U.S. Markets closed

Edited Transcript of ELEMENT*.MX earnings conference call or presentation 29-Oct-19 3:00pm GMT

Q3 2019 Elementia SAB de CV Earnings Call

MEXICO, D.F. Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Elementia SAB de CV earnings conference call or presentation Tuesday, October 29, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Alfonso Molina Romo

Elementia, S.A.B. de C.V. - Corporate Treasury

* Fernando Benjamín Ruiz Jacques

Elementia, S.A.B. de C.V. - CEO

* Juan Francisco Sánchez Kramer

Elementia, S.A.B. de C.V. - CFO

================================================================================

Conference Call Participants

================================================================================

* Alejandra Obregon Martinez

Morgan Stanley, Research Division - Research Associate

* Elizabeth Gunning;PGIM Fixed Income;Emerging Markets Corporate Credit Analyst

* Jamie Nicholson-Leener

Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning. My name is Chris. I will be your conference operator. At this time, I would like to welcome everyone to Elementia's Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

And I will now turn the call over to Mr. Alfonso Molina, Elementia's Head of Investor Relations and Treasury. Please go ahead.

--------------------------------------------------------------------------------

Alfonso Molina Romo, Elementia, S.A.B. de C.V. - Corporate Treasury [2]

--------------------------------------------------------------------------------

Good day, everyone, and welcome to Elementia's Third Quarter 2019 Earnings Conference Call. Joining us today is Chief Executive Officer, Fernando Ruiz Jacques; and Chief Financial Officer, Juan Francisco Sánchez Kramer.

Please be advised that this call is for investors and analysts only. During this call, they will be discussing Elementia's performance as per the press release released yesterday. If you did not receive this report, it's available on the company's website in the Investor Relations section. All figures discussed today are in Mexican pesos unless otherwise stated. And all growth comparisons are related to the corresponding period of last year.

Let remind you that forward-looking statements may be made during the conference call. This is based on information that is currently available and are subject to change due to a variety of factors. For more detail and complete disclaimer, please refer to the earnings release.

With that, I'll turn the call to Fernando.

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [3]

--------------------------------------------------------------------------------

Thank you, Chris. Thank you, Alfonso. And good morning, everyone. Thank you for joining us to discuss our results and recent developments. So our third quarter shows important highlights, including an 8% improvement in EBITDA compared to the previous quarter; higher revenues in our Cement business in the U.S.; and a significant decrease in net sales for our billing systems business unit also in the U.S. This in a context of a challenging operating environment due to slower economic dynamics in Mexico, Central America and South America and likewise, weather events affecting some of our U.S. operations.

Market conditions have created challenges for our business unit -- metals business unit due to high raw material cost and availability of special grades. However, we carried out important initiatives to mitigate these effects, which I will review. After my remarks, Juan Francisco will go through our financials and provide an update on the spin-off process.

So let's start with our Cement business unit in the U.S., where we registered 4% higher revenues in the third quarter versus last year stemming from improved volume and pricing. Please bear in mind that some of this volume comes from our redundancy strategy and, therefore, has a lower margin than the one we produce. It's important to note that EBITDA for this business grows nearly 50% when compared to the previous quarter. Our markets in North America showed stability this quarter, following a period of increased competition that we believe has been stabilized. However, the mandatory evacuations due to 2 hurricane threats and several tropical storms during the period impacted our sales in the South. We are expecting our market to stabilize in the fourth quarter and follow normal seasonality.

In terms of our initiatives to improve return over invested capital in this division, on September 27, we announced the sale of our Cement assets in Pennsylvania to Lehigh Hanson. Since we acquired this plant in 2016 through the Giant acquisition, we worked to improve its sales and cost structure. However, we came to the decision that this will be the best opportunity to help reduce our leverage level by using these proceeds to prepay debt and enable us to focus on our operations in Maine and South Carolina. This will help us achieve a better ROIC level for our core assets. We are estimating that once this transaction is fully concluded, we will increase the returns for the Cement business in the U.S. in about 2 to 3 percentage points.

In the U.S., we will continue working towards increasing the profitability of our business through the optimization of our operations in the medium term. For 2020, we are expecting the markets in which we participate to remain stable despite the global economic slowdown observed and the uncertainty surrounding next year's presidential election.

