Slide 1: Corporate Presentation Q3 2019
CORPOR ATE PRESENTATION Q3 2019 JANUARY 2020 1
Slide 2: Safe Harbor Statement
This presentation has been prepared by Grupo Cementos EBITDA de Chihuahua, S.A.B. de C.V. (together with its subsidiaries, We define EBITDA as consolidated net income after adding “GCC”). Nothing in this presentation is intended to be taken back or subtracting, as the case may be: (1) depreciation b
Slide 3: Investment Highlights
INVESTMENT 1 Leading position in attractive U.S. regional markets and in Chihuahua, Mexico HIGHLIGHTS Mexico operations also provide a strong base, and TICKER: BMV: GCC 2 add operational flexibility with export capacity Vertically integrated, with state of the art production 3 facilities and logisti
Slide 4: More than four years of operational and financial transformation
MORE THAN FOUR Disciplined expansion Prudent balance sheet YE ARS OF O PER ATIONAL management Customer focus AND F INANCIAL Increased shareholder Operational excellence value T R ANSFORMATION AS OF Cement Capacity EBITDA Growth EBITDA Margin Net Debt/ EBITDA Free Float Share Price (01/10/20) DECEMBE
Slide 5: GCC at a Glance: A Unique Market Presence
5.8 MMT1 cement production capacity GCC AT A G L ANCE: 3.5 MMT in U.S. + 2.3 MMT in Mexico CEMENT AND READY-MIX CONCRETE OPERATIONS ACROSS THE “CENTER A UNIQUE MARKET #1 or #2 share in core markets CUT“ OF NORTH AMERICA Landlocked states, insulated from PRESENCE seaborne competition 8 cement plants,
Slide 6: Regional Leader in U.S. Mid-Continent Markets
ALBERTA REGIONAL LEADER IN U.S. MID-CONTINENT MARKETS #1 #3 MT ND WELL-POSITIONED TO CAPTURE U.S. GROWTH AND MN #1 CONSTRUCTION INDUSTRY RECOVERY ID SD WI WY #2 Leadership position in 18 contiguous states IA NE CO, SD, NM, W.TX, MT, MN and ND are our core markets, with UT #2 87% of U.S. sales CO KS
Slide 7: Markets with Demonstrated Volume and Price Recovery
GCC U.S. CEMENT SALES GCC U.S. CONCRETE SALES MARKETS WITH (’000 MT) 4yr CAGR (’000 M3 / YEAR) Continued +8.0% operations DEMONSTRATED 2,963 3,103 3,190 1,569 2,305 VOLUME AND 927 918 878 PRICE RECOVERY 2016 2017 2018 LTM Q3-19 2016 2017 2018 LTM Q3-19 GCC U.S. CEMENT PRICES GCC U.S. CONCRETE PRICES
Slide 8: Where GCC Faces Fragmented Competition and Has a Diversified Business Mix
WHERE GCC FACES FRAGMENTED COMPETITION AND HAS A DIVERSIFIED BUSINESS MIX GCC MARKET POSITION AND COMPETITORS IN CORE MARKETS COLORADO N. MEXICO N. DAKOTA S. DAKOTA W. TEXAS WYOMING MONTANA GCC market position #2 #1 #3 #1 #1 #2 #1 * Refers to West Texas only GCC cement plant in state — — ** Aprox. 1
