Cemex SAB de CV (CX) 2015 Q1 法說會逐字稿

Good morning. Welcome to the CEMEX first-quarter 2015 conference call and webcast. My name is Sylvia, and I will be your operator for today. (Operator Instructions)

Our hosts for today are Fernando Gonzalez, Chief Executive Officer; Maher Al-Haffar, Executive Vice President of Investors Relations, Communications, and Public Affairs. Now I will turn the conference over to your host, Fernando Gonzalez. Please proceed.

Thank you. Good day to everyone, and thank you for joining us for our first-quarter 2015 conference call and webcast. After Maher and I discuss the results of the quarter, we will be happy to take your questions.

We are pleased with our first-quarter results. We had a 7% increase in sales, with operating EBITDA generation growing by 14% on a like-for-like basis. First-quarter EBITDA was the highest since 2008 despite adverse currency fluctuations. EBITDA margin expanded by 1.8 percentage points. Improvement in prices for our three core products in most of our operations; better volumes in most of our products in Mexico, the US, Northern Europe, and Asia; the favorable operating leverage affect in the US; as well as our continued cost reduction initiatives led to this EBITDA growth.

We had significant achievements during the quarter. Consolidated first-quarter gray cement and ready-mix volumes are the highest in seven and six years, respectively. First-quarter EBITDA margin was the highest since 2010. In addition, we continued with our working capital initiatives and achieved our record low 24 working capital days during the quarter.

We continued with our efforts to improve our free cash flow generation. In January we closed the three transactions with Holcim in the Czech Republic, Germany, and Spain. We expect a recurring improvement in our EBITDA, including synergies of about $20 million to $30 million starting this year.

On the financing, side we continue to proactively address our refinancing requirements, improving our debt maturity profile, further reducing our interest expense and strengthening our capital structure. During the quarter we raised about $1.35 billion equivalents at competitive yields.

We are pleased with the way our credit continues to re-rate. We continue to be vigilant and prepared for windows of opportunity to reduce the interest expense at the margin. Consolidated cement and ready-mix volumes increased by 4% and 5%, respectively, while aggregates volumes remained flat. We had higher cement volumes in Mexico, Northern Europe, and Asia. We had higher ready-mix volumes and aggregates volumes in Mexico, the US, and South Central America and Caribbean region.

In Mexico our first-quarter cement and ready-mix volumes were the highest since 2009. Also, during the quarter we achieved record-high cement volumes in the Philippines and Nicaragua; and record ready-mix volumes in Colombia, Nicaragua, Poland, Egypt, and Croatia.

Consolidated prices for cement, ready-mix, and aggregates in local currency terms are higher both on a year-over-year and on a quarter-on-quarter basis. Sequentially cement prices in local currency terms grew by 1%, mainly driven by increases in Mexico, the US, the Northern Europe, and South Central America and the Caribbean regions. The decline in sequential prices in US dollar terms in cement and ready-mix reflects weaker currencies in some of our markets.

We continue with the implementation of our Value Before Volume strategy in all of our regions, focusing our efforts on achieving sustainable higher margins and returns in all of our business lines. We will continue to improve the transparency on the value we provide to our customers through our products and services by focusing on our surcharges and service fees in each market.

Now I would like to discuss the most important developments in our markets. In Mexico we are pleased with the 18% growth in sales and EBITDA on a like-to-like basis, driven by higher volumes and prices in local currency terms in our three core products. Our cement and ready-mix volumes increased by 13% and 9%, respectively, during the quarter. These were the highest first-quarter cement and ready-mix volumes in six years. In addition to the sustained increase in our volumes to the industrial and commercial and formal residential sectors, we saw growth in the infrastructure and informal residential sectors.

The formal residential sector continued to be strong during the quarter. Subsidies from the National Housing Commission almost doubled during the quarter on a year-over-year basis. In addition, year-to-date credits from INFONAVIT have also grown in the double digits. Leading housing indicators should lead to continued growth into the rest of 2015, although at a more moderate rate.

Regarding the infrastructure sector, the budget from the Ministry of communications and transportation, which is the most cement-intensive, is suspected to grow in the double digits this year from last year's levels, even after the budget reduction. In light of this and our current project pipeline, our volumes to the sector should grow in the mid- to high single digits, driven by increased investment -- especially in transportation projects, including highways, rural roads, and airports.

The industrial and commercial sector should continue to be driven by stronger industrial activity derived from manufacturing exports, driven by increased US activity as well as a commercial sector supported by stronger private consumption and retail sales. The main drivers for the self-construction sector, including remittances, employment, and consumer confidence also continued to improve.

On the pricing side we had positive traction from our cement price increase at the end of December. Prices as of the first quarter were 4% higher sequentially in local currency terms. We announced a 7.5% price increase in bagged cement effective in April. We aim to recover prices in real terms. After the positive performance during the first quarter, we now expect our cement volumes to grow in the mid- to high single digits during 2015.

Our US business continued its steady recovery. Our sales increased by 10%, while operating EBITDA more than doubled during the quarter. Incremental EBITDA margins for our US operations during the first quarter was 48% on a year-over-year basis due to strong pricing gains and continued favorable operating leverage.

