Cemex SAB de CV Sponsored ADR Aktie

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. [Operator Instructions]

And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer, please proceed.

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 more 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. And then 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 closes. In addition, we announced the purchase of Omega on February '26 and began consolidating the business as of April 1.

And now, I will hand the call over to Jaime.

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 the days before the Iran war began. First and for most, 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 pet coke, natural gas, coal and alternative fuels when economically attractive. We also typically maintain 2 to 3 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 and are 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, and remain confident in our ability to deliver our full year EBITDA guidance. And 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-on-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 did 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 a strong EBITDA growth and margin expansion with a recovery gaining traction and 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 and 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. But what really stands out is how effectively revenue growth translated into EBITDA, EBIT and free cash flow generation. On a like-to-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 and 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 single-digit growth across our 3 core products remains unchanged, with only a 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 as rate differential were also important factors in EBITDA. 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 the 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 are identifying and you should expect that the $400 million in Project Cutting Edge cost savings from 2025 to 2027 will be upsized when I addressed 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 nonoperational 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 CEMEX Day, we announced the acquisition of Omega, the leading stucco producer in the Western U.S. with the #1 brand at a post-synergy multiple below 7x. The acquisition was completed on March 31. This transaction is highly accretive with significant direct synergies driven by vertical integration as stucco and mortars, use cement, sand and admixtures as key raw materials. In fact, Omega cement requirements are equivalent to those of approximately 8 average-sized 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 built this platform together.

And with that, back to you, Lucy.

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 6 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 rural roads 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-Nuevo Laredo 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% and benefiting from a significantly stronger peso as well as important cost savings driven by our transformation, including a new organization structure. Margin expanded by nearly 5 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 pet coke, 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 profit. 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 aggregate volumes was offset by pricing and higher freight costs, resulting in stable EBITDA and EBITDA margins. Aggregate 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 midyear. 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 supportive 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 1/3 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 supportive 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 that 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 today.

Our operations in South, Central American and 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.

And with that, I will now turn the call over to Maher to review our financial development.

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 2/3 of this amount is related to fuel and electricity in cement production and 1/3 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% to 40% of our fuel use for cement production is hedged via contract for 2026.

2 to 3 months of inventories provide some protection for pet coke 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 cost 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 cost 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 5 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, 2 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 MXN 6 billion loan during the quarter. We funded these payments with the issuance of MXN 5.5 billion or approximately $300 million in a 5-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 Europe 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 2.3x, 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 to 2x. 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 3 years. You should expect gradual improvement in shareholder return as free cash flow continues to grow in subsequent years.

And now back to you, Jaime.

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.

And now back to you, Lucy.

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.

And now we will be happy to take your questions.

[Operator Instructions] And the first question comes from Alejandra Obregon from Morgan Stanley.

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?

Alejandra, 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, right? In ready-mix, those fields or charges cover around 90% of our dispatches and aggregates 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. And we saw that working very well, when the Ukraine will began back in '22, '23 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 resilient and stickiness in fuel surcharges, that will be the case in the U.K. and Germany, where we are introducing them. But 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. Those are 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 cost -- 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 pet coke with future price increases, if needed to offset input cost inflation and the same applies to most of our markets in SCAC. So I hope that I answered the question on Alejandra.

The next question comes from Jorel Guilloty from Goldman Sachs.

So really quickly from my end, I just wanted to understand the relative bullishness on your U.S. 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 softening in residential? That's my question.

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 plus 1%, ready-mix around plus 5%, and aggregates plus 10%. So there was some momentum out there that was affected by the weather. Going forward, we are paying special attention to markets we're highly vertically integrated with very strong resilient upstream margins in cement and aggregates.

And 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. And that's the reason why we kept our guidance and change despite the softness in residential and the weather impact in the first quarter. So I hope that I answered your question, Jorel. So it's mainly driven by expected incremental work that we are gaining in the segments that are performing back.

And the next question comes from Francisco Suarez from Scotiabank.

Paco, are you there?

Pardon me. I'm sorry. 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 United States, that would be very helpful. And congrats again for the great delivery that you have guys done so far.

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 '22, '23, 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. So 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%. And in the case of Texas, the Gulf, that's around 26%. So when you think about CIF, all combined, you're talking about spot import prices going up between 10% to 12% sequentially. So as importers write contract volume on the basis of new shipping rates, and they're going to feel the impact, and that's how things are evolving so far.

And the next question comes from Carlos Peyrelongue from Bank of America.

My question is related to free cash flow and capital allocation. So free cash flow conversion is increasing materially as a result of CEMEX' 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?

Thanks, Carlos, for your question. We continue to strengthen the pipeline of M&A targets, mainly in the U.S. We are proactively engaging with a larger number of potential targets. But 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.

And we are also committed to a progressive improvement on the shareholders' returns, right, dividends on share buybacks. And as you know, the shareholders approved the $500 million share buyback program. So we have accretive 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.

And the next question comes from Adrian Huerta from JPMorgan.

Jaime, congrats on the results, first of all, 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 beat was quite strong this quarter. The outlook is improving. I understand the pressure on energy cost, but the improvements in margin was huge. So what was the thinking and the rationale to keep the guidance unchanged?

Adrian, thanks for the question. The main reason is the lack of visibility on where the war is heading. And 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. And 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 those -- with more visibility on the war and where inflation is heading and how our pricing and fuel surcharges are sticking and then the incremental savings, I -- 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.

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 the possible upgrade to BBB? Maher, I think this is yours.

Thanks a lot, Lucy. Yes, and 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 1.5x, maybe a little bit higher than that. So that puts -- and that is the kind of BBB level that they expect.

In the case of S&P, we are already within their BBB leverage ratio. And for S&P, the real metric for that is what they call free cash flow from operations as a percentage of debt. And I'm not going to give you the definition of that. You could look it up from S&P website. But 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.

So bottom line, based on the performance and the deleveraging 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 '27. Of course, we'd be super happy if that happens 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.

Thanks, Maher. The next question comes from Ben Theurer from Barclays.

Congrats on those very strong results in 1Q. Quick question on the performance in Mexico, in particular. So maybe help us understand a little bit better that 470 basis points margin expansion. How much of that was really driven onetime things like maintenance related, et cetera, and how much of that would you describe as being a recurring margin improvement?

Ben, thanks for the question. Well, the first thing to understand 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. And therefore, we saw margin expansion contributions from variable costs around 160 basis points. Freight was very material, around 1 percentage points. SG&A and corporate expenses as well, followed by a bit from volumes, but more so from prices, around 2 percentage points. So with that in mind, yes, there were a few positive one-offs that wouldn't be recurrent, we think.

So the first one is, as I highlighted, before the temporary market share gain of around -- that's -- we calculated around 2% of volumes. So if we grew 6%, maybe 4% is what will be there going forward. The other 2 percentage points would be a one-off. Also it's correct that we had some maintenance timing, which will increase going forward.

The other aspect then is the product mix in cement. This quarter, we had a strong bagged mix, 60%-40%, 60% bagged, 40% bulk. And as we expect to see infrastructure ramp up, we should see a different product mix. So in addition to that, also the pet coke, we are expecting a rising pet coke price for the rest of the year, and all of this 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. But that's the way I'd like to answer your question, Ben.

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?

Paul, thanks for the question. In 2025, our aggregates business accounted for 40% of CEMEX USA EBITDA. In the first quarter, aggregates contributed 45%. So aggregates was accounted -- accountable for 45% of CEMEX U.S. 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 mixer, 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? So we see very favorably entering with a minority position, right, and growing that up to our controlling interest in years to come, while partnering with family-owned operators who are great operators to continue running their businesses or longer. So maybe that flexibility could help us be seen as the partner of choice for the right targets. So 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 going to be patient.

And the other aspect is our new investment projects, right? So we are taking advantage of Immokalee, in Florida. Four Corners also in Florida. Our exports from Canada to mention a few, and there are more investments underway right now from our growth CapEx pipeline. So that should continue contributing to enlarging the U.S. aggregates business in the U.S. Thanks for your question.

Thanks, Jaime. The next question comes from Yassine Touahri from Enfield.

So 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 and subordinated notes and other financial fees, because I think that on that basis, your 2026 guidance seems to imply your free cash flow conversion of around 20%, 25%, which is improving a lot, but it's still like less than half of the level of your best-in-class peers at 50%.

So I think what I'm trying to understand is that, 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?

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. And today, we are developing road maps to materially optimize every line.

Therefore, do expect that we will make significant surges 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 -- as a matter of example on our progress, right, 60 ready-mix concrete facility that is in our portfolio. That's just an example, but we are accelerating our -- the transformation of our portfolio. And as we let go 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.

And regarding your question whether we're going to move to that other definition, the answer is yes, we will at the right time and we're working on it, and we'll let you know when we would be introducing that definition. Whether we do that in short, midterm, what matters is that we're going to be improving free cash flow under all definitions. Thanks for your question, Yassine.

The next question comes from Andres Cardona from Citi.

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, '27, you already mentioned that you are negotiating some 100,000 more housing. But if you could help us to understand when the infrastructure plan would already incremental demand.

And if I may, a very quick one regarding Colombia. Is there any reason why you decided to do like a partial divestiture of the assets there? Are the remaining assets considered core?

Andres, thanks for the question. Allow me to start with the second question first, that, in Colombia, in 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. And that's the reason why we decided to carve out the current perimeter under that transaction. The team will be -- post transaction, we'll 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 the -- our expectations on infrastructure, which includes trains and highways, right, 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, right, to break ground. And we also need to understand the fiscal conditions, right, of public accounts in light of what's happening on potential inflationary effects to budget.

So I say that I don't expect much for '26 on the newly announced infrastructure plan beyond what was in the budget, but that's already embedded in our guidance. But 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. And it is too early to provide our views on 2027 cement volumes for CEMEX Mexico. So Andres, thank you for your question.

We have time for one last question, and it is coming from Gordon Lee from BTG Pactual.

Congratulations on a very good quarter. This is a bit of a -- more of a just a clerical question for Maher. Maher, I noticed that you sort of formally changed the way that you present the leverage ratio in the release and now you include the totality of the subordinated debt. So one, I just wanted to see whether there was any particular rationale for that. And two, just to confirm that when you refer to the 1.5x long-term leverage target, that's the measurement that you're using for that?

Yes. Thanks, Gordon, for leaving the clerical questions for me, but it's good to hear from you, just kidding. The rationale is very simple, okay? I mean, when we issued these perps, we were a BB-. And we have been -- 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. And the -- 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. And based on yesterday's Fitch Rating, that also happened on the side of Fitch. So 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 deleveraging, including the levels that are included through the subordinated notes. So the answer is yes. When we talk about 1.5x, we're talking about net financial leverage, including potential subordinated notes that are on the balance sheet. And that's the way in the future way that the rating agencies will look at it. We think it's -- and 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.

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 23. If you do have any additional questions, please feel free to reach out to the Investor Relations team. Many thanks.

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

Good morning, and welcome to CEMEX Day 2026. My name is Lucy Rodriguez, and I am the Chief Communications Officer for CEMEX. Whether you braved this week's bomb cyclone in New York to make it here today or you're a chicken and joining us from the online, I want to thank you for taking the time to hear our Analyst Day. I usually introduce CEMEX Day by stepping back and looking at what has changed since we last met, which was March 2024.

At that time, in March of 2024, I talked about the velocity of change and how it has accelerated and so much was happening so fast. Now when I look back at that time, it almost seems like it was dial-up Internet. The speed of change that we're experiencing is absolutely unprecedented. I never could have imagined what would have happened over the last 2 years. We've seen geopolitical disruption at a pace not experienced for decades. While many of us initially thought this would be temporary, it certainly seems as though it's structural, signaling a very broad shift in how the global economy operates. The globalization model that shaped trade as well as investment flows for years, 50 years, in fact, is evolving towards a much more multipolar and regionally oriented system.

At the same time, the rapid advancement of artificial intelligence is reshaping productivity, competitiveness and national priorities, reinforcing the importance of domestic, industrial and digital infrastructure. Governments are once again leaning into industrial policy, placing greater emphasis on economic security, energy independence, supply chain resilience, technological leadership and local manufacturing capacity. And ultimately, all of these trends influence capital allocation, manufacturing investment and infrastructure spending, all key drivers of construction demand. Now you all are very lucky.

That's all I'm going to say on these topics, and I'm not going into detail. But the real point I want to bring you is that against that backdrop, it would be very easy to think that geopolitics has been the primary force shaping CEMEX's outlook. But I think if you were to ask most of our employees, what has been most important in the development of the past few years, it has been internal, strengthening our capital structure, appointing a new CEO and launching our transformation plan. Together, these actions have brought renewed clarity, focus and visibility to CEMEX, positioning us to deliver best-in-class operational performance and shareholder return excellence. Now for some housekeeping duties. Slides are available on our website. We have Q&A sessions scheduled at the end of the European decarbonization landscape and the U.S. aggregate presentations.

In the case of our CEO, Jaime Muguiro; our CFO, Maher Al-Haffar; and our EVP of Strategic Planning, José Antonio González, we will not have Q&A at the end of their presentations, but rather have a wrap-up Q&A as the final event of the day. We ask that you hold your questions until the Q&A sessions. During this session, we ask that you wait to be recognized and handed a microphone prior to asking the question. And we would suggest finally that you stand up to ask the question so you can be captured on the webcast. For those joining us through the webcast, you can submit your questions via e-mail to [email protected]. Please keep in mind that we have a limited amount of time and may not be able to cover every question. You're welcome to reach out to IR, and we will try to get answers back to you. As usual, there are no questions that are off limits, except for those that present disclosure or confidentiality issues.

Finally, and I am coming to the end. Please note that our presentations today may include forward-looking statements and assumptions based on currently available information. As market conditions change, our views and our forward-looking statements will adjust to incorporate such information. Unless the context indicates otherwise, all references to pricing initiatives, pricing increases or decreases refer to prices for our products. We invite you to read the disclaimer section included at the beginning of each presentation. I dare you to do it.

And now without further delay, it is my pleasure to introduce our first speaker, Jaime Muguiro, our CEO.

Good morning, everybody, and it's great to have you all here. It's a pity that many more were coming, but I think that their traveling arrangements were disrupted because of the weather. Normally, when we organize something in New York, and I'm coming, it always snows or something goes wrong. That's why my wife this year decided not to come with me. And I'm very excited to be here in my new capacity together with the rest of my teams. Others from the ExCo didn't come because of our transformation because we're truly focusing on cost containment. And I think that sense an important message. I want to introduce myself. Some of you do know me, but not everybody and many connected on the webcast. I'm Jaime, a simple person. happily married to Conchita. We have 3 adults, 2 grand children, 2 of Jaimanimena live in New York and my eldest daughter lives in Spain. She's the one married. And there is a third baby coming, Future Ana in May. We have been an expat family for 24 years. And I've given my life and that of my family to CEMEX.

Next month, I will be celebrating 30 years serving my employees, my colleagues, the Board, our customers and more importantly, our investors. And I have had the privilege of doing business in most of our portfolio. And I think that, that gives me as the new leader in CEMEX, a competitive advantage that when you combine it with a very talented group of managers who have also enjoyed and experienced a vast, right, living experience, both in corporate functions and in the business, it sets us as a strong talented team to drive this transformation, which, as I will elaborate in a minute, it all puts -- is all about putting the investor at the center on how we manage the company. When I was appointed the CEO, which was a surprise and it is indeed an honor to take the job, the first thing I did was to spend a lot of time talking to people. I talked to customers, I talked to investors. and I talk to employees and all of my colleagues relentlessly. And we learned many things in that discussion. It was a very candid discussion because we were talking about our strengths and we were talking about our weaknesses. We were talking about what type of company were we taking over after I set up my new team. There were great things from the past, but we understood that there were also things that needed to change. And in that journey, right, I'm going to start by telling you today that we have one of the best talented teams in the industry to deliver superior shareholder returns.

Number two, I took the baton of a company that had recently reached investment credit rating, a much stronger balance sheet, not yet enough, but a much stronger balance sheet, right, and that was undergoing a portfolio rebalancing effort, concentrating geographically in Mexico, the United States and Europe and operating additionally in some other positions in the Middle East and LatAm because they deliver above-average growth and very strong free cash flow. Today, I come here to tell you that CEMEX will continue to be a heavy building material provider, concentrated geographically in mainly Mexico, the United States and Europe. serving our customers across all end markets. And we are pursuing this strategy because of the following: -- we believe we have great teams, very strong positions in well-structured attractive markets in the short and medium term. First, Mexico, think about it. It's a country that has one of the best demographic pyramid in the world, very young population, eager to make progress in life and in need for housing, shelter, schooling infrastructure. Mexico, fixing a few things, is one of the countries that has the great potential to become a great country and deliver very strong growth.

Through the cycle, CEMEX has always delivered very strong free cash flow in dollar terms. And in the very short term, we do see, right, the recovery of the demand that was affected last year. We began to see that recovery in the second half of 2025, but we do see that momentum is building. We do see social housing, and we do see infrastructure. When you think about the United States, we believe that it's one of the markets with the strongest -- still with the strongest economic fundamentals. The economy is very resilient, and the midterm outlook continues to be very solid. There is pent-up demand for housing, and I'm pretty sure that as affordability recovers, we will begin to enjoy the single-family home segment of the market in the short term. I don't know long term where the new starts will stabilize depending on domestic migration and immigration trends. But for the time being, there is pent-up demand, and we do expect in the short term, not in 2026, though, but we do expect the recovery of the residential sector in the United States. We also think that infrastructure will continue.

And therefore, growth for heavy building materials will be underpinned by infrastructure. And we're also very excited because we do see opportunities to deploy our growth bolt-on strategy under a new capital allocation framework that I will share with you in a minute around aggregates and additional adjacent synergetic businesses such as Omega, and we will elaborate about that, that strengthens our value proposition to the targeted end markets. And then Europe, where we do see recovering volumes underpinned by infrastructure and also residential. But what I'm most excited about, despite all the noise about the ETS, and José Antonio González will elaborate more about that, is that in the short term, we do see a buildup of significant pricing characteristics, favorable pricing characteristics. And we do see -- we are very strong positioned because of what we did in the past, and we are -- we have a very competitive CO2 carbon cost curve relative to the industry and more so importers as CBAM, right, has been introduced. So after confirming who we want to be and where we want to play, also in my conversations, right, we did recognize that there were significant opportunities to improve. And one of my main concerns when I took over was that we were not generating any free cash flow. And that needed to change and needed to change immediately. And the other aspect was that we were not producing good shareholder returns. And finally, we were not a lean company, and we had excessive cost, okay? With this in mind, right, we began our transformation April 1. And I took -- when I took over, I took advantage that we had announced project cutting edge, which back then aimed at saving $350 million recurring savings -- EBITDA savings by 2027. But I decided together with my team to leverage project cutting edge to transform, not just to cut cost that is going to come back again, but to substantially transform the company.

And the transformation is simple. is about managing the company, putting the investors at the center on how we allocate capital and the decisions we take. And this transformation is underpinned by a relentless focus on operational excellence. The transformation is built around 4 pillars. First one, we want to grow like we used to in the past, which means become the best-in-class operator, managing properly the top line, which means being expert on every end market, having our teams understand what is the profitability per customer per ton, per cubic yard, per cubic meter per site and being very fast and agile moving from residential to infrastructure using the right data and moving fast and on real time. But also being best-in-class operator means becoming very lean, being able to eliminate non-value-added activities and always keep competitive cost base and pursue margin expansions, leveraging technology.

The second pillar is how we assess internally our performance. And we introduced new metrics that are more aligned with shareholders. We're not looking anymore only at top line growth and EBITDA and EBITDA margin. Now we're managing the business using EBIT, EBIT growth, EBIT margin, free cash flow conversion from operations, fully loaded free cash flow and ROIC over WACC. And something new that I did was I decided to run away from 5-year business plans because everything that we were putting in front of us first and then in front of you, we never met it because of uncertainty. So what I decided to do was to introduce Formula 1, 3-year sprints. And what I'm doing is together with my team, we're engaging with the line, relentlessly driving operational excellence in a 3-year sprint where everybody needs to be feet, looking for shareholder returns, maximizing free cash flow and keeping us very feet, very lean and very agile. In those business performance reviews, we put every business to test through those new metrics, and particularly ROIC over WACC through the cycle and free cash flow conversion.

I will elaborate a little bit later what it means and the opportunities that come along with that effort. The third pillar of our transformation is our new capital allocation framework, and I'm really very excited about it. I can tell you right now 2 things, but then I'll elaborate more. That capital allocation framework is anchored on 2 things. First, all cash uses compete for risk-adjusted best shareholder returns. That's new to CEMEX. We're not managing the company that way. This is the new way. This is the only way. And the second aspect is that investment-grade rating status, which it took us so long, is nonnegotiable. Right? And that is there to stay. And Maher will elaborate much more about our capital allocation framework and about our investment-grade rating. And finally, we are committed and it's another pillar of our transformation, right, to set a robust shareholder return platform with progressive dividends and share buybacks. And as we announced, right, we're making progress because we announced and we will subject to the shareholders meeting in March, the approval for an increase of close to 40% in dividends, and we have already begun share buybacks. In fact, as of yesterday, we had already purchased $100 billion, right? And that -- I think that it demonstrates that we are saying and executing what we said. Okay. But this transformation is not just about finance. It's not about numbers. It's also about our culture because if we didn't transform how we operate, how we feel, right, what makes us proud and our culture, we wouldn't be transforming, right? And then we would be seeing costs coming back. So what is it that I look for, right? CEMEX is and will become a very agile company, very lean, relentless focus on cost and operational excellence, continue putting the customer and our job sites at the center of what we do, okay? Killing bureaucracy, automating processes, killing non-value-added activities. And you know what's very exciting, adopting the owner's mentality, right? And that -- what does that mean? It means allocate capital as if you were the owner right?

And that is critical. We are going to pursue operational excellence, which means benchmarking against best-in-class in every business, in every macro market, against our peers, but beyond because there are good benchmarks outside of our industry when it comes to overhead, SG&A, so on and so forth. And we are, right, bringing those benchmarks to our business performance reviews, top down and bottom up, as I will explain in a minute. I want a company, an organization and employees who want to change, who want to adapt, who are not scur from change and technology. We will continue. We've done great in the past using technology. Now is the time to continue adopting AI to boost productivity to support operational excellence through margin expansion, right? And for sure, this transformation continues to put safety as our first core value.

Let's continue with my presentation. One of the first things that we did when I took over was to move very fast, again, taking advantage of project cutting edge, right, to propel a structural savings. We had announced a target of $350 million. And today, I want to confirm to you all that we're going to deliver $400 million. But what's more exciting is that in the next quarter calls, I'll be updating you that we will be surpassing this target. By how much? I cannot give you today the number, but bear with me, we will do so at least in the second quarter call, okay? And I feel very comfortable that there will be more and it will be material. With that in mind, why am I so sure that at least we're going to deliver $400 million? Very simple because the job is done for 50% of the savings, $200 million results from a 23% reduction on global overhead. The job is done. And of that, incrementally, $125 million is already happening. We saw it in January big time, and it's secured -- the other $200 million are operating efficiencies linked to operational excellence. And José Antonio González will provide more color on that bucket. We are expecting incrementally $40 million and an additional $35 million by 2027. So do expect more savings as we continue our transformation and be patient, I'll provide you color in the 2Q call. I also want to share with you how exciting our business performance reviews are as part of our Sprint. What happens there? My operating colleagues, my regional presidents, right, again, I'm one of them, right, together with the rest of the -- some of the rest of the ExCo members, right, working with me in the staff, travel and go boots on the ground to the line. And in those engagements, I always engage with a customer at least to continue learning. One of the things that I'm concerned about is that I end up trapping offices, losing the understanding of what is going on in the marketplace.

That's not going to happen. I use my business reviews to have boots on the ground, understanding whether we are delivering the right value propositions to the right market segments to the right customers. The other thing that happens is that we review our performance through the lenses of the new metrics, EBIT, free cash flow conversion from operations fully loaded free cash flow and ROIC over our WACC. We were not doing that in the past, okay? And we do that by business, but also by micro market. We go very detailed. And as a result of these reviews, we have identified incremental opportunities that would bring incremental EBITDA between $80 million to $120 million and would free up free cash flow between $100 million to $150 million. Please note that we have included very little of this lever, if you will, in our commitment by 2027. And the reason for that is because -- some to turn around some of this business, we need to continue transforming and lowering the cost because our assessment comes fully loaded with overhead by business, which we were not doing in the past, okay? So more cost transformation, right? But the other thing is that we need a little bit of tailwind, okay, in volumes.

Having said that, there will be structurally certain businesses that are not meeting today are much more demanding financial thresholds, we will let them go. Most of the opportunities are in ready-mix in Europe, followed by some in the U.S. The rest of the work in the rest of the portfolio for the most part is done. And as you can imagine, the low-hanging fruit, which means shut the thing down has been done. Now it will take a little bit of time, and that's why it's not included in our first spring because we have vertically integrated positions. And therefore, deconsolidating as divesting requires delicate move. It requires transacting with others to continue protecting what we have upstream, right, which is admixtures, cement, cement titues and aggregates. But rest assured that this is a self-help lever. And please note that from this effort, we will bring profits that we will recirculate helping improve the earnings quality of our portfolio.

Okay. Allow me now to share with you the new capital allocation framework that, as I said, right, is anchored around 2 critical things, right? Investment-grade rating status is not negotiable. And all cash uses compete, again, I'll say it loudly for risk-adjusted based shareholder return. Mahed, you're going to explain later in more detail our capital allocation framework. Allow me to take you with me through our journey, right? What have we been doing? We've been relentlessly working in the past to pay debt because we were highly levered. You know the story, right? And that's the only thing we did. We divested and all proceeds and free cash flow went to pay debt. From 2020 onwards, we began -- CEMEX began approving significant strategic CapEx. And back then, we continue paying debt to delever, aiming at getting investment-grade rating, which we did end of '24, right? And because of that, when you look at '22 to '25, 35% of our cash sources went to pay debt. Before '22, it was almost everything. But 59% went to strategic CapEx to fuel growth. That strategic CapEx is something else that we learned when I had so many conversations, right? Because there are 2 types of strategic CapEx, margin expansion and greenfields. And when you think about risk-adjusted decisions, right, there could be some that maybe we shouldn't have done because they were exposed to volume. And then you have strategic CapEx related to margin expansion, which we tend to control more, right? But if you look at '22 to '25, we barely provided cash to shareholders. Now is the time for shareholders in CEMEX. That is our transformation, and that is our commitment. I want a capital allocation that by 2030, it provides between 40% to 50% of the free cash flow we generate to the shareholders through progressive dividends and share buybacks. And I mean it, and we're doing it. In addition, in the very short term, we will continue paying debt because when you look at our interest expenses per year relative to our EBITDA, it still is high. So it is accretive to shareholders to continue to pay debt to boost free cash flow, which at the end is going to go 40%, 50% by 2030 to shareholders. okay? And then there is a fundamental change on our growth strategy.

No more strategic CapEx. We're going to be reducing it and will only be used for margin expansion to support operational excellence and for profitable decarbonization at the speed dictated by CO2 prices. And José Antonio González will elaborate more about that because not all this noise is -- we like the noise, the market doesn't. We will explain why we think we had a great opportunity in Europe on our pricing. Allow me to elaborate a little bit more on growth, but then José Antonio will expand. So we're going to be materially reducing CapEx, and we're going to use cash, 40%, 50% for bolt-ons. And we're going to do them primarily in the U.S. in aggregates and adjacent synergetic businesses. That complement and strengthens our value proposition to the end market segment. I would like to be more exposed to infrastructure in the U.S., which is a less cyclical end market, while also pursuing a value proposition for the building environment, which brings higher earnings quality businesses, less volatile with much higher free cash flow conversion.

Omega is a great example of that. And José Antonio will elaborate more about that. And finally, after the bolt-ons, as I said a second ago, we will use some strategic CapEx just for margin expansion for the most part and for profitable decarbonization, where in Europe and California. Why? Because those are the regions that provide the necessary regulation for continuous profitable decarbonization.

And finally, right, we will continue our portfolio rebalancing. I do expect, right, at least $1 billion of divestitures in this sprint, and that will be recycled into bolt-ons in the United States for the time being. But we will not let go a once-in-a-lifetime opportunity if we see a very good opportunity for M&A in Mexico and in Europe. Although, again, I don't want to confuse my team, I don't want to confuse you, priority is the United States for the time being. I want to make a pause here for a second to thank my team for what they did last year. When I took over and this new team took over, we were facing a very difficult 2025 because our 2 main markets, the United States and Mexico were facing, right, a material reduction in the demand for our building materials. And in the case of the U.S., 2 years, if not 3, of soft demand in a row. It was a very difficult year, right? When I was saying, "Oh my gosh, I've been appointed. And I was like, did it, right? What am I going to say in the first call? No. We had a plan, we set it up, and we did what we said. And one strength that we do have is our capability to execute and that is very relevant. And that's the reason why the second half of the year, right, our top line grew by 8%, but our EBITDA and our EBITDA grew disproportionately by 17% and 25%, right, as you well know. And our EBITDA margin expanded by 160 basis points at times when volumes were dropping. And this demonstrated that we were capturing the synergies we promised. And this is exactly what's happening right now. But furthermore, last year, we also boosted free cash flow, one of my main concerns -- because since I took over, in fact, as I was transitioning in March, I was able already to take some decisions. And the first one I did was stop all capital allocation. And we reviewed every CapEx, and we stopped a lot of them, okay? And because of that, right, we kept doing what it made sense according with our new capital allocation framework.

And the rest gone. And because of that, we were able to improve free cash flow conversion from operations by 15 percentage points when adjusted by the one-off several payments, which were material, $180 million last year and discontinued operations. And please note that, that sets us strong to a path to achieving at least 50% free cash flow conversion from operations. I will show you the numbers in a minute. But furthermore, we already guided you that in 2026 compared to 2024, our CapEx and interest expenses are reducing by $500 million, of which $160 million is interest -- annual interest expenses, and Maher will continue to do the job to reduce that number over time. And the rest is CapEx, which will be reduced by $327 million in 2026. And that will continue to boost free cash flow conversion from operations. And please note, that we are transitioning from free cash flow conversion from operations to fully loaded free cash flow, which means free cash flow before discretionary capital allocation, which means growth, debt, shareholders.

