Good morning. Welcome to the Cemex Fourth Quarter 2016 Conference Call and Webcast. My name is Richard and I'll be your operator for today. [Operator Instructions] Our hosts for today are Fernando Gonzalez, Chief Executive Officer; and Maher Al-Haffar, Executive Vice President of Investor Relations, Communications and Public Affairs. And now I will turn the call over to your host Fernando Gonzalez. Please proceed.

Thank you. Good day to everyone and thank you for joining us for our fourth quarter 2016 conference call and webcast. We will be happy to take your questions after our initial remarks. 2016 was a very good year for Cemex. Despite a continued volatility and uncertainty in the markets, we were able to deliver strong underlying operational and financial results by remaining focus on the variables that we control. Our consolidated cement and aggregates volumes grew during the year. Our consolidated prices in local currency terms for our three core products increase as well reflecting the success of our pricing strategy and exceeding input cost increases. Overall, our cost increases were contained as we deliver on our cost reduction program of $150 million and benefited from operating leverage in several markets. As a result of our favorable volume and price performance during 2016 sales increased by 4% while operating EBITDA grew by 15% on a like-to-like basis. The impact of higher pricing on EBITDA generation for the full year was close to $500 million, materially exceeding the increase in our costs. This together with a positive operating leverage effect in many of our markets led to an EBITDA margin expansion of 1.7 percentage points. All regions reflected margin improvements during the year. We achieved the highest EBITDA since 2008 and the highest EBITDA margin since 2007. Our free cash flow after maintenance CapEx was close to $1.7 billion, almost double last year's level. This was driven by higher EBITDA generation as well as our initiatives to reduce interest expense, maintenance CapEx and working capital investment. In the case of working capital, we achieved negative four working capital days during the fourth quarter and ended the year with four average days. Conversion of EBITDA into free cash flow after maintenance…

Thank you. Fernando, hello everyone. It is important to note that in our fourth quarter report the results of our concrete pipe business in the U.S. as well as our operations in Croatia, Austria, Hungary, Bangladesh and Thailand have been reclassified as per IFRS accounting standards and are now reflected in a discontinued operations line item in our financial statements. Our net sales and operating EBITDA on a like-to-like basis increased by 4% and 10% respectively during the quarter. There was higher like-to-like EBITDA contribution from Mexico, the U.S., and our Asia, Middle East and Africa region. Our operating EBITDA margin increased by 1 percentage point and was the highest fourth quarter EBITDA margin since 2006. For the full-year, EBITDA margin reached 20.5%, the highest since 2007. The quarterly and yearly margin expansions mainly reflect the positive effect of our pricing strategies. On a year-over-year basis, we continued to see the effect of the appreciation of the U.S. dollar versus some currencies in our markets. The full-year FX impact on our EBITDA was $220 million, excluding about $61 million of the effect of dollarized costs in our operations, which mainly consist of energy and maintenance related parts. As Fernando mentioned earlier, this was more than offset by the favorable contribution of higher prices on our EBITDA. Cost of sales plus operating expenses as a percentage of net sales declined by 1.7 percentage points during 2016. Our kiln fuel and electricity bill on a per ton of cement produced basis declined by 10% during the fourth quarter and by 15% in 2016. Now regarding the EBITDA related to our asset sales, it is important to highlight that our reported 2016 EBITDA excludes the EBITDA generated by our concrete pipe business in the U.S.. We are providing a pro forma EBITDA for…