On a year-over-year basis cement volumes were flat, while ready-mix and aggregate volumes rose by 15% and 3%, respectively. The growth differential between cement and ready-mix during the quarter reflects the decline in our oil-well-related cement sales, as well as poor weather conditions in our less integrated markets.

On a pro forma basis adjusting for oil-well cement and related activity, cement volumes grew by 4%. Activity in the quarter continues to be propelled by the industrial and commercial as well as by the residential sectors. Housing permits in our four key states -- Texas, Florida, California, and Arizona -- grew 12% year to date February compared with an 8% increase at the national level. California, driven by multifamily sector, as well as Florida showed particular strength.

Construction spending for the industrial and commercial sector is up 22% year to date February, while growth in national contract awards has slowed, dropping 6% year to date March. Florida, however, continues performing at above-trend levels with high single-digit growth.

The public sector contribution to volume growth was fairly flat during the quarter. While total public infrastructure spending is down 4% year to date February, highway and bridge investment grows 2% versus the same period last year.

Highway and bridge spending continues to benefit from increased state activity, fueled by improved fiscal conditions and TIFIA projects. Contract awards for highways and bridges are up 31% year to date March. We believe this increase is largely due to a low prior-year comparison, as well as the contracting of one large highway project in Florida during the period rather than a robust pickup in project signings.

The current Florida highway program is set to expire in May, and we expect Congress will move to roll over the existing program until year-end at a fairly flat level of spending. Removing the uncertainty facing the program for even a short period of time should be supportive of some incremental highway spending.

Our pricing strategy in the US continues to deliver strong returns. On the back of largely successful January cement price increases in Colorado, Florida, the Midwest, and parts of the Mid-South, cement prices rose 2% sequentially. For the regions where we raised cement prices in January, which represent about 40% of our volumes, pricing increased by 9% sequentially. Ready-mix prices also increased 2% sequentially, while aggregate prices declined 1%, due primarily to project mix.

In April we implemented cement price increases of $9 per metric ton in California and the Southeast and $7 in Texas, along with ready-mix and aggregate price increases in California. These new increases should be absorbed by the market.

Poor winter weather, the timing of the roll-off of several cement-intensive projects, the decline in oil-well cement volumes -- all occurring in the quarter with the seasonally lowest volumes of the year -- hampered our cement volume performance during the quarter. Despite this headwind we remain confident that we will meet our mid-single-digit volume guidance for the year. Our confidence is rooted in the double-digit volume growth that we have seen in our ready-mix business, a strong order book for our cement-intensive projects, and our expectation that the pace of decline in oil-well cement will slow.

In our Northern Europe region on a pro forma basis, giving effect to the transactions with Holcim, cement volumes during this quarter increased by 18%. All countries in the region registered volume growth in this period, with the exception of Latvia. Pro forma ready-mix volumes declined by 4%, mainly driven by lowered activity in France and Germany.

Quarterly regional cement and ready-mix prices increased by 5% and 6%, respectively, on a sequential basis and in local currency terms. In Germany our cement volumes during the quarter, adjusting for the sale of our assets in the western part of the country to Holcim, grew by 5%, driven by the infrastructure and residential sectors.

Adjusted prices for our current operations remained stable sequentially in local currency terms. For the remainder of the year the infrastructure sector should continue to benefit from higher tax revenues translating into incremental spending, especially in transportation projects. Residential activity should continue to benefit from low mortgage interest rates, low unemployment, rising purchasing power, and growing immigration into the country, which should more than offset restrictions such as land availability and regulatory caps on rental increases.

In Poland our market position remained relatively stable from that in fourth-quarter last year. On a year-over-year basis our cement volumes grew by 32% during the quarter, resulting from improved weather conditions as well as considerably stronger weight of volumes to our ready-mix operations. Ready-mix volumes benefit from large infrastructure projects, including highways, as well as from residential developments in different cities, including Warsaw.

We remain committed to our pricing initiatives. Our prices in local currency terms were stable sequentially after two quarters of decline and actually increased throughout the quarter. In fact, prices as of March are 1% up from December levels.

During the rest of 2015 we expect infrastructure and residential sectors to be the main drivers of demand for our products. Additionally, in the upcoming quarters we expect our domestic cement volumes in Poland to benefit from the consolidation of sales that were previously done in the country by our recently-acquired plant in the Czech Republic.

In France our ready-mix and aggregate volumes were affected by the continued macroeconomic weakness. The only sector expected to show a slight recovery this year is the residential sector. Government initiatives, including a new buy-to-let program and a stimulus package starting in September, should translate into back-ended growth.

In the United Kingdom the double-digit growth in our volumes reflects the continued favorable performance from the residential sector and an improving commercial sector, as well as comparisons to a first-quarter 2014, in which floods and wet weather impacted quarterly volumes. For the remainder of the year, the residential sector should continue to contribute to demand growth, driven by low unemployment and inflation as well as higher wages and consumer confidence. In the industrial/commercial sector, higher activity should come from office projects, retail, and warehouses.

In the Mediterranean region, cement volumes adjusted for the acquisition of cement assets in Spain declined by 10% during the quarter. In contrast, regional ready-mix volumes increased during the quarter, driven by improved performance in Egypt, Croatia, and the United Arab Emirates.

