Q2 2025 Cemex SAB de CV Earnings Call
Operator: Good morning. Welcome to the Cemex Q2 2025 Conference Call and Webcast. My name is Becky. I will be your operator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If at any time you require operator assistance, please press star followed by zero, and we'll be happy to assist you. Now, I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.
Operator: 2025 conference call and webcast.
Becky: My name is Becky and I will be your operator today. At this time all participants are in a listen only mode.
Good morning. Welcome to the seax. Second quarter 2025 conference call and webcast.
Becky: My name is Becky and I will be your operator today.
Becky: Later we will conduct a question and answer session. If at any time you require operator assistance please press star followed by zero and we'll be happy to assist you.
Becky: At this time, all participants are in a listen-only mode.
Becky: Later, we will conduct a question and answer session.
Lucy Rodriguez: And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.
Becky: If at any time you require operator assistance, please press star followed by zero and we'll be happy to assist you.
Lucy Rodriguez: Good morning and thank you for joining us for our second quarter 2025 conference call and webcast. We hope this call finds you well.
Lucy Rodriguez: Good morning. Thank you for joining us for our Q2 2025 Conference Call and Webcast. We hope this call finds you well. I'm joined today by Jaime Muguiro, our CEO, and by Maher Al-Haffar, our CFO. We will start our call with an update on the progress made so far on our strategic priorities, followed by a review of our business and outlook for the H2 of the year, and then we will be happy to take your questions. I will now hand the call over to Jaime.
Speaker Change: And now I will turn the conference over to Lucy Rodriguez Chief Communications officer. Please proceed.
Lucy Rodriguez: I'm joined today by Jaime Muguero, our CEO, and by Maher Al-Hafar, our CFO. We will start our call with an update on the progress made so far on our strategic priorities, followed by a review of our business and outlook for the second half of the year. And then we will be happy to take your questions.
Lucy Rodriguez: Good morning and thank you for joining us for our second quarter, 2025 conference call and webcast. We hope this call finds you well.
Speaker Change: I'm joined today by Hero, our CEO and by Marco or CFO.
Jaime Muguero: I will now hand the call over to Jaime. Thanks, Lucy, and good day to everyone.
Speaker Change: We will start our call with an update on the progress made so far on our strategic priorities, followed by a review of our business and Outlook from the second half of the year. And then we will be happy to take your questions.
Jaime Muguiro: Thanks, Lucy, and good day to everyone. In our last earnings call in April, I presented a forward-looking vision for CEMEX, focusing on two primary objectives: attaining best-in-class operational excellence, and delivering industry-leading shareholder returns. Since then, we have developed a comprehensive roadmap to achieve these goals and embarked on the first phase of implementation. Our first actions were focused on transforming our corporate structure by streamlining overhead, fostering agility, and empowering our regional teams to drive results. This process has involved difficult decisions that are necessary to support the company's long-term growth and competitiveness. Today, I'd like to provide more detail regarding our strategic plan, highlight the actions we have taken thus far, and outline what you can expect from us in the future. I will, of course, then review our Q2 performance, which once again exceeded internal expectations.
Hime: I will now hand the call over to Hime.
Jaime Muguero: In our last earnings call in April, I presented a forward-looking vision for FEMEX. Focusing on two primary Attaining best-in-class operational excellence and delivering industry-leading shareholder returns. Since then, we have developed a comprehensive roadmap to achieve these goals and embarked on the first phase of implementation. Our first actions were focused on transforming our corporate structure by streamlining overhead, fostering agility and empowering our regional teams to drive results. This process has involved difficult decisions that are necessary to support the company's long-term growth and competitiveness.
Hime: Thanks, Lucy and good day to everyone.
Hime: In our last earnings, call in April, I presented a forward-looking vision for phemex.
Hime: Focusing on 2 primary objectives.
Hime: Attaining best-in-class, operational excellence and delivering industry-leading, shareholder returns.
Hime: Since then, we have developed a comprehensive roadmap to achieve these goals and embarked on the first phase of implementation.
Hime: Our first actions were focused on transforming our corporate structure by streamlining overhead fostering agility and empowering our regional teams to drive results.
Jaime Muguero: Today, I'd like to provide more detail regarding our strategic plan, highlight the actions we have taken thus far, and outline what you can expect from us in the future. I will, of course, then review our second quarter performance, which once again exceeded internal expectations. Our strategic framework is based on six guiding principles. effectively transforming our organization to achieve operational excellence and sustainable best-in-class shareholder returns. These principles aim to improve profitability, increase our free cash flow conversion rate, boost asset efficiency, and deliver compelling returns over cost of capital. In the quarter we moved quickly on the first lever, simplifying our operating model and empowering our regional operations to make more agile decisions.
Hime: This process has involved difficult decisions that are necessary to support the company's long-term growth and competitiveness.
Hime: Today.
Hime: I'd like to provide more detail, regarding our strategic plan, highlight the actions, we have taken thus far and outline what you can expect from us in the future.
Hime: I will of course, then review our second quarter performance, which once again exceeded internal expectations.
Jaime Muguiro: Our strategic framework is based on six guiding principles, effectively transforming our organization to achieve operational excellence and sustainable best-in-class shareholder return. These principles aim to improve profitability, increase our free cash flow conversion rate, boost asset efficiency, and deliver compelling returns over cost of capital. In the quarter, we moved quickly on the first lever, simplifying our operating model and empowering our regional operations to make more agile decisions. These actions are intended to promote an ownership mindset with a culture of increased accountability, responsibility, and collaboration. At the core of this transformation is the reorganization of corporate areas to support operational excellence in our business units. We also carried out the initial performance reviews of our regional businesses.
Hime: our strategic framework is based on 6,
Hime: And sustainable best-in-class shareholder return.
Hime: This principles and to improve profitability, increase our free cash flow conversion rate.
Hime: Boost asset efficiency and deliver compelling returns of our cost of capital.
Jaime Muguero: These actions are intended to promote an ownership mindset with a culture of increased accountability, responsibility, and collaboration. At the core of this transformation is the reorganization of corporate areas to support operational excellence in our business unit. We also carried out the initial performance reviews of our regional business. I was joined by several members of my team conducting a thorough review of key performance indicators at the individual facility level in each of our regions. Based on these reviews, areas for potential improvement have been identified and detailed action plans have been developed so that underperforming assets meet predetermined return benchmarks.
In the quarter, we moved quickly on the first lever simplifying, our operating model and empowering. Our regional operations to make more agile decisions.
Hime: This actions are intended to promote an ownership mindset with a culture of increased accountability responsibility and collaboration.
Hime: At the core of this transformation is the reorganization of corporate areas to support. Operational excellence in our business units.
Jaime Muguiro: I was joined by several members of my team conducting a thorough review of Key Performance Indicators at the individual facility level in each of our regions. Based on these reviews, areas for potential improvement have been identified, and detailed action plans have been developed so that underperforming assets meet predetermined return benchmarks. These action plans will support further strategic decisions regarding our footprint evolution at a local level, with the goal of increasing profitability and free cash flow. We have also examined in detail our ongoing growth CapEx pipeline to validate that every investment is on track to generate an appropriate and timely return. Execution of ongoing profitable projects will continue, but we intend to make a strategic shift towards prioritizing small to mid-size M&A transactions in the US, aiming for immediate positive impact on earnings.
Hime: we also carried out the initial performance reviews of our regional businesses
Hime: I was joined by several members of my team. Conducting a thorough review of key performance indicators at the individual facility level in each of our regions.
Jaime Muguero: These action plans will support further strategic decisions regarding our footprint evolution at a local level with a goal of increasing profitability and free cash. We have also examined in detail our ongoing growth traffic spotlight to validate that every investment is on track to generate an appropriate and timely return. Execution of ongoing profitable projects will continue, but we intend to make a strategic shift towards prioritizing small to mid-size M&A transactions in the U.S., aiming for immediate positive impact on earnings.
Hime: Based on these reviews areas for potential Improvement, have been identified and detailed action plans have been developed so that underperforming assets meet to determine return benchmarks.
Hime: This action plans will support further strategic decisions regarding our footprint. Evolution at a local level with the goal of increasing profitability and free cash flow.
Hime: We have also examined in detail, our ongoing growth capex Spotlight to validate that every investment is on track to generate an appropriate And Timely return.
Jaime Muguero: Finally, we have also introduced a new, more structured and balanced capital allocation model to guide future capital deployment decisions. We are committed to progressively grow our shareholder return program. This effort should accelerate as profitability and free cash flow generation are boosted by our actions to date. Since its introduction in February, we have further expanded our Project Cutting Edge program, a foundational element of our organization's transformation. In our efforts to develop a leaner operating model and empower our regions, we have merged several centralized functions into our operations, while some corporate initiatives have been eliminated altogether or reorganized to better support the business model.
Jaime Muguiro: Finally, we have also introduced a new, more structured and balanced capital allocation model to guide future capital deployment decisions. We are committed to progressively grow our shareholder return program. This effort should accelerate as profitability and free cash flow generation are boosted by our actions to date. Since its introduction in February, we have further expanded our Project Cutting Edge program, a foundational element of our organization's transformation. In our efforts to develop a leaner operating model and empower our regions, we have merged several centralized functions into our operations, while some corporate initiatives have been eliminated altogether or reorganized to better support the business. As a result of the expansion of Project Cutting Edge and the steps we took in Q2, we now expect EBITDA savings for this year to reach $200 million, up from our initial expectation of $150 million.
Hime: Execution of ongoing profitable projects will continue, but we intend to make a strategic shift towards prioritizing small to midsize m&a transactions, in the US, aiming for immediate positive impact on earnings.
Hime: Finally, we have also introduced a new more structured, and balanced Capital, allocation model, to guide future Capital deployment decisions.
Hime: We are committed to progressively grow our shareholder return program. This effort should accelerate as profitability and free cash flow generation are boosted by our actions to date.
Hime: Since its introduction in February, we have further expanded, our project, Cutting Edge program, a foundational element of our organization's transformation.
Jaime Muguero: As a result of the expansion of Project Cutting Edge and the steps we took in second quarter, we now expect EBITDA savings for this year to reach $200 million, up from our initial expectation of $150 million. And we anticipate a run rate of EBITDA savings of about $400 million by 2020. Included in these estimates are approximately $200 million of corporate headcount reduction on an analyzed basis. While this effort is largely behind us, there are still some additional actions suspected in the second half.
Hime: In our efforts to develop a leaner, operating model and Empower our regions. We have merged several centralized functions into our operations. While some corporate initiatives have been eliminated, altogether or reorganized to better support the business.
Hime: As a result of the expansion of project Cutting Edge. And the steps we took in second quarter. We now expect ibida savings for this year, to reach, 200 million
Jaime Muguiro: We anticipate a run rate of EBITDA savings of about $400 million by 2027. Included in these estimates are approximately $200 million of corporate headcount reduction on an annualized basis. While this effort is largely behind us, there are still some additional actions expected in H2. I am confident that this transformation will help us advance towards our goals, further strengthening Cemex position as an industry leader. Now, allow me to review our Q2 performance. Our Q2 results are aligned to our February guidance, which assumed a challenging H1, driven by difficult prior year comparison in Mexico. We expected, and continue to believe, that H2 would bring year-over-year growth as we lap prior year pre-electoral spending in Mexico with an improvement in peso FX rate. As in Q1, consolidated EBITDA once again outperformed our internal expectations.
Hime: From our initial, expectations of 150 million.
Hime: And we anticipate a run rate of Eva Savings of about 400 million dollars by 2027.
Hime: Included in this estimates are approximately $200 million of corporate headcount reduction on an annualized basis.
Jaime Muguero: I am confident that this transformation will help us advance towards our goals, further strengthening Temex's position as an industry leader.
Hime: While this effort is largely behind us, there are still some additional actions suspected in the second house.
Jaime Muguero: And now, allow me to review our second quarter performance. Our second quarter results are aligned to our February guidance, which assumed a challenging first half driven by difficult prior year comparison in Mexico. We expected and continue to believe that the back half of the year would bring year over year growth as we lapped prior year pre-electoral spending in Mexico with an improvement in PASO FX rates. As in the first quarter, consolidated EBITDA once again outperformed our internal expectations. The EMEA region delivered impressive results, driven by volume recovery and operating leverage, extending its four consecutive quarters of earnings recovery.
Hime: I am confident that these transformation will help us Advance towards our goals further. Strengthening them Exposition as an industry leader.
Hime: And now allow me to review our second quarter performance.
Hime: Our second quarter results are aligned to our February guidance, which assumed a challenging, first, half driven by difficult prior year, comparison in Mexico.
Hime: We expected and continue to believe that the back half of the year would bring year-over-year growth as we lap prior year, pre-electoral spending in Mexico with an improvement in Paso ethics rate.
Jaime Muguiro: The EMEA region delivered impressive results driven by volume recovery and operating leverage, extending its 4 consecutive quarters of earnings recovery. Consolidated EBITDA margin, even with volume decline, remained relatively resilient with a stable to improved performance in 3 of our regions. Variation of consolidated margin is largely driven by the effect of geographic mix. Net income in the quarter increased by 38% on the back of strong FX rates as well as lower interest expense. The variation in free cash flow from operations is explained by EBITDA, working capital, and severance payments, as well as the one-off contribution from discontinued operations in the prior year. Importantly, adjusting for severance and discontinued operations, free cash flow in the quarter would in fact be growing on a year-over-year basis.
Hime: As in the first quarter Consolidated, Evita once again outperformed our internal expectations.
Jaime Muguero: Consolidated EBITDA margin, even with volume decline, remain relatively resilient with a stable to improved performance in three of our regions. Variation of consolidated margin is largely driven by the effect of geographic mix. Net income in the quarter increased by 38% on the back of strong FX rates as well as lower interest expense. The variation in free cash flow from operations is explained by EBITDA, working capital, and severance payments, as well as the one-off contribution from discontinued operations in the prior year. Importantly, adjusting for severance and discontinued operations, free cash flow in the quarter would in fact be growing on a year-over-year basis.
Hime: The EMA region, delivered, impressive results, driven by volume recovery. And operating, leverage, extending its 4, consecutive quarters of earnings recovery.
Hime: Remained relatively resilient with a stable to improve performance in 3 of our regions.
Hime: Variation of Consolidated. Margin is largely driven by the effect of geographic mix.
Hime: Net income in the quarter increased by 38%, on the back of a strong FX rates, as well as lower interest expense.
Hime: The variation in free cash flow from operations, is explained by Ava working capital and Severance payments, as well as the 1-off contribution from discontinued operations in the prior year.
Jaime Muguero: I expect the cash flow generation to improve in the second half with higher profitability and the typical seasonal reversal of working capital in the second half. Consolidated prices are stable to positive on a sequential basis, with ready mix and aggregates prices up 1% and 2% respectively. In cement, consolidated prices were relatively flat on a year-over-year basis, largely explained by geographic mix, as volumes declined in Mexico and Rio in ML. Pricing in Mexico has been particularly resilient despite softer volumes. Since the beginning of the year, Cement, ReadyMix, and Aggregate's prices have increased by 5%, 6%, and 8% respectively.
