CEMEX, S.A.B. de C.V. (CEMEXCPO) Earnings Call Transcript & Summary

Good morning, and welcome. My name is Lucy Rodriguez, and I'm the Head of Investor Relations for CEMEX. We are pleased to be with you today for our very first Climate Action Panel. In September of this year, we rolled out our medium-term strategy, operation resilience, in which sustainability assumes a leading role, and achievement of our 2030 carbon goal is a key pillar. This event stems from the escalation of climate action within our corporate priorities as well as the groundswell of interest in sustainability we have seen from financial community since the beginning of the year. We intend for this event to be the beginning of a robust dialogue with the market around sustainability at CEMEX. We have with us today, Juan Romero, our Executive Vice President of Sustainability, Commercial and Operational Development and a member of our Executive Committee. He is one of our most experienced operators, having managed, I believe, pretty much every region except for one within our operations. Most recently, he was in charge of the Mexico business. Juan brings valuable operational, commercial and strategic knowledge of the industry to the sustainability effort. Vicente Saisó is the Head of Sustainability at CEMEX. He is responsible for defining our global sustainability strategy and overseeing that initiative across all our business units. He represents the company at the World Business Council for Sustainable Development as well as the Global Concrete and Cement Association. We are also pleased to have with us today, Davide Zampini who heads CEMEX's global research and development effort out of Switzerland. He leads a multidisciplinary group of scientists and specialists that spearhead new technologies and solutions for the global building materials market. He is a civil engineer by training and has been with CEMEX for over 15 years. Juan will begin with a brief overview of our climate action strategy, followed by Vicente and Davide. The panel will then be available for your questions. [Operator Instructions] 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 other words, all references to pricing initiatives, price increases or decreases refer to prices for our own products. Without further delay, I am pleased to introduce Juan Romero, EVP of Sustainability, Commercial and Operations Development.

Thank you very much, Lucy. Good morning. Climate action is one of the biggest challenges in our times, and we support collectively action to achieve compliance with the Paris Agreement commitment and United Nations Sustainable Development Goals on climate actions. Sustainability, as you know, is one of our top priorities under operation resilience, but it is not new to us. We have been focused on sustainability since 1998, and we play a leading role in our industry in this regard. We are a founding member of the Cement Sustainability Initiative that was created in 1999. In 2018, we helped create the Global Cement and Concrete Association, a global industry platform to facilitate sustainable development of the cement and concrete sector and their value chains. GCCA includes 40 of the leading companies in the world and offers a Research and Development Hub called Innovandi to accelerate global collaboration on cement and concrete. Vicente, who you will be hearing from shortly, has a leadership role in the GCCA, while Davide who also will be presenting sits on the steering committee of the Innovandi. And we have had success. Through our effort to date, CEMEX has reduced emission by 22% versus 1990 industry baseline. Concrete, which is typically the final product we deliver to customers in our cement value chain, plays an integral role in society. It is the second most widely used material in the world after water. There are no substitutes for the key attributes of concrete, strength and resilience. Its key ingredient, limestone, is widely available in the Earth curst, which makes its unique strength quality supportable. While the world is reengineering itself at an extraordinary pace, we do not see disruption in the form of substitution