Improved EBITDA generation from Spain during the quarter mitigated lower contribution from Egypt and Israel. In Egypt the decline in cement volumes during the quarter was mainly the result of the unusual rainy and cold weather during January and February and to lower activity in the informal sector.

Sequential cement prices in local currency terms were 3% down during the quarter but still 11% higher than in the previous year, more than offsetting higher energy prices. Regarding energy, we expect to start switching our kiln fuel from mazot to petcoke starting in the fourth quarter of this year. We are currently in the process of installing a petcoke grinding mill for this purpose.

During this year the informal residential sector should continue to be the main driver of cement demand. The formal residential sector should also show a slight pickup in activity.

Furthermore, during the economic summit last month, the Gulf countries committed to support Egypt's economic development. This should be positive for cement demand in the country.

In Israel, our ready-mix volumes during the first quarter declined by 5%, mainly reflecting unusual snow and rain during the first two months of the year. In Spain cement volumes on a like-to-like basis, adjusting for the assets acquired from Holcim, declined by 8%. This negative variation results from a tough comparison with first-quarter 2014, in which then-prevailing market conditions resulted in an increase in our market position.

As 2014 progressed, we've remained focused on pricing and on our most profitable customers. We expect our domestic cement volumes for this year to increase 4% on a like-to-like basis. The sequential decline in prices is mainly due to customer mix as we integrate the acquired assets in the country. In fact, pro forma cement prices in local currency terms increased by 10% on a year-over-year basis and by 7% from fourth-quarter levels.

In infrastructure there was an increase in activity in the sector. Easing of fiscal austerity measures, reduction in sovereign spreads, and local and general elections later this year should continue to benefit this sector for the remainder of the year.

The residential sector is also benefiting from improved credit conditions, employment, and consumer confidence. New credit for home purchases is growing at double digits. Activity in the sector this year should continue to be favorable, driven by positive traction in housing permits and stabilization of home prices. We expect to continue to see a favorable operating leverage effect in our margins in Spain, as our volumes continue to improve and we realize the expected synergies from the integration of the acquired cement assets.

In our South Central American and the Caribbean region, quarterly ready-mix and aggregate volumes increased by 3% and 5%, respectively; while cement volumes declined by 5%, mainly due to lower cement volumes in Colombia, El Salvador, and Guatemala. We are pleased with the positive demand environment in Panama, the Dominican Republic, and Nicaragua during the quarter.

I will give a general overview of the region. For additional information you can also see CLH quarterly results, which were also reported today. The regional decline in margins reflects the lower margin in Colombia due to the decline in cement volumes and the impact of FX on our dollar-denominated costs.

The Colombian peso depreciated 25% on a year-over-year basis. In Colombia the 15% decline in domestic gray cement volumes was due to: first, we come from a very strong comparison in first-quarter 2014, where we had a 34% year-over-year increase in volumes; and second, our price increase last January resulted in a decline in market share. Historically the market share has reverted back in the following months. In fact, daily cement sales in March were significantly better than those in January and February, and we currently expect this trend to continue.

Ready-mix and aggregate volumes increased by 5% during the quarter. Cement prices in local currency terms increased by 4% during the quarter on a sequential basis and reached levels close to those we had during first-quarter 2014. We continue to aim to recover our prices in real terms.

Demand from the residential sector should continue to be bolstered by the various government housing initiatives, which include the second phase of the free home program for an additional 100,000 houses; the construction of the 86,000 homes under a subsidy program; as well as the Mi Casa Ya program, which includes an additional 100,000 homes with subsidies.

The infrastructure sector continues its positive trend, with the continuation of some projects like Corredores de la Prosperidad, and Ruta del Sol, and the initiation of new ones. Allocation of a portion of the royalty fund to transportation projects should also boost this sector. In addition, some projects under the 4G infrastructure program will start toward the end of this year.

In Panama we saw positive performance in cement volumes during the quarter, mainly driven by an increase in volumes to the Panama Canal project compared with last year, when this project suffered stoppages which affected volumes. Excluding volumes to the Canal, cement volumes still increased by 4% during the quarter.

The residential sector continued to be the main driver for cement demand in Panama during the quarter, supported by middle-income housing activity. Regarding infrastructure, the government has announced a five-year, $11 billion public investment plan which includes important projects such as the metro system expansion, interstate highways, water management, among others. In general we continue to expect strong demand levels from these sectors over the medium-term.

In Asia cement volumes increased in the double digits during the quarter. In the Philippines we also saw double-digit growth in cement volumes, mainly driven by the industrial and commercial sector as well as a better ability to serve our markets through the introduction of the new cement grinding capacity at the end of the second quarter of last year. For the remainder of the year we expect to see demand growth from all sectors.

The positive volume trends in the Philippines should continue this year. The residential sector should continue to be supported by increased remittances, stable inflation, and low mortgage rates, as well as by higher housing demand from foreigners. Continued growth in the industrial and commercial sector should come from expansions in different industries, including manufacturing; automotive; business process outsourcing; gaming; and hospitality, among others. Regarding infrastructure, the government is committed to attaining its goal of increasing infrastructure spending to 5% of the country's GDP by next year.

