Good morning. Welcome to the CEMEX Third Quarter 2024 Conference Call and Webcast. My name is Adam, and I will 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 third quarter 2024 conference call and webcast. We hope this call finds you in good health. I am 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. I would like to remind you that during third quarter, we announced the sale of our Dominican Republic and Guatemala operations as well as the remaining minority stake in Neoris. This is in addition to the anticipated sale of our Philippines operations, which we announced in April. All of these operations have been reclassified as discontinued operations and are now excluded from our 2024 and 2023 operating results. We are expecting to close these transactions by year-end, except for Guatemala, which has already closed in September. And now, I will hand it over to Fernando.

Thanks, Lucy, and good day to everyone. I'm pleased with the significant progress we have made this year with our portfolio optimization efforts. We advanced materially on our goal of streamlining our portfolio towards developed markets with the announcement of $1.4 billion in asset sales in the quarter, bringing year-to-date announced divestitures of noncore assets to $2.2 billion. With the closing of these transactions, approximately 90% of our EBITDA will be generated in the U.S., Europe and Mexico. The proceeds from the divestments are expected to be recycled into our growth strategy launched in 2019 and primarily focused on the U.S. Our growth strategy continues to pay off in the quarter by contributing 13% of EBITDA, and we are excited by the new accretive growth opportunities we are finding. During the quarter, we formed a joint venture in the U.S. to strengthen and expand our aggregate reserves in the Southeast. And additionally, we acquired a majority stake in a construction demolition and excavation business in Germany to produce recycled aggregates. Our quarterly results were significantly impacted by temporary factors such as extraordinary weather conditions in all of our regions as well as transportation strike in SCAC. In the U.S. alone, we faced three major hurricanes in the quarter versus one the prior year. Additionally, results have a difficult comparison base where EBITDA last year grew more than 30% and EBITDA margin expanded by 3.5 percentage points. Our pricing strategy continued to show resiliency as prices for our products rose low single digits. Net income showed exceptional strength growing over 200% year-over-year. In climate action, we continue delivering against our Future in Action roadmap, reducing our year-to-date Scope 1 and 2 CO2 emissions by 3% and 4%, respectively. And while we are working hard to decarbonize using existing technologies, we are…

Thank you, Fernando. Consistent with our expectations, volumes in our Mexican operations slowed as construction activity decelerated after the June election. The slowdown was further exacerbated by record precipitation and a prior year base effect in which EBITDA rose more than 30%. For the full quarter, precipitation levels were 50% higher than the prior year. We estimate the impact from bad weather on EBITDA to be approximately $8 million. As a forward-looking indicator, we continue to see healthy growth in our ready-mix order book for projects related to nearshoring and infrastructure. Importantly, our cement and ready-mix prices rose mid-single digits and help to alleviate some of the cost pressure in the form of an unfavorable currency movement, higher maintenance and electricity cost. The margin variation related primarily to a 30% rise in electricity cost compared to a mid-single-digit decline observed in the first half. We are in the midst of transitioning our power supply sourcing in Mexico. And in the interim, we are incurring incremental cost, which should reverse in first quarter 2025. In October, we announced a 5% price increase for bagged cement to offset recent cost inflation. Over the medium term, we are optimistic about Mexico's growth prospects. As the new government settles in, its agenda appears supportive of housing as well as infrastructure. In the past few days, the government announced its intention to build 1 million homes over the next six years as well as reaffirming the development of 10 economic corridors across the country, with the purpose of capitalizing on the nearshoring story. Recently announced investments of more than $20 billion in the energy, tourism, IT and logistics sectors, provides an encouraging outlook for the administration's receptivity to foreign direct investment. Demand for our products and solutions will continue to be supported by social programs,…

