Q3 2020 Cemex SAB de CV Earnings Call
Dead dead dead dead dead.
Dead dead dead.
Good morning, and welcome to the Cinemax third quarter 2020 conference call and webcast. My name is Chuck and I'll be your operator for today at this time. All participants are in a listen-only mode later. We will conduct a question-and-answer session. If I anytime you require operator assistance, please press star followed by zero and we'll be happy to assist you our host for today or Fernando Gonzalez chief executive officer and Maher Alpha former Chief Financial Officer. And now I would like to turn the conference over to your host Fernando Gonzalez. Please proceed sir.
Good morning, and thank you for joining us today on our service water 20/20 conference call and webcast. I hope this call finds you and your family is in good health. I'm joined today by 5. Our our CFO. We we spent a few minutes reviewing the business and then we will be happy to take your questions.
We are quite pleased with our performance instead of water and the recovery, we have experienced since the disruptions caused by COVID-19 logged out in second-quarter in this in third-quarter. We are moving beyond Avatar recovery from second quarter, but rather to growth inevitable on a year-over-year basis at a double-digit rate.
In fact, if it's maybe some margin, I'm freaking flowing the quarter where the highest since 2016.
With the lifting of lockdown measures both men has rebounded sequentially in Mexico and South Central America and the Caribbean region and jet black cement has also continued to grow.
Importantly Mexico growth in the water is not simply recording from second-quarter COVID-19 destruction, but also about the rebound from a difficult 2019 off in the form of double-digit growth as the current government settled into his second year.
This is the second consecutive quarter of significant margin Improvement resulting from higher prices energy Tailwinds and cost efficiencies under operation resilience.
Despite the volatile COVID-19 the month conditions this year pricing is up year-over-year for all three products.
We continue to decrease the capital structure in the quarter with extension of near-term back maturities under our facilities agreement the bond liability management as well as an improvement in our level ratio.
Our safety protocols distribution capabilities and digital platforms are winning Customer Loyalty as evidenced by the second consecutive quarter of record net promoted suck.
Finally disability for our business continues to improve and we believe that while the future may be bumpy. We are experiencing sustainable demand Trends in many markets.
I would be remiss if I did not recognized as a third-quarter achievements are a result of the extraordinary efforts on the part of our employees during this challenging time on their appearance to the safety protocols. We have put in place which ensure the continuity of our business.
Before we review the quarter. I would like to briefly recap some of the takeaways from our analysts day in September.
We roll out our medium-term strategy operation proceedings, which will guide us to 20 23.
This plan is recognition that COVID-19 has changed the landscape of our industry and that our strategy must adjust to this new reality.
Any of the goals of operation resilience are familiar at the root how we get there is different.
It is about enhancing margins through operational performance and Cost Containment and committing to a sustainable 20% margin by 2023.
It is about optimizing our portfolio for growth through strategic asset divestments on both on investments.
Descent we have been augmenting our resources and focus to enhance the bolt on growth strategy.
We had a focusing on identifying and selecting the investment projects that will either improve our profitability or capture additional value in our four core businesses.
Both of which will result in increased every day.
We have been progressing on this strategy for the last couple of years.
Our current Bolton Investments pipeline includes over forty projects representing investments in excess of two hundred fifteen minutes. That should contribute around fifty million in every twenty twenty-one.
It is about achieving an investment-grade capital structure and this risking I would business to lay the foundation for the future growth.
And finally, it is about considering sustainability as competitive advantage and for the integrated it into all our operations and decision-making.
Now, let me move to the quarter.
Volumes have not only retraced the seat decline of seconds water, but they are showing year-over-year growth in all markets, except Middle East Asia and Africa.
We believe this growth is not simply result of pent-up demand during the lockdown. As we are now several months Beyond restrictions in most markets.
Mexico sent out with double-digit volume growth in the water reflecting recovery from last year's government decision.
The trends we are seeing give us confidence that these volumes are sustainable in the near-term in most markets.
We know that's COVID-19 will continue to challenge our operations. But we believe that the learning curve of the government has improved significantly and that government reactions to fish out Grace will be more targeted and less disruptive to our business.
Importantly pricing for our free products probably between 1 and 3% year-to-date September.
Is High Capacity utilization that exists today in our major markets combined with a more stable demand environment will lead to opportunities to compensate lost input of inflation.
One of the most encouraging Trends we have experienced this year has been the performance of back cement in I would imagine Market footprint.
Why the back cement has always been resilient in downturns that performance this year has been one not just of stability but growth.
Give me not to consume. It globally backs amendment has been supported by a search in Home Improvements as families quarantine and use the disposable income to enhance their home.
Additionally bad consumption is highly correlated to remittances and remittance levels remain strong today in the crisis.
Finally government programs designed to promote self construction. I'll also supportive of consumption. This has been an important factor in the growth of black cement in Mexico.
Students water and slowly dated says 3% reflecting strong growth in cement volume that was partially offset by a declining Ready Mix.
White all regions contributed to the growth in sales on a like-to-like basis Mexico was the largest contributor with a 14% increase.
Local currency pricing for our free products increase between one and 4%
even by our Cost Containment effort Consolidated Every Rose 15% on a like-for-like basis to 728 million with all regions showing off.