In summary we are pleased with the growth in local currency prices in most of our regions, reflecting the continued positive outcome of our Value Before Volume strategy. We are also encouraged by the performance of our operations in Mexico, where first quarter cement volumes grew by 13%, reaching the highest levels in six years.

This quarter, on top of the sustained increase in our volumes to the industrial and commercial and formal residential sectors, we also saw growth in the infrastructure and informal residential sectors. Cement demand from the infrastructure sector grew by 6%, marking an inflection point driven by increased public works spending; while demand from the informal residential sector grew by 11% as a result of higher consumer confidence, due to improvements in employment; disposable income; and remittances.

And now I will turn the call over to Maher to discuss our financials. Maher?

Thank you, Fernando. Hello, everyone. Net sales on a like-to-like basis increased by 7% during the quarter, while operating EBITDA increased by 14%, with a margin expansion of 1.8 percentage points. It was higher EBITDA contribution from Mexico, the US, the Northern Europe, and Asia regions.

On a year-over-year basis we continue to see the effect of the depreciation of some currencies versus the US dollar. As we commented last quarter, typically currency devaluations translate into input cost inflation, which stands to put upward pressure on prices, with some lag effect.

Cost of sales as a percentage of net sales decreased by 2.9 percentage points during the quarter, mainly driven by our cost reduction initiatives and product mix. Operating expenses -- also as a percentage of net sales -- increased by 0.5 percentage points as efficiencies were offset by higher distribution expenses. Our kiln fuel and electricity bill on a per-ton-of-cement-produced basis increased by 5% during the first quarter. This increase reflects higher fuel and electricity prices in Egypt as well as a country mix effect.

During the quarter our free cash flow after maintenance CapEx was less negative by $173 million. This is explained by higher EBITDA as well as lower financial expenses and cash taxes during the quarter. While the working capital investment during the quarter was similar to that of the first quarter last year, working capital days reached 24, a new first-quarter record compared with 29 days in the same period in 2014.

As in prior years, we expect to recover most of the investment in working capital during the second half of the year. We had a foreign-exchange gain of $59 million, resulting primarily from the fluctuation of the Mexican peso and the euro versus the US dollar. We also recognized a loss on financial instruments of $59 million related mainly to CEMEX shares.

The controlling interest net loss of $149 million was practically half of that in the first quarter of 2014. This narrower loss is primarily due to higher operating earnings before other expenses, lower financial expenses, and a foreign-exchange gain versus a loss last year, mitigated by a loss on financial instruments.

We continue with our initiative to improve our debt maturity profile and strengthen our capital structure. During March we successfully accessed the debt capital markets and raised $750 million in 10-year senior secured notes, with a coupon of 6 1/8% as well as EUR550 million in 8-year senior secured notes with a coupon of 4 3/8%.

We used the proceeds from these notes to pay a portion of our higher-coupon 2018 notes as well as a portion of the revolving tranche of the syndicated loan facility, leaving this line of $746 million completely available. We also created a cash reserve of $588 million to pay our 2020 notes in May and a portion of the floating-rate notes, which matures in September.

In addition, as per the contingent convertible units transaction, we issued $200 million of optional convertible subordinated notes due in 2020 -- used to refinance the optional convertible subordinated notes that matured on March 13. Total debt plus perpetual securities increased by $417 million during the quarter. This includes a non-cash positive conversion effect of $208 million. The negative free cash flow during the quarter was met with a reduction in our cash balance.

We have included a pro forma debt maturity profile which shows the use of the created cash reserve of $588 million to pay the remaining $222 million of our 2020 notes and a portion of our floating-rate notes. The rest of the floating-rate notes is addressed by drawing down on the revolving portion of our syndicated loan facility.

We remain comfortable with our liquidity position. Furthermore, we maintain sufficient working capital and receivables financing facilities, which further bolster our liquidity position. We continue with our liability management initiatives to lower our interest expense, lengthen the average life of our debt, and reduce refinancing risk.

Now Fernando will discuss our outlook for this year. Fernando?

For 2015 we reaffirm our guidance for cement and aggregate volumes provided last quarter. As regards our ready-mix volumes, we are improving our guidance and now expect growth to be in mid- to high single digits.

Regarding our cost of energy, despite higher energy costs during the first quarter, on a per-ton-of-cement-produced basis, we expect a slight decline for the full year from last year's levels. Guidance for total CapEx for 2015 is about $800 million. This includes $500 million in maintenance CapEx and $300 million in strategic CapEx.

The increase in strategic CapEx guidance reflects the ongoing expansion projects announced last year. Regarding working capital, we now anticipate the working capital investment during this year to be about $50 million, including the addition of free cash flow initiatives we discussed last quarter and during our CEMEX day.

We now expect cash taxes for 2015 to reach about $550 million to $600 million. As a result of our liability management initiatives, we anticipate a reduction in financial expenses for this year of about $100 million.

In closing I want to emphasize that this quarter we delivered strong results, despite headwinds caused by currency fluctuations and volatility in the financial markets. Our EBITDA generation and EBITDA margin were the highest in several years. We also continued to improve our working capital, reaching a record low 24 days.

