Q3 2023 Cemex SAB De CV Earnings Call

We are in listen only mode. Later, we will conduct a question answer session.

Operator: At this time all participants are in listen only mode. Later we will conduct a question answer session. If any time you require a free to assistance, please press star flip by zero and we'll be happy to assist you.

Any time you require operator assistance. Please press star zero, and we will be happy because history.

And now I will turn the conference over to Alicia Rodriguez, Chief Communications Officer to begin the <unk>. Please proceed.

Lucy Rodriguez: And now I would turn the conference over to Lucy Rodriguez, chief communications officer to begin. Lucy please proceed. Good morning. Thank you for joining us today for our third quarter 2023 conference call and webcast. We hope this call finds you in good health.

Good morning, Thank you for joining us today for our third quarter 2023 conference call and webcast. We hope this call finds you in good health I'm joined today by Fernando Gonzalez, our CEO in Montreal, So far our CFO.

Lucy Rodriguez: I am joined today by Fernando González, our CEO and Maya Alzafar, our CFS. As always we will spend a few minutes reviewing the business and then we will be happy to take your questions.

As always we will spend a few minutes reviewing the business and then we will be happy to take your questions.

Before we begin I would like to point out a few changes in our stomachs quarterly reporting.

Lucy Rodriguez: Before we begin I would like to point out a few changes in our Cemex quarterly reporting. Reflecting the higher Cemex ownership of CHP and CLH is de-listing. We will be moving this quarter from a country reporting framework to more of a regional disclosure. Consequently, we will include quarterly regional results in full year guidance for South Central America and the Caribbean and the Asia Middle East and Africa subregion composed of the Philippine, Egypt, Israel and the United Arab Emirates.

Reflecting the higher simex ownership of CHP.

CLA delisting.

We'll be moving this quarter from our country reporting framework to more of a regional disclosure. Consequently, we won't include quarterly regional results and full year guidance for South Central American and the Caribbean and the Asia Middle East and Africa's subregion composed of the Philippines.

<unk>, Israel and the United Arab Emirates.

Currently this subgroup represents approximately a quarter of Europe, Middle East Africa, and Asia, EBITDA and now I will hand, it over to Fernando.

Lucy Rodriguez: Currently this subgroup represents approximately a quarter of Europe Middle East, Africa and Asia's EBITDA and now I will hand it over to Fernando.

Thanks, Rafi and good day to everyone.

Fernando Gonzalez: Thanks Lucy and good day to everyone.

Before I begin as we watch this terrible situation unfold in Israel, and the Middle East I would like to convey that our thoughts are very much with the people affected by these events.

Fernando Gonzalez: Before I begin as we watch this terrible situation unfold in Israel and the Middle East I would like to convey that our thoughts are very much with the people affected by these events. We have accounted for all our employees as well as our assets in Israel. We remain firmly committed to prioritizing our people's health and safety and as such we are supporting in every possible way our employees, their families and communities.

We have accounted for all our <unk> produce as well as our assets in Israel.

We remain firmly committed to prioritizing our People's health and safety.

And as such we are supporting in every possible way our employees their families and communities.

Now moving on to our third quarter performance.

Fernando Gonzalez: Now moving on to our third quarter performance we continue delivering very strong results with EBITDA growing 32% reflecting the success of our commercial and growth strategies. Decelerating input cost inflation, coupled with strong pricing led to a material margin expansion. For the first time since we launched our pricing strategy in mid-2021 our quarterly EBITDA margin exceeded our goal of recovering 2021 margins. The incremental EBITDA contribution from our growth investments continue to ramp up accounting for 11% of incremental EBITDA.

We continued delivering very strong results with EBITDA growing 32%, reflecting the success of our commercial and growth strategies.

Decelerating input cost inflation, coupled with strong pricing led to a material margin expansion.

For the first time since we launched our pricing strategy in mid 2021.

Our quarterly EBITDA margin exceeded our goal of recovering 2021 margins.

The incremental EBITDA contribution from our growth investments continue to ramp up.

Accounting for 11% of incremental EBITDA.

In addition, our organization solutions business is expanding meaningfully.

Fernando Gonzalez: In addition our organization solution business is expanding meaningfully. On the customer's electricity front we achieve a record net promoted score of 73 in the quarter, a benchmark for the industry and similar to digital related companies. In climate action we continue to post record rows in CO2 emissions. Pre-cash flow grew significantly driven by higher EBITDA and lower investment in working capital. Importantly, the strong earnings growth has amplified our delivery in trajectory, with the leverage ratio now at 2.16 times, a reduction of almost 1.3 of a turn.

On the customer Centricity fronts.

<unk> achieved a record net promoter score of 73 in the quarter.

A benchmark for the industry.

On similar to digitally native companies.

In climate action, we continue to both record lows in tier two emissions.

Free cash flow grew significantly driven by higher EBITDA.

Lower investment in working capital.

Importantly.

The strong earnings growth has amplify our deleveraging trajectory with a leverage ratio now at 216 times a reduction of almost one third of a turn.

On our return on capital.

Fernando Gonzalez: And our return on capital, in the double digit area, keeps expanding relative to our cost of capital. While net sales grew by high single digits, EBITDA expanded by 32% with contributions from all regions. EBITDA margin increased 350 Wases points, the largest expansion in many years. EBITDA of performance reflects not only strong pricing and decelerating input cost inflation, but also the success of our growth investments strategy. As you know, for the last two years, we have been moving to recover margins impacted by a rapid spike in inflation, stemming from the outbreak of the Ukraine war.

In the double digit area.

Expanding relative to our cost of capital.

While net sales grew by high single digits EBITDA expanded by 32% with contributions from all regions.

EBITDA margin increased 350 basis points.

The largest expansion in many years.

EBITDA performance reflects not only strong pricing and decelerating input cost inflation, but also the success of our growth investment strategy.

As you know for the last two years, we have been moving to recover margins impacted by a rapid spike in inflation stemming from the outbreak of the Ukraine War.

For the first time this quarter, we achieved this goal with margin exceeding that of third quarter 2021.

Fernando Gonzalez: For the first time, this quarter, we achieved this goal with margin exceeding that of third quarter 2021. Pre-casual after maintenance capics increased almost $300 million, reflecting EBITDA growth and a lower working capital span. While consolidated, Cemem volumes continue to decline year over year. We have seen improvement versus the first half performance. Mexico and SCAC both reported Cemem volume increases as formal sector demand growth more than compensated for slower back activity. Volume declines in the U.S, and Europe reflect continued weakness in specific micro markets in the U.S, and lower economic activity in Europe.

Free cash flow after maintenance capex increased almost $300 million, reflecting EBITDA growth and a lower working capital spend.

While consolidated cement volumes continued to decline year over year, we have seen an improvement versus the first half performance.

Mexico, and Scott both reported cement volume increases as formal sector demand growth more than compensated for lower back activity.

Volume declines in the U S and Europe reflect continued weakness in specific micro markets in the U S and lower economic activity in Europe.

Despite the soft volume backdrop in certain markets.

Fernando Gonzalez: Despite the soft volume backdrop in certain markets, prices in all regions maintain strong momentum. Consolidated prices across our products rose between 9 and 14 percent. On a sequential basis, consolidated Cemem prices decline 1 percent due primarily to the competitive situation in the Philippines. EBITDA growth continues to be explained by the contribution of pricing over incremental costs, growth investments, as well as our rapidly growing urbanization solutions business. As our growth investment strategy scales, investments are contributing more and more to improve profitability, accounting for 10 percent total EBITDA and 11 percent of incremental EBITDA in the quarter.

Rices in all regions maintained strong momentum.

Consolidated prices across our products rose between 9% and 14%.

On a sequential basis consolidated cement prices declined 1% due primarily to the competitive situations in the Philippines.

EBITDA growth continues to be explained by the contribution of pricing over incremental costs growth investments as well as our rapidly growing organization solutions business.

As our growth investment strategy scales investments are contributing more and more to improve profitability accounting for 10% of total EBITDA and 11% of incremental EBITDA in the quarter.

As I mentioned earlier.

Fernando Gonzalez: As I mentioned earlier, third quarter margin of 19.9 percent reflects the success of our pricing strategy, exceeding our goal of recovering 2021 levels for the first time. And this is happening despite margin headwinds from lower consolidated volumes and product mix. Increasingly, margin expansion is being driven by easing cost inflation and operational efficiencies as shown in the decrease in cost as a percentage of sales over the last four In the second quarter of 2021, when we announced our action plan to cope with the unprecedented inflation, we have oriented our pricing efforts around an inflation-based strategy.

Third quarter margin of 19, 9% reflects the success of our pricing strategy exceeding our goal of recovering 2021 levels for the first time.

And this is happening despite margin headwinds from lower consolidated volumes and product mix.

Increasingly margin expansion is being driven by easing cost inflation and operational efficiencies as shown in the decrease in Cogs as a percentage of sales over the last four quarters.

In second quarter 2021, when we announce our action plan to cope with the unprecedented inflation, we have oriented our pricing efforts around an inflation based strategy.

Now for the first time in almost two years pricing increases in cement, our most energy intensive products.

Fernando Gonzalez: Now for the first time in almost two years, pricing increases in cement, our most energy intensive product, have more than compensated for incremental costs. This achievement has been driven by a marked deceleration in cost inflation since third quarter 2022. A key contributor to this decline is energy, with the cost per ton settling at a 1% increase for the quarter. With it, today's margins approach in 2021 levels, we believe we will have fully accomplish our goal of recovering input cost inflation by four quarter.

More than compensated for incremental costs.

This achievement has been driven by a marked deceleration in cost inflation since third quarter of 2022.

A key contributor to this decline is energy.

With the cost per tonne settling at a 1% increase for the quarter.

