Good morning, and welcome to the CEMEX second quarter 2021 conference call and webcast. My name is Chuck and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If at any time you require operator assistance, please press star followed zero, and we will be happy to assist you. Now we'll turn the conference over to Ms. Lucy Rodriguez, Chief Communications Officer. Please go ahead.
Good morning? Thank you for joining us today on our 2nd quarter 2021 conference call and webcast. I hope this call finds you and your family in good health. I'm joined today by Fernando González, our Chief Executive Officer, and Maher Al-Haffar, our Chief Financial Officer. As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. I will now hand it over to Fernando.
Thanks, Lucy. Good morning to everyone. I'm happy to report another strong consecutive performance. Second quarter results are another important milestone in our growth story. Quarterly highlights include the achievement of our long-time leverage goal, a 39% increase in quarterly EBITDA, and our announcement of industry-leading climate action targets. Additionally, consolidated sales have increased 13%, while EBITDA rose 31% relative to pre-pandemic levels of second quarter 2019. On a year-over-year basis, sales increased by 25%, with all regions growing double digits. EBITDA for the quarter was $818 million, again, with all regions contributing. Margin improved by 2.1 percentage points to 21.2%, well above our operational ceiling target. The improvement was largely due to volumes and cost-savings initiatives.
We continue to make important strides in costs, with operating expenses as a percentage of sales at 7.4%, a company record. We did see an escalation in variable costs within the quarter. These were driven largely by imports, maintenance, and rising energy costs. With strong demand momentum, we expect pricing in the near term to adjust accordingly. Free cash flow after maintenance CapEx of $401 million significantly outpaced the prior year and was the highest for the second quarter since 2016. In line with what we indicated at earnings day in June, we ended the quarter with a 2.85x leverage ratio, achieving our September 2020 operational ceiling target of less than 3x , significantly ahead of schedule.
Importantly, we are using this period of robust operational growth to prepare for what lies ahead and advancing more rapidly on our corporate focus to build a better future. We are accelerating our investment in the business and repositioning our products for a low-carbon world, as well as moving quickly to decarbonize our industry. Despite the favorable operating results, the operations continue to be challenged by rising COVID infection rates in many countries. For the safety of our employees, we must remain vigilant and adhere to public safety protocols. We have not been untouched by the virus within the quarter and sadly have lost colleagues. These individuals are part of our collective CEMEX family, and we grieve their loss.
As you know, our operational ceiling strategy is predicated on the belief that developed markets in Mexico will deliver the best growth opportunities over the next few years due to the unprecedented monetary and fiscal stimulus being deployed. This quarter certainly confirmed that view, with cement volumes in the U.S., Mexico, and Europe growing double digits versus pre-pandemic levels. Underlying demand trends in SCAC continued to show momentum, but quarterly cement volumes were disrupted by exogenous events, both in Colombia and the lockdown of the cement industry in Trinidad and Tobago due to rising COVID infection rates. Middle East, Africa, and Asia volumes are slightly down versus 2019 pre-pandemic levels due to the quarterly performance of Egypt. With the recent government announcement of the cement capacity limitation program, we expect improved performance going forward.
While we did benefit from an easy prior year comparison in the quarter, we believe that underlying growth momentum is significant and sustainable in most markets, albeit at a moderated pace due to more difficult base comparisons in the near term. As you know, supply-demand dynamics in most of our markets are exceptionally tight. In our footprint, the Americas stands out, in particular, with most countries operating at high capacity utilization. Within the quarter, the industry saw a sharp increase in shipping costs for imports in the region. We believe that as shipping contracts expire and demand continues to grow, prices will need to reflect increased costs.
In this environment, our well-developed footprint and supply chain, as well as the introduction of new cement capacity in the Americas, will be an important competitive advantage. Our capital allocation strategy is dedicated to organic growth with capacity additions in our existing markets, as well as bolt-on and margin enhancement projects. With the legacy projects as well as the domination of plants and the opening of closed lines, we will be introducing 10 million metric tons of additional cement capacity over the next two and a half years. The incremental investment to bring on this capacity is very compelling, with an average remaining spend of $43 a ton and is highly accretive. Importantly, the timing is right with the majority of the capacity coming on sold out markets and the Americas constituting 75% of the total.
With regard to our bolt-on margin enhancement portfolio, we currently have a pipeline of approved projects that is expected to deliver $270 million in EBITDA in 2023. These projects carry a relatively low risk profile since they are happening in markets that we know and in products related to our core businesses. An important focus of the portfolio is the ramp-up in our fourth product line, Urbanization Solutions. Urbanization Solutions are construction material products closely aligned to cement, concrete and aggregates that meet the essential needs of cities of the future and are sustainable in nature. These products promote the circular economy, use of lower footprint cement and concrete, as well as greener and more efficient construction practices. As a business line, Urbanization Solutions is growing rapidly.
Year- to- date, EBITDA is currently 7% of total and has grown 50% year-over-year. We expect that 80% of the EBITDA coming from Urbanization Solutions this year will have a sustainable value proposition. Our 39% EBITDA growth was driven by higher volumes and prices, as well as an increased contribution from our growth investment portfolio. While all regions were responsible for EBITDA growth, Mexico and MEA and SCAC had the largest contributions. We experienced an increase in variable cost during the quarter. While the timing of maintenance contributed, this increase was largely due to rising shipping costs associated with cement imports into the U.S., as well as the cost of energy, which grew 16% year-over-year. Importantly, in the first half of the year, pricing has significantly outpaced variable cost inflation.
