Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q2 2022 Earnings Presentation
28 slides from Gcc Sab De Cv's earnings presentation, Jul 27, 2022
Slide 1: Q2 2022 Earnings Conference Call
Q2 2022 EARNINGS CONFERENCE CALL ENRIQUE ESCALANTE, CEO LUIS CARLOS ARIAS, CFO JULY 27, 2022
Slide 2: Safe Harbor Statement
This presentation has been prepared by GCC, S.A.B. de C.V. (together with securities, exchange rates, interest rates, inflation, foreign trade its subsidiaries, “GCC”). Nothing in this presentation is intended to be restrictions, and market conditions, which may cause the actual financial taken by a
Slide 3: Highlights
HIGHLIGHTS • • Outstanding quarter Solid 1H 2022 +12% CONSOLIDATED NET SALES • Strong start to the construction season • Unprecedented demand • Increased volumes Focusing on customers to ensure • US cement uninterrupted supply • Mexico concrete • Favorable price environment • Availability outweighs
Slide 4: Highlights: Industry Wide Challenges
HIGHLIGHTS CONSTRUCTION PROJECTS DELAYED PRIMARY FOCUS: Limits the speed at Address demand while which we move our • Increasing cost of raw materials moving our backlog • Labor shortages backlog • Supply chain and logistics bottlenecks INDUSTRY WIDE GCC's vertical integration of raw materials and co
Slide 5: Fuel Costs
FUEL COSTS • Margin pressure Natural gas hedge • New reserve at our coal mine 100% of • Decreased coal production during 1H 2022 Odessa’s consumption below market prices • Unable to ship coal to Mexico plants • Continue burning purchased third party coal in Chihuahua and Samalayuca Odessa runs • Thr
Slide 6: Alternative Fuels
ALTERNATIVE FUELS Coal provides • Maximize biomass, natural gas, and transformational fuels (hydrogen) an important • Working with local and regional companies, regulators and state agencies advantage… • Ensure flexible fuel mix is available However, • Examples of our innovation: GCC is • Pueblo: GC
Slide 7: Pricing
Second price increase: Construction cement • Second increase was one month earlier than the 2021 6% - 8% per ston second price increase Effective July 1 • Cost inflation pressures and adverse market conditions PRICING • No pushback from customers • Focused on ensuring uninterrupted supply Second pri
Slide 8: Wages
WAGES UNION CONTRACT NEGOTIATIONS IN 2022 RAPID CITY Fully staffed in ready-mix • Concluded resulting in reasonable terms transportation TRIDENT • Ongoing but also under fair terms Pending positions for some specialized positions • All non-economic clauses concluded (environmental engineers) • Econo
Slide 9: U.S. Overview
U.S. OVERVIEW • Sales increased 13% 74% • High demand • Strong trends in industrial real estate construction and oil well drilling of sales • Every GCC kiln remains up and running to produce cement • Teams focused on maintaining operations and increasing terminal throughput Q2 22 vs. Q2 21 H1 22 vs.
Slide 10: Residential and Oil Well Cement
RESIDENTIAL • PCA forecasts a 2% increase in residential construction in 2022 • Fundamentals for housing demand appear to be softening • Maintain our prudent approach and remain vigilant of opportunities and changes in US market and economy OIL WELL CEMENT • Strong demand • Strong drilling activity
Slide 11: U.S. Overview: Infrastructure Investment and Jobs Act
INFRASTRUCTURE INVESTMENT AND JOBS ACT • States and DOTs are preparing for funding U.S. OVERVIEW • Projects are running at a steady but slower pace • Substantial cement demand • Will begin to resonate in late 2023 • Favorable impact of cooling housing demand enables GCC to prepare ahead of the infra
Slide 12: Mexico Overview
26% Q2 22 vs. Q2 21 H1 22 vs. H1 21 of sales Volumes Prices Volumes Prices Cement -2% 12% -3% 12% Concrete 14% 8% 11% 8% MEXICO OVERVIEW • Strong performance • Sales increased 8% • Difficult comparison to Q2 2021 cement • COVID-related quarantine and work-from-home increased bagged cement sales • St