180 basis points increase in margin reflect higher prices lower energy costs Savings in sg&a improve Logistics and Miss effects.
Finally, why don't you free cash flow after maintenance capex grew more than 50% year-over-year reflecting increased earnings and lower maintenance and working capital needs.
The last time we achieved 21% margins warranty and free cash flow of this magnitude was in 2016.
Now to bring down Abby's on the 15% increase in maybe.
all business letters contributed to the performance pricing provided the biggest boost
our cost-savings initiative lower Fuel and distribution costs were also important factors.
Report a b. Reflect the favorable effect from currency situation of 22 million due primarily to the depreciation of the Mexican peso.
Recent resilience called savings were an important contributor to margin Improvement.
We achieve almost one-third of our twenty-twenty cost-savings call in the water.
Dating to hear today's are equivalent to 240 basis points in marketing.
Vitas contributors have been busy Renee with reduction in fees sales and marketing expenses distribution travel and health discount.
And operational savings related to increase efficiency Mexico and Ready-Mix plant right-sizing among others.
During this year we have learned new ways to operate and we believe many of these savings are sustainable in the future.
During the last few months our digital platforms under the same umbrella have been important tools to serve our customers and a significant differentiating factor.
Of course, we did not foresee. It's endemic when we went live with a Mexico three years ago. That's how would investment has certainly been Timely.
In only two years approximately 90% of requiring customers use in Mexico.
On today under the same umbrella. We have rollout digital applications mid specific customer segments. For example of Ramadan is a digital platform available for retail customers, and I would imagine Market portfolio.
Another example would be the development of Senex golf. We're willing digital application to efficiency and promote both parts delivery of our products or commercial aggregate customers off.
We believe our digital capabilities are an important factor in our record net promote this course of the last two quarters.
You know what operation proceeding strategies to send ability as soon as a little growth.
We drove nice discovering challenges our industry faces, and we believe that climate action will be an important competitive advantage.
We have aggressive goals to meet these challenges.
mm
City goal of 35% reduction in CO2 emissions
I'm not 2050 and vision of Net Zero CO2 concrete globally.
Unfortunately the fat to achieve our Quincy city called his fear and based on existing proven Technologies.
It's a 2019. We have already achieved a 22% reduction in CO2 emissions.
Because the rest of the way we have the value of a detailing plant by plant road map.
Instead of water. He's a road map and Frankie Valli dated by carbon trust a recognized independent organization that provides certification carbon reduction plans.
Leave again this important Challenge from a place of strength.
We already have one of the highest alternative fuel usage is in the industry and this expertise will be an important tool to move forward.
Additionally, we will relay on the experience. We have gained in our European region which leads our way on co2 reduction initiatives.
Europe will reach the 35% reduction in CO2. Go by the end of this year ten years ahead of our Consolidated Target and buy Thursday. We expect Europe will reduce your two by 55%
Online through our twenty fifty plus we are already offering an 800 to concrete restaurant.
Concrete that Miss I would 2050 ambition.
Because we introduced is several countries in Europe and will be roll out shortly in other major markets around the world.
The fax is been used in the largest infrastructure project in Europe. The high-speed to rent project in the UK.
To believe it fully or never 2050 ambition. The industry will need to find a new technologies that can be scaled easy.
We are working within our industry with governments and multilateral organizations and our own to develop these Solutions.
We are uniquely positioned in this works by our ability to quickly roll out Innovations through our Global Network.
I would new business of organization Solutions as well as some extent teachers will play a critical role in this challenge.
You didn't this quarter alone. We announced two joint ventures.
One with a Swiss company sent a lien to eliminate the carbon footprint of cement using solar power and the other with carbon cling to the value of low-wage carbon-capture.
And now let's move to the regions.
Our operations in the US continue to enjoy strong momentum in service water driven primarily by a pickup and residential activity as well as long road in the infrastructure sector.
Volumes in the quarter. We're somewhat affected by weather fires in California cooperate with higher precipitation in the southeast.
The residential sector continues to benefit from low interest rates and record-low inventory strong household formation and changes in by your preferences to favor service on single family homes.
The latest. The shows that single family starts a new home sales are at the highest level since the Great Recession.
Permits for new single-family homes were up 20% year-on-year in water.
Suggesting that this housing strength should continue into next year.
The infrastructure sector has also shown growth highways and streets spending quality today. August was up 3% year-over-year.
Why trailing 12-month contract a wired for our Porky stays atop September are up 9%
We are in cottage by the one-year extension to the first acts that was recently passed.
We believe that with more visibility of federal funding States will feel more comfortable disbursing their own transportation funds in addition. The extension will be the new Administration trying to undertake a more meaningful Federal Transportation program.
Righteous remains stable sequentially for our free products. We introduced a price increase for Samantha in California in September and we are optimistic about instructions.
Cuz we think about next year. We look to recover much of the cost increases that we were not able to pass through this year due to COVID-19 disruptions.
If you tell margin expanded Why by one percentage Point reflecting improved Logistics lower fuel costs and savings from operation for seniors.
In Mexico, the double-digit growth in cement volumes is a sign of recovering from a difficult 2019 at government program stakeholders and spending excelling in the second year of the administration.
If growth is supported by strong self construction infrastructure and a pickup informal housing and Industrial Construction.
