Good morning, welcome to the GCC's Q2 2023 earnings results conference call. Before we begin, I would like to remind you that this call is being recorded and that all participants will be in a listen-only mode. Please also note that a slide presentation accompanies today's webcast. The link is available on the company IR's website at gcc.com. At this time, I would like to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead.
Good morning, everyone, and thank you for joining. With me today are Mr. Enrique Escalante, our Chief Executive Officer, and Maik Strecker, Chief Financial Officer. The earnings release detailing our 2023 Q2 results was released yesterday afternoon and is available on the company's website. This conference call is also being broadcast live within the investor section of the company's website at gcc.com, and both the webcast replay of the call and transcript will be available on the same site approximately one hour after the end of today's call. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the BMV.
Any forward-looking statements that we make on this call are based on assumptions as of to date, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique.
Thank you, Sahory. Good morning, everyone. I'd like to begin today's call by noting that this is GCC's ninth consecutive quarter delivering year-on-year double-digit top-line growth. I'd like to thank our team for their hard work and relentless focus on operational excellence, while we further optimize GCC's operation and leverage close relationships with clients and partners alike. Enabling us to capture exciting opportunities from the favorable momentum we are seeing in Mexico. During the Q2 , we continued to feel the adverse effect of the weather-related headwind, challenging our industry and a prolonged wet spring within many of our key markets. As one example, June 2023 was Colorado's wettest month in recorded history of more than 150 years, also exceeding Colorado's annual rainfall for the entire year.
This impacted projects and slowed down shipments within certain regions in which we operate. At our U.S. operations, while we believe the pandemic and post-pandemic uncharacteristically high demand for construction materials will be forced to moderate, weighted by decreased spending on residential projects, GCC has demonstrated ability to quickly pivot our business to ensure we are positioned to capture opportunities, ensuring year-on-year improvements to our bottom line. Our decision to pivot GCC's business away from residential construction continues to prove insightful in light of recently released construction spending data. Rising interest rates are slowing residential construction. Non-residential construction spend remains strong. Within the Federal Reserve economic data for May, private non-residential spending increased 21%, and private manufacturing construction by 73% compared to May 2022. GCC remains well positioned to capture related demand.
During the quarter, we also further strengthened how we manage variable costs across GCC's plants. We took additional steps forward in the quarter to better serve our customers and deliver for key stakeholders by leveraging enhanced cost controls and optimizing our supply chains, while continuing to increase our investments in innovation, our people, and end-user activation. I'm encouraged by our progress thus far, and I'm confident that by using the current transition period to focus on our strategy, we're positioning the company for strong long-term growth, cash flow generation, profitability, and shareholder return. This continuous improvement mindset and related optimization will make a sustainable difference as activity levels begin to accelerate with the infrastructure build, funding allocation we expect next year, and related bidding in the Q4 of this year.
Let me share some highlights related to the three pillars aligned with our vision and goals through 2025. Starting with people, even though across all sectors, labor continues to be a concern in the U.S., I'm pleased to note that in the Q2 of 2023, GCC achieved the fewest open positions within the last 5 years. This level of retention is a result of prioritizing and investing in our team's well-being, skill building, and training. We're also ensuring our team's safety through 2 important strategies. During the H1 of the year, GCC began the implementation phase of our safety strategy plan that will enable us to become a world-class safety company through proactive identification and control of exposure to hazards. We have been implementing safety governance practices to strengthen our communication, resource allocation, and empower our employees.
In addition, we are putting in place a serious injury and fatality prevention system, which involves all leaders across the organization. I'm pleased to report on GCC's ongoing commitment to fostering a skilled workforce and maintaining our competitive advantage by investing in training and education initiatives to build technical capacity, increase professional knowledge, and accelerate careers. Motivating and supporting individuals to adopt a strategic approach that positively affects our business performance and profit. The GCC Technical Training Institute has enabled us to identify gaps within our operations. As a result, during the Q2 , we rolled out further GCC training programs tailored to our respective plants needs and areas of improvement, including job-specific training programs based on a learner-centered experience. This has been fully deployed by the end of the Q2 , with the appropriate work plans in place and employee training at all GCC plants.
