Cemex (CX) Q1 2022 Earnings Call Transcript

Cemex (CX -2.62%)
Q1 2022 Earnings Call
Apr 28, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to the CEMEX first quarter 2021 conference call and webcast. My name is Hannah, and I'll be your operator for today's call. [Operator instructions] And now I would turn the conference over to Lucy Rodriguez, chief communications officer.

Please proceed.

Lucy Rodriguez -- Chief Communications Officer

Good morning. Thank you for joining us today for our first quarter 2022 conference call and webcast. I hope this call finds you and your families in good health. I'm joined today by Fernando Gonzalez, our CEO; and Maher Al-Haffar, our CFO.

As always, we will spend a few minutes reviewing the business, and then we will be happy to take your questions. I will now hand it over to Fernando. Fernando?

Fernando Gonzalez -- Chief Executive Officer

Thanks, Lucy, and good day to everyone. Before we begin, I will like to convey that our thoughts are very much with the people affected by the war in Ukraine as we witnessed the humanitarian crisis unfolding there. Our corporate purpose is all about building a better future: homes, infrastructure, school, hospital. And we are saddened to see this destruction and the refugee crisis it had sparked.

We are supporting the UN refugee program and coordinating with local authorities in the communities in which we operate across Europe. We will continue to look for additional opportunities to support the people most affected by this crisis. Now moving on to our key achievements. I'm quite pleased with our first-quarter results.

We achieved a double-digit growth in sales with all regions contributing. In a supply chain-constrained world, we have tried very hard to meet customer needs. Our EBITDA was higher than last year, led primarily by EMEA. These results were achieved despite a challenging macroenvironment to which our management team had to adjust in real-time.

Growth was driven primarily by pricing with cement prices up double-digit. While significant, the pricing achievement was not sufficient to completely offset inflationary pressures with margins down year over year. Volumes for our three core products increased with the highest growth rates in Europe and the U.S. Our Urbanization Solutions business grew double-digits.

We continue to roll out our growth investments. And this quarter, we approved over $200 million of additional bolt-on margin enhancement projects. During the quarter, we bought back a total of 1.5% of CEMEX outstanding shares. Since the initiation of our share buyback program in 2018, we have repurchased more than 6% of the company's shares.

We believe that these transactions have been accretive to our shareholders. We continue to post impressive numbers in our climate action efforts. We continue to make great strides in our decarbonization efforts. This quarter, we reduced our carbon emissions by 4%, in line with our reduction in 2021, our largest on record.

This performance was a result of a decline in clinker factor as well as an increase in alternative fuels to a new high of 33.3%. Today, seven of our plants are operating below our 2030 CO2 target of 475 kilograms. Sales of our Vertua low-carbon cement and concrete are growing significantly since their introduction in 2020 and currently represent approximately a third of our volumes. By 2025, we expect that Vertua cement and concrete will represent 50% of our volumes.

With regard to innovation, we continue to make progress in the quarter. In an innovation born out of our internal open innovation platform, smart innovation. We successfully converted in a lab setting, 50% of the CO2 directly from the flue gases of our kilns into carbon nanomaterials, a material that is used by multiple industries. This is an example of how potentially bad carbon can be converted into good carbon and actually commercialize.

We will now move forward on this concept in an industrial pilot. Additionally, we established a new consortium for the Rudersdorf Carbon Neutral Alliance in Germany, a project to transform our plan into the first-ever net CO2 cement plant by 2030. For more information, please see our website. Finally, we recently published our sixth integrated report in which we highlight the substantive progress we have made in our climate action roadmap as well as significant corporate governance improvements.

I invite you to access the report on our website. Pricing was a primary driver in our 12% growth in sales with cement prices up double digits in three of our four regions. As you know, we adjusted our pricing strategy in second quarter 2021 to address the rising inflation clouds that we were seeing coming out of the pandemic lockdown. From the beginning, we view inflation as permanent rather than transitory.

And this is serving us well with the additional challenges of the Ukraine war. And even with continuing cost pressures as well as the difficult prior-year comparison, we delivered a 3% increase in EBITDA. Consolidated margin declined 1.7 percentage points, reflecting the cost as well as geographic and product mix. Free cash flow declined year over year due to higher capex spending and working capital.

Our developed market portfolio continued to enjoy strong demand dynamics with cement and ready-mix volumes growing high single to double digits. Cement volumes in Mexico declined, reflecting the demand rebalancing that is occurring between the formal and informal construction market as we move out from the pandemic as well as a difficult 2021 comparison base. Throughout the portfolio, we are seeing strong growth in ready-mix, reflecting formal sector demand, while aggregates volumes are increasing in all markets expect for SCAC. We are quite pleased with the pricing performance.

Against the backdrop of the worst inflation headwinds since the '80s, we realized a record sequential cement price growth for cement. Consolidated cement prices were up 12% year over year, while ready-mix and aggregates rose 8% and 7% respectively. Importantly, our January price increases saw important traction with sequential consolidated prices up between mid-single to high-single digits for all products. All regions contributed to pricing gains.

Despite the January pricing achievement, we still have work to do to compensate for rising costs. We have implemented April pricing increases for those markets in the U.S. and Europe that did not have a January increase, and we expect similar results. In addition, we have already announced subsequent increases in many markets for the summer months.