Government social programs couple with a search in Home Improvements and strong remittances have supported back cement volumes.
This social programs for school improvements rural roads and housing are significant.
We estimate they are responsible for approximately a third of the increase in maximum volume.
Based on the preliminary budget for 20 21 the existing social programs are expected to be maintained while several new programs such as to cut and last name of developing 13,000 new homes for social housing will be introduced.
It's 20:31 budget for this social programs is expected to increase at a double-digit rate versus prior year budget.
Infrastructure execution of federal Flagship projects has quickened while state and local governments have initiated improvements in urban infrastructure and transportation.
We welcome the announcement by the Mexican Government of the US fourteen billion private public infrastructure plan.
Islam is evidence of the intent of the public and private sector to work together to reignite the economy by an infrastructure.
Get in the water despite a successful price increase for back cement our prices were flat on a sequential basis.
This is explained by product mix as bulk cement roof 54% Sequentially while back cement volumes were up 5%
You know, we are committed to recovering our input cost inflation in terms of pricing of our products.
Since January 2019 cement prices have declined in real terms.
To that end. We have announced at 3% Nationwide price increase on black cement beginning early October.
David. Margin during the quarter increase 0.6 percentage points mainly due to volume and prices a favor of protein mix affect us reduction initiative and few they lose.
My computer is running high in the country and we believe our defects function is coming online at the right time in the first half of 2021.
Finally next year's 2021 midterm election will be the most comprehensive election in Mexico's history with the full chamber of deputies and fifteen States Governors up for election as well as numerous local positions in north latitude States.
Electric spending is typically another Catalyst for the consumption of Maximus.
No.
it may I region every. Grew 8% year-on-year driven by Europe Israel and the Philippines
maybe. Margin increase response to to pricing and Cost Containment initiatives.
Anything's was an important contributor.
Europe we saw an important Rebound in our Western European markets from the lockdowns in second-quarter our central European countries continue to grow.
We saw strong volume for the formats in the water from Germany Poland and the Czech Republic while the UK Market pick up at lockdowns were lifted in July would continue to see year-over-year weakness in construction activity.
We entered 20 21. We remain well-positioned for phase 4 of the European Union's emissions trading system. We have sufficient carbon allowances to cover our operations through 2030.
This position was smooth the way in our transition to reach our 20-30 climate calls.
In the Philippines, we experienced a sharp recovery of volumes in the quarter at the lockdown measures were lifted in late May.
For more information. Please. See our CHP quarterly earnings which will be available this evening.
Israel continued with his robust performance again beaten is record. Which what Jeff says in second-quarter.
in response to Rising infection rates recently with the mayor we have seen new targeted restrictions imposed by the UK France same Israel and the Philippines among others, but devices
the construction sector continues to operate without restrictions
construction activity in our style Central and Caribbean region during the quarter shows in origin friends.
Regional cement volumes have recovered to almost 2019 levels pricing Dynamics remain favorable in the region with markets representing approximately fifty 80% of our original volume experiencing sequential increases in local currency terms.
Reported the client response from a geographic mix effect.
For the region increased 31% year-over-year.
It was the first increase in evidence since fourth quarter 2019.
Maybe. Margin increase 630 basis points on the back of our cost-reduction initiatives higher prices on the positive contribution of lower fuel prices.
Columbia activity improves using the quarter driven by the sales construction sector and execution of Highway projects.
To meet certain Outlook in Columbus favorable by fiscal stimulus measures including investments in social housing as well as the new 5G infrastructure program.
execution of the existing 4G Highway projects will continue to support volumes
cement volumes in the Dominican Republic grew 5% on a year-over-year basis on the back of increased activity in the construction sector as a result of strong remittances.
What additional details on this region I invite you to review clhs quarterly results, which were also published today.
No, I will pass the call to Marcus to review our financial performance.
Thank you for Nando. And what date everyone has Fernando said it was indeed a good quarter with record performance since 2016 reflecting better-than-expected trading environment as well as the successful implementation of operation resilience. Now, let's move to the next slide.
Yeah, I would like to highlight the more than doubling of our free cash flow after total capex for the quarter. This was the result of improved operational performance as well as lower capex and investment working Gap.
The games and working capital are largely a result of a rigorous management of our receivable and inventory levels.
Average working capital days on a year-over-year basis have improved from -6 days in the third quarter of 2019 to -12 days in the third quarter of this year.
Our lower expenditure in maintenance capex. Year-to-date largely reflects the hard stop a non-essential capex enacted in April as a response 2019.
We have resumed our normal maintenance in third-quarter and expect to execute much of the Deferred capex in fourth quarter or during the 2021 with your other cash items are explained by higher Severance payments and lower fixed assets sales versus last year.
As we disclosed some days ago. We are recognizing a non-cash impairment of approximately 1 and 1/2 billion dollars during the quarter.
Most of the right down relates to Goodwill in our us business and an impairment of idle Assets in the US Europe Middle East Africa and Asia region as well as our South Central America Caribbean region.
As a result our net income assets and equity in the quarter or negatively impacted. We do not foresee any favorable cash tax in fact as a consequence of this action.