And I will provide the equivalent of what we're targeting for 2027 in a minute. So allow me to say kudos as we say that in the U.S., right, Jos, kudos to the team. I think we delivered. But the message here is we are, as a team, fully committed to delivering best-in-class shareholder returns. And one -- I want to share with you a personal question that I asked myself when I was appointed that I think some investors have also asked themselves, which is can a management team with a long tenure in a company change? I think we can. and an incumbent has an advantage. And that advantage is that you know the business inside out. And when you have the mentality to say enough of meduocracy, we must transform, we can do it. And this team here and those who didn't travel to save cost are fully committed to changing, transforming and executing and doing what's necessary to achieve best-in-class shareholder returns. Allow me to share with you our targets for, again, first to Sprint, 3 years, which began in 2025 and is going to finish in 2027. And then what we do is that we roll it up 12 months. This is a race. I like to combine Formula 1 with 3-year, right? So we're already working on 2028, bottom up, top down, where we have operating KPIs connected to financial KPIs and personally to a share price target, which I will not tell you today. What are the targets we're looking for to deliver?

We want to deliver $3.7 billion of EBITDA by 2027. That is a compounded annual growth rate of 10% from '25, a disproportionately CAGR growth for EBIT, 14%, an expansion of ROIC of 170 basis points and EBITDA and an EBIT expansion margin of 190 points and sales mid-single-digit CAGR. And what is very relevant is that 55% of this growth relies on self-help measures, little relies on organic growth. José Antonio will provide more color on the organic growth and the self-help. And please note, I said it before that we're working, and I'm expecting that by the second quarter, we'll provide more color on structural transformation savings. And what those will do is to increase that percent from 55% to something else. And we have done very conservative assumptions on organic growth. And please note that we have only considered Couch and Omega in this target. But as I will comment in a minute, we will continue to pursue accretive bolt-ons under a very disciplined capital allocation framework that recently -- that I just shared with you. But the free cash flow, right, will grow exponentially, significantly higher than the rate of our EBITDA and our EBIT, achieving at least 47% free cash flow conversion from operations, which translates into a 38% free cash flow fully loaded before paying debt, growth, returning cash to shareholders.

We aim at a cumulative free cash flow of $3.3 billion from operations. And please also note that we will have $5 billion of available financial capacity to support our strategy. I'm saying this, right? But at the same time, I want to clarify that we're going to be very disciplined, and we're not going to be using $5 billion to do big deals, right? Here, we are including $1 billion of divestitures process that will be recycled. So the amount, right, of capital that we can use for our growth strategy is around $2 billion, Maher, José Antonio, both of them will elaborate more later. But please note that all our decisions, again, will be based on our framework, which commits and have already committed 40% to 50% cash return to shareholders by 2030. In the shorter term, I want to continue paying a bit of debt, lower interest, boost free cash flow and get us to 50% by 2030.

So to summarize it, what should investors expect from us? Investors should expect from us that I am together with my team at your service and that we're here to deliver best-in-class shareholder returns that my team at CEMEX is relentlessly focused on operational excellence, Shoemaker, do shoes, don't get distracted, continue serving your customers, be very close to the end markets to the job sites and provide the right value propositions. You have my promise that we will turn around those businesses that are not meeting our new financial metrics. And those that we think that we will not make it because volumes might not be there and structurally, there might be a better business and asset for somebody else, we will divest. Just be patient, it's delicate. It will take a bit of time, but it's a self-help lever that has a tremendous upside potential to our EBITDA and free cash flow and will bring profits that we will recycle, improving the earnings quality of our portfolio. My team and I are totally committed to working relentlessly to boost free cash flow conversion. And we are committed to providing to shareholders 40%, 50% of our cash, right, through dividends and share buybacks. And we will deploy a very disciplined capital allocation for M&A under strict financial metrics that José Antonio González will share later in the U.S. around aggregates and a few other adjacent synergetic businesses, direct synergies, upstream, direct synergies, customers and some logistics synergies in between. In the building environment, some of which we have exposure to renovation, okay?uortus is a good example. It's for both new construction and renovation, right, and then infrastructure.

And with that, I'll leave you, and I'm going to pass the word to you, Luy, who will introduce to Jose Antonio. And I'll come back later with Maher and Jose Antonio to answer your questions. And then I have here Jeff Bobles. Jeff Bobles runs the U.S. aggregates. He'll talk more about aggregates. So I didn't elaborate much. Jose Antonio won't elaborate too much because Jeff has very exciting things to share with you. And I look forward also, Jose Antonio, to your presentation about our CO2 cost competitiveness, the great job that the team did in Europe and why we're so excited about our pricing in Europe. Okay. So thank you so much for your interest. I'll be back later. Thank you.

So this will be very quick, but I am pleased to introduce probably someone who many of you know, José Antonio González, who's Head of Planning and Corporate Development for us to take us into a little more detail into Jaime's business plan.

Thank you. Thank you very much, Lucy, and thank you, Jaime. Well, it's great to be here this morning. Thank you, everybody, for joining us. Also those who are joining via the webcast, welcome, and thank you for being here. I'm glad to see quite a few familiar faces, also looking forward to meeting some of you that I haven't met before. So great to be here. And I will -- during my presentation, which is about our growth strategy, I will build and elaborate on many of the points that Jaime was just made in his presentation.

So I'd like to focus on 2 things today. These are -- the way we see it is 2 main levers of our transformation, of our ongoing transformation, which have a direct -- we believe have a direct impact in our potential to deliver attractive shareholder returns. So one of them is operational excellence and how we are driving to become a best-in-class operator with improvement in metrics, improvement in free cash flow, free cash flow conversion spread between our cost of capital and the returns we get out of our businesses. So that's a big topic in our ongoing transformation. And the second one has to do with our growth strategy. So we have included in our sprint, in our 3-year sprint a few investments that are already executed, most notably Omega, which was announced this morning, and I will elaborate a little bit more on that as well as an investment in aggregates in Southern United States. But we will build or we will develop in our sprint financial capacity to undertake additional initiatives for growth under a very strict investment criteria and a very clear capital allocation framework in which capital is competing for the best options that are -- we can comfortably link to shareholder return.

So those are the 2 things that I will elaborate a little bit more on. The business performance reviews, which we have been talking about, I would like to share a little bit of my personal experience undertaking those because they are quite they're an important component culturally of the transformation that we are going through right now. So first, we had this conceptual view that was developed by this consultation process that Jaime followed with many people in the company together with own views. So we started on the left side here, establishing metrics that we thought were required to deploy across the company, deep down to each operating unit that could really tell us how each unit is performing from a shareholder return, from a value creation standpoint. We also established targets. There was a lot of benchmarking going on. There was a lot of data mining in tons of public information available. and also comparison against internal benchmarks. So all of this allowed us to establish top-down targets, very ambitious targets, but brought down to a very detailed level, almost plant by plant or cluster by cluster in the case of ready-mix.

So the combination of this establishment of these top-down targets as well as the rollout of these metrics are tremendous tools that allow us to understand how the business is performing, identify performance gaps and then through the business performance reviews, establish the action plans to close these gaps. Other things that go into the business performance review are how we're doing with our capital deployment. We did allocate substantial CapEx or capital in multiple projects across our businesses a few years ago. There's a lot of successes, and there are some that haven't worked out yet as we were planning, either because of shortfalls in volumes or changes versus the original assumption. So there's a very deep discussion about how we are doing or how we have done to inform our decisions going forward. And very importantly, it is about establishing very specific action plans and commitments to close these performance gaps. And it's been quite a process. We -- a few people from the staff or supporting areas join our colleagues in the operations. We sit around the table for a few days, and we have very deep and detailed discussions micro market by micro market, business by business. And inevitably, we identify opportunities. And that creates the basis for an action plan and agenda that we then follow up and track going into the future. And these performance reviews happen twice a year in each one of our regions, and it's -- we already performed last year, 2 of them in each of the regions, except for SCA, only one. And it's very interesting to see how the quality of the conversation, especially given all this information and the methodology, how the quality of the conversation improves as everybody sort of -- as we're leveling our understanding of the business and being able to -- based on benchmarks comparisons c, come up with very attractive improvement plans.

So that's a big component of this ongoing transformation, and it's been quite exciting. And on a personal note, while we are doing all of this and while the conversations are ongoing, while we identify this opportunity space, we create a sprint, which has 10% CAGR for 2 years. We changed the narrative with the markets. And of course, inevitably, we get excited about how we see our share price performing, for example, last year. But we realize that a lot of that is an anticipation of the results of all of this. So in a way, we're getting paid a little bit in advance. So that creates in ourselves a higher degree of commitment to make all of this a reality. So on the one hand, it's exciting, but it's a realization that we need to deliver. Now what happens when we see units that have important performance gaps. Down below, you can see we've identified assets, units in our portfolio that have an opportunity for improvement. We have estimated the size of the opportunity to be between $80 million to $120 million of EBITDA, $100 million to $150 million in free cash flow. And a very small portion of this has been already sort of, let's say, has already a plan attached to it and therefore, has made it towards sprint, but it's only a small portion because normally, the complete solution of a unit that has an opportunity for improvement, it takes a lot of time. So we go through -- again, part of the review methodology, we go through an analysis of how these businesses are doing relative to the cycle because, as you know, we have been seeing softish volumes in some of our markets over the last few years.

So some assets have a performance gap probably just because of where they are in the cycle. So it's very important to understand that. And also that in these assets, we're taking actions to confront profitability challenges because of low part of the cycle. We also look at the vertical integration. We want to see the performance of the assets each one of them on a stand-alone basis, but we cannot ignore that in some instances, these assets, for example, in ready-mix, we're selling cement and aggregates through them, which have important profitability, but we don't want to subsidize businesses just because of vertical integration. But it's very important to understand for this set of assets what is going on from a vertical integration standpoint. So then we look at performance improvement plans, like I already mentioned, in some instances, we've already accounted for some of those improvements in the sprint, a small portion, not the full amount that you see here below. And ultimately, for some assets, sometimes the best solution involves third parties or a more, let's say, drastic solution. Eventually, we've closed down some assets. Some assets are really -- when we look at them, we look at all these analysis and the best conclusion is, you know what, just close them down, you close them down, and we've done some of that. Others is a little bit more complicated. Probably some assets are better owned by other parties because they have more synergies or more vertical integration.

So we might decide to divest, and there's some of that already happening. And in some instances, the solution might be a joint venture because there's probably a great operator that runs assets on a very efficient basis and putting them together with us, their synergies, et cetera. And in joint ventures, is a preferred solution whenever we want to retain the vertical integration part of this angle. So also a very well-structured methodology to address assets that have performance gaps and that can be improved. And we think that there's a lot of -- a very significant opportunity by approaching this and closing these gaps. So that was a little bit of a summary or a little bit more color in terms of how we are approaching operational excellence and how we want to drive performance and value creation in that process. And now I'd like to address a little bit more detail on how we have built our Sprint. This is what we consider to be an attractive sprint.

It considers growth 2 years in a row of around 10%. And very interestingly, a little bit more than half of this improvement in performance over 2 years is measures that are more under our control or self-help measures.

A very important component here is Project Cutting Edge, which I'm sure you're familiar with. It's a $400 million cost reduction program, out of which $200 million we've already taken the benefit from in 2025, but there's $200 million that we will still -- allow us to benefit in the sprint. So that's an important component inside the self-help.

Additionally, we have been making investments in the past. There are some investments that are allowing us to get margin enhancement, meaning they're not reliant on volumes or other significant elements outside of our control. So we've also taken into account the benefits that we expect to get from those investments as part of this self-help bucket. And additionally, we included here "executed M&A," so businesses that are up and running, that we have acquired, and that with a relatively low risk, we believe will be contributing.

And most importantly, inside this bucket, we have 2 important investments. One is Omega, that we announced this morning, and I will describe in a little more detail. And the other one is Couch Aggregates, which we began consolidating late last year after having begun with a 49% stake that we did not consolidate and later investing an additional -- making an additional investment in order to consolidate that business.

And on the far right, we have organic growth. And organic growth explains 1/2 or a little bit less than 1/2 of this 10% CAGR, so maybe 5% or a little bit less. And 5% CAGR over 2 years, basically behind this is an assumption that volumes are going to grow low single digit and that our pricing strategy will allow us to compensate for input cost inflation. So that explains this assumption of 5% organic growth in 2 years.

Now also supporting the organic growth component is we did complete some investments over the last couple of years that are allowing us to capture the benefits of recovering volumes. Most notably, there's a number of projects in the U.S. in aggregates that will allow us to increase our volumes. And I will not say much about that because Jeff will be making -- addressing our aggregates position in the U.S. But we have that under organic growth because it's investments that will allow us to benefit from a more robust volume environment.

So going back, again, a little bit more details in terms of the elements included in the 3-year sprint. So here you see $200 million operational efficiencies. So I mentioned Project Cutting Edge, $400 million. Now out of the $400 million, $200 million have to do with overhead reductions, so personnel reductions. Those are done, but they were implemented in the middle of last year. So we'll have the benefit -- part of the benefit we will get between '25, '26 -- sorry, '26, '27.

But there's another component which is not overhead or personnel reduction, which is just operational efficiency. That's another $200 million. Part of that we already accomplished in 2025, about $120 million, but an $80 million incremental benefits from operational efficiencies are included in this sprint from '25 to '27.

Some examples, we will have a breakdown, cost optimization, activities related to our procurement efforts, optimizing our network, reducing our fixed costs, the business improvement plans that I described, which a small portion of this is already embedded in our 3-year sprint, and reduction in cost in energy and fuels.

So for example, in the U.S., we have increased our production, which is allowing us to reduce imports, and the equation there is very attractive. So 6% increase in cement production compared to prior years, allowing us to benefit from the lower cost of production versus imports. Rail network optimization in the U.S., we reviewed the way we are paying for railway services. We used a shoot cost approach, conduct negotiations with a lot of information in our hands that allows us to accomplish some savings in the cost of -- that we spend on rail carriers.

We're transforming our procurement model, both from a capability standpoint, but also a process whereby we're looking at every single item we buy or we procure with a -- under a very robust methodology consisting of a lot of benchmarking and a lot of information where we can compare costs across different suppliers, et cetera. We're accomplishing cost savings from that as well.

And from the business performance reviews, we've already included some components, which has to do with consolidation of ready-mix plants, reduction of fixed costs, et cetera. And finally, in Mexico, we'll continue to find opportunities that we're taking actions in order to reduce fuel costs and the mix in Mexico, and that also contributes to these savings.

Now going to the organic growth component of our sprint. As I mentioned, we're assuming low single-digit volume growth across the board after having a couple of years with softish volumes in our main markets. We think this is a conservative assumption. In Mexico, demand is beginning to pick up after a very soft year last year, thanks to a resumption in infrastructure spending, also the social housing program from the government that is targeting 1.8 million units. We believe some of that will also be supporting low single-digit demand growth in Mexico.

In the United States, continue to be very positive on infrastructure and how that will underpin or support demand growth in the U.S. And as you all know, investments in chip manufacturing facilities, data centers, all of that is continuing to support demand. Residential spending has been somewhat subdued. We don't think that, at least in the very near term, is going to be driving resumption of growth in the U.S. But thankfully, infrastructure and private investment, we think, is going to be providing very interesting support.

In Europe -- in Europe, the story is also recovery. We're very positive on our portfolio in Eastern Europe: Poland, Czech Republic, Croatia. We think those -- even Spain, we see very robust activity levels, driven by infrastructure, European Union-backed investments. The German infrastructure bill, we believe, will provide some tailwinds.

And very importantly, in Europe, and Jose Antonio Cabrera, my colleague, will elaborate, but we see a robust pricing environment driven by ETS and CBAM. I won't get into that. So we think that considering low single-digit volume growth in our 2-year, '26 and '27, coupled with a pricing strategy that allows us to offset inflation, is realistic, is somewhat conservative. And we're at this stage very positive on our ability to -- or on that materializing and supporting the overall sprint, which, as you know, has 10% growth in '26, 10% growth in '27.

Now additionally, I did mention that our growth investments from the past are also allowing us to support our 2-year sprint. I have here a few examples. But growth investments from the past, which are already contributing a significant amount of EBITDA in 2025, we think are going to contribute an additional or incremental $200 million between '26 and '27.

We have mentioned how we are pivoting away from growth CapEx into M&A. So we're going to be -- we are being, since last year and going forward, very selective with our growth CapEx. We expect to see very moderate amounts of growth CapEx into the future. But we do have this tailwind of the projects that we have been completing since a few years ago and we're still completing with a much lower CapEx that we're spending -- investing this year.

But we have sort of these 3 buckets, projects that are allowing us to benefit from margin expansion, like in our Knoxville plant in the United States. We have -- because of investment we made, we have reduced significantly the clinker factor, to maximize the production of 1L cement, reducing CO2 emissions, but allowing us important savings.

In Huichapan, which is a low-temperature clinker with a Mexican flag, similar story. We have redesigned the clinker chemistry, adding more gypsum. That allows us to reduce the temperature at the kiln, reducing the clinker factor. Also with a very moderate investment, we get significant savings. Those are only 2 examples.

In the case of growth, we have commissioned the Four Corners sand plant, allowing us to sell -- or to produce and sell an incremental 1.2 million tons of commercial sand. Jeff will elaborate on all our investments that we have made to allow us to sell more aggregates in the U.S.

In Jamaica, we completed a debottlenecking. By the way, in the organic growth, I did not -- and Ben pointed out to something interesting this morning. I didn't mention -- I mentioned our organic growth assumptions for Mexico, Europe, the United States, but also in SCAC. In SCAC, we're also very, let's say, confident that a low single-digit volume growth assumption is the right one. There's more confidence, and also infrastructure investment.

And to that end, we're also very happy that we have completed a debottlenecking in our Jamaica cement plant. Jamaica is booming. We were not being able to satisfy the market needs, so we invested in debottlenecking the plant. We're adding 30% additional capacity to reach about 1.2 million tons, and plant is going. So we've been able to replace some imports that we're having to make because of the tightness in supply. And also, we get a little bit more flexibility to export into our system in the Caribbean. So very excited about the Jamaica plant and the incremental EBITDA that we will get.

And if you recall, this component of growth is supporting our organic growth. So again, so investments that will allow us to capture the growth in volumes because of market growth.

And finally, bolt-on M&A. Two main acquisitions that we have completed: Couch Aggregates, in which we own a majority stake since late last year; and Omega, which is a stucco, the leading stucco producer in Western United States, that we announced the acquisition this morning and we expect to close by the end of March. So again, all of these elements are supporting our 3-year sprint.

So now moving on, I would like to elaborate a little more going forward how we are aligning our efforts to produce incremental growth through our bolt-on M&A efforts. And the priorities are investing in the U.S. primarily, very selectively in other markets. So we're also looking into opportunities with Mexico, Europe and elsewhere. But overwhelmingly, the priority is going to be the United States, focusing on aggregates as a high priority in the U.S., selectively potentially in other markets. And then adjacent businesses. This is again for bolt-on M&A. Adjacent businesses, I will get into a little more details shortly.

So I won't say a lot about aggregates. Again, Jeff will do it later. But we're very excited about, of course, the fundamentals of aggregates, especially in the U.S. Some key highlights. Still highly fragmented with a lot of opportunities with the privately-owned businesses.

And we look at Couch as an example of the flexibility that we can provide for partnering with small aggregate producers or privately-run companies. Using Couch as an example, the entrepreneurs behind it wanted to run the business still for a few years. That's fine. So we reached an agreement where we invested a minority stake. We established some goalposts in terms of the performance. And we have supported the management team, the sellers, in this multiyear period in which they're running the business with a very ambitious business plan. And we had incorporated in the contract a pathway to control to consolidation and eventual control and ownership.

So that's the kind of flexibility we want to run with as we approach these private companies or privately family-run businesses in aggregates in the U.S., which is there's a lot of that. Of course, an industry with high entry barriers because of permitting restrictions and regulations related to the land use and the environment. It is an essential material with very attractive pricing discipline that we have seen in the markets with a very positive demand outlook.

Now in terms of adjacent businesses, we are simplifying, I guess, is the right word, simplifying the way we look at our urbanization solutions businesses. We want to focus or we will focus going forward in 4 key businesses that meet a number of criteria that we have determined.

Number one, highly complementary to our legacy activities. And by that, I mean also highly synergistic because of vertical integration, because we might share customers, distribution or logistics. So highly complementary. The other thing is potential for growth. So these are businesses that we think we can scale up and create a larger platform.

Number three is that it allows -- having this business in our portfolio, and because the products are highly complementary to our legacy products, we believe that we will be able to expand our offering to our customer base and, therefore, be a much more valuable supplier and partner. So it's also about being able to enhance our product offering to our customers.

And finally, end markets. We believe that through these particular businesses, we will be able to increase our exposure to end markets that we want to increase our exposure to, such as infrastructure and repairs and renovations.

Now we used to be organized by verticals. I didn't mention, for example, alternative fuels or construction demolition and excavation materials. We're not stopping those activities. Those activities continue to be very important and core to the things we do. But we have embedded those in the businesses where they are mostly related to, like alternative fuels in cement and construction demolition and excavation has gone back or is being run by our materials businesses, ready-mix aggregates.

So it's about simplifying. It's about focus. And it's about deploying our energy and our resources to grow these businesses: construction chemicals, concrete products, mortars and asphalt and aggregates, which all of them comply with this set of criteria that I mentioned.

Construction chemicals, for example, is admixtures. Admixtures is a great business, highly complementary to our legacy business. We, as a very large ready-mix producer, having admixtures allows us to optimize our mixes, optimize our costs, reduce CO2 emissions of our mixes. And when we think about the cement we sell to other ready-mix companies, it allows us to enhance the product offering to our customers. So that's very attractive in concrete products.

We have a starting base with concrete products in the U.S., in Europe, in Israel. And again, allows us to enhance the product offering to our customers, but also allows us to gain exposure to infrastructure. And this is a very attractive segment that is growing at a very attractive pace.

Mortars, highly complementary to our business, allows us to enhance the product offering to our customers. And in the case of asphalt aggregates, this is another avenue to pursue as we think about growing our aggregates business, for example, in the U.S., also Europe, that is more related to infrastructure activity.

So when we consider these businesses we're focusing on, this is going to be sort of the baseline for 2025. As you can see, we have been growing in these particular businesses, growing sales at 7%, EBITDA at 12%. The most important one is, from a size standpoint, is construction chemicals or admixtures. The second one right now is concrete products, but with the acquisition we announced this morning, mortars is going to become much more important, which is the dark blue. And asphalt is very small and it's just a platform where we already have an attractive activity in the U.K., but we think that this is an opportunity -- there's an opportunity there for us to expand as we think about, again, developing our aggregate business in the U.S.

Immediate efforts that are underway at the moment, in construction chemicals or admixtures, we're focused on increasing third-party sales. We have significant activity of third-party sales in admixtures in Mexico and Europe, and a huge opportunity to do the same in the United States, which is currently underway.

In mortars, announced this morning the acquisition of Omega, which is a very attractive platform that we can use as a base to grow. We also have an interesting platform with our Multiplast product in Mexico, which is a specialized mortar, which is very attractive and has a lot of draw in the market. That is also a platform from which to grow our Mexican mortar business. And in concrete products, continue building the platform in the United States and EMEA.

Mortars, because we announced this morning Omega, just a few words on that. In the U.S., the broad mortars family and the acquisition this morning, Omega is one member of the mortars family, which is stuccos. But mortars is $13 billion industry in the United States growing at a 6% CAGR between '21 and '24, so grows at a faster pace than cement. It includes stuccos or materials to prepare the base so that then the final flooring can be placed on top of it. Adhesives for tile setting; dry mortars, which go in walls, et cetera; and concrete repairs, to name a few members of the stuccos family. So this is all highly complementary and synergistic with our legacy businesses. So again, Omega is now a starting base from which to grow.

These businesses have significant vertical integration. So for example, the acquisition this morning, Omega, which has 4 mortars plants, consume the equivalent amount to cement of 8 ready-mix facilities on average -- average size ready-mix facilities. So we like the vertical integration coming with much lower capital intensity relative to a concrete plant, for example. And they have higher free cash flow conversion, low capital intensity. So very interested or very attractive business, highly complementary to the legacy businesses.

And a little bit more details. So Omega is the leading stucco producer in the Western United States, has the #1 recognized brand. And it has national brand recognition, which is very important because, as we think about expanding this platform. It has $110 million revenue, $23 million EBITDA before synergies, 65% free cash flow conversion, 150 employees and 5 locations, 4 plants in California, Nevada, -- 2 in California, 1 in Nevada and 1 in Colorado.

Again, very strong vertical integration, synergies related to logistics and procurement and a cross-selling opportunity with our customer base. The acquisition multiple after synergies is going to be below 7x. And this is a business with 50 years in operation.

So in closing, we're very excited about our ongoing transformation. We're very excited about our sprint between '25 and '27. We are committed to delivering 10% EBITDA growth every year over the next 2 years. We're very comfortable in the fact that more than half of this will come from self-help measures, things that are more under our control, and a little bit less than 1/2 coming from organic growth where we believe we've made some conservative assumptions.

It's all about improving our margins, generating more free cash flow through more free cash flow conversion, increasing our ROIC by almost 200 basis points through decisive actions that we are taking through this methodology and platform of the business performance reviews. We have a very focused growth strategy around aggregates in the U.S. and highly synergistic businesses. And we're pivoting away from CapEx and into M&A. We will ensure that we take the benefits of our investments in growth CapEx in the past, but we will pivot into very accretive M&A. And this we will do while we have a highly disciplined capital allocation framework.

And that's it for me. So thank you very much, and I look forward to interacting with you during the day. And Lucy, I think -- thank you very much. I think I went over by 2 or 3 minutes, so sorry about that. Thank you very much.

One point I just want to highlight besides the conservative assumptions on organic growth that Jose Antonio just walked us to, is that we are using a peso rate of 18.25 to 18.50, consistent with our guidance for '26 for the 2-year period. So just to keep that in mind.

Well, I think probably the next speaker has the most topical subject to cover. I'm very pleased to introduce Jose Antonio Cabrera, Head of EMEA, to discuss the European decarbonization landscape.

Thank you, Lucy. So thank you very much, Lucy. Good morning to everyone. So this is my first time here in this event. So I will do the same. I will introduce myself.

I have been working in CEMEX for more than 25 years across different functions, from mainly cement operations, commercial, strategic planning, general management. And I had the opportunity to visit and to be involved in many operations. I began in Europe, but I was working also in the Middle East. I spent 6 years in Latin America. And now I'm back in Europe and I have the privilege to run this operation in this, I would say, very exciting times in which this region will continue to deliver growth for CEMEX.

The drivers, as Jaime and Jose Antonio mentioned before, strong demand recovery, very good operating leverage that we have in the region, more so after our Cutting Edge efforts, and a very strong pricing environment. But today, I will focus my presentation on decarbonization, on the ETS, on CBAM. And so my objective today with you is to have -- to ensure a clear understanding on regulatory developments in Europe regarding ETS and CBAM, how we see those and why CEMEX is in a privileged position to continue creating value in this environment.

But let me go one step back and remind everyone how the ETS works. So the ETS has been in place since 2005. It's the largest carbon trade, carbon market in the world. And many sectors are included in the ETS, from heating system, power generation, to heavy industries like glass, refineries, chemicals, steel and, of course, cement. Some of the sectors receive free CO2 allocations in order to operate or have been receiving free CO2 allocations to operate. And these allowances are tradable in the carbon trade market.

So these free CO2 allocations are based in a specific benchmark for each and every sector. And that benchmark is calculated just with the 10% best performers in each sector. We have a clinker benchmark that is being reduced. Every phase has been reduced, tightening the supply of the allowances, of the CO2 allowances, and then pushing CO2 prices up.

But what is happening this year? Why 2026 is so important and everybody talks about more than the noise about the ETS, and what is happening in Europe this year? So 3 events happening at the same time.

The first one is that in this phase, again, the benchmark will be reduced. It will be published at the end of the quarter or beginning of second quarter. But we estimate that the benchmark maybe will be reduced between 4% to 9% compared to the clinker benchmark that we used to have in the previous phase.

But also this year, 2 new events are happening for the first time. One of them is the phasing out of the free CO2 allocations for the industries. This means that even if you're running your plants in the 10% best performance, you are not going to have the full 100% allowances of CO2 that you need. So that is the first one. This means that the industries will have a carbon cost from this year or a growing carbon cost from this year.

And the second very important event that is happening this year is the introduction of CBAM. The Carbon Border Adjustment Mechanism is phasing in and is increasing with the same pace as the gradual removal of the free CO2 allocations for the European Union producers. In practical terms, this means that the importers for the first time are going to face an import carbon cost as well.

So let me also comment on how we see this noise or some rumors in the recent weeks regarding the ETS. So the ETS was designed since the beginning in phases because it's a noble scheme in order to assess and adjust. And this has been happening since 21 years ago and is the case right now. So for example, CBAM was not in place since the beginning of the ETS. So it was because of the demand of some sectors, for example, the steel sector or the cement industry, that the CBAM now is in place and is favorable for the industries in Europe.

So probably there will be some adjustments to the system. It has always been there, but probably this will happen in the phases from 2030 onwards, not in the current phase, is what we see. So what we know right now is that the current phase in 2026, this system is giving a really competitive advantage to the low carbon producers and to the most efficient producers.

But what is the size of that advantage? So we made this exercise. So here, you can see, in the blue bars, you can see the estimated carbon cost for an average European Union producer from 2026 onwards. In the green one, you can see the estimated carbon cost for an import coming into the European Union if the customs in the European Union is accepting the verified emissions. If not, the regulation says that what applies is emission factor by default, depending on the country of origin of that product. That is the dotted line that is even much higher.