I would also like to reiterate the messages I provided during our CEMEX day a month ago related to how we are responding to this volatile environment and are further bolstering our growth to investment-grade. For 2015 we are pursuing, first, cost and expense reductions of $150 million; second, free cash flow initiatives of $200 million, half in working capital investment and half in financial expenses -- guidance for these items reflects these initiatives; and third, we are targeting to pay between $500 million and $1 billion of debt this year.

Furthermore, as part of our ongoing efforts to optimize our portfolio we expect to sell assets for $1 billion to $1.5 billion in the next 12 to 18 months. Thank you for your attention.

Before we go into our Q&A session, I would like to remind you that any forward-looking statements we make today are based on our current knowledge of the markets in which we operate and could change in the future due to a variety of factors beyond our control. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases, or decreases refer to our prices for our products.

And now we will be happy to take your questions. Operator?

(Operator Instructions) Benjamin Theurer, Barclays.

First of all, congratulations for the results in Mexico. They were pretty decent.

Good morning. Thanks. Thank you for the comment.

First of all, thank you very much. My question is actually on the United States, and one on Colombia.

So in the US, you mentioned that you had pretty adverse weather conditions affecting volumes. And you have mentioned in the presentation that excluding the oil-well cement, it would have grown by 4%. But do you also have an estimate how much growth would have been in volumes in the US if weather would have been, let's say, in the more normal condition?

And on the Colombia, just one follow-up -- so we've seen that there is actually in the region a decrease in prices in local currency terms. Any initiatives at the end of the first quarter, beginning of the second quarter, to get that at least in local currency terms into a positive territory? That would be my questions.

Well, as an objective, yes, as we have mentioned -- and I'm referring to Colombia -- we are always trying to find ways to recuperate prices in real terms. So that continues being our objective in Colombia and everywhere else.

The dynamics in the country the first quarter, as we mentioned, compare very unfavorably to first-quarter last year, precisely because of the timing of price increases. But again, we will continue with the objective of recovering prices -- Colombia and everywhere else -- in real terms.

Ben, as regarding the weather, I would say that certainly Texas probably was the biggest recipient in our markets of the brunt of that. And so we saw places like Midland, Austin, certainly suffering quite a bit from that. In fact, if you take a look at Midland, Texas, on it, we had almost close to 150% more rain. San Antonio is another market -- close to almost 50% more.

I think we don't have a specific number. But what I can do, for instance, is just give you an indicator -- California, for instance, where we had very good weather. There our volumes were up around 12%. So that can give you an idea of how much of a difference the weather makes an impact.

Okay. Thank you very much, Maher. But you expect that -- to some sort of recover into the summer months, right, I suppose?

Yes. I mean, if you take a look at our volumes that were generated in the -- you know, that flat growth that we've seen in the first quarter; and given our guidance, which we have high conviction on for the full year, that would translate to, obviously, high single-digit growth in the rest of the year to get to that number. And we're fairly confident with that.

Weather played a very important role in housing construction, for instance, if you take a look at the numbers in housing in our markets. Especially in permits versus starts, there's a huge difference, as Fernando mentioned during his discussion of the US business. So we're confident that construction activity will pick up as the year goes on and we get better weather.

All right. Perfect. Thank you very much, and congratulations again.

Adrian Huerta, JPMorgan.

Hi, thank you. Good morning, Fernando and Maher, and congratulations as well on the results.

Thanks.

My question has to do with margins. You bolstered a good expansion on EBITDA margin in the first quarter. What is the outlook for the rest of the year, considering that now you are expecting lower energy costs -- also, the positive pricing environment that we are seeing in most regions? And also, for the remainder of the year, and the potential synergies that you are also expecting for the rest of the year? Thanks.

I think the expectation is for the margins to improve. Let me make a clarification of our margin improvement during the first quarter. About a third of it -- about 0.5 percentage point is coming because of the divestment of our German assets, which -- you know, because of seasonality, they do have a negative impact on this year, given that we closed the transaction before the starting of the quarter. We don't have that negative impact that compares to last year.

So on the other percentage point, it's basically -- it is structural. It has to do with our prices growing more than our costs and expenses. Our costs and expenses grew about 3 percentage points less than our prices. And I think that will prevail during the rest of the year.

And the other elements that we should continue considering, because it is structural, also, and we will continue to see the benefits of it is operational leverage, mainly in the US. As you saw the performance of EBITDA compared to sales, that is a confirmation that we do continue having a significant -- a pretty significant operating leverage in the US. So that's why we think margins this year compared to last year should be materially higher.

Excellent. Thank you, Fernando. Appreciate it.

Marcos Assumpcao, Itau.

Good morning, everyone. Congratulations on the strong results. Two quick questions: first, in the US, regarding the pricing environment, if you could comment a little bit on the success rate of the price increases announced for January? If they are almost 100% implemented already -- and so if the market is really strong, and you continue to expect that to be the case for the price increases also, and also through April?

And the second question: regarding Mexico, we saw you upgraded a little bit the volume expectations for the full year on the cement side. Like, we saw the very strong numbers -- 13% volume growth in the first quarter. Is that a possibility, like, if the market continues to be surprising, and eventually we could see -- instead of high single digits, we could even see double-digit growth rates for Mexico for the full year?

