Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q4 2019 Earnings Presentation
43 slides from Gcc Sab De Cv's earnings presentation, March 2020
Slide 1: Corporate Presentation Q4 2019
CORPOR ATE PRESENTATION Q4 2019 MARCH 2020 1
Slide 2: Safe Harbor Statement
This presentation has been prepared by Grupo Cementos EBITDA de Chihuahua, S.A.B. de C.V. (together with its subsidiaries, We define EBITDA as consolidated net income after adding “GCC”). Nothing in this presentation is intended to be taken back or subtracting, as the case may be: (1) depreciation b
Slide 3: 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 4: 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 (12/31/19) DECEMBE
Slide 5: 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 6: 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 7: Markets with demonstrated volume and price recovery
GCC U.S. CEMENT SALES GCC U.S. CONCRETE SALES MARKETS WITH (’000 MT) 4yr CAGR (’000 M3 / YEAR) Continued +9.2% operations DEMONSTRATED 2,963 3,103 3,277 1,569 2,305 VOLUME AND 927 918 901 PRICE RECOVERY 2016 2017 2018 2019 2016 2017 2018 2019 GCC U.S. CEMENT PRICES GCC U.S. CONCRETE PRICES (CHANGE,
Slide 8: Fragmented competition and 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 9: A clear need for increased infrastructure spending
AND A CLEAR NEED FOR INCREASED INFRASTRUCTURE SPENDING WA NH ME NH ME WA WA MT ND MT ND VT VT NH ME MT ND MT ND VT OR MN MN ID ID SD MA MA OR OR NY NY MN MN WII SD WII RI RI ID IDSD NY MA WY WY MI MI CT CT WI SD WI WY WY RI IA IA MI MI PA PA CT NE NE NJ NJ IA IA V NV OH OH PA NJ IN IN DE DE NE NE UT
Slide 10: 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 DRIVEN BY AN 35.3 44.0 35.0 43.1 34.4 41.0 EXPECTED INCREASE 3.7% 33.3 3.3% 2.5% 32.5 1.7% IN INFRASTRUCTURE 1.1% S
Slide 11: Solid outlook in key states
PORTLAND CEMENT ASSOCIATION (PCA) WINTER 2020 FORECAST AND MAIN CONSUMERS WITH A SOLID COLORADO TEXAS* OUTLOOK IN KEY 3,000 18,000 STATES 2,500 15,000 8.1% 23.5% 2,000 12,000 5.2% 1,500 9,000 0.6% 1.1% 4.8% 7.6% 1,000 6,000 7.8% 3.4% 4.3% 3.2% 1.7% -3.8% 1.9% 0.8% 500 3,000 - - 2017 2018 2019 2020 2
Slide 12: 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 2018 U.S. apparent consumption is still 25% below 2005 peak Current expansion is 8 years
Slide 13: Leading producer in Chihuahua with 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 14: 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 15: 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 Tijeras, NM Samalayuca, Chih. United States 1.1 MMT Mexico 0.4 MMT 3.5 MMT 2015 modernized 0.8 MMT 1995 startup 2.3 MMT Avai
Slide 16: 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 16
Slide 17: 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 ND Cost efficiency MT WI LEVERAGES Faster delivery time MN CONTIGUOUS Advanced logistics ID SD WI MARKET Reduced supply disrupt
Slide 18: Optimizing operations for value generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 13.3% ROIC 11.4% 10.0% 9.6% Value generated 9.1% WACC 8.9% 9.0% 9.0% 9.2% 8.8% 8.7% 8.7% 8.4% 8.1% 7.0% 5.8% 2014 2015 2016 2017 2018 2019 2020E 2021E Any projections have been prepared based on GCC’s views as of the date of this presentation and include es
Slide 19: GCC generates a higher ROIC than most U.S. peers