For 2017 we are constructive on our volume outlook for our biggest markets leading as consolidated cement and ready-mix volumes to grow in the 1% to 3% range. While aggregate volumes should be from flat to up 3% compared with last year's levels. Regarding our cost of energy, on a per ton of cement produced basis, we expect a 5% increase from last year's levels. Guidance for total CapEx for 2017 is about $730 million. This includes $520 million in maintenance CapEx and $210 million in strategic CapEx. We also anticipate a reduction in financial expenses for this year of about $125 million. With respect the working capital we anticipate an investment during this year of about $50 million. Cash taxes for 2017 are estimated to be under $325 million. As regards to one of our most important priorities, which is regaining our investment grade, I'm very happy to report that we are well ahead of our expectations on all fronts. We almost doubled our free cash flow during this year, as a result of the implementation of different initiatives, which improve all drivers of free cash flow generation. We have announced asset sales for about $2 billion out of which about $1 billion closed during 2016 at average multiples into double digits. We reduce our total debt by $2.3 billion in line with our estimates reducing our leverage ratio to 4.22 times. On back of this performance, we are increasing our asset divestment and debt reduction targets for the two-year period ending in 2017. We are increasing our 2016, 2017 divestments target and now expect to sell assets for about $2.5 billion in this period. We are also updating our debt reduction target for 2017. We now expect to decrease our debt by about $3.5 billion to $4 billion…

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 our prices for our products. And now we will be happy to take your questions. Operator?

[Operator Instructions] Your first question comes from Carlos Peyrelongue from Bank of America. Please go ahead.

Thank you. Congratulations, Fernando and Maher on the strong 2016 results. Two questions if I may. First one on Mexico, on your volume guidance for Mexico from 2% to 3% growth how much of that comes from the New Mexico City Airport are you considering demand from that particular infrastructure project. And the second question is related to the U.S. During 2016 volumes increased 2% and prices 4%, for this year your midpoint of the guidance is 2% for volumes. Can you see different drivers this year versus last year that can support higher price increases in the U.S. this year versus the 4% increase last year? Thank you.

Thanks Carlos. If I take the question on the U.S., I think, the drivers in 2017 will continue being about then same than 2016 plus the additional volumes we – the whole market or the industry will get from higher infrastructure expenditure. And I think your question was related also on how that could affect pricing, if I understood that correctly. Well you know that that capacity utilization in the U.S. little by little it’s been increasing and is getting to very close to full utilization in total I mean the whole market. But as you know there are some markets which are sold out already some others are not that close to that situation. But I think as far as volumes continue growing which we believe will continue being the case that will be very supportive of increases announcement sticking much better than previous years. If I can add also Carlos to what Fernando was saying, I think it's important to note that if we take a look at point to point pricing increases in the U.S. if we adjust for divestments, they were 8% for cement. So that has been attractive. And in terms of the drivers, I mean talking to our customers very recently and particularly in the south and to a large extent, I mean there is quite a bit of cautious optimism or optimism in general in terms of what's happening in the U.S. in terms of deregulation, energy sector improvements, potential deregulation on the credit side. So when we talk to our end clients at the end of the day there’s definitely a sense that things are going to or about to get better. The drivers for next year – for this year, I mean for 2017, the residential market is going to continue to be a very important driver. I mean we're expecting residential to probably be our fastest growing segment at mid-single-digit growth. And just as by way of a reminder I mean single-family starts are running almost at 60% of the 35-year average. And let’s not forget that during the last 35 years the population of the U.S. have increased quite a bit. So we expect that segment to do quite well. Industrial and commercial is probably the second largest contributor to growth and we definitely expect to see some increased private sector expansion there. On the infrastructure side, I mean, I think, you've cited in your own report, frankly, the FAST Act. I mean we expect that certainly to start contributing this year. And all of this conversation, by the way, does not include any potential upside from the new administrations and actually bipartisan support to infrastructure spending. And we can discuss that a little bit more in terms of our outlook later if you wish.

Thank you.

Yes.

And the question on Mexico.

Yes, the Mexico I mean, I think the part of the question that perhaps we have not answered is the part on the Mexico City airport. I mean we definitely – the Mexico City airport is part of our expectations, I mean of course it could be accelerated or decelerated, but it's definitely part of our expectations. As you know the first phase, which includes the one terminal and two commercial runways and there's a military runway and a couple of platforms, that's on its way. We are in a favorable position frankly given our footprint and our ability to supply some specialty products. So we should definitely be benefiting from that contract and that is within our expectations that we mentioned.

And the construction is advanced enough that you will see demand from the runaways, et cetera this year already. What’s your expectation?

