Good afternoon, and thank you for holding, and welcome to Grupo México's third quarter 2023 earnings conference call. With us this afternoon are all of Grupo México's top executives, who will discuss the third quarter 2023 financial performance of the company, 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 risk 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 register to the call and press star one, one. A copy of the slides that the company will be reviewing today is available on their 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, I'll pass the call to Ms. Marlene Finny de la Torre.
Thank you so much, Carmen. Good morning everybody, and thank you for joining us today for Grupo México's third quarter earnings conference call. Sitting with me today are the top executives from our three divisions. Unfortunately, I would like to take a moment to pay due respect to Mr. Javier García de Quevedo. No, we are not all the top executives from our three divisions. We have to pay due respect to Mr. Javier García de Quevedo, who passed away recently. We can't believe we have to say goodbye far too soon. He will always be remembered as one of the early shapers of Grupo México, and most importantly, as an extraordinary leader and even a better human being. May he rest in peace. He will be missed by everybody here, I think. Definitely.
So after that, I will continue to our call. So during our call, we will be following a presentation that can be downloaded from our website or followed by us, accessing the webcast, as Carmen mentioned at the beginning. Today's detailed program can be found on slide number three. On slide number three. I will kick off with Grupo México's ESG highlights, followed by the quarter's scorecard and financial highlights. Then Mr. 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 be then followed by Mr. Isaac Franklin, who will go through the financial results and main events of the Transportation Division. Last but not least, Mr. Francisco Zinser will comment on the amazing results of our Infrastructure Division and relevant events which occurred during the quarter.
As per usual, at the end, the line will be open for questions and answers. Before continuing with our results, I want to highlight that besides lower copper prices and some inflationary pressures, Grupo México continues to show positive results in revenues, EBITDA, and net income during this quarter and the year. These good operative results allow the company to continue its growth trend, focusing on long-term investments and creating a positive impact on its stakeholders. With that being said, let me start with our main ESG highlights on slide number five. On our safety prevention approach, our Buenav ista del Cobre unit received the ELSSA certification after a thorough audit performed by the Mexican Social Security Institute. This is a very important recognition for the Buenav ista mine.
Touching on our innovations in water usage and efficiency, I'd like to mention that our new savings dam filtration plant in Quebrada Honda in Peru reclaims around 6,000 cu m of water per day, making this filter press the largest of its kind in the mining industry worldwide. We continue to promote health and well-being, this time through strategic alliances between two nonprofits organization and Plan de la Salud del Doctor Vagón . And continue with that, let's continue to our scorecard on slide number six. On slide number six. Our communities, y eah? Sorry. Our community's revenues for the first nine months of the year total close to $11 billion, representing an increase of 8.7% when compared to the first nine months of 2022, and 17% higher on a quarterly basis.
This was mainly due to higher copper volume sold, good metrics in our transportation, and remarkable performance of our infrastructure division. Following the same trend, our operating income and EBITDA show important gains for the first nine months of the year, increasing 7.6 and 9.2, respectively, when compared to the same period of last year. These increases are even higher when comparing the quarterly results of 2022 versus 2023, with both metrics improving over 25%, despite having a higher net cash cost, cash cost, which amounted to $1.2 per pound. A 6% increase on a cumulative basis.
As for production, we continue to have higher copper production on a cumulative basis, roughly four, roughly a 4% increase when compared to the first nine months of 2022, even though we saw a slight decrease of 1% on a quarterly basis. Leonardo will dive deeper into the mining results afterwards. It's important to say that our board approved one peso per share dividend. This increased from the last quarter of eight cents and translates into a 5.4% implied dividend yield, which is one of the highest in Mexico. Moving forward to slide number seven, you can find a summary of our financial highlights there, so and okay, just to have in hand and in case you need it at any point during the presentation. So let's continue to slide number eight. Thank you.
As you can see here, Grupo México maintains a solid balance sheet with low leverage, a net debt-to-EBITDA ratio of 0.3x . This is because of strong cash generation that we have seen in all of our divisions. As you might already know, our debt is mainly issued in U.S. dollars, representing 77% of the total debt, while the rest is mainly denominated in Mexican pesos. Ninety-five percent of our total debt was issued with a fixed rate. On this slide, you can also see the dividend paid from 2021 to 2023, and the implied dividend yield, including the MXN one cash dividend for the quarter approved by our board, which translates, as I mentioned before, into a 5.4% dividend yield.
