CEMEX, S.A.B. de C.V. (CX) Q2 2024 Earnings Report, Transcript and Summary

Good morning, and welcome to the CEMEX Second Quarter 2024 Conference Call and Webcast. My name is Drew, 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]. And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning. Thank you for joining us today for our second quarter 2024 conference call and webcast. We hope this call finds you in good health. I'm joined today by Fernando Gonzalez, our CEO; and Maher Al-Haffar, our CFO. As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. And now I'll hand it over to Fernando.

Thanks, Lucy, and good day to everyone. I'm pleased with our second quarter results, where EBITDA grew year-over-year despite significant weather challenges in several key markets. Even with the decline in volumes and a strong prior year comparison, EBITDA margin expanded to the highest levels of the last three years, marking five consecutive quarters of expansion. Our pricing strategy adjusting to reflect decelerating cost inflation continue to pay off with a widening price to cost ratio. Bolt-on growth investments, mainly in the U.S. and our urbanization solutions business continued to support EBITDA growth. During the quarter, we achieved another important milestone with our second investment-grade rating from Fitch ratings. Our return on capital in the double-digit area remains comfortably above our cost of capital. In climate action, we are focused on delivering on our future in action road map, reducing our Scope 1 CO2 emissions by 3% in the first half of the year relative to the same period of 2023. During the quarter, we were recognized by the World Benchmarking Alliance, a nonprofit organization that assesses and ranks the world's most influential companies on their contribution to the UN sustainable development goals with the highest climate transition score. Net sales were flat impacted by difficult weather conditions in several of our regions. Pricing growth offset the decline in ready-mix and aggregate volumes. EBITDA rose 2%, driven by strong growth in Mexico. EBITDA margin expanded to the highest level since 2016 as our pricing strategy effectively outpaced input cost inflation. Free cash flow after maintenance CapEx declined slightly, driven by the timing of tax payments and lower fixed asset sales. Consolidated cement volumes were flat while ready-mix and aggregate volumes declined 9% and 3%, respectively. The U.S. and Mexico experienced difficult weather conditions, which impacted volumes. Even with the weather headwind, Mexico again stood out in the quarter with strong volume performance, driven by improved bagged cement activity and continued strength in the infrastructure and industrial segments. U.S. volumes were impacted by weather, slowing demand in residential and competitive dynamics in certain micro markets. In EMEA, volumes declined due primarily to the challenging demand environment in Germany, U.K. and France and geopolitical events in the Middle East. Despite the challenging volume backdrop, our consolidated prices rose mid-single-digit year-over-year and were stable on a sequential basis. While price increases are moderating from the prior year, the increases continued to more than offset decelerating costs. In the U.S. and SCAC, cement prices rose sequentially due to price increases in the quarter, while EMEA's mid-single-digit increase is largely explained by geographic mix. Sequential declines in aggregate prices in Mexico and SCAC are related to geographic and product mix effects. I am excited to see the evolution of EBITDA in the quarter where we clearly see the impact of our pricing approach and growth strategy. Our pricing contribution continues to exceed decelerating input cost inflation with the price cost dynamic improving versus the prior year. The deceleration in cost is visible with cost of goods sold as a percentage of sales declining 1 percentage point. Bolt-on investments made since 2021 continue to be an important component of growth, now accounting for 10% of total EBITDA. EBITDA margin expanded to peak levels driven by our pricing and growth strategy. With a well-balanced geographic and product footprint, urbanization solutions maintained its trend of double-digit EBITDA growth and margin expansion. Main driver of growth came from our Regenera Circularity business, driven by the construction, demolition and excavation materials activity in Europe. In Mexico, pavements and services and admixtures continued their growth trajectory, driven by the high level of former construction activity. Although global admixtures volumes declined in sympathy with lower cement and ready-mix sales in several regions, EBITDA increased on the back of double-digit pricing increases. Our efforts to expand the admixture business are meeting with success as sales to third-parties continue to scale. We are very excited about our recently announced partnership with Ellen MacArthur Foundation, the world's leading circular economy network with the purpose to continue accelerating our circularity efforts in the built environment with our Regenera brand. On climate action, we continue to make steady progress in the carbonization with a 3% decline in Scope 1 emissions year-to-date. Our continued success speaks to the effectiveness and profitability of traditional decarbonization levels in our industry and the validity of our "Reduce before Capture" strategy. Since the launch of our Future in Action program in 2020, we have materially accelerated the pace of our decarbonization, reducing Scope 1 emissions by 14% and reduction that previously would have taken us more than 15 years to achieve. CEMEX Europe continues to lead the way in this transition with emissions within reach of our 2030 consolidated target six years ahead of time. CEMEX's Europe climate leadership stacks up globally as well with a carbon footprint already way below the European cement industry comparable 2030 target. Finally, I'm very pleased that CEMEX was recognized as the industry top scoring company in The World Benchmarking Alliance 2024 Climate and Energy benchmark. CEMEX achieved the highest score of 91 heavy industrial companies within the cement, aluminum and steel sectors, demonstrating our leadership in climate action and social impact not only within the cement industry, but across several hard to abate sectors. And now back to you, Lucy.