Okay. Regarding Mexico, let me start with your question on Mexico's expectation. I think what we saw in the first quarter this year is a positive trend that started third-quarter last year. If you remember, our volumes in Mexico started increasing slightly in the third quarter; then even more during the fourth quarter.

And what we saw this quarter -- on top of the growth of the formal housing sector, industrial and commercial, that was driving this recovery, we saw clearly an inflection point and a significant growth in infrastructure spending and also in the consumer market or the informal construction market for 11%. So compared to our estimates -- our original estimates and our current guidance -- definitely there is an upside risk in Mexico, because we believe that what we have been expecting already for some time, the growth in the formal sector as well as infrastructure, is already happening. And that accounts for about 60% of total demand.

We have to take into consideration also that we have elections in midterm. So we are kind of cautious on the trends for the whole year. That's why we are not increasing our guidance even more despite of the good results that Mexico showed during the first quarter. But, yes, we might have an upside risk in our estimates in volumes in Mexico.

Maybe I can address the US question.

Please go ahead.

Marcos, I just like to say that Fernando kind of discussed the pricing environment in the US in his comments. And it's very important to note, actually, that in the markets where we announce pricing increases for January -- we are starting January in Florida, Colorado, Ohio, Pennsylvania, Kentucky, Tennessee, the Carolinas. They represent around 40% of our volumes during the quarter.

And there, if you take a look at kind of the volume-weighted pricing increase, it's almost $9. That's almost a -- representing about a 9% increase. That is awfully close to most of the pricing increases that we have announced.

Now, we are also quite encouraged, frankly, by the response to the pricing increases for April. And the markets that are affected with the April pricing increases represent about 53% of the markets: that's California, Texas, and Georgia. So we think the supply/demand dynamics are quite positive. And we have high conviction on the pricing dynamics -- not just in cement, but across all of our products. I don't know if that answers your question, Marcos.

Yes, sure. Thank you very much. That was clear.

Marimar Torreblanca, UBS.

Hi, guys. Thanks for the call, and congratulations also on your results. I have a question on your leverage ratio. Can you tell us if you have a target for year-end, considering the FX environment? And also maybe if you can give us an update on the asset sales plan that you have for this year?

Yes, we do have a target for leverage ratio, but we don't disclose it. But I can tell you that it will be -- there will be an improvement compared to last year.

There was an improvement already compared to last quarter -- you know, the numbers I remember is 5.19 compared to 5.11 or so. That is a trend that we have seen in the last two, three years. And the trend will continue, and I do expect this trend even to accelerate as long as we manage to continue providing good results, and we manage to execute our 2015 program in order to support our objective of gaining back our investment grade, which is -- this is related to your second question on divestments.

We don't have a significant amount of divestments already done. We are in progress, as we have commented. The time horizon we have is from -- well, we started last January, as of mid-next year. What I can tell you is that we are moving forward. We have divested some minor, nonproductive assets.

But we feel confident that in this time horizon, we will be able to divest the assets for the amount we have been targeting, from $1 billion to $1.5 billion. I don't know if that answered the question, Marimar?

Yes. Yes, thank you.

Mike Betts, Jefferies.

Yes, thank you very much. My two questions, please? Firstly, I seem to remember a year ago in the US there was a lot of maintenance spending that impacted results. Was there any benefit this time from the nonrecurrence of that? And then, secondly, in terms of the cost reductions, you can clearly see them in the overall results. I wonder if you could give us some idea of where they are concentrated in terms of the regional mix in Q1? Thank you.

On the first question on maintenance, the difference is not significant yet. We might see some difference as we advance in the year, but so far this quarter we don't have a significant difference to show.

On cost reduction, what I can mention is -- as I already mentioned -- there is an impact because of the divestment in Germany. But -- as I mentioned, in terms of margin for about a third of it. But the rest is reduction and costs and expenses across the board.

I don't have any specific comment. It's everywhere. The program we designed and started executing in January is global, and it's happening. I'm very pleased to say it's happening almost everywhere.

The other comment that -- just in case it was not properly communicated, the other comment is that this first quarter, even though we are reducing costs and expenses, our energy cost did increase by 5% and has to do with the mix of countries -- increases in Egypt and increases in Mexico. But at the same time, through the year we will see that the inventories that we are using at higher prices are depleted, and now we are going to start getting the benefit of lower cost of petcoke and other fuels.

Okay. Thank you. And then just one small question is the final one. The 7% of the market in the US where you haven't raised cement prices, either in January or April -- where is the 7% that prices aren't going up, and why?

I think -- it's probably just very small markets, because I went through the list of the areas where we've done it; and there's really, frankly, no reason. We have the breakdown for, like you said, 93% of the market so far.

And there will be efforts, obviously, going forward for additional reviews of the pricing environment in the US as well, on back of the results that we've gotten so far. But there's really no reason why we have not had 100% increases in prices throughout our portfolio.

Understood. Thank you very much.

Adam Thalhimer, BB&T Capital Markets.

Hi, good morning. Congrats on a solid start to the year.

Thanks.

In the US, how easy is it to switch from oil-well cement to construction cement? Can you share your thoughts on whether you'll be doing that this year?

