CEMEX Q1 2026 Earnings Call - Record EBITDA Amid Geopolitical Volatility and Strategic Rebalancing

Alejandra Obregon, Analyst, Morgan Stanley1: Good morning, and welcome to the CEMEX first quarter 2026 conference call and webcast. My name is Becky, and I will be your operator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero, and we’ll be happy to assist you. Now, I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Good morning, and thank you for joining us for our first quarter 2026 conference call and webcast. We hope this call finds you well. I am joined today by Jaime Muguiro, our CEO, and by Maher Al-Haffar, our CFO. We will start our call with some brief comments on our current views on the immediate ramifications of the Iran war, and then review our first quarter results, followed by our expectations and guidance for full year 2026. We will be happy to take your questions. In relation to the recent portfolio rebalancing transactions that we have announced, I would like to clarify the relevant accounting treatment.

With respect to the announcement of the sale of some of our operating assets in Colombia, which we expect to close by the end of the year, as a partial sale of an operation, we will continue to fully consolidate these operations in our P&L until the transaction close. In addition, we announced the purchase of Omega on February 26th, and began consolidating the business as of April 1st. Now I will hand the call over to Jaime.

Jaime Muguiro, Chief Executive Officer, CEMEX: Thank you, Lucy, and good day to everyone. Before turning to our quarterly results, let me share a few thoughts on the global backdrop. I last spoke to you at our Analyst Day in late February, just days before the Iran war began. First and foremost, our thoughts are with those affected by the war. We have colleagues, customers, and partners in the region, and our priority is, and will continue to be, ensuring their safety and well-being. The war adds another layer of uncertainty to an already complex global environment. Once again, it reinforces the importance of focusing on what we control, and those levers are working. Over the past several quarters, our transformation has delivered a structurally stronger cost base, higher margins, and improved free cash flow generation, positioning CEMEX to navigate increased volatility well.

To date, we have seen limited direct impact from the war on our business. Our operations in Israel and the UAE together represent around 4% of consolidated EBITDA. While we experienced some temporary disruptions at the outset of the war, construction activity has largely normalized. The most relevant immediate exposure is energy, where we benefit from a comprehensive strategy that limits our risk to volatile markets. Approximately 60% of our total energy spend in 2025 has been hedged for 2026 through a combination of financial derivatives, yearly contracts, and regulated pricing frameworks. Maher will go into more detail on this. In addition, operationally, we have flexibility to adjust the fuels we use in our kilns, allowing us to switch between petcoke, natural gas, coal, and alternative fuels when economically attractive.

We also typically maintain two to three months of fossil fuel inventories across our network, further limiting short-term sensitivity to market disruptions. Consequently, we believe our direct exposure to energy price volatility this year is significantly contained. We also have dusted off our Ukraine war playbook to help cushion us more medium term. We have already begun implementing fuel surcharges on our ready-mix, reviewing additional pricing increases for this year throughout the portfolio. The war is disrupting cement supply chains, making some import sources more expensive. We expect that over time, this will increase pressure on U.S. cement importers, leading to relevant pricing opportunities in several U.S. markets. Finally, our transformation mindset has allowed us to identify additional structural savings and self-help initiatives that should provide important support in an increasingly volatile environment.

While we have a currency hedge in place to protect our leverage ratio, the Mexican peso has been resilient and remains stronger than the FX assumption embedded in our 2026 EBITDA guidance. While volatility will persist, with our approach to date and our strong first quarter performance, I remain confident in our ability to deliver our full year EBITDA guidance. With that, let me turn to our results. I am very pleased with our first quarter results that continue to benefit from our transformation efforts. Record quarterly EBITDA of $794 million, a 34% increase, serves as a great start to achieve our full year plan. EBITDA growth was broad-based, with Mexico, EMEA, and South Central America, and the Caribbean all delivering solid results. EBITDA margin expanded meaningfully with a more than 300 basis point increase year-over-year.

Cost of sales and operating expenses as a percentage of sales improved significantly. Importantly, a large part of this margin gain is structural and sustainable, driven by improved operating efficiency and a leaner cost base. These efforts were complemented by disciplined pricing and the benefit of operating leverage in some markets. As you know, through our regional review process, we have identified a number of facilities that do not meet our return requirements. At Cemex Day, we highlighted both the size of this opportunity and that it would take time to realize it. Since launching this effort in 2025, while not yet material in scope, we have already disposed of approximately 60 of these facilities. Free cash flow from operations grew at a multiple to EBITDA, increasing by about $300 million. The trailing 12-month conversion rate reached 51% after adjusting for severance and discontinued operations.

Our Mexico operations delivered strong EBITDA growth on margin expansion, with a recovery gaining traction on cement volumes posting year-over-year growth for the first time since mid-2024. During the quarter, Cemex was upgraded to AAA, the highest MSCI ESG rating, placing us among the leaders in our industry. This upgrade reflects our continued progress on sustainability and our commitment to decarbonize through value-accretive levers. We continued advancing on our portfolio rebalancing during the quarter with the announced divestment of selected assets in Colombia in a transaction expected to close by year-end. We also acquired Omega, a leading stucco and mortar player in the western U.S., which offers significant synergies to our existing business and serves as an important foundation to expand this product line throughout the U.S. These transactions, of course, adhere to our new capital allocation framework.