With year to date margins approaching 2021 levels. We believe we will have fully accomplish our goal of recovering input cost inflation by fourth quarter.

You should expect that we will continue to calibrate our pricing strategy going forward to reflect inflationary costs of the business.

Fernando Gonzalez: You should expect that we will continue to calibrate our pricing strategy going forward to reflect inflationary costs of the business. If the launch of our future in action program in 2020, we have reduced scope one carbon emissions by 12%, a reduction that previously would have taken us almost 15 years to achieve. We have been equally successful in scope two emissions with an 11% decline. This year is not different, with a 3% decline in scope one carbon emissions and a record high alternative fuel usage and record low-printer factor.

Is the launch of our official inaction program in 2020, we have reduced scope one carbon emissions by 12%.

A reduction that previously would have taken us almost 15 years to achieve.

We have been equally successful in scope two emissions with an 11% decline.

This year is no different with a 3% decline in scope one carbon emissions.

Our record high alternative fuel usage and record low clinker factor.

During the quarter, we achieved an important milestone becoming the first company in the industry to provide third party validated environmental impact information globally for all core products in our main markets.

Fernando Gonzalez: During the quarter, we achieve an important milestone, becoming the first company in the industry to provide third-party, validated and environmental impact information globally, for all core products in our main markets. This transparency is an essential step to support our clients in the design of sustainable construction and to decarbonize the build environment. Over the last year, we have been working to enhance our future in action program with biodiversity and water goals. We are working with the Science-Based Targets Network to establish targets on nature and biodiversity.

This transparency is an essential step to support our clients in the design of sustainable construction until the Carbonize the built environment.

Over the last year, we have been working to enhance our future inaction program with biodiversity and water goals.

We are working with the science based targets network to establish targets on nature and biodiversity.

We recognize that our industry can play a vital role in reversing biodiversity loss.

Fernando Gonzalez: We recognize that our industry can play a vital role in reversing biodiversity loss. Our queries can make important contributions at the end of their life cycle to biodiversity and the ecosystem. By 2025, we have committed to develop biodiversity baselines for all active queries, providing the foundation for a nature-positive approach. Our organization solutions continue to enjoy double-dead growth with every day rising more than 30% yield to date and contributing 7% of quarterly incremental evidence.

Our queries can make important contributions at the end of their lifecycle to biodiversity and the ecosystem.

By 2025, we have committed to develop biodiversity baselines for all active queries.

Providing the foundation for a nature positive approach.

For organizational solutions continue to enjoy double digit growth with EBITDA rising more than 30% year to date contributing 7% of quarterly incremental EBITDA.

On a compounded annual growth basis, EBITDA has grown at a rate above 20% since inception of the business in 2019.

Fernando Gonzalez: On a compounded annual growth basis, every day has grown at a rate about 20% since inception of the business in 2019. Growth has been achieved through both organic and inorganic investments. Organically, we have completed numerous CAPEX projects that have 4-year average payback periods and 50% IRRs. On the inorganic front, we have executed transactions at an average of 3 times EB-DAM multiples with acquisitions immediately accredited. The business is closely aligned to the mega trends rolling out in the construction industry, including the carbonization, resiliency, sustainability, and organization.

Growth has been achieved through both organic and inorganic investment.

Organically, we have completed numerous capex projects that have a four year average payback periods and 50% IRR.

On the inorganic front, we have executed transactions at an average of three times EBITDA multiples with acquisitions immediately accretive.

The business is closely aligned to the Mega trends rolling out in the construction industry <unk>.

Including the carbonization resiliency sustainability and organization.

We believe the business is well positioned for continued sustainable growth.

Lucy Rodriguez: We believe the business is well positioned for continuous sustainable growth, and now back to you Lucy. Thank you Fernanda, our Mexican operations once again delivered strong results with sales supported by a double-digit increase in volumes and prices across all products. And EBITDA growing by more than 30% cement volumes rose 10%, the second consecutive quarter of growth since the pandemic locked down east in 3rd quarter of 2021. Fag cement grew for the first time since 2021, while bulk cement continued its double-digit growth trajectory driven by formal demand.

And now back to Uli.

Thank you Fernando our Mexican.

<unk> operations once again delivered strong results with sales supported by a double digit increase in volumes and prices across all products.

And EBITDA growing by more than 30%.

<unk> spread is 10%.

<unk> consecutive quarter of growth since the pandemic Lockdown E in third quarter 2021.

Cement grew for the first time since 2021, while bulk cement continued its double digit growth trajectory driven by form of demand.

Ready mix and aggregates volumes also benefited from strength in formal construction.

Lucy Rodriguez: Ready-mix and aggregate volumes also benefited from spring informal construction. Volumes continued to be supported by accelerated execution of infrastructure projects ahead of national elections and near-suring investments. Cement prices were flat sequentially, while ready-mix and aggregates increased by 2% and 5% respectively. On the back of strong pricing and volumes, accompanied by lower fuel cost, margin expanded significantly, posting the fourth consecutive quarter of growth.

Volumes continued to be supported by accelerated execution of infrastructure projects ahead of national elections, and near shoring investments.

Cement prices were flat sequentially, while ready mix and aggregates increased by two and 5% respectively.

On the back of strong pricing and volumes accompanied by lower fuel cost margin expanded significantly posting the fourth consecutive quarter of growth.

Higher transportation cost, resulting from tight supply demand conditions in the north and south.

Lucy Rodriguez: Higher transportation cost, resulting from tight supply demand conditions in the north and south, coupled with product mix, explained the sequential decline in EBITDA margin. During the quarter, our 1.5 million tons capacity expansion in Tepeaca came online, allowing us to serve expected medium-term demand of the country at a lower cost than existing capacity. We have also initiated an expansion of our Merida cement plant from the additional 400,000 tons to serve the long-term growth needs of the southeast. This new capacity should be introduced in 2025.

Coupled with product mix explain the sequential decline in EBITDA margin.

During the quarter, our $1 5 million ton capacity expansion in <unk> came online.

Allowing us to serve expected medium term demand of the country at a lower cost than existing capacity.

We have also initiated an expansion of our Meredith Smith plant for an additional 400000 tons to serve the long term growth needs of the southeast this new capacity should be introduced in 2020.

Despite lower volumes in cement and ready mix, our U S operations delivered another strong quarter.

Fernando Gonzalez: Despite lower volumes in cement and ready-mix, our US operations delivered another strong quarter. EBITDA grew by an impressive 36% driven by pricing strategy and decelerating cost, helping us recover prior year cost inflation and bringing us closer to our margin goal.

EBITDA grew by an impressive 36% driven by pricing strategy and decelerating cost, helping us recover prior year cost inflation, you are bringing us closer to our margin goal.

While EBITA margin expanded significantly it declined sequentially, mainly due to lower volume and higher maintenance.

Fernando Gonzalez: While EBITDA margin expanded significantly, it declined sequentially mainly due to lower volumes and higher maintenance. Cement and ready-mix pricing rose double digits, while aggregate increased 9%. On a sequential basis, cement and ready-mix prices rose low single digits, reflecting the success of second-half pricing increases implemented in most of our states. We are currently in the process of announcing first quarter of 2024 price increases.

Cement and ready mix pricing rose double digits, while aggregate increased 9%.

On a sequential basis, net and ready mix prices rose low single digits, reflecting the success of second half pricing increases implemented in most of our states.

We're currently in the process of announcing first quarter 2020 for price increases.

The volume decline in cement and ready mix, primarily relates to continued weakness in California, along with the winding down of a few large industrial projects.

Fernando Gonzalez: The volume decline in cement and ready mix primarily relates to continued weakness in California along with the winding down of a few large industrial projects. Commercial residential activity slowed in the quarter while infrastructure activity continued to grow. In response to the demand environment we reduced cement imports to support margins. Aggregate volumes grew benefiting from recent acquisitions in Florida and Canada. While we expect higher interest rates to impact some commercial and residential projects in the near term, our states have healthy financial positions and remain key beneficiaries from ensuring and clean technology spending and continue to have a long-term deficit of housing survive. Furthermore, the tailwinds and the well-funded government fiscal stimulus program will continue to drive construction activity and is expected to be supportive of volume over the medium term.

Commercial and residential activity slowed in the quarter, while infrastructure activity continued to grow.

In response to the demand environment, we produced cement imports to support margins.

Aggregate volumes grew benefiting from recent acquisitions in Florida and Canada.

While we expect higher interest rates to impact some commercial and residential projects in the near term our states have healthy financial position and remain key beneficiaries from the onshoring and clean technology spending and continue to have a long term deficit of housing supply.

Furthermore, the tailwind from the well funded government fiscal stimulus program will continue to drive construction activity and is expected to be supported the volume over the medium term.

In EMEA, despite a challenging demand environment EBITDA continues to grow while margin expanded to the highest level in several years. This performance was largely anchored by another quarter of solid results in Europe.

Fernando Gonzalez: In India, despite a challenging demand environment, EBITDA continues to grow while margin expanded to the highest level in several years. This performance was largely anchored by another quarter of solid results in Europe. EBITDA in Europe rose 17 percent while margin increased 2.6 percentage points to a record high of 17.3 percent. In a quarter where European volumes declined double digits, these achievements speak to the success of our one Europe strategy implemented in 2019, where we consolidated and integrated our value chain footprint, accelerated our climate action efforts while rationalizing cost and pursuing both on growth investments in integrated urban micro markets.

EBITDA in Europe rose, 17%, while margin increased two six percentage points to a record high of 17, 3%.

In a quarter, where European volumes declined double digits.

Shipments speak to the success of our one Europe strategy implemented in 2019, where we consolidated and integrated our value chain footprint accelerated our climate action efforts, while rationalizing cost and pursuing bolt on growth investments in integrated urban micro markets.