Turning now to our Cement business in Mexico. We observed a market contraction, mainly from slower dynamics in the company -- in the economy and a sharp decline in productive investments due to the rising local uncertainty. The resulting weakness in demand and lower average prices caused our revenues for this segment to drop by 13% and EBITDA by 15% in the third quarter versus last year. Thanks to our sales strategy and strong commercial network, we were able to mitigate much of the effects from lower demand. We are expecting the trends we saw this quarter to continue for the final quarter of the year and potentially all the way through the first half of 2020.

Our Cement business in Costa Rica remained stable despite a market contraction observed throughout the year. We were able to maintain our market share and our EBITDA margin at 26% for the second consecutive quarter. This business is contributing positively to our operating results and represents an important opportunity to continue with the geographic diversification.

Moving now to our Metal Product business. We remained focused on our efforts to stabilize the business, recover profitability levels and generate positive cash flow. This quarter, we continued to observe a market contraction and higher raw material costs due to lack of availability of special grades. However, we are closing the gap in EBITDA through proactive initiatives. EBITDA declined 24% for the quarter on a year-on-year basis but increased close to 50% when compared to the second quarter of 2019. We are also working on operating strategies that are aligned with the cash flow generation.

In this context, we have taken a number of mitigation measures that have significantly contributed to the stabilization of our results for the metal business this quarter. Some of these measures were: we continued to rationalize our SKUs with a focus on long-term feasibility, margin increase and cash flow generation; we continued reducing inventories; we reduced our head count in more than 10%; the contribution of our commercialized products has grown steadily since 2017 and will contribute this year EBITDA in more than $1 million; we redefined our distribution strategy during the quarter; and many, many, many other actions. We recognized that the market contraction is affecting our sales, particularly of high-margin products and, therefore, our profitability. We will continue our efforts to mitigate as much of the factors we can control.

Last, but not the least, in our Building Systems division, in the U.S., we remained focused on achieving stability and growth. We registered a 12% increase in net sales driven by the ramp-up of production and sales efforts at the Indiana plants. Nonrecurring events as well as the cost of the reopening Terre Haute plant have impacted our EBITDA line, which was down 20% in the third quarter versus last year. However, we are closing the gap and without the nonrecurring effects, EBITDA would have been better than the third quarter 2018.

Furthermore, we are working to increase profitability of the Indiana facility in the coming quarters. In Building Systems LatAm, we have focused on recovering profitability as evidenced by our 110% increase in EBITDA for the third quarter versus last year. Aligned to the expectations we have shared with you, we are proud to inform you that this is the fourth quarter in a row with this trend. This demonstrates the success of our change over in technology and product portfolio simplification.

So in summary, we will continue to work towards optimizing our product portfolios, driving our sales efforts and reducing cost to improve our profitability. Under the challenging market conditions, we will rely on the strength of our brands and our team to overcome this period and be prepared to capitalize on an economic turnaround.

With this, I conclude my remarks. I'll now turn the call over to Juan Francisco Sánchez Kramer for further details on the spin-off progress and our financials. So please, Juan Francisco, go ahead.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Fernando. Let me start with the divestment of the Pennsylvania Cement facility and an update on the spin-off process. As we announced on the 27th of September, we have reached an agreement with Lehigh Hanson, a subsidiary of HeidelbergCement, to sell them the Pennsylvania assets for a gross value of $151 million. We are waiting on the approval from antitrust authorities, and if everything goes as expected, we believe we will -- could execute the transaction by year-end.

As we have mentioned on previous occasions, we have conducted an asset and business analysis and made a recognition on our core and noncore ones. As a result of this analysis, the Pennsylvania facility was among the noncore. Also, as we have mentioned in previous quarterly reports, one of the main objectives for this year was to deleverage the company. So in line with this, the plan is to use the proceeds for the transaction mainly to pay down debt. It's also important to mention that as a result of the divestment, we will show an accounting, and I repeat, accounting negative impact, which will reduce EBITDA for the business and, therefore, the consolidated figures for the year and will have also an impact on the leverage ratio.

The rationale of the divestment of these noncore assets is not only aligned to the deliberation objective but also to our commitment to create value to all our stakeholders. In other words, it reduces the multiples paid for Giant's acquisition from the original value and it makes it more accretive and increasing the current ROIC ratio.

Moving now to the spin-off process. Let me remind you 3 relevant issues first: First, for every share an investor has in Elementia, he or she will receive a share of the Newco. And therefore, the controlling shareholders will be the same for both companies at the moment of the spin-off.

