Anne Milne

Anne Milne from Bank of America questioned CFO Maher Al-Haffar about CEMEX's refinancing strategy for its significant debt maturities and callable instruments in the current year, including subordinated notes and bank facilities, and the balance between debt reduction and extension.

Answer

CFO Maher Al-Haffar reiterated the target net leverage of 1.5-2 times for a solid BBB rating. He confirmed plans to use free cash flow for debt reduction while prioritizing shareholder returns and M&A. He identified several liability management opportunities: addressing subordinated notes with a prohibitively expensive reset spread in September, a potential bank market transaction for callable euro funding, and a MXN 5 billion-MXN 7.5 billion Cebures issuance in the Mexican market. Al-Haffar stated they are constantly seeking NPV positive opportunities to recalibrate the debt stack and extend average life, noting a flat interest expense guidance with potential upside from these transactions. He also confirmed that replacing subordinated perps for equity treatment is under evaluation.

Anne Milne asked CFO Maher Al-Haffar about CEMEX's refinancing plans for its significant debt maturities and callable instruments in 2026, including bank facilities, euro funding, callable bonds, and subordinated perpetual notes, and the capital structure strategy.

Answer

CFO Maher Al-Haffar stated the aspiration for 1.5-2x net leverage for a solid BBB rating. He mentioned using free cash flow for debt reduction, but also prioritizing shareholder returns and M&A. Specific liability management opportunities include addressing subordinated notes resetting in September, a potential bank market transaction for euro funding, and MXN 5-7.5 billion CBORs in the Mexican market. He noted they are constantly looking at NPV positive opportunities to recalibrate the debt stack and extend average life.

Anne Milne asked about Cemex's debt profile, specifically its plans for large maturities in 2026, strategies for extending the average debt life, and the desired leverage range given current levels and potential acquisitions.

Answer

CEO Jaime Muguiro stated a comfortable fully loaded leverage range of 1.5x-2x. CFO Maher Al-Haffar agreed on using fully loaded leverage for rating agencies and debt markets, noting that this range provides adequate M&A capacity without risking ratings. He highlighted attractive long-end market yields and the consideration of extending maturities, especially with upcoming term loan and a EUR 400 million bond maturity in March 2026, and a subordinated note reset next year. He clarified that 'fully loaded debt' includes subordinated notes.

Anne Milne of Bank of America Merrill Lynch asked about the company's current thinking on the path and timing to reach its 1.5x net leverage target, and which levers—EBITDA growth or debt reduction—would be prioritized.

Answer

CFO Maher Al-Haffar responded that EBITDA growth is the most important lever, driven by Project Cutting Edge savings, incremental earnings from growth projects, and a focus on free cash flow conversion. He stated that this combination of EBITDA improvement and some debt reduction should allow CEMEX to reach its leverage target within the next 12 to 24 months.

Anne Milne from Bank of America asked about the company's financial strategy following the redemption of its 9.125% perpetual notes, including plans for other notes and potential new financing.

Answer

CFO Maher Al-Haffar stated that the primary goal is reducing interest expense through continued deleveraging. He confirmed that perpetual notes remain part of the capital structure and they will monitor markets to refinance the called notes at a lower cost. He added there are no immediate plans to call the other perpetual note and that the company is exploring refinancing options for some euro-denominated debt.

Anne Milne from Bank of America asked via webcast about CEMEX's current export levels from Mexico to the U.S. and how potential tariffs on Mexican imports could impact operations and product flows.

Answer

Executive Lucy Rodriguez stated that Mexico's exports to the U.S. were about 5% of its volume in 2024, with plans to reduce this to 2.5% in 2025 for economic reasons, independent of tariff discussions. She noted that broad-based tariffs would likely be positive for domestic pricing by raising import parity, while targeted tariffs would have a neutral effect.

Anne Milne asked about the primary drivers behind CEMEX Europe meeting its emission targets ahead of schedule and whether other regions were on a similar trajectory.

Answer

Executive Fernando Olivieri attributed the success in Europe to the 'reduce before capture' strategy. Key drivers included high usage of alternative fuels, achieving a clinker factor below 70%, and using decarbonated raw materials. He noted that progress is company-wide, as CEMEX has already surpassed its 2025 global target for sales of its lower-carbon 'Vertua' products, indicating that other regions are also contributing significantly to decarbonization goals.