That is our expectation, yes.

Okay, perfect. Thank you very much.

Thank you Carlos.

Thanks.

Thank you. Our next question comes from Mr. Benjamin Theurer from Barclays. Please go ahead your line is open.

Good morning Fernando, good morning Maher. As well congratulations on the results. I have a question around the free cash flow and the outlook. I mean, clearly, we've had a very strong performance on the release of the working capital over the last couple of years. And you’re now expecting for 2017 that sort of investment. Could you give a little more detail around the actual drivers of that significant working capital improvement in 2016? I mean the quarter at minus four days, the full year at four what's the healthy level? Are you willing to stay at those levels, and hence, now expect some investments, or what could we expect on that side? That would be my first question then I have one other question afterwards.

Yes I think Benjamin the way to answer that is that the initiative of working capital is not a new one in Cemex as you may know. And we have done progress at different paces in different businesses. And I think what we saw last year was it was mainly Mexico and the U.S., the two largest business units making very material progress on our initiative of optimizing working capital. As well as South America also improving even further to the levels they used to have the drivers. The idea of optimizing is concentrated in the three main variables of working capital: it’s collections of receivables, payment terms, and inventories. And what we have done is to change paradigms on the inventories, to change the processes that we use the way we program our exploration [ph], production and transportation of products and materials to the market. So everything is being contributing, it is different on a per country basis for instance in some countries there is a large contribution of better payables or payment terms with suppliers of course without effecting prices of the goods and services we buy. So I think again what you saw last year it was Mexico turning to – I mean it's a milestone. And Mexico turned for the first time in history into negative working capital numbers, negative working capital days.

Okay.

And the U.S. making a very significant progress, also. Now what is that we can expect for 2017? I think we can expect for the U.S. to do further progress and for the rest of the company to be more or less stable compared to last year.

Okay, perfect. And then one other question I had and I mean it's a little unrelated to that one. On your pricing strategy in the different markets, I mean with the still ongoing devaluation in many of the EM currency markets but also within Europe, I mean you’ve had some very decent success already with local price increases over the last couple of quarters. Now I mean with let’s say rather low growth outlook for Mexico in terms of volume zero to 3%, remind me quickly about the competitive environment and how you see with a more muted growth outlook for Mexico what you think can be achieved or should be achieved on the pricing side, just to offset some of that FX pressure? So any initiatives you're looking at for price hikes in Mexico on the different products for 2017?

Well in general terms what do we see in 2017 compared to 2016 in the market, what is different. What is different is that the market is going to be growing less than last year, that's an important buyable. And the other one is that there is new capacity coming stream in the market, meaning the combination of both are going to impose a different competitive dynamics in 2017 compared to 2016. Now our strategy is not changing. As we have been saying particularly in the case of Mexico because of different reasons we lost in the several previous years again because of market conditions we did lose significant pricing in constant pesos and that's what we have been trying to recover. We have recovered that to some extent but there is still opportunity or room in order to bring prices to a higher level. How fast? It will depend again on competitive dynamics in 2017, which I already said are different to 2016. But we have not changed our intent and our strategy in Mexico.

Okay, perfect. Thank you very much.

Thanks Benjamin.

Thanks Ben.

Thank you. Our next question online comes from Gordon Lee from BTG Pactual. Please go ahead.

Hi good morning. Thank you very much for the call. A couple questions, really more on the cash flow side and the asset divestiture side, et cetera. First, on the sort of new guidance of $2.5 billion which is an extra $500 million really from what you've completed already, it looks like $400 million of that might be completed tonight assuming a successful share sale of GCC. So from that should we imply that after all of this wave of divestments we should go back to sort of more real estate type of asset sales where we see smaller numbers but nothing that really impacts EBITDA. And then the second question and I’m going to ask something that maybe a few years ago was unthinkable. But as you move towards three times leverage and we think about say 2018, is Cemex paying a dividend, something that we could see is a plausible scenario in the mid term. Thank you.

