Good morning, and thank you for holding, and welcome to Grupo México's second quarter earnings conference call. With us this morning are all of Grupo México's top executives, who will discuss the financial performance of the company during the second quarter 2026 results, giving you a summary of the latest news and addressing any questions you may have at the end of the call. Before we begin, I would like to remind you that information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements. Grupo México undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. All results are expressed in full U.S. GAAP.
The presentation may be followed through our webcast, but if you wish to ask a question during the Q&A session, you will need to do so via phone call by pressing star one one. A copy of the slides that the company will be reviewing today is available on the website at grupomexico.com. At this moment, I would like to remind everyone that your lines must be in listen-only mode until the question and answer session. Now, we'll pass the call to Ms. Marlene Finny.
Hi. Good morning, everyone, and thank you for being here and joining us today for Grupo México's second quarter earnings conference call. Sitting here with me today are the top executives from our divisions. During our call, as Carmen already mentioned, we will be following a presentation that can be downloaded from our website or followed by accessing the webcast as well. Today's detailed program can be found on slide number three. I'll kick off with Grupo México's ESG highlights, followed by the quarter scorecard and financial highlights. Leonardo Contreras will provide detailed information regarding our mining division's main highlights, project updates, and comment on the industry's economic environment. He will then be followed by Mr. Fernando López Guerra, who will go through the results of and main events of our transportation division. Lastly, Francisco Zinser will comment on the infrastructure division's relevant events and financial results.
Then, as usual, at the end, the line will be open for questions and answers. With that being said, let's go to our main ESG highlights in slide number five. In its fifth year of operation, the dam located in Candarave, in the southern part of Peru, continues to generate positive impacts by improving year-round water availability for local farmers and increasing crop productivity by 20%. In addition, the planned Las Llajas and Calientes dams could extend water coverage to more than 90% of local producers. In addition to that, to promote the integration and wellbeing through sports in communities near our operations, Grupo México joined the Mexican government's Mundial Social initiative, reaching more than 3,000 participants and 41% of the youth in communities near operations.
Lastly, during the first half of the year, the Dr. Vagón, the health train, provided free medical services to more than 30,000 people across six Mexican states while expanding preventive care, reaffirming its commitment to medical innovation in remote communities. Sorry, I got a number wrong. I said it right. Sorry for that. It was my mistake. Let's continue to slide six. Our revenues for the first half of the year totaled $11.28 billion. Actually, this is a record high number for our revenues and our EBITDA as well, representing an increase of almost 34% when compared to the first half of 2025. Our accumulated EBITDA was $6.85 billion, also a record high as the number. This is almost 50% higher than the first half of 2025.
This is mainly because we had better results and better prices in the different metals and better results in the different divisions. The copper production reached just north of 515,000 tons for the first half of the year, showing a slight decrease when compared to 2025. The net cash cost was $0.31 per pound. This is a more than 68% improvement when compared to the first half of 2025. As you know, we continue to be the company with the lowest cash cost worldwide in terms of copper. That is very relevant. Lastly, our board approved a cash dividend of $0.80 per share and a stock dividend that is equivalent to one common share per every 194 common share outstanding, representing a total dividend of approximately $1.84 per share, which translates into a 3.7% dividend yield. Turning to slide seven.
Grupo México continues to have a solid balance sheet with $3.1 billion generated during the first half of 2026. As you might already know, our debt is mainly issued in dollars, representing 76% of the total debt, while the rest is denominated in Mexican pesos, and 85% of our total debt was issued at a fixed rate. On this slide, you can also see the dividend paid since 2024, along with the corresponding payout ratios and the implied dividend yields. For this quarter, dividend per share in pesos reflects both the cash and stock dividend components based on the closing share price on the date of the board's approval. Additionally, I would like to mention that in June, we successfully issued a $1.25 billion senior bond with a ten-year maturity through the mining division.
The proceeds will support the development of the Tía María project and SPCC Southern Peru Copper Corporation's capital investment programs. On slide eight, you can see that we continue to have a comfortable debt maturity profile with no payments of over $1 billion until 2028. Our cash position stood at $13.3 billion at the end of the first half of 2026, which is very good. I will let Leonardo Contreras comment on our mining division's performance.
Thank you, Marlene. Good morning, everyone, and thank you again for joining us today. I will start today with a brief remark on the current copper market on slide 10. The LME copper price increased 40% from an average of $4.32 in the second quarter of 2025 to $6.04 this quarter. In the COMEX market, we saw a 31% increase with an average of $6.16 per pound during the second quarter. Based on current supply and demand dynamics, we think there will probably be a slight copper market deficit for 2026 on the back of a resilient U.S. economy and higher demand driven by decarbonization technologies, artificial intelligence, and electric vehicles. Copper inventories worldwide stood at 1,125,000 tons as of July 17, and we estimate that this inventory can currently cover approximately 15 days of global demand. Now let's continue with the mining division's financial highlights on slide 11.