Jaime Muguiro: I expect free cash flow generation to improve in H2, with higher profitability and the typical seasonal reversal of working capital investment. Consolidated prices are stable to positive on a sequential basis, with ready-mix and aggregates prices up 1% and 2% respectively. In cement, consolidated prices were relatively flat on a year-over-year basis, largely explained by geographic mix as volumes declined in Mexico and grew in EMEA. Pricing in Mexico has been particularly resilient despite softer volumes. Since the beginning of the year, cement, ready-mix, and aggregates prices have increased by 5%, 6%, and 8% respectively. In the US, aggregate prices, adjusting for product mix, increased by 5% in H1 compared to Q4 of 2024. In EMEA, the Middle East and Africa region, along with several markets in Europe, experienced sequential pricing gains.
Hime: Importantly, adjusting for severance and discontinued operations, free cash flow in the quarter. Would, in fact, be growing on a year-over-year basis.
Hime: I expect the cash flow generation to improve in the second half with higher profitability and the typical seasonal reversal of working capital investment.
Hime: Consolidated, prices are stable to positive on a sequential basis with readymix and Aggregates prices up 1 and 2 percent respectively.
In cement Consolidated, prices were relatively flat on a year-over-year basis. Largely explained by Geographic mix as volumes declined in Mexico and grew in America.
Hime: Pricing in Mexico has been particularly resilient despite softer volumes.
Jaime Muguero: In the U.S., aggregate prices adjusting for product mix increased by 5% in the first half compared to fourth quarter of 2024. In EMEA, the Middle East and Africa region, along with several markets in Europe, experienced sequential pricing gains. pricing strategy continues to achieve its goal of at least recovering cost inflation in our market. Consolidated volume performance is largely explained by weaker volumes in Mexico and the U.S., partially offset by continued recovery in EMEA. We expect volumes in Mexico to improve in the second half as we left difficult prior year comparison base and the new government accelerates its infrastructure and social housing plan.
Hime: Since the beginning of the year. Cement Ready? Mix and Aggregates prices have increased by 5 6 and 8% respectively.
Hime: In the US aggregate prices adjusting for product, mix increased by 5%, in the first half, compared to fourth quarter of 2024.
Jaime Muguiro: Our pricing strategy continues to achieve its goal of at least recovering cost inflation in our markets. Consolidated volume performance is largely explained by weaker volumes in Mexico and the US, partially offset by continued recovery in EMEA. We expect volumes in Mexico to improve in H2 as we lap difficult prior year comparison base and the new government accelerates its infrastructure and social housing plans. In the US, volumes in the quarter reflect the sharp trend in residential activity, along with increased precipitation in most of our markets. We are encouraged by the positive trend in Europe as this is the fourth consecutive quarter with cement volume growth on a year-over-year basis. The Middle East and Africa region is also showing robust volume growth.
Hime: In Amia the Middle East and Africa region along with several markets in Europe, experienced sequential pricing gains.
Hime: Our pricing strategy continues to achieve its goal of at least recovering cost inflation in our markets.
Hime: Consolidated volume performance is largely explained by weaker volumes in Mexico and the US partially upset by continued recovery in America.
Jaime Muguero: In the U.S., volumes in the water reflect a sub-trend in residential activity, along with increased precipitation in most of our markets. We are encouraged by the positive trend in Europe, as this is the fourth consecutive quarter with cement volume growth on a year-over-year basis. The Middle East and Africa region is also showing robust volume growth. Consolidated EBITDA performance is largely explained by volume. Partially upset by cost improvements, as well as a tough comparison base with a record high second quarter EBITDA in prior years. Volume decline in Mexico and the U.S. was partially upset by growth in the MENA region.
Hime: Respect volumes in Mexico to improve in the second half as we lap difficult prior year comparison, base and the new government accelerates its infrastructure and social housing plans.
Hime: in the US volumes in the quarter, reflect the sock Trend in residential, activity, along with increased precipitation, in most of our markets,
We are encouraged by the positive trend in Europe. As this is the fourth consecutive quarter with cement, volume growth on a year-over-year basis. The Middle East and Africa region is also showing robust volume growth.
Jaime Muguiro: Consolidated EBITDA performance is largely explained by volumes, partially offset by cost improvements as well as a tough comparison base with a record high Q2 EBITDA in prior year. Volume decline in Mexico and the US was partially offset by growth in the EMEA region. Cost contributed positively, largely due to energy and distribution. Energy costs on a per ton of cement basis declined 14%. The Mexican peso remained a relevant headwind, which was partially offset by the appreciation of other currencies in our portfolio. Importantly, even with a significant volume decline and lower operating leverage, our EBITDA margin remained resilient at a level slightly above the historical 10-year Q2 average. Now back to you, Lucy.
Hime: Consolidated. Ebita performance, is largely explained by volumes partially upset by cost improvements as well as a tough comparison base with a record high second quarter ibitta in Prior year.
Jaime Muguero: cost contributed. largely due to energy and distribution. Energy costs on a per ton of cement basis declined 14%. The Mexican peso remained a relevant headwind, which was partially upset by the appreciation of other currencies in our portfolio. Importantly, even with a significant volume decline and lower operating leverage, our EBITDA margin remained resilient at a level slightly above the historical 10-year second quarter average.
Hime: Volume declined in Mexico. And the US was partially offset by growth in the mea region.
Hime: Cost contributed positively largely due to energy and distribution energy costs on a per ton of cement bases. Decline 14%
Hime: The Mexican peso remained, a relevant headwind which was partially upset by the appreciation of other currencies in our portfolio.
Lucy Rodriguez: And now, back to you, Lucy. Thank you, Jaime. As expected, second quarter results in Mexico continued to be challenged by the difficult prior year comparison driven by pre-election social and infrastructure spending and the FX level, as well as the first year of a new administration. Volumes were further hampered by record national precipitation levels in June, which primarily impacted the central region. Significantly, we saw average daily cement sales in the quarter stabilize with low single digit sequential growth. Demand in the Northeast region continues to outperform the rest of the country, both in terms of cement and leading.
Hime: Importantly, even with a significant volume Decline and lower operating. Leverage, our ibida margin remain resilient at a level slightly above the historical. 10-year second quarter, average,
And now, back to you, Lucy.
Lucy Rodriguez: Thank you, Jaime. As expected, Q2 results in Mexico continued to be challenged by the difficult prior year comparison, driven by pre-election social and infrastructure spending and the FX level, as well as the 1st year of a new administration. Volumes were further hampered by record national precipitation levels in June, which primarily impacted the central region. Significantly, we saw average daily cement sales in the quarter stabilize with low single-digit sequential growth. Demand in the northeast region continues to outperform the rest of the country, both in terms of cement and ready-mix. This dynamic has been supported by ongoing industrial projects as well as state-driven infrastructure works. We continue to see positive pricing performance for our products, rising by a low single-digit rate sequentially.
Hime: Thank you, ha.
Hime: As expected second quarter results in Mexico. Continued to be challenged by the difficult prior year comparison driven by pre-election social and infrastructure spending and the FX level, as well as the first year of a new Administration.
Hime: Science will further hampered by records National precipitation levels in June, which primarily impacted the central region.
Hime: Significantly. We saw average daily cement sales in the quarter stabilized. With low single digit. Sequential growth.
Lucy Rodriguez: This dynamic has been supported by ongoing industrial projects, as well as state-driven infrastructure work. We continue to see positive pricing performance for our products, rising by a low single digit rate sequentially. Since the beginning of the year, cement ready mix and aggregate prices are up 5, 6, and 8% respectively, as we work to offset prior years input costs to inflation. Additionally, we recently announced a high single-digit price increase for cement affected July. Despite the volume headwind and resulting loss of operating leverage, margins were remarkably resilient, roughly flat to the prior year. This performance was driven by a combination of higher prices, favorable energy, and project cutting-edge efforts.
Demand in the Northeast region, continues to outperform the rest of the country both in terms of cement and readiness.
Hime: Has been supported by ongoing industrial projects as well as state-driven infrastructure works.
Lucy Rodriguez: Since the beginning of the year, cement ready-mix, and aggregate prices are up 5%, 6%, and 8% respectively as we work to offset prior years' input costs inflation. Additionally, we recently announced a high single-digit price increase for cement effective July. Despite the volume headwind and resulting loss of operating leverage, margins were remarkably resilient, roughly flat to the prior year. This performance was driven by a combination of higher prices, favorable energy, and Project Cutting Edge efforts. While FX impact moderated in Q2, it still accounted for about 40% of the variation in EBITDA. Going into H2 of the year, we are optimistic as we lap the difficult comparison base in volumes and peso FX rate. In fact, assuming for the H2 the same level of average daily cement sales as Q2, it would imply a 4% year-over-year decline in the H2.
Hime: We continue to see positive pricing performance for our products, Rising by a low single digit rate sequentially.
Hime: Since the beginning of the year cement Ready. Mix and aggregate prices are up, 5, 6, and 8% respectively. As we work to offset prior years input costs inflation.
Additionally, we recently announced a high single digit price increase for cement effective July.
Hime: Despite the volume headwind and resulting loss of operating leverage. Margins were remarkably resilient roughly flat to the prior year.
Lucy Rodriguez: While FX impact moderated in second quarter, it still accounted for about 40% of the variation in EBITDA. Going into the second half of the year, we are optimistic as we lap the difficult comparison base in volumes and peso FX rate. In fact, assuming for the back half the same level of average daily cement sales as second quarter, it would imply a 4% year-over-year decline in the second half. Additionally, we do expect a pickup in construction activity driven by the start of some railroad works as well as projects under the social housing program. Our READMEX backlog is improving, mainly in the central region, with relevant industrial projects expected to begin in the following months.
This performance was driven by a combination of higher prices favorable energy and project Cutting Edge efforts.
Hime: While FX impact moderated in second quarter. It's still accounted for about 40% of the variation in Evita
Hime: Going into the second half of the year. We are optimistic as we lap the difficult comparison base in volumes in peso FX rate.
Lucy Rodriguez: Additionally, we do expect a pickup in construction activity driven by the start of some railroad works, as well as projects under the social housing program. Our ready-mix backlog is improving, mainly in the central region, with relevant industrial projects expected to begin in the following months. Distribution centers and logistics developments are gaining momentum. In the US, EBITDA declined by a mid-single-digit rate due primarily to lower volumes given high levels of precipitation in many of our markets and continued weakness in the residential sector. Ready-mix volumes adjusted for asset divestitures declined by a mid-single-digit rate in line with cement and aggregate performance. Sequential pricing was stable in cement and ready-mix, with aggregates increasing by 1% adjusting for product mix. Since the beginning of the year, aggregate prices adjusted for product mix are up 5%. EBITDA margin remained relatively stable, just shy of last year's record high.
Hime: In fact, assuming for the back half the same level of average daily cement sales, as second quarter, it would imply a 4% year-over-year decline in the second half.
Hime: Additionally, we do expect a pickup in construction, activity driven, by the start of some railroad works, as well as projects under the social housing program.
Lucy Rodriguez: Distribution centers and logistics developments are gaining momentum.
Lucy Rodriguez: In the U.S., EBITDA declined by a mid-single-digit rate due primarily to lower volumes, given high levels of precipitation in many of our markets, and continued weakness in the residential sector. ReadyMix volumes adjusted for asset divestitures declined by a mid-single-digit rate, in line with cement and aggregate performance. Sequential pricing was stable in Cement and ReadyMix, with aggregates increasing by 1% adjusting for product. Since the beginning of the year, aggregate prices adjusted for product mix are up 5%. EBITDA margins remain relatively stable, just shy of last year's record high. This performance is explained by higher prices and lower costs due to continued gains in operational efficiency with increased domestic production replacing import.
Hime: Our Ready Mixed backlog is improving. Mainly in the central region with relevant industrial projects expected to begin in the following months, distribution, centers and Logistics. Developments are gaining momentum.
Hime: In the US, I declined by a mid single-digit rate, due primarily to lower volumes given high levels of precipitation in many of our markets and continued weakness in the residential sector.
Hime: Ready. Mix, volume adjusted for asset. Divestitures decline by a mid single digit rate. In line with cement and aggregate performance.
Sequential pricing was stable in cement and ready. Mix with Aggregates increasing by 1% adjusting for product mix.
Hime: Since the beginning of the year, aggregate prices, adjusted for product. Mix are up 5%.
Lucy Rodriguez: This performance is explained by higher prices and lower costs due to continued gains in operational efficiency with increased domestic production replacing imports. Margin continues to improve in our two main products, cement and aggregates, which account for about 80% of our EBITDA. As part of our transformation effort, we recently restructured our operations in the US, transitioning from a regionally based model to one organized by product line. We believe this change will encourage best practice sharing across regions, increase transparency in our business, and provide a more comprehensive view of our asset footprint. We are investing in our aggregates business and are already seeing the benefits of completed projects, such as the Balcones Quarry upgrade in Texas. Balcones is one of the largest quarries in the US, and the project is contributing to increased margins.
EV down, margin remain, relatively stable, just shy of last year's record high.
Lucy Rodriguez: Margin continues to improve in our two main products, cement and aggregates, which account for about 80% of our EBITDA.
Hime: This performance is explained by higher prices and lower costs, due to continued gains in operational efficiency with increased domestic production replacing Imports.
Lucy Rodriguez: As part of our transformation effort, we recently restructured our operations in the US, transitioning from a regionally based model to one organized by product. We believe this change will encourage best practice sharing across regions, increase transparency in our business, and provide a more comprehensive view of our asset footprint. We are investing in our aggregate business and are already seeing the benefits of completed projects, such as the Balcones quarry upgrade in Texas. Balcones is one of the largest quarries in the US and the project is contributing to increased margin. We are also expecting completion by year-end of another ongoing aggregates project, Four Corners, a sand mine in Orlando, Florida.
Margins continues to improve in our 2, main products cement and Aggregates which accounts for about 80% of our Eva.
Hime: As part of our transformation efforts, we recently restructured our operations in the US transitioning, from a regionally based model to 1 organized by product line.
Hime: We believe this change will encourage best practice sharing across regions increased transparency in our business and provide a more comprehensive view of our asset footprint.
Lucy Rodriguez: We are also expecting completion by year-end of another ongoing aggregates project, Four Corners, a sand mine in Orlando, Florida. For 2025, we expect demand to be driven by infrastructure as IIJA transportation projects continue to roll out. Close to 50% of funds under IIJA have been spent, and we expect to reach peak spending in 2026. We remain optimistic about the outlook for the industrial and commercial sector, which is gaining momentum with data centers and chip manufacturing projects being planned in our markets, as well as relevant works in Cape Canaveral. In addition, the recently approved US budget bill includes some relevant provisions that are expected to bring forward investment in manufacturing facilities. While there is continued pressure on the single-family home segment with slightly better performance in multifamily, we see strong potential in residential over the medium term once mortgage rates and market sentiment improve.
Hime: We are investing in our aggregate business and are already seeing the benefits of completed projects such as the balcony. Corey upgrade in Texas, balcony. This is 1 of the largest queries in the US and the project is contributing to increase margins.
Lucy Rodriguez: For 2025, we expect demand to be driven by infrastructure, as IIJA transportation projects continue to roll out. Close to 50% of funds under IIJA have been spent, and we expect to reach peak spending in 2020. We remain optimistic about the outlook to the industrial and commercial sector, which is gaining momentum with data centers and chip manufacturing projects being planned in our markets, as well as relevant works in Cape Canaveral.
Hime: We are also expecting completion by year. End of another ongoing Aggregates project 4 corners, a sand mind in Orlando, Florida.
Hime: For 2025, we expect demand to be driven by infrastructure as iija. Transportation projects continue to roll out.
Close to 50% of funds. Under iija have been spent and we expect to reach Peak spending in 2026.
