Cemex Sab De Ord

Good morning. Welcome to the CEMEX third quarter 2024 conference call and webcast. My name is Adam and I'll be your operator for today. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero and we will be happy to assist you. And now, I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning. Thank you for joining us today for our third quarter 2024 conference call and webcast. We hope this call finds you in good health. I am joined today by Fernando Gonzalez, our CEO, and Mahir Alhafar, our CFO. As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. I would like to remind you that during third quarter, we announced the sale of our Dominican Republic and Guatemala operations, as well as the remaining minority stake in Neoris. This is in addition to the anticipated sale of our Philippines operations, which we announced in April. All of these operations have been reclassified as discontinued operations and are now excluded from our 2024 and 2023 operating results. We are expecting to close these transactions by year end, except for Guatemala, which has already closed in September. And now, I will hand it over to Fernando.

Thanks, Lucy, and good day to everyone. I'm pleased with the significant progress we have made this year with our portfolio optimization efforts. We advanced materially on our goal of translining our portfolio towards developed markets with the announcement of $1.4 billion in asset sales in the quarter, bringing year-to-date announced divestitures of non-core assets to $2.2 billion. With the closing of these transactions, approximately 90% of our EBITDA will be generated in the US, Europe, and Mexico. The proceeds from the divestments are expected to be recycled into our growth strategy launched in 2019 and primarily focused on the US. Our growth strategy continues to pay off in the quarter by contributing 13% of EBITDA. And we are excited by the new accretive growth opportunities we are finding. During the quarter, we formed a joint venture in the U.S. to strengthen and expand our aggregate reserves in the Southeast. And additionally, we acquired a majority stake in a construction, demolition, and excavation business in Germany to produce recycled aggregates. Our quarterly results were significantly impacted by temporal factors such as extraordinary weather conditions in all of our regions, as well as transportation strike in SCAC. In the U.S. alone, we faced three major hurricanes in the quarter versus one the prior year. Additionally, results have a difficult comparison base where EBITDA last year grew more than 30% an EBITDA margin expanded by 3.5 percentage points. Our pricing strategy continue to show resiliency as prices for our products rose low single digits. Net income show exceptional strength, growing over 200% year-over-year. In climate action, we continue delivering against our future inaction roadmap, reducing our year-to-date scope one and two CO2 emissions by 3 and 4% respectively. And while we are working hard to decarbonize using existing technologies, we are also developing breakthrough decarbonization solutions, such as the Cemex-led consortium carbon capture project at our Rudethorpe cement plant in Germany. This is Cemex's largest CCUS project to date. And I'm happy to share that the EU Innovation Fund recently selected this project to receive in funding. During the quarter, Cemex, through the activities of Regenera, our global waste management business, was honored by the inclusion in Fortune's 2024 Change the World list. Fortune highlighted our Very Nile initiative cleaning the Nile River. This landmark project exemplifies how companies can collaborate with NGOs and society to change the world for the better. Our financial results were impacted by extraordinary weather events in all of our main markets, as well as a significant depreciation in the Mexican peso. We estimate a consolidated weather impact of approximately $33 million in EBITDA, a little less than half of the like-to-like EBITDA shortfall in the quarter. Hurricanes and precipitation impacted our U.S., Mexico, and SCAC businesses, while Europe was affected by significant flooding events in the east. Precash flow after maintenance capex declined primarily due to a one-off $306 million tax payment related to the 2023 Spanish tax penalty. Maher will elaborate more on this. Adjusting for this extraordinary tax payment, free cash flow after maintenance capex would have been slightly lower than the prior year. Consolidated volumes declined between low to mid single digits. The U.S. experienced three major hurricanes and significantly higher precipitation and flooding, impacting construction in several of our major markets. In Mexico, as we anticipated, we experienced a slowdown of construction activity post-elections, particularly in the informal residential and infrastructure segments. With the hurricane burial impact in Jamaica, a transportation strike in Colombia, and overall softness in cement consumption in Panama and Colombia, SCAC volumes declined in the quarter. In Europe, cement volumes increased after nine quarters of consecutive declines. Consolidated prices. rose low single digit while sequential prices were largely stable with minor price variations explained by product and geographic mix. Importantly, price gains more than covered variable costs, but were not sufficient to cover fixed costs due to the decline in volumes. With prices and the contribution from growth investments offsetting costs in the quarter, The decline in EBITDA was largely attributable to volumes. Weather impact accounted for a little less than half of the like-to-like EBITDA shortfall. While fixed cost increased due to higher maintenance and labor, we continue to experience energy tailwinds. Growth investments remain an important contributor, now accounting for 13% of total EBITDA. FX was a headwind to EBITDA primarily due to the devaluation of the Mexican peso. Our dynamic hedging strategy that we have followed since 2017 was designed specifically for these situations and worked as we expected, booking again below the EBITDA line, protecting our leverage ratio, and giving the company time to adjust to