Recorder was a busy quarter in terms of liability Madison's we came into the quarter with an unusually high cash position the result of the proactive liquidity measures. We took in the first half naked in front the uncertainties of COVID-19 during the quarter. Our cash position was further strengthened by our free cash flow of $427 the proceeds from the closing of the sale of some Ready Mix and aggregate assets in the UK for two hundred million dollars and the issuance of a 1 billion dollar Bond.
We issued a 10-year us dollar-denominated bond in mid-september with a yield to maturity of 5.2% This is the lowest yield that we have achieved for that dinner every month and more than two hundred basis points tighter than the 7-year Bond we issued in June.
With greater visibility into business in the quarter. We felt comfortable. We deployed cash.
We paid down $700 million of the revolving credit facility, which will continue to be fully available to us through 2023.
Additionally, the 306 million of net other uses of cash in the quarter includes the payment of approximately $300 in short-term working Capital Loans in Italy fifty million dollars of term loans under the facilities agreement.
Subsequent to the quarter end be redeemed approximately one point nine billion dollars of outstanding bonds with maturities in twenty Twenty Four and Twenty twenty-five. We also took down approximately $530 million dollars of term loans as part of the process to amend the facilities agreement.
October we successfully completed the refinancing of our facilities agreement extending out the majority of our maturity. I'm pleased to report that currently $90 off of our lenders have approved the extension.
Close to two point two billion dollars or 62% of our facilities agreement debt was pushed out between one and three years as a result. We have no material dead of July 2023.
how to better align the currency of our debt with our we have read denominated $313 of previous US dollar exposure under the term loan Mexican vessels as well as $82 to Euros
it's new Mexican peso trench will have a lower interest rate margin grid of between twenty-five to fifty basis points relative to the other countries pricing of all the trenches remains unchanged.
Additionally, I'm proud to report in alignment with our climate action strategy and ultimate vision of a carbon-neutral economy. The facilities agreement has now become one of the largest sustainability linked loans in the world. The interest rate now incorporates five sustainability link metrics, which include reduction of net CO2 emissions personal issues product.
our
Consumption from Green energy in cement for a rehabilitation water management and clinker Factor.
I would like to recognize and thank all the participating banks for their continued support.
The maturity profile shown in this slide is performance after giving effect to the refinancing of the facilities agreement the prepayment of approximately $530 million of term loans under the facilities at Greenberg and the Redemption of approximately 1.9 billion knows that matured in twenty Twenty Four and Twenty twenty-five that I discussed earlier as you can see. We now have a very comfortable maturity profile with no material debt maturities until July 2023. We also have extended the average life of our debt while maintaining of our funding
Going forward we will continue with our efforts to have a Runway without significant maturity or about 24 to 36 months.
Despite an unfavorable effects effect of $154 our net debt decreased by more than $500 sequentially as we generated substantial free cash flow during the quarter and receive the proceeds from the UK investment.
Our leverage ratio was reduced by three times due to a decrease in net debt and an improvement from the trailing-twelve-month speak with a moving us to a lower interest level within the margin grid for our facility agreement to get back to you for number.
Thanks a lot here. Even the results in the water and improve visibility. We are upgrading our guidance to approximately two point four billion from the 2.5 billion we gave in our open dialogue event in early September.
It would mean that our full year 2020 guidance on a like-to-like basis adjusting for FX would be approximately 6% higher than the prior-year month.
We now estimate that the cost of energy return Optimum produced for this year will be at -7 to -9 best of the previous guidance of -5 to -7 month.
We are adjusting at work our local Catholic to arrange of 750 to 780 previous guidance of 700.
For working capital. We are expecting and Investments of approximately hundred and fifty million dollars for the year.
Finally regarding our address. We are now expecting a lower interest expense versus our prior guidance due to our liability management efforts and life incidents in the forequarter under the bank agreement t mean from our level of ratio Improvement. We now expect an increase of between fifteen to twenty million relative or five year sentence the prior guidance of twenty-five to fifty million.
disabilities improve in in most markets in second-quarter
As we look to 20 21, we expect positive year-on-year GDP growth in all markets for twenty Twenty-One, which should translate into higher consumption of our products.
We expect that COVID-19 will create bumps in the road. But we leave that disruption in our Market will not be as challenging as in second quarter of this year.
We expect the US and Europe. We left deployed significant fiscal stimulus including for infrastructure purposes.
In Mexico the ramp up in government spending and 2021 elections will be supportive of back cement.
With high capacity utilization in most markets we expect pass-through of input cost inflation going forward.
To fly the man Dynamics in Europe will continue to be favorable as a result of the new carbon regime.
Additionally, we will continue to take action on all elements of operation resilience, including our Walton investment strategy.
We will of course continue to prioritize the health and safety of our employees customers and suppliers and now back to humor her.
Thank you for number before we go into our Q&A session. I would like to remind you that any forward-looking statements. We make today are based on our current knowledge of the markets in which we operate and of course could change in the future due to a variety of factors beyond our control in addition unless the context indicates. Otherwise all references to pricing initiatives price increases or decreases refer to prices for our products.
And now we will be happy to take your questions operator.
Ladies and gentlemen. If you wish to ask a question, please press star followed by one on your touch-tone telephone if your question has been answered or you or you wish to withdraw your question, please press star followed by Tom, press star One to begin. Please stand by for your first question.
