Yassine Touahri

Yassine Touahri of On Field Investment Research asked about the potential magnitude of 2026 price increases in Europe, considering the impact of EU ETS Phase 4 revisions and the carbon border adjustment mechanism (CBAM).

Answer

CEO Miljan Gutovic acknowledged that it is too early to discuss specific 2026 price increases until the new EU ETS benchmarks are known later in the year. However, he noted that the revision of EU ETS, including benchmark adjustments and the phasing out of free allowances starting in 2026, will be a factor. He stated his belief that price increases next year will likely be higher than this year, but final decisions await more clarity on the regulatory impact.

Yassine Touahri asked about CEMEX's 2026 pricing strategy for the U.S. and Europe, inquiring if price increase letters have been sent, the expected magnitude of increases, and if a change in direction is anticipated after muted prices in 2025.

Answer

CEO Jaime Muguiro confirmed that 2026 price increase letters had not yet been sent but outlined a strategy to more than offset input cost inflation. He anticipated potential price increases in Europe due to the Carbon Border Adjustment Mechanism (CBAM) and local producers needing to buy CO2 credits. For the U.S., he targeted price increases to recover 2025's 'opportunity lost,' noting potential positive impacts from tariffs and FOB cement/clinker price increases.

Yassine Touahri asked about Cemex's 2026 pricing strategy for the U.S. and Europe, specifically if price increase letters have been sent, the expected magnitude, and if a change in pricing direction is anticipated after muted 2025 performance.

Answer

CEO Jaime Muguiro confirmed that price increase letters for 2026 have not yet been sent, but the strategy is to more than offset input cost inflation. He highlighted the Carbon Border Adjustment Mechanism (CBAM) in Europe, which could add EUR 5-EUR 10 per ton, potentially leading to favorable pricing dynamics. In the U.S., Cemex aims to recover lost opportunities from 2025 by targeting price increases that exceed input cost inflation, also noting potential positive impacts from tariffs and FOB cement/clinker price increases from the Med Basin.

Yassine Touahri of On field investment research asked how the new corporate structure supports free cash flow conversion and whether CEMEX can achieve a peer-level EBITDA-to-FCF conversion rate of nearly 50%, and over what timeframe.

Answer

CEO Jaime Muguiro affirmed that a peer-level free cash flow conversion rate is achievable, targeting 2027, driven by divesting underperforming assets and aligning management compensation with FCF metrics. He explained the new structure decentralizes operational excellence, reduces bureaucracy, and fosters an 'owner mindset,' which directly contributes to cost savings and margin expansion, thereby boosting free cash flow.

Yassine Touahri from On field questioned why CEMEX's free cash flow conversion guidance is significantly lower than peers and asked if the company can achieve best-in-class conversion.

Answer

CEO Jaime Dominguez affirmed that the target is to meet best-in-class cash conversion. He outlined several drivers: increasing EBITDA through volume recovery, realizing benefits from completed CapEx, reducing future strategic CapEx, and active portfolio management based on ROCE. This includes reviewing the ready-mix business to improve returns, using the U.S. as a template for optimization.

Yassine Touahri from Onfield questioned the significant valuation gap between CEMEX and its peers, asking what the market might be missing and what management can do to improve investor perception.

Answer

CFO Maher Al-Haffar attributed the valuation discount primarily to market uncertainty surrounding Mexico's economy and currency. He highlighted significant upside potential from further deleveraging, reducing interest expense (currently double that of peers), and a natural recovery from a ~$750 million volume headwind experienced over the last three years. He stated the strategy is to continue executing and delivering strong results, which he believes will eventually lead to a re-rating.

Yassine Touahri highlighted the valuation gap between CEMEX's trading multiple and its sum-of-the-parts value, asking what the company could do to unlock the value of its U.S. assets and if share buybacks were being considered.

Answer

Executive Maher Al-Haffar responded that the company's focus is on delivering operational growth in its key U.S. and Mexico markets rather than pursuing complex corporate restructuring. Regarding buybacks, Al-Haffar argued that deploying capital into growth projects at highly accretive EBITDA multiples of 3.5-4x currently offers a better return for shareholders than buying back stock, despite acknowledging the shares are undervalued.

Yassine Touahri of On Field Investment Research asked about the expected magnitude of 2026 price increases in Europe, considering regulatory changes from EU ETS Phase 4.

Answer

CEO Miljan Gutovic stated that while it's too early for specifics pending new benchmark details, he believes price increases in 2026 will likely be higher than in 2025. This is due to the need to address the financial impact of EU ETS Phase 4, which includes benchmark adjustments and the phasing out of free allowances.

