GCC Q2 2025 slides reveal margin pressure amid mixed regional performance

Introduction & Market Context

GCC, S.A.B. de C.V. (BMV:GCC) reported mixed results for the second quarter of 2025, with strong performance in the United States offsetting challenges in Mexico. During its July 23 earnings call, CEO Enrique Escalante and CFO Maik Strecker presented a quarter marked by persistent inflationary pressures and evolving trade dynamics.

The cement producer reported a modest 1% increase in consolidated sales, with U.S. operations showing robust 7.7% growth. However, the company faced margin pressure compared to the record performance in Q2 2024, with EBITDA declining 11.6% year-over-year.

GCC shares have declined 1.83% to 162.37 pesos following the earnings release, though the stock remains up year-to-date, trading well above its 52-week low of 143.72 pesos.

Quarterly Performance Highlights

GCC’s Q2 2025 results showed consolidated net sales of $363.9 million, a slight increase from $360.3 million in the same period last year. However, the company’s EBITDA declined to $118.4 million from $133.9 million, with margins contracting from 37.1% to 32.5%.

As shown in the following chart of EBITDA and margin performance:

Net income decreased by 18% to $73.5 million, with earnings per share falling to $0.2242 from $0.2738 in Q2 2024. The company’s net income margin contracted to 20.2% from 24.9% a year earlier.

The following slide illustrates the net income performance:

Despite the profit decline, GCC reported a significant improvement in free cash flow, which increased 67.7% to $48.6 million, with the FCF conversion rate rising to 41.1% from 21.7% in Q2 2024.

The following waterfall chart breaks down the components of GCC’s free cash flow:

Regional Performance Analysis

The U.S. market, which accounts for 75% of GCC’s sales, delivered strong results with cement volumes increasing 4.2% and prices rising 0.6%. Ready-mix concrete operations showed even stronger performance with volumes up 20.7% and prices increasing 9.5%.

The following slide details GCC’s U.S. performance:

Growth in the U.S. was primarily driven by renewable energy projects, with the company currently supplying five windfarm projects. Infrastructure demand remained solid, with ongoing work at Denver International Airport and the beginning of Phase 2 of the I-10 project in El Paso.

However, GCC faced challenges in the U.S. residential segment, which experienced pressure due to elevated housing inventory and declining affordability, with housing starts falling to their lowest level in five years. The oil and gas segment also showed softened demand with declining rig counts.

Operational challenges further impacted U.S. performance, with an unplanned outage at the Odessa plant and the Rapid City plant being offline for half of the quarter.

In Mexico, which represents 25% of GCC’s sales, market conditions remained challenging. Cement volumes decreased by 6.2%, while prices increased by 4.2%. Concrete volumes in Mexico declined by 13.1% with prices up 3.0%.

The following slide illustrates the Mexican market performance:

The Mexican market faced softness in industrial demand and adverse weather conditions, with industrial developers remaining cautious and mining activity muted. However, residential demand remained strong, supported by federal housing initiatives, and the company is participating in infrastructure opportunities under "Plan México," including the Sonora-Chihuahua highway project.

Strategic Initiatives and Capital Allocation

GCC outlined several strategic initiatives aimed at optimizing costs and expanding capacity. The company has implemented a cost and expense optimization program targeting $12 million in reductions, with $5 million already realized and the remaining $7 million on track for the second half of 2025.

On the capital allocation front, GCC highlighted two major projects:

1. A new cement distribution terminal in Trenton, Texas, which began operations in early July 2025. This facility aims to address growing customer demand and strengthen GCC’s ability to serve the dynamic Texas market.

2. The Odessa cement plant expansion, which remains on track, on time, and on budget. The company has deployed $458 million of the total investment, with $174 million remaining for the balance of the year.

GCC maintained a strong financial position with $827 million in cash and equivalents and a negative net leverage ratio of -0.48x, providing ample flexibility for future investments.

Sustainability Initiatives

GCC also emphasized its commitment to environmental sustainability, reporting a 3.7% decrease in Scope 1 CO2 gross emissions and a 3.5 percentage point increase in blended cements, which now account for 78% of total cement sales.

The following slide highlights GCC’s environmental initiatives:

The company is advancing research into the use of calcined clays and has increased its use of clean fuels and alternative fuel substitution, aligning with its broader ESG strategy.

Forward Guidance and Outlook

Looking ahead, GCC provided revised guidance for 2025, expecting flat cement volumes in the United States and a mid-teens increase in concrete volumes. In Mexico, both cement and concrete volumes are projected to decrease by mid-single digits.

The following slide details GCC’s full-year 2025 guidance:

On a consolidated basis, GCC now expects a mid-single digit decrease in EBITDA for the full year, with a free cash flow conversion rate above 60%. Total capital expenditures are projected at $400 million, including $330 million for strategic and growth initiatives and $70 million for maintenance.

Despite the near-term challenges, management expressed confidence in the company’s ability to navigate market pressures. "We remain confident in GCC’s ability to manage pressures and build long-term value," stated the company, emphasizing its focus on "operational efficiencies, cost optimization and disciplined capital deployment."

Full presentation:

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