CEMEX, S.A.B. de C.V. (CX) Q1 2015 Earnings Report, Transcript and Summary

Good morning, welcome to the CEMEX First Quarter 2015 Conference Call and Webcast. My name is Sylvia, and I'll be your operator for today. [Operator Instructions] Our host for today are Fernando González, Chief Executive Officer; and Maher Al-Haffar, Executive Vice President of Investor Relations, Communications and Public Affairs. And now, I will turn the conference over to your host, Fernando González. Please proceed. Fernando Angel González Olivieri: Thank you. Good day to everyone, and thank you for joining us for our first quarter 2015 conference call and webcast. After Maher and I discuss the results of the quarter, we will be happy to take your questions. We are pleased with our first quarter results. We had a 7% increase in sales with operating EBITDA generation growing by 14% on a like-to-like basis. First quarter EBITDA was the highest since 2008, despite adverse currency fluctuations. EBITDA margin expanded by 1.8 percentage points, improvement in prices for our three core products in most of our operations, better volumes in most of our products in Mexico, the US, Northern Europe and Asia, the favorable operating leverage affect in the US, as well as our continued construction initiatives led to this EBITDA growth. We have significant achievements during the quarter. Consolidated first quarter grey cement and ready-mix volumes are the highest in seven and six years respectively. First quarter EBITDA margin was the highest since 2010. In addition, we continue with our working capital initiatives and achieve our record low 24-working capital days during the quarter. We continue with our efforts to improve our free cash flow generation. In January, we closed the three transactions with Holcim in the Czech Republic, Germany and Spain. We expect our recurring improvement in our EBITDA, including synergies of about $20million to $30 million dollars starting this year. On the financing side, we continue to proactively address our refinancing requirements, improving our debt maturity profile, further reducing our interest expense and strengthening our capital structure. During the quarter, we raised about $1.35 billion equivalents at competitive yields. We are pleased with the way our credit continues to re-rate. We continue to be vigilant and prepare for windows of opportunity to reduce interest expense at the margin. Consolidated cement and ready-mix volume increased by 4% and 5% respectively, while aggregates volume remain flat. We had higher cement volumes in Mexico, Northern Europe and Asia. We had higher ready-mix volumes and aggregates volumes in Mexico, the US, and the South/Central America, and Caribbean region. In Mexico, our first quarter cement and ready-mix volumes were the highest since 2009. Also, during the quarter, we achieved record high cement volumes in the Philippines and Nicaragua, and record ready-mix volumes in Colombia, Nicaragua, Poland, Egypt and Croatia. Consolidated prices for cement, ready-mix and aggregates in local currency terms are higher both on a year-over-year and on a quarter-on-quarter basis. Sequentially, cement prices in local currency terms grew by 1%, mainly driven by increases in Mexico, the US, the Northern Europe and South/Central America, and the Caribbean regions. The decline in sequential prices in US Dollar terms in cement and ready-mix reflects weaker currencies in some of our markets. We continue with implementation of our value for volume strategy in all of our regions, focusing our efforts on achieving sustainable higher margins and returns in all of our business lines. We will continue to improve the transparency on the value we provide to our customers through our products and services, by focusing on our surcharges and services fees in each market. Now, I will like to discuss the most important developments in our markets. In Mexico, we are pleased with the 18% growth in sales and EBITDA on a like-to-like basis driven by higher volumes and prices in local currency terms in our three core products. Our cement and ready-mix volumes increase by 13% and 9% respectively during the quarter. These were the highest first quarter cement and ready-mix volume in six years. In addition, to the sustained increase in our volumes to the industrial and commercial and formal residential sectors, we saw growth in the infrastructure and informal residential sectors. The formal residential sectors continue to be strong during the quarter. Subsidies from the National Housing Commission almost doubled during the quarter on a year-over-year basis. In addition, year-to-date credits from Informa bid [ph] have also grown into double digits. Leading housing indicators should lead to continue growth into the rest of 2015, although there are more - modern great. Regarding the infrastructure sector, the budget from the Ministry of Communications and Transportation, which is the most cement intensive, is expected to grow in the double digits this year from last year’s levels even after the budget reduction. In like of this and our current project pipeline, our volumes to the sector should grow in the mid to high single digits driven by increased investment, especially in transportation projects including highways, rural roads and airports. The industrial and commercial sectors should continue to be driven by stronger industrial activity, right from manufacturing exports driven by increased US activity as well as a commercial sector supported by stronger private consumption and retail sales. The main drivers for the self-construction sector including remittances, employment, and consumer confidence also continue to improve. On the pricing side, we had positive traction from our cement price increase at the end of December. Prices as of the first quarter were 4% higher sequentially in local currency terms. We announced a 7.5% price increase in bagged cement effective in April. We aim to recover prices in real terms. After the positive performance during the first quarter we now expect our cement volumes to grow in the mid to high single digits during 2015. Our US business continues its steady recovery. Our sales increased by 10% while operating EBITDA more than doubled during the quarter. Incremental EBITDA margin for our US operations during the first quarter was 48% on a year-over-year basis due to strong pricing gains and continue favorable operating leverage. On a year-over-year basis, cement volumes were flat while ready-mix and aggregate volumes rose by 15% and 3% respectively. The growth differential between cement and ready-mix during the quarter reflects the decline in our oil well related cement sales, as well as poor weather conditions in our less integrated markets. On a proforma basis, adjusting for oil well, cement and related activity, cement volumes grew by 4%. Activity in the quarter continues to be propelled by the industrial and commercial, as well