum purchase amounts that require different levels of approval. Customers that do not meet the levels of solvency requirements imposed by CEMEX, S.A.B. de C.V. can only carry out transactions by paying cash in advance. As of December 31, 2018, considering CEMEX, S.A.B. de C.V.’s best estimate of potential expected losses based on the ECL model developed by CEMEX, S.A.B. de C.V. (note 8), the allowance for expected credit losses was $317.

The aging of trade accounts receivable as of December 31, 2018 is as follows:

	2018
Neither past due, nor impaired portfolio	$	3,635
Past due less than 90 days portfolio		239
Past due more than 90 days portfolio		424
	$	4,298

Liquidity risk

Liquidity risk is the risk that CEMEX, S.A.B. de C.V. will not have sufficient funds available to meet its obligations. In addition to cash flows provided by its operating activities, in order to meet CEMEX, S.A.B. de C.V.’s overall liquidity needs for operations, servicing debt and funding capital expenditures and acquisitions, CEMEX, S.A.B. de C.V. relies on cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowing under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. CEMEX, S.A.B. de C.V. is exposed to risks from changes in foreign currency exchange rates, prices and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments, any one of which may materially affect CEMEX, S.A.B. de C.V.’s results and reduce cash from operations. The maturities of CEMEX, S.A.B. de C.V.’s contractual obligations are included in note 20.4 .

As of December 31, 2018, current liabilities, which included $90,017 of current maturities of debt and other financial obligations, exceed current assets in $78,360. For the year ended December 31, 2018, CEMEX, S.A.B. de C.V. generated net cash flows provided by operating activities for $17,591. In addition, CEMEX, S.A.B. de C.V. has committed available lines of credit under its 2017 Credit Agreement, which includes the revolving credit facility and an undrawn tranche for a combined amount of $16,211 (US$825), as well as CEMEX, S.A.B. de C.V.’s proven capacity to continually refinance and replace its short-term obligations, will enable CEMEX, S.A.B. de C.V. to meet any liquidity risk in the short-term.

As of December 31, 2018, in connection with the current liabilities with related parties, for $73,210, mainly from Lomez International. B.V. and CEMEX México, S.A. of C.V. (note 17.1), CEMEX, S.A.B. of C.V. has proven successful in refinancing such liabilities.

Equity risk

Equity risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market price of CEMEX, S.A.B. de C.V.’s and/or third party’s shares. As described in note 16.4 , considering specific objectives, CEMEX, S.A.B. de C.V. has entered into equity forward contracts on third-party shares, as well as capped calls based on the price of CEMEX, S.A.B. de C.V.’s own ADSs. Under these equity derivative instruments, there is a direct relationship from the change in the fair value of the derivative with the change in price of the underlying share. All changes in fair value of such derivative instruments are recognized in the income statement as part of “Financial income and other items, net.” Until December 31, 2016, a significant decrease in the market price of CEMEX, S.A.B. de C.V.’s ADSs would negatively affect CEMEX, S.A.B. de C.V.’s liquidity and financial position. During 2017, all outstanding capped calls based on the price of CEMEX, S.A.B. de C.V.’s own ADSs were early settled.

As of December 31, 2018 and 2017, the potential change in the fair value of CEMEX, S.A.B. de C.V.’s forward contracts in GCC shares that would result from a hypothetical, instantaneous decrease of 10% in the market price of GCC shares in dollars, with all other variables held constant, CEMEX, S.A.B. de C.V.’s net income would have reduced by US$11 ($210) in 2018 and US$14 ($283) in 2017, as a result of additional negative changes in fair value associated with these forward contracts. A 10% hypothetical increase in the price of GCC shares would have generated approximately the opposite effect.

