Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q4 2022 Earnings Presentation
48 slides from Gcc Sab De Cv's earnings presentation, March 2023
Slide 1: Corporate Presentation Q4 2022
CORPOR ATE PRESENTATION Q4 2022 MARCH 2023
Slide 2: Safe Harbor Statement
This presentation has been prepared by GCC, S.A.B. de C.V. (together exchange rates, interest rates, inflation, foreign trade restrictions, and market with its subsidiaries, “GCC”). Nothing in this presentation is intended to conditions, which may cause the actual financial and other results to be b
Slide 3: Reflection of the strategy execution since 2016
REFLECTION OF THE STRATEGY EXECUTION SINCE 2016 Deleveraging as soon as possible ONE OF THE Maintaining a healthy cash balance STRONGEST PLAYERS IN THE INDUSTRY Refinancing bank debt and notes, extending maturities and reducing the average cost of debt Swapping non-integrated ready-mix assets for Mo
Slide 4: Cash, liquidity and balance sheet
Cost and expense reductions throughout the organization Variable costs and distribution efficiencies Achieved US$24 million in savings during 2020 and maintained US$10 million in 2021 e.g. hiring freeze, not filling vacant positions and limiting external service providers CASH, LIQUIDITY Cash and eq
Slide 5: 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 add operational flexibility 2 TICKER: BMV: GCC with export capacity 3 Vertically integrated, with best in class production facilities and logistics
Slide 6: More than five years of operational and financial transformation
MORE THAN FIVE YE ARS Disciplined expansion Prudent balance sheet OF O PER ATIONAL management Customer focus AND F INANCIAL Increased shareholder Operational excellence value T R ANSFORMATION AS OF Cement EBITDA EBITDA Net Debt/ Free Float Share Price (03/22/23) Capacity Growth Margin EBITDA DECEMBE
Slide 7: GCC at a glance: a unique market presence
5.8 MMT1 cement production capacity 3.5 MMT in U.S. + 2.3 MMT in Mexico GCC AT A G L ANCE: CEMENT AND READY-MIX CONCRETE OPERATIONS #1 or #2 share in core markets A UNIQUE MARKET Landlocked states, insulated from seaborne ACROSS THE “CENTER CUT“ OF NORTH AMERICA competition PRESENCE 8 cement plants,
Slide 8: Regional leader in U.S. mid-continent markets
ALBERTA REGIONAL LEADER IN U.S. MID-CONTINENT MARKETS #1 #3 WELL-POSITIONED TO CAPTURE U.S. GROWTH AND CONSTRUCTION INDUSTRY RECOVERY MT ND MN #1 ID SD WI Leadership position in 16 contiguous states WY #2 CO, MN, MT, ND, NM, SD, UT and W.TX are our core markets, with 89% of U.S. sales IA NE UT #2 No
Slide 9: Markets with demonstrated volume and price recovery
GCC U.S. CEMENT SALES GCC U.S. CONCRETE SALES (’000 MT) 3yr CAGR (’000 M3 / YEAR) 3yr CAGR +1.8% -4.5% MARKETS WITH Continued operations 3,359 3,458 DEMONSTRATED 3,277 3,180 3,103 918 901 939 760 784 VOLUME AND PRICE RECOVERY 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 GCC U.S. CEMENT PRICES 3
Slide 10: 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 11: A clear need for increased infrastructure spending
AND A CLEAR NEED FOR INCREASED INFRASTRUCTURE SPENDING DEFICIENT ROADS 1 CEMENT FUNDAMENTALS 2 LANE MILES RATED ‘POOR’ BASED ON PCA SECTOR COMPOSITE AS A SHARE OF TOTAL LANE MILES RANKINGS* WA WA NH ME NH ME MT ND VT MT VT ND OR OR MN MN ID SD NY MA ID NY MA WII SD WI RI RI WY MI WY MI CT CT IA PA I
Slide 12: Positive outlook driven by expected increase in infrastructure spending
FORECAST CEMENT CONSUMPTION FORECAST HIGHWAYTOTAL BUDGETU.S.AUTHORIZATIONS CEMENT U.S CEMENT IN ALL GCC U.S. MARKETS (MMT) 1 CONSUMPTION INCLUDED IN (MMT) 2 THE FAST ACT ($ BB) ² 4yr CAGR IMPORTS W 4yr CAGR +1.2% +2.4% 108.6 47.1 47.1 106.0 46.0 104.7 45.0 120 101.7 LEADING TO A 99.8 44.0 43.1 112 3