Regarding our commitment to bolster shareholder return, we repurchased approximately $100 million in shares during the quarter. In addition, at our annual shareholder meeting in March, the annual dividend was approved with an increase of almost 40%. In short, our quarterly results and activities reinforce a key point. We are delivering on the commitments of our Project Cutting Edge Plan we introduced a year ago, centering on operational excellence and best-in-class shareholder returns. There is more still to be done. We are actively working on dimensioning the next phase of our savings program and continued reorganization. I intend to share more detail on this in our second quarter earnings call. First quarter performance reflects a structurally stronger CEMEX with a more resilient earnings profile and clear momentum heading into the rest of the year.

Despite challenging weather in the U.S. and EMEA, net sales grew 3%, supported by higher consolidated prices and cement volume recovery in Mexico. What really stands out is how effectively revenue growth translated into EBITDA, EBIT, and free cash flow generation. On a like-for-like basis, EBITDA increased 23%, driven by operational efficiencies and pricing. EBIT, a key metric in our transformation, expanded 40%. Our free cash flow from operations increased by nearly $300 million and was positive in a quarter that has historically generated negative free cash flow due to our working capital cycle with a significant investment in the first half of the year. Adjusting for severance payments and discontinued operations, free cash flow from operations conversion rate reached 51% on a trailing 12-month basis, reflecting a structurally stronger cash generation, up from 31% a year ago.

Additional Project Cutting Edge savings and transformation initiatives, coupled with operating leverage as volumes in our core markets recover, should increasingly translate into higher margins and a stronger cash conversion. Adjusting for the effect of the one-off gain from the sale of our operations in the Dominican Republic in 2025, first quarter net income would have almost doubled. At the consolidated level, cement volumes reflect continued recovery in Mexico, which, along with improvement in South, Central America, and the Caribbean, as well as in the Middle East and Africa, more than offset weather disruptions in the U.S. and Europe. U.S. volumes were impacted by adverse weather in the Mid-South and Texas. In aggregates, volumes benefited from our Couch acquisition on our recently completed expansion projects, which more than offset the weather impact.

In Europe, volume performance also reflected difficult winter conditions throughout the portfolio, which were further exacerbated by a prior year comparison base with very benign weather. For the full year, our consolidated volume guidance of low double-digit growth across our three core products remains unchanged, with only slight regional adjustments. With our focus on operational efficiency and available capacity, we remain well-positioned to capitalize on the strong operating leverage in our business as volumes recover. Consolidated prices across cement, ready-mix, and aggregates increased at a low to mid-single-digit rate on a sequential basis, supported by positive pricing dynamics in most of our markets. In Mexico, cement prices rose 5%, while in the U.S., aggregates prices increased mid-single digits. In Europe, mid-single-digit pricing gains were supported by the introduction of a Carbon Border Adjustment Mechanism, together with tightening of free CO2 allowances under the EU ETS system.

Our pricing strategy seeks to compensate for input cost inflation. With recent sudden moves in energy prices, we have moved to implement fuel surcharges in most markets, as well as evaluating subsequent pricing increases to offset energy cost inflation. EBITDA in the quarter was supported by positive contributions across all levers. Importantly, nearly half of EBITDA growth came from self-help initiatives, underscoring our focus on the things we can control, particularly in a volatile environment. Pricing and FX, driven primarily by a large year-over-year peso rate differential, were also important factors in EBITDA growth. Finally, organic growth in our core products and urbanization solutions portfolio also made an important contribution. EBITDA margin expanded by 3.3 percentage points, reflecting a combination of structurally lower costs, pricing discipline, and operating leverage. A year ago, I laid out the priorities of our transformation centered on operational excellence and best-in-class shareholder returns.

Since then, we have worked relentlessly to execute on our plan, focusing on operational efficiency, elimination of overhead, and enhanced free cash flow generation. We have clear evidence of progress in the quarter, with $60 million in incremental recurring savings under Project Cutting Edge, as well as improved EBITDA margins across our regions. Our efforts to reduce overhead, along with our operating initiatives, are paying off, with important reduction in cost of goods sold and SG&A as a percentage of sales. We still have more to deliver, with an additional $105 million in savings expected during the rest of this year under our announced $400 million Project Cutting Edge commitment. Importantly, three-quarters of the savings relate to overhead reduction decisions taken last year.

As I have mentioned, there are additional transformation opportunities we’re identifying, and you should expect that the $400 million in Project Cutting Edge cost savings from 2025 to 2027 will be upsized when I address this in July. In March, we announced the divestment of several assets in Colombia, including cement operations and a portfolio of ready-mix concrete, aggregates, mortars, and admixtures for total proceeds of approximately $485 million. We are currently in discussions to divest related non-operational assets in the country for around $70 million. We expect these transactions to close by the end of the year, representing a combined multiple of 10x 2025 EBITDA. In line with our strategy to grow our U.S. business, we recycled a portion of the future proceeds into higher return opportunities in the U.S.

At MX Day, we announced the acquisition of Omega, the leading stucco producer in the western U.S. with the number one brand at a post-synergy multiple below 7x. The acquisition was completed on March 31st. This transaction is highly accretive, with significant direct synergies driven by vertical integration, as the stuccos and mortars use cement, sand, and admixtures as key raw materials. In fact, Omega’s cement requirements are equivalent to those of approximately eight average size ready-mix plants, and it has already begun to direct their raw materials needs to Cemex in first quarter. Direct synergies are expected to amount to close to 50% of Omega’s 2025 EBITDA of roughly $23 million. Beyond direct input synergies, the acquisition also unlocks cost efficiencies across procurement and R&D, as well as cross-selling opportunities through our existing customer base.

