Earnings Call: Q3 2020

Oct 28, 2020

Good morning, and welcome to the CIMAC's Third Quarter twenty twenty 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, will conduct a question and answer session. Our host for today are Fernando Gonzalez, Chief Executive Officer and Maher Al Khofar, Chief Financial Officer. And now I would like to turn the conference over to your host, Fernando Gonzalez. Please proceed, sir. Good morning, and thank you for joining us today on our third quarter twenty twenty conference call and webcast. I hope this call finds you and your families in good health. I'm joined today by Maher Al Zapar, our CFO. We will spend a few minutes reviewing the business and then we will be happy to take your questions. We are quite pleased with our performance in third quarter and the recovery we have experienced since the disruptions caused by COVID-nineteen lockdowns in second quarter. Indeed, in third quarter, we are moving beyond EBITDA with quality from second quarter, but rather to growth in EBITDA on a year over year basis at a double digit rate. In fact, EBITDA margin and free cash flow in the quarter were the highest since 2016. With the lifting of lockdown measures, bulk cement has rebounded sequentially in Mexico America and The Caribbean regions and jet bagged cement has also continued to grow. Importantly, Mexico growth in the quarter is not simply recovering from second quarter COVID-nineteen restrictions, but also about a rebound from a difficult 2019 in the form of double digit EBITDA growth as the current government settles into its second year. This is the second consecutive quarter of significant margin improvement resulting from higher prices, energy tailwinds, and cost efficiencies under operation resilience. Despite the volatile COVID nineteen demand conditions this year, pricing is up year over year for all three products. We continue to derisk the capital structure in the quarter with the extension of near term bank maturities under our facilities agreement, the bond liability management, as well as an improvement in our level of ratio. Our safety protocols, distribution capabilities and digital platforms are winning customer loyalty as evidenced by the second consecutive quarter of record Net Promoter Score. Finally, visibility for our business continues to improve and we believe that while the future may be bumpy, we are experiencing sustainable demand trends in many markets. I would be remiss if RISE did not recognize that the third quarter achievements are a result of the extraordinary efforts on the part of our employees during these challenging times and their adherence to the safety protocols we have put in place, which ensure the continuity of our business. Before we review the quarter, I would like to briefly recap some of the takeaways from our Analyst Day in September. We rolled out our medium term strategy operation resilience, which will guide us through 2023. This plan is recognition that COVID-nineteen has changed the landscape of our industry and that our strategy must adjust to this new reality. Many of the goals of Operation Resilience are familiar at the route to how we get there is different. It is about enhancing margins through operational performance and cost containment and committing to a sustainable 20% EBITDA margin by 2023. It is about optimizing our portfolio for growth through strategic asset divestments and bolt on investments. To this end, we have been augmenting our resources and focus to enhance the bolt on growth strategy. We are focusing on identifying and selecting investment projects that will either improve our profitability or capture additional value in our four core businesses, both of which will result in increased EBITDA. We have been progressing on this strategy for the last couple of years. Our current bolt on investment pipeline includes over 40 projects representing investments in excess of $250,000,000 that should contribute around $50,000,000 in EBITDA in 2021. It is about achieving an investment grade capital structure and derisking our business to lay the foundation for future growth. And finally, it is about considering sustainability as competitive advantage and further integrated it into all our operations and decision making. Now let me move to the quarter. Volumes have not only refraced the steep decline of second quarter, but they are showing year over year growth in all markets except Middle East, Asia and Africa. We believe this growth is not simply a result of pent up demand during the lockdown period as we are now several months beyond restrictions in most markets. Mexico stands out with double digit volume growth in the quarter, reflecting recovery from last year's government transition. The trends we are seeing give us confidence that these volumes are sustainable in the near term in most markets. We know that COVID-nineteen will continue to challenge our operations, but we believe that the learning curve of the governments have improved significantly and that government reactions to future outbreaks will be more targeted and less disruptive to our business. Importantly, prices for our three products grow between 13% year to date September. The high capacity utilization that exists today in our major markets combined with a more stable demand environment will lead to opportunities to compensate lost input cost inflation. One of the most encouraging trends we have experienced this year has been the performance of bagged cement in our emerging market footprint. While bagged cement has always been resilient in downturns, the performance this year has been one not just of stability but growth. Similar to consumer trends globally, bagged cement demand has been supported by a surge in home improvement as families quarantine and use their disposable income to enhance their homes. Additionally, life consumption is highly correlated to remittances and remittance levels have remained strong to date in the crisis. Finally, government programs designed to promote self construction are also supportive of consumption. This has been an important factor in the growth of bagged cement in Mexico this year. During third quarter, consolidated sales grew 3% reflecting strong growth in cement volumes that was partially offset by a decline in ready mix. While all regions contributed to the growth in sales on a like to like basis, Mexico was the largest contributor with a 14% increase. Local currency pricing for our three products increased between 12% driven by our cost containment effort. Consolidated EBITDA rose 15% on a like to like basis to €728,000,000 with all regions showing growth. The 180 basis points increase in EBITDA margin reflects higher prices, lower energy costs, savings in SG and A, improved logistics and mix effects. Finally, quarterly free cash flow after maintenance CapEx grew more than 50% year over year reflecting increased earnings and lower maintenance and working capital needs. The last time we achieved 21% margins, quarterly EBITDA and free cash flow of this magnitude was in 2016. And now to drill down a bit on the fifteen percent