Yes Gordon if I can take the second question on the dividend side, I mean that's a high class problem to have once we get to three times leverage. I mean the unfortunate thing as you may know that we do have in our bond indentures a limitation on being able to pay dividends or what resembles a dividend payment requiring two investment grade ratings prior to being able to do that. So we're constrained by that but certainly as we – we're working very hard in that direction and we'll see how we achieve that.

If I could just follow-up on that before we go to the divestiture question that's okay. But just to clarify the constraint is on the covenant side it's not something sort of strategic or philosophical at the border management level because if I had asked this question let’s say seven, eight years ago, the answer would have been companies that don't grow pay dividends, companies that grow do pay dividends. Has that changed, has that mindset changed?

I think that I’m going to turn it over to Fernando to make that – to comment on that point and then I will address the free cash – the guidance on the asset sales.

Well as much as I say this is a high class problem to have but I think there has been changes and mindset in the Board, nothing that we will see being executed in the very short term. Again market already clarify that we have an indenture that doesn't allow us to do that. But clearly once we get into our investment grade we will be or even before that we will be this close in communicating. What is it that we are willing to do different? What I mean is whenever we get to our investment grade the company will be different, we will assume growth. Yes the idea used to pay dividend again whenever that is feasible. But as of today there is nothing specific, or a policy or something that we can communicate. It will take some time but we will communicate that in due time. How to do it, how to avoid, or how to do better risk management, how to better do shareholders all of that it's on the table to be let’s say rethink and modifying.

Gordon on the asset divestments I mean just to summarize for everybody's interest, I mean as we mentioned we’ve announced divestments to date of $2 billion, $1 billion, little bit over $1 billion the transactions have been closed and proceeds were received in 2016. Then as you know we received the payment for the concrete pipes which was $500 million. We have two additional transactions that we've announced that are also in the pipeline that as Fernando mentioned in his remarks are also expected to be completed fairly soon. I mean we expect that to happen certainly within the quarter that we're in right now and that's the Fairborn assets and the Mexican ready-mix pumping business and that's for around a little bit under $500 million as been previously announced. So you're correct in saying that the incremental amount to meet that target of $0.5 billion should be easily achievable from the many opportunities that we will have between now and the end of the year. I think the one thing that I would like to stress and certainly hearing Fernando is that because we're so well ahead of what we want to achieve on this and on the deleveraging side but particular on the asset side, obviously we're going to be even more vigilant on the value of which we are conducting these assets divestments. And as we've seen, I mean we probably compared to the market, I mean the average was well above a double-digit number and we would like to maintain that track record to the extent possible. But we feel very comfortable that we're going to be able to achieve that asset divestment number.

Perfect. Thanks very much.

Thank you.

Thank you. Our next question on line comes from Vanessa Quiroga from Credit Suisse. Please go ahead.

Hi Fernando and Maher thanks for the call. I have a question regarding the guidance that you are giving for the reduction in the cost of debt of about $125 million. I believe that you are not comparing for that guidance, the reduction in debt that you will be able to do. We process from divestments that are still to be collected, is that correct, you are only including about $2 billion of debt reduction that you’ve done for which you already receive proceeds, is that correct?

Yes, I mean we have not – I mean one thing of course is this is early part of the year, right. I mean so we are being cautious in terms of what markets are going to be available and refinancing opportunities. So there’s definitely a bit of cautiousness in that. I mean we do have still $2 billion of bonds that are callable this year as you know. $1 billion of the two have a coupon that is a little bit over 9%, $1 billion is around 6%. And then of course depending on what happen to our asset divestments and free cash flow. So all I can say is that there is definitely a bit of cautiousness in that number. And we will revisit it as the year goes by and as we see what happens in the capital markets in terms of liability management and asset divestments and of course our free cash flow generation as well.

Okay. And regarding the CapEx matter, the drivers for the increase in maintenance CapEx that you are expecting what’s the – what are the countries where you are investing right now in the maintenance CapEx. And also I guess I want to understand better the number that you posted in 2016 because it seems that you are actually exceeded the CapEx that you had provided for 2016. Already adjusting for the asset divestments, if I’m correct so just want to make sure that I understand the CapEx number that posted in 2016 and the increase as you are guiding for in 2017?