Lucy Rodriguez: In addition, the recently approved U.S. budget bill includes some relevant provisions that are expected to bring forward investment in manufacturing facilities. While there is continued pressure on the single family home segment, with slightly better performance in multifamily, we see strong potential in residential over the medium term once mortgage rates and market sentiment improve.
Hime: We remain optimistic about the Outlook through the Industrial and Commercial sector, which is gaining momentum with data centers and Chip, manufacturing projects being planned in our markets as well as relevant Works in Cape Canaveral.
Hime: In addition, the recently approved us budget Bill includes some relevant Provisions that are expected to bring forward investment in manufacturing facilities.
Hime: Mortgage rates and Market sentiment improved.
Lucy Rodriguez: The EMEA region continued to deliver strong performance, leading to the highest first-half EBITDA in recent history, with a solid margin expansion of almost three percentage points. In Europe, strong volume growth in the quarter was driven by improved conditions in most markets, with the exception of France, where we continue to see a soft macro backdrop, and Poland with weather and delays in infrastructure works impacting volume. Infrastructure activity supported by EU funding increased along with a modest improvement in the residential sector in most markets. Demand conditions in the Middle East and Africa remain strong, expanding by double digits.
Lucy Rodriguez: The EMEA region continued to deliver strong performance, leading to the highest H1 EBITDA in recent history, with a solid margin expansion of almost 3 percentage points. In Europe, strong volume growth in the quarter was driven by improved conditions in most markets, with the exception of France, where we continue to see a soft macro backdrop, and Poland, with weather and delays in infrastructure works impacting volumes. Infrastructure activity supported by EU funding increased along with a modest improvement in the residential sector in most markets. Demand conditions in the Middle East and Africa remain strong, expanding by double-digit rates. Construction activity in these markets is recovering, fueled by housing and non-residential projects, and in the case of Egypt, also by large infrastructure. Sequential cement and ready-mix prices in EMEA increased 4% and 1% respectively, while aggregate prices declined by 1%.
The Amia region continued to deliver strong performance. Leading to the highest first half ibadan. Recent history with a solid margin expansion of almost 3 percentage points.
Hime: in Europe, strong volume growth in the quarter was driven by improved conditions in most markets with the exception of France, where we continue to see a soft macro backdrop in Poland with weather and delays in infrastructure Works impacting volumes
Hime: Infrastructure activities supported by EU funding increased along with a modest Improvement in the residential sector in most markets.
Lucy Rodriguez: Construction activity in these markets is recovering, fueled by housing and non-residential projects, and in the case of Egypt, also by large infrastructure. Sequential cement and ready mix prices in EMEA increased 4% and 1% respectively, while aggregate prices declined by 1%. On a cumulative basis, cement ready mix prices increased by 4% while aggregate prices are up 3% compared to the fourth quarter of 2024. Higher volumes and prices, coupled with lower cost, primarily in power, led to a significant margin expansion. Our operations in Europe continue progressing on decarbonization with net CO2 emissions in the quarter reaching a new record low of 418 kilograms per ton of cement a quarter.
Hime: Demand conditions in the Middle East and Africa. Remain strong expanding by double-digit rates.
Construction activity in these markets is recovering fueled by housing and non-residential projects and in the case of Egypt also buy large infrastructure.
Lucy Rodriguez: On a cumulative basis, cement and ready-mix prices increased by 4%, while aggregate prices are up 3% compared to the Q4 of 2024. Higher volumes and prices, coupled with lower costs, primarily in power, led to a significant margin expansion. Our operations in Europe continue progressing on decarbonization, with net CO2 emissions in the quarter reaching a new record low of 418 kilograms per ton of cement equivalent. This is an important milestone as CEMEX Europe has now surpassed our consolidated target for 2030, further enforcing our position as an industry leader. We believe that the implementation of the Carbon Border Adjustment Mechanism, along with the gradual phase-out of free EU ETS allowances, should be supportive of cement prices in 2026 and beyond. We remain optimistic on the outlook for the region with a continued positive trend in infrastructure and further recovery in residential.
Sequential cement and readymix prices in Amia increased 4% and 1% respectively while aggregate prices decline by 1%.
Hime: On a cumulative basis cement ready. Mix prices increase by 4% while aggregate prices are up, 3% compared to the fourth quarter of 2024
Hime: Higher volumes and prices coupled with lower cost. Primarily in power led to a significant margin expansion
Lucy Rodriguez: This is an important milestone as Cemex Europe has now surpassed our consolidated target for 2030, further enforcing our position as an industry leader. We believe that the implementation of the Carbon Border Adjustment Mechanism, along with the gradual phase-out of free EU ETS allowances, should be supportive of cement prices in 2026 and beyond. We remain optimistic on the outlook for the region with a continued positive trend in infrastructure and further recovery in residential.
Hime: Our operations in Europe, continue progressing on decarbonization with net CO2. Emissions in the quarter, reaching a new record low of 418 kilograms per ton of cement equivalent.
This is an important Milestone as semx Europe. Has now surpassed our Consolidated Target for 2030 further enforcing our position as an industry leader.
Hime: We believe that the implementation of the carbon border adjustment mechanism, along with the gradual phase out of free EU. ETS allowances should be supportive of cement prices in 2026 and Beyond.
Lucy Rodriguez: In our South Central America and the Caribbean region, adjusting for business days in the quarter, cement volumes actually increased by one percent. Demand in Columbia is being driven by the informal sector with a rebound in bag cement volumes and the Metro project in Bogota. In Jamaica, tourism-related developments, along with improved bag cement sales, are driving Sequential prices in cement ready mix in the region were relatively stable after the mid single digit increase achieved in first quarter. In Jamaica, we recently concluded a significant de-bottlenecking project. The increased capacity will allow us to address market demand without relying on lower margin imports.
Lucy Rodriguez: In our South Central America and the Caribbean region, adjusting for business days in the quarter, cement volumes actually increased by 1%. Demand in Colombia is being driven by the informal sector with a rebound in bag cement volumes and the metro project in Bogota. In Jamaica, tourism-related developments, along with improved bag cement sales, are driving activity. Sequential prices in cement and ready-mix in the region were relatively stable after the mid-single-digit increase achieved in Q1. In Jamaica, we recently concluded a significant debottlenecking project. The increased capacity will allow us to address market demand without relying on lower-margin imports. As we worked to complete the expansion project in the quarter, we increased import volumes to meet market demand. These imports temporarily impacted margin in the quarter. We expect a recovery in H2, driven by higher profitability as we ramp up the incremental capacity.
Hime: we we remain optimistic on the outlook for the region with a continued positive trend in infrastructure and further recovery in residential,
Hime: In our South Central America and the Caribbean region adjusting Food. Business days in the quarter cement volumes actually increased by 1%
demand in Colombia is being driven by the informal sector with a rebound in bag cement volumes and the Metro project in Bogota
Hime: In Jamaica tourism related developments. Along with improved bag, cement sales are driving activity.
Hime: The sequential prices in cement Readiness in the region were relatively stable. After the mid single digit increase achieved in first quarter,
Lucy Rodriguez: As we worked to complete the expansion project in the quarter, we increased import volumes to meet market demand. These imports temporarily impacted margin in the quarter. We expect a recovery in the second half driven by higher profitability as we ramp up the incremental capacity. On the operations front, higher kiln efficiency, along with lower clinker factor continue to improve across the region.
Hime: In Jamaica, we recently concluded a significant debottlenecking project. The increased capacity will allow us to address market demand without relying on Lower margin Imports.
Hime: as we worked to complete the Expansion Project in the quarter,
Hime: We increase import volumes to meet market demand.
Hime: These Imports temporarily impacted margin in the quarter.
Lucy Rodriguez: On the operations front, higher kiln efficiency along with lower clinker factor continued to improve across the region. Now I will pass the call to Maher to review our financial developments.
Hime: We expect a recovery in the second half driven by higher profitability as we ramp up the incremental capacity.
Maher Al-Hafar: And now I will pass the call to Maher to review our financial development. Thank you, Lucy, and good day to everyone. Free cash flow from operations for the quarter was slightly over $200 million. The variation versus last year is driven mainly by combination of severance payments related to project cutting edge, lower EBITDA, higher investment in working capital, and last year's benefit from discontinued operations. This was partially offset by lower taxes and interest expenses. Adjusting for severance payments and discontinued operations, free cash flow in the quarter increased by 3% despite EBITDA performance. Our tax payments are significantly lower due to the payment of the Spanish tax fine in 2024 plus other effects.
on the operations part hired Kiln efficiency along with lower clinker factors continue to improve across the region and now I will pass the call to Maher to review our financial developments
Maher Al-Haffar: Thank you, Lucy, and good day to everyone. Free cash flow from operations for the quarter was slightly over $200 million. The variation versus last year is driven mainly by a combination of severance payments related to Project Cutting Edge, lower EBITDA, higher investment in working capital, and last year's benefit from discontinued operations. This was partially offset by lower taxes and interest expense. Adjusting for severance payments and discontinued operations, free cash flow in the quarter increased by 3% despite EBITDA performance. Our tax payments are significantly lower due to the payment of the Spanish tax fine in 2024, plus other effects. While investment in working capital during the H1 was higher than last year, the average working capital days declined by 4 days, driven by continued improvement efforts. In line with our normal seasonality, we expect working capital to reverse throughout the rest of the year.
Maher: Thank you, Lucy and good day to everyone.
Free cash flow from operations, for the quarter was slightly over a hundred million dollars.
Maher: The variation versus last year is driven mainly by combination of severance payments. Related to project, Cutting Edge, lower ibida, higher investment in working capital and last year's benefit from discontinued operations,
Maher: This was partially offset by lower taxes and interest expense.
Maher: Adjusting for severance payments and discontinued operations. Free cash flow in the quarter increased by 3%, despite ibida performance.
Maher Al-Hafar: While investment in working capital during the first half was higher than last year, the average working capital day has declined by four days, driven by continued improvement efforts. In line with our normal seasonality, we expect working capital to reverse throughout the rest of the year. On the cost side, energy costs on a per ton of cement basis declined by 15% in the first half, driven by lower power and fuel prices and a continued improvement in clinker factor and thermal efficiency. Record debt income of 1.05 billion dollars for the first six months of the year was driven primarily by the sale of our operations in the Dominican Republic and a favorable effects effect.
Maher: Our tax payments are significantly lower due to the payment of the Spanish tax fine in 2024 plus other effects.
Maher: While investment in working capital. During the first half was higher than last year.
Maher: Driven by continued improvements efforts.
Maher: In line, with our normal seasonality, we expect working capital to reverse throughout the rest of the year.
Maher Al-Haffar: On the cost side, energy costs on a per ton of cement basis declined by 15% in H1, driven by lower power and fuel prices, and a continued improvement in clinker factor and thermal efficiency. Record net income of $1.05 billion for H1 was driven primarily by the sale of our operations in the Dominican Republic and a favorable FX effect. Given the volatility in the Mexican peso, I would like to remind you of our ongoing Mexican peso hedging strategy, fully covering our operating cash flow from Mexico. This program effectively lowers the volatility of the exchange rate at which we convert pesos into dollars for tenors of up to 2 years.
Maher: On the cost side, energy costs on a per ton of cement bases declined by 15%, in the first half.
Maher: Driven by lower power and fuel prices and a continued Improvement in clinker factor and thermal efficiency.
Maher Al-Hafar: Given the volatility in the Mexican Peso, I would like to remind you of our ongoing Mexican Peso hedging strategy, fully covering our operating cash flow for Mexico. This program effectively lowers the volatility of the exchange rate at which we convert pesos into dollars for tenors of up to two years. During the quarter, we replaced the $9 and $1.8 billion subordinated perpetual notes with new 7.2% $1 billion subordinated perpetual notes issued at a tighter spread than our last two perpetual notes. This transaction is not only enhancing our free cash flow by reducing the coupon, but it also marked a successful return to the international capital market since regaining our investment grid.
Maher: Record debt income of 1.05 billion dollars. For the first 6 months of the year was driven primarily by the sale of our operations, in the Dominican Republic and a favorable FX effect.
Given the volatility in the Mexican peso. I would like to remind you of our ongoing Mexican peso hedging strategy fully covering our operating cash flow for Mexico.
Maher Al-Haffar: During the quarter, we replaced the 9 1/8 $1 billion subordinated perpetual notes with new 7.2% $1 billion subordinated perpetual notes, issued at a tighter spread than our last two perpetual notes. This transaction is not only enhancing our free cash flow by reducing the coupon, but it also marked a successful return to the international capital market since regaining our investment grade. Our leverage ratio stood at 2.05 times in June, a quarter return higher compared to December. We expect the leverage ratio to decrease during the H2 as we improve EBITDA and generate more free cash flow from operations. We have a comfortable debt maturity schedule with no need to access the capital markets, and we remain committed to further strengthening our capital structure, as Jaime mentioned in his remarks.
This program effectively lowers the volatility of the exchange rate at which we convert pesos into dollars for teners of up to 2 years.
Maher: During the quarter we replaced the 9 and 1/8 1 billion dollar subordinated, Perpetual notes with new 7.2%, 1 billion dollars subordinated. Perpetual notes issued at a tighter spread than our last 2 Perpetual notes.
Maher: This transaction is not only enhancing our free cash flow by reducing the coupon, but it also marked a successful return to the international Capital markets since regaining. Our investment grade
Maher Al-Hafar: Our leverage ratio stood at 2.05 times in June, a quarter return higher compared to December. We expect the leverage ratio to decrease during the second half as we improve EBITDA and generate more free cash flow from operators. We have a comfortable debt maturity schedule with no need to access the capital markets, and we remain committed to further strengthening our capital structure as Jaime mentioned in his remarks. Considering the financial initiatives carried out in the first half, along with current market conditions, we now expect net interest paid, including coupons on subordinated perpetual notes, to decline by $125 million in 2025.
Maher: Our leverage ratio stood, at 2.05%.
We expect the leverage ratio to decrease during the second half as we improve ibida and generate more free cash flow from operations.
Maher Al-Haffar: Considering the financial initiatives carried out in the H1, along with current market conditions, we now expect net interest paid, including coupons on subordinated perpetual notes, to decline by $125 million in 2025. Now back to you, Jaime.
Maher: We have a comfortable debt maturity schedule with no need to access the capital markets. And we remain committed to further strengthening our capital structure as haime mentioned in his remarks.
Maher Al-Hafar: And now, back to you, Heidi. Thank you, Majer. Considering our year-to-date results, as well as progress made under Project Cutting Edge, we expect Consolidated EBITDA to be flat versus 2024 with potential upside, subject to evolution of microeconomic conditions in our key markets.
Maher: Considering the financial initiatives carried out in the first half along with current market conditions. We now expect net interest, paid, including coupons on subordinated. Perpetual notes to decline by 125 million in 2025.
Jane: and now, back to you Jane,
Jaime Muguiro: Thank you, Maher. Considering our year-to-date results as well as progress made under Project Cutting Edge, we expect consolidated EBITDA to be flat versus 2024, with potential upside subject to evolution of macroeconomic conditions in our key markets. While we are confident in our self-help measures taken to date, we must recognize the volatility and lack of visibility in our main markets. As we go into the back half of the year, if FX rates in our portfolio remain stable at their end of June level, we would see a tailwind of about $60 million in consolidated EBITDA compared to H2 2024. We remain focused on the implementation of our strategic plan, delivering EBITDA savings under Project Cutting Edge, higher free cash flow conversion rate, and returns above cost of capital. We will keep you updated as we continue making progress towards these objectives.