Slide 9: A Clear Need for Increased Infrastructure Spending
AND A CLEAR NEED FOR INCREASED INFRASTRUCTURE SPENDING WA NH ME NH ME WA WA MT ND MT ND VT VT NH ME MT ND MT ND VT OR MN MN ID ID SD MA MA OR OR NY NY MN MN WII SD WII RI RI ID IDSD NY MA WY WY MI MI CT CT WI SD WI WY WY RI IA IA MI MI PA PA CT NE NE NJ NJ IA IA V NV OH OH PA NJ IN IN DE DE NE NE UT
Slide 10: Positive Outlook Driven by Expected Increase in Infrastructure Spending
FORECAST CEMENT FORECAST CONSUMPTION CEMENT CONSUMPTION HIGHWAY BUDGET HIGHWAY AUTHORIZATIONS BUDGET AUTHORIZATIONS LEADING TO A IN ALL INGCC U.S. MARKETS ALL GCC (MMT) U.S. MARKETS 1 (MMT) 1 INCLUDED IN THE FAST1 ACT1 ($ INCLUDED IN THE FAST ACTBB) ($²BB) ² POSITIVE OUTLOOK, 4yr CAGR 4yr CAGR +2.0%
Slide 11: With a Solid Outlook in Key States
PORTLAND CEMENT ASSOCIATION (PCA) FALL 2019 FORECAST AND MAIN CONSUMERS WITH A SOLID COLORADO TEXAS OUTLOOK IN KEY 3,000 18,000 23.5% STATES 2,500 15,000 8.1% 7.6% 2,000 12,000 1,500 1.3% 9,000 4.8% 1.2% 0.8% 4.3% 6,000 3.1% 3.4% 1,000 -3.8% 3.2% 500 3,000 1.7% 2.4% 0.8% - - 2017 2018 2019 2020 2021
Slide 12: Favorable Phase of the U.S. Cement Cycle
WHILE IN A FAVORABLE PHASE OF THE U.S. CEMENT CYCLE U.S. CEMENT PRODUCTION AND CONSUMPTION 140 Consumption 120 -25% Actual 2003-17 Estimated 2018-22 100 Production 80 60 40 Source: USGS, GCC 2003 2008 2013 2018 2018 U.S. apparent consumption is still 25% below 2005 peak Current expansion is 8 years
Slide 13: Leading Producer in Chihuahua with Significant Export Capacity
GCC IS THE LEADING PRODUCER IN THE STATE OF CHIHUAHUA, WITH SIGNIFICANT EXPORT CAPACITY Exports to U.S. Juarez GCC is sole producer of cement and the leading producer of ready-mix concrete in Chihuahua. Samalayuca Close economic ties between Chihuahua and the U.S. Chihuahua Cyclical recovery benefit
Slide 14: Vertically Integrated Operations
Coal mine in Colorado provides a significant source of fuel FUEL for GCC cement plants, lowering costs and reducing price volatility GCC owns most of the limestone quarries needed to supply RAW MATERIALS cement, ready-mix and aggregates operations over the VERTICALLY long-term INTEGRATED OPERATIONS
Slide 15: State of the Art Production Facilities
WITH STATE OF THE ART Pueblo, CO PRODUCTION 1.1 MMT 2008 startup Chihuahua, Chih. FACILITIES Rapid City, SD 1.1 MMT 1.1 MMT 1941 startup 2018 expansion 2009 modernized 5.8 MMT Tijeras, NM Samalayuca, Chih. United States 1.1 MMT Mexico 0.4 MMT 3.5 MMT 2015 modernized 0.8 MMT 1995 startup 2.3 MMT Avai
