CEMEX, S.A.B. de C.V. (BMV:CEMEX.CPO)

CEMEX Day 2021

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Jun 24, 2021

Good morning and welcome to CEMEX Day. My name is Lucy Rodriguez and I am the Executive Vice President of Corporate Communication, Public Affairs and Investor Relations for CEMEX. We are pleased to be here today at the New York Stock Exchange and grateful to the exchange for making their premises available to us during the pandemic. It almost seems like a normal CEMEX Day, minus our guests unfortunately. As you know, we typically host CEMEX Day annually in the first quarter. Due to the pandemic, we have changed the normal cadence of the event because we felt it was important to update you as visibility improved and market conditions changed. This year, due to the progress we have made on our Operation Resilience strategy, we thought it was important to update you on our outlook and strategy and save a more detailed market by market review for what we hope will be an in person meeting in the fall. In this first virtual meeting, our CEO, Fernando Gonzalez our CFO, Maher Al Hafar and our Executive Vice President of Strategic Planning and Business Development, Jose Antonio Gonzalez will discuss our current consolidated outlook and our strategy in the context of our Operation Resilience framework. We think we have a good story to tell today, and we hope you find this event useful and leave here with a clearer understanding strategy. We are optimistic and believe the opportunities ahead of us far exceed the challenges. Lastly, we will keep you informed as we confirm the details for the second part of CEMEX Day twenty twenty one, where we will have our Regional Presidents discuss operations and a detailed review of our climate action goals. Today, Fernando, Maher and Jose Antonio will each begin with a brief presentation and then we will open it up to a Q and A session with our analysts. And now for a quick disclaimer. 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 it is my pleasure to introduce our CEO, Fernando Gonzalez, for the first presentation. Fernando, can you please join us on stage? Thank you, Lucy. And thank you all for joining us today and I hope this event finds you in good health. I wanted to host this CEMEX Day financial and strategic outlook because so much has changed since we last met in September 2020, '6 months into the pandemic. In second quarter of last year, when coronavirus hit, we had visions of start demand adjustments in our markets and introduced emergency measures to safeguard our company. As you know, those worst case scenarios did not come to fruition and instead we have experienced important year over year growth. And as we look forward, we believe this growth is sustainable and the outlook for our business is bright. Our results are not driven simply by market momentum, however. It is also due to the decisive management actions that have reshaped the company. These include cost reduction efforts, efficiency enhancements, liability management, introducing important growth elements to the portfolio, while derisking the business profile. This has allowed us to execute faster on our strategic goals than we previously anticipated. And perhaps the achievements for which I'm proudest is that through our investment strategy, we have injected growth into our portfolio. And that the elusive investment grade capital structure that we have talked about for so long is now well within reach. This allow us to turn the page on what has been a long chapter for CEMEX and open a new book where we consolidate our recent achievements and shift our strategic balance a bit more towards growth. The world and our industry, however, have not returned to a pre pandemic normal. And we do not believe that they will and perhaps nowhere is this more evident than in climate action. Society has been escalating its demands for climate action over the past few years, but the pandemic has triggered calls for even more aggressive action. Our strategy must adjust not only to the best market outlook that we have had in years, but also to this new normal. That is why I wanted to have this meeting today to update you on what we believe lies ahead and how we are adjusting our strategy to meet these new opportunities and challenges. I would like to quickly review the strategic priorities, which I outlined the last time we met. And of course, our operational resilience framework was designed to deliver these priorities. We aim to be a building materials and solutions company where The U. S, Europe and Mexico will constitute a large part of our footprint. We will concentrate on vertically integrated positions near growing metropolises. And on our four core businesses cement, ready mix, aggregates and urbanization solutions. Our digital platforms and customer centricity efforts are important competitive advantages that will drive customer loyalty over the medium term. Climate action is the biggest challenge of our lifetime and progress on this front will differentiate players in the industry. We will continue to lead in sustainability, not only because it creates shareholder value, but because it is the right thing to do and builds a better future for the world. Quickly to recap our achievements over the last few quarters. Due to market recovery and management actions to confront the pandemic, we have enjoyed steady year over year growth in consolidated sales and EBITDA since third quarter twenty twenty. The digital marketing strategy that we launched in 2017 with its industry leading CEMEX Go platform as well as our extensive distribution network have an important competitive advantages and allow us to capture market share during the pandemic. And due to the cost and efficiency initiatives we introduced, we have seen increased profitability and strong operating leverage with EBITDA growing 2.7 times sales growth. Free cash flow and leverage quickly responded to improved market dynamics. And important management actions such as the sale of carbon credits and issuance of subordinated notes further drove the deleveraging process. On a pro form a basis for the issuance of the notes, first quarter leverage declined 1.4 turns from its recent peak in second quarter of twenty twenty to 3.2 times. And this growth momentum accelerated into first quarter twenty twenty one with cement volumes equal to or outpacing that of first quarter twenty nineteen well before the pandemic. And with government lockdown measures significantly affecting volumes in second quarter last year, second quarter of '20 '20 '1 has an easy growth comparison. But even taking that consideration, consolidated cement volumes quarter to date may continue to outperform 2019 average daily sales volume. In April, we gave 2021 EBITDA guidance of 2,900,000,000.0 Based on what I'm seeing today, I'm now confident that we can deliver $3,100,000,000 in 2021, a 26% increase versus prior year. In a cyclical industry, our markets are positioned at an attractive point in the cycle, either coming out of our recent downturn or at a sustainable mid cycle level. For the next two years, we expect robust GDP growth in our markets as economies recover from the recession and our industry should align against that growth. Due to monetary and fiscal stimulus as well as vaccination levels, we continue to believe the best growth opportunities will be in the developed markets with important spillover effects for the emerging markets, particularly Mexico. After a year of lockdown, economic reopening in advanced economies is the moment when consumers spend again. Some economists estimate that over $2,000,000,000,000 of fiscal stimulus are sitting on the balance sheet of U. S. Households and ready for deployment with economic reopening. As consumers spend, the economy slowly wakes up and we see this tension between supply and demand that is evident recently in The U. S. With shortages of everything imaginable. Industrial and manufacturing as well as supply chain will respond to these shortages with important investments. Indeed, we are already seeing a significant expansion in global capital expenditures. A recent report from our prominent financial institution predicts global investment to reach 115% of pre recession levels by the end of twenty twenty one. With rising vaccination rates, travel is picking up to tourist makers such as Orlando, Las Vegas, Cancun and The Caribbean and we expect pandemic delay construction projects to resume. And finally, additional fiscal stimulus such as the green wave and the proposed Americas job plan will lead to significant cement intensive infrastructure spend in late twenty twenty two and beyond. While new waves of coronavirus and low vaccination rates could challenge some of our emerging market portfolio, we do not expect the government response to significantly impact sector. In addition, we have seen that cement demand in these markets has benefited importantly from stimulus and advanced economies in the form of remittances, low interest rates and a pickup in global trade. In these markets, we expect that demand from the formal construction will accelerate in anticipation of economic reopening and more than compensate for potential lower growth in the bag cement segment. Indeed, we are already seeing this behavior in Mexico. As a result of this favorable backdrop, we expect double digit EBITDA growth in 2022. While it is early and we will update this view as we go through the year, I'm confident that growth is sustainable. In an environment where inorganic growth is at sky high multiples, I'm proud to say that CEMEX is growing again organically. This growth consists of capacity additions in our key markets as well as our current approved bolt on and margin enhancement portfolio. In total, we expect to spend $925,000,000 over the next three years and generate approximately $400,000,000 in EBITDA by 2023. Let me first talk about the capacity additions and I will address the bolt on component during the operation resilience review. With most of our markets around the world at a favorable point in the construction cycle, supply demand dynamics are extremely tight. In terms of cement capacity, we will be introducing around 10,000,000 metric tons by 2023. This is equivalent to approximately 15% of our twenty twenty global cement volumes. I know you are aware of our legacy projects in Tepeyacca, Maseo in Colombia and solid in The Philippines, but we also are bringing on additional capacity through reopening of idle capacity, brownfield projects, debottlenecking and grinding mills in some locations. We are fortunate that all of this expansion is coming on stream in markets with high capacity utilization and position at an attractive point in the cycle. I would like to highlight that 75% of this new capacity is located in The Americas, where utilization is particularly high and where our unique footprint and supply chain can shine. These additions should increase the flexibility we have to address incremental demand in the region. The expansions are highly accretive and will be structured to take into consideration our climate action priority. We will be deploying the most modern energy efficient equipment and technologies. And in several cases, this