Good morning, welcome to CEMEX First Quarter 2020 Conference Call and Webcast. My name is Kate, and I'll be your operator today. [Operator Instructions] Our host today are Fernando González, Chief Executive Officer; and Maher Al-Haffar, Executive Vice President of Investor Relations, Communications and Public Affairs. And now, I'll turn the conference call over to your host, Fernando González. Please proceed. Fernando González: Thank you. Good day to everyone. I hope you and your family are in good health. Thank you for joining us for our first quarter 2020 conference call and webcast. We will be happy to take your questions after our initial remarks. Before I start, I would like to thank the whole CEMEX family especially our frontline employees, who have kept us running during this crisis. The world is going through an unprecedented time due to the COVID-19 pandemic. Construction activity across most of our market is being impacted to different degrees. However, it is important to highlight that construction together with our industry have been considered essential in many countries around the world because of two characteristics. First, construction can be performed with a high degree of safety and low risk of transmission. Construction worksites, as well as our production sites are effectively controlled and not open to the general public. Most work is done in the outdoors with low personnel density and under the strict health and safety standards to prioritize the safety of workers. And second, construction activity contributes significantly to economies and society. The construction industry provides essential infrastructure requirements to support the vital needs of the markets in which we operate. There is a critical component of local and national economies and represents an important percentage of their GDP. It is also a fundamental engine for reactivating economies and generating employment. Going…

Thank you, Fernando. Hello, everyone. During the first quarter of 2020, operating EBITDA increased by 1% on a like-to-like basis with a reduction in margin of 0.3 percentage points. The favorable impact of consolidated prices and fuel during the quarter was offset by increased freight and transportation costs, high raw materials in ready-mix as well as increased purchase cement. Reported EBITDA also reflects an unfavorable effect from currency fluctuations of $16 million we continue to see tailwinds from lower energy cost during the quarter. Our unitary energy cost of producing cement including kiln fuel and electricity was 12% lower during the quarter. This includes a 21% reduction in fuels and a 2% decline in electricity. Our quarterly free cash flow after maintenance CapEx was negative $215 million compared with negative $337 million in the same period last year. This is mainly explained by a lower investment in working capital due to aggressive receivables and inventory management as a result of the health crisis. We expect a portion of this working capital investment to reverse during the second half of the year. As Fernando mentioned earlier, we took important measures to improve our overall cash position in anticipation of potential disruptions in the capital markets. These measures help us improve our cash level as of the end of the quarter, but also increased overall debt. As a result of expected higher total debt for the year on average, we now anticipate a slight increase in our full year financial [technical difficulty] During the quarter, total debt, reflects a favorable translation effect of $100 million. We ended the quarter with a strong liquidity position and a manageable debt maturity profile with no significant debt maturities through July 2021. Our leverage ratio ended at 4.4 times at the end of the quarter. Before…

[Operator Instructions] Our first question is from Carlos Peyrelongue from Bank of America. Go ahead.

Thank you, Fernando, and Maher for the call. Can you comment on any initiatives, either in the U.S. or Europe to approve new infrastructure packages, and so far has there been any package been approved in either the U.S. or Europe? Thank you.

Carlos, thank you. There hasn't been specific packages yet but there is definitely conversations in the U.S. certainly bipartisan conversations, there are definitely conversations in Europe as well about very major potential infrastructure - additional infrastructure packages to be developed. Having said that, and we are encouraged. I mean this is probably of all things, I mean we think this is something that is definitely needed as soon as the markets normalize. Now, it is important, however to mention that as government strike to normalize this process, they have committed an historic as Fernando said in the remarks, an historic amount of stimulus close to $8 trillion of stimulus has been announced and is currently being implemented on an accelerated manner. This is - on top of that we have major additional monetary policies through central banks. The markets in which we operate have announced probably over $5 trillion to date of fiscal stimulus including things like individual subsidies, barrel support, deferred taxes, and some markets have improved like the U.S. for instance have committed close to $3 billion so far, and of course Mexico has also announced a few days back a $26 billion program in loans to small and medium-size businesses and individuals and social programs. So we are encouraged. We think the next stage for governments in market package would be to start looking at infrastructure related project, which we believe is very likely to happen. I don't know if that answers your question, Carlos?