In addition, even though the changes in fair value of CEMEX, S.A.B. de C.V.’s embedded conversion option in the Mandatorily Convertible Notes 2019 denominated in a currency other than the functional issuer’s currency affect the income statement, this do not imply any risk or variability in cash flows, considering that through their exercise, CEMEX, S.A.B. de C.V. will settle a fixed amount of debt with a fixed number of shares. As of December 31, 2018 and 2017, the potential change in the fair value of the embedded conversion options in the Mandatorily Convertible Notes 2019 that would result from a hypothetical, instantaneous increase of 10% in the market price of CEMEX, S.A.B. de C.V.’s CPOs, with all other variables held constant, would have decreased CEMEX, S.A.B. de C.V.’s net income by US$1 ($16) in 2018 and decreased by US$9 ($180) in 2017 as a result of additional negative changes in fair value associated with this option. A 10% hypothetical decrease in the CEMEX, S.A.B. de C.V. CPO price would generate approximately the opposite effect.

29

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

17) BALANCES AND TRANSACTIONS WITH RELATED PARTIES

17.1) ACCOUNTS RECEIVABLE AND PAYABLE WITH RELATED PARTIES

Balances and operations between CEMEX, S.A.B. de C.V. and the subsidiaries and associates companies result mainly from: (i) businesses and operational activities in Mexico; (ii) the acquisition or sale of shares of subsidiaries within the group; (iii) billing of administrative services, rents, rights to use brands and commercial names, royalties and other services rendered between affiliated companies; and (iv) loans between subsidiaries and associates companies. The transactions between subsidiaries and associates companies are conducted at arm’s length. When market prices and/or market conditions are not readily available, CEMEX, S.A.B. de C.V. conducts transfer pricing studies to assure compliance with regulations applicable to transactions between related parties.

For the transactions mentioned above, as of December 31, 2018 and 2017, the main accounts receivable and payable with related parties, are the following:

	Assets				Liabilities
2018	Short-term		Long-term		Short-term		Long-term
Lomez International B.V. 1	$	—		—		41,467		—
CEMEX Operaciones México, S.A. de C.V.		—		—		524		—
CEMEX Concretos, S.A. de C.V.		775		—		—		9
CEMEX México, S.A. de C.V.		—		—		29,588		—
CEMEX Central, S.A. de C.V.		—		—		941		—
Transenergy, Inc.		—		—		475		—
TEG Energía, S.A. de C.V.		—		—		—		209
Proveedora Mexicana de Materiales, S.A. de C.V.		223		—		—		—
Others		726		42		215		—
	$	1,724		42		73,210		218

	Assets				Liabilities
2017	Short-term		Long-term		Short-term		Long-term
New Sunward Holdings. B.V. 1	$	—		—		35,783		—
CEMEX Operaciones México, S.A. de C.V.		—		—		628		—
CEMEX Concretos, S.A. de C.V.		456		—		—		49
CEMEX México, S.A. de C.V.		—		—		20,128		—
CEMEX Central, S.A. de C.V.		—		—		2,259		—
Transenergy, Inc.		—		—		942		—
TEG Energía, S.A. de C.V.		—		—		—		324
Proveedora Mexicana de Materiales, S.A. de C.V.		207		—		—		—
Others		537		—		401		—
	$	1,200		—		60,141		373

1 On March 1, 2018, New Sunward Holding, B.V. (“NSH”) granted to Lomez International, B.V., the loans that had been granted by NSH to CEMEX, S.A.B. of C.V. The conditions of such credits and loans were not affected by the referred assignment.

17.2) MAIN OPERATIONS WITH RELATED PARTIES

The main operations of CEMEX, S.A.B. de C.V. with related parties for the years ended December 31, 2018, 2017 and 2016, were as follows:

	2018		2017		2016
Revenues:
Net sales	$	6,213		4,704		5,013
Rental income (note 3)		72		65		63
License fees (note 3)		774		671		744
Cost of sales and operating expenses:
Raw material and other production cost		3,973		5,831		5,507
Management service expenses		7,963		4,758		4,159
Rental expense		3,793		3,630		3,540
Financing cost (income):
Financial expenses		3,111		2,429		1,208
Financial income and other items, net		3,545		37		(409	)

During 2015, in connection with all businesses and operational activities of the cement and aggregates sectors in Mexico, CEMEX, S.A.B. de C.V. agreed to an operating lease contract with its subsidiaries CEMEX México, S.A. de C.V. and CEMEX Agregados, S.A. de C.V., primarily for operating facilities, cement storage and distribution facilities, under which annual rental payments are required plus the payment of certain operating expenses related to leased assets. In addition, with the integration of some activities of the ready-mix concrete business, CEMEX, S.A.B. de C.V. agreed to a finance lease contract its subsidiary CEMEX Concretos, S.A. de C.V., primarily for ready-mix trucks.