increase in EBITDA. While all business levers contributed to the performance, pricing provided the biggest boost. Our cost savings initiative, lower fuel and distribution costs were also important factors. Reported EBITDA reflected the unfavorable effects from currency fluctuation of $22,000,000 due primarily to the depreciation of the Mexican peso. Operation resilience cost savings were an important contributor to margin improvement. We achieved almost one third of our 2020 cost savings goal in the quarter. Savings year to date are equivalent to two forty basis points in margin. The biggest contributors have been SG and A with reductions in fees, sales and marketing expenses, distribution, travel and headcount. And operational savings related to increased demand efficiency in Mexico and ready mix plant rightsizing among others. During this year, we have learned new ways to operate, and we believe many of these savings are sustainable in the future. During the last few months, our digital platforms under the CEMEX Go umbrella have been important tools to serve our customers and a significant differentiating factor. Of course, we did not foresee a pandemic when we went live with CEMEX Go three years ago, but our investment has certainly been timely. In only two years, approximately 90% of recurring customers use CEMEX Go. And today, under the CEMEX Go umbrella, we have rolled out digital applications to meet specific customer segments. For example, Costurama.com is a digital platform available for retail customers in our emerging markets portfolio. Another example would be the development of CEMEX Go Query Link, a digital application to improve efficiency and promote low touch delivery of our products for commercial aggregate customers. We believe our digital capabilities are an important factor in our record Net Promoter Scores of the last two quarters. In our operation receiving strategy, sustainability assumes a leading growth. We recognize the current challenges our industry faces and we believe that climate action will be an important competitive advantage. We have aggressive goals to meet these challenges. 02/1930 goal of 35% reduction in CO2 emissions and 02/1950 ambition of net zero CO2 concrete globally. Importantly, the path to achieve our 02/1930 goal is clear and based on existing proven technologies. And as of 2019, we have already achieved a 22% reduction in CO2 emissions. Take up the rest of the way, we have developed a detailed plant by plant roadmap. In third quarter, this roadmap and 02/1930 targets were validated by Carbon Trust, a recognized independent organization that provides certification of carbon reduction plans. We regain this important challenge from a place of strength. We already have one of the highest alternative fuel usage in the industry, and this expertise will be an important tool to move forward. Additionally, we will relay on the experience we have gained in our European region which leads our way on CO2 reduction initiatives. Europe will reach the 35% reduction in CO2 goal by the end of this year, ten years ahead of our consolidated targets. And by 02/1930, we expect Europe will reduce CO2 by 55%. Aligned to our 02/1950 plan, we are already offering a net zero CO2 concrete concrete that meets our 02/1950 ambition. It has been introduced in several countries in Europe and will be rolled out shortly in other major markets around the world. In fact, it's been used in the largest infrastructure project in Europe, the high speed two rail project in The UK. To deliver fully on our twenty fifty ambition, the industry will need to find new technologies that can be scaled easily. We are working within our industry with governments and multilateral organizations and our own to develop these solutions. We are uniquely positioned in this work by our ability to quickly roll out innovations to our global network. Our new business of organization solutions as well as CEMEX Ventures will play a critical role in this challenge. During this quarter alone, we announced two joint ventures. One with a Swiss company, Sankelion, to eliminate the carbon footprint of cement using solar power and the other with Carbon Clean to develop low cost carbon capture. And now let's move to the regions. Our operations in The U. S. Continued to enjoy strong momentum in third quarter driven primarily by a pickup in residential activity as well as some growth in the infrastructure sector. Volumes in the quarter were somewhat affected by weather, fires in California coupled with higher precipitation in the Southeast. The residential sector continues to benefit from low interest rates and record low inventory, strong household formation and changes in buyer preferences to favor sewers and single family homes. The latest data shows that single family starts and new home sales are at the highest levels since the great recession. Permits for new single family homes were up 20% year on year in third quarter, suggesting that this housing strength should continue into next year. The infrastructure sector has also shown growth. Highways and streets spending quarter to date, August was up 3% year over year. While trailing twelve months contract awards for our four key states as of September are up 9%. We are encouraged by the one year extension to the past act that was recently passed. We believe that with more visibility of federal funding, states will feel more comfortable with working their own transportation. In addition, the extension will give the new administration time to undertake a more meaning prices remain stable to quit. We introduced a price to mistake about its traction. As we think about next year, we look to recover much of the cost increases that we were not able to pass through this year due to COVID-nineteen disruptions. EBITDA margin expanded by one percentage point reflecting improved lower fuel costs and savings from operations procedures. In Mexico, the double digit growth in cement volumes is a sign of recovery from a difficult 2019 as government programs take hold and spending accelerates in the second year of the administration. The growth is supported by strong self construction, infrastructure and a pickup in formal housing industrial construction. Government social programs coupled with a surge in home improvements and strong remittances have supported back cement volumes. These social programs for school improvements, rural roads and housing are significant. We estimate they are responsible for approximately a third of the increase in bagged cement volumes this year. Based on the preliminary budget for 2021, the existing social programs are expected to be maintained while several new programs such as Tucatan Las Judas aimed at developing 13,000 new homes for social housing will be introduced. The 2021 budget for these social programs is expected to increase at a double digit rate versus prior year budget. In infrastructure, execution of federal flagship projects has weakened while state and local governments have initiated improvements in urban infrastructure and transportation. We welcome the announcement by the Mexican