• Asset Sales: $1.4 billion in asset sales announced in the quarter, with year-to-date divestitures totaling $2.2 billion.
• EBITDA Contribution: Growth strategy contributed 13% of EBITDA.
• Net Income Growth: Over 200% year-over-year increase in net income.
• Weather Impact on EBITDA: Estimated $33 million impact due to extraordinary weather events.
• Free Cash Flow Impact: Decline due to a $306 million tax payment related to a Spanish tax penalty.
• Volume Decline: Consolidated volumes declined low to mid-single digits.
• Price Increase: Consolidated prices rose low single digits.
• EBITDA Margin: Urbanization solutions business margin rose 1.6 percentage points.
• Fuel Cost Reduction: 23% decline in fuel cost per tonne of cement year-to-date.
• Net Income for Nine Months: $891 million, 43% higher than last year.
• Leverage Ratio: Stood at 2.22 times, slightly higher due to lower EBITDA and tax payment.
• Full Year EBITDA Guidance: Adjusted to a low single-digit percentage decrease.
• CapEx Guidance: Reduced by $100 million to $1.5 billion.
• Cash Taxes Guidance: Reduced by $100 million to $900 million.

• Warning! GuruFocus has detected 4 Warning Sign with CX.

Release Date: October 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cemex SAB de CV (NYSE:CX) announced $1.4 billion in asset sales in the quarter, contributing to a total of $2.2 billion in divestitures year-to-date, aligning with their strategy to focus on developed markets.
• The company's growth strategy, primarily focused on the US, contributed 13% of EBITDA in the quarter, showcasing its effectiveness.
• Net income showed exceptional strength, growing over 200% year-over-year.
• Cemex SAB de CV (NYSE:CX) continues to make progress in decarbonization, with a 3% reduction in Scope 1 emissions year-to-date and significant advancements in carbon capture projects.
• The aggregates business in the US is now the largest contributor to profitability, accounting for 36% of EBITDA with margins in excess of 30%.

Negative Points

• The company's financial results were significantly impacted by extraordinary weather events, with an estimated $33 million impact on EBITDA.
• Consolidated volumes declined between low to mid-single digits due to adverse weather conditions and a slowdown in construction activity in key markets.
• Free cash flow after maintenance CapEx declined due to a one-off $306 million tax payment related to a Spanish tax penalty.
• The Mexican peso's significant depreciation posed a headwind to EBITDA.
• Electricity costs in Mexico rose by 30% due to transitioning power supply sourcing, impacting margins.

Q & A Highlights

Q: Can you provide more details on the volume shortfall for the quarter and how confident are you that it was primarily weather-driven? A: Maher Al-Haffar, CFO, explained that in Mexico, 40% of the 7% volume drop was due to weather, with the rest attributed to post-election slowdown and infrastructure challenges. In the US, 50% of the 6% volume decline was weather-related, particularly due to three hurricanes. Both regions saw sales levels align with expectations when weather conditions were favorable.

Q: Could you elaborate on the margin drop in Mexico and the reasons for higher electricity costs? A: Maher Al-Haffar, CFO, noted that the margin drop was primarily due to a 1.8 percentage point impact from higher electricity costs as they transitioned to the wholesale market. This is expected to reverse in early 2025. Despite this, pricing strategies contributed positively to margins, and a 5% price increase for bagged cement was announced in October.

Q: Is the larger contribution of the aggregates business in the US expected to continue, and could this be replicated in other regions? A: Maher Al-Haffar, CFO, confirmed that the aggregates business, now contributing over a third of US EBITDA, is a focus for future capital allocation due to its profitability and growth potential. Similar opportunities are being explored in Mexico and other developed markets.

Q: Regarding the $3 billion investment pipeline expected to add $700 million in EBITDA by 2028, how much has been invested so far? A: Maher Al-Haffar, CFO, stated that about $1.1 billion has been invested, contributing over 11% of EBITDA. The remaining $2 billion will be invested in the next few years, primarily in the US, focusing on aggregates and urbanization solutions.

Q: How do you expect the Mexican president's proposal to build 1 million homes to impact residential demand? A: Louisa Rodriguez, EVP, noted that the proposal could positively impact formal residential construction, which accounts for about 30% of volumes. The plan to build 167,000 homes in 2025 is expected to support demand, alongside other infrastructure and onshoring investments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.