Good morning, and welcome to the CEMEX second quarter 2020 conference call and webcast. My name is Chuck, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero, and we will be happy to assist you. Our hosts for today's call are Fernando González, Chief Executive Officer, and Maher Al-Haffar, Chief Financial Officer. Now, I would like to turn the conference over to your host, Fernando González. Please proceed.
Good morning. I hope this call finds you and your family in good health. Thanks for joining us to our second quarter 2020 conference call and webcast. I'm joined by Maher Al-Haffar, our newly appointed CFO. As usual, we will be happy to take your questions after our initial remarks. Let me just remind you that beginning this quarter, Europe, Middle East, Asia, and Africa regions have been consolidated into one region. We are very pleased with our performance in second quarter under extraordinarily challenging conditions. Our safety protocols kept employees safe and our businesses operating. Our geographic diversification was a clear advantage as government restrictions on our businesses varied significantly from market to market. Our bag cement product was resilient across our emerging market portfolio. Our infrastructure exposure and developed market footprint provided a stable base of existing medium-term business to execute.
Our existing digital platforms allow our customers and us to work seamlessly in a low-touch environment, while our distribution network enabled us to meet surprisingly strong bag cement demand in remote markets. Pricing was resilient with a difficult demand environment in many markets, while energy provided a nice cost tailwind. We took important steps to boost liquidity and de-risk our financial profile. I'm especially grateful to our employees, who rose to the COVID-19 challenge and made the necessary adjustments to keep our colleagues and customers safe and our facilities operating. Despite our safety efforts, there have been cases of COVID-19 among our employees, customers, and suppliers. I would like to extend my sympathy and hopes for a full recovery with each and every one of you. Our three priorities rolled out in February, which we have now named Operation Resilience, guided us in the quarter.
Our top priority was to protect our employees, suppliers, and customers, thereby ensuring business continuity. We introduced new operating protocols, which included social distancing, minimal staffing, virtual work, daily temperature checks, testing of employees on timely case management, track and trace capabilities to minimize virus spread, outreach to employee families to reinforce health and safety measures in the home environment. As a result, I am pleased to say that outcomes among all employees are significantly better than national statistics. In a world of social distancing, we employ a strategy of human touch at a distance, and we saw 13% increase in number of visits to our CEMEX Go platform versus pre-COVID-19 levels, while visits to our Construrama website for Mexican retail customers increased 19% in second quarter 2020. Our global sales force seamlessly transitioned from customer visits to virtual meetings, hosting thousands of video conferences.
Our supply chain and distribution network allow us to satisfy strong bag cement demand without interruption. We shared best COVID-19 construction practices with our customers and suppliers. It was just not enough to keep our facilities running. We needed to share best practices with customers and suppliers to keep them running. These efforts were recognized by our customers. We obtained the highest global net promoter score ever in second quarter 2020. We took steps in a highly uncertain time to minimize financial risk. We conserved cash and nailed down all available funding sources. We renegotiated our leverage covenants with our bank group. COVID-19 challenges to our business are not over, and these priorities will continue to guide us going forward.
Part of protecting the future of CEMEX in a world of high COVID-19 uncertainty where we might face disruption to the capital markets is reducing financial risk wherever possible and ensuring that we have sufficient liquidity for whatever lies ahead. We initiated this process of building our liquidity position in February with a decision to retain proceeds, $500 million, from the sale of our Kentucky assets. Additionally, we drew down on the majority, about $1 billion, of our bank revolver facility. We continued to build the cash position in second quarter by drawing down on the remaining revolver, as well as additional short-term credit lines for about $446 million.
We took advantage of the first market window available to us post-COVID-19 to access the capital markets with a $1 billion seven-year note. Finally, with the help of our COVID-19 cost savings program and better than expected volumes, we generated $90 million of free cash flow in the quarter. We ended the quarter with the highest cash balance ever. We expect that our cash position will be further strengthened in the second half of the year by the closure of our two previously announced divestments of $400 million. As visibility on our markets improves, we do expect to deploy part of our cash position to pay down debt. Coronavirus challenge in second quarter was really about government-mandated lockdowns and industry closures in our markets. This is the first time we have ever experienced national shutdowns of our industry. Strength of sales correlated strongly with level of restrictions.
In second quarter, we faced complete industry shutdowns in markets representing 12% of consolidated EBITDA. Colombia, Panama, the Philippines, Trinidad. Volumes in these markets declined between 30% and 90% in the quarter year-over-year. In our other markets, lockdowns had varying impact on demand for our products. For example, in our footprint in the U.S., government restrictions had little impact on demand in the quarter. While lockdown restrictions in the U.K. and France led to demand declines of approximately 35%. In all cases, demand picked up rapidly as restrictions eased almost as fast as they fell. Consolidated volumes fell 24% year-over-year in April, and month-to-date July, volumes have recovered to be up 4% year-over-year. We expect that the challenges of the next stage of the pandemic will be different.
Governments may impose new restrictions to cope with virus flare-ups, but expect them to be moderate in tone and will not occur simultaneously. Future quarters for our business will be more about impact of economic slowdown in markets, fiscal programs, and pace of recovery. During second quarter, sales fell 10% like-to-like. Drop is attributable to Mexico, EMEA, and SCA&C, the regions that experienced the most stringent lockdowns in the quarter. Year-over-year decline in sales was a function of a double-digit drop in consolidated volumes, while local currency prices for our three core products increased between 1% and 4%. Like-to-like EBITDA declined 6% year-over-year. The U.S. was the only region with a year-over-year increase in EBITDA. Our cost containment programs and declining energy costs were impactful in the quarter, shown by the 70 basis points improvement in margins year-over-year.
By the large decline in volumes, we still were able to generate free cash flow after maintenance CapEx of $140 million, $77 million less than prior year, which is equivalent to the decline in year-over-year EBITDA. Finally, COVID-19 did not deter us from making progress on our ESG goals. We had the highest alternative fuel substitution in Europe on a trailing 12-month basis. 100% of our electricity in Poland is now renewable. Clinker factor in Egypt was our lowest ever. Our cost savings under Operation Resilience were visible in the quarter. These savings include $150 million from our prior A Stronger CEMEX program, plus $80 million COVID-19 related cost containment initiatives for full year 2020. Savings year-to-date have improved our EBITDA margin in first half by 2.4 percentage points. Includes savings from SG&A, like fees, selling, marketing, distribution, travel expenses, and headcount optimization.