Second, at the moment of the spin-off, both company shares will be valued the same. And from that moment on, the value of each company's share will depend on the market valuation. And three, the current company will keep the Cement business and the Newco or Spinco will hold the Building Systems and Metal business.

So where are we in the process? Given that we are expecting to receive the proceeds from the sale of the Pennsylvania plant in the coming months, we believe it's worth waiting a little bit more to execute the spin-off because we plan to deleverage and then the structure and the value that it might generate to all our stakeholders will be much clearer.

A new date for the execution of the spin-off will depend on several factors, like the date of execution of the divestment; the date of the execution of the deleveraging; the agreement with our creditors; and the information and timing that is required from regulating authorities in Mexico.

Let me now turn to our review on our consolidated figures. During the third quarter of the year, our strong performance in Building Systems, particularly in LatAm, was enough to offset the declines experienced in the other businesses, where several factors like a soft Mexican economy and nonrecurring impacts in businesses in U.S.

Consolidated revenue decreased by 4% while EBITDA remained fairly the same as the third quarter of 2018. In terms of EBITDA margin, this indicator remained at a stable 15% compared to the third quarter last year and presented an expansion of 1 percentage point from the 14% of the second quarter this year and also reflected an increase of 7% points in Building Systems LatAm.

We adopted IFRS 16 beginning January 2019, which increased our assets and liabilities by close to $777 million. And in the income statement, the impact is roughly $158 million, which is reflected in depreciation. Operating profit decreased 20% by third quarter last year. The net profit was the same of last year.

Financing cost increased by 27% versus the same period of last year and mainly because during the third quarter of last year, we benefited from currency fluctuations. Without this effect, it would have been 20% -- 27% lower than third quarter 2018.

Moving onto cash flow. It was MXN 473 million before CapEx or 17% of the EBITDA generation, mainly because of a working capital consumption due to a combination of inventories and receivables mainly in the U.S. operations for both Cement and Building Systems while we begin preparations for the winter during the outages.

In terms of our balance sheet, 44% of our gross debt is in U.S. dollars while 75% is at a fixed rate, which offers a better stability with regards to potential fluctuations. Additionally, close to 94% of our debt is long term. I want to point out here that Elementia's total net debt will increase slightly given the deduction in cash and cash equivalents. Our leverage ratio considering the last 12 months EBITDA is 3.7x, which is about our leverage ratio, which is 3.75x. While the interest coverage ratio remained at 2.71x.

With this, I conclude my remarks and ask the operator to please proceed with the Q&A session. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes from Alejandra Obregon from Morgan Stanley.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [2]

--------------------------------------------------------------------------------

I have a couple of follow-ups in the U.S. First, in the Cement business, I was wondering if you could elaborate a little bit more. You mentioned that volume and pricing increased but that was on a lower margin at sales, so if you could help us understand that, that would be very helpful. And then in the fiber cement business, if you could elaborate a little bit more on what are those nonrecurring items that are weighing on profitability during the quarter, that would be very helpful.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [3]

--------------------------------------------------------------------------------

Starting with the Cement -- with Cement U.S. As you know or as we have mentioned before, we are continuing with our redundancy strategy that is mainly having the capabilities to import Cement in order to prevent not being able to supply our customers. So for that volume, as you mentioned, we have a lesser margin than what we have from the cement that we produce. This volume is particularly going into the Southeast region that we cover with our South Carolina facility.

Now price-wise, in the North region, it has been stabilized. If you remember, we have the entrance of a competitor, that is McInnis and they took our market share by reducing prices. The good news is it has been stabilized. There has been no more decline in prices, and we have been able to maintain our volumes and market share.

Going to the Building Systems U.S., the nonrecurring effects, they are mainly through provisions that we are doing for claims and legal charges.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [4]

--------------------------------------------------------------------------------

Understood. And maybe one follow-up in Mexico. Just trying to figure out if you could provide us an update on the Merida grinder, is that still starting operations early in 2020?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [5]

--------------------------------------------------------------------------------

Yes, sure. The Yucatan project is ongoing. We have faced a delay in the execution. So now we are expecting to begin commercial operations between the second and the third quarter next year.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [6]

--------------------------------------------------------------------------------

Right. And could you remind us what's the capacity you're starting with? That's only one line, right? And you have the capability to expand it into a second line in the future, is that right?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [7]

--------------------------------------------------------------------------------

I mean it's a grinding...