capacity will take the form of grinding mills, which will be used for blended cement, thereby lowering the clinker factor. In addition, the locations of these operations will be carefully chosen to take advantage of the availability of the carbonated or alternative raw materials, carbon capture and alternative energy sources. Jose Antonio will cover the growth strategy in more detail in this presentation. In September of last year, I rolled out the four pillars of operation resilience, EBITDA growth through margin enhancement and investment grade capital structure, the optimization of our portfolio for growth and advancing our sustainability agenda. With today's stronger market outlook, our faster than expected progression against our target as well as society's heightened expectations of the role of the private sector, we must adjust our strategy to reflect these changes. Let me update you on each target and where we stand. With regard to the consolidated EBITDA margin, we have experienced a significant year over year expansion in margin over the last three quarters. In two of the last three, we have been above 20%. And importantly, this includes first quarter, which is normally the lowest EBITDA margin of the year due to seasonality. We feel confident that we will achieve this metric this year on an annualized basis. The increase in margin is due to cost reduction initiatives, operating leverage as well as pricing gains. And of course, the favorable supply demand dynamics coupled with rising input costs should lend themselves to a strong pricing environment. In first quarter, with the exception of The U. S. Where two rounds of 2021 price increases are scheduled for later in the year, we are enjoying mid single digit price appreciation in Mexico, Europe and SCAG sequentially. You should expect that we will push for favorable pricing that will more than offset current input cost inflation as well as continue to execute cost saving initiatives. However, growing inputs in sold out markets and bagged cement mix may provide headwinds to further margins improvements. In light of this, we will maintain the 20% or greater margin target under operation resilience. An investment grade capital structure of three times leverage has been our goal for a long time and we are confident that it will be achieved by this quarter twenty twenty one. Pro form a for the issuance of the subordinated notes a few weeks ago, our first quarter leverage ratio would be 3.2 times within striking distance of the 2023 target. We expect that by year end based on our new EBITDA guidance, our leverage ratio will be around 2.6 times. And while a three times leverage has been the goal for a long, long time, this is not the end of our deleveraging efforts. We recognize that cost of capital is an important competitive advantage in this industry and you should expect additional deleveraging beyond the three times ratio in order to arrive at our optimal capital structure. Therefore, we are resetting our new operational resilience leverage target to an investment grade rating. We believe this will open up liability management opportunities throughout the debt stack and will result in significant savings from a cost of capital perspective. Maher will go into additional details on his presentation. Our optimization of the portfolio target includes two levers: our growth investment strategy as well as opportunistic divestments in emerging markets. Implicit in this strategy is the concept of repositioning our portfolio towards attractive developed markets. On the investment side of the pillar, we began investing in bolt on investments enhancement projects in 2019. With the introduction of preparation resilience, we sped up the execution of these investments. We have advanced significantly with the pipeline of approved bolt on and margin enhancement projects, more than doubling to €600,000,000 as of first quarter twenty twenty one. The recent progress we have made in deleveraging as well as our increased profitability will allow us to invest even more heavily on this front over the next few years. The divestiture level implies potential selective disposals in emerging markets and redeployment of capital towards investments in The U. S. And Europe as well as deleveraging. However, execution on this front has been slow by the pandemic. We expect the pace of the M and A market to pick up with economic reopening and we will continue to pursue opportunistic asset sales. From my vantage point today, optimizing the portfolio is less about the need to delever and more about building faster growing business as well as assuring optimal valuation of assets sold. The bolt on and margin enhancing portfolio consists of small to medium sized projects in markets in which we currently operate and know well and in products that align against our four core businesses. As of today, the current pipeline of approved projects is $710,000,000 These investments are highly accretive. We now expect to generate an incremental EBITDA of $150,000,000 in 2021 ramping up from ramping up to a contribution of $330,000,000 by 2023. And importantly, as you will hear from Jose Antonio, we have plenty of investment opportunities under our growth strategy to keep us busy for the next three years. The pandemic's biggest impact has been on our final target climate action. The pandemic has served as a powerful reminder of global environmental threats and it has pushed society, governments and the private sector to accelerate climate action even more. Over the last year, governments around the world have responded with ever more ambitious climate action target as well as an unprecedented amount of green fiscal stimulus to aid the transition to a low carbon world. Indeed, The U. S, our second largest market has made an important U-turn by rejoining Paris Club and President Biden announcement of his intent for a 502% reduction in carbon by 02/1930. We welcome these initiatives and acknowledge that our industry has an important role to play in decarbonization. And we are harmonizing our own climate action goals to recognize this urgency. We recognize that in today's world, the 24% reduction in carbon that we have achieved to date is not enough and we can do better. So in response, I'm proud to announce that we are setting a new more ambitious target for below four seventy five kilos of CO2 per tonne, a more than 40% reduction in CO2 emissions for 02/1930. We have already committed to validate this new 02/1930 goal with a well below two degree scenario of the science based targets initiative. And we are bringing forward our previous 02/1930 carbon goal of five twenty kilos of CO2 per ton of cementitious materials, representing a 35% reduction in CO2 emissions by five years to 2025. And we are not stopping there. As the largest concrete manufacturer in the Western world, I'm happy to announce our commitment to a medium term carbon reduction goal for concrete. While we previously announced our ambition to deliver net zero concrete by 02/1950, we are now committing to a target of 165 kilos of CO2 per cubic meter by 02/1930, equivalent to approximately a 35% reduction versus our 1990 baseline. This is important because concrete is typically the final form in which customers consume our products and it embodies the full life cycle of carbon emissions. One of the most interesting attributes of concrete is its ability in its build form to absorb carbon from the atmosphere. This quality combined with the ability to substitute cement with other binders and admixtures offers additional pathways to eliminate carbon beyond those in cement production. Finally, an intermediate goal of carbon emissions for concrete also offers better transparency to assess our progress against our 50 ambition to be net zero in concrete. We will go into a more detailed discussion of the road map to the twenty twenty five and two thousand and thirty goals at our CEMEX Day in the fall, but let me highlight a few key points here. We have learned a tremendous amount over the last year and we have seen how far our existing levers can take us in the decarbonization journey as well as how quickly technology in this area is advancing. To reach our twenty twenty five and two thousand and thirty targets, we are relying on known processes, practices, materials and proven technologies, all of which we have deployed in Europe over the last seventeen years. The levers are the same in our previous plan, alternative fuels usage with high biomass content, hydrogen injection, low temperature and low CO2 clinker and lowering clinker factor, but we are adopting them at an even faster pace. Of course, more aggressive targets will require additional investment. We estimate that approximately $60,000,000 annually of our strategic CapEx will go towards this objective. I'm so confident in our ability to reach this 2025 target that progress against this goal has been included as a factor in variable compensation for our senior management team and regional operations. To give you some sense of the art of the possible on this slide, we are showcasing our cement plant in Rudelsdorf, Germany, which we expect to be carbon neutral by 02/1930. In Rudelsdorf, we are working with other industrial and technology companies on a pilot project to create a carbon neutral cluster. We are utilizing alternative fuel substitution, waste heat recovery, green hydrogen, the carbonated raw materials, activated clay and carbon capture. We are analyzing technologies to potentially transport and store carbon as well as to transform the carbon produced into green fuels that can be reused in other industrial sectors. During the first five years of the consumption, we will pilot a variety of demonstration projects to test concept and scalability. We have applied for EU as well as local funding designed to support this groundbreaking initiative. To achieve our net zero ambition by 02/1950, we are partnering with our cement and concrete peers as well as other industries, associations and academia. To reach these goals, development of new technology that is scalable and commercially viable is necessary. We are currently working on approximately 40 projects globally, some of which we are developing in house, while others are in collaborations with other industry leaders and startups. We are investing in several areas including carbon capture usage and storage, accelerating the carbon absorption qualities of concrete and hydrogen technology. And we are engaged in six pilots of carbon capture technology. Of those three are located in Europe, 2 in The U. S. And one in Mexico. We are partnering with a number of startups including MTR, Carbon Clean and Sanghelion. And some of these projects have received funding from the European Union and the U. S. Department of Energy. However, we are focused on reducing our carbon footprint throughout our entire value chain. For example, with a collaboration with ENGINE, one hundred percent of our electricity in The U. K. Comes from renewable sources including wind and hydro. I am pleased to announce that we are partnering with Volvo in a CO2 reduction program toward a sustainable fleet. This program includes the use of electric ready mixed trucks, productivity services