30

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Main operations with related parties - continued

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. had the following contractual obligations with related parties were as follows:

(Millions of U.S. dollars)		2018											2017
		Less than		1-3		3-5		More than
Obligations		1 year		Years		Years		5 Years		Total			Total
Finance leases with related parties 1	US	$	2		1		—		—		3	US	$	12
Operating leases with related parties 2			178		356		356		—		890			1,022
Total leases with related parties	US	$	180		357		356		—		893	US	$	1,034
		$	3,537		7,015		6,995		—		17,547		$	20,318

1 The amounts represent nominal cash flows. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.16).

2 The amounts represent nominal cash flows. CEMEX, S.A.B. de C.V. has operating leases, primarily for operating facilities, cement storage and distribution facilities and certain transportation and other equipment, under which annual rental payments are required plus the payment of certain operating expenses. Rental expense was US$193 ($3,793) in 2018, US$190 ($3,731) in 2017 and US$168 ($3,471) in 2016. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.16).

In connection with the transfer of CEMEX, S.A.B. de C.V. assets and activities related to the ready-mix concrete pumping in Mexico to Cementos Españoles de Bombeo, S. de R.L., during 2016 (note 20.3), CEMEX, S.A.B. de C.V. derecognized the related finance leases of such assets for US$9 ($186).

For the years ended December 31, 2018, 2017 and 2016, in ordinary course of business, CEMEX, S.A.B. de C.V. has entered into transactions with related parties for the sale and/or purchase of products, sale and/or purchase of services or the lease of assets, all of which are not significant for CEMEX, S.A.B. de C.V. and to the best of CEMEX, S.A.B. de C.V.’s knowledge are not significant to the related party, are incurred for non-significant amounts for CEMEX, S.A.B. de C.V. and are executed under market terms and conditions following the same commercial principles and authorizations applied to other third parties. These identified transactions, as applicable, are approved at least annually by CEMEX, S.A.B. de C.V.’s Board of Directors. For CEMEX, S.A.B. de C.V., none of these transactions are material to be disclosed separately.

18) INCOME TAXES

18.1) INCOME TAXES FOR THE PERIOD

The amounts of income tax (expense) revenue in the income statements for 2018, 2017 and 2016 are summarized as follows:

	2018			2017			2016
Current income tax	$	10			(295	)		(90	)
Deferred income tax		(397	)		1,033			(3,309	)
	$	(387	)		738			(3,399	)

As of December 31, 2018, tax loss and tax credits carryforwards expire as follows:

			Amount of
	Amount of		unrecognized
	carryforwards		carryforwards
2025 and thereafter	$	58,585		58,585

In December 2013, the Mexican Congress approved amendments to the income tax law effective January 1, 2014, which eliminated the tax consolidation regime. A period of up to 10 years was established for the settlement of any liability for income taxes related to the tax consolidation regime accrued until December 31, 2013, amount which considering the rules issued for the disconnection of the tax consolidation regime amounted to $24,804. In October 2015, a new tax reform approved by the Mexican Congress (the “new tax reform”) granted entities the option to settle a portion of the liability for the exit of the tax consolidation regime using available tax loss carryforwards of the previously consolidated entities, considering a discount factor, and a tax credit to offset certain items of the aforementioned liability.

Consequently, as a result of payments made during 2014 and 2015, the liability was further reduced to $16,244, which after the application of tax credits and assets for tax loss carryforwards (as provided by the new tax reform) which had a book value for CEMEX, S.A.B. de C.V. before discount of $11,136, as of December 31, 2015, CEMEX, S.A.B. de C.V.’s liability was reduced to $3,971. As of December 31, 2018 and 2017, considering payments made during these years net of inflation adjustments, CEMEX, S.A.B. de C.V. reduced the balance payable to $1,571 and $2,456, respectively.