for concrete in the foreseeable future. Rather, we see the more likely disruption occurring in the treatment and ability to contain carbon within the concrete production process, and we believe concrete will continue to have a critical role in a low economy -- carbon economy. In March, we rolled out our climate position paper, in which we committed to a 35% reduction in CO2 emission by 2030 and set an ambition plan to deliver net-zero CO2 concrete globally by 2050. The tool to reach our 2030 goals are known to us. In fact, these are the same levers we have used to achieve the 22% reduction in emissions today. Now it is simply a matter of accelerating our resistant effort in Europe and replicating those efforts across all of our markets. As you will hear from Vicente, the price tag to achieve this goal is reasonable. Our 2050 ambition of net-zero CO2 concrete is more challenging as much of the technology to meeting this target is not yet developed. We have an action plan in place to test what we believe -- excuse me. We have a specific -- just give a minute, but I guess I have some problem here with my mic. We believe progress of carbonation will be competitive, as I said at the beginning. Our target for 2050 is an ambition plan. We have an action plan in place to test that we believe that are most promising solution we're executing against the plan via our Research and Development Hub as well as CEMEX Ventures. We are working with partners across all industry as well as academia to tap into the latest innovation, and we are working alongside government and multilateral institutions to cofinance much of the technology. In our industry, we have seen how quickly technology has evolved over time. Just look at the speed at which solar and wind energy as well as an alternative fuel has developed and are now able to compete with the cost of more traditional fossil fuels used in our industry. We strongly believe that the same will be true for our 2050 carbon solutions. We believe progress on carbon action will be a competitive advantage, both within the industry versus other construction material. There will be significant business opportunities in the transition to a low-carbon economy, and we intend to take full advantage of them. Indeed, we have found this to be true already in Europe where we have been able to significantly reduce the fuel cost while addressing a pressing need of society and promoting sustainability. Vicente will go into more detail later in the presentation. We are coming in the climate challenge from a position of strength. We have been successfully navigating the carbon emission protocols in Europe since 2005. We expect that our other markets will model their own carbon regulatory framework out of the learning in Europe and our experience there will be an important competitive advantage. Our European operation leads the way for us in the carbon channel. By the end of this year, we expect the European business will reduce its emission by 35% effectivity, reaching our 2030 goals just 10 years ahead of the consolidated company. Indeed, the 2030 target for our European business is 55%. We are fortunate in Europe to have allowed inventory for carbon credits enough to last us through 2030 under current regulation that will help us transition to a lower-carbon footprint. Our experience in Europe and the expertise we have gained there will be redeployed across our global network. In some markets, the regulatory environment will need to evolve, but we do believe that will happen in not too distant future. And finally, but most importantly, climate action is the right thing to do for society and future generations. As such, consideration of carbon must be an internal element on everything that we do. In this regard, since 2016, we have started including carbon cost as a factor in our capital allocation decisions. We priced our share of building the future, and climate action is now part of that future. We intend to play a leading role in the interest in kicking this carbon habit. And now I will pass it over to Vicente to discuss carbon in our industry and our 2030 goals in more detail.