a new FX level. Maher will explain in more detail. Despite lower volumes, EBITDA margin for our urbanization solutions business rose 1.6 percentage points, reflecting our favorable pricing cost dynamics. Admixtures and mortars continue to contribute strongly to EBITDA with growth across all regions. Circularity, our fastest growing business, also saw important growth in the construction, demolition, and excavation materials business in the US and Europe. The flat EBITDA variation was due primarily to Mexico, where some of the large government-related pavement projects of the prior administration come to an end. During the quarter, we announced the acquisition of a majority stake in a recycling company in Berlin that processes 400,000 tons of construction, demolition, and excavation materials, which can be repurposed into aggregates for recycled concrete. Beyond its recycling capabilities, this facility operates the first plant to permanently store biogenic CO2 in recycled mineral waste in Germany. This investment will integrate with our regenerative business as we continue to scale the repurposing of construction, demolition, and excavation materials and advance our circularity focus. We remain optimistic about the outlook for this business and its contribution to our overall results. On climate action, through our reduce before capture strategy, we continue to make steady progress in decarbonization with a 3% decline in Scope 1 emissions year-to-date, driven by a 0.9 percentage point reduction in clinical factor. Since the launch of our Fisher in Action program in 2020, we have materially accelerated the pace of our decarbonization in a profitable way, reducing Scope 1 emissions by 15%, a reduction that previously would have taken us more than 15 years to achieve. And we continue to make strides in scope to emissions with a 15% reduction since 2020. Additionally, we are working hard to innovate around carbon capture and other technologies to drive decarbonization from 2030 and beyond. One of those projects is in Rudelsdorf, Germany, where we have CEMEX largest CCUS project to date. I'm pleased to announce that our CEMEX-led consumption was selected to receive 157 million euros of EU innovation funding for carbon capture at Rudersdorf. We will work with Linde, a leading global industrial gases and engineering company, to capture 1.3 million metric tons of CO2 per year. This is a milestone project which aims to convert Rudersdorf into the first net zero CO2 plant within the CEMEX system. We are very pleased with the rapid adoption of our lower carbon family of products, Vertua, which was introduced in 2018. Today, more than 60% of our total cement volumes have Vertua attributes, while ready mix has a rate of 55% acceptance. This is an improvement of 8 percentage points versus the prior year. To qualify as a vertical cement or concrete, the material must have a minimum 25% reduction in CO2 versus a traditional cement or concrete. On average, The Vertua cement and ready mix that we are selling today has a 45 to 49% reduction of CO2 compared to a traditional product, which is quite significant. From the renovation of the Grand Palais in Paris ahead of the Olympics, to the longest tunnel in Latin America, to a 28-acre mixed-use facility in San Francisco, CEMEX is participating in key projects across the world, supplying sustainable building materials and leading the way in decarbonizing the built environment. I recognize we are at an important moment in our capital allocation strategy with the expected closing of $2.2 billion in announced investments by the end of the year. I would like to take this opportunity to reaffirm what we have discussed a few months ago during our CEMEX Day event related to our capital allocation framework. You should expect that we will continue to execute a balanced approach where we will prioritize recycling divestiture proceeds into growth investments, while also focusing on deleveraging and accelerating shareholder returns. The growth strategy is focused on investing in developed markets and Mexico with particular focus on the US, which we are expecting over the medium term to contribute to 40% of consolidated EBITDA. With the divestment proceeds, we will continue to pursue both on margin enhancement investments aligned to what we have done over the last few years. but complement these efforts with small to midsize M&A transactions. At the product level, investments are focused on aggregates, urbanization solutions, and addressing specific needs in cement and decarbonization. We also expect to continue locating capital to reduce our net debt leverage ratio to one and a half times over the next two years. And as a third element of our framework, we will gradually build on the recent initiation of a progressive dividend program, an opportunistic share buyback program to return cash to shareholders. Our business has been growing nicely since 2020 with a care of 14% driven not only by organic growth, but also by our growth strategy adopted in 2019. With $1.1 billion invested in 239 projects, our completed projects had an average IRR of 35%. The portfolio contribution is accelerating with growth projects now accounting for $325 million in 2023, roughly 10% of total EBITDA. The completed projects consist of accretive bolt-on and margin enhancement investments, typically within our existing footprint. They offer important synergies with our existing portfolio and customers with significantly less acquisition risk. The growth strategy is proving to be a great complement to our organic growth. We expect that the contribution from our $3 billion pipeline of growth investments will continue to ramp up and contribute more than 700 million of EBITDA by 2028. Excluding cement legacy projects, half of the investments are expected to be allocated to the U.S. These are examples of some of the growth investments that we have executed over the last three years. Our initial portfolio consisting primarily of Bolton investments offer IRRs in the 35% area. Going forward, as we pursue small and medium-sized acquisitions, we expect overall return metrics to be somewhat tighter. And now back to you, Lucy.