Earnings Call: Q1 2021

Apr 29, 2021

Good morning, and welcome to the CIMMEX First Quarter twenty twenty one 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. And now I will turn the call over to miss Lucy Rodriguez, Executive Vice President of Investor Relations, Corporate Communications and Public Affairs. Please go ahead. Good morning. Thank you for joining us today on our first quarter twenty twenty one conference call and webcast. I hope this call finds you and your families in good health. I'm joined today by Fernando Gonzalez, our CEO and Maher Al Hafar, our CFO. As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. I will hand it over to Fernando now. Thanks, Lucy, and good morning to everyone. We are quite pleased with our first quarter results where we achieved some important milestones and advanced significantly on our operation resilience goals. On a consolidated basis, sales increased 9% driven by the highest first quarter Cement volume since 02/2008 on pricing. We posted $684,000,000 in EBITDA, the highest reported first quarter EBITDA since 02/2008 with all regions contributing to growth. Margin increased 2.8 percentage points to 20.1 in line with our operation resilience goal. High capacity utilization coupled with cost savings and product mix produced significant operational leverage of 45% in the quarter. Free cash flow after maintenance CapEx was the highest in the first quarter since 2016. And perhaps most importantly, the deleveraging ending the quarter with a leverage ratio of 3.61 times brings into focus a clear path to our operational resilience goal of an investment grade capital structure. We must not forget, however, that our business continues to be challenged by COVID. For the safety of our employees, we must remain vigilant and adhere to COVID safety protocols in all our operations. Sadly, we have lost value colleagues to the virus over the last year. These individuals are part of the CEMEX community, and we mourn their loss alongside their family and friends. Finally, I would like to recognize the contribution of all our employees who throughout the crisis after their behavior to protect colleagues and customers and ensure the continuous operation of our facilities. Thank you for your effort and dedication. In the last two quarters of twenty twenty, we witnessed the resilient volume recovery from the second quarter COVID lockdowns. But as you can see from this slide, what we are experiencing in first quarter goes well beyond recovery. Instead, we are seeing strong volume growth even over first quarter twenty nineteen well before the pandemic. This is true in all regions except for Europe, where due to seasonality, first quarter benchmarking is difficult. In the case of Mexico, where 2019 volumes might be an easy comp due to the government transition, we are running at similar average daily sales as first quarter two thousand and eighteen. While we see waves of rising COVID infection rates challenging some markets, government response has been less disruptive to our industry than in 2020. In developed markets, growth is being fueled by an unprecedented level of monetary and fiscal stimulus coupled with the rollout of vaccination programs which hold out the promise of a full economic reopening. Our emerging market portfolio has generally not had the benefit of significant stimulus, but to varying degree, it has enjoyed an important spillover effect from US and European stimulus in the form of trade, interest rates, and remittances. Mexican demand has been further supported by government social programs that promote construction. Of course, the pandemic has boosted demand for our products in all markets as people in quarantine look to improve their homes or change up their housing situation in search of more space. And so far, this behavior is not slowing even one year into the pandemic. And with economic reopening, we expect to of long delayed projects in tourism and services that cater to a population wary of lockdown and actions to travel and go to restaurants once again. And, of course, with the green deal in Europe and the proposed America jobs plan in The US, it is the added driver of infrastructure spending over the medium term. Supply demand conditions for demand are extremely tight throughout The Americas. It is a times like this that our unique supply chain capabilities in the region. The US, a market that is chronically short cement production at a mid cycle level, we have best in class supply chain capabilities, which include input capacity via water terminals for 8,700,000 tons of cement for approximately 75% of our active US production capacity. In addition, we have an extensive network of land terminals and exceptional railway connectivity that allow us to source additional inputs over the land from our operations in Mexico. In this regard, during second quarter, we will be recognitioning 1,000,000 pumps from our CPM cement plant in Northern Mexico to meet pricing U. S. Demand. In Mexico, to meet incremental demand, we expect to commission our 1,500,000 pumps expansion in Tepeaca by the first quarter of twenty twenty two. In CAC, we have been leveraging our supply chain capabilities by flexing our production to serve markets that are currently under tight supply conditions. In The Dominican Republic, we expect to recognition a product line in fourth quarter that will bring an additional 500,000 metric tons or approximately 33% of current plant capacity. This increase will strengthen our ability to meet domestic demand and supply other Caribbean markets. Finally, in Colombia, we expect to commission our 1,300,000 tonne plant by the fourth quarter of twenty twenty two. Our 28% EBITDA growth was driven by higher volumes and prices, cost savings in OpEx and logistics as well as a higher contribution from our growth investments and utilization solutions business. Every region contributed to EBITDA growth. Our SG and A as a percentage of sales was slightly below 8%, one point seven percentage points lower than first quarter twenty twenty. Our OpEx in the quarter benefited from the operation resilience cost savings program we implemented last year. Valuable costs were impacted by higher cement imports into The U. S. And Europe as well as higher maintenance costs. Fuel costs were also a headwind. We benefited from a small FX phasing in the quarter. The benefit came primarily from the appreciation of the British pound and euro. I am pleased with the progress we have made in less than nine months on our operation with savings target. While we have been helped by market conditions in our key regions, the cost savings program and our financial planning have also contributed materially. For 2021, we have now identified $50,000,000 in incremental savings, mainly in areas such as OpEx and operational efficiencies. Our first quarter twenty twenty one EBITDA margin stands at above 20%. Due to the seasonality of our business, first quarter typically has the lowest margin in the year. Over the last few years, we have initiated bolt on investments and efficiency projects of approximately $600,000,000 covering our four product lines, demand, ready mix, aggregate, and urbanization solutions. These investments typically have very short payback periods from one to four years, and we are already seeing incremental EBITDA from these investments. For the full year, we expect these investments to contribute approximately 100,000,000 of incremental EBITDA. Our leverage ratio stands at 3.61x at the end of first quarter, a quarter in which due to working capital needs, leverage increases. With regard to our fourth goal of operation resilient, we have overcome some of the 2020 COVID supply challenges surrounding alternative fuels. And in the first quarter, we reduced net CO2 emissions by 3% year over year. This implies a reduction in emissions of approximately 24% versus the 1990 baseline. Let me expand on our sustainability initiatives. Our fee integrated report was recently published and is available in our website, which details the progress we are making in our 02/1930 sustainability goals. As of 2020, we have a 22.6% reduction in net CO2 emissions, driven by a reduction in our clean tech factor of one percentage point, the largest drop in five years due to increased sales of low clinker or blended cement. As of first quarter, '60 '7 percent of our total cement sold was blended cement. In first quarter twenty twenty one, we reduced CO2 emissions by 3% on a year over year basis. Due to disruptions in alternative fuel supply caused by COVID, our alternative fuel usage declined in 2020. However, in first quarter, we have been solve these issues and our alternative fuel usage has almost returned to 2,019 levels. Before that, our alternative fuel usage in 2020, we successfully hydrophed hydrogen injection in our plants in Europe, and we are now replicating that success globally. This technology allow us to operate our plants at even higher alternative fuel substitution level as well as significantly improves the thermal efficiency of our plant. Our alternative fuel substitution rate is one of the highest in the industry, particularly in biomass substitution. While there are no specific alternative fuel usage in Europe, we consume 60% while the industry average is 40%. And this is important not only to service, but to society. Alternative fuels allow us to recycle waste from other industries that is important to communities and use it as energy in our teams. In fact, in 2020, CEMEX consumed industrial waste in volumes close to 50 times more than the nonrecoverable waste we generate, a prime example of our contribution to the secular economy. Our first quarter weight consumption had some seasonality in need and we expect consumption to increase in the rest of the year. We expect that the progress made in clinker factor reduction combined with our assumption of our pre COVID alternative fuel usage should lead to an achieved improvement in current emissions this year. After rolling out concrete product globally in twenty twenty twenty, we are now introducing Vectra cement and aggregates products. Customer reactions to these products have been very positive, and our low CO two concrete is already being used in iconic infrastructure projects in our main market. We are working hard to educate our customer base on the benefits of this value added product. We also are investing to reach our 02/1930 goal as well as net CO2 complete globally by 02/1950. In order to accelerate our progress towards our 02/1930 goal, we are updating the necessary investment to $350,000,000 The growth story for our business in The U. S. Gained steam in the quarter. We achieved the highest first quarter reported EBITDA and EBITDA margins since 02/2006 and 02/2007, respectively. EBITDA grew 21% with our EBITDA margin expanding by 2.5 percentage points. The margin improvement was driven by higher volumes, lower freight and SG and A and a growing contribution from our expanding organization solution business. With the exception of Texas, which was impacted by the February feed, all of our key markets contributed double digit volume growth. Residential remains the largest driver and with residential construction spending up 22% as of February. Forward looking indicators are strong with the single family permits up 26% in first quarter with new home inventory at low levels. The infrastructure sector was also broadly supportive. March trailing first month contract awards for highways and streets rose 15% for our 40 states versus 3% at the national level. The industrial and commercial sector remains weak with the exception of cement intensive warehousing and distribution for e commerce. However, with the front face of vaccinations in The US and the prospect of a dental economic reopening, we are encouraged by the possible resumption of commercial projects in our major metro markets such as Orlando and Lodega. After more than a year of lockdown and with generous fiscal stimulus sales, consumer sentiment has recovered. This much of the sales posted the second highest growth rate since the data series began. We expect a surge in pent up consumer demand that will eventually translate to the tourism and commercial segments. All of our major markets are tight with regard to cement supply and demand is being met with pricing inputs. With our strong logistics networks in The U. S. Coupled with our unique geographic footprint in The Americas, we are particularly well positioned to meet incremental demand. Even supply demand dynamics as well as the pricing disruption last year due to COVID, we are optimistic regarding April's pricing increases, which covers states that represent 80% of our. With greater visibility, we now expect cement volumes to grow between 35% in 2021, while ready mix and aggregates volumes grow low single digit. In the medium term, we are optimistic regarding President Biden's two point three trillion dollars American Jobs Plan. This proposal includes $625,000,000,000 for transportation infrastructure with $115,000,000,000 of incremental spending for highways and streets. The plan also includes other elements that we will expect to have cement content. As of this year, we would expect incremental cement demand to materialize towards the end of twenty twenty two at the earliest. In Mexico, we continue to see strong growth in demand, which has brought in quarterly volumes back to 02/2018 pre election levels. If you consider the exported volumes, we estimate that utilization in the country is quite high, reaching levels close to 9%. Our 13% year over year cement volume growth was driven by the informal sector with bagged cement increasing on double digits. Bagged cement growth is supported by remittances, home improvement, social government programs and pre electoral spending. Ready mix and aggregate volumes declined 123% respectively, reflecting the slow recovery of formal sector demand from the pandemic. The decline is mainly due to a difficult base effect and the impact of the pandemic began in early April twenty twenty. We continue to see improving indicators in the residential sector while government flagship infrastructure projects accelerate. Activity formal housing continues recovering, supported by low levels of inventories and attractive mortgage rates. Housing permits are accelerating growing at 27% year over year in the quarter. While the commercial sector remains subdued due to the pandemic, we are seeing increases in air travel and consumer confidence, which could imply an event of restart to previously delayed tourism and commercial projects. We have seen some activity in the industrial segment with the construction of warehouses along the border as well as distribution facilities in interior designed to meet the growing needs of e commerce. We expect that economic reopening in The U. S. And the USMCA trade agreement will continue to provide tailwinds for industrial work. Our national footprint, strong distribution network, digital platforms and safety protocols have been important competitive advantages, allowing us to consistently deliver cement and capture growth. During the quarter, sequential cement and ready mix prices grew 51% respectively. The sequential increase in cement prices reflects the traction of the January price increases as well as tight supply demand conditions. In early March, we announced a second price increase in bagged cement of approximately 4% with the objective to continue recovering input cost inflation. EBITDA during the quarter increased 28% and margin increased 2.4 percentage points mainly due to higher volumes and prices as well as our cost reduction initiatives. This improvement is occurring even with higher maintenance during the quarter. Capacity utilization is running high in Mexico, especially when you consider our exports to The U. S. We expect the start of our new line at Tepeaca in the first quarter of twenty twenty two. The additional 1,500,000 metric tons will allow us to better serve the growing central and southern regions while providing higher efficiency grades and improved logistics. For 2021, we are increasing our volume guidance for Mexico to better reflect current demand conditions. We now expect domestic grade cement volumes to grow between 79% while ready mix and aggregate to increase between 812%. We anticipate that the bag cement growth rate will slow in the second half of the year after the June elections and the comparison basis becomes more challenging. Both cement, ready mix and aggregates demand, however, should continue improving supported by the gradual recovery of the formal sector coupled with a favorable base effect arising from the second quarter twenty twenty lockdown. In our EMEA region, EBITDA grew 9% driven by cost larger contribution from the Urbanization Solutions business and ready mix and aggregate growth. On a like to like basis, adjusting for FX, EBITDA grew 3%. EBITDA was flat due to higher prices in Europe and lower SG and A and distribution expenses, which was offset by higher cement imports. European cement volumes declined 9% due to unfavorable weather conditions. The region also faced the imposition of new COVID lockdown measures during the quarter. We expect cement volumes to rebound in subsequent quarters with better weather. In fact, we have seen an important recovery in March and growth has continued month to date in April. In the quarter, we saw volume improvement in The UK, France and Spain. We believe this growth rate represented volumes beyond simply the base effect from severe lockdowns occurring in March 2010. The UK experienced its first year over year volume growth for all core products in first quarter of nineteen as housing and infrastructure activity pick up. Prices in Europe were up between 48% sequentially in local currency terms for our three core products. We attribute this to tight supply demand condition and rising energy and carbon costs for the industry. Phase four of the European Union's emission trading system commenced on January. After the sale of carbon credits in the quarter, we remain well positioned and expect to have sufficient carbon allowances to cover our operations until the end of twenty twenty five under the current regulation framework. We will use this advantage to technology and research and development in the transition to our 2030 and 2050 carbon goal. And now moving to Israel. With the highest vaccination rates in the world, ready mix volumes rose 4% driven by construction act related to transportation as the government moves to execute condition long term infrastructure plan. We expect the commercial sector to gradually pick up as the economy reopen. In The Philippines, economic activity remains to do on a recent surge in COVID cases have been met with new government lockdown measures. While the cement industry remains open, volumes have been impacted. And despite the closure of the cement industry that began in mid March twenty twenty, volumes declined year over year. We do expect an easy comp in second quarter when the industry was closed for approximately forty five days in 2020. For more information, please see our CHP quarterly earnings, which will be available this evening. For 2021 in Europe, we expect stable cement volumes and anticipate 1% to 3% growth in our ready mix and aggregates volume. Infrastructure and residential sector will continue to drive demand. In the we expect cement volumes to grow between 57%, a slight improvement versus our prior guidance supported by a pickup in economic activity and the 2020 base effect. In Israel, we expect ready mix and aggregates volumes to decline between 24%. The guidance reflects the fact that the business operated at a record pace in 2020 as well as the completion of several launch projects. Our operations in the South, Central America and The Caribbean enjoyed the best quarterly performance since 2017. Regional cement volumes increased 16% reaching the highest levels in second quarter twenty eighteen. All countries except for Panama show cement volume growth. Regional cement prices rose 5% in local currency terms, mainly due to increases in The Dominican Republic. EBITDA increased 36% with higher contributions from TCL, Dominican Republic and Colombia. EBITDA margin rose 4.8 percentage points due to volume and price performance coupled with our cost reduction initiatives. In Colombia, despite the closure of the industry for two weeks in March, our cement volumes only grew 4% in the quarter, a consequence of our pricing strategy and competitive dynamic. The industry is enjoying robust growth with the housing sector being the biggest driver of demand with record home sales, translating into higher levels of housing starts. Despite the imposition of new lockdown measures in April, the outlook remains favorable supported by fiscal stimulus including investments in social housing, execution of the existing four gs highway project as well as the rollout of the new five gs infrastructure program. For the year, we are upgrading our expectations for cement volumes in Colombia to an increase of 10% to 12%. In The Dominican Republic at this year, cement volumes grew 29% on the back of dynamic set construction sectors. Volume growth in this year was largely due to activity in Jamaica and Trinidad. We are increasing our guidance for twenty twenty one cement volumes in The Dominican Republic to 14% to 16%. In the region, zinc and cement utilization are at extremely high levels. We are taking advantage of our strong regional logistics network to meet local demand while we are moving forward to address supply constraints with capacity additions in The Dominican Republic and Colombia. I invite you to review CLH's quarterly results, which were also published today. Given the reduced size of the publicly traded shares, CLH decided to no longer be hosting a separate conference call. And now I will pass the call to Maher to review our financial performance. Maher? Thank you, Fernando, and good day to everyone. I would like to reiterate what Fernando highlighted earlier in his remarks. Our performance went beyond recovery from the pandemic effects with a solid top line growth of 9% and more than three times that in our EBITDA growth demonstrating the important operating leverage of the business. This is our third consecutive quarter of accelerating EBITDA growth. Free cash flow after total CapEx was 81% better than last year despite the usual unfavorable working capital seasonality of our business. This was driven primarily by the strong EBITDA performance and by the lowest investment in working capital in a first quarter since 2016. Continuously improving our working capital management in particular attention to credit quality and receivables collection translated into a record of a negative seventeen days in average working capital. On the other hand, net income was the highest in a quarter since 02/2007 driven by the sale of carbon credits and higher operating earnings. As regards our debt maturity profile, we were very active during the quarter in terms of liability management. During the quarter and up to April 20, we undertook $2,100,000,000 of highly accretive transactions that resulted in the further improvement in our maturity profile. As we see here, we have no material maturities until July 2023. These liability management exercises along with the tail effect from April last year as well as the reduction in our debt levels locked in slightly more than $100,000,000 of savings in interest expense for the year. Going forward, we will continue to take advantage of in the debt markets to maintain a runway of about twenty four to thirty six months ahead of significant maturities. As Fernando mentioned earlier, we significantly reduced our leverage ratio during the quarter from increased EBITDA and the proceeds from the sale of carbon credits. As we can see on this slide, we reduced our net debt plus perpetuals by $545,000,000, which translated into a leverage ratio of 3.61 times, almost half a turn reduction compared to December thirty first of last year. With our new EBITDA guidance that Fernando will present next, coupled with the expected 2021 free cash flow and proceeds from outstanding asset sales being dedicated to debt pay down, this would suggest further improvement in our leverage during the year and could put us two years ahead of our plan of reaching investment grade capital structure by the end of twenty twenty three. And now back to you, Fernando. Thank you, Maher. Given the strong momentum in our business in first quarter and with greater visibility on demand, we now expect 2021 EBITDA to be in excess of $2,900,000,000 EBITDA should be supported by consolidated volume growth in the range of 3% to 5% for cement, 2% to 4% cement for ready mix and 1% to 3% 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. On cost of energy, we maintain our previous guidance of a 10% increase with both fuels and electricity costs rising. Based on our prior year consumption, a 10% increase in energy costs would represent an approximate $100,000,000 headwind. As discussed earlier, we now expect $50,000,000 in incremental cost savings this year relative to 2020. Given the success of our bolt on growth initiatives, we intend to increase CapEx spending to $1,300,000,000 with $800,000,000 of maintenance and $500,000,000 in strategic. The incremental CapEx will be used towards bolt on investments, sustainability and the completion of the Maceo plant in Colombia. We will continue to be disciplined in capital allocation, laying on bolt on investments that meet high IRRs and short payback criteria. We expect an investment in working capital of between 100,000,000 and $150,000,000 Cash taxes are estimated to be about $250,000,000. We estimate our financial expense, interest on our prepared notes, to be approximately $120,000,000 less than last year. Fourth quarter performance convinces me that we should be entering a period of sustainable growth for our major markets. Supply demand conditions are extremely tight, which should support pricing and enhances the contribution of our unique supply chain capability. Over the medium term, we anticipate economic reopening should lead to incremental growth driven by the resumption of postponed formal construction projects. And in addition, we see demand upside from infrastructure fiscal stimulus in the form of green and the American jobs plan. Our bolt on strategy should continue to contribute meaningfully as we ramp up our investments. All of these places us on an accelerated path to achieve our investment grade capital structure and our 20% EBITDA margin well ahead of 2023 operations with this timeline. And finally, we are committed to our carbon reduction goals and this will be reflected in our operating model and investment priorities. And now back to you Lucie. Before we go into our Q and 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 and decreases refer to prices for our products. And now we will be happy to take your questions. If you wish to ask a question, please press star followed by one on your touch tone telephone. If your question has been answered or you wish to withdraw your question, please press star followed by 2. In the interest of time and to give others an opportunity to participate, we kindly ask that you limit yourself to only one question. Our first question comes from the webcast from Paul Roger from Exane BNP Paribas. How could the new green agenda in The U. S. Impact CEMEX? Is it a risk or an opportunity? Thanks. Thanks for the question. This is this is Fernando Gonzalez. The direct answer is that we do believe it is a positive position, this new position from president Biden. Stemex, as as many other global companies, do do not have a position on a per country basis. We have a global philosophy, and we run with the idea of carbon neutrality world. And that's why we have expressed and we have adjusted our targets for 02/1930 and for 02/1950, and we have introduced our in our product portfolio, a c o two reduced or even c o two neutral products. In the case of The US, given that this this is a very recent statement, a reduction of 50% by 02/1930, we are reviewing our current plans, and we will adjust accordingly. I believe that in The US, several of the schemes or or variables for the cement industry to reduce of its CO2 emissions are are there, are already given. But for sure, there will be additional adjustment changes to be done so we can move forward decisively and faster than our current plans. A couple of examples is The US has the highest or one of the top high factors because of the way things are measured. Another example is that, there might be material opportunities