Mexican government of The US Fourteen Billion private public infrastructure plan. This plan is evidence of the intent of the public and private sector to work together to reignite economy via infrastructure. During the quarter, despite a successful price increase for bagged cement, our prices were flat on a sequential basis. This is explained by product mix as bulk cement grew 54% sequentially while the bag cement volumes were up 5%. As you know, we are committed to recovering our input cost inflation in terms of pricing of our products. Since January 2019, cement prices have declined in real terms. To that end, we have announced a 3% nationwide price increase on bagged cement beginning early October. The EBITDA margin during the quarter increased 0.6 percentage points mainly due to volume and prices, a favorable product mix effect, cost reduction initiatives and fuel. Busy utilization is running high in the country and we believe our TEPIAX expansion is coming online at the right time in the first half of twenty twenty one. Finally, next year's twenty twenty one midterm election will be the most comprehensive election in Mexico's history with the full chamber of big duties and 15 state governors up for election as well as numerous local positions in all 32 states. The electoral spending is typically another catalyst for the consumption of daxamers. In our EMEA region, EBITDA grew 8% year on year driven by Europe, Israel and The Philippines. The EBITDA margin increased 90 basis points due to pricing and cost containment initiatives. Philippines was an important contributor. In Europe, we saw an important rebound in our Western European markets from the lockdowns in second quarter. Our Central European countries continue to grow. We saw strong volume performance in the quarter from Germany, Poland and The Czech Republic. While The UK market pick up as lockdowns were lifted in July, we continue to see year over year weakness in construction activity. As we enter 2021, we remain well positioned for phase four of the European Union's emission trading system. We have sufficient carbon allowances to cover our operations through 02/1930. This position will smooth the way in our transition to reach our 02/1930 climate goals. In The Philippines, we experienced a sharp recovery of volumes in the quarter as the lockdown measures were lifted in late May. For more information, please see our CHP quarterly earnings which will be available this evening. Israel continued with its robust performance, again beating its record EBITDA, which was just set in second quarter. In response to rising infection rates recently within EMEA, we have seen new targeted restrictions imposed by The UK, France, Spain, Israel, and The Philippines among others to combat the virus. The construction sector continues to operate without restrictions. Construction activity in our South, Central And Caribbean region during the quarter showed encouraging trends. Regional cement volumes have recovered to almost twenty nineteen levels. Pricing dynamics remain favorable in the region with markets representing approximately 80% of our regional volumes experiencing sequential increases in local currency terms. The reported decline results from a geographic mix effect. EBITDA for the region increased 31% year over year. This was the first increase in EBITDA since fourth quarter twenty nineteen. EBITDA margin increased six thirty basis points on the back of our cost reduction initiatives, higher prices and the positive contribution of lower fuel prices. In Colombia, activity improved during the quarter driven by the self construction sector and execution of four gs highway projects. The mid term outlook in Colombia is favorable, supported by fiscal stimulus measures, including investments in social housing as well as the new five gs infrastructure program. Execution of the existing four gs highway projects will continue to support volumes. Cement volumes in The Dominican Republic grew 5% on a year over year basis on the back of increased activity in the self construction sector as a result of strong remittances. For additional detail on this region, I invite you to review CLH's quarterly results, which were also published today. And now, I will pass the call to Markus to review our financial performance. Thank you, Fernando, and good day to everyone. As Fernando said, it was indeed a good quarter with record performance since 2016, reflecting better than expected trading environment as well as the successful implementation of operation resilience. Now let's move to the next slide. Here I would like to highlight the more than doubling of our free cash flow after total CapEx for the quarter. This was the result of improved operational performance as well as lower CapEx and investments in working capital. The gains in working capital are largely a result of a rigorous management of our receivables and inventory levels. Average working capital days on a year over year basis have improved from minus six days in the third quarter of twenty nineteen to minus twelve days in the third quarter of this year. Our lower expenditure and maintenance CapEx year to date largely reflects the hard stop in non essential CapEx enacted in April as a response to COVID-nineteen. We have resumed our normal maintenance in third quarter and expect to execute much of the deferred CapEx in fourth quarter or during 2021. Higher other cash items are explained by higher severance payments and lower fixed asset sales versus last year. As we disclosed some days ago, we are recognizing a non cash impairment of approximately $1,500,000,000 during the quarter. Most of the write down relates to goodwill in our U. S. Business and an impairment of idle assets in The U. S, Europe, Middle East, Africa and Asia region as well as our South Central America Caribbean region. As a result, our net income, assets and equity in the quarter were negatively impacted. We do not foresee any favorable cash tax impact as a consequence of this action. Third quarter was a busy quarter in terms of Liability Management. We came into the quarter with an unusually high cash position, the result of the proactive liquidity measures we took in the first half to confront the uncertainties of COVID-nineteen. During the quarter, our cash position was further strengthened by our free cash flow of $427,000,000 The proceeds from the closing of the sale of some ready mix and aggregate assets in The UK for $200,000,000 and the issuance of a $1,000,000,000 bond. We issued a ten year U. S. Dollar denominated bond in mid September with a yield to maturity of 5.2%. This is the lowest yield that we have achieved for that tenor ever and more than 200 basis points tighter than the seven year bonds we issued in June. With greater visibility of the business in the quarter, we felt comfortable redeploying cash. We paid down $700,000,000 of the revolving credit facility, which will continue to be fully available to us through 2023. Additionally, the $3.00 $6,000,000 of net other uses of cash in the quarter includes the payment of approximately $300,000,000 in short