Cemex SAB de CV (NYSE:CX) Q2 2022 Earnings Conference Call July 28, 2022 10:00 AM ET

Company Participants

Louisa Page Rodriguez - EVP, IR, Corporate Communications & Public Affairs

Fernando Gonzalez - CEO

Maher Al-Haffar - CFO & EVP, Finance & Administration

Conference Call Participants

Benjamin Theurer - Barclays Bank

Gordon Lee - BTG Pactual

Vanessa Quiroga - Crédit Suisse

Francisco Suarez - Scotiabank

Nikolaj Lippmann - Morgan Stanley

Anne Milne - Bank of America Merrill Lynch

Yassine Touahri - On Field Investment Research

Louisa Page Rodriguez

Good morning. Thank you for joining us today for our Second Quarter 2022 Conference Call and webcast. I hope this call finds you and your family in good health. I am 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 will now hand it over to Fernando.

Fernando Gonzalez

Thanks Lucy and good day to everyone. The #1 challenge facing our industry at the beginning of this year was pricing and I'm quite pleased with our pricing response. Pricing for our products rose between 12% and 16%. As of second quarter, our pricing strategy has fully offset inflationary costs in dollar terms. We are now focused on the second phase of our strategy to recover 2021 margins. Despite significant macro volatility, our EMEA region demonstrated exceptional resiliency with a 17% EBITDA growth year-to-date. The Urbanization Solutions business continues to grow rapidly. While we are showing important success in our climate action target, we continue broadening and aligning our sustainability goals across our business.

With regards to financial metrics, Fitch upgraded our credit rating to BB+, one notch away from our goal of an investment grade rating. Our return on capital currently at 13% continues to improve growth strategy with an acceleration in project approvals. And finally, we are embarking on the next stage of our CEMEX Go journey to evolve into a fully automated digital customer experience, the first in the industry. From the beginning of this year, we expected pricing rather than volumes to drive growth.

EBITDA growth was expected to be primarily in the second half as we move out beyond the difficult first half 2021 comps that does not incorporate the surge in cost inflation since third quarter 2021. This quarter was expected to be the most difficult second quarter 2021 EBITDA representing the highest since 2007 and highest margin since 2018. So far, the year is playing out in line with those expectations. Strong growth in sales reflects a significant pricing contribution. Our pricing initiatives designed to recover 2021 margins is showing important traction with prices of our core products up double digits. Higher energy distribution, maintenance and import costs explain the reduction in EBITDA and margins.