Q2 2024 Earnings Summary
- Robust Pricing Power and Expanding Margins: Executives highlighted that despite volume challenges and weather headwinds, the company achieved strong pricing traction—with mid- to high-single-digit sequential pricing increases across key markets—resulting in expanded EBITDA margins and a favorable price–cost dynamic.
- Strong U.S. and Mexico Growth Prospects: The U.S. business, in particular, is expected to grow materially over the next 2–3 years, driven by resilient infrastructure demand and a robust backlog, while Mexico continues to deliver record top-line and margin performance, positioning these regions as key cash flow generators.
- Cost Management and Fuel Efficiency Improvements: The company has effectively managed energy costs through a shift to lower-cost fuels and improved hedging strategies (with approximately 70% of hedgeable costs secured), contributing to both margin expansion and a reduction in fuel expense per ton of cement.
- Adverse weather and softness in the U.S. housing market: U.S. operations have been notably hit by bad weather, resulting in lower volumes and slowed residential demand—exacerbated by rising mortgage rates (above 7%) that dampen affordability, potentially further pressuring margins and volumes.
- Inflation and tariff uncertainty in Mexico: Despite strong pricing traction in Mexico, headline inflation (around 6%) and policy uncertainties—evidenced by delays in industrial projects due to unclear tariff regimes—could undermine the ability to fully pass on higher costs, impacting both volumes and profitability.
- Currency and geopolitical risks: Ongoing FX volatility, highlighted by a 3% decline in net income from FX losses due to peso depreciation, combined with geopolitical headwinds in regions like Europe where tensions and devaluation issues persist, present a risk to overall margins and cash flow.
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Valuation Outlook
Q: How will US value crystallize?
A: Management plans to drive robust US growth and leverage strong Mexican earnings—accounting for 75–80% of cash flow—to narrow the valuation gap, preferring organic growth over complex restructuring. -
US Pricing
Q: What is US pricing outlook?
A: Executives expect solid US pricing backed by mid-to-high single-digit sequential increases already underway, supporting margin resilience into 2025. -
Mexico Margins
Q: How will Mexican margins hold?
A: They are supported by lower fuel costs, a shift to lower-cost natural gas, and effective decarbonization measures that, together with strong market demand, should sustain improved margins. -
Energy Costs
Q: Will energy costs beat expectations?
A: Management highlighted improved fuel mix and a shift to lower carbon alternatives that have delivered better-than-expected energy cost dynamics, hinting at potential upside. -
Mexico Markets
Q: Which Mexican market leads performance?
A: Infrastructure drove exceptional EBITDA with housing and ready-mix sectors also picking up, reflecting consistent strength across Mexico’s markets. -
Global Pricing
Q: What are near-term pricing plans?
A: The team confirmed mid-single-digit price increases across key segments in the US, Mexico, and Europe, aligned with easing inflation and cost trends. -
US Demand
Q: What drives US cement demand?
A: While robust infrastructure spending remains a key driver, residential demand slowed due to higher mortgage rates, though single-family starts have stayed strong. -
Sustainability Ranking
Q: What is the ranking criteria?
A: The World Benchmarking Alliance’s criteria are split 60% for climate action and 40% for social factors, with CEMEX achieving a top ranking among peers. -
Pricing Resiliency
Q: Why will pricing remain high?
A: Even with softer volumes, a strong history of successful first pricing increases combined with energy cost moderation supports continued resilient pricing dynamics.
Research analysts covering CEMEX SAB DE CV.