Slide 16: Operating at Near-Optimal Capacity Utilization Levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 100% 94% 93% 90% 90% 89% 87% 87% 87% 88% 87%2 85% 85% U.S. Industry 79% Average ‘18e 86% 65% 66% 38%1 2017 2018 Mx Avg Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident US Avg MEXICO UNITED STATES 1 2 Expansion shutdown Exclude
Slide 17: Linked by Sophisticated Distribution Network
ROBUST LOGISTICS PLATFORM STRETCHES LINKED BY FROM NORTHERN MEXICO TO THE U.S. ALBERTA SOPHISTICATED BORDER WITH CANADA DISTRIBUTION Operational flexibility NETWORK THAT ID MT ND WI Cost efficiency LEVERAGES MN Faster delivery time CONTIGUOUS Advanced logistics ID SD WI MARKET WY Reduced supply disr
Slide 18: Optimizing Operations for Value Generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 13.3% ROIC 11.5% 10.3% Value generated 9.7% WACC 9.1% 9.0% 9.0% 8.9% 9.8% 9.4% 9.2% 9.1% 8.8% 8.0% 7.0% 5.8% 2014 2015 2016 2017 2018 2019e 2020e 2021e Any projections have been prepared based on GCC’s views as of the date of this presentation and include e
Slide 19: GCC Generates a Higher ROIC than Most U.S. Peers
GCC GENERATES A HIGHER ROIC THAN MOST OF ITS U.S. PEERS... 11.5% GCC 10.6% EXP 9.7% 10.3% 9.6% MLM 9.0% VMC 8.0% 7.0% SUM 7.0% 2015 2016 2017 2018 2019e 2020e Source: Company and J.P. Morgan estimates. US Constuction Materials. North America Equity Research (March 21, 2019) 19
Slide 20: ... As Well as Its LatAm Peers
... AS WELL AS ITS LATAM PEERS 11.5% GCC 10.3% 9.7% 9.0% 8.6% CPAC 8.0% 7.0% 5.4% CX 4.3% CMTOY 4.2% CLH 2015 2016 2017 2018 2019e 2020e Source: Company and UBS estimates 20
Slide 21: Recent Developments Enhance GCC's Value Proposition
RECENT Increased free DEVELOPMENTS Cement Capacity Growing EBITDA Growing Debt Falling and float and Refinancing liquidity ENHANCE GCC’S VALUE +514k mt +36.0% 1.52x 48% Odessa in 2016 EBITDA growth Leverage of total shares PROPOSITION acquisition since 2016 on BMV +440k mt 29.0% BB+ +23% Rapid City
Slide 22: Bond and Bank Debt Refinancing
REDUCTION OF ANNUAL INTEREST EXPENSES BY US$18M BOND AND Bond interest coupon decreased to 5.250% from 8.125% (June 2017) MATURITY PROFILE (US$ million) BANK DEBT Savings on financial expenses = ~ US$ 8 million per year 260 Extended maturity 4 years REFINANCING 176 Bank debt refinancing yields an es
Slide 23: Debt and Capital Efficiency Indicators Steadily Improving
DEBT AND CAPITAL EFFICIENCY INDICATORS STEADILY IMPROVING EBITDA MARGIN ROIC (NOPAT / Avg. Invested Capital) 9.7% 9.0% 29.0% 8.0% 7.0% 5.8% 3.1% 17.3% 2013 2014 2015 2016 2017* 2018 2013 2014 2015 2016 2017 2018 NET LEVERAGE RATIO (Net Debt / EBITDA) WORKING CAPITAL 107 3.45x 2.57x 91 2.28x 1.84x 1.
