CEMEX, S.A.B. de C.V. (CX) Q1 2020 Earnings Report, Transcript and Summary

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 forward, as fiscal and monetary measures take hold and economic activity starts to normalize, policymakers will need to move swiftly to boost demand. We believe needed infrastructure spending will represent a very effective way to reactivate the economy in a targeted manner. Now, regarding our operation, governments have adopted different measures throughout the past few months, designed to contain the spread of COVID-19. The construction industry and on the cement industry have been considered essential activity in most of our operations. Under current restrictions, we are able to supply our products to about 90% of our customers worldwide. However, other COVID-19 measures like physical distancing, stay at home orders and limitation on non-essential activities have significantly impacted demand. In this challenging time, we have responded in an agile manner and we are focusing on three main priority. First, is on safety, our number one priority for many years. We have complemented our existing standards by developing and implementing more than 50 new hygiene and safety protocols, the signs to protect our employees, customers, suppliers and communities from the risk of COVID-19. As part of these measures, we have applied strict hygiene protocols in all our operations and modified processes to implement physical distancing. We have made arrangements, so that employees can work remotely where possible, restricted travel, and enhanced our internal information campaigns and recommended practices for health, hygiene, and social interaction. Our efforts are not limited to our operations, we are also taking actions to protect our community. We are using our ready-mix trucks to carry our soap and water solutions to clean and sanitize open areas like hospital entrances, health care facilities, urban places, and others. Some of our admixtures plants are producing hand disinfectants according to World Health Organization's specifications, to cover the needs of employees and neighboring local communities. We are delivering food, water, medical supplies and other essentials to vulnerable groups. Also, we are donating personal protective equipment to local authorities and communities. Second, to support our customers as much as possible in a responsive way, we have enabled our service centers with remote workforce and capabilities. We are also sharing best practices with our clients. With our CEMEX Go platform, we are uniquely positioned to protect not only our workers, but also our customers. CEMEX Go facilitates physical distancing by allowing us to continue our sales, our payments and our customer service operations in a digital and safe manner that eliminates any risk of virus transmission. The only essential part of the customer journey where there is a physical touch point is at pickup or delivery of our products. On both processes, we have established special health and safety protocols, which includes sanitary centers at pickup points in our facilities and limited interaction at pickup or delivery. And third, to protect the future of our company, we are taking steps to preserve and build our cash position. CEMEX's executive committee and senior leadership members have agreed to voluntarily waive a percentage of their salaries and fees within the next three months. Other salary employees have voluntarily deferred a percentage of their monthly salary within the same period. I would like to take this opportunity to thank my colleagues for their support in these challenging times. In addition, on the operating side, we are reducing total capital expenditures by $400 million from our February guidance. These represent a 60% reduction in non-committed CapEx for the rest of the year. Regarding operating expenses, the savings of $200 million intensify under our strong incentive plan for the year where based on our initial estimates. While we now expect lower activity, which results in headwinds to achieve the savings, we are taking additional measures to respond to the crisis. We also continue to monitor demand conditions and market positions in our different operations to be able to respond and adapt rapidly to any change in the variables. On the financial side, we implemented measures to strengthen our cash position. During March and April, we drilled down about $1.45 billion under our committed revolving credit facility and other credit lines. We also suspended our share repurchase program and will not pay dividends this year. Additionally, in order to increase the margin for compliance under our financial covenants, we have officially initiated the request for the amendment of our leverage and coverage ratio under our facilities agreement. The response from the banks to this request is expected by May 26. We'll update you on this process as soon as possible. As a result of the above, as well as the receipt of $500 million in proceeds from assets