Slide 13: With a solid outlook in key states
PORTLAND CEMENT ASSOCIATION (PCA) SUMMER 2022 FORECAST AND MAIN CONSUMERS COLORADO TEXAS WITH A SOLID 3,000 18,000 OUTLOOK IN KEY 2,500 15,000 STATES 2,000 5.9% 12,000 3.4% 3.2% 9.9% 1,500 9,000 2.9% -0.1% -2.5% 1,000 -0.8% 6,000 -2.2% 500 -3.8% 3,000 - - 2018 2019 2020 2021 2022E 2018 2019 2020 202
Slide 14: U.S. infrastructure plan will boost the cement industry
BIDEN INFRASTRUCTURE PLAN The Infrastructure Investment and Jobs Act is a $1.2 trillion infrastructure package. Included in the package is roughly $550 billion in new surface transportation spending. The plan will take 5-years and combines transformational efforts in roads, bridges, railroads, and d
Slide 15: While in a 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 140 120 -15% Consumption Actual 2003-2022 100 Estimated 2023-2025 Production 80 60 40 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: USGS, PCA 2022 U.S. apparent consumption is still 15% b
Slide 16: GCC is the leading producer in the state of Chihuahua
GCC IS THE LEADING PRODUCER IN THE STATE OF CHIHUAHUA, WITH SIGNIFICANT EXPORT CAPACITY Exports to U.S. GCC is sole producer of cement and the leading producer Juarez of ready-mix concrete in Chihuahua Samalayuca Close economic ties between Chihuahua and the U.S. Chihuahua Cyclical recovery benefit
Slide 17: 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 long-term VERTICALLY INTEGRATED OPERATIONS
Slide 18: With state of the art production facilities
Pueblo, CO WITH STATE 1.1 MMT 2008 startup OF THE ART Rapid City, SD Chihuahua, Chih. 1.1 MMT PRODUCTION 1.1 MMT 1941 startup 2018 expansion 2009 modernized FACILITIES 5.8 MMT Cement production capacity Tijeras, NM Samalayuca, Chih. United States 1.0 MMT Mexico 3.5 MMT 0.4 MMT 2015 modernized 0.9 MM
Slide 19: Operating at near-optimal capacity utilization levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 100% 91% U.S. industry 88% 86% 86% 84% 85% estimated average 82% 82% 82% 82% 79% 79% 78% 79% 80% 80% 74% 71% 68% 2021 2022 Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident MX US GCC MEXICO UNITED STATES 19
Slide 20: Linked by sophisticated distribution network
ROBUST LOGISTICS PLATFORM STRETCHES FROM NORTHERN MEXICO TO THE U.S. BORDER WITH CANADA ALBERTA LINKED BY Operational flexibility SOPHISTICATED Cost efficiency DISTRIBUTION Faster delivery time ID WI NETWORK THAT MT ND MN Advanced logistics LEVERAGES Reduced supply disruption risk WI CONTIGUOUS ID S
Slide 21: Optimizing operations for value generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 15.2% ROIC 13.1% 12.4% 10.0% Value generated 9.6% 9.1% 9.0% 8.8% 8.2% 9.0% 9.0% 8.6% 8.4% 7.0% 8.1% 7.8% WACC 5.8% 7.0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 Any projections have been prepared based on GCC’s views as of the date of this presentation
Slide 22: GCC generates a higher ROIC than most of its U.S. peers
GCC GENERATES A HIGHER ROIC THAN MOST OF ITS U.S. PEERS... 20.5% EXP 15.2% GCC 13.1% 12.4% 10.5% 9.6% 9.0% 8.4% MLM 8.1% VMC 8.1% 7.0% 6.8% SUM 2015 2016 2017 2018 2019 2020 2021 2022 22 Source: Company and J.P. Morgan estimates (March 2023)
Slide 23: ... as well as its LatAm peers
... AS WELL AS ITS LATAM PEERS 15.2% GCC 13.1% 12.5% CX 12.4% 10.5% 9.6% 9.0% 8.1% 7.0% 6.3% CLH 5.1% CEMARGOS 2015 2016 2017 2018 2019 2020 2021 2022 23 Source: Company and Morgan Stanley estimates (March 2023)
Slide 24: Recent developments enhance GCC's value proposition
Cement Capacity EBITDA Debt Falling Increased free Growing Growing and float and RECENT Refinancing liquidity DEVELOPMENTS +514k mt +92% -0.95x 49% ENHANCE Odessa in 2016 EBITDA growth Net leverage of total shares GCC’S VALUE acquisition since 2016 on BMV PROPOSITION +440k mt 31.0% BBB- +23% Rapid C