Thank you Fernando. Our Mexican operations once again delivered exceptional results with EBITDA reaching record less while bad weather engine dampened performance, quarterly volume growth remained strong, reflecting the dynamism of both formal and informal construction. Infrastructure assuring with particular strength in the North and Southeast continued to be the principal growth drivers. Bagged cement grew at a mid-single-digit pace, benefiting from increased social spending and a favorable comparison base. Significant expansion in Mexico's EBITDA margin resulted from mid-single-digit price increases as well as decelerating cost, particularly in energy. Implicit in our guidance from the beginning of the year has been an expectation of softening volume in the second half of the year due to an expected decline in government spending post elections, and the completion of the cement-intensive pavements of the current administration's mega infrastructure projects, coupled with a tougher comparative base. Nevertheless, we have a healthy backlog of projects in formal construction, particularly those related to nearshoring and infrastructure. On the medium-term outlook for our industry in Mexico, we are optimistic. The new federal government's agenda appears supportive with the goal to increase housing by 1 million units as well as focus on building out infrastructure nationally. Social programs, low unemployment rate and wage growth as well as increased focus on low-income housing will support cement demand. The new federal government has also expressed interest in capitalizing on the nearshoring story by developing 14 economic corridors across the country as well as additional industrial space. We hope to work with the new federal administration on developing new innovative ways to expand the circular economy, including replicating our work on the repurposing of municipal waste streams in Mexico City. In the U.S., our operations continued to be impacted by bad weather in much of our portfolio. Despite these weather challenges, margin expanded to record lows driven by higher prices and lower cost inflation in the form of fuel and imports. EBITDA declined slightly due to lower volumes and higher maintenance costs. We expect EBITDA to improve in the second half of the year with volume growth, less scheduled maintenance, decelerating costs and market share recovery. Cement and ready-mix volumes declined 7% and 12%, respectively, due to heavy precipitation, some softening in the residential sector, portfolio rationalization, competitive dynamics in certain markets and the timing of several large projects. In aggregate, where volumes are less impacted by weather conditions, volumes declined low-single-digits. We estimate the impact of weather conditions on cement, explains approximately 25% of the volume decline. Pricing for our core products is up mid- to high-single-digits year-over-year. We have implemented cement pricing increases in approximately 70% of our portfolio with increases in all markets, except Northern California and Texas. In the markets in which we raised prices, prices were up sequentially between low to mid-single-digit percent. During July, we implemented mid-single-digit price increases for cement in most of our Texas market. Year-to-date, we have implemented aggregate price increases in all markets. Pricing in aggregate is up 6% point-to-point since December. We are expecting improved volume growth in the second half of the year, supported by positive underlying demand in infrastructure and industrial from projects related to onshoring and clean energy as well as easier comps. Finally, we are also excited about our recent joint venture agreement with Couch Aggregates, which will strengthen our aggregate reserves and distribution capabilities in the mid-South market. In EMEA, EBITDA declined, driven by a continued challenging demand backdrop in Europe and geopolitical events in the Middle East, although the magnitude of the drop was considerably less than what we experienced in the first quarter. Last quarter, we announced the sale of our Philippines operations, and we expect to close this transaction by year-end. As a result, our Philippines business has been reclassified as a discontinued operation, and is now excluded from our 2024 and 2023 operating results. In Europe, EBITDA declined high single-digits against a tough comp due to volume performance derived from continued sluggish growth in Europe and the current construction ban in Paris in preparation for the Olympics. Importantly, we are seeing a divergence in volume dynamics between Western and Eastern Europe with the U.K., Germany and France, experiencing large declines while our Eastern European footprint, the Czech Republic, Poland and Croatia continued to grow significantly. We have responded to conditions in Western Europe over the last two years with adjustments to our operations to protect margins as much as possible. We believe we are approaching an inflection point in Western Europe with better economic data and expected decline in interest rates, easier prior year comps and the lifting of the ban in Paris for new construction post-Olympics. Despite volume headwinds, prices for our products have remained resilient across our European footprint with flattish year-over-year and sequential performance. The reported price declines in ready-mix results from geographic mix with lower ready-mix sales in higher-priced markets such as France and the U.K. EBITDA margin in Europe declined against a difficult record level comp last year. Our costs continue to decelerate, particularly in energy from the production of cement. On climate action, CEMEX Europe continues to test record low levels of clinker factor with a reduction of 3 percentage points year-to-date to below 70% using traditional decarbonization levers. Additionally, the sale of lower carbon cement now accounts for more than 80% of our total cement sales in Europe, rising almost 5 percentage points year-to-date. Finally, in the Middle East and Africa, EBITDA declined due to ongoing tensions from a conflict in the Middle East and from the devaluation of the Egyptian pound. Sales in the South, Central America and the Caribbean grew low-single-digit, driven by positive pricing contribution of our products across the region. EBITDA in the region declined slightly, driven by timing and maintenance, which more than offset positive pricing contribution as well as lower energy and raw materials costs. Cement volumes were flat with continued growth in bulk cement, supported mainly by the infrastructure sector. The formal sector drove demand in the region with large infrastructure projects, such as highways and metro line projects in Bogota and Panama, construction of the fourth bridge over the Panama Canal and tourism projects in the Dominican Republic. And now I will pass the call to Maher to review our financial developments.

