CEMEX, S.A.B. de C.V. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Health: Achieved investment-grade rating in 2024, leverage ratio at 1.8 times (lowest since GFC). Announced progressive dividend program and $500 million share buyback program.
• Portfolio Rebalancing: Divested $2.2 billion of operations in 2024, rebalanced portfolio towards developed markets (90% EBITDA from US, Europe, Mexico). Net income 2024 was $939 million, record level.
• Decarbonization: Reduced Scope 1 and 2 CO2 emissions by 15% and 17% vs 2020. Received EU innovation funding for carbon capture at Rudersdorf, expected to be first net zero plant.
• Cost Optimization: Launched Project Cutting Edge, a $350 million cost program to deliver $150 million EBITDA savings in 2025. 2024 EBITDA margin 19%, flat to prior year, supported by pricing, cost containment, and business optimization.

Segment Performance

• Urbanization Solutions: EBITDA increased 4% in 2024 with margin expanding by 1.1 percentage points. In South Central America and the Caribbean, EBITDA growth was led by positive pricing dynamics, with cement and ready-mix prices growing 4% and 11% respectively. Urbanization solutions business posted record EBITDA growth of 36% in 2024 with a margin expansion of 5.3 percentage points.
• Mexico: Full-year 2024 EBITDA increased 3% with margin improvement almost 1 percentage point. Fourth quarter EBITDA declined due to tough prior year comparison. Cement volumes grew 6% in first half 2024, declined 7% in second half post-election. Ready-mix volumes supported by formal sector in Northeast and Central regions.
• US: 2024 EBITDA would have increased 3% adjusting for weather events. Hurricane Milton in October 2024 had $17 million impact on fourth quarter. Cement and ready-mix volumes declined 3% in fourth quarter, aggregates declined 7%. 2025 demand driven by infrastructure from Infrastructure Investment and Jobs Act.
• EMEA: Fourth quarter EBITDA grew 43%, margin expanded 3.6 percentage points. Europe EBITDA increased 30%, all European countries showed year-over-year cement volume growth. 2025 expected volume recovery in EMEA driven by Europe's improved construction activity.
• South Central America and Caribbean: 2024 EBITDA positive despite challenging demand, led by pricing. Cement and ready-mix prices up 4% and 11% respectively. Urbanization solutions EBITDA grew 36% in 2024 with margin expansion 5.3 percentage points.

Guidance

• EBITDA: Low single-digit growth excluding FX impact, with FX expected to be headwind in first half, more favorable in back half.
• Free Cash Flow: Expected to increase by ~$500 million vs 2024, with savings in maintenance CapEx, taxes, and cash interest expense.
• Strategic CapEx: $600 million guidance for 2025, focusing on growth investments in US, M&A, and reducing debt.
• Dividends/Share Buybacks: Dividend program is progressive, share buyback program of $500 million available.

Risks

• FX Volatility: Volatility in Mexican peso and FX rates impacting EBITDA.
• Weather Events: Weather events (e.g., Hurricane Milton) affecting volumes in US.
• Trade Policy: Uncertainty in US-Mexico trade policy affecting ready-mix demand in Mexico.
• Tariffs: Potential tariffs on Mexican imports and impact on exports/production redirection.
• Project Execution: Dependence on successful execution of Project Cutting Edge for cost savings.

Question and Answer

Q: Ben Theurer from Barclays asked about capital allocation prioritization and one-off in UK operations.

A: Maher Al-Haffar and Fernando Gonzalez responded on capital allocation focusing on free cash flow, strategic CapEx peak in 2025, and one-off legal case in UK contributing $10 million to EMEA EBITDA.

Q: Carlos Peyrelongue from Bank of America asked about pricing strategy.

A: Maher Al-Haffar and Fernando Gonzalez discussed pricing strategy to maintain/increase margins, with specific examples in US, Mexico, and EMEA.

Q: Alejandra Obregon from Morgan Stanley asked about strategic CapEx EBITDA contribution and dividends/buybacks.

A: Maher Al-Haffar and Lucy Rodriguez explained strategic CapEx contribution to EBITDA and dividend/progressive nature, share buyback program availability.

Q: Gordon Lee from BTG Pactual asked about Spanish tax penalty and provisions.

A: Maher Al-Haffar clarified cash taxes guidance for 2025 and tax provision reversals.

Q: Adrian Huerta from JPMorgan asked about US pricing and aggregates volumes.

A: Lucy Rodriguez discussed US pricing challenges in Texas due to weather and imports, and aggregates volume decline due to quarries at end of life.

Q: Yassine Touahri from Onfield asked about market valuation.

A: Maher Al-Haffar discussed deleveraging, interest expense, and expected re-rating of valuations as earnings recover.