Pricing, however, is not the only lever. We remain focused on costs. Our diversified energy, supply chain, and climate action strategies are paying off. EBITDA for the quarter increased 3%, driven primarily by prices and growth in our EMEA region.

EBITDA from Urbanization Solutions grew double digits, and we expect this growth to continue in 2022 as our growth investment portfolio ramps up and more projects come online. The contribution of pricing to EBITDA fully offsets the increase in variable cost and imports. With rising volumes, however, it was not sufficient to maintain year-over-year margins. Consolidated margins declined 1.7 percentage points.

In mid-2021, we began to see significant inflation in the business, stemming largely from rising energy and transportation costs. We updated our pricing strategy to take this into account and began to see the benefits of our efforts in fourth quarter. While there is, of course, seasonality in our results, I am pleased that consolidated margins in the first quarter increased sequentially. We are cautious and we know of the inflation challenges ahead of us, but we are carefully managing costs and our pricing strategy has been recalibrated to reflect the new cost environment.

Our goal is to recover margins in line with our operation resilience target of at least 20%. And now back to you, Lucy.

Lucy Rodriguez -- Chief Communications Officer

Thank you, Fernando. In a largely sold-out domestic market, our U.S. operations experienced impressive growth across all products. Sales expanded 18% on the back of high single-digit volume growth for the three products.

This growth reflects strong demand from the residential and industrial sectors as well as milder weather. Pricing gains contributed significantly to sales with cement prices increasing 10%. Our January increases were highly successful. In markets which account for 40% of our U.S.

cement volumes, cement prices rose between 8% and 10%. In April, our remaining markets received their first pricing increase for the year. We are optimistic that traction will be in line with January. We have already announced additional price increases for the summer in all markets and we have advised customers that further price increases may be necessary.

On the cost side, imports, logistics, and energy continued to be the biggest headwind to margins. With largely sold-out markets and rising shipping rates are increasing reliance on imports negatively impacts margins. While EBITDA margin declined year over year, sequential margins improved almost one percentage point. With today's challenging global shipping market, we will take full advantage of imports by rail and water from our Mexican operations in order to meet customer needs.

We remain optimistic with regard to the outlook for the U.S. Despite rising interest rates, we have not seen evidence of softening residential demand in our markets. The industrial and commercial sector shows important recovery due to onshoring and manufacturing activity and the resurgence of the oil industry. We expect these industrial trends to persist with additional supply chain pressures from the Ukraine war.

Finally, for infrastructure, we expect the new Infrastructure Investment and Jobs Act to yield incremental demand for our products toward the end of 2022. In Mexico, net sales grew 5%, driven by a successful pricing strategy. In January, cement price announcements saw record attraction with cement prices rising 9% sequentially. Volume dynamics continue to reflect the rebalancing of demand between the informal and formal construction sectors as we move out from pandemic resurgence.

Cement volumes declined 8%, reflecting weaker demand in bagged cement while ready-mix volumes grew 9%. The decline in bagged cement volumes results from a difficult 2021 comparison base with a high level of pandemic home improvements and pre-electoral spending. Going forward, we expect bagged cement volumes to stabilize at a normalized market share. In the formal sector, activity is driven by the industrial and commercial sector and formal residential.

We continue to see the build-out of manufacturing and warehousing facilities in Northern states, with companies taking advantage of near-shoring opportunities. Demand for industrial space is growing significantly, led by cities such as Tijuana and Monterrey. The commercial sector has been supported by hotel construction in tourism corridors as the industry responds to a post-pandemic influx of tourists. The strong pricing performance is still not sufficient to offset the significant inflation in our operations, driven largely by energy.

Rising energy costs coupled with product mix, including a rapidly expanding urbanization solutions business were largely responsible for the decline in EBITDA margin. We expect our pricing strategy and cost containment initiatives to address the inflation challenges. We announced a second price increase of 11% in bagged cement effective April 1. To date, the increase is showing similar traction to our January price action.

Our climate action road map is also helping us to respond to cost pressures. Alternative fuel usage with clear cost advantages over fossil fuels posted new record highs. Efforts to reduce clinker factor and improved thermal efficiency of our plants is also supported. While a sold-out U.S.

market not only allows us to support the needs of our U.S. business in a cost-effective manner, but also to maintain high-capacity utilization in Mexico. We will continue pushing for additional price increases as necessary to compensate for cost headwinds. EMEA posted excellent results, with sales and EBITDA rising double digits.

Top-line growth was driven by double-digit growth in price in mid-single-digit growth in volume from cement. Europe is responsible for much of the improvement with cement volumes rising 16% led by infrastructure and residential activity as well as milder winter weather. Prices for our three core products increased between 9% and 13% sequentially, reflecting strong January price increases. In April, we implemented price increases in those markets, which represent about 40% of European cement volumes that did not have a January increase.

We have already announced a second round of price increases to be implemented during the second quarter. We are fortunate that our business in Europe is relatively insulated from the Ukraine war, both in terms of footprint, supply chain, and cost pressures. As a result of our One Europe strategy implemented in 2019 and the consolidation of our cement footprint, our plant network today runs at high-capacity utilization. The business is well diversified with our less energy-intensive products other than cement contributing about 50% of regional EBITDA.