among other electromobility solutions such as charging solutions. We recognize that climate action is the biggest challenge facing the world and that the cement industry offers part of the solution. I would like to highlight the unique contribution our industry can make to the circular economy with its ability to recycle waste and residue from households and industry as alternative energy for its kilns. Due to the characteristics of the production process, our cement plant can recover and revalue energy from waste materials. Not only does this reduce carbon emissions, but it can alleviate one of society's most intractable problems, the treatment of municipal waste. In terms of repurposing waste from other industries such as steel and utilities, in 2020 we processed close to 9,000,000 metric tons of industrial residues. In 2020 alone, with an alternative fuel usage of 25% and a clinker factor of 77%, CEMEX recycle 50 times the waste that we generate. We could grow this contribution even more if the concept of a green and circular economy was universally adopted. From our thirty year experience of our operating in Europe, we know what needs to be done to create a circular economy. In many markets outside of Europe, the regulatory framework does not promote the recycling of waste or the use of zero or low carbon products in construction. We will actively advocate in our markets for the rapid adoption of a green and circular economy and the updating of construction codes to accommodate low CO2 products. We will collaborate with cement and ready mix associations and other industrial groups in our various geographies to promote these changes. Concrete, the second most widely consumed material in the world after water and with no real substitutes can be an important part of the climate solution. In summary, here are our new operation resilience goals: maintain EBITDA margins greater than 20% achieve an investment grade rating accelerate our growth strategy and continue leading the industry in climate action. While we have delivered on a significant part of operational resilience, we still have work to do. I would suggest that the next few years for us are a period of consolidation and resumption of profitable growth in which we continue to delever and capital allocation looks fairly similar to where we are today. Except that we will devote a growing percentage of free cash flow to our growth strategy consisting of our bolt on and margin enhancement investments as well as capacity expansions. And of course, in this consolidation period, we will look to introduce a sustainable return to shareholders in the form of a sustainable dividend program in the short term. Of course, a dividend requires both Board and shareholder approval. And finally, we will invest to achieve our 2025 and 02/1930 carbon goals as well as in R and D to reach our 02/1950 ambition of net zero carbon concrete. We believe that we currently have the best market outlook that we have seen in years and that we are entering a period of sustainable growth. We will use this time to consolidate our recent achievements and advance even further against our strategic initiatives. EBITDA growth will benefit from robust market conditions and be enhanced by our growth investment strategy. We will strengthen our capital structure and achieve an investment grade rating provided a significant competitive advantage in a capital intensive business and opening up liability management opportunities. And finally, you should expect that CEMEX will continue being a leader in the industry in carbon reduction efforts. I firmly believe that this will be an important differentiating factor in the industry going forward and that the future of the worldwide in climate action. And that the better future CEMEX's building must be sustainable. And now I will pass it on to Jose Antonio. Jose Antonio? Thank you, Fernando, and thank you all for joining us today in CEMEX Day. We hope the information we are sharing with you today is useful and also interesting for you. As Fernando already mentioned, the positive momentum we have been experiencing has brought us to an investment grade capital structure, one of our pillars under operation resilience. As a result, we can now accelerate even further our growth investment strategy. We would like to share with you our approach to developing our investment pipeline and how it will fuel growth over the next years. We are methodically identifying and evaluating these opportunities by looking at how to better leverage our existing business and also looking at possibilities of adding assets that are adjacent to our existing business or that complement our footprint. In terms of geography, our bias as we think about these new investments is to focus in The U. S. And Europe as well as selective investments in Mexico, which is our home market. Within these geographies, we focus on high growth metropolitan areas where our products and solutions can serve the urbanization needs of these markets. These areas represent around 70% of the population and around 80% of the construction GDP in our footprint. An important driver for our growth pipeline is sustainability and, in particular, CO2 reduction, as described by Fernando. We are excited about bringing products and solutions to the market, which contribute to sustainable construction and also excited about investing in CO2 reduction initiatives, which by the way happen to have attractive financial metrics. Our growth pipeline follows a robust process of identifying opportunities, evaluating those opportunities, prioritizing and we follow both financial KPIs as well as strategic and risk criteria. We started this investment driven growth strategy in 2019. Of course, right now, we are accelerating this process. The criteria that we are applying as we evaluate these projects include projects must be complementary to our existing footprint like I said, with a bias towards developed markets like The U. S. And Europe. A great number of the projects that we have been approving happen to have paybacks of around four years and IRRs that start at percent or above. Our current ongoing portfolio of investments, as we are working on right now to complete, can be summarized as shown in the slide. We have two main components. On the one hand, we have large cement projects. And on the other hand, we have bolt on and margin enhancement investments. So we'll try to break these two and provide you with more details. So our cement capacity projects, all of which should be brought online by the end of twenty twenty three or before, represent around $425,000,000 of incremental investments between 2021 and 2023 and will contribute to CEMEX adding approximately 10,000,000 tons to total capacity. These investments we expect will bring an annual EBITDA contribution of $170,000,000 on a steady state basis. On the other hand, we have our bolt on and margin enhancement portfolio. Right now, we have approved projects under implementation of $500,000,000 And once completed, we expect they will bring incremental EBITDA of $350,000,000 on a steady state basis annually. Now I do want to stress that this is the status of the growth initiative as of today, but this is dynamic. We continue to evaluate projects as we go along, so these numbers will be changing. Now let me get a little bit more specific in terms of the cement capacity additions. In cement, the industry is experiencing robust demand in markets like The U. S, Mexico, South America and The Caribbean. In Mexico, industry capacity, in fact, today industry capacity utilization today is running at the highest level we have seen in many years. South America and The Caribbean has returned to growth mode after a challenging year last year with high capacity utilizations right now in markets like Dominican Republic, Guatemala and Jamaica. Our investments in cement capacity are focused, of course, in addressing the requirements of these markets. Now also we have legacy investments, cement investments that we started some years ago in Mexico, Colombia and The Philippines. Those projects will bring on 4,300,000 metric tons of capacity over the next year and a half. We expect these projects to start delivering production by 2022 and should be running at a steady state within a few years. Additionally, we expect to bring 5,700,000 metric tons with ongoing debottlenecking investments, brownfields, additional grinding mills and also reopening of idle capacity. These ongoing projects, which are in addition to the legacy projects, require relatively small investments. And let me break it out. They will provide additional cement capacity of around 3,500,000 metric tons in Mexico. This consists of 1,500,000 tons of additional grinding capacity in our Tepeyacca plant, a 5,000,000 tonne expansion in our Huichapan plant in the state of Hidalgo and 1,500,000 tonnes of additional capacity by bringing online both lines at our formerly idle CPN plant in Sonora, which by the way, one of those lines is already producing cement. In The U. S. And Europe, we expect to add 1,200,000 metric tons, including expanding grinding capacity in DUC plants in Europe, which we will detail in due course. And finally, another 1,000,000 metric ton of additional capacity in South America, which includes restarting a kiln in The Dominican Republic for 5,000,000 tons, and a new 5,000,000 ton grinding mill in Guatemala. Importantly, I would like to highlight that due to our robust supply chain, several of these investments in the region, such as the reactivation of our CPN plant in Sonora, will allow us to serve incremental demand in The U. S. Now let me talk a little bit about our bolt on investment strategy. Our bolt on strategy is diversified across our four core businesses and our geographical footprint. The U. S. And Europe account for around three quarters of the investments that are currently underway and will contribute, we expect, around 70% of the steady state EBITDA generation. Let me go through some examples in each of the businesses, so that we can get a better picture of these bolt on investments. Now in addition to the cement capacity, which I already covered, inside the bolt on investment strategy, we also have cement projects. We are focused these projects are focused on improving operational efficiency across our plants and also in reducing our CO2 footprint. Our investments in operational efficiency will contribute to improve our cement margin and these projects have very quick paybacks and are relatively low risk. Regarding our CO2 reduction investments, these are directed mostly towards increasing the use of alternative fuels and also at reducing our clinker factor. Also these initiatives that we have been approving also generate attractive returns. As mentioned by Fernando, we expect to invest at a rate of around $60,000,000 per year in carbon reduction initiatives. Right now in our pipeline approved and projects under implementation, we have around $9,000,000 in CO2 reduction initiatives. All of them have favorable returns. A couple of interesting examples include an investment of $36,000,000 in our Rugby plant in The U. K, which we call Clima Fuel System, where we will be able to increase our alternative fuel substitution