Good morning, and welcome to the CEMEX Third Quarter 2020 Conference Call and Webcast. My name is Chuck, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Our host for today are; Fernando González, Chief Executive Officer; and Maher Al-Haffar, Chief Financial Officer. And now, I would like to turn the conference over to your host, Fernando González. Please proceed, sir. Fernando González: Good morning, and thank you for joining us today on our third quarter 2020 conference call and webcast. I hope this call finds you and your families in good health. I'm joined today by Maher Al-Haffar, our CFO. We will spend a few minutes reviewing the business, and then we will be happy to take your questions. We are quite pleased with our performance in third quarter and the recovery we have experienced since the disruptions caused by COVID-19 lockdown in second quarter. In this, in the third quarter, we are moving beyond EBITDA recovery from second quarter, but rather to growth in EBITDA on a year-over-year basis at a double-digit rate. In fact, EBITDA, EBITDA margin and free cash flow in the quarter were the highest since 2016. With the lifting of lockdown measures, bulk cement has rebounded sequentially in Mexico and South, Central America and the Caribbean regions and just bagged cement has also continued to grow. Importantly, Mexico growth in the quarter is not simply recovering from second quarter COVID-19 restrictions, but also about a rebound from a difficult 2019 in the form of double-digit EBITDA growth as the current government settles into its second year. This is the second consecutive quarter of significant margin improvement, resulting from higher prices, energy tailwinds and cost efficiencies under operational…

Thank you, Fernando, and good day to everyone. As Fernando said, it was indeed a good quarter with record performance since 2016, reflecting better than expected trading environment as well as the successful implementation of operation resilience. Now let's move to the next slide. Here, I would like to highlight the more than doubling of our free cash flow after total CapEx for the quarter. This was the result of improved operational performance as well as lower CapEx and investment in working capital. The gains in working capital are largely a result of a rigorous management of our receivables and inventory levels. Average working capital days, on a year-over-year basis, have improved from minus six days in the third quarter of 2019 to minus 12 days in the third quarter of this year. Our lower expenditure and maintenance CapEx year-to-date largely reflects the hotspot in non-essential CapEx enacted in April as a response to COVID-19. We have resumed our normal maintenance in the third quarter and expect to execute much of the deferred CapEx in fourth quarter, or during 2021. Higher other cash items are explained by higher severance payments and lower fixed asset sales versus last year. As we disclosed some days ago, we are recognizing a non-cash impairment of approximately $1.5 billion during the quarter. Most of the write-down relates to goodwill in our U.S. business and an impairment of idle assets in the U.S., Europe, Middle East, Africa and Asia region as well as our South Central America Caribbean region. As a result, our net income, assets and equity in the quarter were negatively impacted. We do not foresee any favorable cash tax impact as a consequence of this action. Third quarter was a busy quarter in terms of liability management. We came into the quarter with…

Thank you, Fernando. 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, of course, 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] Your first question will come from Vanessa Quiroga with Credit Suisse. Please go ahead.

Hi. Thank you for taking my question. It is regarding Mexico volumes. Do you think -- I mean, they are obviously very strong and continue to be in September after the charge that you shared with us in the presentation. Would you expect that the new INFONAVIT programs and the government projects could lead the Mexican cement volumes to reach a new peak? Thank you. Fernando González: Hello, Vanessa, thank you for your question. The answer is, we think, is very supportive of additional volumes, not only this year but next year. But let me refer you a little bit to the general context of what we see happening in Mexico. And I think we all need to remind that last year, 2019 was the first year of this new several government, and it was a transition year. We commented for over times that, but we have forgotten to revisit and reduce that phenomena. So last year, there was no social housing program and other programs in German is supported by the government. But we see this year, it's precisely how different type of problems are supporting the consumption of cement. And we have several types of problems that we believe are going to continue for 2021, and they will even grow in 2021. I'm referring on the one hand to the large projects like that we all know, the airport, the broadcast, the train. And on top of that, little by little, we have seen how other supported programs have been effectively executed and referring to, schools with import to housing. And on top of that, there is this new $40 billion projects -- additional infrastructure projects recently agreed between the public administration and private investors. So what I think that what we have seen is a market that has been reacted -- has been reacting to all those issues with some, let's say, special characteristics impressed by COVID. And we know the story in Mexico, March, April, May, the construction more related to the consumption of both cement lockdown, while the consumption of bags was not respected. So what we have seen on top of that on top recommend on these new projects, what we have seen is the most cement increasing materially to new levels after the initial lockdowns during COVID. So a very long answer, but the answer is, we are quite happy with the performance of the market in Mexico and understand that can be extended an additional potential positive factor next year is midterm election, which sometimes is conducive to reinforcement of the strong momentum.

