Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q4 2021 Earnings Presentation
49 slides from Gcc Sab De Cv's earnings presentation, February 2022
Slide 1: Corporate Presentation Q4 2021
CORPOR ATE PRESENTATION Q4 2021 FEBRUARY 2022
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: 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 CASH, LIQUIDITY e.g. hiring freeze, not filling vacant positions and limiting external service providers AND BALANCE Deferred all non-essential projects
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 add operational flexibility 2 TICKER: BMV: GCC with export capacity 3 Vertically integrated, with best in class production facilities and logistics
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 EBITDA EBITDA Net Debt/ Free Float Share Price (12/31/21) Capacity Growth Margin EBITDA DECEMBE
Slide 8: 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 9: 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 88% of U.S. sales IA NE UT #2 No
Slide 10: 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 +2.7% -6.1% MARKETS WITH Continued operations DEMONSTRATED 2,963 3,103 3,277 3,180 3,359 939 927 918 901 VOLUME AND 760 PRICE RECOVERY 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 GCC U.S. CEMENT PRICES G
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: 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 13: 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 +2.8% +3% 107.647.1 47.1 104.9 46.0 120 101.7 45.0 LEADING TO A 99.8 44.0 32.2 96.3 43.1 112
Slide 14: With a solid outlook in key states
PORTLAND CEMENT ASSOCIATION (PCA) SUMMER 2020 FORECAST AND MAIN CONSUMERS COLORADO TEXAS* WITH A SOLID 3,000 18,000 OUTLOOK IN KEY 2,500 8.1% 15,000 39.2% STATES 2,000 5.9% 12,000 10.9% 22.1% 9.4% 1,500 3.4% 9,000 4.3% 3.2% 9.9% -0.1% -0.5% 1,000 6,000 -3.8% 500 -4.8% 3,000 -57.7% - - 2017 2018 2019
Slide 15: 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 16: 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 17: 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. 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 18: 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 19: 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 Mexico 3.5 MMT 0.4 MMT 0.9 MMT 1.0 MMT 1995 startup 2
Slide 20: Operating at near-optimal capacity utilization levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 100% 96% 97% 93% 90% U.S. industry 88% 84% 85% estimated average 82% 82% 79% 86% 78% 76% 75% 71% 68% 65% 56% 53% 2020 2021 Mx Avg Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident US Avg MEXICO UNITED STATES 20
Slide 21: 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 22: Optimizing operations for value generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 14.1% ROIC 12.4% 10.0% Value generated 9.6% 9.1% 9.0% 8.8% WACC 8.2% 9.0% 9.0% 8.6% 8.4% 7.0% 8.1% 7.8% 5.8% 2014 2015 2016 2017 2018 2019 2020 2021 Any projections have been prepared based on GCC’s views as of the date of this presentation and include esti
Slide 23: GCC generates a higher ROIC than most of its U.S. peers
GCC GENERATES A HIGHER ROIC THAN MOST OF ITS U.S. PEERS... 15.3% EXP 12.4% GCC 10.5% 9.9% MLM 9.6% 9.0% 9.0% VMC 8.1% 7.0% 6.5% SUM 2015 2016 2017 2018 2019 2020 23 Source: Company and J.P. Morgan estimates
Slide 24: ... as well as its LatAm peers
... AS WELL AS ITS LATAM PEERS 12.4% GCC 10.5% 9.6% 9.0% 8.1% 7.1% CX 7.0% 3.9%CEMARGOS 3.9% CLH 2.6% ELEMENT 2015 2016 2017 2018 2019 2020 24 Source: Company and Morgan Stanley estimates
Slide 25: 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 +79% -0.44x 48% ENHANCE Odessa in 2016 EBITDA growth Net leverage of total shares GCC’S VALUE acquisition since 2016 on BMV PROPOSITION +440k mt 32.5% BBB- +23% Rapid C
Slide 26: 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 27: 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 28: Sustainability linked bond
SUSTAINABILITY LINKED BOND REINFORCING GCC’S COMMITMENT TO DECARBONIZATION First SLB from a cement company in the Americas, positioning GCC 775 at the forefront of the industry’s decarbonization strategy Actuals 746 750 744 734 SUSTAINABILITY PERFORMANCE TARGET 725 700 SP Carbon Intensity Reduction,
Slide 29: 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) 14.1% 14.1% 32.5% 32.5% 12.4% 12.4% 10.5% 10.5% 9.6% 9.6% 9.0% 9.0% 8.1% 8.1% 7.0% 7.0% +15.2 ppt +15.2 ppt 5.8% 5.8% 3.1% 3.1% 17.3% 17.3% 2