term working capital loans and approximately $50,000,000 of term loans under the facilities agreement. Subsequent to the quarter end, we redeemed approximately $1,900,000,000 of outstanding bonds with maturities in 2024 and 2025. We also paid down approximately $530,000,000 of term loans as part of the process to amend the facility's agreement. During October, we successfully completed the refinancing of our facilities agreement, extending out the majority of our maturity. I'm pleased to report that currently 93% of our lenders have approved the extension. Close to $2,200,000,000 or 62% of our facilities agreement debt was pushed out between one and two years. As a result, we have no material debt maturities through July 2023. Now to better align the currency of our debt with our EBITDA, we have redenominated $313,000,000 of previous U. S. Dollar exposure under the term loans to Mexican pesos as well as $82,000,000 to euros. This new Mexican peso tranche will have a lower interest rate margin grid of between 25 to 50 basis points relative to the other tranches. Pricing of all other tranches remains unchanged. Additionally, I'm proud to report in alignment with our climate action strategy and ultimate vision of a carbon neutral economy, the facilities agreement has now become one of the largest sustainability linked loans in the world. The interest rate now incorporates five sustainability linked metrics, which include reduction of net c o two emissions for cementitious product, power consumption from clean energy and cement, quarry rehabilitation, water management, and cleaner factor. I would like to recognize and thank all the participating banks for their continued support. The maturity profile shown in this slide is pro form a after giving effect to the refinancing of the facilities agreement, the prepayment of approximately 530,000,000 of term loans under the facilities agreement, and the redemption of approximately 1,900,000,000.0 notes that matured in 2024 and 2025 that I discussed earlier. As you can see, we now have a very comfortable maturity profile with no material debt maturity until July 2023. We also have extended the average life of our debt while maintaining the cost of our funding. Going forward, we will continue with our efforts to have a runway without significant maturity of about twenty four to thirty six months. Despite an unfavorable FX effect of $154,000,000 our net debt decreased by more than $500,000,000 sequentially as we generated substantial free cash flow during the quarter and received the proceeds from The UK investment. Our leverage ratio was reduced by 0.3 times due to a decrease in net debt and an improvement in the trailing twelve months EBITDA, moving us to interest rate level within the margin grid for our facilities agreement debt. Back to you, Fernando. Thanks, Maher. Given the results in the third quarter and improved visibility, we are upgrading our EBITDA guidance to approximately $2,400,000,000 from the $2,350,000,000 we gave in our Open Dialogue event in early September. It would mean that our full year 2020 guidance on a like to like basis adjusting for FX would be approximately 6% higher than the prior year. We now estimate that the cost of energy per ton of cement produced for this year will be at minus seven to minus nine versus the previous guidance of minus five to minus seven. We are adjusting our total CapEx to a range of seven fifty to seven eighty versus previous guidance of 700. For working capital, we are expecting an investment of approximately $150,000,000 for the year. Finally, regarding our cost of debt, we are now expecting a lower interest expense versus our prior guidance due to our liability management efforts and lower interest in the fourth quarter under the bank agreement, stemming from our level of ratio improvement. We now expect an increase of between $15,000,000 to $20,000,000 relative to last year, hence the prior guidance of 25,000,000 to $15,000,000 Visibility is improving in most markets since second quarter. As we look to 2021, we expect positive year on year GDP growth in all markets for 2021, which should translate into higher consumption of our products. We expect that COVID-nineteen will create bumps in the road but we believe that disruption in our markets will not be a challenging as in second quarter of this year. We expect The U. S. And Europe will deploy significant fiscal stimulus including for infrastructure purposes. In Mexico, the ramp up in government spending and twenty twenty one elections will be supportive of bagged cement. With high capacity utilization in most markets, we expect pass to input cost inflation going forward. Supply demand dynamics in Europe will continue to be favorable as a result of the new carbon regime. Additionally, we will continue to take action on all elements of operation resilience including our bolt on investment strategy. We will of course continue to prioritize the health and safety of our employees, customers and suppliers. And now back to you, Maher. Thank you, Fernando. 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 of course could change in the future due to a variety of factors beyond our control. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases refer to prices for our products. And now we will be happy to take your questions. Operator? Your first question will come from Vanessa Quiroga with Credit Suisse. Please go ahead. Hi. Thank you for taking my question. It is regarding Mexico volumes. Do you think mean, they are obviously very strong and and continue to be in September after that charge that you shared with us in the presentation. Would you expect that the new Infonavvy programs and the government projects could lead the Mexican cement going to reach a new peak? Thank you. Hello, Vanessa. Thank you for your question. The answer is we think it's very supportive of additional volumes not only this year but next year. But let me refer a little bit to the general context of what we see happening in Mexico. And I I think we we we all need to remind that last year, 2019, was the first year of this new federal government, and it was a transition year. We committed several times that, but we have forgotten to to revisit and revisit that phenomenon. So last year, there was no social housing program and other programs involved in supported by the government. But we see this year is precisely how different type of programs are supporting the consumption of the money. And we have several types of programs that we believe are going to continue from 2021, and they will even grow in 2021. And we're saying on the one hand, the large projects like the ones we all know, the airport, the broker, the the the train. And and on top of that, you know, little by little, we have seen how other supported programs have been effectively executed and returning to the roads, schools, which support to housing. So and on top of that, there is this new $14,000,000 projects, additional infrastructure projects recently agreed between the public administration and private investors. So what I think that what we have seen