Fernando Gonzalez: I’m not sure I listened to the whole question, but let me try and let me know. I think as you mentioned in our CEMEX Day recently, we reaffirmed our strategy, a strategy that we started developing in 2020, and we have been communicating it, meaning with the idea of making up, let’s say adjustments or changes to our portfolio, willing to growth, mainly our first priority in the U.S., we also mentioned Europe and to some extent in Mexico. And that’s what we’ve been doing. So this divestment in the Philippines, we see it pretty aligned to that strategy in the same way when we did other divestments from 2000 to 2003. And all the — or most of the proceeds of those divestments have been used in our bolt-on growth strategy.
Little by little, but in this three years and a half, let’s say, or two years in the quarter. We have divested already about $2.5 billion, and all of it or most of it have been repurposed to investments, again, U.S. sales priority and also part of it to reduce our leverage ratio. So again, this divestment is aligned with that strategy. This is the last piece that we usually have in Southeast Asia. So our Asian chapter has been also, it’s going to be closed once we perfect or execute the transaction by year-end. Again, maybe there is another part of the question that I didn’t get. I don’t know if Maher or Lucy have a comment on it.
Alberto Valerio: I would just say that the other part of the question was about Colombia that we see the same way that we see Philippines.
Maher Al-Haffar: I think Alberto is asking at about — it’s about Colombia and because we’ve delisted the company there and I was wondering if that something the same as Philippines would occur. Am I correct? Alberto, that was your question?
Alberto Valerio: Exactly that, Maher. Thank you very much.
Fernando Olivieri: Okay. Sorry, I didn’t understood it. Well, we — again, as I said, we have a clear strategy properly communicated and we are executing. We do not comment on potential future either acquisitions or divestments. But what you can expect in the future is that we will continue with the same note. Even in our CEMEX Day, we shared a new piece of info, let’s say, on our strategy with the target of the U.S. to be up to 40% of CEMEX portfolio, currently being around 30%. And so again, as you can see, all pieces are moving forward according to that idea, what you can expect in the future is that we will continue with the same process.
Alberto Valerio: Fantastic. Makes sense. Thank you for the answers.
Fernando Olivieri: Thank you.
Lucy Rodriguez: The next question comes from Yassine Touahri from On Field Research. Yassine.
Yassine Touahri: Just a question on your volume outlook for Europe. You increased a little bit your volume forecast. But the cement demand was quite weak in Q1. Can you comment a little bit about the trends in March and maybe at the beginning of April? Do you start to see a recovery in volume in Europe? And then maybe a second question on the 9% volume growth that you delivered in aggregate in the U.S., it’s like exceptional compared to what many other companies have reported. Is it something which is specific to CEMEX? Is it your — is it some specific infrastructure project? Or is it something which is a one-off? Or do you see this strong growth continuing for the rest of the year?
Fernando Olivieri: I will take the second one. Just saying specifically the case of the volume growth in aggregates in the U.S. it is specific to CEMEX. Well, that might be a similar effect in other players. But in our case, it’s a product mix effect. We are selling more based materials. That means infrastructure is playing a role in that volume. It is not referred to all volumes, I mean, to all products, but very specific on base materials, which we interpret as good news because it could also suggest and activity in infrastructure already in development. But it’s product specific.
Lucy Rodriguez: Great. And maybe just on Europe. Yes, Yassine seen Europe, obviously, there was a drop in EBITDA year-over-year in first quarter. I think it’s important just to remind everyone what I know you know that first quarter typically is the most seasonally impacted quarter, and Europe is the region where we see that most. Typically, first quarter is about 11% to 12% of full-year EBITDA for Europe. So we shouldn’t read a lot into what we saw. The first quarter was impacted by two fewer working days in Europe, which explains about 10% of the EBITDA drop. We had bad weather in a number of geographies, particularly the U.K., which is our largest market in Europe and where we saw quite a bit of precipitation. Germany also was impacted primarily from the economic slowdown.
But on the other hand, we saw great growth in places like Poland, where we’re seeing increased confidence coming out of the elections and the expectation of EU funding going forward. France also has been an important source of the decline. As you know, we’re only ready mix in France. But of course, because of the Olympics, there has been a ban on large projects that’s going to go through kind of early summer, early mid-summer. But we are expecting that, that will get better as, of course, construction opens up again post Olympics. In the quarter, I think it’s important to note that even with the decline in volumes that we saw, which was anywhere between 8% to 15% on our products, we actually saw very resilient pricing sequentially. So local currency prices were up between 1% to 5%, depending on the product.