rate from approximately 50% to more than 90%. A similar project in our Rudnicki plant in Poland, where we have invested $38,000,000 and we will be increasing alternative fuel substitution rate from the level of 55% to more than 90%. Now in this regard also, other examples of investments include high efficiency separators for the cement mills in several plants that will allow us to decrease energy consumption in the milling process. And also because of the quality of the product, we will be able to reduce clinker factor. In addition to these projects, across many of our plants, we are right now implementing hydrogen injection, which further reduce energy consumption and allows us to increase alternative fuel substitution. Now turning into aggregates. Developing our aggregates footprint is our high priority for us. Aggregate investments represent around 35% of our bolt on and margin enhancement portfolio. And two thirds of these investments by size are in The U. S. And one third is in Europe. Let me provide some examples of our investments in these two important markets. Let me start, for example, with The U. S. In Florida, our new Four Corners site in Orlando as well as our new Imokali site in Fort Myers will enhance our ability to provide sand for these important markets. We will be adding 70,000,000 tons of reserves just in these two sites. In Texas, for example, we are investing in our Balcones quarry to enhance our production capacity and logistic capabilities so that we can better serve the Houston and San Antonio markets and reduce operating costs. Another example is Atlanta, a very important and attractive metro market. We recently acquired a rail terminal, which will allow us to serve this market. In Europe, we are building a network that will provide us with a better position to supply the Grand Paris project. We recently announced the agreement to acquire some aggregates and logistics assets in the North Of Paris and upgraded capacity in our Goodman quarry that together with barge, the logistics system based on barge that we have developed in the last years in the River Seine will contribute to the transformation of the Paris Metro Area into a twenty first century city. Now let's talk a little bit about ready mix. In the case of ready mix, twenty percent of our current bolt on portfolio is directed to this business. These investments are split between The United States What we want to accomplish with these investments is higher degree of vertical integration and optimizing our network. For example, in The U. S, we recently announced an acquisition of four ready mix plants in San Antonio, Texas, which will serve as a platform to further develop our presence in this metro market, which is supported by our Balcona cement plant. We continue to enhance our fleet of portable ready mix plants in The U. S. To take advantage of ongoing project work and to be prepared for a future infrastructure program. And in our EMEA region, we are adding more than 20 plants to meet growing demand across our markets. An interesting example is the HS2 high speed rail project in The UK, an ambitious initiative we are proud to be supporting by supplying products where we have added ready mix batching capabilities among other solutions to supply low carbon concrete products for this project. Finally, another example is our ready mix plant in La Corneuvo in Paris will support sustainable construction targets of the Olympics project. Urbanization Solutions is our fourth core business. Now we already have an interesting base in Urbanization Solutions. This year, the current portfolio is expected to generate around $200,000,000 in EBITDA. It's an interesting growth compared to the prior year, which provides us with a great platform from which to expand. We aim to capitalize on our expertise in Building Materials to offer complementary solutions that build the sustainable cities of the future. In Urbanization Solutions, we're organized around three verticals. One of them is Performance Materials, the other one is Construction Systems and the other one is Circularity. So let me talk briefly about each one. In Performance Materials, we are investing to develop our positions in admixtures and mortars as we seek to enhance our offering as a provider of sustainable building envelope and interior solutions. Our global footprint with more than 30 plants and a large portfolio of applications allows us to be growing within our customer base. In admixtures, our 200,000 tonnes supplied each year cover 90% of our own internal requirement for admixtures in our concrete business. And also, we serve a broad range of clients in the construction space. Third party sales of admixtures is a growing business and now accounts for about 15 of our admixtures revenue. Our more than 40 families of products serve different needs and functions. Recent products introduced in our priority markets are enabling water and carbon reduction of up to 50% in concrete mix designs. Our mortars and special mortars technology has become essential for the increasing building rehabilitation and energy efficiency needs for sustainable and resilient cities of today and tomorrow. Ongoing investments in state of the art plants in Europe, The United States and Mexico will allow CEMEX to further support this need. Today, our more than 600,000 tonnes of mortars and special mortars delivered every year to our clients already cover a wide range of systems for insulation, adherence and protection. Now let's talk about Construction Systems. Construction Systems are evolving towards off-site industrialized solutions in order to address the most pressing challenges of the construction industry today, such as resource and labor scarcity, productivity and sustainability and affordability. This business line provides solutions for urban developments such as landscaping products, building blocks in The United States and Europe, mobility projects like railway sleepers that we manufacture in our Rochester factory in The U. K. And, for example, net zero buildings that we contribute to building with our new factory for integrated residential concrete panels in Spain called Walex. We're also developing circular solutions, which actively contribute to construction sustainability through the recycling and revaluation of construction waste. A good example is our platform in Genevilliers, Paris that optimizes construction and demolition waste streams as well as results for the very challenging logistics in a city like Paris in an urban environment. So to close, let me recap and come back to the key messages of our growth strategy. We're driving growth through bolt on investments in high growth metro areas with a bias to The United States and Europe. We have currently under implementation projects with CapEx of $925,000,000 and we're closely tracking this so that we can ensure delivery of expected results. We will continue to apply a rigorous capital allocation criteria. For the future, we currently have around $4,000,000,000 in opportunities that we are evaluating and analyzing. These opportunities will continue to fuel our investments going forward and will contribute to further enhancing our profitable growth. Under the bolt on margin enhancement strategy, we do expect as we move forward that we will be evaluating somewhat larger investment opportunities. And with larger projects, we might see somewhat longer payback periods to what we have seen with the smaller projects that we have been implementing. You should expect that we will remain highly disciplined in our approach to capital allocation as we continue evaluating projects going forward. As commented by Fernando, we will be making investments to achieve our CO2 reduction road map. We look forward to continue discussing our progress on this front in the future. Thank you, everyone. And now I will pass it on to Maher. Maher? Thank you, Jose Antonio, and good day to everyone. And thank you for your interest in CEMEX. As we accelerate towards a more robust capital structure, we would like to today to walk you through on how we think about capital allocation through the cycle and what are the levers that we are prioritizing to create value for our shareholders. If we can start, let's move to the first slide please. As you can see on the left hand side of this slide, we show our priorities and the building blocks for creating value for our shareholders from a financial management perspective. First, as you have seen from our results, we are on the path to achieving investment grade ratings sooner than expected. Our goal is not just getting there. We intend on maintaining an investment grade rating through economic cycles and through our growth cycles. As you saw in Jose Antonio's presentation, we have a very robust pipeline of projects that will allow us to grow our EBITDA significantly. It's important to stress that we will not jeopardize our path to an investment grade rating process. So why is this important? Well, an IG rating means we have a more flexible capital structure that can sustain the ebb and flow of economic cycles and which translates into a lower cost of capital. As you know, our business is a very capital intensive business. So every percentage point we reduce out of our cost of capital translates directly into a higher valuation for our company. In fact, if you think about it, each quarter of a point decline in our weighted average cost of capital should translate into roughly a $1 increase in our share value. A rerating of our cost of capital allows us to free up to more free cash flow for either investing in high growth projects or returning capital to shareholders. Now we expect in the medium term interest expense will represent less than 10% of our EBITDA, everything else being equal of course. Now as a reference and based on our latest guidance, interest expense this year will be about 19%. Now this in turn creates a positive cycle in which we can direct more free cash flow to reduce our stock of debt, further reducing interest expense and increasing our free cash flow to EBITDA conversion rate even more. Now we expect to reach a free cash flow to EBITDA conversion rate in excess of 50% in the medium term. This should allow us to introduce a sustainable dividend policy reflective of our performance and the robustness of our capital structure. And this is a very important point here. We believe this will be well received by our shareholders and is very likely to broaden our investor base. 2021 represents an important inflection point in our results and capital structure. As Fernando mentioned earlier, we are on track to meet our objectives sooner than what we had anticipated. Now we're seeing an important inflection point in our results driven by strong operating leverage in our business and healthy underlying demand in most of our markets. Top line growth is complemented by a record level record low level in the cost of operating our business due to decisive actions taken by our management team. This year we expect to reduce net debt by about $2,000,000,000 driven by strong generation, the sale of CO2 credits earlier this year and the issuance of $1,000,000,000 in subordinated notes, which are deeply subordinated and are only