in The US for for adjustments towards, let's say, a green and circular economy. I'm I'm referring particularly on how the cement industry is a a very material contributor when in a fiscal economy, we cannot solve 50 times the residues from other industries or even households when compared to the residues we do generate. So, we believe this is an opportunity to adjust and and to and to, decide for bolder decisions and faster decisions in The US. Another way to put it is we are going to we are going to do something very similar to what we have already stated for Europe, a reduction of 55 for 2030. It is doable. We know how to do it. We don't depend on known technologies. What we have to do to reduce this 50% is related to clinker factor, to blended cements, to efficiencies in processes, production processes, in a larger proportion of alternative fuels, in additional raw materials. So things that we know that we adjust in our roadmap for 2033. Can I Fernando? Can I Lucy, maybe I can just add one thing to what Fernando said which is very important as far as the green agenda in The U? S. Although it's still at an early stage, I mean, is definitely the possibility of better access to capital and funding and in some instances from the government that will support rich R and D development environment that will lower the potential cost of emerging technologies for decarbonization. So it's legitimizing and really taking it to kind of a countrywide level. We think that's, at the end of the day, is going to translate to a lot of alternatives that Fernando was outlining that would lead to lower cost for us at the end of the day. Thank you, Maher. Our next question comes from Carlos Parillon from Bank of America. Thank you, Lucy. Congratulations on the very strong results. My question is related to other income that you reported. It accounts for about 60% of operating income. If could provide some more color on that would be very helpful. And also if you could provide some color on U. S. Pricing, you mentioned an increase. If you could comment on what is so far the acceptance of that, that would be useful. Thank you. Vanda, do you want me to take the first part of the question? Well, let me start by, Maher, and do my complement. Go ahead. I think that the most relevant impact is the sale of CO2 credits in Europe for the amount of around $600,000,000 That basically explains can put down for it. Yeah. Yeah. or the chunk of the variation. Great. And in terms of of US pricing, I mean, it's it's quite surprising that with such a tight supply demand that we haven't seen higher increases in prices. So if you could comment on the increases you've already announced, but also more on the medium term, what do you think is needed to show higher prices that would be more according to the very tight supply demand equation in The U. S? Thank you. Well, on pricing, what we saw in the first quarter is price increases in Florida only. We are announcing for price increases starting in April. And so the impact of Florida, which is a fifth or a quarter of of total volumes, you know, is is not is not that that visible. I don't know if you want to add something to pricing, Margaret. Yes. I think a couple of things, Carlos. I mean, number one, as Fernando said, the pricing increase was in Florida. We got traction there. It was a low single digit traction. Florida represents about 20%, twenty three % of volumes. The biggest phase of pricing increases will take has taken place as of April 1. Now it's very important to note that all of these pricing increases were made in October of last year prior to the surge in demand that we have So based on the tight supply demand conditions, we are expecting and we are getting good traction on the April pricing increases. And in fact, there has been some selective announcements and the pricing increases in April are high single digit percentage of prevailing prices in the relevant markets. And that represents the majority, mean 8% our business. Based on the dynamics that are emerging, especially driven by the housing market, we have announced selectively additional pricing increases that would go in the early part of the summer. Pricing dynamics clearly are in our view are positive. Many of our markets are on allocation and sold out and that is true throughout the whole market, not just because of us. Mean we happen we also have a very robust supply chain as Fernando highlighted in the early part of his remarks to benefit from that. I don't know if that addresses your question, if you have any follow-up. Can I add just one point, Carlos? In first quarter, you know, Fernando mentioned, we did get traction on the Florida price increase. The other issue, however, that played out is that we had several markets that have some of the highest cement prices that, had lower volumes because of bad weather places such as Colorado, the Mid South, for example. So there's a geographic mix issue as well in the sequential pricing performance. Okay. And and as a follow-up, the increases in Carla, one question. No. No. It's the same it's the same on on pricing. Just California and Texas, I'm wondering if if the price increase in these two markets was in April. Just to That's correct. Okay. Great. Okay. Thank you. Okay. Great. And the next question comes from Mick Whitman from Morgan Stanley. Hi, thanks. Thanks, Lucy. Hi, everyone. Congratulations on the superb numbers. Thanks for taking my question. Just one question on M and A, if you don't mind, potential opportunities in Brazil, South America. I was wondering if you can say anything about that. Again, congratulations and thanks. Thank you, Nick. Meaning our potential participation on those, I assume that is the question. Yes. How are you looking at Epicel, the LaFarge announcement? And if you I know you in in in the past have talked about about maybe reducing, this Latin American exposure. Yeah. But, you know, it's obviously a big announcement. It asset. So I was wondering if you could just comment on that. Well, you know, we continue with the strategy that we have been outlining already for more than a year. Our our strategy on portfolio is directing our investments more into The US and Europe rather than emerging markets and in particular Latin America. We and just to clarify, with the idea of a midterm capital allocation exercise or portfolio management exercise, because as as you see, our leverage ratio is declining and with the new guidance, you can make your numbers and and, you know, it it seems like we are not anymore in a position to divest to to improve our balance sheet. So it's just portfolio management. Are we willing to invest in large acquisitions? No. We are not. We have outlined our strategy of making bolt on acquisitions, small acquisitions like the ones we did in ready mix in San Antonio recently and investments in businesses that we know that are related and we can easily execute all the investments, small investments we are doing in organization solutions, the group of businesses related into organization solutions as well as cement, resin, mix, and aggregate. These are investments with very attractive returns and very short paybacks like the