<unk>.

The most recent examples of our growth investment strategy or the purchase of aggregate quarries near Madrid that will bolster our reserves in this fast growing metropolis and the acquisition of Kiesel are motors in adhesives technological leader it serves the German French and Polish and <unk>.

Fernando Gonzalez: The most recent examples of our growth investment strategy are the purchase of aggregate quarries near Madrid that will bolster our reserves in the fast-growing metropolis and the acquisition of Kisal, a mortars and adhesives technological leader that serves the German, French, Polish and Czech Republic markets. Pricing in Europe remained resilient with cement prices up 21 percent, commensurate with the still elevated input cost inflation environment while prices were flat sequentially. Redding mix and aggregate prices also shows significant growth but decline slightly sequentially due to geographic mix.

The public markets.

Pricing in Europe remained resilient with cement prices up 21% commensurate with the still elevated input cost inflation environment, while prices were flat sequentially.

Ready mix and aggregate prices also showed significant growth, but declined slightly sequentially due to geographic mix.

While European construction demand is currently challenging we remain optimistic over the regions medium term prospects as Europe pivot decisively towards a more circular economy and construction is supported by multibillion euro projects related to green renovation.

Fernando Gonzalez: While European construction demand is currently challenging, we remain optimistic over the region's medium-term prospects as Europe pivots decisively towards a more circular economy and construction is supported by multi-billion euro projects related to green renovation, transportation, climate spend, energy reconfiguration and ensuring investment opportunities.

<unk> climate spend energy reconfiguration, and onshoring investment opportunities.

EBITDA from Asia, Middle East and Africa increased low single digits, while margin contracted by one two percentage points, primarily due to the competitive environment in the summer.

Fernando Gonzalez: Evita from Asia, Middle East and Africa increased low single digits while margin contracted by 1.2 percentage points primarily due to the competitive environment in the Philippines.

As Fernando mentioned, we are deeply saddened by the recent events in Israel and the Middle East and we remain focused on supporting our employees and communities. During these challenging times and keeping them as safe as possible.

Fernando Gonzalez: As Fernando mentioned, we are deeply saddened by the recent events in Israel and the Middle East and we remain focused on supporting our employees and communities during these challenging times and keeping them as safe as possible. Next sales in EBITDA in the South Central America and Caribbean region rose 11 and 18 percent respectively, driven primarily by prices and flowing energy inflation. Margin improved 1 percentage point with the slight decline in sequential margin, largely explained by higher maintenance.

Net sales and EBITDA in the South Central America, and Caribbean region, those 11, and 18%, respectively, driven primarily by prices and slowing energy inflation.

Margin improved one percentage point with the slight decline in sequential margin largely explained by higher maintenance regional cement prices rose high single digits.

Fernando Gonzalez: Regional cement prices rose high single digit. Despite continued pressure and bag cement in the region, volumes grew for the first time in two years, driven largely by positive performance in Panama, the Dominican Republic and Jamaica. Demand has been supported by formal construction related to infrastructure projects, such as the Bogota metro, the fourth bridge over the canal in Panama, in tourism related projects in the Dominican Republic and Jamaica.

Despite continued pressure in bagged cement in the region volumes grew for the first time in two years driven largely by positive performance in Panama, The Dominican Republic and in Jamaica.

Demand has been supported by formal construction related to infrastructure projects, such as the Bogota Metro the fourth bridge over the canal in Panama in tourism related projects in the Dominican Republic Jamaica.

And now I will pass the call to marker to review our financial developments.

Lucy Rodriguez: And now I will pass the call to mock her to review our financial developments.

Thank you Lucy and good day to everyone.

Maya Alzafar: Thank you Lucy and good day to everyone. We are very pleased with our performance this year with EBITDA growing at an increasing rate for three consecutive quarters. EBITDA grew 40 percent on a reported basis and 32 percent on a like to like, reaching the highest third quarter in recent times and growing at two and a half times sales growth. This performance was achieved through three levers. The first is the successful execution of our robust pricing strategy across our businesses and markets.

We are very pleased with our performance this year with EBITDA growing at an increasing rate for three consecutive quarters.

EBITDA grew 40% on a reported basis and 32% on a like for like reached.

Reaching the highest third quarter in recent times and growing at two five times sales growth.

This performance was achieved through three levers.

Maya Alzafar: The second contributions from our growth strategy and urbanization solutions. And lastly, decelerating input cost inflation coupled with cost efficiency measures. With respect to slowing inflation, fuels and electricity for the production of cement are the most important contributors. We have seen year-over-year growth rates in unitary fuel cost decelerate for four consecutive quarters. In the third quarter, we saw unitary fuel cost reverse for the first time since the inception of the Ukraine war and declined by 5 percent versus the prior year.

The first is the successful execution of our robust pricing strategy across our businesses and markets.

Second contributions from our growth strategy and organization solutions, and lastly, decelerating input cost inflation, coupled with cost efficiency measures.

With respect to slowing inflation fuels and electricity for the production of cement are the most important contributors.

We have seen year over year growth rates in unitary fuel costs decelerate for four consecutive quarters.

In the third quarter, we saw unitary fuel cost reversed for the first time since the inception of the Ukraine War and declined by 5% versus the prior year.

Unitary electricity costs rose, 10% in the third quarter, the lowest growth rate in eight quarters.

Maya Alzafar: Unitary electricity cost rose 10 percent in the third quarter, the lowest growth rate in eight quarters. In the context of our sustainability agenda, as well as our strategy to lower the volatility of our fuels, we continue to expand the use of alternative fuels, which are significantly less expensive than non-renewables and an important source of biomass. Here today, free cash flow after maintenance gap X of almost $700 million was $535 million higher than the same period last year.

In the context of our sustainability agenda as well as our strategy to lower the volatility of our fuels. We continue to expand the use of alternative fuels, which are significantly less expensive than non renewables and an important source of biomass.

Year to date free cash flow after maintenance capex of almost $700 million.

Was $535 million higher than the same period last year.

Primarily due to higher EBITDA and lower investment in working capital, which was partially offset by higher taxes.

Maya Alzafar: Primarily due to higher EBITDA and lower investment in working capital, which was partially offset by higher taxes. The increase in cash taxes is a consequence of stronger results as well as the tax effect of foreign exchange on our US dollar-denominated debt. Working capital days stood at minus two, two more days on a year-over-year basis. But importantly, improving by two days sequentially driven primarily by inventories. We expect to further reduce our working capital investment as supply chain challenges normalized. After adjusting for an extraordinary gain from the sale of assets in the prior year, net income declined approximately $130 million due to the higher taxes as discussed previously.

The increase in cash taxes as a consequence of stronger results as well as the tax effect of foreign exchange on our U S dollar denominated debt.

Working capital days stood at minus two two more days on a year over year basis, but importantly, improving by two days sequentially driven primarily by inventories.

We expect to further reduce our working capital investment of supply chain challenges normalized.

After adjusting for an extraordinary gain from the sale of assets in the prior year net income declined approximately $130 million due to the higher taxes as discussed previously.

During October we successfully completed two transactions aimed at further streamlining our debt maturity profile and diversifying our sources of funds.

Maya Alzafar: During October, we successfully completed two transactions aimed at further streamlining our debt maturity profile and diversifying our sources of funds.

First on October 30, we expect to close the refinancing of our syndicated bank facility, consisting of a $1 billion term loan and a $2 billion committed revolving credit facility.

Maya Alzafar: First, on October 30th, we expect to close the refinancing of our syndicated bank facility, consisting of a $1 billion term loan and a $2 billion committed revolving credit facility. This represents an increase of $250 million in our revolver and a reduction of $500 million in our term loan. Final maturity under the syndicated bank facility is now 2028. We are pleased that in a volatile market where yields have been rising to be able to maintain terms and conditions, including the pricing grid established in 2021, as well as being able to increase our committed revolver.

This represents an increase of $250 million on our revolver and a reduction of $500 million in our term loan.

Final maturity under the syndicated bank facility is now 2028.

We are pleased that in a volatile market, where yields have been rising to be able to maintain terms and conditions, including the pricing grid established in 2021, as well as being able to increase our committed revolver.

Second in early October.

Maya Alzafar: Second, in early October, we, taking advantage of our recent upgrade in our credit ratings, we issued $6 billion of vessel-denominated sustainability linked long-term notes in Mexico, the equivalent of approximately $335 million in three and seven-year tranches, which were then swapped into dollars, achieving a U.S, dollar cost approximately 130 basis points below our dollar curve.

Taking advantage of our recent upgrade in our credit ratings, we issued 6 billion peso denominated sustainability linked long term notes in Mexico, the equivalent of approximately $335 million.

In three and seven year tranches, which were then swapped into dollars achieving a U S. Dollar cost of approximately 130 basis points below our dollar curve.

This was the first time in 15 years that we tapped the Mexican debt capital markets. The book was oversubscribed by two five times.

Maya Alzafar: This was the first time in 15 years that we tapped the Mexican debt capital markets. The book was oversubscribed by two and a half times. Proceeds were used to reduce exposure under our bank facility. On the slide, you can see our debt maturity profile, as of the end of the third quarter, perform for the refinancing of our bank facility and the issuance of the notes in Mexico. As you can see, we now have a platter debt maturity profile with no significant maturities in any year, and with an average life of five years.

Proceeds were used to reduce exposure under our bank facility.

On the slide you can see our debt maturity profile as of the end of the third quarter pro forma for the refinancing of our bank facility and the issuance of the notes in Mexico.

As you can see we now have a flat our debt maturity profile with no significant maturities in any year and with an average life of five years.

I expect our free cash flow after maintenance capex generation should be sufficient to meet our maturities in any given year.