as by the residential sectors. Housing permits in our four key states; Texas, Florida, California and Arizona grew 12% year-to-date February compared with an 8% increase at the national level. California driven by the family sector, as well as Florida showed particular strength. Construction spending for the industrial and commercial sector is at 22% year-to-date February, while growth in national contract awards has slowed, dropping 6% year-to-date March. Florida however, continues performing at above threat levels with high single digit growth. The public sector contribution to volume growth was fairly flat during the quarter. While total public infrastructure spending is down 4% year-to-date February, highway and bridge investment rose 2% versus the same period last year. Highway and bridge spending continues to benefit from increased state activity fuelled by improved fiscal conditions and TIFIA projects. Contract awards for highways and bridges are up 31% year-to-date March. We believe this increase is largely due to a low prior year comparison, as well as the contracting of one large highway project in Florida during the period rather than a robust pick up in project signings. The current Federal Highway Program is set to expire in May and we expect the Congress will move to roll over the existing program until year end at a fairly flat level of spending. Removing the uncertainty facing the program for even a short period of time should be supportive of some incremental highway spending. Our prices strategy in US continues to deliver strong returns. On the back of largely successful January cements price increases in Colorado, Florida, the Midwestern parts of the mid-south, cement prices rose 2% sequentially. For the regions where we raise cement prices in January which represents about 40% of our volumes, pricing increase by 9% sequentially. Ready-mix prices also increased 2% sequentially while aggregate prices declined 1% due primarily to project-mix. In April we implemented cement price increases of $9 per metric ton in California, and the Southeast and $7 in Texas, along with ready-mix and aggregate price increases in California. These new increases should be absorbed by the market. Poor winter weather, the timing of the roll-off of several cement intensive projects, the decline in oil well cement volumes, all occurring in the quarter with the seasonality lowest volumes of the year hampered our cement volume performance due to the quarter. Despite this headwind we remain confident that we will meet our mid-single digit volume guidance for the year. Our confidence is rooted in the double digit volume growth that we have seen in our ready-mix business, our strong order book for the cement intensive projects, and our expectations that the pace of the decline in oil well cement will slow. In our northern Europe region, on a proforma basis given effect to the transaction with Holcim, cement volumes during this quarter increased by 18%. All countries in the region registered volume growth in this period with exception of Latvia. Proforma ready-mix volumes decline by 4%, mainly driven by lower activity in France and Germany. Quarterly regional cement and ready-mix prices increased by 5% and 6% respectively on a sequential basis and local currency terms. In Germany our cement volumes during the quarter adjusting for the sale of our assets in the western part of the country to Holcim grew by 5% driven by the infrastructure and residential sectors. Adjusted prices for our current operations remain stable sequentially in local currency terms. For the remainder of the year the infrastructure sector should continue to benefit from higher tax revenue translating into incremental spending specially in transportation projects. Residential activity should continue to benefit from low mortgage interest rates, low unemployment, rising purchasing power and growing immigration into the country which should more than offset restrictions such as land availability and regulatory caps on rental increases. In Poland, our market position remained relatively stable from that in four quarter last year. On a year-over-year basis our cement volumes grew by 32% during the quarter resulting from improved weather conditions, as well as considerably stronger weight of volumes to our ready-mix operations. Ready-mix volumes benefit from large infrastructure projects including highways, as well as residential developments in different cities including Warsaw [ph]. We remain committed to our pricing initiatives; our prices in local currency terms were stable sequentially after two quarters of decline and actually increased throughout the quarter. In fact prices as of March are 1% up from December levels. During the rest of 2015 we expect the infrastructure and residential sectors to be the main drivers of the math of our products. Additionally, in the upcoming quarters we expect our domestic cement volumes in Poland to benefit from the consolidation of sales that were previously done in the country by our recently acquired plant in the Czech Republic. In France our ready-mix and aggregate volumes were affected by the continued macroeconomic weakness. The only sector expected to show as slight recovered this is the residential sector. Government initiatives including a new buy to lead program on a stimulus package starting September should translate into back ended growth. In the United Kingdom, the double digit growth in our volumes reflects the continued favorable performance from the residential sector and improving commercial sector, as well as comparisons to our first quarter 2014 in which flood and wet weather impacted quarterly volumes. For the reminder of the year the residential sector should continue to contribute to demand growth driven by low unemployment, and inflation, as well as higher wages and consumer confidence. In the industrial commercial sector, higher activity should come from office projects, retail and warehouses. In the Mediterranean region, cement volume adjusted for the acquisition of cement assets in Spain declined by 10% during the quarter. In contrast, regional ready-mix volume increased in quarter driven by improved performance in Egypt, Croatia and the United Arab Emirates. Improved EBITDA generation form Spain during the quarter mitigated lower contribution from Egypt and Israel. In Egypt, the decline cement volume during the quarter was the mainly result of unusual rainy and cold weather during January and February, and to lower activity in the informal sector. Sequential cement prices in the local currency terms were 3% down during the quarter but still 11% higher than in the previous the year, more than offsetting higher energy prices. Regarding energy, we expect to start switching our key fuel from masatt [ph] to pet coke starting in the fourth quarter of this year. We are currently in the process of installing the pet coke grinding mill for this purpose. During