Thank you, Juan. Glad to be here, and I'm excited to present to everybody. First, I would like to quickly review the source of carbon emissions in our business. In the image, we are showing direct and indirect carbon emissions in our business. It includes scopes 1, 2 and 3 of CO2 emissions. Direct emissions are those related to our production process. Indirect emissions include those from electricity consumption, transport and supplies. 90% of our total emissions are in the cement business. 80% of these are direct emissions, out of which 60% are process emissions that come from decarbonation of limestone and 40% are emissions from fuel consumption. Our 30% target -- our 3030 (sic) [ 2030 ] target, which I will explain in detail later, is focused on direct emissions in cement, so we can have the biggest and most immediate impact. We also believe the most relevant assessment of carbon emissions for building materials should be done over the life cycle of a product. This is particularly important for concrete, which has a unique ability to absorb up to 25% of its embodied CO2 process emissions over its lifetime. As Juan mentioned before, we have set an aggressive 2030 goal for a 35% reduction in net CO2 emissions versus the 1990 baseline. These targets refers to direct emissions, which account for the large majority of the industry's footprint. We have been working to reduce carbon emissions since the late '90s, and we have made significant progress. To date, we have reduced CO2 emissions by 22% versus the 1990 industry baseline. This has been achieved through our leadership position in alternative fuel use, where we have the highest biomass substitution rate among global competitors as well as our recycling capabilities. We recycle waste from other industries into alternative fuels and raw materials, consuming 32x the waste that we generate and send to landfill every year. Going forward, we are confident in our ability to achieve the 35% reduction by 2030 given that the majority of levers to reach this target are existing technology that we have been using for many years. Europe has been our testing ground for these levers since carbon regulation came into place in 2005. As Juan mentioned, we expect our European region to reach the 35% reduction target by the end of this year and to achieve a 55% reduction by 2030. The work for 2030 lies in accelerating the adoption of these levers in Europe as well as in the rest of our regions. We have a detailed plan-by-plan road map to take us there. Under our road map, alternative fuels with high biomass content and clinker factor are the 2 most important levers, contributing about 65% of the reduction necessary for our 2030 target. We have some plans in Europe today, where alternative fuel is above 80% of fuel mix. A reduction in clinker factor will also be an important contributor. We continue to source additional local cementitious materials with active properties, including pozzolan and calcined clay. The remaining 35% will come from more recent technologies, which include a wider use of decarbonated raw materials, which reduce process emissions and the development of new types of clinker that reduce both heat consumption and process emissions. I would also like to point out at the role of hydrogen as a fuel, which has great potential. We have used hydrogen in our plants in Europe with very promising results. We have found that it allows for higher alternative fuel substitution, and it can reduce heat consumption in a significant way. We are now rolling out this technology to all of our other regions. We not only have significant experience with the reduction levers, but we also have a very realistic road map that sets yearly targets on a plant-by-plant basis. And the cost to achieve our 2030 target is manageable. Approximately $130 million in total CapEx, with most of this expenditure happening in the next 5 years. Finally, our road map has been validated by Carbon Trust, an internationally recognized consulting company that provides a rigorous third-party assessment of carbon reduction plans. In their verification process, Carbon Trust assessed the technology, the expected benefit of each lever on carbon reduction as well as the cost to implement the plan for its viability. I truly believe that we have the most robust 2030 target and road map in our industry, and we are keeping track of its implementation closely. When looking at climate change, we have opportunities to generate relevant savings on the cost side of our business. On the European Waste Directives, we have been able to take our largest production cost, which is fuel, and converted to an income stream in some European operations. In many countries in Europe, landfill and incineration of waste is extremely expensive or even prohibited. Given the high temperature of our kilns, we can burn municipal waste for energy. And in Europe, we are paid to do it. Coprocessing is a very efficient waste management solution and an important example of the circular economy. We helped society solve a complex environmental problem. Our unitary fuel cost in Europe has declined 53% since 2011, while alternative fuel usage has increased by 7 percentage points. There are some countries within the European region today that actually have a negative fuel cost. I would include Poland, Germany and soon, the U.K. in this category. Today, alternative fuels constitute 60% of our fuel used in Europe. Thus, we still have room to increase it further. Additionally, we expect to expand this opportunity to all of our geographies as country regulations in waste and CO2 evolve over time. This is already happening in countries such as Mexico and Colombia today. We also believe that there are significant opportunities on the revenue side in a low-carbon economy. As an example, we have launched globally the Vertua brand umbrella for low CO2 products. The first products were launched in the concrete business in Europe, and we are now quickly expanding to all other regions. This product line allows customers to customize the carbon content to meet their construction needs. With Vertua ultra zero, we are offering for the first time to our customers a net-zero CO2 concrete product. It is a CEMEX technology with geopolymers, which allows us to reduce up to 70% of CO2 emissions. For the remaining 30%, we provide a carbon-neutral certificate through the complementary use of carbon offsets from reforestation projects. As Davide will present shortly, our 2050 ambition contemplates other solutions apart from carbon offsets to reach this net-zero concrete. Importantly, the Vertua line of product is a value-added product that carries premium pricing. This offering has had a good reception from customers in several markets and is already being used in some emblematic projects, like the HS2 high speed railway in the U.K., which is the largest infrastructure project in Europe happening at the moment. We expect that the segment for low-carbon building materials will gradually grow to become relevant, first in Europe and then in other regions of the world. Now I will pass the presentation on to Davide to discuss our 2050 ambition. Thank you.