is is a market that has been reacted has been reacting to all those issues with with some, let's say, special characteristics in credit by COVID. And you know the story, you know, in Mexico, March, April, May, the the the construction more related to the consumption of both cement was was down while the consumption of bags was not was not restricted. So what we have seen on top of that, on on top of what I commented from this new project, what we have seen is this bulk cement increasing materially to to new levels after the initial lockdown during COVID. So very long answer, but but the answer is we we are quite happy with the performance of the market in Mexico, and and we think that can be extended to this year. An additional potential positive factor in next year is midterm elections, which sometimes is conducive to enforcement of this government called problem. Thank you very much, Fernando. That really helps. And I guess to continue with Mexico and just to drill down on the pricing dynamics, it seems like prices were flat sequentially in local currency. Currency. So can you tell us what happened with the price increase that you proposed to customers in the bad cement segment? Did they not pass through, or were they offset by the other unimposed cement? Thank you. Well, we are still in the middle of that process, Vanessa. Hopefully, it it will properly speak. But we are, as you know, very vigilant on the objectives we have on updating or increasing prices to recover into cost inflation. We we we have had that policy already for some time. Unfortunately, we we have already about a year and a half or so in which our prices in in real peso terms have declined slightly. I mean, we have not managed to update or to pass through our cost inflation. We will continue having that as an objective as the norm and we will try bring back prices in good terms at the levels we wanted. Of course, there is a dynamic going on in the market. As you know, if the market continues growing, that that will be very careful to achieve our our target of bringing back tons of new terms. On the other hand, there is you know, another consideration which is because of back cement volumes being robust already for a few months and bulk cement coming back recently, take some effect on on on on on pricing because of the mix of both and and that. It is just a mix effect, nothing to do with pure price. It is gold card indexing. Excellent. Thank you very much for now. Our next question will come from Gordon Lee with BTG Taxable. Please go ahead. Hi. Thank you very much for the call. Two two quick questions. The first, I was wondering if you could, explain to us the the sort of very different performance in cement volume growth and ready mix growth. Think it's really interesting that if you look at table with your cement volume growth by region, which is very positive, ready mix is almost a mirror image of that even in developed markets, right, where I suppose the bad drivers are a lot less powerful. So I was wondering if you could maybe explain why that is. Is it a mere coincidence? Is it something that worries you in any way going forward, as far as the ready mixed performance relative to cement? And then the second question was just a very specific one. Looking at your results from The Middle East, it would assume it would appear that pricing, cement pricing in Egypt dropped very quickly in the third quarter relative to the second quarter, and I was wondering if you could maybe comment why that happened. Thank you. Well, regarding Egypt, as you know, the situation is very complex with with very high capacity when compared to the market. We do believe that the market, little by little, will tend to recover, but the capacity utilization in the country is really too low and will continue as being low for the near future. Very very challenging to to, let's say, to to guess or to project, you know, how we keep reasonable. And market conditions are going to very similar to what they have been in the last few months of this. So I don't if there's maybe changes except for a sort of an exhaustion in the industry because, you know, things are not there are several companies losing money, so there might be reactions on that on that return. On the on the dynamics, I don't see any any major change. On your other question, I think, you know, a a few comments. I think that the pattern in the emerging markets is that Black Cement is the one that has been resilient and growing after the negative impact of of lockdowns in the second quarter of this year. And that's the part of the volume that has been more resilient. As I commented, for instance, in the case market. In our emerging markets, revenue mix coming after the rebound in bank and cement. On the other hand, even in in developed markets, credit mix is is more related to industrial and and and the commercial sectors or segments, and that is the part that is the difference in the case of The US, that is the part that is being more impacted negatively. Housing and infrastructure in The US, but industrial and commercial is not has not evolved in the unfortunate manner. So, historically, revenue extends tends to recover slowly than Symantec, know, after a negative impact of whatever resource. So we we we have seen Readiness recovering little by little. And but but again, the main reason being its relation with the investment commercial segments in in particular in the case of The US and some lockdowns, like, example, I've mentioned in the case of Mexico. And Fernando, maybe I can add Hi, Gordon. Maybe I can just say that bolstering what Fernando said, if you take a look at sequential volumes you know, pretty much in tandem. I mean, you see, you know, quarter sequentially is up 16%, ready mix is up 17%, and aggregates are up sequentially 16%. So the point that Fernando made is precisely right. And as you had lockdowns and then you had the impact of industrial and commercial as we started coming out of lockdowns, you started seeing a fairly rapid pickup on a sequential basis of ready mix and aggregates in line with what's happening to cement. That's very clear, guys. Thank you very much. Thank you very much, Claudio. And now we will have a question from the webcast. Okay. The the first question from the webcast from from Paul Rogers. And the question is about carbon position in Europe and in our strategy. And the question is, are we mean, especially in terms of of of coming into this Do wanna take that? Yes, ma'am. If I understood correctly, I I think the the the the the the first thing to note is that we we are being pleased that we have c o two credits enough to go through the the rest of the four days until 2030. So that that is giving us lots of flexibility, And then particularly because we understand that most of of the players in Europe are when compared to that position, let's say, are short or they will be needing to to buy two or two credits some starting the 2022 or as fast as as soon as 2022 or 2023 and and forth. We we believe that that will have an impact in the market, different types of impact. And I think that will give