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Cemex (CX) Q2 2020 Earnings Call Transcript

By Motley Fool Transcribing – Jul 27, 2020 at 11:31PM

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CX earnings call for the period ending June 30, 2020.

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Cemex (CX -0.56%)
Q2 2020 Earnings Call
Jul 27, 2020, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning and welcome to the CEMEX second-quarter 2020 conference call and webcast. My name is Chuck, and I'll be your operator for today. [Operator instructions] Our host for today's call are Fernando Gonzalez, chief executive officer; and Maher Al-Haffar, chief financial officer. And now I would like to turn the conference over to your host, Fernando Gonzalez.

Please proceed.

Fernando Gonzalez -- Chief Executive Officer

Good morning. I hope this call finds you and your family in good health. Thanks for joining us inour second-quarter 2020 conference call and webcast. I'm joined by Maher Al-Haffar, our newly appointed CFO.

As usual, we will be happy to take your questions after our initial remarks. Let me just remind you that beginning this quarter, Europe, Middle East, Asia and Africa regions have been consolidated into one region. We are very pleased with our performance in second quarter under extraordinarily challenging conditions. Our safety protocols kept employees safe and our businesses operating.

Our geographic diversification was a clear advantage as government restrictions on our businesses operated significantly from market to market. Our bagged cement product was resilient across our emerging market portfolio. Our infrastructure exposure and developed market footprint provided a stable base of existing medium-term business to execute. Our existing digital platforms allow our customers and us to work seamlessly on -- in a low-touch environment while our distribution network enabled us to meet surprisingly strong bagged cement demand in remote markets.

Pricing was resilient with a difficult demand environment in many markets while energy provided a nice cost tailwind. We took important steps to boost liquidity and derisk our financial profile. I'm especially grateful to our employees who rose to the COVID-19 challenge and made the necessary adjustments to keep our colleagues and customers safe and our facilities operating. Despite our safety efforts, there have been cases of COVID-19 among our employees, customers, and suppliers.

I would like to extend my sympathy and hopes for a full recovery with each and every one of you. Our key priorities rolled out in February, which we have now named Operation Resilience guided us in the quarter. Our top priority was to protect our employees, suppliers, and customers, thereby ensuring business continuity. We introduced new operating protocols, which included social distancing, minimal staffing into our work, daily temperature checks, testing of employees and timely case management, track and trace capabilities to minimize virus spread, outreach to employee families to reinforce health and safety measures in the home environment.

As a result, I'm pleased to say that outcomes among all employees are significantly better than national statistics. In our world of social distancing, we employ a strategy of human touch at a distance, and we saw 13% increase in number of visits to our CEMEX Go platform versus pre-COVID-19 levels while visits to our Construrama website for Mexican retail customers increased 19% in second-quarter 2020. Our global sales force seamlessly transitioned from customer visits to virtual meetings, hosting thousands of videoconferences. Our supply chain and distribution network allow us to satisfy strong bagged cement demand without interruption.

And we shared best COVID-19 construction practices with our customers and suppliers, but just not enough to keep our facilities running. We needed to share best practices with customers and suppliers to keep them running. These efforts were recognized by our customers. We obtained the highest global Net Promoter Score ever in second-quarter 2020.

We took steps in a highly uncertain time to minimize financial risk. We conserved cash and nailed down all available funding sources. We renegotiated our leverage covenants with our bank group, and COVID-19 challenges to our business are not over, and these priorities will continue to guide us going forward. Part of protecting the future of CEMEX in a world of high COVID uncertainty where we might face disruption to the capital markets is reducing financial risk wherever possible, and ensuring that we have sufficient liquidity for whatever lies ahead.

We initiated this process of building our liquidity position in February with the decision to retain proceeds $500 million from the sale of our Kentucky assets. Additionally, we drew down on the majority, about $1 billion of our bank revolver facility. We continue to build the cash position in second quarter by drawing down on the remaining revolver as well as additional short-term credit lines for about $446 million. We took advantage of the first market window available to us post COVID-19 to access the capital markets with a $1 billion seven-year note.

And finally, with the help of our COVID-19 cost savings program and better-than-expected volumes, we generated $98 million of free cash flow in the quarter. We ended the quarter with the highest cash balance ever. We expect that our cash position will be further strengthened in the second half of the year by the closure of our two previously announced divestments of $400 million. The visibility in our markets improves, we do expect to deploy part of our cash position to pay down debt.

Coronavirus challenge in second quarter was really about government-mandated lockdowns and industry closures in our markets. This is the first time we have experienced national shutdowns of our industry. Strength of sales correlated strongly with level of restrictions. In the second quarter, we faced complete industry shutdowns in markets representing 12% of consolidated EBITDA.

Colombia, Panama, the Philippines, Trinidad, volumes in these markets declined between 30% and 90% in the quarter year over year. In our other markets, lockdowns had varying impact on demand for our products. For example, in our footprint in the U.S., government restrictions had little impact on demand in the quarter while lockdown restrictions in the U.K. and France led to the month decline of approximately 35%.

In all cases, demand picked up rapidly as restrictions eased almost as fast as they fell. Consolidated volumes fell 24% year over year in April, and month-to-date July volumes have recovered to be up 4% year over year. We expect that the challenges of the next stage of the pandemic will be different. Governments may impose new restrictions to cope with virus flare-ups, but expect that to be moderate in tone and will not occur simultaneously.

The initial quarters for our business will be more about impact of economic slowdown in markets, fiscal programs, and pace of recovery. During second quarter, sales fell 10% like to like. Drop is attributable to Mexico, EMEAA and SCAC, the regions that experienced the most stringent lockdowns in the quarter. Year-over-year decline in sales was a function of a double-digit drop in consolidated volumes while local currency prices for our three core products increased between 1% and 4%.

Like-to-like EBITDA declined 6% year over year. The U.S. was the only region with a year-over-year increase in EBITDA. Our cost containment programs and decline in energy costs were impactful in the quarter shown by the 70-basis-point improvement in margins year over year.

By the large decline in volumes, we still were able to generate free cash flow after maintenance capex of $140 million, $77 million less than prior year, which is equivalent to the decline in year-over-year EBITDA. Finally, COVID-19 did not deter us from making progress on our ESG goals. We had the highest alternative fuel substitution in Europe on a trailing 12-month basis. 100% of our electricity in Poland is now renewable, and clinker factor in Egypt was our lowest ever.

Our cost savings under Operation Resilience were visible in the quarter. These savings include $150 million from our prior stronger CEMEX program plus $80 million COVID-19-related cost containment initiatives for full-year 2020. Savings year to date have improved our EBITDA margin in first half by 2.4 percentage points. Enclosed savings from SG&A, like fees, selling, marketing, distribution, travel expenses and headcount optimization.

Operations in cement plant operational efficiency, low-cost supplier initiative, energy, alternate fuels, and additional switches to pet coke includes $35 million from maintenance deferrals, which will be largely executed in the second half. I'm now moving on to the regions. The U.S. continued to enjoy strong momentum in second quarter, driven by infrastructure and residential.