With a free cash flow conversion rate of around 65%, Omega will enhance our overall cash generation and improve our earnings quality. More importantly, leveraging Omega’s expertise provides us with a strong platform from which to expand our mortars and stucco business in the U.S., consistent with our focus on adjacent high return growth opportunities. I would also like to take a moment to warmly welcome the Omega team to Cemex. We’re excited to have you join us and look forward to learning from your solid capabilities, strong culture, and market leadership as we build this platform together. With that, back to you, Lucy.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thank you, Jaime. Mexico delivered strong results supported by continued cement volume recovery, relevant operational efficiencies, pricing, and operating leverage, reinforcing the momentum built over recent quarters. For the first time in six quarters, year-over-year cement volumes inflected positively as the government accelerated the rollout of their social programs. Demand to date has largely benefited from self-construction and government-backed social programs such as railroads and housing, supporting bagged cement volumes. The social housing program, targeting 1.8 million units through 2030, is also ramping up. We are currently participating in the construction of approximately 120,000 units, double the level of fourth quarter, and are in negotiations for an additional 110,000 more. In infrastructure, while conditions remain relatively soft, activity on the ground is improving and our ready-mix backlog is trending higher.

We are currently participating in the construction of relevant projects, including the elevated viaduct in Tijuana and rail line projects such as Querétaro, Irapuato, and Saltillo Nueva Lourdes, with additional projects expected in the near term. Going forward, we expect the main drivers of growth to come from resilient housing demand and, while timing remains difficult to pinpoint, infrastructure activity. Cement volume performance was also supported by a temporary market share gain as a few competitors experienced outages in the central part of the country in the quarter. EBITDA grew 47%, benefiting from a significantly stronger peso as well as important cost savings driven by our transformation, including a new organizational structure. Margin expanded by nearly five percentage points to 36.1%, returning to levels last achieved in first quarter of 2021, driven by Project Cutting Edge.

Performance also benefited from lower maintenance activity, which we expect will normalize throughout the rest of the year. On a sequential basis, cement prices increased mid-single digits. As in our other markets, we will look to adapt our pricing strategy to offset cost inflation. Due to our large exposure to petcoke, which cannot be efficiently hedged in our fuel mix, we do anticipate that Mexico will experience the largest headwind from energy inflation this year. We are moving already to increase our alternative fuel usage, which should partially offset some of the cost impact. Regarding our decarbonization efforts, we achieved a new clinker factor record in Mexico, averaging 62.9% for the quarter, underscoring our commitment to reducing CO2 emissions properly. The ongoing recovery in volumes, the structural improvements we have implemented over the last year, better infrastructure visibility, and disciplined pricing should continue to support strong results in Mexico.

We expect some normalization in EBITDA growth as we go through the year as the comps become more difficult, energy inflation accelerates, and growth relies more on formal construction, which is more difficult to time. Our U.S. operations delivered resilient results in a challenging operating environment, supported by Project Cutting Edge, higher cement production, and continued growth in our aggregates business. Adverse weather conditions in January and February weighed on activity, particularly in Texas and the Mid-South. Despite these headwinds, ready-mix volumes grew 2%, marking the first year-over-year increase since mid-2022. Aggregate volumes increased 9%, reflecting the consolidation of Couch Aggregates and other investments that have recently come online. Adjusting for winter storms, we estimate that cement, ready-mix, and aggregate volumes would have increased by 1%, 5%, and 10% respectively, reflecting a slight improvement in underlying market demand.

The contribution from higher ready-mix and aggregates volumes was offset by pricing and higher freight costs, resulting in stable EBITDA and EBITDA margins. Aggregates sequential prices rose mid-single digits as a result of our January price increase in certain sectors. In cement and ready-mix, prices declined 1% sequentially, reflecting continued competitive pressure following multiple years of soft industry demand. In this environment, most of the April price increases were deferred to mid-year. Importantly, fuel surcharges are already in place. In the current global context, marked by rising maritime freight rates, tariffs, supply chain disruptions, and increasing energy and logistics costs, we expect progressively stronger pricing support as the year unfolds. Demand continues to be primarily driven by infrastructure, supported by the ongoing rollout of IIJA projects, with about 50% of allocated funds already spent and peak activity expected this year.

Industrial and commercial projects, particularly large data centers and chip manufacturing facilities, continue to drive construction activity. Importantly, 40% of mega data center projects, investments that exceed $500 million, currently planned or under construction, are located within our footprint. Rising investment in the power sector to meet growing AI electricity needs should also support demand. With the current geopolitical situation, we expect recovery in the residential sector to be further delayed due to the higher rate environment and expected incremental inflationary pressures. However, pent-up demand and favorable demographic trends should be supported over the medium term. As volumes recover, operational leverage, combined with our structurally leaner cost base and expanding aggregates business, position the U.S. business for stronger profitability.