Maya Alzafar: I expect our free cash flow after maintenance gap X generation should be sufficient to meet our maturities in any given year. Leverage at the end of the quarter stood at 2.16 times, with a trailing 12-month EBITDA of $3.2 billion. This is the third consecutive quarter of declining leverage and the lowest leverage in recent times.

Leverage at the end of the quarter stood at 216 times with a trailing 12 months EBITDA of $3 2 billion.

This is the third consecutive quarter of declining leverage and the lowest leverage in recent times.

These transactions along with our improved performance and continued declining leverage should continue to pave the way to reaching investment grade and now back to you Fernando.

Maya Alzafar: These transactions, along with our improved performance and continued declining leverage, should continue to pave the way to reaching investment grade, and now back to you for another. Based on our strong results here today, we are improving our 2023 EBITDA guidance from $3.25 billion to in excess of $3.3 billion. Representing at least a 23% increase versus 2022. As always, our guidance is based on the foreign exchange rates in effect at the time of guidance, in this case, as of the end of September.

Based on our stronger associate to date, we are improving our 'twenty to 'twenty three EBITDA guidance.

From $3 billion to $5 billion.

Two in excess of $3 $3 billion.

Representing at least 23% increase versus 2022.

As always our guidance is based on the foreign exchange rates in effect at the time of guidance in this case as of the end of September.

As we look forward, we are confident that despite softer volume outlooks in several markets our pricing strategy will be successful in reflecting current input cost inflation.

Maya Alzafar: As we look forward we are confident that despite software volume outlooks in several markets our pricing strategy will be successful in reflecting current input cost inflation. We also expect that absent a mayor macro shock we should continue to experience a more benign input cost backdrop than that of the past two years. For Capix we now expect a total of $1.35 billion with $900 million for maintenance and $450 million for strategic. For working capital we now expect an investment of $100 million.

We also expect that absent a major macro shock, we should continue to experience a more benign input cost backdrop than that of the past two years.

For Capex, we now expect a total of $135 billion with.

With $900 million for maintenance and a $450 million for strategic.

We're working capital, we now expect an investment of $100 million.

Finally, we are increasing our cash tax guidance to $550 million.

Maya Alzafar: Finally we are increasing our cash tax guidance to $550 million driven by the tax effect of a stronger peso on debt and by better results primarily from Mexico. We have made some adjustments in regional volume guidance where you can find detailed in the appendix.

Driven by the tax effect of a stronger peso on depth and by better results primarily from Mexico.

We have made some adjustments in regional volume guidance, which you can find detailed in the appendix.

Lucy Rodriguez: And now back to you Lucie.

And now back to <unk>.

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 could change in the future due to a variety of factors beyond our control.

Lucy Rodriguez: 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 could change the future due to variety 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.

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: And now we will be happy to take your questions. In the interest of time and to give other people an opportunity to participate we kindly ask that you limit yourself to only one question. 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 wish to withdraw your question press star followed by two press star one to begin.

In the interest of time and to give other people an opportunity to participate we kindly ask that you limit yourself to only one question.

If you wish to ask a question. Please press star followed by one on your Touchtone telephone.

If your question has been answered or you wish to withdraw your question.

Star followed by two.

Press Star one to begin.

And the first question comes from Carlos <unk> from Bank of America Carla.

Carlos Perry Long: And the first question comes from Carlos Perry Long from Bank of America. Carla?

Well, thank you Jose congratulations on the strong results.

Carlos Perry Long: Thank you Lucie. Congratulations on the strong results. My question is related to US volumes. If you could comment on on their outlook for residential commercial and infrastructure for next year. Just some general views as to what you see as the drivers and the risks for next year would be very helpful. Thank you.

My question is related to U S volumes, if you could comment.

On the outlook for residential commercial and infrastructure for next year, just some general views as to what do you see as the drivers of the risks for next year would be very helpful. Thank you.

Hi, Carlos.

Fernando Gonzalez: Hi Carla. Yeah, let me comment on what you are asking. But let me clarify that we are not necessarily giving guidance on 2024 volumes yet.

Yeah, Let me, let me comment on what you're asking.

Let me clarify that.

We're not we're not necessarily giving guidance.

Before.

The volumes that we are in the middle of <unk>.

Fernando Gonzalez: We are in the middle of getting as much updated info as we can to have a better understanding and view and in the future provide a better guidance on 2024 volumes. I think there are trends that will continue with current trends that we can see in 2023 that will continue evolving in 2024. So specifically in the case of volume, for instance, we've seen how different markets are performing differently, meaning not all markets are synchronized in volume trends.

Getting us.

Much updated info.

To have a better.

Better understanding and view on in the future provide a better guidance on 2020 for volumes, but.

But.

Despite that.

I think there are there are trends that will continue with current trends that we can see in 2023.

That will continue evolving in 'twenty.

Four.

So specifically in the case of volume for instance.

We've seen how different markets are performing.

Differently, meaning meaning not not all markets are.

Synchronize.

In volume trends.

Different you saw the numbers in Mexico, when compared to the numbers in Europe.

Fernando Gonzalez: They are different. You saw the numbers in Mexico when compared to the numbers in Europe and so they are materially different. Now, I think the trends or the reasons why makers believe that there might be positive changes in current trends in volumes is, for instance, in the case of the US and Europe, is our exposure to relevant fiscal stimulus and public projects in the US and Europe. You know the type of initiatives related to infrastructure in the US, the 1.2 trillion infrastructure plant, the inflation reduction act, the cheap act.

So.

So.

The automotive really different.

No.

I think the trends or the reasons why you know.

Make us believe that there might be.

Positive changes in current trends in volumes.

For instance, in the case of the U S and.

Europe is our exposure to relevant fiscal stimulus.

Hum public.

Public or private.

Projects.

In the U S and Europe.

You know the.

The.

The type of initiatives related to infrastructure in the U S. The 1.2.

Trillion infrastructure plan.

Inflation reduction cheapside.

<unk>. So there are a number of positives.

Fernando Gonzalez: So there are a number of positive reasons to make us believe that trends in this case in the US might be better than the ones we've seen in 2023. The negative impact this year, because of commercial unhousing, again, this is not a guidance, we still need more of data to info, but in the case of housing, you have the data. You know, the level of inventories is at historical loss. The level of unemployment is at the level of the economy is growing.

The reasons to make us believe.

The trends.

In this case in the U S might be better than the ones we've seen in 'twenty three.

Three.

The negative impact this year because of let's say commercial.

On housing.

Again this is not a guidance, we still need more updated info, but but in the case of housing.

Do you have the data.

<unk> inventory is historical lows.

The level of unemployment.

The economy is growing.

The the the.

The challenging part is the cost of mortgages.

Fernando Gonzalez: The challenge in part is the cost of mortgages, but at some point in time, you know, housing should react just because of house formation, the regular one or the demographics in the US. Now, in the case of Europe, again, it was heated this year in volumes, many reasons for volumes to be impacted a large year and this year, but at the same time, we still have the initiative of the renovation wave, which is around $700 billion. Yeah, one trillion in transportation, climate and energy, and another incentive in manufacturing.

But at some point in time.

Housing should react.

Just because of house formation, the regular one or demographics.

In the U S. Now in the case of Europe again, it was heated.

It's heated this year.

<unk>.

Volumes.

Many reasons to for <unk> to be impacted.

And last year and this year.

But at the same time, we still have the.

The initiative of the renovation wave, which is around $710 billion.

Yes.

Trillion in transportation and energy.

Another incentives.

Manufacturing.

So although we have not provided specific guidance, we believe that in the case of the U S and Europe those those variables.

Fernando Gonzalez: So, although we are not providing a specific guidance, we believe that in the case of the US and Europe, those planables could be supportive of, let's say, a slot volume for next year and perhaps even moderate growth, to be confirmed afterwards in our form of guidance for 2024. Thank you very much. Maybe I should let me add. Okay. Thank you. Thank you very much. Thanks. Okay. Fernando, did you want to add anything?

Could be supportive of.

Let's say a flat volume for next year, and perhaps even moderate growth from them to be confirmed.

Afterwards in hour.

Formal guidance for 'twenty.

Four.

Thank you remember maybe I should.

I should maybe go ahead, let me add okay. Thank you.

Thank you very much.

Thanks.

Fernando did you want to add anything it seemed as though we might have cut you off.

Fernando Gonzalez: It seems as if we might have cut you off. Well, I was going to say that the case of Mexico, which is a very relevant market for us, again, not a guidance, but the trends are positive. And next year is an election year, which tends to be also a positive context. And most probably we will see next year an acceleration of the infrastructure, the large infrastructure projects, like for instance, the Mayan Train and the Ismos, you know, because it's the last year of of the current federal government. So Mexico might have also a positive trend in volumes next year. But again, clarifying this is not necessarily a guidance. This is an indication.

Well I was going to say that the case of Mexico, which is a very relevant market for us again, not a guidance, but the trends are positive and next year is an election year, which tends to be also a positive.

Context.

And most probably we will see next year.

A an acceleration of the infrastructure the large infrastructure projects.

Like for instance, the Mayan train and.

Because this is the last year of <unk>.

For the quarter and for the government So Mexico My my hub also.

Positive.

At trend in volumes next year, but again clarify this is not necessarily a guidance. This is an indication.

And afterwards, we will provide more detail.

Fernando Gonzalez: And afterwards we will provide more detailed guidance. Okay. Thank you Fernando.

Guidance.

Okay.

Thank you Fernando.

Next question comes from the webcast from Bruno Amorim from Goldman Sachs and the question is what level of margins would trigger a halt in the sequential price increases you have been implementing.