Jane: Thank you, mAh.
Maher Al-Hafar: While we are confident in our self-help measures taken to date, we must recognize the volatility and lack of visibility in our main market. As we go into the back half of the year, if FX rates in our portfolio remain stable at their end of June level, we would see a tailwind of about 60 million in consolidated EBITDA compared to the second half in 2024. We remain focused on the implementation of our strategic plan, delivering EBITDA savings under Project Cutting Edge, higher free cash flow conversion rate, and returns above cost of capital. We will keep you updated as we continue making progress towards these objectives.
Speaker Change: Considering our year-to-date results as well as progress made under project Cutting Edge. We expect Consolidated ibida to be flat versus 2024 with potential upside subject to evolution of microeconomic conditions in our key markets.
Speaker Change: Why we are confident in our self-help measures taken to date. We must recognize the volatility and lack of visibility in our main markets.
Speaker Change: as we go into the back, half of the year in Fedex rates, in our portfolio remains stable, at the end of June level, we would see a Tailwind of about 60 million in Consolidated, ebida compared to the second half in 2024,
We remain focused on the implementation of our strategic plan, delivering ibida savings under project Cutting Edge Higher free cash flow conversion rate and returns above cost of capital.
Lucy Rodriguez: And now back to you, Lucy. Thank you, Jaime.
Jaime Muguiro: Now back to you, Lucy.
Lucy Rodriguez: Thank you, Jaime. 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. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases, refer to our prices for our products. 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.
Lucy Rodriguez: We will keep you updated as we continue making progress towards these objectives and now back to you, Lucy.
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 in the future due to a variety of factors. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases, or decreases refer to our prices for our And now we will be happy to take your questions in the interest of time and to give other people an opportunity to participate.
Speaker Change: Thank you, honey. 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. In addition, unless the context indicates otherwise all references to pricing initiatives, price increases or decreases refer to our prices for our products.
Becky: 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 touchstone telephone. If your question has already been answered or you wish to withdraw your question, press star followed by two. Press star 1 to begin.
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 1 question.
Speaker Change: If you wish to ask a question, please press star. Followed by 1 on your touchtone. Telephone, if your question is already been answered or you wish to withdraw. Your question, press star followed by 2.
Speaker Change: Press star 1 to begin.
Ben Thurow: And the first question comes from Ben Thurow from Barclays. Ben. Good morning, and thanks for taking my question.
Lucy Rodriguez: The first question comes from Benjamin Theurer from Barclays. Ben?
Ben Thor: And the first question comes from Ben Thor from barklay, been
Benjamin Theurer: Hey. Good morning, and thanks for taking my question. Jaime, congrats on the results. Lucy, Maher, good morning. Just a quick one. As for Project Cutting Edge, you clearly upped already the target for this year by $50 million as well as for 2027. The question really is, in what area have you identified those additional savings? As you look to 2027, if you would have to give a guess on how conservative or not the target of $400 million is, how confident are you with that? Do you think there's risk to the upside here as well?
Gordon Lee: Hi, congrats on the results, Lucy Meyer. Good morning. So just a quick one. As for project cutting edge, you clearly upped already the target for this year by $50 million, as well as for 2027. So the question really is, in what area have you identified those additional savings? And as you look to 2027, if you would have to give a guess on how conservatively not the target of $400 million is, how confident are you with that? Or do you think there's risk to the upside here? And thanks for the question. In the additional 50 million mainly comes from our transformation of our organization and particularly the efforts around overhead headcount reductions.
As you look to 2027, if you would have to, to give a guess on how conservative or not, um, the target of 400 million is, um, how, how confident are you with that, or do you think there's there's risk to the upside here as well?
Jaime Muguiro: Ben, thanks for the question. The additional $50 million mainly comes from our transformation of our organization and particularly the efforts around overhead headcount reductions. I feel very comfortable that we will deliver the $200 million of headcount overhead reduction between this year and next year. This year is going to be around $85 million. Next year is going to be around $111 million, $115 million. For a total of $200 million. To make sure that I wasn't aggressive with our target of $400 million run rate savings for 2027, what I've done is that I've reviewed all our initiatives, and I'm only counting on what is truly recurring. Out of a $400 million savings, please note that $200 million relate to overhead personnel, direct overhead personnel. On top of that, you need to add the indirect and overhead non-personnel savings.
Jaime Muguero: and I feel very comfortable that we will deliver the 200 million dollars of headcount overhead reduction between this year and next year. This year is going to be around 85 million dollars, next year is going to be around 111 115 million dollars for a total of 200 million dollars. To make sure that I wasn't aggressive with our target of $400 million rent rate savings for 2027, what I've done is that I've reviewed all our initiatives, and I'm only counting on what is truly recurrent. Out of the $400 million savings, please note that $200 relate to overhead personnel, direct overhead personnel.
Ben Thor: And thanks for the question. Um, the additional 50 million mainly comes from our transformation of our organization and particularly the airports around overhead headcount reductions, I feel very comfortable that we will deliver. Um, the 200 million dollars of headcount overhead reduction between this year, and next year, this year is going to be around 85 million dollars. Next year is going to be around 1111 1115 million dollars for a total of 200 million dollars.
Ben Thor: Um,
Ben Thor: to make sure that I wasn't aggressive, um, with our
Jaime Muguero: But on top of that, you need to add the indirect and overhead non-personnel savings. And then we have operative savings of around $150 million on spending smarter, which is the effort that we're doing around procurement, third-party addressable spend. So there is nothing in the $400 million that's speculative, that depends on year-on-year negotiations. Very good.
Ben Thor: Target of 400 million, right? Rate savings for 2027. What I've done is that, I've reviewed all our initiatives and I'm only counting on what is truly recurring out of the 400 million dollar savings. Please note that 200 relate to overhead Personnel direct over.
Had personnel.
Jaime Muguiro: We have operating savings of around $150 million on spending smarter, which is the effort that we're doing around procurement, third-party addressable spend. There is nothing in the $400 million that's speculative, that depends on year-on-year negotiations.
Ben Thor: But but on top of that, you need to add the indirect and overhead non-personal savings and then we have operative Savings of our own 150 million dollars on a spending smarter, which is the effort that we're doing around procurement, third party, addressable spend. So there is nothing in the 400 million dollars. That's a speculative. That depends on year on year negotiations.
Benjamin Theurer: Okay. Very clear. Thanks very much, Jaime, and congrats again.
Jaime Muguero: Thanks very much, Jaime, and congrats again. Thanks, Ben. Thanks. Thanks, Ben.
Jaime Muguiro: Thanks, Ben.
Lucy Rodriguez: Thanks. Thanks, Ben. The next question comes from Gordon Lee from BTG Pactual. Gordon?
Ben Thor: Very clear. Thank you very much K Congress again.
Speaker Change: Thanks Ben.
Alejandra Obregón: The next question comes from Gordon Lee from BPG Paxua. Gordon? Thanks, Lucy.
Thanks Ben.
Gordon Lee: The next question comes from Gordon Lee from btg, pwa Gordon.
Gordon Lee: Thanks, Lucy. Good morning, everybody. Just quickly on strategy, and it's a two-part single question, which is, I was wondering, Jaime, if you could elaborate a little or provide a little bit more color on what you mean by building a shareholder return platform. The second question, is it still safe for us to assume that you see the US, Mexico, and Europe as core and SCAC as core-ish, but something that you would consider divesting if the opportunity presented itself? Thank you.
Gordon Lee: Good morning, everybody. Just quickly on strategy. And it's a it's a two part, single question, which is, I was wondering if you could elaborate a little or provide a little bit more color on what you mean by building a shareholder return platform. And the second question, is it still safe for us to assume that you see the US, Mexico and Europe as core and SCAC as core-ish, but something that you would consider divesting if the opportunity presented itself. Thank you. Gordon, thanks for the question. The meaning of building a shareholding return platform is simple. It's around our capital allocation effort.
Gordon Lee: Thanks Lucy. Good morning everybody. Um just uh quickly uh on strategy. And it's a it's a 2-part single question which is I was wondering kind of if you could elaborate a little or provide a little bit more color on what you mean by building a shareholder, return platform. And and the second question is it still
Gordon Lee: Safe for us to assume that you see the US Mexico. And Europe is core and stack as
Core is, but something that you would consider divesting if the opportunity presented itself.
Thank you.
Jaime Muguiro: Gordon, thanks for the question. The meaning of building a shareholder return platform is simple. It's around our capital allocation efforts. We are subjecting any capital allocation decisions to shareholder returns. We will not proceed with a CapEx or M&A that does not deliver a return above our thresholds for shareholder returns. In addition, we are planning to progressively increase dividends, and we will also consider as early as potentially next year, opportunistic share buybacks. That's what it basically means. Regarding your second part of the question, the answer is yes. That's what we're doing. We will concentrate in the US, Mexico, and Europe, and there'll be additional divestitures in our SCAC portfolio between end of this year and next year. Yes, you said it, core-ish, and that's how we see SCAC.
Gordon Lee: Gordon. Thanks for the question. Um the meaning of building a shareholder return platform is is simple.
Jaime Muguero: We are subjecting any capital allocation decisions to shareholder returns. We will not proceed with a top-expensive policy. or MNA. that does not deliver a return above our thresholds for shareholder return. In addition, we are planning to progressively increase dividends and we will also consider as early as potentially next year opportunistic share buyback.
Gordon Lee: Um, it's it's around our Capital, allocation efforts.
Gordon Lee: Um, we are subjecting any Capital allocation decisions to shareholder returns, we will not proceed with a topics.
Gordon Lee: Or m&a.
That does not deliver a return above our thresholds for shareholder returns.
Jaime Muguero: and that's what it what it basically means. Regarding your second part of the question, the answer is yes. That's what we're doing. We will concentrate in the U.S., Mexico and Europe and there will be additional divestitures in our SCAC portfolio between end of this year and next year. And yes, you said it cornish. And that's how we that's how we see Scott. We're very clear.
Gordon Lee: In addition, we are planning to progressively increase dividends and we will also consider as early as potentially next year. Opportunistic. Share BuyBacks.
And that's what it. What it basically means regarding your second part of the question. The answer is. Yes, that's what we're doing. We will concentrate in the US, Mexico on Europe. And that will be additional divestitures, um, in our scat portfolio between end of this year. And next year,
Gordon Lee: Super. Very clear. Thank you very much.
Speaker Change: Um yes. You said it Cornish. And that's how we that's how we see skak.
Gordon Lee: Thank you very much.
Speaker Change: Clear, thank you very much.
Alejandra Obregón: And the next question comes from Alejandra Obregón from Morgan Stanley. Hi, good morning, Cenex team. Thank you for taking my question. I have one on free cash flow generation and the leverage for free cash flow generation. Specifically, I would perhaps want to know and perhaps what should we be watching in terms of the milestones here? I mean, whether it's profitability, is it working capital improvements? Is it capex discipline, asset sales or even debt management, if I can throw it in? I mean, just trying to get a sense of how the canons plays out, like what's likely to come first.
Lucy Rodriguez: The next question comes from Alejandra Obregón from Morgan Stanley. Ale?
And the next question comes from Alejandra or bond from Morgan Stanley Ali.
Alejandra Obregón: Hi, good morning, Cemex team. Thank you for taking my question. I have one on free cash flow generation and the leverage for free cash flow generation. Specifically, I would perhaps want to know what should we be watching in terms of the milestones here? I mean, whether it's profitability, is it working capital improvements, is it CapEx discipline, asset sales, or even debt management, if I can throw it in. I am just trying to get a sense of how the cadence plays out, like what is likely to come first, what might take longer, perhaps to materialize if we think of free cash flow from a structural perspective, where are the biggest unlocks that we could see here? Thank you.
Alejandra Obregón: What might take longer perhaps to materialize if we think of free cash flow from a structural perspective? And where are the biggest unlocks that we could see here? Thank you.
I mean, just trying to get a sense of how the Cannons plays out, like, what's likely to come first? Uh, what might take longer perhaps to materialize in? If we if we think of free cash flow from a structural perspective? And and where are the biggest unlocks that that we could see here? Thank you.
Jaime Muguero: Alejandra, thanks for the question. We're working on all fronts in parallel. And I will elaborate in a second.
Jaime Muguiro: Alejandra, thanks for the question. We are working on all fronts in parallel, and I will elaborate in a second. The one that will take us a little bit longer is portfolio rebalancing beyond developed and emerging, and that relates to underperforming assets in our portfolio at a micro market level that might not be delivering our new targeted free cash flow conversion for every asset. That will take a little bit longer. I have already completed with my team full review of our portfolio at a micro level. It means cement plant, ready-mix plant, quarry, so on and so forth. We have identified opportunities to boost free cash flow conversion that will require turnaround or it would require divesting and exiting. That will inform how we shape our portfolio going forward. Beyond that, we are acting simultaneously on all fronts. Number 1, do expect a reduction in CapEx.
Jaime Muguero: The one that will take us a little bit longer is portfolio rebalancing beyond develop and emerging. And that relates to underperforming assets in our portfolio at a micro market level that might not be delivering our new targeted free cash flow conversion for every asset. And that will take a little bit longer. I've already completed with my team full review of our portfolio at a micro level. It means cement plant, ready mix plant, quarry, so on and so forth. And we've identified opportunities to boost free cash flow conversion that will require turnaround or it would require divesting and exiting.
Speaker Change: Alejandra. Thanks for the question. Well, working on all fronts in parallel and I will elaborate in a second. The 1 that will take us a little bit. Longer is portfolio rebalancing Beyond development emerging and that relates to underperforming Assets in our portfolio at a micro Market level. That might not be delivering our new targeted, frequency as flow conversion for every asset.
Jaime Muguero: And that will inform how we shape our portfolio going forward.
Jaime Muguero: Beyond that, we're acting simultaneously on all fronts. Number one, do expect a reduction in CAPEX. We will start to normalize platform CAPEX while materially reducing strategic CAPEX. if that's that's one on working then the second one is going to be the incremental the cutting edge savings because those go straight not only to EBITDA but also to pre-cash. on on on remember that's that's 400 million dollars the state is stayed by 20 27. The other aspect is the incremental EBITDA on free cash flow that you should expect from our strategic CAPEX approved and that we're executing from our strategic CAPEX pipeline.
Jaime Muguiro: We will start to normalize platform CapEx while materially reducing strategic CapEx. That's one. The second one is going to be the incremental, the cutting-edge savings, because those go straight not only to EBITDA, but also to free cash flow. Remember, that's $400 million steady state by 2027. The other aspect is the incremental EBITDA and free cash flow that you should expect from our strategic CapEx approved and that we're executing from our strategic OpEx pipeline. I'm expecting an incremental $300 million of EBITDA between now and up to 2029, 2030 on a steady state basis. That should also boost free cash flow. On working capital, that won't be the lever to maximize free cash flow because we are already performing at very good levels. Please also note that we're significantly reducing interest expenses. Maher already alluded to it, $125 million of savings this year.
Speaker Change: Um, and that will take a little bit longer. I've already completed with my team full review, uh, of our portfolio at a micro level. It means cement planned. Ready. Mix plan query so on and so forth. And we've identified opportunities to boost free cash flow conversion that will require turnaround or it will require divesting and exiting and that will inform how we shape our portfolio. Going forward beyond that, we're acting simultaneously on all fronts. Number 1, do expect a reduction in capex.
Speaker Change: We will start to normalize platform CeX, while materially reducing a strategic topics.