this year the formal residential sector should continue to be the main driver of cement demand. The formal residential sector should also show a slight pickup in activity. Furthermore, during the economic summit last month, the Gulf countries committed to support Egypt’s economic development. This should be positive for the cement demand in the country. In Israel our ready-mix volumes during the first quarter declined by 5%, mainly reflecting unusual snow and rain during the first two months of the year. In Spain cement volumes on a like-to-like basis adjusting for the assets acquired from Holcim declined by 8%. This negative variation results from a thought comparison with first quarter 2014 in which then prevailing market conditions resulted in an increase in our market position. As 2014 progressed, we remain focused on pricing and on our most profitable customers. We expect our domestic cement volumes for this year to increase 4% on a like-to-like basis. The sequential declining prices is mainly due to customer mix as we integrate the acquired assets in the country. In fact proforma cement prices in local currency terms increased by 10% from - on a year-over-year basis and by 7% from fourth quarter levels. In infrastructure there is vast and increasing activity in the sector. Easing of fiscal austerity measures, reduction in sovereign spreads and local and general elections later this year should continue to benefit the sector for the reminder of the year. The residential sector is also benefiting from improved growing conditions and employment and consumer confidence. New credit for home purchases is growing at double digit, activity in the sector this year should continue to be favorable driven by positive traction in housing permits and stabilization of home prices. We expect to continue to see favorable operating levels affecting our margins in Spain as our volumes continue to improve and as we realize the expected synergies from the integration of the acquired cement assets. In our South/Central America and the Caribbean region, quarterly ready-mix and aggregate volumes increased by 3% and 5% respectively. While cement volumes declined by 5%, mainly due to lower cement volumes in Colombia, El Salvador and Guatemala. We are pleased with the positive demand environment in Panama, the Dominican Republic, and Nicaragua during the quarter. I will give a general overview of the region, for addition information you can also see CLH quarterly results which were also reported today. The regional decline in margins reflects the lower margin in Colombia due to the decline in cement volumes and the impact of effects on our dollar denominated costs. The Colombian peso depreciated 25% on year-over-year basis. In Colombia, the 15% decline in domestic grey cement volumes was due to first, it comes from very strong comparison in first quarter 2014 where we had a 34% year-over-year increase in volumes; and second, our price increase last January resulted in a decline in market share. Historically the market share has reverted back in the following months. In fact, daily cement sales in March were significantly better than those in January and February, and we couldn’t expect this trend to continue. Ready-mix and aggregate volumes increased by 5% during the quarter. Cement prices in local currency terms increased by 4% during the quarter on a sequential basis and reached levels close to those we had during the first quarter 2014. We continue to aim to recover our prices in real terms. Demand from the residential sector should continue to be boosted by the various government housing initiatives which include the second phase of the free home program for an additional 100,000 houses, the construction of the 86,000 homes under a subsidy program, as well as the Mikhasaya [ph] Program which includes an additional 100,000 homes with subsidies. The infrastructure sector continues its positive trend with the continuation of some projects like [indiscernible] and the initiation of new ones. Allocation of a portion of the Royalty Fund to transportation projects should also boost this sector. In addition some projects under the 4G infrastructure program would start towards the end of this year. In Panama, we saw positive performance in cement volumes during the quarter, mainly driven by an increase in volumes to the Panama Canal project compared with last year, when this project suffers stoppages which affected volumes. Excluding volumes to the canal, cement volumes still increased by 4% during the quarter. The residential sector continues to be the main drive for cement for Panama during the quarter supported by middle income housing activity. Regarding infrastructure, the government has announced a five-year $11 billion public investment plan which includes important projects such as the metro system expansion, interstate highways, water management among others. In general, we continue to expect strong demand levels from these sectors over the medium term. In Asia cement volumes increase in the double digits during the quarter. In the Philippines we also saw the double digit growth in cement volumes, mainly driven by the industrial and commercial sector, as well as the better ability to serve our markets, throughout introduction of the new cement grinding capacity at the end of the second quarter of the last year. For the remainder of the year we expect to see the demand growth from all sectors. The positive volumes trends in the Philippines should continue this year, the residential sector should continue to be supported by increased remittances, stable inflation and low mortgage rates, as well as by higher housing demands from foreigners. Continued growth in the industrial and commercial sector should come from expansions in different industries, including manufacturing, automotive, business process outsourcing, gaming and hospitality among others. Regarding infrastructure, the government is committed to attaining its goal of increasing infrastructure spending to 5% of the country’s GDP by next year. In summary we are pleased with the growth in local currency prices in most of our regions reflecting the continued positive outcome of our valuable for volume strategy. We are also encouraged by the performance of our operations in Mexico, where first quarter cement volumes grew by 13% reaching the highest levels since six years. This quarter on top of the sustained increase in our volumes to industrial and commercial and formal residential sectors, we also show growth in the infrastructure and in formal residential sectors. Cement demand from the infrastructure sector grew by 6% marking an inflection point driven by increase public works spending while demand from the informal residential grew by 11% as a result of higher consumer confidence due to improvements in employments, disposable incomes and remittances. And now I will turn over the call to Maher to discuss our financials. Maher?