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [8]

--------------------------------------------------------------------------------

It's a grinding -- yes, it's a grinding line. It's not a complete cement line. So for the moment, we are working only in one cement -- one grinding plant. And yes, in the future, we could build another one. But for the moment, it's only one.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [9]

--------------------------------------------------------------------------------

And what's the capacity?

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [10]

--------------------------------------------------------------------------------

It's 250,000 tons per year.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

And our next question comes from Jamie Nicholson from Crédit Suisse.

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [12]

--------------------------------------------------------------------------------

I have a couple of questions about the divestiture. You mentioned gross proceeds of $151 million, I'm wondering if you have an estimate of net proceeds. And also how much EBITDA was generated by that business? And then finally, you mentioned there was some negative accounting impact and you expect the leverage ratio for the year to go up, can you explain that a little bit more?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [13]

--------------------------------------------------------------------------------

Jamie, thank you for the questions. Sure. So as we mentioned, we will -- we reached an agreement for $151 million gross that means that there are some liabilities there that will reduce the amount for us. On top of that, regarding your question how much EBITDA this facility generates. What I can tell you is that it is the lesser contributor to our U.S. systems. And therefore, this transaction makes the full acquisition of Giant more accretive. Can you remind me your third point, please?

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [14]

--------------------------------------------------------------------------------

Okay. You mentioned on your comments that there were some negative accounting impacts related to the divestiture and, therefore, you expect your leverage ratio for the year to increase. I think that's what I heard, so I'm wondering if you could explain that. And also I didn't quite hear if you said what you expect from net proceeds.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [15]

--------------------------------------------------------------------------------

Okay. Yes. So let me begin by the third and go back. What I meant to say, is the negative impact on the EBITDA is that there is a different value between book value and what we are gaining and that will create an accounting negative impact on EBITDA. And because of that, the full year's EBITDA will be reduced and, therefore, we will reconsider this impact on the 12-month EBITDA. It will increase the net debt-to-EBITDA ratio. For...

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [16]

--------------------------------------------------------------------------------

Do you -- so if -- yes, I'm sorry, so the accounting impact, is that noncash charge? And do you have a quantification of that?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [17]

--------------------------------------------------------------------------------

Correct. It is...

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [18]

--------------------------------------------------------------------------------

It's a noncash.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [19]

--------------------------------------------------------------------------------

It's a noncash. And the final figures for that are being concluded. So we do not have yet a final figure for that.

The second point on which will be the net income for us? What we are targeting to deleverage, it is between MXN 130 million and MXN 140 million.

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [20]

--------------------------------------------------------------------------------

Net proceeds?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [21]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [22]

--------------------------------------------------------------------------------

Okay. And then just...

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [23]

--------------------------------------------------------------------------------

And that is what will be used to pay down debt.

--------------------------------------------------------------------------------

Jamie Nicholson-Leener, Crédit Suisse AG, Research Division - Global Head of Emerging Markets Corporate Credit Research & MD [24]

--------------------------------------------------------------------------------

Great. And then just one final question if I may. You mentioned working capital consumption in the third quarter was -- impacted cash flow. I'm wondering what you're expecting for the fourth quarter if you expect to generate proceeds from working capital in 4Q and what your outlook for cash flow is in the fourth quarter aside from the proceeds from the divestiture.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [25]

--------------------------------------------------------------------------------

Thank you. Yes. Good point. Yes, we are expecting to have cash flow generation from working capital by year-end. As I mentioned, we are beginning to prepare for the winter. In the U.S. operations, we always increase inventories to prepare for the yearly outages, mainly in the Cement business. And in the Building Systems, we also prepare with inventories for the winter. Nevertheless, as I mentioned, there is a culminated effect from inventories and receivables. So the plan is to reduce mainly this time receivable and also inventories within other -- in other regions where we do not need them to be so high.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Elizabeth Gunning from PGIM.

--------------------------------------------------------------------------------

Elizabeth Gunning;PGIM Fixed Income;Emerging Markets Corporate Credit Analyst, [27]

--------------------------------------------------------------------------------

I had some trouble hearing the second gentleman who spoke. So when you were discussing the spin-off, I missed actually a fair amount of your commentary. Can you just clarify now the timing, if I understood you correctly, the timing is going to be delayed until after the divestiture of the Pennsylvania asset and you're waiting for regulatory approval? So is the timing on the spin-off first quarter or the second quarter of next year? And when are you going to present something to creditors? So we have an idea what your company will look like.