Right. So just for the benefit of everybody the actual maintenance CapEx for 2016 was $450 million and our guidance is $520 million. So we are talking about a difference of $70 million. An important difference and you are right, Vanessa. I mean we are talking about adjusting for two plants that have been sold in the U.S. the Odessa plant and Fairborn. We are on the other hand adding three additional plants from TCL. And the TCL plants requires probably slightly higher maintenance CapEx just because they're under different type of management, different standards and so forth and so on. So there's a little bit of the increase is attributable to that. And then again I mean as you have seen I mean historically that number could be better at the end of the year. We'll have to wait and see. It is targeted, there’s some timing issues as well. There is a small investment in the U.S. that we have to finish on the environmental regulation side. So you've got essentially the three TCLs a little bit of environmental and timing. And frankly there is the possibility of an adjustment by the end of the year. We'll have to wait and see.

Thanks Maher. If I could add just question about the investment grade discussion and what metric do you think the rating agencies will be focusing on to give you that investment grade. I remember that we're talking about that downgrade some years ago, they were focusing a lot on the return, return on invested capital. So in your discussion with the rating agencies, what are they focusing right now to make that decision?

Well, I mean look rating agencies are fairly holistic in their approach. Right, there is not one single metric that they focus on. And obviously leverage is extremely important and I would say that typically if you're somewhere below the three, you start getting into that area. But again I mean the agencies are much more holistic, they will take a look at the environment, they will take a look at the markets that we are in part of the cycle that we are in and so forth and so on. All I can tell you is that we have a very good consistent and fluid dialogue with the rating agencies. They are all on confidentiality agreements with us and they see more numbers than anybody sees. And we have a very good relationship that goes back for close to two decades now if not more so. So we feel very comfortable that hopefully we will not surprise them on the negative side and we will surprise them on the positive. But that's in general and that's what we're managing towards. Now what's probably as important is the capital markets, right. I mean the capital markets are probably a little bit more anticipatory as they – as perhaps they should be compared to the rating agencies. And so our average cost of debt as of the end of the quarter is below 6% and we've had very good access to the bond market, quite a bit of liquidity and very, very good price discovery of our credit worthiness in the high yield markets, which we are very, very proud of. I don’t know if that answers your question, Vanessa.

Great.

Thank you.

Yes, thank you very much, Maher and Fernando.

Thank you.

Thank you. Our next question on line comes from Adrian Huerta from JPMorgan. Please go ahead. Your line is open.

Hi, thank you. Good morning, Fernando and Maher and congrats as well on the results. Two questions also on prices, first on Mexico. What is – the increase that you did in January of this year was that more to compensate for a lack of traction on the October increases that you did. Given that the quarter-over-quarter increase in 4Q was only 1%. This is my first question on Mexico. And then the second one is how effective were these increases so far that you did in January. And then in the U.S. you can tell us a little bit what do you think could be the role of imports in the U.S. going forward considering the U.S. dollars strengthening and the difference of cement prices in U.S. dollars in the U.S. versus many other country that could import cement to the U.S. has expanded a lot over the last two years making in more profitable imports than in the past? Thanks.

So, Adrian I'll address your first question and then you'll have to remind me of the second question. But on the first question, remember that our October pricing increase that we did was a follow on to others that we are catching up in their pricing strategies in the country. And if you take a look actually at the markets that have been affected both by product and by geography, although it seems like the realization is small. Actually when it comes to effective realization it was close to 50%. Now you have to also take into consideration what was happening for the whole year. I mean point to point pricing increases for the year were close to 20% for us. So we think actually that that pricing increases is not really indicative of any trends it was kind of more filling in certain gaps within our pricing strategy within the portfolio. So I wouldn't draw that many conclusions. Now we as you know announced pricing increases of 12% and 15% – to 12% in bag cement and 16% in bulk cement and 15% in ready-mix. So kind of the weighted average pricing increase for cement is close to about 13% and that was effective January. And all I can tell you is that we've gotten a very good response, we've gotten good traction. What we understand from our clients is that others have made similar moves to a greater or slightly lesser extent. So we're optimistic frankly about the traction and we'll just have to wait and see.