Thank you, Vicente, and greetings to everybody. In continuation, I will highlight the key considerations and actions we're taking to achieve the 2050 ambition, which is to deliver a net-zero CO2 concrete in all products and solutions across the geographies where we operate. Going to the considerations. I would like to draw your attention to the fact that our 2050 ambition is based on concrete. Why concrete? Concrete is a product that is consumed by users, and the concrete production process affords more ways to deal with carbon. As Vicente mentioned, carbon -- concrete absorbs up to 25% of its embodied CO2 process emissions during its lifetime, an important CO2 mitigation feature of this construction material that should be underlined and taken advantage of. Unlike our 2030 goal, our 2050 ambition of net-zero concrete requires work to be done on the technology side, and therefore, R&D and innovation are fundamental. Levers to reach our 2050 ambition have been identified, but much of this technology is embryonic and currently cannot be scaled at a competitive cost. Given the research and development required for the 2050 levers as well as the time period we are covering, these CO2 mitigation contributions are best estimates based on the current state of the art and may change in the future. To reach our 2050 ambition, we continue to rely on further gains from the 2030 levers Vicente spoke about. The 2030 levers should contribute about 40% of the carbon reduction. But where is the rest coming from? Carbon capture, utilization and storage is one of the most promising opportunities out there. Roughly 1/3 of the emissions reduction for the 2050 ambition is expected to come from carbon capture, utilization and storage. But it's not enough. Further development is required on the concrete technology side, and it's going to be very important to develop novel binding materials with lower CO2 footprint compared to ordinary Portland cement and also developed accompanying admixtures that will enable us to use these novel binders, the development of products and processes that will accelerate the natural carbonation of concrete over its lifetime. The importance of the circular economy to reach our 2050 ambition cannot be overstated. While the percentage contribution for concrete is small, approximately 4%, we are not including important benefits from the circular economy in cement, which is part of the 2030 levers. The contribution from concrete includes recycling of aggregates, recycling of concrete at end of life as well as improvements in the durability of the concrete. With the levers identified to reach our goal of net-zero CO2 by 2050, we're investing across a spectrum of technologies and managing the challenges to address the scaling at cost and cost issues. We're establishing alliances with industry, governments, NGOs, academia and cross-industries partnership, among others. We're adopting an open innovation approach to foster creativity and technological breakthroughs. While we are experts on the cement process, there's a lot happening regarding carbon capture and other indices that we want to tap into. As you will see in the following slides, we're working with start-ups that have experience in successfully applying carbon capture solutions in other industries. Additionally, we will -- we are also working within the industry. An example is Innovandi, which is the industry think-tank part of GCCA, and it's mandated to collaborate and identify key innovation areas for sustainability in cement and concrete. On the other hand, much of the research being done is on a bilateral as well as industry basis and relies on government funding. We have been active in both the U.S. and Europe in securing government funding for various projects. The role of governments in financing projects will be key in accelerating as well as validating the most promising technologies. Our investments in 2050 technology are being executed by our R&D team as well as CEMEX Ventures. Now as I indicated in the previous slide, these are the areas where we think technological developments will be the most critical for reaching our 2050 ambition: the carbon capture, the technologies that I mentioned in concrete and the circular economy. We're investing across our value chain and across the multiple levers to achieve our ambition. To date, we have made roughly 30 investments through our R&D department and CEMEX Ventures. Under carbon capture, I would point to LEILAC, an example of an EU-funded project, where we're working with Heidelberg and key equipment manufacturers and Calix, who are the owners of the idea and the core technology to develop a novel calcination technology that will facilitate and render carbon capture more efficient. Synhelion is another project in this category with the exciting opportunity to reduce emissions to zero. I will elaborate shortly on this. In the circular economy category, I would like to highlight the FastCarb project, where we are trying to accelerate the carbon absorption quality of concrete that was discussed earlier by carbonating recycled concrete to utilize it as aggregates. In each of these projects, we're working with partners from outside our industry to facilitate innovation and quickly adapt it to our manufacturing process. R&D and CEMEX Ventures work hand-in-hand to identify and critically review technologies, fostering alliances and promoting our open innovation approach. Now as I mentioned, and as I promised, we're going to talk about the Synhelion project, which is a great example of capture, utilization as well as the use of renewable energy source, which is the solar radiation. Synhelion is a start-up whose expertise is to convert CO2 and sunlight into fuels. The key breakthrough in Synhelion's solar receiver -- is actually Synhelion's solar receiver because it's possible to heat gases, specifically CO2 and water vapor, up to 1,500 degrees, and this is unprecedented. This is key for cement manufacturing. 1,500 degrees is a temperature high enough to burn raw materials to produce clinker. The solar-heated CO2 and water vapor mixture substitutes conventional fuel. The gases exiting from the kiln are also used to decarbonate the limestone. The result is a gas mixture very rich in CO2 and water vapor. It's very easy to separate the water from the CO2, thus allowing for the capture of 100% of the CO2 emissions. Synhelion innovations include the technology to convert CO2 to green fuels, this -- thus allowing us to create value and to capture CO2. Such a technological development will allow us -- for us to close the carbon cycle. We are very excited to work on this project, advance it and bring it to the pilot stage by the end of 2021 and early 2022. And then let's go back to Vicente to discuss climate disclosure.