This results in the quantifiable benefits of strengthened organization stability while mitigating turnover, also in enhanced efficiency with cost savings. Attracting and training the industry's best talent is a critical part of our operational excellence goals. Turning to our profit pillar. We have seen some positive developments in the U.S. volume in recent weeks, and remain committed to pushing for maximized production and delivery efficiency in the coming months. Due to a slower H1 of the year, we find ourselves with a robust inventory at our plants and terminals, and we're well positioned to service our projects pipeline in the H2 of the year. However, catching up entirely to the volume lost in the H1 of the year will be a challenge, given the ongoing labor constraints in the construction industry chain and other market dynamics.
While Q2 volumes for our U.S. business decreased year-on-year, these were offset by continued price strength and by running our operations as stable and efficiently as possible. The use of rail transport has strengthened our margins on a per ton basis compared to the trucks we were forced to use last year. In addition, thanks to our flexible fuel strategy, most of the plants can burn natural gas, coal, and alternative fuels, switching between fuels when we identify a cost benefit. During the quarter, we converted the plants in Mexico to get the maximum benefit from favorable natural gas prices. During this period, we are capitalizing on the opportunity to take advantage of current market dynamics by accelerating coal sales to third parties. It's important to note that GCC's coal is high efficiency and low sulfur, ideal for this specific industrial process.
Our third-party customers are therefore burning our coal instead of sulfur-heavy coke. This leads into our planet pillar. This week, we will release our 2022 sustainability report, which provides detailed updates on our commitment to our people, the planet, and best practice corporate governance. To highlight a few of these important milestones we achieved, let me say, Number one, 50% of total power consumed in 2022 was derived from renewable sources. As a reminder, we have renewable energy agreements for our Rapid City, Montana, and Odessa plants, which substitute 50%, 75%, and 100% of their hydrocarbon-generated electricity with renewable sources, respectively. Number two, alternative fuels, including biogenic fuels, are key to reducing emissions from our production process.
In 2022, we achieved a 7.7% substitution rate, and we remain on track to reach 25% of our fuel consumption by 2030. Number three, we achieved strong fuel substitution rates of roughly 40% at our Juarez plant, 18% at our Samalayuca and Pueblo plants, and 6% at our Chihuahua plant in 2022. Number four, we decreased our clinker ratio to 86% in 2022 from 87 in 2021. Also on track to achieve our target of 80% by 2030. Regarding CO2 emissions, number one, during 2022, our Scope 1 CO2 emissions decreased 1.7% year-on-year, and by 3.4% compared to our 2015 baseline year.
Number two, during the same period, our Scope 2 CO2 emissions decreased by 26% compared to 2015. As another related comment, we installed a pilot solar plant at our Samalayuca plant in 2022, and we are continuing today with similar projects at other Mexico facilities. This strategic initiative enables us to gain valuable insight into the technology and its practical implementation. By actively engaging with solar energy at this stage, we are building the corporate knowledge and expertise to effectively incorporate this within our larger scale operations in the future. During the quarter, GCC saw continued investment in solar projects in Montana. These are progressing nicely and are projected to provide 11% of the plant's electricity needs, representing a significant step towards our goal of transitioning to renewable energies.
Solar plant construction began during the Q2 , with full installation and commissioning set to be completed in early 2024. GCC has secured the newest and most cutting-edge equipment available in the market, all sourced locally within the United States. This solar project aligned with the U.S. federal grants through the Solar Investment Tax Credit, tax rate deductible. While we evaluate the second phase for this solar plant, we will continue to source the remaining electricity from regional suppliers under long-term contracts, prioritizing economic efficiency and sustainable practices in line with our company's objectives. Let me now review our markets. The weather-related disruptions in the U.S., I described, led to an 11% year-on-year decrease in cement volumes for the quarter in such markets.
In contrast, concrete volumes grew 4% in the period, driven by strong wind farm projected related demand in South Dakota and a multi-lane widening project on I-10 at El Paso, Texas. We are working at full capacity while we benefit from close relationships with our clients to assess their needs for the quarters ahead and until the end of the year. Demand from GCC's infrastructure and oil and gas clients remains strong as these industries continue to see favorable momentum. Revenues from GCC's U.S. operations increased by 6.6% as compared to the same quarter in 2022, benefiting from sequential price action over the past year. GCC selectively implemented the year's second price increase of $7 for construction cement and $15 for oil well cement, which took effect on July 1st.
