Q & A Highlights

Q: Mine is regarding pricing and how to think about it for the remainder of the year, more in particular on the surcharges that you mentioned where have -- when and where have they been implemented today and whether there are differences across the regions and products in these dynamics? And to what extent is this dynamic already embedded in your guidance? A: Alejandra, thanks for your question. I separate pricing from surcharges, particularly fuel surcharges. Regarding fuel surcharges, we have had them for years in the US in our contracts to give you more detail. In ready-mix, those fields or charges cover around 90% of our dispatches is around 85% of our deliveries. And in the case of cement, it's around 80% of our deliveries. And it's a mechanism that offsets volatility in diesel. We also have fuel surcharges in Europe, particularly in the UK and Germany. In other markets, we are implementing incremental pricing due to expected inflation.

Q: I just wanted to understand the relative bullishness on your US volume guidance. I mean, it remains unchanged, even though there's ongoing softness on residential. So I just wanted to understand if the thought here is that whatever you're expecting from, say, infrastructure or private investments is enough to outweigh the impact of South in residential -- that's my question. A: Thanks for your question. Adjusted by the weather impact, mainly in Texas and the Mid-South, our pro forma weather volumes would have been cement plus 1%, ready-mix around plus 5% in aggregates plus 10%. We are gaining more work, particularly in infrastructure and in the industrial sector, such as data centers and chip manufacturing facilities. That's why we kept our guidance unchanged despite the softness in residential and the weather impact in the first quarter.

Q: The question that I have relates to because you have a generally benign outlook on pricing trends in the United States, but you have some exposure to imports. So the question relates with to what extent and if you can give a little bit of color on what the differences might be that we should be aware of on import parity prices between the Mid-Atlantic, the Southeast and perhaps the west -- of the next states that would be very helpful. A: Regarding import parity, we haven't seen any sequential increase in FOB export pricing from February to March, but we expect that to happen later in the year due to energy inflation. Freight rates have increased substantially, with the West Coast seeing a 37% increase per ton, the East Coast 31%, and the Gulf 26%. This results in spot import prices going up between 10% to 12% sequentially.

Q: My question is related to free cash flow and capital allocation. So free cash flow conversion is increasing materially as a result of CEMEX's efforts to reduce costs and also growth CapEx. Can the company accelerate M&A this year versus last year considering this? And do you have enough prospects that you're looking at in order to be able to increase your M&A deployment of capital? A: We continue to strengthen the pipeline of M&A targets, mainly in the US. We are proactively engaging with a larger number of potential targets but will be patient and disciplined. There is nothing imminent right now, but plenty of conversations. We also see accretive options to allocate capital to shareholders beyond M&A, such as debt reduction and share buybacks.

Q: My question has to do with the guidance. I mean, I understand that 1Q is a seasonally small quarter, but I want to understand how you -- what was the process you're thinking of the rational and keeping guidance unchanged. I mean the bit was quite strong this quarter. The outlook is improving. I understand the pressure on energy cost, but the improvement in margin was huge. So what was the thinking and the rationale to keep the guidance unchanged? A: The main reason is the lack of visibility on where the war is heading. With the current situation and volatility, we thought it was better to wait until the July call once we see 2Q results. We also want to understand better the level of incremental structural recurring savings that we will be committing to. With more visibility on the war, inflation, pricing, and savings, we will be in a better position to think about changes to guidance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .