Gcc Sab De Cv · BMV:GCC
Gcc Sab De Cv — Q3 2023 Earnings Presentation
49 slides from Gcc Sab De Cv's earnings presentation, November 2023
Slide 1: Corporate Presentation Q3 2023
CORPOR ATE PRESENTATION Q3 2023 NOVEMBER 2023
Slide 2: Safe Harbor Statement
This presentation has been prepared by GCC, S.A.B. de C.V. (together EBITDA with its subsidiaries, “GCC”). Nothing in this presentation is intended to We define EBITDA as consolidated net income after adding back or be taken by any person as investment advice, a recommendation to buy, subtracting, a
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: 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 and maintained US$10 million in 2021 e.g. hiring freeze, not filling vacant positions and limiting external service providers CASH, LIQUIDITY Cash and eq
Slide 5: 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 with export capacity TICKER: BMV: GCC 3 Vertically integrated, with best in class production facilities and logistics
Slide 6: 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 (11/01/23) Capacity Growth Margin EBITDA DECEMBE
Slide 7: GCC at a glance: a unique market presence
6 MMT1 cement production capacity 3.5 MMT in U.S. + 2.5 MMT in Mexico GCC AT A G L ANCE: CEMENT AND READY-MIX CONCRETE OPERATIONS #1 or #2 share in core markets ACROSS THE “CENTER CUT“ OF NORTH AMERICA A UNIQUE MARKET Landlocked states, insulated from seaborne competition PRESENCE 8 cement plants, 2
Slide 8: 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 Leadership position in 15 contiguous states ID SD WI CO, MN, MT, ND, NM, SD, UT and W.TX are our core markets, with 91% of U.S. sales WY #2 NE IA No other
Slide 9: 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 +0.6% -4.6% MARKETS WITH Continued operations 3,359 3,458 3,240 3,277 DEMONSTRATED 3,180 901 939 784 816 760 VOLUME AND PRICE RECOVERY 2019 2020 2021 2022 LTM Q3-23 2019 2020 2021 2022 LTM Q3-23 GCC U.S. CEMEN
Slide 10: 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 11: And 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 12: Leading to a 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 (MMT) INCLUDED IN THE 2 FAST ACT ($ BB) ² 4yr CAGR IMPORTS W 4yr CAGR +1.3% +0.3% 108.4 106.0 47.1 47.1 46.0 105.2 120 101.7 45.0 LEADING TO A 99.8 43.1 44.0 112 4
Slide 13: With a solid outlook in key states
PORTLAND CEMENT ASSOCIATION (PCA) SUMMER 2023 FORECAST AND MAIN CONSUMERS COLORADO TEXAS WITH A SOLID 3,000 18,000 OUTLOOK IN KEY 2,500 15,000 STATES 2,000 3.4% 12,000 9.9% 1,500 5.9% -2.2% 9,000 0.2% 2.0% -0.1% -2.5% 1,000 0.0% -8.7% 6,000 500 3,000 - - 2019 2020 2021 2022 2023E 2019 2020 2021 2022
Slide 14: 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 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 -15% Consumption Actual 2003-2022 100 Estimated 2023-2025 Production 80 60 40 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: USGS, PCA 2022 U.S. apparent consumption is still 15% b
Slide 16: GCC is the leading producer in the state of Chihuahua
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. Cyclical recovery benefit Chihuahua
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 long-term VERTICALLY INTEGRATED CEMENT 8 pl
Slide 18: With state of the art production facilities
Pueblo, CO 1.1 MMT WITH STATE 2008 startup Chihuahua, Chih. OF THE ART Rapid City, SD 1.1 MMT 1941 startup 1.1 MMT PRODUCTION 2009 modernized 2018 expansion FACILITIES 6.0 MMT Cement production capacity Tijeras, NM Samalayuca, Chih. United States Mexico 3.5 MMT 0.4 MMT 2015 modernized 1.4 MMT 1.2 MM
Slide 19: Operating at near-optimal capacity utilization levels
OPERATING AT NEAR-OPTIMAL CAPACITY UTILIZATION LEVELS 100% 91% U.S. industry 88% 86% 86% 84% 85% estimated average 82% 82% 82% 82% 79% 79% 78% 79% 80% 80% 74% 71% 68% 2021 2022 Chihuahua Samalayuca Juarez Tijeras Rapid City Pueblo Odessa Trident MX US GCC MEXICO UNITED STATES 19
Slide 20: 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 ND WI NETWORK THAT Advanced logistics MT MN LEVERAGES Reduced supply disruption risk WI SD CONTIGUOUS H
Slide 21: Optimizing operations for value generation
OPTIMIZING OPERATIONS FOR VALUE GENERATION 13.1% 12.4% 11.7% ROIC 10.5% Value generated 9.6% 9.1% 9.0% 8.8% 8.2% 9.0% 9.0% 8.6% 8.4% 7.0% 8.1% 7.8% WACC 5.8% 7.0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 Any projections have been prepared based on GCC’s views as of the date of this presentation
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... 20.5% EXP 13.1% 12.4% 11.7% GCC 10.5% 9.6% 9.0% 8.4% MLM 8.1% VMC 8.1% 7.0% 6.8% SUM 2015 2016 2017 2018 2019 2020 2021 2022 22 Source: Company and J.P. Morgan estimates (March 2023)
Slide 23: ... as well as its LatAm peers
... AS WELL AS ITS LATAM PEERS 12.5% CX 13.1% 12.4% 11.7% GCC 10.5% 9.6% 9.0% 8.1% 7.0% 6.3% CLH 5.1% CEMARGOS 2015 2016 2017 2018 2019 2020 2021 2022 23 Source: Company and Morgan Stanley estimates (March 2023)
Slide 24: Recent developments enhance GCC's value proposition
EBITDA Cement Capacity Debt Falling Increased free Growing Growing and float and RECENT Refinancing liquidity DEVELOPMENTS +92% +514k mt -0.82x 49% ENHANCE Odessa in 2016 Net leverage of total shares EBITDA growth GCC’S VALUE since 2016 acquisition on BMV PROPOSITION 30.9% +440k mt BBB- +23% 2022 ma
Slide 25: 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 26: Sustainability linked bond US$500 MM
SUSTAINABILITY LINKED BOND FIRST ISSUANCE AS AN INVESTMENT GRADE COMPANY Largest USD SLB by a cement company ever 2.8x oversubscribed orderbook US$500 MM 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 27: Sustainability linked bond
SUSTAINABILITY LINKED BOND REINFORCING GCC’S COMMITMENT TO DECARBONIZATION First SLB from a cement company in the Americas, positioning GCC 770 767 Actuals at the forefront of the industry’s decarbonization strategy 754 754 755 746 741 740 SUSTAINABILITY PERFORMANCE TARGET 710 Carbon Intensity Reduc
Slide 28: 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) 13.1% 13.1% 12.4% 12.4% 30.9% 30.9% 11.7% 11.7% 10.5% 10.5% 9.6% 9.6% 9.0% 9.0% 8.1% 8.1% 7.0% 7.0% +13.6 ppt +13.6 ppt 5.8% 5.8% 17.3% 17.3%
Slide 29: Strengthened margins and lower indebtedness than most of our peers
STRENGTHENED MARGINS AND LOWER INDEBTEDNESS THAN MOST OF OUR PEERS 2023 estimated Net Debt/EBITDA multiples* 5.1x LatAm Average 3.1x US Average 1.6x 1.7x 2.2x 1.8x 2.4x 3.9x 2.9x 0.7x -0.8x EXP VMC MLM SUM Cemex CLH Argos GCC 2023 estimated EBITDA margins* US Average 28.2% LatAm Average 18.3% 32.6%
Slide 30: Capital markets transactions increased share float and liquidity; valuation remains attractive
CAPITAL MARKETS TRANSACTIONS INCREASED SHARE FLOAT AND LIQUIDITY; VALUATION REMAINS ATTRACTIVE TRANSACTIONS BENEFIT PUBLIC 2023 ESTIMATED EV/EBITDA MULTIPLES1 MARKET SHAREHOLDERS Transparent control group shareholdings Float increased to 49% of shares US Average 11.5x Increased liquidity LatAm Peers
Slide 31: 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 427,000 MSCI Index inclusion, June 2018 IPC Index inclusion, September 2018 LIQUIDITY 278,000 FTSE Index inclusion, March 2019 ENHANC
Slide 32: Sustainable Development Performance Targets
GCC IS MEMBER OF THE GLOBAL CEMENT AND CONCRETE ASSOCIATION MAIN GOALS SUSTAINABLE DEVELOPMENT GOALS 2020 ✓ HOW? REDUCE NET CO2 Climate & Energy EMISSIONS BY 9% Sustainable Development Performance Targets Energy efficiency Circular Economy 2030 Alternative fuels REDUCE NET CO2 EMISSIONS BY 30.7% Hea
Slide 33: Sustainability initiatives: alternative fuels
SUPPORTED BY SUSTAINABILITY INITIATIVES RESULTING IN DIRECT ECONOMIC AND ENVIRONMENTAL BENEFITS ALTERNATIVE FUELS (AF) USAGE AF USAGE BY PLANT 11.5% 10.2% 9.7% 9.1% 9.1% 7.7% 38% 37% 40% 27% 27% 24% 25% 21% 19% 18% 18% 16% 18% 50k 81k 78k 78k 88k 79k 64k 11% 11% 6% 2015 2017 2018 2019 2020 2021 2022
Slide 34: Sustainability initiatives: clinker ratio and blended cement
SUPPORTED BY SUSTAINABILITY INITIATIVES RESULTING IN DIRECT ECONOMIC AND ENVIRONMENTAL BENEFITS CLINKER RATIO LOWER CLINKER RATIO TRANSLATES INTO LOWER CO2 EMISSIONS 88% 88% 88% 87% 86% GCC reduced clinker factor to 86% in 2022 Blended cement represented 41% of 2022 cement production 91% 91% 91% 90%