expansion of our terminal in Dallas. We are doubling the size of 1,000,000 tons. We will have a terminal with 1,000,000 tons of cement we will be able to sell in the Dallas market with a very small investment. So we continue on that track, and we have hundreds of those bolt on investments, that's our current focus, Nick. Crystal clear. Thank you. Thanks. And the next question comes from Vanessa Quiroga from Credit Suisse. Hi. Thank you. So the one question that I chose to make is regarding your increased guidance for CapEx. So you mentioned that it's gonna be focused on more bolt on acquisitions. So can you clarify exactly the amount that you plan to to dedicate to bolt on acquisitions in 02/2021? If if they refer to acquisition of third party assets? Or or when you say bolt on investments, do you also refer to internal internally sourced projects for margin enhancement? Thanks. What is what is included, Vanessa, are really small acquisitions. For instance, I I can mention a few as as examples. The acquisition we did of the ready mix assets in some polymers, not a material amount. The investment needed to for us to reactivate 1,000,000 ton of capacity in one of our kits in CPM, which is not material at all. And and those are investments that will pay back, you know, one of them immediately. The other one is it take, like, a few months to to for us to be able to to serve the California market with with that investment. We have another small investment. When I say small, it's even less than $10,000,000 to activate our clean Dominican Republic so we can produce more than 500,500,000 tons of of clinker. We have several investments in in aggregate, not not not on replenishment of aggregates, which is something that we believe systematically do, but additional businesses, small businesses in in aggregates. So well, to give you an idea, you know, out of the total CapEx that we are expecting to invest this year, you know, it's it's more than 200 projects. So they they are really small in in in nature. We've been preparing. We've been building this growth portfolio with with with the investments of this profile since early last year. So now now we do see the potential of a large number of very small projects with high returns and and short paybacks that we are already executing. That's why we are saying we we we think we can add 100,000,000 to our EBITDA because of these projects that we started executing last year. So Okay. Very good explanation. Solutions They are really bolt on. We've not seen any large we have not committed any large project. And if I what we see is that we still have a potential to continue growing this portfolio of this type of project. Thank you very much for that color, Fernando. Thank you, Vanessa. Thank you, Vanessa. Thank you, Vanessa. And our next question comes from Alberto Valerio from UBS. Thank you very much, Lucy. Congrats for the results. Thank you, Fernando and May for the opportunity of making this question. Chose the question about the carbon price in Europe. How recurring it would be in the future? Should we expect for the following quarters to also have some revenues from carbon credit sales? This is a contract of a year if you we could see this in the next year 2022 for instance. Thank you very much, and congrats again. Thank you. I think I think on our let let me try to briefly describe our c o two trade position in in Europe. With the information we have available, you know, I wonder if we have everything, but with the information that we access, we believe we used to have the largest c o two credit position in our industry in Europe. There are other companies with large positions. And and we thought that when you consider the the deduction target of c o two we have in Europe and the type of investment we need to do and considering that other players are already buying c o two credits or they will be buying very soon, we thought on monetizing a portion of the c o two portfolio. So the the the sale we did is not selling everything on on on on on the full portfolio in c o two credit. We are keeping according to our own estimates, we are keeping c o two credits needed until December 2025, which is still a longer period of time when compared to other sizable players in in Europe. So we feel confident that we are properly covered on that side. We are pleased because we managed to monetize the position at reasonable or attractive prices. We will use part of those investments to finance what we have to do in c o two in Europe and and in other countries. And at this point in time, I I don't foresee any additional sale of of of c o two credits. I think and and and, you know, we are just starting phase four. There are new conversations about possibilities of of the c o two market in Europe in the future. So we will continue monitoring and participating and and making decisions accordingly. But but right now, I don't I don't see any additional reason to divest another portion of that portfolio. Perfect. Very clear. Thank you. If I could just add one point on that. You know, unlike maybe other members of the industry, we have not sold any carbon credits in Europe since 02/2012. So so this was unusual. Okay. And our next question comes from Francisco Chavez from BBVA. Hi. Thanks for the call, and also congratulations on the strong results. My question is regarding Mexico. What are your assumptions behind the improved guidance for cement volumes? And specifically, what are you assuming for the self construction and the formal segment? Thank you. Well, Francisco, as you know, the cement market in in Mexico has been surprising to the upside. We do see a strong performance in housing, both informal and formal, and even in in industrial and construction to some extent. I think there are many variables at play in Mexico, you know, making very challenging to to the one hand to understand, on the other hand to to to understand the the the potential scenarios for the rest of of the year. But we see it very in a very positive manner. As you know, bag cement has been the segment growing the the most. I think although we don't speak that much about it, but, you know, the first year of of the current government, it happens most of the time with the first year of any federal government coming from a different political party was a very challenging year. So what what we see in part is a recovery of that transitional year of the government. Then we got the COVID and and that, you know, did complicate things a little bit. As you know, in Mexico, there was a partial lockdown in our industry, partial in in in in terms of not allowing traction to to do business, but deep allowing back cement distribution to continue. So comparisons are, you know, very challenging. What is it that we see this year? We we continue seeing that cement growing materially. This year, we might have it is always a very subjective appreciation, but we we might have an impact because of elections. And if that is the case, that will a temporary impact. But but even if that is a temporary impact, what we have seen already in first quarter and and and for sure, you know, April is confirming the trend is that the formal part of