Thank you very much, Fernando. And I guess to continue with Mexico and just to drill down on the pricing dynamics. It seems like prices were flat sequentially in local currency. So can you tell us what happened with the price increase that you propose to customers in the bagged cement segment? Did they not pass-through? Or were they offset by the other involved cement? Fernando González: Well, we are still in the middle of that process. Vanessa, hopefully, it will probably stick. But we are, as you know, very big one on the objective we have on updating on increasing prices to recover into cost inflation. We have had that policy already for some time. Unfortunately, we have already about 1.5 years or so in which our prices in real peso terms have declined slightly and we have not managed to update or to pass-through our cost inflation. We will continue having that as an objective as the most, and we will try to -- and bring back prices in real terms at the levels we went through. Of course, there is a dynamic going on in the market. We are subject to that dynamic. And as you know, if the market continues growing as it has happened in the last few months, but we'll be very careful to achieve our target of gaining back [Indiscernible]. On the other hand, there is another consideration, which is because of bagged cement volumes being robust already for the few months and box cement coming back recently had some affect on pricing because of the mix of -- but it's just a mix effect, nothing to do with the particularly result in [Indiscernible].

Excellent. Thank you very much. Fernando González: Thank you, Vanessa.

Our next question will come from Gordon Lee with BTG Pactual. Please go ahead.

Hi. Thank you very much for the call. Two quick questions. The first, I was wondering if you could explain to us the sort of very different performance in cement volume growth and ready mix growth. I think it's really interesting that if you look at your cable with your cement volume growth by region, which is very positive, ready-mix is almost a mirror image of that, even in developed markets, where I suppose the bad drivers are a lot less powerful. So I was wondering if you could maybe explain why that is? Is it a mere coincidence? Is it something that worries you in any way going forward as far as the ready-mix performance relative to cement? And then the second question was just a very specific one. Looking at your results from the Middle East, it would appear that pricing, cement pricing in Egypt dropped very quickly in the third quarter relative to the second quarter. And I was wondering if you could maybe comment why that happened? Thank you. Fernando González: Well, regarding Middle East, as you know, the situation is very complex with very high capacity when compared to the market. We do believe that the market little by little will tend to recover, but the capacity utilization in the country is really too low and we will continue as being low for the near future. That's very challenging to, let's say, to guess or to project how Egypt will evolve. Market conditions continue being very similar to what they have been in the last few months last year. So I don't misstate that maybe changes as set for sort of an exception in the industries because things are not -- there are several companies decent money. So there might be reactions on that company.…

Fernando, maybe I can add. Hi, Gordon. Maybe I could just say that bolstering what Fernando said. If you take a look at sequential volumes of cement, ready-mix and aggregates for the quarter, they're growing pretty much in tandem. I mean you see the recovery and in cement for instance sequentially is up 16%, ready-mix is up 17%, and aggregates are up sequentially 16%. So the point that Fernando made is precisely right. And as you had lockdowns and you had the impact of industrial and commercial, as we started coming out of lockdowns, you started seeing a fairly rapid pickup on a sequential basis of ready-mix and aggregates, in line with what's happening to cement.

That’s very clear, guys. Thank you very much.

Thank you very much, Gordon.

And now we will have a question from the webcast.

Okay. The first question from the webcast is from Paul Roger. And the question is about carbon position in Europe and in our strategy. And the question is, are we focusing on market share or pricing? I mean, especially in light of what we said in terms of coming into this cycle from a position of strength. Fernando, would you like to take that? Fernando González: Yes, Maher. If I understood correctly, I think the first thing to note is that we are been pleased that we have CO2 credits enough to go through the rest of the full phase until 2030. So that is giving us lots of flexibility. And particularly because we understand that most of players in Europe are -- when compared to that position, let's say, they are short or they will be needing to buy CO2 credits and some starting in 2022 as fast as I assume 2022 or 2023 and 2024. We believe that, that will have an impact in the market, different types of impact. And I think that will give us a strong position in Europe, the market was completely based in Europe. And I think it will be more related to pricing rather than market share. Let's say, but they might be then maybe a combination who knows. Let's see how different companies in Europe deal will be situation in the next two, three years, and we will have a better understanding and say on how this positive position will translate into additional benefits. Operator? Operator: Yes. Our next question will come from Yassine Touahri with On Field. Please go ahead.

