Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Comercial Chedraui SAB de CV (GCHEF, Financial) achieved a 37.1% EBITDA margin for the second quarter, reflecting strong cost discipline.
- The company reported a 1% year-on-year increase in EBITDA despite a 1% decrease in sales.
- Safety initiatives led to a 14% year-on-year decrease in recordable injuries, showcasing a strong commitment to employee safety.
- The company made significant progress in sustainability, including a 2.5% year-to-date decrease in CO2 gross intensity per tonne of cementitious material.
- Grupo Comercial Chedraui SAB de CV (GCHEF) secured a term loan agreement to enhance distribution capabilities in the Salt Lake City region, strengthening its market position.
Negative Points
- Second quarter sales decreased by 1%, reflecting a challenging demand environment.
- US cement and concrete volumes decreased by 7.1% and 14.3%, respectively, due to adverse weather and economic factors.
- Mexico sales decreased by 2.8% year-over-year, with cement and concrete volumes down by 7.1% and 12.4%, respectively.
- The mining segment in Mexico continues to contract, with no significant improvement expected until 2026.
- The company anticipates that US cement and Mexico concrete volumes will finish the year either flat or with a slight decrease.
Q & A Highlights
Q: Can you clarify the guidance for cement volumes in Mexico and the expected growth?
A: We now anticipate cement volumes in Mexico to be flat for the year, with growth continuing around mid-single digits. For the US, we expect cement volumes to be flat or slightly decrease. Our target to achieve EBITDA growth remains unchanged.
Q: What should we expect for maintenance CapEx in the second half of the year?
A: We plan to continue our maintenance CapEx according to our schedule, with an overall target of $70 million for the year. This includes reinvesting in our plants and optimizing our distribution network.
Q: What drove the strong EBITDA performance in Mexico, and is it sustainable?
A: The strong performance was driven by favorable fuel and power costs. We expect these savings to continue, and if volumes increase, we will see better cost absorption, further improving EBITDA per tonne.
Q: Can you elaborate on the volume drop in the US and its causes?
A: The volume drop was due to both economic factors like high interest rates and weather-related delays. We are working to quantify the exact impact of weather and will provide more details later.
Q: Are there any planned price increases for construction cement in the US and Mexico in the second half of the year?
A: No, we do not plan any price increases for construction cement in the second half of the year. We are focused on maintaining current price levels despite inflationary pressures.
Q: What is the magnitude of potential M&A targets you are considering?
A: We are looking at both bolt-on acquisitions that can be integrated into our existing network and larger targets that could start new networks. In the aggregates space, we are focusing on companies with substantial reserves within our footprint.
Q: How resilient are cement prices given the current market conditions?
A: We expect cement prices to remain stable even with lower volumes. The industry consolidation and our proactive commercial strategies support this resilience.
Q: What is the outlook for the mining segment in Mexico?
A: We do not expect improvement in the mining segment in the second half of the year. The segment will continue to decline until new projects come online, which is expected around 2026.
Q: Can you elaborate on your capital allocation strategy?
A: Our top priority is growth, including the Odessa plant expansion and sustainability initiatives. We are also actively looking for M&A opportunities. We have consistently increased dividends and have a small buyback program.
Q: How is July performing compared to June, and what is your visibility for the second half of the year?
A: July is performing better than June, and we expect volumes to be flat for the year compared to last year. We are also actively managing our gas costs through hedging strategies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
