Earnings Call: Q2 2021

Aug 10, 2021

Good morning, everyone. My name is Indira Diaz, Cementos Argos Allero, and I welcome you to our 2nd quarter results release. On the call today are Juan Esteban Calle, our CEO Carlos Angarita, our Finance Manager, who is in charge of the Financial VP Marisa Velezcheverri, the VP of Legal Affairs Bill Wagner, the VP of the U. S. Division Carlos Tussie, the VP of the Colombia Division and Camilo Restrepo, the VP of the Caribbean and Central America Division. Please note that certain forward looking statements and information during the call or in the reports and presentation uploaded at www.argos.co/ir are related to Cementos Argos' I and A subsidiaries, which are based on the knowledge of current facts, expectations, circumstances and assumptions of future events. Various factors may cause Argos' future results, performance or accomplishments to differ from those expressed herein. The forward looking statements are made to date, and Argos does not assume any obligation to update said statements in the future as a result of new information, future events or any other factors. Today, after the initial remarks, there will be a Q and A session. We will record this Q and A session and upload it in our web. Page. It is now my pleasure to turn the call over to Mr. Kavi. Thank you, Indira, and good morning, everyone. The Q2 of 2021 was marked by the continuation of a strong economic recovery in most of our markets. Notwithstanding, we still face some social, health and political challenges, mainly related to the impact of the pandemic in poverty and employment in some of our territories. As a building materials company, we have just caused in society. We have not only learned to navigate through these uncertain times by adapting and overcoming these difficulties, but have also understood the important role that we play in the recovery of all the countries where we operate by providing sustainable solutions to our customers and quality employment for our people. In Colombia and Honduras, we joined airports with the local governments in the vaccination program, bought around 8,000 COVID-nineteen vaccines for our employees. At the end of July, 71% of our employees in Colombia and 77% in Honduras have had at least the first dose of the vaccines, contributing to the economic reactivation of these countries and to the health and safety of our employees. We are supporting similar vaccination programs in all of our jurisdictions other than the U. S. Our financial results during the Q2 were remarkably positive along our footprint, even though we faced close to 40 days of marches, both blockades and social unrest in Colombia and social and political challenges in Haiti during several weeks. Adjusted EBITDA margin for the 1st semester of 2021, excluding the gaining sale from the ready mix assets sold, reached a record of 20.2%, the highest since 2013. This important milestone is not something fortuitous. On the contrary, it is the result of the consistent execution of best and research, our customer centricity, quest for innovation are the constant pursuit of excellence and competitiveness in our operations. In that sense, we expect this level of margins to remain and improve in the midterm for our company. In that same line, we are very glad to announce that these outstanding results together with the $183,800,000 obtained from the Dallas Freddie Mix divestment allow us to reach the target leverage ratio of 3.2 times net debt to EBITDA plus dividends that we have committed to achieve by the end of 2021. We closed the quarter with a ratio of 3.1 times, the lowest leverage ratio in 8 years. Now referring to our consolidated results, the comparisons versus last year have benefited from the low basis given the quarantines experienced during the Q2 of 2020 in most of our geographies. Adjusted EBITDA excludes for 2021, a $48,000,000 gain in sale from the ready mixed Dallas divestiture. In comparison versus 2019, adjusted EBITDA and adjusted ready mix volumes for that year exclude the figures from the ready mix plants divested at the end of 2019. Cement dispatches reached 4,500,000 tons during the quarter, increasing 42% versus the Q2 of 2020 and 9% versus the same period of 2019, driven by solid demand condition across all markets. Meanwhile ready mix volumes reached 2,000,000 cubic meters, increasing 1.3% versus 2020 and decreasing 18% versus 2019 on a like for like basis affected by the weather conditions in Texas, which experienced heavy rainfalls during the quarter. Revenues on the other hand increased 15.9% year over year and adjusted EBITDA reached MXN522 1,000,000, increasing 25.9% versus 2020 as a result of increasing volumes, strong prices and linear operations associated with efficiencies gained with the execution of RESET. Adjusted EBITDA margin reached 21.1%, expanding 168 basis points versus 2020 and 2 25 basis points versus 2019. Year to date through June, adjusted EBITDA reached MXN 967,000,000,000, increasing 28% versus 2020 and more than MXN 178,000,000,000 on a like for like basis versus 2019. Now to start with our results in each region, I would like to invite Bill to provide more context about the performance of the U. S. Region and our