We continue to have a comfortable debt maturity profile, as you can see in slide number nine, with no payment of over $1 billion until 2035, and our cash and equivalent positions ended the quarter with $6.8 billion dollars. Now, I'll let Mr. Leonardo Contreras Lerdo de Tejada 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 some remarks on the current copper market on slide 11. Even though the average LME copper price increased 8% in the third quarter of 2023, compared to the same period of last year, from an average of $3.51- $3.79 per pound, we continue to see uncertainty in the basic metals markets due to the slow recovery of the Chinese economy, a potential recession in Europe, and the expected soft landing or minor recession in the U.S. We continue to see very low copper inventory levels, despite the 24 increase by the end of September, closing the quarter at 295,000 tons.
On the other hand, most copper market intelligence houses are now expecting a surplus of around 170,000 tons by year-end. We also believe that a stronger market, a stronger than expected U.S. dollar, is reducing metals prices, including copper, which are expressed in that currency. It is important to emphasize again, that copper plays a leading role in the global shift to clean energy, correlating positively with our assertion that the underlying demand for copper will be strong in the long term, and that the current cycle of relatively low prices will be short-lived. Now, let's move on with the mining division, financial highlights. Mining division, financial highlights, mining division, financial highlights, mining division, financial highlights.
Please stand by for some minor background noise. You may continue.
Now, let's continue with the mining division's financial highlights. First, as Marlene previously mentioned, higher copper sales volume, along important increases in moly and silver prices, helped mitigate the price decrease of copper and zinc, and allowed us to reach $8.3 billion of revenue for the first nine months of 2023, a 5% increase when compared to the same period of last year. Our year-to-date EBITDA totaled $4.16 billion, 5.5% higher than 2022, and 29% higher than on the third quarter basis, setting our EBITDA margin at 50%. We ended the period with a total copper production of 765,000 tons, almost a 4% increase compared to the first nine months of 2022, due to an increase in production in Peru and ASARCO.
On a quarterly basis, we saw a slight decrease of 1% due to lower ore grades in Cuajone, which were partially offset by a 7.5% production increase in ASARCO. Increases in production costs due to inflationary pressures resulted in a 6.2% increase in net cash costs year to date, settling at $1.20 per pound, and $1.29 during the third quarter of 2023. Nonetheless, we continue to be the cost leader in the worldwide industry. As for our CapEx, we invested $837 million during the first nine months of 2023. I would like to continue talking about our projects and their progress in slides 13 and 14. Let's first talk about our short-term projects. Our Pilares project in Sonora, Mexico, will significantly improve the overall mineral ore grade.
We have invested around $144 million of $176 million, and is currently operating and delivering copper mineral to the La Caridad facilities. In our Buenav ista Zinc Project, also located in Sonora, we have invested most of the $416 million, and have around 99% progress. Additionally, we have initiated a commissioning process. The plant ramp-up has been pushed back to the first quarter of 2024, given that we have some technical difficulties with the concentrators. As for El Pilar, the basic engineering has been completed, and the company continues to develop environmental activities on site, while external engineering and technology corporations develop the project's engineering. Now, moving on to our long-term projects.
In the Los Chancas, our project in Apurímac, Peru, as of September 30, we continue to have talks with the Tiaparo community representatives to acquire part of the land required for the project. Hydrogeological and geotechnical studies will be set up to gather additional information regarding the deposit's characteristics. In our Michiquillay project, we continue supporting Michiquillay and La Cañada communities' social programs, while exploration activities are underway. As of September 30, 2023, we have drilled 47,000 meters and obtained 15,000 core samples, which are currently under evaluation. On slide 15, you can see our robust pipeline with all of our upcoming projects and their impact on production, as we continue our journey to reach roughly 2 million tons of copper produced per year. If you happen to have any follow-up questions, we will be pleased to address them during the Q&A session.
Now, I will let Isaac comment on our transportation division.