Your first question will come from Vanessa with Credit Suisse, please go ahead.
Hi, thank you for taking my question. Is this regarding and Mexico a volume? Do you think I'm there? Obviously, very strong and and continue to be in September after that charge that you've shared with us. And the presentation. Would you expect that the new job going to be programs and the government projects could lead the Mexican cement columns to reach a new Peak. Thank you.
Hello, Vanessa. Thank you for your question.
The answer is we think of additional volumes not only the near the next year, but let me refer back to the the general context of what we see happening in Mexico. And I think we we we all need to remind that last year 2019 was the first year of this new federal government and it was a transition year. We commented several times. But we have forgotten to pack up and release it. That's the nominal so last year. There was no social housing program and ordered programs involving supported by the government, but we may be easier.
Is it precisely how different type of programs are supporting the consumption of we have several thanks problems that we believe are going to continue for twenty Twenty-One and they will even grow in 2021 and repairing all the one hand to the long projects. Like what we all know the airport the forecast the train took that you know little by little we have seen how order support it and programs have been effectively executed and returning to do a growth as long as it's important to housing. So and on top of that there is this new billion-dollar dead.
Well, yes additional infrastructure projects. I recently agreed between the public administration and private investors. So I I think that what we have seen is is a market that has been reacted will be acting all those issues with some let's say special characteristics in place by calling, you know, the story, you know in Mexico March April May the the the construction more related to the consumption of both cement what you want done while the construction project back to what not not restricted. So what we have seen on purpose of these new products what we have seen is Samantha dead.
Increasing my Legos after the ignition lock down in the lung cancer, but you should be activated. We we are quite happy with the performance of the market in Mexico, and I'm just saying that can be extended to place an additional potential possibility past year is midterm election, which which you know often times is conducive to enforcement of this government of a problem.
Thank you very much. A fan under that really helps and I get to continue with Mexico and just to drill down on the pricing Dynamics life seems like prices were flat sequentially in local currency. So can you tell us what happens with the price increase that you proposed our customers in The Backson and segments. Did they not pass through or were they upset by the other involved? Thank you God. Well, we're in the middle of that process. Hopefully it will probably stick but we are as you know, very Vigilant off the objective we have on on updating on increasing prices to recover it would cost inflation we wage.
We have had that policy already for some time. Unfortunately, we we have already about a year and half or so in which our prices in real life turns optic line slightly green. We have not managed to update or to chew our cost inflation. We will continue having that as an objective as the North and when you tried to bring back prices and return at the labels, we we want off course going on in the market. We are subject to that Dynamic and as you know off the market could be drawn as it has been happening with the last three months, but that will be very careful to achieve our Target wage.
On the other hand, there is another consideration which is because of Maximum being proposed already for this amount and box and that can impact recently taken effect on on on on price because of the needs of the month we get the nothing to do with anything.
Excellent. Thank you very much.
Our next question will come from Gordon leave with btg pactual, please go ahead.
Hi. Thank you very much for the call to two quick questions the first I was wondering if you could explain to us the the sort of a different performance in cement volume growth and ready ma'am. I think it's really interesting that if you look at your table with your cement volume growth by region, which is very positive Ready Mix is almost a mirror image of that even in developed markets where I where I'm supposed a off the bag drivers are a lot less powerful. So I was wondering if you could maybe explain why that is is it a mere coincidence? Is it something that worries you in any way going forward as far as already mixed performance relative to cement and then the second question was just a very specific one looking at your results from the Middle East. It would assume it would appear at that pricing cement pricing Egypt dropped very quickly in the third quarter relative to the second quarter, and I was wondering if you could maybe comment why that happened. Thank you.
Well as regarding my jeep that you know, the situation is the complex.
He's very high capacity and compared to the market. We do believe that the market will be zero. We will print to recover but that the gas station in the country is really slow. And if you continue in know for the near future, that's very very challenging to the 32.
Yes of the projecting the 5 digit market conditions continue being very similar to what they have been in the last three months a year off. Well, I don't take that maybe changes is set for a sort of an Xbox exhaustion because you know things like not all this money but there might be the reactions on that regard the Dynamics. I don't see any oil change your other question. I think you know a few common.
I think that the pattern is Emerging Market is that black cement is the one that has been received and wrong after the negative impact of Life Lock Down the second quarter of the year. And and and that's the part of the volume that had been more resilient South Side comment that indicates Mexico. The lockdown was a partial type of lockdown impacting for my construction both cement and because of that very month. Um General sense that he makes it we have seen in our Market never imagined Market wedding Ready Mix coming after the bomb in in blank page on the other hand even in in in the market is more related to in dog.
The commercial sectors or or segments and that is the part that that indicates of the US that is the part that has been more impacted my life. I was thinking infrastructure. Okay, and do you not have not moved? Well and 30 Calibre ten pence to recover slowlier. We don't have negative impact of whatever the month so we we testing and ready to recover the data and apps relations with that investment commercials segments in in
The speaker in the face of the US.
And some counseling example, I'd mention the case of Mexico.