So here, what we can see is that there is a gap between the average producers and the average imported of around EUR 9 per ton at a CO2 cost of around EUR 70.

But the question is, is this going to be sustainable in the short to midterm? So we think that for the most part, yes, it's going to be sustainable. It's just not a matter of CapEx that it takes resources, it takes investment. It's a matter of changing your process itself in order to adapt, for example, in the case of alternative fuels, to adapt to the new fuels that you are using. But it's also a matter of regulatory, in order to have a regulation, a local regulation, for example, the one that we have in Europe, that limits the disposal in the landfill is not happening in the short to midterm, and it takes time.

Finally, in order to develop the supply chain of the alternative fuels to reduce your carbon emissions or your carbon cost, it will take a lot of time. Believe me, I was working in the cement operations 2 decades back just when introducing this, and it takes a lot of time to state these regulations, local regulations and to develop the value chain. So we think -- and the same happened with other levers like clinker factor. So we think that the majority of this advantage from European Union producers to importers is going to be sustainable in the midterm.

But we have another, I will say, a very relevant aspect to understand the dynamics of the industry in the midterm. That is the overcapacity. So currently, in Europe, this means the European Union, Switzerland and the U.K., the capacity -- the clinker capacity is around 200 million tons. But the clinker needs currently are around 120 million tons, so a 30% to 40% overcapacity.

So this overcapacity has been because of the incentives related to maximizing the free CO2 allowances that we can get or the industry can get. In 2, 3 years from now, the market will grow, but as the clinker factor will be reduced, the clinker demand in the European Union probably will be very similar to the current one.

What is going to happen? What is the difference? So the difference is like, unlike in the past, after 2028 or 2029, it's no longer worthwhile to keep all the plants running because the fixed cost to keep those plants running is higher than the benefits of the free CO2 allocations that you can get after that year. So this will trigger or will accelerate rationalization, probably first among large players, that represents 50% of the clinker capacity right now in Europe.

And CEMEX, for example, has already begun. We have shut down 3 plants in the last years, and we will continue to optimize our cement footprint in the future, and we are expecting the rest of the players that probably will do the same. Again, this is independent on the discussions on what happened in the next phase of the ETS because this is happening in the current phase, at the end of the current phase.

But what has CEMEX been done in -- doing in during these years. I mean, CEMEX has been quite a long time decarbonizing. For CEMEX, decarbonization has always been a strategic value more than just a compliance issue. So we have reduced our emissions by 38% compared to the baseline on 1990, and it has been accelerated in the last years. In the 5 -- in the last 5 years, we have reduced our emissions by 19%.

So our current emissions is 507 kilos of CO2 per ton of cement. This figure that is around 430 kilos in net terms, because it's 507 in gross, 430 around in net terms, is the objective of the Cement Europe Association in 2030, without considering any carbon capture technology. So we are right now 5 years ahead of the average of the cement industry in Europe.

How we got here? Well, first, excelling in alternative fuels. Our alternative fuels substitution in our kilns in Europe right now is close to 70%. Our decarbonated raw materials that we're using in our kilns right now goes from 10% to 20% depending on the kiln, also with efficiency and clinker factor. Our current clinker factor in the European Union plants is 67%. And we still have some room for improvement because we can go down to 50% in the midterm.

So another important -- very important piece of evidence of our leading position is our bank of European Union allowances, free CO2 allowances, that we have. We have always had a surplus in each and every year. And currently, we have 2.9 million allowances of CO2 that is equivalent to around EUR 200 million that we have in the bank. This has been obtained just because of our decarbonization efforts and because of properly managing our supply chain in order to maximize our CO2 allowances.

This bank will cover our deficit for the next 4 years. I mean deficit because remember that with the phasing out of the free CO2 allocation, every year, we are not going to get free CO2 allocations for the 100% of our emissions. So this will cover the next 4 years. However, given that we made the efforts upfront, it will not influence how we are going to set our cement prices currently and in the future.

I think this waterfall represents very well how we are going to make that. As you can clearly see here, we have a cost advantage versus the -- not only versus the importers in the European Union, but also versus the average of the European Union producers. So our pricing is reflecting our cost, of course, but also our efforts in decarbonization that we did in the past, and we have to continue doing in the future because we want to maintain our competitive advantage.

What I can tell you is that as we speak, we are seeing really strong pricing characteristics in many European Union markets in the ones that we already announced at the end of last year or January this year, mainly in Southern Europe, we are seeing these very good characteristics. And in Central and Northern Europe, after the very harsh winter that we have had in the beginning of this year, probably we will see a similar behavior. And also the U.K., the U.K., remember that we'll have in place a similar system as CBAM, but from 2027, not from this year.

So as I mentioned before, we will continue to keep our competitive advantage in Europe and we will continue to invest in profitable decarbonization projects. Which projects? Well, we have what we call the traditional levers that is alternative fuels. We still have some room for improvement, from 70% go up to 80% of alternative fuels with our current footprint.

And we also, we will be reducing our clinker factor. For example, we are using, and I think it's another competitive advantage that we have, we are using our own admixtures that have state-of-the-art products to decarbonize in our road map of decarbonization of cement.

But we are also partnering with our customers in order to use novel concrete mixes that use cement with as low as 50% clinker factor, not only with the slag, but also with calcined clays. We have a couple of projects in Europe and in Egypt, and also with micronization.

These 2 technologies, calcined clay and micronization, the good thing of these 2 technologies is that, of course, reduces the emission factor, but also we are repurposing idle clinker kilns or idle raw mill grinding mills in order to produce those. So lowering our CapEx needs and contributing to the free cash flow conversion that -- objective that we have. So for the long run and for the long term, we will also -- we are also developing our options in carbon capture. We have 2 or 3 projects in Europe. The most advanced, you know it very well, is Rudersdorf, in our plant in Germany, and we are advancing on that.

But a very clear message is that we are not going to undertake any decarbonization project that is not going to create value. So financial metrics will be there before we have a positive FID.

So as a summary, this industry in Europe, the dynamics of the industry will improve because of rationalization, because of the introduction of CBAM, and CEMEX Europe has a lower carbon cost curve compared to importers and compared to the rest of the European Union producers. So both levers will help us to expand our margins. So as a result, decarbonization in Europe will continue to be a source of value creation for the company.

So that was everything. Lucy, I think I will remain for some Q&A, right?

Okay. So I'm hoping for a lively, but short discussion here. So we could open it up to Q&A either from the webcast or within the room.

Come on. Ben Theurer from Barclays. Oh, please say who you are and where you're from.

Lucy, you just did. Ben Theurer, Barclays.

Jose Antonio, thank you very much for that. Obviously, there's a lot of news going on in the back-and-forth. And it seems like that nobody really knows what the European Union actually should aim for, is aiming for. I mean you have certain member states that are pushing back on the different initiatives. So maybe help us understand what are those -- how do these different positions affect you on your decision-making process and how you prepare for that? I mean clearly, you do have the balance. I mean we're seeing price reactions short term. But just to understand a little bit better what the different nations want and what's the big complication under debate right now.

Yes. Thank you for the question. I think, of course, we have volatility in the very short term because of the discussions. What we do when we are analyzing projects for the future, of course, is sensitivity analysis with different CO2 prices that we have to take.

But this is not new. I mean 5 years back, the CO2 price was EUR 5, now is around EUR 70. So because in the end, the supply-demand is working, is tightening the supply of CO2 allowances and is pushing prices up. What is the level? We don't know. Nobody knows, but we make those scenarios in order to see what are the profitable projects that we can undertake.

Also take into account that some of the projects that we have, mainly in the traditional levers, are accretive for the company even in a scenario with other different CO2 prices, very low CO2 prices. For example, some alternative fuels are really accretive for us, clinker factor reduction or efficient programs. But yes.

So we don't see in the short term, we think CBAM is in place, CBAM is working. And any adjustments that will come probably will come, will be more for the phase after 2030. And it's not necessarily bad because that will give us visibility and predictability to make a proper capital allocation.

Alejandra right here in the middle.

Alejandra Obregon from Morgan Stanley. I was wondering if you can talk about what is the sort of level of pricing that you're thinking for the industry with everything that's moving, if there's any sort of indication inside of the company where that could trend going forward. And more importantly, there's a big exports business for CEMEX in Europe. So I was just wondering if you can talk about whether CBAM is an opportunity for pricing outside or whether that's a challenge. And what percentage of your business is exported today?

Well, we don't have that much business exporting outside of the European Union because many of the export that we are doing is inside the European Union, that, by the way, they are benefiting this year from the CBAM. So our exports within the European Union are increasing and expanding margins just because of the introduction of CBAM and the cost, the carbon cost, that the importers will face.

So that's why we are not -- I think you have another first question before the exports? Yes. And regarding pricing, what I can tell you, I mean, it's very early in the year, what I can tell you is that we are seeing in the countries that we already announced, in the Southern European countries because of weather conditions, that we already announced, we are seeing really good traction, price traction. And probably in future calls, quarterly calls, Jaime and Lucy can update you on how this develops. But so far, it's taking very good traction.

Those are, of course, our January pricing increases. We still have other countries that are -- that they announced pricing increases for April.

Correct.

We could pass it to Yassine quickly. Okay.

Yassine from On Field Investment Research. Just 2 quick questions on Europe. What is European cement as a percentage of CEMEX EBITDA? If you could give us a ballpark figure. The European cement EBITDA as a percentage of the Group, would be good to get a sense of what it is.

And the second question on the U.K. I think the CBAM here is delayed until 2027. Any update there? And any expected impact in the context where there is a bit of Turkish imports?

Yes. Well, the share of the -- I mean, the percentage of the European cement business in CEMEX is around 12% with the U.K. Continental Europe is 8% without the U.K. So I mean, the U.K. is progressing the conversations. CBAM will be in place from next year and the conversations with the government and the different sectors. I'm very positive that in the short to midterm, we can have in the U.K. a similar scheme and converging the scheme to the one that we have in the European Union.

If I could just maybe interject here. I believe that the 8% that you gave was for EU total. He was asking specific to cement, I believe.

Cement.

Yes, which I think is probably about 4%. Because it's about 50%, I think, of total EBITDA.

Cement, yes, it's around 8% without the U.K.

That's cement itself?

Yes.

Antonio, if you could tell us, if pricing power improves due to rationalization, do you see an opportunity to increase volume market share instead of protecting price? And if such, where do you see more opportunities in specific countries or regions where this could happen?

Well, this is -- we are seeing opportunities in the cement business in Europe. I think we are enjoying very good margins, and these margins will continue to improve. And we will be part of the rationalization for sure.

Being part of the consolidation, that is what I mean that probably we will have some opportunities. We don't have anything clear right now, but we will be definitely part of the rationalization.

I think we have time for one last question. Did you want to...

[indiscernible] that if we have [indiscernible] market shares that are around what we're targeting in every market, well, the good [indiscernible] is that [indiscernible] as we exercise our pricing [indiscernible].

And we will continue to work on lowering our CO2 cost curve relative to the rest so that, in the next phase, when they review that 10% of plants in the U.S., we continue to widen the gap between our benchmark, right, the European new future benchmarks and those of importers and average local players. Does that make sense? So that's what we're doing.

We're not going to give up our opportunity on pricing just for the sake of volume. But we're going to retain market shares, right, and move forward.

Would we ever gain market share? Well, that might happen only if others just shut down capacity because they just lose money. Somebody else will need, right, to supply that. But it is too early to conclude whether that is going to happen or not, right? So I hope that provides a little bit more of color to your question.

I think we may have time for one last question, if there is one, a fairly quick one. Do we have -- no?

Okay. Great. Then it's time for a break. So if we could come back at 11:00, that would be great.

Thank you. Thank you very much.

Thank you very much. Okay.

[Break]

Okay. Well, thank you for coming back. And I'm very pleased to introduce you to a new face for many of you at CEMEX, not new to us, however. Jeff Bobolts, who runs our U.S. Aggregates business. Jeff?

Good morning. I'm Jeff Bobolts. I'm the Senior Vice President for our U.S. Aggregates business. Prior to this role, actually, let me say that we recently reorganized this way shortly after [ Jaime's ] appointment. Prior to this role, I've run our Arizona aggregates business, our Florida aggregates business and was most recently the Regional President of our integrated Florida business. So that was cement, ready-mix excuse me, not cement, ready-mix and aggregate. On behalf of CEMEX's U.S. aggregate team and our 8,000 employees, thank you for being with us today.

So I'll start with an introduction to the business. I'll point out some strengths, and then I'll make a comparison with public data. There's a lot of really good public data available in the aggregate space. After that, I'm going to talk about operational excellence. You've heard of that from Jaime. We'll talk about how we expand margins organically and then how capital improvement makes a big difference in our business. Following that, we'll get into growth.

So in terms of an introduction, CEMEX is the sixth largest aggregate producer in the United States. We produce about 54 million tons of aggregate annually from the footprint that you see on the screen, starting in coastal Georgia, around to Florida, which is the #1 position for us, into the Alabama and Florida Gulf Coast area. This is new with our joint venture in [ Couch ] that Jose Antonio spoke about. Then in Texas, where we have our largest quarry Balcones, into Arizona and a solid position in California. I can't forget our operation in Newfoundland, Canada. This is a newer acquisition in 2024 of Atlantic Minerals. I'll talk more about that, but this material travels from Canada by water as far as Brazil.

Over that footprint, we're generally vertically integrated into ready-mix. About 29% of our volume goes into that ready-mix business. We have 90 total sites, 50 of which are operating mines, about the other 40 are terminals generally, so marine and rail terminals. When you look at the aggregates business, size matters and breadth, overall count and network matters.

But in many cases, what matters more is individual quarry size. The [ USGS ] coined the term mega quarry in the U.S. about 7 or 8 years ago. This is to signify a quarry that produces over 5 million tons per year. There are about 15 of these throughout the United States. CEMEX operates 2, our [ FEC ] quarry in Miami and then our Balcones quarry in Texas. Balcones is one of the largest construction aggregate quarries in the United States. This all leads to an EBITDA contribution of 40% of the U.S.'s total EBITDA.

I'll jump right into a comparison. This is all produced with public data. I'll explain the slide first on the vertical access, the rows that you see, I think the first 3 are generally pretty self-explanatory. The fourth row, cash gross margin. So this is unit gross margin for aggregate. You will see this reported in many of our competitors' public releases. Across the horizontal axis, so the first column on the left is going to be an average of 2 of the larger pure-play aggregate producers in the U.S.

On the right-hand side is an average of some of the larger public regional players. And we've got CEMEX right in the middle. And we believe that we sit comfortably in between these 2 sets of competitors. Primary reason for that is along the bottom, is margins. We believe that our asset base, our vertical integration and an excellent team provide us with a fantastic margin that has separated us from many of the regional players, and we're closing the gap to some of the blue bloods.

Next, I'm going to talk about operational excellence, 2 elements here, organic and then project-based. So first, the comparisons that you're going to see, we're going to do an evolution in many of these is going to be sort of 2020 to 2025, right? Over the period, our aggregates business grew our cash gross margin by unit by over 10% on a compound annual growth rate.

So how do we do that? We look at it from 2 elements: commercial and operational. On the commercial side, the most visible is obviously price. Over the period, we've grown the average selling price by 8% on a compound aggregate annual growth rate, please. So the next step for us is optimizing product market fit. So I told you that we move a lot of material into our ready-mix business.

But when we go to produce aggregate for the ready-mix business, we don't just get that type of aggregate. If we put 100 tons of feed into an aggregate plant, we probably get 60 tons of aggregate that's suitable for ready-mix. What our team excels at is finding the best and highest use for that other 40 tons. We might blend material together, blend different sizes to produce a specific aggregate for precast. We can scout the top off and produce a landscape rock or we might take the bottom end of a natural sand and produce something that makes a beach renourishment sand in Florida. This helps maximize our revenue and improves our working capital.

On the operational end, our cost has grown at 4% over this period. Keep in mind, this is going to be one of the heaviest inflationary cycles that many of us have seen. The 4% number is comparable or favorable to many of the public data that we see out there. As I mentioned, we recently reorganized the business. This has allowed us to streamline things to look at aggregate-specific best practices, operational efficiency, are we keeping our equipment operating at maximum throughput at all times.

We're also very excited about technology. Our teams developed digital road map. We're using drones to fly our stockpiles, ensure that we're sticking to our mine plans. We have semiautonomous haul trucks running right now. And we're using AI to develop maintenance task lists and push them directly to our operators' tablets in the field so they can get the work done right there. Why does that matter?

So technology is extremely important in the last 2, I'll use an example. So haul trucks and maintenance. Two of the largest cost categories in any quarry are going to be labor and maintenance. We're using this to leverage that. Now what does that do for us? Over the period, we've increased our price/cost spread, and we've increased our EBITDA margin from 28% to 33%.

Next, I want to talk about a success story with capital improvement. So first off, Balcones. This is, again, our largest quarry, one of the largest in the United States. This covers 4,000 acres. On site, we have a cement plant. We have an aggregate plant. We have a customer line film. We have customer ready-mix plants, asphalt plants. We load hundreds of railcars every day, and we load thousands of trucks. So this is an extremely impactful site for us.

Before I talk about the project, real quick and forgive me if this is redundant for anybody. But the aggregates mining process. So generally, we're starting on the upper left, and we have to extract reserves from the ground, from the mining phase. Then it's hauled to our primary crusher and keep this in mind, it's called a primary crusher for a reason.

Once we go through that process, we're going to go to a secondary crusher. We're going to reduce the size to something that's more suitable for the end use. We're going to sort it, we're going to wash it and put it in product piles. The 2 important things I want you to take away from this is, number one, this is a sequential process. You can't go to step 3 without having done step 2 and 1. And at a site and at a major site, everything goes through the primary crusher.

So at our Balcones facility, we replaced and upgraded that primary crusher. That's provided tremendous improvement in overall cost. I'm going to get to that in a second. One of the other things that's done has allowed us to optimize our reserve. So we are taking the full depth of our permitted reserve at this facility. When you look at the geology at Balcones, you can see this when you're in the pit. It looks like a layer cake. The top is suitable for construction aggregate. The next layer goes to cement feed. The layer after that third layer is suitable for lime. And then the final layer goes to road base and infrastructure, but all of it has to get through the primary.

The upgrade of the primary crusher allows us to work through this sequentially on a regular basis so that we're not double handling material, which costs money. It gives us the ability to take that primary down on a scheduled basis because we have enough throughput so that we can do preventative maintenance. Preventative maintenance is going to cost 3x less than corrective maintenance if we have a problem. So there's a tremendous value in just that.

When we look at variable costs, these are generally -- this is labor, this is power, and this is maintenance again. We're saving 28% in the first full year of production with our new primary. This has led to almost a 10-point increase in EBITDA margin at our largest facility. Capital improvement makes a tremendous difference in the Agri business. And I'll finish with growth.

So you heard Jose Antonio and Jaime talk about growth and how our team is excited to be part of that. One of the first things we think about is reserve base. And up until about 2020, as you know, CEMEX was working hard to improve our capital position to get back to investment grade. So many of -- most of this journey started right around 2020. Start on the left-hand side of the screen, and we work our way to today. Over this period of time, when we think about accelerating aggregate replenishment.

This is effectively acquiring raw land adjacent to our current quarries that we can then convert into mineable land. The next step, projects. So this is an aggregate project in a market we're already doing business. Raw land away from an existing quarry, we're building a plant there. Many of these are just coming online right now. We've got a video we're going to show you. We think we're very excited about these projects. And then as you've heard, we've begun an M&A activity.

So in 2023, moving into '24, our first opportunity was the acquisition of [ Atlantic Minerals ]. The combination of these 3 avenues have led to a net improvement and a net add to our reserve bank of over 400 million tons. Now keep in mind, this is net of the 50 million, 55 million tons we're consuming every single year. We're very proud of that. When we think about reserves, the first thing we present, we have Jaime has talked about the business performance review.

We've got our business performance review next week. The first thing we will prevent -- present is safety. The very next thing we present is reserves every single time. So going over to the left-hand side of the screen, replenishment. Again, 2 pieces: acquiring raw land, and then we have to convert that land into mineable proven reserves. That takes permitting, that takes drilling, that takes various different environmental approvals. We have geologists and we have experts in permitting on staff available to do that, and we've demonstrated the ability to move that.

Next, projects, and we're very excited about these. As I mentioned, we started a few years ago on this. This adds to our reserve bank and also gives us growth. I told you that size matters in aggregates. Location matters, too. So our 4 quarter sand mine is just outside of Orlando, Florida. It's the closest site to many of Orlando's biggest theme parks. You can actually see the castle at one of the theme parks from the top of the tower.

So location matters here. Buckeye, Arizona. This is a site that will be operational in the third quarter of this year. It supports the west side of Phoenix. Our ready-mix business in that area does many high-tech chip plants, so we're excited about this. And the next one is Immokalee, Florida. This is a sand mine in South Florida, and we're highlighting some of those sand mines because the margin is so strong. These are some of our best businesses.

And next, moving over to M&A. A big focus for us right now. So we have a dedicated U.S.-based aggregate-focused M&A team on staff working things through this pipeline. We're focused on small to midsized companies. We have demonstrated the ability to be flexible and work through acquisitions with small family businesses. That's an important piece for us. And I'll highlight 2 of them, Atlantic Minerals and Couch.

So before I do, let me just comment on some of the synergies that we believe we can bring. Beyond typical operational savings from a synergy basis, which we've demonstrated the ability to execute on some of these, we can also bring 2 unique elements. Number one, we have a -- excuse me, we have a big ready-mix business.

We consume a lot of aggregate. I told you that 30% of the aggregate that is produced from our business gets consumed by our internal ready-mix business. That only satisfies about 60% of their demand. So there's another 40% out there. This is millions of tons that we purchase on the external market. When we think about acquisitions like this, we have the ability, number one, to be a customer, so we can approach in a little bit different fashion, right?

Next, we can provide volume, which can reduce fixed costs and provide leverage and performance there. We've done that in both of these cases, [ Atlantic Minerals ] and [ Couch ]. The other thing we can provide is logistics and cross-selling. We talked about 40 terminals total. The other piece is when you think about it, a customer that buys cement, most customers that are buying cement will buy rock and sand as well. This provides us an opportunity to sell to a customer base that we already have.

Two great examples of this, Atlantic Minerals. And Atlantic Minerals, the East Coast of the United States coming from Canada. The example here is Savannah, Georgia. We've had a sand mine in Savannah, Georgia for years. Our customers asked us, can we buy rock from you? We now land [ Atlantic Minerals ] rock in the Port of Savannah. We've increased our revenue stream in this market. [ Couch ] Aggregates. This business starts in the Alabama area and connects by barge into the Gulf Coast of Florida. Couch was working their way east along the [ Panhandle Coast ] of Florida, east of Panama City, they were looking for another avenue and another port to come into.

CEMEX already has a cement terminal in an area called Freeport. We now land couches aggregate at that terminal as well, combine it with cement, and we've increased the market base there. So that's a tremendous opportunity for us to drive down the multiples of these acquisitions. I should also comment that this isn't necessarily just a short-term growth story. When we think about [ Atlantic Minerals ], it has a tremendous reserve base, number one.

Number two, it's unique in the fact that it's one of the only large-scale production facilities on that entire East Coast that is directly on water, as you can see in the picture, has a ship loader. So this material can travel even farther than if you're moving it from inland. And again, it goes as far as Brazil. A quick video to highlight some of our aggregates projects.

[Presentation]

So what to expect from us and looking forward? Number one, we believe we've got a very solid foundation with the current aggregates business in the United States. We've got a great asset base. vertical integration makes a difference, and we've got a fantastic team of mining engineers, geologists, miners, commercial and logistic folks on the ground making this work.

Next, those individuals and those teams have been focused and will continue to focus on operational excellence, improving our margins at both an organic basis and then working for capital investment and improvement from that side of things. And we're committed to continue to drive growth. We love the footprint that we have. We're excited about that opportunity to grow, and we believe that we provide some unique opportunities to drive synergies and reduce those purchase multiples.

Thank you. With that, I think Lucy is going to take us through some questions.

Thank you, Jeff. Before we begin on the Q&A, this is just a great example of that earnings quality and improving earnings quality that Jaime was talking about. And I know you all saw that number of 40% of U.S. EBITDA in the first, but aggregates is rapidly becoming our biggest business. So just to keep that in mind. And now if we could take some fairly quick Q&A. Ben, and then I'll get to you, Paco.

Ben Theurer, Barclays. Real quick on the M&A side in order to expand and you've talked about the need to replenish, how would you describe yourself the positioning of CEMEX and the ability to execute on M&A, just given the valuation discrepancy between where CEMEX is trading at versus some of like the pure-play national peers obviously do get different multiples. So where is the competitive edge that you try to play in order to be active on M&A?

Sure. Thanks for the question, Ben. As I mentioned, we're trying to drive that purchase multiple down through network synergies and through many of the things that we're doing. Are we going to go and make a big large-scale acquisition? Perhaps not. We may bolt-on individual elements within most of the footprint. We have the opportunity to go outside as well. But we think we have that opportunity with the synergies that we laid out, specifically and then with the expertise that our team brings.

And if we get a microphone over to the corner to Paco.

Francis Suarez from Scotiabank. So the question is, to what extent you are kind of constrained of doing acquisitions within your footprint or adjacent to your footprint? And to what extent would it be worthwhile building new ecosystems away from this footprint and considering potentially perhaps the connections and the connectivity on the river system in the U.S.

No, thank you. That's a great question. I think when you think about connectivity, it varies from region to region depending on what that logistics network looks like. And the one thing we're encouraged to think about is not right next to you in a network. How far can material travel? How do you connect to that? And perhaps, is there a step in between that needs to be filled in?

I think Anne Milne over here on the right.

Okay. Just following up on some of the other questions, and I think a lot of this you discussed in your presentation, which was very enlightening, thank you very much, was some of the other conditions for expanding in the aggregates business. You're at 29% now. How much higher do you think you can go in that number? Are some of these people clients of yours? And how big do you think is the universe for acquisitions or bolt-ons in the U.S.? And I know this is the U.S., if there's anyone that can comment on outside of the U.S. aggregates business, that would be helpful, too.

Maybe take the first point and then Jaime can cover the rest of the world.

Sure. So first off, when we think about vertical integration into ready-mix, I mentioned that they're consuming 60% of their material from CEMEX's aggregate business. I don't think we want that to be 100%, but there are specific areas where that's obviously an average, right? In certain areas of the United States, it's much higher. In certain areas, it's much lower. It's an easy way to look at where those opportunities are to integrate in that level.

The other piece as it relates to the ability to acquire is the vast majority of the aggregates business is still a fragmented independent base of operators throughout the United States. There are certainly some large markets that have been consolidated. But what we are really looking at is some of those smaller areas in which you haven't seen that enormous consolidation cycle. So we believe that, that provides plenty of opportunity out there. And then I'll defer on the ...

Can we get a microphone ...

Regarding elsewhere, we have a very solid aggregate business in Europe, and that's the region that because of similar regulatory environments, there are entry barriers and we have a very good team, good assets, and we do see opportunity, right? Why shouldn't we not become the [ Vulcans ] and [ Martins ] in Europe. So we're also assessing those opportunities. However, for the time being, priority is the U.S.

And maybe if we could just pass the microphone to Alejandra.

Alejandra, Morgan Stanley. I guess a follow-up on vertical integration. So you mentioned all these analysis into making the most value out of your reserves out of the rock. So just wondering, I mean, we're seeing a lot of pricing power in aggregates. I'm assuming free cash flow conversion is higher for this product, maybe returns as well.

So when do you think vertical integration makes sense into the downstream when perhaps pricing power is not as high? And when and where will it not? And what are the reasons or the rationale for vertically integrating if that sort of makes sense?

Sure. That's actually -- it's a great question. You saw something in Jose Antonio's presentation when he was talking about urbanization solutions. He mentioned asphalt. So one of the other largest consumers of aggregates is going to be asphalt. CEMEX is not in the asphalt business. Generally, the aggregate that is used for ready-mix and asphalt depends on regionally, sometimes it's the same, sometimes it's different.

So it's important from a product mix standpoint that we're focusing on multiple different segments and end uses. We also think about just our overall segmentation, how much is going to infrastructure, how much is going to residential, how much is going to public. And we're constantly balancing all of that when we think about what is the best and highest use. As I mentioned, we don't necessarily want to -- or we don't want to sell 100% of our aggregates into our internal ready-mix business. Right now, we sell 29%. So we see we've demonstrated that flexibility in that respect.

Thanks, Jeff. And if we could get a mic to [ Garrett Greenblatt ] from JPMorgan in the back row, please.

As we think about the next 5-year outlook or so, how are you thinking about the price/cost spread, the puts and takes to drive that forward and close that gap you have versus national peers?

Great question. We continue to push. We've seen that price/cost spread. We've seen a positive variation in that. We don't see that closing to nothing in any way, shape or form. As I mentioned, our teams worked very, very hard on the pricing side of things. You've seen the outlook there, I think those outlooks are generally different than some of our other product lines.

The largest concentration that we have, I believe, in the United States in infrastructure sits in aggregates. So that's generally supportive of top line price. And then on the cost side, I think over the period, we've demonstrated solid cost control. It's focus for our teams up and down. And I think we also have the ability to continue to leverage some capital improvement and technology in the business to maintain that spread.

Okay. The last question is Gordon.

Gordon Lee from BTG. A quick question. A competitor of yours that used to be in the U.S. market that's no longer in the U.S. market is speaking or initiating a project where they intend to basically from quarries in the Dominican Republic and Puerto Rico sell to U.S. Gulf Coast markets. And they think that business can be $100 million, $250 million in EBITDA by 2030. So one, I wonder whether you think that's feasible. And two, whether there are similar assets or assets in CEMEX's [ SAC ] footprint where you could maybe think of replenishment through them?

Sure. Thanks for the question. I won't comment on what our competitors specific plans are. What I will say is that CEMEX ran through a similar analysis some years ago. As you know, we have operations in the [ SCAC ] region and in those areas. And after going through that analysis, the determination was to acquire the Atlantic Minerals Quarry in Canada. So at that time, we found that, that was a better avenue for investment than making that move.

Thanks, Gordon. I think you're at the wrong Analyst Day. Okay. Thank you very much, Jeff. Okay. And to wrap up, I'm very happy to welcome to the stage, Maher Al-Haffar, our CFO.

Thank you very much, Lucy. Good to see everyone. It's a very nice intimate room, a smaller number of people since we have another meeting afterwards, but it's very good to be here with all of you. This has got to be one of the most exciting analyst meeting that I have attended. And I can tell you, I've attended many of these over the last 25 years of my being at CEMEX. So it's a really exciting time. Not only are we coming from a period where several of our markets have underperformed and now are positioned to outperform, but also because of all the things that my colleagues discussed from our CEO to all of my colleagues discussed on the things that we are doing.

Today, I would like to talk about our financial strategy and center stage of our financial strategy is capital allocation. This business is a I don't want to say a cash printing machine, but if you manage it properly, it is a cash printing machine. And the challenge becomes how do you allocate capital for maximum value to shareholders on a per share basis, which is very important.

Now before I get into that, I thought I would like to -- and maybe at the risk of being a little redundant, highlight some of the levers that we are managing in this 3-year sprint. And we have 6 of them. We have many, of course, but these are the 6 levers that are moving the needle the most. Number one is managing growth; number two, earnings quality; number three, free cash flow; number four, improving return on capital employed. And then, of course, capital allocation discipline and then the balance sheet, which, as Jaime said, the maintaining an investment-grade capital structure through the cycle is absolutely nonnegotiable.

Now in terms of growth, because of all the things that we're doing, because of project cutting edge, there's tremendous operating leverage that is embedded in our business model throughout the Sprint. If you take a look at top line growth, we're expecting 5% growth per annum for sales. That is delivering 10% growth in EBITDA, 14% in EBIT but very importantly, 20% of free cash flow growth during the period. And it's very important to note that, that free -- and I will talk about free cash flow in a second.

And then earnings quality. 85% of our operating cash flow is coming from the U.S., Europe and Mexico. That's not to say that we're not -- we don't have a fantastic business in [ STACK], but those are businesses where we see maximum amount of growth in the future and where we see earnings quality being the highest in the future. And if we take a look at the components, both the U.S. and Europe have been growing over the last 5 years by mid- to high single digits. underpinned by very important demand in infrastructure and residential in those markets.

If we take a look at Mexico, which some investors sometimes have there -- have a little difficulty with, that has been -- that has proven to be a terrific market actually. If you take a look at our EBITDA growth over the last decade, it's been a CAGR of 4%. If we take a look at the CAGR EBITDA growth of Mexico, this is in dollar terms, by the way, because everybody is concerned sometimes about the currency risk and volatility and all of that. In dollar terms, Mexican EBITDA over the last 5 years has grown by 9%. And of course, the pricing of our products have been performing very reasonably in excess of some of these numbers in Mexico.

Now if we take a look at free cash flow, as Jaime mentioned and as several other my colleagues mentioned, we're targeting a 47% free cash flow conversion by the end of '27. This is free cash flow from operations, okay? This is not the free cash flow number that Jaime highlighted. I wish Jaime was with us here in the room. There you are. Sorry, I didn't see you. I was looking over here, I didn't see you. And as Jaime mentioned, my favorite free cash flow number is the free cash flow number that is available to distribute to shareholders, to lenders and to invest in. And that's what Jaime said.

And if we take a look at that free cash flow conversion rate, the equivalent of the 47%, it's actually 38%, okay? So we're looking at 38% conversion. Now I think it's very important to put it into perspective because if we take a look at where we're coming from, in 2024, that number was $650 million. So 21% conversion. That number in 2025 was actually up to $960 million. And I don't want to go through every year, but if we go from '25 to '27, we're talking about slightly under 50% growth in that free cash flow period. The cumulative amount from the '25 to '27 is close to $2.5 billion, and I will talk about that. So these are powerful numbers that are going to fuel and will continue to fuel our growth going forward.

Now very importantly, and something I did not mention in the growth, which Jaime mentioned and several other people alluded to, is that more than half of our growth is coming from self-help programs. That is extremely important because it turbocharges the free cash flow conversion because after initial investments in order to put into place those self-help programs, we essentially -- everything goes down to free cash flow in the following years.

So it's very important that, that is one very important tool of really improving the leverage of growth and free cash flow. And of course, we are going to expand margins by close to 200 basis points for the period. So top line growth, earnings quality, free cash flow conversion rates and healthy growth very important. And then we take a look at return on capital employed. As Jaime mentioned, we're looking -- we're targeting about 170 basis points improvement. And of course, we're working on both sides of the ratio, right, the numerator and the denominator.

I'm not going to go through the BPRs. I've been fortunate that Jaime has asked me to participate. It's translating one of the biggest contributions is that I'm adding a lot of miles to my flight programs because we have 8 of these things during the year. I have never learned and gotten a feel for the business as much as I've gotten through my participation in the BPRs. It's extremely -- it is -- this whole process, in my view, is translating into a very exciting foundational transformation of the way we do business in the company.

I feel that everybody is behaving and adopting a very strong owner's mentality. And it's terrifically rewarding when we see all of us benefiting from how the market is valuing our stock. I don't know if you're aware, but roughly 750 people in the company, top levels of management, both at the global level and in the U.S. received stock compensation, 750 people. And all those people must be ecstatic over last year because they feel like owners. They're making money like owners, and they are impacting that process, which is extremely important. It's a very positive reinforcement on management across the company.

In terms of the return on capital employed, as of the end of last year, we have now data, granular data, ROIC, NPAT, statutory tax on a per asset basis, per plant basis. We never had that before. So in the past, when we looked at some parts of our ready-mix business, we looked at it as clusters or our aggregates business as clusters. Now we are able to go down to plant by plant and able to make surgical decisions on what to do with some of these assets with a view of substantially improving return, which is happening.

Capital allocation, as Jaime said, center stage at the capital allocation is returning capital to shareholders. And also center stage is making sure that we are looking at total shareholder returns on a per share basis. That has really never been on the radar screen of management in the company. And that's extremely important because it makes a very different way of looking at the business.

Then balance sheet. Balance sheet, we have been working very hard over the years to reduce debt, improve our investment-grade ratings. We think we have more to come. My belief is that we should be a solid BBB-rated company through the cycle, through the cycle, very important, and that is also nonnegotiable.

Now in terms of the capital allocation framework, it really starts by anchoring our position by saying that we need to always have an investment-grade capital structure that actually improves. We want to be -- we aspire and we want to be and we're aligning people to be best-in-class stewards of capital. We have -- we are going to undertake bolt-on M&A acquisitions and very selective growth investments, as Jaime mentioned and several of my colleagues also have mentioned, based on very strict return criteria. And whatever that criteria is, we will always benchmark. It's like having an angel on our shoulder. We will always check with the angel.

How does that compare to buying back our stock. Now that does not mean that we are going to, for long periods of time, not do anything and buy our stock. We'll have a balanced approach, of course. But clearly, we are not going to chase deals, and we're not going to invest in transactions that do not compete with the return of our stock.

Now we also realize that we also are very conscious of the fact that when we're buying back our stock, that has an immediate impact to shareholders. This is the lowest risk activity that we can take in terms of deploying capital. So anything else that we do, we have to make sure that we have a proper buffer of higher return in order to make the cut to be investing.

So that's a conversation that will be an extraordinarily difficult, tough conversation, and it will be had at very -- at the most senior levels of the company. Jaime said risk-adjusted. That's what I mean by risk-adjusted, not risk-adjusted because of currency, of course, currency is one of them, but risk-adjusted by execution, adjacency, pricing strategies and so forth and so on. Always, like I said, we'll talk to the little angel on our right shoulder, -- does it make sense when we compare it to investing in our own stock based on metrics, which we can address in the Q&A.

Then the other thing that is also very new foundational in my view, it's a structural pillar, as Jaime said, is returning cash to shareholders. We -- as you saw this year, we announced a 40% increase. We did not grow 40%. As you saw, we barely grew, but yet we increased dividends by 40% for the year. We announced a $500 million share buyback. As Jaime said this morning, we're happy it's actually not $100 million.

Unfortunately, I got a little upset with our Treasurer this morning. I said, why couldn't you bought a little bit more? It was $99.9 that we bought. That's roughly at an average price of $12.70. I just did the math on the back of the envelope based on our -- the most recent FX rates. But $100, we did. We continue to believe there's tremendous value in our stock, which we will take a look at in a second. And lastly, we are super committed, as Jaime mentioned, to return by 2020 -- 2030, I'm sorry, returning between 40% to 50% of our free cash flow to shareholders through the combination of growing -- stable growing dividends and share buybacks.

Now in terms of investment strategy or financing strategy, like I said, investment grade, nonnegotiable. We've done a lot. And I know there's a lot of shareholders that have been very frustrated with us because we've paid a lot to our debt. Just to put into perspective, in the last decade, we reduced our interest expense by $850 million on an annualized basis. In the last 5 years, we've reduced it by $200 million. And I expect that we should be able to, in the foreseeable future in the next 2, 3 years to reduce it by another $200 million. That will be due to a combination of gross debt reduction, improvement credit risk, liability management that reprices our debt stack. And all of that should hopefully translate to a solid BBB rating.

One of the key metrics with one of our rating agencies, S&P, is funds from operations. We are probably going to get to that metric in the BBB category by probably the first half of '27. And I'm very excited. I'm looking forward to maybe getting them to cross over. The other thing is that given the Sprint and the results of the Sprint, that is likely to mean that we will no longer need the subordinated notes as part of our cap structure in the medium term. So that will also be another source of saving.

Interest expense has been the big kind of steal ball in the ankles, frankly, for so long. And last year was 16% of EBITDA. Most of our competitors are well below 10% -- so that's what we're shooting for. We need to get to below 10% as a percentage of EBITDA, and we should be making an important step in that direction. Now you might say, well, why is this so important? And of course, we're targeting 1.5 to 2x leverage more on the lower end of the side. And you may say, well, why is that so important for our shareholders? It's super important.

Everything else being equal, every dollar of debt we pay should go to shareholder value, right, unless our multiples start going down, right? If they're going up, there's even more leverage. The other thing is lower leverage is lower risk, lower beta, higher -- lower cost of equity, more access to a broader shareholder base. So it's super important. And that all should translate to a better total shareholder return for our shareholders over time.

We think we have a very clear plan to get there. We're looking at transforming our maturity profile more in line with an IG investment grade. We're looking this year to double the average life of our debt. Our average life right now is somewhere around 4 years. We're looking to probably be 8-plus years, very much in line with most of our global peers, especially our U.S. aggregate peers.

How do we do that? We need to do that through proactive liability management. We need to do that by deemphasizing funding through banks, which also is an is an IG characteristic, by the way, and going to the debt capital markets. And for that, we think it's extremely important to become an SEC-registered issuer. So we are planning to go to the SEC registered market.

Now you may say, why do you need that? I mean you've been very successful in getting debt in the 144A market. The 144A market is about $6 billion to $7 trillion. That's a total market. The SEC registered market is 10x that much. It's $60 million to $70 trillion with a much broader investor base, especially at the retail level. So we think we're going to get much better risk price discovery in the SEC registered market, not to mention speed of execution, lower cost of execution and tenure. We think we should be able to get very important tenor. Now on the FX risk, we will continue to manage our currency exposure through our hedging strategies. Now it's very important to highlight here, what is the philosophy of CEMEX hedging strategy? Our strategy is to dampen the volatility that is given to our operators from a pricing perspective. So it's giving our operators in Mexico giving [indiscernible] and his team 12 to 18 months to recover prices in dollars. That's what we are trying to do.

If you take a look interestingly enough at earnings out of Mexico, they have been substantially dollarized. I mean if you take a look at the peso FX behavior in the last decade, it has depreciated by 0.4% CAGR, 0.4% CAGR for 10 years. In the last 5 years, it's actually appreciated by 2%, right? So it has not been a headwind. It's been a tailwind. And if it has been a headwind, it's been a minor headwind. So quality of earnings in Mexico are super high, super positive, and we're very excited about that. And then if we take a look at the blueprint for our capital deployment, I'm purposefully not going to address the criteria that we're going to use for growth CapEx because growth CapEx has been substantially deemphasized. We can address that in the Q&A. I think bolt-on M&A is really where we want to be for a number of reasons.

One important reason is it's much -- has a much higher certainty of adding to EBITDA of transforming our portfolio and improving our free cash flow and making sure that we go to markets where we want to be in the shortest period of time. Obviously, if we take a look at the right-hand side of the slide, the first thing is strategic fit, right? I mean -- and I'm not going to go through that because I think one of my colleagues exhausted that. But clearly, first thing we're going to do, we're not going to do anything crazy. We're not going to do anything beyond the strategies that you heard this morning. And then when we get through financial criteria in making investments #1 criteria. We need to have earnings per share accretion and free cash flow per share accretion in year 1, very powerful filter for investments that we're going to make. The other criteria that is extremely important for us is a return on capital employed being over weighted average cost of capital within 3 years of acquisition.

For virtually all investments with some acceptance. If we're talking about aggregates investments in the U.S. in particular, depending on strategic importance, fit, quality, many other things that may be very localized, we may tolerate slightly longer than 3 years achieving that target.

And then lastly, we don't want to be in a situation where we're paying higher than single-digit multiple EBITDA after we get synergies. And when we took a look at the Omega transaction that Jose Antonio was announcing today, we literally ticked all of the above. including the comparison to accretiveness to the profitability of our stock price given where we stand today and given our valuation levels today in the market. And then the next thing is, of course, the shareholder commitment. As Jaime said, it's -- again, it's another one of those nonnegotiables, 40% to 50% distributions to shareholders by 2030 in the form of dividends and share buybacks. And we're putting our money where our mouth is, like you said, after the -- we literally started -- I think we reported on a Thursday. And on Monday, our quiet period, was over, and we already bought $100 million worth of $99.9 million worth. We are committed to having a steady, reliable and progressive dividend payouts in the future.

Of course, when we do buybacks, we're always keeping an eye on are we buying within intrinsic value? Are we delivering real value to our shareholders? How does that compare to alternative investment strategies. But clearly, there is a preordained balance that we want to deliver to shareholders, which is a 40% to 50% return to cash to shareholders. That's something that is almost preordained, right? It's not if we have this. We are going to do that as a primary as a primary objective.

Now the story doesn't end here. What I wanted to share with you also is that there's ample capacity to accelerate growth to shareholder returns in the next couple of years. We're expecting, as I mentioned earlier, that free cash flow number, we're expecting to generate $2.5 billion, I'm sorry, free cash flow in '26 and '27. I'm expecting that we would end the Sprint period with leverage that is more on the lower end of our leverage target, around closer to the 1.5x. So if we want, for whatever reason, to releverage because there's an absolutely fantastic opportunity to be had or opportunities to be had that would add another $2.5 billion of leverage capacity. I'm not suggesting that that's what we plan, intend or have something to do. But if you're wondering what else can we do, how much capacity do we have? We have close to $5 billion of that is for discretionary use for investments, for return of capital to shareholders, either through dividends or through share buybacks.

So we feel, in addition to the Sprint improvement and growth organically and through our self-help, we have this additional very powerful lever to do that. Bottom line and summarizing, as I said earlier, we are -- I believe we are going through a really profound transformation in the company, changing how people behave. And I think that by having best-in-class operational KPIs, and we are doing that, by the way, I mean we can't go to [indiscernible] managers and ready-mix managers -- ready-mix plant managers and say, I need you to give me this TSR. We have very clear KPIs, operational KPIs that translate or that map back to all of our EBITDA, EBIT, free cash flow conversion and growth and return on capital employed. We believe if we achieve all of these things, we should demonstrate to the world a much more capital allocation discipline, and that should hopefully translate and be recognized by the market through improved valuations and that should contribute very favorably to total shareholder return.

Next slide I would like to share with you -- this is not just a slide that I like very much, but I think everybody likes the slide. Not only we've beaten the market, we've also delivered 106% of TSR in the year. Now we definitely don't want to be overly smug or overly happy. We want to be cautious. We're coming from a lousy valuation that we had Fortunately, we've improved the valuation by 2 turns. We have a lot to do. We have a lot to prove. We have a lot to be consistent of over the next 2 and beyond that. And hopefully, as we do that, we should be able to converge to the players that are doing most of the things that we are aspiring or targeting to do. I really believe that we have a very powerful strategy. We have a fantastic team. I think we have a very precise plan to deliver, and I really believe -- we believe that the best is yet to come, and especially in the Sprint. Thank you very much.

[indiscernible], don't go anywhere. So if we could get the chairs up and if we could ask Jaime and Jose Antonio to join us on stage. Thank you all. Okay. If we could get a mic [indiscernible], please here right here. We have time and ready to go. Okay.

[indiscernible] what the expectation for next couple of years in terms of employee investments. The criteria that Maher mentioned seems very solid. Obviously, that might limit some opportunities. Aggregates in the U.S. is quite fragmented. But most likely, you have to go for family businesses was relatively, like you said, bolt-on acquisitions, smaller acquisitions. So any color you can provide as to the opportunities that you are seeing and the ability to deploy some of that firepower that was mentioned by Maher in the presentation?

Yes, I'd like to elaborate on that. Carlos, thanks for the question. We are developing the muscle. In the past, we didn't do any M&A as we were delevering. We have rebuilt the teams -- and we have a strong team in Monterrey and even a stronger team with Jesus. We hired a M&A had separate from a strategic planning, solely dedicated to knocking on the doors and execute deals. We've been working in the last years to build the top line and using the same tools as anyone interested in our space, right?

We are locating and identifying appropriate partners to target. And we have a list of 100 plus. And our idea is to continue strengthening that pipeline. And as my team and I elaborate today, we buy a lot of aggregate that gives us a direct relationship and we know the quality because we are consuming it in our ready mix. That gives us a little bit of of momentum, at least opportunity, right, to relate to those partners who supply today, right? So that will allow us to engage meaningfully, right? And hopefully, we will make good strides. And then we're also looking beyond where we do business today because in aggregate, although the most energetic things are the ones closer to home, as Jeff highlighted, we do want to grow beyond in our footprint. So we need a bit of time. We are developing and sooner or later, we will gain traction in Carlos, and that's what we're working on.

Can I just add one more. The other comment is that we have broader options in addition to aggregates, although aggregates is a priority. The U.S. is a priority. We did mention that in adjacent business, we're looking at developing and growing for different businesses, construction chemicals, concrete products, mortars and aggregate asphalt. So that gives us more avenues to pursue. In the case of mortars, for example, we announced the acquisition today of Omega $23 million. We have a plan in place to scale that up, and the ambition is in a relatively short period of time to grow that from 20-plus to $100 million EBITDA. So I think that by broadening our options also gives us, let's say, more optionality in terms of how to pursue the objective that you described to us.

A follow-up, if I may. Jaime, you mentioned also that in Europe, obviously, you are very strong in that regard. And that you're not really now the possibility of becoming the Vulcan or [indiscernible] of Europe. So does that mean that you're also looking, I guess, at opportunities in Europe, and I would presume that's a much more consolidated market? Or you think there's also some family businesses that you could consolidate?

In our markets where we operate in Europe, the aggregate industry, if your question is around aggregates is more fragmented, even more fragmented than in the U.S. Having said that, you need to go micro market by micro market. Unlike in the U.S. because of the scale of some of the quarries where they aggregate travel further. That's not the case in Europe. There are very few large queries is a different game and aspects differ. Well, in the U.S., we watch, not necessarily is the case in Europe.

So when you look at micro market by micro market, the way we think, Carlos is look at a metropolis want demand, right, exists, the growth demand expectation, and then we look around it, and we try to consolidate by micro market. That's how you build a strong portfolio. But that, in Europe, right, it provides ample opportunity. The reason why today, we are first prioritizing the U.S. right, is because we have a great footprint because we don't want to be late, right, in that process. We have more time to do that in Europe. And also because, again, for a great reason, which is growing in the U.S., we want to dilute, right, if the weighted of Mexico to our portfolio in terms of EBITDA, EBITDA and free cash flow. And we want to grow in dollars in the U.S. We have the team. We're developing the muscle. It will take a little bit of time. but we know our targets, and we are actively engaged in.

In fact, I'm going to -- next week, in the next 2 weeks, I'll be on the road engaging personally as well with many family-owned owning aggregate assets and a few others around mortars. So that's how we are beginning the journey. Thanks for your question, Carlos.

I think, Jose, [indiscernible] did you have a question if we get a mic over here. Thank you.

Jose Espitia from BBVA. Well, my question is in the context of CEMEX transformational change, what are the specific milestones in terms of operation or market signs is a company monitoring to determine if a structural move, such as U.S. listing will be appropriate for the portfolio in this region?

Allow me to take that question. I am aware of capital market structures. And we are following what others have done. -- the way I think is that for the time being, there is no best substitute to a strong shareholder returns, but to deliver in our Chapter 1 transformation on the metrics that we have provided to you. So relentlessly, for the time being, we're going to be working on delivering strong TSR through operational excellence, maximizing free cash flow fully loaded, right, getting to our best peers benchmark performers.

There is a Chapter 2. And in that Chapter 2, there is a tool kit. At tool kit, there exists some capital market structures, right? Today, they're not on the table. But in a journey, everything we're doing will prepare the company, right, that at the right time that type of capital market structures could be an option. But today, we're not deviating our attention. We don't want to get distracted. We're going to deliver on what we said we would. Thanks for the question.

Okay. Maybe we could just go right next to Paco, that would be great.

Francisco Travis once again. Congrats on this wonderful transformation on the business culture and CEMEX, it's amazing. It's exciting. I think that my question relates present with that. To what extent if you can elaborate to what is similar and what is different to what Holcim does in terms of the P&L leadership and what works me a little bit in these times where lots of your peers have also substantial free cash flow generation. To what extent this empowerment at the macro level that you are creating within CEMEX, do you feel comfortable with how you are precisely given enough compensation for these leads that you have in CEMEX? And how is your engagement on the ground when you see these guys and the response on them and if you think that they are properly compensated?

Francisco, thanks for the question. I think in Pemex, we have a best-in-class approach to compensation. I think that beyond our industry, we have access to the right data. We define our compensation based on market compensation and market practices, right? We use bands, and then we use penetration, right? And we have, obviously, basic and then short-term and long-term incentives.

And I'm very happy that you asked the question. Because in my presentation, I said that as part of transformation, we are changing, effective January 1, our compensation scheme for the close to 800 owners of our stock. And what we did was to introduce the new metrics, EBIT, free cash flow conversion, ROIC over WACC okay, [ and CO2 ]. But also for the executive committee, that's short term. Cash and then for the executive committee, we also introduced free cash flow per share, all right? Why? Because again, right, we're benchmarking cash usage, risk adjusted for shareholder returns.

So the executive committee members will apply that capital allocation framework, understanding that free cash flow per share matters, and that connects to share buybacks as a benchmark. So that's already in place. Furthermore, we have short-term cash, short-term restricted stock, and then we have long-term restricted stock. The long-term restricted stock is a 3-year performance, it totally linked to total shareholder return, TSR, relative to a bunch of peers and then the Mexico [indiscernible]. So with that -- with all those modifications, right, we are no longer looking at EBITDA and top line is about EBIT, it's about managing the asset base. Owners mentality is about ROIC, free cash flow conversion and then TSR.

And just a follow-up on that. If any differences or similarities with what Holcim is doing on their P&L leadership program because tens of resembles and how we empower as well their leaders.

Although I read a lot about our competitors, I might not have the dates to be able to respond to that about what, Francisco, you need to understand on our end is now our P&L leaders have EBIT, free cash flow conversion targets and ROIC over WACC targets unlike in the past. And now they have received, as you explained, Maher, all those details on their asset base, which we were not managing the same way we're managing today, right? Now everyone knows that these are your assets you're responsible for and you better get that return on asset high. Otherwise, get rid of it because it penalizes your pocket.

And the other important thing is that all of a sudden, our managers hate CapEx. Oh, interesting. Well, that's a behavioral change. And the reason for that is that CapEx is not for free anymore. When you only look at EBITDA growth, right, you can spend a lot of CapEx, grow your EBITDA, but you're not improving free cash flow. Fully loaded conversion. That's gone. And therefore, the owner's mentality is I need to get to my free cash flow conversion rate. I need to get my ROIC above WACC through the cycle structurally, and I'm now managing my asset base. I understand my depreciation, and I understand that the decision on -- what the decisions on CapEx do to my depreciation and my asset base. And we're also providing the thresholds, again, when benchmarking to risk-adjusted share buybacks so that everybody understands that either you bring a proposal that is above the threshold don't even come. So that's the transformation that is happening right now. It will take a bit of time, but we're getting there and moving very fast.

Maybe if we could get a mic to Alejandra first, and then we can read here in the middle. Okay.

I guess my question is you both mentioned these very unique analysis from the bottom up, where you now have details into ROIC and free cash flow at the asset level. So I was just wondering if we could get a sneak peak of what -- and that analysis is revealing. And when I double click on that $1 billion of divestments, is that including any sort of decision at the asset base level? Is that an exit from a full country? What is included in that $1 billion divestment and if we could have potentially timing around that? I know many moving parts, but...

Yes. So there's 2 -- to [indiscernible] to your question. In terms of the information bottom up, I think it's revealing very interesting data that allows for very insightful and deep discussions around the business. But ultimately, the way I would describe it to you, we now can see the look at the discussion, right? One thing is to look at how is ready mix in Mexico doing? The other thing is to be able to map out how is each single plant in the [indiscernible] business in Mexico doing, right? And as always, there's a normal distribution. You have outliers, but then we can identify the outliers that are underperforming, where the performance gap peaks and then -- because the discussion evolves around not only the performance but also the market, the conditions, the competitive dynamics, vertical integration, et cetera, et cetera, et cetera.

So it's just -- it's like that we're being able to double or triple or quadruple click into the performance so that we can see much more detail. And to your second question, definitely, I mean, when we think about -- I think market presented as an assumption. When we think about a $5 billion investment capacity for either share buyback, dividends, M&A, pay down debt, $1 billion definitely picks up on this theme because when we describe the toolkit that we are using to evaluate assets that have performance gaps, maybe in some of those instances, we will find that one of the best outcomes for some of those assets is they're probably better in the hands of somebody else because they have a different operating model or they have better vertical integration or some other reason. And therefore, yes, the $1 billion in divestments covers the possibility of disposing or divesting some of those assets that meet that criteria. So I hope I answered your question.

The $1 billion, you asked about the timing, Alejandra, we should do that in the next 12 to 14 months. So do expect that very soon.

If I can just add one comment Again, this is not to be the bean counter in me. But having that granular data on a monthly basis, part of our executive committee review plant by plant, region by region, business by business. Let me tell you, it puts an incredible amount of focus on what is going well and what should be going better. And that's very powerful, I think. And having that at hand is really a game changer, I think.

Regional presidents, please jump in at any time, if you want to provide some color on how you drive the business branch [indiscernible] use together with us as one team.

All right. Can we get a mic to Yassine right here.

First question, I'm just trying to understand a bit better your fully loaded free cash flow by 2027. I think could you give us some color on what kind of investment in intangible assets that you planned for 2027? I think it was [indiscernible] that you're planning for 2026? And also the growth CapEx. I think if you're targeting 300 million growth CapEx in 2026, what kind of growth CapEx do you plan for 2027 or midterm? So intangible CapEx investments 2027 midterm would be very useful? And my second question is on the organic EBITDA growth that you're targeting over the next 2 years is about [indiscernible]. It suggests approximately 5% organic EBITDA growth per year. Do you see upside to that number if you managed to increase prices more than cost inflation in U.S. aggregates in Mexico and in European CEMEX?

All right. I'm going to take advantage of your first question and pass the word to Maher to first repeat what we said about free cash flow conversion fully loaded. I want to please, Maher, to describe the definition so that there is no misunderstanding with investors, okay? And then I'll give you guidance on what we expect for total CapEx as we transition from free cash flow from operations as we used to report all the way to free cash flow before discretionary decisions.

And why don't you refresh again, right, the percent that we will achieve in '27, right, which will be not yet where we want to be, okay? But over time, we will get there. And I will give you guidance on total CapEx, right?

So the -- historically, what we have reported is free cash flow from operations. And then below that, we had things like the coupons that we pay on the subordinated notes, for instance, there could be some pension fund top-ups. There potentially could be some investments into intangibles and a few other things, right? Not many things mostly on the financial side. And when you back all of those, which are really not discretionary, okay, most of those investments are not discretionary. We have to use free cash flow to -- so in reality, any analysts looking at our numbers would be better guided to take a look at the lower number, which is essentially taking everything away that is truly nondiscretionary and believing the cash that is available to distribute to shareholders, make investments or pay down debt.

And there's a big difference, right, from the -- between the free cash flow from operations number and that number. To address what Jaime was suggesting, if you recall, we're targeting 47% free cash flow conversion by '27. That is the free cash flow conversion from EBITDA to free cash flow from operations. If we take out -- if we subtract all of those effectively nondiscretionary uses of cash, it takes us down to 38% free cash flow conversion. Now if we were to take a look at the growth of that free cash flow. That specific type of -- that specific definition of free cash flow, then we're talking from the beginning of 2025 to '27, a 50% growth in that period of that particular free cash. And the cumulative number there is about $2.5 billion, $2.5 billion. So we'd be more than happy to give you the exact details, frankly, of all the different things, but there's a few items that are large, and it's a big difference, right? I mean when you go from the cash flow conversion -- from free cash flow from operations down to the, what I'll call, the clean free cash flow number. It's a big difference, going from 47% conversion to 38%. So it's a big number, right. I don't know if...

Regarding -- so I hope that is clear. Regarding guidance, we will continue -- I said in my presentation that when compared to '24, we guided for 2026, a reduction of $500 million. That includes $160 million of less interest payments and $327 million less including intangible investments. Please note that we will continue with that journey. And we will only provide for the most part for margin expansion, profitable decarbonization in Europe in California, and we will continue to do some investments in process in IT to bring technology and AI to boost operational excellence, but it's not going to be as large as it used to be.