Thank you, Leonardo, and good morning, everyone. Thanks again for joining us. Continuing with the Transportation division's results on slide 17, I would like to talk about our financial highlights for the first nine months of the year. First, I'm glad to announce that although having mixed results across segments, we have achieved excellent financial results, with revenues totaling almost $2.4 billion during the first nine months of 2023, mainly driven by a strong performance of the automotive segment. Along these lines, our EBITDA totaled over $1.1 billion for the first nine months of 2023, a 20.4 increase when compared to the previous year, and 10.1% when compared on a quarterly basis year-over-year. This translates into a 46.2% EBITDA margin, a 60 basis points expansion year-over-year.
Continuing with the good notes, our transported volumes saw a 5.2% increase in total net ton-kilometers over 1.4 million cars hauled year to date. Our net income totaled $373 million on a cumulative basis, a 10.2% increase when compared to 2022. Lastly, as you might already know, a dividend of 50 cents of peso per share was approved by our board. Continuing with the main variation of our revenue on slide 18, as I just mentioned, we saw mixed results through our different segments during the quarter, with the automotive segment above the rest, with an increase of 47% due to volume market share gains and empty car viability alone, increased imports of Asian brands.
As a reminder, these variations are considering results in Mexican pesos, so this might vary using a different currency. In relative terms, this quarter's second top performance was metal segment, which saw an increase of 17%, as we continue to see higher scrap and slab imports, as well as new freight of copper cathodes. The other segments which saw double digits revenue growth was cement, where local demand in Mexico and the U.S. continued to increase new construction projects. With low growth, we have at the agricultural segment, increasing 0.2%, as the volume of shuttle trains from the U.S. increased due to competitive prices, but offset by a decrease in local crops due to the market price difference. The segments which saw decrease in revenues were industrial, with 3% decrease, mainly affected by programmed maintenance in one of the largest beer plants during the third quarter.
Minerals with 10% decrease caused by the shutdown of one of the larger steel plants in Mexico, and less iron ore extraction in one of the mines served by GMXT. Intermodal, which saw an 11% decrease in revenue, as although seeing a recovery in September, a slowdown in the U.S. retail markets negatively affected strong results in Mexico, propelled by new capacity and market share gains. Chemical at the plant relocation, resulted in less acrylic acid freight and major resin companies reduced their volume due to plant maintenance. Lastly, the energy segment saw a 14% decrease in revenue generation, as the shutdown of one of the mines served by GMXT resulted in reduced coal volumes, along with reduced fuel oil volumes due to liquidity issues faced at one of our clients. Now, let's take a look at our operating metrics, shown in slide 19.
In general, metrics showed a sustained improved performance, as we saw a good combination between a 4% increase in average train speed and a 12% reduction in dwell time. That resulting in an improvement of 6% in car velocity during the first nine months of 2023, settling at 288.1 km per day. As for the rest of the metrics, despite not showing improvement, they allow us to maintain competitiveness and provide an efficient and timely service for our customers. On slide 20, you can see our expected CapEx for 2024. GMXT's board approve a plan to invest $460 million during the year for maintenance, growth, efficiency, and special project. This will allow GMXT to continue with the required levels of investment for infrastructure and service improvement.
Around 62% of the yearly CapEx will be invested in maintenance, including new rail and ties, locomotive and machinery overhauls, bridges and surfacing, through which we also gain efficiency, speed, and reliability of our service. Our $40 million growth CapEx will be deployed for the construction of the Pesquería branch, center marketing project, siding enlargement, and the balance on being double tracked. For special projects, we expect an investment of $88 million, which we invested in El Mexicano Tunnel rehabilitation, the Celaya bypass, the Monterrey bypass, and our safety program. Lastly, our expected CapEx for efficiency project during 2024 totals $41 million, including yard reconfiguration, digital infrastructure, and telecommunication equipment. This concludes a general overview of the Transportation Division. I will now let Francisco Zinser comment on the Infrastructure Division.
Thank you very much, Isaac, and good morning, everyone. I'll start by going through the financial highlights of the Infrastructure Division, shown in slide number 22. I'm proud to announce that we continue to have a solid performance during the 2023 year, and generating value and growth in our different business units, with revenues increasing over 4.1% on a cumulative basis, year-over-year. All our business units have achieved significant growth at the sales, EBITDA, and net profit level, and we are on track to close 2023 at record levels of both sales and EBITDA. Mostly, thanks to increased daily progress in our 6 drilling rigs, increased traffic volumes and inflationary tariffs adjustments within our toll roads business unit, enhanced production levels in the engineering business unit, and a successful integration of the real estate operations into our division's results since April nineteenth.