Operations in cement plant operational efficiency, low-cost suppliers initiative, energy, alternative fuels, and additional switches to petcoke, includes $25 million from maintenance deferrals, which will be largely executed in second half. Now moving on to the regions. The U.S. continued to enjoy strong momentum in second quarter, driven by infrastructure and residential. We did not experience much disruption from government lockdowns in our markets. We achieved the highest EBITDA in a quarter in the last decade, adjusting for asset sales. Infrastructure, around 50% of demand, saw a pickup in quarter as departments of transportation took advantage of empty roads to accelerate road projects. The residential sector, about 30% of demand, has performed better than expected. Low interest rates, low new home inventory levels, and shift in buyer preferences towards suburbs and single-family housing.
Stable sequential pricing in our three core products as COVID-19 delayed implementation of April price increases in several markets. Year-over-year EBITDA margin expansion due to higher ready-mix prices, lower fuel costs, and cost efficiencies in general. The second half of the year outlook. July month to date, cement volumes are growing 7%, and the three-month ready-mix backlog are promising. Do not have much visibility beyond September, though. Expect our states to have fairly stable transportation spending. We expect fiscal stimulus in the form of incremental transportation spending at the federal level. Low interest rates, low new home inventories, and progressive recovery of employment should be supportive of the residential sector. In Mexico, the drop in sales in second quarter is a function of the decline in volumes. Cement - 7% year-over-year, and ready-mix - 44%.
We saw a divergent volume performance between ready-mix and cement, which reflected COVID-19 lockdown measures. Industry was only allowed to provide cement to essential infrastructure projects and to retail for much of quarter. Formal construction projects of private sector were suspended until June 1st. We saw an acceleration in execution of key infrastructure projects like the new airport and Dos Bocas. We developed an innovative solution to meet the urgent need for hospital beds to deal with COVID-19 patients in Mexico, with the construction of modular mobile hospital units. We constructed nine units during the second quarter in a record two to three-week period each. Bag cement, about 65% demand in Mexico, shows significant growth, 10% in the second quarter year-over-year, mainly due to government investment in schools, housing programs, and rural roads. Also increasing home improvement projects as consumers spend more time at home.
Historically, in uncertain economic times, informal sector has shown more resiliency. Despite the second year of industry volume declines, prices have been resilient. Logistics and distribution network allow us to meet surge in bag demand on a timely basis. Decline in EBITDA margin was mitigated by product mix, our cost savings program, and lower fuel prices. With regard to the second half outlook, we have limited visibility. Since June the 1st, we have seen recovery in both cement and ready-mix demand. Ready-mix volumes have recovered from -44% year-over-year in second quarter to -19% July month-to-date. While cement volumes have recovered from -7% year-over-year in second quarter to +11% July month-to-date, bag cement has been extremely resilient. At some point, expect bag cement to recalibrate to economic environment. Formal housing and industrial and commercial recovering at a slow pace.
Expect continued expansion of infrastructure spending. $26 billion federal stimulus to increase spending on social and infrastructure projects. Mexico City economic reactivation program of $3.4 billion focused on construction. In EMEA, first quarter in which we consolidate our Europe region with the Middle East, Africa, and Asia. In the quarter report, we do give more details on sub-region performance. In Europe, we experienced the same divergent behavior between Western and Central Europe that we saw in the first quarter. Central Europe, with strong year-over-year cement volumes in Germany, Poland, and the Czech Republic, driven by infrastructure and less restrictive lockdown measures. Western Europe, with lower cement volumes in the U.K., Spain, and ready-mix volumes in France, due to strict lockdown measures. As lockdown measures eased in each country, volumes recovered. Good pricing momentum in cement and aggregates on sequential basis in Europe.
The Philippines was the first country in our portfolio to experience lockdown and one of the most impacted in quarter. Strict lockdown measures, with solid plant in Luzon province closed from March 16 to May 20. Cement volumes were down 31% in quarter, but volumes turned positive year-over-year in June, with solid reopening. For more information, please see our CHP quarterly earnings, which will be available this evening. In Middle East and Africa, we experienced fairly low impact from COVID-19 in quarter. Israel had a record EBITDA and volume performance. Egypt's decline in cement volumes, -13%, due primarily to government suspension of private residential construction permits. SCA&C was the region most impacted by COVID-19 restrictions. Cement volumes declined 29% in second quarter of this year-over-year. Favorable cement pricing dynamics in the region despite lower volumes.
Cement was 3% quarter-on-quarter, with increases in practically all countries. Even with a large drop in volumes, EBITDA margin increased year-over-year 1.7 percentage points, mainly due to lower fixed cost and SG&A, 5.2 percentage point margins benefit. Pricing efforts, 4.1 percentage points benefit. Both offset by volume decline. In the region most impacted by government-mandated industry shutdowns, we saw a sharp decline in cement volumes in April of 60% year-over-year, followed by a rapid recovery over the following three months. June cement volumes for the region were up 3% year-over-year. In Colombia, activity picked up in the back half of the quarter, driven by 4G projects and the self construction sector. In the Dominican Republic, we saw increased activity after restrictions were lifted. However, some tourism projects are being postponed.
In Panama, with most restrictions currently only serving selected infrastructure projects and retail. For additional details on this region, I invite you to review CLH's quarterly results, which were also published today. Now, I will pass the call to Maher to review our financial performance. Maher?
Thank you, Fernando, and good day to everyone. Our operating EBITDA declined 6% on a like-to-like basis this quarter. As we can see here, higher prices combined with a significant reduction in our fixed costs due to Operation Resilience, more than offset the impact of lower volumes. All of our regions, as well as central units, contributed to these savings. Variable costs increased primarily due to higher raw material costs in our ready-mix business in several of our business units. This is due to higher prices of cement and aggregates, as well as the impact from purchased cement in some of our sold-out markets. Reported EBITDA reflects the unfavorable effect from our currency fluctuation of $32 million. This is mainly due to the depreciation of the Mexican peso, but most currencies also contributed.