And Fernando, maybe I can add my garden maybe I could just say that you know bolstering was Fernando said if you take a look at sequential volumes wage, you know of cement Ready Mix and Aggregates for the quarter. They're growing pretty much in Kendall. I mean, you see the recovery, I mean cement for instance, you know quarterback sequentially is up 16% ready mix up 17% and Aggregates are up sequentially 16% So so we the point that I, you know made it is precisely right unless you had lockdowns and if you had the impact of Industrial and Commercial as we you know, started coming out of lockdown, you started seeing it fairly rapid pick up on a sequential basis of of Ready-Mix and Aggregates in line with what's happening to someone.
That's very clear guys. Thank you very much. Thank you very much.
And now we will have a question from the webcast.
Okay, the the first question from the webcast is from Paul Rodgers, and the question is asked about the carbon position in Europe and in our strategy and the question is are we focusing on market share or pricing in especially in light of what we said in terms of coming into this cycle from a position of strength, but I know would you like to take that?
If I understood correctly, I think the first thing to note is that we are pleased that we may have CO2 credit enough go through the the rest of the Forte's the 27th that given us lots of flexibility and particularly because we understand that more young players in Europe are when compared to that position. They say they are bored. They will be applied to your credit at some typing and twenty twenty two or twenty two or Twenty twenty three month.
Unfortunately, we we release that that wind have a new product in the market.
Deep inside. Impact and a nice thing doesn't give us a strong position in Europe Europe Europe. And and you know, I think it will be more related to two prices rather than rather than market share loss. Let's say but they might be you know, there may be a combination. You know, let's see how different company in Europe would be situation between the next two three years and and we will have a better understanding and say on how this this positive they should be calculated additional benefit.
Thank you for calling the operator.
Yes, our next question will come from you seen Tower with on-field, please. Go ahead.
Yes, good morning. Come in just a couple of questions on have you seen any significant change this is what you presented in the first few weeks of October. We seeing the number of K increasing quite substantially in Europe. And in in the US do you see any consolation in in Thousand Oaks and also in in Europe or in in the US and also regarding infrastructure? I think what we understand is that the weather you understand is that the the the stimulus is likely to be implemented after direction. Do you see any slowdown in infrastructure or while the Department of Transportation or just waiting for the money from Washington?
That that's a very interesting question. I think.
You know seen since we started having the impact of early March dear. We have been and as you can imagine, you know trying to observe as much as possible. What what are the
Mary's Academy so we can we can respond back out of 35. Whatever these phenomena. I think I think the way we see it now is that we are at least in the Working World. We are all facing wage. They're all going to update existing with this bio personally business-wise socially bound
Unless infections hospitalizations and you know home screen. We we believe that because of because of the experience and knowledge of regulators wage Society of doctors and hospitals. We believe that several men should be restricted on mobility and in certain sectors, of course, impacting economic activity in general terms, but not necessarily disrupting activity of the construction industry wages.
I I
Think that you know, so so far the industry has shown to be a low-risk type of activities compared to two months. I mean, okay. I mean, we had a very pleased because we did several actions like for instance the the health profitable that we Define home late and we are promoting not only for our lives but also available for our customers. You know, what is the latest business activity have been affected. Not in need of shooting down because of a possibility, you know, and I think we have we have managed to dead.
I'm taking care of sales of again and stakeholders on a wait when we compared those with with relevant societies within our infection rates in Mexico compared with with Statistics in Mexico and the light bulb it's about half of the general population and and then prepared to do this again available would be Regent what it is. So I think we have we have we have managed to protect Faith managed to assure business continuity. And I think that we continue being the case again unless unless you know you need something else.
Completely different, you know.
But so far, I think we can we can manage we've been able to manage that now the market the market tax laws are changing just the most of these the number for sure that you know in Mexico with the parts of people related to tourism of other markets. We needed to tourism or activity that have been deeply impacted by dozens of dead. Sure. On the other hand we have seen how is Emerging Market in former construction back. Samantha is growing much more about the call every month on the other hand. I think there are several examples on how serious problems are going to be impacting already.
the consumption of material and with the Decay or parts of the country that the US and
Different different countries that factors should be a positive one. Also in the in the performance of the behavior of all I wouldn't give you some time.
And maybe just a very quick follow-up question. Could you give us the the percentage of how much petcoke represent as a percentage of your quest?
Say that again. What would be the percentage of what would be what would you what would cook represent as a percentage of your total cost?
If you go that you could disclose.
Open Google how much petcoke represent as a percentage of your of your energy cost of total cost?
It's only or or we've seen an increase in that capacity since the beginning of the
I don't you referring to only in our Samantha structure, you know, I don't have that info handy with me, but I will get back to you once a month.
Thank you so much. Do you have any any yeah, I'm trying to get the breakdown.
We'll get back to you on that point.
Thank you very much. Thank you.
And our next question will come from the webcast.
Okay. Our next question is from Alejandro with the GM. The question is what are your thoughts regarding cement prices in Mexico the US and Europe as we approached twenty twenty-one.
We're not we're not providing guidance. But you know, I suppose it's impossible month or something like that. You have seen even the worst part of the prices prices have been received.
so and
that would be plus or minus it for 20 21 on the one hand Winston its own markets the pricing out at me was interrupted because of how it ready that is certainly the case within Regions Bank us from Mexico. So there is there is a sort of dead.
How you needed to go?