Within our cement business, alternative fuels account for almost two-thirds of our total fuel mix, allowing us to minimize fossil fuel volatility. Recent modifications to our plants in the U.K., Germany, and the Czech Republic will allow us to boost alternative fuels even further up to 70% by midyear. We have a surplus of CO2 allowances that we expect will last through 2025. And on the demand side, the renovation waves and other infrastructure programs totaling approximately EUR 1.4 trillion, coupled with expected new investments in energy and independence should support values.

Moving to the rest of the region. In the Philippines, cement volumes declined 6%, impacted by disruptions caused by Typhoon Odette in December and COVID lockdown measures. Cement prices improved 3% sequentially, marking 4 consecutive quarters of growth. For more information, please see our CHP quarterly earnings, which will be available this evening.

In Israel, construction activity was strong with ready-mix and aggregate volumes growing while sequential pricing for our products rose between mid- to high-single digit. Finally, in Egypt, we continue to see strong EBITDA growth, driven by the industry rationalization plan announced by the government in midyear 2021. In our South, Central American, and Caribbean operations, net sales increased 9%. This strong top-line growth was driven by strong pricing with high-capacity utilization in most countries.

Regional cement prices increased 9% year over year. Similar to Mexico, the formal sector continues recovering from the pandemic while bagged cement growth moderates. The decline in regional EBITDA and margins is mainly due to increases in energy costs. We announced a second round of price increases effective April 1, in markets that represent around 30% of cement volumes.

We also are taking full advantage of the ability of our plants to switch between multiple tools as well as increasing alternative fuels in order to dampen the effect of rising energy prices. In Colombia, cement volumes increased 4%, supported by housing, self-construction, and infrastructure. The outlook in the country remains positive with the continued rollout of 4G highway projects and a healthy formal housing sector. In the Dominican Republic, cement volumes declined 4%, led by a reduction in bagged cement sales.

We reopened a kiln in our plant, which will increase our production capacity by a third, underscoring our growth strategy and commitment to the development of the country. With higher global shipping costs in a largely sold-out region, we believe our strong logistics network, coupled with our cement capacity additions will be an important competitive advantage. 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 developments.

Maher Al-Haffar -- Chief Financial Officer

Thank you, Lucy, and good day to everyone. As Fernando mentioned, we are very pleased with our first-quarter performance. Despite higher EBITDA and lower financial expense, free cash flow after maintenance capex declined versus the prior year due to higher investments in working capital and maintenance capex. Investment in working capital increased due to higher sales, plus higher inventory to support customer demand as markets continue to face supply chain bottlenecks.

We have been redesigning and introducing new technologies in our collections processes to make them more efficient. The credit quality and the turnover efficiency of our receivables are at record levels. This has led to a significant improvement in our receivables collection cycle. I would like to highlight that our working capital cycle is seasonal and investments in the first quarter typically turn around in the early part of the second half.

The increase in maintenance capex relates primarily to the delayed delivery of mobile equipment originally slated for 2021. This is mostly due to supply chain disruptions. As a result of positive operating performance and lower financial expenses, net income for the quarter more than tripled when compared to that of last year, after adjusting for gains from sale of assets. Return on capital employed for the last 12 months stood at 13.7%, excluding goodwill, well above our cost of capital.

Inflation for us has been felt mostly in energy in the production of cement, which represents approximately 30% of our total cement production costs. During the quarter, it increased 37% year over year. Unitary fuel cost is up 53%, driven primarily by the increase in petcoke and coal and partially mitigated by an increase in alternative fuel usage. This quarter, the alternative fuel substitution rate was 33.3%, 7.3 percentage points higher than last year.

We expect our substitution rate to further increase during the year. Unitary electricity cost is up 21%, driven principally by our operations in Europe. While we experienced an important increase in the cost of energy, it continued to have a much lower volatility than our key energy indices. This is due to a combination of factors.

First, a portion of our fuel and electricity contracts are negotiated on a fixed price basis. So there is some lag in the repricing of these contracts. And second, as mentioned before, about a third of our fuels are alternate fuels, which have different price dynamics than fossil fuels. Apart from energy used in the production of cement, we're also exposed to energy in the form of transportation needs for all our products.

We've had a diesel hedging program in place in 2016 in which we cover our direct diesel exposure for the next 12 to 24 months, depending on market conditions. Now, with respect to our capital structure and risk management. As I commented last quarter, we entered 2022 with a very strong financial position with no refinancing needs for the next three years, a strong liquidity position, and minimal exposure to interest rates as 90% of our debt is at fixed rates. We will continue to be prudent in our financial strategy, maintaining an adequate risk profile consistent with an investment-grade capital structure.

During the quarter, we executed a series of transactions taking advantage of the current environment. First, with the rise in interest rates, we launched a tender offer to purchase up to $500 million of three of our bonds at very attractive prices. Through the tender process, which closed after the end of the quarter, we repurchased approximately $440 million in those at an attractive discount. This exercise will result in more than $11 million in annual interest expense savings and will be funded through our revolving credit facility at a much lower rate than the yield of the notes.