divestments pro forma cash as of the end of the quarter reached about $1.7 billion. This represents about five times our average cash in hand during the last two years. In addition, we have pending proceeds from divestment for about $400 million, which are expected to close during the second half of this year. Regarding our financial results, we came into 2020 with favorable demand momentum, which began to be impacted in March as COVID-19 spread. Timing and magnitude of this impact, - throughout our portfolio each market has experienced a unique trajectory of virus transmission, as well as different environment responses to mitigate the spread of the virus. During the first quarter, our consolidated cement volumes increased by 1%, while prices improved in the 1% to 4% range for our three core products, leading to a 2% like-to-like increase in sales, and EBITDA also improved by 1%, while margins declined by 0.3 percentage points. During the quarter, we had our free cash flow after maintenance CapEx best case of $215 million compared to a deficit of $337 million in the same quarter last year, mainly due to a lower investment in working capital as a result of timely management of receivables and inventory as the crisis unfolded. With regards our strongest CEMEX plan we have substantially met most of our desired target asset for the debt reduction goal. Even the challenging conditions we do not expect to reduce our debt by the end of the year as originally planned. Reaching an investment grade capital structure continues to be a top priority, but clearly it will take us more time. Regarding our cost reduction initiatives as I mentioned earlier, we are continuously at evaluating our markets and we will react as needed. Now I would like to discuss the most important developments in our market. In Mexico, our cement volumes grew 2% during the quarter, driven by higher consumption of bad cement. The month during March continued to be strong. Cement prices grew by 3% sequentially, reflecting the price increase implemented at the beginning of the year. Despite this, overall cement prices are still lagging our input cost inflation since the beginning of 2018. The decline in EBITDA margin reflect a favorable contribution from volumes and fuels offset mainly by higher raw material costs in ready-mix and higher freight costs. While cement continues to be considered essential, the construction industry is experiencing restrictions with only the following sectors been allowed to operate. First, from several projects including the Mexico City airport robust Baucus refinery, the mining drain, and projects related to hospitals, clinics, rural roads and other projects considered essential. Construction activity rise widely from state-to-state. And second, retail sales we continue supplying bag cement to most of our distributors. We believe bag cement activity may experience some headwinds in the following months affected by an expected increase in unemployment, decline in remittances and current uncertainty. The continuation of government programs including global growth, while these declines. In addition, the recently announced ready progress for set of structures should also support the formal demand. Regarding former construction, we should see suspended - site to reactivate once the declared as emergency ends. Infrastructure activity could be bolstered by the government as a counter cyclical nature. We're assuming COVID projects and continue to establish the conditions for the private investment needed under the infrastructure agreement. Suspended industrial and commercial projects should gradually restart as restrictions are lifted. New projects will continue to depends on the presence of the right conditions for investment. It is too early to assess the speed of recovery of the construction industry and cement demand for the rest of the year. However, we expect construction to be one of the first sectors to start recovering. In addition, we are coming from very low levels of infrastructure and housing activity last year. The government recently announced a $26 billion stimulus program which will be used to increase spending on social programs and infrastructure projects to help mitigate the impact of COVID-19. Any additional stimulus put in place to reactivate construction should reflect positively on cement demand. The United States the strong results of our operations within the quarter reflect the continuation of the demand momentum we experienced in the fourth quarter coupled with better weather conditions, improve logistics management, and lower energy costs. The strong demand picture at the start of the year moderated in the second half of March as COVID-19 restrictions and certain California markets impacted bodies. Demand and aggregate volumes increased 10% on a like-to-like basis while ready-mix volumes rose 9%. The drivers of demand in the quarter were the residential and infrastructure segments. Texas, California and Florida contributed to volume growth. Prices for