We did not experience much disruption from government lockdowns in our markets. We achieved the highest EBITDA in the quarter in the last decade, adjusted for asset sales. Infrastructure around 50% of the month. We saw pickup in quarter as Department of Transportation took advantage of empty roads to accelerate growth projects.

The residential sector, about 30% of demand, has performed better than expected. Low interest rates, low new home inventory levels and shift in buyer preferences toward the suburban single-family housing. Stable sequential pricing in our three core products as COVID-19 delay implementation of April price increases in several markets. Year-over-year EBITDA margin expansion due to higher ready-mix prices, lower fuel costs and cost efficiencies in general.

The second half of the year outlook. July month-to-date cement volumes are growing 7%, and the three-month ready-mix backlog are promising. Do not have much visibility beyond September though. Expect our states to have fairly stable transportation spending.

We expect fiscal stimulus in the form of incremental transportation spending at the federal level. Low interest rates, low new home inventories and progressive recovery of employment should be supportive of the residential sector. In Mexico, the drop in sales in second quarter is a function of the decline in volumes. Cement minus 7% year over year and ready-mix minus 44%.

We saw a diverging volume performance between ready-mix and cement, which reflected COVID-19 lockdown measures. Industry was only allowed to provide cement to essential infrastructure projects and to retail for much of quarter. Formal construction projects of private sector were suspended until June 1st. Saw an acceleration in execution of key infrastructure projects like the new airport in Dos Bocas.

We developed an innovative solution to meet the urgent need for hospital beds to deal with COVID-19 patients in Mexico with the construction of modular mobile hospital units. We constructed nine units during the second quarter in a record two- to three-week period each. Bagged cement, about 65% demand in Mexico, shows significant growth, 10% in the second quarter year over year, mainly due to government investment in schools, housing programs, and rural roads, also increasing home improvement projects as consumers spend more time at home. And historically, in uncertain economic times, informal sector has shown more resiliency.

Despite the second year of industry volume declines, prices have been resilient. Logistics and distribution network allow us to meet surge in bagged demand on a timely basis. Decline in EBITDA margin was mitigated by product mix, our cost savings program, and lower fuel prices. And with regard to the second-half outlook, we have limited visibility.

Since June 1st, we have seen recovery in both cement and ready-mix demand. Ready-mix volumes have recovered from minus 44% year over year in second quarter to minus 19% July month to date. While cement volumes have recovered from minus 7% year over year, since acquired to plus 11% July month to date, bagged cement has been extremely resilient. At some point, expect bagged cement to recalibrate to economic environment.

Formal housing and industrial and commercial recovering at a slow pace. We expect continued expansion of infrastructure spending, $26 billion virus stimulus to increased spending on social and infrastructure projects. On Mexico City, economic reactivation program of USD 3.4 billion focused on construction. In EMEAA, first quarter in which we consolidate our Europe region with the Middle East, Africa, and Asia.

In the quarter report, we do give more details on subregion performance. In Europe, we experienced the same divergent behavior between Western and Central Europe that we saw in the first quarter. Central Europe with strong year-over-year cement volumes in Germany, Poland and the Czech Republic, driven by infrastructure and less restrictive lockdown measures. While Western Europe with lower cement volumes in the U.K., Spain and ready-mix volumes in France due to strict lockdown measures.

As lockdown measures eased in each country, volumes recovered, good pricing momentum in cement and aggregates on a sequential basis in Europe. The Philippines was the first country in our portfolio to experience lockdown and one of the most impacted in the quarter. Peak lockdown measures with solid plant in Luzon province closed from March 16 to May 20. Cement volumes were down 31% in quarter, but volumes turned positive year over year in June with solid reopening.

For more information, please see our CHP quarterly earnings, which will be available this evening. In Middle East and Africa, we experienced fairly low impact from COVID-19 in quarter. Israel had a record EBITDA and volume performance. Egypt declined in cement volumes minus 13% due primarily to government suspension of private residential construction permits.

SCAC was the region most impacted by COVID-19 restrictions. Cement volumes declined 29% in second quarter of this year, year over year. Favorable cement pricing dynamics in the region despite lower volumes, cement plus 3% quarter on quarter with increases in practically our countries. Even with the large drop in volumes, EBITDA margin increased year over year 1.7 percentage points, mainly due to lower fixed cost and SG&A 5.2 percentage point margin benefit and pricing efforts 4.1 percentage points benefit, and both offset by volume decline.

In the region, most impacted by government-mandated industry shutdowns, we saw a sharp decline in cement volumes in April of 60% year over year followed by a rapid recovery over the following three months. June cement volumes for the region were up 3% year over year. In Colombia, activity picked up in the back half of the quarter, driven by 4G projects and the self-construction sector. In the Dominican Republic, we saw increased activity after restrictions were lifted; however, some tourism projects are being postponed.

In Panama, with most restrictions, currently only serving selected infrastructure projects and retail. For additional detail on this region, I invite you to review CLH's quarterly results, which were also published today. And now I will pass the call to Maher to review our financial performance. Maher?

Maher Al-Haffar -- Chief Financial Officer

Thank you, Fernando, and good day to everyone. Our operating EBITDA declined 6% on a like-to-like basis this quarter. As we can see here, higher prices, combined with a significant reduction in our fixed cost due to Operation Resilience, more than offset the impact of lower volumes. All of our regions as well as central units contributed to these savings.

Variable costs increased primarily due to higher raw material cost in our ready-mix business in several of our business units. This is due to higher prices of cement and aggregates as well as the impact from purchased cement in some of our sold-out markets. Reported EBITDA reflects the unfavorable effect from our currency fluctuation of $32 million. This is mainly due to the depreciation of the Mexican peso, like most currencies also contributed.

Most importantly, as a consequence of the hard pass on expenses that Fernando discussed earlier, EBITDA margin increased by 0.7 percentage points on a year-over-year basis. Despite double-digit drop in our EBITDA, we generated positive free cash flow during the quarter as we managed to reduce and/or postpone our capital expenditures during the quarter. We aggressively managed receivables collections and aligned inventory levels to current demand. As a consequence, average working capital days in the second quarter this year improved to a minus 11 days.

This compares very favorably to a minus six days in our second quarter of last year. We also had lower taxes year over year. This is primarily due to the drop in earnings in several of our operations. I would like to remind you that free cash flow is highly seasonal.

We typically, as you know, we have larger working capital investments in the first half of the year. That significantly reverses in the back half. Similarly, we expect partial working capital reversals this year as well. In addition, we expect to execute much of the deferred maintenance capex in the second half of the year.

It's important to highlight that in the last 20 years, we, at CEMEX, have consistently generated positive free cash flow after maintenance capex every year, except for one year, and that was back in 2013, where we had a negative $90 million of free cash flow. As Fernando mentioned during 2Q, we continued to execute on Operation Resilience by accessing the capital markets. We were the first emerging market high-yield issuer since COVID-19. We took the opportunity of issuing $1 billion in seven-year notes, as Fernando mentioned earlier.