us a strong position in in Europe, in the market with the prepaid in Europe. And and, you know, I think it will be more related to to pricing rather rather than market share, let's say. But but there might be, you know, there might be a a combination. Who who who knows? Let's see how different company in Europe deal with this situation in in the next two, three years, and we will have a better understanding and say on how this this positive position will translate it to additional benefit. Operator? Yes. Our next question will come from Yaseen Kauri with On Field. Please go ahead. Yes. Good morning, gentlemen. Just a couple of questions on have you seen any significant change versus what you presented in the first few weeks of October? We're seeing the number of case increasing quite substantially in Europe and in The U. S. Do you see any consolidation in order books? And also Europe or in The U. S. And also regarding infrastructure, I think what we understand is that the what I understand is that the stimulus is likely to be implemented after the election. Do you see any slowdown in infrastructure while the Department of Transportation are waiting for the money from Washington? Well, that that's a very interesting question. I think, you know, since since we started having the impact of COVID early March this year. We we have been as you can imagine, you know, trying to observe as much as possible what what are the the the scenarios that this and then it is causing the different markets on health and the economy, our own activity. So we can we can respond, and we can react at a very fast pace to to to whatever this phenomena bring us. I think I think the the way we see it now is that we are, at least in the working world, we are all facing we are all going through a phase of coexisting with this virus personally, business wise, socially. And and unless infections, hospitalizations, and and and fatalities, you know, go to an extreme. We we believe that because of because of the experience and knowledge of regulators, of society, of doctors and hospitals, we believe that several R and D measures will be restricted on mobility and in certain sectors, of course, impacting economic activity in general terms, but not necessarily disrupting the activity of the construction industry. I I think that, you know, so so so far, the industry has has shown to be low risk type of of activity, of course, when compared to to others. And in our case, we we are very pleased because with with several actions, like, for instance, the health protocols that we define and put in place, and we are promoting not only for our employees, but also available for our customers, suppliers, and, you know, whether it's related to our business activity. We have not been in need of shutting down a facility because of our facility, you know, being being an infection center type of of phenomenon. So I think we have we have managed to to to assure business continuity and taking care of health of, again, our own employees and stakeholders. Our infection rates, when we compare those with with relevant societies within our infection rates in Mexico compared with with statistics in Mexico and US and the like, is about half of the general population. And and fatality is when compared to to to fatalities again on on on we have managed to protect sales. We have managed to assure business completely and not say that we continue to be paid. The the parts of Mexico related to tourism or other markets in Mexico. With tourism or to activity that have been deeply impacted by COVID. Formal construction, maximum is is growing much more of that than whole area is expected. On the other hand, I think there are several examples on how stimulus programs are going to be impacting or are already impacting those in the in the consumption of other parts of the company. That's the the performance of the behavior of of of our material demand for the rest of the year. And maybe just another follow-up. Very quick follow-up question. Could you give us the the percentage of how much ECOC represents as a percentage of your cost? Say that again? What what would be what would be the percentage of what would be what could what would would pet coke represent as a percentage of your total cost? Is it a figure that you could disclose? It's cost of For pet coke, how much pet coke represents a percentage of your of your energy per total cost? Pet coke. Pet coke only or fuse? Or Pet pet coke. No. No. Pet coke only because we we've seen an an increase in pet coke prices since the beginning of the year. I don't if you're referring to Petcook only in our cement cost structure, you know, I don't have that info handy with me, but I will get back to you and provide that info. Thank you very much. Okay. Do you have any any info related particularly to the phone? Yeah. I'm trying to I'll just get the breakdown. We'll get back to you on that point. Thank you very much. Thank you. Thank you. And our next question will come from the webcast. Okay. Our next question is from Andre Gonzalo Azar with the GBM. The question is what are your thoughts regarding cement prices in Mexico, the US, and Europe as we approach 2021? Well, we are we are not 2021 guidance to to something like that. As you have seen, even in the worst part of the COVID crisis, prices have been resilient resilient and growing. So there will be a lot of minuses for 2021. On the one hand, for instance, in some markets, the the pricing dynamic was interrupted because of COVID. That is that is certainly the case in in several regions in The US and to some extent in Mexico. So there is there is a a a sort of a higher pass through needed to go to pricing gas because of inflation that we have not managed to to properly reflect in transit. Given given that we expect, reasonable performance, again, not providing guidance yet, but a reasonable performance of volume next year, I think, in general terms, we will be able or we will be in a better position to to offset inflation through price price increases. But but again, given the specific guidance on on that regard, very challenging now. Thank you. Operator? Yes, sir. Our next question will come from Ben Fiedler with Barclays. Please go ahead. Hey, good morning, Sanam and Maher. First of all, thanks for taking questions and congrats on the results. I wanted to follow-up a little bit on your operational resilience and in combination with Cemex Go. So clearly, you're showing on the slides that basically one out of two sales transactions are basically now done for CEMEX Go, and you also show that there's a a very nice savings that you've been able on the SG and A side. So I wanted to understand a little bit the evolution of Cemexco over the last couple of years, how that has gone up from nonexistent three, four years ago to now basically more than 50% of sales being processed through the platform? And how much that has actually been helping to drive some of your efficiencies by just reducing SG and A? And where do you think this is going to be for your 2023 target? Sure. Thanks for your question. Let me try to summarize a