view for the market. Thank you, Juan, and good morning, everyone. In the Q2 of 2021, we have been in strong demand conditions in the U. S. Due to positive momentum in the residential construction and a progressive recovery in the commercial segment. Consequently, both cement and ready mix prices increased versus the Q1 of 2021 in 2% and 1.5%, respectively. Cement volumes grew 8% year over year, while ready mix dispatches decreased 13% with different behaviors across our footprint. The Southeast zone, for instance, had an outstanding performance in terms of volume during the quarter, increasing 6.6% year over year with remarkable growth specifically in the Carolinas. The South Central zone on the other hand was highly impacted by heavy rainfall in Houston and Dallas where weather days increased by 100% 50%, respectively, as well as by the Dallas divestiture that was carried out on June 15th, affecting the last 15 days of sales with a lower comparable basis. Both revenues and adjusted EBITDA remained strong and consistent year over year, posting an increase of 0.2% and a decrease of 1.6%, respectively. The cost efficiencies together with the positive market dynamics allowed us to obtain a record adjusted EBITDA margin of 20.2% when excluding the $48,000,000 from the gain on sale of the Dallas divestiture, very similar to the one obtained during the same quarter of last year when most of the savings from the RESET program were executed in the U. S. As Juan previously mentioned, this margin is a result of hard work of our people in both maintaining the cost efficiencies and making commercial efforts to improve the margins via better negotiations. In Ready Mix for instance, we have achieved around 17% of sales associated to value added specialty products, which have an incremental margin of 8% above regular concrete. These products include colored concrete, macro or microfiber concrete, which adds additional strength with less cracking, and sustainable products such as our pervious concrete, which allows the rain or stormwater runoff to go through our concrete into the sub base, filtering all of the contaminants of the rainwater and sending clean water back into our aquifer. Our backlog continues to be strong in every segment. Civil projects related to road paving as well as commercial projects such as the 3rd phase of Facebook campus close to Atlanta, which is scheduled to start in November and will consume 300,000 yards of concrete over a period of 3 years are currently part of our ready mix backlog. Regarding market dynamics, leading indicators in the residential segment continue on a strong footing. Despite concerns on availability of land and high prices and supply constraints of materials such as lumber, building permits and housing starts increased year over year 38% 45%, respectively, and were relatively stable compared to the Q1 of 2021. Indicators that track Commercial segment also suggest strong business conditions for the coming months. The ABI, which is an indicator of the dynamic of the non residential construction in the next 9 to 12 months, has been in positive territory since February and reached in May one of the highest scores ever reported, driven by the robust growth of the economy. In the same line, the Dodge Momentum Index, despite a monthly decrease of 5%, remains near a 13 year high and well above last year, with both commercial and institutional planning significantly higher than June 2020, driven by projects such as data centers, warehouses and hospitals. On the civil and infrastructure front, all the attention remains over the bipartisan infrastructure framework announced by the White House with an expected investment of $550,000,000,000 to fund roads, water projects and power grid. The bill, which is expected to be fully approved soon, includes $110,000,000,000 in new spending for roads and bridges, meaning that we could evidence increased demand of materials by the second half of twenty twenty two. We are confident that our unique footprint of local cement production and import terminals, the integration of our ready mix plants and our superior value proposition provide a unique opportunity to take advantage of the positive industry trends that we are expected for the coming years. We continue making progress on our strategy to increase profitability by balancing our portfolio mix and asset base and we'll monitor the external risks associated to the Building Materials industry to be prepared to face the challenges of a changing market environment. Thank you, Will. The strong momentum of the Building Materials industry in the U. S. Together with the positive forecast for the years ahead and the outstanding team that we have in place, reinforce the unparalleled opportunities that our U. S. Business has to continue growing and improving its performance and profitability. Now moving to Colombia, I would like to highlight the tremendous effort from our employees, specifically those in supply chain to continue delivering our products to customers amidst the social unrest address experienced during the last week of April and the whole month of May. Thank you, Juan, and good morning. As you just mentioned, during the Q2, we experienced challenging