We anticipate a slight increase in full-year financial expenses due to this change. During the quarter, net debt, which is adjusted for the effect of higher cash balances, was marginally increased by $51 million, reflecting an unfavorable FX effect of $55 million. Proceeds from our newly issued $1 billion bond and the drawdown of the remainder of our revolving credit facility as well as other credit lines will be retained in our cash balance for the time being. As visibility in our market improve during the year, we do expect to deploy most of our cash position to reduce debt.

As you can see from this slide, we ended the quarter with a strong liquidity position and a manageable debt maturity profile. The majority of 2020 debt is short-term debt that we have withdrawn in the last few months to strengthen our liquidity. Next material maturity is not until 2021, which is essentially the $571 million due under our facility agreement debt, which is due July '21. All maturities through 2023 are bank maturities.

We have no maturities in the capital markets until 2024. Our leverage ratio, as defined by our facilities agreement, marginally increased on a sequential basis to 4.5 seven times at the end of the quarter. This is well below the recently amended covenant level of 6.75 times. You should expect us to continue with our strategy of maintaining a 12- to 24-month runway without any significant maturities.

As part of our strategy to respond to the coronavirus pandemic, we initiated a consent request to amend our financial covenants and other items in our facilities agreement. We are pleased to report that we received 100% of the support of our banks on this by late May. And for that, we thank them. Under the terms of the amendment, we modified the leverage and coverage covenants to the levels that you see in the graph.

The leverage covenant increases to 6.75 times for June 2020 and then it goes up to seven times from September 2020 through March of 2021, and it decreases after that. Also, we agreed to temporarily limit capital expenditures, acquisitions, and share buybacks, among other things. Capex limit goes for $1.2 billion to $1.5 billion per year when the leverage ratio is less than 5.25 times for two consecutive quarters, and we have a $500 million basket for repurchases, which can be used when our leverage ratio falls below four and a half times. These limits are in line with our previously announced measures to contain the impact of COVID-19.

Our interest rate margin has been adjusted to accommodate the new higher leverage ranges to the consolidated leverage covenant, as shown in the table. It's very important to highlight that the margin grid remains unchanged from our prior agreement for leverage levels below five times and simply adds pricing for leverage above five times. And now I would like to turn the call over to Fernando. Back to you, Fernando.

Fernando Gonzalez -- Chief Executive Officer

Thanks, Maher. Even the continued uncertainty from COVID-19, it is very difficult to provide EBITDA and volume guidance at this time, but e can comment on other variables. Cost of energy per ton of cement produced, we estimated at minus 7% -- from minus 7% to minus 5%. Previously, it was minus 6% to minus 4%.

Adjustment in forecast mainly due to lower fuel costs. Also capex unchanged versus previous guidance. No change of guidance for cash taxes and cost of debt. Working capital will be higher than the $100 million guidance provided in fourth-quarter '19.

But again due to continued lack of visibility on our top-line growth, we still cannot provide a specific amount. So in summary, we saw local restrictions on our business in the second quarter that we have never experienced before. This was all occurring at a time of tremendous uncertainty but our management team reacted quickly and took immediate steps to protect employees and customers as well as stabilized their business for whatever conditions might develop. June volumes for our three core products show sequential volume improvement in all regions while July month-to-date consolidated cement volumes are up 4% year over year.

Key events will be the status of expiring seamless efforts in many countries, additional lockdowns, announcement, and execution of infrastructure stimulus packages as well as the base of economic recovery. You should expect that we will continue to focus on health and safety of our stakeholders, that we will continue with our COVID-19 cost initiatives, and be vigilant to changes in market demand. We will make the most of our competitive advantages, like our digital platforms, our well-developed distribution arm, and diversified product and market segment offerings to stabilize demand. And finally, as visibility improves, we will redeploy our historic level of cash to pay down debt.

Thank you for your attention, and I would like to take this opportunity to wish everybody good health and to please keep safe.

Maher Al-Haffar -- Chief Financial Officer

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. Operator?

Questions & Answers:


Thank you. [Operator instructions] And our first question will come from Adrian Huerta with JP Morgan.

Adrian Huerta -- J.P. Morgan -- Analyst

Thank you. Hi, Fernando and Maher. How are you doing now? Well, congrats on the results despite the environment.

Fernando Gonzalez -- Chief Executive Officer

Thanks, Adrian.

Maher Al-Haffar -- Chief Financial Officer

Thank you very much.

Adrian Huerta -- J.P. Morgan -- Analyst

Maher and Fernando, what was the experience navigating through the second quarter on top of what we saw on the results and the measures that we're taking? And on top of what you have already mentioned on the outlook, what else can you share based on this experience on what could be the outlook for the rest of the year?

Fernando Gonzalez -- Chief Executive Officer

Sure, Adrian. Thanks for your question. I think we all have gone through a phenomenon, exogenous one, causing lots of uncertainty. So if we reposition ourselves, let's say, in early last March, we already then understood that the virus was going to be impacting in a certain manner.

But we spent some time trying to answer three questions. The first one is how deep the damage was going to be, how long was it going to last and if there were going to be repetitions or not? After a few days, we realized that we could spend time getting -- we were getting lower. So we decided to just to act and make what we call a hard stop, meaning we don't know, but given that we don't know let's stop whatever we think is not essential for the next three months, and that's what we did and so really that's why we managed to offset somehow the very negative impact of different markets locking down. Three main priorities, health of our employees, customers and suppliers as a precondition of business continuity; second, assuring that we could serve our customers, meaning taking care of all our supply chain and allowing and promoting our platform, our CEMEX and digital platforms for our customers to be able to interact with us without, let's say, with a physical distance; and the third was liquidity.

And so the thinking process was as simple as that. We just decided, three months have been passed and I think we are in a very good position to continue this journey. I think what we will be facing -- although we're not providing outlook or guidance and what we will be facing in the months to come is a situation in which we are going to be doing business coexisting with the virus. Until there is a vaccine or a treatment or herd immunity, but we have to consider that almost everywhere we will continue operating under these circumstances.

So because of that and still lots of uncertainty, we decided to extend the same measures that we took for the first 90 days. We also have to extend them as of December 31st with a few exceptions. The decision in March was too tough, thinking that some plants were going to shut down. It is not the case.

So we need to engage in additional maintenance when compared to the decisions we took then. But in general, the decision has been extended. We are going to be facing this way to coexist with the virus with more or less the same priorities. So that was our thinking process, Adrian.

Nobody knows what's really going to happen, but we can think on second or third wave. But what we have seen, it seems like they do not have an economic impact as strong as the original one but all of that is still to be seen. We are prepared to continue acting cautiously on this environment.