Thank you, Lucy, and good day to everyone. Sales and EBITDA for the first six months of the year were up 2% and 4%, respectively, versus last year and with a margin expansion of 40 basis points, reaching 20.3%. If we adjust for volumes, our margin would be 70 basis points higher for the first half of the year. Mexico continued performing extraordinarily well with first half EBITDA growing 17%, driven by strong volume and pricing. EBITDA for our U.S. operations was flat during the first half of the year, driven in part by bad weather. Combined, our Mexico and U.S. markets, which represents 75% of our EBITDA, delivered EBITDA growth of 10% in the first half of the year, which was offset primarily by weaker volumes in our EMEA region. Our Urbanization Solutions business continues to deliver a strong performance, growing 13% year-to-date. This business now represents 10% of our consolidated EBITDA. On the cost side, year-to-date, we saw a 21% decline in fuel costs on a per ton of cement basis versus last year. This was driven by a decline in the price of all of our fuels, our increased proportion of lower cost and lower carbon fuels and our continued reduction in clinker factor. On a sequential basis, consolidated fuel cost per ton of cement declined 8%. Currently, approximately 70% of our hedgeable energy and freight costs are hedged for 2024, and we are well advanced in our 2025 program. Some of our hedges allow us to benefit prices decline while protecting us in the case of sharp upward movements in energy prices. Free cash flow after maintenance CapEx for the first six months was $40 million, about $180 million lower than last year. While we had better operating results and lower maintenance expense, our free cash flow was impacted by higher taxes, primarily in Mexico and Spain. We have been implementing targeted actions to improve working capital, optimizing our inventories and terms of trade throughout the company. And we remain on track to our previously stated guidance of reducing about $300 million in working capital this year. Net income for the first six months of the year was $485 million, 3% lower than last year, driven primarily by FX losses related to the depreciation of the Mexican peso. Given the recent volatility in the Mexican peso, I would like to highlight that we have an ongoing Mexican peso hedging strategy that effectively lowers the volatility of the exchange rate at which we convert pesos into dollars for tenors of up to two years. This program helps smooth out our free cash flow in dollar terms. Our capital structure remains strong with ample liquidity and no material debt maturities until 2026. Our leverage ratio stood at 2.13x, about one-third of a turn lower than last year and slightly lower than the first quarter. We remain fully committed to achieve an even stronger capital structure and reduced leverage by 0.5 turn in the next 24 to 36 months. I would like now to discuss briefly some of the things we're doing to further align our financial strategy with our Future in Action agenda. As you know, we now have over 50% of our debt stack linked to sustainability KPIs. And we are on track to reach our goal of 85% by 2030. In addition, we have recently implemented a variety of programs throughout the company totaling about $300 million that provide a financial incentive to our suppliers and clients that align with our Future in Action goals. These include supplier finance programs with special conditions for suppliers that meet a certain minimum sustainability goal, women-owned businesses and small companies as well as incentives for clients that purchase our lower carbon products. And now back to you, Fernando.

I'm happy with our year-to-date performance despite difficult weather conditions in several markets. I am confident with our 2024 low to mid-single-digit EBITDA growth guidance. We remind you that our guidance is for like-to-like operations and now excludes the Philippines and assumes FX as of the end of the quarter for the remaining of the year. We continue to expect favorable price to cost dynamics for the rest of the year. For energy cost per ton of cement, we are upgrading our guidance to a high single-digit decline instead of a mid-single-digit decline. We expect improved volume performance in the U.S. and Europe in the second half and continued pricing resilience in our markets. Please see the annex for our current volume guidance by region. And now back to you, Lucy.

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 Instructions]. And the first question comes from Alejandra Obregon from Morgan Stanley.

Hi, good morning, CEMEX team. Thank you for taking my questions. I guess this one is about the U.S. So you did provide some color on residential, but I was wondering if you can talk a little bit more about what you were seeing from the ground for U.S. cement demand from an end market perspective. And more importantly, as you look at the backlog and the trends into July, we can help us understand how to think of each end market going forward. So we did mention that you expect some improvements for the U.S. here. Thank you.