Most importantly, as a consequence of the hard stop on expenses that Fernando discussed earlier, EBITDA margin increased by 0.7 percentage points on a year-over-year basis. Despite double-digit drop in our EBITDA, we generated positive free cash flow during the quarter as we managed to reduce and/or postpone our capital expenditures during the quarter. We aggressively managed receivables collections and aligned inventory levels to current demand. As a consequence, average working capital days in the second quarter this year improved to a - 11 days. This compares very favorably to a minus six days in our second quarter of last year. We also had lower taxes year-over-year. This is primarily due to the drop in earnings in several of our operations. I would like to remind you that free cash flow is highly seasonal.
We typically, as you know, we have larger working capital investments in the first half of the year. That significantly reverses in the back half. Similarly, we expect partial working capital reversals this year as well. In addition, we expect to execute much of the deferred maintenance CapEx in the second half of the year. It is important to highlight that in the last 20 years, we at CEMEX have consistently generated positive free cash flow after maintenance CapEx every year, except for one year, and that was back in 2013 when we had a - $90 million of free cash flow. As Fernando mentioned during 2Q, we continued to execute on Operation Resilience by accessing the capital markets. We were the first emerging market high yield issuer since COVID-19. We took the opportunity of issuing $1 billion in seven-year notes, as Fernando mentioned earlier.
We anticipate a slight increase in full-year financial expenses due to this change. During the quarter, net debt, which is adjusted for the effect of higher cash balances, was marginally increased by $51 million, reflecting an unfavorable FX effect of $55 million. Proceeds from our newly issued $1 billion bond and the drawdown of the remainder of our revolving credit facility, as well as other credit lines, will be retained in our cash balance for the time being. As visibility in our market improve during the year, we do expect to deploy most of our cash position to reduce debt. As you can see from this slide, we ended the quarter with a strong liquidity position and a manageable debt maturity profile. The majority of 2020 debt is short-term debt that we have withdrawn in the last few months to strengthen our liquidity.
Next material maturity is not until 2021, which is essentially the $571 million due under our facilities agreement debt, which is due July 21. All maturities through 2023 are bank maturities. We have no maturities in the capital markets until 2024. Our leverage ratio, as defined by our facilities agreement, marginally increased on a sequential basis to 4.57 x at the end of the quarter. This is well below the recently amended covenant level of 6.75 x. You should expect us to continue with our strategy of maintaining a 12 to 24 months runway without any significant maturities. As part of our strategy to respond to the coronavirus pandemic, we initiated a consent request to amend our financial covenants and other items in our facilities agreement. We are pleased to report that we received 100% of the support of our banks on this by late May.
For that, we thank them. Under the terms of the amendment, we modified the leverage and coverage covenants to the level that you see in the graph. The leverage covenant increases to 6.75 x for June 2020, and then it goes up to 7x from September 2020 through March of 2021, and it decreases after that. Also, we agreed to temporarily limit capital expenditures, acquisitions, and share buybacks, among other things. CapEx limit goes from $1.2 billion to $1.5 billion per year when the leverage ratio is less than 5.25x for two consecutive quarters. We have a $500 million basket for repurchases, which can be used when our leverage ratio falls below 4.5 x. These limits are in line with our previously announced measures to contain the impact of COVID-19.
Our interest rate margin has been adjusted to accommodate the new higher leverage ranges to the consolidated leverage covenant, as shown in the table. It's very important to highlight that the margin grid remains unchanged from our prior agreement for leverage levels below 5x , and simply adds pricing for leverage above 5x . Now I would like to turn the call over to Fernando. Back to you, Fernando.
Thanks, Maher. Given the continued uncertainty from COVID-19, it is very difficult to provide EBITDA volume guidance at this time. We can comment on other variables. Cost of energy per ton of cement produced, we estimate it at - 7% to - 5%. Previously, it was - 6% to - 4%. Adjustment in forecast mainly due to lower fuel of power costs. Also, CapEx unchanged versus previous guidance. No change of guidance for cash taxes and cost of debt. Working capital will be higher than the $100 million guidance provided in fourth quarter 2019. Again, due to continued lack of visibility on our top-line growth, we still cannot provide a specific amount. In summary, we saw local restrictions on our business in second quarter that we have never experienced before. This was all occurring at a time of tremendous uncertainty.
Our management team reacted quickly and took immediate steps to protect employees and customers, as well as stabilize their business for whatever conditions might develop. June volumes for our three core products show sequential monthly improvement in all regions. While July month-to-date, consolidated cement volumes are up 4% year-over-year. Key events will be the status of expiring stimulus efforts in many countries, additional lockdowns, announcement and execution of infrastructure stimulus packages, as well as the pace of economic recovery. You should expect that we will continue to focus on health and safety of our stakeholders, that we will continue with our COVID-19 cost initiatives and be vigilant to changes in market demand. We will make the most of our competitive advantages, like our digital platforms, our well-developed distribution arms, and diversified product and market segment offerings to stabilize demand.
Finally, as visibility improves, we will redeploy our historic level of cash to pay down debt. Thank you for your attention, and I would like to take this opportunity to wish everybody good health and to please keep safe.
Before we go into our Q&A session, I would like to remind you that any forward-looking statements we make today are based on our current knowledge of the markets in which we operate and could change in the future due to a variety of factors beyond our control. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases, or decreases refer to prices for our products. Now we will be happy to take your questions. Operator?
Thank you. Ladies and gentlemen, 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 two. Press star one to begin. Please stand by for your first question. Our first question will come from Adrian Huerta with JPMorgan.
Thank you. Hi, Fernando and Maher. Hope you're doing well, and congrats on the results despite the environment.
Thanks, Adrian.
Thank you very much, Adrian.
Thank you. Maher and Fernando, what was the experience navigating through the second quarter on top of what we saw on the results and the measures that we're taking? On top of what you have already mentioned on the outlook, what else can you share based on this experience on what could be the outlook for the rest of the year?
Sure, Adrian. Thanks for your question. I think we all have gone through a phenomenon, exogenous one, causing lots of uncertainty. If we position ourselves, let's say, in early last March, we already then understood that the virus was going to be impacting in an important manner. We spent some time trying to answer three questions. The first one is, how deep the damage was going to be? How long was it going to last? If there were going to be repetitions or not. After a few days, we realized that we could spend time guessing, but we were getting nowhere. We decided just to act and make what we call a hard stop, meaning given that we don't know, let's stop whatever we think is not essential for the next three months. That's what we did.