social conditions all over the country, arising from the economic difficulties from our population that worsened with the COVID-nineteen pandemic. This social unrest had nationwide affectations, but was more severe in the southwestern of the country, where our NUBO plant that accounts for 18% of the sales of Colombia had to be shut down for 40 days due to the road blockage that prevented our product from being delivered to our customers. The impact of this situation in our results was limited thanks to the effort and commitment of our employees, who they in and day out gave their maximum effort to be able to safely serve our customers. Cement volumes grew 74% versus the same period of 2020, benefited by a weak comparison base and were only 7% lower than the Q2 of 2019. With progressive weekly recoveries after the lifting of the nationwide road blockage and improvements in the market share of the company versus the same quarter of last year. On the ready mix business, volumes grew 63% year over year, but as lower pace of recovery in former construction and more severe business disruption in the main cities led to a 28% decrease when compared to 2019. Despite lower volumes, we were able to close the Q2 of 2021 with an EBITDA of MXN105 billion, which represents an increase of 143 percent versus 2020 and a decrease of 7% versus the Q2 of 2019, impacted mainly by lower revenues. EBITDA margin stood at 19.8%, a strong result taking into account the recent developments. In terms of pricing, the positive momentum that the country experienced during the Q1 of the year was also affected by the social unrest, posting during the Q2 of 2021 a decrease of 0.8% in cement prices and 2% in ready mix prices year over year. This decrease was also a result of lower sales in the southwestern of the country that has a better average price in gray cement. In that line, we consider this situation to be temporal and expect the market to regain its inertia given the global dynamics in cement trading and its improving prices due to the activation of worldwide economy. The current market dynamics of the country continue to be positive in both the residential and infrastructure segments. Indicators such as the housing starts, which reached during June 2021, a level not seen since 2018, together with the positive development of the self construction trend and the back cement in the country, reinforced this idea. On the infrastructure front, big projects such as the Bogota that will start construction at the end of the current year and the Magalha del Valle that has continued in bidding process that effectively provide positive support for the cement demand forecast during the coming years. Other infrastructure projects such as the Aeolic Park in the Guajira, which is comprised of 11 different projects of Aeolic Energy support the government's commitment to develop sustainable projects in the country. Our portfolio of green solutions that accounts for 16 different products in both cement and concrete had an outstanding performance during the 1st semester of the year. In terms of volume, the cement and concrete sustainable products increased 168% and 24% respectively, versus the 1st semester of 2020 as the result of our comprehensive strategy to deliver sustainable solutions to our clients. For the remainder of 2021, we remain optimistic. Total cement demand in Colombia was 1,070,000 tons in June, fairly strong and back to normal levels, showing the resilience of the market and the speedy recovery of consumption after the marches in May. We are sure that housing and infrastructure will continue to play a central role in the recovery of economic activity and employment. Thank you, Carlos. We believe the fundamentals in Colombia are strong and there is room for more constructive prices going forward, taking into account the significant increases that we are seeing in import parties. Moving on to the Caribbean and Central America region, I would like to highlight the continuity of the positive market dynamics within the region. Camilo will provide additional information on the region. Thank you, Juan, and good morning, everyone. I would like to start by highlighting the strong demand conditions throughout the region, which led to cement volumes reaching a new all time high monthly figure during June. Cement dispatches increased during the quarter 73% year over year and 32% compared to the same period of 2019, driven by the strong dynamics of countries such as Honduras, Dominican Republic and Puerto Rico, as well as by the strong performance of exports and the trading business. The Antis and French Guiana also experienced solid demand and our supply chain has remained robust despite the impacts from the pandemic. Experts from Cartagena to the U. S. Accounted for 96,000 tons during the quarter and together with the boost in local markets led to the year over year increase of 2 46% in trading and 9% in exports. Additionally, an increase in freight cost, clinker and cement costs from Europe and Asia are having an impact on the cost of importers that could materialize in the 3rd or Q4 of the year. Ready mix volumes were significantly higher compared to the previous year, coming from a low comparison base, but