Perfect. Thank you, Maher. My second question was…

On the U.S., right?

What do you think about, yes, correct. The role of imported cement in the U.S. going forward considering the strengthening of the U.S. dollar and considering that if you continue increasing prices in the U.S. the difference versus cement prices in other countries that could import cement to the U.S. in U.S. dollar terms it will be wider. So with that in mind, I mean when imports come in to supply this additional demand, those could come on lower prices and preventing potentially further price increases in the U.S. What's your general view on that?

I will take that one again. My view on that – on imports in the U.S. at least in the case of our markets meaning let's forget for a moment on the imports coming from Canada to the U.S. because we're not part of that of those markets and so those dynamics don't affect us. But I think most of imports in the U.S. either through California or through Texas, Florida. Historically has been done mainly by local producers meaning most of import facilities and remember the U.S. is a bulk cement market, it’s not a bag market. So most of imports are done by local producers as part of their plans on capacity usage or how to serve customers combining local production with imports, if you remember the U.S. until 2007, 2008 crisis used to be a structural importer meaning most of the time the brand is much higher than the local production capacity as numbers rounded figures were 125 or 130 million tonnes of consumption with a capacity of around 100 million tonnes per year. So I think in general terms the dynamics of imports will follow the logic or the economics of local producers. Not 100% of it but a large percentage. Let's say 90% of it. Now that doesn't mean that there won't be let's say impacts because of imports because there are different strategies per player so but as long as we see most of capacity production – local production capacity been utilized we will see more and more inputs coming into the markets, do I see that as a threat for the future price increases in the U.S. I don't see it. I don't believe that it's really a threat. Again I think they are complimentary and little by little in the U.S. the market will go back to the pre-crisis supply structure, let’s put it down there.

And Adrian if I can just add actually we see it frankly as an opportunity. Now I’ll tell you why. Number one, we probably have the best import infrastructure in the country on both sides of the coasts of the country. And so I think that to the extent the demand continues to grow. And we do expect it to grow I mean just to put it into – just to throw a few numbers at you, okay, which are important. I mean we think total installed capacity in the U.S. just a tad above 100 million tonnes. And 2016 probably is going to end up with total consumption of around 96 a little bit more or a little bit less. So if you assume that imports around 14 million tonnes last year, you're talking about a kind of low to mid 80s consumption. Now despite the fact that we're expecting the growth that we commented on, I mean 2018 and 2019 the outlook actually if you take a look at the bipartisan support to the infrastructure program. Even if you haircut those numbers materially I mean if you haircut those numbers by half or by two-thirds. And if you take a look at the PCA’s outlook in terms of where the types of projects that are likely to be used under that those infrastructure programs as proposed by both Republicans and Democrats. 75% of the amounts are going to high cement intensity projects whether its streets and highways, airports, bridges, tunnels, water purification facilities and so forth and so on. 75% so no matter how much you haircut the 100 billion per year, if you haircut it by half or by two-thirds. And if you assume some degree of sterilization by the states and what I mean by sterilization…

Very clear, Maher and Fernando. Thank you so much.

Thank you, Adrian.

Thanks Adrian.

Thank you. Our next question on line comes from [indiscernible]. Please go ahead.

Good morning, just two questions on my side. First question on pricing within the competitive situation becoming a little bit tougher in Colombia and Philippines in the fourth quarter. Could you give us a little bit more color related to impact, related to local player being a little bit more aggressive on pricing? Then my second question is on cost inflation target. I think your cost inflation – your cost inflation guidance approximately 5% is for energy, it’s much slower than the 10% guidance given by Transenergy team. How do you think we – how should we think about that because in some of your region you are fully hedged or because of your contract in Mexico? And should we expect any big difference in inflation from one region to another when we’re looking at energy costs for 2017? My very last question on the UK. You are expecting a slight decline volume this year. Could you tell us where do you expect these volume declines to come from? Is it residential or non-residential infrastructure?