Thank you, Fernando, hello everyone. Net sales on a like-to-like basis increased by 7% during the quarter while operating EBITDA increased by 14% with a margin expansion of 1.8 percentage points. There was higher EBITDA contribution from Mexico, the US, the Northern Europe and Asia regions. On a year-over-year basis we continue to see the effect of depreciation of some currency versus the US Dollars. As we commented last quarter, typically currency devaluation translate into input cost inflation which tends to put upward pressure on prices with some lag effect. Cost of sales as a percentage of net sales decreased by 2.9 percentage points during the quarter, mainly driven by our cost reduction initiatives, and product mix. Operating expenses also as a percentage of net sales increased by 0.5 percentage points as efficiencies were offset by higher distribution expenses. Our kiln fuel and electricity bill on a per ton of cement produced basis increased by 5% during the first quarter. This increase reflects higher fuel and electricity prices in Egypt as well as a country mix effect. During the quarter, our free cash flow after maintenance CapEx was less negative by $173 million; this is explained by higher EBITDA, as well as lower financial expenses and cash taxes during the quarter. While the working capital investment during the first quarter was similar to that of the first quarter last year, working capital days reached 24, a new first quarter record compared with 29 days in the same period in 2014. As in prior years we expect to recover most of the investment in working capital during the second half of the year. We had a foreign exchange gain of $59 million resulting primarily from the fluctuation of the Mexican peso and the Euro versus the US dollar. We also recognized a loss on financial instruments of $59 million dollars related mainly to some ex-shares. The controlling interest of net loss $149 million was practically half of that in the first quarter of 2014. This narrower loss is primarily due to higher operative earnings before other expenses, lower financial expenses, and a foreign exchange gain versus a loss last year mitigated by loss on financial instruments. We continue with our initiatives to improve our debt maturity profile and strengthen our capital structure. During March we successfully accessed the debt capital markets and raised $750 million in 10-year senior secured notes with a coupon of six in one eight [ph], as well as 550 million euros in 8-year senior secure notes with coupon of 4.38%. We used the proceeds from these notes to pay a portion of our higher coupon 2018 notes, as well as a portion of the revolving trench of the syndicated loan facility leaving this line of $746 million completely available. We also created a cash reserve of $588 million to pay our 2020 notes in May, and a portion of the floating rate notes which matures in September. In addition as per the contingent convertible unit’s transaction, we issued $200 million of the optional convertible subordinated notes due in 2020 used to refinancien the optional convertible subordinated notes that matured on March 2013. Total debt plus perpetual securities increased by $417 million during the quarter. This includes a non-cash positive conversion effect of $208 million. The negative free cash flow during the quarter was meet with a reduction in our cash balance. We have included a proforma debt maturity profile which shows the use of the created cash reserve of $588 million to pay the remaining $222 million of our 2020 notes, and a portion of our floating rate notes. The rest of the floating rate notes is addressed by drawing down on the revolving portion of our syndicated loan facility. We remain comfortable with our liquidity position; furthermore, we maintain sufficient working capital and receivables financing facilities which further bolster our liquidity position. We continue with our liability management initiatives to lower our interest expense, lengthen the average life of our debt and reduce refinancing risk. Now Fernando will discuss our outlook for this year. Fernando? Fernando Angel González Olivieri: For 2015, we reaffirm our guidance for cement and aggregate volumes provided last quarter. As regards, our ready-mix volumes, we are improving our guidance and growth to be in mid to high single digits. Regarding our cost of energy, despite higher energy cost during the first quarter on a per ton of cement produced basis, we expect a slight decline for the full year from last year's levels. Guidance for total CapEx for 2015 is about $800 million, this includes $500 million in maintenance CapEx and $300 million in strategic CapEx. The increase in strategic CapEx guidance reflects the ongoing expansion projects announced last year. Regarding working capital, we now anticipate the working capital investment during this year to be about $50 million, including the addition of free cash flow initiatives which is cost last quarter and during our Cemex Day. We now expect cash taxes for 2015 to reach about $500 million to $600 million. As a result of our liability management initiatives, we anticipate a reduction in financial expenses for this year of about $100 million. In closing, I want to emphasize that this quarter we delivered strong results despite headwinds caused by currency fluctuations and volatility in the financial markets. Our EBITDA generation and EBITDA margin were the highest in several years. We also continue to improve our working capital reaching a record low 24-days. I would also like to reiterate the messages I provided during our Cemex Day a month ago related to how we are responding to this volatile environment and are further bolstering our role to investment grade. For 2015 we are pursuing first cost and expense reductions of $150 million; second, free cash flow initiatives of $200 million, half in working capital investment and half in financial expenses, guidance for these items reflects these initiatives. And third, we're targeting to pay between $500 million and a $1 billion of debt this year. Furthermore, as part of our ongoing efforts to optimize our portfolio, we expect to sell assets for $1 billion to $1.5 billion in the next 12 to 18 months. Thank you for your attention.