When I think about '27 and beyond, right, the total fully loaded including intangibles, right? It's going to be around $1 billion, $1.1 million, no more. But we used to come from what was the number? That number was more than 1.5, 1.6. And in intangibles, IT, we were investing $150 million to $100 million, the days that we were deploying [indiscernible] is already there. That is a sum cost. It doesn't require anything and the future technology investments are related to artificial intelligence to boost yield margins. So do expect a very strong reduction in free cash flow. And another key thing, right? I took over in April. In months, we boosted free cash flow. Are we where I want to be? No. We need to do more work, right? And we brought to you great visibility in the very short term, '26 guided and '27 targets, but the journey continues, right? And I do expect to continue improving free cash flow conversion and I see no reason as we improve our earnings quality, no reason not to match the best-in-class free cash flow conversion of our peers. And that's our mandate, and that's what we're going to be pursuing.

And again, we will be transitioning from free cash flow from operations to free cash flow. And we will consult with investors, right, to understand what is exactly the definition that they want us to use, right? And we will move to that one. Thanks for the question.

The question on the organic EBITDA growth? The question on the organic EBITDA growth, if there is upside to the upside in organic?

Right. There is a side. What are your estimates, right? What are your estimates? Give me your estimates, and then I'll answer you. This is how we see it. Where are the risks of our target, right? The risk of our target is on organic side because the 55% growth is under our control, right? So first thing, what are the upside levers that we're working on, more structural savings out of our transformation we will provide you more color about that in the second Q. That's my commitment to you, okay? We're making progress and do expect a bit of upside risk, right, even in '26 because of our transformation, we're going to bring more savings, okay? So that's going to happen.

And second, in organic growth, on prices, right, we are targeting to at least recover input cost inflation. But there are certain pockets where we might do better than that, and that could be another upside risk, okay? For the same reason, right, there is volatility, there could be some, I don't know, right? And there will always be on the organic side outside of our control, volume driven, whether it's a hurricane or bad weather, such as this first quarter in Europe, right? And that is out of our control. But the important thing is that, yes, there is some upside risk. But we will continue increasing the percent of the self-help transformation to get to our target. And you'll hear more from us in the 2Q and 3Q calls as we make progress.

Just one point on that. We're assuming low single-digit volume growth, and that's across the entire portfolio. But most of our markets are at a very low point at the moment. So I think we are expecting recovery Yes. So if we could pass the mic to Ben Theurer.

I guess that's one for Maher, on the share buyback, Maher, $99.9 million. As you look at it, and the announcement was about to repurchase up to $500 million over the next 3 years what you had in your presentation. So obviously, having done almost at the early stage is kind of like already 20% of that. So it's a very fast pace. How do you think about going forward in terms of buying back shares? Is this going to be like on a pro rata basis when you're basically able to buy shares that you just constantly buy no matter where the prices? Or is it more going to be approached in terms of opportunistic share buybacks versus maybe on a more pro rata basis. What's like the approach that you...

Yes. I really never liked the word opportunistic. Share buybacks should be programmatic investors should almost be able to account for how much free cash is being returned to them as a package, both in the form of dividends, which, of course, we know doesn't really impact necessarily the enterprise valuation, right? So I'm a big believer that we should be programmatic. We should be constantly taking advantage of undervaluation. I mean, of course, we're not going to go out there and buy stock if we don't think there's intrinsic value, but you saw the valuation parameters. We have a significant upside between now -- and obviously, we're not going to advertise what levels we believe is the right valuation because the world may change by the time that we get there.

And of course, as you know, the approval for our program is an annual basis. And to the extent that we think there's opportunity, and we think that from a strategic allocation, we are not investing the capital at rates that we like. I mean, maybe we may reconsider the amount of share buybacks that we are undertaking. Right now, we don't need to do that. We have $500 million limit. I can't comment whether we're done or not done, we're going to do more because the lawyers will kill me. And so I can't do that. But obviously, we're going through -- and they are very clear corridors and restrictions on when, how, what percentage of the daily float we are undertaking. And we're not just widely going in and just buying back, obviously, we're selective. We wanted to be very categorical after the quiet period. And so we systematically -- and again, we were buying a pretty attractive, in my view, pretty attractive valuations, right, pretty attractive free cash flow yield at the end of the day.

If I could just tack on a question from the webcast. We got a question asking if we would be canceling the shares. So it seems like a good time to [indiscernible].

Yes. I mean, look...

Yes, we are. Yes. Yes, we are. Thanks for your question, [indiscernible].

And Anne Milne here on the side. I think there's a mic.

Anne Milne from Bank of America. I have a question for Jaime and a question for Maher. Jaime, fully aware that CEMEX strategy is on Mexico, the U.S. and Europe. A lot of people are asking now if you would consider going back into Venezuela, given that you did have a large presence there in the past and there is a big reopening in the oil sector at the moment. I'll let you ask that in the [indiscernible].

Yes. Allow me to answer that question. Thanks for the question. We involuntarily left Venezuela. And we did it in a way that we were not properly compensated for the excellent talent pool and asset that we run in Venezuela. We're the only company to produce oil well cement, which is necessary to drill baby drill. And we had very competitive well locally positioned assets, particularly our Portugal plant, very well connected to our Caribbean and the U.S. presence.

Under the rule of law, number one, right? And you all understand what that means, right? I should not rule out the possibility to at least take a look at our former assets, right, on [indiscernible], if it makes sense at the right time and always under, again, predictable environment, whether we should recover those operations and whether doing so will comply with our capital allocation could be met, right? I like practicality at least, and we would first need to confirm whether the business would enjoy very competitive natural gas costs, which is what made us very strong in the past. When I was leading this cock, I did send I had the chance to send a very small team to visit some of our former plants. And they were really destroyed. In horrible shape, dusting everywhere. Safety was a total disaster, and there were -- the worst population invading the areas of the mineral reserves. It will be very complex, right? We will take it at less low, but at least we want to take a look at the right time on when appropriate happens. We will not enter if it does not make any sense neither because of uncertainty, right, or because of financial commitments, financial metrics. Thanks for the question.

That's very clear. Maher, you've made the life of fixed income analysts and investors a little boring with your reduction in leverage right now. After many years of volatility, but congratulations on that. One question -- one comment that you made here, I just -- I know that there will be a lot of questions on this. There's 2 words in particular, that on the -- that you're not likely to need subordinated notes in the medium term. Could you please define medium term?

I mean I think within -- it's very difficult to do that, right? But to me, I'm thinking really within the framework of our Sprint, right? We're not thinking beyond the sprint. So I think there should be an impact within the print as we improve free cash flow generation as we improve FFO for somebody like S&P, for instance, that will make a huge difference, right? And so that's going to happen. Sorry? Yes, exactly, yes. Yes, exactly. Yes. Thank you.

[ Emilio Fuentes ] from GBM. And regarding earnings quality and important sort of the urbanization solutions business has within that. Can you give us a role of estimate on the medium term, how much do you expect it to represent for your EBITDA on a consolidated basis, also especially given the role it has on your free cash flow returns platform?

We -- I don't think I can answer that question today, and I apologize because I don't think what we have a detailed concrete numbers for the midterm. And the reason for that, again, is because as I introduced this discussion today, instead of doing 5-year business plans and thinking beyond our reach. I wanted to bring forward immediate performance under our new transformation and capital allocation. We will need to provide -- we will need to do more work to provide you with an answer to your question.

Having said that, right, I also said that we will continue to be a heavy building materials company. So CEMEX and [indiscernible] aggregates, ready-mix concrete with some adjacent right, businesses that enhance our value proposition to every market segment. And what I can -- rate to rate of what Jose Antonio said, is that in the U.S. for our market family of solutions that are very synergetic with cement and adventures, logistics and customers, we have a very concrete plan to build through roll-up and a few greenfields in Florida around $100 million of EBITDA platform with a free cash flow conversion of around 65% to 70%. That's what I can tell you today about urbanization solutions within right, the next years.

And [indiscernible] may add touching on a really hot topic right now, AI. I know you talked on it on aggregates, but could you give us a little more detail on how this could impact your other businesses?

You mean AI, artificial intelligence?

Yes. And when would you expect a material impact? I assume it's not incorporated into your metrics for the current Sprint?

No. They are not incorporated into our metrics. We have a -- you may want to elaborate a little bit about our flagship project in bacons, Texas, right? So when we plan a little bit what we're doing on AI for the cement business. And then I'll tell you a little bit about how we're going to scale it. And then I'm going to elaborate very fast about certain lines of cost where we will deploy AI to boost margins. But it's a little bit too early to provide specifics within this Sprint. We're working on it. Jesus, why don't you provide some light?

Yes. We selected our Balcones plant in San Antonio, Texas as a flagship project for developing all our AI projects. So the -- what we're doing there is twofold. We're trying to implement AI in 2 categories of margin improvement opportunities. So one of them is in maximizing production out of our facilities. So we have implemented already, and we are working with those algorithms that help us maximize production. And this is very relevant in our Balcones plant because remember that we are importing cement into Houston. So by increasing production in Balcones we're going to be able to displace imports.

So that's ongoing. I mean, we have been able to run the plant in autonomous AI out-of-pilot condition for several hours already for the whole plant. So that's one aspect of what we're doing there. The other aspect is using AI to minimize cost. We can program this algorithm to energy consumption to reduce electricity consumption, et cetera. So depending on the market conditions, we can adjust these algorithms to maximize production and reduce costs and increase efficiencies. The idea is to -- once we finish with this pilot in [indiscernible], we're going to start deploying those algorithms based on artificial intelligence to other plants, not only in the U.S. but across all other operations. So that's mainly what we're doing with AI focused on operations, CEMEX operations. There are more examples that Jaime can elaborate.

And to be more specific, in the case of Balcones, we're getting a 10% to 15% increase in yield, all right, which is very meaningful. And I think as that your next plan is going to be Miami and then you have another which is Brooksville, I believe, you proposed. So that's how impactful it becomes. You and your team produced incrementally last year, 100,000 short tons, right? This year, you're targeting incrementally from the same assets, 700,000 tons. Some of that is a result -- will be a result of AI because what AI does in the cement plant is that it adjusts chemistry and operating parameters on real time, and we don't need to wait to see the results of breaking a model to see strength performance waiting for days.

So we -- the system adjusts and that provides more reliable operation and lower specific heat consumption and then higher production. We don't know yet what it means for every plan because you need to go one by one but that's one of the applications. And then we do see AI on 2 fronts: back office overhead, push productivity, starting with third-party spend, right, and doing more in-house with the same head count powered by artificial intelligence, right? And so that should drive a continuous improvement on overhead costs, right? And then we do see AI or network optimization, the logistics network, delivery network optimization, cement, aggregates, right, AI optimizing concrete mixes? We don't know yet, right, by how much, it's too early, right, so on and so forth. So we have already identified every line. We have hypothesis.

Now based on our commitment to fully loaded free cash flow, we will be deploying these things, right, based on business cases unlike in the past, and if there isn't a robust business case that meets the shareholder return thresholds, we will not pursue it. So that's how we're thinking we're thinking about it. So I hope that I have answered your question, but because I see interest, we will elaborate in the next months about that as we engage with you.

Sadly, I think that we have gone over already.

Gentlemen has done his best effort raising. He deserve it, I apologize, very fast. Lucy, I'm sorry that I'm overriding.

Jorel Guilloty from Goldman Sachs. Hopefully, it is a last question, but I wanted to parse out the 50% free cash flow conversion target. Specifically, I want to think a bit from a market basis. So what are the medium-term free cash flow conversion targets per market? I recall that in the 2024 Investor Day, there was a 90% target for Mexico, for example in free cash conversion. So I wanted to see if there's a proxy.

We're not going to provide free cash flow conversion by market. I don't think we've ever...

I think we've said in the past that Mexico does have an extremely [indiscernible]. Yes.

Oh, yes, Okay. we're not I apologize, but we're not going to be providing a specific free cash flow conversion by region right now.

Proxy for that, where do you see the biggest improvement?

The question is where we see the biggest improvement?

Or rather that can answer, where do you see the biggest improvement in free cash flow conversion in the different markets?

Yes. I can tell you where we see the largest improvements are in the U.S., right, EMEA, followed by CAC Mexico, right, operates at a very solid free cash flow conversion. That's -- those are where we have the largest opportunity.

Okay. So thank you all. Let's do a round of applause.

Thank you very much for your questions. Thanks to you for your questions and your interest. Thanks.

Please take advantage of finding them in the next few minutes if you have additional questions. I hope that you found today's events informative and an opportunity to get to know part of our senior management team a little better. You will be receiving a survey to evaluate this event. We hope you fill it out. We try to listen to respondents and improve on CEMEX Day.

Thank you again for joining us, and we look forward to connecting with you again soon. This finalizes the webcast. And for those of you that are here, we do have lunch. I think that if you look on the back of your name tags, you have an assigned seat, there will be someone from CEMEX senior management team at every table. And of course, you can use that opportunity also.

Hello. Good morning, and welcome, everyone, to the CEMEX Fourth Quarter 2025 Conference Call and Webcast. My name is Becky, and I will be your operator for today. [Operator Instructions] And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning, and thank you for joining us for our fourth quarter 2025 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 a review of our fourth quarter and full year results, followed by an update on the progress made so far on our strategic plan as well as our expectations and guidance for 2026. And then we will be happy to take your questions. We will host our CEMEX Day on February 26, where we will be providing additional details on our value creation strategy and medium-term financial targets. There will be a live video webcast available. And now I will hand the call over to Jaime.

Thanks, Lucy, and good day to everyone. From a results perspective, my first year as CEO has been marked by sharp contrasts as we embarked on our transformation process. As expected, our first half performance was challenged by headwinds in Mexico related to the first year of a new government administration and a weaker peso, coupled with soft demand conditions in the U.S. In contrast, the significant second half improvement was predicated on Mexico's recovery as well as early results from our ambitious and disciplined transformation announced in the second quarter.

As I assume my role as CEO in April, we moved quickly to introduce a multiyear strategic plan that included significant self-help measures designed to address the challenging market conditions. I want to recognize our teams across the organization. 2025 was a demanding year of transformation for our company, one that required discipline, resilience and a strong execution mindset at every level.

Our people delivered on operational excellence, maintained a strong focus on safety and customers and executed important structural changes while continuing to run the business day-to-day. These results reflect their commitment and professionalism, and I want to thank them for their hard work and dedication.

Under Project Cutting Edge, our cost efficiency program, we fully realized our 2025 EBITDA recurring savings target of $200 million, leading to improved margins in all markets in the back half of the year. Importantly, this effort should continue to reap substantial benefits in 2026 and beyond. Our free cash flow from operations reached $1.4 billion in 2025 with a 46% conversion rate adjusting for one-off items such as severance and discontinued operations.

We continue progressing on our portfolio rebalancing and growth strategy. We divested most of our operations in Panama while investing in targeted businesses in the U.S. The consolidation of Couch Aggregates materially strengthened our aggregates position in the Southeast. We will continue seeking potential divestments in noncore markets to expand our presence primarily in the U.S. through disciplined capital allocation with a clear focus on aggregates and adjacent businesses such as mortars, stuccos, renders and plasters.

In decarbonization, our consolidated gross CO2 emissions declined 2% in 2025, mainly driven by further reduction in clinker factor. Our operations in Europe continued to lead the way, having reached the Cement Europe Association's 2030 gross CO2 emissions reduction targets 5 years ahead of schedule. But it was not just Europe, notably, our operations in Mexico and South, Central America and the Caribbean profitably achieved record clinker factor levels in 2025.

Finally, we're making important strides on our commitment to deliver enhanced shareholder returns. In our upcoming General Shareholders' Meeting in late March, our Board of Directors will propose an annual cash dividend close to 40% higher than the one announced in 2025. Complementing our cash dividend and subject to annual approval by shareholders and other formalities, we will activate usage of our buyback program with the intent to buy back up to $500 million in shares over the next 3 years. I am proud of what we have accomplished so far and expect even better results in 2026, supported by improved market demand, operating leverage available to us in most markets and continued cost and efficiency measures.

In our CEMEX Day on February 26, we will dive into more detail on what you should expect from us in future years. With momentum building in the second half on recovery in Mexico and solid results from EMEA, full year consolidated sales and EBITDA rebounded. Indeed, fourth quarter sales and EBITDA increased by a double-digit rate, supported by project cutting-edge savings in Mexico. EBITDA margin was stable for the full year, again with a significant expansion in the second half as cost efficiencies began to materialize.

All regions reported flat to improved EBITDA margin in 2025. I am most proud of our performance in free cash flow from operations, a key metric of our transformation. Excluding one-offs from severance payments and discontinued operations, free cash flow from operations grew by 50% to $1.4 billion. With a goal to achieve 50% conversion rate of EBITDA to operational free cash flow, we achieved 46% in 2025 after adjusting for one-off cash expenses. After incorporating growth CapEx, intangible assets and other expenses, total adjusted free cash flow increased by more than $550 million in 2025 compared to prior year. These achievements underscore our focus on the levers we can control to ultimately deliver more cash to shareholders.

For 2026, you should expect additional improvements on these metrics as we make further progress on our strategic initiatives. Finally, we recognized $538 million in goodwill impairment and asset write-down in 2025. Adjusting for this effect, net income would have increased by 41% to $1.5 billion. Consolidated cement and aggregates volumes in the fourth quarter grew by 1% and 2%, respectively. The continued growth in EMEA cement volumes more than offset volume performance in the U.S. and the slight decline in Mexico.

Demand conditions in Mexico improved with average daily sales for our 3 core products growing on a sequential basis. Double-digit growth in aggregates volumes in the U.S. reflects the consolidation of Couch Aggregates. As construction activity is expected to increase in all of our regions, we anticipate a better demand outlook in 2026. With our focus on operational efficiency as well as available capacity, we are well positioned to capitalize on the strong operating leverage in our business as volumes begin to recover.

Consolidated cement, ready-mix and aggregates prices increased by a low single digit in 2025, with positive performance in most markets. In Mexico, despite adverse demand conditions and in South, Central America and the Caribbean region, prices rose mid-single digits in 2025. As demand is expected to improve in all regions in 2026, we aim to continue recovering input cost inflation throughout our portfolio and see particular strength in Continental Europe.

The carbon border adjustment mechanism, along with the gradual phaseout of free CO2 allowances under the EU ETS should support favorable pricing dynamics as the industry looks to recover the rising carbon emission costs. Full year EBITDA performance was mainly explained by project cutting edge, cost efficiencies and higher prices. Despite ongoing cost inflation, we were able to reduce our total cost base by close to $100 million.

Consolidated margins were supported by margin expansion of close to 2 percentage points in both Mexico and EMEA. Significant FX headwinds in the first half were almost fully offset by a reversal in the second half. In our Urbanization Solutions portfolio, higher EBITDA in the admixtures business in EMEA partially compensated for soft performance in Mexico and the U.S. 2025 marked a year of profound transformation for CEMEX, centered on achieving operational excellence and delivering shareholder return. To that end, we defined a set of strategic priorities focused on enhancing profitability, increasing free cash flow conversion, improving operational efficiency and ensuring returns above our cost of capital in every asset we manage.

As I explained earlier, in 2025, we made significant progress on our plan. First, we expanded our cost reduction program, Project Cutting Edge to recurring savings of $400 million by 2027. Importantly, half of this amount is related to overhead actions already taken in 2025. These actions should deliver additional savings of $125 million in 2026. The $200 million savings realized in 2025 drove a decline in cost of goods sold and operating expenses as a percentage of sales in most regions with higher EBITDA margin across our portfolio.

We introduced EBIT, free cash flow conversion and a spread of ROIC over WACC as new performance metrics for our operations. We also advanced on the implementation of operating initiatives such as improvement in kiln efficiency in the U.S. and the optimization of fuel mix in Mexico. These efforts drove a 17% increase in EBITDA in the second half and a 25% jump in EBIT, a key metric of our transformation. With regard to free cash flow, we adjusted our maintenance CapEx spend and reviewed all projects under our growth CapEx pipeline.

We conducted a detailed evaluation of every asset in our portfolio, defining a clear action plan for those underperforming assets. This plan is expected to positively contribute to our results in the future. And we also revamped our variable compensation plan effective January to reflect these new metrics and to better align with long-term value creation and shareholder return. I am confident that as we continue working on our strategic plan, we will identify additional opportunities to further support margins while aiming to increase free cash flow conversion and return on capital. And now back to you, Lucy.

Thank you, Jaime. We are encouraged by the volume recovery in the second half in Mexico as well as the contribution from our cost and efficiency initiatives. Sales growth accelerated in the quarter, marking the first quarter of year-over-year growth since the election in Mexico in 2024. EBITDA increased by 20% like-to-like and margin expanded by an impressive 5 percentage points.

Importantly, EBITDA also increased sequentially, contrary to historical seasonality patterns, further underscoring our recovery trend. Demand conditions in Mexico continued to improve with average daily cement sales increasing by 8% sequentially, again outperforming historical seasonality patterns.

As anticipated, public spending on social programs and infrastructure is beginning to gain momentum, albeit from a low base. Rural road projects in which we typically have a large participation rate as well as other programs show early signs of increased activity, benefiting bagged cement volumes. In infrastructure, while conditions are still soft, we began construction works on projects such as the Quer�taro to Irapuato rail line, along with the continuation of the AIFA Airport to Pachuca line with other projects expected in the near term.

In addition, we see increased activity in projects related to the 2026 World Cup in Mexico City, Monterrey and Guadalajara. The social housing program with the goal of constructing 1.8 million units through 2030 is also beginning to pick up speed. In the fourth quarter, while off a small base, we doubled our participation in projects under construction to 58,000 units. Additionally, we have also seen an important pickup in projects under negotiation for the program, currently 105,000 units.

Last year, prices for our 3 core products increased by mid-single digits. For 2026, we will continue with our strategy to at least recover input cost inflation. In that effort, we recently announced a 10% price increase in cement and ready-mix effective January. Our transformation program is leading to a more agile and efficient organization in Mexico. As Jaime mentioned, last year, we achieved important cost savings in the country, driving material increases in our cement and ready-mix margins despite the challenging market backdrop.

As demand conditions improve, operating leverage, along with cost initiatives should support further margin expansion. In 2026, we expect that volume recovery, pricing and cost savings will be important drivers of growth. Our U.S. operations posted a record fourth quarter EBITDA with margin near record highs, underscoring the resilience of our business in challenging market conditions.

Performance was driven by project cutting edge, facilitating higher operating efficiency, along with the consolidation of Couch Aggregates. Demand continues to reflect strength in infrastructure with some bright spots in the industrial sector, offset by continued softness in residential. The 10% increase in aggregate volumes was driven by investments coming online in fourth quarter as well as the effect of Couch Aggregates.

With three consecutive years of cement volume declines, we have seen increased competitive pressure in select markets in our footprint, explaining the slight decline in sequential cement prices. In aggregates, prices rose 4% in the year on a mix-adjusted basis. Adjusting for the Couch acquisition, sequential prices in aggregates remained flat in the fourth quarter. The expansion in quarterly margin was primarily due to Project Cutting Edge, where we saw a material reduction in cost of goods sold as a percentage of sales.

The slight decline in full year margin is largely explained by disruptions from difficult weather conditions in the first half. As Jaime mentioned, our efforts to improve cement kiln efficiency as part of Project Cutting Edge continued to pay off with domestic production expanding by 500,000 tons last year. This increase in domestic production replaced lower-margin imports, leading to relevant EBITDA margin expansion. We expect domestic productivity to further increase in 2026.

Our aggregates business continues to grow through both organic and inorganic means. The 39% contribution of the aggregates business to U.S. EBITDA is almost equal to that of cement. We continue to focus on initiatives to drive additional efficiencies in our aggregate operations as well as expand our reserve base. Examples include the recent consolidation of Couch Aggregates, along with expansion projects in Florida and Arizona, which will come online later this year.

These additions support volume guidance of mid-single-digit increase for aggregates in 2026. We will be drilling down in more detail on the drivers of our U.S. aggregates business at our Analyst Day in late February.

Looking ahead, we expect infrastructure to drive demand as IIJA transportation projects continue to roll out. About 50% of funds under IIJA have been spent with peak spending levels expected this year. We are encouraged by the December release of highway awards, the strongest on record with most markets reporting positive momentum. The industrial and commercial sector continues to benefit from data centers, energy investments and chip manufacturing facilities in our markets.

While single-family residential remains soft, we see demographic tailwinds boosting demand over the medium term as affordability and market sentiment improve. With a better demand outlook for 2026, we have announced mid-single-digit price increases in cement, ready-mix and aggregates in several markets, aiming to at least recover input cost inflation. It is important to highlight that as in the case of Mexico, operational leverage once volumes recover, should lead to higher profitability.

In the EMEA region, EBITDA and EBITDA margin achieved records in 2025, led by higher volumes and prices as well as cost efficiencies under Project Cutting Edge. Pro forma for a number of one-off adjustments in the fourth quarter, EBITDA in EMEA grew by a double-digit rate with margin expansion of 1 percentage point, supported by positive performance in both Europe and Middle East and Africa. Demand conditions continued with a positive trend with cement and ready-mix volumes growing by 7% and 3%, respectively, and by a mid-single-digit rate for the year. Full year cement and ready-mix prices in EMEA increased by low single digits. On a sequential basis, cement price variation in fourth quarter is mainly explained by a geographic mix effect.

In Europe, despite difficult weather conditions, we posted high single-digit growth in cement volumes. Performance was primarily related to infrastructure projects in Eastern Europe and sustained housing activity and infrastructure investment in Spain. On a sequential basis, prices in Europe were stable in the fourth quarter. Price dynamics for full year 2025 are explained by geographic mix and limited competitive pressure in specific markets. Going forward, construction activity in Europe is expected to be supported by infrastructure investment backed by EU funding, the German infrastructure bill providing some tailwinds along with the gradual recovery in the residential sector.

In the Middle East and Africa, cement and ready-mix volumes in the fourth quarter expanded by 11% and 9%, respectively. Construction activity across these markets is recovering on the back of housing and nonresidential projects with Egypt also benefiting from large-scale infrastructure projects and the start of mega tourism development.

Our operations in Europe remain at the forefront of our decarbonization efforts, reaching a level of 507 kilograms of CO2 gross emissions on a per ton of cement equivalent basis in 2025, representing a 19% reduction versus 2020. This level is already surpassing Cement Europe Association's 2030 emissions target for cement production, further reinforcing our position as an industry leader.

The implementation of the carbon border adjustment mechanism in Continental Europe, along with the gradual phaseout of free EU ETS allowances this year should be supportive of cement pricing in 2026 and beyond. Our operations in South Central America and the Caribbean delivered full year EBITDA growth in 2025 for the third consecutive year, driven by pricing discipline and continued benefits from Project Cutting Edge.

Fourth quarter EBITDA performance reflects the impact of Hurricane Melissa in Jamaica as well as increased maintenance in Colombia and Trinidad and Tobago. In Colombia, cement volumes continued to recover, growing 7% in the quarter, driven by the informal sector with bagged cement benefiting from stabilizing macroeconomic conditions. Jamaica posted record full year EBITDA with cement volumes growing by 7%, driven by tourism and self-construction.

The completion of our kiln de-bottlenecking in third quarter 2025 should allow us to profitably substitute imports with local production to meet rising domestic demand and better serve export markets.

Sequential pricing for cement and ready-mix in the region is relatively stable with variation explained by geographic mix. We remain optimistic about the medium-term outlook for the region, where improved consumer sentiment and formal construction are expected to drive demand. And now, I will pass the call to Maher to review our financial developments.

Thank you, Lucy, and good day to everyone. We are pleased with our performance in 2025 with our Project Cutting Edge program delivering important cost savings, primarily in the second half of the year, boosting our EBITDA growth, as Jaime outlined. Our full year free cash flow from operations was $1.2 billion, an increase of 15% versus 2024 on a reported basis. This growth is explained by an important reduction in taxes, interest expense and maintenance CapEx.

Adjusting for the extraordinary payment of a fine in Spain in 2024, cash taxes declined by $170 million in 2025. Our interest expense in 2025, including coupons on our subordinated perpetual notes was $160 million lower than last year. This improvement was driven by lower average debt, lower base rates and the refinancing of one of our subordinated notes.

In line with our normal seasonality, we saw a divestment of $529 million from working capital during the quarter, resulting in a marginal $16 million investment for the full year. Working capital days for 2025 stood at negative 11 days, an improvement of 4 days versus 2024. Excluding severance payments and discontinued operations, our free cash flow in 2025 reached $1.4 billion with a conversion rate of 46%, highlighting our free cash flow generation potential going forward.

The initial benefits from our efforts to optimize our cost base under Project Cutting Edge are visible in our results, and we expect incremental benefits in 2026 and beyond. Energy costs on a per ton of cement basis declined by 12% for the full year, driven by lower fuel and power prices and a continued improvement in clinker factor and thermal efficiency.

In the fourth quarter, cost of goods sold as a percentage of sales were 44 basis points lower year-over-year, while operating expenses as a percentage of sales were 62 basis points lower despite recognizing a one-off true-up provision related to variable compensation. Net income variation in the quarter is mainly explained by goodwill impairment and an asset write-down amounting to $493 million.

For the full year, net income increased by 2% as the gain from the sale of our operations in the Dominican Republic, a favorable FX effect and lower financial expense offset the impact of higher income tax and impairments. As I have mentioned in prior occasions, our steady-state net total financial leverage target is between 1.5 to 2x. This ratio includes our net debt plus $2 billion of subordinated perpetual notes.

At the end of 2025, this ratio stood at 2.26x. We aim to reach and maintain a solid BBB rating to further improve our risk profile, bolster our growth potential and maximize value creation for our shareholders. With a significantly improved leverage position, a high level of confidence in our transformation plan and our new more balanced and disciplined capital allocation framework prioritizing shareholders, we believe 2026 is the moment to begin to move on shareholder return.