We are moving quickly to adjust prices to reflect these new cost trends. Despite supply and demand dynamics in most markets, we have already announced additional pricing increases in the U.S. and Mexico. We continue to make progress on rationalizing administrative expenses, largely due to the cost savings program introduced last year under our Operation Resilience strategy. OpEx as a percent of sales was 7.4% for the quarter, marking a record low and 2.6 percentage points lower than the prior year. The new initiatives such as our Working Smarter program, our global initiative designed to utilize digital platforms and automation technologies to standardize and centralize business processes, we should expect continued savings on this front in 2022. Finally, we benefited from an important FX favor in the quarter of $47 million.
The gain came primarily from the appreciation of the Mexican peso, euro, and British pound. The favorable market backdrop and the decisive management actions that we have taken have led to earlier achievement of some of our original Operation Resilience targets. At our analyst day a few weeks ago, we used the event as an opportunity to update the targets under each of our pillars. The most significant changes were the leverage target, where we committed to achieve an investment grade rating, and the climate action target, where we now have industry leading carbon reduction goals for 2030, as well as brought forward our previous 2030 target to 2025, thereby providing transparency on our short-term progress. We are pleased with the rapid achievement under Operation Resilience to date and expect to continue making strides in the following quarters.
With the rollout of Operation Resilience in September 2020, our climate action agenda was escalated to a top priority of the company. We did this because we are committed to the belief building a better future implies a green and sustainable world. We will continue to lead the industry in our efforts to decarbonize, the first step is establishing industry leading carbon reduction goals. Of course, goals are not enough, we need to be transparent on our progress as we enter this critical decade. Therefore, similar to our other key targets, we intend to provide quarterly updates on our climate action metrics, giving it the same visibility as all other key financial metrics. I want to take this opportunity to update you on our digital initiatives. We are leveraging digital innovation in everything that we do.
We were the first in the industry to roll out a global digital commercial platform, CEMEX Go. We employ a perpetual beta approach that regularly updates the offering based on strong customer feedback loop. Recent innovations include 100% paperless experience and direct real-time connectivity between CEMEX and select customers. In our operations, we apply artificial intelligence and data analytics for predictive maintenance, optimization of energy consumption, and the reduction of carbon emission. We are using digital reality in our safety training courses on drones for inventory management. The latest innovation is our Working Smarter global initiative, which will place CEMEX at the forefront of the new business environment. Its primary goal is to leverage technology and remote work environments to drive efficiencies in the organization while building global operational scale. CEMEX will enable new digital platforms and automation technologies to orchestrate and centralize processes while reducing CapEx.
Now, I will pass it on to Lucy so she can discuss regional performance. Lucy?
Thank you, Fernando. The U.S. continued to enjoy strong demand in second quarter, with most of our markets sold out. Sales increased 13%, while EBITDA rose 7% on the back of strong volumes and pricing. Despite heavy rains in Texas during the quarter, cement volumes grew high single-digit. Volumes were again driven by solid residential demand. Residential construction spending grew 30% quarter-to-date May. Forward-looking indicators remain strong, with single-family permits up 46% year-over-year in the second quarter and low housing inventory levels. The infrastructure sector was supportive and the outlook remains favorable, with May trailing 12-month contract awards for highways and streets rising 2% for our four key states versus flat at the national level. The industrial and commercial sector remains weak, but activity is accelerating as cement-intensive distribution facilities for e-commerce continue to grow.
Our cement prices rose 3% sequentially, reflecting traction of our April pricing increase, which was implemented in all markets except Florida. To meet higher than expected demand, we significantly increased imports in the quarter beyond the level locked in for the full year. With industry spot shipping rates up more than 100% versus last year, these imports carried a steep cost and one that is not yet reflected in our pricing. This led to a one percentage point decline in EBITDA margin. We expect this headwind to continue, and we are working hard to ensure that our pricing policy adequately reflects the true cost of imports. As a first step, we have announced a second round of price increases for July and August in most markets.
In the case of imports, we believe we have superior supply chain capabilities with close to nine million metric tons of maritime import cement capacity, rail capabilities, as well as a strong production footprint in the Americas. We estimate 2021 cement and ready-mix volume growth of between 4%-6%, with aggregates growth of low single digits. For the medium term, we remain optimistic regarding approval late this year of an infrastructure plan, which we would expect to yield incremental demand for our products towards the end of 2022. In Mexico, our operations are experiencing exceptional supply-demand conditions, with the industry currently at historical peak production levels. EBITDA increased almost 60% due to higher volumes and prices as well as our cost reduction initiatives.
Bag cement maintained its growth trajectory, with volumes increasing 18% and continued to be supported by a high level of remittances, home improvements, government social programs, and pre-electoral spending. The 28% increase in cement volumes, however, was driven by an almost 60% growth in bulk cement, reflecting the second quarter 2020 industry lockdown measures which restricted the delivery of cement and ready-mix. Importantly, we have seen significant recovery of formal sector demand over the last few quarters, and bulk cement volumes are slightly above second quarter 2019 pre-pandemic levels on a daily sales basis. While ready-mix volumes are up 56% and show important sequential growth, they still lag pre-pandemic levels. We expect ready-mix to continue to recover as formal sector demand reactivates.