senior to equity and therefore excluded from our debt metrics. Earlier this year, we issued the largest and lowest cost U. S. Dollar funding in our history, which allowed us to take out more expensive debt due in 2024 and 2025 and further extending our average life of debt. The liability management actions that we've taken this year plus a lower average debt balance and lower average cost of funding will translate into savings of about $120,000,000 in interest expense this year. Now this is very important because based on our current free cash flow to EBITDA conversion rate, this reduction in interest expense is equivalent in impact to having an additional $350,000,000 in EBITDA. Now all of this is accelerating our glide path towards investment grade rating. By end of twenty twenty two, we expect to be in strong IG territory with leverage in the two times range, give or take of course a few points. As you saw in Fernando's presentation, we expect to end our second quarter, which ends in a few days with leverage of about three times, a reduction of slightly more than one turn versus 2020, which is two years ahead of our original schedule. This is driven by the sale of CO2 credits plus the slice of subordinated debt we introduced in our capital structure. Now for purposes of our bank debt leverage covenant, our subordinated debt gets full equity credit and is therefore excluded from the calculation. As we get into the second half of the year, when our working capital cycle turns positive for us, we expect to further reduce leverage well below three times by the end of the year. The leverage metric that you see on this slide is the one that we report in our quarterly results and the one that our banks and senior lenders look at. However, as you know, rating agencies take a tighter approach to calculating our leverage. For example, they only give us 50% equity credit for the subordinated debt, which is equivalent to adding about 0.2 times to our leverage ratio. They also make some other adjustments. Now of course, while leverage is a very important component for obtaining investment grade rating, the rating agencies take other things into consideration such as delivery of results and the robustness of the market where we operate among others of course. But we expect to deliver on all of these metrics by 2022, which we expect will translate into an investment grade rating soon thereafter. The slide shows you the building blocks of our leverage ratio in the next eighteen months. We expect that debt reduction in 2021 and 2022 will lead to about a one turn decline in leverage, give or take a few points. As Fernando mentioned in his presentation, we expect EBITDA of $3,100,000,000 in 2021 and a double digit growth in 2022. This increase or this expected increase I should say at EBITDA would translate to a decline of roughly 0.9 times of a turn in lower leverage. This would put us comfortably in investment grade territory even with the stricter parameters of the rating agencies. Now here as you can see, we have a debt profile with very manageable maturities for the foreseeable future with ample potential for improvement of our debt stack. We have an average life of debt of about six years and our expected free cash flow generation alone would be sufficient to meet our maturities. Now what you're seeing on the slide is our maturity profile as of the end of the first quarter of this year, giving pro form a effect to the partial redemption of €450,000,000 of our 2.75% notes due in 2024, which as you are aware were announced last week, as well as the prepayment of slightly less than $400,000,000 of our bank debt during May. Now as regards to our liquidity. We have about $1,500,000,000 between cash and our committed revolving credit facility throughout most of the year, adjusting, of course for the typical cyclicality of our business. To put it into perspective, this is enough to cover by about 2.5 times our negative working capital cycle at the beginning of each year. Now as mentioned earlier, we are in a capital intensive business. And as such, we pay very close attention to the stock of capital we use to run our business and the return we provide to our shareholders. We aim to improve the return on capital employed to levels well in excess of our average cost of capital, which analysts estimate to be roughly in the 8% to 8.5% range. Now we expect to achieve a positive GAAP this year 2021 and continue improving as we work our way various initiatives to improve EBITDA and reduce debt. Now on the numerator side, earnings after tax, you've heard from Fernando that we are aiming for a $3,100,000,000 in EBITDA for this year. And as he said, '20 this represents about 26% growth versus last year and then grow at a double digit rate in 2022. We expect to achieve this with better asset efficiency, which is extremely important here and I'd like to stress that point. Now on the cost side, we continue aggressively targeting all elements of our cost structure and expect to further reduce it with the help of new technologies and best practice sharing in both our operations and our administrative functions. We expect to improve our EBITDA margin by more than one percentage point this year to end the year above 20% and maintain a margin in excess of 20% going forward as mentioned by Fernando in his presentation. We are currently deploying a new initiative, we're calling working smarter, aimed at making our administrative processes even more efficient. We will be introducing new technologies and ways of working and expect to capture recurring savings for up to $100 1 hundred million dollars I meant to say, starting next year. We also aim to improve our discipline in working capital management. As you know, we have reduced in a very significant way our working capital balance and we continue making improvements in all components of working capital to be even more efficient. For example, reducing the risk profile of our receivables by partnering with third parties that are using artificial intelligence and other technologies to speed up and automate our credit assessment process by better analyzing our clients' credit metrics and behaviors and improve and speed up the complete sales to collection process. And just as a matter efficiency of our receivables are at record levels. Now on this slide, I would just like to share some food for thought. If we exclude goodwill out of our return on capital employed calculation, which is represented by the white dots that you see on the screen here, our return on capital employed is expected to be in the mid teens percent range in the next two years, almost double our weighted average cost of capital. And now as you may have gathered from my presentation, we aim to have a simple, no frills financial management that supports growth with the ultimate goal of increasing value for our shareholders. As we reduce debt, deliver on results and obtain an investment grade rating, our capital allocation framework will increasingly shift towards a bias for growth and returning capital to shareholders. As you heard from Fernando and Jose Antonio, we have a very accretive investment pipeline, which we expect will add tremendously to our bottom line in the next three years. In fact, we expect it to add somewhere in the order of $400,000,000 in additional or incremental EBITDA. As I mentioned earlier, one of our main targets is to reduce our cost of capital, which we are accomplishing this year and expect to continue to do so going forward. In this framework of reducing leverage, improving free cash flow and achieving investment grade rating, we will evaluate how and when we can put in place a sustainable dividend policy based on performance and our capital structure robustness. And with this, I would like to close my presentation for today and I'll be happy to answer any questions you may have in the Q and A session. Thank you. And now back to Lucy. Thank you, Maher. I would like to ask Fernando, Jose Antonio and Maher to join us on stage for our Q and A session. Before we start, I'd like to review a few of the ground rules. I'd like to remind the sell side analysts who would like to ask a question to click on the raised hand button that is enabled on your screen. Please wait until your name is called for a question and then we will ask that you unmute yourself and make sure your camera is on. And with that, we are ready to begin. Thank you. Okay, so I think we're ready for Q and A. I'm having a little trouble getting the panel to take their seats. And our first question comes from Ben Theurer at Barclays. Ben, if you could go ahead please. Perfect. Thank you very much, Lucy. And Fernando, Maura, Jose Antonio, thank you very much for the presentation. Just a quick one to follow-up on the focus on ESG, Fernando. So you've talked a lot about investments that you're going to do and the focus to bring down the carbon footprint to invest here, 60,000,000 per annum. Could you elaborate more on the type of investments, the return profile you're expecting from those? And also in light of that, you've nicely showcased the Berlin facility. Could you elaborate like how easy or not it would be to replicate some of the investments that are made there at upper facilities, particularly in emerging markets, which I think are not as of state of the art as maybe a facility in Germany? Thank you very much. Sure. Yes, Ben, thanks for the question. I think investments through time might be evolving or changing. For sure, we want to invest first in the type of adjustments or changes we can make in our plants, fast things that are known, meaning technologies that are known, proved materials, processes. And those as you can imagine, most of them are related either to the use of alternative fuels with high contents of biomass, which is normally known as RDF at least in the case of Europe or climate fuel in the case of The UK and also ways for us to reduce our clinker factor. So most of the investments done in the first few years are going to be related to those. For example, we are very soon going to be starting up two projects of alternative fuels in Drokbe in The U. K. And Rosenthoff in Germany to move those plants up to 90% or more than 90% of RDF as fuel for those plants. They being in 50%, sixty % or so for the last few years. So all those type of projects are the ones that we continue executing. And as you may know, particularly in the case of Europe, these projects are not sunk costs, meaning this is not an investment that is going to be lost to the idea of reducing CO2. Reducing CO2 is moving towards a green economy. And the green economy is profitable. If the green economy is not sustainable, it doesn't make sense. So all our investments in alternative fuels are profitable. Again, the most profitable ones because of current waste directives and circular economy rules are the ones in Europe. In Europe and The U. K, our largest cost, which is fuels, is turned into an income. That is the relevance of the circular economy. Now there are other geographies, other markets in which we don't have the same rules. But that's why we are saying we are going to be advocating in a pretty well organized manner for us to promote the idea of norms that conduce