Thank you, Lucy, and good day to everyone. Sales and EBITDA for the first nine months of the year were down 1% and 2%, respectively versus last year. As mentioned earlier, we have faced volume headwinds due to adverse weather and weak demand dynamics in several of our markets. Despite this, our year-to-date EBITDA margin has shown remarkable resiliency and is virtually flat to last year at 19.4%. This performance is a consequence of our pricing strategy, which has outpaced inflation in our business, as well as cost containment and business optimization efforts. On the cost side, year-to-date, we saw a 23% decline in fuel cost on a per ton of cement basis. This was driven by lower fuel prices, the increased use of lower cost and lower carbon fuels and our continued reduction in clinker factor. We have seen this cost trending down since third quarter of 2023 and expect this to continue through year-end. Currently, close to 80% of our hedge-able energy and freight costs are either contractually fixed or hedged for 2024, while for 2025, we are close to a 60% level. Free cash flow after maintenance CapEx for the first nine months of the year was impacted by non-recurring items for $383 million, which includes a $306 million payment towards the $500 million Spanish tax line announced in fourth quarter of 2023. Adjusting for these extraordinary payments, free cash flow year-to-date would be 23% lower than last year due primarily to lower EBITDA and fewer fixed asset sales. Working capital investment so far this year has been $415 million, and we remain on track to achieve our guidance of reducing working capital by about $300 million for the full year. Net income for the first nine months of the year was $891 million, 43% higher than…

We are adjusting our full year EBITDA guidance to a low single-digit percentage decrease. This primarily reflects the impact of weather in third quarter as well as the current Mexican peso FX rate relative to our previous guidance. We remind you that our guidance is for like-to-like operations and assumes FX as of the end of the quarter for the remaining of the year. For total CapEx, we are reducing our guidance by $100 million to $1.5 billion. This guidance expects a significant ramp-up in spending in fourth quarter, the pace of which is not completely in our control. For cash taxes, we are reducing our guidance by $100 million to $900 million, to reflect the recent payment of the Spanish tax line. Please see the annex for our current volume guidance by region. It is a bit early for us to be talking about 2025, but I would like to share some of our thoughts on the upcoming year. We will, of course, give the usual guidance when we report fourth quarter results. We are seeing the evolution of some important macro trends and demand drivers for next year and beyond. Billions of dollars in fiscal stimulus remain to be deployed in the U.S. and Europe for infrastructure and climate action purposes. We also expect the near sharing story to continue to unfold as global supply chain shift and consolidate. In 2024, we had a record year for global elections occurring in countries home to almost half of the world's population. As we enter 2025, with more visibility on the policy of the new administrations, we expect incremental spending from both the private and public sector. Decrease in interest rates across the globe should stimulate additional private sector investment in the residential and industrial space. All of this should be supportive of demand conditions for our products in the core markets in 2025. 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 Gordon Lee at BTG Pactual. Gordon?

I just wanted to drill down a little further on the volume shortfall for the quarter and particularly get a better understanding of how confident you are that the bulk of it or a significant portion of it at least was weather-driven, whether you see some normalization of that as the fourth quarter has now begun and it looks like weather seems to have normalized in most places. And then maybe also at sort of explain to us how your backlog performed, particularly in Mexico and the U.S., in contrast to the volume performance that you saw during the quarter. Just to get a better sense of how confident you are in attributing a good part of that weakness to weather and not to something more structural or underlying on the demand front?

Great. Lucy, do you want to let me take Mexico and then follow with the U.S. or?

Sure. Go right ahead here Maher.

So, Gordon, just to remind the -- also the listeners, I mean, Mexico was down 7% on the quarter. And we had pretty bad weather both in July and in September. So that was very important. And we estimate -- I mean, as you can imagine, the impact is not just the number of days of precipitation, but also prep before and after some of these storms that take place, and that applies to all of our markets. So, the impact is quite material. And for the quarter, in the case of Mexico, we estimate about 40% was -- 40% of the drop in volumes of the 7% is really due to weather. And the balance is due to the kind of post-election slowdown. And clearly, we've had some slowdown in the infrastructure side, the residential market in Mexico, especially the formal construction, housing market continued to be challenged because of the interest rate environment. But we do believe that things should be getting better. Now the other thing that you've got to consider is when we're comparing to last year, third quarter, pretty much all over our markets, things were phenomenally better, right? And so, we're suffering also from a base effect comparison versus last year. Lucy, I don't know if you want to cover the U.S. piece?