Thank you, Davide. We are leading the industry in climate change disclosure. We disclose on pretty much every standard investors refer to. The Task Force for Climate-Related Financial Disclosure, Sustainability Accounting Standard Board, United Nations Global Compact, CDP, GRI, et cetera. We have been recognized by CDP as a member of the A list, which means we have the highest level of disclosure, and we are one of the 2 in the whole cement industry with this distinction. We make all these reports available on our website and transparent to all of our stakeholders. Very importantly, our key climate change-related metrics are audited yearly by a third party, KPMG. The verification includes visits to our plants and a very thorough review of the soundness of our metrics. Regarding ESG performance evaluation, there is a lot of confusion out there because there are so many different reporting standards. We believe that with time, consensus will emerge and there will be consolidation. Disclosure is very relevant but is not enough. What is more important is moving forward and showing progress against our targets. And now I will leave you with Juan Romero, as he will be providing the closing remarks for this session. Thank you.

Okay. Thank you, Vicente. I would like to recap the most important takeaways from today's presentation. First, there are no substitutes for concrete that offer a comparable [indiscernible]. The challenge for the industry lies in finding answer to deal with the carbon emissions. We have already made significant progress, and we know we can do more. We have an aggressive 2030 CO2 target that relies on technology and tools we know and have been using for the last 20 years. Our experience in Europe provides us with the blueprint for how we need to move forward globally. Our 2050 ambition of net-zero concrete is where we need additional R&D and innovation. While carbon reduction is a challenge, it has presented unique business opportunities in Europe today. We expect that this as well as new opportunities will be available in other geographies as we move forward on this challenge. By built of our footprint and effort today, we are well positioned to succeed. We are working across industry and across the cement sector as well as with government and academia to the better solution to the scaling of carbon capture technology for our products. Our -- this industry has developed and quickly adopted breakthrough technology in the past, and we have every reason to expect that this time will be no different. We have always been associated with building the future, and we believe that the future is in a low-carbon world. Finally, we are committed to kicking the carbon habit because it is the right thing to do for society and future generations. My apologies for the technical things that we have at the beginning. And now we are -- we will be happy to take your questions. Thank you very much.

[Operator Instructions] I'm going to take advantage of the mic and ask the first question. Juan, I think this is for you. I'm not letting you off the hook very easily. Can you talk about the commercial demand you are seeing for our zero to low-carbon products under the Vertua line. How do you see it developing across our geographical footprint?

Okay. Thank you. I really believe that we are in the beginning of the demand of these kind of products. Just during the last 5 years, we have been contributing by using different products to help some people to reduce the -- to make some sustainable construction, mainly -- probably, the main one is by installation of different techniques that we have been using, so different types of concrete to do these type of things. But up to date, every day, much more, we are seeing how our customers are looking for products that has reduced CO2 footprint. We have been responding to the market with our new products that we have been presenting during the last month. The demand for those products are starting to be much more relevant in Europe. It's probably where they are much more conscious of -- the people in fact are much more conscious there, the society is making more pressure to the different institutions to reduce the CO2 footprint and maybe in some countries like the U.K., France or Germany. Up to date, the monies have been probably mainly for products to build some iconic buildings or iconic construction that are up to date, is that we are trying to start disrupting. But every day, we feel how the customers are starting to be much more insight to find the different products, to see how they can be much more -- how they can reduce the footprint, the complete footprint for the construction side at different [indiscernible]. And that's happened in Europe mainly up to date. And it is starting to have some movement in other countries. You know perfectly that in the U.S., California had been always more advanced and forward-looking state in the U.S., and we have been working with some people in there. We are launching new products right now in California. And we have been starting to have some people interested to develop or to see or to understand what kind of product we can use to reduce the footprint in other countries. Even in emerging markets, that is happening, probably in countries like Mexico or Colombia, just started to express some contact. The key question here is we are at the beginning, and we are now even explaining to our customers because in many cases, they don't really know what -- that it is available, how is -- it works, how different it is. And I think that it is a matter of time to start to have much more people demanding those sort of products. As I said, it's very, very -- it's growing very, very fast in Europe. I hope it will be happening in other countries.