Our operations in EMEA delivered a solid first quarter, driven primarily by our new leaner cost structure and pricing, with EBITDA in both Europe and the Middle East and Africa expanding at double-digit rates. Margin improvement in the region mostly reflects recurring cost savings and higher prices, with some temporary benefit from lower maintenance activity in the quarter. In Europe, demand was impacted by adverse winter weather and precipitation early in the quarter. With weather conditions largely normalizing in March, cement volumes grew 14% year-over-year, while ready-mix and aggregate volumes increased at low single-digit rates. Supported by the implementation of the Carbon Border Adjustment Mechanism and the tightening of free CO2 allowances under the EU ETS system, cement prices increased 4% sequentially. First quarter price announcements covered approximately one-third of total European volumes. We have announced price increases in Poland, Germany, and Croatia, effective April.

As Jaime explained, we have introduced fuel surcharges or additional price increases in several markets to offset energy inflation. Residential activity across much of Europe remains muted, and higher interest rates point to a slower recovery. The notable exception is Spain, where housing activity has been supported since 2024. In contrast, infrastructure continues to be the most resilient segment across the region, particularly in Eastern Europe, and we expect it to remain a key driver of demand this year. Middle East and Africa outperformed our internal pre-war expectations, with EBITDA growth of 27%, driven by Project Cutting Edge and improved pricing. Despite heightened geopolitical tensions, the impact of the Iran conflict during the quarter was limited. Average daily sales declined significantly at the outset of the war, but have largely recovered as of early April.

While we remain cautious on the outlook, given the war, we are pleased with the resilience of our operations in the region to date. Our operations in South Central America and the Caribbean delivered double-digit EBITDA growth and meaningful margin expansion, driven by improved cement volumes and the continued benefits of our transformation. Performance was also bolstered by the debottlenecking project completed last year in Jamaica, which is allowing us to fully supply the local market, domestic production. Cement demand across the region was supported by growth in the informal sector in Colombia, as well as reconstruction efforts following Hurricane Melissa and tourism-related projects in Jamaica. Cement prices increased by 5% sequentially, reflecting our disciplined pricing strategy. Looking ahead, we remain optimistic on the outlook for the region, supported by improving consumer confidence and continued activity in informal construction.

With that, I will now turn the call over to Maher Al-Haffar to review our financial development.

Alejandra Obregon, Analyst, Morgan Stanley0: Thank you, Lucy, and good day to everyone. Given the current environment, I would like to provide additional details on our energy strategy and our exposure to market volatility before turning to our financial highlights. As Jaime mentioned, we estimate approximately 60% of our total 2025 energy exposure of $1.65 billion has been hedged for 2026 through a combination of derivatives, annual contracts, and regulated pricing frameworks for the full year. Roughly two-thirds of this amount is related to fuel and electricity in cement production, and one-third to diesel in transportation. Approximately 75% of our expected 2026 diesel consumption, direct and indirect, through our third-party haulers is hedged. In addition, we have already started implementing fuel surcharges across our regions. In cement production, our energy exposure is evenly split between electricity and fuels. In electricity, about 70% of our needs are fixed or are in regulated markets.

As you can see on this slide, our kiln fuel mix, measured on a calorific value basis, which is primarily sourced locally, is well diversified. We estimate that approximately 35%-40% of our fuel use for cement production is hedged via contract for 2026. Two to three months of inventories provide some protection for petcoke while our natural gas exposure is primarily in the U.S., where we have seen far less price volatility. Importantly, we also have flexibility to adjust our kiln fuel mix in our operations, switching among the various alternatives based on relative economics. Where possible, we are working to switch to alternative fuels that are generally cheaper and carry little correlation to fossil fuel prices. Together, these levers provide a meaningful buffer in the short term during periods of high volatility.

To date, we have seen little impact from energy inflation, with energy costs per ton of cement in the quarter stable, with declines in fuel costs offset by higher electricity costs. While our energy strategy provides meaningful protection in the short term, we expect to face inflationary pressures in energy later in the year. As such, we are downgrading our full year guidance and now expect energy costs per ton of cement produced to rise mid- to high-single-digit rate, up from our prior mid-single-digit guidance. Moving to our financial highlights, our self-help measures are delivering exceptional results, driving record quarterly EBITDA, the highest first quarter EBITDA margin in five years, and significant improvements in free cash flow from operations.

Free cash flow from operations increased by nearly $300 million, reaching $29 million in a quarter that has historically generated negative free cash flow due to significant working capital investment. This growth is explained by exceptional EBITDA growth, along with important reductions in CapEx, working capital, interest, and other cash expenditures. The working capital investment during the quarter, $31 million lower than prior year, is expected to largely reverse throughout the rest of the year. Working capital days for the quarter stood at negative 11 days, two additional days versus first quarter of 2025. Excluding severance payments and discontinued operations, our free cash flow from operations conversion rate for the trailing 12 months reached 51%, compared to 46% for the full year 2025. Project Cutting Edge is delivering tangible results in our cost structure.

As Jaime mentioned, cost of goods sold and operating expenses as a percentage of sales are down 175 basis points and 148 basis points year-over-year, respectively. The decline in net income is explained by the gain on the sale of our Dominican Republic operations during the first quarter of 2025. As we work to transform our liability profile through proactive liability management and reduce the overall debt burden, we repaid a EUR 400 million euro-denominated bond and a MXN 6 billion peso loan during the quarter. We funded these payments with the issuance of MXN 5.5 billion, or approximately $300 million, in a five-year certificados bursátiles and cash on hand. To drive the interest rate savings, we swapped the newly issued certificados bursátiles into euros, locking in rates inside our euro curve. As a result of these transactions, our total debt plus subordinated notes decreased by around $540 million sequentially.

