Cemex Sab De Ord

Good morning. Welcome to the CEMEX third quarter 2024 conference call and webcast. My name is Charlie and I'll be the operator for today. At this time, all participants are in 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. 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 fourth quarter 2024 conference call and webcast. We hope this call finds you well. I am joined today by Fernando Gonzalez, our CEO, and Maher Al-Haffar, our CFO. As always, we will spend a few minutes reviewing the business and outlook for 2025, and then we will be happy to take your questions. As you know, in connection with the announced asset sales in 2024, we closed the sale of our Guatemala and Philippines operations as well as the remaining minority stake in New York. Our Dominican Republic operations remained accounted for as discontinued operations as of the end of 2024. This divestment was closed last week on January 30th. Our reported results assume the sale of these operations for the full year and year-over-year like-to-like variations are for the current footprint. And now, I will hand it over to Fernando.

Thanks, Lucy, and good day to everyone. I'm very pleased with our achievements in 2024, which represents a pivotal year in the corporate transformation we envisioned in 2020. Setting the backdrop early in the year, we achieved our long-running goal of recovering our investment-grade rating. While we remain committed to additional credit improvements in the near term, this achievement provides a runway to more aggressively pursue our growth strategy and lay the foundation for a sustainable shareholder return program. Our leverage ratio stood at 1.81 times its lowest level since the outbreak of the global financial crisis. With the restoration of our financial health and several years of progress on our growth strategy, we took the first step on a shareholder return policy with announcement of a progressive dividend program in March 2024. We expect to expand this in the future years with opportunistic use of our 500 million share buyback program. Through the execution of $2.2 billion in announced divestitures in 2024, we significantly rebalance our portfolio towards developed markets with more consistent and attractive growth potential. Approximately 90% of our EBITDA is now generated in the US, Europe, and Mexico. Divestment proceeds will free up additional resources for future organic growth opportunities, and small to medium-sized acquisitions focus primarily on the US in urbanization solutions and aggregates. As we move towards introducing inorganic growth to the portfolio, we expect to gradually reduce our strategic apex spending. Net income for the year reached $939 million, a record level in recent history. On future inaction, we continue making progress on profitable decarbonization, reducing our scope 1 and scope 2 CO2 emissions by 15% and by about 17%, respectively, compared to 2020. In addition, as we look towards developing the new technology necessary to decarbonize beyond 2030, a CEMEX-led consumption was selected to receive 157 million euros of EU innovation funding for carbon capture at Rudelsdorf. which is expected to become CEMEX's first net zero plant. We are optimistic about the future. In the last three years, we have undergone a cyclical downturn in demand in several of our key markets, most notably in the US and Europe. While we have been able to more than upset this decline with pricing, cost efficiencies, and growth investments, This is an opportunity for the future as demand returns to these markets. We expect volumes to begin recovering in the U.S. and Europe this year, which will sustain demand growth over the medium term. While we are confident on the medium-term fundamentals in Mexico, we have limited visibility on 2025 outlook with a difficult comparable base, FX, headwinds, and new administrations setting into office in Mexico and the United States. In this environment, we are focusing on the variables we can control. While we have achieved a significant improvement in our consolidated profitability metrics, reaching higher operating efficiency levels, EBITDA margins, and free cash flow generation, there is more to be done. We are launching our project, Cutting Edge, which encompasses a three-year, 350 million cost program anticipated to deliver EBITDA savings of 150 million in 2025. Maher will elaborate on this initiative. After an exceptional year in 2023, we delivered strong results in 2024. In fact, last year, we posted the second strongest sales on EBITDA. We also achieved the highest free cash flow after maintenance capex in 2017, adjusting for the extraordinary payment of the Spanish tax fine. As you know, the guidance we provide at the beginning of each year is based on prevailing FX rates. Adjusting for significant FX volatility experienced during the year, we achieved our 2024 initial guidance of a low-to-mid single-digit EBITDA growth. In 2024, in a muted volume environment, we focused our attention on costs as well as optimizing production with increases in operating efficiency in key markets. As a result of these efforts, consolidated