CEMEX Third Quarter 2024 Conference Call Summary

In their recent Third Quarter 2024 Conference Call, CEMEX (NYSE: CX) executives reported a year of significant portfolio optimization, strategic growth, and resilience in the face of natural disasters. The company announced divestitures amounting to $2.2 billion, focusing on operations in the Dominican Republic, Guatemala, and the Philippines.

Despite extreme weather conditions, including three major hurricanes in the U.S. that impacted EBITDA by an estimated $33 million, CEMEX achieved a net income increase of over 200% year-over-year. The company's growth strategy, initiated in 2019, continues to yield favorable results, with a 14% compound annual growth rate (CAGR) since 2020.

Key Takeaways

• Divestitures in three countries reached $2.2 billion, with 90% of EBITDA post-divestment coming from the U.S., Europe, and Mexico.
• A growth strategy started in 2019 contributed 13% to this quarter's EBITDA, with a 14% CAGR since 2020.
• Net income surged over 200% year-over-year despite a $33 million EBITDA impact from U.S. hurricanes.
• Decarbonization efforts led to a 3% reduction in Scope 1 emissions and a €157 million grant from the EU for a carbon capture project in Germany.
• CEMEX plans to reduce net debt leverage to 1.5x in two years and reinvest divestment proceeds in growth, especially in the U.S.
• The Mexican government's housing and infrastructure plans are expected to boost demand.
• Full-year EBITDA guidance adjusted to a low single-digit percentage decrease, with CapEx guidance reduced to $1.5 billion.

Company Outlook

• CEMEX anticipates allocating proceeds from divestitures to growth investments in the U.S. and reducing net debt leverage ratio to 1.5x within two years.
• The Mexican market is expected to recover, driven by government support for housing and infrastructure.
• Increased spending from private and public sectors is expected in 2025, enhancing demand for CEMEX products.

Bearish Highlights

• Extreme weather in the U.S. and record precipitation in Mexico led to volume declines and EBITDA impacts.
• Full-year EBITDA guidance was adjusted to a low single-digit percentage decrease due to weather impacts and currency fluctuations.
• Rising electricity costs in Mexico negatively impacted margins.

Bullish Highlights

• Growth projects contributed $325 million to EBITDA, representing about 10% of the total.
• Aggregate operations became the largest contributor to U.S. profitability, accounting for 36% of EBITDA.
• The EU Innovation Fund's €157 million grant for a carbon capture project in Germany bolsters decarbonization efforts.

Misses

• A 7% volume decline in Mexico and a 6% decline in the U.S. were recorded due to adverse weather and other challenges.
• EBITDA was impacted by $17 million in the U.S. and $8 million in Mexico due to weather conditions.

Q&A Highlights

• Adam Thalhimer from Thompson Davis inquired about strategies to address the company's valuation, with Maher Al-Haffar emphasizing the importance of careful evaluation for any operational changes.
• Jorel Guilloty from Goldman Sachs questioned the impact of Mexican residential demand on CEMEX, with Al-Haffar indicating positive expectations for significant impact starting in 2025.

CEMEX's resilience and strategic focus have allowed it to navigate a challenging environment while maintaining a positive outlook for growth. With a strong emphasis on sustainability and market recovery, particularly in the U.S. and Mexico, CEMEX is positioning itself for continued success in the coming years. The next earnings call is scheduled for February 6, 2025, where further developments will be discussed.

InvestingPro Insights

CEMEX's strategic focus on portfolio optimization and growth is reflected in several key metrics: the market capitalization stands at $7.96 billion, with revenue for the last twelve months as of Q2 2024 being $17.52 billion, reflecting a growth of 7.77%. CEMEX is trading near its 52-week low, providing a possible investment opportunity given the company's positive outlook and strategic initiatives.

Transcript Highlights

Operator: Good morning. Welcome to the CEMEX Third Quarter 2024 Conference Call and Webcast. My name is Adam, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. And now, I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Lucy Rodriguez: Good morning. Thank you for joining us today for our third quarter 2024 conference call and webcast. We hope this call finds you in good health. We are joined today by Fernando Gonzalez, our CEO; and Maher Al-Haffar, our CFO. As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. I would like to remind you that during the third quarter, we announced the sale of our Dominican Republic and Guatemala operations as well as the remaining minority stake in Neoris. This is in addition to the anticipated sale of our Philippines operations, which we announced in April. All of these operations have been reclassified as discontinued operations and are now excluded from our 2024 and 2023 operating results. We expect to close these transactions by year-end, except for Guatemala, which has already closed in September. And now, I will hand it over to Fernando.

Fernando Gonzalez: Thanks, Lucy, and good day to everyone. I'm pleased with the significant progress we have made this year with our portfolio optimization efforts. We advanced materially on our goal of streamlining our portfolio towards developed markets with the announcement of $1.4 billion in asset sales in the quarter, bringing year-to-date announced divestitures of noncore assets to $2.2 billion…

Note: The transcript continues with detailed discussions on various operational and financial highlights.