economies into circular economies. But even with current rules, you know, in Mexico and The U. S, we have 20%, twenty five % of alternative fuels. And that can be increased. We're just starting up another four projects of alternative fuels for The U. S, profitable, current rules. So that's most of the investments that we are going to be doing in the next few years. Together with that, we have, let's say, newer practices. In our case, we have been mentioning that we are using hydrogen in small portions in our cement plants to improve combustion of RDF. So it's not hydrogen to use hydrogen as the only fuel, but it's supporting better combustion processes of RDF with the use of hydrogen. And I think you were asking, is that doable everywhere? Is it applicable? There are for sure issues that are very local to a cement plant. If it happens that in a cement plant you have a place where you can store CO2, that's a particularity of that cement plant. That might not be the case in a different cement plant without that opportunity. But right now, we are using hydrogen in all our cement plants in Europe. And we are in our way to use it in all our cement plants worldwide. That can be done. That is one of the practices that we believe they can be replicated. And as you know, we have commented this before in other type of exercises. That's what we do. Our model in CEMEX is the replication model. That's how we move from zero alternative fuels to be the leader in alternative fuels, after understanding, learning and replicating the possibilities of using RBF as alternative fuel. So most of the practices with the exception of some particularities can be replicated all over the company. It might take some time, but it can be done. On top of alternative fuels, there are other smaller investments like cement separators, some bypasses to being able to increase the amount of RDF. But I think alternative fuels will be at least for the first few years the main investments. Perfect. Thank you very much. Thank you, Ben. And now we're going to move on to the next analyst. I believe it's Adrian Huerta from JPMorgan who is on deck. Adrian, are you with us? Yes. Thank you, Lucine. Hi, Fernando, Jose Antonio, Maher. Congrats on the presentation. I guess you made it a little bit difficult to ask questions. The given the all the details that you guys gave. Okay. So I gave my best to try to find something a little bit different, which is within the same topics. And it's regarding some expenditures. Can you just give us some more details on the investments you have done so far? What are you planning going forward in terms of our new investments? And what are the key ones that where you see good potential going forward on what you have seen so far on this? Well, thanks, Adrian. CEMEX Venture has been already in motion for close to four years or so. And through time, we have been making different type of investments. You know that the profile of these investments are kind of startups, meaning they are not very large investments. It is just finding out partners or companies that we can integrate into our objectives of either sustainability or business diversification. So we have different type of examples. Some of them are related to urbanization solutions, which is the new core business we are developing, meaning it's an emerging core business that we have put in place already for a year and a half or two. Examples are investments in modular construction, for instance, in the case of Spain. And CX Ventures is also supporting us in our digital transformation strategy. What CEMEX Venture is doing for us on that regard is for us to better understand the value chain of the construction space and how we can integrate and develop additional businesses in that space as long as there are new business models enabled by the application of new technologies. Put it in a different manner. We have a platform already developed CEMEX Go. We can sell, we can deliver, we can inform our we can do everything with our CEMEX platform. And the opportunity is for us to extend and to integrate the CEMEX Go platform to other platforms in the construction industry, for instance, platforms managing the logistics in construction sites, just to use an example. So CX Ventures is also helping us on that front. So I think it's mainly diversification, which means mainly urbanization solutions. Some of it is sustainability and this digital space in construction. On top of that, through CEMEX Ventures, we are organizing our internal innovation process, meaning it's a pretty well organized process in which all over the company we do have activities in order to identify, to select, to support and to develop ideas from our own employees. And SEMES Ventures is like the entity for us to develop networks on innovation. In this case, I'm describing our internal innovation process, but there are also external innovation processes that CEMEX Venture organizes through hackathons with different companies or entrepreneur for the same issues I already described. So that's more or less what CEMEX Venture sees nowadays. Excellent. Thank you, Fernando. Congrats again. Thank you, Adrian. Thank you, Adrian. We're moving on. We have Paul Roger from Exane BNP. Paul, please go ahead. Hi. Thanks, Lucia. Hello, Fernando and team and congratulations. Hello, Paul. Hi. So I'll stick with the ESG theme as well then. And maybe a question specifically on your green products. I mean, you've clearly got quite a lot of these like Virtua. And what I'd be interested in is to understand how the margin profile compares to more traditional cement and concrete. And I guess linked to that, whether you're seeing evidence of a green premium in some of the markets. I'm not sure I understood the question, but let me start answering and you tell me if I did answer the question. Okay. Our BERTOA family of products is products with a lower content of CO2. We let me make first a clarification. Low CO2 products when compared to Type one cement, they have been existing in the market, meaning this is not introducing a product with less than 95% clinker factor. So that's one clarification. So the products we are identifying as Bertois are the ones that comply with the different categories we have in this family, which is reduction of 20% or much more until getting to the point of CO2 in our ready mix product. We are positioning the product in the market. We started doing it in 2018. We did it originally or initially in concrete. That's why there is still many people thinking that Berto is only applicable to concrete. We have done that already all over CEMEX, meaning that new family of products is already replicated worldwide. And we have already started last year to introduce Bertois also for cement or cement tissues products. In some instances, there are pricing differences or strategies towards these products. In other cases, there are not necessarily a different pricing strategy for them. I don't see a material difference in margins on those products, because production costs are not necessarily that different. What I do see is that and is a surprise at least to me is that in most of the markets, we were expecting a positive reaction in some markets. Europe, for instance, we were expecting a good reaction and there is a good reaction. But it's everywhere. Emerging markets, there has been a very relevant reaction towards these low CO2 products. So nowadays, regardless of regulations, regardless of different practices, what is required or not required because of codes, construction codes or whatever. There is a mass of customers. There is a number of customers highly interested in this low CO2 products. So that's a force that is pulling us to increase as fast as possible the portfolio of Vertuo. Very positive welcome from customers. Great. Thank you. Thank you. Thank you. Next on deck, we have Nick Lipman from Morgan Stanley. Hi, Nick. You can go ahead. Hi, there. Hi, everyone. Thanks for doing this. Congratulations on you're clearly seeing some strong momentum. My question relates to the momentum. If you can go through where you're seeing the change or increasing the guidance, If I might have just heard you wrong, but I think I heard you say two price increases towards the second half. Maybe is it one maybe two price increases in The U. S. Full year, so you have another price increase to go in the second half. But if you could just clarify that and then just address in what geographies, where exactly have you seen the biggest change in the market so far that caused you to have the confidence to change the guidance? Thank you very much and again congrats. Can you take it, Martin? Sure. Yes. Thanks Nick for your question. I mean, you're referring to The U. S. Nod, if you're referring to overall consolidated portfolio, nod twice and I will try to answer. But as far as The U. S. Is concerned, pricing as you know can you hear me Nick? Great. So pricing as you know in The U. S. Is announced typically on a cycle of being prior year sometime in the fall. And our pricing increases cover in January essentially the Florida market. And then in April they cover the rest of the markets. And that's roughly about 10% in January and then 90% in April. So the pricing increase did go through April. We've gotten some very good traction there. And as things got tighter as we are all we're sold out in The U. S. And there are several markets that are on allocation, we've announced a second pricing increase for July. Now just to put it into perspective, I mean we have not seen a second pricing increase like this historically for a long while and the last one that we saw was only in one market in Texas in 2015. So it's really an indication I would say in terms of the strength of the supply demand dynamics The U. S. And we're optimistic. And of course you see all of the economic indicators on what's happening in terms of the residential market, which has underpinned the growth, industrial and commercial, which is beginning to pick up and infrastructure has been flattish. So that's as far as The U. S. Is concerned. I don't know if you want me to cover Mexico at all or not. What's the magnitude of that July price increase? Sorry, yes. It's mid single digits percentage of price increases. And it's in a variety of markets and we're expecting we've seen some response from in some of the markets from our competitors. So we're quite we're reasonably optimistic that we're going to get good traction for the second half of the year. Appreciate it. If you can talk to Mexico that would be this is basically a composite of course I think I and many other people would be hearing about what's going on in I mean as you know in Mexico we're always trying to keep up with input cost inflation right and we seem to be a little bit behind it. Although pricing has been very good in Mexico, would say. I mean, first as you know, first quarter we were up 5% and we have announced pricing increases for both bulk and bag cement. And so and we're optimistic that again supply demand dynamics there are very attractive. I don't know Fernando if you would like to comment on just the general dynamic. Nowadays the industry in cement industry in Mexico seems to be very busy. And as Maher said, it's been already