Net debt plus subordinated notes, however, increased by $590 million over the same period, primarily due to cash uses related to the Omega acquisition, growth CapEx, share buybacks, dividends, and other items. As we generate additional free cash flow in the coming quarters, we expect to end the year with a lower level of net debt plus subordinated notes relative to 2025. Our net financial leverage, including $2 billion of subordinated perpetual notes, stood at 2.3 times, unchanged sequentially. With improved free cash flow generation and higher EBITDA, we remain confident in our ability to continue deleveraging toward our target range of 1.5-2 times. We aim to further improve our risk profile with a solid BBB rating, bolster our growth potential, and maximize value creation for our shareholders.

In fact, yesterday, Fitch Ratings reaffirmed our BBB- global rating and raised the outlook to positive from stable. Additionally, they upgraded our long-term national scale ratings from AA+ to AAA, the highest credit quality on the Mexican national scale. This should further strengthen our credit profile and reinforce external confidence in our long-term financial strategy. Consistent with our commitment to strengthening our shareholder return platform, a nearly 40% dividend increase was approved by shareholders at our recent shareholder meeting. This will raise the annual dividend to $180 million from $130 million approved last year. Complementing our cash dividend, we also executed $100 million of share buybacks during the quarter. As we discussed in our fourth quarter results, our intent is to buy back up to $500 million in shares over the next three years.

You should expect gradual improvement in shareholder return as free cash flow continues to grow in subsequent years. Now back to you, Jaime.

Jaime Muguiro, Chief Executive Officer, CEMEX: Thank you, Maher. I am proud of the results and achievements my team delivered this quarter, incremental evidence of the power of our transformation efforts. I recognize that there is still important work ahead as we continue executing on our plan. We remain constructive on the demand environment across most of our markets this year, with continued recovery expected, particularly in Mexico, where we are modestly adjusting our volume guidance upward. Our focus remains on capturing the announced savings under Project Cutting Edge, identifying and securing new recurring savings, and moving quickly to reflect the new energy headwinds in our pricing strategy for the rest of the year. We will also continue to advance on our portfolio alignment plan coming out of our business performance reviews designed to improve the quality of our earnings and free cash flow generation.

Let me reiterate what I said at the beginning of this call. While volatility will persist, with our self-help measures delivering as intended and our strong first quarter performance, I remain confident in our ability to deliver our full year EBITDA guidance. Now back to you, Lucy.

Lucy Rodriguez, Chief Communications Officer, CEMEX: 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. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases, refer to our prices for our products. Now, we will be happy to take your questions. In the interest of time and to give other people an opportunity to participate, we kindly ask that you limit yourself to one question.

The first question comes from Alejandra Obregon from Morgan Stanley.

Alejandra Obregon, Analyst, Morgan Stanley: Hi. Good morning, CEMEX team. Thank you for taking my question. 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. When and where have they been implemented today, and whether there are differences across the regions and products in this dynamic, and to what extent is this dynamic already embedded in your guidance? Thank you.

Jaime Muguiro, Chief Executive Officer, CEMEX: Alejandra, good morning. Thanks for your question. I separate pricing from surcharges, particularly fuel surcharges. Regarding fuel surcharges, we have had them for years in the U.S. in our contracts. To give you more detail. In ready-mix, those fuel surcharges cover around 90% of our dispatches. On aggregates, it’s around 85% of our deliveries. In the case of cement, it’s around 80% of our deliveries. It’s a mechanism that offsets volatility in diesel, and we saw that working very well when the Ukraine war began back in 2022, 2023, when we faced inflation in that line. Also, we do have fuel surcharges in Europe. There our strategy is twofold. There are markets where we see more resilience and stickiness in fuel surcharges. That will be the case in the U.K. and Germany, where we are introducing them.

In other markets where we see strong pricing characteristics, we’re going to go ahead with incremental pricing beyond what we were planning for because of expected inflation. That is the case of Spain, Croatia, Czech Republic, and Poland, for example. Regarding the U.S., we are expecting to see material inflation in shipping and therefore we expect import parity cost to increase. That should build some momentum for better pricing environment going forward. In the rest of the portfolio, we are ready to react to inflation in Mexico from petcoke with future price increases if needed to offset input cost inflation and the same applies to most of our markets in SCAC. I hope that I answered the question, Alejandra.

Andres Cardona, Analyst, Citi: Very clear. Thank you.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Ali. The next question comes from Jorel Guilloty from Goldman Sachs. Jorel?

Jorel Guilloty, Analyst, Goldman Sachs: Good morning, everyone. Thank you for taking my question. Really quickly from my end, I just wanted to understand the relative bullishness on your U.S. volumes guidance. It remains unchanged even though there’s ongoing softness on residential. Just want 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 softening residential. That’s my question. Thank you.

Jaime Muguiro, Chief Executive Officer, CEMEX: Thanks, Jorel, for your question. Well, first of all, as we highlighted earlier, adjusted by the weather impact, mainly in Texas and the Mid-South, our pro forma weather volumes would have been cement +1%, ready-mix around +5%, and aggregates +10%. There was some momentum out there that was affected by the weather. Going forward, we are paying special attention to markets where we’re highly vertically integrated with very strong resilient upstream margins in cement and aggregates. In those micro markets, we are gaining more work, particularly in infrastructure and in the industrial sector, things such as some data centers and chip manufacturing facilities. That’s the reason why we kept our guidance unchanged despite the softness in residential and the weather impact in the first quarter. I hope that I answered your question, Jorel.