are still 56% lower than in the Q2 of 2019, reflecting a slower dynamic of the industrial segment, especially in Panama. The weighted average cement price in the CCA region improved 1% year over year, led by a better pricing dynamic, especially in Honduras and Dominican Republic. Higher volumes and prices led to a revenue growth of 59% versus 2020, while EBITDA increased 88%, reaching $43,000,000 and EBITDA margin expanded 4.86 basis points, closing over 31% for the 2nd consecutive quarter. In Honduras, the construction industry continues to outperform every month driven by the high level of remittances and the government plans for housing reconstruction following the tropical storms in 2020, which have positively impacted the demand of bagged cement within the country. The increasing local demand has been successfully supplied from our integrated plant and our grinding station in Rio Blanquito, located at the north of the country where the tropical storms of 2020 had the biggest impact. The higher production has also been benefited from the new pet coke yard in Rio La Quinta, which allows us to import bigger quantities of solid fuels, reducing costs and guaranteeing the stable quality of the material. Haiti, with similar commercial dynamics related to the remittances, continued to present an increasing demand for cement use in self construction, which unfortunately could not be fully captured during the Q2 by our operation due to technical, social and political difficulties experienced in our operation. From July on, the social unrest arising from the political instability of the country has continued to affect our production due to intermittent blockages that have hindered the entrance from our employees and contractors as well as the fuel supply of our operation. The market perspective continues to be positive in both Dominican Republic and Puerto Rico as a result of the remittances as well as the funds for reconstruction of Puerto Rico Island following 20 seventeen's hurricanes Irma and Maria. The reconstruction activity from tourism, which is expected to resume activity soon in the Dominican Republic, together with the success of the new operational model in Puerto Rico, support the positive outlook for these two countries. Panama, on the other side, remains affected but starts to show signs of economic recovery and better demand conditions as a result of a slight improvement in private construction and the construction of the 3rd line of the metro, which is expected to begin in October. We remain optimistic for the Caribbean and Central America region as there are clear signs of improving demand. Conditions across our footprint together with strong drivers associated to remittances and local recovery plans. Thank you, Camilo. I would like now to make reference to our balance statement. In terms of debt management, we are proud to announce the disbursement of an ESG loan with Bank Colombia for an amount of MXN135 1,000,000,000. The loan, which was disbursed last month, We have reduced interest rates once the company achieves its targets for CO2 emissions, water consumption in the cement business and number of supplies evaluated in sustainability over the tenure of the loan. During the quarter, we successfully closed and received the funds from the divestiture of the ready mix assets located in Dallas on June 15th for a final amount of $183,800,000 including the $180,000,000 initially negotiated plus an adjustment of $3,800,000 from working capital. The funds from the transaction were fully used to amortize debt, reducing our leverage and allowing us to achieve a net debt to EBITDA ratio of 3.1 times at the end of June. We expect this ratio to be below 3 times by the end of the year, the lowest since 2013. Taking into account the positive evolution of the markets where we operate and the continuity of our strategy of deleveraging. Given the outstanding results, the strong cash generation during the first half of the year and the positive outlook of our businesses going forward, our Board of Directors has decided to call an extraordinary shareholders meeting in order to request an approval for an extraordinary dividend of COP 79.97 per share to be distributed in one single payment during the month of September. With this dividend of COP 110,000,000, we intend to recognize and reward our minority shareholders, including the more than 10,000 individuals who are part of our investor base for their support and the trust they had placed in our company during these challenging times of pandemic and economic hardship. I would like to end this intervention by honoring the memory of our colleague and friend, Harri Aluchayo, who was appointed as Vice President of the Colombian region on October 2020 and unfortunately passed away last June. We were very fortunate to work side by side with him for the last 20 years. Our company will guard his legacy and continue to develop the outstanding ideas that he has for our future. May his family find the strength they need to overcome these difficult times. Thank you all for your attention. Indeed, we can proceed now with the Q and A session. Thank you, Juan. We will proceed now with the Q and A session. Please remember that in order to