Activity in the formal residential sector is gaining momentum, as evidenced by the growth in housing starts and permits of 40% year-to-date. Going forward, low level of inventories and attractive mortgage rates should support volumes. We are also seeing activity in the industrial segment with the construction of warehouses along the border states related to near shoring opportunities with the U.S. While the commercial sector remains subdued, increasing tourism and consumer confidence should imply a restart to previously delayed projects. Sequential prices increased 2% for cement, reflecting our March price increase of 4%, as well as tight supply-demand dynamics. While margins improved 3.2 percentage points, sequential margins declined mainly due to higher maintenance and fuel. In order to recover increasing input cost inflation, we announced a price increase of mid-single digits for bagged and bulk cement effective July first.
Given favorable dynamics, we are increasing cement volume guidance for Mexico to now grow between 10%-12%. We expect that bagged cement growth rate will slow in the second half as the comparison base becomes more challenging. While the bulk cement ready-mix and aggregates growth continues to improve, supported by the housing sector and a favorable base. In our EMEA region, EBITDA grew 25%, driven by a strong performance in Europe and the Philippines. EBITDA margin improvement is due largely to the Philippines. EBITDA margin in Europe was flat, impacted by rising energy, raw materials and logistic costs despite better volumes and prices. European volumes for our three core products were up between 14%-23%, reflecting an easy comparable base in Western European operations last year due to the impact from COVID and an acceleration in residential and infrastructure activity.
We implemented cement price increases in Germany, Poland, Czech Republic and Croatia. The sequential decline in prices in Europe results from geographic mix, with the U.K., the country with the highest cement price in the region, growing its sequential volumes at a slower pace than the rest of the countries. We are raising our 2021 volume guidance for Europe. For cement, we now anticipate 2%-4% growth, 3%-5% for ready-mix and 6%-8% for aggregates. In the Philippines, cement volumes grew by 45%, reflecting not only the low comparison base resulting from strict government lockdown last year, but also increasing construction activity. Our average daily sales volumes have now recovered to levels higher than second quarter 2019. In the Philippines, we are increasing our cement volume guidance to 12%-14%, supported by strong public construction.
For more information, please see our CHP quarterly earnings, which will be available this evening. In Israel, we continue to see strong demand dynamics, particularly from transportation, as the government moves to execute its ambitious long-term infrastructure plan. Ready-mix volumes were up high single digits on an average daily sales basis, while aggregates were down mid-single digits. In Israel, we expect ready-mix and aggregate volumes to decline between 3%-5% for the year. The guidance reflects the record pace of business in 2020, as well as the completion of several large projects. Finally, in Egypt, we are encouraged by the recent decree from the government to rationalize cement production capacity for all players. We are pleased with the performance in our SCAC operations, the region that experienced the most severe government lockdown measures in 2Q 2020.
Regional cement volumes rose 43%, with all countries reporting growth. Regional cement prices rose 2% sequentially due to successful price increases in Jamaica, Costa Rica and Nicaragua. Favorable volume and price performance drove a 50% increase in net sales. The close to 80% increase in EBITDA reflected higher contributions from the Dominican Republic, Panama and Colombia. EBITDA margin rose 4.5 percentage points due to volume and prices coupled with our cost reduction initiatives. In Colombia, cement growth momentum driven by housing and infrastructure was interrupted by the social protests in May, which restricted the ability of the industry to deliver product. The protests were largely resolved by early June and industry activity returned to first quarter levels.
We believe the outlook for cement volumes remains favorable, supported by the self-construction sector, record home sales, existing 4G highway projects, as well as the rollout of new infrastructure programs. For the full year, we expect cement volumes in Colombia to increase between 9%-11%. For Trinidad Cement Limited, our listed subsidiary in the Caribbean, despite an industry lockdown in Trinidad and Tobago in the quarter, cement volumes grew by 28%, mainly due to Jamaica and a favorable base effect. In the Dominican Republic, cement volumes grew 72% on the back of a dynamic self-construction sector. Favorable fundamentals, including a slight pickup in tourism, support our increase in cement volume guidance of 19%-21% growth. We continue to take advantage of our strong regional logistics network to meet local demand while we introduce cement capacity additions to the region.
I invite you to review CLH's quarterly results, which were also published today. Now I will pass the call to Maher to review our financial performance.
Thank you, Lucy, and good day to everyone. As Fernando and Lucy mentioned earlier in their remarks, this was another very strong quarter with significant improvements in most of our financial metrics. Our business continues to show important operating leverage, with top line growing 25% and EBITDA expanding 39% on a like-to-like basis. Free cash flow for the quarter was up 187% when compared to 2Q 2020, and 85% better than 2Q 2019 pre-pandemic. This was driven primarily by strong EBITDA performance, helped by savings from our Operation Resilience program, lower financial expenses and lower investment in working capital. Continuously improving our working capital management and particular attention to credit quality and receivables collection translated into a record for a second quarter of -13 days in average working capital.
Net income increased $314 million year-over-year, driven mainly by better operating earnings and lower financial expenses. All of this culminated in the doubling of our return on capital employed to 10.2% when compared to last year. With regards to our debt maturity profile, we have the best runway to next maturities in a decade. We achieved a debt profile with very manageable maturities for the foreseeable future and still with ample potential for improvement in our debt stack. We have an average life of debt of slightly more than six years, and our expected free cash flow generation alone would be sufficient to meet our maturities in the near term. We were active during the quarter in terms of liability management and the enhancement of our capital structure.