We also activated our share buyback program in the quarter in which we repurchased $111 million of our stock. Since 2018, we have returned approximately $470 million to shareholders through a combination of share buybacks and cash dividends. As mentioned before, we do not have any refinancing needs this year. However, in anticipation of a rising interest rate environment, we executed $300 million in interest rate locks to partially mitigate interest rate risk in connection with potential liability management transactions in the future.

These rate locks were executed when the 10-year treasury yield was approximately at 1.7%. So as of today, they have a positive mark-to-market. The result of this transaction will be amortized in financial expense over the life of a new potential bond when issued. We continue with our goal to align our capital structure to our sustainability targets.

During this quarter, we introduced our sustainability framework into our accounts receivable securitization programs in the U.K. and France for approximately $215 million. And now back to you, Fernando.

Fernando Gonzalez -- Chief Executive Officer

We are quite pleased with first-quarter performance, which exceeded our expectations underlying our February guidance. Today, we are not seeing signs of slowdown in our operations and pricing has accelerated significantly. We realize that first quarter is not always a good indicator of full-year performance in our industry. We are maintaining our EBITDA guidance of mid-single-digit growth.

Although given the current environment, there might be some downside risk. However, we are confident that we will grow year over year. Growth should be driven primarily by pricing with flat to mid-single-digit consolidated volume increases. Given the successful price traction we have seen as well as additional pricing announcements, we believe that we can continue closing the gap between cost and prices.

We are increasing our guidance for energy in the production of cement to 35% on a per ton of cement-produced basis, assuming no further escalation in energy costs. We now expect capex of $1.2 billion with $700 million going to maintenance and $500 million going to strategic. If global supply chain issues improve, we could accelerate this capex spending. Our strategic capex will be primarily directed toward bolt-on margin enhancement projects.

We continue to expect $100 million of incremental EBITDA for this year from our growth investments, such as ready-mix block plants in Florida, alternative fuels upgrade at our Rugby plant in the U.K., sustainable waste management and mortar production in Mexico, among others. Cash taxes are now expected to be $200 million. We recognize that cost headwinds will be a challenge, but we anticipate a favorable environment with moderate volume growth and strong pricing dynamics supported by high-capacity utilization. While it may take longer than we initially expected, we aim to recover margins in line with our Operation Resilience goal.

And now back to you, Lucy.

Lucy Rodriguez -- Chief Communications 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 instructions] And the first question comes from Francisco Suarez from Scotiabank.

Francisco, please go ahead.

Francisco Suarez -- Scotiabank -- Analyst

-- that allow you to have this positive price would costs this quarter and your sequential margin improvement, that was impressive. My question relates to the cost side of your equation on these levers that you are playing with. Do you see room for upside risk in better fossil fuel substitution rates, perhaps clinker factors, particularly outside Europe. And perhaps this is actually linked to your statements that made at the beginning on the incremental margin improvement investments that you have in the pipeline?

Fernando Gonzalez -- Chief Executive Officer

Thank you, Francisco. Let me comment on the cost side, and you were referring particularly, I think, to higher substitution of alternative fuels and lower clinker factor. And the answer to your question is definitely yes, we do have room, and we have been investing and preparing to doing more progress in those particular variables, both contributing economically and both contributing to our targets in our transition toward a lower-carbon economy. We commented that increasing alternative fuels on a consolidated basis was seven percentage points.

It's from about 27% first quarter last year to 33% this year. Now that will continue growing a few explanations. We have already made installations in all our European plants to inject hydrogen, to improve the combustion of RDF, our main alternative fuel. That's one reason.

The other one is that it was very recently announced, I think it was this week, a rule in Spain that will be very positive in order to promote the use of RDF in our cement plants in Spain, where we have the low substitution rate. And the other reason why we will increase is, because we have already finished the projects to increase the use of alternative fuels in our -- two of our largest plants in Europe, Rudersdorf in Germany and Rugby in the U.K. So that is done, and we are starting to see much higher levels of substitution in those plants, close to 80%, 90%, similar to what we have in Poland. Now as, you know, substitution rates or the use of alternative fuels in Europe are the ones contributing the most economically.

So as of the first quarter, our substitution was around 65%, which is at -- in the very high end of the substitution we understand that is in the industry in Europe. And because of the variables I just mentioned, these new rules in Spain injecting hydrogen to improve combustion and the two projects we just finished, we are going to be moving around or above 70% substitution in Europe. We don't have info regarding other levels. We understand the average in Europe is around 50%.

So with this 70% we might be leading Europe in the substitution rate of alternative fuels. On the other hand clinker factor, we continue reduce clinker factor. And you know we've been, for instance -- as an example, we've been switching from type one cement to limestone cement and other types of blended cement in the U.S. So we are reducing clinker factor in the U.S.

using materials that have a lower cost when compared to clinker itself. So that is also on top of contributing to CO2 reduction, which is contributing to our competitiveness. We have the lowest clinker factor during the first quarter, and we do expect continue reducing it. As we have said before, the driving force in these two main variables is our commitments on CO2 reduction.