Adrian Huerta -- J.P. Morgan -- Analyst

Thank you, Fernando. Let me add, I think the company with strong operations shine during difficult times, and you guys did, so congrats on that. And if I may just do a follow-up. Do you think, given the numbers that you mentioned on CEMEX Go that would increase that you saw on your platform, etc., do you think that you gained market share during the quarter in some of your key markets?

Fernando Gonzalez -- Chief Executive Officer

We are not completely sure. We need to wait until public info. is available. But what I can tell you, Adrian, is that we do believe, given that other companies do not have still a platform end to end on the commercial relation, meaning from very early stages of the commercial process, all over the transactions, requesting, buying, asking, programming, delivering, paying, and everything.

Some customers might have preferred that type of services during this period of time. So, again, we don't have hard data to say that, but we believe it is helping.

Adrian Huerta -- J.P. Morgan -- Analyst

Understood. Thank you, Fernando, again.

Fernando Gonzalez -- Chief Executive Officer

Thanks, Adrian.

Maher Al-Haffar -- Chief Financial Officer



And the next question will come from Gordon Lee with BTG. Please go ahead.

Gordon Lee -- Banco BTG Pactual SA

Hi. Good morning. Thank you very much for the call. I hope everyone and their families are doing well.

Two quick questions. First, on the cost reductions on the savings. I was wondering, first, if you could give us a sense of how much you think of the savings that have been achieved year to date or that you're expecting for the year as a whole? How much of that do you think is permanent? And how much of that is sensitive to volume growth? In other words, if we do see a recovery continuing this year into next, how much of those savings will actually remain in place? And on the same front, I was also hoping maybe you could provide a little bit of color on the U.S., where the margin expansion was impressive. And so I don't know whether the cost savings were particularly concentrated there.

And then just the second question, if you could remind us what the total proceeds of pending asset sales is and when we would expect those to hit the balance sheet? Thank you.

Fernando Gonzalez -- Chief Executive Officer

Thanks, Gordon. Let me take the first question regarding savings. In total, we were -- we did activate certain optimizations and savings through stronger CEMEX. And then in March, we took additional deficient because of COVID-19.

So we ended up adding everything and calling it Operation Resilience. All in all, we are expecting to save around $230 million, of which around $140 million were saved in the first half. The remaining -- you can expect that the remaining to be in the second half. But the -- it's very challenging to answer how much of that is permanent because we still don't have a clear scenario that we can define and compare with.

I think scenarios are still wide open because of uncertainty. But what I can tell you now is that, I think, I already mentioned because of the decision we took last March was a strong one, now given that we have a more positive scenario than the one we saw then, we also need to engage in certain expenses and capex to keep some plants running. And those expenses that were saved in the first half will be spent in the second half, and those are mainly maintenance and are between $20 million and $25 million. The rest, unless something really changes very fast, they're very -- even positive or negative, if we continue the rest of the year, more or less in the same -- let's say, scenario in the same context, all those savings can be kept during the year.

And regarding the U.S., in the U.S. -- our savings in the U.S., you know there were some changes in the management team, the head of the U.S., a few months ago. And through Stronger CEMEX and with direct contributions from the team, we have managed to define savings for about, not necessarily all of them this year, but most probably that will be the case from between $100 million to $120 million. And those savings are coming in different -- from different concepts.

One really relevant is related to primary fuels. We are switching a number of plants that we used to run with coal. And it happens that because of the dynamics, now it is much better to run with coke and that will allow us to save some money. There are additional market measures.

We are getting into new segments in different states. So that is helping somehow our margins in the U.S. I think you also have a question regarding assets. There is very little we can say right now.

So, as you can imagine, because of COVID-19, things have kind of come down on the plants on divesting assets, but we have not changed our mind. So we will continue that effort moving forward.

Gordon Lee -- Banco BTG Pactual SA

The question on the asset sales was actually of those that have already been closed, so effectively of the ones that you announced prior to the COVID outbreak. So about how much --

Fernando Gonzalez -- Chief Executive Officer

The one in the U.K. is to be closed this month. We don't have any info opposed to the closing we have for that assets and the other one will come afterwards. We are more assured at this time.

My comment will refer to all the potential asset sales.

Maher Al-Haffar -- Chief Financial Officer

And maybe, Fernando, if I can add the -- we're expecting on the U.K. transaction about -- it's going to be around $230 million and the balance is for the white cement and the total is about $400 million that we're expecting sometime this year.

Gordon Lee -- Banco BTG Pactual SA

Perfect. Thank you very much.

Maher Al-Haffar -- Chief Financial Officer

Thanks a lot, Gordon.

Fernando Gonzalez -- Chief Executive Officer

Thank you, Gordon.

Maher Al-Haffar -- Chief Financial Officer



Our next question will come from Ben Theurer with Barclays. Please go ahead.

Ben Theurer -- Barclays -- Analyst

Yes. Good morning, Fernando and Maher. Thank you very much for taking my questions. And congratulations on the results, clearly impressive.

I wanted to dig a little bit into the U.S. and some of the commentary you made during the quarter and then obviously the situation as it evolves right now, but with 13 cases in states you're heavily exposed, Texas, Florida, California. So could you run us through a little bit how you've been seeing activity over the last couple of weeks and what you expect on the different markets? Just to understand a little bit how much maybe of an impact is yet to be seen in the U.S.? That will be my first question and I have a quick one on pricing in Mexico.

Fernando Gonzalez -- Chief Executive Officer

OK. Let me take that one, Ben. Again, referring to, let's say, the process that we follow, we thought that the U.S. as well as other countries, we're going to have material lockdowns or shutdowns in our industry.

And as you know, it didn't happen. With the exception of two or three weeks in the Bay Area, as far as I remember, the U.S. didn't have any of the material lockdown. I think what we have learned from, let's say, our early thoughts is that the impact of COVID directly into the market, let's say, construction activity volumes was not as immediate as we thought originally.

We have stimulus programs, fiscal programs, furloughs, and economy open, I mean, and of course, except for restaurants and theaters, but nothing that impacted directly our activity. So I think the economic impact there was also softened just because all of these supporting programs. And then there were -- in some cases, there were some reactions that initially we were not expecting. For instance, we thought that certain construction sites we are going to be delaying their projects, in some cases, it happened the opposite.

Some construction companies speeded up the process for them to finish their projects. So again, the immediate impact was not as thought -- as what we had thought. We do have also ordered books for, let's say, the next three months, and they seem to be solid. Our concern is, put it that way, is that perhaps volumes in the fourth quarter, there are still months to go, but on the fourth quarter and moving forward, might be softened because of these programs terminated.

So again, it's still really uncertain to confirm something like that. We will continue with our programs, cost reductions and to see how it goes.

Ben Theurer -- Barclays -- Analyst

Perfect. Thank you very much, Fernando. And then on Mexico, I was wondering if you could elaborate a little bit. I mean, clearly, we've seen the discrepancy between back in bulk, and you've elaborated on the different demand scenarios.