That's why we managed to offset somehow the very negative impact of different markets locking down. Three main priorities: health of our employees, customers, and suppliers as a precondition of business continuity. Second, assuring that we could serve our customers, meaning taking care of all our supply chain and allowing and promoting our platform, our CEMEX Go and construrama.com virtual platforms for our customers to be able to interact with us with a physical distance. The third was liquidity. The thinking process was as simple as that. We just decided. Three months have already passed. I think we are in a very good position to continue this journey.
I think what we will be facing, although we are not providing outlook or guidance, what we will be facing in the months to come is a situation in which we are going to be doing business, coexisting with the virus, until there is a vaccine, or a treatment, or herd immunity. We have to consider that almost everywhere, we will continue operating under these circumstances. Because of that, and still lots of uncertainty, we decided to extend the same measures that we took for the first 90 days. We already extend them as of December 31st, with a few exceptions. The decision in March was to pause, thinking that some plants were going to shut down. It is not the case, so we need to engage in additional maintenance when compared to the decisions we took then. In general, the decision has been extended.
We are going to be facing this way to coexist with the virus with more or less the same priorities. That was our thinking process, Adrian. Nobody knows.
Thank you.
What is going to happen. We can think on second or third waves. The ones we have seen seem like they do not have an economic impact as strong as the original one. All of that is to be seen. We are prepared to continue acting cautiously in this environment.
Thank you, Fernando. If I may add, I think the companies with strong operations shine during difficult times, and you guys did. Congrats on that. If I might just do a follow-up, do you think, given the numbers that you mentioned on CEMEX Go, the good increase that you saw on your platform, et cetera, do you think that you gained market share during the quarter in some of your key markets?
We're not completely sure. We need to wait until public info is available. What I can tell you, Adrian, is that we do believe, given that other companies did not have build a platform end-to-end on the commercial relation, meaning from very early stages of the commercial process, all over the transaction, requesting, buying, asking, programming, delivering, paying, everything. Some customers might have preferred that type of services during this period of time. Again, we don't have hard data to say that, but we believe it is helping.
Understood. Thank you, Fernando, again.
Thanks, Adrian.
The next question will come from Gordon Lee with BTG. Please go ahead.
Hi. Good morning. Thank you very much for the call. I hope everyone and their families are doing well. Two quick questions. First on the cost reductions, on the savings. I was wondering first if you could give us a sense of how much you think of the savings that have been achieved year to date or that you're expecting for the year as a whole. How much of that do you think is permanent, and how much of that is sensitive to volume growth? In other words, if we do see a recovery continuing this year and into next, how much of those savings will actually remain in place? On the savings front, I was also hoping maybe you could provide a little bit of color on the U.S., where the margin expansion was impressive, and so I don't know whether the cost savings were particularly concentrated there.
Just the second question, if you could remind us what the total proceeds of pending asset sales is and when we would expect those to hit the balance sheet. Thank you.
Thanks, Gordon. Let me take the first question regarding savings. In total, we did activate certain optimizations and savings through A Stronger CEMEX. In March, we took additional decisions because of COVID-19. We ended up adding everything and calling it operations improvements. All in all, we are expecting to save around $230 million, of which around $140 million were saved in the first half. We can expect the remaining in the second half. It's very challenging to answer how much of that is permanent, because we still don't have a clear scenario that we can define and compare with. I think scenarios are still wide open because of uncertainty. What I can tell you now is that, I think I already mentioned, because of the decision we took last March was a strong one.
Given that we have a more positive scenario than the one we thought then, now we need to engage in certain expenses and CapEx to keep some plants running. Those expenses that were saved in the first half will be spent in the second half. Those are mainly maintenance and are between $20 million and $25 million. The rest, unless something really changes very fast, either positive or negative, but if we continue the rest of the year, more or less in the same, let's say, scenario, in the same context, all those savings can be kept during the year. Regarding the U.S., our savings in the U.S., there were some changes in our management team, the head of the U.S., a few months ago.
Through A Stronger CEMEX and with direct contributions from the team, we have managed to define savings for about, not necessarily all of them this year, but most probably that will be the case, from between $100 million-$120 million. Those savings are coming from different concepts. One very relevant is related to primary fuels. We are switching a number of plants that we used to run with coal, and it happens that because of the dynamics, now it is much better to run in coke, and that will allow us to save some money. There are additional market measures. We are getting into new segments in different states. That is helping somehow our margins in the U.S. I think you also have a question regarding assets. There is very little we can say right now.
As you can imagine, because of COVID-19, things have kind of cooled down on the plans on divesting assets. We have not changed our minds, so we will continue that effort moving forward.
Thank you. The question on the asset sales was actually of those that have already been closed, so effectively, of the ones that you announced prior to the COVID-19 outbreak?
I see. No.
How much is pending to collect?
The one in the U.K. is to be closed this month. We don't have any info opposed to the closing we have for that asset. The other one will come afterwards. It is not a short-term thing. My comment was referring to all the potential asset sales.
Yeah.
Perfect, got it.
Maybe, Fernando, if I can add, we're expecting on the U.K. transaction, it's going to be around $230 million. The balance is for the white cement, and the total is about $400 million that we're expecting sometime this year.
Perfect. Thank you very much.
Thanks a lot, Gordon.
Thank you, Gordon.
Operator?
Our next question will come from Ben Theurer with Barclays. Please go ahead.
Yeah. Good morning, Fernando, Maher. Thank you very much for taking my question.
Good morning.
Congratulations on the results. Clearly impressive. I wanted to dig a little bit into the U.S. and some of the commentary you made during the quarter, and then obviously the situation as it evolves right now with surging cases in states you're heavily exposed, Texas, Florida, California. Could you run us through a little bit how you've been seeing activity over the last couple of weeks and what you expect on the different markets, just to understand a little bit how much maybe of an impact is yet to be seen in the U.S.? That will be my first question, and I have a quick one on pricing in Mexico.
