Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q3 2020 Earnings Presentation
45 slides from Gcc Sab De Cv's earnings presentation, January 2021
Slide 1: Corporate Presentation Q3 2020
CORPOR ATE PRESENTATION Q3 2020 JANUARY 2021 1
Slide 2: Safe Harbor Statement
This presentation has been prepared by Grupo Cementos risks, including, but not limited to, broad trends in business de Chihuahua, S.A.B. de C.V. (together with its subsidiaries, and finance, legislation affecting our securities, exchange “GCC”). Nothing in this presentation is intended to be taken
Slide 3: Reflection of the Strategy Execution Since 2016
REFLECTION OF THE STRATEGY EXECUTION SINCE 2016 Deleveraging as soon as possible ONE OF THE STRONGEST Maintaining a healthy cash balance 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: Action Plan to Mitigate COVID-19 Impact
PEOPLE AND BUSINESS CONTINUITY Developed specific health and safety protocols for each of GCC’s operations ACTION PLAN Enacted “work from home” protocols for the majority of employees TO MITIGATE Established skeleton crews wherever possible COVID-19 IMPACT Ensured that every employee receives their
Slide 5: Cash, Liquidity and Balance Sheet
Cost and expense reductions throughout the organization Variable costs and distribution efficiencies Identified US$20 million in savings e.g. hiring freeze, not filling vacant positions and limiting external service providers US$ 7M deferral from the Cares Act CASH, LIQUIDITY Reduction of 2020 capex
Slide 6: 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 7: 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 Capacity EBITDA Growth EBITDA Margin Net Debt/ EBITDA Free Float Share Price (12/31/20) DECEMBE
Slide 8: 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 9: 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 10: Markets with Demonstrated Volume and Price Recovery
GCC U.S. CEMENT SALES GCC U.S. CONCRETE SALES MARKETS WITH (’000 MT) 3yr CAGR (’000 M3 / YEAR) +2.0% Continued DEMONSTRATED operations 3,277 3,210 2,963 3,103 927 918 959 VOLUME AND 901 PRICE RECOVERY 2017 2018 2019 LTM Q3-20 2017 2018 2019 LTM Q3-20 GCC U.S. CEMENT PRICES GCC U.S. CONCRETE PRICES (
Slide 11: 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 12: And a Clear Need for Increased Infrastructure Spending
AND A CLEAR NEED FOR INCREASED INFRASTRUCTURE SPENDING WA WA WA NH ME NH ME NH ME MT ND MT ND VT VT MT ND MT ND VT OR OR OR MN MN MN MN ID ID SD NY MA NY MA ID ID SD NY MA WII SD WII WI SD WI RI RI RI WY WY MI MI WY WY MI MI CT CT CT IA IA PA PA IA IA PA PA NE NE NJ NJ NE NE NJ V NV OH OH NV NV OH O
Slide 13: Leading to a Positive Outlook, Driven by Expected Infrastructure Spending
FORECAST CEMENT CONSUMPTION HIGHWAY BUDGET AUTHORIZATIONS LEADING TO A IN ALL GCC U.S. MARKETS (MMT) 1 INCLUDED IN THE FAST ACT ($ BB) ² 4yr CAGR POSITIVE OUTLOOK, +2.0% 45.0 46.0 47.1 47.1 DRIVEN BY AN 44.0 43.1 32.5 32.4 32.7 41.0 6.3% EXPECTED INCREASE 30.2 3.2% 30.6 IN INFRASTRUCTURE 1.2% -0.1%
Slide 14: With a Solid Outlook in Key States
PORTLAND CEMENT ASSOCIATION (PCA) SUMMER 2020 FORECAST AND MAIN CONSUMERS WITH A SOLID COLORADO TEXAS* OUTLOOK IN KEY 3,000 18,000 45.0% STATES 2,500 15,000 8.1% 2,000 12,000 5.4% 21.8% 1,500 9,000 0.2% 1,000 6,000 4.8% -1.7% 4.3% 3.2% 9.9% -0.7% 1.8% -3.8% 500 3,000 -5.3% -9.0% - - 2017 2018 2019 2
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 Consumption 120 -25% Actual 2003-17 Estimated 2018-22 100 Production 80 60 40 Source: USGS, GCC 2003 2008 2013 2018 2019 U.S. apparent consumption is still 25% below 2005 peak Current expansion is 8 years
Slide 16: 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 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 VERTICALLY long-term INTEGRATED OPERATIONS