And clearly, I mean volume within what is ready-mix and aggregate, which is the more former piece heavily impacted, so what's your strategy when it comes to pricing? I mean we all know that the Mexican peso has depreciated, stabilized now against the U.S. dollar. But in order to recover some of that input cost pressure, which is just dollarized input cost, what's your pricing strategy going forward in Mexico on the different segments within cement bulk versus bag, and then also on ready-mix and aggregates?

Fernando Gonzalez -- Chief Executive Officer

OK. Let me start by -- I mean I think it is more or less obvious on the dynamics that happened in Mexico during the pandemic, part because of the characteristics of the market and part because of decisions made on partial lockdown in the industry. In Mexico, in average, 65% of cement is holding back. And if you remember, the lockdown, that these immediate sales are bagged cement in retail stores.

That was not canceled. And at the same time, the large work of the new airport, Dos Bocas and Mayan Train also would not shut down. So what you saw in the last few months is that the infrastructure and formal activity did decline materially, but bagged cement because of not being locked down because of some government investments in social programs related to the consumption of bagged cement did offset in a very important manner the decline of the former part, which is bulk cement and ready-mix and to some extent aggregates. Now Mexico is -- the industry is open, meaning there is no lockdown.

The volumes of bagged cement continued increasing. Just to give you a couple of numbers, in April -- April and May, the worst months in Mexico, the decrease of volumes in bulk was slightly more than 40% while bagged cement increased 5%. Now what we have seen this since then is that bagged cement continues growing in a material manner. This month, month to date, I think as of July this [Inaudible], bagged cement is growing 28% and the bulk cement is decreasing but in a much lower manner, minus 14% instead of minus 40%.

So those have been the dynamics. And except for the very formal part, bulk, ready-mix, the rest of the market, which is the bulk of the market, has not been impacted so far.

Ben Theurer -- Barclays -- Analyst

And your pricing strategy is going to try to recover basically on pricing what you lose in dollar terms, correct?

Fernando Gonzalez -- Chief Executive Officer

Regarding pricing, well, we always -- in our strategies, we always try to gain back into cost inflation. What you mentioned, it is true, that the peso has depreciated and there is a loss of prices in dollar terms. At the same time, inflation has not been increasing materially. So we do have a cost inflation too that need to cover the price increases.

That's why we try price increase in maximum that's reduced this year. Now the market is very challenging nowadays. So it is very soon to really, really understand the possibility of this price increase to speak, but that's what we did for this month.

Ben Theurer -- Barclays -- Analyst

OK. Thank you very much and congrats again.

Maher Al-Haffar -- Chief Financial Officer

Thanks a lot, Ben.

Fernando Gonzalez -- Chief Executive Officer

Thank you, Ben.


Our next question will come from Carlos Peyrelongue with Bank of America. Please go ahead.

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

Thank you. Thank you, Fernando and Maher, for the call. And let me echo what others have said regarding the results despite a very challenging situation. Your margins were much better than expected.

So my question is related to margins. Can you -- you commented a little bit already but if barring any major disruption going forward, should we expect margins flat versus last year? Is that something that you think is achievable considering the $230 million in savings that you're expecting for the year? Clearly, the U.S. margins were much better than expected, but this was seen mostly in your major markets. So if you could comment a little bit further on margins would be appreciated.

Maher Al-Haffar -- Chief Financial Officer

Sure, Carlos. I will take a stab at it and then if Fernando wants to add -- I mean we think -- as Fernando said earlier, we think that most of the cost-cutting efforts that we adopted in the first half of the year should remain. And in fact, some of the expenses that we incurred in dealing with the COVID-19 crisis, which we had some that were in the other income and expenses line, are also likely to occur at a lesser pace. So everything else being equal, I mean we have expected it to kind of retain the margin levels that we have.

There's a possibility that things could be better. But as you heard, I mean, out of $230 million cost-cutting efforts under operation resilience, we're expecting -- $140 million happened in the first half and we're expecting the balance to happen in the second half of the year. Now as far as the different margins, like in the U.S., for instance, I mean, there, as you know, and as Fernando mentioned, I mean, we had a program that started -- an efficiency program that started in the third quarter of last year and that this program has been going on, and it's paid off quite nicely. And operating expenses in the U.S.

were dropped significantly. I mean we had almost a drop of 10% in operating expenses there. Everything from SG&A, travel, you name it, plus reductions in fixed costs also were achieved. Improvements in profitability in the ready-mix business, for instance, which we achieved.

Energy was a very important source. So all of these things are expected, frankly, to continue in the case of the U.S. business.

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

Understood. Thank you. And could you comment on pricing on the U.S.? Has there been any announcement of increases in prices that we should expect in -- during the summer or have you already implemented those in the second quarter? Can you comment a little bit on U.S. pricing?

Maher Al-Haffar -- Chief Financial Officer

Yes. I would say that pricing was fairly stable on a sequential basis. I mean we had flat pricing for our three products on a quarter-on-quarter basis. As you know, the biggest pricing increase was expected to take effect in April.

Unfortunately, because of the COVID-19, ourselves and most other players decided to push just it to July. And we're -- I guess, in some cases, with some clients, the pricing increases did go through in April. But mostly, it's being staggered into -- was staggered into kind of June and July. We did move ahead with the Texas pricing increases, with Arizona.

In Colorado as well we had pricing increases but it's being staggered by geography. And we are fairly constructive about the ability to improve our pricing in the second half of the year.

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

OK. Understood. And lastly, is there anything you could comment regarding the possibility of support from the U.S. Congress? Any initiatives worth highlighting for a potential support to the states that has been talked about, anything that you can comment or infrastructure packages worth highlighting? Any initiatives in the Congress?

Maher Al-Haffar -- Chief Financial Officer

Yes, Carlos. I mean there's a number of things that we are benefiting from in the U.S. I mean, obviously, you have a lot of the packages that were put into place that impact employment and all of that, and that has been very favorable. What's really important is that we -- when we take a look at the -- either the Republicans or the Democrats, both have been fairly aggressive proposals for infrastructure in general and for streets and highways, in particular.

So we are -- we don't expect -- I mean, it could happen, who knows, but we're certainly not expecting anything this year. But certainly, into '21 and '22, we do expect something to happen in support of the streets-and-highways program. And so based on the programs that are being mentioned, I mean, the latest announcement, for instance, from the Democrats, the component that they are talking about for streets and highways, if enacted, could represent a very material increase over this life of the program. And the interesting thing is that the Democratic proposal is very front-loaded in expenditure.

So it starts impacting -- as you know, the fiscal budget at the federal level are September to September, at the state level are July to July. So it could literally start impacting materially the fourth quarter of '21, if we have something enacted after the elections at the beginning of the year. So we're quite hopeful. We think that if there's been any time of star alignment for something like this, it would be now.