And as you know, last year, we reduced more than 4% first quarter, an additional reduction of 4%. So we have a very comprehensive road map, and we are executing these projects and because of the info we are sharing, you can see that it is working. We are moving forward effectively.

Francisco Suarez -- Scotiabank -- Analyst

Yes, that's helpful. Do you think that -- that the market might be overlooking those positive -- potential advantages that you may have in Europe?

Fernando Gonzalez -- Chief Executive Officer

Well, hard to know. What I've seen is that there was an expectation of Europe being Harley heated for good reasons, meaning for obvious reasons, the war, inflation in fossil fuels, inflation in electricity because of this reference of electricity prices being based in gas prices. But what I can comment in our case is, in the case of Europe about 50% of our EBITDA comes from cement. The other 50% comes from ready-mix, aggregates and urbanization solutions businesses that are less impacted by inflation in fuels.

And this 50%, as I already mentioned, alternative fuels, which in the case of Europe, their cost is much lower than fossil fuels. And in most instances, alternative fuels are even an income stream. And the real impact of inflation in fossil fuels for us in Europe is on 35% of cement production or related to 35% of EBITDA. So the potential impact at least as of first quarter it was -- because of the inflation in fossil fuels was 18% of our EBITDA in Europe.

And what we can expect because of what I have just explained, I'm not going to repeat that. It's given that we are going to continue increasing the use of alternative fuels in Europe and in other regions, that exposure, that 80% will be lower. So it's hard to say if these facts have been other look, but this is what I can comment.

Lucy Rodriguez -- Chief Communications Officer

Maybe I would just add to that because I think you asked a question about alternative fuel usage even outside of Europe. And while we saw a 12% increase, I think, year-over-year in alternative fuel usage in Europe, we shouldn't neglect Mexico where we've had almost a 10% increase in alternative usage as well year-over-year. Just to keep that in mind. The next question comes from Paul Roger from BNP Paribas and this question is from the web.

So I'll read it. It's a continuation of Europe. What impact would gas stoppage in Europe have on CEMEX, assuming it also pushes up power cost. What's the hedging position for European electricity? Has the group seen any project cancellation and is there a risk of demand destruction due to higher prices?

Fernando Gonzalez -- Chief Executive Officer

Well, on the first part, First clarification is, we don't use gas for cement production. So gas shortages shouldn't impact us directly in our production, processes or facilities. As we have said, 65% of fuels are RDF mainly, alternative field, the rest is pet coking coal. So gas is not one of -- it's not a part of our fuel mix in Europe.

Regarding electricity, about 60% of our electricity is contracted for the year. And the good news is that in Spain, where we don't have this type of contracts for the year, there was a very recent news on an agreement made by Spain and Portugal to the European Union or with the European Union regarding this post this idea of fixing electricity prices based in gas prices. So that very recent decision will have a material impact in the prices of electricity in Spain. Material, meaning -- material meaning maybe have to be seen.

So that's the situation regarding our fuels inflation coverage or our hedge in electricity.

Lucy Rodriguez -- Chief Communications Officer

And there was a second part to the question on has the group seen any project cancellations, yes.

Fernando Gonzalez -- Chief Executive Officer

No, we have not seen material credit cancellations. What we have seen through time and this might not be that new is that because of supply chain issues, there are delays -- there are delays in projects. There are delays in developments, in construction. Now the latest news -- latest meaning conflict between Ukraine and Russia that might add to that process of delays.

So far, order books are strong. We still don't see any sizable deterioration. But of course, we will continue monitoring that situation.

Lucy Rodriguez -- Chief Communications Officer

OK. And the next question comes from Alejandro Azar from GBM.

Alejandro Azar -- GBM -- Analyst

Good morning, Fernando, Maher. Mine is on the pricing side, if you could remind us where have you made a second price increase in Mexico and SCAC and where did you already announce one? And if there is a possibility of a third price increase later in the year in some of your markets.

Fernando Gonzalez -- Chief Executive Officer

Sure. Thanks for your question. Let me take the opportunity to give a better explanation or a clarification on our pricing strategy because this year, we have very high inflation. Sometimes I already qualified as hyperinflation in our industry.

So pricing strategy is of the most important. The 7% increase sequentially from December to March that we commented was achieved impacting only 60% of our cement volumes consolidated -- at a consolidated level because of the timing of price increases in different markets. So in the case of the U.S., this price increase impacted 20%-40% of our volumes. In the case of Europe it's 60%.

And in April, which is still part of our first half pricing strategy, our pricing strategy is not executed in one single quarter. So in April, we are increasing again double-digit increases in 50% of our cement volumes. Now in the case of the U.S. and Europe, increases in April are the first increases in certain regions.

In other countries like Mexico, like Germany, Poland, Croatia, Colombia and other markets this might be the second price increase, if not in 100% of all cement products, in the most relevant part. Now with these price increases in April and some in May and June, will be -- we will be completing the first phase of our 2022 pricing strategy. We believe that the same way we achieve price increase -- double-digit price increases in the first quarter, that will be the same case when comparing December to June, meaning double-digit price increases, and that will be half of our pricing strategy. We have already announced price increases for the summer, beyond June, July.