Slide 13: Blended Cements
BLENDED CEMENTS Samalayuca is exporting Portland Limestone Cement (PLC) to the U.S. Rapid City began shipping PLC to the Minnesota market on July 1 Montana was fully converted to produce only Portland Limestone Cement this year Will reduce our clinker content from 88% to a minimum of 80% by 2030 13
Slide 14: Financial Results
FINANCIAL RESULTS LUIS CARLOS ARIAS, CFO
Slide 15: Consolidated Net Sales
CONSOLIDATED NET SALES +13% Q2 22 vs. Q2 21 H1 22 vs. H1 21 527 Volumes Prices* Volumes Prices* +12% 465 Cement 154 United States 6% 10% 8% 10% 142 320 287 Mexico -2% 12% -3% 12% 82 76 Concrete 373 323 United States -1% -1% 3% -1% 211 238 Mexico 14% 8% 11% 8% Q2 21 Q2 22 H1 21 H1 22 (US$ Million) Un
Slide 16: Cost of Sales and SG&A
COST OF SALES SG&A % of sales % of sales 67.2% 69.0% 70.0% 70.9% 7.2% 7.3% 8.8% 8.7% + 180 BPS + 90 BPS + 10 BPS - 10 BPS 374 326 46 41 221 193 21 24 Q2 21 Q2 22 H1 21 H1 22 Q2 21 Q2 22 H1 21 H1 22 (US$ Million) (US$ Million) 16
Slide 17: EBITDA
EBITDA EBITDA 31.5% 33.8% 31.1% 29.2% margin - 280 BPS - 230 BPS +5% +3% 147 154 97 99 Q2 21 Q2 22 H1 21 H1 22 (US$ Million) 17
Slide 18: Net Financial Expenses and Net Income
NET FINANCIAL US$3.9M US$9.8M EXPENSES Q2 2022 Q2 2021 NET INCOME (11%) Net income as % of sales Q2 2021 48 EPS = US$0.1439 16.6% Unchanged Q2 2022 53 EPS = US$0.1606 16.6% (US$ Million) 18
Slide 19: Cash Flow
CASH FLOW US$ million Q2 22 Q2 21 Var 1H 22 1H 21 Var EBITDA 99 97 3% 154 147 5% Interest (Expense) 3 (7) n.m. (5) (9) -45% (Increase) Decrease in Working Capital (18) (27) -33% (31) (35) -12% Taxes (8) (8) -7% (8) (10) -16% Prepaid expenses 2 1 36% 4 4 -2% Accruals and other accounts (6) 4 n.m. (28
Slide 20: Net Leverage Ratio and Cash
NET LEVERAGE RATIO Reduced days in net working capital by 11 days; to 47 from 58 0.1x Q3 21 Q4 21 Q1 22 Q2 22 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 US$645M -0.2x cash and equivalents -0.4x -0.4x -0.4x 20
Slide 21: Samalayuca Debottlenecking
Under construction and on track SAMALAYUCA 200,000 mtons mid 2023 DEBOTTLENECKING Short-term relief for our cement network 21
Slide 22: Odessa Plant Expansion
+1 million metric The market is tons developing faster US$750 in the U.S. million Large freight PLANT savings mid EXPANSION 2025 Optimization of Location: cost structure Odessa, TX and GCC’s cement network Double-digit investment return and strong value creation 22
Slide 23: Dividend and Share Buyback
DIVIDEND SHARE BUYBACK Ps. 1.1621 per share reactivated in April 2022 can buy back up to US$50 million paid on May 17 2.6 million shares during Q2 +15% vs 2021 equivalent to US$17.2 million 23
Slide 24: Revised Guidance
United States Consolidated Volumes EBITDA growth High-single to double digits Cement Mid-single digit FCF Conversion Rate > 60% 2022 Prices Concrete Low- to mid-single digit Total CapEx US$140M REVISED Cement Double digit Strategic & growth US$60M GUIDANCE Concrete Low single digit Maintenance US$65
Slide 25: Questions
QUESTIONS CONTACT: Luis Carlos Arias, Chief Financial Officer larias@gcc.com WWW.GCC.COM Sahory Ogushi, Head of Investor Relations soguship@gcc.com +52 (614) 442 3176 + 1 (303) 739 5943 2 5
Slide 26: Appendix
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Slide 27: Income Statement
INCOME STATEMENT US$ million Q2 22 Q2 21 Var H1 22 H1 21 Var Net sales 320.1 286.7 11.6% 527.0 465.5 13.2% Cost of sales 220.9 192.8 14.6% 373.8 325.8 14.7% SG&A 23.5 20.7 13.5% 46.1 40.9 12.6% Other expenses, net 0.3 0.4 -36.5% 0.3 0.5 -34.5% Operating income 75.3 72.8 3.6% 106.7 98.2 8.6% Operatin
Slide 28: Balance Sheet
BALANCE SHEET June 2022 June 2021 Variation Total assets 2,274.7 2,200.6 3.4% Current assets 978.2 905.6 8.0% Cash and equivalents 645.3 592.9 8.8% Other current assets 332.9 312.6 6.5% Non-current assets 1,296.5 1,295.1 0.1% Plant, property and equipment 957.5 944.8 1.4% Goodwill and intangibles 27