Before we go into our Q&A session, I would like to remind you that any forward-looking statements we make today are based on our current knowledge of the markets in which we operate and it could change in the future due to a variety of factors beyond our control. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases refer to our prices for our products. And now we will be happy to take your questions. Operator?

[Operator Instructions] And our first question comes from Benjamin Theurer from Barclays.

Hi, good morning Fernando, good morning Maher. First of all, congratulations for the results in Mexico, they were pretty decent. Can you hear me? Fernando Angel González Olivieri: Good morning and thank you for the comment.

Hello? Fernando Angel González Olivieri: Yes, we can hear you.

First of all thank you, thank you very much. My question is actually on the United States, and one on Colombia. So in the US you mentioned that you have pretty adverse weather conditions effecting volumes and you mentioned in the presentation that excluding the oil-well cement it would have grown by 4%, but do you also have an estimate on how much growth would have been in volumes in the U.S. if the weather would have been, let’s say in the normal condition and on Colombia one follow up that we have seen that actually in the region decrease prices in local currency terms. Any initiatives in the end of the first quarter, beginning of a second quarter to get the decent local currency terms into a positive territory that would be my question. Fernando Angel González Olivieri: Well, as an objectives here we have mentioned, and I am referring to Colombia we are always you know try to find ways to corporate prices in real terms so that continue being our objective in Colombia and everywhere else. The dynamics in the country, the first quarters as we mentioned compared very unfavorably to first quarter last year, precisely because of the timing of price increase but again we will continue with the objective of recovering prices in Colombia and everywhere else in real terms.

Yes Ben, regarding the weather, I would say that certainly Texas was probably the biggest recipient in our markets of the bunch of that and so you know we saw place like Midland, Austin, certainly suffering quite a bit from that. In fact if you take a look at Midland, Texas, we had almost close to 150% more rains, San Antonio is another market close to almost 50% more. I think you know we don't have a specific number but what I can do for instance is just give you an indicator, California for instance where we had very good weather and there are volume terms were up you know around 12%. So that can give you an idea of how much of difference weather makes an impact.

Okay, thank you very much Maher, but you expect that some sort of recovery in summer month’s right I suppose.

Yes, I mean if you take, you know if you take a look at our volumes that generated in the flat growth that we have seen in the first quarter and given our guidance which we high conviction on for the full year, you know that would translate to obviously to the high single digit growth in the rest of the year to get to that growth and we are fairly confident with the I mean weather played an important role in the housing construction for instance you know if you take a look at the numbers in housing and our markets, specially informants versus starts, there is a huge differences as a Fernando mentioned during his discussion of the US business. So we are confident that the construction activity will pick up as the year goes on we get better weather.

Alright, perfect. Thank you very much and congratulations, again.

Thank you.

Our next question comes from Adrien Wester [ph] from JP Morgan.

Hi, thank you. Good morning, Fernando and Maher, and congratulations as well on the results. My question has to do with margins, you posted a good expansion on EBITDA margin in the first quarter. What is the outlook for the rest of the year considering that now you're expecting lower energy cost, also the positive pricing environment that we're seeing in most regions and also for the remainder of the year and the potentially synergies that you are also expecting for the rest of the year. Thanks. Fernando Angel González Olivieri: I think the expectation is for the margins to improve, let me make a clarification of our margin improvement during the first quarter. About a third of it, about half a percentage point is because of the divestment of our German assets which because of seasonality they do have a negative impact on this year given that we closed the transaction before the starting of the quarter, we didn't have that negative impact that compares to last year. So on the other percentage point it's basically social, it has to do with our prices growing more than our cost and expenses, our cost and expenses grew about three percentage points less than our prices and I think that will prevail during the rest of the year. And the other element that we should continue considering because it's social also and we will continue since the benefit of it is operational leverage, mainly in the US as you saw the performance of EBITDA compared to sales, that is a confirmation that we do continue having a significant operating leverage in the US. So that's why we think margins this year compared to last year should be materially higher.

Excellent, thank you, I appreciate it. Fernando Angel González Olivieri: Thank you.

And the next question comes from Marigold from ITAU [ph].

Good morning everyone and congratulations on the strong results. Two quick questions; first in the US regarding the pricing environment, if you could comment a little bit on the success rate of the price increases and also for January, if you are like almost a 100% implemented already, so if the market is really strong and you continue to expect that to be the case where the price increase is also announced for April. And second question is regarding [indiscernible] we saw you upgraded a little bit the volume expectations for the full year on the cement side like we saw the very strong numbers 13% volume growth in the first quarter, is that like - is that a possibility, the market continue to be surprising and eventually we could see instead of high-single digit we could see double digit growth rate from Mexico for the year? Fernando Angel González Olivieri: Okay, regarding Mexico let me start with your question on Mexico’s expectation. I think what we saw in the first quarter this year is a positive trend that started third quarter last year. You remember our volumes in Mexico started increasing slightly in third quarter. Then even more during the fourth quarter. And what we saw this quarter on top of the growth of the formal housing sector industrial and commercial sector that was guiding this recovery, you know we saw a clearly an inflection point and a significant growth in infrastructure spending, and also in the consumer market or the informal construction market for 11%. So compared to our estimates, our original estimates and our current guidance, definitely there is an upside risk in Mexico because we believe that what we have expecting already for some time, the growth in the informal sector, as well as infrastructure is already happening, and that accounts for about 60% of total demand. We have to take into consideration also that we have elections in mid-term, so we are kind of cautious on the trends for the whole year, that's why we are not increasing our guidance even more despite of the good results that Mexico showed during the first quarter, but yes, we might have an upside risk in our estimates in volumes in Mexico.

