Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q4 2020 Earnings Presentation
45 slides from Gcc Sab De Cv's earnings presentation, February 2021
Slide 1: Corporate Presentation Q4 2020
CORPOR ATE PRESENTATION Q4 2020 FEBRUARY 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 Achieved US$24 million in savings during 2020 e.g. hiring freeze, not filling vacant positions and limiting external service providers CASH, LIQUIDITY Deferred all non-essential projects AND BALANCE
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 (01/29/21) 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 IA Leadership position in 16 contiguous states NE CO, MN, MT, ND, NM, SD and W.TX are our core markets, with #2 UT 85% of U.S. sales CO No
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) 3yr CAGR +1.8% Continued +0.3% DEMONSTRATED 3,277 3,180 operations 2,963 3,103 927 918 939 VOLUME AND 901 PRICE RECOVERY 2017 2018 2019 2020 2017 2018 2019 2020 GCC U.S. CEMENT PRICES GCC U.S. CONCRETE PRI
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 WA NH ME NH NH ME N MT MT VT VT ME MT VT ND ND MT ND ND VT OR OR OR OR MN MN MN MN ID ID SD NY MA NY MA ID MA SD WII WII ID SD SD WI NY NY RI RI WI RI WY WY MI MI WY MI CT CT WY MI CT IA IA PA IA NE NJ PA IA PA PA NE NJ NE NJ NV OH NE O
Slide 13: Leading to a positive outlook, driven by expected increase in infrastructure spending
FORECAST CEMENT CONSUMPTION HIGHWAY BUDGET AUTHORIZATIONS LEADING TO A IN ALL GCC U.S. MARKETS (MMT) 1 4yr CAGR INCLUDED IN THE FAST ACT ($ BB) ² +3.3% POSITIVE OUTLOOK, 46.0 47.1 47.1 45.0 DRIVEN BY AN 32.6 44.0 43.1 31.1 31.7 30.5 41.0 EXPECTED INCREASE 6.7% IN INFRASTRUCTURE 28.6 1.2% 2.1% 2.0% 2
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 STATES 2,500 15,000 8.1% 44.3% 2,000 5.9% 12,000 30.5% 4.3% 21.4% 3.1% 9.9% 0.2% 1,500 9,000 3.2% 0.8% 4.3% 3.2% 1,000 6,000 -3.8% 500 3,000 -65.6% - - 2017 2018 2019 20
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 Consumption -20% Actual 2003-2020 Estimated 2021-2024 100 80 Production 60 40 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Source: USGS, PCA 2020 U.S. apparent consumption is still 20% below
Slide 16: GCC is the 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 1.3 MMT 1.0 MMT 1995 startup 2
Slide 19: Operating at near-optimal capacity utilization levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 95% 96% 97% 90% 87% 86% U.S. industry 82% 85% estimated average 78% 80% 79% 78% 86% 76% 72% 66% 65% 66% 56% 53% 38%1 2019 2020 Mx Avg Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident US Avg MEXICO UNITED STATES 1 Expansion shu
Slide 20: Linked by sophisticated distribution network
ROBUST LOGISTICS PLATFORM STRETCHES LINKED BY FROM NORTHERN MEXICO TO THE U.S. ALBERTA BORDER WITH CANADA SOPHISTICATED 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 12.4% ROIC 10.5% 9.6% Value generated 9.1% 9.0% 8.9% 9.0% 9.2% 8.8% 8.4% 8.1% 7.5% WACC 7.0% 5.8% 2014 2015 2016 2017 2018 2019 2020 Any projections have been prepared based on GCC’s views as of the date of this presentation and include estimates and assump
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... 14.5% EXP 12.4% GCC 10.5% 9.6% 9.6% VMC 9.0% 9.5% MLM 8.1% 7.0% 6.2% 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 12.7% CX 12.4% GCC 10.5% 9.6% 9.0% 8.1% 7.0% 4.7% CLH 4.4% CEMARGOS 3.7% ELEMENT 2015 2016 2017 2018 2019 2020E 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 liquidity ENHANCE Refinancing GCC’S VALUE +514k mt +63% 0.24x 48% PROPOSITION Odessa in 2016 acquisition EBITDA growth since 2016 Net leverage of total shares on BMV +440k mt 32.9% BBB- +23% Rapid Ci
Slide 25: Bond and bank debt refinancing
REDUCTION OF ANNUAL INTEREST EXPENSES BY US$18M Fitch Ratings upgraded GCC’s rating to investment grade MATURITY PROFILE (February 2021) MATURITY PROFILE (US$ million) MATURITY PROFILE BOND AND Bond interest coupon decreased to 5.250% from 8.125% (June 2017) (US$ million) Callable June 2021 BANK DEB
Slide 26: Debt and capital efficiency indicators steadily improving
DEBT AND CAPITAL EFFICIENCY INDICATORS STEADILY IMPROVING EBITDA MARGIN ROIC (NOPAT / Avg. Invested Capital) 12.4% 32.9% 10.5% 9.6% 9.0% 8.1% 7.0% +15.6 ppt 5.8% 3.1% 17.3% 2013 2014 2015 2016 2017* 2018** 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 NET LEVERAGE RATIO (Net Debt / EBITDA) WORKI