Now the other thing that is also very important is that it is highly expected that under all of the stabilization programs and fiscal stimulus programs that are being put out that a big chunk of that money is really going to be transferred to states to bridge some of the budget deficit that some of the states are incurring at this point in time because of COVID-19. And while we think that's going to be a little bit of -- a little bit like sausage making, it's not going to be pretty while it's happening, but we do think at the end of the day, something will happen, and that should also be very supportive of the space that we operate in. Now having said that, Carlos, it's very important to note that our states, our three most important states, California, Texas and Florida, came into this with very healthy rainy day funds as of -- for state general spending. And all the three states are very highly rated and -- I mean California is BB-, Texas and Florida is AAA.

And so we think that our states are very high-quality credits and should be more than able to, I guess, recover or to sustain the situation that we're experiencing right now very easily.

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

Very, very clear. Just a follow-up on these, Maher. I understand that for the roads and highways, a five-year deal is very likely to be addressed in more detail next year. But for support for the states, is that something that you think the U.S.

Congress could enact in the next two or three months, or would you say that's also something for -- that we should expect for after the election?

Maher Al-Haffar -- Chief Financial Officer

Carlos, it's very difficult to tell. I mean, obviously, there's a lot of negotiation. I think that there is a possibility that we could get something in support of the states certainly sooner than getting a kind of final bill for -- that would impact the streets and highways at the federal level. So that's entirely possible that could happen.

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thanks so much, guys.

Maher Al-Haffar -- Chief Financial Officer

Thank you very much, Carlos. Operator?


And our next question will come from Nikolaj Lippmann from Morgan Stanley. Please go ahead.

Nikolaj Lippmann -- Morgan Stanley -- Analyst

Hi, Fernando and Maher. Hi, everyone. And just three quick questions here. And also, sorry, congrats on the phenomenal numbers there.

First, on the U.S., if you, much like you did in Mexico, can provide a little bit of color on where the demand came from, infrastructure versus residential, etc.? Two, on CEMEX Go, the 19% growth you saw there, can you talk a little bit about what markets saw that growth and your experience in terms of migrating to that model? And then finally, Maher, congratulations on your new role. As kind of a personal question, I'll see if you take the bait, but you've been with CEMEX for more than 20 years. If you can share with us sort of any ideas or changes that you can envision going forward in your new role? Thank you very much.

Maher Al-Haffar -- Chief Financial Officer

Thanks, Nik. I don't -- Fernando, I don't know if you want to --

Fernando Gonzalez -- Chief Executive Officer

Let me take the one regarding CEMEX Go. Nik, I'm going to try to summarize a little bit. You know it was like three years ago we got engaged into the initiative of building the platform, a commercial platform to allow our customers to do better business for them and better business for us. I mean, in general terms, a superior customer experience enables that technology.

So we ended up developing a platform that covers the full spectrum of our commercial relation from data of our products, registering customers, orders, payments, everything is covered in the platform. Now before COVID, we -- very fortunate, we -- it happens that the platform started being highly accepted by customers in general because the platform is available all over the world in all our businesses. Acceptance and adoption from our customers increased very fast. But the same way that happened in other digital services during this past few months, we saw an increase of, I think, between 19%, 20%, depending on the platform.

We mainly have the CEMEX Go and as the main platforms. So we have seen that customers increase the usage occupancy. What I cannot assure is that in my view the same customers using -- adopting the platform in a much more decisive way or that phenomena plus additional customers willing to do business in this way. That -- at this point in time, I don't know about what it is true.

What I can say is that our adoption continues growing after one year or and a half years into making this platform available. And what can I say, it works. Customers are happy with it. Things are faster and that way and because of the pandemic, we've been able to offer, we call it a service at a distance but we don't touch, meaning it's also everything is if -- the only touch point with customers is when they receive the product or when they pick up the product from our desk.

The rest is done digitally.

Nikolaj Lippmann -- Morgan Stanley -- Analyst

For that, thank you, Fernando. Is that something -- is this -- are you seeing what markets are -- in what markets are you seeing particularly high-growth from this platform, if you don't mind me asking?

Fernando Gonzalez -- Chief Executive Officer

Well, more than specific markets, what we see is demand, it seems like customers in cement, either bulk or bag. The adoption is much higher than, for instance, than volumes but I don't have any specific info to share on, let's say, geographically which part -- which geography or which part of the market is growing more than others through this way to transact.

Maher Al-Haffar -- Chief Financial Officer

And, Nik, maybe I could respond to your question on the U.S. As you saw, I mean, we had fairly strong cement volumes in the second-quarter year over year with about 6% growth in volumes. And clearly, we started the year with very good momentum. And as Fernando said, the U.S.

almost continued, I don't want to say business as usual, but almost business as usual in the construction sector. And the level of, let's say, safety that was practiced through these different protocols by ourselves and by most of our clients in the U.S. meant that there were not really any hotspots that were experienced in the construction area. So it allowed us the continuity factor, and that's what was -- that's what contributed very favorably to our business.

Now the biggest contributor in terms of sectors is infrastructure and residential. Those are the two biggest markets. Those account for 80% of our volumes in the U.S. In the case of just -- and geographically, I mean, Texas and Arizona, for instance, had double-digit growth, which is amazing in this kind of an environment.

Florida had mid-single-digit growth. California, we experienced a bit of a decline in volumes, primarily because we have higher precipitation. And also, believe it or not, because of some of the coronavirus restrictions, we did have issues in bringing in cement into different parts of California because we were sold out. And there were some restrictions in the Bay Area, which have then been lifted -- have been lifted off.

Now looking forward -- I mean looking at what was happening in infrastructure, for instance, I mean, the DoTs definitely took advantage of less traffic to accelerate construction. We have seen also very good demand still in terms of -- a lot of growth in projects are going to be now lasting for two to four years in -- forward. In May, we saw spending growing by 1%. As you know, we don't have data newer than that.

But we're quite -- it was quite a pleasant surprise. The other thing is we started -- Jaime started focusing a lot on the direct bid business, which is very conducive to infrastructure projects as well as large residential, and we have been really successful in gaining our position in that segment. On the residential side, the business has been -- has continued to really boom. Unfortunately, the residential market did a little bit like we did.

They went through their own hard stop. And so as a consequence of that, there has been a fairly constrained inventory in new home sales. And now that things are opening up slowly again, it's starting to reactivate. And now that interest rates are continuing to drop, we saw long-term mortgage rates break below 3%.

Demand for housing continues to be quite strong, and we frankly expected to continue housing permits rebounded very strongly in May and June. And mortgage applications, although we need to be very careful about that number, also have done extremely well. The area that we think intuitively likely to be negatively impacted from all of this are in the industrial and commercial. I mean that's something that we need -- I mean that's suffered certainly during the first half of the year, and the jury is still out on where that happens.

But fortunately, the other segments are offsetting and really giving us good outlook. And as Fernando said, we're cautious. I mean, we think forward-looking order book is good into the third quarter. We're being cautious probably is what may happen in the fourth quarter, but we'll have to wait and see.

I mean visibility is not as good as we'd like it to be. And certainly, that's attributable mostly to the COVID-19 situation. I don't know if that answers your question on the U.S.

