Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Investor Day (March 2018)
46 slides from Gcc Sab De Cv's investor day presentation, March 2018
Slide 1: GCC Analyst Day 2018
GCC Analyst Day 2018 Denver – March 2018 [TBU]
Slide 2: Agenda
Agenda 1. GCC’s transformation and strategy 2. Mexico overview 3. U.S. overview 4. Finance perspective 1
Slide 3: Our team
Our team Enrique Escalante Chief Executive Officer Ron Henley U.S. Division President Luis Carlos Arias Chief Financial Officer 2
Slide 4: GCC's transformation and strategy
GCC’s transformation and strategy Enrique Escalante Chief Executive Officer 3
Slide 5: GCC at a glance: a unique market presence
GCC at a glance: a unique market presence 2017 Sales EBITDA Margin The “Center Cut” of North America US$ 925 mm 27.0% T by Country by Product Me Cement x Ready- 58% 24% mix U.S. 29% 76% Other 13% 4
Slide 6: Coherent market footprint
Coherent market footprint “Center cut” of North America MT #1 or #2 ND MN in core markets SD WI WY IA NE CO Insulated from seaborne KS Higher sales NM OK competition T AR Mid sales W TX Lower sales 7 Cement plants E TX 21 Cement terminals Chihuahua + 2 distribution centers 130 Ready-mix plants in 6
Slide 7: Three years of operational and financial transformation
Three years of operational and financial transformation Disciplined expansion Prudent balance sheet management Customer focus Increased Operational shareholder value excellence 3 year change: 2017 vs 2014 Cement EBITDA EBITDA Leverage Free float Share Price Capacity US$ Margin Dec 2017 (3/2/18) 25%
Slide 8: Market driver: U.S. demand outpacing supply
#1 Market driver: U.S. demand outpacing supply 140 U.S. Cement Consumption U.S. consumption up 38% Clinker Capacity since 2010 Million metric tons PCA forecasts 3.4% p.a. growth 2018-2022 U.S. demand and domestic production curves will cross in 40 2003 2005 2007 2009 2011 2013 2015 2017e 2019e 2021e
Slide 9: Disciplined investment strategy
Disciplined investment strategy Framework Priorities Increase presence in existing Seek out markets Cement Case by case Rapid Odessa City Aggregates w/ Increase productivity vertical El Paso aggregates integration Ready-mix w/ TX, NM vertical Ready-mix Enter new U.S. markets integration Aggregates D
Slide 10: Investment strategy in action
Investment strategy in action US$ 410 million, 2016-2018 Priority 1 Odessa, Rapid City cement Rapid El Paso,City, SD new cement line TX ready-mix Odessa, TX cement plant Priority 2 El Paso aggregates Priority 3 El Paso and Las Cruces ready-mix El Paso, TX aggregates Ready-Mix operations 9
Slide 11: Customer focus: 2018 is Year of the Customer
Customer focus: 2018 is Year of the Customer High level engagement with customers Act on customer feedback Adjust and improve processes to best meet customer needs New tools: Customer App Tailored product solutions 10
Slide 12: Operational excellence: High Performance Organization
Operational excellence: High Performance Organization Safety Highly efficient operation Continuous improvement Empowering our people Teamwork Vertically integrated operations Cement network optimization Sustainability Human capital development 11
Slide 13: Operational excellence: Highly efficient operations
Operational excellence: Highly efficient operations Continuous improvement Work team level Standardized methodology Quantitative indicators Prioritization and selection Example: Increase availability of the conveyors for the aggregates crushing mills in Chihuahua High Impact Ideas Encourage and rewa
Slide 14: Vertical integration and cement network optimization
Vertical integration and cement network optimization Thermal energy ND MT MN Raw materials WY SD WI IA NE Cement CO UT KS Ready-mix NM OK T AR W TX Cement terminals E TX Chihuahua Transport Chih Cement terminal Cement plants 13
Slide 15: Sustainability: Transparency and cost savings
Sustainability: Transparency and cost savings Alternative Fuels Expansion 45% 40% 33% 36% 29% 25% 20% 7% 12% 5% Samalayuca Pueblo Tires 45% Transparency Explicit goals 20% 11% 13% 14% 9% 5% Progress Chihuahua Rapid City in Permitting process 48% 45% 40% Industrial waste 28% 19% 20% 7% Juarez Tijeras
Slide 16: Human capital development
Human capital development “The Right People in the Right Place” Talent development and succession planning in a sustainable context GCC strategy defines talent needs From growth and/or retirement Skills requirements Leadership profiles Critical position identification Succession planning Operational
Slide 17: Mexico Division Overview
Mexico Division Overview Enrique Escalante Chief Executive Officer 16