Thanks, Ale, for the question. I think as we think about this, what we saw in the second quarter was that infrastructure, which, as you know accounts for about 50% of U.S. demand in street and highway spending, which is the most cement-intensive part of infrastructure has continued to be quite vibrant. The multiyear projects that have been improved under IIJA are continuing to roll out. When we look at contract awards at the national level, we continue to see double-digit growth up until last month where it slowed to low-single-digit. But again, these are multiyear projects. So I think that gives you some sense of the momentum in the infrastructure sector. In the case of residential, we did see more of a slowdown than we anticipated in second quarter. And as you know, residential is about 30% to 35% of demand. I think we would attribute that slowdown due primarily to affordability and to the mortgage rates actually moving above 7% in the second quarter. This is not necessarily to be particularly surprising. We think in this kind of environment where you see things like benchmark rates going above 7%, that it will lead to a slowdown in residential. But I think it's also to look a little bit beyond into what's driving it. And what's really been driving that slowdown in residential has been primarily multifamily. If you look at single-family start and permit data, that is continuing to rise. In fact, I think there's only been one month in the last 14 months were on a year-over-year basis, single-family starts and permits declined. So fundamentally, there is still very much of a shortage in terms of housing inventories in total in this country. And I think our expectation is that as we continue to hopefully see more improvements on the interest rate side and some pricing adjustments in specific markets that residential is going to recover, but it's not on as fast trajectory at the moment as what we expected at the beginning of the year. Finally, with regard to industrial and commercial, I think really no surprises here. We started out the year thinking that commercial would be quite slow, and that has proven to be true. There are some structural issues that probably are going to take a while to resolve as well as, of course, those higher interest rates very much impact the profitability of commercial projects. On the industrial side, we do continue to see projects rolling out, particularly with regard to onshoring and manufacturing in our markets. Of course, these are very large projects and it can be episodic, but definitely demand is there on the manufacturing side. It has not been enough to offset the weakness that we've seen in terms of commercial. We do expect, as we move into the back half of the year that things will get better. Number one, that weather impact, which -- and this is a fairly conservative estimate. It's not easy to come up with. We estimate it was about 25% of our volume decline in the second quarter, but we believe that, that should get better. The comps themselves become easier because we saw volumes declining last year in the back half. And some of our efforts to recover market share should also be paying off in the second half. So I hope that answers your question.

It does, Lucy. Thank you very much.

Thank you. And I think the next question comes from Ben Theurer at Barclays. Ben, please go ahead.

Yes, good morning, Fernando, Lucy, Maher. Thanks for taking my questions. Just wanted to follow-up on some of the components of the guidance and how to get to the EBITDA. And obviously, I noticed the improvement that you're seeing on the energy cost side raising or kind of lowering, but at the same time it's raising it for EBITDA. The energy cost from mid-single digit to high-single-digit. But at the same time, you spoke about 20-plus percent decrease in fuel. So I just wanted to understand like the moving pieces and the confidence you're having as to the energy cost of being what's hedged, what's not hedged. And if there is potential upside risk to the guidance, i.e., that maybe would even be in the low-double-digits instead of the high-single-digit when it comes to energy costs. Thank you.

Yes. Thanks, Ben. Maybe I'll take that and if you guys want to help me out if I miss out on anything. Ben, very importantly, throughout the year, we have been pleasantly surprised and better than our expectations in terms of energy cost dynamics, particularly on fuels. And that's being driven by a few things. Number one is that most of the primary fuel markets have -- commodities markets has dropped since the beginning of the year. So pet coke, coal have dropped. But also very importantly, we have been going away from the more expensive, more carbon content fuels to lower expensive, lower carbon such as nat gas, for instance, which is an important switch in the case of Mexico and in the U.S. And also at the -- we're substituting in the case of alternative fuels as well from higher carbon content to lower carbon content and lower cost, in particular, in Mexico. So those two trends are very important drivers for the reduction of the cost of fuels. And then the other thing, of course, as we mentioned, clinker factor is down as well about 1.2 percentage points. And the expectation pretty much on all of these trends to kind of continue either to be stable or to continue to improve in the second half of the year. Now a lot of these changes have taken place. So the expectation of the added improvement of this in the second half of the year is probably not quite the majority of the improvement for the -- on a full-year basis. And the other component of that is that on electricity, that is up slightly. But again, in the first half of the year, we had some very important changes in Europe, in particular, renegotiation of some important contracts that contributed to some of the increase. Electricity was up like 3% once you consider efficiencies that we introduced in our business. So a combination of better comps in the back half for electricity continued stable and/or declining markets and/or substitution into lower-cost fuels is giving us the conviction of improving our guidance from what we had in the beginning of the year to the second half of the year.

Got it, thank you.

Thank you.

And the next question comes from the webcast from Paul Roger from Exane BNP Paribas. What criteria did the World Benchmarking Alliance used to rank companies on sustainability? And was there anything specific that won CEMEX, the number one ranking?