construction in Mexico is is is growing. So the the the as as measured or or measured as a proxy with our order book in credit mix and aggregate, which in the case of April, you know, on top of the base effect that we we have and compare when comparing second quarter last year with this second quarter, But it seems like there is a there is a material recovery in the in the formal sector. So all in all, that's why we believe that the forecast for volumes in Mexico are improving. And, of course, we have the first quarter behind us with a good performance. So that that is basically the explanation, Francisco. Still gray areas, but but very positive. Thanks so much, Fernando. And our next question comes from Adrian Muerta from JPMorgan. Thank you, Lucy. Hi, Fernando and Marquez. Congrats on the results. On the bolt on investments, this €100,000,000 of incremental EBITDA on the €600,000,000 investment, I guess given the payback time that you said of one to four years, the recurring level of stabilized EBITDA of this investment should be greater than that? That will be my first question on the bolt on investments. And the second one is given the on expansion CapEx to €500,000,000 is that is this the kind of a recurrent on expansion that we could expect for the next couple of years and somewhat related to the size of these projects that you have been working on already for a couple of years that you have identified? Well, think on on expansion or strategic CapEx, they taking your second question first, Adrian. I think that can be right either as an amount or or what's included in in those 500,000,000? Because as you might remember, next year, we're gonna be finishing building cement capacity expansion for 4,300,000 tons of cement that will happen during next year. And, of course, all the CapEx related to those projects are gonna be done. What we are expecting, again, because we've been having this exercise of building a bolt on portfolio of acquisitions and investment, is that, you know, we we have detected and we continue detecting very sizable opportunities with the same profile, meaning most probably for the rest of the year, I wonder if for next year, we will continue adding this type of the microdemeanor and and organization solutions opportunities to our bolt on strategy. Now what else might come in the future? Well, that's to be seen, you know. What if our, you know, balance sheet goes to, you know, our objective of less than three times sooner than what we expected and we believe that is what is going to be happening. Okay. So we will review our portfolio, our growth portfolio, both on investments and acquisitions and we will decide. I remember time ago, we did review and we did communicate adjustments to our criteria for growth for M and A given that we are not expecting, let's say, nothing in particular, meaning no launch acquisitions in the short but in the midterm, we have not brought that to the table. That might be a conversation for a Samik Day one of these days. But again, I don't see any material changes on what we have announced and we are executing. It's enlarging our growth portfolio of bolt on projects. Thank you, Fernando, for making that clear. Think that was quite important as given the improved leverage that you have and likely to be around three times or even below that by the end of the year. Many people are starting to ask if if a larger could happen at some point, but that was very clear. No. I'm I'm I'm I'm receiving that type of concern. You know? We're still at hopefully, very soon, we will be low three. But, you know, maybe in the next day or in the next call, we should review all the criteria that we we did publish, but it was one time ago. It was 02/2016. I don't remember. Our plans of course, we want to grow, and we are doing it. And our plans is, you know, to get investment grade and to keep it. And we have some flexibility now, and we are doing profitable short paybacks, low risk type of hundreds of investments. That's what we are doing. They are paying off and we will continue with those. Understood. Thank you, Fernando. Thank you, Adrian. Okay. And our next question comes from Gordon Lee from BTG Paxlo. Hi, everybody. Thanks very much for the call and congratulations on the results. I have a follow-up, I think, on Vanessa's bolt on investments question, but it's just, I guess, just to clarify numerically two points. First, if you could of the $500,000,000 in strategic CapEx for this year, how much of the 600,000,000 in your bolt on pipeline is included there? And then the second question is whether the 100,000,000 or or let me put it differently. How much of the 100,000,000 in incremental EBITDA is in your 2,900,000,000.0 guidance for this year already? Thank you. The incremental EBITDA we are included for including for 2021 is around 100,000,000. And and and that EBITDA is coming from bolt on investments and acquisitions we started doing in early early last year. So they they are already, let's say, producing around 100. Now we are not disclosing any additional info, but if if these investments were done, you know, in recent months, what you can expect is that the steady state EBITDA is much higher than 100. So that that should be coming, meaning in higher amounts starting next year. The the the the type of bolt on investments we are doing, you know, I I I have mentioned a few examples because, again, we have more than 200 projects, but but we we are expanding the capacity of our cement terminal in Dallas. Dallas is a good market, a market that is growing. We do have a position and we just realized that we can grow that position to 1,000,000 tons. We used to have a terminal with the capacity of 5,000,000. And that again, those are the type of projects we are focusing in because, you know, every next year, that terminal will be ready, and we will be able to sell that cement in the in market. The ready mix business we acquired in San Antonio is another example of a bolt on acquisition. We are starting up a 1,000,000 ton in Campana to experts in order to serve other markets in California. And then we have still a number of the projects related to alternative fuels. We are making an investment in Crop B because, you know, Crop B has been in average around 60% substitution of alternative fuels. And we believe we can take it to 90% and it's a very attractive project on top of the environmental and CO two benefits. The UK nowadays is the country between UK and Europe is the country with the highest PPC for the use of household waste as fuels. So it's a it's a also very attractive, economically attractive proposition. We are investing in new concrete block plants in The US, in Florida. We are investing in new mortar plants in several countries. We continue increasing our construction, administer materials, the latest investments done in The US. So again, we have you know, I can I cannot mention 200, but that explains more or less the nature of the type of projects we are doing related to our current business activity, related to the markets we are in with, let's say, a low risk and and for our management team to be able to develop those? So we are very pleased with with with how this