Slide 18: The market leader in the state of Chihuahua
The market leader in the state of Chihuahua Cement Plants 3 Plants 2.3 mmt capacity 2017 utilization rate: 73% Juarez Cement plant Samalayuca Distribution Centers Aggregates plant 2 Centers Distribution center State of Chihuahua Ready-mix plant Chihuahua Block plant Ready-mix Operations 3 Regions Pr
Slide 19: Mexico Division serves three distinct markets
Mexico Division serves three distinct markets by Segment Contractor U.S. s Housing 20% 9% 28% of Cement Govt. 8% Mining Exports 13% Distributio Exports n network 11% 34% Other 5% Mexico 61% of Cement 11% of Cement Division by Format 100% of Ready-mix and other Bag products 32% U.S. and Mexico Chihua
Slide 20: Improved pricing and operating efficiencies have improved profitability
Improved pricing and operating efficiencies have improved profitability Cement Sales Mexico Division EBITDA (US$ mm) and EBITDA Margin Volumes Prices 3yr CAGR 3yr CAGR +8.5% +16.1% 160 38% 140 120 32% 2014 2017 4Q14 4Q17 100 29% 80 Concrete Sales 25% Volumes Prices 60 23% 3yr CAGR 3yr CAGR 40 86 85
Slide 21: Innovation and customer focus: New technology for highway repair
Innovation and customer focus: New technology for highway repair Joint Venture Deacero-GCC Deacero engineered welded wire mesh + GCC Fraguamax hydraulic concrete technology Repaired concrete roads reopen <12 hours First time solution approved for use in Mexico Technovia Express was just awarded its
Slide 22: Innovation and Customer focus: Santa Eulalia mine rescue
Innovation and Customer focus: Santa Eulalia mine rescue Grupo Mexico’s Santa Eulalia mine in Chihuahua was forced to close by flooding 26,000 gal./min. of water from an aquifer overwhelmed pumps Santa Eulalia is rich in silver, lead and zinc A multi-national team developed a rescue plan Divert the
Slide 23: U.S. Division overview
U.S. Division overview Ron Henley U.S. Division President 22
Slide 24: Regional leader in the center cut of North America
Regional leader in the “center cut” of North America Cement Plants 4 Plants MT 3.3 mmt capacity (incl. expansion) ND MN 2017 utilization rate: 89% SD WI WY Cement Distribution Terminals Rapid City IA 21 Terminals NE North Central UT CO Pueblo KS Ready-mix Operations 3 Regions NM 90 Plants OK Higher
Slide 25: #1 or #2 in core markets
#1 or #2 in core markets GCC market position in core markets Colorado N Mexico N Dakota S Dakota W Texas Wyoming GCC market position #2 #1 #3 #1 #1 #2 GCC cement plant in state ✔ ✔ — ✔ ✔ Competitor in-state plant LHN, CX none none none BZU* EXP HEI, LHN, LHN, Other principal competitors EXP LHN AG A
Slide 26: Sustained price and volume recovery in the U.S.
Volumes (mmt) Sustained price and volume recovery in the U.S. Cement Sales U.S. Division EBITDA (US$ mm) and EBITDA Margin Volumes Prices 3yr CAGR 3.0 3yr CAGR +7.1% +6.1% 1.9 30% 27% 200 23% 25% 20% 2014 2017 4Q14 4Q17 14% 15% Concrete Sales 100 Volumes Prices 165 10% 3yr CAGR 3yr CAGR 122 125 +4.2
Slide 27: Solid state level outlook for GCC market area
Solid state level outlook for GCC market area U.S. Market Drivers Continued growth in GDP and Oil and commodity price increases income Residential construction expansion Domestic demand > domestic Highway infrastructure production development PCA Winter 2017 Forecast Total Consumption ∆% Y-o-Y 120 6
Slide 28: Seizing market opportunities: Oil well cement in Permian Basin
Seizing market opportunities: Oil well cement in Permian Basin Odessa plant 100% dedicated to oil well cement Tijeras plant supports additional volume Tijeras Permian basin rig count +220% since 2Q16 Samalayuca exports meet W. Texas demand for construction cement Permian Basin rig count Odes
Slide 29: A unique cement network
A unique cement network Better customer service ND MT Ensure delivery to clients MN when and where they need it SD WI WY IA Optimize production CO NE decisions UT KS NM Reduce costs T OK AR W TX E TX Chihuahua Chihuahua Cement terminal Cement plants 28
Slide 30: Cement network optimization – Post merger integration
Cement network optimization – Post merger integration Objective: Maximize profits by optimizing freight and movement costs in sourcing the markets we serve Nov 2016: Odessa’s production supplied ready-mix markets in El Paso, Las Cruces, Odessa, and other parts of West Texas 1. GCC shifts cement supp
Slide 31: Rapid City expansion project to meet future cement demand
Rapid City expansion project to meet future cement demand + 440,000 mt cement capacity US$104 mm budget 3Q18 tie-in and start-up 75% completed (Dec 2017) Jan 2016 Sept 2016 July 2017 3Q18 4Q18-2019 2015 Feasibility All permits Civil construction Mechanical & Tie in Ramp-up study in hand begins elect