Yes, Paul, we understand that the criteria of the World Benchmarking Alliance is accounting 60% for climate action activity and 40% for social issues. As you can imagine, we are very pleased by being ranked number one among these three so-called hard to-abate industries. I mean cement, steel and aluminum. On the specific reasons why we won or we were ranked number one, I can't describe what is it that. But I don't have the elements to compare with other 90 companies that were considered in the ranking. I think our Future in Action strategy, our strategy that was reloaded in 2020 is working very well. Most of the indicators that we are committing and promising to 2025 and to 2030 are evolving very well. Our reduction since 2020 as of the second quarter of this year is already a reduction of CO2 Scope 1 is already 14%, which is a very material reduction. And we are headed to comply with our 2025 and our 2030 targets, as I mentioned, just to remind that the 2030 target for our CO2 at per ton of cementitious material, is a reduction of 47% using [indiscernible] base. And in the social part, I think it's already -- our social strategy is it's known and it's already even a traditional Web CEMEX to focus on or issues. Having said that, again, we were not -- really, we were not expecting this ranking, and we are extremely knowing that this -- this ranking was -- did favor. As you can imagine, this is a huge incentive for the CEMEX team to continue in this direction.

Thank you, Fernando. The next question comes from Carlos Peyrelongue from Bank of America.

Thank you, Lucy. And Thank you. The question is related to pricing, particularly in Mexico, but if you could also comment on the U.S. for the second half of next year. We've seen very strong volumes in Mexico obviously. So you think there is room for further price increases or have announced any price increase already in Mexico? And any color on the U.S. would be helpful as well.

Well, Carlos, maybe I'll take that to start with, and then Lucy, maybe you can also help me out as well. I mean pricing strategy, one thing that's important has been very much driven by the inflation that we're experiencing in the different markets and our different products. So when -- clearly, as you saw over the last couple of years, as inflation spiked, we took action in our pricing strategy and very successfully. So now what we are seeing is definitely a moderation or deceleration in inflation in several of our markets. And so it goes without saying that our pricing strategy moderates as well, keeping in line, of course, the positive impact that we want to have in terms of price minus cost in all of our businesses there. Mexico, as you know, continue to have probably one of the highest inflation in our markets. Just yesterday or the day before, as you know, Carlos, inflation numbers came out a headline numbers are up like 6%, core inflation is 4%, and our business, it's even probably more. So on the back of that and back up very positive demand, we have announced pricing increases in the bag product in the mid-single digit level. And we're getting reasonably good traction. So I would keep an eye on inflation indicators in each one of our markets. In general, pricing in the year-to-date has been affected in 75% of our volumes all of our portfolio in the U.S., in Europe, South Central America and Mexico. In the case of the U.S., we had increases in the beginning of the year. We've announced some very selective increases in Dexus in July, and we're seeing very good traction there as well. Inflation is a little bit less in the case of the U.S., but the markets are sold out. Supply/demand dynamics are very positive. So we expect to get decent traction there. And in Europe, we had a similar situation like despite the weakness or headwinds in terms of volumes, because of inflation, because of carbon taxes, I would say the whole market has been fairly resilient in terms of pricing, and we've had we've had good pricing increase in the first half in several of our markets, and we continue to push as much as possible in the second half of the year. One thing I'd like to say is that even if we don't have any further pricing increases in the second half of the year, we have a couple of percentage points or more tailwind in pricing in the back half of the year.

Very clear. Thank you, Maher.

Thank you very much, Carlos.

The next question comes from Yassine Touahri from On Field Research. Yassine?

Yes, good morning. So just one question on my side. During the CEMEX Market Day, you mentioned that when you look at the sum of the parts, you believe that CEMEX should trade at 7x to 9x of EBITDA, when you look at the multiple of peers. Today, you're trading at 5x to 6x, so it's much lower. And we've seen some of your -- some companies in the sector such as Holcim moving to the U.S., [indiscernible] moving to the U.S., Argos selling some assets in the U.S. or Titan Cements moving to a listing a minority stake in the U.S. and they managed to crystallize some of the value of their U.S. assets. When you look at the share price performance on your multiple, how do you think about the future? And what do you think you can do to crystallize this U.S. value, which is not currently reflected in the share price?

Yassine, thank you very much for the question. Obviously, each -- I don't want to comment on our peer strategies, because they may have different drivers and not just for effectuating proper valuation. The only thing, frankly, that we can do is continue to deliver growth in our business. I mean, I think that's very important, highlighting also the profile of our U.S. business. Our U.S. business is growing materially, and we're expecting it to grow significantly over the next two to three years. You've seen that despite headwinds in volumes, pricing is very good. Margins have improved significantly to historic levels. And we're continuing on that. We were expecting the U.S. business to continue to contribute to the overall contribution of our EBITDA in the next two to three years. And so we just need to continue to deliver that and highlight that to the market. The other thing is our Mexican business. Our Mexican business under a lot of volatility is delivering record performance, both top line and EBITDA and margin growth. And we're seeing definitely a lot more stability in the recent past in terms of FX and dollar generation out of our Mexican business compared to many, many years ago. So I think -- and a combination of these two businesses is 75% to 80% -- we're expecting to have those two businesses be 75% to 80% of our cash flow generation. And so the thing that we can do right now is rather than fiddling around with capital structuring and creating a much more complex corporate structure. We would rather continue with the approach that we have and just deliver the performance, shine the light on the undervaluation given the growth that we're seeing in our North American businesses. And hopefully, the supply and demand for our stock would get us to a more favorable valuation.