Yes. It's not easy, but it's doable. And we are certainly looking at possibly doing it, especially in Texas, where the market continues -- I mean, despite the drop in oil-well cement, as you know, leading up to this correction in the oil-well cement market, Texas was a net importer of cement from neighboring states.

We were importing, for instance, cement from Colorado. Others bring cement from other locations. And the state, despite the drop in consumption, continues to be a net importer of cement -- albeit a very small amount. So, clearly, to the extent that we need to, for instance, convert one of our oil-well cements in Texas to regular cement, we will do that. And it can be done. And the switch is not that costly, frankly.

Okay. Thank you.

Dan McGoey, Citigroup.

Thanks for the call. Question is on prices and market share. In Colombia, you mentioned the price increase is through, but it looks like you ceded a fair amount of market share. You've been successful in the price increases in Mexico and the US. I'm wondering if you could talk a little bit about whether or not that's come at the expense of market share in both countries -- and, obviously, with the focus on the regional markets where you are operating?

And then the second question is just on the US: you had, as usual, a fairly significant drop in EBITDA margin quarter on quarter; although for the lower volume amount, the step-down from the 15% EBITDA margin in the fourth quarter to 7.5%, is steeper than usual. I'm wondering, as we move into the seasonally stronger quarters, if you could talk a little bit about the slope of increase heading into the midyear -- in the US, specifically, I'm referring. Thanks.

Let me start with the first question on prices and market shares, particularly in Colombia. As we commented, the comparison of first-quarter 2015 to first-quarter 2014 is a challenging one. Pricing initiatives or price increases happen in different ways in different times of the year.

And it happens that last year we did take the initiative during the first quarter on balancing our market share, and this year we did take the initiative to increase prices. And that did affect it -- our market share. We don't know exactly to what amount. We don't have market information as of today for the first quarter. But definitely we know it was effective for the dynamics. And the comparison, then, it is very challenging.

Is that going to affect our regular position in the market in Colombia midterm? I don't think so. These are the characteristics of price increases. You know, again, with the objective of recovering prices in real terms, you act on it. And you have to see how the dynamics go, and then you have to react to them.

Definitely the impact on the first quarter this year -- although, again, we don't have information -- but we know we suffered on market share for the first quarter. But we do expect to come back little by little.

In the case of Mexico, I think the pricing dynamics -- we don't think -- again, just clarifying; we don't have market information that fast -- but we do think that in Mexico the impact was not as high as it was in Colombia. And in general terms, the process is about the same. Every time you try to increase prices, you have the same effect.

Again, unfortunately, at this point in time we don't have reliable data on market performance in either country, Colombia and Mexico. And we cannot provide specific figures on market share as of today.

Dan, I don't know -- I forget. Did you have a similar question in terms of the market share on the US or not?

No, I think it became clear. You don't have the specific data on market share yet, but the color Fernando provided on that is fine.

Great. Now, in terms of the EBITDA margin differential between fourth quarter and first quarter, obviously you have enormous seasonality and non-comparability between those two quarters. If you look at prior years -- for instance, if you take a look at the example of, say, 2013, for instance -- 2013 fourth quarter versus 2014 -- it's not comparable, frankly.

So that analysis is -- we could certainly look into it, but it's really not comparable, frankly. There's some maintenance issues, potentially; inventory effects that could be there, depending on weather, and in line with maintenance as well. So I wouldn't draw a lot of conclusions.

Now, in terms of the improvements in the margin for the year, clearly the answer is yes, right? Because the first quarter is the weaker quarter, we had volumes that were flat in cement. Cement clearly has the highest margin contribution, has the highest operating leverage within the business. So clearly, as we proceed during the year and get closer to our guidance, hopefully, for volumes in cement, that will have hopefully a very positive impact on the EBITDA margin, clearly.

I guess maybe a simpler way to ask it, Maher, is: if you are looking for mid-single-digit volume growth in the US, and you are tracking at better than mid-single-digit price increases -- if you could talk a little bit about where you think EBITDA margins might be in the US in your seasonally stronger quarters?

We don't guide -- what I can point you at, frankly, is the only thing that we have given out publicly that would help you in that area is what we said about full-year EBITDA for the US, which -- we said that it's going to be in excess of $600 million for the year. And so you can extrapolate from where we are in the first quarter.

You could look at seasonality. The second and third quarter are the best quarters for us, typically, during the course of the year, unless we have some exceptional weather on the end caps of the year. And you would get an idea of where EBITDA margin is likely to be towards the end of the year. But clearly, it's going to be an important level higher than what it was in the first quarter.

Understood. Thank you.

Alvaro Garcia, BTG Pactual.

Hi, guys, good morning. Congrats on the results. Two questions: first, on taxes, the guidance came down on margin. And I was just curious -- what was driving that?

And, two, on the Federal Highway Program in the States, you mentioned spending was probably going to be flat throughout the second half of the year, and the continuation of that. Is there any risk that might not be the case? And just your general outlook on the infrastructure space in the US would be great. Thanks.

In the case of taxes, there are two reasons. On the one hand we are expecting lower taxes in many of our regions than what we estimated late last year or early this year; plus, there is also some impact because we have weaker currencies, and that has some effect in our estimates.