Great. Thank you very much for that one. I have a question from Vanessa Quiroga from Crédit Suisse. When we look at CEMEX's per tonne Scope 1 emissions, they appear to be slightly above your European peers, even though CEMEX's metrics in terms of kiln efficiency and usage of alternative fuels are better. What explains the discrepancy. Vicente, I think this might be for you.

Yes, I can take it. Thank you very much, Lucy. Yes, I think the main explanation for that is clinker factor. And within clinker factor, there's a geographical mix that can explain that. No? We are located in markets. Approximately 40% of the markets where we are or we operate are, let's say, not favorable for the use of cementitious materials in cement. In some countries like the U.S. and the U.K., there's a strong limitation for the use of cementitious in cement. And then in other markets, either there's not a lot of availability of cementitious materials or there are commercial practices that have gone for many, many years that favor type 1 and not blended cement that cause the clinker factor to be quite high, countries like Spain, Czech Republic, then in Central and South America, Costa Rica, Panama, Jamaica, Trinidad and Tobago, et cetera. So those countries that are not in favor of that, we are always working on how to change things. Some of the examples that Juan was providing are going to serve us to educate customers when we start to launch and have a broader portfolio of low CO2 products, including cement. Of course, this will drive the segment for these products and the needs or the interest in products with additions. I think that will help us change. And obviously, in some other places, regulations and specifications for products, we also have to work on those and work with authorities to change the mindset and for them to create a more favorable environment for a wider use of blended cement that will allow us to reduce our clinker factor in a significant way.

Thank you very much, Vicente. Davide, I think I'm going to try to bring you into the conversation. Our next question comes from Francisco Chávez from BBVA. What role will your fourth core business urbanization solutions play in your climate change targets? Will this business help or make it more challenging the path to achieve your 2030 and 2050 goals? And can you share with us the role of prefabricated products within CEMEX's climate change strategy?

Thank you for the question, Francisco. And yes. So I think our fourth core business urbanization solutions will definitely, I think, reinforce everything that we have been talking about today. It's one of the -- let's say, if you can look at it as a channel where we can actually provide our, let's say, low CO2 footprint products and solutions and if you look at our core business of urbanization solutions, I mean, they have identified certain cities with high-growth markets. And we're developing products to meet the needs of those growing cities and especially the smart cities that are to come. And what are some of the solutions that we're offering, we have -- first of all, we have, as I think, a key differentiation is the -- our admixtures business, where we're developing chemical admixtures to actually be able to tailor design the properties of the concrete solutions that we're providing. And a lot of those admixtures help reduce the CO2. And then we have a strong focus on circular economy. So part of the business is going to be dealing with how we do waste management, how do we recycle materials. So there's a waste recycling platform in Paris that we have put in place. And we're going to also start focusing on energy efficiency of buildings and be able to provide solutions that address that very important issue of energy efficiency of buildings. Because when you look at cities, I mean 36% of the emissions is coming from buildings that are not really conformed with when it comes to energy efficiency. And that brings us to the precast now, is that we're starting to get into the precast. Recently, we announced Wallex, which is a joint venture between CEMEX and Avintia. And if you look at the particular type of technology that we're putting forth in those precast elements, it has to do with thermal insulation, and we're addressing that as well. And in the whole, let's say, prefabrication and off-site construction is a very sustainable resource management type of solution where you bring all the resources in one point, and you're manufacturing and putting in place the elements then to be delivered on site. So I think we are definitely reinforcing everything that we're doing with urbanization solutions core business. And so I think it's going to even, I think, help channel everything that we are capitalizing in terms of our CO2 mitigation efforts into the market.

Thank you, Vicente -- thank you, Davide, sorry. I think this next question might be both for Vicente and Davide potentially. It's from Adrian Huerta from JPMorgan. Ready-mix seems to be the low-hanging fruit to reduce CO2 footprint as you can substitute the clinker with other binding factors into the mix. What are the sources of CO2 reduction in the cement business? Are there higher opportunities in specific countries?

I don't know if Davide wants to address the ready-mix part of that or...