process that we we have been going through, let's say, in the last few years. We thought that it was a good idea for us to be able to offer our customers a greater customer experience. So the whole the whole the whole idea of the philosophy behind the next call is the the the the idea of being able to offer our customers a superior customer experience enabled by digital technologies. That's where we stand. And in these type of processes, as you know, I think there are some specificities because this has been the development of a digital platform of the B2B type of business. But besides that, the process we have been following is not different to the process that other digital companies have gone through. It's been a journey. We started with a first NDP, a minimum viable cost. We started using agile methodologies to enrich and to evolve our proposition. So as you can imagine, our first version of Zendesk Pro is twenty five years ago, three years ago. It was a basic type of version that has been reached now, and it will continue being reached in different manner. And it has allowed us, and we've been able to offer this platform all over our markets except for the few in the Canadian region, particularly TCL. But the rest of platform is available. That's why adoption is massive already. We are very pleased with it. It is massive. It covers all of our products and vendor mix, aggregate, different segments, large customers, small customers, picking up products, delivering products. So it's a very flexible platform that the customers can use in their laptops, in their mobiles, in their iPads, and and they can they can do in a much simpler, faster, and cheaper way all the commercial information from getting info to getting quotations with this thing, you know, or getting modifying orders, canceling orders, making additional orders, to repeat things in the mail order. So you you know how the story goes. Because that part is not that different to other other companies that have gone through that that journey. The the the benefits we are getting, I think the benefit of offering superior customer experience that's obtained immediately. So our customers and because of the feedback we are getting from them are very pleased with the solution because that solution also allows them to make a better business. I mean, for them, it is cheaper to have a commercial relation with us on this platform rather than the fixed one. And so they are very pleased. And I think one of the relevant reasons why in the last couple of quarters that have been the most challenging quarters commercially, let's put it in a way. You know, we have we have got the highest rates in our net promoter score up to 68 points. So we are we are very pleased with the fact that we've been able to offer this platform feedback from customers, adoption NPS. It's it's great. We will continue at building the platform, adding new functionalities, new technologies, and simplifying automating. So it's it's it is better than Verint. And and and it's going to affect the water experiences, and most of them are, I mean, in the in the b two c world rather than the b two d. That that's not common in the b two c. But it it causes the you know, the The EOS one of iPhone was brought to the market in 02/2007, you know, didn't have the copy paste function. You know, that part came after this. So that is that is the type of a giant process that allows that is going to allow us to continue in reaching the the the the our customer experience. On savings, it took some time and we are adding and we are protecting the platform. Now currently, most of our invoices are digital invoices and they are paperless invoices. And because of that, we have simplified and reduced the number of invoices we need to redo to up there on what we need to have. I I can I can continue spending about this for for an hour? But but what I'm saying is very pleased because we have managed to to to bring a superior customer experience enabled by this technology. Our position is pretty good. When we see what's happening in in our industry, we feel very pleased because it's it's something we have already done massively. And at the same time, we have learned, and we will continue evolving our platform and converting it into a competitive advantage. So going forward, you you expect this to further penetrate and to be even more relevant and, obviously, then drive further savings to your margin target in 2023. Correct? Yes. And I think this has been a learning process for us and being a learning process for our customers also. The construction industry is not an industry that have been adopting digital technologies, let's say, long ago. There are some examples on on on the in knowledge, but let's say, materials, this is kind of a kind of a new or or a change in the way customers do do business. So we are very busy. We will continue investing. We will continue listening to customers and improving our customer experience through this platform. Okay. Perfect, Fernando. Very clear. Thank you very much, and congrats again. Thank you. Next question will come Our next question come from Adrian Horta with JPMorgan. Please go ahead. Thank you. Hi, Fernando and Michael. Good talking to you. Thank you for taking my question. My question has to do with CapEx. You're targeting $750,000,000 to $800,000,000 for this year. How can we look into CapEx for over the next two, three years, especially given potential investments that might be required to reach your climate change targets? Yes. Again, a few comments on CapEx. Let me start by explaining our CapEx performance during 2020, and then we will move to, you know, what might happen in 2021 and other. If you remember last March, we we decided and and commented on a on on a bold connection or a bold program. We we started calling it a sort of a hard stop. You know? Remember, three questions, how deep the damage is going to be? How long is it going to last? Is it going to be disputed or not? And not having clear answers to those questions, we decided to be positive. And that included suspending all nonessential or short term CapEx. We we took that action for ninety days. After ninety days, we reviewed it. We had some additional CapEx because the the the measures that we started to curbing were more benign than the ones we thought during during March. So increase we we adjusted and we increased some CapEx at that time. But we continue in this kind of alert status, and we extended the the concept of the first call after ninety days after December 31 this year. So the process was a hard stop than adding some because of a more positive scenario evolving. And now for next year, what we see, we'll be doing something very similar. We're the scenarios that are unfolded, we will act accordingly. Now in particular, the CapEx related, if I if I understood correctly, that's part of the question, CapEx related to sustainability or or climate change. I think there will be there will be some. For the first time, we are having a very strategic road map to our 2025 and 02/1930 targets. And we will be spending a number of CapEx. I