Our unwavering commitment to operational excellence, along with strict cost effectiveness within the energy business unit and substantial cost advantages in our construction business unit, allowed us to increase our net income and EBITDA 70.6% and 31.6% respectively on a cumulative basis compared to 2022, totaling $57 million of net income and $261 million of EBITDA. On a quarterly basis, the increases are even higher, netting 140% increase in net income and 37.7% in EBITDA versus the third quarter of 2022. To close the Infrastructure Division highlights, I would like to go through some of our most relevant events depicted on slide number 23.
Perforadora México, PEMEX, continues showcasing outstanding operational efficiency as of the end of the third quarter of the year, with a 96.1% rate, efficiency and consistent profitability improvement. Year to date, PEMEX has reached $152 million in revenues and an EBITDA of $77 million, a 32% and 50% increase respectively when compared to the same period of last year. Continuing with the good notes, I'm pleased to announce that our toll roads achieved a 34% net sales growth on a cumulative basis, as we continue to experience a steady rise in daily traffic and higher tariffs due to inflation. The business unit revenues totaled $49 million, while EBITDA stood at $33 million.
Lastly, our new real estate business unit has established itself as one of the main drivers of growth for the division, by adding $33 million in revenues and $21 million in EBITDA by the end of September 2023. Where increased rental income and fees, along with improved occupancy rates, which stand now above pre-pandemic levels at 94.4%, resulted in a 21% increase in revenues. That would be all for the Infrastructure Division. Now, I will let Marlene give her closing remarks.
Thank you so much, Leonardo, Isaac, and Francisco, for your comments. Thank you everybody, again, for your time and attention. Now, we will open the line for the Q&A session.
Thank you. I will open the lines now, and as a reminder, to ask a question, please press star one one, and to withdraw the question, press star one one again. Please stand by while we compile the Q&A roster. All right, our first question comes from the line of Carlos de Alba with Morgan Stanley. Please proceed.
Yeah, thank you. Good morning, everyone. Maybe, maybe, Isaac, I'll... I would like to ask you, what, what is the impression, or what is the view of the, of the group regarding the petition of the government to run or to offer a passenger service in, in the existing railways, in México? And, and to what extent is this, feasible, an option for, for the company? And, and could it be profitable, even, you know, first, can it be done? Second, could it be profitable? And, yeah, and just overall, what is the company's position on this, on this petition?
Thank you, Carlos, for your question. Well, regarding that, it's been very public from the presidency, their willingness to run and operate passenger trains. We're in a very early stage of that. We'll take a look. There are many studies to be conducted regarding demand and regarding the need of infrastructure and all that. So we are open to do the studies and to collaborate with the government regarding that.
But this, we are in a very early stage in order to tell profitability or feasibility. So we're just starting with this, and maybe in the coming months, we'll be able to comment more on that.
All right, thank you very much, Zach.
Thank you. One moment for our next question, please. It comes from the line of John Tumazos, with Very Independent Research. Please proceed.
Thank you. My question is whether the unit costs at the ASARCO division in Arizona rose or fell, and what are the five-year plans for capital investment and output growth in it? I'm observing that the third quarter cash costs of Southern Copper fell $0.05 or 5%, but Grupo México rose 6%, while ASARCO's output rose 7.5%.
We lost you, John.
Cost hike was from a mix effect or whether ASARCO's costs were rising.
Good afternoon, John. This is Leonardo. In regards to your question about the unit costs at ASARCO, when you compare it quarter or on a yearly basis, quarter-over-quarter, we were 1.5% below. The outlook that we have for the next 5 years is we would be investing in maintenance CapEx. We have around $80 million-$100 million on a yearly basis. And we have an output of copper around 120,000-130,000 tons of copper, depending on the mine plans. However, we have several analyses that we're doing at the three of our units, in which we are foreseeing potential expansions.
One is in transitioning from oxides to sulfides, and then Ray, we're potentially looking at an expansion, and there's Mission, and the Mission as well. So, however, we're not at the feasibility level still, so, hopefully we can have more clarity and more visibility by next year.
Muchas gracias, muy amable.
Thank you. One moment for our next question, please. Comes from the line of Sofía Martin with GBM. Please proceed.