In addition to lengthening our maturity profile, our liability management efforts this year translated into about 50 basis points reduction in our average cost of debt, which today is around 4.6%. During the quarter, we repaid around $370 million of bank debt under the facilities agreement, $320 million of the 5.7% notes due in 2025, and $450 million of the perpetual instruments. In June, we issued $1 billion of subordinated notes, which are deeply subordinated and without a fixed maturity. Under IFRS, these notes are treated as equity and are not considered for the calculation of our leverage ratio as per the facilities agreement. Rating agencies give us 50% equity credit for these notes.
This transaction propels us forward in our path towards investment-grade rating, optimizing our capital structure and accelerating our deleveraging path. After the closing of the second quarter, we paid down EUR 450 million of the 2.75% notes due in 2024. During the quarter, we accelerated our path to investment-grade ratings. As Fernando mentioned earlier, we significantly reduced our leverage ratio in Q2 due to increased EBITDA, strong free cash flow generation, and the issuance of the new subordinated notes. As we can see on this slide, during the quarter, we reduced net debt by $743 million, which resulted in a leverage ratio of 2.85x, a 3/4 return reduction compared to end of Q1 and 1.7x reduction versus second quarter 2020.
Our current $3.1 billion EBITDA guidance for 2021, coupled with the expected free cash flow during the second half of the year, would suggest further improvement in our leverage ratio for the rest of the year. Now back to you, Fernando.
Thank you, Maher. As we've covered in our CEMEX D ay a few weeks ago, we expect EBITDA this year to be around $3.1 billion. EBITDA should be supported by consolidated volume growth in the range of 5%-7% for cement, 3%-5% for ready-mix, and 2%-4% for aggregates. Please note that our regional volume guidance is included in the appendix. Regarding pricing, we believe supply-demand dynamics are supportive of pricing increases, and as I mentioned before, we have announced additional price increases in the U.S. and Mexico. For cost of [inaudible], we now expect a 12% increase with both fuels and electricity costs rising. Incorporating some savings from our Working Smarter initiative, we now expect $60 million in annual cost savings this year relative to 2020.
Guidance for CapEx, working capital, cash taxes and interest expense is unchanged. As we move beyond the favorable year-over-year comp, we expect more groundwork growth in most regions. We believe we will see isolated flare-ups of COVID in our markets. Governments have learned how to more effectively combat the pandemic with little disruption to the industry. A significant amount of government stimulus still sits on the balance sheets of households and should be deployed as economies reopen. Growth will be driven by consumer spending and investment in supply chain and manufacturing, coupled with the resumption of solid former construction projects. Over the medium term, developed markets should benefit from additional stimulus in the form of infrastructure with tight supply-demand dynamics in most markets. Rising energy and import costs, we expect pricing to reflect inflationary pressures.
While we do not give guidance a year ahead, all of this give us confidence in the view that we expressed at earnings day in June that EBITDA should grow double-digits in 2022. We will take advantage of the market environment and focus on our bolt-on investment strategy, deleveraging and investing to reach our new climate action target. 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. Now, we will be happy to take your questions. In the interest of time and to give other people an opportunity to participate, we kindly ask that you limit yourself to only one question. If you wish to ask a question, please press star followed by one on your touchtone telephone. If your question has been answered or you wish to withdraw your question, press star followed by two. Press star one to begin.
The first question comes from Gordon Lee from BTG Pactual.
Hi, everybody? Thank you very much for the call. A quick question on U.S. cement imports. I was wondering if you could give us a sense of how much of that is being sourced by other CEMEX operations and how much of that is being sourced through third parties. If you could give us a sense of where in the CEMEX network this is happening, just to get a sense of whether, you know, what the other regions are that might be benefiting on the other side of the higher import costs into the U.S. Thanks very much.
Can you take that one, Maher?
Sure, yeah. Thank you, Fernando. Hi, Gordon, how are you doing? You know, a significant portion, Gordon, of our imports now, into the U.S. are coming from Mexico. We also have some coming from Europe and Asia. As you're aware, we started the CPN plant, which has not only very positive logistics vis-a-vis the U.S. market, but also it's, you know, it's us producing and the marginal cost of starting up that capacity is fairly marginal. It's primarily Mexico, some from Europe, some from Asia, and this has translated into a change over the last couple of years. I mean, we, you know, because of the ability to ship from Mexico.
Of course, we will continue to look for the most competitive pricing and quality and, you know, as Lucy mentioned earlier and Fernando mentioned earlier, we have, you know, natural competitive advantages in terms of trading and in terms of importing into the U.S. market. I don't know if that answers your question, Gordon.
Yep, that's very clear. Thanks very much.
Great. Thank you, Gordon.
The second question comes from Vanessa Quiroga from Credit Suisse. Vanessa, if you can give us one question, that would be great.
Okay, thank you. Hello, everyone? Congrats on the results. My question, I want to focus on Europe. Obviously, the comparison base reflects the pandemic versus 2020. I'm wondering if you can give any color versus 2019, how the volumes of each of the main European markets is performing currently. Thank you.
Maher, can you take it?
Sure. Yeah, Vanessa, you know, Europe, all three products are up between, you know, 14%-23%. Obviously in, it reflected an easy comp because of, you know, from last year. The biggest contributors, Vanessa, to the business has been residential and infrastructure throughout the region. That's why we, you know, we raised the volume guidance for the year as Lucy mentioned, you know, from 2%-4% growth in cement, from 3%-5% in ready-mix. Also, you know, as a consequence of the most of these markets are fairly sold out.