Slide 32: Customer focused: Supplying wind farms
Customer focused: Supplying wind farms GCC collaborates with wind energy leader M.A. Mortenson on 10 wind power projects Iowa, Minnesota, North Dakota, and South Dakota 2,000+ MW 1,000+ turbines 400,000 cubic yards of concrete poured 100,000 cubic yards additional quoted in partnership with Mortenso
Slide 33: Customer focused: Innovative solution for improved supply
Customer focused: Innovative solution for improved supply Knife River Corporation is a long-standing GCC customer for their operations across the norther tier Their St. Joseph, MN ready-mix plant had a disused terminal and rail spur Previous efforts to use or adapt the terminal had failed GCC Logist
Slide 34: Finance perspective
Finance perspective Luis Carlos Arias Chief Financial Officer 33
Slide 35: Solid 4Q17 and 2017 results
Solid 4Q17 and 2017 results Sales (US$ million) EBITDA and EBITDA margin (US$ million) 24.2% 29.9% 25.2% 27.0% 925 250 748 188 +32% 238 71 186 +24% +28% 45 +58% 4Q16 4Q17 2016 2017 4Q16 4Q17 2016 2017 Price and Volume, full year Net Income (US$ million) Free Cash Flow (US$ million) 107 112 Volume Pr
Slide 36: Factors driving increased margins
Factors driving increased margins $60.9 / 1.8% $53.1 -$67.6 $123.7 1.6% -2.0% -$48.3 3.7% -1.4% 27.0% 25.2% $188.6 $249.5 Prices and Volumes ++ December 16 YTD Volume Price Variable Cost Fixed Cost December 17 YTD Unit transport costs + +0.7% +1.8% Alternative fuels + +0.3% +0.8% Maintenance - 27.0%
Slide 37: Factors driving increased margins
Factors driving increased margins $60.9 / 1.8% $53.1 -$67.6 $123.7 1.6% -2.0% -$48.3 3.7% -1.4% 27.0% 25.2% $188.6 $249.5 Prices and Volumes ++ December 16 YTD Volume Price Variable Cost Fixed Cost December 17 YTD Unit transport costs + +0.7% +1.8% Alternative fuels + +0.3% +0.8% Maintenance - 27.0%
Slide 38: Historical financial performance
Historical financial performance Sales (US$ million) EBITDA (US$ million) Mexico U.S. Mexico U.S. 925 250 755 753 748 657 189 154 165 114 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Free Cash Flow* (US$ million) EBITDA Margin (US$ million) Mexico GCC Consolidated U.S. 107 112 38.3% 27.0% 69 61
Slide 39: Effective capital management improves returns
Effective capital management improves returns CAPEX (US$ million) Excluding acquisitions 120 Maintenance Expansion NESHAP ROIC 9.2% 75 (NOPAT/Avg. Invested Capital) 55 8.0% 47 46 36 7.0% 6.2% 2013 2014 2015 2016 2017 2018e Working Capital (US$ million) 140 100 3.2% 89 Total working capital Days in W
Slide 40: Financial transformation alongside operational transformation
Financial transformation alongside operational transformation Major financial transactions 2016-2017 Market Capitalization and Float 2015 Feb 2018 Reorganize corporate structure Ps. 15 bb Ps. 34 bb (Sep 2016) US$0.9 bb US$1.7 bb … … $254 mm bank acquisition 25% free 48% free financing (Nov 2016) flo
Slide 41: Bond refinancing in 2017 improves financial position
Bond refinancing in 2017 improves financial position 2020 Notes called; 2024 Notes issued Maturity Profile (US$ million) Coupon: 8.125% 5.25% 4 years Rating: BB 260 Maturity: 2020 2024 260 48 165 17 102 83 20 2018 2019 2020 2021 2022 2023 1H24 Banks Notes due 2020 Notes due 2024 Debt Com
Slide 42: Proven track record of balance sheet management
Proven track record of balance sheet management Net leverage ratio (Net Debt / EBITDA) 3.45x 2.57x 2.28x 1.84x 1.86x 2013 2014 2015 2016 2017 Net interest coverage ratio (EBITDA/ Net interest expense) 7.05x 6.45x 5.72x 4.34x 3.14x 2013 2014 2015 2016 2017 41
Slide 43: 2018 outlook
2018 outlook United States Consolidated EBITDA growth: Mid-single digit Volumes: Working capital: Slight decrease Cement: } Low single digit Total CAPEX: US$ 120 million Concrete: 3% – 5% Maintenance and carryover: 60 Prices: T Rapid City expansion: 60 Net Debt / EBITDA ≦ 2.0 Mex
Slide 44: Investment highlights
Investment highlights Leading position in attractive U.S. regional 1 markets and Chihuahua, Mexico Mexico operations also provide a strong base, and 2 add operational flexibility and export capacity Vertically integrated, with state of the art 3 production facilities and network Experienced manageme
Slide 45: Disclaimer
Disclaimer This presentation has been prepared by Grupo Cementos de Chihuahua, S.A.B. de C.V. (together with its subsidiaries, “GCC”). Nothing in this presentation is intended to be taken by any person as investment advice, a recommendation to buy, hold or sell any security, or an offer to sell or a
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