GCC GENERATES A HIGHER ROIC THAN MOST OF ITS U.S. PEERS... 12.6% EXP 11.5% MLM GCC 11.4% 9.6% 9.8% 10.0% VMC 9.0% 7.9% SUM 8.1% 7.0% 2015 2016 2017 2018 2019 2020E Source: Company and J.P. Morgan estimates. 19
Slide 20: ... as well as its LatAm peers
... AS WELL AS ITS LATAM PEERS 11.4% GCC 10.0% 9.6% 9.0% 8.6% CPAC 8.1% 7.0% 5.4% CX 4.3% CMTOY 4.2% CLH 2015 2016 2017 2018 2019 2020E Source: Company and UBS estimates 20
Slide 21: 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% 1.11x 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 22: Bond and bank debt refinancing
REDUCTION OF ANNUAL INTEREST EXPENSES BY US$18M BOND AND Bond interest coupon decreased to 5.250% from 8.125% (June 2017) MATURITY PROFILE (US$ million) BANK DEBT Savings on financial expenses = ~ US$ 8 million per year 260 Extended maturity 4 years REFINANCING 176 Bank debt refinancing yields an es
Slide 23: 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 24: Strengthened margins and lower indebtedness than peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2020 estimated Net Debt/EBITDA multiples* LatAm Average 3.6x 3.9x 3.4x US Average 1.8x 2.9x 4.0x 3.0x 2.6x 1.4x 1.4x 1.5x 0.7x GCC EXP VMC MLM SUM Cemex Elementia CLH Argos Pacasmayo 2020 estimated EBITDA margins* US Average 28.2% La
Slide 25: Capital markets transactions increased 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 US Average 12.2x 14.9x Increased liquidity 14.3x
Slide 26: 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 MSCI Index inclusion, June 2018 335,000 LIQUIDITY 276,000 IPC Index inclusion, September 2018 FTSE Index inclusion, March 2019 ENHANC
Slide 27: Sustainable Development Performance Targets
GCC JOINED THE GLOBAL CEMENT AND CONCRETE ASSOCIATION IN 2018 SUSTAINABLE DEVELOPMENT GOALS MAIN GOAL HOW? REDUCE NET Climate & Energy Sustainable Development Performance Targets CO2 EMISSIONS Energy efficiency 9% BY 2020 AND 31% BY 2030 Circular Economy Alternative fuels Health & Safety Blended cem
Slide 28: 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% 7.4% 7.6% 6.8% 48% 6.3% 6.3% 45% 45% 36% 38% 33% 30% 13.5% 10.4% 10.9% 10.3% 20% 8.1% 9.1% 14% 12% 12% 11% 2015 2016 2017
Slide 29: Latest ESG achievements
GCC joined the Science Based Targets initiative to reduce CO2 emissions Two long-term agreements were signed with renewable energy suppliers LATEST ESG covering approximately 20% and 100% of the electricity consumed at Mexico’s ACHIEVEMENTS operations and Odessa’s cement plant, respectively Use of b
Slide 30: Experienced management team, with sound corporate governance
EXPERIENCED MANAGEMENT TEAM, WITH SOUND CORPORATE GOVERNANCE 48.4% 51.6% ENRIQUE ESCALANTE, CEO GCC since 1999; 20 years in industry Free float CAMCEM LUIS CARLOS ARIAS, CFO 100% GCC since 1996; 23 years in industry Chihuahua CEMEX Investors + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC since 20
Slide 31: 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 32: 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 33: Reinforcing a positive 2020 outlook
REINFORCING A POSITIVE 2020 OUTLOOK UNITED STATES CONSOLIDATED VOLUMES EBITDA growth 6% - 9% Cement 1% - 3% FCF Conversion Rate > 50% Concrete Total CAPEX: US$ 70 million PRICES Maintenance US$ 60 million Cement 3% - 5% 2019 carry-over US$ 10 million Concrete 2% - 4% Net Debt / EBITDA, year-end ~ 0.