Slide 24: Strengthened Margins and Lower Indebtedness than Most Peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2020 estimated Net Debt/EBITDA multiples* 4.2x LatAm Average 3.9x 3.4x US Average 1.8x 2.9x 3.3x 3.0x 2.6x 1.4x 1.4x 1.5x 0.7x GCC EXP VMC MLM SUM Cemex Elementia CLH Argos Pacasmayo 2020 estimated EBITDA margins* US Average 28.2% La
Slide 25: Capital Markets Transactions Increased Share Float and Liquidity
CAPITAL MARKETS TRANSACTIONS INCREASED SHARE FLOAT AND LIQUIDITY; VALUATION REMAINS ATTRACTIVE TRANSACTIONS BENEFIT PUBLIC 2020 ESTIMATED EV/EBITDA MULTIPLES1 MARKET SHAREHOLDERS Transparent control group shareholdings US Average 12.2x Float increased to 48% of shares 14.9x 14.3x Increased liquidity
Slide 26: Liquidity Enhancing Events
LIQUIDITY HAS INCREASED SIGNIFICANTLY AS A RESULT OF CORPORATE DEVELOPMENTS AND STOCK MARKET POSITIONING AVERAGE DAILY TRADING VOLUME, SHARES1 “Re-IPO,” February 2017 340,000 MSCI Index inclusion, June 2018 234,000 LIQUIDITY IPC Index inclusion, September 2018 FTSE Index inclusion, March 2019 ENHANC
Slide 27: Sustainable Development Performance Targets
GCC JOINED THE GLOBAL CEMENT AND CONCRETE ASSOCIATION IN 2018 SUSTAINABLE DEVELOPMENT GOALS MAIN GOAL HOW? REDUCE NET Climate & Energy Sustainable Development Performance Targets CO2 EMISSIONS Energy efficiency 9% BY 2020 AND 31% BY 2030 Circular Economy Alternative fuels Health & Safety Blended cem
Slide 28: Sustainability Initiatives Resulting in Economic and Environmental Benefits
SUPPORTED BY SUSTAINABILITY INITIATIVES RESULTING IN DIRECT ECONOMIC AND ENVIRONMENTAL BENEFITS ALTERNATIVE FUELS (AF) USAGE AND CO2 AF USAGE BY PLANT EMISSIONS REDUCTION 1 9.0% 7.4% 7.6% 6.8% 48% 6.3% 6.3% 45% 45% 36% 38% 33% 30% 13.5% 10.4% 10.9% 10.3% 20% 8.1% 9.1% 14% 12% 12% 11% 2015 2016 2017
Slide 29: 2018 ESG Main Achievements
2018 ESG MAIN Use of biomass fuel at the Juárez plant reduced CO2 emissions by 38% ACHIEVEMENTS Rapid City has permanently shut down two wet kilns Two U.S. cement plants earned EPA Energy Star certification Pueblo plant scored a 100/100 Energy Star evaluation Zero fatalities Lost time accidents decr
Slide 30: Experienced Management Team, with Sound Corporate Governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 48.4% 51.6% ENRIQUE ESCALANTE, CEO GCC since 1999; 20 years in industry Free float CAMCEM LUIS CARLOS ARIAS, CFO 100% GCC since 1996; 23 years in industry Chihuahua Investors CEMEX + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC since 20
Slide 31: Compensation Plan
COMPENSATION PLAN GOAL: CLOSELY ALIGN PAY WITH PERFORMANCE AND VALUE CREATION OVER THE SHORT AND LONG-TERM FIXED PAY VARIABLE PAY BASE SALARY ANNUAL INCENTIVE Smallest component of target Based on EBITDA: TDC Budgeted growth CEO: ~ 31% EBITDA margin Key executives: 40% - 62% TOTAL DIRECT Pays out be
Slide 32: Disciplined Approach to Acquisition and Growth Investments
WITH A DISCIPLINED APPROACH TO ACQUISITION AND GROWTH INVESTMENTS FRAMEWORK STRATEGIC PRIORIZATION AND EVALUATION OF ALTERNATIVES Seek out Increase market share Cement opportunities 1 Increase presence in existing markets Vertical integration Odessa Rapid City Value-added products Case by case Aggre
Slide 33: Reinforcing a Positive 2019 Outlook