Fernando Gonzalez: The next question comes from the webcast from Bruno Amarine from Goldman Sachs. And the question is, what level of margins would trigger a halt in the sequential price increases you have been implementing? Let me take this one. I don't see the pricing strategies necessarily defined by the levels of margins, at least not under conditions that have been prevailing in the last two years. Let's say, I think just to clarify, I think our pricing strategy has been for prices to cope with inflation so we can protect our margins.

Let me take this one.

I don't see the.

Pricing toward the east necessarily defined by the levels of margins.

He is not on there.

Conditions that have been prevailing in the in the last.

Two years.

Hey.

I think just to clarify.

I think our pricing strategy has been for prices to cope with inflation. So we can protect our margins.

It happens.

Fernando Gonzalez: It happens that after many years of very moderate inflation in our cost structures in 2021, you know, second quarter of 2021 high levels of inflation started showing up and we reacted with pricing strategies to cope with those new very high levels of inflation. To simplify the story in 2022 inflation continued growing our own inflation cost inflation and it went up as much as 2022 percent while prices started reacting at lower level of increases.

After many years of.

Very moderate inflation in our cost structures.

In 'twenty.

One second and third quarter of 2021 high levels of inflation started showing up and we reacted with pricing strategies to cope with those new very high levels of inflation.

To simplify the story.

In 2022 inflation continued growing.

Our own inflation.

Cost inflation and it went up as much as <unk>.

22% while.

While prices.

Acting at lower level of increases and that's why we lost.

Fernando Gonzalez: And that's why we lost margin in 2022. Now the trends are changing our prices, you know, started to increase more and more. And in the first quarter of this year, for the first time in June, in almost two years, then price increases were higher of the level of inflation, which in the first quarter of 23 started receiving. So what we see this year is, let's say, is the second part of the price in strategy, pricing strategies cannot be executed in very short period of time.

Margin.

In 2022 now the trends are changing our prices.

Started.

The increase more and more on in the first quarter of this year for the first time in between.

Two years than price increases were higher of the level of inflation, which in the first quarter of 'twenty three started receiving.

So what we see this year is let's say is the second part of the pricing strategy.

Strategies cannot be executed in very short periods.

Fourth time, so what we see but the 23 is that on the one hand prices are increasing.

At the levels of 18% to 20% on an inflation, which is decelerating is decreasing from the levels of 18 to 10 11.

Fernando Gonzalez: At the levels of 18-20% and inflation, which is deteriorating, is decreasing from the levels of 18-10-11%. So I think the basis of our pricing strategy will continue being the idea of at least recovering input cost inflation. Now, if inflation continues its trend and being lower and lower, of course, prices increases will follow that inflationary trend. That's what you can expect, that what defines or has been defining our pricing strategy in the last couple of years.

So I think the basis of our pricing strategy will continue being the idea of at least recovering input cost inflation.

Fernando Gonzalez: Thank you, Fernando, very clear.

Now.

If inflation continues.

Its trend.

<unk> been lower and lower.

Cause pricing increases will follow that inflationary.

The trend that's what.

You can expect that defines or has it been defining our pricing strategy in the last couple of years.

Thank you Fernando very clear.

The next question comes from Ben Theurer from Barclays.

Ben Thur: The next question comes from Ben Thur from Barkley Ben. Yeah, good morning and concrete on the results, Fernando Marlucci, well done, I would say. My question is also on the US and volumes and kind of a little bit of a follow-up on Carlos' question. So we've seen volumes due to date down by about 13% guidance is roughly a 12% decline, so same trends kind of guided for into the fourth quarter. But one thing you've highlighted was the decreased share of imports into the US market. So if you could help us understand, where do we stand right now as it relates to imports into the US market?

Yes, good morning, and congrats on the results Fernando Maher, Lucy well done I would say.

My question is also also in the U S. In volume some kind of a little bit of a follow up on Carlos. This question. So we've seen volumes year to debt year to date down by about 13% guidance is roughly a 12% decline so same trends.

Guidance for them to the fourth quarter.

But one thing you've highlighted.

The decreased.

Share of imports into the U S market. So if you could help us understand where do we stand right now as it relates to imports into the U S market if that decline that we saw year to date really all decline in imports, which has helped so much to drive to 500 basis.

Fernando Gonzalez: Is that decline that we saw here today, really all decline in imports, which has helped so much to drive the 500 basis points, EBITDA margin expansion, how much more imports is left, and how do you think about that just in the general context of your margin potential in the US, if imports were to come down more as it relates to be even more profitable of what you're selling produced in the US. Let me make a comment on general terms and then I will pass the word to Maher and Lucy, but the general dynamic in the US when combining our, let's say, cement domestically produce and cement we import in order to sell.

Points EBITDA margin expansion, how much more imports imports is left and how do you think about that just in the general context of your margin potential in the U S.

If imports were to come down more.

As it relates to be even more profitable of what youre selling produced in the U S.

Maybe I comment on general terms, and then I will pass the word to the market.

We'll see.

But again it is a dynamic in.

In the U S.

When combining our.

Let's say cement domestically produce and cement that we.

Important in order to do so.

Fernando Gonzalez: So imports are complementary to our core activity in cement, which is local production. We've been importing around maybe Maher or Lucy have the exact proportion, but we've been importing around, let's say, 30%, of the cement we sell in the U.S. Now our capacity utilization, which is, you know, very important in order to succeed in pricing strategies, our capacity, cement capacity utilization in the U.S, is full, is 100 percent. And whenever that are either declines like it is the case this year, or growth in volumes, what we do is we do adjust inputs given that inputs have lower margins than locally produced cement.

Imports are complementary to our core activity and cement, which is local production.

We've been importing around maybe market or have the sac.

Portion, but we've been importing around let's say, 30%.

Of the cement we sell in.

In the U S.

Now our capacity utilization, which you know very important in order to.

To succeed in pricing strategies, our capacity cement capacity utilization in the U S who is 100%.

When neighbor that are either declines like.

It is the case this year or growth in volumes. What we do is we do adjust inputs given that inputs have lower margins than locally produced shipments. So that's the dynamic in general terms.

Fernando Gonzalez: So that's the dynamic in general terms. So we do not impact the local, let's say the local dynamics that we are trying to put in place in the market. I don't know if Lucie or Margaret want to complement. Maybe I just add, you know, obviously, even with that 13 percent decline in cement volumes, we had a great quarter in the U.S, with EBITDA rising 36 percent. And part of that certainly was that reduction in imports as we calibrated that dropped in cement volumes.

So we do not.

The impact the local.

Let's say the local dynamics that we are trying to.

To put in place in the market.

Don't know if you lose your remarks, I don't want to complement.

Maybe a question.

Maybe I'd just add I mean, obviously, even with that 13% decline in cement volumes, we had a great quarter in the U S with EBITDA rising, 36% and part of that certainly was that reduction in imports as we calibrated that drop in cement volumes.

<unk> volumes in the quarter dropped about a third from where they had been to compensate for the decline in overall volumes we were seeing.

Fernando Gonzalez: So import volumes in the quarter dropped about a third from where they had been to compensate for the decline in overall volumes we were seeing. And that was very supportive of margins. And that was probably about a 300 basis point impact in terms of margins. So quite significant.

And that again was very supportive of margins, that's probably about a 300 basis point impact in terms of margin so quite significant.

Perfect. That's what I was hoping for thank you very much.

Fernando Gonzalez: Perfect. That's what I was hoping for. Thank you very much. Thank you.

Thank you Kat.

The next question comes from and Melanie from Bank of America.

Operator: Okay.

Yes.

Good morning, congratulations on another spectacular quarter I know that you were involved.

Anne Melney: The next question comes from Anne Melney from Bank of America. Good morning.

Maya Alzafar: Congratulations on another pretty spectacular quarter. I know that you were involved at this quarter in a local peso issuance for the first time in a long time. So I guess the question is, will you continue to try to match your debt with the currencies and which you operate and what other currencies might there be? And again, on the debt side, your debt levels continue to decline pretty rapidly or well below your, at least your previously stated goal of below three times that EBITDA.

This quarter in our local peso issuance for the first time in a long time. So I guess the question is well.

You continue to try to match your debt with the currencies in which you operate and what other currencies.

Might there be and again on the debt side.

Debt levels continue to decline pretty rapidly well below your at least your previously stated goal of below three times debt to EBITDA will there be a point when you might actually look at.

Maya Alzafar: Will there be a point when you might actually look at sort of an ideal debt level versus just a leverage level that if you are below that three times, you don't need to go below a certain debt level. And if there's anything else you could tell us on the loan agreement that you said that you will be signing soon in terms of covenant surprising.

Sort of a.

An ideal debt level versus just a leverage level that if you are below that three times, you don't need to go below a certain debt level.

And if theres anything else you could tell us on the.

The loan agreement that you have you said that you will be signing soon in terms of covenants or pricing. Thank you.

Fernando would you like me to take that.

Maya Alzafar: Thank you. Fernando, would you like me to take that? Why don't you take the part of what you are ricocheting with banks and the strategy to be in developing this year. And I will take the second part of the question related to how to the ideal or the target or the side. That level. So why don't you start with the first part? Very good. Yeah, so thanks. And I mean, first, you know, we our currency split right now is about 75% in dollars and the other 25 is primarily euros and Mexican pesos.

Why don't you take the.

<unk>.

Part of of.

What you are renegotiating with banks and the strategy <unk> been developing this year.

I will take the second part of the question related to the outage.

The idea or the audio tour.

The side.

That level of weapons to start with the first part.

Okay, great yeah. So so thanks, Ann I mean first.

Our currency split right now is about 75% in dollars and.

And the other 25 years, and primarily euros and Mexican vessels as you know we have about $300 million equivalent in Mexican peso.

