Alejandra Obregon

Alejandra Obregón from Morgan Stanley asked CEO Jaime Muguiro to reflect on his first year in the role, identifying underappreciated opportunities and risks, major upsides, and challenges CEMEX faces beyond 2026 in achieving its long-term goals.

Answer

CEO Jaime Muguiro highlighted several opportunities: enhancing shareholder returns through improved free cash flow conversion, further structural recurring savings (including AI deployment), accelerating profitable decarbonization in Europe for competitive advantage, boosting free cash flow by reducing interest expenses, and disciplined bolt-on M&A in the U.S. (prioritizing aggregates and adjacent businesses). He also mentioned rebalancing the portfolio. Challenges include geopolitical aspects, which are outside their control, reinforcing their focus on controllable variables.

Alejandra Obregón asked the CEO to reflect on his first year, identifying underappreciated opportunities and risks, the biggest upsides found, and challenges beyond 2026 that will guide CEMEX towards its long-term goals.

Answer

CEO Jaime Muguiro highlighted opportunities such as enhancing shareholder returns through improved free cash flow conversion, further structural recurring savings (including AI deployment), accelerating profitable decarbonization in Europe, boosting free cash flow by reducing interest expenses, and disciplined bolt-on M&A in the U.S. Challenges include geopolitical aspects and managing the 'new normal'.

Alejandra Obregón asked about the optimization plans and yield improvement initiatives at Cemex's Balcones quarry in Texas, how these translate into profitability by substituting imports, and the potential for similar improvements at other U.S. plants.

Answer

CEO Jaime Muguiro explained that Balcones is using artificial intelligence to automate raw meal, kiln, and cement mill operations, leading to high single-digit to low teens yield increases. This technology is being scaled across all U.S. cement plants, with a target of an incremental 1 million short tons from the existing asset base. This strategy is expected to expand margins by replacing imports and improving energy efficiency, potentially boosting U.S. cement margins by 2%-3% midterm.

Alejandra Obregon asked for details on the optimization plans and yield improvement initiatives at the Balcones quarry in Texas, how these translate into profitability improvements through import substitution, and the potential for similar improvements at other U.S. plants.

Answer

CEO Jaime Muguiro explained that Balcones uses AI to optimize operations, leading to high single-digit to low teens yield increases and over 500,000 short tons of increased cement production this year. This expands margins by replacing imports and improving energy efficiency. He sees potential to scale this technology to all U.S. cement plants, targeting an incremental 1 million short tons and a 2% to 3% midterm cement margin improvement in the U.S.

Alejandra Obregon from Morgan Stanley asked for a regional and product-level perspective on where the benefits of 'Project Cutting Edge' are most likely to be realized.

Answer

CEO Jaime Dominguez detailed the impact by pillar: supply chain optimization will primarily benefit cement and aggregates; fuel sourcing will impact cement; operational efficiency gains are focused on U.S. cement; procurement savings and overhead reductions will be company-wide; and a review of the ready-mix network is expected to enhance margins in that business.

Alejandra Obregon of Morgan Stanley followed up on capital allocation, asking if the incremental EBITDA from the $600 million in strategic CapEx was included in the 2025 guidance and sought clarity on the timing of dividends and buybacks for the year.

Answer

CFO Maher Al-Haffar confirmed the 2025 guidance already includes all contributions from capital allocation, including an expected $80 million in incremental EBITDA from growth investments this year. He noted the dividend policy is progressive but subject to board approval, while the $500 million buyback program remains an opportunistic tool. Executive Lucy Rodriguez added that the growth portfolio's contribution is expected to double from $350 million to $700 million by 2028.

Alejandra Obregon inquired about U.S. cement demand, seeking details on end-market performance (infrastructure, residential, industrial) and the outlook for the second half of the year based on backlogs.

Answer

Executive Lucy Rodriguez explained that infrastructure demand remains vibrant due to IIJA projects. The residential sector has slowed more than anticipated, particularly in multifamily, due to affordability and high mortgage rates. Industrial and commercial demand is mixed, with commercial being slow but manufacturing and onshoring projects providing support. Rodriguez expressed optimism for the second half, citing easier comps, better weather, and market share recovery efforts.

Asked for insights into conversations with existing tenants, specifically if any tenant groups are more hesitant due to tariff concerns. Also inquired about the potential emergence of new industrial ecosystems, like IT hardware, in the Bajio region.

Answer

Executives reported positive conversations, stating that key sectors like auto, medical devices, and e-commerce remain strong and are adapting to tariff scenarios. They confirmed seeing increased demand from electronics and tech companies, particularly in Guadalajara and potentially Ciudad Juarez, indicating a growing ecosystem.

Alejandra Obregon sought insight into the existing tenant base, asking if specific industries were delaying decisions due to tariff risks and if new ecosystems, like IT hardware, were emerging in the Bajio region.

Answer

CEO Lorenzo Dominique Berho Carranza noted that key sectors like auto, medical devices, and e-commerce remain strong. He confirmed seeing increased demand from electronics and technology companies in the Bajio region, particularly Guadalajara, a trend he expects to grow.

Alejandra Obregon from Morgan Stanley sought insight into the behavior of existing tenants, asking if specific industries are showing more hesitation due to tariff concerns. She also inquired about the emergence of new ecosystems, such as IT hardware, in the Bajio region.

Answer

CEO Lorenzo Dominique Berho Carranza expressed confidence in the resilience of their tenant base, particularly in the auto industry, which is highly integrated with the U.S. He noted that logistics, e-commerce, and medical devices also remain strong. For the Bajio region, he confirmed increased demand from electronics and technology companies, a trend also seen in markets like Ciudad Juarez.

Asked for an on-the-ground perspective of the Bajio region, specifically which tenant ecosystems are driving demand for available and development space in Queretaro and Guadalajara.

Answer

The executive highlighted strong demand in Guadalajara from the electronics and e-commerce sectors, prompting a land acquisition to expand their park. In Queretaro, demand has recovered, vacancy is low, and Vesta is starting new inventory buildings to meet anticipated needs from sectors like electric manufacturing and aerospace. They remain cautious in other Bajio markets due to trade uncertainties.

Alejandra Obregon from Morgan Stanley requested an on-the-ground perspective of the Bajio region, asking about improving KPIs, tenant demand, and which specific industries are leading leasing conversations, particularly for new developments in Queretaro and Guadalajara.

Answer

CEO Lorenzo Dominique Berho Carranza confirmed positive signs in the Bajio region. He noted Guadalajara is attractive for electronics and e-commerce, with a new land acquisition allowing for expansion. In Queretaro, low vacancy and picked-up demand prompted new inventory construction to meet immediate needs from sectors like electric manufacturing and aerospace. He mentioned that while other Bajio markets are improving, Vesta remains cautious due to trade uncertainties.