31

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

18.2) DEFERRED INCOME TAXES

The effect of deferred income taxes for the period represents the difference between the income tax balances at the beginning and end of the period. As of December 31, 2018 and 2017 the temporary differences that generated the deferred income tax assets and liabilities of CEMEX, S.A.B. de C.V. are presented below:

	2018			2017
Deferred tax assets:
Allowances for doubtful accounts	$	95			77
Provisions		190			170
Advances from customers		818			872
Accounts payable to related parties		64			108
Derivative financial instruments		58			120
Total deferred tax assets		1,225			1,347
Deferred tax liabilities:
Land and buildings		(454	)		(488	)
Derivative financial instruments		(44	)		(130	)
Convertible securities		64			95
Advance payments		21			4
Total deferred tax liabilities		(413	)		(519	)
Net deferred tax assets	$	812			828

CEMEX, S.A.B. de C.V. does not recognize a deferred tax liability for the undistributed earnings generated by its subsidiaries, considering that such undistributed earnings are expected to be reinvested and not generating taxable income in the foreseeable future. In addition, for the year ended December 31, 2018, CEMEX, S.A.B. de C.V. recognized an income tax revenue within other comprehensive income in stockholders’ equity of $348 related to the net investment hedge (note 16.4) and $33 related to the adoption of IFRS9 on January 1, 2018.

18.3) RECONCILIATION OF EFFECTIVE INCOME TAX RATE

For the years ended December 31, 2018, 2017 and 2016, the effective income tax rates were as follows:

	2018			2017			2016
Net income before income tax	$	10,854			14,486			17,430
Income tax		(387	)		738			(3,399	)
Effective income tax rate 1		(3.6	%)		5.1	%		(19.5	%)

1 The average effective tax rate equals the net amount of income tax benefit or expense divided by income or loss before income taxes, as these line items are reported in the income statement.

The effects of inflation are recognized differently for tax purposes and for book purposes. This situation, as in the differences between book and tax bases, give rise to permanent differences between the approximate tax rate and the effective rate shown in the income statement of CEMEX, S.A.B. de C.V.

As of December 31, 2018, 2017 and 2016, these differences are as follows:

	2018						2017						2016
	%			$			%			$			%			$
Tax law income tax rate		(30.0	)		(3,256	)		(30.0	)		(4,346	)		(30.0	)		(5,229	)
Inflation adjustments		(31.4	)		(3,404	)		(32.8	)		(4,755	)		(12.5	)		(2,178	)
Non-deductible and other items		57.8			6,273			67.9			9,839			23.0			4,008
Effective tax rate and tax benefit (expense)		(3.6	)		(387	)		5.1			738			(19.5	)		(3,399	)

The Results on tax benefits for the year, includes changes during the period related to deferred tax assets originated by tax loss carryforwards.

19) STOCKHOLDERS’ EQUITY

As of December 31, 2018 and 2017, stockholders’ equity excludes investments in CPOs of CEMEX, S.A.B. de C.V. held by subsidiaries of $194 (20,541,277 CPOs) and $301 (20,541,277 CPOs), respectively, which were eliminated within “Other equity reserves.”

32

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

19.1) COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

As of December 31, 2018 and 2017, common stock and additional paid-in capital was as follows:

	2018		2017
Common stock	$	4,171		4,171
Additional paid-in capital		141,151		140,483
	$	145,322		144,654

As of December 31, 2018 and 2017, the common stock of CEMEX, S.A.B. de C.V. was represented as follows:

	2018				2017
Shares 1	Series A 2		Series B 2		Series A 2		Series B 2
Subscribed and paid shares		30,002,628,318		15,001,314,159		30,214,469,912		15,107,234,956
Unissued shares authorized for executives’ stock compensation programs		936,375,524		468,187,762		531,739,616		265,869,808
Repurchased shares 3		307,207,506		153,603,753		—		—
Shares that guarantee the issuance of convertible securities 4		4,529,603,200		2,264,801,600		4,529,605,020		2,264,802,510
Shares authorized for the issuance of stock or convertible securities 5		302,144,720		151,072,360		—		—
		36,077,959,268		18,038,979,634		35,275,814,548		17,637,907,274

1 As of December 31, 2018 and 2017, 13,068,000,000 shares correspond to the fixed portion, and 41,048,938,902 shares in 2018 and 39,845,721,822 shares in 2017, correspond to the variable portion.