don't have any specific amount right now to disclose. But what I can tell you is that the CapEx that we are that we will be doing in the near and longer, not not all of them are are, let's say, CapEx to adapt and and and not being able to get returns from those CapEx. I think a good example, particularly in the case of Europe, is CapEx related to a '22. As you know, because of the EU waste directive, I mean, I mean, that that is aligned to the idea of a particular economy. Waste partly to our industry, waste can be obtained. RBS in particular, in Northeast quantities with high quantities of biomass as high as 50%. And because of the dynamics of of that sector, you know, energy the fuel in in several countries in Europe now are converted into. And and so it's it's our highest cost converted into. UK and other countries we follow. And those, know, in order to use 100%, ninety %, one hundred % of the 30 fields, there will be additional CapEx, but those CapEx will done with higher returns. There there will be other CapEx down to adapt plans and and other aspects that might not have returns, but I I'm not expecting outside of the amount that type of this CapEx. Hopefully, next year, we will be able to be more specific on on our twenty thirty month plant by plant, microbial market, including benefits, investments, and and and particularly, the some of the investments we are making on on the technologies that are the very few technologies that are currently unknown and that should be part of our solution for in order to be sealed to neutral and return to carbon capture and use. We are making some investments with partners, with technology companies, and trying different options for us to be able to either avoid the recent CO2 or to capture any and be using. Yeah. Thank you, Fernando. Thank you, Adrian. We have time for one last question, and that will come from Anne Mill with Bank of America. Please go ahead. Thank you very much. Very great quarter. So good information. I have a few questions, but to make it not too long, I'll just focus on those that really have to do with the debt side of the business. You were very active, as you mentioned, in liability management during the quarter. So the first question is, you still have a few bonds that have call options that are in the money. And just, you know, for 2021, is this something that you will consider going forward if it's, you know, interesting from a cost perspective for CEMEX? And the second I found very interesting was the introduction of sustainability targets in your loan documentation. So just a few questions. What was the catalyst behind this? Was this CEMEX? Or was it the lenders? Where did you come up with the indicators? Is this like an industry sort of level? And then I noticed that the pricing differential is not huge right now, just five basis points. And is this something that you think might change in the Thank you very much. Randall, would you like me to address those two questions? Yeah. Go ahead. Yeah. And we're I mean, as you've noted, I mean, we do have several potential bonds that have called that are due and we're monitoring the markets. I mean, to the extent that rates continue to be attractive, I think there may be opportunities for us to do something. Of course, the markets are very volatile. But we're always looking at the possibility of doing liability management. So yes, we're in Pacific bonds, but you can match already the schedule. We're going to focus you know, the things that are closer rather than the things that are farther away. We we just as you I mean, as you know, we issued, you know, seven year notes in June, and then we issued ten year notes in in September. So, you know, we're clearly looking, you know, at a gap, and we do have a year there that is, you know, with no maturity. So we we would be looking at, you know, kind smoothing out things or pushing them out and definitely taking advantage of rates. And we're looking at, obviously, all currencies. I mean, so to the extent that we have a window, we're definitely going to exercise that. Now as far as the sustainability linked loan structure, it was really a combination idea from our banks and from ourselves. And we have been thinking about this for a while. And as you know, there are two types two ways that you can kind of have a sustainability linked structure. One is restriction on the use of proceeds, and the other is having certain KPIs that you would be measured or benchmarked against. The KPIs that we chose, the five that I mentioned in the messages, in the comments, are really very much part of our, climate change and CO two, emission reduction, you know, over the next ten years. So it is totally in line with what we are trying to execute internally. The The penalties, to the extent that you don't meet the benchmark, is one basis point per metric. We have five metrics. So the worst case scenario would be five basis points up. To the extent that we beat the benchmarks, it would be a potential maximum saving of five basis points. And the structure is attractive to many banks, because they do have now special baskets within their, within their asset allocation for green structures. So this actually, you know, translated into a good idea also from our banks, position to be able to possibly book either some or all of the loans that are outstanding under the facility under the green bucket, which probably is less invasive from a capital requirement perspective. So it's a very attractive structure. It's a win win. Mean, it's good for them. It's good for us. It also sends a very strong message on our part, how committed and how climate reacting to climate change and sustainability is hardwired in our in the way that we run the business, both operationally and on the finance side. I hope that addresses the the comment. Sure. Very interesting. Just a follow-up question on that. Will you, at some point, be publishing what those targets are and what your what your performance is measured against it, or that will just be for the the bank group? No. I'm sure that we would make those public. I mean, there's no frankly, they're they're they're I I don't see any reason why they they should be, and and we just haven't we haven't gone through the cycle of disclosure yet, where we would because, you know, as you know, we're just closed a couple of weeks ago and we have a final participant that would be coming in about a week or a week and a half, which we finalized the whole process. So as soon as that happens, I'm sure this will be part of our disclosure, and we'll make it available to the market. Okay. Great. Thank you very much, and congrats on a good quarter. Great. Thank you very much, Ann. I would now like to turn the call over to Fernando Gonzalez for any closing remarks. Please go ahead, sir. Alright. Thank you for joining us on our third quarter twenty twenty's call. And you you have any additional questions, please feel free to reach out to us. And please stay safe. Bye now. Thank you for participating in today's conference. This concludes the presentation. You may now disconnect, and have a great day.