In the case of the U.S. and Europe will be the second price increase, in other markets might be the third price increase. And that is the main reason why we feel so confident on affirming our guidance of $3 billion EBITDA. Pricing strategy is -- our pricing strategy is based in the idea of recovering margins -- and recovering 2021 margins.

And so far, so good. It has been effectively implemented.

Lucy Rodriguez -- Chief Communications Officer

OK. And the next question comes from Ben Theurer at Barclays. Ben, please go ahead.

Ben Theurer -- Barclays -- Analyst

Thank you very much, Lucy, Fernando, Maher, congrats on the results. I wanted to follow up on some of the comments you made during your prepared remarks on the import dynamics from Mexico into the United States and the advantages you have from a proximity point of view, disruption in logistics. If I remember right a year ago, you started to face some issues because you haven't had contracted enough on the logistics side and hence the import margin came down. Can you share any comments on the dynamics here and where we spend on import margins now given that you knew about the need for logistics, so maybe you've been able to lock that in.

And so any incremental color here, please?

Fernando Gonzalez -- Chief Executive Officer

Let me make some general comments, and I will ask Maher to complement, if necessary. As you can imagine, serving from Mexico, the needs of our customers in the south part of the U.S., it's much more convenient because this is a sort of a nearshore supply chain issue. That means response times are much shorter, they are much faster. Transportation is less exposed to nowadays high inflation levels.

I'm referring particularly to maritime transportation, meaning instead of serving these volumes from Mexico, we bring it from Asian countries or from other Middle East or European countries, then the exposure to maritime cost is huge. So that is very convenient. So in that case, both Mexico and for the U.S., margins on these imports or exports are much more attractive than the ones that we do from third parties through maritime transportation. I don't know if you want to complement anything Maher on the cost or the margin specifically.

Maher, I cannot hear you.

Lucy Rodriguez -- Chief Communications Officer

I think you are on mute. While Maher regains his voice, maybe I'll add one comment. Yes, go ahead, and then I'll add.

Maher Al-Haffar -- Chief Financial Officer

Sorry about that. I don't know what happened. I must have hit the phone the wrong way or something like that. Sorry, Ben.

I mean, one thing, of course, we're expecting imports to grow. Last year, imports into the U.S. were about $2.5 million. We're expecting this year to be close to about 4 million tons of imports.

And of course, we, as you know, have ramped up our production for the export market from Mexico significantly through CPN, Huichapan, Tamuin, Torreon. These are all plants that have very good transportation and logistics into very attractive markets within the U.S. that are showing probably some of the highest growth and some of the strongest pricing dynamics. So, fortunately, we're almost doubling the amount of imports for the year from Mexico directly into the U.S.

and capturing clearly a big chunk of the third party, let's say, profit within consolidated CEMEX profits. And I mean, we don't break out the specific details in terms of margins of third-party imports and CEMEX imports and all of that. But clearly, the imports are not as profitable as the domestically produced cement, but they are very profitable, and it's very important that we are using them to satisfy demand from our customers, which is extremely important. We're able to -- this shortens our supply chain.

It gives us assurance of good quality cement. We've heard of some traders, for instance, because of a lot of reasons, have not been able to deliver on their contract. So I think that reduces increasingly certainty of being able to deliver. And so because of that, we think it's important that we continue to do that.

And Mexican imports are probably almost 30% less expensive than third-party imports. So you could imagine the benefit swing from last year to this year when you see volumes are growing and you see the substitution of third-party product by CEMEX product coming in from Mexico. So those are the -- I guess, I don't think we -- I mean, Lucy, is there anything else that we need to add to that question.

Lucy Rodriguez -- Chief Communications Officer

I would just add maybe one or two comments. I mean, number one, what's very clear is that the issue in the United States right now is one of supply, and we are trying our hardest to meet customer demand. And this is a very important source for us of our ability to do that in a quicker reaction time. But that is the goal.

I know we have some frustrating customers because of the shortages, but we are doing our best to ramp up imports as much as possible. Secondly, I think the other message that I would say here is that in first quarter, specifically, last year in the first quarter, we weren't importing as much as we did this year in the first quarter. and the imports that we were bringing in last year, this was before we began to see the ramp-up in transportation and energy costs. So it was at a very low-cost relative to we did contract, obviously, ahead of time for this year, as we always do.

So we're seeing better transportation costs. But on a year-over-year basis, we have a hard comp versus first quarter. So just to keep that in mind, Ben.

Ben Theurer -- Barclays -- Analyst

Perfect. Very clear. Thank you very much.

Lucy Rodriguez -- Chief Communications Officer

Next question comes from Adrian Huerta from JPMorgan. Adrian, please go ahead.

Adrian Huerta -- JPMorgan Chase and Company

Thank you, Lucy. My question is also with prices. When you gave guidance after 4Q results and you're reiterating the guidance now for EBITDA growth of mid-single digits. How much did your price assumption? I know you don't give guidance on pricing, but how much did the price increase assumption change from then up until now?

Fernando Gonzalez -- Chief Executive Officer

Let me start with a few comments and then either Maher or Lucy might complement. Adrian, I think we all have seen how things have changed since early last year meaning we started last year with a regular, now we can call it low inflation with a very positive outlook. And then at about mid-year, we saw an inflection point, meaning inflation started to escalate, particularly power, I mean, fuels and electricity. And growth expectations started to be adjusted to lower levels.