ask a question, you need to raise your hand using the icon that is at the bottom of your screen. I will say your name and company, and we'll enable your microphone. Take into account that you need to unmute your microphone before you speak. The first question comes from Juliana Aguilar from Bancolombia. Hi, good morning, everyone. Congrats on the great results. I have two questions. The first one regarding margins. Do you think the U. S. Operation has reached the desired margin leverage? Or do you see room for further improvement? And in Colombia, when do you expect to reach the 25% EBITDA margin you have previously mentioned as your midterm target? And my second question is regarding ready mix volumes in Colombia and Panama. When do you expect these volumes to reach pre COVID levels in these regions? Thank you very much. Thank you, Juliane, for the questions. I mean, we are extremely happy with the performance and the results of the U. S. Business, but we still think that there is room for improvement. I mean, we have close to a 115 basis point margin expansion in the cement business during the first half of the year in the U. S. However, the margins in Dynamics were flat compared to last year. And they were flat because volumes were impacted for the challenging weather that we experienced in most of the half of the year. So even though margins were above 20%, we still think that there is room for continue improving our margins and the performance of the business in the U. S. Similarly, in Colombia, we're expecting way better margins during the second half of the year. We're expecting higher volumes as most of our major maintenances in Colombia were doing in the first half of the year. So we are expecting to hit that 25% target during the second half. Regarding the normalization of volumes in Colombia and Panama, the industry has been very strong in Colombia after the March season in April May, and we are foreseeing a full recovery of the market for the second half. So the reality is that we even think that the industry will end up growing in 2021, normalizing our volumes in Colombia. In Panama, we think that volumes will improve starting in 2022 and most likely will normalize in 2023. We are not foreseeing a significant improvement in the dynamics in Panama for the remaining of the year. That's great. Thank you very much for your answers. Next question comes from Rodrigo Sanchez from Davivienda Corredores. Yes, good morning and thank you for the presentation and congrats on the results. My first question is, if you could please comment on your dividend policy strategy going forward, especially considering this year you reduced your dividend and offered to receive the dividend in shares that recurrently you have maintained a payout above 100%, which is well above the MSCI cold cap average. And in line with this previous question, I would like to know what's your target debt level for the coming quarters or years since you have significantly reduced debt, but you have also announced new credits? And my last question is if maybe considering the conditions that look a lot more stable than when the pandemic began, if you could maybe provide any guidance on EBITDA for the remainder of the year? Thank you. Thank you, Rodrigo, for the question. I mean, we are extremely happy with the incremental leverage of the company. It is a significant milestone for us to end the Q2 below 3.2 times. That was the target that we set at the beginning of the year. Going forward, our goal is to be below 3 times by the end of December, and we will continue with the stronger momentum that the company has. I mean, we are fairly positive that we will continue deleveraging the company and regaining financial flexibility. In terms of our dividend policy, a significant part of our investor base are individuals. So the reality is that it is important for us to continue paying dividends going forward, And we will do so as long as we continue with the stronger cash generation that we are showing. We are completely sure that we will be able to continue the leverage in the company, but at the same time rewarding our loyal investors that have been part of the company for quite a long time. In terms of guidance, for the second half of the year, we are not providing guidance, but we are expecting a better second half of the year than the first half. So for sure, we will have a very strong 2021. Thank you, Vanessa. Next question comes from Adrian Huerta from JPMorgan. Hi. Good morning, everyone. Thank you, Juan Esteban, for taking my question. On Colombia, you did mention that you expect pricing to start to recover. Can you give us a little better sense of whose your peers, are they operating closer to full capacity? Because what I've seen is that peers, excluding also semis, have are selling now close to a little less than 1,000,000 more tons than what they were selling back in 2019. So I wonder who's gaining market share and if they are close to full capacity that could allow for better pricing. And if we could see better pricing, is that something that we could already start seeing in the second half of this year? Thank you, Adrian. I mean, in our opinion, the fundamentals are there to continue with our