Well, I mean, I think that on the ready-mix side, I mean, we, of course, substitutes are -- for clinker is one option. And of course, the key always there is to be able to find resources that are available. But I think one of the important things that we're going to see in the future is that we're going to be able to tap into, let's say -- thanks to technology and thanks to the developments that we're looking at, we're going to be tapping into additional ways to reduce the CO2 footprint of the concrete, either by the clinker substitution or by introducing materials that somehow have a much lower CO2 footprint as to -- compared to, let's say, what the substitutes that we're using today. So that's one means as we see moving forward.

And related to cement and the opportunities to reduce emissions in cement, I would say that traditional levers still have a role to play. Alternative fuels, we are globally at 28%. And as I -- as we talked during the conversation, there are countries and plants in CEMEX geographies where we are above 80% substitution, and we know how to do it. It will depend on the availability of the waste and the regulatory framework that facilitates the whole process for it to make it viable. So we still have a lot of room to grow in alternative fuels. In clinker factor, I also explained that there are opportunities to work with customers, with authorities, with the market to push for more blended cement in many markets that today are not doing it. That has already been proved to be a good solution in many other places that we can take it there. And in addition to that, we have additional levers, always innovating and always getting our hands in technology that we think that it works and that it's proven. There are new types of clinker that reduce heat consumption and also reduce process emissions. We can also use more decarbonated raw materials that will reduce process emissions in our clinker production. So actually, there's a lot of levers that we are putting together, and it's just a matter to push them and also to work to create the market conditions and the regulatory framework that is required for this to happen at a bigger scale in all of our geographies across the world as we have been seeing that it can happen in Europe.

Yes. Just to maybe complement on the ready-mix side. There's a couple of things also maybe that, as I mentioned during the presentation, I mean the carbonation, the characteristics of concrete and cementitious materials to be able to take in CO2 is a very important feature that we plan to capitalize on to be able to accelerate the process, and there we'll also get an important benefit. And I think what we're doing with Vertua and bringing in new binder technologies that can be clinker-free can be also very important, and we're exploring different options and also improving already on the existing product that we have today.

Thank you, both. We have a question from Francisco Suarez from Scotiabank. Some of the potential solutions may require partnerships with other companies and other industries, such as steel and in hydrogen-driven solutions. Are you considering partnering with other cement companies or a company from another industry like cement -- or like other cement companies are doing, sorry? Maybe Davide, you want to start with that. And I don't know if either Vicente or Juan has anything they want to add there?

Yes. So I think we are, and let's say, we are in the -- let's say, in the midst of discussions with other industries. And specifically, let's say, I can give you an example where we're talking to industries where they have had already gone through the carbon capture bit. They have applied certain technologies, and they're even exploring new technologies. And in talking to them, they're very interested in seeing what they are developing and evolving and improving for their industry and applying it to cement. So those conversations are taking place. We are indeed exploring. And the key there is exploring the most, let's say, viable, most interesting and the experience of the companies that we're talking to. And then you've seen also throughout the presentation that some start-ups present some very interesting experience also in other fields, like the example that I gave from Synhelion is, they are working with oil and gas industry to actually use the CO2 capture there to produce fuels. And we're capitalizing on that as well. And as we move along, I think we're going to get -- we're going to see more and more opportunities. But we're being selective because also we want to focus on the technologies that are the most promising and the ones that we can readily adapt and capitalize on the experience from those partners.

I would complement Davide's response saying that we are also working with the cement industry in this effort. I think the cement industry has come together in certain developments of key technology. We are presently in the Innovandi Research Center that is in the Global Cement and Concrete Association. We are a very active player in that. We think Innovandi will be a think-tank where there's going to be a lot of collaboration happening in the pursuit of the most promising technologies. And certainly, I think everybody is in the same line of thought, that for some key technologies, it's in the best interest of the cement industry to come together and co-develop.

Yes. And that's even -- what's even more interesting also is that Innovandi today opened its scope, say it's R&D scope, not only just to the industry players. So that's where we're collaborating and working with other industry players. But there are also equipment manufacturers, there are admixture suppliers and other industries are being contemplated as the network moves forward. So it's not just close to the cement industry. And that's, I think, very important, and we've seen that as being a very good approach.