Yassine Touahri of On Field Investment Research asked about the expected magnitude of 2026 price increases in Europe, considering the impacts of CBAM and the revised EU ETS Phase 4.

Answer

CEO Miljan Gutovic stated it was too early to give a specific figure for 2026 price increases, as it depends on the new EU ETS benchmark to be released later in the year. However, acknowledging the impact of phasing out free allowances, he said he believes 'price increases next year will be higher than this year.'

Yassine Touahri from On Field Investment Research asked for details on the drivers behind the significant market share gains in North America, current business trends in early Q2, the potential for industry consolidation in Europe due to technological shifts, and an update on a plant sale in Poland.

Answer

CEO Jes Hansen attributed U.S. market share gains to a multi-faceted strategy involving new customers, new channels, and product introductions like fire-resistant insulation, noting their share is still low at 2-3% compared to over 10% in Canada. He confirmed Q2 trends are similar to Q1, with strong pipelines but some customer hesitation. He agreed that the shift to electric melters could drive consolidation for smaller players but had no new updates on the Polish plant sale.

Questioned the drivers of North American market share gains, current Q2 trends, the potential for industry consolidation due to technology shifts, and the status of a plant sale in Poland.

Answer

North American growth is driven by gaining share from a very low base through new customers, channels, and fire-resistant products. Q2 trends are similar to Q1. The potential for consolidation exists but is not certain to accelerate. There is no new development on the Polish plant sale.

Asked about the long-term strategic vision for ROCKWOOL's asset portfolio, particularly regarding the trend of selling systems, and sought confirmation on the estimated high profitability of the Russian business based on public tax data.

Answer

The long-term strategy is to remain a pure-play leader in stone wool, capitalizing on growth from European regulations (EPBD), category shift in the U.S., and expansion in Asia. The company will become more global and invest in technology. The executive refused to comment on the specifics of the Russian business's profitability.

Sought clarification on the Q3 pricing dynamics, which seemed to imply a sequential increase, and asked about the company's long-term view on capital allocation, leverage, and potential strategic moves into systems solutions.

Answer

The Q3 year-on-year price increase of over 2% was primarily driven by a sequential 8% price hike in North America. On capital allocation, the company will remain cautious, prioritizing stable dividends and increasing capital expenditures for new factories. Excess cash may be returned via ad-hoc share buybacks. There is a strategic interest in investing more into 'system thinking' to offer more value, but no specific leverage target was provided.

Asked if strong like-for-like sales growth occurred in April to align with full-year guidance after a weak Q1, and inquired about the impact of cheaper cement imports on pricing and market share in key regions.

Answer

The company confirmed that the assumption of good like-for-like growth in April was correct and that group volumes were up slightly. Regarding imports, while costs have decreased, the impact is described as very localized and not a 'massive flood'. The company also benefits from lower import costs in regions where it is a net importer, like the U.S. and Africa.

Yassine Touahri of On Field Investment Research asked if accelerated pricing in the distribution business could offset lower H2 activity and allow it to repeat H1's strong margin. He also inquired about any updates to the company's energy hedging policy amid market volatility.

Answer

COO, CEO & Director Benoit Bazin noted that 2021 seasonality is abnormal due to the H1 volume catch-up, making a direct margin comparison difficult, but confirmed distribution is maintaining healthy margins. CFO Sreedhar N. stated that the hedging policy is unchanged at 50% for the current year, but they have increased the hedge to 60% for 2022 and are monitoring the volatile energy market on a daily basis.

Yassine Touahri of One Field Investment Research asked if management was surprised by the strength of demand and pricing, whether pre-buying in March led to a slowdown in April, and about the company's 2021 gas hedging position.

Answer

Pierre-Andre de Chalendar confirmed that March was stronger than anticipated and that April continued to be very strong, with no slowdown from pre-buying activity. CFO N. Sreedhar stated that on average, close to 50% of the company's energy is hedged and noted that gas prices had risen substantially, up 170% in April compared to the prior year.

Yassine Touahri asked for an assessment of the EU's "renovation wave" program on structural growth, how Saint-Gobain plans to capture this growth, and the company's specific ROI criteria for CapEx and acquisitions.

Answer

CEO Pierre-André de Chalendar called the EU program "extremely powerful" for future growth, which would be captured mainly through CapEx in existing businesses. CFO N. Sreedhar specified the criteria as a 20% pre-tax IRR for CapEx and value creation within three years for acquisitions. De Chalendar estimated that about 60% of Saint-Gobain's business is linked to energy efficiency renovation.