It is important to note that we did not anticipate a 2nd price increase at the beginning of 2023, which will have a favorable impact on margins. As I noted, we continue strengthening margins by reducing our variable costs, with notably high standards at our South Dakota and Pueblo facilities. Our Pueblo facility has maintained flat costs year-on-year, despite inflation. We achieved this by running the plant more efficiently, resulting in decreased power prices. Our Rapid City plant has also benefited from streamlined operations and from our renewable energy commitment that supports our energy costs. To update you on the Odessa plant expansion, we signed the equipment purchase agreement during the Q2 and expect to sign the construction agreement during the Q3 .
In parallel to the to the contracts, we continue to advance in regards to the site and utility preparation, as well as foundation construction according to our plan. We have worked hard to reduce the original investment communicated in August 2022, and expect to inform the final cost per ton to build the new line during the Q3 upon finalizing the construction agreements, aiming to start production by the end of 2025. As noted, oil and gas activity in the Permian Basin remains strong. GCC successfully sold every ton of oil well cement we produced during the Q2 and expanded our shipping schedule to include Sundays to address high demand.
Regarding GCC's Mexico operations, we continue to benefit from today's positive nearshoring trend, with 15 manufacturing projects currently underway in Juarez and 7 in Chihuahua, with clients such as Foxconn, Wistron, Pegatron, and Inventec, as well as housing demand to support the flow of labor and employees in the area. To illustrate this point, GCC received 44 new ready-mix trucks during the last 18 months, and during the quarter, we purchased 48 additional new ready-mix trucks, a new concrete pump, and one more ready-mix plant. All this, in addition to the recent investment in 2 mobile crushers for our aggregate operations in Juarez. These additional investment commitments are focused in maintaining a high service level to all our customers today. In conclusion, during the quarter, GCC continued to make meaningful progress on our strategic pillars.
Our people, profit, and planet priorities for 2023 remain unchanged as essential parts of our strategy. With all elements in place, we are well-positioned to capitalize on the positive U.S. construction outlook, supported by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, while taking advantage of the impressive momentum we are seeing in the Mexican market. Our team is activated against our strategy, and I'd like to extend my sincere thanks to all our operations associates throughout all the markets where we participate. Let me now turn the call over to Maik for some further financial highlights of the quarter and our latest outlook.
Thank you, Enrique, and good morning to everyone. Starting with our financial results on slide 22, consolidated net sales for the Q2 increased by 14%. This was mainly driven by increases in concrete volumes in Mexico and the U.S., higher cement volumes in Mexico, coupled with strengthened prices in both markets. This was partially offset by lower cement volumes in the U.S. due to the adverse weather conditions during the quarter. Please turn to slide 23. Cost of sales, as a percentage of revenues, decreased 7 percentage points in the Q2 to 62%, mainly reflecting favorable cement prices in both divisions, higher fixed cost dilution, and lower fuel prices. These were partially offset by higher production costs and expenses.
It is important to highlight that last year, we experienced some logistical headwinds associated with the rail network, which led us to use more and reliable on trucks and to deliver the products to our customers on time. I am pleased to inform you that the situation has now returned to normal, allowing GCC to return to our more cost-efficient rail freight. As you may recall, we concluded the Samalayuca debottlenecking project in the H2 of April, which came at a $0.5 million one-time impact on our U.S. freight costs for the quarter, at a total of $3.5 million, one-time impact year-to-date. These incremental costs were required to support our southern network through shipments from our Tijeras and Pueblo facilities. Please turn to slide 24.
SG&A expenses as a percentage of sales increased 70 basis points in the quarter to 8%, mainly due to the appreciation of the Mexican peso. As a result, Q2 EBITDA increased by 33% to $133 million, and the EBITDA margin expanded 540 basis points to 36.4%. As we mentioned at the beginning of the year, we remain committed to improving our EBITDA margins by leveraging our own logistics network, operational excellence, normalized energy costs, and the pricing strategy that enables us to offset the impact of inflation on our cost structure. Moving down the P&L on slide 25. Net financial income totaled $5 million in the Q2 of 2023, compared to net financial expenses of $4 million in the prior year quarter.