Anne Milne of Bank of America Merrill Lynch inquired about the current status of gasoline and diesel prices in Colombia and the expected impact on the Fuel Price Stabilization Fund (FEPEC) balance going forward.

Answer

An executive explained that recent fuel price increases have helped reduce the FEPEC balance, which stood at COP 2.5 trillion at the end of the first half. They noted discussions are ongoing for further diesel price hikes in early 2026. The company expects the year-end FEPEC balance to be around COP 5 trillion, supported by timely payments from the nation.

Anne Milne asked about Brazil's strategic importance, valuation changes for Argentine assets, potential operator roles in Argentina, and financial details regarding further bond buybacks and minimum cash levels.

Answer

CEO Felipe Bayon confirmed the primary focus remains on Colombia and Argentina, with Brazil under review. CFO Jaime Caballero Uribe addressed the financial questions, stating the current cash position of $266 million is strong, well above the $30-40 million minimum operational need, which provides ample flexibility for organic CapEx, M&A, and potentially opportunistic debt repurchases.

Anne Milne inquired about the drivers of higher 2024 cost of sales and the outlook for 2025, long-term production potential for 2026-2027, and the sales destinations for production from Colombia, Ecuador, and Canada, including the potential impact of tariffs.

Answer

EVP and CFO Ryan Ellson responded, stating that costs are expected to decrease in 2025 as production ramps up, particularly in Ecuador. He projected a potential 5-10% production growth rate post-2025, contingent on capital allocation. Regarding tariffs, Ellson explained that Gran Tierra is well-insulated and could be a net beneficiary, as tightening differentials in South America would more than offset any negative impacts from tariffs on its Canadian production.

Anne Milne asked about Gran Tierra's confidence in meeting its 2024 EBITDA guidance, the timing for 2025 guidance, the expected increase in 2025 CapEx, the outlook for oil price differentials, and the long-term production mix between Canada and South America.

Answer

EVP & CFO Ryan Ellson expressed confidence in meeting 2024 guidance and said 2025 guidance will be released in early January. He anticipates Canada will be cash flow neutral in 2025, with CapEx driving production growth. He attributed wider differentials to market competition, partly from Canada's Trans Mountain pipeline, and confirmed South America will remain the majority EBITDA contributor for the foreseeable future.

Anne Milne requested an update on global supply and demand dynamics, particularly regarding China and potential capacity shutdowns, and asked about the status of the due diligence by the Kuwait Investment Authority.

Answer

Executive Pedro van Langendonck Teixeira de Freitas confirmed that the Kuwait Investment Authority is the only party currently conducting due diligence. On market dynamics, he noted a more balanced polyethylene market but sees new polypropylene capacity coming from China. He highlighted that players like Sabic and Exxon are reducing production in Europe and that Braskem has idled a PP line in the U.S., with a slow global recovery expected.

Asked for an update on global supply/demand dynamics, particularly regarding new capacity and shutdowns in China and the Middle East. Also inquired about the status of the due diligence by the Kuwait Investment Authority and if other potential buyers have emerged.

Answer

The executive noted that polyethylene supply/demand is more balanced, but polypropylene faces new capacity from China. The industry is responding with low operating rates and asset reviews globally. Braskem has hibernated one PP line in Marcus Hook. Regarding the sale process, the Kuwait Investment Authority is the only company currently conducting due diligence, and the process is ongoing.

Anne Milne from Bank of America requested an update on global supply and demand dynamics, particularly regarding new capacity from China and the Middle East, and asked about the status of the Kuwait Investment Authority's due diligence on the company.

Answer

Executive Pedro van Langendonck Teixeira de Freitas confirmed that the Kuwait Investment Authority is the only party currently conducting due diligence and the process is ongoing. On market dynamics, he noted a better balance in polyethylene but sees more polypropylene capacity coming from China. He observed players globally reviewing assets and pointed to low operating rates in China (under 70%) and production cuts in Europe. He expects a slow recovery with global PE and PP rates remaining around 80%.