Slide 35: Latest ESG achievements
GCC’s CO2 emissions reduction targets were validated by the Science Based Targets initiative GCC was awarded a “B” rating in Carbon Disclosure Project (CDP) climate rating in 2022 100% and 50% of the electricity consumed at the Odessa and Rapid City plants, respectively, comes LATEST ESG from renewa
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; 24 years in the industry Free float CAMCEM MAIK STRECKER, CFO 100% GCC since 2020; 23 years in the industry Chihuahua Investors CEMEX + 60% 40% RON HENLEY, U.S. DIVISION PRESIDENT GCC sinc
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 2023 outlook
REINFORCING A POSITIVE 2023 OUTLOOK UNITED STATES CONSOLIDATED Volumes EBITDA growth Double digits increase Cement Mid-single digit decrease Concrete Mid-single digit increase FCF Conversion Rate > 60% Prices Total CAPEX US$290 million Cement Double digits increase Growth US$220 million Concrete Hig
Slide 40: Enrique Escalante, CEO Q3 2023 quote
ENRIQUE Enrique Escalante, GCC’s Chief Executive Officer, commented: “Once again, GCC ESCALANTE achieved double-digit growth in both top and bottom-line, driven by our commitment to excellence, and our strong client relationships. Our teams’ ability to navigate market CEO Q3 2023 QUOTE conditions ha
Slide 41: Appendix
05 APPENDIX
Slide 42: Q3 2023 & 9M 2023 results
Q3 2023 & 9M 2023 RESULTS SALES (US$ MILLION) EBITDA & EBITDA MARGIN (US$ MILLION) FREE CASH FLOW (US$ MILLION)1 1,024 33.3% 38.1% 30.9% 34.6% 880 354 159 271 124 126 +16.4% 105 416 +30.5% 353 159 117 +17.9% +35.0% +17.2% -20.4% Q3-22 Q3-23 9M 2022 9M 2023 Q3-22 Q3-23 9M 2022 9M 2023 Q3-22 Q3-23 9M
Slide 43: Q3 2023 results highlights
Q3 2023 RESULTS HIGHLIGHTS Millions of dollars Q3-23 Q3-22 Var 9M-23 9M-22 Var Net sales 416.1 352.8 17.9% 1,024.1 879.8 16.4% Operating income before other expenses 135.5 93.1 45.5% 284.7 200.2 42.2% EBITDA 158.5 117.4 35.0% 354.2 271.4 30.5% EBITDA Margin 38.1% 33.3% 34.6% 30.9% Consolidated net i
Slide 44: Sales volumes and prices
SALES VOLUMES AND PRICES Q3-23 vs Q3-22 9M-23 vs 9M-22 Cement volumes Favorable price environment in both countries U.S. -4.1% -8.1% Oil-well cement demand remained strong Mexico 2.9% 5.5% The most dynamic U.S. market segments during the quarter were oil and gas sector Concrete volumes U.S. 1.1% 5.3
Slide 45: Sales
SALES Million dollars Q3-23 Q3-22 Var 9M-23 9M-22 Var Consolidated 416.1 352.8 17.9% 1,024.1 879.8 16.4% U.S. 299.5 269.1 11.3% 701.2 642.3 9.2% Mexico 116.6 83.7 39.3% 322.9 237.5 36.0% U.S. SALES MEXICO SALES Positive price environment across product lines offset the decline High demand for indust
Slide 46: Income statement (million dollars)
INCOME STATEMENT (MILLION DOLLARS) Q3-23 Q3-22 Var 9M-23 9M-22 Var Net Sales 416.1 352.8 17.9% 1,024.1 879.8 16.4% U.S. 299.5 269.1 11.3% 701.2 642.3 9.2% Mexico 116.6 83.7 39.3% 322.9 237.5 36.0% Cost of sales 249.4 236.0 5.7% 651.3 609.9 6.8% SG&A expenses 31.2 23.6 32.3% 88.1 69.7 26.4% Other exp
Slide 47: Free cash flow (million dollars)
FREE CASH FLOW (MILLION DOLLARS) Q3-23 Q3-22 Var 9M-23 9M-22 Var Operating income before other expenses 135.5 93.1 45.5% 284.7 200.2 42.2% Increased free cash flow in Q3-23 reflects: Depreciation and amortization 23.0 24.3 -5.1% 69.5 71.3 -2.5% EBITDA 158.5 117.4 35.0% 354.2 271.4 30.5% Higher EBITD
Slide 48: Balance sheet (million dollars)
BALANCE SHEET (MILLION DOLLARS) Sep-23 Sep-22 Var Total Assets 2,657.9 2,372.1 12.0% Net leverage (net debt/EBITDA) ratio totaled Current Assets 1,226.8 1,064.5 15.2% Cash 857.3 732.0 17.1% -0.82x as of September 2023 Other current assets 369.5 332.5 11.1% Cash and equivalents totaled US$857.3 milli
Slide 49: Contact
CONTACT: Maik Strecker, Chief Financial and Planning Officer mstrecker@gcc.com WWW.GCC.COM Sahory Ogushi, Head of Investor Relations soguship@gcc.com +52 (614) 442 3176 + 1 (303) 739 5943