This was mainly due to higher cash balance and increased U.S. and Mexican interest rates on our treasury investments. In turn, consolidated net income increased by $29 million in the Q2 to $82 million, and earnings per share increased 56% year-on-year. Moving to our cash generation on slide 26. Free cash flow decreased 62% to $21 million in the Q2 of 2023. This was mainly driven by higher working capital requirements, cash taxes, and maintenance CapEx, partially offset by increased EBITDA generation. Turning to our balance sheet, we ended the quarter with $770 million in cash and equivalents, and $500 million in total debt. Our net debt to EBITDA ratio stood at -0.69 times, which is well below the industry's average.
As we announced during our Q1 earnings call. GCC's general shareholder meeting, held in April, declared an annual dividend of MXN 1.3364, which was paid on May 24th. Please note that during the quarter, we repurchased a net amount of 900,000 shares, equivalent to $8 million, under our current share buyback program. In terms of capital allocation and inorganic growth, we're optimistic with the opportunities ahead. We continue to actively pursue value-creating initiatives through acquisitions of cement assets in the U.S. that could be plugged into our network and are aligned with our long-term strategic vision. Finally, turning to slide 29, I would like to discuss GCC's updated guidance for 2023.
Starting in the U.S., as a result of the adverse weather condition we experienced in the H1 of the year, we now expect GCC's cement volume to decrease mid-single digit year-over-year. In the ready-mix business in the U.S., we had a strong H1 of the year, those we expect volumes to increase mid-single digits. In terms of prices, in light of the announcements we've already made, we now expect price increases in the double digits range for cement and high single digits range for concrete. In Mexico, we continue to see a strong market with robust demand and positive pricing environment. We now expect concrete volumes to increase high single digits and prices for both products to increase low double digits year-over-year. The outlook for Mexico's cement volumes remains unchanged.
Regarding profitability, thanks to the operational efficiencies and cost strategies Enrique mentioned, we now expect 2023 EBITDA to increase double digits against 2022 levels. We expect to re-recover the margins lost in 2022 during this year. I will now turn the call over to your questions. Operator, please begin with the first question.
Thank you. Again, at this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using the speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Nikolaj Lippmann with Morgan Stanley. Please proceed with your question.
Thank you very much. Congrats on the, on the fantastic results here. I have two very simple questions. Can you first talk a little bit about how we should think about U.S. pricing for the H2 ? It looks like you're sold out in oil cement, which is the highest priced product. You're going to be growing in the mountains, as far as I can see, as the weather improves, which is kind of the second best option. Does that mean that, you know, net-net, we're going to have, how should we handicap, or how should we think about, U.S. pricing? Would it, would it be going down a little bit on a sequential basis, or can it continue to grow in your view? So that's question number one.
Question number 2, can you talk a bit about the strategic reasoning for your aggressive push into ready-mix concrete? Thank you very much, and again, congrats on the numbers.
Hi, Nick. Good morning. This is Enrique. Thanks for the questions. On pricing, if I understood correctly, your question, it's, I mean, about the effect of our recent price increase. We expect it to, I mean, hold in several of the markets that we are, I mean, doing business on. In some of the markets, it's not going to take. I mean, we discuss on specific situations for several markets within our customers, but overall, we expect it to improve our total price on a sequential basis. The second question was, I mean, related to ready-mix, but I've missed a little bit what you said. Can you repeat that, please?
Yeah. If you can talk a bit about. You've historically had a relatively, compared to other cement, some of many of your peers, you've had less of an emphasis on ready-mix, and it looks like you're trying to increase your ready-mix exposure. Can you talk about some of the strategic reasoning behind that?
Well, yes. As we have mentioned in our strategy, I mean, ready-mix, we only look at ready-mix favorably in the markets where we have cement to have a totally integrated business. In light of that, we're always open and attentive to see if there is an opportunity to increase that business, but it will have to fit within that criteria. Irrespective of, I mean, a project, strategic project in, on a new business in ready-mix, we always also continue to see organic growth and look for opportunities within the regions where we are today.