And maybe I can address the US question? Fernando Angel González Olivieri: Please go ahead.

Marcus, I just like to say that Fernando kind of discussed the pricing environment in the US in his comments and it's very important to note actually that in the markets where we announced pricing increases for January, were starting January, Florida, Colorado, Ohio, Pennsylvania, Kentucky, Tennessee, the Carolina which represent - they represent around 40% of our volumes during the quarter and there if you take a look at kind of the volume weighted pricing increase, it's almost $9, that is almost representing about a 9% increase. That is awfully close to most of the pricing increases that we have announced. Now we were also quite encouraged frankly by the response to the pricing increases for April, and the markets that are affected with the April pricing increases represent about 53% of the markets, that's California, Texas and Georgia. So we think the supply demand dynamics are quite positive and we have high conviction on the pricing dynamics, not just in cement but across all of our products. I don't know if that answers your question Marcos [ph].

Yes, sure. Thank you very much, that was clear.

Thank you. Fernando Angel González Olivieri: Thank you.

And the next question comes from Marimar Torreblanca from UBS.

Hi guys, thanks for the call and congratulations also on your results. I have a question on your leverage ratio, can you tell us if you have a target for year-end considering the FX environment and also maybe if you can give us an update on the asset sales plan that you have for this year? Fernando Angel González Olivieri: Yes we do have a target for leverage ratio but we don't disclose it. But I can tell you that it will be - there will be an improvement compared to last year, there was improvement already compared to last quarter, the numbers I remember is 5.19 compared to 5.11 or so. And that is a trend that we have seen in the last two three years and the trend will continue and I do expect this trend to even accelerate as long as we manage to continue to providing good results and we manage to make the - to execute our 2015 program in order to support our objective of gaining back our investment grade which is - this is related to your second question on divestments, we don't have a significant amount of divestments already done, we are in progress as we have commented, the time horizon we have is from where we started last January and as of mid-next year. What I can tell you is that we are moving forward, we have divested some minor productive assets but we feel confident that in this time horizon we would be able to divest the assets for the amount we have been targeting from $1 billion to $1.5 billion. I don't know if that answers the question very much.

Yes, yes, thank you. Fernando Angel González Olivieri: Thank you very much.

And the following question comes from Mike Bett [ph] from Jefferies.

Yes, thank you very much. Maher, two questions please. Firstly, I think you remember, a year ago in the US there was a lot of maintenance spending that impacted the results, was there any benefit this time from the non-recurrence of that? And then secondly, in terms of the cost reductions, you can clearly see them in the overall results. So I'm wondering if you could give us some idea of where is that concentrated in terms of the regional mix in Q1. Thank you. Fernando Angel González Olivieri: On the first question on maintenance, the difference is not significant, yet we might see some difference as we advance in the year but so far this quarter we don't have a significant difference to show. On cost reduction, what I can mention is, as I already mentioned there is an impact because of the divestment in Germany but as I mentioned in terms of margin for about a third of it but the rest is reduction and cost and expenses across the Board and I don't have any specific comment, it's everywhere, the program we design and started executing in January is global and it's happening - I'm very pleased to say it's happening almost everywhere. The other comment that just in case it was not properly communicated, the other comment is that this first quarter - even though we are reducing cost and expenses, our energy cost did increase by 5% and it has to do with the mix of countries increases in Egypt and increases in Mexico, but at the same time through the year we will see that the inventories that we are using at higher prices are depleted and now we are going to start getting to benefit of lower cost of pet coke and other fuels.

Okay, thank you. And then just one small question, it's the final one. The 7% of the market in the US where you haven't raised cement prices either in January or April where is the 7% that prices aren’t going up and why?

Well I think, I mean it's probably just very small markets because I went through the list of the areas where we've done it - I mean there is really frankly no reason, we have to break down for - like you said, 93% of the market so far but - and there will be efforts obviously going forward for additional reviews of the pricing environment in the US as well on back of the results that we've gotten so far but there is really no reason why we have not had a 100% increases in prices throughout our portfolio.

I understood. Thank you very much. Fernando Angel González Olivieri: Thanks.

And our next question comes from Adam [ph] from BB&T Capital Markets.

Hi, good morning, congrats on a solid start to the year. Fernando Angel González Olivieri: Thanks.

In the US, how easy it is to switch from summit to construction summit, can you share your thoughts on whether you will be doing that this year?