It’s mainly driven by expected incremental work that we are gaining in the segments that are performing better.

Jorel Guilloty, Analyst, Goldman Sachs: Thank you.

Lucy Rodriguez, Chief Communications Officer, CEMEX: The next question comes from Francisco Suarez from Scotiabank. Paco? Paco, are you there?

Francisco Suarez, Analyst, Scotiabank: Pardon me. Sorry. Thank you for the call. Apologies for that. 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. The question relates 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 United States, that would be very helpful. Congrats again for the great delivery that you guys have done so far.

Jaime Muguiro, Chief Executive Officer, CEMEX: Francisco, thanks for your question. I’ll extend your recognition to the team who is doing a good job executing what we said we would. Regarding your specific question about import parity, what we’ve seen is the following. Regarding FOB export pricing, we haven’t seen yet any sequential increase from February to March. I expect that to happen later in the year as exporters face inflation on energy, and they’re going to feel it. If you think about what happened back in 2022, 2023, that’s exactly what happened. It took a bit of time, but we saw FOB prices increasing. What has changed though, sequentially from February to March, was freight rates, so maritime rates, and they have increased substantially. In the case of the West California, our number is that freight went up by around 37% per ton.

In the case of the East Coast, an example, Florida, by 31%. In the case of Texas, the Gulf, that’s around 26%. When you think about CIF all combined, you’re talking about spot import prices going up between 10%-12% sequentially. As importers write a contract volume on the basis of new shipping rates and they’re going to feel the impact. That’s how things are evolving so far.

Francisco Suarez, Analyst, Scotiabank: Very clear. Thank you, and congrats again. Take care.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Paco. The next question comes from Carlos Parellón from Bank of America. Carlos?

Carlos Parellón, Analyst, Bank of America: Thank you, Lucy, for taking my question. Hi, my question is related to free cash flow and capital allocation. 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? Thank you.

Jaime Muguiro, Chief Executive Officer, CEMEX: Thanks, Carlos, for your question. We continue to strengthen the pipeline of M&A targets, mainly in the U.S. We’re proactively engaging with a larger number of potential targets. We’re going to be very patient because we want to be very disciplined, right, and only pursue where we can create value. There is nothing imminent right now on the table, but plenty of conversations. In addition to that, Carlos, when we look at our opportunities to allocate capital, we still see accretive to shareholders uses of capital when we think about debt to reduce interest expenses and boost free cash flow. We are also committed to a progressive improvement on the shareholders’ returns, right? Dividends and share buybacks. As you know, the shareholders approved the $500 million share buyback program. We have creative options to allocate capital to shareholders beyond M&A.

Let’s be patient, and when the right time comes, we will be executing those. Thanks for the question, Carlos.

Carlos Parellón, Analyst, Bank of America: Thank you, Jaime, and congratulations on the strong results.

Lucy Rodriguez, Chief Communications Officer, CEMEX: The next question comes from Adrian Huerta from JP Morgan. Adrian?

Adrian Huerta, Analyst, JP Morgan: Thank you, Lucy. Hi, everyone. Jaime, congrats on the results, first of all. My question has to do with the guidance. I understand that 1Q is a seasonally small quarter, but I want to understand what was the process you’re thinking, the rationale on keeping guidance unchanged. I mean, the beat was quite strong this quarter. The outlook is improving. I understand the pressure on energy cost, but the improvements on margin was huge. What was the thinking and the rationale to keep the guidance unchanged?

Jaime Muguiro, Chief Executive Officer, CEMEX: Adrian, thanks for the question. The main reason is the lack of visibility on where the war is heading. With that situation and the volatility we’re facing, I thought that it was better to wait at least until July call once we see 2Q. I also wanted to understand better the level of incremental structural recurring savings that we will be committing to as we have begun executing those additional levers. With more visibility on the war, on where inflation is heading, and how our pricing and fuel surcharges are sticking, and then the incremental savings, we will be in a better position to think about changes to guidance. That’s the main reason why we believe that today the best is to be consciously optimistic, but still conservative.

Adrian Huerta, Analyst, JP Morgan: Thank you, Jaime.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Adrian. The next question comes from Anne Milne from Bank of America via the webcast. Congratulations on the Fitch positive outlook upgrade. When do you believe is the timing around a possible upgrade to BBB? Maher, I think this is yours.

Alejandra Obregon, Analyst, Morgan Stanley0: Thanks a lot, Lucy. Yeah. Thank you, Anne, for the question. One thing that I would like to highlight is that if you take a look at our net financial leverage, we’re expecting it to converge fairly rapidly throughout the year, given our expectations for full-year performance towards the Fitch level that they defined in their release yesterday, which is 1.5 times. Maybe a little bit higher than that. That is the kind of BBB level that they expect. In the case of S&P, we are already within their BBB leverage ratio. For S&P, the real metric for that is what they call free cash flow from operations as a percentage of debt. I’m not going to give you the definition of that. You can look it up from S&P website.