Okay, let me take that one, Ben. Referring to, let's say, the process that we follow, we thought that the U.S. as well as other countries were going to have material lockdowns or shutdowns in our industry. As you know, it didn't happen. With the exception of two or three weeks in the Bay Area, as far as I remember, the U.S. didn't have any material lockdown. I think what we have learned from, let's say, our early thoughts, is that the impact of COVID directly into the market, let's say, construction activity volumes, was not as immediate as we thought originally. We have stimulus programs, fiscal programs, furloughs, and the economy open. Of course, except for restaurants, theaters, stadiums, but nothing that impacts directly our activities. I think the economic impact there was softened because all of these supporting programs.
In some cases, there were some reactions that initially we were not expecting. For instance, we thought that certain construction sites were going to be delaying their progress. In some cases, it happened the opposite. Some construction companies speeded up the process for them to finish their projects. Again, the immediate impact was not as tough as what we thought. We do have order books for, let's say, the next three months, and they seem to be solid. Our concern, let's put it that way, is that perhaps volumes in the fourth quarter, but still months to go, but on the fourth quarter and moving forward, might be softened because of these programs terminating. Again, it's still very uncertain to confirm something like that. We will continue with our programs, measures, cost reductions, and let's see how it goes.
Okay, perfect. Thank you very much, Fernando. On Mexico, I was wondering if you could elaborate a little bit. Clearly, we've seen the discrepancy between bag and bulk, and you've elaborated on the different demand scenarios. Clearly, volume within what is ready-mix and aggregates, which is the more formal piece, heavily impacted. What's your strategy when it comes to pricing? We all know that the Mexican peso has depreciated, stabilized now against the U.S. dollar. In order to recover some of that input cost pressure, which is just dollarized input cost, what's your pricing strategy going forward in Mexico on the different segments within cement, bulk versus bag, and then also on ready-mix and aggregates?
Okay. Let me start by, I think it is more or less obvious on the dynamics that happened in Mexico during the pandemic, part because of the characteristics of the market and part because of decisions made on partial lockdown in the industry. In Mexico, on average, 65% of cement is sold in bags. If you remember, the lockdown permitted sales of bag cement in retail stores. That was not canceled. At the same time, the large works of the new airport, Dos Bocas, and the Mayan Train, also would not shut down. What you saw in the last few months is that the infrastructure and formal activity did decline materially.
Bag cement, because of not being locked down and because of some government investments in social programs related to the consumption of bag cement, did offset in an important manner the decline of the formal part, which is bulk cement and ready-mix, and to some extent, aggregates. Mexico, the industry is open, meaning there is no lockdown. The volumes of bag cement continue increasing. Just to give you a couple of numbers. In April, I think, or May, the worst month in Mexico, the decrease of volumes in bulk was slightly more than 40%, while bag cement increased 5%. What we have seen since then is that bag cement continues growing in a material manner. This month to date, I think as of July the 20th or something like that, bag cement is growing 28%, and bulk cement is still decreasing, but in a much lower manner.
It's -14% instead of [-40%]. Those have been the dynamics, and except for the very formal part, bulk, ready-mix, the rest of the market, which is the bulk of the market, has not been impacted so far.
Your pricing strategy is going to try to recover basically on pricing what you lose in dollar terms, correct?
Regarding pricing, in our strategies, we always try to gain back input cost inflation. What you mentioned, it is true. The peso has depreciated, and there is a loss of prices in dollar terms. We do have a cost inflation need to cover with price increases. That's why we try price increase in cement early this year. The market is very challenging nowadays, so it is very soon to really understand the possibility of this price increase to stick, but that's what we did early this month.
Okay. Thank you very much, and congrats again.
Thanks a lot, Ben.
Thank you, Ben.
Our next question will come from Carlos Peyrelongue with Bank of America. Please go ahead.
Thank you. Thank you, Fernando and Maher, for the call. Let me echo what others have said regarding the results. Despite the very challenging situation, your margins were much better than expected. My question is related to margins. You comment a little bit already, but if barring any major disruption going forward, should we expect margins flat versus last year? Is that something that you think is achievable considering the $230 million in savings that you're expecting for the year? Clearly, the U.S. margins were much better than expected, but this was seen mostly in your major markets. If you could comment a little bit further on margins, would be appreciated.
Sure, Carlos. I will take a stab at it, if Fernando wants to add. As Fernando said earlier, we think that most of the cost-cutting efforts that we invested in the first half of the year should sustain. In fact, some of the expenses that we incurred in dealing with the COVID-19 crisis, which we had some that were in the other income and expenses line, are also likely to occur at a lesser pace. Everything else being equal, we expect to kind of retain the margin levels that we have. There's a possibility that things could be better. As you heard, out of a $230 million cost-cutting efforts under Operation Resilience, we're expecting $140 million happened in the first half, and we're expecting the balance to happen in the second half of the year.
As far as the different margins, like in the U.S., for instance, as you know and as Fernando mentioned, we had an efficiency program that started in the third quarter of last year. That program has been going on, and it's paid off quite nicely. Operating expenses in the U.S. were dropped significantly. We had almost a drop of 10% in operating expenses there. Everything from SG&A, travel, you name it, plus reductions in fixed costs also were achieved. Improvements in profitability in the ready-mix business, for instance, was achieved. Energy was a very important source. All of these things are expected, frankly, to continue in the case of the U.S. business.
Understood. Thank you. Could you comment on pricing on the U.S.? Has there been any announcement of increases in prices that we should expect during the summer, or have you already implemented those in the second quarter? Can you comment a little bit on U.S. pricing?
I would say that pricing was fairly stable on a sequential basis. We had flat pricing for our three products on a quarter-on-quarter basis. As you know, the biggest pricing increase was expected to take effect in April. Unfortunately, because of the COVID-19, ourselves and most other players decided to push it to July. I guess in some cases, with some clients, the pricing increases did go through in April. Mostly it's being staggered into kind of June and July. We did move ahead with Texas pricing increases, with Arizona. In Colorado as well, we had pricing increases. It's being staggered by geography. We are fairly constructive about the ability to improve our pricing in the second half of the year.
Okay. Understood. Lastly, is there anything you could comment regarding the possibility of support from the U.S. Congress, any initiatives worth highlighting for potential support to the states that has been talked about? Anything that you can comment or infrastructure packages worth highlighting, any initiatives in the Congress?