When we saw that, we adjusted our -- as much as you can do in July or August of a year, but we adjusted our pricing strategy to cope with that newer assumptions of inflation that we did as much as we could mean start increasing prices again in July or September. Then we prepared our pricing strategy for this year, and we started executing in January the 1st, the trends continue being more or less the same. Just to find out in February, re the 24th or the 25th that there was a war and the -- on top of the humanitarian pain that comes with it, what we saw is these trends higher inflation and growth deterioration, GDP growth deterioration being accelerated. So the prices we executed in January didn't have yet the full -- or the current assumptions for inflation that we are updating in this call.

Now, the rest of price increases in our strategy have been updated to the newest estimates of inflation. As you saw, we are increasing materially the assumption of inflation of fuels. So we have adapted our strategy and I think we have considered that for the rest of the year, we will continue having this high level of inflation. And we are prepared on the elements of the first phase and calling first phase, our full price strategy for the first half; second phase, the second price increases in the second half.

And we are prepared to continue monitoring and continue adjusting our pricing strategy under the base that our aim is to recover margins. That's what we are aiming for. That's what we are adjusting. That's our other objectives, what we are executing.

I hope that answers your question.

Lucy Rodriguez -- Chief Communications Officer

And the next question comes from Anne Milne from Bank of America. Anne, please go ahead.

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

I want to ask a question related to higher interest rates. I know that Fernando commented earlier that so far, you haven't seen or maybe will see an impact on the housing markets in the U.S. and maybe other markets. But I was wondering where do you see the impact of higher interest rates.

Maher, I know you said that most of the debt is fixed rate. So until you have the opportunity to call these or on that small percentage that's floating. Where do you see the impact of interest rates on the business? And maybe, Mark, could you give us a little bit more information on the interest rate lock that you discussed?

Maher Al-Haffar -- Chief Financial Officer

Sure. Fernando, do you want me to address the impact of interest rate. And I imagine and you're talking about the impact of interest rates on potentially demand disruption on one side and then on the financing side. I mean the areas that potentially it could impact is probably more in the U.S.

in the residential market, but affordability continues to be, I would say, OK, it's less affordable because prices have gone up quite a bit. rentals have gone up quite a bit. But if you take a look at inventories of existing houses and if you take a look at inventories of new homes, they continue to be very tight. I mean we certainly have seen a slowdown in refinancings, but demand for housing continues to be quite good.

I mean, so we haven't seen yet a drop in demand in that perspective and the order book in the U.S. continues to be good. But clearly, there is expected moderation, right? I mean, that clearly is going to happen. But then on the other hand, what we're seeing on industrial and commercial actually doing better, frankly.

If we take a look at certainly now and forward-looking if we take a look at the order book. And in terms of infrastructure, we also think we are very well-positioned when we take a look at our own at four largest markets in the U.S. I mean, DOT budgets for the year are all either stable to growing. I mean -- so that's also very healthy.

So for the time being, we are not seeing and we're not expecting any major demand disruption as a consequence of the interest rate environment in the U.S. In Mexico, again, I think the housing area continues to affordability from a financing perspective continues to be fairly good, fairly affordable. We continue to have the highest trend in remittances into Mexico, which goes into the residential market, which is the market that is highest -- with highest risk in terms of interest sensitivity to it. So we don't see that.

And certainly, that's not something that we're beating in any important way in Europe. So the areas that are interest rate sensitive are -- we're not seeing that being impacted, which is the residential market, frankly, from our perspective. Now in terms of our capital structure, our financing, our debt stack, we're depending on how you look at the numbers, we're somewhere between 86%, 87% to 90% fixed rate already. And the reason I'm giving the range is because of the tender offer that we did recently, that's been funded through our revolving credit facility, which is of course floating.

But the anticipation either from asset sales that are closing or from operating cash flow generation is that that amount would be paid throughout the year. And there's really no need for us to be bothering to technically kind of fix that component of our exposure. Now in terms of forward-looking, frankly, we don't have any financing needs, but we do think that there may be opportunities in terms of liability management. And it's precisely because of that, that we were fairly proactive.

And of course, we do expect that, I would say, everybody and our expectations kind of came through of higher interest rates going into next year. And so we took advantage of that at a very attractive window and we entered into essentially a forward rate locks for 10-year treasuries starting June of next year. At a rate -- I mean, at the time that we did the rate locks, the treasuries were probably at one of their lowest moments in the last few months, and we locked it in a level of 1.735 which is very attractive because I haven't looked at treasuries this morning, but we've been hovering between 2.7% and 2.8%, 2.9%, and the expectations maybe is that it would go higher. Now why did we do that? Because starting next year, you know, excluding the discounting of some of our bonds in the market because of market activity, some of our bonds become callable.

And so we want to position ourselves to do liability management with attractive cost in advance. I mean we would have liked to have done more rate locks, but 300 is better than nothing. And so that's what we did. I'm not suggesting that we're necessarily going to be calling any bonds.