Slide 27: Strengthened margins and lower indebtedness than most of our peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2021 estimated Net Debt/EBITDA multiples* 5.1x LatAm Average 3.6x US Average 4.1x 4.2x 1.3x 2.6x 3.0x 2.9x 1.0x 1.1x 0.3x -0.3x GCC EXP VMC MLM SUM Cemex Elementia CLH Argos 2021 estimated EBITDA margins* US Average 29.9% LatAm Avera
Slide 28: Capital markets transactions increased share float and liquidity
CAPITAL MARKETS TRANSACTIONS INCREASED SHARE FLOAT AND LIQUIDITY; VALUATION REMAINS ATTRACTIVE TRANSACTIONS BENEFIT PUBLIC 2021 ESTIMATED EV/EBITDA MULTIPLES1 MARKET SHAREHOLDERS Transparent control group shareholdings Float increased to 48% of shares 15.9x US Average 12.7x Increased liquidity 14.7x
Slide 29: Liquidity enhancing events
LIQUIDITY HAS INCREASED SIGNIFICANTLY AS A RESULT OF CORPORATE DEVELOPMENTS AND STOCK MARKET POSITIONING AVERAGE DAILY TRADING VOLUME, SHARES1 497,000 “Re-IPO,” February 2017 276,000 LIQUIDITY MSCI Index inclusion, June 2018 IPC Index inclusion, September 2018 ENHANCING FTSE Index inclusion, March 2
Slide 30: Sustainable Development Performance Targets
GCC JOINED THE GLOBAL CEMENT AND CONCRETE ASSOCIATION IN 2018 SUSTAINABLE MAIN GOALS DEVELOPMENT GOALS HOW? 2020 ✓ Sustainable Development Performance Targets Climate & Energy REDUCE NET CO2 Energy efficiency EMISSIONS BY 9% Circular Economy Alternative fuels 2030 Health & Safety Blended cements RED
Slide 31: Sustainability initiatives with direct 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 Mexico’s operations, Odessa plant and Rapid City plant, respectively LATEST ESG GCC j
Slide 33: Experienced management team, with sound corporate governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 49.1% 50.9% 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: 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 City Value-added products Case by case Aggre
Slide 36: Enrique Escalante, CEO Q4 2020 quote
Enrique Escalante, GCC’s Chief Executive Officer, commented: ENRIQUE “GCC wrapped up 2020 with strong operational and financial results despite the challenges created by the COVID- 19 pandemic. These positive results show GCC’s adaptability, resiliency ESCALANTE and what we can do in challenging tim
Slide 37: Appendix: Q4 2020 Results
APPENDIX Q4 2020 RESULTS 37
Slide 38: Q4 2020 Results
Q4 2020 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 934 938 37.8% 35.0% 31.3% 32.9% 251 308 292 +5.6% 138 +0.4% 100 83 229 232 86 81 +1.7% -5.9% Q4-19 Q4-20 2019 2020 Q4-19 Q4-20 2019 2020 Q4-19 Q4-20 2019 2020 NET SALES BY COUNTRY SALES MIX NET INC
Slide 39: Q4 2020 Results Highlights
Q4 2020 RESULTS HIGHLIGHTS Millions of dollars Q4-20 Q4-19 Var 2020 2019 Var Net sales 232.5 228.6 1.7% 937.8 934.1 0.4% Operating Income before other 56.7 60.4 -6.1% 211.3 183.6 15.1% expenses EBITDA 81.3 86.4 -5.9% 308.3 292 5.6% EBITDA Margin 35.0% 37.8% 32.9% 31.3% Consolidated Net Income 27.5 3
Slide 40: Sales volumes and prices
SALES VOLUMES AND PRICES Q4-20 vs Q4-19 2020 vs 2019 The decrease in U.S. cement volumes was primarily due to a tough comparison against an all-time-high fourth quarter and a global drop in oil well cement Cement sales volumes U.S. -3.7% -3.0% Excluding the shortfall felt from the oil well market, U
Slide 41: Sales
SALES Million dollars Q4-20 Q4-19 Var 2020 2019 Var Consolidated 232.5 228.6 1.7% 937.8 934.1 0.4% U.S. 165.2 167.0 -1.1% 693.1 681.9 1.7% Mexico 67.3 61.6 9.3% 244.6 252.3 -3.0% U.S SALES MEXICO SALES The most dynamic market segments during the quarter Sales during the quarter were primarily driven
Slide 42: Income statement (million dollars)
INCOME STATEMENT (MILLION DOLLARS) Q4-20 Q4-19 Var 2020 2019 Var Net Sales 232.5 228.6 1.7% 937.8 934.1 0.4% U.S. 165.2 167.0 -1.1% 693.1 681.9 1.7% Mexico 67.3 61.6 9.3% 244.6 252.3 -3.0% Cost of sales 156.6 149.8 4.5% 647.9 667.2 -2.9% SG&A expenses 19.2 18.3 4.4% 78.5 83.3 -5.8% Other expenses, n
Slide 43: Free cash flow (million dollars)
FREE CASH FLOW (MILLION DOLLARS) Q4-20 Q4-19 Var 2020 2019 Var Operating income before other expenses 56.7 60.4 -6.1% 211.3 183.6 15.1% Depreciation and amortization 24.6 26.0 -5.5% 96.9 108.4 -10.6% EBITDA 81.3 86.4 -5.9% 308.3 292.0 5.6% Increase in Free Cash Flow in Q4-20 reflects: Interest incom
Slide 44: Balance sheet (million dollars)
BALANCE SHEET (MILLION DOLLARS) Dec-20 Dec-19 Var Total Assets 2,138.1 2,057.6 3.9% Current Assets 832.2 653.7 27.3% Cash 562.1 350.5 60.4% Other current assets 270.1 303.2 -10.9% Net leverage (net debt/EBITDA) dropped to 0.24x as of December 2020 Non-current assets 1,305.9 1,403.9 -7.0% Paid back U
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 (GCC) — Q4 2020 Earnings Presentation on 6ix