2 Series “A” or Mexican shares must represent at least 64% of CEMEX, S.A.B. de C.V.’s capital stock; meanwhile, Series “B” or free subscription shares must represent at most 36% of CEMEX, S.A.B. de C.V.’s common stock.

3 Shares repurchased under the share repurchase program authorized by CEMEX, S.A.B. de C.V.’s shareholders.

4 Refers to those shares that guarantee the conversion of both the outstanding voluntary and mandatorily convertible securities and new securities issues (note 16.2).

5 Shares authorized until April 4, 2023 for issuance in a public offer or private placement or by issuance of new convertible securities.

On April 5, 2018, stockholders at the annual ordinary shareholders’ meeting approved: (i) a resolution to increase the variable common stock by issuing up to 750 million shares (250 million CPOs), which will be kept in the Parent Company’s treasury and used to be subscribed and paid pursuant to the terms and conditions of CEMEX, S.A.B. de C.V.’s long-term compensation stock program, and (ii) the amount of a reserve of up to US$500 or its equivalent in pesos for the year ending December 31, 2018 and until the next ordinary shareholders meeting to be held in 2019 for purposes of a Parent Company’s share repurchase program. On April 5, 2018, stockholders at the extraordinary shareholders’ meeting approved a resolution to increase the variable common stock by issuing up to 453 million shares (151 million CPOs), which will be kept in the Parent Company’s treasury for potential issuance in a public offer or private placement or by issuance of new convertible securities. This authorization expires on April 4, 2023.

On March 30, 2017, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,687 million shares (562 million CPOs), shares which were issued, representing an increase in common stock of $5, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of $9,459; (ii) increase the variable common stock by issuing up to 258 million shares (86 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX, S.A.B. de C.V.’s convertible securities (note 16.2).

On March 31, 2016, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,616 million shares (539 million CPOs), shares which were issued, representing an increase in common stock of $4, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of $6,966; (ii) increase the variable common stock by issuing up to 297 million shares (99 million CPOs), which will be kept in CEMEX, S.A.B. de C.V.’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX, S.A.B. de C.V.’s convertible securities (note 16.2).

In connection with the long-term executive share-based compensation programs in 2018, 2017 and 2016, CEMEX, S.A.B. de C.V. issued approximately 49.3 million CPOs, 53.2 million CPOs and 53.9 million, respectively, generating an additional paid-in capital of $706 in 2018, $817 in 2017 and $742 in 2016 associated with the fair value of the compensation received by executives.

19.2) RETAINED EARNINGS

CEMEX, S.A.B. de C.V.’s net income for the year is subject to a 5% allocation toward a legal reserve until such reserve equals one fifth of the equity represented by the common stock. As of December 31, 2018, 2017 and 2016, the legal reserve amounted to $1,804.

20) CONTINGENCIES AND COMMITMENTS

20.1) GUARANTEES

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V., had guaranteed loans of certain subsidiaries for US$1,493 ($29,331) and US$1,506 ($29,601), respectively.

33

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

20.2) PLEDGED ASSET

CEMEX, S.A.B. de C.V. transferred to a guarantee trust the shares of its main subsidiaries, including, among others, CEMEX México, S.A. de C.V., New Sunward Holding B.V. and CEMEX España, S.A., and entered into pledge agreements in order to secure payment obligations under the 2017 Credit Agreement (formerly under the 2014 Credit Agreement and the Facilities Agreement) and other debt instruments entered into prior and after the date of these agreements (note 16.1).