Speaker Change: That's that's 1 on working. Then the second 1 is going to be the incremental
Speaker Change: The Cutting Edge savings because those go straight, not only to ibida but also to free cash flow. And and and and remember that's that's 400 million dollars. Instead you stayed by 20
Speaker Change: 27, the other aspect is the incremental ebida and free cash flow that you should expect from our strategic compass.
Jaime Muguero: I'm expecting an incremental $300 million of EBITDA between now and up to 2029-2030 on a three-state basis. That should also boost free cash flow. On working capital, that won't be the lever to maximize free cash flow because we are already performing at very good levels. Please also note that we're significantly reducing interest expenses. Maher already allotted to it $125 million of savings this year. And part of our capital allocation strategy will continue around reducing the principle of our debt. I'm not in a hurry to do that, but we will continue, and that should continue to reduce interest expenses.
Jaime Muguiro: On part of our capital allocation strategy, we'll continue around reducing the principal of our debt. I'm not in a hurry to do that. We will continue. That should continue to reduce interest expenses. Finally, operational excellence. We're going to be working very hard on expanding margins, looking at every line of our cost as we're doing right now. That's the reason why Cutting Edge is delivering what we were expecting. I hope that I have answered the question, Alejandra Obregón.
Speaker Change: Approved and and that we're executing um, from our strategic ethics Topline. I'm expecting an incremental a 300 million dollars of ebida between now and up to 2029 2030 on a steady state basis, that should also boost free cash flow on working capital. That won't be the lever to maximize free cash flow because we are already performing at very good. All levels. Please also note that we're significantly reducing interest expenses, Mark here already alluded to with 125 million dollars of savings this year and part of our Capital, allocation strategy will continue around reducing the principal.
Jaime Muguero: And finally, operational excellence. So we're going to be working very hard on expanding margins, looking at every line of our doing right now, and that's the reason why cutting-edge is delivering what we were expecting. So I hope that I have answered the question, Alejandra. You did. Thank you very much. Thanks, Sally.
Of our debt. It I'm not in a hurry to do that, but we will continue and that should continue to reduce interest expenses and finally operational excellence. So we're going to be working very hard on expanding margins. Uh, looking at every line of our cost as we're doing right now and that's the reason why Cutting Edge is delivering. Uh what what we're, what we were expecting so I hope that I have answered the question Alejandra.
Alejandra Obregón: You did. Thank you very much.
You did. Thank you very much.
Lucy Rodriguez: Thanks, Ale. The next question comes from Yassine Touahri from On Field Investment Research. Yassine?
Yassine Tawiri: The next question comes from Yassine Tawiri from Onfield. Yassine. Yes, good morning. Just one question on the new corporate structure, new operating model that you're announcing today. Could you explain a little bit what it is and how it could support and improve the free cash flow conversion? Another question that I think I already asked is that Olsim, Amrise, Heidelberg Materials, they're targeting an EBDA to free cash flow conversion rate of close to 50 percent. Is it something that you believe CEMEX can achieve as well? And if so, what would be the timeframe on the level that you would be working on?
Thanks Ali. The next question comes from Yasin toiri from on field jessen.
Yassine Touahri: Yes, sir. Good morning. Just one question on the new corporate structure, new operating model that you're announcing today. Could you explain a little bit what it is and how it could support an improved free cash flow conversion? Another question that I think I already asked is that Holcim, Amrize, Heidelberg Materials, they're targeting an EBITDA to free cash flow conversion rate of close to 50%. Is it something that you believe CEMEX can achieve as well? If so, what would be the timeframe on the level that you would be working on?
Uh yes sir. Good morning. Um, just 1 question on the, on the new Cooperative structure on new operating model that you are announcing today. Uh, could you explain a little bit what it is and how it could support an improved? The free cash flow conversion. And another question that I, I think I already asked, is that all Sim am R materials, their targeting and ability to free cash flow conversion, rate of close to 50%. Uh, is it something that you believe cmx can achieve as well?
Speaker Change: uh, and if so, uh, what would be the the time frame, uh, on the on the, on the lover that you would uh, you would be working on
Jaime Muguero: Yes, and thank you for your question. Let me start with the back of your of your question. I see no reason why we shouldn't achieve a similar free cash flow conversion rate from operations is the ones that hold the amount rise in Heidelberg are are providing in it. I think that next year, we're going to be getting closer to that target. And for sure, I see that happening in 2027. Because between now and then, I'm pretty sure that we're going to be letting go some assets that at a micro level do not generate enough free cash flow conversion.
Jaime Muguiro: Yassine, thank you for your question. Let me start with the back of your question. I see no reason why we shouldn't achieve a similar free cash flow conversion rate from operations than the ones that Holcim, Amrize, and Heidelberg are providing. I think that next year we're going to be getting closer to that target, and for sure, I see that happening in 2027, because between now and then, I'm pretty sure that we're going to be letting go some assets that at a micro level do not generate enough free cash flow conversion. We have introduced EBIT, ROIC above WACC, and free cash flow conversion from operations as part of our management KPIs and our compensation scheme, which we're reviewing for management, will be aligned to those metrics. I'm pretty sure that we're going to be relentlessly working on improving free cash flow conversion rates.
Jaime Muguero: Because we have introduced EBIT, heroic above what and free cash flow conversion from operations as part of our management KPIs and our compensation scheme, which we're reviewing for management will be aligned to those metrics, I'm pretty sure that we're going to be relentlessly working on improving free cash flow conversion rates. So I see really no reason. And again, I don't want to be redundant.
Jaime Muguiro: I see really no reason. Again, I don't want to be redundant, but a lot of the Cutting Edge savings would go directly to free cash flow. Headcount reduction is a good example, the $200 million annualized savings. That connects very nice with the first part of your question, right, about the transformation of corporate structure and the operating model. Basically, what we're doing is discontinuing centrally led initiatives that were very successful in the past and that do not require further mobilization and management from the center. In addition, we are decentralizing operational excellence initiatives to the line around commercial supply chain and customer centricity. The line is responsible for that. We are decentralizing, we are boosting collaboration by concentrated on innovation efforts and venture efforts on very impactful but few things. We are copy-pasting across regions faster and better.
Jaime Muguero: But but a lot of the cutting edge in savings would go directly to free cash flow, you know, headcount reduction is a good example, the 200 million analyzed savings regarding the that connects very nice with the first part of your question right about the transformation of corporate structure on the operating model. Basically, what we're doing is, is discontinuing a central centrally led initiatives that were very successful in the past and that do not require further in mobilization and management from the center. In addition, we are decentralizing a operational excellence initiatives through the line around commercial supply chain and customer synchricity.
Speaker Change: Not generate enough free cash flow conversion because we have introduced eBid aoic about what and free cash flow conversion from operations as part of our management, kpis and our compensation scheme, which we're reviewing for management will be aligned to those metrics. I'm pretty sure that we're going to be, we endlessly working on, improving, free cash, flow conversion rates. So I see really no reason. And again, I don't want to be redundant, but but a lot of The Cutting Edge in savings would go directly to free cash flow. You know head cam reduction is is is a good example that 200 million analyze savings regarding the that connects very nice with the first part of your question, right? About the transformation of corporate structure on the operating model. Basically, what we're doing is um is discontinuing
A Central Central lead initiatives that were very successful in the past and that do not require further. Um mobilization and management from this Center. In addition, we are decentralizing. Um, operational excellence
Jaime Muguero: The line is responsible for that. So we are decentralizing and then we are boosting collaboration by by Concentrated on Innovation Efforts and Venture Efforts. on very impactful but few things. And then we are copy pasting, you know, across regions faster and better. That is helping us and will help us to optimize resources, optimize Cape Town, reduce costs, while having an impactful effect on operational excellence and therefore margins.
Speaker Change: Initiatives through the line around commercial supply chain and customers electricity. The the line is responsible for that. So we, we are decentralizing and then we are boosting collaboration by
Jaime Muguiro: That is helping us and will help us to optimize resources, optimize headcount, reduce cost, while having an impactful effect on operational excellence and therefore margins. I want my teams and all our employees to have an owner mindset, and that's what we are heading towards. Agility, less bureaucracy, and speed of execution. I hope that what I'm saying, Yassine, makes sense.
Jaime Muguero: I want my teams and all our employees to have an owner mindset. And that's what we are heading towards. Agility, less bureaucracy and speed of execution. I hope that what I'm saying, you see makes. Makes a lot of sense and thank you so much for answering my question.
Yassine Touahri: Makes a lot of sense, and thank you so much for answering my question.
By concentrated on Innovation efforts and Venture efforts. Um, on on very impactful but few things and then we are copy pasting, you know, across regions faster and better. That is helping us and will help us to optimize resources, optimize Capcom reduce cost while having an impactful impactful effect, on operational, excellence and therefore margins. I, I, I want my teams and all our employees to have an owner mindset and that's what we are heading towards agility, less bureaucracy and a speed of execution, I hope that what I'm saying you see makes sense.
Speaker Change: Uh, makes a lot of sense and thank you so much for answering my question.
Adam Thalheimer: And the next question comes from Adam Thalheimer from Thompson Davis, and I'm going to read it. It's a bit repetitive of what Yasin just asked, Jaime, so maybe you want to talk a little bit of some of the organizational changes in the U.S. as well. But the question is, can you please discuss some of the structural changes you are making at CEMEX? I am particularly interested in the relationship between corporate and regional managers.
Lucy Rodriguez: The next question comes from Adam Thalhimer from Thompson Davis, and I'm going to read it. It's a bit repetitive of what Yassine just asked Jaime, so maybe you want to talk a little bit of some of the organizational changes in the US as well. The question is, can you please discuss some of the structural changes you are making at Cemex? I am particularly interested in the relationship between corporate and regional managers. Is it fair to say that regional managers are being given more autonomy?
Speaker Change: And the next question comes from Adam.
Jaime Muguero: Is it fair to say that regional managers are being given more Thanks, Adam, for your question. I will complement what I just said before. it with the following the center. is here to serve the line. The center, right, comes with me to conduct thorough Regional Business Performance Reviews to Boost Operational Excellence. So that's a key aspect. We've done already three, one more to come. I'll be doing two per year. And there is where we looked at all aspects of our business. And there is where we identified best practices. We deploy in a coordinated way, an efficient way, new technology.
Speaker Change: Alzheimer from Thompson Davis. Um, and I'm going to read it. It's a bit repetitive of what Yasin just asked him. So maybe you want to talk a little bit of some of the organizational changes in the US as well. But the question is, can you please discuss some of the structural changes you were making at semx? I am particularly interested in the relationship between corporate and regional managers, is it fair to say that regional managers are being given more autonomy?
Jaime Muguiro: Thanks, Adam, for your question. I will complement what I just said before with the following. The center is here to serve the line. The center comes with me to conduct our regional business performance reviews to boost operational excellence. That's a key aspect. We've done already three, one more to come. I'll be doing two per year. There is where we looked at all aspects of our business, and there is where we identified best practices. We deploy in a coordinated way, an efficient way, new technology, we innovate together, and we relentlessly look at cost optimization. The other aspect, and it's a good suggestion, Lucy, is our new organization in the US, where we are pivoting towards operational excellence and growth. In the case of operational excellence, sorry. We've appointed three P&L owners: cement, ready-mix, and aggregates.
Speaker Change: Thanks. Adam for your question. I will compliment what I just um, said before.
Speaker Change: With the following the center.
Is here to serve the line.
Speaker Change: Um, the center right comes with me,
Speaker Change: Um, to conduct thorough.
Speaker Change: Regional business performance reviews to boost operational excellence.
Jaime Muguero: We innovate together. And we relentlessly look at cost optimization.
Jaime Muguero: The other aspect, and it's a good suggestion, Lucy, is our new organization in the U.S. and where we we are pivoting right towards operational excellence and growth. In the case of operational excellence, sorry, we've appointed three OPML owners, CEMENT, REDIMIX and AGRI. And with that, we are expediting best practice sharing, driving margin improvements across every line of business and across geographies. That's going to be very, very powerful. And by having those three P&L owners, we're freeing up the time. Sorry about that. the time of Jesus González, our FEMEX US president, you know, to spend high quality time on growth in the US because as you know, right, we are materially reducing strategic apex and we are favoring part of our capital allocation to a very responsible M&A in the US around aggregates and some organization solutions business.
Speaker Change: Um, so that's a key aspect. We've done already 3, what more to come? I I'll be doing 2 or for year and there is where we looked at all. All aspects of our business and there is where I we identified this practices, we deploy in a coordinated way, an efficient way new technology, we innovate together and we relentlessly look at the cost optimization.
Speaker Change: The other aspect, um, and it's a good suggestion. Lucy is, is our new organization in the US.
Speaker Change: Where we, we are pivoting, right towards operational excellence and growth.
Jaime Muguiro: With that, we are expediting best practice sharing, driving margin improvements across every line of business and across geographies. That's going to be very powerful. By having those three P&L owners, we're freeing up the time of Jesus Gonzalez, our Cemex USA President, to spend high-quality time on growth in the US. As you know, we are materially reducing strategic CapEx, and we are favoring part of our capital allocation to very responsible M&A in the US around aggregates and some urbanization solutions businesses, in the US mainly. Lucy, I hope that I have answered the question for Adam Thalhimer, complementing what I said before.
In the case of operational excellence. Sorry we've appointed 3 opl owners cement already makes an aggregates.
And with that, we are Expediting, best practice, sharing, driving margin improvements across every um, um, line of business and across geographies. That's going to be very, very powerful and by having those 3 PML owners who are freeing up the time, sorry about that.
Jaime Muguero: in the U.S. mainly. So, Lucy, I hope that I have answered the question for Adam, complementing what I said before. Thank you, Hyman.
Speaker Change: As you know, right we we are materially reducing a strategic capex and we are favoring part of our Capital allocation to a very responsible m&a in the US around Aggregates and some organization Solutions businesses, um, in the US. Mainly
Lucy Rodriguez: Great. Thank you, Jaime. The next question comes from Jorel Guilloty from Goldman Sachs. Jorel?
So Lucy. I hope that I have answered the question for, for Adam complementing, what I said before.
Jarell Gilotti: The next question comes from Jarell Gilotti from Goldman Sachs. Jarell? Thanks, Lucia. Good morning, everyone.
Thank you, h.
Speaker Change: Um, the next question comes from Gerald gilot from Goldman Sachs Gerald.
Jorel Guilloty: Thanks, Lucy Rodriguez. Good morning, everyone. I want to shift gears a bit and wanted to ask on pricing trends. Specifically, if I recall correctly, at the beginning of the year, there was an expectation for Mexico pricing to maybe go into the teens for both cements and aggregates. Year to date, you're at about 5% hikes. You did mention that you did pursue an increase now in July. I just want to understand, where do you stand on the outlook for hikes in pricing through year end for Mexico and the US? Specifically want to know about cement, but if you can provide some color for ready-mix and aggregates, that'd be great. Thank you.
Jarell Gilotti: So I want to shift gears a bit and wanted to ask on pricing trends. So specifically, if I recall correctly, at the beginning of the year, there was an expectation for Mexico pricing to maybe go into the teens for both cements and aggregates. And, you know, year to date, you're at about five percent hikes. And you did mention that you did pursue an increase now in July. So I just want to understand, where do you stand on the outlook for hikes in pricing through year end? Why for Mexico and the U.S. specifically want to know, you know, about cement, but if you can provide some color for ready mixing aggregates, that'd be great.