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [28]

--------------------------------------------------------------------------------

So Elizabeth, so just -- we are delaying the spin-off given that we are expecting to receive the proceeds from the sale of the Pennsylvania asset in the coming months. So we believe it's better to wait until we execute the divestment and reduce the debt to continue with the spin-off process. So, therefore, a new debt for the execution of the spin-off will depend on several factors, like the date of the execution of the divestment, the date of the execution of the deleveraging, the agreement from our creditors, the information and the timing that is required from regulating authorities in Mexico, so at least will be in the first quarter of next year. We do not see it during this year.

--------------------------------------------------------------------------------

Elizabeth Gunning;PGIM Fixed Income;Emerging Markets Corporate Credit Analyst, [29]

--------------------------------------------------------------------------------

Okay. My understanding is the equity holders have been presented with a plan already, is that correct? Or are they getting a new plan?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [30]

--------------------------------------------------------------------------------

Can you elaborate a little bit further?

--------------------------------------------------------------------------------

Elizabeth Gunning;PGIM Fixed Income;Emerging Markets Corporate Credit Analyst, [31]

--------------------------------------------------------------------------------

My understanding was the equity holders of your company have been presented with a spin-off plan for approval, is that correct?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [32]

--------------------------------------------------------------------------------

Yes, that is correct. We have a shareholders meeting in June, that was the last one. So it has been presented and it has been approved.

--------------------------------------------------------------------------------

Elizabeth Gunning;PGIM Fixed Income;Emerging Markets Corporate Credit Analyst, [33]

--------------------------------------------------------------------------------

Okay. And just -- it's a little frustrating being a bondholder and not knowing what's going on. It's impacting your bond prices quite a bit. It just would be helpful if we got a little more communication from you on this.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [34]

--------------------------------------------------------------------------------

Thank you for your feedback. We will be pleased to hold a, I mean, one-to-one conference anytime.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

(Operator Instructions) And it looks like we got a follow-up question from Alejandra Obregon from Morgan Stanley.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [36]

--------------------------------------------------------------------------------

Just a question in Mexico. We've been seeing a difference in bulk and bag performance. So I was just wondering if you could provide us some color and what you're seeing and what are the trends in performance based on these 2 segments.

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [37]

--------------------------------------------------------------------------------

Sure. Probably you remember, we've mentioned that we changed the mix of bulk and bag in order to allocate the volume from the expansion that we did in our Tula facility. So with that change, we pick -- we went down from roughly 70% in bags to some 60% in bags. Currently, we are trying to create bag -- the bags percentage and we are at about 63%.

--------------------------------------------------------------------------------

Alejandra Obregon Martinez, Morgan Stanley, Research Division - Research Associate [38]

--------------------------------------------------------------------------------

And in terms of performance for the industry, have you seen the bag business declining over the bulk?

--------------------------------------------------------------------------------

Juan Francisco Sánchez Kramer, Elementia, S.A.B. de C.V. - CFO [39]

--------------------------------------------------------------------------------

No. It has happened through history, the bag segment is more resilient since it goes mainly to the...

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [40]

--------------------------------------------------------------------------------

Do-it-yourself. It is more resilient to the do-it-yourself to the bad economy, not to say like that. So yes.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

And I would like to go ahead and turn it back to Mr. Fernando Ruiz Jacques for closing remarks.

--------------------------------------------------------------------------------

Fernando Benjamín Ruiz Jacques, Elementia, S.A.B. de C.V. - CEO [42]

--------------------------------------------------------------------------------

Perfect. Perfect. So thank you, Chris, and thank you all, once again, for your interest in Elementia. As mentioned by Juan Francisco, we will keep you updated on the progress of our spin-off in the months ahead. So let me just close with this final remarks. So our results show that we're back on profitable growth for Building Systems LatAm and Cement USA and that we have been able to improve our business unit results and develop strategies and alternatives to turn headwinds into opportunities in a constantly changing and challenging environment.

We are aware about the challenges we're facing in this environment, in particular for the metal business. So we will remain steadfast in our commitment to develop innovative solutions that generate higher value to our investors and stockholders, maximize the company's value and increase our focus on better service to our customers.

So having said that, that concludes our call. So please feel free to contact me or Juan Francisco if you have any further questions. So have a nice rest of the day.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

This does conclude today's program. Thank you for your participation. You may disconnect at any time.