we continue to follow our objective of gaining back the inflation that is hitting us in Mexico. So we decided to announce a price increase for July, again, about mid single digit on top of what has already happened in the last few months of this year. So let's see how it goes. For sure, if we decided to launch this price increase is because we believe we will get traction or some traction on it. So for sure we will comment in on this on additional conversations. So far it's positive. It is positive. Great. Thanks a lot. A lot. Thanks Nick. And next we have Alain Alonese from Santander. Alain, please go ahead. Thank you, Lucy. Congratulations, Marjor, Fernando, Jose Antonio. I guess today marks the end of an era and the beginning of a new one. So really congratulations. I mean, I'm sure it took a lot of effort and perseverance to get back to where we are right now in terms of investment grade. My question is, I'm going to shift gears a little bit and I'm going to ask a question around the geographical footprint of CEMEX in the current way and form. I understand that you want to emphasize the work that you want to do in North America and Europe and the metropolitan areas, But your current footprint is much more diverse than that. Could you speak a little bit about how will CEMEX look, I don't know, three, five years from now in terms of its presence in Asia and in Latin America and in The Middle East? I mean, we're seeing equity capital market activity in Brazil right now, meaning that they're willing sellers. I know that that's a market that in the past CEMEX has been interest. I'm sure that you're getting, or you could be listening to offers from Chinese companies into your Philippine assets and so forth. So how are you thinking in terms of your existing assets, in terms of divestitures and acquisitions outside of what you already indicated? Can you take that one? Sure. Absolutely. Look, as we think about CEMEX going forward, we do like the fundamentals of developed markets. And that's where we are, let's say, focusing as we think about marginal investments going forward. Of course, attractive metropolis, for example, in Mexico as well. In terms of you asked about three to five years. We think that capital deployed will influence that composition as we go forward and with a bias towards U. S. And Mexico that will make that portion of the portfolio grow. And as we have been stating since last year, when we think about in addition to incremental investments, if we think about proactively, let's say, managing the portfolio composition, we would be open to reducing exposure to emerging markets at the right conditions. And in the past, when we have decided to dispose assets, we have been very selective, always identifying another party whose footprint is perhaps even better suited for a particular asset. So if we find those conditions for our emerging market assets, we may consider doing something like that. And that will even add more to this evolution of the portfolio composition. The one thing we know right now is selling assets for the purpose of deleveraging is no longer a driver. The driver would be portfolio recomposition at the right terms. And going back to your comments at the beginning, I think they do ring a bell in terms of end of an era. The way we refer to it in many ways in the company, but turning the page, going transitioning from playing defense to playing offense. And that is pretty reflective of the mood right now in the company and it's very exciting. The future looks quite exciting. So thank you very much. I don't know if I answered your question you did. You did. Okay. Thank you very much. You did and you earned this is the beginning of new era. So congratulations. Thank you. Thank you very much. Thank you. And I think next we have from the fixed income side, Ann Milne from Bank of America. Good morning. I would just echo the comments of Alan. This is a real big page turning surpassing the $3,000,000,000 mark. So that's a really big achievement. My questions are really fairly similar to his, but I'll just take it to a little different perspective. In the past, sometimes the rating agencies have commented that they prefer to see a more developed market emphasis in the portfolio maybe because of lower volatility. And also as we know rating agencies are very slow to upgrade and slow to downgrade sometimes as well. So assuming that you reach this let's say mid-two leverage in the next year or two, Have they made any comments in terms of the diversification of the portfolio or the how long over cycle they would like to see before they make a ratings decision? Thank you. Before passing it to Maher for comments from rating the potential comments. Think what I can tell you is that, it seems like we are aligned with the idea. We've been already commenting several times that we would like to enlarge to focus on U. S. And Europe as our priorities for additional investments. Now I wonder to some extent what is different now to what we have done through time, because the last $20,000,000,000 that CEMEX has invested through acquisitions, they were in The U. S. And Europe. So it's unfortunately, did some before 02/2007. But yes, we want to grow. And as you have been hearing now in this event, yes, we want to continue making this emphasis in The U. S. And in Europe. Now on comments specific comments from rating agencies, I will pass it to Mahervi. Sure. Thanks, Ann. I mean, obviously, as you know, we're in constant contact with the rating agencies. And as you saw from the presentation that we made, we feel fairly confident based on the our expectations for performance and investments and use of free cash flow to get to within the sweet spot of their investment grade, maybe on the lower end of the investment grade parameters by the end of twenty twenty two. And there's a bit of a difference right between S and P. I mean, this is not a dig into either of the rating agencies, but S and P has a slightly higher hurdle in the way that they take a look at leverage. And we think frankly based on our expectations that we should be in that sweet spot for them, which is higher than the other agency that follows us other than Fitch by the end of twenty twenty two. And so when is there likely to be action? I mean, as you know they take a look at two pronged kind of choices. They take a look at financial analysis and there they take a look at leverage and they take a look at essentially free cash flow as a percentage of the debt. And I think that again as I probably commented in my remarks earlier in the webcast is that we're going to be there on both of those two metrics by the end of twenty twenty two, potentially a little bit later, potentially a little less, mean who knows, right? And then the other part, they take a look at the industry where we are and certainly the volatility, right? So I think that given the volatility of what we've seen in the markets last year, they're probably going to take a little bit of time. But I think what's really important to take a look at is how the rest of the market is looking at our at the value of our credit risk essentially. And you know better than anybody what our pricing is and our yield certainly on the latest bond that we did, the ten year bond. So we're fairly confident that they're going to come around. They may be cautious in their timing. But I would say end of twenty twenty two, early '20 '20 '3 we should see an action from them. Not an action, the first action because as you know they are outlook that they can change and then in the case of S and P we got to go from BB to BB plus and then investment grade. So but I'm optimistic. I mean from the conversations that we've seen and if we deliver this kind of growth and the predictability, I think that's going to go a long way into comforting them that things have definitely turned the page in terms of the risk factors of the company. Thank you. And it sounds like you'll at least for a while keep your leverage ratio in the somewhere between two and three times. Yes. I mean that's definitely and I mean that's again the that is the way we think that that's the way to deliver best value for our shareholders from our view. And that should not impact our investment capacity going forward. I I think we will have comfortably be able to take care of our investment opportunities. Thank you very much. Excellent presentation today. Thanks a lot. Thanks, Thanks, Nice library. Thank you. And next we have Yassine Tuiry from On Field. Hi, Yassine. So I just could have one question. In Europe, we have seen many industrial companies buying CO2 allowance ahead of a potential change in regulations. But you have decided in the first quarter actually to sell $600,000,000 of CO2 allowance, which was a bit of a surprise to some. Could you explain to us what was the rationale of this decision? Sure. Well, maybe I should comment on a couple of factors. The first one is for sure the most relevant, which is we used to have the largest CO2 portfolio in Europe among all cement companies. So it was a long position. It was sufficient enough to cover all CO2 needs for all the phase until 02/1930. So we thought that was a very long position that we could partially monetize. As far as I know, and I know it because of public reports, there is only one additional company with a long position on CO2. The rest, the majors are they don't have CO2 credits already. They are already buying or they are about to start buying in one or two years. So taking the position of, let's say, the position from industrial competition and how long our position was, we decided to partially monetize that position. Which part we monetize? Where we made our calculations and we are keeping what we believe is going to be enough until 2025 or 2026, which is still longer than other CO2 positions in the industry in Europe. So that's one factor. The second factor is very simple to explain is pricing. We thought the price when we sold this position was attractive enough. It was like around $50 50 1 dollars per ton. So when you combine both things, was sort of a no brainer for us. And the investments going into reduction of carbon as well, no? Well, exactly. I mean, the proceeds, it's $600,000,000 We're going to be using them together with all the cash we are generating for our CO2 investments and other investments, because this is $600,000,000 and we are going to be doing like $60 per year. But funds from that are going to be partially used for speeding up the process that we already described. It's anticipating our targets and developing more challenging targets for 02/1930. Thank you very much. Thank Thank you. Next we have Adam Thalhsimer from Thompson Davis. Adam, are you with us? Hey, morning, guys. Okay. Hi. Hello. So the question I've gotten most from clients this morning is on the 2022 guidance. And they're just curious sitting here in June of twenty twenty one, what gives you the confidence that you can do double digit EBITDA growth next year? Jose Antonio, can you take it? Yes. Well, look, first of all, we are seeing robust activity. And we think that that environment will remain at least for the foreseeable future. Have Maher already covered also how we are proactively managing pricing