CEMEX(CX) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported strong topline growth of 8% on a like-for-like basis, driven by continued demand and pricing efforts to offset input cost inflation [5][6] - Consolidated EBITDA margin dropped by 1.6 percentage points due to supply chain issues and rising costs [6][16] - Free cash flow after maintenance CapEx was approximately $370 million, decreasing from the previous year due to higher maintenance and working capital investments [8][38] - The leverage ratio improved to 2.74x, a reduction of 0.11x sequentially [8][16] Business Line Data and Key Metrics Changes - Total domestic cement sales grew by 2% on an average daily sales basis, with ready-mix volumes up 5% and urbanization solutions sales growing by 16% [10][11] - In the U.S., cement prices increased by 2% sequentially, marking the first time in 15 years that a second round of national cement price increases was introduced in the same year [22][31] - In Mexico, net sales increased by 10%, driven by strong pricing and volumes, although cement volumes declined by 3% due to adverse weather [25][26] Market Data and Key Metrics Changes - In the U.S., cement volumes grew double-digit in three of four key states, with demand primarily driven by the residential sector [21][24] - In EMEA, European cement volumes increased by 4%, led by growth in the UK and Poland, while Asia, the Middle East, and Africa saw a slight decline [31][32] - South Central America and Caribbean operations reported a 10% year-over-year increase in net sales, with regional cement volumes up 5% [34][35] Company Strategy and Development Direction - The company plans to continue adjusting pricing strategies to recover input cost inflation, with expectations for multiple price increases in 2022 [14][100] - The focus remains on bolt-on investments and enhancing operational efficiency through digitalization and alternative fuels [80][82] - The company is committed to sustainability, having signed the business ambition for a 1.5-degree commitment and aiming for significant reductions in carbon emissions [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the outlook for volumes in the U.S., despite a slowdown in residential growth, expecting continued demand from industrial and commercial sectors [24][56] - The company anticipates that inflationary pressures will persist, particularly in the U.S. and Europe, but believes that pricing strategies will help mitigate these impacts [106][109] - The economic outlook remains favorable, with expectations for growth driven by pandemic reopening and fiscal stimulus [56][116] Other Important Information - The company is refinancing $3.25 billion of bank debt, improving terms to reflect an investment-grade credit profile [9][42] - The company reported a non-cash impairment of approximately $500 million related to goodwill in Spain and the UAE, resulting in a net loss of $376 million for the quarter [41][42] - The company has seen a significant increase in the use of alternative fuels, which is expected to reduce costs and carbon footprint [49][50] Q&A Session Summary Question: Guidance and Expectations for EBITDA Growth - Management indicated that the fourth quarter EBITDA growth is expected to be better than the third quarter due to adjusted pricing strategies and lower maintenance levels [63][66] Question: Strategies to Offset Margin Erosion - Management highlighted the importance of pricing strategies and cost reductions, including increased use of alternative fuels and digitization efforts [76][78] Question: Pricing Dynamics in South America - Management noted that pricing strategies vary by market, with some countries experiencing underutilized capacity affecting pricing effectiveness [92][93] Question: Persistence of Cost Increases - Management expects inflationary pressures to continue, particularly in the U.S. and Europe, but is confident in managing costs through better transportation contracts and production ramp-ups [106][110] Question: Early 2022 Guidance Comfort Level - Management remains positive about the 10% growth in EBITDA for 2022, citing strong market fundamentals and ongoing demand [115][116]