Maya Alzafar: As you know, we have about 300 million dollars equivalent Mexican pesos. The way that we manage our funding strategy is really, you know, getting the lowest cost that we can get in the different markets. We believe in dollar funding because at the end of the day, we think that most of our cash flow is fairly dollarized, has been demonstrated by the pricing strategies that we have implemented successfully recently. The transaction that we did in Mexico is was taken advantage of a very interesting liquidity situation, where despite the fact that local pricing was was relatively high when we swapped it to the dollars, it actually represented almost a 20% reduction in our spread compared to, you know, a straight issuance in dollars today.

The way that we manage our funding strategy is really.

Getting the lowest cost.

That we can get in the different markets. We believe in dollar funding because at the end of the day, we think that most of our cash flow is fairly dollarized as has been demonstrated by the pricing strategies that we have implemented successfully recent.

Recently, the transaction that we did in Mexico.

It was taking advantage of a very interesting liquidity situation.

Despite the fact that local pricing was was relatively high when we swapped it to dollars. It actually represented almost a 20% reduction in our spread compared to eight.

A straight issuance in dollars today, so it was a very attractive.

Funding cost.

Maya Alzafar: So it was a very attractive funding cost and we use that money to essentially reduce our exposure under the under the term loan that we have with the bank facility. The way that we cover our currency risk is primarily through our hedging strategy, through the derivatives, through the currency derivatives market. We manage a derivatives position notional in Mexican pesos against dollars that is roughly commensurate with the operating cash flow generation of our Mexican business.

And we use that money to essentially reduce our exposure under the under the term loan that we have with the bank facility. The way that we cover our currency risk is primarily through our hedging strategy through the derivatives through the the currency derivatives market.

Maya Alzafar: So we run a position of about a billion and a half dollars. In primarily straight forwards, we sometimes do capped forwards in order to reduce the cost, we sometimes use options to reduce the cost. We prefer frankly to manage our hedging strategy that way rather than borrowing outright in pesos because that is much more expensive. The derivatives, you know, so far we're running at almost half the carry cost on average, so it's economically much better.

We manage.

Derivatives position notional in Mexican vessels against dollars that is roughly commensurate with the operating cash flow generation of our Mexican business. So we run a position of about 1 billion to $5.

In primarily straight forwards, we sometimes do capped forwards in order to reduce the cost we sometimes use options to reduce the costs.

We prefer frankly to manage our hedging strategy that way rather than borrowing outright in vessels because that is much more expensive.

Derivatives.

So far we're running at almost half the the carry cost on average so it's economically much better.

Can be much more agile.

Maya Alzafar: We can be much more agile. Obviously, we're not traders, we're following very strict rules and how we put the position. We lay our positions every month based on free cash flow generation out of our Mexican business. So that's how we manage the currency risk and we, you know, we run a pretty kind of leverage neutral position in the positions that we have in place. And, you know, we do have a single, you know, borrowing in 300 million dollars, like I said, that is in pesos.

Obviously, we are not traders were following very strict rules and how we put the position.

We lay our positions every month based on free cash flow generation out of our Mexican business.

So that's how we manage the currency risk and we.

We run a pretty kind of leverage neutral position in the positions that we have.

In place.

And we do have a single.

Borrowing.

And $300 million like I said that is in vessels were leaving and vessels because when we took that borrowing we swap the.

Maya Alzafar: We're leaving in pesos because when we took that borrowing, we swapped the, the vessel rate, you know, into a fixed rate, a very attractive borrowing rate, which is like 475. Today, tier rates are like 11.5%. So, you know, at that rate, it was very attractive to, you know, have a, you know, a loan borrowing in pesos. So that's kind of the, now, whether we will continue accessing the local market, the answer is yes.

The peso rate.

Into a fixed rate at a very attractive.

Borrowings right, which is like for 475.

The day rates are like at 11, 5% so at that rate and was very attractive.

Have a alone borrowing in vessels. So so that's kind of the now whether we will continue accessing that local market. The answer is yes.

We as you know, we've just been upgraded to double a and local markets, we're hoping to get higher rating as we re rate.

Maya Alzafar: You know, we, as you know, we've just been upgraded to double A in the local market. We're hoping to get higher rating as we re-rate. The Mexican market is quite deep. We're a big issuer. We should be a frequent issuer in that market.

The Mexican market is quite deep, where a big issuer, we should be a frequent issuer in that market.

Now going to the credit agreement.

Fernando Gonzalez: Now, going to the credit agreement. Create agreement. We have all the commitments and we're really going towards closing by the end of the month in a couple of days essentially and there I would like to say a few things. One is that we reduce the amount of the term loan by about half a billion. So we're now the term will be a billion with a maturity by 2028. 5 year maturity 336 months and then we have amortizations of 20% and then we also managed to increase the amount of our committed revolver in pretty challenging times from the bank perspective.

Great agreement.

We have all the commitments and we're really going towards closing by the end of the month and a couple of days essentially.

And there I would like to say a few things one is that we reduce the amount of the term loan by about half a billion. So we're now a term loan will be a $1 billion with a maturity by 2000.

28.

Five year maturity.

336 months, and then we have amortization of 20%.

And then we also managed to increase.

The amount of our committed revolver.

And pretty challenging times from the bank's perspective, so we're very pleased with the support that the banks have given us and now we have $2 billion in a committed revolver.

Fernando Gonzalez: So we're very pleased with the support that the banks have given us and now we have $2 billion in a committed revolver. And the committed revolver very importantly has a bullet payment five years. So it's very attractive in terms of, you know, in terms of providing liquidity. Very important is that we had the same grid pricing that we had two years ago. We're paying less fees than we did. Two years ago, also very importantly, as you know, you know, and when, as of June, we had to switch from live board to sofa and the initial sofa spread that was obtained by the, that was agreed to by the market was I believe 26 basis points above, above, above, so, so for plus 26 basis points.

And the committed revolver interest very importantly has a bullet payment five years. So it's very attractive in terms of.

In terms of providing liquidity very important is that we had the same grid pricing that we had two years ago.

We're paying.

Less fees than we did.

Two years ago also very importantly, as you know.

And when as of June we had to switch from LIBOR to silver and the initial sulfur spread that was obtained by that was agreed to by the market because I believe 26 basis points above above LIBOR above so a sofa plus 26 basis points. We also managed to negotiate a reduction.

Fernando Gonzalez: We also managed to negotiate a reduction in that spread. So so bottom line at the end of the day, I feel that we're getting some very good price discovery in the bank market in our, in our bank facility. And that is being reflected in the pricing and in the availability of the of the revolving credit facility, the committed revolving credit facility and that should provide us with more than adequate liquidity, you know, in the medium term.

And in that spreads. So so bottom line at the end of the day I feel is that were getting some very good price discovery in the bank market in our in our bank facility.

And <unk>.

That is being reflected in the pricing and the availability of the <unk>.

The revolving credit facility, the committed revolving credit facility and that should provide us with more than adequate liquidity.

In the medium term.

And then I'll turn it to Fernando.

Fernando Gonzalez: And then I'll turn it to Fernando to address the leverage issue. Yes, thank you, Martin. And I think the, the thing about the leverage ratio, I can't describe it in the in the following manner. Since more than a decade, we have been insisting in gaining back our investment grade. And, you know, to be precise, it's been like 14 years. And we started insisting basically when we said, gaining back investment grade, we were always thinking in a lever of ratio as defined in the, in the FA below three times.

To address the.

The leverage issue.

Yes, Thank you Omar.

And I think the.

The think about the leverage ratio.

I can describe it.

The following winter.

Since more than a day.

We have been.

Insisting in gaining back our investment grade.

And.

It will be precisely as being like 14 years.

We started insisting.

Basically when we said gaining back investment grade we were always thinking in our liberate a ratio as defined in the in the F. A below three times.

Of course, we don't grade ourselves that's the job done by the rating agencies.

Fernando Gonzalez: Of course, we don't rate ourselves. That's the job done by the rated agencies. But it's been some time now that we believe we, we are in the range of our objective of gaining back investment grade. Now, if you remember, in 2020, we communicated adjustments to our strategy. And then on top of continue allocating resources to continue reducing our level of ratio, we started with the idea of investing in growth, and the basic definition was to invest in growth in semendradi mix aggregates and added urbanization solutions and we mentioned mailing the US and Europe to some extent in Mexico and an important part of the strategy we communicated is that we were going to be growing through bold on investments and acquisitions, which is what we have been doing already for three years around three years.

It's been some time now that we believe we are in the range of our objective of gaining back investment grade now.

If you remember in 2020, we communicated the adjustments to our strategy.

Fernando Gonzalez: So I think with that definition the liberal ratio we are having at the end of the year very close to two times. We think that we feel comfortable with it. Now the good financial results of this year did accelerate our delivery in process. So do we have a target of a very or extremely low level ratio? No, we don't. What we have is the target of growing in a very disciplined manner and keeping our lever ratio always in the investment grade parameters.

And then on.

On top of continue.

Allocated resources to continue reducing our leverage ratio.

We started with the idea of investing in growth.

And the basic definition was to invest in growth in cement ready mix aggregates on added urbanization solutions.

And we mentioned mainly in the U S and Europe to some extent in.

In Mexico.

And an important part of the strategy. We communicated is that we were going to be growing through bolt on investments and acquisitions.

Which is what we have been doing.

Ready for.

To us around three years.

So I think I think with that.

Our definition.

The leverage ratio.

We are having by the end of the year very close to two times.

We think that.

<unk>.

Let's say comfortable with it.

Now the good financial results of this year.

Did accelerate our deleveraging process.

So the we have a target of a battery or extremely low levered ratio no we don't.

What we have is the target of <unk>.

Growing in.

Barry.

Disciplined manner.

Keeping our leverage ratio always.

In the investment grade parameters.

What are those parameters as well.

