Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA grew year-over-year despite significant weather challenges in key markets.
- Achieved the highest EBITDA margin in the last eight years, marking five consecutive quarters of expansion.
- Received a second investment grade rating from Fitch Ratings.
- Reduced Scope 1 CO2 emissions by 3% in the first half of the year compared to the same period in 2023.
- Strong performance in Mexico with record EBITDA levels and significant volume growth.
Negative Points
- Net sales were flat, impacted by difficult weather conditions in several regions.
- Free cash flow after maintenance CapEx declined slightly due to timing of tax payments and lower fixed asset sales.
- Consolidated cement volumes were flat, while ready-mix and aggregates volumes declined by 9% and 3% respectively.
- US operations were impacted by bad weather, leading to lower volumes and higher maintenance costs.
- EMEA region faced a challenging demand backdrop and geopolitical events, leading to a decline in EBITDA.
Q & A Highlights
Q: Hi, good morning, Cemex team. Thank you for taking my question. I guess this one is about the US. So you did provide some color on residential, but I was wondering if you can talk a little bit more about what you're seeing from the ground for U.S. cement demand from an end market perspective. And more importantly, as you look at the backlog and the trends into July, if you can help us understand how to think of each end market going forward. So you did mention that you expect some improvements for the US here. Thank you.
A: I think Sally has a question on, you know, I think if we think about this on what we saw in second quarter was that infrastructure, which, as you know, accounts for about 50% of US demand in street and highway spending, which is the most cement-intensive part of infrastructure has continued to be quite vibrant on the multi year projects that have been improved under IJA or continuing to roll out. When we look at contract awards at the national level, we continued to see double digit growth up until last month, where it slowed to low single digit. But again, this these are multiyear projects. So I think that gives you some sense of the momentum in the infrastructure sector. In the case of residential, we did see more of a slowdown than we anticipated in second quarter. And as you know, residential is about 30% to 35% of demand. I think we would attribute that slowdown due primarily to affordability and to the mortgage rates actually moving above 7% in the second quarter. And this is not necessarily to be particularly surprising. And we think in this kind of environment where you see things like benchmark rates going above 7% that it will lead to a slowdown in residential. But I think it's also to look a little bit beyond into what's driving it and what's really been driving that slowdown in residential has been primarily multifamily. If you look at single-family starts and permit data that is continuing to rise. In fact, I think there's only been one month in the last 14 months where on a year-over-year basis, single-family starts and permits declined. So fundamentally, there is still very much of a shortage in terms of housing inventories in total in this country. And I think our expectation is that as we continue to hopefully see more improvements on the interest rate side and some pricing adjustments in specific markets that residential is going to recover, but it's not on as fast a trajectory at the moment as what we expected at the beginning of the year. And finally, with regard to industrial and commercial, I think really no surprises here. We started out the year thinking that commercial would be quite slow, and that has proven to be true. And there are some structural issues that probably are going to take a while to resolve as well as, of course, those higher interest rates, very much impact to profitability of commercial projects. On the industrial side, we do continue to see projects rolling out, particularly with regard to onshoring and manufacturing in our markets. And of course, these are very large projects and it can be episodic. But definitely demand is there on the manufacturing side, it has not been enough to offset the weakness that we've seen in terms of commercial. And we do expect as we move into the back half of the year that things will get better, number one, weather impact, which and this is a fairly conservative estimate. It's not easy to come up with this assumption we estimate it was about 25% of our volume decline in the second quarter. But we believe that that should get better. The comps themselves become easier easier because we saw volumes declining last year in the back half. And some of our efforts to recover market share should also be paying off in the second half. So I hope that answers your questions.
Q: Yes, good morning, Fernando, Lucy, Mario Thanks. Thanks for taking my question. I just wanted to follow up on some of the components of the guidance and how to how to get to the EBITDA. And obviously, I noticed the improvement that you're seeing on the energy cost side raising or kind of lowering, but at the same time, it's raising it for EBITDA, the energy cost from mid-single digit to high single digit. But at the same time, you spoke about the 20%-plus decrease in fuel. So just wanted to understand like the moving pieces and the confidence you're having as to the energy cost of being what's hedged, what's not hedged? And if there's potential upside risk to the guidance, i.e., that maybe even be in the low double digits instead of the high single digit when it comes to energy cost. Thank you.
A: Yes, thanks, Ben. Maybe I'll take that and if you guys want to help me out if I miss out on anything spend. Very importantly, throughout the year, we have been pleasantly surprised and better than our expectations in terms of energy cost dynamics, particularly on fuels. And that's being driven by a few things. Number one is that most of primary fuel markets have commodities markets have dropped since the beginning of the year. So petcoke coal have dropped, but also very importantly, we have been going away from the more expensive, more carbon content fuels to lower expensive, lower carbon, such as nat gas, for instance, which is an important switch in the case of Mexico and in the US. And also, you know, at the we're substituting in the case of alternative fuels as well from higher carbon content to lower carbon content and lower costs, in particular in Mexico. So those those two trends are very important drivers for the reduction of the cost of fuels. And then the other thing, of course, as we mentioned, clinker factor is down as well, about 1.2 percentage points. And the expectation pretty much on all of these trends to kind of continue either to be stable or to continue to improve in the second half of the year as a lot of these changes have taken place. So the expectation of the added improvement of this in the second half of the year is it's probably not quite on the majority of the improvement for the on a full year basis. The other the other component of that is that on electricity and you know that that is up slightly. But again, in the first half of the year, we had some very important changes in Europe in particular renegotiation of some important contracts that that contributed to some of the increase. Electricity was up like 3% once you consider deficiencies that we introduced in our business. So a combination of know better comps in the back half for electricity and continued stable and or declining markets and or substitution into lower cost fuels is giving us the conviction of improving our guidance and from from what we had in the beginning of the year to the second half of the year.
Q: What criteria did the world benchmarking alliance use to rank companies on sustainability? And was there anything specific that one center number one ranking?
A: And was there anything specific that one center number one ranking and yes, for wind, we understand that the criteria of the well. But Mike, in Alliance, you're counting 60% for climate action activity and
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