Sure, those. Thank you.

Our next question is from Nikolaj Lippmann from Morgan Stanley. Go ahead.

We were trying to handicap your - the huge future performance the key markets such as the U.S. I was just looking, U.S. strong performance I looked at the date of tax that kind of showed at least with regards to your numbers that January, February were very strong, and then March although homogeneous performance by everyone. But is that something you can say, did we see in the last month of this quarter a general slowdown in the United States or is there anything you can say about how this quarter kind of played out in the U.S. specifically. Fernando González: Yes Nikolaj, I think with news like the recent one in the Bay Area in California on the activating the construction that might be - those type of positive news, but now in general terms what we've seen in the very short-term, is that the construction companies they have been kind of speeding up their job sites, their works, and so there are positive reasons why we're seeing volumes can be resilient, but as you know, the U.S. is still in its way to get to the peak and additional measures of easing the lockdown might take those another two or three weeks, very challenging to give you a guidance on volumes, but they could be stable and perhaps time after the execution of some projects that might be a slight decline.

Okay. Can you give us a sense of how much you think the first quarter looks like an attempt by construction companies to perhaps finish - finish some initial work and therefore they sort of more cement on - goes forward with activity in the quarter? Fernando González: Yes, there is very challenging to give you some additional guidance on the second quarter. April up about mid-April, volumes have been stable, but again we feel very early to give you a guidance on the second quarter. What I can comment perhaps is that a few weeks ago, we were expecting in the U.S. for an impact in the second quarter, but now because of this reason that I am commenting, I think if there is a reduction in volumes that is not necessarily happening. It's going to be happening in the second quarter or it might be divided into the second quarter and the third quarter.

And in the first quarter. Sorry.

Yes, maybe if I can just complement what Fernando was saying is also, I mean especially in infrastructure what we're finding is that DOT's pretty much all over our markets. Now of course as you can imagine, I mean we have - our footprint is quite big and the actions or the limitations, let's say on mobility or construction activity has been varied. Most of our markets have been open the exception as Fernando said is the Bay Area. But the interesting part is that on the infrastructure side, it seems like DOT's are taking advantage of lighter traffic to actually accelerate most projects and that's probably true for other construction projects as well. I mean certainly in residential, industrial, and commercial, I mean we're seeing generally speaking builders and contractors trying to accelerate as quickly as possible, not knowing what lies ahead.

And now we will have a question from the webcast. Our host will read it.

The first question from the webcast is going to be from Mike Betts from Data Based Analysis. And the question is, have you adjusted your payment terms before COVID-19 in order to reduce risk of bad debt? Fernando González: Okay. I don't think that one market, I think the answer to that question Mike is that we are in constant touch with our customers. We are not necessarily taking on across the Board decision on payment terms, but we are being making decisions individually and depending on market conditions in different markets we still have very different conditions. And we have been in touch and agreeing with them the best way to grow, particularly through the first couple of three months of the impact of the coronavirus, but so far so good. We still don't see any major impact in this regard. Operator?

Our next question is from Adrian Huerta from JPMorgan. Go ahead.

One, if you can just comment a little bit more on the margins in Mexico. I was quite surprised on the sequential improvement on margins and also in the U.S. where the margin was well above what we have seen in the last four years in the first quarter. What else on top of volumes and prices impacted positively margins on these two markets?