As a consequence, we did implement pricing increases in Germany, Poland, Czech Republic, Croatia, and we've gotten very good responses to that. Now, in terms of in terms of volume increases, I mean, it's a little bit, you know, to to compare the quarters, it's kind of tough because, you know, in individual countries because of the varying lockdowns and the easy comp, so it doesn't, it doesn't really make sense. I think it's better to take a look at what's happening in the first half of the year. The major drivers are residential and infrastructure.
Maher, if I could just add on-
Thank you very much. Yeah.
If I could just add on there, Vanessa. Remember that last year in second quarter, our Western European operations were hit significantly by lockdowns, while our Central European markets were not. You're seeing that come through in the results. Having said that, as Maher was saying, we are seeing strong growth in residential and infrastructure across the portfolio. The U.K. stands out in particular, where we have seen very strong residential demand as well as several large infrastructure projects going out. I think when you look at residential permits and things there, they're operating at, you know, decade high levels at the moment. I guess the next question comes from Carlos Peyrelongue.
Thank you, Lucy. Hello, everyone?
Hi, Carlos.
Congrats on the results. Hi. My question is related to U.S. pricing. I mean, there's obviously several factors that are supporting much higher prices, whether it's shipping, as you mentioned in the call, increasing more than 100% the cost, so that markets and the potential for an infrastructure package. My question is, do you think that the probability of moving to now adjusting prices at least 2x a year or more is increasing materially? You think that's something that we're entering a new phase where instead of having just price increases once a year, not just this year, but going forward, we might, you might have to adjust prices more than once a year?
Thanks for your question. I think that the dynamics, Carlos, are it's kind of clear, and it's the one that we've been describing for some time now. The market is requiring higher amounts of imported cement. Capacity is fully utilized almost everywhere. For sure in ourselves that's the case. So what we see is imports serving additional needs from our customers. As you know, imports nowadays have an additional component on inflation, which is the high inflation in shipping costs. So now we have additional portions of imported cement at a higher cost. What I expect is for the dynamics to continue evolving, meaning we cannot offset inflation immediately, not in shipping costs, you know, increasing 100% or even increasing the cost of fuels.
What we can expect is for price increases either once or twice a year, in adapting to the new supply structure of the market. Yes, the time we've been describing, once we get to full utilization, the dynamics on the pricing side should improve materially. Is it going to happen with increases once or twice a year? That's difficult to say. This time we thought it was the right thing to do, that's why we announced price increases for July and August, and we will continue trying to offset inflation either, you know, it's mainly shipping inflation but other type of inflation through pricing.
Right. Very clear. Thanks, Fernando.
Thank you, Carlos.
The next question comes from Francisco Suarez from Scotiabank.
Thanks so much. Morning? Congrats on superb results. Thank you for the great disclosure on your progress on carbon intensity. That's fantastic. My question is on Petcoke prices, your primary fuel in the U.S. and Mexico. Can you tell us a little bit about what you are doing in the U.S. and Mexico to cope with the huge increases in Petcoke, including the use of alternative fuels, and if that has anything to do with the major cut in carbon intensity that we saw in this on the 1st half? Thank you.
Well, can you repeat the last part of the question, please?
Oh, yes. I just wanted to know that if you, among your strategies to deal with the increases in Petcoke, if that includes the higher use of alternative fuels, and if that explains a bit the major cut in carbon intensity that you are reporting on this half of the year?
I see. I see. Thank you for clarifying. The first part, you know, we are always monitoring the availability, quality, and cost of our fuel mix. Now we see sizable increases in the prices of Petcoke. Of course, what we try to do is to find the cheapest sources on the one hand, but on the other is to reduce coke in our fuel mix. In the case of this second quarter, we did manage to increase the use of alternative fuels. I think we were at the highest level ever. It's close to 30%. We will continue, we are. We do continue with our strategy. It's one of the elements in our climate action strategy.
We will continue increasing the use of alternative fuels with the preference for alternative fuels with very high content of biomass, which is what we've been doing already for several years. We are developing new projects of alternative fuels for our business in the U.S. As you know, we are close to finish two very sizable alternative fuels projects in Europe, in Rugby, in the U.K., as well as in Rüdersdorf in Germany. Yes, the increment in alternative fuels in the second quarter do play a role in the cost of all fuels.
Fantastic. Thank you so much. Congrats again.
Thank you.
Thank you very much. Bye.
The next question comes from the webcast from Paul Rogers, continuing on the climate action theme. Congratulations on the new CO2 targets. What has changed to give you confidence the group can go further and faster by 2030? Has the group validated the new carbon reduction targets with independent third parties like SBTi and aligned management incentives with the new targets?
Thanks for the question. Let me start with the second part. We are in the process of validating the targets with SBTi, so we will very soon have those targets validated. Now, the reason why we adjusted our we brought forward our previous 2030 target for 2025 and established a new target for cement as well as for Ready-mix by 2030, is because in the process on how things are evolving in climate change and how much we have learned and how much and how fast we think we can do. Now we feel very confident that we can align, and that's what we did.
We did align our climate action strategy and targets to the well below two-degree scenario, which is nowadays the one that, you know, you can adhere to with very specific numbers. The reason why we established these new targets of 475 CO2 kilos per ton of cement and 165 per cu m is because we know and we are confident that we can achieve those without counting with any of the technologies, new technologies needed to capture and use CO2. Technologies that we are proactively investing in. We already have the needed roadmaps to get to those objectives without the support of these new technologies.