Yes, it's not - I mean it's not easy but it's doable and we are certainly looking at possibly doing it, especially in Texas where the market continues, I mean despite the drop in oil well cement, as you know, leading up to this correction in the oil well cement market, Texas was a net importer of cement from neighboring states, we were importing for instance cement from Colorado, others bring cement from other locations and the state despite the drop in consumption continues to be a net importer of cement, albeit a very small amount. So clearly, to the extent that we need to for instance convert one of our oil well cements in Texas to regular cement, we will do that and it can be done and the switch is not that costly frankly.

Okay, good, thank you.

Thank you.

And the next question comes from Dan MacGowie [ph] from Citigroup.

Good morning, thanks for the call. Question is on prices and market share, in Columbia you mentioned your price increase is through but it looks like exceeded a fair amount of market share. You've been successful on the price increases in Mexico and the US, I'm wondering if you talk a little bit about whether or not that's come at the expense of market share in both countries and obviously, the focus on the regional markets where you're operating. And then the second question is just on the US, you had as usual a fairly significant drop in EBITDA margin quarter-on-quarter although for the lower volume amount the step down from the 15% EBITDA margin level in the fourth quarter to 7.5% is steeper than usual, I'm wondering as we move into the seasonally stronger quarters, if you could talk a little bit about the slope of increase heading into the mid-year in the US, specifically I'm referring. Thanks. Fernando Angel González Olivieri: Alright, let me start with the first question on prices and market shares, particularly in Columbia. As we commented, the comparison of first quarter 2015 to first quarter 2014 is a challenging one. Pricing initiatives or price increases happen in different ways in different times of the year and it happens that last year we did take the initiative during the first quarter and on balancing our market share, and this year we did take the initiative to increase prices and that did affect our market share, we don't know exactly to what amount, we don't have market information as of today for the first quarter but definitely we know it was affected for the dynamics and the comparison then it's very challenging. Is that going to affect our regular precision in the market in Columbia mid-term, I don't think so. I mean these are the characteristics of price increases, again with the objective of recovering prices in real terms, you act on it and you have to see how the dynamics go and then you have to react to them. Definitely the impact on the first quarter this year - although again we don't have information but we know we suffered on market share for the first quarter but we do expect that to come back little by little. In the case of Mexico, I think the pricing dynamics - we don't think, again, just clarifying we don't have market information that fast but we do think that in Mexico the impact was not as high as it was in Columbia. And in general terms, yes, the process is about the same, every time you try to increase prices, you have the same affect. Again, unfortunately at this point in time we don't have reliable data on market performance in either country, Columbia and Mexico, and we cannot provide specific figures on market share as of today.

And Dan, I don't know - I forget, did you have a similar question in terms of market share on the US or not?

No, I mean I think it became clear, I mean you don't have the specific data on market share yet but the color is provided on that is fine.

Great, now in terms of the EBITDA margin differential between fourth quarter and first quarter, I mean obviously you have enormous seasonality and non-comparability between those two quarters and if you look at prior years, for instance, if you take a look at the example of 2013 for instance, 2013 fourth quarter versus 2014, I mean it's not comparable, frankly, so that analysis is - I mean we can certainly look into it but it's really not comparable frankly. There are some maintenance issues potentially, inventory effects that could be there depending on whether and in line with maintenance as well. So I wouldn’t draw a lot of conclusions now in terms of the improvement in the margin for the year, clearly the answer is yes, right, I mean - because the first quarter is the weaker quarter, we had volumes that were flat in cement; cement is our - clearly has the highest margin contribution, has the highest operating leverage within the business. So clearly as we proceed during the year and get closer to our guidance, hopefully for volumes in cement, that will have a very positive impact on the EBITDA margin clearly.

I guess, maybe the simpler way to ask if I may is if you're looking for mid-single digit volume growth in the US and your tracking at better than mid-single digit price increases, if you could talk a little bit about where you think EBITDA margins might be in the US in your seasonally stronger quarters?

I mean we don't - we don't guide, I mean what I can point you at frankly is the only thing that we have given out publicly ensured that would help you in that area is what we said about full year EBITDA for the US. I mean which we said that it's going to be in excess of $600 million for the year and so you can extrapolate from where we are in the first quarter, you could look at seasonality to second and third quarter are the best quarters for us typically during the course of the year unless we have some exceptional weather on the end caps of the year. And you would get an idea of where EBITDA margin is likely to be towards the end of the year but clearly it's going to be an important level higher than it was in the first quarter.

Understood, thank you.

Okay, thank you.

And the following question comes from Alvaro Garcia from BTT [ph].

Hey guys, good morning, congrats for the results. Two questions, first on taxes, I mean the guidance came down marginally, I was just curious what was driving that, one. And two, on the Federal Highway Program in the States, you mentioned spending as far can be flat throughout the second half of the year and the continuation of that, is there any risk that might not be the case and just a general outlook on the infrastructure space in the US would be great. Thanks.