Adrian, if I can just in the case of Mexico, while we had fuel tailwinds, which were significant close to more - by far more than half then the total decline in margin. And the reason for that is because of pet coke, pet coke prices dropped. Importantly almost 50%, the cement volumes also did well, as you can imagine, prices were kind of flattish I mean there is a little bit of deterioration there and that's primarily because of a mix effect. We had a higher proportion of exports and exports happened at a slightly lower price, so that it's more of a mix effect than anything else. And then, we had some items like freight, for instance, transport, in the case of ready-mix some negative impact in electricity and some cost in some of the materials that we use in maintenance like refractory bricks. So those are kind of the, the reasons where we've had a benefit on the energy side, and volumes in cement and to some extent prices but were offset by these other items. I don't know if that's sufficient breakdown on Mexico.

Yes Maher.

Yes, in terms of the U.S. I mean we had a terrific. We had a terrific quarter that's all I can say. And obviously we had a close to a percentage point expansion in margin, a big chunk of that is because of volumes. I mean we had cement and ags were up 10% ready-mix was close second plus 9%. We had good pricing performance plus 3% year-over-year. And then also, very importantly the organization the U.S. organization was very good at making sure that our stronger CEMEX initiatives are coming through and so we had - so that's also an important an important driver of the improvement there. Lower energy cost for the production of cement offset that a little bit, but we continue to switch more to pet coke. Now we did have some purchase cement and imports because several of our markets, we're sold out. So we had to do that and also another contributor that was offsetting the positive was the increase in raw materials in ready-mix. I mean, when you have aggregates and cement prices strong as that that impacts obviously the raw material input. And then transportation, I mean freight cost has been also fairly strong. And so, the combination of all of this translated to an improvement of close to 3 percentage points in our EBITDA margin in the U.S. business.

Yes so the higher frequency that you had in the past, there were still this quarter Maher?

Yes, I mean we have two new terminals in California and Texas that were not operating last year and so clearly, and there is more travel distances in our Florida market as well.

Our next question is from Yassine Touahri from On Field Investment Research. Go ahead.

Yes good morning gentlemen, a couple of questions. First, could you quantify the volume development that you've seen the first few weeks of April and maybe in the U.S., in Mexico, in Colombia and if you could also give us some color what happened in France, the UK in the Philippines, that would be very, very helpful? And then my second question would be on your covenants if the development where last year to be Colombia are you already discussing with your banks about potentially updating your covenants. And if you update your covenants what could be the cost for you? Fernando González: Yes, let me take the first question, Yassine. As you saw in the presentation there is a chart showing the curve, which we believe each country, each market is evolving to the pandemic. And I think the first volumes during the first couple of weeks of April and most probably for April at the month. We see volumes behaving according to that [indiscernible] in the case of Mexico. As the construction activity - was not considered fully essential meaning there were on the one hand some infrastructure a type of project that continue its operations. And on the other hand, the retail stores of bag cement were considered essential. So what we have seen is precisely because bad definition is that in the last few days and we have been decline in both cement, which is mainly used for lots of works, but people are restructuring work. And we have seen a bag demand growing again, that I think will kind of been reflected all over the month of April. But all in all, volumes in Mexico in the last few days have shown a decline. As you may know, the lockdown the social lockdown in Mexico…

And Yassine regarding your question

Sorry just on Mexico.

Yes go ahead. Fernando González: Say that again?

Just in Europe. When we look at the volume in the UK, in France and in Spain, we understand that the volume decline in April has been close to 50%, sometimes even higher. Is this kind of a volume decline that you see Mexico or is it lower? Fernando González: No, in Mexico during the first few days in April and we can perhaps extend that comment to all the month of April, now the client are not at that that level, are much lower. As I mentioned the clients in both cement are sizeable, but there is a sizable growth in bag cement, again because - retail stores - that in Mexico two-thirds of cement volumes also been bags that's two-thirds, and those are sold to retail stores [indiscernible] and other stores and that business activity was considered attention. So that's continued operating and thing has been or volumes not to drop as significantly as the ones in Europe. We are not expecting a lot should drop in Mexico at least for the month of April.

Okay. Fernando González: Again as I mentioned, the lockdown was extended until May 30, but there were signals from authorities in the sense of reviewing the business lockdown of different type of business activity in around mid-May.

