With unprecedented levels of input cost inflation over the last two years, cement prices in Europe rose significantly during the year and were stable sequentially in the fourth quarter. Although we remain optimistic over Europe’s medium-term prospects as the region pivots decisively towards a more circular economy, we recognize that construction in certain countries in the region are facing challenges in 2024. Germany has slowed significantly in the past year, while construction in Paris will be also in advance of the Olympics. We expect demand in these markets to pick up as we enter 2025. For Europe in 2024, we expect flat to low single-digit decline in volumes, reflecting a slight recovery in construction activity, albeit at a slow pace. Our EMEA region was negatively impacted throughout the year by adverse competitive dynamics in the Philippines as well as an overall slowdown of construction activity.
For 2024, in EMEA, we expect flat to low single-digit increase in cement volumes and mid-single-digit declines for ready-mix and aggregates. In South Central America and the Caribbean, after a challenging 2022, where our pricing is struggling to keep up with cost inflation, sales and EBITDA rebounded in 2023. Pricing drove top line growth with our cement prices increasing 9%, but still not sufficient to fully cover input cost inflation. In fourth quarter, net sales and EBITDA grew high single and double-digits, respectively. While bag cement demand remains under pressure, bulk volumes continue to grow, supported by infrastructure projects such as Bogota Metro, the fourth bridge over the canal in Panama and tourism-related projects in the Dominican Republic.
Quarterly margin improved 0.7 percentage points year-over-year with a slight decrease in sequential margins, largely explained by lower volumes, partially offset by lower energy and maintenance costs. For 2024, we expect flat volumes across all products as formal construction continues to scale on the back of infrastructure projects and offset continued pressure on bag cement volumes. And now, I will pass the call to Maher to review our financial developments.
Maher Al-Haffar: Thank you, Lucy, and good day to everyone. 2023 was an outstanding year, reaching a record EBITDA and achieving margins substantially in line with 2021. EBITDA for the year grew 25% on a reported basis, 2x the rate of growth in sales. This performance was achieved through the successful execution of our robust pricing strategy across our businesses and markets. In addition, we had a very healthy contribution from our growth investment strategy and Urbanization Solutions, which in total now represent close to 20% of our annual EBITDA, with the latter growing almost 30% in 2023. Our results also benefited from a deceleration of input cost inflation coupled with cost efficiency measures across our businesses, such as our Working Smarter initiative and our Climate Action road map, among others.
These efforts more than compensated for volume headwinds in some markets. Energy cost per ton of cement grew 9% in 2023, slightly below our guidance and at a significantly slower pace than the prior year. The containment of energy cost was due to a combination of deceleration in market prices as well as proactive efforts to align our portfolio towards lower-cost alternative fuels. In 2023, we continued to increase alternative fuel usage, growing almost 2 percentage points and reaching 37% of total fuels. As we mentioned before, alternative fuels are significantly less expensive than non-renewables, have different supply-demand dynamics and are critical in our decarbonization road map. We are particularly focused on alternative fuels with biomass, which currently account for approximately one-third of our alternative fuel mix.
In 2023, we more than doubled our free cash flow after maintenance CapEx to $1.2 billion. The increase in free cash flow was driven primarily by significantly better operating performance, including working capital management, which more than offset higher taxes. The increase in cash taxes is a consequence of stronger results as well as the tax effect of foreign exchange on our U.S. dollar-denominated debt. This year, we had no incremental investment in working capital despite higher sales and continued inflationary and supply chain pressures. As Fernando mentioned, this is the consequence of targeted management actions to optimize working capital, which we will further deploy in 2024, seeking to maximize free cash flow generation. Despite significantly better operating performance, net income for the year was lower due to an extraordinary gain in the prior year of $234 million as well as a tax provision in 2023 for a fine related to a case in Spain dating to 2006.
We currently expect the majority of the tax provision to be paid in 2024. We ended the year with a stronger financial position, reflecting greater liquidity and average life of debt of close to five years, a flatter debt maturity profile with no outsized maturities in any year. We believe our expected free cash flow generation alone should be sufficient to meet our maturities in any given year. Our leverage ratio stood at 2.06x, down three quarter return from last year’s level, driven by strong operating performance, including working capital management and a reduction of over $700 million in our consolidated net debt. All of these accomplishments were driven by a series of transactions executed throughout the year. These include the issuance of $1 billion of green subordinated notes with an after-tax cost comparable to our senior debt, the refinancing of our bank credit agreement well ahead of schedule, the tapping of the Mexican debt capital markets for the first time in over 15 years and the redemption of our 7 and 3/8 notes.
In addition, we achieved our goal of 50% of our debt stack being linked to sustainability KPIs two years ahead of plan. We will continue to undertake strategies that bolster our capital structure and remain focused on attaining an investment-grade rating in the short-term. As a consequence of our strong performance, we reached a return on capital employed of 13.7%, 1.5 percentage points higher than last year. Bottom line, this was a terrific year. And now back to you, Fernando.
Fernando Gonzalez: I’m optimistic for 2024, especially regarding our main markets of Mexico and the U.S. For 2024, based on December 31 FX rates and operations, we expect EBITDA to grow between low to mid-single-digits. We expect cost inflation to continue to decelerate and our commercial strategy to continue to focus on recouping inflation in the business and will recalibrate to reflect current lower inflation. The ultimate goal is to maintain and increase margins. We also continue expecting important incremental contributions from our growth investments. Energy cost per ton is expected to decline mid-single digit, primarily driven by lower fuel costs. For CapEx, we expect a total of $1.6 billion with $1 billion for maintenance and $600 million for strategic.
For working capital, we expect a reduction of $300 million as we continue to execute on our working capital initiative. Cash taxes are expected to be approximately $1 billion, which includes the tax fine in Spain, the FX effect on our U.S. dollar-denominated debt and improved profitability in our main markets. Our cost of debt is expected to remain flat at $694 million, including the coupons from our subordinated perpetual notes. And now back to you, Lucy.
Lucy Rodriguez : 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 beyond our control. In addition, unless the context indicates otherwise, all references to pricing initiatives, price increases or decreases refer to prices for our products. And now we will be happy to take your questions.
A – Lucy Rodriguez: [Operator Instructions] And the first question comes from Ben Theurer from Barclays.
Ben Theurer: Congrats on a exceptional 2023. I wanted to pick up on the final comments and the outlook and particularly Fernando’s comments around the strength and the outlook for Mexico and the U.S. in two key markets. Would it be possible to share with us where you see maybe upside risks to your current volume expectations, but also the downside risk? So just about the puts and takes in those two regions as it relates to volume.
Fernando Gonzalez: Ben. Well, that could be the case, but we are taking that builds our base case scenario. Remember, in both countries this year is an election year earlier in Mexico than in the U.S., but anyhow, in both cases, there will be this election process. We will continue observing the dynamics. There are positives. For instance, in the case of Mexico, demand coming from the strong activity because of nearshoring, particularly in the north of the country. And then the projects in the Southeast, they are not finished yet, meaning there is activity still going on for the rest of the year. So again, it’s — there are reasons to believe that the way volumes are going to go is going to be positive. We would like to take this stance, which we believe is reasonable. We will monitor, and we will continue guiding according to the way we see the variable evolving.