Slide 18: With 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 Cement production capacity Tijeras, NM Samalayuca, Chih. United States Mexico 3.5 MMT 0.4 MMT 1.1 MMT 1.0 MMT 1995 startup 2
Slide 19: Operating at Near-Optimal Capacity Utilization Levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 100% 95% 94% 89% U.S. Industry 86% 87% 87% 86% 85% Average ‘19E 79% 80% 79% 86% 76% 78% 78% 66% 66% 38%1 2018 2019 Mx Avg Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident US Avg MEXICO UNITED STATES 1 Expansion shutdown 19
Slide 20: 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 Cost efficiency MT ND WI LEVERAGES Faster delivery time MN CONTIGUOUS Advanced logistics SD WI ID MARKET Reduced supply disrupt
Slide 21: Optimizing Operations for Value Generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 10.9% ROIC 10.0% 9.6% 9.1% 9.0% 9.0% 8.9% Value generated WACC 9.2% 8.8% 8.4% 8.1% 8.1% 7.0% 5.8% 2014 2015 2016 2017 2018 2019 2020E Any projections have been prepared based on GCC’s views as of the date of this presentation and include estimates and assum
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... 12.2% EXP 10.9% GCC 10.0% 9.6% 9.0% 8.0% MLM 8.1% VMC 7.7% 7.0% 4.6% SUM 2015 2016 2017 2018 2019 2020E Source: Company and J.P. Morgan estimates 22
Slide 23: ... As Well As Its LatAm Peers
... AS WELL AS ITS LATAM PEERS 22 10.9% GCC 9.6% 10.0% 9.0% 8.1% 7.0% 4.9% CLH 4.7% CX 3.9% CEMARGOS 3.6% ELEMENT 2015 2016 2017 2018 2019 2020E -5 Source: Company and Morgan Stanley estimates 23
Slide 24: Recent Developments Enhance GCC's Value Proposition
RECENT DEVELOPMENTS Cement Capacity EBITDA Debt Falling Increased free float and Growing Growing and ENHANCE Refinancing liquidity GCC’S VALUE +514k mt +55.0% 0.61x 48% PROPOSITION Odessa in 2016 acquisition EBITDA growth since 2016 Leverage of total shares on BMV +440k mt 31.3% BB+ +23% Rapid City
Slide 25: Bond and Bank Debt Refinancing
REDUCTION OF ANNUAL INTEREST EXPENSES BY US$18M MATURITY MATURITY PROFILE PROFILE (US$ million) MATURITY PROFILE BOND AND Bond interest coupon decreased to 5.250% from 8.125% (June 2017) (US$ million) 260 Savings on financial expenses = ~ US$ 8 million per year BANK DEBT Extended maturity 4 years 17
Slide 26: Debt and Capital Efficiency Indicators Steadily Improving
DEBT AND CAPITAL EFFICIENCY INDICATORS STEADILY IMPROVING EBITDA MARGIN ROIC (NOPAT / Avg. Invested Capital) 31.3% 10.0% 9.6% 9.0% 8.1% 7.0% 5.8% 3.1% 17.3% 2013 2014 2015 2016 2017* 2018** 2019 2013 2014 2015 2016 2017 2018 2019 NET LEVERAGE RATIO (Net Debt / EBITDA) WORKING CAPITAL (Based on sales
Slide 27: Strengthened Margins and Lower Indebtedness Than Most Peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2020 estimated Net Debt/EBITDA multiples* 5.1x LatAm Average 4.7x 5.0x 5.6x US Average 4.7x 2.6x 3.8x 3.6x 2.7x 1.9x 2.0x 0.9x GCC EXP VMC MLM SUM Cemex Elementia CLH Argos 2020 estimated EBITDA margins* US Average 26.0% 29.0% LatAm
Slide 28: 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 Float increased to 48% of shares 15.2x US Average 11.9x Increased liquidity 13.4x
Slide 29: Liquidity Enhancing Events
LIQUIDITY HAS INCREASED SIGNIFICANTLY AS A RESULT OF CORPORATE DEVELOPMENTS AND STOCK MARKET POSITIONING AVERAGE DAILY TRADING VOLUME, SHARES1 491,000 “Re-IPO,” February 2017 MSCI Index inclusion, June 2018 IPC Index inclusion 276,000 LIQUIDITY (September 2018 - April 2020) FTSE Index inclusion, Mar
Slide 30: Sustainable Development Performance Targets
GCC JOINED THE GLOBAL CEMENT AND CONCRETE ASSOCIATION IN 2018 SUSTAINABLE MAIN GOAL DEVELOPMENT GOALS HOW? REDUCE NET CO2 EMISSIONS Climate & Energy Sustainable Development Performance Targets 9% BY 2020 AND Energy efficiency 22% BY 2030 Circular Economy Alternative fuels Health & Safety Blended cem