And Yassine very quickly to address your other question regarding covenants I mean, as we mentioned on the call earlier. We have a formally approach the banks for an amendment of our current covenants we expect a response from the banks by the 26th of May. As you know there are 20 or so banks in the syndicate, and we expect to get continued support from our syndicate. We have a very good track record with conversations with them and securing amendments from the syndicate in the past. So we will update the market as soon as we have more news. Thank you very much. Operator, next question please.

And now we will have a question from the webcast. Our host will read it.

Our next question is from Paul Roger from BNP Exane Paribas. And the question is how radical could you be when considering divestments that's the first question, Fernando. The next question is everything outside of Mexico and U.S. on the table and what does the crisis mean for sustainability efforts - they were few other questions? Fernando González: I think the comment - that the comment is very simple. The market for different cap change and we will keep the focus on the strategy and kind of policy that we have been using on asset divestments. As you know, we have never done a kind of a fire sale and divestments. And you could even though the COVID-19 is imposing a particular need in liquidity in the very short-term. We have sold this, meaning we don't need divestments as source as a financing source at all. We have mentioned, the amount of cash we have or we had some closing March. And I also mentioned that at least in our opinion when you have this type of unknowns this lack of visibility and this uncertainty I think we have to concentrate on measures that can be careful for whatever the scenario that are unfolding. In this hotspot that we made during March, we've made decisions in order to bring cash or to preserve cash additional to let's say business as usual. An additional to what we were thinking or almost $3 billion most of it has been already accumulated as we speak and the rest will come for instance the reduction of 400 medium borrowings and CapEx would be gradual from now to December. So we might continue access from divestments, but again I mean, it doesn't seem like these are the best market conditions.

And then the other question, Fernando was on sustainability. Are you still investing in sustainability improvements or have you decided to cut environmental CapEx? Fernando González: Well again I have to refer to [indiscernible] we didn't elaborate that much on the thinking process that we are going through. We do consider COVID-19 as a phenomena coming from. We're not specialist in the model that's coming from almost nowhere and unknown virus, same virus for everybody, but different indications, because of we remain because of public policies or because of high for and demographics, weather whatever and - the decision we made was - it's really to privilege our cash position and the rest was let's say at least in our minds it was postponed. For how long, when we made those decisions in March it was 90 days. So are we changing our strategy. Are we thinking that sustainability in this example is less relevant now than what it was of course not, but we can't afford waiting 90 days or reasonably longer for some investments. For instance, let me put to get one simple example. We were investing in a cement plant in order to use biofuels, biomass fuel which is part of our problem as noted to improve our sustainability position. But you know what that plant is not going to be needed for 90 days because of high inventories or because the activities respected then it doesn't make that much sense to continue that project. Now are we going to abandon it of course not? We will continue the plant it is just - even at a time a 3 to 6 months time to be focus only in the issues that we consider essential for business. Then after we know better the process until we know better the performance of different markets. Then we will - can think on going back to business as usual. But nothing is relevant has changed.

Our next question is from Ben Theurer from Barclays. Go ahead.