Would you can still buy back?

The buyback question, Yassine, is a very good one. And I think there, I would like to kind of make this not exactly the same comment, but roughly a similar comment to the one that I made at our Analyst Day earlier in the year. And that is that we have had in the last three years, a very robust deployment of capital that have been completed and that isn't flight in our growth portfolio and as well in urbanization solutions. Both of those two deployments of capital are extremely accretive. And today, we estimate that the EBITDA multiple that we're deploying capital at is somewhere between 3.5x and 4x. So and we have a very robust -- not order book, a very robust portfolio of projects that are in flight right now that we expect to deliver similar accretion in the next 12 to 24 months and maybe beyond. But I'm going to be cautious and just stay in the next year to two years. So with that kind of profile, from a capital allocation perspective, it makes a lot more sense for us to continue to invest for growth at very attractive multiples despite the fact that we believe our stock at current valuations is very, very undervalued.

Thank you.

Thank you.

And the next question comes from the webcast from Anne Milne from Bank of America. Good news on meeting emission targets ahead of schedule in CEMEX Europe. What have been the main drivers of meeting this objective? And will any other regions meet these targets ahead of schedule? Fernando González: Hi, Anne, thanks for the question. We are very pleased with the results of our fusion in action strategy in Europe as well as all over the company, but particularly in Europe, given that Europe is the region that is leading and is ahead on the transition towards low carbon or carbon-neutral economy. And the main drivers, if you remember, I mentioned the term that we started using this idea of reducing before capturing, which is not reducing instead of capturing, but it's just making a very strong emphasis on massively and at a high speed to do as much as possible to use all the levers to produce CO2 generation in cement. So in the case of Europe, we have the targets for 2030, very ambitious, a reduction of 55%. But as we speak, we currently have, we believe, the high level of alternative fuels in Europe, alternative fuels with relevant biomass content. So that's one of the drivers, allowing us to make this reduction before we were expecting it in our targets. Same for clinker factor, which very recently, it's already below 70%, one of the lowest in Europe. That is a third lever that might explain why you said that we are achieving this objectives is that we are increasing -- we've been increasing the use of the carbonated raw materials to produce clinker. And of corporate traditional levers like the use of [indiscernible], electricity and others, but I'm just mentioning the most relevant one. [indiscernible] in Europe nowadays, we've been able to suit our objective of our Baluarte cement and ready-mix family products. Because in Europe, already, we are selling more than 90% of cement and ready-mix with these characteristics, meaning a reduction of at least 5% of your percent issues material per ton or per cubic meter of ready-mix. So we are very pleased with our position, is a leading position in the cement and ready-mix industry in Europe. And referring to the other part of your question is are other reads meeting the targets ahead of schedule. I think in general terms, they are a good way to -- a good example to show it, again, achieving some targets before the year we were expecting to achieve. Let me refer to the global number for Baluarte products, Baluarte cement and ready-mix products, we were expecting a reduction or not a reduction. We were expecting to sell 50%, but half of our products with -- in this brand, Baluarte brand by 2025, meaning by next year. And we are already achieving in the case of cement, more than 60%. Again, in total, our total cement sales out of the total, 62% already have at least a 25% reduction on CO2 when compared to traditional cement or type 1 cement. And in the case of ready-mix, it's 55%. So in both cases, in these two very relevant business lines, we have achieved our 2025 targets one and a half or two years before. And this is because of the contribution of the four regions in which we are divided is not only Europe. So we want to continue making massive and hard efforts on reduction, we believe that the more we reduce through the traditional levers, our investments in carbon capture are going to be smaller. And let me refer to them a little bit because, while we are focusing in this massive and fast reduction through the additional levers, we are already developing or we have developed at least six carbon capture projects most of them in Europe, some in the U.S., that we will be developing in the years to come. Some of them might be up rationale before 2030, and the rest will come afterwards. Needless to say that our current target by reduction of CO2 target by 2030, and that is based on the 1.5 degree scenario and certified by SBTi is not including any CO2 -- any ton of CO2 reduction through carbon capture. Everything is already -- is only with traditional levers. So very pleased with the results. We are ahead of time. We want to continue delivering. And the good news is that, at least for us, it is clearer and clearer than the transition towards a low carbon company in our industry. Again, one of the so-called hard-to-abate industries is feasible. It's not an unknown thing. It's been happening. And also the good news is that in all traditional levels, investments needed to increase the use of alternative fuels to reduce clinker factor and the likes do create value. So I think little by little, in general, is cleared and clear that in our industry, this transition towards a low carbon economy is creating value and not necessarily destroying it as some people some time ago might have thought. So I think it's a good time to reflect on the meaning of this decarbonization process, of course, for us, but also for the whole industry. Maybe I'm using my GCCA head now, but anyhow.