During the first half of this year, sales stood at $9.3 billion, almost a 40% increase versus 2025, mainly due to higher volumes of silver sales and higher copper, molybdenum, and silver prices that increased 28.6%, 34%, and 138%, respectively. Our EBITDA totaled slightly over $5.9 billion, a 61.3% improvement compared to the first half of 2025 with a margin of 63.3%. Our copper production reached slightly over 515,000 tons, a slight decrease of 3% when compared to the first half of 2025, mainly due to lower ore grades as projected for 2026 in our Peruvian operations. This was partially offset by higher production at our mining units in Mexico and in the United States. We are currently assessing different alternatives to increase production volumes at our operations in Peru.
Now, in terms of our net cash costs for the first half of this year, it settled at $0.3031 per pound, a significant 68% improvement compared to the first half of 2025, which reflects a $0.67 reduction, mainly driven by higher by-product credits and cost contention in the United States. Regarding CapEx, we invested $904 million during the first half of the year. I would like to continue talking about our projects and their progress in slides 12 and 13. Let me start with slide 12. Tía María continues to make solid progress, reaching 42% overall completion. As of June 30, we have committed almost $1.1 billion, of which $693 million has already been invested. Key milestones include significant progress in earthworks, procurement of major equipment, and continued construction across the project's main facilities and infrastructure.
The project has also generated more than 5,800 jobs, including over 1,200 local positions, and remains on track to begin operations by the second half of 2027. In Los Chancas, we remain actively engaged with authorities to address illegal mining within the project area. At the same time, we continue to advance community development and environmental management programs in our area of influence. Lastly, in Michiquillay, we continue advancing with technical studies supporting mineral reserve estimation and mine planning, while geotechnical work is entering its final stages. Now let me continue on slide 13 with our project Los Frailes in Spain. During the second quarter, we continued advancing on the engineering phase of the water treatment plant and implementing cost optimization measures. Additionally, we began with the exploration campaign at the Cuchichon Ore Body. Now moving into our Mexican projects.
We are very glad to share that El Pilar has secured all required environmental permits and is scheduled to begin early site work in September 2026. We expect construction to start in the first quarter of 2027 and production to come in line by the second half of 2029. Turning to slide 14, you will see a timeline for our main projects. Please, if you have any follow-up questions, we would be happy to address them during the Q&A session. Now I will let Fernando comment on our transportation division.
Thank you, Leo, and good morning to everyone. Thanks again for joining us. I will be taking you through the divisions of the transportation division, starting on slide 16. Our sales reached just shy of $1.9 billion. This is a 14.9% increase compared to the first half of 2025. Our EBITDA for the first half of 2026 totaled slightly over $780 million. This is 10% higher than 2025. The EBITDA margin stood at almost 42%, 41.8%. Transported volumes grew a solid 7.6% in net ton-kilometers during the first half of the year. Carloads grew 5.6% during the same period. Continuing with the main variations of our revenue. This is on slide 17. You can see that the segments that delivered the strongest revenue during the quarters were metals, which led with a 22% increase.
This is what is driven by higher exports of some copper products and higher imports of slabs and scrap as well for the steel industry. Cement followed with 11% increase, supported by domestic volumes in southern and central regions of the country in Mexico. Lastly, the intermodal segment, which is the one with which we address the finished good products. This one is growing by 10%, reflecting a higher cross-border traffic between Mexico and the U.S., and increased domestic volumes, both in our intermodal services within Mexico and the U.S., as well as a higher market share as we continue to grow in Mexican ports, Manzanillo, Veracruz, mainly. On the mid-growth range, we have automotive segment with a 7% growth rate in revenue, which is benefiting from our market share gains versus other competitors on water, over the road, and rail.
Also, we have a 1% growth in agricultural segment due to higher local crops and the consistent imports through our grain shuttle system. On the other hand, we have a revenue decline in some segments, minerals with a 3% due to lower copper ore volumes and some maintenance activities of some of our customers. Chemicals and industrials also declined by 6%. These were impacted by the demand of chlorine and soda ash, as well as lower resin volumes during the quarter due to oil price volatility. The industrial segment itself was impacted by a softer demand in finished goods and also in alcohol consumption in the U.S. The energy segment decreased by 16% due to a lower fuel oil production in Mexico and lower imports of gasoline, fuel oil. Not fuel oil, gasoline, jet fuel, and diesel as well.