... name it, El Paso, southern New Mexico, and Iowa, Minnesota, and South Dakota. We're attentive also for opportunities there, but if it's, if you're talking about an acquisition, it will have to be totally, I mean, on an integrated market for us.
Got it. Thank you.
Our next question comes from the line of Carlos Peyrelongue with Bank of America. Please proceed with your question.
Thank you. T hank you for taking my question, and congrats on the results. J ust a quick follow-up on, on, on Nick's questions, on Nikolaj's question. I n terms of the price increase you announced in the US, can you give us an idea on what type of traction you're getting? It looks from your new guidance that the traction seems to be going quite well, but would just like to hear if you had a little bit more color on that. And the second, in terms of acquisitions you talked about, you know, trying to find assets that would fit into your, existing system in the US.
Can you provide any color as to whether that's something that you are, you know, getting closer to finding a potential target? Is that still something that you're looking for and it's still not, something that could occur in the next 12 months or so? Thank you.
Thank you, Carlos. Again, this is Enrique. Let me address first the pricing question. Of course, we announced a $7 price increase in construction cement and $15 in oil well cement. As I mentioned on construction cement, several markets are definitely going up with a full $7 price increase. In other markets, I mean, there is no price increase, and in other markets, I mean, there is probably, I mean, a partial price increase. Overall, I will say that at least 50% of our markets at least are going to, I mean, take that price increase. On oil well cement, of course, we expect a 100% penetration with the new $15 price increase.
We're looking, I mean, very optimistically at the, at the performance of prices for the rest of the year as, as we reported. In terms of M&A, yes, as we have said, our priority is to find opportunities within our network, and but we're not limited anymore, I mean, to just that. We are looking at the whole United States as a big opportunity to continue increasing the presence of GCC. Of course, of course, with priority, as I said before, on the current network. We are always very active in data, Carlos Peyrelongue, so we don't have anything specific to report on at this moment.
I can tell you that, supported by the planning team here with Mike and his staff and our U.S. folks, I mean, we are searching, I mean, very actively for every opportunity. We think that, there will be, I mean, more opportunities going forward, of course, than in the last three years.
Perfect, Enrique. If I may add one more related to pricing in Mexico. Volumes have been quite strong. As you mentioned, nearshoring is really taking off, and that's resulting in additional cement demand. Is there room in the H to move prices higher in Mexico?
Can you repeat the last part, Carlos? I couldn't hear it. In Mexico.
Sorry. Sure, in Mexico, it's related about cement prices. Volumes have been quite strong as a result of the nearshoring-related cement demand. Is there room to increase prices in Mexico in the H2 ?
Yes, okay. Thanks for the question again. Definitely there is room. We are actively determining at this moment, I mean, how much we can increase to recover. Obviously, I mean, the inflation we've been subject to, and shortly we will be announcing, I mean, a price increase for the H2 of the year in Mexico.
Perfect. Thank you, Enrique.
Our next question comes from the line of Vanessa Quiroga, with Credit Suisse. Please proceed with your question.
Hi. Thank you for taking my question. Congrats on the results. The first one, I want to focus a little bit on Mexico, in a segment that is not being talked about that much recently, which is self-construction. Remittances in peso terms are down now, year-over-year. I was wondering if you are seeing that impacting negatively on the self-construction segment, which I assume is still quite relevant for your operations in Mexico. That's the first one. The second one is about your fuel strategy currently. If you can provide your exposure to coal and to natural gas, currently, and what, how you are using coal, given your existing mine, that you own, and your use of the coal. Thanks.
Thank you, Vanessa. Yes, let me address first, I mean, the question on the self-construction market in Mexico and our bag cement, and then I will turn it to Mike for the analysis on the fuel and the strategy. We see basically a very stable market in terms of bags and self-construction where we are. We have been, I mean, shipping about 24%, 25% of our total shipments in Mexico in bags, which is basically the normal level for our market. It's a little bit of a decrease from the almost 8% during the pandemic, and we're stable there.