Yes, good morning Fernando and Maher. Thanks for taking my question, hope you both safe and sound. Just wanted to dig a little bit into your medium-term strategy I mean it's going to be obvious that some of the volume losses that we're going to see within the second quarter might not be immediately recovered but another degree we're seeing, particularly in emerging market significant FX headwinds already impacting your pricing in U.S. dollar terms at an initial stage for the first quarter. And obviously a lot of that has accelerated now into April. So if you think through some of the key currencies. The Mexican peso, Colombian peso even the British pound, where you have certain exposure when translating that into U.S. dollars. So how do you think about your pricing strategy in order to recover that in the light of what is likely going to be a lower demand environment in coming quarters? Fernando González: Well as thanks for the question. As you know, these are tough times and in the case of major markets you've mentioned Mexico and Colombia those are the currencies that impact has the most. We are going to this level of depreciation. Now in the case of the Mexican peso, well let’s see how it goes - that we are covered. Maher might make some comments regarding the hedge that we have in peso terms. But I think what I can comment on pricing is that performance of FX is not necessarily or not the only variable to consider in market dynamics. You have seen in the past how almost regardless of FX depending on market dynamics we apply our policy of recovering input cost inflation. So now in Mexico, Colombia in other markets, we need to by the way advance the activities resume to our regular conditions, we need to evaluate market conditions and see how we are doing with the idea or the strategy of recovering the cost inflation and we would accordingly. I think we have mentioned that in particularly in the case of Mexico, we have not recovered fully in cost - our input cost inflation since early 2018. On the other hand, I already commented because our previous question, is that currently this month or the first couple of weeks of this month, we have seen both cement decline in materially. We have seen bag cement growing also materially. We have to consider those dynamics and act accordingly. Hopefully, we will manage to continue our strategy of keeping prices at a reasonable level.

Okay. Fernando González: Maher anything you wanted to add on the hedging and how it impacts or, Maher? Well I don't know we have a technical problem here, but what I can comment on covered actions that I think we started couple of years ago also on hedging our peso income in Mexico for an amount equivalent to expect that cash flows. So that's what we have. I do remember, I might not remember the exactly the year - that it's around 20 pesos per dollar or about that more or less that level. We will be, let's say our risk currently in personal guarantees up to 24 as well on top of that we are covered. I don’t know if Maher wants to add any additional commentary. Are you there? Maher or are we having a technical issue. We cannot hear you. We cannot hear you. We cannot hear you. Give us a second, let's see, if we can solve this issue. We cannot hear you Maher. I wonder if we lost connection or somebody is in mute or. I think we lost Maher, but we are reconnecting, so please give us few seconds.

Do you want to take the next question, or you want to wait for Maher to reconnect. Fernando González: I don't know what the technical problem is, if it can be solved in 30 seconds, let's wait, if we cannot be solved, we will continue.

Okay. He is back. Our next question is from Anne Milne from Bank of America. Go ahead.

Thank you very much. Fernando. Thank you Maher, and thank you for running all of the measures that you are implementing. I have a few questions that all relate to your liquidity over the course of the year. So I'll just go through them. They are - none of them are very long. You've drawn down your credit lines for about $1.4 billion, which I think is very good. What are the terms or - at least the maturities of these credit line extensions? And then the second question is you do have $397 million in your debt profile, which matures this year, it says other bank debt. Is this something that can be rolled over? I know you also have some pending asset sales here waiting for collection, and my question would be, is there anything that could reverse those sales or cancel them or at least so that you wouldn't get that money. And then as part of your negotiations with creditors, which you mentioned that will be related to covenants and we'll find out details next month. Would part of that be an extension of the facility as well? So those would be my main questions right now. Thank you. I guess one other one you could add to that is working capital. I know you said it will be higher this year. How do you manage it when you really don't know what your demand is going to be from one month to the next. Thank you very much. Fernando González: Thank you, Anne. Let me start with the credit lines and combining it with the second question. The most relevant credit we do is the revolver facility, which is part of the financial agreement with banks, that's one point - growth 1.4. So that's most…

The pending asset sale proceeds coming in, is there any risk of those not coming in? Fernando González: The asset sales proceeds, we are considering them. I think in the second half of the year. We don't have any indication of not, let's say of the threat of not receiving them, but anyhow, we are considering all possibilities when making decisions in order to build this cash buffer - contingencies like those.

Yes. Thank you. Good luck, and be safe.

Thanks, Anne. Thank you very much. Fernando González: Are you back Maher?

Yes, I am.

I would like to turn the conference over to Fernando González for closing remarks. Fernando González: Okay, so you were back timely Maher.

Yes. Fernando. Thank you. Fernando González: Okay. I would like to thank you all for your time and attention. We look forward to your continued participation in CEMEX. So feel free to contact us directly or visit our website at any time. Thank you. Good day and stay safe.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.