EBITDA growth strategy is is is working with this type and this profile of projects. Perfect. That's great color. Thanks very much. By the way, I think it's the first time it is the first time that we, let's say, we are strengthening the muscle of bolt on acquisition because it's not the same thing to buy a large thing that that, you know, evaluating, detecting, and deciding on hundreds and hundreds of small projects. But it it is it is a big thing. Okay. Thank you. And thanks, Gordon. And our next question comes from Anne Melny from Bank of America. Good morning. Congratulations like everyone else on an amazing quarter. My question is on the debt side. Do you have any more liability management exercises planned for 2021 as you were extremely active last year and in the first quarter. And in fact, if you have a lot of free cash flow and then we'll be reducing debt. I guess one question is where will you focus on debt reduction? And on the same lines within the capital structure and your goal of reaching IG Metrics, I noticed that you're both of the credit rating agencies that rate CEMEX's debt have you on negative outlook. What's wrong there? When are they going to start looking at upgrading you now that you've had at least giving you positive outlook during the quarter? Thank you. Let let me take the second one, and I will ask Masvid to to answer the the first one. And I I think what, you know, the the reaction of the rating agencies might might might not be that different to to reaction from other institutions. Meaning, you know, a year ago, we were expecting at least, I thought, I was expecting a high kind of a disaster. Humanitarian crisis crisis translated into an economic crisis. It did happen. It is still happening, but not for all sectors. You know, economists talking about the k shaped recovery. Fortunately, construction and materials are one of the industries that, you know, was impacted in any stages of the pandemic, but it had a v shaped recovery. And after the v shaped recovery is is correct. So what I do believe is what is happening is that we all have been in a kind of a conservative way adjusting all our views, outlooks, estimates because, you know, it it was not the base case a few months ago. What what we see today, the the first quarter report and the outlook we have for the rest of the year was not in our scenarios a few months ago. So most probably, they were not also part of the scenarios of the rating agencies or even yours or whoever. So what what what I think is we are coming from a very low expectation to a very high one, and and people is kind of taking their time to adjust. That that's what I think is is going on. So that might change in the future as as as long as we continue delivering and as long as the outlook, which is not only our industry, but the outlook of the main markets we participate is positive. Look at the growth in The U. The recovery 6.9 of fraction. I don't give them the three or four, whatever it is. Next, you're expecting 5% growth, during the year because of the base, effect. But, you know, Europe is saying so it it the outlook is positive. We were not expecting this or not at this level, but it's happening. So I think little by little, we we all we ask internally and everybody rating agencies will will adjust with some more additional evidence. Okay. Ann, if I could add regarding the liability management, you know, we do have a couple of things that, you know, we're looking at obviously whether we do them this year or not remains to seen it remains to be seen in terms of capital markets responsiveness. Mean the markets have been fairly good I would say. There's the perpetuals. We have about 400 a little bit over $450,000,000 of perpetuals and the cost there is higher certainly where we would like it to be and so that's one opportunity potentially. And then of course we also have the euro denominated note, the $650,000,000 that is due in 2024, there's a slight premium to call it this year. All this is 100 spot six eighty eight. You probably know that better than I do. And then of course it goes to par next year. And there are potential other opportunities that we're looking at. But I mean, think that we continue to be vigilant. We continue to take a look at the markets and as I said, we will continue to take advantage of the capital markets to make sure that our runway is twenty four to, you know, thirty six months out or or better. You know, so I don't if that answers Yes. It does. I know that you have the euro that's callable. It is a very low coupon bond. So I think that's another consideration. But thank you very much. Appreciate the answers. Yeah. Thank you very much, Anne. And we have time for one more question. And last but not least, the last question comes from Ben Theurer from Barclays. Thank you very much, Josie, for closing it out. I want to ask something which is actually related to your ESG agenda. So we all know over the last couple of years, you had a very preferential deal with Pemex on pet coke supply. I think this is going to come to an end somehow in 2022 now with what's left over. So in light of your agenda to become a more carbon conscious switch towards alternative fuel, how should we think of 2022 onwards impact from not having that supportive price environment for pet coke and how you're going to offset that through all the measures you've been doing on the international scale from an alternative fuel perspective already taking that then into Mexico? Thank you. Thank you, Ben. I think, as you can imagine, our strategy is to continue moving towards lower c o two type of fuels when compared to pet coke or coal or or these natural gas. And Mexico will not be an exception. And you are right. Some contracts will be due next year in 2023. And and, you know, what we have been doing is is working and and for for us to or from the economy in Mexico to consider some of the basic aspects of a circular economy, the same way I mentioned for the case of the of The US. And there there is a new there are good news in new laws and regulations related to waste directives that through time will be conducive to to a much more, let's say, a better way for all waste to be better dealt with. As as you know, a ton of waste that is landfill generates about 20 tons of methane. So that that's our move. That's our strategy, increasing increasing alternative fuels. It is in our in our targets for CO two reduction for 2030, and that's what we will do. In Mexico, we have managed to do as much as 27%, I think. It has to go much higher. And, definitely, what you had mentioned, it will be an incentive for us to move in that direction. Perfect. Well, you very much. And then with that, let me close it and as well say congratulations on those very strong results. Thank you very much. Thanks, Ben. Thank you for joining us today for our first quarter webcast and conference call. If you have any additional questions, please feel free to contact Investor Relations. And we look forward to seeing you again on our next quarter results webcast. Many thanks. Thank you for participating in today's conference. This concludes the presentation. You may now disconnect. Good day.