Jaime Muguero: Thank you. Thanks for the question. Regarding Mexico, yes, we put a price increase effective July 1st that in dollar terms was around $15. We do expect to get, hopefully it's a little bit too early to say it, but we do expect to get between $8 to $10 per ton and that should continue to improve sequentially our cement price increase in Mexico and we did that for both bags and bottles. Regarding ReadyMix, we continue. by Micro Market to find opportunities to increase our prices. Please note that year-on-year our ReadyMix prices are up 7% and sequentially second quarter 25 average to fourth quarter 24 average our ReadyMix price is up 6.
Thanks Lucy. Uh, good morning everyone. Um so um I want to shift gears a bit and wanted to ask on pricing Trends. Um, so specifically I as I was going to call correctly at the beginning of the year, um, there was an expectation for Mexico, pricing to maybe go into the teens uh, for both cement and Aggregates. Um, and you know, year to date. Um, you're at about uh, 5% um, hikes and you did mention that you did um uh, pursue an increase now in July. So I just want to understand. Where do you stand on the outlook for hikes and pricing through year end. Um by for for Mexico and the US um specifically want to know, you know about cement. But if you can provide some color for ready mixing agrees, that would be great. Thank you.
Jaime Muguiro: Thanks, Jorel, for the question. Regarding Mexico, yes, we put a price increase effective 1 July. That in dollar terms was around $15. We do expect to get, hopefully, it is a little bit too early to say it, but we do expect to get between $8 to $10 per ton. That should continue to improve sequentially our cement price increase in Mexico. We did that for both bags and bulk. Regarding ready-mix, we continue by micro market to find opportunities to increase our prices. Please note that year-on-year, our ready-mix prices are up 7%. Sequentially Q2 2025 average to Q4 2024 average, our ready-mix price is up 6%. In aggregates is year-on-year 8%, and 8% sequentially average Q2 2025 to Q4 2024. Regarding the US, I am not expecting any price increase in cement between now and year-end.
Thanks your for the, for the question regarding Mexico. Yes. We put a price, increase effective July 1st that in dollar terms was around 15. Um, we do expect to get, hopefully, it's a little bit too early to say it, but we do expect to get between 8 to 10 dollars per ton and that should continue to improve sequentially. Our cement price increase in Mexico and we did that uh for both bags and and bulk.
Speaker Change: Um, regarding Ready? Mix. We continue.
Speaker Change: By micro Market to find Opportunities, to increase our prices, please note that year in year already makes prices are up 7% and, uh, sequentially.
Jaime Muguero: and in aggregates is year on year 8% and 8% sequentially average second quarter 25 to fourth quarter in 2024.
Jaime Muguero: Regarding the U.S. I'm not expecting any price increase in cement between now and year end. And I do expect ReadyMix to be flat, while aggregates, it will stay around that five to six percent sequentially from average 2Q25 to 4Q24. And as we think about 2026, right, I do is that we will continue with our pricing strategy to at least offset input cost inflation.
Speaker Change: Second quarter, 25, average to fourth quarter. 24, average are already mixed price is up 6% and um in Aggregates is year and year, right percent and 8% sequentially average. Second quarter 25 to fourth quarter at 2024
Speaker Change: Regarding the US.
Jaime Muguiro: I do expect ready-mix to be flat while aggregates will stay around that 5% to 6% sequentially from average Q2 2025 to Q4 2024. As we think about 2026, I do expect that we will continue with our pricing strategy to at least offset input cost inflation. A final thought, if we assume the Q2 2025 prices for the rest of the year, that will lead to a price tailwind in US dollars of around 4% in cement, 6% in ready-mix, and 7% in aggregates. I hope I've answered the question. Back to you, Lucy.
Speaker Change: I'm not expecting any price increase in cement between now and year end. Um,
Speaker Change: And I do expect already mix to be.
Flat while Aggregates will stay around that 5 to 6%, sequentially from uh average to 225 to 4 q, 24. And I as we think about 2026, right? Um I I I do expect
Jaime Muguero: And a final thought, if we assume the 2Q25 prices for the rest of the year, that will lead to a price tailwind in US dollars of around 4% in cement, 6% in readymix, and 7% in I hope I've answered the question back to you. Wonderful. Thank you. Thank you, Gerald.
Um that we will continue with our pricing strategy to at least offset input cost inflation and and a final thought if we assume the 2q 25 prices for the rest of the year, that will lead to a price Tailwind in US Dollars of around.
4% in the man. 6% in Ready. Mix and 7% in agriculture.
Speaker Change: I hope I have answered the question.
Jorel Guilloty: Wonderful. Thank you.
Back to you, Lucy.
Lucy Rodriguez: Oh, wonderful.
Thank you.
Lucy Rodriguez: Thank you, Jorel. The next question comes from Adrian Huerta from JPMorgan. Adrian?
Lucy Rodriguez: um,
Adrian Wertha: The next question comes from Adrian Wertha from J.P. Morgan. Adrian. Thank you, Ms. Shea. Good morning, everyone. My question is related to EMEA, we have seen a tremendous performance year-to-date of 32%. Almost 250 million dollars in the first half. How do you see this region in the medium term, let's say over the next 18 months? What is that's on volumes and also on margins. And what could we expect out of this region in two to three years? Thanks, Adrian.
Thank you, D. The next question comes from other from JP Morgan Adrian.
Adrian Huerta: Thank you, Lucy. Good morning, everyone. Jaime, my question is related to EMEA. We have seen a tremendous performance year to date, EBITDA up 32%, almost $350 million in H1. How do you see this region in the medium term, let's say over the next 18 months? Let's say on volumes and also on margins, what could we expect out of this region in two to three years?
Adrian: Thank you. Good morning everyone. Um,
I have my question is related to Mia? Uh we have seen a tremendous performance uh year to date. There we go. 32%.
Adrian: Almost 350 million dollars in the first half.
Speaker Change: Um how do you see these uh region in the medium term, let's say over the next 18 months. Um what is
The sale on volumes and also on markets and uh what could we expect out of this? Uh region in uh in 2 or 3 years?
Jaime Muguiro: Thanks, Adrian. Well, I'm very excited about our operations in EMEA, including Europe. Let me start first, outside of Europe, we do see a significant potential for free cash flow and EBITDA growth in Israel. The fundamentals continue to be very solid. Population growth, highly intensive concrete-driven construction systems, and a lot of liquidity. There is pent-up demand for housing and infrastructure. We're very well positioned, and therefore, I'm very excited about our operations in that part of the world. Although Egypt will continue with volatility, we are enjoying, for the very short term, strong volumes and strong pricing. If I go to Europe, I'm bullish about Europe. We will continue to see volume increase in markets such as Spain, Germany, and you know why, right?
Jaime Muguero: Well, I'm very excited about our operations in EMEA, including Europe. Let me start first, outside of Europe, we do see a significant potential for free cash flow on EBITDA growth in Israel. The fundamentals continue to be very solid population growth, highly intensive concrete driven construction systems. and a lot of liquidity and there is pent up demand for housing and infrastructure. are very well positioned. And therefore, I'm very excited about our operations in that part of the world. Although Egypt will continue with volatility, we are enjoining for the next, for the very short term, a strong volumes and a strong pricing.
Thanks Adrian. Well, I'm very excited about our operations in Neah uh, including Europe.
Speaker Change: For free cash flow and maybe that grow with the Israel.
Speaker Change: The fundamentals continue to be very solid population growth.
Speaker Change: Highly intensive, concrete driven construction systems.
Um, and a lot of liquidity and there is pent-up demand for housing and infrastructure.
Speaker Change: Uh we're very well positioned and therefore, I'm very excited about our operations in that point of the world.
Jaime Muguero: If I go to Europe, I'm bullish about Europe. We will continue to see volume increase in markets such as Spain, Germany, and you know what, why, right? The change in fiscal policy, the commitment in infrastructure investments and in the defense segment as well, some of which will relate to infrastructure. We also see solid Eastern Europe. And it's exciting, because the opportunities is material. Think about a reconstruction of Ukraine, if it happens in the midterm, right? That won't happen next year. But as soon as there is peace between Ukraine and Russia, the reconstruction is going to draw significant volumes and that's going to reduce imports from Ukraine into Poland, that's going to improve dynamics in the east of our portfolio in Europe, and we're going to see significant product that today is exported from Turkey, some of which goes to Europe, going back to Ukraine, another reconstruction effort such as potentially in the midterm the Middle East.
Speaker Change: Um, although Egypt will continue with volatility. And we, we are enjoying for the next, for the very short term, a strong volumes, and a strong pricing. If I go to Europe,
Jaime Muguiro: The change in fiscal policy, the commitment in infrastructure investments and in the defense segment as well, some of which will relate to infrastructure. We also see solid Eastern Europe, and it's exciting because the opportunities is material. Think about a reconstruction of Ukraine, if it happens in the midterm, right? That won't happen next year, but as soon as there is peace between Ukraine and Russia, the reconstruction is going to draw significant volumes, and that's going to reduce imports from Ukraine into Poland. That's going to improve dynamics in the east of our portfolio in Europe. We're going to see significant product that today is exported from Turkey, some of which goes to Europe, going back to Ukraine, another reconstruction effort such as potentially in the midterm, the Middle East. That's going to be a key lever.
um, I'm bullish about Europe. We will continue to see, uh, volume increase in in markets such as Spain, Germany. And you know what, why? Right the, the change in fiscal policy the commitment in, um, infrastructure Investments and in the defense, um, um, um, um segment as well, some of which will will relate to infrastructure. We also see, solid Eastern Europe,
Speaker Change: And is exciting because the opportunities is is material. Think about a reconstruction reconstruction of Ukraine. If it happens in the midterm, um, right? That won't happen next year but
Jaime Muguero: So that's going to be a key lever. Thinking about the midterm, also, we will see Poland expediting infrastructure using European Union funds. There is a delay there, but I do think that that's going to happen next year. And then the UK should continue investing in infrastructure and potentially we'll see a bit recovery in housing in the midterm.
Speaker Change: as soon as there is peace between Ukraine and Russia. The, the Reconstruction is going to draw a significant volumes that and that's going to reduce imports from Ukraine into Poland. That's going to improve Dynamics in the east of our portfolio um in in Europe. And we're going to see significant product that today is exported from Turkey. Some of which goes to Europe going back to Ukraine. Another reconstruction efforts such as potentially in the midterm, the Middle East.
Jaime Muguiro: Thinking about the midterm also, we will see Poland expediting infrastructure using European Union funds. There is a delay there, but I do think that that's going to happen next year. The UK should continue investing in infrastructure and potentially, we'll see a bit of recovery in housing in the midterm. What excites me also is our CO2 decarbonization. We are leading the pack. Our CO2 performance is going very well. There in 2026 and 2027, we're going to see two things, Adrian. First, the CBAM, and number two, the withdrawal of free CO2 allowances, which will materialize starting in 2027. We have significant CO2 credit surpluses, but that's not the case of the industry. Next year, when we look also at the CO2 footprint of imports from exporting countries such as Turkey, Algeria, Saudi Arabia, and others, they'll have to.
Speaker Change: Um so so that's going to be acute lever.
Speaker Change: Thinking about the midterm also we we will see Poland, Expediting infrastructure using European Union funds. There is a delay there, but I do think that that's going to happen next year.
Jaime Muguero: What excites me also is our CO2 decarbonization. in our CO2 performance is going very well and there in 26 and 27 we're going to see two things Adrian. First the CBAM, number two the withdrawal of three CO2 allowances which will be which will materialize starting in 2027 and we have a significant CO2 credit surpluses but that's not the case of the industry. So as soon as next year when we look also at the CO2 footprint of imports from exporting countries such as Turkey, Algeria, Saudi Arabia and others they'll have to, they will face a CBAM that would give us a cost advantage that will materialize hopefully in our pricing strategy.
Speaker Change: Um and and then the UK should continue investing in infrastructure and um potentially we we'll see a bit of recovery in housing. Um, in the mid in the midterm, what excites me also is is the the our CO2 ticker politizoom
Speaker Change: CO2 footprint of imports from exporting countries such as Turkey. Um, Algeria, Saudi Arabia and others
Jaime Muguiro: They will face a CBAM that would give us a cost advantage that will materialize, hopefully in our pricing strategy. I do expect cement capacity closures, including our footprint, and we're analyzing that as we continue lowering our clinker factor, and doing more milling and less clinker. That also would lead to less excess capacity because some of it won't be needed to get CO2 free allowances. All of those dynamics, better volumes, and rationalization in the industry should lead to our pricing strategy is going to be to leverage that momentum, and trying to close the gap on pricing that we see between, for example, European markets and the US. I hope that I've answered my question, Adrian.
Speaker Change: They'll have to, they will face a sebum that would would would give us um a a cost advantage that will materialize.
Jaime Muguero: And then I do expect cement capacity closures including our footprint and we're analyzing that as we continue lowering our factor on doing more milling and less clinker. And that also would lead to less excess capacity, because some of it won't be needed to get CO2 free allowances. So all of those dynamics, better volumes and rationalization in the industry should lead to. Pricing strategy is going to be to leverage that momentum on trying to close the gap on pricing that we see between, for example, European markets and the U.S. So I hope that I've answered my question.
Fully in our in our pricing strategy and then I do expect cement capacity closures including our food. And we're analyzing that as we continue lowering our clinker Factor, um, and and doing more Milling unless clinker
Speaker Change: And that also would lead to less excess capacity because some of it won't be needed to get Co2 free allowances. So all of those Dynamics better volumes and rationalization in the industry should lead to, um, um,
Speaker Change: Um are are pricing strategies going to be to leverage that momentum. Um and and and trying to close the gap on pricing that we see between for example, European markets, and the US.
So I I hope that I've answered my question at the end.
Jaime Muguero: You did. Thank you so much.
Adrian Huerta: You did. Thank you so much.
Lucy Rodriguez: Adrianne, I would also just add that we've already seen some momentum in Europe in terms of pricing. If you exclude Germany, pricing for our three core products is already up two to 3% versus fourth quarter this year. So, I think that that's important to note.
Lucy Rodriguez: Adrian, I would also just add that we've already seen some momentum in Europe in terms of pricing. If you exclude Germany, pricing for our 3 core products is already up 2% to 3% versus Q4 this year. I think that that's important to note. Anyway, the next question comes from Paul Roger from BNP Paribas. I'm going to read it via the webcast. Guidance mentions potential upside. Where could this come from?
Speaker Change: You did. Thank you so much.
Paul Roger: Anyway, and the next question calls comes from Paul Roger from BMP. I'm going to read it via the webcast guidance mentions potential upside. Where could this come from?
Speaker Change: Adrien I would also just add that you've already seen some momentum in Europe. In terms of pricing if you exclude Germany pricing for our 3, core products is already up 2 to 3% versus fourth quarter this year. So um I think that that's important to note.
Any rate. Um, and the next question calls, uh, comes from Paul Rodgers from BMP. I'm going to read it via the web webcast.
Paul Rodgers: Guidance mentions potential upside. Where could this come from?
Jaime Muguero: Thanks, Paul, for the question. Let me elaborate a little bit about it. First, as part of our cutting edge effort, We count on around $23 to $5 million that I haven't yet even included in our SDB. that, you know, works as a cushion, but there is some upside as we continue executing those. Also, think about these. In the first semester, we did $1.424 billion. So if we were to do the same thing, meaning second semester $1.4 billion, that'll be a flat second semester growth that will lead to $2.850 billion. But then you need to add...