price recovery strategy. Demand is strong and we are foreseeing the demand will continue being strong going forward. And on top of that, import parity prices have been increasing in a significant way. Just to give you an example, import parity has increased close to $30 in Colombia. FOB prices are close to $80 and import parity prices on the northern part of Colombia are close to $80 now, close to $80 And import parity prices in general, overall in Colombia should be closer to $120,000,000 $1.15 So the reality is that all the fundamentals are there to continue with our pricing strategy recovery. I would like Carlos just to give you a little bit more color about the outlook in Colombia going forward. Thank you, Juan. And hi, Adrian. No, no, completely agree with you, Juan. And beside that, I think that we need as well to take into account the increase in the internal freight that we are suffering. That is in the case of Colombia. At the moment, because of the blockage, the freight has increased by about 15% versus the month previous to the start of the margins. And as well, the impact that we are having in the generative cost because of the internal freight as well. For that reason, we are because of that because of the demand, we are seeing a very good second half of the year internal prices as well And more optimistic in the 2022 area because there are because in the 2022 probably there are rollover in the contract for the import cement or there is a new contract for the import cement better. Great. Thank you, Carlos and Juan Sebastian. Okay, Adrian. Next question comes from Alejandra Obregon from Morgan Stanley. Congratulations on the numbers, Mentos Argos team. Two questions on my end. First, on the DoT funding in the U. S, I was just wondering if you could provide some color on what you have seen on the behavior of the states in which you operate, particularly on revenue management and the backlog as the states prepare for a greater match linked to the infrastructure package? And then 2nd, on the Cartagena exports to the U. S. And the economics here. So if you can help us understand, first, where they are booked in the volume and sales numbers that you reported? And how has profitability of your exports compared to that of your domestic production at this point? Thank you. [SPEAKER JOSE RAFAEL FERNANDEZ:] Thank you, Alejandro. And I would like Bill to start by answering your question about the infrastructure in the U. S. Yes, Alejandro. Thank you for the question. We feel like the estimated impact, I think, will be good. The local DOTs, I think, are still struggling a bit to kind of comprehend what's going on. I mean, where we've exceeded in our own position there, we've taken a pretty strong approach with the local DOTs and we've improved our share fairly significantly in the last 4 or 5 years of that market. And we want to continue to the White the White House at the $110,000,000,000 that was previously spoken about. I think that we're looking at maybe 3% to 5% increase in volumes that through that segment by 2023, 2024 perhaps. But the states I still think will have to wrestle with their own involvement in those programs and it's pretty undetermined right now. I think we're monitoring okay. It's a little bit of a mixed scenario depending on the states that we operate in. One is a little bit closer to working things out and maybe others. But in general, I think there's an open mind in this about everyone trying to work together to get this moving forward. So we have a positive outlook on that and we're prepared to take advantage of that situation. Thank you, Bill. Regarding the economics of our exports, I mean, we booked the exports in the Central America and Caribbean region. Our Cartagena plant is as competitive as you can get when you compare it with our loyal peers. And we have a freight advantage to export not only to not only to Central America and the Caribbean but also to the U. S. Prices are recording everywhere. So the reality is that we think that we have an extremely positive competitive advantage to continue increasing our exports out of Cartagena. We are planning to export close to 1,000,000 tons out of Cartagena in 2021. For 2022, with the increasing capacity that we have in Cartagena, we are expecting to increase exports by at least 50% going forward. Understood. Very clear. One additional question, if I may. It's on capacity in the U. S. You once mentioned in the past that the adoption of blended cement in the U. S. Was perhaps a strategy that could be considered to liberate capacity in the U. S. So just wondering if it's too early for us to think about that and if you are implementing something linked to this already. Yes, Bill, please answer the question as well. Sure, Alejandro. No, I mean, given that the capacity is certainly high, I mean, building additional type of greenfield operations is not really practical for the and it takes an awful long time in the U. S. Because of permitting issues and things that go on. So I think in the midterm, we still want to continue looking at finding ways to improve our marginal capacity at our plants and that's kind of our focus right now. We also want to continue working with regulatory bodies to kind of