Yes, Carlos. There's a number of things that we are benefiting from in the U.S. Obviously, you have a lot of the packages that were put into place that impact employment and all of that, and that has been very favorable. What's really important is that when we take a look at either the Republicans or the Democrats, both have fairly aggressive proposals for infrastructure in general, and for streets and highways in particular. We don't expect-- It could happen, who knows? But we're certainly not expecting anything this year. Certainly, into 2021 and 2022, we do expect something to happen in support of the streets and highway program.
Based on the programs that are being mentioned, the latest announcement, for instance, from the Democrats, the component that they are talking about for streets and highways, if enacted, could represent a very material increase over the life of the program. The interesting thing is that the Democratic proposal is very front-loaded in expenditures. It starts impacting, as you know, the fiscal budget at the federal level are September to September, at the state level are July to July. It could literally start impacting materially the fourth quarter of 2021 if we have something enacted after the elections at the beginning of the year. We're quite hopeful. We think that if there's been any time of star alignment for something like this, it would be now.
The other thing that is also very important is that it is highly expected that under all of the stabilization programs and fiscal stimulus programs that are being put out, that a big chunk of that money is going to be transferred to states to bridge some of the budget deficits that some of the states are incurring at this point in time because of COVID-19. While we think that's going to be a little bit like sausage making, it's not going to be pretty while it's happening, but we do think at the end of the day, something will happen, and that should also be very supportive of the states that we operate in.
Having said that, Carlos, it's very important to note that our states, our three most important states, California, Texas, and Florida, came into this with very healthy rainy day funds for state general spending. All three states are very highly rated. California is BB-, Texas and Florida is AAA. We think that our states are very high-quality credit and should be more than able to, I guess, recover or to sustain the situation that we're experiencing right now very easily.
V?ry clear. Just a follow-up on this, Maher. I understand that for the roads and highways, a five-year bill is very likely to be addressed in more detail next year. For support for the states, is that something that you think the U.S. Congress could enact in the next two, three months? Would you say that's also something that we should expect for after the election?
Carlos, it's very difficult to tell. Obviously, there's a lot of negotiation. I think that there is a possibility that we could get something in support of the states, certainly sooner than getting a kind of final bill that would impact the streets and highways at the federal level. That's entirely possible that could happen.
Okay, great. Thank you so much, Maher.
Thank you very much, Carlos. Operator?
Our next question will come from Nikolaj Lippmann with Morgan Stanley. Please go ahead.
Hi, Fernando and Maher. Hi, everyone. Just three quick questions here. Sorry, congrats on the phenomenal numbers there. First, on the U.S., if you much like you did in Mexico, can provide a little bit of color on where the demand came from, infrastructure versus residential, et cetera. Two, on CEMEX Go, the 19% growth you saw there, can you talk a little bit about what markets saw that growth and your experience in terms of migrating to that model? Then finally, Maher, congratulations on your new role. As kind of a personal question, let's see if you take the bait, but you've been with CEMEX for more than 20 years. If you can share with us sort of any ideas or changes that you can envision going forward in your new role. Thank you very much.
Thanks, Nik. Fernando, I don't know if you want to.
Let me take the one regarding CEMEX Go, Nik. I'm going to try to summarize a little bit. You know, it was like three years ago, we got engaged into.
The initiative of building the platform, a commercial platform, to allow our customers to do better business for them and better business for us. In general terms, a superior customer experience enabled by technology. We ended up developing a platform that covers the whole spectrum of the commercial relation, from data of our products, registering customers, orders, and payments. Everything is covered in the platform. Before COVID-19, we are very fortunate. It happens that the platform started being highly accepted by customers in general, because the platform is available all over the world, in all our businesses. Acceptance and adoption from our customers increased very fast. The same way that happened in other B2C services, during these past few months, we saw an increase of, I think, between 19%-20%, depending on the platform. We mainly have CEMEX Go and construrama.com as the main platforms.
We have seen that customers increased the usage of the platform. What I cannot assure is that it might be the same customers adopting the platform in a much more decisive way, or that phenomenon plus additional customers willing to do business in this way. That, at this point in time, I don't know. What is true, what I can say, is that our adoption continues growing after a year or year and a half of making this platform available. What can I say. It works. Customers are happy with it. Simpler factor. That way, and because of the pandemic, we've been able to offer, we call it, a service at a distance, but with human touch. Meaning, the only touchpoint with customers is when they receive the product or when they pick up the product from our place.
The rest is done virtually. That's what I can say.
Thank you, Fernando. In what markets are you seeing particularly high growth from this platform? If you don't mind me asking.
Well, more than specific markets, what we see is demand. It seems like customers in cement, either bulk or bag, adoption is much higher than, for instance, than ready-mix. I don't have any specific info to share on, let's say, geographically, which geography or which part of the market is growing more than others through this way to transact.
Interesting.
Nik, maybe I could respond to your question on the U.S. As you saw, we had fairly strong cement volumes in the second quarter year-over-year, with about 6% growth in volumes. Clearly, we started the year with very good momentum. As Fernando said, the U.S. almost continued, I don't want to say business as usual, but almost business as usual in the construction sector. The level of, let's say, safety that was practiced through the different protocols by ourselves and by most of our clients in the U.S., meant that there were not really any hotspots that were experienced in the construction area. It allowed us the continuity factor, and that's what contributed very favorably to our business. Now, the biggest contributor in terms of sectors is infrastructure and residential. Those are the two biggest markets.
Those account for 80% of our volumes in the U.S. In geographically, Texas and Arizona, for instance, had double-digit growth, which is amazing in this kind of an environment. Florida had mid-single digit growth. California, we experienced a bit of a decline in volumes, primarily because higher precipitation. Also, believe it or not, because of some of the coronavirus restrictions, we did have issues in bringing in cement into different parts of California because we were sold out. There were some restrictions in the Bay Area, which have been lifted off. Looking at what was happening in infrastructure, for instance, the DOTs definitely took advantage of less traffic to accelerate construction. We have seen also very good demand still in terms of a lot of growth in projects are going to be lasting for two to four years forward. In May, we saw spending growing by 1%.