I'm referring to additional clinker factor reduction, additional, I just mentioned because of the previous question, additional alternative fuels with high contents of biomass, additional fillers like calcined clay for blended cements on top of the ones we currently use. Things like alternative raw materials for cement production and a number of other levers we have for to manage that reduction. Again, we feel very confident that it's doable. To some extent, we have already done it in the case of Europe with a reduction of 35% when we use figures based in 1990. In this case now, it's a reduction, again based in 1990, of about or close to 40%.
It is lots of challenges, lots of work, lots of advocacy towards circular economy in different markets we participate. Again, it's doable, and we feel confident we will manage to achieve those targets.
Fernando, there was one last part of Paul Rogers' question that maybe you'd like to address, and that is, are management incentives aligned with the new targets?
Starting this year, we include in our variable compensation system the targets of CO2 reduction for our personnel, particularly the one directly related to the different levers of CO2 reduction. That started early this year. In the last month or so, we included another element in variable compensation. We decided to try for the second half of the year to see, you know, how it works, so we can put in place starting next year. We are calling it the CEMEX ETS, meaning a variable compensation modifying our EBITDA with the cost of CO2.
Achieving our targets and economic impact of achieving them or under achieving them in variable compensations in all our executives. Again, we started early in the year with performance of trials, including a sizable proportion of the evaluation on CO2 on achieving the CO2 reduction plan. Now we are adding this ETS concept in order to modify our EBITDA. We're currently trying using a European ETS for our business in Europe, we are using currently our California ETS price for the rest of the business. Again, this second portion of the variable compensation is a trial, we will fine-tune and of course, we will communicate that early next year.
Thank you, Fernando. The next question comes from Nik Lippmann from Morgan Stanley. Nick.
Thank you very much. Thanks for the call and for taking my question. I'm going to try to cheat here a little bit. I wanna ask two questions, so I'm just gonna put them into one.
They both relate to pricing, but sort of microeconomics 101, you're doing a negative supply shock into Latin America. You're exporting more up to the U.S. What is sort of the, pardon me, the reflection on pricing locally in Latin America and similarly in Europe, where the marginal cost of production seems to be going out in line with the higher cost of carbon emissions. What's the reflection there on cement pricing in Europe? Thanks a lot and congrats on the numbers.
Thanks. Can you take that one, Maher?
Yeah. Hi, Nick. I mean, I think that, you know, you hit on a very good point, Nick. The reality is that our markets supply-demand dynamics are tight virtually everywhere. I mean, and of course, it, you know, in the case of Mexico, I mean, I'll start with Mexico. In the case of Mexico, especially in the central and southern central regions of Mexico, I mean, we, and I believe most of our competitors are pretty much in sold-out positions, and we're expanding capacity as much as possible. Clearly, you know, bringing in on the CPN plant to address the U.S. market, I mean, it does have some impact in Mexico, but not that much of an impact.
Clearly there are tight supply-demand conditions that are leading to positive pricing dynamics in the case of Mexico, and that is expected to continue. I mean, we believe that the demand in the residential market and infrastructure, both of those two core businesses have a lot of legs. They will continue to contribute to demand. We're seeing also, you know, a lot more inshoring from China to Mexico, industrial and manufacturing is also beginning to grow. I would say, definitely we are benefiting from those dynamics in Mexico. In the case of the U.S., absolutely right. I mean, we're sold out. There are some markets on allocation.
As we discussed, we're bringing in, you know, we've increased our imports into the U.S., quite materially. There you do have pressures of transportation, as Fernando mentioned, which are escalating quite a bit. You know, pricing has gotta react to it. It is reacting to it. As you know, we've increased prices for the second half of the year, we should be getting those pricing increases. In Europe, you have a similar situation. You know, you have tight supply-demand conditions. I mean, even in some markets in ready-mix, we're, you know, we're able to start to cherry-pick, you know, our most profitable projects because we're reaching, you know, capacity utilization even in ready-mix in some of the markets. That's what's leading to good pricing environment.
You know, we've implemented pricing increases, I would say, in most of our European markets, and we're getting some very good traction on that pricing. I don't know if, Nick, that covers your. If I missed anything, please remind me.
Yeah. No, look, I think it clearly covers it. You know, what I'm sort of looking at is to what degree, you know, I understand you're making money on the imports into the U.S., right? That's profitable freight.
Sure. Yeah.
My question is really to what degree are you know, say you're selling two million tons or three million tons to the U.S., which is wonderful, but are you repricing, say, 20 million tons of cement sales in Latin America because, you know, all of a sudden, all of that excess is going up north? Is there anything that will really prohibit you from taking that U.S. pricing power and use it as things get tighter across the region?
Well, I mean, markets, Nick, markets are fairly, I mean, obviously are fairly fragmented when it comes to cement, and especially when the cement needs to go overland. I think if you're saying that just because we're exporting out of Mexico into the U.S., is that necessarily pulling up prices throughout Latin America? I think the situation is a little more complex than that. I think you need to get more granular on a local market by local market, and that's why I, in my comments, I separated kind of the northern part of Mexico and the central and southern part of Mexico, where they're less impacted by the exports to the U.S. and much more impacted by local supply-demand conditions.
We are, you know, we are increasing capacity in the, you know, and doing debottlenecking in the central and southern regions in Mexico as well. You know, we are, you know, Tepeaca is coming on stream, and that should be supporting. I think to talk about pulling up prices because of exports out of Mexico, into the U.S., in Mexico and in Latin America, I think it is a little more complicated than that.