Jaime Muguiro: Thanks, Paul, for the question. Let me elaborate a little bit about it. First, as part of our Cutting Edge effort, we count on around $23 to $25 million that I haven't yet even included in our estimates. That works as a cushion, but there is some upside as we continue executing those savings. Also, think about it this way. In H1, we did $1.424 billion. If we were to do the same thing, meaning H2, $1.4 billion, that'll be a flat H2 growth that will lead to $2.850 billion. You need to add tailwinds on FX. If the FX stays around 18.75 pesos to the dollar, that's going to add at least $40 million in H2.
Paul Rodgers: Thanks Paul for the question.
Paul Rodgers: Let me elaborate a little bit about it first as part of our Cutting Edge. If
Paul Rodgers: for uh, we count
Paul Rodgers: On around 23 to 5 million dollars. That
Paul Rodgers: I haven't yet even included in our estimates.
Uh that, you know, works as a cushion but there is some upside as we continue. Executing those savings
Paul Rodgers: Also think about this way.
Paul Rodgers: Um in the first semester, we did 1.424 billion dollars so if we were to do the same thing, um, meaning second semester 1.4 billion dollars, that would be a flat.
Paul Rodgers: Second semester growth.
Jaime Muguero: Tailwinds on effect. If the FX stays around 18.75 pesos to the dollar, that's going to add, you know, at least $40 million in the second semester. And then we have our budget cutting-edge savings, and we're counting on the $85 million of headcount, overhead reduction savings that I'll be firming up in future calls as we completed the labor consultation process in Europe. But beyond $85 million of headcount savings, we haven't yet even considered the indirect savings from eliminating those positions. That could be between 3 to 6% more savings, and those relate to licenses, traveling expenses, so on and so forth.
Paul Rodgers: Uh, that will lead to 2.850 billion dollars. But then you need to add
Hail wins on FX.
Jaime Muguiro: We have our Project Cutting Edge savings, and we're counting on the $85 million of headcount overhead reduction savings that I'll be firming up in future calls as we completed the labor consultation process in CEMEX Europe. Beyond $85 million of headcount savings, we haven't yet even considered the indirect savings from eliminating those positions. That could be between 3% to 6% more savings, and those relate to licenses, traveling expenses, and so on and so forth. We count on around $100 million of the rest of Project Cutting Edge, because it's fully loaded in H2. I think that that's where the potential upside comes from, really.
Jaime Muguero: And then we count on around $100 million of the rest of cutting-edge because it's fully loaded in the second semester.
Um, if if the FX stays around, 8.75 pesos to the dollar that's going to add, you know, at least 40 million dollars in the second semester and then we have our budget, Cutting Edge savings, and we're counting on the 85 million dollars. Um, uh, headcount or head reduction savings, that I'll be firming up in future cause as we complete the, um, um, the the labor consultation process in Europe but beyond 85 million dollars of hitcon savings. We haven't yet even considered the indirect savings from from eliminating those, uh, positions that could be between 3 to 6% more savings on those related to licenses traveling expenses, so on and so forth. And and then we count on on around.
Jaime Muguero: So I think that that's where the potential upside It comes from really Thank you.
Paul Rodgers: A hundred million dollars of the rest of Cutting Edge because he's fully loaded in in the second in the second semester. So I I I think that that's where the potential upside, um, comes from, really
Lucy Rodriguez: Thank you, Juan.
Lucy Rodriguez: Back to you, Lucy.
Lucy Rodriguez: Thanks. The next question comes from Francisco Suárez from Scotiabank. Paco?
Lucy Rodriguez: Thank you, Lucy.
Paco Suarez: The next question comes from Paco Suarez from Scotiabank. Paco? And congrats for this wonderful transformation of changes at CEMEX and for the execution so far. My question relates with the overall conditions in the United States. If you see prices of aggregates in general in the United States are doing far better than those in cement. Do you think that such overperformance on prices in aggregates combined with many players interested in acquiring these type of assets may undermine your plans to acquire operations in at accretive values? And perhaps you can link the answer to precisely what you have said about how this new model on capital allocation works.
Paul Rodgers: Thanks.
Speaker Change: The next question comes from Paco, Suarez from Scotia Bank, Paco.
Francisco Suárez: Congrats for this wonderful transformational changes at Cemex and for the execution so far. My question relates with the overall conditions in the United States. If you see prices of aggregates in general in the United States are doing far better than those in cement. Do you think that such overperformance on prices in aggregates, combined with many players interested in acquiring these type of assets, may undermine your plans to acquire operations at accretive values? Perhaps you can link the answer to precisely what you have said about how this new model on capital allocation works.
Paco Suarez: And congrats for this wonderful transformation of changes and and and for the execution so far. Uh my question relates with the um overall conditions in in the United States. Um, if you see prices of Aggregates in the in in in general, in the United States are doing far better than those in cement. Do you think that such of a performance on prices? In Aggregates combined, with many players interested in acquiring, this type of assets May undermine your plans to acquire operations in at a creative values and perhaps you can link the answer to precisely what you have said about the the how this new model on Capital allocation works.
Jaime Muguero: Francisco, thank you very much for the for the question. You have a good point. That many companies are are interested in investing in the aggregated space in the The first thing I want to tell you is that we have a great aggregates team in the U.S. in and they know our business very well. The second thing is that because we purchase aggregates in some markets in our ReadyMix operations, when we do not consume our own, we do have an extensive network of family-owned aggregate players with whom we have had years and years of relationship. and we're nurturing them.
Jaime Muguiro: Francisco, thank you very much for the question. You have a good point, that many companies are interested in investing in the aggregate space in the US. The first thing I want to tell you is that we have a great aggregates team in the US, and they know our business very well. The second thing is that because we purchase aggregates in some markets in our ready-mix operations, when we do not consume our own, we do have an extensive network of family-owned aggregate players with whom we have had years and years of relationships. We're nurturing them. Those should potentially, if we do the right things, give us at least a bit of an advantage in certain markets. You're right, competition is gonna be tough.
Hey Scott. Thank you very much for the for the question. You have a good point.
Paco Suarez: That many companies are are interested in investing in the aggregated, space in the US.
Paco Suarez: Um, the first thing I want to tell you is that we have a great aggregate team in the US.
Um, and they know are that the business very well.
Paco Suarez: the second thing is,
Paco Suarez: That because we purchase Aggregates in some markets, in our already, mixed operations.
Paco Suarez: When we do not consume our own, we do have an extensive network of family owned.
Jaime Muguero: And those should potentially, if we do the right things, give us at least a bit of an advantage in certain markets. But you're right, the competition is going to be tough and what I can commit to and that's new companies commitment on capital allocation is that we will not do any accusation that does not deliver on the targeted metrics. And this means obviously NPV must be above zero. We want it from a free cash flow per share to be accretive in year one. We want ROIC above WAC plus 100 basic points. We will do only acquisitions with synergies of around 3% of sales.
Advantage in certain markets.
Paco Suarez: Uh, but you're right.
Jaime Muguiro: What I can commit to, and that's the new company's commitment on capital allocation, is that we will not do any acquisition that does not deliver on the targeted metrics. This means, obviously, NPV must be above 0. We want from a free cash flow per share to be accretive in year 1. We want ROIC above WACC plus 100 basis points. We will do only acquisitions with synergies of around 3% of sales. We want to do acquisitions that, by those synergies, will reduce multiples to high single digits. As you can imagine, Francisco Suárez, we are anchoring to preserve our investment credit rating status. Definitely, if looking at shareholder returns, the ROIC from these investments are worse than otherwise paying down principal of the debt or returning cash to shareholders, we will do the latter. It's gonna be competitive.
Paco Suarez: The competition is going to be tough and what I can commit to and that's the the the new companies commitment on Capital allocation is that we will not do any accusation, that does not deliver on the targeted metrics. And this means obviously npv must be above zero with 1 um from a free cash flow per share to be accredited in year 1. We want Roi above what plus 100 basis points,
Jaime Muguero: We want to do acquisitions that by those synergies will reduce multiples to high single digits. And as you can imagine, Francisco, we are anchoring to preserve our investment credit rating status. And definitely, if looking at shareholder returns, the rolling from these investments are worse than otherwise paying down principal of the debt or returning cash to shareholders, we will do the So it's going to be competitive. We're ready, but we're also going to be very responsible. And this will be small to medium-sized accusations.
We will do only accusations with synergies of around, 3% of sales. We want to do accusations with that, by those synergies will reduce multiples to high single digits. And as you can imagine Francisco, we are anchoring to preserve our investment credit rating status. And definitely if looking at shareholder Returns the, the roic from these Investments do do are worse than um otherwise paying down principal of the debt of returning cash to shareholders. We will do the latter.
Jaime Muguiro: We're ready, but we're also gonna be very responsible, and this will be small to medium-sized acquisitions. A final thought, the reason also why we're looking at mortars, stuccos, renders is because we see great synergies with what we do today. We will open a little bit the breadth of accretive investment opportunities in the US on a space that we know pretty well and where we are well-positioned to take advantage of a fragmented industry. I hope that I have answered your question, Francisco Suárez.
Jaime Muguero: And a final thought. The reason also why we're looking at mortgages, stookers, renders is because we see great synergies with our what we do today. And we will spend a little bit the breadth of investment, a creative investment opportunities in the US on on a space that we know pretty well, and where we are well positioned to take advantage of a fragmented industry. So I hope that I have answered your question, Francisco.
Paco Suarez: So, it's going to be competitive, we're ready. But we're also going to be very responsible, and this will be small, 2 million to medium sized accusations and a final thought.
Francisco Suárez: Sure, David, it was fantastic. Thank you so much.
Jaime Muguero: Thank you Dave, it was a fantastic thing. Thank you, Paco.
The reason also, why we're looking at marketers stoers renders is because we see great synergies with our what we do today and we will been a little bit the breadth of invest accredited investment opportunities. Um, in the US on, on a space, that we know pretty well and where we are, well positioned to take advantage of a fragmented industry. So I hope that I have answered your question, Francisco.
Speaker Change: Today, it was fantastic. Thank you for
Lucy Rodriguez: Thank you, Paco. The next question comes from José Itzamna Espitia, from BBVA. Jose?
Jose Aspicia: The next question comes from Jose Aspicia from BBVA. Jose? Good morning, everyone. Can you hear me? Yes. Yes, Jose, I can hear you. Thank you. Thank you for the call.
Paco Suarez: thank you, Paco.
Speaker Change: The next question comes from Hosea, from BBVA Jose.
José Itzamna Espitia: Good morning, everyone. Can you hear me?
Lucy Rodriguez: Yes.
Good morning, everyone. Can you hear me?
Jaime Muguiro: Yes, José, I can hear you.
José Itzamna Espitia: Thank you. Thanks for the call. My question is, considering the update in volume expectations, if you can elaborate on the demand outlook in Mexico and the US for the H2 of the year, given the uncertainty scenario and challenging economic context.
Speaker Change: Yes, yes, yes. I can hear you.
Jose Aspicia: So my question is, considering the upgrade in volume expectations, if you can elaborate on the demand outlook in Mexico and the U.S. for the second half of the year, given the uncertainty scenario and challenging economic context, Yes, Jose. Regarding Mexico. What, what I'm counting on is a small sequential volume improvement from the first half of this year into the second half of around 2%. if the how we see the market is that in the second half of 25 it implies a minus 2% in cement. Okay, and please remember that last year in the second semester of 2024, I believe that the demand already dropped by 7%.
Speaker Change: Thank you. Thank you for calling. So my question is um, considering the update in volume expectations if you can elaborate on the the man Outlook in Mexico and the US for the second half of the year.
Uh, given the uncertainty is narian challenging economic context.
Jaime Muguiro: Yes, Jose. Regarding Mexico, what I'm counting on is a small sequential volume improvement from the H1 of this year into the H2 of around 2%. How we see the market is that in the H2 of 2025, it implies a -2% in cement. Okay. Please remember that last year, in the H2 of 2024, I believe that the demand already dropped by 7%. Right. The baseline from which we start last year it was much worse than the H1 of 2024, where there was a significant growth. Also, if I think about average daily sales, I'm only expecting a very minor increase quarter over quarter. I feel pretty confident on this implied sequential growth for Mexico. We're talking to customers. They're telling us that they do see the government moving ahead with their social housing program.
Speaker Change: Yes, Jose regarding Mexico.
Speaker Change: What what I'm counting on is a small sequential volume improvement from the first half of this year into the second half of around 2%.
Speaker Change: The how we see the market is that in the second half of 25, it implies a minus 2% in cement.
Jaime Muguero: right so the baseline from which we start last year is it was much worse than the first semester of 2024 where there was a significant a significant growth also if I think about average daily sales I'm only, I'm only. expecting a very minor increase. quarter over quarter. So I feel pretty confident on this implied sequential growth for Mexico. We do, we're talking to customers, they're telling us that they do see the government moving ahead with their social housing program. So we do expect to see some of these projects breaking ground in the last part of this second half of the year on some infrastructure spending on railroads.
Speaker Change: Okay. And please remember that last year, in the second semester of 2024, I believe that the demand already dropped by 7%.
Right. So the baseline from which we start last year is is is it was much worse than the first semester of 2024 where there was a significant, a significant growth
Speaker Change: also, um, if I think about average daily sales,
Speaker Change: I'm only, I'm only expecting a very minor increase quarter over quarter.
Jaime Muguiro: We do expect to see some of these projects breaking ground in the last part of this H2 of the year, and some infrastructure spending on railroads. That's how we see it. Nevertheless, if we assume no sequential average daily sales improvement, meaning flat to Q2 2025 for the H2, that will lead to a 4% year-on-year decline in the H2 and a full-year decline of 9%. Regarding the US, look, this H1 has been very rainy. Now we're entering into the hurricane season. Last year, hurricane season was very difficult. At least in July, we haven't had the hurricanes that we had last year. 1 month behind us, and that's helping indeed our volumes. Depending on weather, it's an externality, and I'm sorry about that, but we have, in the H2, an implied +1% in cement.
Speaker Change: So I I feel pretty confident on on on this implied. Sequential growth for Mexico, we do, we're talking to customers, they're telling us that they do see the government moving ahead with their social housing program. So we do expect to see some of these projects breaking ground um in in in the last part of the of this second half of the year.
Jaime Muguero: And so that's how, that's how we see it, but never, nevertheless, if we assume no sequential average daily sales improvement. Meaning flat to second quarter 25 for the second semester that will lead to a 4% year on year declining the second half on a full year decline of 9%.
Um, on on some infrastructure spending on on railroads.
Speaker Change: And so, that's how.
Speaker Change: That's how we see it, but never nevertheless, if we assume no sequential, our daily sales Improvement.
Jaime Muguero: Regarding the U.S. Look, this first semester has been very rainy. Now we're entering into the hurricane season. Last year's hurricane season was very difficult. At least in July, we haven't had the hurricanes that we had last year. So one more month, you know, one month behind us. And that's helping indeed our volume. depending on weather, so it's an externality and I'm sorry about that, but we have in the second semester an implied plus one percent in cement and that is because we continue to see infrastructure unfolding and data centers. We're going to be more busy in Arizona doing some second phase semiconductor facility.
Speaker Change: 9%.
Speaker Change: Uh, regarding the US.