Let me start with your question on cost inflation. Of course, I cannot compare our guidance with Lafarge’s because I don’t know the numbers. But what I can tell you is that our guidance comes from the information we have on our fuel mix, the type of contracts we can manage already to agree with different suppliers, and with current trends of different fuels. Just to give you an example, in the case of petcoke, we saw petcoke prices increasing very materially last year point-to-point. And we have seen again a trend on these prices to been reduced. Again, very difficult to compare with a figure that I don’t know, but trying to find explanations, as you may know our fuel mix is different compared to other companies. Our alternative fuel usage is much higher with the better economic done primary fuels. So we feel comfortable with the figure that we are using for guidance, but again, I just cannot compare with others.

Yes and Eshin [ph] if I can talk about Colombia. I mean, Colombia, as you know first – I mean, I don’t want to make a broad comment about the whole year because you know that we had fairly high GDP – fairly weak GDP I should say. We had – interest rate environment was not very attractive, inflation was not that attractive. And frankly, the government in that kind of against that backdrop had some challenges on the infrastructure side and spending side. And so in general, I mean, the market I would say was down as you know. We outperformed a little bit. We had a big strike, frankly, that also impacted the demand dynamics. So I would say that the fourth quarter kind of exacerbated all of that with higher fragmentation in some competitive dynamics. The way that we’re trying to differentiate ourselves frankly, I think we have done so successfully is through a number of customer centric strategies, I mean, by offering more specialty products by improving our services that we’re giving to our customers and really increasing customer loyalty that is getting us to outperform frankly our pricing dynamics to the markets. So both – I would like to think that both in terms of the volume perspective and the pricing perspective, we are better than the market, but the reality is that the situation in Colombia for the year has been challenging. Now looking forward to 2017, we think things are going to be a little bit better. I mean, again, we’re very cautious about the outlook on Colombia because a lot of the investment there has been delayed because of the tax reform and that is impacting consumer sentiment, it’s impacting industrial and commercial investments. So we’ll have to wait and see; the government is definitely favorably looking at subsidies for housing sector which could be a very positive component for next year. So we’ll just have to wait and see. Like I said, we’re cautious on the volumes and we’re continuing to very, very vigilantly monitor and execute our pricing policies there.

In the Philippines, what’s the future price this year minus 5% decline in pricing in Q4 when prices were up at the beginning of the year?

Yes. I mean, I think the Philippines, you had some – I mean, the weather played a very big factor there and so I would say that those adjustments were – again, I think it’s primarily the weather and competitive dynamics that were the causes of consequence of that just in the different markets. But again in the Philippines we are constructive about the demand for next year and certainly we’re expecting as a consequence of that to have a positive impact on pricing. Anything else?

The last question was on the UK. The last question was on the UK on the outlook for similar decline this year. Where does it come from?

Well, I mean, again it’s caution, right. I mean, there is the uncertainty of – I mean, so far the whole Brexit thing had a fairly minimal impact on our business. We’ve been benefiting frankly from being able to sell blended product fly ash availability so that’s helped us. So we’re being a little bit cautious about that, we don’t know how this $23 billion five-year national productivity investment fund is going to be allocated. We did say that if it does get ramped up, it should translate to somewhere between 2.5 percentage point to possibly higher percentage points in growth in cement. We’re quite constructive frankly about the residential sector. The housing deficit, I mean, there’s a chronic housing deficit in the UK market that has not been met, that is close to a 100,000 units. So you may have – the high-end London market not being that great, but certainly the greater UK market we think is pretty good. So I think we’re cautious, but there are these elements that may translate into upside during the course of the year.

That’s very clear. Thank you very much

Thank you.

We have time for one more question. Our next question comes from Nikolaj Lippmann from Morgan Stanley. Please go ahead. Your line is open.