Slide 25: Bond and bank debt refinancing
REDUCTION OF INTEREST COUPON BY 1.636 PERCENTAGE POINTS MATURITY PROFILE (US$ million) Fitch and S&P upgraded GCC’s rating to investment grade (Q1-21) 500 BOND AND Bond interest coupon decreased to 3.614% from 5.250% (January 2022) BANK DEBT Undrawn ~US$270mm revolving credit facility to support liq
Slide 26: Sustainability linked bond US$500 MM BBB-
SUSTAINABILITY LINKED BOND FIRST ISSUANCE AS AN INVESTMENT GRADE COMPANY Largest USD SLB by a cement company ever US$500 MM 2.8x oversubscribed orderbook Drove a 25bps compression from IPTs to launch BBB- GCC hosted conference calls with over 75 accounts, over a 4-day marketing exercise, while simul
Slide 27: Sustainability linked bond
SUSTAINABILITY LINKED BOND REINFORCING GCC’S COMMITMENT TO DECARBONIZATION First SLB from a cement company in the Americas, positioning GCC 770 767 Actuals at the forefront of the industry’s decarbonization strategy 754 754 754 746 740 740 SUSTAINABILITY PERFORMANCE TARGET 710 SP 680 T Carbon Intens
Slide 28: Debt and capital efficiency indicators steadily improving
DEBT AND CAPITAL EFFICIENCY INDICATORS STEADILY IMPROVING EBITDA MARGIN EBITDA MARGIN ROIC (NOPAT / Avg. InvestedROIC Capital) (NOPAT / Avg. Invested Capital) 15.2% 15.2% 13.1% 13.1% 12.4% 12.4% 31.0% 31.0% 10.5% 10.5% 9.6% 9.6% 9.0% 9.0% 8.1% 8.1% 7.0% 7.0% +13.7 ppt +13.7 ppt 5.8% 5.8% 17.3% 17.3%
Slide 29: Strengthened margins and lower indebtedness than most of our peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2023 estimated Net Debt/EBITDA multiples* 5.1x LatAm Average 3.1x US Average 1.6x 1.7x 2.2x 1.8x 2.4x 3.9x 2.9x 1.1x 0.7x GCC EXP VMC MLM SUM Cemex CLH Argos 2023 estimated EBITDA margins* US Average 28.2% LatAm Average 18.3% 32.6% 3
Slide 30: Capital markets transactions increased share float and liquidity; valuation remains attractive
CAPITAL MARKETS TRANSACTIONS INCREASED SHARE FLOAT AND LIQUIDITY; VALUATION REMAINS ATTRACTIVE TRANSACTIONS BENEFIT PUBLIC 2023 ESTIMATED EV/EBITDA MULTIPLES1 MARKET SHAREHOLDERS Transparent control group shareholdings Float increased to 49% of shares US Average 11.5x Increased liquidity LatAm Peers
Slide 31: 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 434,000 MSCI Index inclusion, June 2018 IPC Index inclusion, September 2018 LIQUIDITY 276,000 FTSE Index inclusion, March 2019 ENHANC
Slide 32: Sustainable Development Performance Targets
GCC JOINED THE GLOBAL CEMENT AND CONCRETE ASSOCIATION IN 2018 MAIN GOALS SUSTAINABLE DEVELOPMENT GOALS 2020 ✓ HOW? REDUCE NET CO2 EMISSIONS BY 9% Climate & Energy Sustainable Development Performance Targets Energy efficiency 2030 Circular Economy Alternative fuels REDUCE NET CO2 EMISSIONS BY 30.7% O
Slide 33: Sustainability initiatives resulting in direct economic and environmental benefits
SUPPORTED BY SUSTAINABILITY INITIATIVES RESULTING IN DIRECT ECONOMIC AND ENVIRONMENTAL BENEFITS ALTERNATIVE FUELS (AF) USAGE AND AF USAGE BY PLANT CO2 EMISSIONS REDUCTION1 3.5% 2.7% 1.7% 1.7% 1.7% 1.0% 38% 37% 40% 27% 27% 24% 25% 21% 19% 18% 18% 16% 18% 11% 11% 6% 9.7% 9.1% 9.1% 11.5% 9.6% 7.7% Sama
Slide 34: Latest ESG achievements
GCC joined the Science Based Targets initiative to verify CO2 reduction targets Three long-term agreements were signed with renewable energy suppliers covering approximately 20%, 100% and 50% of the electricity consumed at Mexico’s operations, Odessa plant and Rapid City plant, respectively LATEST E
Slide 35: Experienced management team, with sound corporate governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 49.1% 50.9% ENRIQUE ESCALANTE, CEO GCC since 1999; 23 years in the industry Free float CAMCEM MAIK STRECKER, CFO 100% GCC since 2020; 22 years in the industry Chihuahua Investors CEMEX + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC sinc