Yes. Good morning, gentlemen. Just a couple of questions. And have you seen any significant change versus what you presented in the first few weeks of October. We're seeing the number of cases increasing quite substantially in Europe and in the U.S. Do you see any cancelation in order books? And also in Europe or in the U.S and also regarding infrastructure, I think what we understand is that the -- what we understand is that the stimulus is likely to be implemented after the election. Do you see any slowdown in infrastructure while the department of transportation are waiting for the money from Washington? Fernando González : Well, that's a very interesting question. I think since we started having the impact of COVID early March this year, we have been -- as you can imagine, trying to observe as much possible, what are the scenarios that this pandemic is causing in different markets, on health, on the economy, on our own activity. So we can respond, we can react at a very fast pace to whatever this phenomena brings. I think the way we see it now is that we are at least in the western world. We are all facing -- we are all going to a phase of existing with these virus personally, business-wise, socially. And unless infections, hospitalizations and totality go to extreme, we believe that because of the experience and knowledge of regulators of society, of doctors and hospitals, we believe that several quarantine measures will be restricted on mobility and in certain sectors of course, impacting economic activity in the terms, but not necessarily disrupting the activity of the construction industry. I think that so far, the industry has shown to be a low risk type of activity, of course, when compared to others.…

And maybe just another very quick follow-up question. Could you give us the percentage of how much pet coke represent as a percentage of your total cost? Fernando González: Say that again.

What would be the percentage of what would be? What would pet coke represent as a percentage of your total cost? Is it a figure that you could disclose? Fernando González: The cost of…

How much pet coke represents as a percentage of your energy cost or total cost? Fernando González: It's pet coke only or fuels?

No, no, pet coke only because we've seen an increase in pet coke prices since the beginning of the year. Fernando González: I don't -- if you're referring to pet coke only in our cement cost structure, no I don't have that info handy with me, but I will get back to you and provide that info.

All right. Thank you very much. Fernando González: Maher, do you have any info related particularly to pet coke?

Yes. I'm trying to just look at the breakdown. Yes, we'll get back to you on that point.

All right. Thank you very much. Fernando González: Thank you.

Thank you.

And our next question will come from the webcast.

Okay. Our next question is from Alejandro Azar with GBM. The question is, what are your thoughts regarding cement prices in Mexico, in the U.S. and Europe, as we approach 2021? Fernando González: Well, we are not providing 2021 guidance. But I suppose it's impossible not to refer to something like that. As you have seen, even in the worst part of the COVID crisis, prices have been receiving on cement are growing. So there will be lot of minuses for 2021. On the one hand, for instance, in some markets, the pricing dynamic was interrupted because of COVID. That is certainly the case in several regions in the U.S. and to some extent, in Mexico. So there is a sort of a higher pass-through needed to go to pricing gap, because of inflation that we have not managed to properly reflect, in France. Given that we expect our reasonable performance, again, we are not providing guidance yet, but the reasonable performance that volumes make here. I think in general sense, we will be able or we will be in a better position to we offset inflation through price increases, but again, given specific guidance on that part, very challenging now.

Thank you, Operator?

Yes sir. Our next question will come from Ben Theurer with Barclays. Please go ahead.

Hey, good morning. Fernando and Maher. First of all, thanks for taking questions and congrats on the results. I wanted to follow-up a little bit on your operational resilience and in combination with CEMEX Go. So clearly, you're showing on the slides that, basically one out of two sales transactions are basically now done for CEMEX Go. And you also show that there's a very nice savings that you've been able on the SG&A side. So I wanted to understand a little bit the evolution of CEMEX Go over the last couple of years. How that has gone up from non-existent three, four years ago to now basically more than 50% of sales being processed through the platform? And how much that has actually been helping to drive some of your efficiencies, by just reducing SG&A? And where do you think this is going to be, for your 2023 target? Fernando González: Sure. Thanks for your question. Let me try to summarize, a process that we have been going to, let's say, in the last three years. We thought that, it was a good idea for us to being able to offer our customers, a superior proximal experience. So the whole idea of the philosophy behind CEMEX Go is the media of being able to offer our customers a superior customer experience, enabled by the technologies. That's where we stand. And in this type of processes, as you know, I think it -- there are some specificity, because this has been the development of a digital platform of a B2B type of business. But besides that, the process we have been following is multi-fit the process that other digital companies have gone through. It's been a journey. And we started with -- with first MVP, Minimum Viable Product. We started…

So, going forward, you expect this to further penetrate and to be even more relevant and, obviously, then drive for savings to your margin target in 2023, correct? Fernando González: Yes. And I think this has been a learning process for us and even a learning process for our customers also. The construction industry is not an industry that have been adopting digital technologies, let's say the long adopt -- there are some examples on the industry and others, but let's say, on material, this is kind of a new or a change in the way customers do business. So we are very pleased with. We will continue investing. We will continue making progress and improving our customer experience through this platform.