Now, if we go into our operating metrics shown on slide 18. During the quarter, our average train speed decreased by 1%, while dwell time improved by 2%. Car velocity overall declined 3%, totaling 302 km per day per rail car. As for the remaining metrics, there was a 1% improvement in average train length, reaching close to 1.86 km per train, a 2% increase in gross tons per train, and a 3% increase in crew starts as a result of 7.6% volume increase during the quarter. If we go to slide 19, you can see our CapEx for 2026, which was budgeted for $450 million for maintenance, special projects, and the acquisition of locomotives. This allows us to continue growing and improving through sustained investments. Around 53% of our annual CapEx will be invested in rail infrastructure, equipment, bridges, locomotives, and overhauls.
18% of it will be in for yards, terminals, focusing on siding enlargement and yard reconfiguration. These siding enlargements enable us to run longer trains. The longer the trains are, the less trains we need in the system, the less crews we have out there. The improvement also is reflected on the fluidity throughout the network. The remainder, 14% of the budget is planned for special projects focusing on key infrastructure such as the Tlayacapan Bypass, which has already been finished. We are just finishing the new yard, which is also built for 150 railcar trains. Remember, we are currently at 120 railcars. The Monterrey Bypass, which is already finished as well. This bypass will allow us to connect the port of Altamira into our terminals to serve the inside of the city of Monterrey and compete head-to-head versus over the road.
Lastly, 16% of it is planned for the acquisition of locomotives. On slide 20, you will find our 2026 outlook. That implies a 6%-8% volume growth, along with 9%-11% revenue growth with the CapEx program that I just mentioned. With this, I conclude the general overview of the Transportation division. I will now let Francisco Zinser comment on the Infra division.
Thank you very much, Fernando, and good morning, everyone. I will start by going through the financial highlights of the Infrastructure division, shown on slide number 22. Our sales for the first half of the year stood at $278 million, a decrease of 18.7% when compared to the first half of 2025. This is mainly due to the four suspended drilling platforms and lower gas prices. Our EBITDA totaled $146 million, a 9.5% decrease for the first half of the year, with a 52.4% margin. Lastly, net income totaled $306 million, an increase of over 920% when compared to 2025. This significant increase was primarily driven by the sale of our 81.1% stake in Concesionaria de Infraestructura del Bajío, the concession holder of the Salamanca-León toll road, for MXN 8,220 million. Now, I would like to go through some of our most relevant events on slides 23 and 24.
In our energy business, we achieved a transformational milestone with the agreement to combine our generation assets with SAAVI Energía, part of BlackRock. The transaction will create a leading private power generation platform in Mexico, with 4.5 GW of installed capacity. Grupo México will maintain a 70% majority stake, and we expect to begin consolidating the new company during the third quarter of this year. This transaction reinforces our long-term growth strategy and significantly expands our presence in the power sector. Continuing with PEMSA, we are pleased to report progress in the reactivation of our oil platforms. The Chihuahua and Zacatecas jack-ups resumed operations on July 3rd, following their suspension in late 2024. In addition, the Campeche and Tabasco jack-ups are expected to return to service in August of this year, which will bring all of our platforms back into operations.
This represents an important step towards normalizing operations in PEMSA. Going into slide 25, we began consolidating Grupo Proyecta following the acquisition of a controlling 60% stake. This transaction expands our real estate development platform through Lomas de Angelópolis and a portfolio of future projects in key markets across Mexico, further enhancing diversification and long-term growth opportunities. Lastly, as we had previously mentioned, in April, we completed the sale of an 81.1% stake in Salamanca-León toll road concession while retaining an 18.9% minority stake. The transaction unlocked value from a mature asset, strengthened our financial flexibility, and supports the redeployment of capital into new investment opportunities aligned with our long-term growth strategy. With this, I conclude our review of the main highlights of the Infrastructure division. Now, I will let Marlene give her closing remarks.
Thank you so much for joining us today. We will answer any questions you might have. Thank you so much.
Thank you. As a reminder, if you do have a question, simply press star one one to get in the queue and wait for your name to be announced. To withdraw the question, press star one one again. One moment for our first question. Comes from Regina Carrillo with GBM. Please proceed.
Hi. Good morning. Thanks for taking my questions. I have two. The first is around the dividend. What drove the decision to combine a cash and stock dividend for the first time? Should we expect that repurchase of shares to be a new element going forward? The second question is regarding GMXT. Could you give us more color on the Brazil investment opportunity, please? Thank you.