Thank you, Fernando. And the next question comes from Alberto Valerio from UBS. Alberto?

[Indiscernible]. We have seen a little acceleration around the U.S. volumes for this year. And also see, as you put in the guidance some leasing energy cost for the industry as well. My question is, should the price be as it is at this moment for next year because we see a huge increase in price in the past three years. And what would be different this time for times that we see a little bit the volumes soften. But the price follow the softness on the volumes and also decrease this time around that could be different that price can be stick at a higher level in the other times. Thank you very much.

Alberto, I just want to make sure your question is around U.S. pricing and primarily the outlook for 2025. Is that correct?

And for the future, Lucy, just to see the resiliency of the pricing, right? Because we see a little bit volumes weak across the board. And just to see why should the price be up this time around?

Right. And I think if we first look at what happened in the first six months of this year, we have seen very good pricing traction, especially when you consider what's been happening in terms of cost. So as Maher mentioned, we've had pricing increases in the U.S. that account for about 70% of our volumes. In the -- there's -- we have announced for early July increases in certain cities in Texas, which was one of the places we hadn't announced 2024 increases. I think when you look at traction in those markets, we were seeing mid- to high single-digit sequential traction in terms of the price increases that we laid out, which we're very happy with, particularly when you consider the deceleration in costs we've been experiencing led primarily by energy. When we look to next year, we think that same resiliency is going to very much be there in what is a sold-out market. Typically, the one pricing increase you can count on in any market is that first pricing increase in the year. And I think -- I don't even remember a time where we did not have a successful first pricing increase in the United States at the national level. So I think it's very, very important, and I think Maher highlighted this to think about pricing more with regard to our goal that it needs to be aligned to the input cost inflation. And hopefully, it's above that and certainly that is what we've been achieving this year. And I think our expectation is that, that will also happen again next year. I don't know Maher or Fernando, if either, you would have anything to add on them.

Yes. Thanks, Lucy. Alberto, I would like to add one additional thing to what Lucy was saying, and that is -- we are -- I think that the market is expecting rates to maybe ease off second half of the year. Don't know if that's going to happen with the news that came out this morning that some of the numbers that came out this morning. But certainly, we expect rates to be dropping some time at early next year. And housing market has pretty bad over the past couple of years. And I think a lot of -- there's no liquidity in the market, prices have gone up, although affordability continues to be pretty good. So going into next year, and we're particularly I would say in our markets, particularly overweighed to the housing market, over exposed to the housing market compared to the national level. So we are quite optimistic that we should see as we get clarity in terms of the election start coming down. We just believe that housing market, which is the market that has been kind of underperforming to start kicking in sometime next year. And that will -- in addition to all of the other drivers, industrial and infrastructure, again, sold out market, tight supply/demand conditions, that should continue to give us right conditions for resilient price dynamics in the U.S. market.

Makes sense. Makes sense. Thank you very much Lucy and Maher.

Thanks, Alberto.

Thank you.

The next question comes from Jorel Guilloty from Goldman Sachs. Jorel, I hope I did not mispronounce your last name?

Thank you for taking my question. So very quickly, is a similar question to what Alejandra asked at the beginning of the call, but I just want to focus on Mexico. So specifically, you mentioned in comments that you saw strength at all your end markets, residential, infrastructure, private non-residential and that drove healthy volume during the quarter. What I wanted to know, however, is if out of those three, if there is one end market that was stronger than the other, perhaps performing ahead of expectations. And connected to that, as you look at your volume expectations, if there is a specific end market that you expect to outperform going forward. So did all three performed the same, the one performed better than expected? And is that going to continue going forward? That's it. Thank you.

And Jorel, this is Mexico specific, correct?

Even, yes, specifically for Mexico.