As of December 31, 2018 and 2017, there are no liabilities secured by property, machinery and equipment.

20.3) OTHER COMMITMENTS

On April 28, 2017, CEMEX, S.A.B. de C.V. concluded the sale of its assets and activities related to the ready-mix concrete pumping business in Mexico to Cementos Españoles de Bombeo, S. de R.L., subsidiary in Mexico of Pumping Team S.L.L. (“Pumping Team”), specialist in the supply of ready-mix concrete pumping services based in Spain, for an aggregate price of $1,649, which included the sale of fixed assets for $309, plus administrative and client and market development services, as well as the lease of facilities in Mexico that CEMEX, S.A.B. de C.V. will supply to Pumping Team over a period of ten years with the possibility to extend for three additional years, for an aggregate initial amount of $1,340, which are recognized each period as services are rendered. There is the possibility of a contingent revenue subject to results for up to $557 linked to annual metrics beginning in the first year and up to the fifth year of the agreement. For the first year of operation under the agreements from May 2017 to April 2018, CEMEX, S.A.B. de C.V. received $25 of this contingent revenue.

20.4) CONTRACTUAL OBLIGATIONS

As of December 31, 2018 and 2017, CEMEX, S.A.B. de C.V. had the following contractual obligations are as follows:

(Millions of U.S. dollars)		2018											2017
Obligations		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years		Total			Total
Long-term debt 1	US	$	—		1,739		2,100		3,565		7,404	US	$	7,984
Convertible notes 2			19		514		—		—		533			906
Finance leases obligations 3			3		6		—		—		9			10
Total debt and other financial obligations			22		2,259		2,100		3,565		7,946			8,900
Interest payments on debt 4			352		649		481		375		1,857			2,387
Operating leases 5			10		21		16		7		54			27
Total contractual obligations	US	$	384		2,929		2,597		3,947		9,857	US	$	11,314
		$	7,542		57,564		51,023		77,556		193,685		$	222,319

1 The schedule of debt payments, which includes current maturities, does not consider the effect of any refinancing of debt that may occur during the following years. In the past, CEMEX, S.A.B. de C.V. has replaced its long-term obligations for others of a similar nature.

2 Refers to the convertible notes described in note 16.2 and assumes repayment at maturity and no conversion of the notes.

3 Represent nominal cash flows. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.16).

4 For the determination of the future estimated interest payments on floating rate denominated debt, CEMEX, S.A.B. de C.V. used the floating interest rates in effect as of December 31, 2018 and 2017.

5 The amounts represent nominal cash flows. CEMEX, S.A.B. de C.V. has operating leases, primarily for operating facilities, cement storage and distribution facilities and certain transportation and other equipment, under which annual rental payments are required plus the payment of certain operating expenses. Rental expense was US$21 ($408) in 2018, US$18 ($348) in 2017 and US$14 ($284) in 2016. Beginning January 1, 2019, IFRS 16 eliminates the classifications of finance and operating leases. This elimination has no effect in the reported amounts of cash flows considering the contracts outstanding as of December 31, 2018 (note 2.16).

21) CONTINGENCIES

CEMEX, S.A.B. de C.V. is involved in various legal proceedings, which have not required the recognition of accruals, considering that the probability of loss is less than probable or remote. In certain cases, a negative resolution may represent a decrease in future revenues, an increase in operating costs or a loss. Nonetheless, until all stages in the procedures are exhausted in each proceeding, CEMEX, S.A.B. de C.V. cannot assure the achievement of a final favorable resolution. As of December 31, 2018, the most significant events with a quantification of the potential loss, when it is determinable and would not impair the outcome of the relevant proceeding, were as follows:

• On March 16, 2018, a putative securities class action complaint was filed against CEMEX, S.A.B. de C.V. and one of its members of the board of directors (CEO) and certain of its officers (CEO and CFO) in the U.S. District Court for the Southern District of New York, on behalf of investors who purchased or otherwise acquired securities of CEMEX, S.A.B. de C.V. between August 14, 2014 to March 13, 2018, inclusive. The complaint alleges that CEMEX, S.A.B. de C.V. purportedly issued press releases and SEC filings that included materially false and misleading statements in connection with alleged misconduct relating to the Maceo Project and the potential regulatory or criminal actions that might arise as a result. On September 14, 2018, CEMEX, S.A.B. de C.V. filed a motion to dismiss this lawsuit. During the fourth quarter of 2018, plaintiffs filed an opposition brief to this motion to dismiss. CEMEX, S.A.B. de C.V. denies liability and intends to vigorously defend the case. As of December 31, 2018, given the status of the lawsuit, CEMEX, S.A.B. de C.V. is not able to assess the likelihood of an adverse result to this lawsuit, and for the same reasons, CEMEX, S.A.B. de C.V. is not able to assess if a final adverse result in this lawsuit would have a material adverse impact on its results of operations, liquidity and financial position.

34

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

Notes to the Parent Company-Only Financial Statements

As of December 31, 2018, 2017 and 2016

(Millions of Mexican pesos)

Contingencies - continued

• In December 2016, CEMEX, S.A.B. de C.V. received subpoenas from the United States Securities and Exchange Commission (“SEC”) seeking information to determine whether there have been any violations of the U.S. Foreign Corrupt Practices Act stemming from the Maceo project. These subpoenas do not mean that the SEC has concluded that CEMEX, S.A.B. de C.V. or any of its affiliates violated the law. CEMEX, S.A.B. de C.V. has been cooperating with the SEC and intends to continue cooperating fully with the SEC. The Department of Justice (“DOJ”) also opened an investigation into this matter. In this regard, on March 12, 2018, the DOJ issued a grand jury subpoena to CEMEX, S.A.B. de C.V. relating to its operations in Colombia and other jurisdictions. CEMEX, S.A.B. de C.V. intends to cooperate fully with the SEC, the DOJ and any other investigatory entity. As of December 31, 2018, CEMEX, S.A.B. de C.V. is unable to predict the duration, scope, or outcome of either the SEC investigation or the DOJ investigation, or any other investigation that may arise, or, because of the current status of the SEC investigation and the preliminary nature of the DOJ investigation, the potential sanctions which could be borne by CEMEX, S.A.B. de C.V., or if such sanctions, if any, would have a material adverse impact on CEMEX, S.A.B. de C.V. results of operations, liquidity or financial position.

In addition, CEMEX, S.A.B. de C.V. is involved in various legal proceedings of minor impact that have arisen in the ordinary course of business. These proceedings involve: 1) product warranty claims; 2) claims for environmental damages; 3) indemnification claims relating to acquisitions or divestitures; 4) claims to revoke permits and/or concessions; and 5) other diverse civil actions, administrative, commercial and lawless. CEMEX, S.A.B. de C.V. considers that in those instances in which obligations have been incurred, CEMEX, S.A.B. de C.V. has accrued adequate provisions to cover the related risks. CEMEX, S.A.B. de C.V. believes these matters will be resolved without any significant effect on its business, financial position or results of operations. In addition, in relation to certain ongoing legal proceedings, CEMEX, S.A.B. de C.V. is sometimes able to make and disclose reasonable estimates of the expected loss or range of possible loss, as well as disclose any provision accrued for such loss, but for a limited number of ongoing legal proceedings, CEMEX, S.A.B. de C.V. may not be able to make a reasonable estimate of the expected loss or range of possible loss or may be able to do so but believes that disclosure of such information on a case-by-case basis would seriously prejudice CEMEX, S.A.B. de C.V.’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases, CEMEX, S.A.B. de C.V. has disclosed qualitative information with respect to the nature and characteristics of the contingency but has not disclosed the estimate of the range of potential loss.