We don't see, I mean, any, I mean, big growth, more than anything, I think, we will expect it to continue a little bit flat, for the rest of the, of the year. We feel, I mean, that's, the normal level that we always enjoy. With that, I will turn it to Mike, for the second question.
Yes. Hi, Vanessa. Regarding the fuel strategy, so over the last few years, we really built out a more flexible fuel strategy across the plants, across the network. A very good example would be Samalayuca. You know, as part of the expansion there, we invested, so we can now burn up to 60% of alternative fuels. That's really in the context. We want to take advantage of, you know, economical opportunities like we've done at this quarter on gas in Mexico specific, but also taking advantage of the alternative fuels market that we're seeing evolving. That's really across the network. Regarding the coal, again, we're in full operation, the new reserve of the coal mine since the beginning of the year.
The coal is our, you know, natural hedge. As Enrique said, it's a very high efficient, coal, a fuel that really brings a lot of, advantages. We're gonna use that, you know, according to our, you know, strategic plan, across the network, but also, again, having the flexibility of taking advantage of other fuels. As we mentioned, the coal also is an opportunity, you know, in the context of sales and growing the business. Overall, that's, a little bit of context around the fuel strategy.
I think too.
Thanks, Mike.
Complement what Mike said, Vanessa, we don't have any problem to hedge, use the lower cost fuel, and then on top of that, sell the excess coal that we produce.
No, that's great. What's your current exposure to each of the fuels, if you don't mind?
Today, our Mexican plants are running on gas. On the U.S. plants, Pueblo, Tijeras, and South Dakota are running on coal. Odessa runs on gas, and Montana runs on both, combination of both fuels.
Thank you very much, Enrique and Mike.
Our next question comes from the line of Alberto Valerio with UBS. Please proceed with your question.
Hi, Enrique, Maik, Sahory. Thank you for taking my questions. I have two on my side. The first one, about the H1 of the year, if there is anything that was a tailwind for you guys, because usually we have seasonality against GCC in the H1 , but in favor for the second one. Just to have an idea how much you can get on EBITDA levels, if it's 20% above last year, 30%, I know both will be inside the guidance, double-digit growth, but it's a huge difference. The second one, it's about competition. With this level of price, I would expect some new projects or some player come to the market.
If you have heard any additional capacity, maybe the current players debottlenecking or increasing capacity as you did in Samalayuca, or new players come to Mexico and U.S. in your region. Thank you.
Alberto, good morning. Thanks for the question. I think I understood, I mean, on our EBITDA, how it's going to continue growing in the second part of the year. Of course, because of the seasonality, that's where we are pushing now, I mean, harder in terms of shipments during the summer and fall in the U.S. operation. That obviously will, I mean, have, I mean, a good effect on EBITDA margins. They are going to continue growing in that part of the year because of better cost fixed absorption through the, I mean, increased sales.
That's why, I mean, based on where we are and what we expect the rest of the year, we increase our outlook, I mean, for EBITDA, as we mentioned in the report. We're looking at it very favorably. In terms of competition from Mexico, I mean, we don't see any, I mean, additional competition coming from Mexico. I think that we saw that effect, I mean, at the beginning of the year and last year. I think that, basically today we're, I mean, very stable, and we don't expect any incremental competition.
In the U.S. market, of course, we are, I mean, as I said, I mean, practically sold out, but we have, I mean, inventories as well as the majority of the industry because of where we compete, because of the weather. We all have a little bit of extra volumes available, I mean, for the rest of the year. It will depend a lot on what type of fall or early winter we have or not, that we will be in a position to ship out those inventories. More, in my opinion, of weather-related than competition.
Maybe Alberto, if I can add, in Mexico, you know, the timing of our Samalayuca expansion was very nice. You know, we have that additional capacity really to facilitate the growth, you know, for that nearshoring aspect. As Enrique said, you know, we're investing quite heavily in equipment and the readymix and aggregates business, really to stay very close to the customers and support them in their projects and their growth ambitions. I think there's a good balance right now that we can provide good quality, good products and service.
Fantastic. If I may, just a follow-up. The growth guidance on CapEx of $200 million-$220 million, is any on Odessa including there, or Odessa just should start just in 2024?