And talking about the US -- I mean, in infrastructure in particular, despite the fact that we had fairly flattish performance, actual highway and bridge spending is actually up about a couple of percentage points year to date. And we believe the thing that is going to be further kind of adding to that growth is what's happening with TIFIA.

13 of the TIFIA projects for a value of slightly more than $20 billion -- about $22 billion -- are in our markets. So, yes, we don't expect out-of-the-ballpark performance. But we do expect things to get better during the course of the year.

And again, I would really point to some of the weather effects that we have seen. And also, let's not forget that in Florida, one of our most important markets, we had very important projects that had been completed -- the Tampa Waterway. But when we look at our backlog of projects throughout our four big markets, we are quite encouraged, frankly, with the outlook and being able to kind of get back on trend where we expect growth for the year to be for the infrastructure segment.

Again, we don't expect out-of-the-ballpark -- we do expect residential to be a very large contributor and industrial and commercial to be the largest contributor. I don't know if that addresses all of your questions?

That's very clear. That's very clear. Thank you very much, Maher.

Yassine Touahri, Exane.

A couple of questions. Firstly, a question on the United States. I understand that volume in Texas in January and February for the market will have done approximately 10%. What kind of trends do you see in March and April? And in context of these trends, how confident are you about your ability to increase prices in Texas? That would be my first question.

And a second question on the improvement of your results in Northern Europe, which were quite impressive. Is it fair to assume that approximately $15 million improvement in EBITDA was related to the German disposals, and that most of the improvement elsewhere comes from the UK?

Regarding your second question, the main -- the explanation for the variation comes mainly from the UK. In the UK the business performed much better. And in the top of that, there is a timing issue with our maintenance of our main or largest cement plant in the UK, Rugby, which last year happened during the first quarter and this year is going to happen most probably during the second quarter.

But most of the explanation for the variation comes from the US and, to some extent, to the German -- the divestment of our Western German assets. But, again, it's mainly the UK.

Thank you.

Yassine, regarding your question on Texas, if we exclude oil-well related cement -- and I'm talking about here specifically oil-well cement, meaning cement going to oil-well construction, and then gray cement going to projects that are related to oil-well construction -- if we exclude that, then volumes would be flat for us.

Now, official data on the Texas market, unfortunately, is only available for the first two months of the year. And that shows actually growth of 2% for the state, not necessarily for us, right?

Now, we do happen to have the largest exposure to the oil-well market, and that has already corrected significantly. So we don't expect, frankly, material corrections from here on.

We talked about bad weather, which we think that's -- hopefully -- I mean, nobody has a crystal ball about the weather, but hopefully we will get better weather during the course of the year. But I would say probably a better -- as it is for the rest of the US, I would say a very good indicator of growth is what's happening on ready-mix.

For the whole country, ready-mix for us was up 15%. And when you adjust for the swap that we did with Vulcan, it would be about 13% growth. We have a similar kind of healthy growth in Texas. Texas ready-mix volumes are up 14%.

So, again, not to -- I don't want to say there is a 100% correlation. But clearly, when you take a look at the markets where we are integrated that were not impacted by weather, the growth is very healthy; it's double digits.

So, now, to go back to your question on pricing -- Texas -- we need to still remember, despite all of these dynamics, continue to be, I would say, sold out; and actually continues to be slightly a net importer of cement. So supply/demand dynamics continue to be actually quite positive. And we are quite encouraged by the reception of the pricing increase since the beginning of this month.

Okay. And -- on Germany, you mentioned the German disposal was approximately 50 basis points of margin expansion. Is that correct? Does it mean that it was -- Germany was still a $15 million EBITDA loss in Q1 last year?

No, it doesn't -- that amount -- it doesn't sound like -- not even close to what it was. I don't have the specific number with me, but we will come back to you with a specific number on the impact of those assets.

Yassine, I'll get back to you on the follow-up question on Germany after the call, if you don't mind.

Thank you.

Did we address all your questions, Yassine?

Yes, you did.

Lilian Stark, Morgan Stanley.

Hi, good morning. Thank you for taking my call. I was just wondering on the Colombian pricing, if you could give a bit more color -- where did you see that pricing take place? As well in terms of the market share, if there was a specific region where you saw more pressure on volumes?

We don't have any additional information on pricing on top of what we have already disclosed. Again, on market share we do have indications, but we don't have formal information about the market performance for the quarter yet.

What I've been explaining is the process that we normally go through when we initiate and leave a price increase. The impact, which is material compared to last year, volumes of minus about 15%. To some extent, it has to do with the impact on volumes because of our price increase initiative this year. But it also has a very significant effect because of the comparison to last year, in which exactly the opposite happened.

So definitely we shouldn't expect volumes dropping as much as first quarter for the rest of the year. Even our volumes in March and the part of April we have gone through are much better than January and February; but, again, unfortunately we don't have data to share on the specific numbers in March here at this point in time.

Okay. Thank you very much.

And we have no further questions at this time. I would like to turn the call over to Fernando Gonzalez.

Well, thank you all for your time and attention. We look forward to your continued participation in CEMEX. And please feel free to contact us directly or visit our website at any time. Thank you and good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, good day.