35

KPMG Cárdenas Dosal, S.C. Manuel Àvila Camacho 176 P1, Reforma Social, Miguel Hidalgo, C.P. 11650, Ciudad de México. Teléfono: +01 (55) 5246 8300 kpmg.com.mx

lndependent auditors’ report

To the Board of Directors and Stockholders

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

Opinion

We have audited the separate financial statements of CEMEX, S.A.B. de C.V. (“the Company”), which comprise the separate statements of financial position as at December 31, 2018 and 2017, the separate statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2018, 2017 and 2016, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the unconsolidated financial position of the Company as at December 31, 2018 and 2017, and its unconsolidated financial performance and its unconsolidated cash flows for the years ended December 31, 2018, 2017 and 2016 in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Mexico and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. and we do not provide a separate opinion on these matters.

“D.R.” © KPMG Cárdenas Dosal, S.C., la firma mexicana miembro de la red de firmas miembro de KPMG afiliadas a KPMG International Cooperative (“KPMG International”), una entidad suiza. Impreso en México. Todos los derechos reservados.	Aguascalientes, Ags.	Guadalajara, Jal.	Puebla, Pue.
	Cancún, Q, Roo.	Hermosillo, Son.	Querétaro, Qro
	Ciudad de México.	León, Gto.	Reynosa, Tamps
	Ciuded Juárez, Chih.	Mérida, Yuc.	Saltillo, Coah.
	Culiacán, Sin.	Mexicali, B.C.	San Luis Potosi, S.L.P.
	Chihuahua, Chih.	Monterray, N.L.	Tijuana, B.C.

Measurement of Investments in subsidiaries
See Note 12 to the separate financial statements
The key audit matter	How the matter was addressed in our audit
The Company’s investments in subsidiaries represent approximately 96% of the Company’s unconsolidated assets and is therefore the most significant component of the Company’s balance sheet. Management’s evaluation of potential triggering events over impairment of its investments requires the exercise of critical judgment, making this a key audit matter.	We also audit the consolidated financial statements of the Company and issued our audit opinion thereon on this same date. When performing the audit of the consolidated financial statements we assessed the Company’s goodwill impairment analysis over the most significant subsidiaries. We used such analysis to consider, whether management’s conclusions with respect to potential impairment triggering events was appropriate, considering the amount of investments in subsidiaries from a separate financial statement perspective.

Recoverability of deferred tax assets related to tax loss carry forwards
See Note 18.2 to the separate financial statements
The key audit matter	How the matter was addressed in our audit
The Company has significant unrecognized deferred tax assets in respect of tax losses. There is inherent uncertainty involved in forecasting future taxable profits, which determines the extent to which deferred tax assets are or are not recognized. The periods over which the deferred tax assets are expected to be recovered can be extensive. As a result, we consider this to be a key audit matter. The Company’s separate financial position shows a significant concentration in liabilities denominated in U.S. dollars which, for Mexican tax reporting purposes, results in significant foreign exchange fluctuations which are deductible/taxable in the year in which they accrue as a result of changes in the exchange rate of the Mexican peso to the U.S. dollar. The current uncertainty on said exchange rate increases the amount of judgment needed to conclude on the projections of future taxable income.	Our procedures included considering historical levels of taxable profits and comparing the assumptions used in respect of future taxable profit forecasts to those used in the Company’s long-term forecasts, such as the forecasts prepared in relation to goodwill impairment evaluations used in preparation of the consolidated financial statements. Our tax specialists assisted in evaluating the reasonableness of key tax assumptions, timing of reversal of temporary differences and expiration of tax loss carry forwards based on our knowledge of applicable tax regulations. For our analysis of recoverability of deferred tax assets related to tax losses, we evaluated management’s scenarios of the possible changes in exchange rates of the Mexican peso to the U.S. dollar in order to conclude whether it was reasonable or not to recognize such tax losses. Nonetheless, there is significant uncertainty with respect to future exchange gains or losses that may affect the use of such tax losses and may therefore affect the carrying amount of the related deferred tax assets. We also assessed the adequacy of the Company’s disclosures setting out the basis of the deferred tax disclosures setting out the basis of the deferred tax asset balances and the level of estimation involved.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the separate financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

/s/ Joaquin Alejandro Aguilera Davila

C.P.C. Joaquin Alejandro Aguilera Davila

KPMG Cárdenas Dosal, S.C.

Monterrey, N.L.

January 30, 2019