Hi, thank you for taking my question. I have three particular questions. First of all, could you give us any color on production for ASARCO for the rest of the year, 2024, and any more guidance going forward? Two, could you also explain the rationale behind the increase in the dividend source to better understand these dynamics going forward? And my last question is related to the copper market. What do you see for next year? Thank you.
Hey, good afternoon, Sofía. If you want, I will just jump in real quick on the production of ASARCO. We should be north of 116-117 for this year, and the guidance for 2024 should be around 122-123. I don't know, Marlene, do you want to answer the next question?
Sure. I will answer regarding dividends. We saw an increase in the Grupo México's dividend because of the cash generation that we had during the quarter and the cash needs that we are expecting for the fourth quarter. So as you know, we assessed that during the board meeting, and this is a decision taken at the board level on a quarterly basis. This is as well we do it. And we decided it was a good moment to increase the dividend from last quarter, and because of the cash need and the cash generation. I don't know if that answers your question. I'm sorry, I didn't get your third question. It was a copper market? I'm gonna let Leonardo or Raúl answer that if you want.
Yeah, Sofía, just thank you, Marlene. Just on the copper market, again, as we mentioned before, you know, we're seeing China is struggling to reactivate, a potential EU recession and slowdown in the US. That gives us insight that, you know, copper prices should be around the where we are at the moment, probably north of them, around the $3.80-$3.90 threshold. That we might be expecting for next year. But we're still waiting to see if China accelerates, which is possible.
Thank you very much.
Thank you. One moment for our next question, please. Comes from the line of Camilla Barder with Bradesco. Please proceed. Camilla, please check your mute button.
Hello, can you hear me?
Yes.
Thank you.
So, I have one question on Southern Copper. It has a very strong performance in the quarter, but I think that part of that may be attributed to $100 million revenue, that it's not explained by core revenues. So I was just wanting to check if it's could be attributed to open sales, provisional adjustments for molybdenum, or if something else. And on that, if you also could comment on your expectations for moly prices in the upcoming quarters. And the second one, on ASARCO, ASARCO's cash costs have increased in the quarter, but I think it's because lower by-product revenues, right? So if you could provide some color on ASARCO's cash costs before by-products for Q3, and also your expectations for the upcoming quarters, it would be great. Thank you.
If you may, let me answer on the first question. Yeah, well, our sales has always receive adjustments on open sales for mainly copper concentrates and molybdenum concentrates. We have seen some positive adjustments through the year because prices has been recovering, recovering, particularly for molybdenum, if you look at what we where we were a year ago, and copper also. But I will say that most of the positive adjustments are coming on the moly side. And speaking about molybdenum, I understand that you want an outlook on the market. Is that your question?
On price-
Yeah.
On your price direction.
Mainly what we're seeing now, it's that the molybdenum market, which is a very small one, it's a very small, relatively speaking with the copper. The size of the copper market is 10 or even more times the molybdenum market size in terms of volume. And in the case of molybdenum, we are expecting the market to be in deficit now. And the drivers of growth in demand will be mainly the defense and aerospace industries that are requiring the kind of steel alloys. That are consumers of molybdenum as part of the qualities that molybdenum has been allowing to enhance hardness as well as corrosion resistance of steels.
Okay. Thank you.
Thank you, Raúl. Let me go on to question number two, Camilla, and it's basically on the, on the ASARCO increase, on the cash, cash cost related to by-products. Not necessarily. We basically have a small, a small accounting adjustment relative to our slag processing that we were doing in Hayden. Basically, what we had, it took us some time to weigh and to put into stabilization our production facilities. So I think that now going forward, we shouldn't have these metallurgical adjustments, was one of the causes. And going forward, I mean, if we compare it to the last year, the nine months, we're basically 1.5% above last year. And what we're foreseeing for next year is we should be lower, no?
That's what we're aiming for, to be south of those $2.90 per pound. I don't know if you have any other further question.
No, that's it. Thank you.
Sure.
Thank you. This concludes the Q&A period. I will turn the call over to Marlene Finny de la Torre for her final remarks.
Just wanna thank everybody for being here today, for your questions, and if you need anything, let us know. Thank you so much, and hope to see you next quarter or hear you next quarter. Bye.
Thank you, everyone, for your participation, and you may now disconnect.