Sure. I think it might be useful to talk a little bit too about how we calculate the weather impact because I think it's a pretty conservative estimate. Normally, the way we look at it is, if operations are closed and we aren't able to sell during those days plus any repairs coming out of the business that we need to make because of the hurricane and any new imports perhaps that we need to bring in to support supply in the aftermath. But it doesn't take into account the level of precipitation. The fact that the ground itself is very wet that it takes a while for contractors to begin to scale up after a hurricane as they get through the debris and everything else. So, I think if anything, our estimates with regard to weather impact are fairly conservative, and that's important to remember. And the other thing that I would say specifically -- well, this is true for both the U.S. and Mexico, is that when the sun was out, we were actually seeing sales levels, average daily sales levels, very much in line with our expectations for the back half. And Gordon, to your point on the question in terms of the Mexico in particular, we were hard hit in July. We were hard hit in September, but August was very much in line with our expectations. And that I think also has been true in terms of October as well. In the case of the United States, the weather impact, based on our definition of weather impact is a little bit higher than Mexico. It's about 50%. So, we reported a 6% decline in volumes, 3% of that was hurricane-related on cement. And, of course, we have three hurricanes during the quarter. And depending on markets, we were seeing precipitation of anywhere from 50% to 200% higher. Now of course, weather doesn't explain all of the volumes. We continue to see somewhat of a slowdown in terms of residential that we've been seeing on a year-over-year basis. And commercial also, although it's beginning to bottom, but it has been a little bit slow as well. But we would attribute about 50% of volumes to weather. And again, as we look at what's been happening in terms of October, it's a difficult month because, of course, we were hit by a hurricane in the second week of October, and that has had an impact. But certainly, what we've seen is a resumption in terms of average daily sales in line with our expectations for the U.S. business for the back half.

That’s very helpful. Thank you very much.

Thanks, Gordon.

And the next question comes from Paco Chávez from BBVA. Paco? Francisco Chávez: Can you give additional color on Mexico's margin dropped and the reason for higher electricity costs? And also, with demand decelerating in Mexico, how feasible it is for you to continue increasing cement prices in order to recover margins?

Thanks, Paco. On the margin and the impact -- the biggest impact, I would say, on the margin was the impact of electricity, the negative impact of electricity, which was about 1.8 percentage points of the decline was due to that effect in the quarter. And then we had another percentage point or so impact in terms of volume. Now fortunately, that was offset by, to some extent, by a very sizable increase in pricing, 3.2 percentage points positive contribution to margins as a consequence of our pricing -- successful pricing strategy. And in terms of what caused the uptick in the price of electricity, it's that we started migrating in the quarter to the wholesale market. And that happened for a large number of our plants, but not all of our plants. And so, we were essentially reducing the amount of electricity that we're getting under our agreement with the TEG, which is the self-electricity, self-producing facility that we have. And we started buying electricity in the spot market from CFE. And there is a price differential between 30% to 35% for the quarter as a consequence of that. Now that's likely to continue into the fourth quarter. It's likely to dissipate as we go into the beginning of the year, number one, because most of our plants, if not all of our plants, will have been migrated to the wholesale market. But additionally, sometime in the beginning of next year, we will start purchasing under a contract in the wholesale market from the TEG. So, we will be reverting to pricing that is much lower cost base than coming from CFE, probably around, again, 30%. So, throughout the course of the year, we should be significantly recovering the increase in the cost of electricity that we saw in the quarter. I don't know if that answers the question. Was there a follow-up question that I missed?

On the pricing?

Yes. On the pricing, Paco sorry -- yes. Go ahead, Lucy.