Thank you so much for your questions, Regina Carrillo. I will answer the dividend question, then I will let Francisco Zinser or Fernando López Guerra answer the Transportation division question. Grupo México has always had long-term investing and sustainable value creation at the core of its DNA. With that philosophy in mind, the board of directors has approved this dividend consisting of shares acquired through the company share buyback program, together with a cash dividend, with the objective of delivering long-term value to its shareholders. As you know, the board of directors review the dividends on a quarterly basis, depending on cash generations, CapEx needs, and the volatility and how the outlook is looking. This is going to be revised on a quarterly basis as we do it always. Thank you for your question.
Marlene, I will take the second question if you want, about Brazil and Argentina. With that, we have been very clear that we are open to explore new territories, and Brazil and Argentina are markets that are big enough in bulk, mainly ag products and minerals as well. The networks themselves, the coverage that they have, they are pretty developed. We believe that these two markets are interesting enough as they could be as large as or even larger than the market that we currently address in Mexico. That is why we are seriously looking at them. Of course, this depends on the opportunities that we find and the rules of each market that we would be serving. I do not think we can evolve in anything else as of this moment with all the information we have.
Perfect. Thank you so much.
Thank you. Our next question comes from the line of Emerson Vieira with Goldman Sachs. Please proceed.
Hello, good morning. I have a couple of questions here, but mainly I want to touch base on the capital allocation strategy. First of all, pretty exciting news here on the share buyback program. I wanted to understand how large is this program and how many shares have been already acquired in the market under the current open share buyback program. What is the share price level that you guys are still comfortable in continuing with this strategy? That is on the share buyback program, please. Then another one on the U.S. copper project. I understand that the company is undergoing feasibility studies on Hayden, Amarillo, and Silver Bell expansion, but just wanted to get an update from you guys in terms of timing to take those projects to the board.
Also if the decision on moving forward with those projects depend on a decision on U.S. copper tariffs. Thank you.
Thank you for your questions, Emerson. I will answer the dividend and buybacks, and I will let Mr. Leonardo answer the second question. As you know, whenever we do a buyback or we do a share repurchase, we have to announce it and give this or notify the Mexican authorities, like also. The number we are giving, close to 40 million shares, we have that. If we will continue, that depends on how we see the outlook, and we are going to evaluate and analyze that on a daily basis. I will let Mr. Leonardo answer the second question.
Okay. Emerson, just in regards to your question, first of all, I think that the board has seen all of the projects, and the only thing that we've done is that we are updating the level of information that we have. For the Ray expansion, we want to have it at a feasibility level, and we would expect that to be during this year. For Silver Bell, we would expect to have a PEA by the end of the year as well. But in terms of taking decisions in terms of tariffs, neither Silver Bell nor Ray would have an impact. It would have a major impact on Hayden and Amarillo, and we're just following closely any developments in terms of tariffs. I don't know if that answers your question or not.
Okay, thank you. Just a follow-up then on copper products overall, but not necessarily in the U.S. You guys mentioned in the beginning of the presentation that you could also look for alternative ways to include copper exposure in Peru. By alternative means, does this imply that the company could also pursue M&A in the region, maybe acquiring stakes, I don't know, in the region next to Michiquillay, for instance, in Cajamarca, where we know there are some projects that could be developed. Thank you. That's all.
I'll just answer that question as well. Yeah, we are always looking at different alternatives. At the moment, we don't have anything that we would like to report, but yeah, we're actively assessing in different jurisdictions.
Okay. Thank you.
Thank you. Our next question comes from Rafael Barcellos with Bradesco BBI. Please proceed.
Oh, thanks for taking my questions. On the transportation division, as a follow-up, can you provide an update on the investment decision in Argentina? What size of investment we are talking about here potentially, and if you can comment a bit more about timing on this one. I know that it has been some time since the first time you mentioned about Argentina. It seems that you are still in the process, and I believe this one should be closer to get a final decision. In terms of the investment decision in Brazil, I believe it is the first time that you are more vocal in saying that Brazil could be one of the chosen regions for investment here. So can you provide additional color on the size of the investment that you see as a potential here? These are the questions for the transportation division.
As a second question, I just wanted to get your views on the outlook for ASARCO into the second half and 2027 in terms of production and cost. Thank you.
Thank you. I will take the questions on Argentina and Brazil. In Argentina, we have evaluated the current assets that the government has. We estimate that the network that will be bid out, they require about $3 billion to be deployed to bring it up to the level under which we operate. However, it is physically impossible to deploy that $3 billion at once. It will take probably between five to eight years to deploy that amount of CapEx. Again, as we have been very vocal about this, the rules need to be there. As you know, there are two models in the world. One is the North American model, where the railroads are vertically integrated and there is not an open access. The European model where there is no vertical integration, and you have a lot of players running small trains on the network, which makes it not feasible.