In the case of taxes there are two reasons; on the one hand we are respecting lower taxes in many forward regions than what we estimated late last year or early this year plus there is also some impact because of - we have weaker currencies and that has some effect in our estimates. And talking about the US, I mean infrastructure in particular, despite the fact that we had fairly flattish performance, actual highway and bridge spending is actually up about a couple of percentage point’s year-to-date. And we believe the thing that is going to be further kind of adding to that growth is what's happening by with TIFIA. 13 of the TIFIA projects for value of slightly more than $20 billion, about $22 billion are in our markets. So, yes, we don't expect out of the ballpark performance but we do expect things to get better during the course of the year and again I would really point to some of the weather effects that we have seen. And also let's not forget that in Florida, one of our most important markets we had very important projects that had been completed the Tampa Waterway, but when we look at our backlog of projects throughout our four big markets, we're quite encouraged frankly with the outlook and being able to kind of get back on trends where we expect growth of the year to be for the infrastructure segment. Again, we don't expect out of the ballpark, we do expect residential to be the very large contributors and industrial and commercial to be the largest contributor. I don't know if that addresses all of your questions?

No, no, that's very clear, thank you very much Maher.

Great, thank you.

And the next question comes from Yassine Touahri with Exane.

Couple of question, first a question on the United States, I understand that volume in Texas in January and February for the market were down approximately 10%, what kind of trends have you seen in March on that field and in terms of these trends, how confident are you about your ability to increase prices in Texas, that would be my first question. And the second question on the improvement of your results in Northern Europe which were quite impressive. Is it fair to achieve that approximately $15 million improvement in EBITDA was related to the German disposals, and that most of the improvement elsewhere comes from the UK? Fernando Angel González Olivieri: Regarding your second question, the main - the explanation for the variation comes mainly from the UK. In the UK, the business perform much better and on top of that there is a time issue with our maintenance of our main or largest cement plant in the UK probably which last year happened in the first quarter and this year is going to happen most probably during the second quarter. But most of the explanation for the variation comes from the US and to some extent due to the German - the divestment of our Western German assets, but again, it's mainly the UK.

Thank you.

And Yassine, regarding your question on Texas, if we exclude oil well related cement and I'm talking about here specifically oil well cement meaning cement going to oil well construction and then grey cement going to projects that are related to oil well construction, if we exclude that then volumes would be flat for us. Now official data on the Texas market unfortunately is only available for the first two months of the year and that shows actually growth of 2% for the state, not necessarily for us, right. Now we do happen to have the largest exposure to the oil well market and that has already corrected significantly, so we don't expect frankly material corrections from here on. We talked about bad weather which we think - that's hopefully, I mean nobody has a crystal ball about the weather but hopefully we'll get better weather during the course of the year but I would say that probably a better - as it is for the rest of the US, I would say a very good indicator of growth is what's happening on ready-mix. I mean for the whole country, ready-mix for us was up 15% and when you were just for the swap that we did with Vulcan, it would be about 13% growth. We have a similar kind of healthy growth in Texas, Texas ready-mix volumes are up 14%. So, again, not to - I don't want to say there is a 100% correlation but clearly when you take a look at the markets where we're integrated that were not impacted by weather, the growth is very healthy, it's double digits. So, now to go back to your question on pricing, I mean Texas, we need to still remember despite all of these dynamics continue to be sold out and actually continues to be slightly net importer of cement, so even - so supply demand dynamics continue to be actually quite positive and we're quite encouraged by the reception of the pricing increase since the beginning of this month.

Okay. And approximately the wrath [ph] on Germany, you mentioned that German disposal was approximately 50 basis points of margin expansion. Is that correct? So it means that it was - Germany posted a $15 million EBITDA loss in Q1 last year?

No, it doesn't - that amount it doesn't sound like not even close to what it was - I don't have the specific number with me but we will come back to you with the specific number on that on the impact of those assets. Fernando Angel González Olivieri: Yassine, I'll get back to you on the follow-up question on Germany after the calls, if you don't mind.

Thank you. Fernando Angel González Olivieri: Thank you. Did we address all your questions, Yassine?

Yes, you did. Fernando Angel González Olivieri: Thank you very much.

We have time for one more question and that question comes from Lillian Starke from Morgan Stanley.

Hi, good morning and thank you for taking my call. I was just wondering on the Columbian pricing, if you could give a bit more color where did you see that pricing take phase and as well in terms of the market share, if there was a specific region where you saw more pressure on volumes? Fernando Angel González Olivieri: Well, don't have any additional information on pricing on top of what we have already disclosed. And again on market share we do have indications but we don't have formal information about the market performance for the quarter yet. What I've been explaining is that the process that we normally go through when we initiate and leave price increase, and the impact which is material compared to last year volumes of minus about 15%, to some extent it has to do with the impacting volumes because of our price increase initiative this year but it also has a very significant effect because of the comparison to last year in which exactly the opposite happened. So definitely we shouldn't expect volumes dropping as much as first quarter for the rest of the year and even our volumes in March and the part of April we have gone through are much better than January and February, but again, unfortunately, we don't have data to share on the specific numbers in March at this point in time.

Okay, thank you very much. Fernando Angel González Olivieri: Thank you.

Thank you.

And we have no further questions at this time, and I will turn the call over to Fernando González. Fernando Angel González Olivieri: Well, thank you all for your time and attention. We look forward to your continued participation in Cemex and please feel free to contact us directly or visit our website at any time. Thank you and good day.