In this context, the Board of Directors will be proposing to our General Shareholders Meeting scheduled for late March, an annual cash dividend of $180 million. Subject to shareholder approval, this would represent an almost 40% increase in our dividends versus the prior year and represent an important advance in our progressive dividend program. The notice and agenda for the general shareholders' meeting, including information on the dividend proposal will be published tomorrow.

Complementing our cash dividend and subject to annual approval by our shareholders and other formalities, we will activate usage of our buyback program with the intent to buy back up to $500 million in shares over the next 3 years. Importantly, as approved in last year's General Shareholders Meeting, we still have an outstanding approval for share buybacks of up to $500 million available to us through late March of this year. Execution will depend on business performance and free cash flow generation, cash needs and overall market conditions. You should expect gradual improvement in shareholder return as free cash flow continues to grow in subsequent years. And now back to you, Jaime.

Thank you, Maher. While we are pleased with our results and achievements in 2025, there is still much more work to be done as part of our transformation. For 2026, we anticipate a more favorable demand environment as construction activity continues to recover in most of our markets. In particular, we expect material contributions from Mexico and EMEA. We also expect a tailwind of $165 million in incremental savings under Project Cutting Edge, including $125 million related to overhead actions already taken in 2025.

Finally, completed projects in our growth portfolio should generate $80 million in incremental EBITDA this year, half of which relies on volume recovery. Based on this, we're guiding to a high single-digit rate growth in EBITDA in 2026. Due to the relevant exposure to Mexico in our EBITDA, our guidance is subject to FX fluctuations. In the past, we assumed a current FX rate for the peso in our guidance. However, with the recent appreciation in the peso, we opted to use an FX estimate of a range of between MXN 18.25 to MXN 18.50 per dollar.

Beginning this year, we are providing guidance for investments in intangible assets. Our flat guidance reflects the purchase of additional aggregates reserves and mining rights in 2026. All in, maintenance CapEx and growth investments, including growth CapEx and intangible assets are anticipated to result in a positive contribution to free cash flow of about $195 million in 2026 versus the prior year.

We expect these savings, coupled with high single-digit EBITDA growth and a favorable comparison to $183 million in severance payments in 2025 should lead to incremental free cash flow and enhanced conversion rate, making progress towards our 50% target.

Let me emphasize that I remain laser focused on operational excellence and shareholder return and we'll continue working relentlessly on improving the variables we can control. We have the right strategy and more importantly, the right team to continue delivering on our key priorities. And while we expect a better operating environment in 2026, much of our projected growth is still driven by self-help measures. And now back to you, Lucy.

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. And now we will be happy to take your questions. [Operator Instructions] The first question comes from Gordon Lee from BTG Pactual. Gordon?

Just a quick question, Jaime, and you sort of mentioned this as an important driver in Europe and passing in your prepared remarks. But I was wondering if you could comment, you could share with us your view of some of the reports that we've seen from Europe suggesting that the EU will actually weaken or soften its ETS targets for this year and going forward. That's obviously had an impact on the sector stock prices globally. But I was wondering what your view is of those reports? And how do you think if this were to happen, it would impact your outlook for prices and profitability in Europe for CEMEX?

Gordon, thanks for the question. Although, as you know very well, that change -- potential change was not confirmed. The likelihood of it happening, right, is reasonable. But if it happens and when it happens, it's not going to change our pricing strategy in Europe. In the very short term, we are confident that on our mid-single-digit price increases targets for '26, '27, '28.

If that regulation comes to place, it will flatten out the price increase curve, but it will not negate the need for industry mid-single-digit to high single-digit price increases over time. And at worst, it might just reduce by 1 percentage point, the need of price increases in the long term on a compounded annual growth rate basis. So I don't think it will be too material at all.

The other thing that I see very positive, Gordon, is that it gives us time to continue our profitable decarbonization in Europe. We will continue using our traditional levers, particularly reducing clinker factor as fast as they can because we will continue reducing our CEMEX carbon cost curve, widening the gap between importers, some European cement players and us. And that will give us a competitive advantage. And by doing that, we might even positively influence the next benchmark in the next phase, which will widen the gap between our CO2 footprint and our cost curve and that of importers. And that's good.

So -- and the final point is free cash flow, right, by postponing the target for 5 years, if that is what is -- it ends up happening, we're going to preserve more cash, and we will have more visibility on future CO2 prices, which will derisk capital allocation for more demanding decarbonization levers. So I hope that I have answered the question, Gordon.

And the next question comes from Adrian Huerta from JPMorgan. Adrian? Okay. So why don't we go on to the next question then. And the next question comes from Ben Theurer from Barclays. Ben?

Congrats on a good 2025, and let's move on to another good 2026. Quick one on your guidance. So you're kind of like assuming a low single-digit volume growth, as you pointed out within your slide deck. And from a pricing, it feels like another low single digits. So that would take us to something like a mid-single-digit sales growth. But obviously, additional savings from Project Cutting Edge. You talked about the operating leverage that you get from the better volume.

Just wanted to understand and if you could elaborate more on the assumptions behind just the high single-digit EBITDA growth on a year-over-year basis? And what are the upside, downside risks you're seeing within that framework?

Ben, thank you so much for the question. What I can tell you is that I see more upsides than downsides. The first one is because of the FX. As you heard our comments, we decided to use a range of MXN 18.25 to MXN 18.50. So if the FX stays stronger, please note that for every peso of appreciation, right, we can increase EBITDA by around $75 million to $80 million. And the other aspect is that as part of our transformation and focus on operating excellence, we will continue to work on firming up new savings -- recurring savings. So that -- I'm very confident about our guidance, and there could be some upside potential. So thanks for the question, Ben.

Okay. I'm going to come back to Adrian Huerta from JPMorgan and see if he is online. Adrian, can you hear us? Okay. I'm going to move on then to the next question, which is via the webcast and is coming from Arnaud Pinatel from On Field. What are the one-offs mentioned for Europe in Q4? And could you quantify them?

Yes. Arnaud, how are you doing? Good morning. Had we excluded the one-offs, the EMEA margin would have been higher by 0.9 percentage points. And the one-offs were related to a few write-offs, the fact that in 4Q '24, we were giving an electricity reimbursement. And then we had a variation on the variable compensation provision at a consolidated level, but also affecting EMEA and Europe.

This means that while in 2024, we reduced variable compensation provisions in the fourth quarter, in 2025 fourth quarter, we increased the provision. And there was a delta, and that affected Europe and it affected CEMEX fourth quarter margin at a consolidated level. And at a consolidated level, that effect was around 0.6 percentage points.

Okay. Thank you very much, Jaime. And I think we are going to take Adrian Huerta's question now by the webcast. So the question is the following. Just thinking about potential sources for additional free cash flow going forward coming from reduced expenses or CapEx. In the case of intangible investments, you are guiding to flat this year, but mentioned that some of this is due to mining rights. Will this type of investment on mining rights continue for a few years? What other items within intangibles were reduced? Other expenses that could be reduced going forward?

Adrian, thank you for the question. First, on intangibles, we have our process and IT investments. And then depending on how we procure, we acquire reserves, if those are mineral rights, that will be accounted under these intangibles. However, if we're acquiring purchasing reserves, not rights, it will be under strategic CapEx. Please note that we will continue reducing both strategic CapEx and intangibles. That's our plan for 2026 and is our plan for 2027 and beyond.

It's part of our change in our capital allocation, and we will elaborate more about that during CEMEX Day. Nevertheless, when looking at 2026, we are already reducing IT investments by $61 million, which is a significant reduction from where we were in '25 and more so where we were in 2024. Do expect further reductions in 2027. Thanks for your question, Adrian.

The next question comes from Alejandra Obregon from Morgan Stanley. Ale?

Jaime, I have one for you. I think -- I mean, you've been close to a year in the role, and you've not only driven this very strong operational turnaround, but you've also reshaped the narrative and how the company tells the story.

So I was just wondering if we can reflect on that first year, where do you think we could be underappreciating of the opportunities and risks of what you found? So meaning what are the biggest upsides that you found? And what are some of the challenges that you're facing now that you're -- I mean, you've been for a while in the job that will take you to the -- take CEMEX to the next chapter and to the long-term North Star. Like what are we missing? And what do you think are the upside and downside risks more -- I mean, beyond 2026?

Alejandra, thank you so much for the question. That's a great question that I'm very excited about it, and we will definitely elaborate a lot of it during the CEMEX Day. What I can anticipate to you is this, first opportunity and foremost is enhancing our shareholder returns. As we continue improving free cash flow conversion, right, we put at the center of our capital allocation strategy, the shareholders, that will lead to significant opportunity.

The second thing is I continue to see as part of our transformation, further structural recurring savings on one hand, because we're not done yet, and we're working on it. And second, because we will responsibly deploy technology, including AI, right, to expand margins. And there are some use cases that look promising that could also boost margins and productivity.

The other opportunity is to accelerate profitably our decarbonization in Europe to widen the gap of our cost carbon curve and therefore, CO2 footprint and that of importers and other European cement players. Not everybody is moving as fast as we or other leaders in the industry. And that will give us a competitive advantage in Europe, combined with resilient, mid-single-digit to high single-digit pricing expected for Europe.

The other big opportunity is boosting free cash flow by reducing interest expenses, not only growth CapEx and intangibles. And that's a great opportunity. I also see bolt-ons M&A for the time being, first in the U.S. as an opportunity, but I recognize that, that could also be a challenge. I'm excited about gaining more exposure to infrastructure in the U.S., I also see opportunities to further rebalance our portfolio, not only between emerging and developed, but also unprofitable and profitable businesses. But I'll elaborate more about that in the CEMEX Day.

Finally, challenges, the new normal, right, the geopolitical aspects that are out of our control and that make swings as we manage the business. That's why we will continue relentlessly focusing on the things that we control. So I hope that I have answered the question, Alejandra, but I look forward to seeing you in New York, and we will elaborate more about your question. Thanks, Alejandra.

The next question comes from Anne Milne from Bank of America.

So my question is really dedicated to Maher -- or directed to Maher. This year, almost -- most of your debt stack could either be -- is either maturing or callable with maybe 1 or 2 exceptions. You have, as you outlined in your press release, the bank facilities coming due. You have the EUR 400 million that's due. You have -- you can call the '29s at par, you can call the '30s and '31s above par, plus you have the perp that's also callable this year, the 5 and 8. You also talked about reducing your leverage and paying dividends. Could you talk about what your refinancing plans are? How much of this will get paid down? How much will you extend and what you're thinking in terms of the capital structure?

Yes. Thank you very much, Anne. Of course, as we said, we continue to aspire to a 1.5 to 2x net leverage level for the company through the cycle. which we believe that will take us into a solid BBB rating, which we think is very important for ourselves. So obviously, we will continue to use some of our free cash flow to further reduce debt, although priorities now are to return cash to shareholders, as we mentioned and also to focus on growth through M&A bolt-on transactions.

Having said that, we do have exactly a number of opportunities for liability management. Number one, the subordinated notes actually come for reset in early September. The spread is -- the reset spread is 464 basis points over treasuries, which would make them prohibitively expensive. So that's one opportunity that we would like to address. As you know, we are also working on a transaction in the bank market that may come to the market in the next 2 or 3 -- couple of months, I will say, that may address some of the euro funding that we have that is callable already.

And also, you're aware that we're in the market with a MXN 5 billion to MXN 7.5 billion CBORs, in the Mexican market, 5-year floating paper that is already publicly in the market, and we're expecting closing that transaction sometime in the middle of February, February 16, 17 and funding it. So there's a number of things that are happening that should give us the opportunity to do liability management in addition to, like we said, there are some bonds that are callable at an attractive -- already at a decent call rate -- call price. So we're looking -- we're constantly looking at NPV positive opportunities. And to the extent that happens, we will do that.

We are guiding flat interest expense for the year, but there could be certainly a positive upside to that as a consequence of these transactions. Now having said this, and we are comparing ourselves to our peers, and we certainly would like to extend our average life, and we would like to create an even longer runway to future maturities. So we will be taking these opportunities to recalibrate our debt stack accordingly. I hope that answers your question.

Yes. On the subordinated perps, are you likely to replace them to get that equity treatment or that's under evaluation?

I can't say it is under valuation. It is under valuation.

The next question comes via the webcast and is coming from Paul Roger from BNP Paribas. Your U.S. cement prices were a little softer than the industry last year. Is that because you are quite coastal? Was there a particular region under pressure? And what's the pricing outlook for U.S. cement this year?

Paul, thanks for the question. Last year, we did see some soft demand and some more difficult competitive dynamics in a few markets. One was Houston. The other one was Northern Cal and then some markets around the mid-South, particularly Atlanta. I saw some softening of cement prices in inland markets as well. And that could be because there might be some excess capacity. As demand begins to recover as expected, right, that will begin to balance out, and that should support pricing going forward. For us, for '26, we have announced $8 per short ton across all our markets, except Houston and effective April 1st. Thanks, Paul, for your question.

Great. And the next question comes from Marcelo Furlan from Ita�. Marcelo?

Question is related to capital allocation. So you guys mentioned the divestment made to $25 million in other months in support. So I'd like to understand...

Marcelo, Marcelo, I'm sorry, Marcelo...

We cannot understand...

Yes, we're having a difficult time understanding you. I don't know if you can either submit by the -- yes, let's try now. Go ahead.

Is it better now?

I think it's a little better. Let's try. Marcelo, we are here. Yes, okay, go ahead.

Okay. Let me try again. So my question is related to capital allocation. So I just would like to know what we expect in terms of further divestments for 2026? And also, you guys mentioned that 2025 was marked by the aggregates business, which is actually working with 40% of total EBITDA in the U.S. So I just would like to understand if you guys, you know, looking for further divestments, what is the company's goal in terms of EBITDA contribution from the aggregate business in U.S. market. So that's pretty much it, guys. Hope you guys...

Okay. Let me -- Marcelo, let me rephrase because I think we're having a difficult time. But I think your question is what would you expect from potential divestments in 2026? And what would that potentially mean for reinvesting in the U.S. aggregate space moving from the current 39% of EBITDA. And so I think the question really, Jaime, is around potential divestments, use of proceeds of those divestments and what it might mean for our U.S. aggregate presence.

Yes, that's it.

Okay, Marcelo. Okay. Great. Thanks, Lucy, because I was struggling to follow up Marcelo's question. Yes, we are working on some divestments. And we are planning to use profits if and when we complete those divestments to invest them responsibly and accretively in the U.S. first. And we are prioritizing aggregates, bolt-ons, followed by mortars, renders, plasters because those businesses have great synergies.

Why upstream? Because those businesses consume our admixtures, our cementitious materials, our sand. Also, they enjoy the same customer base, and there are some synergies in distribution and supply chain. So that's the space we're thinking in the U.S.

And if you think about our M&A, we will do that very disciplined, right? We approved a new framework, right? And we will pursue only acquisitions provided that it's accretive to shareholders. Otherwise, we won't do them. And that's part of the new capital allocation and scheme, our strategy, and we will elaborate much more of that during CEMEX Day. So Marcelo, thanks for your question.

And maybe if I could just complement that, we are seeing a benefit from some of the investments that we've made in U.S. aggregates already. I would just note that we are guiding to a mid-single-digit increase in volumes for 2026 and a significant piece of that is coming from the inorganic side. Okay. The next question comes from Daniel Rojas from Bank of America. Daniel?

My question is on Claudia Sheinbaum recently announced investment plan. It may be too early, but I was curious maybe you have had some contact with the government to get these projects up and running as quickly as possible and that we might see some upside to volumes in the back half of 2026.

Daniel, thanks for your question. We began to see progress in the fourth quarter of last year. Things are happening. As you saw, the average daily cement sales grew sequentially by 8%, and that is because we are beginning to enjoy incremental new social housing projects as part of the President's social housing efforts. We are beginning to see as well Caminos Rurales that is intensive with bagged cement, and that's also happening. And we are beginning to supply some important infrastructure railroad and highway projects, as Lucy highlighted in her remarks. So yes, things are happening and all those projects are already part of our guidance for CEMEX Mexico volumes. So thanks for the question, Daniel.

The next question comes from Jorel Guilloty from Goldman Sachs. Jorel?

So you mentioned that infrastructure and social housing are key drivers for Mexico volumes in 2026. However, I wanted to understand how you're thinking about potential changes in volumes contingent on USMCA outcomes. In other words, if we have a USMCA review completion this year, what could this potentially mean for volumes? If USMCA review goes to 2027, what could this mean?

Okay. So we have not incorporated to our volume guidance for Mexico a very positive outcome from the negotiation of the free trade agreement. Should that happen, then we do see upside to volumes, which I guess, will materialize in 2027 and beyond. When talking to investors, they're waiting. And we will see many manufacturing industrial projects resuming as soon as the clouds around the negotiation settle down. I think that is the uncertainty of what might happen, what is affecting that segment of the market.

In our guidance for '26, we haven't included any driver from the USMCA negotiation. So I see that as an upside risk to volumes. But it will take time for those projects to hit the ground and break ground, right? So I guess that we might get some late this year if it happens, but much more in '27. Thanks for the question.

We have time for one last question, and it is coming from Francisco Suarez from Scotiabank. Paco?

Congrats on the wonderful milestones achieved so far, looking forward for the next ones. My question relates with your overall guidance in energy cost per ton that you expect to increase this year. And it kind of struck me to see that because we already see a favorable outlook on oil and petcoke costs. But can you elaborate a little bit more if this is driven more by electricity costs or perhaps even more importantly, how these pressures in energy costs are unfolding geographically and where those pressures are higher and where those pressures are lower, that might be very helpful.

Francisco, thanks for your question. Yes, your reading is correct. In our guidance, we're expecting fuels to go down fuel cost. It is electricity where we see the increase, and that's what's supporting our guidance. And this is happening in 2 markets, Mexico and the U.S. Most of the increase, I'll say, around 65% of it is in Mexico. And that is because in '25, there was a one-off incentive to migrate to the wholesale market, which we will not have in 2026.

And then the rest is in the U.S. where some utility companies that supply us, but based on their fuel cost and their mix of generation are announcing some cost increases as well. So those are the 2 markets where we see that increase in electricity. Fuels is down.

We appreciate you joining us today for our fourth quarter and full year 2025 results. We hope you'll take the time to join us for our CEMEX Day video webcast on February 26th as well as for our first quarter 2026 earnings call on April 23rd. If you have any additional questions, please feel free to reach out to the Investor Relations team. Many thanks.

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

Good morning. Welcome, everyone, to the CEMEX Third Quarter 2025 Conference Call and Webcast. My name is Becky, and I'll be your operator for today. [Operator Instructions] And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning and thank you for joining us for our third quarter 2025 conference call and webcast. We hope this call finds you well. I'm joined today by Jaime Muguiro, our CEO; and by Maher Al-Haffar, our CFO. We will start our call with an update on the progress made so far on our strategic plan, followed by a review of our business and the outlook for the remainder of the year. And then we will be happy to take your questions.

Please note that although the sale of our business in Panama was successfully completed on October 6, these operations were reclassified as discontinued as of the end of the third quarter and have been excluded from our results for both 2025 and 2024. As communicated previously, we retained our admixtures business in Panama, which we will continue to operate. In the case of Couch Aggregates, after increasing our holdings to a majority stake, we are fully consolidating these assets and their results in our U.S. business effective September 1. And now I will hand the call over to Jaime.

Thanks, Lucy, and good day to everyone. Six months ago, I outlined our vision for CEMEX with 2 core objectives: attaining best-in-class operational excellence and delivering industry-leading shareholder returns. I also presented our strategic framework and the guiding principles to drive our company's transformation. These levers aim to enhance profitability, increase free cash flow conversion, improve asset efficiency and generate returns that comfortably exceed our cost of capital. Since then, we have worked relentlessly bringing together and aligning our entire organization with these principles.

This has required sustained commitment and a willingness to embrace change at all levels. By engaging our teams and fostering a shared vision, we are ensuring that everyone at CEMEX is dedicated and empowered to deliver on our strategic plan. Today, I am pleased to share with you that while we still have much work to do, we are making important progress on our key priorities. As anticipated in our full year guidance, which assumed a significant year-over-year recovery in the second half, we're now seeing an improved performance in the third quarter. Consolidated EBITDA rose sharply, increasing at a double-digit rate with solid growth across our portfolio.

Substantive margin gains in every region were largely driven by cost savings under Project Cutting Edge and higher prices. In the quarter, we made significant headway in the implementation of Project Cutting Edge with the realization of approximately $90 million in EBITDA savings. This keeps us on track to reach our 2025 full year goal of $200 million in savings. We continued executing on our portfolio rebalancing and growth strategy by divesting our operations in Panama while investing in targeted businesses in the U.S. with the consolidation of Couch Aggregates, strengthening our position in the Southeast.

Our operations in Europe remain at the forefront of our decarbonization agenda and point to our climate leadership with net CO2 emissions on a per ton of cement equivalent basis ahead of the European Cement Association's 2030 target. All of these achievements serve as important stepping stones, strengthening our resolve to continue working towards our long-term goals. Third quarter results surpassed our recovery expectations for the back half of the year. Consolidated net sales are growing for the first time since the first quarter 2024 on the back of a stable volume backdrop and higher prices. Demand conditions in Mexico, while still soft, are showing signs of improvement, and Europe continues with its volume growth trend.

The increase in consolidated EBITDA was supported by all regions with EMEA, Mexico and South Central America and the Caribbean region recording double-digit growth. EBITDA margin expanded by 2.5 percentage points, reaching its highest level for a third quarter since 2020. The U.S. and Europe reached record third quarter margins, while Mexico and our South, Central America and the Caribbean region posted multiyear margin highs. Net income performance in the quarter was largely explained by the prior year one-off gain from asset divestments. Adjusting for discontinued operations, net income is growing by 8% in the quarter and by 3% year-to-date.

Free cash flow from operations benefited from higher EBITDA, lower interest costs and cash taxes. Importantly, the free cash flow from operations conversion rate, a key operating metric for our strategic plan, reached 41% on a trailing 12-month basis despite severance payments of $135 million. I expect free cash flow generation and the conversion rate to continue improving as we make additional progress on our strategic priorities. Consolidated volumes in the quarter were stable with growth in EMEA compensating for dynamics in other markets. While demand conditions are still soft in Mexico, we saw the first signs of improvement in the quarter.

In the U.S., while year-over-year volume performance improved versus the first half of the year, we attribute this change primarily to an easier prior year comparison base. We are pleased with the positive trend in our operations in Europe. Cement volume growth was driven by higher activity throughout Eastern Europe and Spain with relatively stable performance in Germany and the U.K. Overall, while we have faced challenging volume conditions in 2 key markets this year, we remain optimistic on fundamentals going forward. With our renewed focus on operational efficiency, we're well positioned to capitalize on the strong operating leverage in our business once volumes improve.

Consolidated prices were stable on a sequential basis, reflecting the customary annual first half price increases that generally prevail in our industry. On a year-over-year basis, consolidated prices are up low single digits, in line with our pricing strategy for at least covering input cost inflation. In Mexico, despite the volume backdrop, prices remain resilient with cement, ready-mix and aggregates prices increasing by a mid-single-digit rate since December. In the U.S., adjusting for product mix, aggregate prices are up 5% since the beginning of the year. In EMEA, rising cement prices in the Middle East and Africa more than offset performance in Europe.

EBITDA growth was largely driven by our self-help measures and higher prices. Costs across the various categories declined by close to $80 million, accounting for approximately 2/3 of the like-to-like increase in EBITDA. Consolidated margin expanded by 2.5 percentage points with all of our regions as well as our 3 core products recording relevant margin gains. After a year of FX headwinds, we're benefiting this quarter from stronger currencies versus the dollar. In our Urbanization Solutions portfolio, better results in admixtures are partially compensating for still challenging conditions in other businesses.

Going forward, our Urbanization Solutions business will primarily focus on admixtures, mortars and concrete products, which we believe offer strong synergies with our traditional core business as well as high margins. Under Project Cutting Edge, we have committed to an annualized recurring EBITDA savings of $400 million by 2027, with half related to overhead reduction. Importantly, with most of the actions required to achieve the overhead savings already done, we anticipate this effort to deliver about $75 million in the second half of 2025 and $125 million in 2026. We achieved about 40% of the 2025 overhead savings in the third quarter.

We're also making progress on the implementation of the operating initiatives, including fuel efficiency, optimization of fuel mix, improvements in logistics and supply chain, among others. As a result of these efforts, both cost of goods sold and operating expenses as a percentage of sales are declining throughout all regions, leading to an expansion in EBITDA margin. With total EBITDA savings captured in third quarter of $90 million, we remain on track to reach our full year 2025 target of $200 million. As we go into 2026, we expect additional progress on Project Cutting Edge to further support margins.

Complementing Project Cutting Edge, our ongoing business performance reviews should provide more visible improvements in EBITDA, profitability and free cash flow during 2026 and beyond. I am confident that by working with a clear focus on our key priorities of operational excellence, free cash flow conversion and return on capital, we will continue to identify opportunities to further optimize our operations. We're also advancing on our portfolio rebalancing efforts, creating shareholder value through disciplined capital allocation. As our growth strategy shifts towards prioritizing small to midsized acquisitions, we will reallocate capital to opportunities that are immediately accretive.

We will continue seeking potential divestments in non-core markets to strengthen our position in the U.S. with a clear focus on aggregates and building solutions such as admixtures and mortars, which strongly complement our cement and ready-mix businesses. Allow me to emphasize that we will be disciplined when evaluating potential growth opportunities, following our return criteria and protecting our investment-grade capital structure.

A clear example of this value creation approach is the recently announced transactions in Panama and Couch Aggregates in the U.S. We completed the divestment of our operations in Panama at an attractive multiple of about 12x. At the same time, we allocated part of the proceeds to acquire a majority stake in Couch Aggregates, a leading player in the aggregates materials industry across the Southeastern U.S. with an implied valuation of a high single-digit multiple after synergies.

We expect that in the short term, this investment will offset the loss of EBITDA from the sale of our operations in Panama. This transaction is strengthening our aggregates footprint in the U.S., providing significant synergies and allowing us to better serve customers with a more complete offering. I am highly encouraged by our achievements in the quarter, which confirm that we're moving in the right direction, setting a strong foundation to position CEMEX as a more focused, agile and high-performing company. And now back to you, Lucy.

Thank you, Jaime. We are encouraged by our third quarter performance in Mexico. EBITDA grew 11%, marking the expected inflection point in quarterly performance underlying our annual guidance. A leaner cost base and higher prices drove this double-digit growth despite lower volumes. After a challenging first half, volume trends suggest an improvement in demand conditions. Average daily cement sales volume outperformed historical sequential seasonality patterns in the quarter despite heavy rains in August and September. In bagged cement, we benefited from a gradual rollout in rural road projects as well as other social programs.

While demand in the formal sector remains soft, there are promising signs of recovery in the near term. In infrastructure, contracted volumes in our ready-mix backlog have increased in each of the last 4 months with several rail projects expected to commence construction soon. We are seeing incremental activity in projects related to the 2026 World Cup in Mexico City, Monterrey and Guadalajara with investments in roads, metro lines, airport terminals, stadium renovations and hotels. The social housing program, which was recently expanded to a goal of 1.8 million units during the administration's 6-year term is accelerating.

We are already participating in the construction phase of several projects, which represent about 26,000 units with a similar amount in the planning phase. Prices for cement continued their positive trajectory with a sequential increase of 1%. Over the first 9 months of the year, cement, ready-mix and aggregate prices are up by mid-single digits, working to offset input cost inflation. We recently announced a mid-single-digit price increase in bagged cement. Project cutting-edge initiatives are already delivering relevant operational improvements, reflected in the 5 percentage points of margin expansion in the quarter.

We believe we have additional opportunities to further drive margins in 2026. Importantly, the 33.1% EBITDA margin achieved in the quarter was the highest level for our Mexican business since 2021. Going forward into 2026, as the government enters its second year in office, we expect to see the customary pickup in infrastructure spending as well as potential benefits from the upcoming renegotiation of the USMCA trade agreement. As demand conditions improve, operating leverage should continue supporting profitability in Mexico. Our operations in the U.S. reached a record third quarter EBITDA and EBITDA margin, driven by increased cost efficiencies and higher prices.

While year-over-year volume performance improved in third quarter, this was largely due to an easy comparison base resulting from adverse weather conditions in the prior year. Adjusting for ready-mix asset sales and the consolidation of Couch Aggregates volumes for our 3 core products declined by 1%. Demand continues to reflect strength in infrastructure, offset by persistent softness in the residential sector. With 3 consecutive years of volume declines, we have seen increased competitive pressure in select markets within our footprint, explaining the slight decline in sequential cement prices.

In aggregates, we continue to experience robust pricing with prices adjusting for product mix, rising 5% since December. Our efforts to improve cement kiln efficiency continue to pay off in the U.S. with domestic production replacing lower-margin imports leading to relevant EBITDA gains. In our aggregates business, which is responsible for about 40% of EBITDA within the U.S., we continue to focus on initiatives to make our operations more efficient as well as expand our production. The recent upgrade of our Balcones quarry in Texas, one of the largest quarries in the United States, is optimizing our cost structure and contributing to higher margin.

The recent consolidation of Couch Aggregates, along with other expansion projects in Florida and Arizona are expected to increase our aggregate production capacity by about 10% in 2026. Going forward, we expect infrastructure to continue driving demand as IIJA transportation projects continue to roll out. About 50% of funds under IIJA have been spent with peak spending levels expected during 2026. We remain optimistic about the outlook for the industrial and commercial sector, which continues gaining momentum with health care projects, data centers and chip manufacturing facilities being planned in our markets as well as relevant works in the Cape Canaveral.

While there is continued weakness on single-family residential, we see strong potential over the medium term as mortgage rates decline and market sentiment improves. It is important to highlight that as in the case of Mexico, operational leverage should result in additional benefits once volumes recover. Our EMEA region continued with its strong performance, reaching new records in EBITDA and margins in both Europe and the Middle East and Africa. In Europe, high single-digit growth in cement volumes was mostly driven by infrastructure throughout Eastern Europe, with housing activity also boosting demand in Spain. In the U.K. and Germany, volumes are stabilizing.