support the use of SCMs, which is supplementary cementitious materials such as slag and pozzolins and things like limestone addition and clays. That's kind of our primary focus right now. We've had some success with that and we can also look at maybe potentially increase imports from Cartagena. Yes, Bill and we will, I mean, complement that with close to 5,000,000 tons of import capacity that we have in our terminals in the U. S. Understood. That was very clear. Thank you very much and congratulations again. Thank you, Alejandro. Next question comes from Alberto Aderio from UBS. Hi, gentlemen. Thank you for taking my questions. It's about price in the U. S, if I may. I would like if it's having you heard that August September might have some price increase in 17 U. S. My question is, if this is happening, how has been the adherence to it? Thank you. Alberto, it is happening in our footprint and I would like Bill to give you a more specific answer. Sure, Alberto. So I mean, as we've mentioned, I think before, we put a price announcement out in April and at this point, we've had very good traction. We got announced those increases across our entire footprint. Given the actual conditions in the industry right now, it's pretty tight in terms of supply. So I think all the fundamentals are very, very strong. Our goal as always, I don't like to talk specifically about pricing, but our goal as always is to cover all cost inflation that we have out there that we see and then also try to focus on improving our margins. So in that sense, we continue to monitor and we're trying to balance those decisions as we go forward. So that's kind of the way that we operate. Next question comes from Vanessa Quiroga from Credit Suisse. Hi, good morning. Thanks for taking my question. It is regarding the outlook for capital allocation. Given that this year, you expect to reach leverage ratios below 3x. Do you plan to invest more maybe in bolt on acquisitions or expand in terms of products in within your regions? Thank you. Thank you, Vanessa. What we want to do going forward is to do light CapEx investment in our current footprint and in our current assets, some upgrades and to increase capacity. But well done that, we will continue just trying to improve our ROCE and our results, taking advantage of the very good assets that we have in place. Thank you. Do you have specific targets regarding the return on capital employed? Sure. We still have a gap to close in our ROCE, and our goal for next year is to be at least at the level of our weighted average cost of capital. Okay. Thank you very much. Very clear. Next question comes from Jesse Tuari from Oncrio Investments. Yes, good morning. Good morning, Jassim. Jassim, you are on mute. Can you hear me now? Yes, perfect. Okay. So good morning, ladies and gentlemen. Couple of questions. So could you tell us what is your what was your energy cost inflation per tonne of cement in H1 2021? And what is your expectation for energy cost inflation per tonne of cement for the full year 2021? And in this respect, we've seen a big increase in maritime freight, fuel prices, power prices. And do you see risk of margin pressure in the second part of the year in some region? That would be my first question. And then my second question is on Colombia. You suggested some sequential price improvement. Have you been able to increase prices sequentially since the beginning of July despite the ramping up of EcoCementos? And if you have been able to increase prices sequentially in Colombia, could you tell us what was the magnitude of the price increase? Thank you for your questions, Jesse. We are seeing some cost inflation in energy for sure. The good thing is that we were mostly contracted in most of our markets. The more significant price increases, we have seen it in pet coke and we don't use pet coke in the U. S. We don't use pet coke in Colombia. We only use pet coke in Honduras and we were contracted for the year. So we were kind of able to mitigate that price increases. We have seen a significant increase in rates. In our opinion, that is extremely positive for our company. It is positive for our cement business in Colombia. It is positive for our cement businesses and for America and the Caribbean. And it is positive for our cement business in the U. S. Because we have a lot of local capacity. So that means that import parity prices are increasing everywhere. I don't know if Bill, Camilo or Carlos would like to give a little bit more color on the impact of the cost inflation in energy in each of our markets. So I think, for example, in coal, I was looking at the coal prices in Colombia, it's maybe double what it is what it was last year. So I'm just wondering when could we see an impact of that on your margin? Hi, Justin. This is Carlos. In the case of Colombia, really more than the energy because like when Esteban mentioned, we have a long term contract in energy. We are having some impact because of the energetics increase like the coal, yes. Specifically, the coal, probably this year we have but more than the price of the coal itself is because of the freight of the coal. Because of that, we are having an increase about 15% versus the inflation in Colombia for