Cemex Sab De Ord

Good morning. Welcome to the CIMEX second quarter 2026 conference call and webcast. My name is Jeanne 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 call over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning, and thank you for joining us for our second quarter 2026 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 by reviewing our second quarter results. Followed by our expectations for the full year and updated guidance. And then we will be happy to take your questions. As a reminder, we expect to close the announced sale of some of our operating assets in Columbia by the end of the year. Until such time, for accounting purposes, the transaction will be treated as a partial sale of an operation, and we will continue to fully consolidate these operations in our P&L. In addition, following our acquisition of Omega earlier in the year, we began consolidating the business as of April 1st. And now I will hand the call over to Jaime.

Thank you, Lucy, and good day to everyone. I am pleased to be here today to present strong second quarter results, reflecting significant progress in our ongoing transformation, as well as organic growth. In most markets. What stands out most is the clear evidence of that progress in our results with meaningful gains against our new KPIs and at a pace that is running ahead of our own expectations. I would like to recognize my colleagues who have embraced this transformation and remain open to the profound cultural change Our transformation is well underway and is already delivering on our goal of a structurally higher earnings quality as reflected in margins and free cash flow. We still have much work to do and continue to uncover new opportunities under Project Cutting Edge, which I will elaborate shortly. Consolidated EBITDA in the quarter exceeded $1 billion and included a favorable one-off settlement of an outstanding claim in Europe of $42 million. As our efficiencies compound, the benefits become increasingly evident across the P&L and cash flow, pointing to a significant improvement in our earnings quality. Adjusting for the one-off, sales grew 11%, while EBITDA expanded 19%, almost twice as fast. And EBIT, a key metric of our transformation, grew 29%, almost three times the pace of sales growth. Again, adjusting for the one-off, consolidated EBITDA margin expanded 1.4 percentage points. to 21.4%, while EBIT margin rose almost two percentage points. Free cash flow is also benefiting from these higher quality earnings stream. Our free cash flow from operations reached a second quarter record of $651 million, up more than $400 million year on year after adjusting for severance and discontinued operations. This lifted our trailing 12-month free cash flow from operations conversion rate to 60%, also on an adjusted basis. Turning to our decarbonization pathway, we continue to advance, profitably reducing growth CO2 emissions by 1% year to date, supported by a lower clinker factor. And with that, let me discuss our results in more detail. EBITDA grew 18% on a like-to-like basis, driven by project cutting-edge efficiencies during the quarter of $60 million in organic growth in most regions. Performance was broad-based, with three of our four regions contributing double-digit EBITDA and EBIT growth and boasting Margin expansion in excess of two and three percentage points respectively. For the second quarter in a row, Mexico led regional results with continued volume recovery, efficiency gains, and an easy prior year comparison. In the U.S., disruptions in our operations related to bad weather in Texas, together with rising materials and freight costs, In the end, despite softer demand in Europe, the region continued to benefit from pricing and project cutting edge savings. South, Central America, and the Caribbean rounded out the picture with significant margin related to cost efficiencies. As a result of project cutting edge, Free cash flow from operations tripled year over year, lifting our toiling 12-month conversion rate to 60% on an adjusted basis. At the consolidated level, volumes were broadly stable, with performance in Mexico largely offsetting lower volumes in EMEA. In Mexico, the recovery continued to build. Posting the second consecutive quarter of year-on-year cement volume growth. In the U.S., despite unseasonable weather in some key markets that brought operational disruptions, volumes remained resilient across all products. In Europe, country volume performance was mixed, calling into question the recovery we were expecting in certain markets. Volumes were further impacted by the severe heat wave through much of Europe, which resulted in restrictions on work at construction sites in many markets. Within South Central America and the Caribbean, both Colombia and Jamaica saw higher cement volumes, which offset performance in other markets. Building on the low to meet single-digit sequential price increases secured in first quarter, consolidated prices for our three core products advanced an additional 1% in second quarter. In both EMEA and Mexico, year-to-date pricing gains continue to offset increasing inflationary costs, and in the case of Europe, rising carbon costs for the industry. In the U.S., our cement prices rose sequentially, led by increases in the Mid-South, while ready-mix prices climbed 2%, reflecting fuel surcharges. With limited visibility of a clear end to the Iran war, we remain vigilant on closely monitoring and offsetting, over time, any persistent input cost inflation through our pricing strategy. For the second consecutive quarter, EBITDA growth was supported by positive contributions across all levers. Incremental savings under project cutting edge accounted for approximately 40% of our like-to-like EBITDA growth. These self-help measures, factors that are under our control, are serving as an important cushion against microeconomic volatility and delayed cyclical recovery in several of our markets. Pricing was another important contributor, while organic growth in our core products as well as our urbanization solutions portfolio also supported EBITDA. Finally, we continued to benefit from a more favorable FX environment, which resulted in a $50 million tailwind in the quarter. Prior year FX comparables will become more challenging as we move into the second half. EBITDA margin expanded by 2.1 percentage points, reflecting structural efficiencies, rising discipline, and benefit from operating leverage as volumes recover in Mexico. I am pleased with the progress we have achieved on our $400 million cost savings program with 80% of the initial target already achieved. In the first half, cost savings under the program have supported a 1.6 percentage points improvement in our consolidated operating expenses as a percentage of sales with all regions contributing. Cost of sales as a percentage of sales also declined approximately 1.4 percentage points. Following up on the commitment I made in our last earnings call, we are confident today in raising our overall savings target under project cutting edge from $400 million to $475 million. We expect most of the new savings to be realized in 2027. In terms of composition, a small portion relates to further overhead optimization. while the majority comes from procurement as we fundamentally transform how we approach third-party spend across our business. Subject to potential slippage resulting from possible cost headwinds from the Iran war that may impact some previously identified savings, I strongly believe that we will continue to find new savings initiatives going forward. It has been one year since I laid out our transformation plan, and I would like to give you an update on where we stand. Project Cutting Edge is a multi-year transformation effort designed to reduce overhead, achieve operational excellence, improve earnings quality, and enhance asset efficiency in line with best-in-class performance in our industry. In the first year, we moved quickly to eliminate overhead and improve operational efficiency through our cost savings program. These efforts helped jumpstart our results while we laid the groundwork for more time consuming transformation initiatives. We also introduced a new capital allocation framework designed to keep shareholders at the center of our decision making while revamping our growth strategy. As we move into 2027, other initiatives under Project Cutting Edge should support progress towards our transformation goals. Our asset pruning exercise designed to improve the quality of our earnings should begin to pay off in material ways. Additionally, some of our recent bolt-on acquisitions should also support this goal. In the quarter, We continue to move forward on our asset pruning exercise by disposing of an additional 12 facilities. Efforts to reduce certain elements of our free cash flow spend should also take hold as we move to lower growth capex and intangible investments while aligning our maintenance spending to best-in-class performance. We estimate a potential opportunity space of $300 million in free cash flow. We also are actively pursuing additional savings afforded by the introduction of AI into our operations. And we believe these efforts will be an important lever for growth in 2028 and beyond. We see particular benefits in plant management, energy efficiency, and the way we work. Our Balcones plant in Texas has been the pilot for the use of AI in our operations. and we're making important advances. Our success there will then be scaled globally. Since we launched Project Cutting Edge last year, I have been impressed by the engagement and creativity our teams continue to demonstrate in identifying new opportunities to improve efficiency and performance. And with that, back to you, Lucy.