EBITDA was relatively stable in 2024 and grew by 3% in four quarters. Evita margin was also resilient and grew in fourth quarter, driven by positive price-cost dynamics in all regions. Free cash flow benefited from an impressive turnaround in working capital. Maher will provide additional details on our working capital efforts. Consolidated prices increased by 3% in cement and ready mix and by 2% in aggregates during 2024. reflecting higher price levels in most markets. While pricing gains have moderated compared to recent years, they more than upset cost inflation despite an adverse demand environment. Inflation in our products decelerated in 2024 to a low single-digit percentage. Going forward, our pricing strategy remains unchanged. aiming to more than recover cost inflation in our markets. In 2024, volumes were stable to lower in all regions. Importantly, volume decline has moderated sequentially in four quarters in virtually all regions. EMEA continued its second half recovery trend with high single digit growth in cement and aggregates in Europe, while Middle East and Africa reported double digit growth in ready mix and aggregates in fourth quarter. In the US, weather continued to impact volumes in fourth quarter, largely due to the devastation caused by Hurricane Milton in October in Florida. In 2024, Mexico posted relatively stable volumes as pre-election demand dynamics were offset by slower construction activity in the second half. During the year, we saw strong price-cost dynamics with pricing contribution to EBITDA more than compensating for decelerating input cost inflation. This positive effect was offset by lower volumes and adverse effects dynamics resulting in a roughly flat performance and stable margin. In four quarters, volume impact to consolidated EBITDA moderated as volumes stabilized. Growth investments continue supporting EBITDA performance. On the cost side, we benefited from a 13% decline in energy costs, mainly driven by lower fuel prices. During the quarter, this favorable energy environment continued driving higher EBITDA and margins. We expect both pricing dynamics and energy costs to remain a tailwind into 2025. However, we expect FX rates to be a headwind, mainly in our operations in Mexico and to a lesser extent in Europe, particularly in the first half of the year. Importantly, our FX hedging strategy mitigates the impact of a strong dollar and protects our leverage ratio. EBITDA in our urbanization solutions increased 4% in 2024, with margin expanding by 1.1 percentage points. Positive performance is mainly driven by growth in higher margin businesses, such as construction and demolition waste recycling, mortars, and admixtures. Since 2019, EBITDA in these three segments has grown at double digit rates. Our urbanization solutions portfolio addresses the changing landscape of the construction industry, focusing on sustainability and climate resiliency solutions. On future inaction, our successful decarbonization efforts in 2024 continue to rely on existing profitable technology as we look to abate before relaying in carbon capture technology. We have reduced our scope one and scope two CO2 emissions by 15% and by about 17% respectively compared to 2020, a reduction that historically would have taken us 16 years to achieve. Based on our progress, we are well on our way to reach our 2025 and 2030 SBTI verified CO2 emissions targets. In this decade to deliver, we continue innovating around carbon capture and other technologies to drive the carbonization beyond 2030. As I mentioned earlier, a CEMEX-led construction was selected to receive EU innovation funding for carbon capture at Rudershof, which is expected to become our first net zero plant. And more recently, Our Knoxville cement plant was awarded funding from the U.S. Department of Energy to develop a pioneering carbon capture removal and conversion test center. This awards a recognition of our commitment to advancing the carbonization solutions in our industry. Finally, we are very pleased with the adoption of our lower carbon family of products, Vertua, In 2024, we increased the adoption rate by seven percentage points of Vertua cement and ReadyMix. We have already surpassed our 2025 adoption target of 50%, with more than 63% of cement volumes and 55% of ReadyMix volumes having Vertua attributes. Over the last four years, Consolidated EBITDA has shown solid growth with a 9% annual growth rate driven not only by our organic performance, but also by our growth strategy. Close to 50% of our 3.1 billion growth investment pipeline has come online, contributing 344 million in EBITDA in 2024. These projects are delivering average IRRs of 35% or an EBITDA multiple of about four times. These projects offer important synergies with our existing portfolio and customers in our key markets. We expect this pipeline to contribute approximately $700 million in EBITDA by 2028, with close to 50% coming from investments in the US. As we continue developing the strategy and relaying more on small to medium-sized acquisitions, we expect overall return metrics to be somewhat tighter. And now, back to you, Lucy.