and, of course, taking into account this kind of demand environments. We continue to be very vigilant with costs and ensuring that we are running an efficient and a smooth operation. And of course, a very important component as we think about growth is our growth pipeline. We did mention that we are ramping up investments. Our guidance for CapEx expansion CapEx this year is $500,000,000 whereas for the last couple of years, it was around $200,000,000 we believe we will be getting incremental EBITDA coming out of these projects. Now we did mention 150,000,000 for 2021, and we think there's another incremental even higher than 150,000,000 coming for 2022. So that's another important component that gives us our confidence to talk about this kind of guidance for 2022. Good answer. Thanks, Gus. Yeah. Can just add Adam, I mean just to put some additional numbers. I mean the as Jose Antonio said, EBITDA contribution from our bolt on investments is 150. The Working Smarter program that we put into place last year frankly, we expect to ramp that up to probably close to $100,000,000 worth of savings. And there are other opportunities that we are looking at. And then if we take a look at kind of the supply demand dynamics in The U. S. And Mexico to a lesser extent in Europe, they're all pointing towards attractive pricing dynamics for a variety of reasons. I mean, not going to highlight all of them right now, but there's a variety of reasons in each one of the markets that argue for better pricing. And then in The U. S, frankly, we're very excited about the announcement that came out yesterday from the Senate about the agreement bipartisan agreement about the fiscal stimulus 200,000,000.0 with a fairly sizable chunk and they seem to be consensus also on the size that is earmarked for infrastructure. And we guesstimate, I mean not just ourselves, but talking to a lot of folks that look at the markets that that's going to translate to a big growth in demand for cement in 2022 and 2023 in The U. S. Market in a market that is very difficult to add capacity to. I mean, so that's when you add all of those pieces together, that's what gives us the comfort and the visibility of our outlook. Great. Thanks, Maher. Thank you, Adeel. Thank you very much. Okay. And next we have Daniel Sasson from Itau. Daniel? Yes. Hi, Lucie, Fernando, Jose Antonio, Maher. Thanks a lot for the opportunity. I missed talking to you guys in person. My question is more from a strategic standpoint. I mean, you provided a very detailed plan in terms of the organic growth and bolt on projects. Can you comment a bit about the possibility of engaging in M and A transactions, maybe talking a bit about the regions you'd like maybe to be exposed or what characteristics would you consider attractive when you analyze the market? If you found good alternatives for attractive prices, where would you most likely be interested in entering? And my second question really quickly, you are really reaching or you're almost at the three times net debt to EBITDA. Would you consider setting a target of net debt in absolute terms, so that you would even in periods when your EBITDA could decline through the cycle, you would not be above three times ever again. Do you consider having a formal net debt target in absolute terms instead of a ratio? Thank you. Let me take the second one and Jose Antonio might take the M and A part. Okay. Time ago, did agree with our Board on the criteria to be used for growth once we were in a position of growing. So we are just getting into the type of capital structure we've been looking for. The way I see it is that what is coming is consolidating that position. Even though we have a criteria on what to do, how far how much to increase the leverage, We're not thinking that that is what we would like to do and that is not what you can expect from us in the next few months and years. As you saw with all the info, all the presentation from Jose Antonio on growth opportunities, we do have plenty, plenty of business opportunities that we consider low risk because all of them are related to businesses related to our portfolio, mainly U. S. And Europe, some in Mexico. They are investments with high returns, because sometimes they are complementary to our current business activity. They do have short paybacks, less than four years or about four years with the exception of the large cement integrated plants. But the rest, the bolt on type of investments have those characteristics. And we believe that in this moment in the cycle, it will be much more profitable to invest in green and brownfield businesses instead of buying. Now, we not going to make any transaction? No. For sure, if we find opportunities that accommodate to this bolt on type of strategy, we will do them. We just did a small ready mix plant Texas, in San Antonio, think about $20,000,000 or so. But not the idea of large transactions. We're not there. We are very busy trying to develop the portfolio that you just saw. It's hundreds, hundreds of projects in cement, ready mix aggregates and urbanization solutions. Thank you. Yes. And perhaps just to add to that, bias you asked about geographies, I think we've been very clear. We have a bias towards U. S. And Europe. And the portfolio that Fernando described is comprised of projects that are highly complementary to the existing footprint that we have. So they we can take advantage of our existing capabilities and that's what makes them from a risk return profile very attractive. So that part of the question I think is covered. Your other part of the question was about setting an absolute target for the debt level. We have not discussed, let's say, targeting an absolute debt level as a goal to include. I think we believe, of course, we will be in a very dynamic mode over the years to come. We think that the relationship between debt and the cash generation of the company is probably more appropriate to determine sort of the goalposts. I think what we are guiding to and if you look at our guidance for 2022, the leverage ratio that we have accomplished already and the kind of investments that we will make, as Fernando mentioned, not big transactions, perhaps small to medium size. I think all that points still to further deleveraging from a debt to EBITDA perspective. And that addresses the risks component that you have addressed. Now what happens if things change and suddenly so we are committed to getting to the investment grade credit rating. I'd like to just mention one thing. Mean, while we don't have a formal target, I mean, I think as Fernando said, one of the key pillars of the value proposition to our shareholders is the getting to investment grade rating and maintaining that investment grade rating. I mean that by itself gives you very clear guardrails of what kind of capital structure we're looking at getting to and maintaining. And we certainly don't want to do something that takes us out of that comfort zone for us and for the rating agencies. So that gives you a very clear, I mean, we're certainly I'd be more than happy to have a discussion later about that with you Absolutely. Thanks a lot for question. Thank you, Danielle. Thank you. Okay. Thanks. We have time for one last question. So Alejandro Assal from HebeiME, the stage is yours. Hi, everyone. Thank you, Lucy. Good morning to everyone. I think this is a follow-up from Daniel. I was thinking how those CEMEX think about those $4,000,000,000 in investments? Do you guys think about size? Do you guys think about profitability? Are you thinking about adding new geographies to your footprint? And the second one is like the opposite. Are you willing or are you looking or analyzing or divesting entirely from our region in emerging markets that you mentioned? And what an example could be, what is the rationale behind CEMEX maintaining your stake in GCC, for example? You want to take that one? Yes. So right now, our growth pipeline, as mentioned, covers $925,000,000 that we expect to be invested between 2021 and 2023. So we're very busy with that. And I did mention that the process and the strategy is not static, right? We continue to evaluate projects and we will be adding to our pipeline. Where do we add from? Well, for that purpose, we do have this expanded, let's say, opportunities that we have eyed or identified for $4,000,000,000 And I think the current pipeline of $925,000,000 is very reflective of the pipeline of $4,000,000,000 So it's spread between our four core businesses. And it has a little bit of a bias or a bias towards U. S, Europe, more geared towards regions in The U. S. And Europe where we're already present. There would be very little of projects identified in this expanded growth pipeline away from our areas where we're already present. What do we do first and what do we do later? Well, the way we this is like a funnel, right? I mean, there's a lot of projects and our job and this is a lot of people involved, of course, our colleagues from the operations in the regions together with the central team that coordinates the process. Well, there's a lot of prioritization that goes on, has to do with market dynamics. Clearly, are quick in identifying the more pressing needs or the more urgent needs and that's what gets prioritized. And of course, in the prioritization, we measure the potential financial returns, the strategic merits of how it influences our footprint and of course, risk. So I think that tells you a little bit about, but I would but it's cement, ready mix aggregates and organization solutions, Everything along those lines is of interest to us. Regarding divestments, I think I mentioned earlier, yes, we are open to divestments in our emerging market portfolio. But that's something we would do under the right conditions because there's a highly motivated counterparty that where this particular asset might fit their footprint nicely. Regarding GCC, I would say that we did have about four years ago a significant restructuring that resulted in us selling a 23% stake in GCC, but we remain as an indirect holder of 20% of the company. And our view with this company is long term. We are long term partners. I think we like the company's footprint and we have a very close relationship and we view that as a long term investment. Don't know if you want to add anything Fernando Maher. Thank you. You, Jose Antonio. I think that's great. And again, on the new guidance and the presentation. Thank you. Thank you very much. Thank you. Thank you, Alain. All right. Well, I think that brings us to the end of our program today. Thank you all for joining us. I know that two hours on Zoom these days is a little more tedious than it used to be. So we're very hopeful that the next time we will physically meet in person in the fall for a review of our regional operations with our regional presidents as well as for continued discussion on our climate action goals. If you have any questions, of course, please contact Investor Relations at CEMEX and we thank you all for joining us today. I don't know if you all want to quickly say thank you. Thank you very much. Thank you very much. Hope to see you in person. Yes, exactly. Okay. Thank you. Thank

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