Jorel, maybe I will start with saying, nice to meet you because I've not had the chance to meet you. And in the case of Mexico well, I mean as in the case of Mexico, I mean, you saw the reperformance pretty much across all sectors. And clearly, infrastructure, there are some new projects that are beginning to happen and pick up. And we may be a little bit of a kind of an intermittency in terms of the flow of products and infrastructure. But clearly, that was extremely positive in Mexico. I think housing, which have been a little bit sluggish. It seems to be also picking up. And you probably heard the news looking forward by the new President of targeting about 1 million home starts, how and when that will happen or needs to be seen, but we're very constructive, I mean, about the housing sector in Mexico. And the same comments that I made earlier, to Alberto regarding interest rates. I mean we do expect rates in Mexico to kind of trail or lead because Mexican rates have -- were tightened much significantly earlier than U.S. numbers. So I would expect to see assuming they get comfort on inflation, to actually act faster potentially, potentially ahead of the Fed in terms of reducing rates, and that is likely to be conducive to the market. I think to the housing market, see that in the volumes -- disproportional growth in volumes that we have seen out of bags lately. And also strong pricing in bags as I mentioned, we've announced a pricing increase in June on that. And so -- and then the other piece that is so very important is the industrial piece. I mean, there is an enormous portfolio, I would say, of projects that have been announced that are under execution and are likely to accelerate, frankly. Now we've seen noises. I don't know if you've heard, I don't know a couple of days ago, we heard something from Tesla saying that they may delay going ahead with the project to go because of the lack of clarity in tariffs policy because of whoever is going to come into the President. Once that clears up, we think that also is going to be convened to accelerating the investments in the industrial sector, which have -- which are quite significant. And then the other piece that is also very positive, which is in line with that, is what's happening to our ready-mix business. Our ready-mix business has picked up enormously. And if we take a look at contracted volumes to that sector in the first half of the year, it's up 50%. And we've seen very positive pricing in that segment as well. And that is probably the best indicator of what is happening in the industrial sector. So a combination of all those three things gives us quite a high conviction that despite the fact that we're going through a change of administration this year to next year, we should have pretty good tailwinds on performance and pricing in the Mexican market and performance in the different segments that I just mentioned. Lucy, I don't know if you want to add anything to that?

Yes. I think I'd like to go back to the ready-mix pipeline. We have seen a very important double-digit increase in our ready-mix contracted volumes. It's the industrial sector that's been driving that. And we have seen -- and I just want to be specific about 50% that Maher has mentioned, we've seen a 50% increase in industrial contracts. So I think that's very important because it's obviously evidence of onshoring and manufacturing. Many of these projects really relate primarily to companies that are already operating in Mexico. And the Maher's point, post-U.S. elections, that might be the real moment to start seeing other companies coming in as we get beyond some of some of the discussion of around the U.S. election at the moment. That's it. And we have time for one more question, and I believe that we have Marcelo Furlan from Itau. Marcella?

Yes, hi Lucy. Hi, Fernando and Maher. Thanks for taking my question. Just a follow-up here in the next [indiscernible] and you see the strong margins in the second year many have by prices, as guys mentioned. And looking ahead, I would like to understand how is the company [indiscernible] maintain these margins at such levels, such a healthy level. So if you could elaborate a little bit making the cost front by the main initiatives that tend to be in the Mexico division to continue to improve margins going forward. So this is my question. Thank you guys.

So Marcelo, just to be clear, this was EBITDA margins in Mexico and why we should expect these to continue to be favorable and improving going forward. Is that correct?

Yes. That's it.

Yes, okay.

Yes, Marcelo, a couple of things. I mean, I think that in the case of Mexico, probably in line with the rest of our businesses, we're -- energy and electricity fuel electricity are two very important levers that we have been working on from the beginning of the year and have contributed quite importantly, in addition to what has been happening in the markets, right? So the markets -- commodities markets have been selling off and stabilizing. But in addition to that, we have been managing the portfolio of energy or fuels and in particular, in Mexico, where we switched from pet coke and to natural gas, and that is likely to increase. Natural gas prices have dropped materially. We've also switched into lower carbon alternative fuels that are less costly than the other alternative fuels that have been using in Mexico, and that has been very important. Mexico also has been reducing its clinker factor. It's been one of the two leading regions in reductions in clinker factor, and we expect that to continue as part of the decarbonization strategy in our business there. And the other thing is responding to transportation costs. Transportation cost rates have gone up. And it's kind of -- it's not so easy to reflect increases in those prices, in those costs into our prices. We are accelerating that. And we're also adopting strategies to potentially dampen the freight cost and transportation cost in Mexico as well. So those are kind of the big three things in addition to, of course, very attractive supply/demand dynamics, right? I mean, in all of our businesses, which are obviously contributing to top line growth, better pricing, higher EBITDA and improving the -- so there's -- all levers are -- volumes are better, pricing is better, the gap price minus cost is getting better because of our management of the energy and electricity portfolio. And a combination of those three things, I think, should continue to give us tailwinds in terms of improving the profitability in the Mexican business.

I would just add that we've experienced higher freight costs in the last year and a half, primarily because we've had some very large projects in the southern part of Mexico. As we expect, we think that some of that activity is going to move more towards infrastructure projects across the country and particularly in the northern part where I think our logistics network is even more developed. So I think that also will be positive as we're going forward.

Okay. Thank you so much guys.

Thank you. We appreciate you joining us today for our second quarter results. We hope that you will join us again for our third quarter 2024 webcast on October 28th. If you have any additional questions, please feel free to contact Investor Relations. Many thanks.

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