cement, ready-mix and aggregates in the quarter was stable sequentially. EBITDA margin for the region drove 2.6 percentage points due primarily to improved volumes and pricing. The stability for 2020 has been substantially reduced due to the health crisis. As of today, construction in all our markets continues to be considered essential and all our facilities can operate and additionally our diversified U.S. footprint implies that the projected of biodiesel Asia the regulatory response and recovery will affect each individual market on its own timeline. While business month to-date April has been resilient, we anticipate that our volumes are likely to be impacted over the year. April price increases in several markets were postponed until summer. Infrastructure accounting for over half of cement demand, its recent strength and counter cyclical nature should provide some cushion for our volumes. Additionally, we are increasingly hopeful that we will see an economic stimulus package that includes significant federal infrastructure spending as the government acts to get the economy moving again. We do however expect weakness in the residential and industrial and commercial sectors. While the continuation of projects in progress will provide support to our volumes for the next few months, initiation of new projects may be delayed as there is greater economic visibility. The majority of our U.S. operations are in markets that are sold out on delay on inputs to meet demand. These inputs serve as an important buffer and allow us to continue operating our cement plants at high capacity levels, while responding to a potential decline in activity. We are analyzing several recently announced government programs both to assist our employees and to facilitate our U.S. operations. In our Europe region, quarterly domestic rates cement volumes were up 1% year-over-year with solid growth in our Central European markets driven primarily by continuing work in the construction sector, partially offset by declines in the UK and Spain due to COVID-19 measures during March. The declines in regional ready-mix an aggregate volumes also reflect the impact of restrictive measures in France and Spain, which offset the growth in our Central European markets. Domestic gray cement prices were up in all our markets both sequentially and on a year-over-year basis. During the quarter, we implemented successful price increases in the United Kingdom and Spain. In April, we also implemented price increases in Germany, Poland, Czech Republic and Croatia. Regional ready-mix and aggregate prices were also higher and each government in the region have imposed different degrees of lockdown measures to mitigate the crisis. The construction sector has be deemed an essential activity in all our geography. In Spain, constructions stopped for two weeks to tighten restrictions at the end of March. Activity restarted on April 15. In France, Spain and the UK, we observe a significant deceleration in construction activity as a result of the implementation of stringent COVID-19 measures during March. Poland, Germany and the Czech Republic authorities have imposed fewer restrictions and the impact has been much less disruptive to the industry. While we expect many of the restrictions in our footprint to be gradually lifted over the next few weeks, the economic toll of the pandemic should continue to challenge the industry for months. While European governments have been some of the most active in announcing monetary and fiscal measures to mitigate the economic impact of COVID-19. Private sector projects should continue to face uncertainty. Infrastructure stimulus spending is expected. However, it may take time, and may not fully compensate for the expected decline in private consumption. It is very hard at this point in time to quantify the regional impact that COVID-19 and potential mitigation actions from governments will have on demand for the full year. In the South Central America and the Caribbean region, we continue to experience favorable pricing dynamics during the quarter despite a significant decline in demand due in part the government's measures to contain the spread of COVID-19. The drop in regional sales and EBITDA was mainly driven by declines in Colombia and Panama. For additional details in this region I invite to review CLH's for any of results, which were also published today. Activities in Colombia was strong before the implementation of COVID-19 restrictions industry volumes improved by around 7% year-to-date, February with an estimated 30% decline during March. Our quarterly domestic gray cement volumes declined by 16% while our prices improved by 9% year-over-year and 2% sequentially. In the Dominican Republic, cement volumes declined by 7% during the quarter. Government restrictions implemented since mid-March slowed down the demand for our products. Cement prices continue their positive trend increasing in the double-digits during the quarter. Our operations in Panama continued to suffer from delays