Fernando Gonzalez: What are those parameters? Well, you know, it could be around more or less around 2.5 times around that figure. So I think there is a ceiling to the lever ratio that we are willing to take, again, not putting at risk the investment grade that we are expecting to obtain some time early next year. But at the same time giving us the opportunity to allocate capital in a different manner as we have been saying, you know, to start paying systematically dividends to shareholders and to do some additional very creative investments in growth as we have been commenting, you know, the bold on investments we have been doing.

Could be around more or less around two five.

Yeah.

The times.

Around that figure.

So I think there is.

There is a ceiling to the leverage ratio.

That we are willing to take again not.

Risk the investment grade that we had is baked into thing from time.

And the next year, but at the same time, giving us the opportunity to.

To allocate capital in a different manner as we've been saying two to start paying systematically dividends to shareholders.

And to do some additional very accretive investments in growth.

We are implementing the bolt on investments that we've been doing.

It is set for the very large cement expansion projects or investments with a better productive profile.

Fernando Gonzalez: And it's said for the very large cement expansion projects are investments with an effective profile, you know, paybacks of 4 to 6 years and an IRR of around 40%. So I think it's been a good combination and we will we will for sure continue having or looking for this equilibrium in the parameters that I have already mentioned.

Paybacks of four to six years.

And.

An IRR of around 40%.

So I think it's been.

Fernando Gonzalez: Thank you very much.

A good combination and we will we will for sure continue having or looking for this equilibrium and the parameters that I have already mentioned.

Thank you very much.

Operator: Thank you.

Thank you thanks, Sam Thanks.

Operator: Thanks, Anne.

Fernando Okay, and we have another question.

Operator: Thanks, Fernando.

Paco Chavez: Okay, and we have another question which is coming from the webcast from Paul Rodger from XAIN BNP Pariva. Several peers have provided a lot more information on their carbon capture's pipeline. How many CCUS projects is Cemex involved in? One will the group's first industrial scale project alive, and what kind of CAPEX and OPEX does Cemex plan to invest on this solution to 2030?

<unk>.

Which is coming from the webcast from Paul Roger from Exane BNP Paribas.

Several peers have provided a lot more information on their carbon capture pipeline.

<unk> project is <unk> involved in one world. The group's first industrial scale project alive, and what kind of Capex and Opex does some ex planned to invest on the solution to 2030.

Let me, let me comment directly on the question and then I think.

Fernando Gonzalez: Let me comment directly on the question and then I think it might be helpful to share some additional context to the objectives we have on reducing CO2 specifically. We have seven CO2 capture and storage reuse projects in the company. Four out of the seven, you can consider them as industrial level projects. The other three are projects in which we are trying and proving certain technologies. Because we would like through the first investments in CO2 capture, we would like to learn on the different options and the different characteristics those options have in capturing and storing CO2.

It might be helpful.

To share some additional context to the objectives we have.

On reducing Q2, specifically, we have seven C or to capture and started to reuse projects in the company.

Four out of the seven you can consider them.

Industrial.

Level projects the orbit three arent.

The.

Projects.

In which we are trying and proving it.

Certain.

Technologies.

We will live through the first investments in <unk> to capture.

I would like to learn on the different options on the different characteristics of those options have in capturing and storing.

You too.

For industrial projects, we have all of them are either in Europe or the U S.

Fernando Gonzalez: The four industrial projects we have, all of them are either in Europe or the US. In the case of the US is in Victor Bill in California and Balconis in Texas. In the case of Europe, we have Rudolf in Germany and Alkanar in Spain. The projects are in development as we speak. We are forming or we have formed consulptions for each one of them to have the full solution of the full spectrum from the very capture to how to store or convert this bad carbon into good carbon.

In the case of the U S.

Victor.

In California on bulk corners in Texas.

And in the case of Europe, we have in Germany another cannot.

In Spain.

The projects are in development as we speak we are performing or we have formed consumptions for each one of them to in order to.

To have the full solution of the spectrum from the very captured two how to.

Store or compared this but carbon into.

Good carbon so we don't have specific amounts to sure yeah.

Fernando Gonzalez: We don't have specific amounts to share yet. Also because these four industrial level projects, we are participating and potentially we will be getting grants that will reduce our investments in those projects.

Yet.

And also because these four industrial level projects we.

Fernando Gonzalez: So that's the specific answer to the specific question.

Are participating and potentially will be we will be getting.

Grants.

We reduce our.

Investments in those.

The projects.

And so that's the specific answer to the specific question, let me add something else.

Fernando Gonzalez: Now, let me add something else.

We sort of.

Fernando Gonzalez: If we sort of, it's kind of an arbitrary definition, but if we divide the CO2 or the transition towards a carbon neutrality in our industry, I see two steps or two phases. The first one is when we can implement and apply all the practices, processes, materials, technologies, fuels that we know will reduce materially the CO2 generation in the case of cement. Our 2030 targets so far which is a reduction of 47% of CO2 generation per ton of cement using 1990 base is not considering a ton of carbon capture.

Kind of an arbitrary.

The definition, but if we divide the.

The SER two or the transition towards carbon neutrality.

Our industry I see too.

Dips or two faces.

The first one is when we can.

Implement and apply all the the <unk>.

Practices processes materials technologies.

Fuels.

We know will reduce materially this year to generation in the case of cement.

Our 2030 targets, so far which is a reduction of 47% of zero two generation per ton of cement using 1990 base.

Is not considering a tonne of carbon capture.

We are pretty sure and I will explain why that we can achieve that level of reduction.

Fernando Gonzalez: We are pretty sure and I will explain why that we can achieve that level of reduction by increasing in our pro-Portafolio blended cements with lower clinker factor using much more alternative fuels with much higher contents of biomass using alternative decarbonated raw materials to produce red mix electrifying as much as possible our production process of meaning using more electricity and reducing the use of fuels increasing the amount or the proportion of renewable electricity that we are using in the process. So perhaps I'm not mentioning all the variables but maybe those are the most relevant.

By increasing in our portfolio blended cements with lower clinker factor.

Using much more alternative fuels with much higher confidence of biomass used.

Using alternative capital needed raw materials to produce ready mix elect to find as much as possible.

Production process or meaning using more electricity and reducing the use of fuels, increasing the amount or the proportion of renewable electricity, though we are using in the in the process.

So all of them.

Perhaps I'm not mentioning all the variables, but maybe those are the most relevant so by doing that we will be able to make a reduction of 47% by 2030.

Fernando Gonzalez: So by doing that we will be able to make a reduction of 47% by 2030 that according to our strategy and according to the one and a half degrees scenario we are subscribed and certified by SBTI that will be able to be done.

According to our words throughout the year and according to the to the one five degree scenario. We are subscribed certified by EBITDA that will.

Yeah.

That will be able to be done now why is it that I feel confident confident that that will be done.

Fernando Gonzalez: Now why is it that I feel confident that that will be done because three years ago we redefined our climate action strategy. We started developing plant-specific roadmaps on the transition and that is why in the last two years and nine months we have reduced the CO2 generation per ton of cement by 12%. Is it to say 12% at the reduction of 12% in CO2 production is what it took us 15 years before the strategy we put in place in 2020 and started executing in 2021.

Because three years ago we.

We redefine our climate action strategy.

Started developing plans for plant specific roadmaps on.

The transition and that is why in the last two years. The nine months, we have reduced the C O two generation per ton of cement by 12%.

Easy to say 12.

Reduction of 12% in Q2 production.

Is what it took US 15 years before the strategy, we put in place in 2020 and started executing in 2021 now I mentioned that our 2030 targets.

Fernando Gonzalez: Now I mentioned that our 2030 target does not include CO2 capture. That doesn't mean that we are not decisively acting and developing this project. As I mentioned we have seven and we are developing the seven projects with different objectives each one because we want to include additional CO2 reduction by 2030 through this project and we want to be sure that we will properly prepare for the additional capture in all our cement plants you know after 2030.

Does not include Seo to capture.

That doesn't mean that we are not decisively acting on developing these projects as I mentioned, we have seven and we are developing the seven projects with different objectives.

Each ones because we one we want to include.

Additional seo to reduction by 2030 through these projects and we want to be sure that we properly prepare for the additional capture in all our cement plants.

Laughter.

The city so that is again at all.

Context in our Seo to or that our transition towards.

Fernando Gonzalez: So that's the general context in our CO2 or our transition towards a carbon neutral production in our process.

A carbon neutral.

The production in our products.

Thank you very much Fernando the.

Fernando Gonzalez: Thank you very much Fernanda.

Our next question comes from the webcast from pocket Chavez from BBVA My.

Marcello Verlone: The next question comes from the webcast from Paco Chavez from BBVA. My question is regarding cement prices. Consolidated quarter-ever-quarter prices declined 1%. Is this a change in trend? What can we expect in coming quarters?

Question is regarding cement prices consolidated quarter over quarter prices declined 1% is this a change in trend what can we expect in coming quarters.

Well.

Let me refer to the to what I commented in the previous in the previous question regarding prices.

Fernando Gonzalez: Well, let me refer to what I commented in a previous question regarding prices. Again, inflation started declining materially in the first quarter of 2023. There was a reduction of three percentage points sequentially when compared to four quarters 2022. And then in second quarter 2023, inflation was 12%, which is a decline of six percentage points when sequentially compared to first quarter 2023. So a 1% decline in prices, I think, is a consequence and it's natural.

Again inflation.

Fernando Gonzalez: It's not drinking a belt to me, because as I mentioned, our pricing strategy is and has been for the last couple of years in this period of very high inflation, is to recover input cost inflation. So if inflation is receiving, inflation is much more moderate that what it was, you can expect our prices to follow the same trend. Is that negative? Not at all. I think it is just that we are accommodating, it's same strategy, but with different levels of inflation.

Got it.

Climbing materially in.