No, I was just going to say that as Maher said, pricing was quite strong on a year-over-year basis. We were up about 3%, I think, year-over-year. That was covering our fixed and variable cost increases and fixed costs are up because of the volume decline as well in margin terms. But importantly, we did announce a pricing increase. In fact, our competitors in Mexico actually first led with the pricing increase. And we did follow in early October on bag cement with a 5% increase. Francisco Chávez: Great. Thanks so much.

And the next question comes from Anne Milne from Bank of America.

My question has to do with the comment on the larger contribution of the aggregates business in the U.S. Is this something that you are expecting that will continue going forward? And is it possible to see something similar in any of CEMEX's other countries or regions?

Yes. I mean if we -- first -- I guess if we step back on the importance of the aggregates business in the U.S., it's really quite material. It's now more than 1/3 of our EBITDA. Actually, it's around 36%, 37% of our EBITDA. It's extremely profitable, and this is one of the businesses that we have targeted for further future capital allocation as we go forward. We think that because of because of regulatory constraints and because of the outlook for growth in construction -- in the construction market in the U.S., it's a very attractive space. We've had very good pricing environment and has enjoyed that for a very long time. So, this is an area that we continue to focus on. We do see opportunities elsewhere in our portfolio to allocate capital in that. And without getting into details, just -- I mean I would say that certainly, Mexico is an area that may benefit from that in the long term. We certainly would take a look at other parts of developed markets where we see the supply-demand dynamics for aggregates and pricing strategies for aggregates being positive. So, this is an area of high priority in terms of allocating capital in the future. And we think pricing capabilities in that market should continue to be fairly positive as well.

And the next question comes from Adrian Huerta from JPMorgan. Adrian?

My question has to do with the capital allocation. First, on the $3 billion that were mentioned on the pipeline that you have that is expected to add $700 million on EBITDA by 2028. How much of this has been invested? And if this is part of the growth CapEx? And then on the proceeds from the asset sales, what percentage of that could end up being allocated towards reducing debt and why not being more active on buybacks?

Yes. I don't think I got the first part of the question, Adrian. Could you mention again, please?

Sure, Maher. You guys mentioned that there was a $3 billion investment pipeline. I guess that there has been -- some of that has been executed already that are expected to add $700 million on EBITDA by 2028?

Yes. Yes. So far...

How much has been invested so far basically was the question.

Right. so far, about 1/3 of that has been invested, about $1.1 billion. And so far, it's contributing north of 11%, 12% of EBITDA. And the multiples that we have been investing in because of the type of investments that we have been making, which are bolt-on acquisitions or margin enhancement investments have been quite attractive. The multiple has been between 3x to 4x. So, clearly -- and these are very accretive transactions. Now the remaining portion of that $3 billion, about $2 billion is expected to be invested in the next couple of years. And we are expecting to increase the total contribution of the $3 billion to around $700 million of EBITDA. So again, very accretive transactions, and we are likely to continue with the same profile and with the exposures primarily addressing the U.S. market, that's where the highest bias, I would say, in terms of markets that we would like to invest in. And in terms of the use of proceeds, I mean from the assets that we have divested, as Fernando mentioned in his opening remarks, will be substantially towards investing or recycling throughout our portfolio along the lines that we have done in the last two to three years. So, there's really no change in the way that we're allocating our assets. There's going to be primary focus on the U.S. Within the U.S., we're looking at aggregates. We're also looking at aggregates in general. Urbanization solutions is another area that has been extremely attractive and it has grown and now contributing quite a bit of our EBITDA, as you have seen. And we're also looking at very specific needs and investments in terms of cement and decarbonization. All of these transactions are likely to have IRRs that are north of 30% and average…

And the next question comes from the webcast from Paul Roger from Exane BNP Paribas.

Guidance is still for high single-digit decline in energy costs despite Q3 issues in Mexico. Does this suggest energy is going down by more than expected elsewhere? How hedged is the group into 2025?