Nikolaj Lippmann -- Morgan Stanley -- Analyst

Very clearly, Maher. Thank you. And could I get you to take the bait on some of your visions for your new role? I'm not ready --

Maher Al-Haffar -- Chief Financial Officer

I will have to do -- it would be difficult to do it in front of, I would say call it, my boss. So what I will -- all I can say -- I mean in seriousness, all I can say is that -- I mean, we have a strategy that has been in place for a while that has been sanctioned by the Board and Fernando. We don't see any changes. I mean we are going to continue to make sure that our investment grade continues to be our North Star.

We will continue to manage our liability situation in order to ensure that we have minimum 12 to 24 months of runway in terms of maturities. We're obviously continuously focused on trying to bring down our cost of funding as much as possible and trying to maintain as much of the flexibility for us to conduct our business in this kind of an environment. But I don't see any -- really any changes. I mean it's a strategy that is being implemented, and I'm very fortunate to have been asked to be in this position to be part of the execution in that strategy.

Nikolaj Lippmann -- Morgan Stanley -- Analyst

Thank you.

Maher Al-Haffar -- Chief Financial Officer

Thank you very much, Nik.


And our next question will come from Vanessa Quiroga with Credit Suisse. Please go ahead.

Vanessa Quiroga -- Credit Suisse -- Analyst

Hi, Fernando and Maher. Thanks for the call and taking my questions. Congrats on the results.

Maher Al-Haffar -- Chief Financial Officer

Thank you.

Vanessa Quiroga -- Credit Suisse -- Analyst

My question is regarding bag cement in Mexico. So just to understand correctly, if you say that bag cement is going up in July to date by 28% year over year, but you also said that you expect bag cement performance to normalize and basically converge to the economic trends in Mexico. So can I understand -- can you give some more details on your views for bag cement in Mexico? And also on the same market, I understand that you have implemented price increases for bag cement in the beginning of July and at least one or two other competitors also did. So what has been your response so far in terms of pricing during the month? Thank you.

Maher Al-Haffar -- Chief Financial Officer

Fernando, would you like me to --

Fernando Gonzalez -- Chief Executive Officer

Yes, please.

Maher Al-Haffar -- Chief Financial Officer

Vanessa, on the bag cement, the bag cement demand has been really driven a lot by -- well, I mean, there were kind of two phases. In the first phase, that was -- distribution was never, especially through our Construrama, was not impacted. And so a lot of the demand that would have gone -- that would have come through bulk came through Construrama in bag format. I mean, in reality, we think that there were some medium-sized and smaller contractors that were only buying bags to actually batch concrete at site.

Now in the second quarter, the situation took a slightly different evolution, and that is that there are three things that started moving bag cement demand much more so than bulk, and that is government-supported program. The government, as you know, has been encouraging self-construction and do-it-yourself improvements, home improvements. And so the government has announced a school improvement program that is close to about $0.5 billion, about $440 million. There's also a home improvement program, mejoravit, which is another $225-close-to-it million.

And then there is also a rural roads program for $120 million. Now all of those programs are designed to be kind of -- to promote the grassroot employment in the country on a very broad base. And so as a consequence of that, that money is going through the bag cement market, and so that's why we have seen the extensive growth. And yes, Fernando did say and correctly, of course, is that the July month-to-date bag growth, I forget exactly as of when it's like the 24th or 23rd, it was up 28% year over year.

That's -- now we do expect it to normalize. That's just kind of an expectation. But the other thing that is also happening, Vanessa, that is very important is that remittances are up year to date by 25%. In dollar terms, they're up 10%.

And as Fernando said, the -- from a peso perspective, we have not yet seen this at the consumer level the flow-through of inflation. So in reality, the weaker peso has translated to higher disposable income in local currency terms. And of course, that is also driving some of the investment in home improvements and home construction and reconstruction in some cases. And that's been kind of the strength.

Now having said that, in the last two months, we have seen an improvement in demand in bulk, meaning, in April, we saw bulk down 40%; in July, month to date, similar to the numbers that we talked about in bags, we saw they drop minus 14%. So it's dropping still just but by much less, and that is because of the activation of some of the infrastructure programs in Mexico. I don't know if that addresses the question. If you have any further follow-ons, and I'll be more than happy to address them.

Vanessa Quiroga -- Credit Suisse -- Analyst

Thank you very much, Maher. Just on pricing, what has been the response in July?

Maher Al-Haffar -- Chief Financial Officer

It's a bit early to comment on that. So I would rather -- I mean, Fernando, I don't know if you want to comment on that, but it's really too early to comment on that at this point in time.

Fernando Gonzalez -- Chief Executive Officer

No, I agree with you, Maher. We need do wait a little bit to see the dynamics and see how it goes. Of course, we try to increase prices thinking that we, on the one hand, we have seen our prices of cement in real terms slightly impacted. I mean we have not been able to gain into cost inflation completely since I think it's mid '19 or so because that's what we are trying given that the performance of the market in the last few months, particularly in the bag cement market that we have decided to do.

So let's see. In a few weeks, and we will know.

Vanessa Quiroga -- Credit Suisse -- Analyst

OK. That's great. If I may, I would like to also ask about working capital. So we saw an improvement in average days of the cycle.

Do you expect to be able to keep that improvement so that as sales normalize we could see a positive result on the working capital investment line?

Fernando Gonzalez -- Chief Executive Officer

Yes, I think we will be able to keep it, Vanessa now -- again, to make a hard statement on the number in this case of working capital with such uncertain landscape is very risky. But I think -- what I think -- what I saw as an important point for the performance of working capital, we knew -- we know we have at least it's our opinion, we have a very efficient scheme for working capital having negative days in a sustained manner. And after the challenges of COVID in the second quarter, now we know that on top of being efficient, it is also resilient because it was not deteriorated, it did improve by about -- four days. Are we going to keep those four days? I really don't know.

Again, it's uncertain, we will see, but very happy with the performance of efficiency and resiliency of our working capital.

Vanessa Quiroga -- Credit Suisse -- Analyst

Thank you very much, Fernando and Maher.

Maher Al-Haffar -- Chief Financial Officer

Thank you very much, Vanessa.

Fernando Gonzalez -- Chief Executive Officer

Thank you, Vanessa.


And we have time for one last question from Anne Milne with Bank of America. Please go ahead.

Anne Milne -- Bank of America Merrill Lynch -- Analyst

Good morning, Fernando. Good morning, Maher. I'm sure that you're happy that this quarter is over and that it came out as well as it did, all circumstances considered. You guys have covered a lot of territory already in terms of the questions.

I do want to ask one more question on CEMEX Go and then a question on liquidity. But on CEMEX Go, I think the reason -- and I know there have been several questions and you've provided some answers. So many questions, it's because under this new lockdown environment, so many more transactions are going the way of virtual. Do you have like a percentage of the number of transactions, even if it's just for cement which you indicated Fernando is the strongest segment of -- that go through CEMEX Go or the volume? I would just sort of be curious to see how much the cement industry is going at this direction right now -- at least your clients?