If I add to what, yes, Maher said, I think, and perhaps this is not the moment to do it, but Maher has already mentioned that capacity utilization is very tight all over the Americas. It might help, but that is not crucial. It's not the reason. Look at capacity utilization in the Dominican Republic. We already announced starting up a old kiln that we're not using since ages, because capacity is fully utilized. We are proceeding with the bottlenecking capacity projects in Jamaica. We are doing the same everywhere.
In the case of Mexico, the bottlenecking in Pochuta and increasing capacity in Tepeaca, starting up Campana, that's for export. It's all over the place. I think the summary to me is the pandemic hit it badly in Latin America last year. Mainly because of the informal economy, it came back very soon, and it continues coming back and growing. The speed at which the recovery has happened has surprised most of the industry, and everybody's trying and using almost 100% of capacity utilization and trying to bottleneck and expand capacities all over the market. That, I think that's the part that we should go deeper to better understand the pricing dynamics currently.
Got it. Makes sense. Thanks a lot.
Thanks, Nick.
The next question comes from Adrian Huerta from JPMorgan.
Hi. Thank you, Lucy. quick question just to clarify. Did you say that the impact from the increased cement imports in the U.S. was one percentage point? just to clarify that first, my second question was also very specific.
You mean in terms of the margin, you mean?
Yeah, the margin impact from the increased cement input. Was 1 percentage point on margins?
That's at the consolidated level, Adrian. It was higher than that on the U.S. level, it accounted for, you know, almost a 3% headwind in margins.
Okay, perfect. Just to clarify, my question is w hich, into which regions, the increased imports, were to? Was that into California, Texas, mainly?
We don't break out where the imports are coming into. But the markets that we have been importing into have been Texas, California, as well as Florida. I can tell you that in the quarter, due to bad weather in Texas, we did have a problem actually taking, you know, taking the shipments into the ports because of bad weather. I hope that gives you some insights into the import activity.
Good enough. Thank you, Lucy.
Thanks, Adrian.
Oops, sorry. The next question comes from the webcast from Alan Alanis from Santander. What is the outlook for imports of cement to the U.S., and is this a risk or an opportunity for CEMEX?
Well, I think the outlook for imports is directly related to the outlook of volumes in the market. Again, once we have all of our local capacity utilized, the delta will need to come from imports. We can expect for imports to continue increasing.
If I can add also, Fernando, I hope I'm not interrupting, Fernando. May I add?
No, no. Go ahead. Go ahead.
Yeah. I think, also, Alan, I think what we need to also take into consideration here, over the medium term, meaning into 2022 and 2023, what's happening on the infrastructure side. I mean, as you probably have been following, in the U.S., we are coming awfully close now to an agreement on an infrastructure bill and also an approval of the existing FAST Act. I mean, if you take a look at what happened literally in the last 48 hours, we had a confluence of agreement between Republicans and Democrats. You have, even though last night there was a procedural vote, it was a very important milestone.
You had 17 Republicans, including McConnell, voting to take the bill forward within the Senate, and that's gonna be a $550 billion bill. A lot of people may say that that bill is a smaller number than what Democrats wanted to do, but in reality, it's pretty much the same amount of what we consider to be cement-intensive projects.
You know, no matter how you skin this cat, I mean, $550 billion on top of the current FAST Act, which is probably gonna be extended by five years, that's what's being proposed by the Biden proposal and the bill that is being put forward, it is gonna translate somewhere between 20%-30% higher demand for cement in the U.S. We all know that there are some very important, you know, environmental, Yeah, I don't wanna call it prohibitions, but certainly environmental, let's say, pressures and headwinds in adding new capacity. Imports are going to play, are gonna continue to play an important role.
I as Fernando said, I think because of what's happening on logistics, I think in reality, that pricing is going to have to go up to increase to make those imports, you know, be at par with the domestically produced product in terms of price. I hope that answers the question, Alan.
Thank you, Maher. The next question comes from Anne Milne from Bank of America.
Thank you. Good morning, Fernando, Maher, Lucy? It took me a long time to go through all the quarters to see the last time you had EBITDA of over $800 million, not just even in the second quarter. Congratulations. I'm going to take the last question a little bit further, the whole question of capacity utilization. You know, clearly you guys are going, you know, bringing older kilns back online and looking to expand capacity in a number of markets. I've heard from other players in the U.S. and other regions that they're looking to do the same. Maybe you could just tell us in, you know, some of your key markets, how much additional capacity you think that could be brought online in the next, just say, 24 months.
Obviously, to build a new plant would take much longer, and given the environmental issues, it might take, you know, even longer than it used to. Maybe you could just comment in that whole context on Egypt and what the government is going to do and how long you think that might take till you have a positive impact on, sort of, let's say, reduced supply in the market in Egypt. Thank you.
Okay. Thanks. Thanks, Anne . I think on the bottlenecking capacity in the U.S., we are already developing a few projects in some plants. We still don't have a final number. We are right now studying and making engineering for some of those bottleneckings. You can expect, let's say for the time being, just to give an order of magnitude, it could be around 300,000 tons. Again, this is related to the bottlenecking. At the same time, as you can imagine, you know, we are looking for opportunities of expanding capacity, not just the bottlenecking. Right now we don't have a concrete info that we can share with you.
We might be able to do that in the near future. Regarding Egypt, well, you know, you already know the news. What the government is doing is what we've been, you know, supporting, an idea that we've been supporting, which is finding a way for the industry to have, let's say, a reasonable context after a very large cement plant was built by the government. What is going on now is rationalizing that on a temporary basis. It's one year. Rationalizing that capacity so the basic economics of the industry can be reasonable for investors. We expect that during this year, you know, prices should be improving.