Another headwind that we had in the quarter was obviously, with volumes down, we had higher fixed costs as well. We expect that will turn around as we go through the year. We have seen a seasonal pickup in terms of volumes. In the case of Europe and April has been looking quite good as well as we saw sequentially the normal seasonal pickup that occurs. So I think that we’re — as we look at Europe going forward, we have better comps as we move into the last three quarters of the year because the declines we experienced in Europe really started in second quarter. We believe we’ll have improving fixed cost dynamics. The Olympics will be — that will be behind us, and we’ll have a more supportive economic environment as well going forward, we believe, and the promise of infrastructure is picking up in Poland.
So that is kind of it in terms of Europe. Hopefully, that answers your question.
Yassine Touahri: It does. Thank you so much.
Lucy Rodriguez: Okay. Thank you, Yassine. And the next question comes from Anne Milne from Bank of America. Anne?
Anne Milne: Yes, good morning Fernando, Maher, Lucy. Thank you for the call.
Maher Al-Haffar: Good morning.
Anne Milne: Good morning. I know that we’ve talked about this in previous calls. By the next quarterly conference call, Mexico will look at presidential elections, and you will know who the new President is even though the polls do give us some good suggestions. I know we’ve talked about the impact on business and volumes in Mexico that maybe will tend to decline. But given some of the dynamics that are going on right now, both near-shoring and right now, an increase in bag cement. Could you just give us an idea of some of your thoughts, if anything, if nothing more on how this time might be different and what you might expect post elections in the second half of ’24?
Fernando Olivieri: Yes. Well, let me start and then Maher or Lucy can complement. I think this year is an election year. What we see is, let’s say, a good performance in different sectors in our industry. Perhaps the one impacted this format housing because of high interest rates, although at least in the case of Mexico, seems like the first adjustment was made, let’s see how that continues moving forward. But I think the informal economy is doing well. Mexico is growing. So on that side, growth in the market could be reasonable and stable for the rest of the year. On the other hand, industrial and commercial impacted by the near shoring effect is also evolving in an attractive manner, particularly in the north of the country.
And the other piece is going on that is positive, which is infrastructure in public works, meaning public infrastructure, everything that is going on in the central part of the country and in the Southeast, meaning the trains that rural roads, the airports. Most of the — with some exceptions like the airport in Mexico City, the projects are not finished yet, and they’re not going to finish in election time. So they are going to be — continue being developed for the rest of the year and who knows maybe also early next year. So that that shouldn’t be a, let’s say, a material factor or a reason why demand can suffer materially. So we see stable volumes for Mexico during the whole year despite the election in mid-year.
Maher Al-Haffar: And if I can add maybe just some more granular color and I’m sure if you visited Monterrey or Mexico recently, you would see a lot of these projects that are just beginning. We think there’s a very strong project pipeline for the second half of the year that is likely to kind of substitute or, let’s say, ease the demand situation in the second half of the year. You have the cross-border terminal in Dejana. There’s a very extensive metro expansion in Monterrey. I mean on the way to the — from the airport, you can see enormous amount of concrete being poured and expected to continue to be poured for quite a bit of the year, major highway construction in on a plateau and there are many, many others, right? And then on the housing side, I mean we do expect, as Fernando said, as rates get a little bit better inflation gets to be easing in the second half of the year.
We do expect some improvement in demand there. Remittances continue to be very positive and impacted and Mexico as a whole, frankly, continue to benefit from the fiscal stimulus from the U.S. through the remittances and to others. And of course, the nearshoring process also continues to happen, especially in the northern part of the country, and it’s starting to make its way further south. And so — and supply/demand dynamics continue to be fairly favorable. So second half of the year is looking reasonably good, I would say.
Anne Milne: Okay. That’s very good color. Thank you very much.
Maher Al-Haffar: Thank you, Anne.
Lucy Rodriguez: Thank you, Anne. And then next question comes from Gordon Lee from BTG.
Gordon Lee: Yes, hi. Can you hear me?
Maher Al-Haffar: Yes, Gordon. How you doing?
Gordon Lee: Hey, how are you? Maher, this is a question, I guess, really for you, but just sort of thinking about capital allocation in the context of your sort of continuous enhancement in financial flexibility. I mean, I know, obviously, priority number one, you stated is to reduce the leverage ratio by 0.5 turn of EBITDA. But I wonder how you feel about the subordinated perpetual notes, whether — because if you look at the coupon, that’s sort of almost not quite a cost of equity type of coupon, but not far from it and particularly considering that you’re now an investment-grade company. And I know that those don’t impact the leverage ratio. But how — do you see them as a permanent feature of your capital structure? And how would that stack up, let’s say, versus buying back shares or increasing the dividend going forward?