As you know, we don't have data newer than that. It was quite a pleasant surprise. The other thing is, Jaime started focusing a lot on the direct bid business, which is very conducive to infrastructure projects as well as large residential, and we have been successful in gaining our position in that segment. On the residential side, the business has continued to really boom. Unfortunately, the residential market did a little bit like we did. They went through their own hard stop. As a consequence of that, there has been a fairly constrained inventory in new home sales. Now that things are opening up again, it's starting to reactivate. Now that interest rates are continuing to drop, we saw long-term mortgage rates break below 3%. Demand for housing continues to be quite strong, and we frankly expect it to continue.
Housing permits rebounded very strongly in May and June. Mortgage applications, although we need to be very careful about that number, also have done extremely well. The area that we think intuitively likely to be negatively impacted from all of this is the industrial and commercial. That suffered certainly during the first half of the year, and the jury is still out on where that happens. Fortunately, the other segments are offsetting and giving us a good outlook. As Fernando said, we're cautious. We think forward-looking order book is good into the third quarter. Where we're being cautious probably is what may happen in the fourth quarter, but we'll have to wait and see. Visibility is not as good as we'd like it to be. Certainly, that's attributable mostly to the COVID-19 situation. I don't know if that answers your question on the U.S.
Very clearly, Maher. Thank you. Could I get you to take the bait on some of your visions for your new role?
It would be difficult to do it in front of my boss. All I can say, in seriousness, all I can say is that we have a strategy that has been in place for a while, that has been sanctioned by the board and Fernando. We don't see any changes. We are going to continue to make sure our becoming investment grade continues to be our North Star. We will continue to manage our liability situation in order to ensure that we have minimum 12 to 24 months of runway in terms of maturities. We're obviously continuously focused on trying to bring down our cost of funding as much as possible, and trying to maintain as much flexibility for us to conduct our business in this kind of an environment. I don't see really any changes.
It's a strategy that is being implemented, and I'm very fortunate to have been asked to be in this position, to be part of the execution of that strategy.
Got it. Thank you.
Thank you very much, Nik.
Our next question will come from Vanessa Quiroga with Credit Suisse. Please go ahead.
Hi, Fernando, and Maher. Thanks for the call and taking my question. Congrats on the results.
Thank you.
My question is regarding bag cement in Mexico. Just to understand correctly, did you say that bag cement is going up in July to date by 28% year-over-year? You also said that you expect bag cement performance to normalize, and basically converge to the economic trends in Mexico. Can you give some more details on your views for bag cement in Mexico? Also on the same market, I understand that you implemented price increases for bag cement in the beginning of July, and at least one or two other competitors also did. What has been the response so far in terms of pricing during the month? Thank you.
Fernando, would you like me to?
Yes, please.
Yeah. Vanessa, on the bag cement demand has been really driven a lot by. There were kind of two phases. In the first phase, distribution was never, especially through our Construramas, was not impacted. A lot of the demand that would've come through bulk came through Construrama in bag format. In reality, we think that there were some medium-sized and smaller contractors that were buying bags to actually batch concrete at site. Now, in the second quarter, the situation took a slightly different evolution, that is that there are three things that started moving bag cement demand much more so than bulk. That is government-supported program. The government, as you know, has been encouraging self-construction and do it yourself improvements, home improvements. The government has announced a School Improvement Program that is close to about $500 million , about $440 million.
There's also a home improvement program, Mejorav it, which is another $225 million, close to it. There is also a rural roads program for $120 million. All of those programs are designed to promote grassroots employment in the country on a very broad base. As a consequence of that money is going through the bag cement market, and that's why we have seen the extensive growth. Yes, Fernando did say, and correctly, of course, is that the July month to date bag growth, and I forget exactly as of when. It's like the 24th or 23rd. It was up 28% year-over-year. We do expect it to normalize. That's just kind of an expectation. The other thing that is also happening, Vanessa, that is very important is that remittances are up year-to-date by 25%.
In dollar terms, they're up 10%. As Fernando said, from a peso perspective, we have not seen at the consumer level the flow-through of inflation. In reality, the weaker peso has translated to higher disposable income in local currency terms. Of course, that is also driving some of the investment in home improvements, and home construction, and reconstruction in some cases. That's been kind of the strength. Now, having said that, in the last two months, we have seen an improvement in demand in bulk. Meaning, in April, we saw bulk down 40%. In July month to date, similar to the numbers that we talked about in bags, we saw the drop -14%. It's dropping still, but by much less, and that is because of the activation of some of the infrastructure programs in Mexico. I don't know if that addresses the question.
If you have any further follow-ons, I'll be more than happy to address them.
Thank you very much, Maher. Just on pricing, what has been the response in July?
It's a bit early to comment on that. Fernando, I don't know if you want to comment on that, it's really too early to comment on that at this point in time.
No, I agree with you, Maher. We need to wait a little bit and see the dynamics and-
Yeah.
See how it goes. Of course, we did try to increase prices with thinking that on the one hand, we have seen our prices of cement in real terms slightly impacted, and we have not been able to gain input cost inflation completely since I think it's mid 2019 or so. That's what we are trying. Even the performance of the market in the last few months, particularly the bag cement market, is that we decided to do so. Let's see. In a few weeks, we will know.
Okay, that's great. If I may, I would like to also ask about working capital. We saw an improvement in average days of the cycle. Do you expect to be able to keep that improvement so that as sales normalize, we could see a positive result on the working capital investment line?
Yeah. I think we will be able to keep it, Vanessa. Again, to make a hard statement on a number, in this case, of working capital with such a uncertain landscape is very risky. What I think, what I saw as an important point for the performance of working capital is we know we have, at least that's our opinion, we have an efficient scheme for working capital, having negative days in a sustained manner. After the challenges of COVID in the second quarter, now we know that on top of being efficient, it is also resilient because it was not deteriorated. It did improve by four days. Are we going to keep those four days? I really don't know. Again, it's uncertain. We will see, but very happy with the performance of the efficiency and resiliency of our working capital.
Thank you very much, Fernando and Maher.
Thank you very much, Vanessa.
Thank you, Vanessa.
We have time for one last question from Anne Milne with Bank of America. Please go ahead.