Everybody loses money, and the governments need to step in and subsidize. The rules under which they bid are really, really relevant. We are going to wait out. We have been listened by the government in Argentina. We are happy with how we are working, and we are very hopeful that the bases are in this path. Regarding Brazil, the rules in Brazil are very similar to the ones in Mexico, to the ones in the U.S. and Canada as well. There are a couple of assets that are online already that make sense. If at the right price, we would be willing to evaluate them.
I will jump in for the ASARCO question, Rafael, and for the second half, we are expecting between 55,000- 60,000 metric tons, similar to what we have done during the first half of the year. With a similar cash cost now, hopefully lower, but we should be in line with what we actually have. For 2027, we should be around 120,000 metric tons and aiming to have a cash cost as well below the $3 threshold.
Okay. Thank you.
Thank you. One moment for our next question, please. It comes from Alfonso Salazar with Scotiabank. Please proceed.
Thank you, and good day, everyone. I have two questions. The first one is regarding El Arco. I just want to understand what is delaying the project. Apparently, there is something that changed regarding the installation of electric grid, the connection to the electric grid. I just want to understand that if that is the case and how can this change the start of the project. The second question is regarding, again, these potential investments in the transportation division in Brazil and Argentina. I just want to understand how would Grupo México Transportes finance such investments, especially if they are big investments. Is the holding going to inject capital? Is it going to be through debt or any color on that would be pretty much appreciated. Thank you.
Hello, Alfonso. I would probably take question number one in regards to El Arco. We are actively engaged in looking for alternatives to give to the government in terms of how to electrify the peninsula, and we are active on that. I think that there's no further comments in that regard. I think we're just there with different alternatives, and we'll see how that situation develops going forward.
Regarding our project in GMXT, we believe we have enough balance within our own unit to finance these initiatives through debt on the commercial banks and also development banks. As you know, the U.S. government has been very vocal about supporting these type of projects in LatAm.
Okay. So in principle, no capital injection at this point. That's not the plan.
This is not planned. We do not foresee it.
Fair enough. Thank you so much.
Thank you. Our next question comes from the line of Yuri Pereira with Santander. Go ahead, Yuri.
Hi, guys. Thanks for the opportunity. I know that you said that you do not have further information about investment opportunities in Brazil and Argentina, but I would like to pick your brain about the potential structure that you are targeting. As far as I remember, your previous expansions outside Mexico were done with control. Is there any precedent where you captured this kind of synergy, without a controlling position? Thank you.
Yes. As you know, we have been very disciplined in our investments with control. We like to operate. We know what we do in all the units where we invest. I think the most relevant part would be to be able to operate and to put our knowledge into the companies we run. I do not think we would change the way we approach, but we are always open to finding local partners that would strengthen us locally.
Great. Thank you.
One moment for our next question, please. It comes from Henrique Braga with Morgan Stanley. Please proceed.
Hello, everyone. Thank you for taking my questions. Just two, one, for the second quarter, if you could, please, what was the cash cost before and after byproducts in ASARCO during the second quarter 2026? Also, what was the energy that you generated during the second quarter 2026? My other question is that if you could give more color on the current situation in PEMSA. I know you gave some disclosures in the release, but how do you envision the business unit now, and what you are expecting for the rest of the year? Thank you.
Henrique, let me jump in with the cash cost of ASARCO during the second quarter of 2026. It was before byproducts, it was $350, and after byproducts, $324.
Regarding power and the outlook for PEMSA. As we mentioned before, the two 300 platforms went online on July 4th, and they've been operating since. As you know, the two modular platforms that we have, they have never stopped operating. They have run continuously for the past years. The two other platforms that we have, the 400 ones, everything is settled. The contract is to be signed this week. Actually, we are just about to move them away from the port where we kept them for a few months while they were not operating. The exact date of when they will start operating is still not 100% sure, but it should happen between the first or second week of the month of August. So in two or three weeks, we should have them online.
Now, regarding the power generation that we have had, it's 2,244 GW for what we have done in the year, which is 0.6% less than what we had last year. This is in the combined operations of all the power assets that we currently have.
All very clear. Thank you.
Thank you so much, and this concludes our Q&A session for today. I will pass it back to Marlene Finny for closing comments.
Sorry, Carmen. I think we have someone who is trying to make a question but is not able. Can we just give a couple?
Thank you. Standing by.
No? No. We will answer his question afterwards. Thank you so much for joining us today, and thank you everybody for being here. See you next quarter. Thank you.
This concludes our conference. Thank you for participating, and you may now disconnect.