Yes, Roger, thank you for the question. And the answer is yes. I mean, while we saw a spike in electricity because of the dynamic that I mentioned, which is the transitioning to the wholesale market in Mexico, which we expect to, again, as I mentioned, reverse itself in 2025. There has been a drop in energy prices, total energy prices in many of our markets. And the same goes through for -- within energy for fuels and for electricity. And that's one of the reasons why we continue to believe that for the full year, guidance is going to continue to be a drop in the cost of energy for us. And we could give you examples. For instance, I mean, in the case of electricity in the U.S., we had a drop in electricity costs in several markets in Europe. We had a drop in cost of electricity, for instance, fuels in general, are dropping and continue -- we expect it to continue to drop as well into the third quarter. The use of alternative fuels of expensive alternative fuels is also dropping significantly, and that's translating to better performance for the full year at the end of the day and getting us to maintain our guidance that we have indicated on the energy side. Now in terms of how hedged in terms of how hedged we are, what I can tell you is that I kind of remarked at that in the -- in my remarks section, but also, we continue to -- as far as diesel going into 2025, we're protected up to 15% increase versus where we are today. In terms of pet coke, we're hedged probably close to 10% versus where we are today. And in electricity, we're 76% of our electricity needs are fixed going into next year, either because they're regulated or because they're fixed or because we have fixed it contractually. So, we've been very proactive on the energy side, pretty much all aspects of energy to try to take advantage of the levels that we have seen this year going into next year.

And Maher, I believe that maybe diesel is almost 100% hedged actually for 2025, if I'm not mistaken.

Yes. Yes.

Okay. Great. And the next question comes from Adam Thalhimer from Thompson Davis.

So, like you, I am surprised at the valuation, it's frustrating. And I'm curious if you've looked at any other strategies to address that such as the primary U.S. listing?

Yes. I mean, I'd hate to speculate, Adam, because I mean, obviously, we're always looking at ways to maximize shareholder value, right? But anything that is along the lines that you're suggesting is it's a major operation. It has its positives. It has its negatives. It takes time to execute. We need to evaluate the ramifications on other things. I mean, at the end of the day, we are optimizing shareholder value at the CX level foremost, I would say. So, I think I would hate to speculate on this. What I can tell you is that we're constantly evaluating different strategies and seeing how we can deliver the most efficient way of shining the light on the valuation of the Company. But I really would prefer not to speculate on whether we're looking at a particular strategy versus another at this point in time.

The next question comes from Carlos Peyrelongue from Bank of America. Carlos?

Thank you, Lucy. My question has already been answered.

And I think we have time for one more question. And the last question comes from Jorel Guilloty from Goldman Sachs. Jorel, sorry if I mispronounce your name.

So, I just wanted to touch upon something that was mentioned earlier, that the current Mexican president announced proposals to the 1 million homes in Mexico. So, I was wondering, considering that more than half of your residential demand is from the informal sector. I just wanted to understand how do you think that these proposals could impact your overall residential demand? And how quickly do you think we can see this flow through? That will be my question.

Lucy I...

I'll start, but please feel free to jump in. You're absolutely right. I mean Claudia Sheinbaum recently announced that she intends to build 1 million homes during her administration. Obviously, that's over a six-year period, but she did say that 167,000 of these homes were expected to be built during 2025. So, we certainly think that this should have a positive impact going into next year. If you look at formal construction, it's coming from the residential sector, it's roughly about 30% of our volumes. So, I think that for that 30%, that obviously is a plus and something we'll be considering as we look towards next year and beyond in terms of growth. In addition, she's had some important announcements as well in terms of onshoring investments, with over $20 million announced in onshoring as well in the last two weeks. And continued focus on her 10 development corridors, which would provide the infrastructure necessary for continued onshoring. So, all in all, I think we're very pleased with the announcements to date. We obviously have to see these come to fruition, and I think 2025 would be the starting point to see that impacting our volumes.

Thank you very much.

We appreciate you joining us today for our third quarter results call, and we hope you'll join us again for our fourth quarter 2024 for webcast on February 6, 2025. If you have any additional questions, please feel free to reach out to the Investor Relations team. Many thanks.

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