Slide 34: Enrique Escalante, CEO Q4 2019 quote
ENRIQUE Enrique Escalante, GCC’s Chief Executive Officer, commented: ESCALANTE “We closed 2019 delivering strong results despite the challenges we faced during the first half of the year. Our strong operational capabilities coupled with our robust and unique distribution network enabled us to quarte
Slide 35: Appendix: Q4-19 & FY 2019 Results
APPENDIX Q4-19 & FY 2019 RESULTS 35
Slide 36: Q4-19 and full year 2019 results
Q4-19 AND FULL YEAR 2019 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 934 28.1% 37.8% 29.0% 31.3% 883 137 256 292 106 82 +5.8% 86 58 44 +28.8% 206 229 +13.9% +87.6% +11.0% +49.6% Q4-18 Q4-19 2018 2019 Q4-18 Q4-19 2018 2019 Q4-18 Q4-19 2018 2019 NET S
Slide 37: Q4-19 results highlights
Q4-19 RESULTS HIGHLIGHTS Millions of dollars Q4-19 Q4-18 Var 2019 2018 Var Net sales 228.6 205.9 11.0% 934.1 883.2 5.8% Operating Income before other 60.4 29.1 107.6% 183.6 169.8 8.1% expenses EBITDA 86.4 57.7 49.6% 292.0 256.4 13.9% EBITDA Margin 37.8% 28.1% 31.3% 29.0% Consolidated Net Income 39.3
Slide 38: Sales volumes and prices
SALES VOLUMES AND PRICES Q4-19 vs Q4-18 2019 vs. 2018 The increase in cement sales volumes was primarily due to strong demand during the quarter and to the significant backlog in all of GCC’s market segments, as well as Cement sales to demand related to a late construction season start. Sales were f
Slide 39: Sales
SALES Million dollars Q4-19 Q4-18 Var 2019 2018 Var Consolidated 228.6 205.9 11.0% 934.1 883.2 5.8% U.S. 167.0 147.5 13.2% 681.9 647.2 5.4% U.S like to like N.A. N.A. N.A. 645.2 624.2 3.4% Mexico 61.6 58.3 5.6% 252.3 236.1 6.9% U.S SALES MEXICO SALES The most dynamic market segments during the quart
Slide 40: Income statement (million dollars)
INCOME STATEMENT (MILLION DOLLARS) Q4-19 Q4-18 Var 2019 2018 Var Net Sales 228.6 205.9 11.0% 934.1 883.2 5.8% U.S. 167.0 147.5 13.2% 681.9 647.2 5.4% Mexico 61.6 58.3 5.6% 252.3 236.1 6.9% Cost of sales 149.8 158.1 -5.2% 667.2 637.9 4.6% Operating expenses 18.3 18.7 -1.9% 83.3 75.5 10.4% Other expen
Slide 41: Free cash flow (million dollars)
FREE CASH FLOW (MILLION DOLLARS) Q4-19 Q4-18 Var 2019 2018 Var Operating income before other expenses 60.4 29.1 107.6% 183.6 169.8 8.1% Depreciation and amortization 26.0 28.7 -9.3% 108.4 86.5 25.3% EBITDA 86.4 57.7 49.6% 292.0 256.4 13.9% Interest income (expense) (9.0) (9.9) -9.4% (24.6) (48.1) -4
Slide 42: Balance sheet (million dollars)
BALANCE SHEET (MILLION DOLLARS) Dec-19 Dec-18 Var Total Assets 2,057.9 1,902.5 8.2% Current Assets 656.0 534.2 22.8% Cash 350.5 251.8 39.2% Other current assets 59.0 59.3 -0.6% A dividend of Ps. 0.8189 per outstanding share was paid on August 15, 2019, representing a 15% Non-current assets 1,401.9 1
Slide 43: 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 43
Grupo Cementos de Chihuahua (GCC) — Q4 2019 Earnings Presentation on 6ix