CEMEX, S.A.B. De C.V. Management Discusses Q2 2012 Results - Earnings Call Transcript

Improvement in pricing and volume in several of our regions as well as the continued success of our transformation effort has led to the highest operating EBITDA margin in almost 3 years. Infrastructure and housing continued to be the main drivers of demand for our products.

Regarding our consolidated volumes, we had strong contribution from our U.S., South, Central America and the Caribbean and Asia regions. In the case of Columbia, Panama and the Philippines, we sold record cement volumes during the first half of the year.

The favorable volumes from these regions partially mitigated the declines we experienced in Mexico, Northern Europe and the Mediterranean regions. Prices for domestic gray cement and the ready mix were stable sequentially in local currency terms with aggregates prices down 2%. Although we are substantially recovering short-term input cost inflation, we continue to be at levels below our targeted return on capital employed.

On this front, as an important component of our transformation, we are introducing an initiative that will drive a change in our business mindset, executing a value before volume strategy. This means that we will be focusing on value enhancement, efficiency gains in our customer relationships, ensuring sustainability of our products and generating returns sufficient for reinvestments.

Under this strategy, we will establish our own internal procedures, guidelines, standards, principles and tools, which will support our approach to cement pricing. We aim to recover our cost and obtain an adequate return on investment in our cement business.

Experiences from our cement pricing approach will be transferred to our ready mix and aggregates business in due course. This initiative is global in scope, and in Europe, we are in the implementation phase, while in all other regions, we are in the evaluation stage.

In Europe, a new price system following a gross minus logic will be introduced to determine prices and to ensure consistent price differentiation to customers. Furthermore, in order to deal with input cost volatility, we will introduce surcharges like transportation fuel and environmental costs depending on the country.

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