Yeah, you know, the guidance on the $220 million includes Odessa. There's a good portion of Odessa spend in that number this year. As Enrique Escalante said, you know, we're progressing nicely around the utility work, around some of the foundation work. So it's an important portion of that growth CapEx, as well as in the Q1 , the completion of Samalayuca, that was an important element of that growth CapEx. The last important or third element in growth CapEx is really enhancing the distribution network in the U.S., putting some CapEx money in the, you know, terminal network and rail capabilities.
It's part of the budget.
That's all part of the budget, yes.
Fantastic. Well, congrats for the results, and thank you for taking my questions again.
Our next question comes from the line of Francisco Suarez with Scotiabank. Please proceed with your question.
Hello. Good morning, guys, and thanks for the call. Congrats on the wonderful execution that you have given to us. It's fantastic. The question that I have is, well, you know, the Teamsters just got a deal with UPS. It seems that they were going to see a little bit more pain on truck-related transportation, and you are clearly ahead of the curve, right? What you are doing on relying more on rail freight. The question is, if you see any sort of risk to higher costs in overall transportation? Thank you.
I'll, turn this call, question to Mike now, Paco. Thanks for it.
We don't see any additional pressure on the distribution cost. You know, as we explained in the earlier part of the call, we saw that last year and, you know, we had to rely more on trucking last year than this year. No, we see some good service levels from the rail. You know, we're going back to all our natural routes again, heavily on rail, which is very cost efficient for us. In general, we feel pretty comfortable what's happening there, and we don't see any major pressures there.
Got you. If I may, just to follow up on this, any more investments in ground terminals or perhaps, making some of your ground terminals, multimodal terminals?
We're completing and are fully operational now in Minneapolis. You know, that has been a terminal that we have been expanding, working on, and that's now fully operational. You know, in addition for this year, there's no additional terminal, but we're working on ideas and things that will enhance us, but more looking in 2024, 2025. You know, typically our terminals, you know, supported by rail. Again, most of our plants have good rail capabilities and of course, the transloading and trucking to the final customers. That's our typical setup. It has proven pretty efficient.
Perfect, it's clear. Thank you so much. Congrats again.
Our next question comes from the line of Alejandro Azar with GBM. Please proceed with your question.
Hi, good morning, Enrique, Mike, sorry, I'm sorry I joined late to the call. Just a quick one. Enrique, on your first remarks, you mentioned the sign and the construction start of the Odessa project. Is there any changes on the amount of the CapEx that you announced back 12, 18 months ago? I don't know if I recall correctly, $775 million. Has that changed from, you know, as of today?
Hi, Alex. How are you? Yes, Alex. What we announced last year was $750 million. There is going to be a different total investment that is going to be lower. I cannot disclose it at this moment as we are actively negotiating, I mean, the construction agreement, which is obviously a big concept in all that investment. Expect, I mean, a better, a better cost per ton of what we initially, I mean, disclosed, and we will be prepared to discuss that in the Q3 call.
Excellent, Enrique. Thank you very much.
Our next question comes from the line of Lucia Gomez with Compass Group. Please proceed with your question.
Hi, good morning, and thank you for taking my question, and congratulations. My question is just a quick, I wanna, I have a little bit more color in the U.S. volume side, thinking of the decrease year-over-year. What has changed this quarter versus the Q1 , or was it more of the same dynamics? Thank you.
Hi, Lucia. Good morning. Thanks for the question. As we said, I mean, our volumes have decreased around 11%, I mean, compared to the Q2 of last year. As I explained, I mean, there has been a very unusual, harsh and weather and extended, I mean, wet season, too. It was difficult to really, I mean, have visibility to see, I mean, how much was the weather related of this decrease and how much could be some soft pockets, especially on the residential side. Now that we have more visibility, we think that we're going to be able to recover part of that lost volume in the second part of the year.
probably, I mean, then that's the year around what we said, mid-single digits, I mean, decrease compared to last year in comparison to the, 11% that we have today.
Perfect. Thank you.
Thank you. We have reached the end of the question and answer session. I'll now turn the call back over to Sahory Ogushi for closing remarks.
Thank you, everyone. We appreciate everyone taking the time today to join us and for your interest in GCC. We look forward to speaking with all of you soon.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.