Again, based on our expectations and the guidance that we’re giving, their metric to go into BBB is more than 30%. We feel reasonably confident that we should be well inside, well above, let’s say, that metric by the end of this year. Bottom line, based on the performance and the de-leveraging that we are delivering and the heightened quality of earnings that we’re delivering through free cash flow conversion, we think that both rating agencies are going to be giving a very hard look to a potential upgrade sometime in the first half of 2027. Of course, we’d be super happy if that happened sooner, but I would say that from my perspective, I’m looking for a first half potential rating action from the rating agencies. I hope that answers the question.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Maher.

Alejandra Obregon, Analyst, Morgan Stanley0: Thank you.

Lucy Rodriguez, Chief Communications Officer, CEMEX: The next question comes from Benjamin Theurer from Barclays. Ben?

Benjamin Theurer, Analyst, Barclays: Yeah, good morning, Jaime, Lucy, Maher, congrats on those very strong results on Q. Quick question on the performance in Mexico in particular. Maybe help us understand a little bit better that 470 basis points margin expansion, how much of that was really driven one time, things like maintenance related, et cetera, and how much of that would you describe as being a recurring margin improvement? Thank you very much.

Jaime Muguiro, Chief Executive Officer, CEMEX: Ben, thanks for the question. Well, the first thing to understand is where the expansion happened. A lot has to do with the transformation, where Cemex Mexico is contributing quite materially together with EMEA in the quarter. Therefore, we saw a margin expansion, contributions from variable cost around 160 basis points. Freight was very material, around 1 percentage point. SG&A and corporate expenses as well, followed by a bit from volumes, but more so from prices, around 2 percentage points. With that in mind, yes, there were a few positive one-offs that wouldn’t be recurrent, we think. The first one is, as I highlighted before, the temporary market share gain of around, we’ve calculated around 2% of volumes. If we agree with 6%, maybe 4% is what will be there going forward. The other 2 percentage points would be a one-off.

It’s correct that we had some maintenance timing, which will increase going forward. The other aspect, Ben, is the product mix in cement. This quarter, we had a strong bagged mix, 60/40%, 60% bags, 40% bulk. As we expect to see infrastructure ramp up, we should see a different product mix. In addition to that, also the petcoke. We are expecting a rise in petcoke price for the rest of the year. All of these combined suggest that you should expect a lower margin. Having said that, the margin will be solid because of the transformation. That will stick, and I cannot provide you more specifics on that, for obvious reasons. That’s the way I like to answer your question, Ben.

Benjamin Theurer, Analyst, Barclays: Perfect. Jaime, thank you very much.

Lucy Rodriguez, Chief Communications Officer, CEMEX: The next question comes via the webcast from Paul Roger from BNP Paribas. How ambitious is your plan for U.S. aggregates? What makes Cemex the partner of choice for targets, and how big could this product line ultimately become in a group context?

Jaime Muguiro, Chief Executive Officer, CEMEX: Paul, thanks for the question. In 2025, our aggregates business accounted for 40% of Cemex USA EBITDA. In the first quarter, aggregates contributed 45%. Aggregates was accountable for 45% of Cemex USA EBITDA. It would be great to see U.S. aggregates accounting for around 60% of our EBITDA in the U.S. Now, regarding your second part of the question, right, whether Cemex is a partner of choice for targets. That remains to be seen, but please note that as a large ready-mix, we buy a lot of aggregates from long-term partners with whom we have strong relationships. That’s a nice start. The other thing is that unlike in the past, we are very flexible and open-minded on different ways to partner with potential targets. Couch was an example, right?

We see very favorably entering with a minority position, right, and growing that up to a controlling interest in years to come, while partnering with family-owned operators who are great operators to continue running their businesses for longer. Maybe that flexibility could help us be seen as the partner of choice for the right targets. That’s what we’re working on, and we’re excited and again, expanding our pipeline of potential targets, and we continue working on that. We’re gonna be patient. The other aspect is our new investment projects. Right? We are taking advantage of Immokalee in Florida, Four Corners is also in Florida, our exports from Canada, to mention a few. There are more investments underway right now from our growth CapEx pipeline. That should continue contributing to enlarging the U.S. aggregates business in the U.S. Thanks for your question.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Jaime. The next question comes from Yassine Touahri from On Field. Yassine.

Alejandra Obregon, Analyst, Morgan Stanley2: Thank you very much for the question. My question would be around your free cash flow conversion. Would you consider moving your definition of free cash flow conversion closer to peers, including strategic CapEx, intangible investment, pension contribution, securitization, coupon on subordinated notes and other financial fees? Because I think that on that basis, your 2026 guidance seems to imply a free cash flow conversion of around 20%-25%, which is improving a lot, but still less than half of the level of your best-in-class peers at 50%. I think what I’m trying to understand is whether you can get closer to that best-in-class level of 50% as soon as 2027. For example, could the total CapEx come down from $1.4 billion in 2026 to $1.1 billion as soon as next year?

Jaime Muguiro, Chief Executive Officer, CEMEX: Yassine, thank you very much for your question. The first thing I want to tell you is that I see no reason why we wouldn’t be as good as performers as our peers on your definition of free cash flow. We just need to continue doing our homeworks, and we are fully committed to delivering on that. What’s different is that, yes, do expect already for 2027 a material reduction in strategic CapEx, intangibles. In addition to that, I have assigned an ExCo member becoming responsible and owner of every of the lines of free cash flow that you mentioned. Today we are developing roadmaps to materially optimize every line. Therefore, do expect that we will make significant progress in 2027 and even more in 2028.