Fernando Gonzalez -- Chief Executive Officer

OK. Sure, Anne. Thanks for your question. And you are right, we are glad this quarter already finished and expecting for what's coming.

How to say it, I think we started developing this platform because of -- you can see it in almost all business sectors. In our case, we are in the context of digital platform, CEMEX Go and, both. Those platforms have the positive context of business to business. I mean, those are the platforms that are not necessarily the ones highly developed or the ones that have been developed in the last 20 years.

Now it is more the business to consumer. So we engaged in a process around three years ago. I think we managed to put in place what we originally follow on the buyable product and all the story and digitization of companies. We decided to focus our efforts in customers and that might be a difference when we compare to other companies in the sector.

In our case, it's also about our customers. It's about developing a superior customer experience. Now to get ready to your question, what we saw in a few months, let's say, 18 months or so is that our customers, our recurring customers were engaged and started adopting the platform very fast. And so right now, our adoption rate is between 60% and 65%.

And for a platform of this kind, sounds -- and after, let's say, 18 to 24 months of operations, sounds -- the win sounds great, meaning it has lots of acceptance. Of course, there were some changes within this last three months. No different to other digital platforms also related to consumption to end customers. So we increased up to 19%.

The use of this platform, that for sure, will be reflected in higher adoption rates. We do, however, believe that one of the reasons why we don't have even much higher adoption rates is because in some cases we still don't develop certain segments or certain sectors of other products. For instance, the customers in aggregate is picking up the product in our request. That's an investment that we are doing this year.

And whenever we, let's say, develop the platform either forward, right now, and we are having around 4th or the 5th version, I don't remember exactly, what you can expect is for that rate to continue increasing. The feedback is -- from of our customers is very positive. And what can I tell you in the case of the use of the platform in COVID, with their section, I think everybody mentioned is with attention of delivering the products of our customers picking them up from our facilities, the rest can be done digitally. I'm not saying only from the office of our customers to our office.

You can use this platform in your mobile, in your iPad, in your PC. So the employees of our customers at home can perform the whole relation or the whole transaction with our employees, which are also at home. So it's been, as you can imagine, very helpful during these last few months. We are clearly happy that we decided to invest in digitizing our commercial relations about three years ago.

And as you know, these processes are never ending type of processes. We are very happy with what we have achieved, but we are still insisting on innovating and trying to find additional ways to serve this market.

Anne Milne -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thanks. Yes, I'm sure that this helped when the customers did have cement purchase as they could look at your platform and know they could process it.

So on a separate question, maybe for Maher. I think one of the strengths of CEMEX going into this quarter was the strong liquidity, which you increased through your drawdown of your credit facilities and your bond issuance. So now you have a really strong liquidity. I know you mentioned that depending on how the outlook looks going forward, you might repay some of those facilities.

And how are you looking at that, particularly, let's say, in some markets, if we go into a W, let's say, shaped economic recovery or an additional close downs as they're talking about in the U.S. at the moment? Do you have a certain minimum amount you want to have? Will you keep a credit facility open with the banks and pay that down and have it available in case you need it down the road? How are you thinking about that?

Maher Al-Haffar -- Chief Financial Officer

Yes. Anne, I think from a liquidity perspective, as you saw, we started the year with a very sizable liquidity position, as you know. We did a bond last year in November to get liquidity to use to pay down the convertible bond and we did just that. We started the year with about $800 million worth of cash, which is probably kind of double what we would -- what we've had over the last couple of years on a quarterly basis.

And we ended last quarter, as a consequence of a number of things that we've done, we've retained cash from use proceeds from the sale of the U.S., we've raised our liquidity through short-term debt. So we started the year with about $1.4 billion. We were very happy that we got our amendment because we wanted to make sure to take advantage of any kind of narrow market window than we did, and we issued the $1 billion notes that you saw which have since traded very nicely. I think that we paid probably a little bit more at this time, but that was -- at the time, actually, the new issue concession was the tightest, and we were the first company from emerging market to be coming and doing that.

And we're expecting an additional $400 million of -- from asset sales settlements. So that would be on top of the $2.8 billion of cash that we have on the balance sheet as of the end of the quarter. So, now going -- again, it depends how things develop. I mean this is a very -- it's a high-class problem to have.

It's nice to have all this liquidity, but at the same time, it costs money. I mean -- so we need to kind of -- we're looking at the different markets. We're looking at a comfort level that would lead us to utilize some of this liquidity to reduce debt. As you know, we do have a revolving credit facility for a little bit over $1.1 billion.

So we do have that flexibility in front of us as well. And so we haven't made a final decision how much of that liquidity will be deployed to reduce debt throughout the year. But as I said, I mean we will continue to focus on making sure that we have a 12- to 24-month runway of maturities going into the future. Now as we get into next year first quarter, we get into the seasonality of free cash flow and working capital needs.

And so we need to make sure that we have a sufficient level, not too different probably from what we had starting this year in terms of cash flow, in terms of cash on our balance sheet getting into 2021. Now again, I'd like to make a caveat here is that what we did was in anticipation of things to be kind of a little different than how they turned out, meaning things have turned out a little bit better, and we've seen almost a V-shaped recovery in most of our markets. So if we get comfortable with that, we're likely to be then deploying more free cash. If we're seeing a Ws or triple Ws, as sometimes Fernando tells me, worldwide web kind of volatility, then obviously, we will be more defensive in our cash position, right? I mean the last thing we want to be is have a situation precipitate because we did not anticipate any liquidity needs.

So we're very, very -- we're very vigilant. We're watching the markets very closely on a daily basis. And as we make those decisions, you will really see us execute in the market.

Anne Milne -- Bank of America Merrill Lynch -- Analyst

OK. Thanks very much, Maher.

Maher Al-Haffar -- Chief Financial Officer

Thank you very much, Anne.


I would now like to turn the conference over to Fernando Gonzalez for any closing remarks. Please go ahead, sir.

Fernando Gonzalez -- Chief Executive Officer

Thanks, operator. Well, thank you all. Thanks for your time and for your attention. And as you know, if you need any additional info or want to make additional questions, please call us and, of course, we will be available for you.

Thank you very much and stay safe. Bye now.


[Operator signoff]

Duration: 92 minutes

Call participants:

Fernando Gonzalez -- Chief Executive Officer

Maher Al-Haffar -- Chief Financial Officer

Adrian Huerta -- J.P. Morgan -- Analyst

Gordon Lee -- Banco BTG Pactual SA

Ben Theurer -- Barclays -- Analyst

Carlos Peyrelongue -- Bank of America Merrill Lynch -- Analyst

Nikolaj Lippmann -- Morgan Stanley -- Analyst

Vanessa Quiroga -- Credit Suisse -- Analyst

Anne Milne -- Bank of America Merrill Lynch -- Analyst

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