Cemex seeks to offset inflationary pressures with price hikes

Fernando A Gonzalez, CEO, opened yesterday's Cemex Day - Part II event with a look at some of the surprises of the last year. Not only has Cemex seen a 'V-shaped' recovery since the pandemic, it has also reported remarkable growth with EBITDA advancing in the 1H21 by 20.7 per cent YoY. However, inflation has become the main challenge going forward, particularly due to price rise for marine transportation and fuel, which the company has responded to with a robust pricing strategy and the postponement of costs and capex. 

Despite the inflationary pressures, the company's Europe, Middle East, Africa & Asia (EMEA) region saw growth of 20 per cent in the 1H21, compared to the same period in 2020, with a strong recovery in volumes which are expected to reach 2019 levels by the end of this year. A second round of price increases is also helping to offset rising input costs. Cemex also completed its 'One Europe' reorganisation, designed to drive efficiencies and better enable it to tap into the EUR1.4trn of infrastructure projects in the pipeline by 2030. The EMEA region also boasts surplus CO₂ allowances that are expected to last until 2026, according to Sergio Menéndez, president, Cemex EMEA.

Cemex Europe has set a new target of a 55 per cent reduction in net carbon emissions by 2030 from 1990 levels, the first company to match this EU goal. Under this target it will aim to reduce Scope 1 GHG emissions by 20 per cent per ton of cementitious material by 2030, from 2020 levels. In addition, it is the first to introduce hydrogen injection in all its plants and to bring carbon neutral concrete to the market. Around 60 per cent of sales in the EMEA region are now defined by the company as low-carbon concrete sales.

Strong volumes and price increases have also driven a 13 per cent EBITDA uptick in the company's USA region. With fuel and shipping rates continuing to escalate, two price rises have been implemented this year, the first time that has happened in 15 years. According to Jaime Muguiro, president, Cemex USA, these headwinds are expected to continue into next year so double-digit price rises are forecast for 2022. 

Perfectly timed for the pandemic was the rollout of Cemex Go, the industry’s first digital global platform enabling customers to create, schedule and modify orders at any time. Designed to "build a superior customer experience," Cemex Go covers the entire customer journey and proved to be a significant competitive advantage during the restrictions of COVID-19, according to Luis Hernández, EVP of Digital and Organization Development. Today Cemex Go accounts for 60 per cent of the company’s global sales and boasts 40,000 recurrent customers. Cemex also runs Arkik, a cloud-based solution for its ready-mixed concrete (RMC) business, covering its 749 RMC plants globally.

In the South, Central America and the Caribbean region, EBITDA fell by 29 per cent YoY in the 2Q20. However, by the 2Q21, EBITDA had advanced YoY by 78 per cent on the back of rising prices and an impressive increase in volumes. The Dominican Republic has become the largest market in the region with EBITDA there doubling in the last three years and clinker demand rising by a CAGR of nine per cent, prompting the restarting of an old kiln to help meet demand. Almost 3Mta of Cemex cement capacity is also due to come with debottlenecking of some plants in the region by 2023.

The Mexico market has seen EBITDA advance by 41 per cent in the 1H21, compared to the same period last year, driven by a "focus on the variables that are within our control", namely price, explained Ricardo Naya, president, Cemex Mexico. Successful cost containment measures in the region have also resulted in a deflation in distribution costs for the first time ever in the 1H21. Mr Naya was "very optimistic" about the performance of the business, which he says "has been and always will be purpose-driven – that purpose being to build a better future."

Juan Romero, EVP Sustainability, Commercial and Operations Development, outlined Cemex’s 2030 goal of a 40 per cent reduction in CO₂ emissions in cement, a 35 per cent reduction in CO₂ emissions in concrete and sourcing 55 per cent of electricity from clean energy sources. This will be achieved mainly through increasing the use of alternative fuels and reducing the clinker factor. The company also aims to increase its offering of sustainable solutions under its Vertua brand, as well as having seven industrial-scale carbon capture usage and storage (CCUS) pilots in operation by 2023-24.