Slide 36: 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 TDC Based on EBITDA: CEO: ~ 31% Budgeted growth Key executives: 40% - 62% EBITDA margin TOTAL DIRECT Pays out be
Slide 37: With a 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 Value-added products City Case by case Aggre
Slide 38: Reinforcing a positive 2023 outlook
REINFORCING A POSITIVE 2023 OUTLOOK UNITED STATES CONSOLIDATED Volumes EBITDA growth High-single to low-double digit Cement Low-single digit FCF Conversion Rate > 60% Concrete Prices Total CAPEX US$290 million Cement Growth US$220 million Mid- to high-single digit Maintenance US$70 million Concrete
Slide 39: Enrique Escalante, CEO Q4 2022 quote
ENRIQUE Enrique Escalante, GCC’s Chief Executive Officer, commented: “GCC’s focus on operational ESCALANTE excellence enabled us to deliver strong results in an unprecedented market environment. We continue to anticipate challenges, mitigating their potential effects while also capitalizing on CEO Q
Slide 40: Appendix
05 APPENDIX
Slide 41: Q4 & FY 2022 Results
Q4 & FY 2022 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 1,169 31.4% 31.5% 32.5% 31.0% 1,039 285 363 244 338 +12.6% +7.4% +16.8% 115 89 258 290 +12.3% 81 91 +29.6% +12.7% Q4-21 Q4-22 2021 2022 Q4-21 Q4-22 2021 2022 Q4-21 Q4-22 2021 2022 2022 NET SAL
Slide 42: Q4 2022 Results Highlights
Q4 2022 RESULTS HIGHLIGHTS Millions of dollars Q4-22 Q4-21 Var 2022 2021 Var Net sales 289.7 257.9 12.3% 1,169.5 1,038.8 12.6% Operating income before other expenses 69.3 57.2 21.1% 269.5 241.1 11.8% EBITDA 91.3 81.0 12.7% 362.7 337.7 7.4% EBITDA Margin 31.5% 31.4% 31.0% 32.5% Consolidated net incom
Slide 43: Sales volumes and prices
SALES VOLUMES AND PRICES Q4-22 vs Q4-21 2022 vs 2021 Cement volumes Favorable price environment in both countries U.S. -4.7% 2.9% Oil-well cement demand strengthened Mexico -1.7% -2.9% The most dynamic U.S. market segment during the quarter was the oil and gas sector Concrete volumes U.S. -3.1% 3.1%
Slide 44: Sales
SALES Million dollars Q4-22 Q4-21 Var 2022 2021 Var Consolidated 289.7 257.9 12.3% 1,169.5 1,038.8 12.6% U.S. 198.3 183.6 8.0% 840.6 750.4 12.0% Mexico 91.4 74.3 23.0% 328.9 288.4 14.0% U.S. SALES MEXICO SALES Strong start in the quarter, affected by mid-December cold front MX cement business was ad
Slide 45: Income statement (million dollars)
INCOME STATEMENT (MILLION DOLLARS) Q4-22 Q4-21 Var 2022 2021 Var Net Sales 289.7 257.9 12.3% 1,169.5 1,038.8 12.6% U.S. 198.3 183.6 8.0% 840.6 750.4 12.0% Mexico 91.4 74.3 23.0% 328.9 288.4 14.0% Cost of sales 194.0 175.0 10.8% 803.8 707.5 13.6% SG&A expenses 26.4 25.6 3.1% 96.1 90.2 6.5% Other expe
Slide 46: Free cash flow (million dollars)
FREE CASH FLOW (MILLION DOLLARS) Q4-22 Q4-21 Var 2022 2021 Var Operating income before other expenses 69.3 57.2 21.1% 269.5 241.1 11.8% Depreciation and amortization 22.0 23.8 -7.6% 93.2 96.6 -3.5% Increased free cash flow in Q4-22 reflects: EBITDA 91.3 81.0 12.7% 362.7 337.7 7.4% Lower maintenance
Slide 47: Balance sheet (million dollars)
BALANCE SHEET (MILLION DOLLARS) Dec-22 Dec-21 Var Total Assets 2,457.5 2,222.6 10.6% Net leverage (net debt/EBITDA) ratio totaled Current Assets 1,121.2 953.9 17.5% Cash 832.1 683.0 21.8% -0.95x as of December 2022 Other current assets 289.1 270.9 6.7% Cash and equivalents totaled US$832 million Non
Slide 48: Contact
CONTACT: Maik Strecker, Chief Financial and Planning Officer mstrecker@gcc.com WWW.GCC.COM Sahory Ogushi, Head of Investor Relations soguship@gcc.com +52 (614) 442 3176 + 1 (303) 739 5943