Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong demand in the oil and gas sector, with a $15 per ton price increase implemented for oil well clients.
- Favorable fuel and power costs in Mexico enabled solid second quarter margins.
- Continued cost efficiency measures and commercial strategy led to strong bottom line results for the first half of the year.
- EBITDA margin for the quarter increased by 70 basis points compared to the prior year's quarter to 37.1%.
- Net financial income significantly increased to $15.2 million from $4.5 million in the second quarter of 2023.
Negative Points
- Consolidated sales for the second quarter decreased by 1% year-over-year due to decreased volumes.
- Revenue from US operations remained flat despite a significant decrease in cement and concrete volumes.
- Mexico sales decreased by 2.8% year-over-year, with cement and concrete volumes dropping by 7.1% and 12.4%, respectively.
- Increased maintenance expenses and SG&A as a percentage of sales rose by 70 basis points year-over-year.
- The mining segment in Mexico continues to contract, with no improvement expected in the second half of the year.
Q & A Highlights
Highlights from GCC SAB de CV (GCWOF, Financial) Q2 2024 Earnings Call
Q: Can you clarify the guidance for cement volumes in Mexico and the expected maintenance CapEx for the second half of the year?
A: We are adjusting our guidance for the second half of the year, expecting cement volumes in the US to be flat or slightly decreased, and similarly for Mexico. Maintenance CapEx is projected to be around $70 million for the year, with no changes anticipated.
Q: What factors contributed to the strong EBITDA performance in Mexico, and do you expect this to be sustainable?
A: The strong performance in Mexico was driven by favorable fuel and power costs. We expect these cost advantages to persist, and if volumes increase, we anticipate further improvements in EBITDA per tonne.
Q: Can you provide more details on the volume drop in the US and how much of it was weather-related?
A: While we cannot specify the exact impact of weather-related delays at this moment, part of the volume drop is due to economic factors such as high interest rates and mortgage segment expectations. We will provide more specifics later.
Q: Are there any planned price increases for construction cement in the US and Mexico in the second half of the year?
A: No, we do not plan any price increases for construction cement in the second half of the year. We are maintaining current price levels while continuously working with customers to manage inflationary pressures.
Q: What is the magnitude of potential M&A targets you are considering?
A: We are focusing on bolt-on acquisitions within our existing network for immediate synergies. For larger acquisitions, we are looking at opportunities that could start new networks, including potential targets in the cement and aggregates space.
Q: How resilient do you expect cement prices to be given the current market conditions?
A: We expect cement prices to remain stable even with lower volumes. The industry consolidation and our proactive commercial strategies help maintain pricing levels despite market fluctuations.
Q: What is the outlook for the mining segment in Mexico, and how does it affect cement demand?
A: We do not expect improvement in the mining segment in the second half of the year. The segment will continue to decline due to depleted reserves, with no significant new projects expected until late 2025.
Q: Can you elaborate on your capital allocation strategy, particularly regarding shareholder returns?
A: Our primary focus is on growth projects, including the Odessa plant expansion and sustainability initiatives. We also prioritize M&A opportunities and have a consistent dividend policy, with a small buyback program to optimize capital allocation.
Q: How confident are you in the visibility for the second half of the year, and do you have the ability to hedge low gas prices for 2025?
A: We are seeing improvements in July compared to June and expect volumes to be flat for the year. We actively hedge gas prices to manage costs effectively, leveraging market opportunities to secure advantageous positions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