Okay. Perfect. Fernando, very clear. Thank you very much and congrats again. Fernando González: Thank you.

Operator?

Yes. Our next question will come from Adrian Huerta with JP Morgan. Please go ahead.

Thank you. Hi, Fernando, Maher. Nice taking to you. Thank you for taking my question. My question has to do with CapEx. You're targeting $750 million to $800 million for this year. How can we look into CapEx for over the next two to three years, especially given potential investments that might be required to reach your climate change targets? Fernando González: Yes. Again, a few comments on CapEx. Let me start by explaining our CapEx performance during 2020, and then we will move to what might happen in 2021 and onwards. If you remember, last March, we decided and commented on a more action of both programs, we started calling it sort of a hard stop. Remember three questions, how did the damage is going to be, how long seen to lab and is it going to be [Indiscernible] and not having clear answers to those questions, we decided to be hard stop. And that included suspending all nonessential or short-term CapEx. We took that action for 90 days, after 90 days we view it. We have some additional CapEx because the scenarios that we started observing were more benign than the ones we thought during March. So we create -- we adjusted and we've increased some CapEx at that time. But we continue in this kind of alert stands, and we extended the concept of the hard stop an event up to December 31 this year. So what the process was a hard stop, then adding some because of a more positive scenario evolving. And now for next year, what we see, what we will be doing something very similar with understanding the scenarios that are unfolded, we will act accordingly. Now in particular, the CapEx related, if I understood correctly, that's part of your question, CapEx related…

Clear. Thank you, Fernando. Fernando González: Thank you, Adrian.

We have time for one last question, and that will come from Anne Milne with Bank of America. Please go ahead.

Thank you, very much. Very great quarter, so good information. I have a few questions, but to make it not too long. I'll just focus on those that really have to do with the debt side of the business. You were very active, as you mentioned, in liability management during the quarter. So the first question is you still have a few bonds that have call options that are in the money. And just for 2021, is this something that you will consider going forward if it's interesting from a cost perspective for CEMEX? And the second, I found very interesting was the introduction of sustainability targets in your loan documentation. So, just a few questions. What was the catalyst behind this? Was this CEMEX or was it the lenders? Where did you come up with the indicators? Is this like an industry sort of level? And then, I noticed that the pricing differential is not huge right now, just five basis points. Is this something that you think might change in the future? Thank you very much.

Fernando, would you like me to address those two questions? Fernando González: Yes, go ahead.

Yes. Anne, we're definitely -- I mean, as you've noted, I mean, we do have several potential bonds that calls that are due. And we're monitoring the market. I mean, to the extent that rates continue to be attractive, I think there maybe opportunities for us to do something. Of course, the markets are very volatile. But, we're always looking at the possibility of doing liability management. So yes, we're looking at it. I mean, obviously, I can't say specific -- I can't refer to specific bonds, but you can imagine when you're looking at our maturity schedule, we're going to focus on the things that are closer rather than the things that are further away. We just -- I mean, as you know, we issued seven-year notes in June, and then we issued 10-year notes in September. So we're clearly looking at a gap, and we do have a year there that is with no maturity. So we would be looking at kind of smoothing out things or pushing them out and definitely taking advantage of rates. And we're looking at, obviously, all currencies. I mean -- so to the extent that we have a window, we're definitely going to exercise that. Now as far as the sustainability-linked loan structure, it was really a combination idea from our banks and from ourselves, I mean, we have been thinking about this for a while. And as you know, there are two types -- two ways that you can kind of have a sustainability-linked structure: One is restriction on the use of proceeds; and the other is having certain KPIs that you would be measured or benchmarked against. The KPIs that we chose, the five that I mentioned in the messages, in the comments, are really very much part of our…

Sure, very interesting. Just a follow-up question on that. Will you, at some point, be publishing what those targets are and what your performance is measured against that? Or that will just be for the bank group?

No. I'm sure that we would make those public. I mean, there's no -- frankly, I don't see any reason why they should be. And we just haven't -- we haven't gone through the cycle of disclosure yet where we -- because as you know, we've just closed a couple of weeks ago and we have a final participant that would be coming in, in about a week or 1.5 weeks, which we finalized the whole process. So as soon as that happens, I'm sure this will be part of our disclosure, and we'll make it available to the market.

Okay, great. Thank you very much, and congrats on the good quarter.

Great. Thank you very much, Anne.

I would now like to turn the call over to Fernando González for any closing remarks. Please go ahead, sir. Fernando González: All right. Thank you for joining us on our third quarter conference call. And if you have any additional questions, please feel free to reach to us, and please stay safe. Bye now.

Thank you for participating in today's conference. This concludes the presentation. You may now disconnect, and have a great day.