Also, please note that we have begun executing our efforts to improve earnings quality by deconsolidating operations that do not meet our free cash flow targets, among other KPIs. As I mentioned earlier, we’ve let go of, as a matter of example, 60 ready-mix concrete facilities in our portfolio. That’s just an example, but we are accelerating the transformation of our portfolio. As we let go of many of these operations that did not generate free cash flow, you’re going to see a higher free cash flow conversion and a higher earnings quality in terms of free cash flow to sales. Regarding your question, whether we’re going to move to that other definition, the answer is yes, we will at the right time. We’re working on it, and we’ll let you know when we would be introducing that definition.

Whether we do that short-term, mid-term, what matters is that we’re going to be improving free cash flow under all definitions. Thanks for your question, Yassine.

Alejandra Obregon, Analyst, Morgan Stanley2: Thanks for this.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Yassine. The next question comes from Andres Cardona from Citi. Andres.

Andres Cardona, Analyst, Citi: Hi, good morning, Jaime, Maher, Lucy. Congratulations on the solid results. My question is regarding Mexico outlook in the context of President Sheinbaum housing initiative and the newly announced highway infrastructure plan. To what extent could these programs drive demand growth in 2026, 2027? You already mentioned that you are negotiating some 100,000 more housing. If you could help us to understand when the infrastructure plan could already yield incremental demand. If I may, a very quick one regarding Colombia, is there any reason why you decided to do a partial divestiture of the assets there? Are the remaining assets considered core? Thank you.

Jaime Muguiro, Chief Executive Officer, CEMEX: Andres, thanks for the question. Allow me to start with the second question first. In Colombia, the right time to divest what’s within the scope of the announced transaction was this year. The rest of the portfolio in Colombia need to increase activity as the demand improves in those micro markets where we have the rest of our portfolio, particularly as we commissioned Maceo cement plant up north of the country. That’s the reason why we decided to carve out the current perimeter under that transaction. The team, post-transaction, will be focused on maximizing free cash flow and EBITDA from the remaining assets, and it remains to be seen our next move regarding the rest of our business in Colombia. Regarding your first question, yes. What we see is this.

In our current guidance for volumes for Mexico for 2026, we’ve already included our expectations on infrastructure, which includes trains and highways, on social housing. I think that the contribution from the recently announced plan from government would be more materially felt in 2027 because it will take time to break ground. We also need to understand the fiscal conditions of public accounts in light of what’s happening on potential inflationary effects to budget. I say that I don’t expect much for 2026 on the newly announced infrastructure plan beyond what was in the budget, but that’s already embedded in our guidance. I do think that being everything equal, and if things don’t worsen for the fiscal accounts, we might see momentum in 2027, particularly on infrastructure. It is too early to provide our views on 2027 cement volumes for CEMEX Mexico.

Andres, thank you for your question.

Lucy Rodriguez, Chief Communications Officer, CEMEX: We have time for one last question, and it is coming from Gordon Lee from BTG Pactual. Gordon?

Gordon Lee, Analyst, BTG Pactual: Hi. Thank you, Lucy. Good morning, everybody, and congratulations on a very good quarter. This is a bit of more of just a clerical question for Maher. Maher, I noticed that you sort of formally changed the way that you present the leverage ratio and the relief, and now you include the totality of the subordinated debt. One, I just wanted to see whether there was any particular rationale for that. Two, just to confirm that when you refer to the one and a half times long-term leverage target, that’s the measurement that you’re using for that. Thank you.

Alejandra Obregon, Analyst, Morgan Stanley0: Yeah. Thanks, Gordon, for leaving the clerical questions for me. It’s good to hear from you. Just kidding. The rationale is very simple, okay? When we issued these perps, we were BB-. As you have seen, we have been working very aggressively to reduce gross debt, including the subordinated notes, very rigorously over the last few years. Now we’re in a different position. The other thing is, as a consequence of the rating action that happened last year by S&P, the 5.125 subordinated note already started receiving full debt treatment from their side. Based on yesterday’s Fitch rating, that also happened on the side of Fitch. Now we’re really left with essentially one of the notes, the 7.2%, that has 50% equity treatment.

From our perspective, we feel, from an investor perspective, we believe it’s a much more conservative and cautious leverage ratio to use the net financial leverage, including subordinated notes to the extent that we have them. We are looking at de-leveraging, including the levels that are included through the subordinated notes. The answer is yes. When we talk about 1.5 times, we’re talking about net financial leverage, including potential subordinated notes that are on the balance sheet. That’s the way, in the future, the rating agencies will look at it. It’s going to push the company, it’s going to push us in our capital allocation decisions also to make sure that we’re taking all of the elements of potential liability on the balance sheet. I hope that answers the question.

Gordon Lee, Analyst, BTG Pactual: Perfect. Makes a lot of sense. Thank you very much.

Alejandra Obregon, Analyst, Morgan Stanley0: Thank you.

Lucy Rodriguez, Chief Communications Officer, CEMEX: Thanks, Gordon. We appreciate you joining us today for our first quarter results. We hope you will join us again for our second quarter 2026 earnings call on July 23rd. If you do have any additional questions, please feel free to reach out to the investor relations team. Many thanks.

Alejandra Obregon, Analyst, Morgan Stanley1: Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day