REINFORCING A POSITIVE 2019 OUTLOOK UNITED STATES CONSOLIDATED VOLUMES EBITDA growth 8% - 10% Cement, like-to-like 1% - 3% Cement 3% - 5% EBITDA growth without IFRS-16 0% - 2% Concrete flat FCF Conversion Rate > 40% PRICES Cement 2% - 3% Working capital investment: slight decrease Concrete 2% - 4% T
Slide 34: Enrique Escalante, CEO Q3 2019 Quote
ENRIQUE Enrique Escalante, GCC’s Chief Executive Officer, commented: ESCALANTE, “GCC delivered strong operational results for the third quarter 2019 despite an increasingly competitive environment in certain markets. Increased volumes, with a record high in cement, reflect robust customer demand and
Slide 35: Appendix: Q3-19 Results
APPENDIX: Q3-19 RESULTS rome
Slide 36: Q3-19 and Nine Month 2019 Results
Q3-19 AND NINE MONTH 2019 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 705 677 30.0% 31.9% 29.3% 29.1% 199 206 91 76 64 +4.2% 302 53 279 96 240 84 +18.9% -16.2% +3.5% +8.3% +15.2% Q3-18 Q3-19 9M-18 9M-19 Q3-18 Q3-19 9M-18 9M-19 Q3-18 Q3-19 9M-18 9M-1
Slide 37: Q3-19 Results Highlights
Q3-19 RESULTS HIGHLIGHTS Millions of dollars Q3-19 Q3-18 Var 9M-19 9M-18 Var Net sales 301.7 278.6 8.3% 705.5 677.4 4.2% Operating Income before other 69.7 64.3 8.4% 123.2 140.7 -12.5% expenses EBITDA 96.4 83.7 15.2% 205.6 198.6 3.5% EBITDA Margin 31.9% 30.0% 29.1% 29.3% Consolidated Net Income 48.8
Slide 38: Sales Volumes and Prices
SALES VOLUMES AND PRICES Q3-19 Q3-18 Var 9M-19 9M-18 Var The increase in U.S. cement sales volumes was primarily due to robust demand and to the strong backlog in all of GCC’s Cement sales 1,454.0 1,341.2 8.4% 3,467.2 3,340.0 3.8% market segments, as well as demand related to the start of the (‘000
Slide 39: Sales
SALES Million dollars Q3-19 Q3-18 Var 9M-19 9M-18 Var Consolidated 301.7 278.6 8.3% 705.5 677.4 4.2% U.S. 236.0 216.4 9.1% 514.8 499.6 3.0% U.S like to like 222.6 202.1 10.2% 487.3 485.3 0.4% Mexico 65.6 62.2 5.5% 190.7 177.7 7.3% U.S SALES MEXICO SALES The most dynamic market segments during the qu
Slide 40: Income Statement (Million Dollars)
INCOME STATEMENT (MILLION DOLLARS) Q3-19 Q3-18 Var 9M-19 9M-18 Var Net Sales 301.7 278.6 8.3% 705.5 677.4 4.2% U.S. 236.0 216.4 9.1% 514.8 499.6 3.0% Mexico 65.6 62.2 5.5% 190.7 177.7 7.3% Cost of sales 209.8 194.2 8.0% 517.4 479.8 7.8% Operating expenses 22.1 20.1 10.4% 65.0 56.8 14.4% Other expens
Slide 41: Free Cash Flow (Million Dollars)
FREE CASH FLOW (MILLION DOLLARS) Q3-19 Q3-18 Var 9M-19 9M-18 Var Operating income before other expenses 69.7 64.3 8.4% 123.2 140.7 -12.5% Depreciation and amortization 26.7 19.3 38.0% 82.4 57.9 42.4% EBITDA 96.4 83.7 15.2% 205.6 198.6 3.5% Interest income (expense) (2.5) (3.5) -27.7% (15.6) (38.2) -
Slide 42: Balance Sheet (Million Dollars)
BALANCE SHEET (MILLION DOLLARS) Sep-19 Sep-18 Var Total Assets 2,014.0 1,901.3 5.9% Current Assets 613.5 537.1 14.2% Cash 276.9 223.8 23.7% Other current assets 52.3 58.7 -10.9% A dividend of Ps. 0.8189 per outstanding share was paid on August 15, 2019, representing a 15% Non-current assets 1,400.6
Slide 43: Contact
CONTACT: Luis Carlos Arias, Chief Financial Officer WWW.GCC.COM larias@gcc.com Ricardo Martinez, Head of Investor Relations rmartinezg@gcc.com +52 (614) 442 3176 + 1 (303) 739 5943 43