Not only because of that, but also because, you know, we do expect the market to recover, to grow. It's two reasons why we should expect better pricing in Egypt in the next few months.
Fernando, do you know how much they're going to reduce their capacity by to help out the whole overall market? Let's say that large plant, hmm?
I don't have the number with me. What I know is it's a sizable deduction. It might be slightly different on a per player basis. But I don't have the numbers with me to share it with you.
Okay, thanks. Are you aware of any other, outside of CEMEX, new cement plants that are being commissioned at the moment?
Where? In Egypt or in the U.S.?
No, just in your footprint globally.
Well, there were some grinding mill cement grinding mills in Yucatan, Mexico. I'm trying to remember if there is any other. In the Caribbean, I don't remember any new capacity. None in Latin America. No, I don't recall any specific expansion project.
Okay. Thank you very much.
I can imagine that because of the context we have described before, everybody is thinking on expanding capacity.
Yeah, I'm sure they're thinking about it with trepidation. Do we do it or not? Anyway. Thank you very much, and congratulations again.
Thank you.
Thank you, Anne.
Thanks, Anne. We have time for 1 last question. Ben Theurer from Barclays, I think you're on deck.
Yes. Thank you very much, Lucy. Fernando, Maher congrats on the results. I wanna close my questions with one of your favorite topics from the past, Fernando. A little bit about the digital innovation and what you've been doing over the last couple of years, be it on the commercial strategy with CEMEX Go. Now you're laying out a couple of other things around business services, manufacturing. The question really is: Within your global footprint, what would you say is a reasonable target where you can get and actually maximize and optimize your operations, ultimately driving margin expansion through all the digital innovation you've been put in place, where you stand today, and how far do you still have to go to reach that target?
Yeah. Yeah, it's a very interesting topic. You know, let me first describe what our current status in our digital strategy, and then I will go through what is it that we can expect moving forward. Three domains. The first one is digitizing and developing a superior customer experience with a digital platform. That's what we basically call CEMEX Go. As you know, CEMEX Go allows our customers and ourselves to have a seamless process to relate and to transact and to receive and to pay and to the whole spectrum of the commercial relation. By now, and with one exception, this platform is available globally for all our customers. We are very pleased with the acceptance of the platform.
Our, about 90% of our recurrent customers do use it as the way for them to get information, to get quotations, to buy, to pay, to receive, to everything. We are very pleased with that platform. What's next for that platform? Think on the platform as a minimum viable product. The platform nowadays is different to what it was two years ago, and two years from now is going to be different to what it is today. We are adding functionalities. The last one of the last functionalities is digital confirmation in ready-mix, meaning now our customers can get into CEMEX Go and pick the slot at which they want the product. They will receive an answer, voila, transaction is done without any additional intervention.
For our customers, we understand that's a very valuable functionality that they will start having globally very soon. The other features or the other ideas we have with this platform is that through that platform, adding other pieces, we want to participate in the business models that are nowadays being developed in the construction space because of digital technologies being applied to them. We have different ways to relate to other platforms through APIs. We have developed the CEMEX Development Center. I mean, this is a way for us to facilitate customers to connect with us through APIs, not necessarily to the platform itself, and make their lives much simpler by them using their own systems. That applies mainly to the segment of very large customers.
We want to expand the scope of our platform into the construction space, and that's what we have been doing lately. The other domain is how to apply digital technologies accompanied with other types of practices in the way we manage the company. You might remember that some time ago, we developed what we call the Global Service Center for CEMEX. Outsourcing most of our back office activities and the ones that we kept internally, you know, trying to concentrate, to standardize, and to automate as much as possible.
Now we are taking that concept into the, let's say, the 4.0 type of idea, and we are in the process of deploying a step forward the concept with what we are calling now Working Smarter, which is part of the initiatives of Operation Resilience. Through that concept, we are going to go deeper into outsourcing. We are going to go deeper into globalizing back office solutions, standardizing. Through all those efforts, covering all the back office and some portions of the service delivery model, we do expect to be even more efficient with customers, more efficient with our resources, and saving about $100 million starting next year. That's a domain on how we manage the company.
When measured at OpEx to sales, last quarter, we just got 7.6%, which is our lower figure ever, meaning we do continue finding ways to reduce the investment we do while managing the company. The third element is operations or production. On that regard, we have been applying some digital solutions in, say, energy in the case of cement and others in the case of aggregates to automate and facilitate the work at quarry works and how our customers are served through quarries. What we can expect for the future is that these technologies will continue invading, let's put it that way, the way we work, the way we serve, the way we manage, the way we operate.
That should be translated into efficiencies and should be translated, in the case of our customers, into a superior customer experience. I think the best feedback we have received from customers is that, again, about 90% of recurring customers are using it, meaning that's a way for them to relate to CEMEX.
Perfect. Fernando, thank you very much. Very clear and right on time. Have a lovely rest of the day. Thank you very much.
Yes.
Thanks, Ben.
Thank you very much.
Thanks, Ben. Well, we appreciate you joining us today for our second quarter webcast and conference call. If you have any additional questions, as always, please feel free to reach out to the investor relations team, and we look forward to seeing you again on the third quarter results webcast. Many thanks.
Thank you for participating in today's conference. This concludes the presentation, y ou may now disconnect, and have a great day.