Price and just because of information that we have not managed to properly reflect off even given that we expect.
Are reasonable performance again providing guidance yet, but the reasonable performance was born in general tends. We will be able to be in a better position to
Offset inflation to price price increases that that again even very challenging now.
Thank you operator. Yes, sir. Our next question will come from benteler with Barclays, please go ahead. Hey, good morning. Fernando Mara. First of all, your questions and Thoughts From the result. I wanted to to follow up a little bit on your operation resilience. And in combination with Ceramics go so clearly you're showing on the slides that basically one out of two thousand sales transactions are basically now done for same X go and you also show that there is a a very nice savings that you've been able on the sg&a side. So I wanted to understand a little bit the evolution of semach's go over the last couple of years how that has gone up from non-existent three four years ago to now basically more than 50% the sales be processed through the platform and how much Dad has actually been helping to drive some of your efficiencies by just reducing sg&a. And where do you think this is going to be Thursday?
2023 Target
Sure. Thanks for your question. Let me try to summarize across have been going to let's say in the last few years back. We thought that it was a good idea.
Will have to be able to offer our customers a superior customer experience the whole the whole the whole idea of the philosophy behind send off East the the the media or be able to offer of the government to pave your customer experience enabled by the technology package. That's where we have in this type of processes. You know, you know, I think if there are some specificity because this is being the development of a digital platform of a B2B type of business, but but besides that the process we have been following is not be coming to the project not ordered it. Company and have gone through it did not a journey and we traded with in Europe off.
Cindy be a minimum by the product decided using and which table
I would proposition but I do can't imagine I would suggest you 10 years ago three years ago what the basic type of version that you've reached now and if we completely be in which managers and it has allow us and we've been able to offer this platform all over our money instead for it to you. But particular address is available. That's why adoption massive. We are very pleased with a message over all of our products and really need different segments large and small customers picking up delivering. It's a very flexible platform that can use in their laptops in their mobile.
I think they can do in a much simpler and cheaper way all the commercial relations with them from getting info the Dayton location registering, you know are already modifying order canceling or make an additional order repeat the name of the story goes that part it's not that different water water companies that have gone through that that you're the boss the benefits we are getting. I think the benefits of offering Superior customer experience was obtained immediately. So I will customers because of the feedback we're getting from them are very pleased with the solution that solution also allows them to Make a Better Business. I mean for them, it is cheaper to have a commercial relation with a dog
East Knoxville, rather than one and so they replaced and I think one of the reasons why in the last couple of Waters Edge that I did the most challenging Waters commission, you know, we have we have the highest rates in our net promoter score. So we are we are very pleased with the fact that we've been able to offer this platform feedback from customers adoption n. It's great. We will continue evolving the platform adding new functionality new technology seem to find automating and so it gives you better number to water experiences and most of them are in the the lead to SeaWorld the bath.
that's not a common need to seek, but it it happens the
You know, the process is the same, you know, the the EOS one iPhone was brought to the market in 2007, you know didn't have the copy paste function know that's that is the type of a giant process that allows that is going to allow us to continue with the wage-and-hour customer on saving it took some time because if you don't have a higher perception, you know, that is known to have any trouble getting to that point. We are driving and we are affecting the the platform now currently most of all the invoices off our vehicle emotions and they have paperless involved and because of that we have simplify and reduce the number of invoices you need to redo to a fair wage.
What you mean? I can I can continue spending about this work for an hour. But but what I'm saying is very pleased because we have managed to bring home your customer experience enabled by this technology. I would have decision is pretty good that you see what's happening in you know, what is attributed very pleased because it's something we have a garden, massively and and at the same time we have learned and we will continue evolving our platform and converging into a competitive advantage.
So going forward you you expect this to further penetrate into be even more relevant and obviously than drive or relating to your margin Target in 2023. Correct. Yes, and I think this has been a learning process for us and we were learning process for our customers. The construction industry is not need to be that have been adopting digital Technologies. Let's say the wrong about there are some examples but let's say on the team kind of like kind of a new or a change from the way customers. Who who
Our next question will come from Adrian Corte with JPMorgan, please go ahead.
Thank you. Hi, Fran. May I help you talking to you. Thank you for taking my question on my question has to do with Catholics. You're targeting 750 to 800 million for this year off. How can we look into cupcakes for over the next two or three years, especially given potential Investments That might be required to reach your climate change targets.
Yes.
a few comments on on Catholic and let me start by explaining I will have it for twenty years to you know, what deals are not I'm not having clear answers to those questions we decided for this hospital and
That's included. It's just sending all non-essential or short-term cabinets.
We we took that action for 90 days after 90 days with the us we pass some additional campus Because the scenarios that we said Thursday at 9, but the one we talked didn't get in March. So increase we adjusted and we can create some carpet at that time, but we continued it's just kind of alert and we extended the the concept of the heart stopped after 90 days after December 31st this year. So what the process was the hospital then adding some because I'm more it's scenario evolving and now for next year, but see we we doing something very soon that we understanding the canaries that are unfolded we act accordingly.
Now in particular the the the Catholics related if I if I understood correctly, that's out of the question related to sustainability or ride my change. I think that will be there will be some for the first time. We are having a very strategic roadmap to about twenty twenty five and twenty Thirty targets and we will be spending a number of Catholics. I don't have any specific amount right now to disclose what I can tell you. Is that the Catholics that we are in.