Good morning, Fernando. Good morning, Maher. I'm sure that you're happy that this quarter is over and that it came out as well as it did all circumstances considered.
Yeah.
You guys have covered a lot of territory already in terms of the questions. I do want to ask one more question on CEMEX Go, and then a question on liquidity. On CEMEX Go, I think the reason, and I know there have been several questions, and you've provided some answers. Many questions is because under this new lockdown environment, so many more transactions are going the way of virtual. Do you have a percentage of the number of transactions, even if it's just for cement, which you indicated, Fernando, is the strongest segment of that go through CEMEX Go or the volume? It would just sort of be curious.
Sure.
To see how much the cement industry is going this direction right now, or at least your clients.
Okay, sure. Anne, thanks for your question. You are right. We are glad this quarter already finished, and expecting for what's coming. How to say it? I think we started developing this platform. You can see it in almost all business sectors. In our case, we are in the context of a digital platform, CEMEX Go and construrama.com, both. Those platforms are in the context of business to business, and those are the platforms that are not necessarily the ones highly developed or the ones that have been developed in the last 20 years. It is more the business to consumer. We engaged in a process around three years ago. I think we managed to put in place what we originally call a minimum viable product and all the story on digitization of companies.
We decided to focus our effort in customers, that might be a difference when compared to other companies in the sector. In our case, it's about customers. It's about developing a superior customer experience. To go directly to your question, what we saw in a few months, let's say 18 months or so, is that our customers, our recurring customers, were engaged and started adopting the platform very fast. Right now, our adoption rate is between 60% and 65%, which for a platform of this kind sounds, and after, let's say, 18 to 24 months of operation, to me, it sounds great, meaning it has lots of acceptance. Of course, there were some changes within the last three months, no different to other digital platforms also related to consumption to end customers.
We increased up to 19% the use of these platforms that for sure will be reflected in higher adoption rates. We do believe that one of the reasons why we don't have even much higher adoption rates is because in some cases, we still don't develop certain segments or certain sectors of other products. For instance, the customers in aggregate picking up the product in our quarries. That's an investment that we are doing this year. Whenever we, let's say, develop the platform even further, right now we are having the fourth or the fifth version, I don't remember exactly. What you can expect is for that rate to continue increasing. The feedback from our customers is very positive. What can I tell you in the case of the use of the platform in COVID?
With the exception, I think we already mentioned it, with exception of delivering the products or our customers picking them up from our facilities, the rest can be done virtually. I'm not saying only from the office of our customers to our office. No. You can use this platform in your mobile, in your iPad, in your PC. The employees of our customers at home can perform the whole relation or the whole transaction with our employees, which are also at home. It's been, as you can imagine, very helpful during these last few months. We are really happy that we decided to invest in digitizing our commercial relations about three years ago. As you know, these processes are never ending type of processes.
We are very happy with what we have achieved, but we are still insisting on innovating and trying to find additional ways to serve the market.
Okay, great. Thanks. Yes, I'm sure that this helped when the customers did have cement purchases, they could look at your platform and know they could access it. I think one of the strengths of CEMEX going into this quarter was the strong liquidity which you increased through your drawdown of your credit facilities and your bond issuance. Now you have a really strong liquidity. I know you mentioned that depending on how the outlook looks going forward, you might repay some of those facilities. How are you looking at that? Particularly, let's say in some markets, if we go into a W, let's say, shaped economic recovery or an additional close downs as they're talking about in the U.S. at the moment. Do you have a certain minimum amount you want to have?
Will you keep like a credit facility open with the banks? I mean, pay that down and have it available in case you need it down the road. How are you thinking about that?
Yeah. Anne, I think, from a liquidity perspective, as you saw, we started the year with a very sizable liquidity position as you know. We did a bond last year in November, to get liquidity to use to pay down the convertible bond. We did that. We started the year with about $800 million worth of cash, which is probably kind of double what we've had over the last couple of years on a quarterly basis. We ended last quarter, as a consequence of a number of things that we've done. We've retained cash from use proceeds from the sale of the U.S., we've raised some liquidity through short-term debt. We started the year with about $1.4 billion. We were very happy that we got our amendment because we wanted to make sure to take advantage of any kind of narrow market windows, and we did.
We issued the $1 billion notes that you saw, which have since traded very nicely. I think that we paid probably a little bit more at the time, but at the time, actually, the new issue concession was the tightest, and we were the first company from emerging market to be coming and doing that. We're expecting an additional $400 million from our asset sales settlements. That would be on top of the $2.8 billion of cash that we have on the balance sheet as of the end of the quarter. Again, it depends how things develop. I mean, this is a very high-class problem to have. It's nice to have all this liquidity, but at the same time, it costs money. We're looking at the different markets.
We're looking at a comfort level that would lead us to utilize some of this liquidity to reduce debt. As you know, we do have a revolving credit facility for a little bit over $1.1 billion. We do have that flexibility for us as well. We haven't made a final decision how much of that liquidity will be deployed to reduce debt throughout the year. As I said, we will continue to focus on making sure that we have a 12-24 months runway of maturities going into the future. As we get into next year, first quarter, we get into the seasonality of free cash flow and working capital needs.
We need to make sure that we have a sufficient level, not too different probably from what we had starting this year, in terms of cash flow, in terms of cash on the balance sheet getting into 2021. Again, I'd like to make a caveat here, is that what we did was in anticipation of things to be kind of a little different than how they turned out, meaning things have turned out a little bit better, and we've seen almost a V-shaped recovery in most of our markets. If we get comfortable with that, we're likely to be then deploying more of our free cash. If we're seeing a W's or triple W's as sometimes Fernando tells me, World Wide Web kind of volatility, obviously we will be more defensive in our cash position, right?
I mean, the last thing we want to be is have a situation precipitate because we did not anticipate liquidity needs. We're very vigilant. We're watching the markets very closely on a daily basis. As we make those decisions, you'll see us execute in the market.
Okay. Thanks very much, Maher.
Thank you very much, Anne.
I would now like to turn the conference over to Fernando González for any closing remarks. Please go ahead, sir.
Thanks, operator. Well, thank you all. Thanks for your time and for your attention. As you know, if you need any additional info or want to make additional questions, please call us and, of course, we will be available for you. Thank you very much and stay safe. Bye now.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.