Thank you and good morning. Thanks for the call and for taking my question. First, could you give us some color and congratulations on the better ratings, could you give us some color on the magnitude or any potential move towards peso financing, any concrete plans or sense of how you would think about that? So that’s number one. And number two, I know you don’t give the margin for your [indiscernible] business, but could you give us a sense of how that is trending? And also did it sort of moving above the 5% level in the U.S. or it’s still below? Those are my question. Thanks.

Yes. Hi, Nick. I will take – I’m sorry, the second half you said just to make sure that I heard you right, you’re talking about ready-mix business in the U.S.?

Correct.

Okay. So I’ll take the first part, I mean, we are obviously very excited with the MX, A–rating in Mexico. That will definitely open up the possibility for us to raise some funding in the local markets, although the depth of that market at that rating is relatively shallow. So whether at the end of the day we will put our toe in that market. I mean, we’re certainly conscious of the fact that there are benefits to that, but also clearly as we deleverage and given the outlook that we just discussed about potentially deleveraging even more during the course of this year, we’re going to be very vigilant on the borrowing rates we get, right. I mean, so we’re going to be evaluating the situation. It’s very difficult to commit today, but clearly to the extent that we get another upgrade on the local side that will get us into the deeper markets for the domestic market which will get us probably more efficient pricing for our credit in the market. So we’re evaluating, we like it, we will certainly consider it, but again, given the trajectory of deleverage for us for this year we’re going to be very careful on the cost side right now. So that’s address your question. On the second part, the ready-mix margins, I mean, we continue to see recovery. We don’t disclose margins, but we are coming awfully close to margins that we have seen close to peak levels in 2006. And what’s also important here is that we’re seeing reasonably – in several of our markets – we’re seeing actually good traction on pricing, which is very important, because that is kind of a leading indicator frankly on what’s likely to happen on the cement side. And so we have seen good traction on pricing and half of our number of years frankly in the ready-mix business. So I think the story there is positive. Can we do more? Can we get better? The answer is of course yes to both of those questions. And frankly, again, we’re quite – let’s say, cautiously optimistic about the potential infrastructure project flow that is likely to happen. And also frankly we’re starting to hear in markets like energy, let’s say, dependent markets like our Texas market for instance, you’re beginning to see people instead of looking at the market kind of as a glass half empty, starting to look at it as a glass half full. So there’s definitely optimism about what could possibly happen to energy prices and what that could mean for the Texas economy and then how that would – how would that work in our favor frankly in terms of that business.

Got it. Very clear. Just one very final question if I may, of your strategic CapEx could you give us a sense of how much of that goes to the Tepeaca plant, close to Puebla? And where that stands on your list of priorities?

Yes, I mean, just – I mean, on Tepeaca – I mean, we’re obviously – I mean, in today’s world in general, right, this has nothing to do with Tepeaca, but in general we are being as stingy as one can be on CapEx, right. I mean, so we’re constantly monitoring and reassessing. I think that we have some opportunities of potentially investing much less in one of our other plants that are in the vicinity, if I can call that vicinity, the Huicahapan plant. And with a relatively small investment below $10 million we can increase our capacity there, debottleneck our capacity there by slightly under 0.5 million tons. So because of that we’re probably assessing the situation in Tepeaca and seeing whether we – how we do the timing there. In terms of other CapEx clearly where we’re looking at is essentially finishing up the Columbia expansion. We have some investment in the Philippines. In solid, we have some investment in TCL. We have some investments in Poland. We’re supplementing our aggregate reserves in many of our markets. And then there’s a few other things that we’re spending on. So that’s kind of roughly, it’s Colombia, Philippines, small investment in Poland and TCL, very small investment in Tepeaca and aggregate reserves or replenishment.

Got it. Very clear. Thank you very much.

Thank you.

Well, thank you very much. In closing, I would like to thank you all for your time and attention. We look forward to your continued participation in CEMEX. And please feel free to contact us directly or visit our website at any time. Thank you and have a good day.