the year could be very close to 4%. It is pretty significant, yes, in the case of Colombia. And that is converting that into dollars, it could be about $4,000,000 for the whole year. But from the U. S. Perspective, it's basically what you said. I mean, we have negotiations that are protected through the year. We do see some inflation next year, especially in coal. And we just have to take that into consideration when we're managing our costs and our margins. So for us this year, we're okay. Thank you, Riela. Yes, come. Yes, from the point of view of Central European Caribbean region, Juan mentioned it already on the contractual side, but we had also put an increase in pet coke on the budget or in the budget. And additionally, we also had an efficiency out of a larger pet coke handling area that we built in the north of the country, which allows us to have bigger sized vessels, which had a reduction in cost. So with respect to budget this year, we're okay. We'll see what happens for the remainder of the year in pet coke and freight prices. I mean, in terms of your question about prices in Colombia and the impact of Ecocementes, I would like Carlos to give you the answer. Yacine, we are analyzing that. We are analyzing what is how is the competitive environment in Colombia because all of these things, what is happening, we are seeing a better environment for the second half of the year and for sure for the 2022. Yes. But we are analyzing what is the what could be the magnitude of the increase. But for sure, the cement price in Colombia, it has to increase because we are having a lot of pressure in our cost on the cost side. And the reality is that currently, I mean, prices in Colombia are the lowest prices that we have in our footprint. And there is a significant gap vis a vis in for parity prices. Demand is strong. So the reality is that we see a much better and constructive pricing dynamic in Colombia going forward. Next question comes from Carlos Enrique Rodriguez from Forginiti. Good morning, everyone, and thank you for the conference call. I have two questions. The first one is in the U. S. And I was wondering why was the reason for not having better margins in the U. S. With cement dispatches increasing and the ready mix decreasing and taking into account that cement has better margins than the ready mix business. So we didn't see any operational leverage of the Cement business there. And my second question is in Colombia and if you could share with us an estimate figures without the social unrest in Colombia. What level of revenues, EBITDA and Cement and ready mix would have been reached without the social unrest in Colombia? Thank you. Thank you, Carlos. I mean, we saw a margin expansion, a very good margin expansion in our Cement business in the U. S. Margins were close to 26.5 percent in Cement. That is an expansion of close to 115 basis points vis a vis last year. So the reality is that we saw a very good margin expansion. Just take into account that all the major maintenances and the stoppage of the kilns data we're doing in the U. S, they happen during the first half of the year. The reason why you don't I mean, we didn't see a larger margin expansion in the consolidated results of the company was because of the lower volumes that we experienced in the ready mix business. And seasonal rain in the U. S. In most of the during most of the quarter, so that was the reality that impacted our margins. But we are seeing an expansion in both the cement margins and the mix margins going forward. In terms of the impact of the margins in April May in Colombia, we estimate that we lost close to 100,000 tons of sales in cement and a significant and similarly, probably 50% of the sales of ready mix during the May the month of May. So the impact was very important. Carlos probably will give you an additional color on the figures. Thank you, Juan Carlos. Carlos, yes, as Juan Estelle mentioned, we could lost in a range between 80,000 to 100,000 tons because the southwest of the country was totally closed. And our Jumbo plant where we should down our Jumbo plant for very close to 50 days. The EBITDA from that market in a for that amount of cement could be between ARS 15,000,000,000 to ARS 20,000,000,000. Really, if you put that as an extra EBITDA in the quarter, the probably the margin EBITDA will increase in 2% 12 points. That's approximately the effect that we had because of the blockage in the Southwest of the country. Next question comes from Francisco Suarez from Scotiabank. Okay, Francisco, it seems like he's no longer asking a question. So our next question comes from Andres So to from Santander. Good morning, everybody. Thank you for the presentation. My first question is a follow-up about Carlos Enrique's question just now. Carlos, you mentioned a significant volume loss during the quarter due to social unrest in Colombia. I would like to understand now that the situation is a little bit more normal, have you seen some pent up demand recovery? Or is just the regular recovery that you were delivering before that? Andre, no, we are really seeing very close to normal market right now with a really strong strong demand in all of our different regions of Colombia, in the