in infrastructure projects, high inventories in apartments and offices, as well as by the deceleration of the economy. The COVID-19 crisis intensified and already weakened demand environment. In our Asia, Middle East and Africa region, we experienced favorable volume dynamics in the quarter. In contrast, regional cement prices declined due to competitive dynamics in the Philippines and Egypt. EBITDA margins for the region increased 1.5 percentage points mainly due to an energy balance, lower raw material cost in cement and higher volume. In the Philippines, domestic gray cement volumes declined by 4% during the quarter, while cement prices declined 6% due to increase competitive dynamics. For the first two months of the year, our cement volumes increased by 8%. However, the persistence transmission of COVID-19 prompted the government to put the region off to some into a strict lockdown, which began on March 16. Our solid cement plant with a capacity of roughly 2 million metric tons, and two marine terminals located in the [indiscernible] region are currently closed. Our operations in the [indiscernible] region are functioning at a low utilization level. Activity for the remainder of the year will be subject to the reopening of the economy, but we expect that rather return to operations and to normalize around the third and fourth quarter of the year. For additional information on our Philippines operations, please see CHP's quarterly results, which will be available on Sunday, May 3 in the evening, Monday morning in Asia. In Egypt, cement volumes increased by 11% during the quarter support mainly by the informal sector while our prices remained relatively stable sequentially. The Egyptian government has been taking very decisive actions to limit the spread of the virus, but avoiding a complete shutdown of the economy. Curfew’s has been imposed however, our industry has been essential. In Israel, ready-mix and aggregate volumes increased by 11% and 8% respectively during the quarter. The infrastructure sector was the main driver for growth closely followed by housing and commercial activity. Prices also improved during the quarter and while we saw a slight decline in activity during the month of March we have not seen a significant impact from COVID-19 pandemic. Construction has been considered an essential activity. In addition, strong economic fundamentals higher activity notice buildings in Tel Aviv and clients bringing consumption forward in anticipation of potential pressures has helped maintained demand for our products in the country. And now I will turn the call over to the Maher to discuss our financials.

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 I turn the call back to Fernando, I would like to mention that starting next quarter. The Europe and the Asia, Middle East and Africa regions will be consolidated into one, reflecting the recently announced changes in senior management. Now I will turn the call to Fernando. Fernando? Fernando González: Thank you, Maher. Given the continued uncertainty because of COVID-19 it is difficult to resume EBITDA and volume guidance at this point. However, we are providing estimates for energy and some of the items - we can't control below the EBITDA line. Regarding cost of energy per ton of cement produced we’ll now forecast a decrease of 46%. We now expect CapEx investments to be around $700 million for the year a reduction of 60% in our non-committed CapEx for the rest of the year. During the next three months, we will be reducing these expenditures to a minimum. On financial expense, we now expect an increase of $25 million to $50 million as a result of higher average debt for the year to improve our cash position, as well as higher rates. We expect no significant change in cash taxes we should reach about 200 million barrels for the year. Due to lack of visibility on our topline growth, we believe that working capital investment will be higher than the one provided at the beginning of the year. However, we are not in a position to provide the new estimate at this point in time. Given the challenging and uncertain times caused by this pandemic we will continue to monitor the development of COVID-19 and act decisively to ensure the health and safety of our employees, customers, suppliers and communities. Thereby support our customers in these difficult times and protect the future of our company. We are encouraged by the historical scope of the physical and monetary measures that are being implemented by governments in a significant portion of our portfolio. We expect additional measures to address, but we need infrastructure and support housing activity in most of our markets. Thank you for your attention. I would like to take this opportunity to wish everybody good health and to be please keep safe. Fernando González: 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 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 prices for our products. And now we will be happy to take your questions. Operator?