And of course, we continue to see some very interesting pricing in our bonds in the market. I mean, they're continuing to trade at a discount, not because of our creditworthiness primarily because of the increase in rates, I would say, more than anything else. I don't know if that answers your question. Lucy, we can't hear you.

Lucy Rodriguez -- Chief Communications Officer

I'd like to add quickly on the U.S. side that volumes in the first quarter were up 9% year over year. And maybe people would think that, that somehow reflects an easy comp, but it doesn't. First quarter '21 volumes were also up 9%.

We did have a weather impact in 2021 in Texas with the grade threes. But interestingly enough, Texas out of our 4 key states had the lowest growth rate year over year. So there's more going on here. It's residential, like Maher said, it's industrial and commercial.

We are seeing a lot of resourcing activity going on. We're seeing chip manufacturers in the Arizona. There's been a real pickup on that industrial and commercial side and residential continues to grow. A lot of this has given our footprint because so much of our footprint from migration, pandemic migrations have benefited.

So just to keep that in mind, yes, of course, we're keeping our eyes out for weakness on the residential side in the U.S., but we certainly haven't seen it so far. And with that, the next question comes from Yassine Touahri from On Field.

Yassine Touahri -- On Field Investment Research -- Analyst

Good morning, ladies and gentlemen. Just one question for me. Have you seen any postponement or cancellation of construction works in Europe, in the U.S. or in Latin America because of increasing cost of building or because of building material shortages?

Fernando Gonzalez -- Chief Executive Officer

Hi, Yassine, as we briefly commented before, no, we have not seen it. Our order books are strong. What we have seen, but it's not that new, meaning it didn't start happening in the last couple of months is that there are several issues, construction has been impacted by supply chain issues. So there are delays in certain jobs in certain developments, but not to the point of suspension.

Now the context, particularly in the case of Europe because of the work. It is a concern. I mean, what's going to be happening and it will depend on the conflict, the duration so many things. But so far, we have not seen a deterioration on our suspension in those type of projects.

Lucy Rodriguez -- Chief Communications Officer

Thanks, Yassine. I think we have time for one last question, and this comes from Vanessa Quiroga from Credit Suisse. Vanessa, go ahead.

Vanessa Quiroga -- Credit Suisse -- Analyst

Congrats on the result. I guess I will ask you about the U.S. because the volume in the first quarter surprised on the upside and your guidance for the full year is more conservative than that. So what do you expect to happen during the rest of the year to get to the guidance? Or do you think there's upside to your current volume guidance?

Fernando Gonzalez -- Chief Executive Officer

Lucy, I'm going to let you answer that one.

Lucy Rodriguez -- Chief Communications Officer

OK. I think, Vanessa, I kind of talked about the strength that we're seeing in the U.S. I think that our guidance, while we haven't seen any weakening in terms of demand, but I think it is being cautious and we are taking into account that there might be some softening of residential in the future. I think that, that's a quarter or two out.

I don't think -- if it does happen, it's not going to be immediate because we have a lot of orders already on the books for residential and industrial and commercial continues to pick up. You can make a pretty good argument today with what's happening in Europe that supply chain issues are only going to get worse in the future. I would also add that the oil industry, while we don't directly sell, but you are seeing a pickup in Western Texas again on the sell side. And we benefit from that from our aggregates business, and we benefited from it because, of course, we have a large exposure in Houston where a lot of oil-related companies are.

But again, Texas was the slower of the growth, we had a lot of other states that contributed more in Arizona, I would call out where there are two chip manufacturing facilities. These are enormous, but are being constructed. And we are involved in either one or both of those. So strong demand from onshoring, I think we're seeing the same thing in Mexico that will benefit.

But what we're seeing in Europe is only going to make this onshoring trend even stronger, we believe, going forward. So that would be my commentary.

Vanessa Quiroga -- Credit Suisse -- Analyst

And about the industrial, are you starting to get already some backlog that indicates maybe from loading of projects related to that deal?

Lucy Rodriguez -- Chief Communications Officer

We are seeing contract awards rising, which, of course, is the step before bidding, but we are seeing those rises fairly robustly at least as of February. So I think that we are optimistic that toward the end of the year and primarily beginning in 2023, we will start seeing the benefit of that for infrastructure. Remember that this year's guidance is primarily based on kind of more moderated volume growth in residential and significant growth in industrial and commercial, primarily the industrial piece. For the first time in a number of years, we're seeing that sector come back.

Well, we appreciate you joining us today for our first quarter webcast and conference call. If you have any additional questions, please feel free to contact Investor Relations, and we look forward to seeing you again on our second-quarter results webcast. Many thanks.

Questions & Answers:

Operator

[Operator signoff]

Duration: 70 minutes

Call participants:

Lucy Rodriguez -- Chief Communications Officer

Fernando Gonzalez -- Chief Executive Officer

Maher Al-Haffar -- Chief Financial Officer

Francisco Suarez -- Scotiabank -- Analyst

Alejandro Azar -- GBM -- Analyst

Ben Theurer -- Barclays -- Analyst

Adrian Huerta -- JPMorgan Chase and Company

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

Yassine Touahri -- On Field Investment Research -- Analyst

Vanessa Quiroga -- Credit Suisse -- Analyst

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