Infrastructure activity driven by EU funding, along with a gradual recovery of residential should continue supporting construction in the region. In the Middle East and Africa, ready-mix and aggregate volumes expanded by 13% and 1%, respectively. The slight decline in cement volumes is explained by a temporary regulatory impact in Egypt with demand already improving on strong market fundamentals. Higher cement prices in the Middle East and Africa more than offset dynamics in Europe. While price performance in Europe is largely explained by geographic mix, we have also faced some limited competitive pressure in specific markets.

For the full EMEA region, cement ready-mix and aggregate prices are up low single digits since year-end. Our European operations remain at the forefront of our decarbonization efforts, having already surpassed the European Cement Association's 2030 consolidated net CO2 emissions target, further reinforcing our position as an industry leader. The implementation of the carbon border adjustment mechanism in 2026, along with the gradual phaseout of the free EU ETS allowances should be supportive of cement prices next year and beyond. We remain optimistic on the outlook for the region with a continued positive trend in infrastructure and further recovery in residential.

Our South Central America and the Caribbean region posted impressive results with EBITDA rising by 54% and margin expanding by 6.8 percentage points. This strong performance was driven by several factors. The completion of the debottlenecking project in Jamaica, allowing us to substitute low-margin imports with domestically produced cement, benefits from savings realized under Project Cutting Edge, improved demand conditions in both Colombia and Jamaica and a more favorable prior year comparison base.

In Colombia, demand is being driven by the informal sector with a rebound in bagged cement volumes and the metro project in Bogota. In Jamaica, we are seeing tourism-related developments along with improved bagged cement sales supported by remittances. Sequential prices for cement and ready-mix in the region are broadly stable with variation explained by regional mix. We remain optimistic on the medium-term outlook for the region, where improved consumer sentiment and formal construction are expected to drive demand. And now I will pass the call to Maher to review our financial development.

Thank you, Lucy, and good day to everyone. We are very pleased with our performance in the quarter. On the back of single-digit growth in our top line, we delivered 19% growth in EBITDA. Free cash flow from operations was close to $540 million, an improvement of more than $350 million versus third quarter of last year. The year-over-year growth was driven by the initial effects of our cost-cutting efforts, lower maintenance CapEx, interest expense and taxes. Adjusting for extraordinary items such as the payment of the Spanish tax fine in 2024, discontinued operations and severance payments, this year, free cash flow for the quarter grew 29% to approximately $600 million.

In line with our normal seasonality, we saw a divestment of more than $130 million for working capital during the third quarter, and we expect this favorable trend to continue in the fourth quarter. Our year-to-date average working capital days stood at negative 10 days, an improvement of 5 days versus the same period last year. Our free cash flow conversion rate reached 41% for the trailing 12 months ending in September versus 35% for the full year 2024. As mentioned earlier, we are seeing the initial benefits from our efforts to optimize our cost base under Project Cutting Edge.

During the third quarter, cost of goods sold as a percentage of sales was 71 basis points lower year-over-year, while operating expenses as a percentage of sales were 164 basis points lower. Energy cost on a per ton of cement basis declined by 14% in the first 9 months, driven by lower fuel and power prices and a continued improvement in clinker factor and thermal efficiency. Record net income of $1.3 billion for the first 9 months of the year was driven primarily by the sale of our operations in the Dominican Republic, a favorable FX effect and lower financial expenses.

Our leverage ratio under our bank debt agreements stood at 1.88x in September, moderately higher than at the end of last year. We expect our leverage ratio to end 2025 below last year's level. We have fine-tuned our full year guidance for working capital and now expect a range of $0 to $50 million in incremental investment compared to the prior year. In the case of cash taxes, we now anticipate $350 million in 2025, which is $100 million lower compared to our previous guidance. And now back to you, Jaime.

Thank you, Maher. In light of our year-to-date results and reflecting the progress achieved in Project Cutting Edge, we are maintaining our full year EBITDA guidance unchanged, expecting a flat performance versus 2024 with potential upside. Based on more visibility, we have made some small adjustments to elements in our free cash flow spend guidance that should positively impact 2025 free cash flow generation.

We remain focused on the implementation of our strategic plan, delivering EBITDA savings under Project Cutting Edge, higher free cash flow conversion rate and returns above cost of capital. We will keep you updated as we continue making progress towards these objectives. And now back to you, Lucy.

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. And now we will be happy to take your questions. [Operator Instructions]

First question comes from Carlos Peyrelongue from Bank of America.

Congratulations, Jaime, Maher and Lucy, on the strong results. My question is related to cash conversion. It improved materially in the last 12 months. What should we expect for next year and 2027 besides the cost-cutting that you mentioned as part of Cutting Edge, what else could drive higher cash conversion in the next 2 years?

In 2026, I'm targeting around 45% free cash flow conversion from operations, and you do expect further improvement beyond '26. We should be targeting around 50% free cash flow conversion from operations. What is driving and will drive this improved performance is basically a reduction in strategic CapEx and an optimization in platform CapEx. We will continue reducing interest expenses for the most part. So that's how we're going to do it, and I feel pretty comfortable about 2026 45% free cash flow conversion.

The next question comes from Adrian Huerta from JPMorgan.

Congrats on the results. You touched base a little bit on my question, which is regarding Mexico, especially for 2026. You mentioned the increased backlogs in the last 4 months on the infra side. We've seen different actions kind of happening but not being advertised on the infra side. In prior presidential changes, we saw volumes recovering 30%, 50% of the volumes lost in the prior year.

It seems like this year; volumes are going to be down high single digits as you're expecting. Is that -- given what you're seeing so far, can we say that we could potentially at least see that type of recoveries closer to half of the volumes lost this year? And if you can give us additional color on what else you're seeing that is giving you confidence on that?

Adrian, thanks for your question. Well, first of all, I don't think I would be crazy if I told you that volumes -- the demand volumes in Mexico next year should grow by no less than 2.5% to 3% and when demand volumes grow, some of it driven by infrastructure, CEMEX tends to do very well because we do have an extensive technical and operating capability to serve complex infrastructure projects, both highways and rail. This means that most probably, we would be gaining some market share next year in the infrastructure sector as it gets back on track, potentially 1 percentage point market share, which is what we normally lose when infrastructure becomes weaker.

So we're ready to see that unfolding next year, supported by infrastructure. To give you a little bit more of examples, right now, we're executing projects such as Escolleras, Dos Bocas, terminal de carga in Quintana Roo, Camino Real, Colima, [indiscernible] La Primavera in Sinaloa. And we do have an extensive number of projects in the pipeline, [indiscernible], so on and so forth. So definitely, we see a better outlook for Mexico for next year. To what extent, I'm comfortable saying that demand will grow by at least 2.5%, close to 3%.

Please also note that we do see already the social housing unfolding. As Lucy highlighted, we are supplying already projects. And when I talk to our partners, customers, they are becoming more excited about the social housing program. And then I don't know what you think, Adrian, but if interest rates in Mexico continue dropping a bit, that should be supportive of a very resilient formal housing sector, which has been surprisingly good so far this year. I hope I have answered your question, Adrian.

Thanks, Adrian. And if I could just complement, we, of course, will continue fine-tuning our thoughts on next year, and we'll give guidance on Mexican volumes in early February, but we are quite positive. The next question comes from Francisco Suarez from Scotiabank.

Congrats on the wonderful execution, exciting times for sure. My question relates with the massive EBITDA margin expansion in Mexico in the quarter. Can you give us a little bit of color on the breakdown roughly of the 500 basis improvements between, say, Project Cutting Edge, how much of that was also driven by lower pet coke prices? How much was by thermal substitution, perhaps prices or any other thing that you can give us a little bit more color?

Francisco, thanks for your question. Well, yes, we had a solid 5-percentage-point expansion. It explains basically around the following: #1, prices close to 4-percentage-point. Then very pleased with our SG&A and corporate reductions that contributed with around 0.8-percentage-point improvement. variable cost, 0.9-percentage+point; fixed cost around 0.3-percentage-point.

When you look at variable cost, energy continues to be a tailwind, both electricity, although there, I must acknowledge that last year, we had a one-off, but still it's tailwind as we take advantage of the wholesale electricity market, right? And then positive contribution of fuels, around 1.1-percentage-point. So that was also encouraging with a minus 18% decrease in unitary fuel cost. So I hope that I answered your question.

So that creates a wonderful foundation for further improvements in 2026 on your operating year-end, isn't it?

Well, in Mexico, particularly, we're targeting to be the most efficient operator in the country. We've done extensive benchmark with others, although we have a different business model Francisco, mainly in retailing, but we are seeking to be best-in-class in margins in Mexico.

Thanks, Paco. And to your point, Mexico is the region that probably has contributed the most to date in terms of Project Cutting Edge, and we do believe that next year a lot of that will continue.

The next question comes from Anna Schumacher from BNP Paribas. Is the industry deprioritizing CCUS? I appreciate CEMEX has always taken a pragmatic approach. Could your schemes like Rudersdorf be delayed? And how will you decide?

Thanks for your question. You're asking me whether the industry is deprioritizing CCUS, among other things, I won't answer on behalf of the industry, but I'll give you a color on how we think in CEMEX. We've always prioritized first traditional delevers -- sorry, levers to decarbonize. And on that, we're doing pretty well. We continue to see a good runway to continue deploying traditional levers, particularly a significant reduction in clinker factor, further improvement in energy efficiency and beyond Europe, a ramp-up of alternative fuels with biomass content. CCUS continues to be a lever that CEMEX will need a midterm.

And we will deploy CCS projects provided that they are accretive to value creation. And for the time being, for that to happen, we need 2 things: significant subsidies on both CapEx and OpEx and then green premium. And in that -- regarding the latter, we are excited about potential bilateral agreements with some offtakers under the book-and-claim scheme that we're working on. But again, although I recognize that CCUS is fundamental for net zero we will not deploy CCS that destroys value. We need to do more work on regulations, right? And we will not deploy CCS in an asset that we might not continue running long term.

So as we speak, we're reviewing, particularly in Europe, right, our asset footprint because we do see opportunity to optimize our asset base. Some of our kilns might be converted to produce calcium clays, while we do micronization technologies to reduce clinker factor and introduce new blends. And our priority for decarbonization continues to be Europe, followed by California. And everywhere else, we're profitable and accretive to shareholder returns, we will continue decarbonizing because it continues to be a priority. Thanks, Anna, for the question.

The next question comes from Yassine Touahri from On Field.

Congratulations for the fantastic results. My question would be around the price for next year. Could you -- have you already sent a letter to your clients in the U.S. and Europe for 2026 price increase? Could you provide an order of magnitude of the price increase that you would like to deliver in those 2 regions? That would be very helpful. And could we see -- I think prices in the U.S. and Europe were a little bit muted in 2025. Could we see a change in direction next year?

Yassine, thanks for your question. We haven't yet sent our price increase letters to our customers. We're working on it but allow me to share with you the way I'm thinking -- the way we're thinking. Across all our markets, our pricing strategy should more than offset input cost inflation. We're excited about Europe because next year, we will begin to see the CBAM, which could add between EUR 5 to EUR 10 per ton when you think about what importers would have to start paying. In the case of CEMEX, right, we do have an advantage because in Europe, we have much lower CO2 footprint on clinker and cement terms.

But the way we're thinking is we understand that competitors, local producers do not have enough CO2 surpluses, would need to buy CO2 credits at EUR 77, EUR 75 per tonne. And then you need to include the CBAM from imports because the Turks, the Algerians and others do have a CO2 footprint per tonne of clinker and cement that is much higher than the European benchmark. And next year, in 1Q, the European Union will publish the new benchmark. It could be as low as 650 kilos per tonne of clinker. So it means that we're going to have the CBAM. And if producers do the math the way I do it, which is thinking about the CO2 incremental cost, right?

I'll say that there could be interesting pricing characteristics in Europe. As we speak, I'm reviewing macro market by macro market, but I'm excited about that. And in the U.S., we will -- unlike in 2025, 2026, we will, right, target price increases, hopefully to more than offset input cost inflation, recovering what the opportunity lost in 2025. Now what's new is tariffs, right, and potentially some FOB cement and clinker price increases out of the Med Basin, which could be positive for the Gulf Coast and the Eastern coastal U.S. markets. So I hope that I have answered your question.

And the next question comes from Ben Theurer from Barclays.

Jaime, congrats on the great execution here once again. I wanted to follow up real quick on the performance in the U.S., particularly as it relates to volume. Clearly, you've highlighted it was still down across all segments. But I wanted to understand if you're seeing any regional differences in the performance. And if you could maybe dig a little bit deeper into the subcategories, residential versus industrial, commercial and infrastructure as it relates to the U.S. volume in specific.

Ben, thanks for your question. Yes, as we speak, and I'm relating more to the third quarter, we saw weaker volumes in Florida and California and Arizona, partially compensated by growth in Texas, Colorado and the Mid-South. And the outlook looks like this. We do continue to see strong infrastructure. Nothing tells us that, that dynamics will change next year. On the contrary, because of what Lucy explained about the infrastructure bill and how it will -- the investment will peak in 2026. We continue to see data centers, chip factories, second phases and projects around chip factories, some high heavy commercial jobs, right?

But what continues to be weak, and I don't think it will recover next year is single-family homes is residential. You know that mortgage rates are reducing, now around 6.3%. I think mortgage rates will stay for longer at around 6%. And I believe that we need to see the Americans who need to buy a house to emotionally understand that mortgage rates might not drop significantly sooner, and that might trigger the need to jump and purchase a house. But I don't think that's going to happen in the short term in '26. So I'm expecting still a -- stabling though, stabilizing, though, but a weak residential, and I hope to see that recovery in 2027. I do expect U.S. demand to grow next year low single digit, though.

The next question comes from Alejandra Obregon from Morgan Stanley. Can you elaborate on the evolution of your optimization plans and yield improvement initiatives at Balcones in Texas? And how can these translate into profitability improvements in Texas as you substitute imports with domestic production? Is there room for similar improvements in any other plant in the U.S.

Alejandra, thanks for your question. First, allow me to explain a little bit what we're doing in Balcones. We are using artificial intelligence to help operators run our raw mills, the kilns and the cement mills in autopilot, allowing the artificial intelligence to take on real-time decisions on operating parameters. And what we're finding is that we do see between high-single-digit to double-digit, low teens yield increases. Basically, the artificial intelligence uses good data much faster to adjust operating parameters that otherwise a human being will need to wait for days, particularly when it comes to adjusting chemistry because of quality adjustments of raw materials.

So it's very exciting. And clearly, we do see the opportunity to expand and scale the technology to all our cement plants in the U.S. because all of them present opportunities for increased yield. This year, we've seen a solid improvement that led to so far, an increase in cement production of more than 500,000 short tons. And that's clearly expanding margins as we replace imports, but also as we operate in a stable environment, which leads to improved energy efficiency. Do expect more to come.

The potential is simple. I'm targeting -- we are targeting, my U.S. folks are targeting incremental 1 million short tons more from our current asset base. Clearly, the technology will help. And that means that you should expect further cement margin improvement in the U.S. going forward. It could be as high as 2 to 3 percentage points midterm. Thanks for the question, Alejandra.

The next question comes from Gordon Lee from BTG Pactual.

Congratulations on the results. Just a quick question, Jaime, and you addressed this a little bit in your opening remarks, but I was wondering if you could speak a little bit more about the Urbanization Solutions business and specifically, the decline that we've seen year-to-date in revenue and EBITDA, is that a function of the completion of projects? Or should we interpret that as a strategic deemphasizing of its relevance within CEMEX or maybe also as a product of the implementation of Cutting Edge?

Gordon, thanks for the question. The reduction in sales and EBITDA are unrelated to completion of projects. The reason why you see a drop in sales and EBITDA is mainly twofold. It's concrete block Florida, for obvious reasons, weakness in residential and then is Mexico infrastructure because of our concrete paving solutions because of much lower infrastructure activity. Those 2 continue to be core to everything we do because as you can understand, it's very synergetic, right, upstream with raw materials, cement, admixtures, aggregates, but also distribution and downstream with a similar customer base.

But because you're asking the question about deemphasizing, what I can tell you is that we are reviewing the umbrella of Urbanization Solutions. And I do see some businesses that will not remain under Urbanization Solutions as such businesses because most of what we report is on internal transactions. Let me give you an example that is New Line Transport business in Florida. So that's a good example, 98% of what we do is internal, and we do sell to third-party shippers, but we're not planning to grow that business. So any business that we are not planning to grow going forward would not be part of Urbanization Solutions. As we speak, we're very excited about admixtures.

We will continue to be there. It's a very solid business. And next year, we will begin to share more data about every vertical. I'm very excited about mortars, stuccos, renders because it's very synergetic and we know it very well, right? And also recycling concrete, recycling aggregates, recycling construction demolition waste where it makes sense, micromarket by micromarket and concrete products such as sleepers, concrete block and infrastructure, which I see it is a vertical that we -- where I see significant opportunity for accretive growth. So I hope that I have answered the question, Gordon.

The next question comes from Anne Milne from Bank of America.

My question is on the debt profile. So you -- a couple of things. One, you have large maturities next year. It looks like most of that is in the debt market. And if you could just give us an idea, sort of some of the thoughts you have for that. But also your average life is 3.7 years, your yields on your bond now are pretty attractive. I mean, spreads on your 31 bonds are somewhere between 20% and 25% over Mexico, just about 100 and something, low hundreds over U.S. treasuries.

Just wondering if you were thinking maybe, you could extend out a little bit from here. And then related to that, I like the number of net debt with a 5 handle, $5 billion or something. And I also like leverage with the 1.88 number. I also know that CEMEX is looking on doing some -- potentially some acquisitions. Do you have a range where you'd like to see leverage going forward? So it's all on the debt profile.

So I will pass the word to Maher to answer the first part of the question. So Maher, you'll take that. I just want to tell you about the leverage. Look, I'm more comfortable using the fully loaded leverage. I don't think that bank leverage has any meaning going forward. And the range I want to set up is between 1.5x to 2x, fully loaded. Back to you, Maher, you may answer the question.

Yes. Thank you, Jaime. And thank you, Anne, for the question. I -- we're totally aligned, and we definitely think that from the rating agencies' perspective and the debt markets, using the fully loaded leverage ratio makes a lot more sense. And to your question about balancing between investment grade versus potentially slightly higher leverage, we feel very comfortable with that, especially as our EBITDA improves. over the next 12 to 24 months and beyond.

We think that, that will give us -- will -- definitely that plus cash on hand as a consequence of some of our portfolio rebalancing efforts, we should have more than adequate M&A capacity without really risking our ratings and in fact, maybe driving our ratings towards the BBB, solid BBB metrics. So we're very comfortable with that. We don't see any divergent kind of forces in that respect. Now in terms of the maturities, we definitely -- we agree with you. We like the yields that we see. Of course, we'd like them to be lower. And certainly, we'd like them to tend towards our peers, which are probably a good 15% to 20% lower than ours. And definitely, we are looking at extending maturities.

One thing I would like to highlight to everybody is that if we include the 2 subordinated notes that we have, which is $2 billion into our debt profile structure, just hypothetically kind of giving them a 10-year tenor from issuance date, our average life would be closer to 5 years. Having said that, the market on the long end is very attractive. So definitely, we are thinking potentially about extending maturities. Of course, we're always balancing cost of debt versus tenor. But certainly, the positivity of the markets leads us to believe that that's something that perhaps we should consider next year.

And as you know, there are some maturities coming up. There's the loan -- the term loan facility is getting closer. We have a EUR 400 million bond that is due next March. So we have a lot of flexibility in terms of liability management and our ability to take advantage of that. The other thing is one of the subordinated notes resets next year. The 5.125 resets next year to -- by quite a bit, which again gives us the opportunity to potentially do something with that as well. So thank you. I hope that answered your question.

Yes. I just have one clarification. When both you and Jaime mentioned fully loaded debt, are you talking about financial debt and leases or something in addition to that as well?

No, we're talking about adding the subordinated notes to the total debt outstanding.

Okay. So that would be in the 1.5 to 2 range figures.

Right.

And the next question comes from Jorel Guilloty from Goldman Sachs Goldman Sachs.

Mine is a more big picture question. So I was wondering if you could provide some color as to how you see the capacity of CEMEX after Project Cutting Edge is completed in 2027. In other words, given the leaner structure you're pursuing, what will be the capacity of the company that we see at the other end of this? Are you thinking that it's a lower yet more profitable volumes? Is it a larger company growing through acquisitions with a leaner base? Just to get a sense of this cost structure vis-a-vis your capacity going forward?

Jorel, thanks for the question. What we see going forward for the time being is a company that achieves excellence in operations and very strong best-in-class shareholder returns. This means that as volumes grow and markets recover, we have very significant operational leverage, which we will enjoy. We want to achieve -- we will have a very responsible capital allocation with very strict parameters and always credit investment rating no matter what we do and a company that does return cash to shareholders. Yes, we do want to do bolt-ons in the U.S. first around aggregates, mortars, renders for the most part, right?

And a company that relentlessly looks at its portfolio to have businesses that deliver ROIC above cost of capital and free cash flow conversion at a consolidated level of no less than 50%. For the time being, we are prioritizing the U.S., Mexico and Europe as the regions where we want to grow. And finally, socially responsible, right, adding value to the communities where we do business, and doing so sustainably from a safety standpoint, right, attracting best talent in the industry and decarbonizing while also taking care of biodiversity and water management. So that's what I can tell you for the time being, Jorel. Thank you for your question.

We have time for one last question, and it's coming from Adam Thalhimer from Thompson, Davis.

Congrats on the strong Q3. And I was curious if you could update us, Jaime, on -- and you just touched on this a little bit, but the outlook for U.S. M&A. What are you looking at? What's ideal and potential time frame?

Adam, thanks for your question. We -- first of all, we are strengthening our team with a few key additions who are bringing great expertise and capabilities on bolt-on acquisition strategy and deployment, and that was important. At #2, we are strengthening the pipeline. So far, we are looking at 100 family-owned aggregate targets in the U.S. And we're beginning to engage with many of them with flexible approaches as we did in Couch, as an example, meaning we entered with a minority equity option to acquire a majority equity holding, so on and so forth or full acquisition.

We're also looking at mortars, stuccos, renders because, Adam, those businesses, we know how to run, and they are very synergetic because upstream, right, those businesses consume our cement, our cementitious, some of our sand and our admixtures solutions. And it also brings distribution synergies, I mean, logistics and more importantly, customer base synergies. And then we do want to explore some niche opportunity in admixtures as well in the U.S. and elsewhere in Europe primarily. So that's what we're looking at for the time being. And allow me to take advantage of your question just to highlight that, again, we will anchor any decisions to preserve our IG rating.

And we've got very clear metrics for acquisitions, such as, you know, free cash flow per share, which must be accretive in year 1, definitely ROIC over WACC plus 100 basis points in midterm, any acquisition we do with synergies with around 3% of sales so that we drive the multiple to high single digit. right? And again, focus is going to be on aggregates and mortars, renders, and stuccos. I hope I answered your question, Adam. So muscle is -- we're working the muscles, and we will be deploying as the opportunities come along, nurturing them in the U.S.

Thank you, Adam. We appreciate you joining us today for our third quarter results, and we hope that you will come back again for our fourth quarter 2025 webcast on February 5, 2026. If you have any additional questions, please feel free to contact the Investor Relations team. Many thanks.

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

Good morning. Welcome to the CEMEX Second Quarter 2025 Conference Call and Webcast. My name is Becky, and I will be your operator today. [Operator Instructions] And now I will turn the conference over to Lucy Rodriguez, Chief Communications Officer. Please proceed.

Good morning, and thank you for joining us for our second quarter 2025 conference call and webcast. We hope this call finds you well. I'm joined today by Jaime Muguiro, our CEO; and by Maher Al-Haffar, our CFO.

We will start our call with an update on the progress made so far on our strategic priorities, followed by a review of our business and outlook for the second half of the year, and then we will be happy to take your questions. I will now hand the call over to Jaime.

Thanks, Lucy, and good day to everyone. In our last earnings call in April, I presented a forward-looking vision for CEMEX, focusing on two primary objectives: attaining best-in-class operational excellence and delivering industry-leading shareholder returns. Since then, we have developed a comprehensive road map to achieve these goals and embarked on the first phase of implementation.

Our first actions were focused on transforming our corporate structure by streamlining overhead, fostering agility and empowering our regional teams to drive results. This process has involved difficult decisions that are necessary to support the company's long-term growth and competitiveness.

Today, I'd like to provide more detail regarding our strategic plan, highlight the actions we have taken thus far and outline what you can expect from us in the future. I will, of course, then review our second quarter performance, which once again exceeded internal expectations.

Our strategic framework is based on six guiding principles: effectively transforming our organization to achieve operational excellence and sustainable best-in-class shareholder return. These principles aim to improve profitability, increase our free cash flow conversion rate, boost asset efficiency and deliver compelling returns over cost of capital.

In the quarter, we moved quickly on the first lever, simplifying our operating model and empowering our regional operations to make more agile decisions. These actions are intended to promote an ownership mindset with a culture of increased accountability, responsibility and collaboration. At the core of this transformation is the reorganization of corporate areas to support operational excellence in our business units.

We also carried out the initial performance reviews of our regional businesses. I was joined by several members of my team conducting a thorough review of key performance indicators at the individual facility level in each of our regions. Based on these reviews, areas for potential improvement have been identified and detailed action plans have been developed so that underperforming assets meet predetermined return benchmarks. These action plans will support further strategic decisions regarding our footprint evolution at a local level with the goal of increasing profitability and free cash flow.

We have also examined in detail our ongoing growth CapEx pipeline to validate that every investment is on track to generate an appropriate and timely return. Execution of ongoing profitable projects will continue, but we intend to make a strategic shift towards prioritizing small to midsized M&A transactions in the U.S., aiming for immediate positive impact on earnings.

Finally, we have also introduced a new more structured and balanced capital allocation model to guide future capital deployment decisions. We are committed to progressively grow our shareholder return program. This effort should accelerate as profitability and free cash flow generation are boosted by our actions to date.

Since its introduction in February, we have further expanded our Project Cutting Edge program, a foundational element of our organization's transformation.

In our efforts to develop a leaner operating model and empower our regions, we have merged several centralized functions into our operations, while some corporate initiatives have been eliminated altogether or reorganized to better support the business.

As a result of the expansion of Project Cutting Edge and the steps we took in second quarter, we now expect EBITDA savings for this year to reach $200 million, up from our initial expectation of $150 million. And we anticipate a run rate of EBITDA savings of about $400 million by 2027. Included in these estimates are approximately $200 million of corporate headcount reduction on an annualized basis.

While this effort is largely behind us, there are still some additional actions expected in the second half. I am confident that this transformation will help us advance towards our goals, further strengthening CEMEX's position as an industry leader. And now allow me to review our second quarter performance.

Our second quarter results are aligned to our February guidance, which assumed a challenging first half, driven by difficult prior year comparison in Mexico. We expected and continue to believe that the back half of the year would bring year-over-year growth as we lap prior year pre-electoral spending in Mexico with an improvement in peso FX rate.

As in the first quarter, consolidated EBITDA once again outperformed our internal expectations. The EMEA region delivered impressive results, driven by volume recovery and operating leverage, extending its 4 consecutive quarters of earnings recovery. Consolidated EBITDA margin, even with volume decline remained relatively resilient with a stable to improved performance in three of our regions.

Variation of consolidated margin is largely driven by the effect of geographic mix. Net income in the quarter increased by 38% on the back of a strong FX rates as well as lower interest expense. The variation in free cash flow from operations is explained by EBITDA, working capital and severance payments as well as the one-off contribution from discontinued operations in the prior year.

Importantly, adjusting for severance and discontinued operations, free cash flow in the quarter would in fact be growing on a year-over-year basis. I expect free cash flow generation to improve in the second half with higher profitability and the typical seasonal reversal of working capital investment.

Consolidated prices are stable to positive on a sequential basis with ready-mix and aggregates prices up 1% and 2%, respectively. In cement, consolidated prices were relatively flat on a year-over-year basis, largely explained by geographic mix as volumes declined in Mexico and grew in EMEA.

Pricing in Mexico has been particularly resilient despite softer volumes. Since the beginning of the year, cement, ready-mix and aggregates prices have increased by 5%, 6% and 8%, respectively. In the U.S. aggregates prices adjusting for product mix increased by 5% in the first half compared to fourth quarter of 2024. In EMEA, the Middle East and Africa region, along with several markets in Europe experienced sequential pricing gains.

Our pricing strategy continues to achieve its goal of at least recovering cost inflation in our markets. Consolidated volume performance is largely explained by weaker volumes in Mexico and the U.S., partially offset by continued recovery in EMEA. We expect volumes in Mexico to improve in the second half as we lap difficult prior year comparison base and the new government accelerates its infrastructure and social housing plans.

In the U.S., volumes in the quarter reflect the soft trend in residential activity, along with increased precipitation in most of our markets. We are encouraged by the positive trend in Europe as this is the fourth consecutive quarter with cement volume growth on a year-over-year basis. The Middle East and Africa region is also showing robust volume growth.

Consolidated EBITDA performance is largely explained by volumes, partially offset by cost improvements as well as a tough comparison base with a record high second quarter EBITDA in prior year. Volume decline in Mexico and the U.S. was partially offset by growth in the EMEA region.

Costs contributed positively, largely due to energy and distribution. Energy costs on a per ton of cement basis declined 14%. The Mexican peso remained a relevant headwind, which was partially offset by the appreciation of other currencies in our portfolio. Importantly, even with a significant volume decline and lower operating leverage, our EBITDA margin remained resilient at a level slightly above the historical 10-year second quarter average. And now back to you, Lucy.

Thank you, Jaime. As expected, second quarter results in Mexico continued to be challenged by the difficult prior year comparison driven by preelection social and infrastructure spending and the FX level as well as the first year of a new administration.