Slide 31: Sustainability Initiatives with 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% 8.9% 8.8% 8.5% 38% 38% 33% 33% 8.1% 27% 27% 25% 18% 20% 12% 11% 11% 10.4% 10.9% 9.1% 9.1% 13.5% Samalayuca Chihuahua Juare
Slide 32: Latest ESG Achievements
GCC joined the Science Based Targets initiative to reduce CO2 emissions Three long-term agreements were signed with renewable energy suppliers covering approximately 20%, 100% and 50% of the electricity consumed at LATEST ESG Mexico’s operations, Odessa plant and Rapid City plant, respectively GCC j
Slide 33: Experienced Management Team, with Sound Corporate Governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 48.2% 51.8% ENRIQUE ESCALANTE, CEO GCC since 1999; 21 years in the industry Free float CAMCEM LUIS CARLOS ARIAS, CFO 100% GCC since 1996; 24 years in the industry Chihuahua CEMEX Investors + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC
Slide 34: 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 35: 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 36: Enrique Escalante, CEO Q3 2020 Quote
Enrique Escalante, GCC’s Chief Executive Officer, commented: ENRIQUE “GCC had a steady EBITDA growth, a strong free cash flow generation & margin expansion, ESCALANTE showing once again, the continued and successful execution of a comprehensive plan to reduce costs and expenses. CEO Q3 2020 QUOTE We
Slide 37: Appendix: Q3 2020 Results
APPENDIX Q3 2020 RESULTS 37
Slide 38: Q3 2020 Results
Q3 2020 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 705 705 151 31.9% 35.5% 29.1% 32.2% 227 206 104 91 +10.4% 0.0% 302 281 96 100 54 -6.8% +3.6% Q3-19 Q3-20 9M-19 9M-20 Q3-19 Q3-20 9M-19 9M-20 Q3-19 Q3-20 9M-19 9M-20 NET SALES BY COUNTRY SALES MIX N
Slide 39: Q3 2020 Results Highlights
Q3 2020 RESULTS HIGHLIGHTS Millions of dollars Q3-20 Q3-19 Var 9M-20 9M-19 Var Net sales 281.1 301.7 -6.8% 705.3 705.5 0.0% Operating Income before other 75.7 69.7 8.7% 154.7 123.2 25.6% expenses EBITDA 99.9 96.4 3.6% 227.0 205.6 10.4% EBITDA Margin 35.5% 31.9% 32.2% 29.1% Consolidated Net Income 52
Slide 40: Sales Volumes and Prices
SALES VOLUMES AND PRICES Q3-20 vs Q3-19 9M-20 vs 9M-19 The decrease in U.S. cement volumes was primarily due to a tough comparison against an all-time-high third quarter and a global drop in oil well cement Cement sales volumes. U.S. -14.6% -2.7% Excluding the shortfall felt from the oil well market
Slide 41: Sales
SALES Million dollars Q3-20 Q3-19 Var 9M-20 9M-19 Var Consolidated 281.1 301.7 -6.8% 705.3 705.5 0.0% U.S. 217.3 236.0 -8.0% 528.0 514.8 2.5% Mexico 63.9 65.6 -2.7% 177.3 190.7 -7.0% U.S SALES MEXICO SALES Experienced mixed demand for our products all across On-going quarantines and work from home t
Slide 42: Income Statement (Million Dollars)
INCOME STATEMENT (MILLION DOLLARS) Q3-20 Q3-19 Var 9M-20 9M-19 Var Net Sales 281.1 301.7 -6.8% 705.3 705.5 0.0% U.S. 217.3 236.0 -8.0% 528.0 514.8 2.5% Mexico 63.9 65.6 -2.7% 177.3 190.7 -7.0% Cost of sales 186.2 209.8 -11.3% 491.3 517.4 -5.0% SG&A expenses 19.2 22.1 -13.1% 59.4 65.0 -8.7% Other exp
Slide 43: Free Cash Flow (Million Dollars)
FREE CASH FLOW (MILLION DOLLARS) Q3-20 Q3-19 Var 9M-20 9M-19 Var Operating income before other expenses 75.7 69.7 8.7% 154.7 123.2 25.6% Depreciation and amortization 24.2 26.7 -9.4% 72.4 82.4 -12.2% Increase in Free Cash Flow in Q3-20 reflects: EBITDA 99.9 96.4 3.7% 227.0 205.6 10.4% Higher EBITDA
Slide 44: Balance Sheet (Million Dollars)
BALANCE SHEET (MILLION DOLLARS) Sep-20 Sep-19 Var Total Assets 2,126.0 2,014.0 5.6% Current Assets 817.5 613.5 33.3% Cash 510.9 276.9 84.5% Other current assets 306.5 336.5 -8.9% Net leverage (net debt/EBITDA) dropped to 0.61x as of September 2020 Non-current assets 1,308.6 1,400.6 -6.6% A dividend
Slide 45: 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 45
Grupo Cementos de Chihuahua, S.A.B. de C.V. (GCC) — Q3 2020 Earnings Presentation on 6ix