Speaker Change: Um,
Speaker Change: look, this first semester is being very rightly. Uh, now we're entering into the hurricane season last year hurricane, season was very difficult. Um, at least in July we haven't had the Hurricanes that we had last year, so 1 more, you know, 1 month behind us. Um, and that's helping indeed our, our volume, um, depending on whether so it's an externality and I sorry about that, but, um, we have in the second semester an implied plus 1% in
Jaime Muguiro: That is because we continue to see infrastructure unfolding and data centers. We're going to be more busy in Arizona, doing some semiconductor, second-phase semiconductor facility. We're busy in Cape Canaveral, and we see more data center projects unfolding. It's going to be very much dependent on weather. I'm sorry about that. That's what we have right now. That's our expectation. Finally, again, if we assume same average daily sales as in Q2 2025 for the H2, that leads to a 1% year-on-year increase in the H2 and a full-year decline of 2%. I hope that my answer has been helpful, José.
Jaime Muguero: We're busy in Cape Canaveral and we see more data center projects unfolding. It's going to be very much dependent on weather. I'm sorry about that, but that's what we have right now. That's our expectation. And finally, again, if we assume the same average daily sales as in the second quarter, 25 for the second semester, that leads to a one percent year-on-year increase in the second half and a full year decline of two percent. So I hope that my answer has been helpful. Yes, thank you so much.
Speaker Change: In in cement. Um, and that is because we continue to see infrastructure unfolding and data centers. Um, we're going to be more up, um, busy or in Arizona doing some semiconductor second phase semiconductor facility where busy in Cape Canaveral. Um, uh, and we see more data center projects unfolding. It is going to be very much dependent on whether I'm sorry about that. But that's that's what we have right now, that's our expectation. And finally again if we assume same average daily says, as in the second quarter, 25 for the second semester that leads to a 1% year-on-year increase in
Speaker Change: The second half and a full year decline of 2%. So I hope that my answer is being helpful. Jose
José Itzamna Espitia: Yeah. Thank you so much.
Jaime Muguero: I would say if I could just compliment with one additional point, and that is that in the case of Mexico, there are also five more working days in the second half than the first half, apart from the average daily sales analysis that we just gave you. So I think that that also was right. It is five days, I think. Yes, yes.
Speaker Change: Yeah, thank you so much.
Lucy Rodriguez: José, if I could just complement with one additional point, that is that in the case of Mexico, there are also five more working days in H2 than H1, apart from the average daily sales analysis that we just gave you. I think that that also is important.
Jaime Muguiro: You're right, Lucy. It is five days, I think.
Lucy Rodriguez: Um, Jose, if I could just compliment with 1 additional point and that is that in the case of Mexico, there are also 5 more working days in the second half than the first half apart from the average daily sales analysis that we just gave you. So I think that that also is all right, Lucy
Lucy Rodriguez: Yes. The next question comes from Daniel Sasson from Itaú. Daniel? Have we lost him?
Speaker Change: 85 days. I think, oh,
Danielle Sasson: So, the next question comes from Danielle Sasson from Itaou. Danielle. Have we lost him?
Yes, yes.
Speaker Change: so,
Speaker Change: um, the next question.
Speaker Change: Comes from Danielle Cason.
Speaker Change: From ayto.
Speaker Change: Have we lost him?
Danielle Sasson: Okay, I'm going to move on. Oh, yes. Yes. Hi, Danielle. Hey, can you hear me right? Yes. I can hear you now, Danielle. Okay. Yeah. Thank you. Thank you, guys.
Daniel Sasson: Hi, guys. Can you hear me?
Lucy Rodriguez: Okay, I'm gonna move on. Oh, yes. Hi, Daniel. Okay.
Daniel Sasson: Hey. Can you hear me right?
Speaker Change: Okay, I'm gonna move on. Oh, yes, yes. Hi Danielle okay.
Lucy Rodriguez: Yes.
Danielle: Hey hey can you hear me, right?
Jaime Muguiro: I can hear you now, Daniel.
Daniel Sasson: Okay. Yeah. Thank you. Thank you, guys. My question is just a follow-up question of the previous ones made. I just would like to understand, first is regarding the share buyback program. You mentioned that this could be an opportunity for 2026. I'd like to understand by how much are you guys thinking of how much you guys have as a base case? My second follow-up is regarding the divestments in non-core regions like SCAC that you mentioned before. If you just could provide a little bit more color in terms of what countries or what regions specifically in SCAC you guys believe could be under review. These are my two follow-up questions. Thank you, guys.
Danielle Sasson: So, my question is just a follow-up question of the previous ones made. So, I just would like to understand, first, this is regarding the share buyback program. You know, you mentioned that this could be an opportunity for 2026. So, I'd like to understand by how much are you guys thinking of how much you guys have as a base case.
Speaker Change: Yes, I can hear you now Danielle. Okay, thanks yeah. Thank you. Thank you guys.
Jaime Muguero: And my second follow-up is regarding the divestment in on-call regions like SCAC that you mentioned before. So, we just could provide a little bit more color in terms of what countries or what regions specifically in SCAC you guys believe could be under review. So, these are my two follow-up questions. Thank you, guys.
So my question is just a follow-up question of the the previous ones made so I just would like to understand. Uh first is is regarding the share buy back program. You know you mentioned that this could be an opportunity for 2026. So I'd like to understand by how much your guys thinking of how much you guys have as a base case. And my second, follow-up is regarding
Speaker Change: The the investments in on call Regions like stock that you mentioned before. So we just could provide a little bit more color in terms of what countries or what region specifically in stock you guys believe could be in the review. So these are my 2. Follow up questions. Thank you guys.
Jaime Muguero: Regarding your first question, Daniel, I'm not ready yet to tell you exactly what we're thinking in terms of amount. I just want to remind you that the general issue holders. and agreed and approved a up to a $500 million share buyback program. I'm not thinking about that amount for next year, but we will begin together with the dividend program. And I think it is a bit too early to share that with you.
Jaime Muguiro: Regarding your first question, Daniel, I'm not ready yet to tell you exactly what we're thinking in terms of amount. I just want to remind you that the general shareholders agreed and approved up to a $500 million share buyback program. I'm not thinking about that amount for next year, but we will begin together with the dividend program. I think it is a bit too early to share that with you. Maybe that's something that I'll be ready to do early next year in the Q4 call. Do expect progressive, both dividends and share buybacks, as we rebalance our capital allocation to look more of much less will go to debt principal repayment, but we will continue with some.
Speaker Change: Regarding your first question Danielle. I'm not ready yet to tell you exactly. Um, what we're thinking in terms of amount. I just want to remind you that
Speaker Change: The you share holders.
Speaker Change: Agree and approved a up to a hundred million dollar share buyback program.
Jaime Muguero: Maybe that's something that I'll be ready to do early next year in the fourth quarter call. But do expect a progressive both dividends and share buybacks as we rebalance our capital allocation to look more of Much less will go to debt principal repayment, but we will continue with some. And then much less strategic APEX, more accretive when it comes available M&A in the space highlighted in the U.S. mainly, and the rest is dividends not shared by VAT. That's our our plan.
I'm not thinking about that amount for next year but we will begin together with the dividend program and I think it is a bit too early to to share that with you. Maybe that's something that I'll be ready to do early next year in the fourth quarter call.
Speaker Change: um, but do expect, you know, a progressive both dividends and shared by Banks, as we rebalanced our Capital allocation um to be to look more of
Speaker Change: a much less will go to debt, principal repayment, but we will continue with some
Jaime Muguiro: Much less strategic CapEx, more accretive when it comes available, M&A in the space highlighted in the US mainly, and the rest is dividends and share buybacks. That's our plan. Regarding your second question, it's about divestments in SCAC. Look, I feel more comfortable not providing you with the specifics because of obvious reasons. Do expect that my expectation is that we will be executing further divestments between October 2024 and late 2025. We will retain some operations that do present significant free cash flow conversion levels for the time being. I will elaborate more about that as we progress on current negotiations. I hope you understand, but I cannot provide you with the specific names right now.
Speaker Change: Um and then much less strategic capex. More accretive when it comes available m&a in the space highlighted in the US. Mainly and the rest is dividends and shared by Banks.
Jaime Muguero: in what regarding your second question could you oh yes it's about divestment in ISCAC look I I feel more comfortable not providing you with this specific in because of obvious reasons. But I do expect that we will be, my expectation is that we will be executing further divestments in between October of this year and late next. And we will retain some operations that do present significant forecast low conversion levels for the time being. I will elaborate more about that as we progress on current negotiations.
Speaker Change: That's our, our plan.
Speaker Change: Um, what regarding your second question, could you? Oh yes. It's about divestments in ESAT. Look, I I I I feel more comfortable not providing you with this specifics.
Speaker Change: but but do expect that we won't be my expectation is that we will be executing um, further Investments between October, um, of this year and late next year,
Jaime Muguero: I hope you understand, but I cannot provide you with the specific names right now. Thank you. Thank you so much. Thanks.
Speaker Change: And we will retain some operations that do present significant free, cash flow conversion levels for the time being I will elaborate more about that as as we progress on carbon negotiations. I hope you understand but I cannot provide you with a specific names right now.
Daniel Sasson: Thank you.
Jaime Muguiro: Back to you, Lucy.
Daniel Sasson: Thank you so much, guys, for that.
Anne Milne: Bye. Okay, we have time for one last question and it is coming from Anne Milne from Bank of America. Yes, good morning, or actually, good afternoon. Hi May, Maher, Lucy. I think this question maybe is for Maher. I just wanted to ask you about your current thinking about the path to reach your previously stated goal of 1.5 times net leverage. In the past, it seemed like it would or could be through primarily increases in EBITDA, not necessarily reductions in debt. But could you please give us an update on what you're thinking about timing of this?
Speaker Change: Okay, but do you lose? All right, thank you so much, guys for that.
Lucy Rodriguez: Okay. We have time for one last question. It is coming from Anne Milne from Bank of America. Anne?
Okay, we have time for 1 last question and it is
Anne Milne: Yes. Good morning, or actually good afternoon. Jaime, Maher, Lucy. I think this question maybe is for Maher. I just wanted to ask you about your current thinking about the path to reach your previously stated goal of 1.5x net leverage. In the past, it seemed like it would or could be through primarily increases in EBITDA, not necessarily reductions in debt. Could you please give us an update on what you're thinking about timing of this, what additional levers you might use if necessary to reach this target? We know you have the maturity, or I should say the call date on one of your perm's next year that could help on that. Any other thoughts would be much appreciated.
Milne: from an Milne from Bank of America, and
Maher Al-Hafar: What additional leverage you might use if necessary to reach this target? We know you have the maturity, or I should say the call date on one of your perms next year. That could help on that. But any other thoughts would be much appreciated.
Milne: Uh, yes, good morning or actually good afternoon. Um hi Maher, Lucy. Um, I think this question maybe is for Maher. Um, I just wanted to ask you about your current thinking about the path to reach your previously, stated goal of 1.5 times net leverage, uh, in the past. It seemed like it would would, or could be through primarily increases in, not necessarily, uh, reductions in debt. But could you please give us an update on what you're thinking about timing of this? What additional levers, you might use if necessary to reach this target, we know you have a the, um,
Milne: Maturity. Or I should say the call date on 1 of your perks next year, that could help on that but any other thoughts would be much appreciated.
Maher Al-Hafar: Sure. Yeah, I mean, I would like just to, you know, reiterate that EBITDA growth is probably the most important leverage that we have, especially after all of the comments that Jaime made. I mean, between operational excellence to, you know, project cutting edge, which, you know, you've heard we've upped the number to $400 million. Incremental EBITDA from some of our growth investments definitely will be contributing materially to EBITDA in the next 12 to 24 months. The hyper focus on free cash flow conversion and then, you know, being able to potentially allocate that based on the criteria that Jaime outlined, I think, you know, we, and this is excluding any, you know, potential improvements from organic growth, just from the natural dynamics of the portfolio.
Maher Al-Haffar: Sure. I would like just to reiterate that EBITDA growth is probably the most important leverage that we have, especially after all of the comments that Jaime made. Between operational excellence to Project Cutting Edge, which you've heard we've upped the number to $400 million. Incremental EBITDA from some of our growth investments definitely will be contributing materially to EBITDA in the next 12 to 24 months. The hyper-focus on free cash flow conversion, and then being able to potentially allocate that based on the criteria that Jaime outlined. This is excluding any potential improvements from organic growth just from the natural dynamics of the portfolio. I think that EBITDA and free cash flow are the two very important levers to continue to deliver de-leveraging in the form of lower leverage ratio.
Maher Al-Hafar: I think that EBITDA and free cash flow are the two very important, you know, levers to continue to deliver deleveraging in the form of more leverage ratio. And I do expect that we should get that, you know, half a turn somewhere in the next 12 to 24 months. I mean, between a combination of reducing the stock of debt and very important improvement in EBITDA that is under our control, that is not dependent on market driven, you know, levers, I think gives me the comfort that we should be able to achieve that target within the next 12 to 24 months.
Milne: Sure. Yeah. I mean, I would like just to, you know, reiterate that, um, ibida growth is probably, um, the most important leverage that we have specially after all of the comments that, uh, haime made. I mean, between operational excellence. Uh, to, you know, uh, project Cutting Edge, which um, you know, you've heard we've upped the number to 400 million dollars, um, incremental IBA Dev from some of our growth Investments. Um, definitely will be, uh, contributing materially to ibida in the next, uh, 12 to 24 months, um, the hyper focus on free cash flow conversion. Um and then you know, being able to potentially allocate that um, based on the the criteria that Hime outline, I, I think uh, you know, we and this is, this is excluding any, um, you know, potential improvements from, you know, organic growth just from the the um, just natural dynamics of the port.
Maher Al-Haffar: I do expect that we should get that half a turn somewhere in the next 12 to 24 months. Between a combination of reducing the stock of debt and very important improvement in EBITDA that is under our control, that is not dependent on market-driven levers, I think gives me the comfort that we should be able to achieve that target within the next 12 to 24 months.
Milne: Portfolio. I think that ibida and and free cash flow are the 2 very important. Uh, you know, levers uh to continue to deliver uh, the leveraging in the form of lower leverage ratio. And I do expect that we should get that, you know, half a turn somewhere in the next, uh, 12 to 24 months. I mean, uh, between a combination
Maher Al-Hafar: Thank you. Thanks, Dan. Thank you.
Milne: Kind of producing the stock of debt and very important Improvement in eBid, that that is under our control, that is not dependent on Market driven, um, you know, levers. I, I think gives me the Comfort, uh, that we should be able to achieve that Target within the next 12 to 24 months.
Anne Milne: Thank you.
Milne: Thank you.
Lucy Rodriguez: Thanks, Anne.
Maher Al-Haffar: Thank you, Anne.
Lucy Rodriguez: So I think that's a wrap. We appreciate you joining us today for our second quarter result, and we hope that you will come back again for our third quarter 2025 webcast on October 28th. If you do have any additional questions, please feel free to reach out to the investor relations team. Many thanks. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.
Lucy Rodriguez: I think that's a wrap. We appreciate you joining us today for our Q2 results, and we hope that you will come back again for our Q3 2025 webcast on 28 October. If you do have any additional questions, please feel free to reach out to the Investor Relations team. Many thanks.
Thanks an, thank you.
So I think that's a wrap. Um, we appreciate you joining us today for our second quarter results and we hope that you will come back again for our third quarter 2025 webcast on October 28th. If you do have any additional questions, please feel free to reach out to the investor relations team. Many thanks.
Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
Milne: Thank you for your participation in today's.
Operator: Good day.
Milne: You may now disconnect good day.