Volumes were further hampered by record national precipitation levels in June, which primarily impacted the central region. Significantly, we saw average daily cement sales in the quarter stabilized with low single-digit sequential growth. Demand in the Northeast region continues to outperform the rest of the country, both in terms of cement and ready-mix. This dynamic has been supported by ongoing industrial projects as well as state-driven infrastructure works.

We continue to see positive pricing performance for our products, rising by a low single-digit rate sequentially. Since the beginning of the year, cement ready-mix and aggregates prices are up 5%, 6% and 8%, respectively, as we work to offset prior year's input costs inflation. Additionally, we recently announced a high single-digit price increase for cement effective July.

Despite the volume headwind and resulting loss of operating leverage, margins were remarkably resilient, roughly flat to the prior year. This performance was driven by a combination of higher prices, favorable energy and Project Cutting Edge efforts. While FX impact moderated in the second quarter, it still accounted for about 40% of the variation in EBITDA.

Going into the second half of the year, we are optimistic as we lap the difficult comparison base in volumes and peso FX rate. In fact, assuming for the back half, the same level of average daily cement sales as second quarter, it would imply a 4% year-over-year decline in the second half.

Additionally, we do expect a pickup in construction activity, driven by the start of some railroad works as well as projects under the social housing program. Our ready-mix backlog is improving, mainly in the central region with relevant industrial projects expected to begin in the following months. Distribution centers and logistics developments are gaining momentum.

In the U.S., EBITDA declined by a mid-single-digit rate due primarily to lower volumes, given high levels of precipitation in many of our markets and continued weakness in the residential sector. Ready-mix volumes adjusted for asset divestitures declined by a mid-single-digit rate in line with cement and aggregates performance.

Sequential pricing was stable in cement and ready-mix with aggregates increasing by 1%, adjusting for product mix. Since the beginning of the year, aggregates prices adjusted for product mix are up 5%. EBITDA margin remained relatively stable, just shy of last year's record high. This performance is explained by higher prices and lower costs due to continued gains in operational efficiency with increased domestic production replacing imports.

Margin continues to improve in our two main products, cement and aggregates, which account for about 80% of our EBITDA. As part of our transformation efforts, we recently restructured our operations in the U.S., transitioning from a regionally based model to one organized by product line. We believe this change will encourage best practice sharing across regions, increase transparency in our business and provide a more comprehensive view of our asset footprint.

We are investing in our aggregates business and are already seeing the benefits of completed projects such as the Balcones quarry upgrade in Texas. Balcones is one of the largest quarries in the U.S. and the project is contributing to increased margins.

We are also expecting completion by year-end of another ongoing aggregates project, Four Corners at Sand Mine in Orlando, Florida. For 2025, we expect demand to be driven by infrastructure as IIJA transportation projects continue to roll out. Close to 50% of funds under IIJA have been spent and we expect to reach peak spending in 2026.

We remain optimistic about the outlook through the industrial and commercial sector, which is gaining momentum with data centers and chip manufacturing projects being planned in our markets as well as relevant works in Cape Canaveral. In addition, the recently approved U.S. budget bill includes some relevant provisions that are expected to bring forward investment in manufacturing facilities.

While there is continued pressure on the single-family home segment with slightly better performance in multifamily, we see strong potential in residential over the medium term once mortgage rates and market sentiment improved. The EMEA region continued to deliver strong performance, leading to the highest first half EBITDA in recent history with a solid margin expansion of almost 3 percentage points.

In Europe, strong volume growth in the quarter was driven by improved conditions in most markets with the exception of France, where we continue to see a soft macro backdrop and in Poland with weather and delays in infrastructure works impacting volumes. Infrastructure activity supported by EU funding increased, along with a modest improvement in the residential sector in most markets.

Demand conditions in the Middle East and Africa remained strong, expanding by double-digit rates. Construction activity in these markets is recovering, fueled by housing and nonresidential projects and in the case of Egypt, also by large infrastructure.

Sequential cement and ready-mix prices in EMEA increased 4% and 1%, respectively, while aggregates prices declined by 1%. On a cumulative basis, cement and ready-mix prices increased by 4%, while aggregates prices are up 3% compared to the fourth quarter of 2024. Higher volumes and prices, coupled with lower costs, primarily in power, led to a significant margin expansion.

Our operations in Europe continue progressing on decarbonization with net CO2 emissions in the quarter, reaching a new record low of 418 kilograms per ton of cement equivalent. This is an important milestone as CEMEX Europe has now surpassed our consolidated target for 2030, further enforcing our position as an industry leader. We believe that the implementation of the carbon border adjustment mechanism along with the gradual phaseout of free EU ETS allowances should be supportive of cement prices in 2026 and beyond.

We remain optimistic on the outlook for the region with a continued positive trend in infrastructure and further recovery in residential. In our South Central America and the Caribbean region, adjusting for business days in the quarter, cement volumes actually increased by 1%.

Demand in Colombia is being driven by the informal sector with a rebound in bag cement volumes and the Metro project in Bogotá. In Jamaica, tourism-related developments, along with improved bag cement sales are driving activity. Sequential prices in cement and ready-mix in the region were relatively stable after the mid-single-digit increase achieved in first quarter.

In Jamaica, we recently concluded a significant debottlenecking project. The increased capacity will allow us to address market demand without relying on lower-margin imports. As we worked to complete the expansion project in the quarter, we increased import volumes to meet market demand.

These imports temporarily impacted margin in the quarter. We expect a recovery in the second half, driven by higher profitability as we ramp up the incremental capacity. On the operations front, higher kiln efficiency, along with lower clinker factor continued to improve across the region. And now I will pass the call to Maher to review our financial development.

Thank you, Lucy, and good day to everyone. Free cash flow from operations for the quarter was slightly over $200 million. The variation versus last year is driven mainly by combination of severance payments related to Project Cutting Edge, lower EBITDA, higher investment in working capital and last year's benefit from discontinued operations. This was partially offset by lower taxes and interest expense.

Adjusting for severance payments and discontinued operations, free cash flow in the quarter increased by 3% despite EBITDA performance. Our tax payments are significantly lower due to the payment of the Spanish tax fine in 2024, plus other effects.

While investment in working capital during the first half was higher than last year, the average working capital days declined by 4 days, driven by continued improvement efforts. In line with our normal seasonality, we expect working capital to reverse throughout the rest of the year.

On the cost side, energy costs on a per ton of cement basis declined by 15% in the first half, driven by lower power and fuel prices and a continued improvement in clinker factor and thermal efficiency. Record net income of $1.05 billion for the first 6 months of the year was driven primarily by the sale of our operations in the Dominican Republic and a favorable FX effect.

Given the volatility in the Mexican peso, I would like to remind you of our ongoing Mexican peso hedging strategy, fully covering our operating cash flow from Mexico. This program effectively lowers the volatility of the exchange rate at which we convert pesos into dollars for tenors of up to 2 years.

During the quarter, we replaced the 9.125% of $1 billion subordinated perpetual notes with new 7.2%, $1 billion subordinated perpetual notes issued at a tighter spread than our last 2 perpetual notes. This transaction is not only enhancing our free cash flow by reducing the coupon, but it also marked a successful return to the international capital markets since regaining our investment grade.

Our leverage ratio stood at 2.05x in June, a quarter return higher compared to December. We expect the leverage ratio to decrease during the second half as we improve EBITDA and generate more free cash flow from operations. We have a comfortable debt maturity schedule with no need to access the capital markets and we remain committed to further strengthening our capital structure, as Jaime mentioned in his remarks.

Considering the financial initiatives carried out in the first half, along with current market conditions, we now expect net interest paid, including coupons on subordinated perpetual notes to decline by $125 million in 2025. And now back to you, Jaime.

Thank you, Maher. Considering our year-to-date results as well as progress made under Project Cutting Edge, we expect consolidated EBITDA to be flat versus 2024 with potential upside, subject to evolution of microeconomic conditions in our key markets.

While we are confident in our self-help measures taken to date, we must recognize the volatility and lack of visibility in our main markets. As we go into the back half of the year, if FX rates in our portfolio remains stable at the end of June level, we would see a tailwind of about $60 million in consolidated EBITDA compared to the second half in 2024.

We remain focused on the implementation of our strategic plan, delivering EBITDA savings under Project Cutting Edge, higher free cash flow conversion rate and returns above cost of capital. We will keep you updated as we continue making progress towards these objectives. And now back to you, Lucy.

Thank you, Jaime. 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. And now we will be happy to take your questions.

[Operator Instructions] And the first question comes from Ben Theurer from Barclays. Ben?

Congrats on the results. So just a quick one as for Project Cutting Edge. You've clearly upped already the target for this year by $50 million as well as for 2027. So the question really is in what area have you identified those additional savings? And as you look to 2027, if you would have to give a guess on how conservative [ are you on thought of a ] target of $400 million is, how confident are you with that? Or do you think there's risk to the upside here as well?

Ben, thanks for the question. And the additional $50 million mainly comes from our transformation of our organization and particularly the efforts around overhead headcount reductions. And I feel very comfortable that we will deliver the $200 million of headcount overhead reduction between this year and next year. This year is going to be around $85 million, next year is going to be around $111 million, $115 million for a total of $200 million.

To make sure that wasn't aggressive with our target of $400 million run rate savings for 2027, what I've done is that I've reviewed all our initiatives, and I'm only counting on what is truly recurring. Out of the $400 million savings, please note that $200 million relate to overhead personnel -- direct overhead personnel.

But on top of that, you need to add the indirect and overhead non-personnel savings. And then we have operative savings of around $150 million on spending smarter, which is the effort that we're doing around procurement and third-party addressable spend. So there is nothing in the $400 million, that's speculative that depends on year-on-year negotiations.

Thanks, Ben. The next question comes from Gordon Lee from BTG Pactual. Gordon?

Just quickly on strategy, and it's a 2-part single question, which is I was wondering kind of if you could elaborate a little or provide a little bit more color on what you mean by building a shareholder return platform. And the second question, is it still safe for us to assume that you see the U.S., Mexico and Europe as core and SCAC as core niche but something that you would consider divesting if the opportunity presented itself?

Gordon, thanks for the question. The meaning of building a shareholder return platform is simple. It's around our capital allocation efforts. We are subjecting any capital allocation decisions to shareholder returns. We will not proceed with a CapEx or M&A that does not deliver a return above our thresholds for shareholder returns.

In addition, we are planning to progressively increase dividends and we will also consider as early as potentially next year opportunistic share buybacks. That's what it basically means. Regarding your second part of the question, the answer is yes. That's what we're doing. We will concentrate in the U.S., Mexico and Europe and there will be additional divestitures in our SCAC portfolio between end of this year and next year. And yes, you said it core niche, and that's how we see SCAC.

And the next question comes from Alejandra Obregon from Morgan Stanley. Ale?

I have one on free cash flow generation and the levers for free cash flow generation. And specifically, I would perhaps want to know -- and perhaps what should be we watching in terms of the milestones here? I mean whether it's profitability? Is it working capital improvements? Is it CapEx discipline, asset sales or even debt management, if I can throw it in?

I'm just trying to get a sense of how the cadence plays out, like what's likely to come first, what might take longer perhaps to materialize if we think of free cash flow from a structural perspective? And where are the biggest unlocks that we could see here?

Alejandra, thanks for the question. Well, working on all fronts in parallel, and I will elaborate in a second. The one that will take us a little bit longer is portfolio rebalancing beyond developed and emerging, and that relates to underperforming assets in our portfolio at a micro market level that might not be delivering our new targeted free cash flow conversion for every asset and that will take a little bit longer.

I've already completed with my team full review of our portfolio at a micro level. It means cement plant, ready-mix plant, quarry, so on and so forth, and we've identified opportunities to boost free cash flow conversion that will require turnaround or it would require divesting and exiting. And that will inform how we shape our portfolio going forward.

Beyond that, we're acting simultaneously on all fronts. Number one, do expect a reduction in CapEx. We will start to normalize platform CapEx while materially reducing the strategic CapEx. That's one.

On working -- then the second one is going to be the incremental, the cutting-edge savings because those go straight not only to EBITDA but also to free cash flow. And remember, that's $400 million, steady state by 2027.

The other aspect is the incremental EBITDA and free cash flow that you should expect from our strategic CapEx approved and that we're executing from our strategic CapEx pipeline. I'm expecting an incremental $300 million of EBITDA between now and up to 2029, 2030 on a steady-state basis. That should also boost free cash flow.

On working capital, that won't be the lever to maximize free cash flow because we are already performing at very good levels. Please also note that we're significantly reducing interest expenses. Maher already alluded to it, $125 million of savings this year. And part of our capital allocation strategy will continue around reducing the principal of our debt.

I'm not in a hurry to do that, but we will continue, and that should continue to reduce interest expenses. And finally, operational excellence. So we're going to be working very hard on expanding margins, looking at every line of our cost as we're doing right now, and that's the reason why cutting edge is delivering what we were expecting. So I hope that I have answered the question, Alejandra.

The next question comes from Yassine Touahri from On Field. Yassine?

Just one question on the new corporate structure, new operating model that you're announcing today. Could you explain a little bit what it is and how it could support an improved free cash flow conversion? And another question that I think I already asked is that Holcim, Amrize, Heidelberg materials, they're targeting an EBITDA to free cash flow conversion rate of close to 50%. Is it something that you believe CEMEX can achieve as well? And if so, what would be the time frame and the level that you would be working on?

Yassine, thank you for your question. Let me start with the back of your question. I see no reason why we shouldn't achieve a similar free cash flow conversion rate from operations than the ones that Holcim, Amrize and Heidelberg are providing.

I think that next year, we're going to be getting closer to that target. And for sure, I see that happening in 2027 because between now and then, I'm pretty sure that we're going to be letting go some assets that at a micro level do not generate enough free cash flow conversion. Because we have introduced EBIT ROIC above WACC and free cash flow conversion from operations as part of our management KPIs and our compensation scheme, which we're reviewing for management, will be aligned to those metrics. I'm pretty sure that we're going to be relentlessly working on improving free cash flow conversion rates.

So I see really no reason. And again, I don't want to be redundant, but a lot of the cutting-edge savings would go directly to free cash flow. Headcount reduction is a good example, the $200 million annualized savings.

Regarding the -- that connects very nice with the first part of your question, right, about the transformation of corporate structure and the operating model. Basically, what we're doing is discontinuing centrally-led initiatives that were very successful in the past and that do not require further mobilization and management from the center.

In addition, we are decentralizing operational excellence initiatives to the line around commercial, supply chain and customer centricity. The line is responsible for that. So we are decentralizing and then we are boosting collaboration by concentrated on innovation efforts and venture efforts on very impactful but few things, and then we are copy-pasting across regions faster and better.

That is helping us and will help us to optimize resources, optimize headcount reduce cost while having an impactful effect on operational excellence and therefore, margins. I want my teams and all our employees to have an owner mindset and that's what we are heading towards. Agility, less bureaucracy and speed of execution. I hope that what I'm saying, Yassine, makes sense.

And the next question comes from Adam Thalhimer from Thompson Davis. And I'm going to read it, it's a bit repetitive of what Yassine just asked. Jaime, maybe you want to talk a little bit of some of the organizational changes in the U.S. as well. But the question is, can you please discuss some of the structural changes you are making at CEMEX? I am particularly interested in the relationship between corporate and regional managers. Is it fair to say that regional managers are being given more autonomy?

Thanks, Adam, for your question. I will complement what I just said before with the following. The center is here to serve the line. And the center, right, comes with me to conduct thorough regional business performance reviews to boost operational excellence. So that's a key aspect. We've done already three, one more to come. I'll be doing two per year.

And that is where we looked at all aspects of our business, and that is where we identified best practices, we deploy in a coordinated way and efficient way new technology. We innovate together, and we relentlessly look at cost optimization.

The other aspect on -- and it is a good suggestion, Lucy, is our new organization in the U.S., where we are pivoting, right, towards operational excellence and growth. In the case of operational excellence, we've appointed three full P&L owners, cement, ready-mix and aggregates.

And with that, we are expediting best practice sharing, driving margin improvements across every line of business and across geographies, that's going to be very, very powerful. And by having those three P&L owners, we're freeing up the time -- sorry about that, the time of Jesus Gonzalez, our CEMEX U.S. President to spend high quality time on growth in the U.S. because, as you know, right, we are materially reducing strategic CapEx, and we are favoring part of our capital allocation to very responsible M&A in the U.S. around aggregates and some urbanization solutions businesses in the U.S. mainly. So Lucy, I hope that I have answered the question for Adam complementing what I said before.

Thank you, Jaime. The next question comes from Jorel Guilloty from Goldman Sachs. Jorel?

So I want to shift gears a bit and wanted to ask on pricing trends. So specifically, if I recall correctly at the beginning of the year, there was an expectation for Mexico pricing to maybe go into the teens for both cement and aggregates. And year-to-date, you're at about 5% hikes. And you did mention that you did pursue an increase now in July. So I just wanted to understand where do you stand on the outlook for hikes in pricing through year-end supply -- for Mexico and the U.S.? Specifically, I want to know about cement, but if you can provide some color for ready-mix and aggregates, that would be great.

Thanks, Jorel, for the question. Regarding Mexico, yes, we put a price increase effective July 1, that in dollar terms was around $15 per ton. We do expect to get -- hopefully, it's a little bit too early to say it, but we do expect to get between $8 to $10 per ton, and that should continue to improve sequentially our cement price increase in Mexico and we did that for both bags and bulk.

Regarding ready-mix, we continue by micro market to find opportunities to increase our prices. Please note that year-on-year, our ready-mix prices are up 7%. And sequentially, second quarter '25 average to fourth quarter '24 average, our ready-mix price is up 6%. And in aggregates is year-on-year 8% and 8% sequentially average second quarter '25 to fourth quarter in 2024.

Regarding the U.S., I'm not expecting any price increase in cement between now and year-end. And I do expect ready-mix to be flat, while aggregates will stay around that 5% to 6% sequentially from average 2Q '25 to 4Q '24 and as we think about 2026, right, I do expect that we will continue with our pricing strategy to at least offset input cost inflation.

And a final thought, if we assume the 2Q '25 prices for the rest of the year, that will lead to a price tailwind in U.S. dollars of around 4% in cement, 6% in ready-mix and 7% in aggregates. I hope I've answered the question. Back to you, Lucy.

Thank you, Jorel. The next question comes from Adrian Huerta from JPMorgan. Adrian?

My question is related to EMEA. We have seen a tremendous performance year-to-date EBITDA of 32% almost $350 million in the first half. How do you see this region in the medium term, let's say, over the next 18 months? What is, let's say, on volumes and also on margins? And what could we expect out of this region in 2 to 3 years?

Thanks, Adrian. Well, I'm very excited about our operations in EMEA, including Europe. Let me start first outside of Europe. We do see a significant potential for free cash flow and EBITDA growth in Israel. The fundamentals continue to be very solid, population growth, highly intensive concrete-driven construction systems and a lot of liquidity and there is pent-up demand for housing and infrastructure. We are very well positioned and therefore, I'm very excited about our operations in that part of the world.

Although Egypt will continue with volatility, we are enjoying for the next -- for the very short term, strong volumes and strong pricing. If I go to Europe, I'm bullish about Europe, we will continue to see volume increase in markets such as Spain, Germany, and you know what, why, right, the change in fiscal policy, the commitment in infrastructure investments and in the Defense segment as well, some of which will relate to infrastructure.

We also see solid Eastern Europe. And it's exciting because the opportunities is material. Think about a reconstruction of Ukraine, if it happens in the midterm, right? That won't happen next year, but as soon as there is peace between Ukraine and Russia, the reconstruction is going to draw significant volumes and that's going to reduce imports from Ukraine into Poland.

That's going to improve dynamics in the east of our portfolio in Europe, and we're going to see significant product that today is exported from Turkey, some of which goes to Europe going back to Ukraine and other reconstruction efforts such as potentially in the midterm, the Middle East. So that's going to be a key lever.

Thinking about the midterm also, we will see Poland expediting infrastructure using European Union funds. There is a delay there, but I do think that that's going to happen next year. And then the U.K. should continue investing in infrastructure and potentially we'll see a bit of recovery in housing in the midterm.

What excites me also is the -- our CO2 decarbonization, we are leading the pack. And our CO2 performance is going very well. And there, in '26 and '27, we're going to see two things, Adrian. First, the CBAM. Number two, the withdrawal of three CO2 allowances, which will be -- which will materialize starting in 2027, and we have a significant CO2 credit surpluses, but that's not the case of the industry.

So as soon as next year, when we look also at the CO2 footprint of imports from exporting countries, such as Turkey, Algeria, Saudi Arabia and others, they'll have to -- they will face a CBAM that would give us a cost advantage that will materialize hopefully in our pricing strategy. And then I do expect cement capacity closures, including our footprint, and we're analyzing that as we continue lowering our clinker factor and doing more milling and less clinker. And that also would lead to less excess capacity because some of it won't be needed to get CO2 free allowances.

So all of those dynamics, better volumes and rationalization in the industry should lead to in -- our pricing strategy is going to be to leverage that momentum and trying to close the gap on pricing that we see between, for example, European markets and the U.S. So I hope that I've answered my question, Adrian.

Adrian, I would also just add that we've already seen some momentum in Europe in terms of pricing. If you exclude Germany, pricing for our three core products is already up 2% to 3% versus fourth quarter this year. So I think that, that's important to note, anyway.

And the next question comes from Paul Roger from BMP. I'm going to read it via the webcast. Guidance mentions potential upside, where could this come from?

Thanks, Paul, for the question. Let me elaborate a little bit about it. First, as part of our cutting-edge effort, we count on around [indiscernible] that I haven't yet even included in our estimates that works as a cushion, but there is some upside as we continue executing those savings.

Also think about it this way. In the first semester, we did $1.424 billion. So if we were to do the same thing, meaning second semester, $1.4 billion, that will be a flat second semester growth, that will lead to $2.850 billion. But then you need to add tailwinds on FX. If the FX stays around MXN 18.75 to the dollar, that's going to add at least $40 million in the second semester.

And then we have our Project Cutting Edge savings, and we're counting on the $85 million of headcount overhead reduction savings that I'll be firming up in future calls as we completed the labor consultation process in Europe.

But beyond $85 million of headcount savings, we haven't yet even considered the indirect savings from eliminating those positions. That could be between 3% to 6% more savings and those relate to licenses, traveling expenses, so on and so forth. And then we count on around $100 million of the rest of cutting edge because it's fully loaded in the second semester. So I think that that's where the potential upside comes from really.

Thanks. The next question comes from Paco Suarez from Scotiabank. Paco?

And congrats for this wonderful transformational changes at CEMEX and for the execution so far. My question relates with the overall conditions in the United States. If you see prices of aggregates in general in the United States are doing far better than those in cement.

Do you think that such overperformance on prices in aggregates combined with many players interested in acquiring these type of assets may undermine your plans to acquire operations in at accretive values. And perhaps you can link the answer to precisely what you have said about the -- how this new model on capital allocation works?

Francisco, thank you very much for the question. You have a good point that many companies are interested in investing in the aggregates space in the U.S. The first thing I want to tell you is that we have a great aggregates team in the U.S. and they know our -- the business very well.

The second thing is that because we purchase aggregates in some markets in our ready-mix operations, when we do not consume our own, we do have an extensive network of family-owned aggregates players with whom we have had years and years of relationships, and we're nurturing them and those should potentially, if we do the right things, give us at least a bit of an advantage in certain markets.

But you're right. The competition is going to be tough. But what I can commit to and that's the new company's commitment on capital allocation is that we will not do any acquisition that does not deliver on the targeted metrics. And this means, obviously, NPV must be above 0. We want from a free cash flow per share to be accretive in year 1. We want ROIC above WACC plus 100 basis points.

We will do only acquisitions with synergies of around 3% of sales. We want to do acquisitions with that -- by those synergies, will reduce multiples to high single digits. And as you can imagine, Francisco, we are anchoring to preserve our investment credit rating status. And definitely, looking at shareholder returns, the ROIC from these investments are worse than otherwise paying down principal of the debt or returning cash to shareholders, we will do the latter.

So it's going to be competitive. We're ready, but we're also going to be very responsible. And this will be small to medium-sized acquisitions. And a final thought. The reason also why we're looking at mortars, stokers, renders is because we see great synergies with our -- what we do today, and we will [indiscernible] a little bit the breadth of accretive investment opportunities in the U.S. on a space that we know pretty well, and where we are well positioned to take advantage of a fragmented industry. So I hope that I have answered your question, Francisco.

Thank you, Paco. The next question comes from José Espitia from BBVA. José?

Can you hear me?

Yes.

Yes, José, I can hear you.

So my question is considering the upgrade in volume expectations, if you can elaborate on the demand outlook in Mexico and the U.S. for the second half of the year, given the uncertainty scenario and challenging economic context.

Yes, José. Regarding Mexico, what I'm counting on is a small sequential volume improvement from the first half of this year into the second half of around 2%. The -- how we see the market is that in the second half of '25, it implies a minus 2% in cement. Okay. And please remember that last year, in the second semester of 2024, I believe that the demand already dropped by 7%, right? So the baseline from which we start last year, it was much worse than the first semester of 2024 where there was a significant growth.

Also, if I think about average daily sales, I'm only expecting a very minor increase quarter-over-quarter. So I feel pretty confident on this implied sequential growth for Mexico. We do -- we're talking to customers, they are telling us that they do see the government moving ahead with their social housing program. So we do expect to see some of these projects breaking ground in the last part of the -- of this second half of the year and some infrastructure spending on railroads. So that's how we see it.

But nevertheless, if we assume no sequential average daily sales improvement, meaning flat to second quarter '25 for the second semester that will lead to a 4% year-on-year decline in the second half and a full year decline of 9%. Regarding the U.S., look, this first semester has been very rainy.

Now we're entering into the hurricane season. Last year, hurricane season was very difficult. At least in July, we haven't had the hurricanes that we had last year. So 1 month behind us, and that's helping indeed our volumes.

Depending on weather, so it's an externality and sorry about that, but we have, in the second semester, an implied plus 1% in cement. And that is because we continue to see infrastructure unfolding and data centers were going to be more up -- busier in Arizona, doing some semiconductor -- second phase semiconductor facility.

We're busy in Cape Canaveral and we see more data center projects unfolding. It's going to be very much dependent on weather. I'm sorry about that. But that's what we have right now. That's our expectation. And finally, again, if we assume same average daily sales as in the second quarter '25 for the second semester, that leads to a 1% year-on-year increase in the second half and a full year decline of 2%. So I hope that my answer has been helpful, José.

José, if I could just complement with one additional point, and that is that in the case of Mexico, there are also 5 more working days in the second half than the first half, apart from the average daily sales analysis that we just gave you. So I think that, that also was...

You're right, Lucy. It is 5 days, I think.

Yes. So the next question comes from Daniel Sasson from Itaú. Daniel? Have we lost him? Okay, I'm going to move on. Yes, yes, Hi, Daniel.

Can you hear me right?

Yes.

I can hear you now, Daniel.

So my question is just a follow-up question of the previous ones made. So I just would like to understand first is regarding the share buyback program. You mentioned that this could be an opportunity for 2026. So I'd like to understand by how much are you guys thinking of? How much you guys have as a base case?

And my second follow-up is regarding the divestments in Hong Kong regions like SCAC that you mentioned before. So you just could provide a little bit more color in terms of what countries or what regions specifically in SCAC, you guys believe could be under review. So these are my two follow-up questions.

Regarding your first question, Daniel, I'm not ready yet to tell you exactly what we're thinking in terms of amount. I just want to remind you that the general shareholders agreed and approved up to a $500 million share buyback program. I'm not thinking about that amount for next year, but we will begin together with the dividend program. And I think it is a bit too early to share that with you.

Maybe that's something that I'll be ready to do early next year in the fourth quarter call. But do expect progressive both dividends and share buybacks as we rebalance our capital allocation to be -- to look more of -- much less will go to debt principal repayment, but we will continue with some and then much less strategic CapEx, more accretive when it comes available M&A in the space highlighted in the U.S. mainly, and the rest is dividends and share buybacks. That's our plan.

Regarding your second question, could you -- oh, yes, it's about divestments in SCAC. Look, I feel more comfortable not providing you with the specifics because of obvious reasons. But I do expect that we will be -- my expectation is that we will be executing further divestments between October of this year and late next year. And we will retain some operations that do present significant free cash flow conversion levels for the time being. I will elaborate more about that as we progress on current negotiations. I hope you understand, but I cannot provide you with a specific names right now.

We have time for one last question, and it is coming from Anne Milne from Bank of America. Anne?

I think this question maybe is for Maher. I just wanted to ask you about your current thinking about the path to reach your previously stated goal of 1.5x net leverage. In the past, it seemed like it would or could be through primarily increases in EBITDA, not necessarily reductions in debt. But could you please give us an update on what you're thinking about timing of this? What additional levers you might use if necessary to reach this target? We know you have the maturity or I should say, the call date on one of your perps next year that could help on that. But any other thoughts would be much appreciated.

Sure. Yes. I mean I would like just to reiterate that EBITDA growth is probably the most important leverage that we have, especially after all of the comments that Jaime made, I mean between operational excellence to Project Cutting Edge, which you've heard. We've upped the number to $400 million.

Incremental EBITDA from some of our growth investments definitely will be contributing materially to EBITDA in the next 12 to 24 months. The hyper focus on free cash flow conversion and then being able to potentially allocate that based on the criteria that Jaime outlined, I think we -- and this is excluding any potential improvement from organic growth just from the -- just natural dynamics of the portfolio.

I think that EBITDA and free cash flow are the two very important levers to continue to deliver deleveraging in the form of lower leverage ratio. And I do expect that we should get that half a turn somewhere in the next 12 to 24 months. I mean between a combination of reducing the stock of debt and very important improvement in EBITDA that is under our control, that is not dependent on market-driven levers, I think, gives me the comfort that we should be able to achieve that target within the next 12 to 24 months.

Thanks, Anne. So I think that's a wrap. We appreciate you joining us today for our second quarter results, and we hope that you will come back again for our third quarter 2025 webcast on October 28. If you do have any additional questions, please feel free to reach out to the Investor Relations team. Many thanks.

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