The link won't work. No not all of them are let's say I'm not I'm not being able to get returns from Discovery. I think a good example.
People are indicates of capital related to Atlanta tools. I didn't know because of the long wait directive on online to the idea of a particular economy waste money waste can be posting our the essence particular not quantity with high content of biomass a higher wage because of the Dynamics of that sector, you know energy if you took care of now are convicted and so it's our highest cost compared to maybe the case.
already
Getting close to that phone and other trying to follow and and those you know, in order to use a hundred percent 90%. Percent of what the the fuels there will be additional campus but don't capture to be determined with five different. Then there will be other dog and cat pics don't adapt plant and that might not have returned, but I'm not expecting a sizable amount that I put down. Hopefully we'll be able to be more specific on on my work done by Club. I could come back it benefits Investments and particularly the some of the Investments we're making on.
On the Technologies are the very few technologies that are currently unknown and that should be part of our solution for Europe to be sealed off and you you have to make yourself investment with partner with technology companies. I'm trying different options. Would have to be able to eat and avoid the relationship or to capture any until you
Yeah. Thank you for Honda.
Thank you again.
We have time for one last question and I will come from and Mill with Bank of America, please go ahead. Thank you very much. Very great quarter. So good information. May I have a few questions but to make it not too long. I'll just focus on those that really have to do with the debt side of the business. You were very active as you mentioned in liability management during the quarter off. So the first question is you still have a few bonds that have options that are in the money and just you know for twenty Twenty-One. Is this something that you will consider going forward if it's a you know, interesting from a cost perspective for some X and the second I found very interesting was the introduction of sustainability Targets in your loan documentation. So it just a few questions. What was the Catalyst behind this was this some ex or was it the lenders? Where did you come up with? The indicators? Is this like an industry sort of level and then I noticed that the pricing differential is not humor.
Right now just five basis points. And is this something that you think might change in the future? Thank you very much.
And would you like me to address those two questions?
Yeah, and we we're definitely I mean as you as you know, as you've noted, I mean we do have several potential bonds that have called that that are due home monitoring the markets. I mean to the extent that rates continue to be attractive. I think there may be opportunities for us to do something. Of course, the markets are very volatile. Um, but you know, we're we're always looking at the possibility of you know of doing liability management. So yeah, we're looking at it. I mean obviously I can't say specific again referred to specific issue bonds, but you can imagine, you know, when you're looking at our maturity schedule we're going to focus on you know, the things that are closer rather than the things that are farther away. We were just as you I mean as you know, we issue that, you know, 7-year notes and um in June and then we should ten year notes in in September. So, you know, we clearly looking dead.
You know out of Gap and we do.
Have a year there that is you know with no maturity. So we we would be looking at you know, kind of smoothing out things or pushing them out and definitely taking advantage of you know wage and and we're looking at you know, obviously all currencies. I mean, uh, so to the extent that we have a window we're we're definitely going to to exercise that now as far as the the um, the sustainability linked loan structure. It was really a combination of idea from our banks and and from ourselves and we have been thinking about this for a while and as you know, there are two types two ways that you can kind of have a sustainability link structure one is restriction on the use of proceeds. And the other thing is, you know, having certain kpis that you would be measured or benchmarked against the the KP eyes that we chose the the 5 that I mentioned in in the in the messaging.
The comments are really very much part of our climate change and CO2 emission reduction. Um, you know over the the next ten years. So it is totally in line with what we are trying to execute internally the the penalties to the extent that you don't need to Benchmark is 1 basis points per metric. We have five metrics of the worst case scenario would be five basis points to the extent that we beat the benchmarks. It would be a potential maximum saving of five basis points and you know, the the structure is attractive to many banks because they do have now special baskets within them within their asset allocation for green structures. So this actually, you know translated into a good idea also for my bank's. Yep.
A position to be able to possibly book either some or all of the loans that are outstanding under the facility under the green bucket, which is which probably is wage is less invasive from a capital requirement perspective. So so it's a very attractive structure. It's a win-win. I mean, it's good for them. It's good for us. It's also sends a very strong message on our part how committed and and how you know climate reacting to climate change and sustainability is hardwired in our you know, in the way that we run the business both operationally and on the finance side wage that addresses the business, short, very interesting just to follow-up question on that will be publishing what those targets are and what your what your performance is measured against it or that will just be for the the bank group.
No, I'm sure that we would make those public. I mean, there's no frankly. I don't see any reason why they should be.
We just haven't we haven't gone through the cycle of disclosure yet where we would cuz you know, as you know, we're just closed up a couple of weeks ago and the we have a final participant that would be sucking in um in about a week or week and half which we finalized the whole the whole process. So as soon as that happens, you know, I'm sure this will be part of our disclosure and will you know will make it available to the market? Okay, great. Thank you very much and congrats on a good quarter.
Great. Thank you very much. And
I will now like to turn the call over to Fernando Gonzalez for any closing remarks, please go ahead sir.
Thank you for joining us on our calls and you you have any additional questions received and please stay safe right now.
Thank you for participating in today's conference. This concludes the presentation you may now disconnect and have a great day.
Dead dead dead.