[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 was extended until May 30 some decisions might be made in mid-May. Some decisions meaning depending on the evolution of the impact of the pandemic. Authorities might start a progressive start of the economy or different cities coming back that we seen. In the case of the U.S., the first couple of weeks volumes are still stable from stable to slight growth. Again, this is the first couple of weeks but let's see how it goes in the next weeks. As I mentioned, there are some positive like construction of the Bay Area opening like market state and infrastructure. What I also mentioned regarding that some construction companies will improve speed up their construction projects. While let's see how it goes moving forward where are all the book is still stable, we wonder if - some early indicators like permits and others will allow us to better understand the behavior of demand in the next 3 to 6 months. In Europe, I think what we see, and it seems like that we’ll continue being the behavior of the impact of COVID-19 is that there are two Europe Central and East Europe has not been materially impacted and even in April, countries like Germany or Poland are still with a positive behavior, positive growth. But clearly, the UK versus Europe, the UK in our case - relevant markets in West Europe, UK, France and Spain are declining in the first couple of weeks of April in different degrees, and most probably that will be the case for America hopefully, if we refer to the chart that we showed before. Hopefully, if the trend continues being the same, we will see West Europe exiting or leaving a period after the peak, which is conducive to believe that authorities will start easing the lockdown in those countries. I think the most stringent measures in the lockdown at least to our industry have been taken in the emerging market or most of South America the Caribbean region. We have for instance, the along the other meaningful deposits which is a complete restriction on construction. Unfortunately, these two countries that I mentioned are also exiting let's say are after the peak and hopefully, and again if trends continue they will be able to offer Colombia has announced already a process to start opening the construction industry and Dominican Republic as well. The Philippines, as you know the part of the different island is - fully restricted, and as you might know - that the islands in the North was Manila is imitated is [indiscernible] around 70% of the economy in the Philippines. Again it has won already that way for about a month till April till - at a very low level because of that, and again if trends continue as things improve, we will see an opening of that market as well we know before COVID-19, it was growing as an objective base. So that's more or less the points I can make on April, we will be updating as much as possible how it is. Again, this is the - kind of variables that we are observing currently meaning as we have commented in mid-March, about mid-March, we decided after looking at the impact of COVID-19. We decided to make that the way I call it is a hard stop which is not stopping [indiscernible] hard stop on business as usual type of mentality concentrate and defined what is it that is essential or what was essential over the next 90 days. And we thought that whatever was not essential for the company for the pressure of the company in 90 days we just stop it, that's how we managed to reduce CapEx by 60%, 60% meaning CapEx that were not spent from January to March or merit I have January to March. And right now we're still observing different scenario because there are decisions still additional decisions to be made depending on the scenario that unfolds in each of the market. So as you can imagine, we are monitoring, we are looking, we are trying to find early indicators so we can act and react kindly to those conditions. If a country after the COVID impact gets into V-shape recovery. We want to be prepared, we want to have the asset, we want to have the people that might be the case in some market but might not be the case in other markets, but we will see.

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 of it, and credit terms similar to what the same than the rest of the assay, and this revolver is due in July 22. So that's the most important part. The other loans are short-term loans which is most probably the ones that you see that there should be a lower during this year, and we will continue to invest, and we will continue exploring different sources of increasing our cash buffer. Regarding negotiations, we are completely focused on covenants right now. Right now, we are not trying or - to negotiate the assay, [indiscernible] is just about a different set of covenants in the very short-term meaning perhaps two, three quarters and that's the focus afterwards meaning it goes in the year, we will see and reduce it again the agreement. Regarding working capital, we believe it is going to increase because that's the - let's say, directionally that's what has to happen, but we know exactly what is it that is going to be happening. The answer is no, but we know what to expect and we are working on that regard. So that is one simple example. If our sales drop, our securitization program will be smaller, so that should we know already, and perhaps the most important part is that, as I mentioned is like trying to manage or trying to drive something that we cannot, you can almost not see anything. But we are sure is that the impact in COVID-19 in different markets both from a mild negative impact to a sizable short-term impact, as why we took these attitude a hard stop, and then if like thought first and act afterwards and working capital is one of the variables that we are giving in our different scenarios. We need more time to be more confident on which scenario is going to be unfolding in each and every market, so we cannot tell you. But as of today, we don’t have any additional color to what we might do - is like the example I mentioned in our cement plant. In cement plant, there is a restriction that is supposed to last 30 days, we act as if that plant is going to be shut down forever, no. What are the proper measures to be taken when the plant is shut down 30 days? Those are the ones that we are taking and continue to evaluating the impact of COVID in that term. So I'm afraid what I'm saying is we are on top of it, but we need more time to evaluate what the specific scenario to be unfolded in each and every market. And I think those were the questions to, did I miss any?

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.