Slide 30: 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 2.9x US Average 1.5x 2.5x 2.9x 3.4x 2.7x 1.1x 1.6x 2.4x -0.1x 0.8x GCC EXP VMC MLM SUM Cemex Elementia CLH Argos 2021 estimated EBITDA margins* US Average 31.1% LatAm Avera
Slide 31: 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 US Average 14.1x Increased liquidity SHARES STIL
Slide 32: 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 470,000 MSCI Index inclusion, June 2018 IPC Index inclusion, September 2018 LIQUIDITY 276,000 FTSE Index inclusion, March 2019 ENHANC
Slide 33: 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 22% OR
Slide 34: Supported by 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 10.0% 8.9% 8.8% 8.5% 38% 38% 33% 8.1% 27% 27% 24% 18% 16% 21% 12% 11% 11% 10.4% 10.9% 9.1% 9.1% 11.5% Samalayuca Chihuahua Juare
Slide 35: 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 36: Experienced management team, with sound corporate governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 49.1% 50.9% ENRIQUE ESCALANTE, CEO GCC since 1999; 22 years in the industry Free float CAMCEM LUIS CARLOS ARIAS, CFO 100% GCC since 1996; 25 years in the industry Chihuahua Investors CEMEX + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC
Slide 37: 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 38: 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 39: Reinforcing a positive 2022 outlook
REINFORCING A POSITIVE 2022 OUTLOOK UNITED STATES CONSOLIDATED Volumes EBITDA growth High-single to double digit Cement Low- to mid-single digit FCF Conversion Rate > 60% Concrete Prices Total CAPEX US$ 260 million Cement Strategic and growth US$ 180 million Mid- to high-single digit Maintenance US$
Slide 40: Enrique Escalante, CEO Q4 2021 quote
ENRIQUE Enrique Escalante, GCC’s Chief Executive Officer, commented: “GCC had another extraordinary ESCALANTE year surpassing US$1 billion in sales with record high EBITDA, despite the inflationary environment and supply chain challenges. We will capitalize on opportunities to further CEO Q4 2021 QU
Slide 41: Appendix
05 APPENDIX
Slide 42: Q4 & FY 2021 Results
Q4 & FY 2021 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 1,039 35.0% 31.5% 32.9% 32.5% 938 246 244 338 308 +10.8% +9.6% 96 -1.0% 89 232 +10.9% 258 -7.9% 81 81 0.0% Q4-20 Q4-21 2020 2021 Q4-20 Q4-21 2020 2021 Q4-20 Q4-21 2020 2021 NET SALES BY COUNTR
Slide 43: Q4 2021 Results Highlights
Q4 2021 RESULTS HIGHLIGHTS Millions of dollars Q4-21 Q4-20 Var 2021 2020 Var Net sales 257.9 232.5 10.9% 1,038.8 937.8 10.8% Operating Income before other expenses 57.5 56.7 1.4% 241.3 211.3 14.2% EBITDA 81.3 81.3 0.0% 337.9 308.3 9.6% EBITDA Margin 31.5% 35.0% 32.5% 32.9% Consolidated Net Income 28
Slide 44: Sales volumes and prices
SALES VOLUMES AND PRICES Q4-21 vs Q4-20 2021 vs 2020 The most dynamic U.S. market segments during the quarter were infrastructure, industrial warehouse construction and the oil sector. Cement volumes U.S. 5.1% 5.6% Higher than expected demand for oil-well cement in the U.S. Mexico 4.5% 6.9% Mexico h
Slide 45: Sales
SALES Million dollars Q4-21 Q4-20 Var 2021 2020 Var Consolidated 257.9 232.5 10.9% 1,038.8 937.8 10.8% U.S. 183.6 165.2 11.2% 750.4 693.1 8.3% Mexico 74.3 67.3 10.4% 288.4 244.6 17.9% U.S. SALES MEXICO SALES Record high for Q4 cement volumes and a considerable Solid performance and strong backlog, d
Slide 46: Income statement (million dollars)
INCOME STATEMENT (MILLION DOLLARS) Q4-21 Q4-20 Var 2021 2020 Var Net Sales 257.9 232.5 10.9% 1,038.8 937.8 10.8% U.S. 183.6 165.2 11.2% 750.4 693.1 8.3% Mexico 74.3 67.3 10.4% 288.4 244.6 17.9% Cost of sales 175.0 156.6 11.7% 707.4 647.9 9.2% SG&A expenses 25.4 19.2 32.9% 90.0 78.5 14.7% Other expen
Slide 47: Free cash flow (million dollars)
FREE CASH FLOW (MILLION DOLLARS) Q4-21 Q4-20 Var 2021 2020 Var Operating income before other expenses 57.5 56.7 1.4% 241.3 211.3 14.2% Depreciation and amortization 23.8 24.6 -3.1% 96.6 96.9 -0.4% Decreased Free Cash Flow in Q4-21 reflects: EBITDA 81.3 81.3 0.0% 337.9 308.3 9.6% Higher maintenance C
Slide 48: Balance sheet (million dollars)
BALANCE SHEET (MILLION DOLLARS) Dec-21 Dec-20 Var Total Assets 2,224.5 2,136.0 4.1% Net leverage (net debt/EBITDA) dropped to Current Assets 955.7 830.1 15.1% Cash 683.0 562.1 21.5% -0.44x as of September 2021 Other current assets 272.7 268.0 1.8% Cash and equivalents totaled US$683 million Non-curr
Slide 49: Contact
CONTACT: Luis Carlos Arias, Chief Financial Officer larias@gcc.com WWW.GCC.COM Ricardo Martinez, Head of Investor Relations rmartinezg@gcc.com +52 (614) 442 3176 + 1 (303) 739 5943