In the first quarter of 2023.

There was a reduction of three percentage points sequentially when compared to fourth quarter 2022, and then in second quarter 'twenty three.

Inflation was 12%, which is a decline of six percentage points when sequentially compared to first quarter 2023.

So a a 1% decline in practices I think.

As a consequence.

It's natural is not drink and Nobel to me.

Because as I mentioned, our pricing strategy is.

Has been for the last couple of years in this period of very high inflation is two.

To recover.

Input cost inflation. So if inflation is receding inflation is much more moderate than what it was.

You can expect our prices to follow the same trend.

Is that negative not at all I think it is just that we are accommodating.

Same strategy, but with different levels of inflation now, having said that what I'm, saying applies in general terms.

Fernando Gonzalez: Now having said that, what I'm saying applies in general terms, because in different markets, we have different pricing levels and in some cases, we of course try to increase prices beyond the levels of inflation when we believe that the prices are not in a given market are not enough or are not reflecting a reality and they are not enough for us to get reasonable returns. But what I explained before, I think it explains the general or the idea or the spirit of the pricing strategy. So at least my opinion, if inflation is moving from 22% to 11, half of it, pricing increases will follow the same trend and that shouldn't be interpreted in a negative manner.

Because in different markets, we have different pricing levels.

In some cases.

We of course try to increase prices beyond.

The levels of inflation, when we believe that the prices are not in a given market.

Sure enough or not reflecting a reality and they are not enough.

For us to get reasonable returns, but but but what I explained before I think it explains the genital or the idea or the spirit of the the pricing strategy. So.

At least in my opinion.

Inflation is moving from 22% to 11 half of it.

Price increases will follow the same trend.

That shouldn't be interpreted that.

In a negative manner.

Maybe if I could just also add on Fernando if you look at the sequential prices regionally I think for cement is either flat or up in Mexico U S and Europe and it really does very slight decline that we have at the sequential level is due to that.

Fernando Gonzalez: Maybe if I could just also add on Fernando, if you look at sequential prices regionally, I think for cement is either flatter up in Mexico, US and Europe, and really the very slight decline that we have at the sequential level is due to the Philippines, which was down 4%, and it primarily relates to the competitive situation in the Philippines, just to put that into place, but it is fairly isolated.

The Philippines, which was down 4% and it primarily relates to the competitive situation in the Philippines, just to put that into place that it's fairly isolated.

Yes.

We have time now for one last question from the web site.

Marcello Verlone: We have time now for one last question from the website and the next question comes from the webcast from Marcello Verlone from Ido. My question is related to capital allocation. The company has a healthy financial leverage, strong liquidity position, and solid pre-cash load generation.

The next question comes from the webcast from Marcello for lung from Italo. My question is related to capital allocation. The company has a healthy financial leverage strong liquidity position and solid free cash flow generation.

I would like to know what are the main strategies for capital allocation for 2024.

Fernando Gonzalez: Thus, I would like to know, what are the main strategies for capital allocation for 2024? If I may, I can start making a few comments and please, Lucien Macher-Philfrey to complement. I think the answer to the question, I think we've been commenting and guiding for something very similar to the question you are making. As I mentioned, we've been for years with a strategy of gaining banking investment grade, meaning using all our resources to reduce debt and bring back our financial health.

If I if I may I can start.

Making a few comments on please lose your market feel free to complement.

I think I think the answer to the question.

I think we've been we've been commenting on guiding.

Yeah.

Something very similar to the question.

You are making.

As I mentioned, we've been for years with our strategy of gaining back investment grade, meaning using all our resources to reduce debt.

And and bring back.

Our financial health.

That was achieved.

Fernando Gonzalez: That was achieved at around 2010-20. Of course, depending on how you find that, in our definition, that was achieved in 2020. That's why we started using part of our cash flow in growth, in EBITDA growth investments. That's what bolt-on type of investments, and that's what we've been doing, and that's what we will continue doing. What might be different for next year, because the level of ratio now, again, it's going to be around or close to times by year, and that is giving us additional flexibility.

Around 2020 of course, depending on how you define that but in our definition that was achieved in 2020.

That's why we started.

Using part of our cash flow and growth in EBITDA growth investments.

That's what bolt on type of investments and that's what we've been doing and Thats, what we will continue doing.

What might be different for next year, because the the leverage ratio now again, it's going to be around.

Or are close to two times by year end and that is giving us additional flexibility.

Maybe maybe the difference of what we've been doing in the last couple of years compared to 24 is that.

Fernando Gonzalez: Maybe the difference of what we've been doing in the last couple of years, compared to 24, is that once we get investment grade, we will start allocating capital in the form of dividends. As you know, we've been commenting that what we want to do is to start paying dividends and doing it systematically. So maybe that's something that is going to be different on capital allocation next year. And I don't know if Lucie or Mahir do want to add any comment to the question.

Once we get investment grade we are.

Allocating capital in the form of dividends.

As you know we've been commenting that what we want to do is to start.

Paying dividends and doing it systematically.

So maybe maybe thats something that is going to be different on capital.

Allocation next year and I don't know if you lose your market.

Want to add any comment to the question.

Yes, Fernando I would just like to add.

Fernando Gonzalez: Yeah, Fernando, I would just like to add, I think it's very important to say that we have this investment muscle now in very well-trained. We have an approved pipeline that is close to $2.5 billion. We've already invested a fairly significant portion of that. The contribution of the growth investments for the full year is probably going to be close to 10% of the EBITDA, the company for this year. And the return or the IRRs of those projects, as Fernando mentioned, they're close to about 40%.

I think it's very important.

To say that we have this this investment muscle now in very well trained we have an approved pipeline that is close to $2 $5 billion, we've already invested a fairly significant portion of that.

The contribution of the growth investments.

For the full year, it's probably going to be close to 10% of the EBITDA of the company for this year.

And the return or the IRR of those projects as Fernando mentioned Theyre close to about 40% now of course, it's very difficult.

Fernando Gonzalez: Now, of course, it's very difficult at infinitum to continue to get 40% invested in investments. I mean, we would like to, but that's not what we're guiding to. Our internal hurdle is above 20% and within an acceptable period. And a lot of these investments that they get completed within the next couple of years, we're expecting them to contribute steady state close to $600 million to EBITDA. So serious contribution to all of these investments.

At infant item to continue to get 40% investments.

We would like to but thats.

That's not what we're guiding to our hurdle internal hurdle is above 20%.

And within an acceptable.

Period, and a lot of these investments as they get completed within the next couple of years, we're expecting them to contribute steady state close to $600 million to EBITDA. So serious contribution to all of these.

Investments and marginally.

They are representing a huge part of the incremental improvement in our EBITDA now.

Fernando Gonzalez: And marginally, they are representing a huge part of the incremental improvement in our EBITDA. When we see that, we take a look at what are the other possibilities for capital deployment. I mean, one is you can buy back debt. Today, our debt is yielding 7%, and on an MPB basis, doesn't compete at all with capital allocation to these projects. We can buy back stock, which today our cost of equity is about 15%.

When we see that we take a look at what are the other what are the other possibilities for capital deployment. I mean, one is you can buy back debt today, our debt is.

Yielding 7% on an NPV basis.

Doesn't compete at all with capital allocation to these projects, we can buy back stock.

Which today our cost of equity is about 15%.

And.

<unk> does not compare very well to invested capital at 40 plus percent.

Fernando Gonzalez: And again, does not compare very well to invested capital at 40 plus percent for very long periods of time. These are long projects that are expected to go for many, many years. These are not short-term projects that we're doing. So when you think to look at capital allocation, really investing in our business at a creative manners like we're saying right now is really what shareholders pay us to do, and that's what we intend to do.

For very long periods of time. These are long projects that are expected to go for many many years. These are not short term projects that we're doing so when you take a look at capital allocation.

Really investing in our business at accretive manners like we're saying right now is really what shareholders pay us to do and Thats, what we intend to do.

And of course, we are making sure that we keep an eye on capital structure, and making sure that we get investment grade getting investment grade means that we get it we keep it maybe improve on it.

Fernando Gonzalez: And of course, we're making sure that we keep an eye on capital structure, making sure that we get investment grade. Getting investment grade means that we get it, we keep it maybe improve on it as time goes by. But that kind of gives you an idea, and of course Fernando mentioned the possibility of returning cash to shareholders in terms of dividend. And that's something that definitely to consider, and it should enhance our total shareholder return in the long-term.

As time goes by but that kind of gives you an idea and of course Fernando mentioned.

The possibility of returning cash to shareholders in terms of dividend.

And thats something that definitely.

Consider in it should enhance our total shareholder return in the long term, but that should kind of in a nutshell give you our thinking about capital allocation, why and where we are doing it and I hope I don't know if theres anything else.

Fernando Gonzalez: But that should kind of a nut shell give you our thinking about capital allocation and why and where we are doing it. And I hope, I don't know if there's anything else you'd like to add. No, I think you two covered it.

You'd like to add.

No I think you covered it thank you.

So with that we appreciate you joining us today for our third quarter webcast and conference call. If you have any additional questions. Please feel free to contact the investor Relations team.

Maya Alzafar: Thank you.

And we will look forward to seeing you all again for our fourth quarter webcast that will take place on February eight many many thanks.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect.

Lucy Rodriguez: So with that, we appreciate you joining us today for our third quarter webcast in conference call.

Lucy Rodriguez: If you have any additional questions, please feel free to contact the investor relations team.

B J.

Lucy Rodriguez: And we will look forward to seeing you all again for our fourth quarter webcast that will take place on February 8th. Many, many thanks. Thank you for your participation in today's conference.

Operator: This concludes the presentation and you may now disconnect.

Operator: Have a lovely day.

Thank you operator.

[music].

Okay.

[music].