It is clear to me that this is a worldwide challenge. That means that people is making alliances, and we are making alliances with different kind of companies or different industries, also with the main companies, trying to shift, understand, to develop the best technology for -- mainly for carbon capture, that this is the most challenge that we have in front. At the same time that we are working together with some government institution and academia to progress as soon as possible or to be ready as soon as possible to offer different technologies that we clasp to reduce the carbon footprint. It's an open thing. I think that everyone is already ready to open the different alliances.

Thank you, all 3 of you. We have another interesting question from Arnaud Pinatel at On Field Investment Research. How do you educate clients in blended cement in the U.S., i.e., to use it in concrete instead of CEM1 when they do their own mix at the concrete batching plant level? What is their incentive to switch?

I think we are doing several things. First, on the cement front, there are limitations to the use of cementitious materials, but there are some that you can use. For example, the use of limestone is approved, and it can happen, and we are pursuing all the opportunities related to that. That also requires informing customers that we are now having a more blended cement that is available for them. So that education process happens with product offering. I think that's one of the most effective things. Even if the market is not demanding it, you offer the product and then you start to work with customers and then you start to do demonstrations and pilot tests, et cetera, and you help to create that segment. In the U.S., the use of cementitious in concrete is happening, and it's happening for many years. So from that point of view, that culture of using cementitious materials at the concrete side is very common practice. What we are doing there is also launching our Vertua concrete product line, and we are also going to contribute to make the end user, the final construction site aware that there is all these low CO2 products that can help contribute. And for example, when we had the possibility of a customer to get to net-zero concrete by using some offsets, if the technology of the material there don't allow to go all the way up to net-zero concrete, we are going to offer that. And for sure, in some places like California, where there's a climate action and climate regulation in place, for sure, this is attractive proposition. But we expect that these offerings and these experiences that we have with customers, we can -- can help us to educate the rest of the market and together develop a very strong segment for low CO2 carbon products that, for sure, will help the U.S. progress in a new scenario that they are going into right now.

Just to complement what Vicente said is that a lot of the things that maybe -- the lot of things that we're doing also in other regions like, for example, in Europe, will serve as part of the experience, part of the demonstration of how these new technologies, how these new ways of reducing concrete can also be easily adopted to other markets. And we have had experience where, for example, in certain markets where it was not usual to introduce additions into the cement and through our experience and through demonstrating that and validating that substitutions of clinker can be possible, slowly those markets change over time. So there is experience in the company of doing that.

Just to complement Davide and Vicente, with the launch of Vertua that we are going to do that in the U.S. right now, we are starting to some way give some information to our customers, mainly in California. As we said, we have been making an extra effort because they are much more cautious today about this kind of thing. But we are extending to other part of the U.S. It is a matter of time, we will give them information. In some cases, they don't really even know what are the possibilities because we are speaking about something that is happening in the market for years and they are habituated to do this kind of things, and they are not thinking about to do different things. But at the end of the equation, if we don't do something different as Davide said and Vicente at the beginning, the [indiscernible] or something like that, having the possibility to produce much more addition to the cement as limestone or different other things, the equation at the end is exactly the same one because if you mix the addition in the cement side or maybe in the concrete, at the end, the footprint of the ready-mix is continue to be the same one. That's an [ another thing ] that we need to be sure. And in this regard is that we are taking to measure the footprint in the ready-mix that we are selling in different countries because it's a valid in other places. But it's a matter of time. It's a market -- there are strong markets that they are really working in this way for years. And we need to, in some ways, tell our customers to understand different ways to work.

Thank you. I think we have time for one last question. We have one, and please forgive me if I pronounce this incorrectly, from Prakhar Agrawal from HSBC. And Vicente, I think that this is for you. You mentioned some plants in the EU have negative fuel cost. Can you please throw some light on how that is and if it could be replicated across other plants? And if so, by when?

Yes. That's a very good question. Yes, we do have some plants in Europe that have that. Some plants in Poland, for example, where we have up to 90% substitution. What they have done there is that, first, they have a very strong regulatory framework in place. Landfilling is very expensive, and it's even prohibited for some type of waste. That creates economic viability of diverting waste that is very expensive to send to landfill that can go into other places. So in that market, we are actually paid for burning municipal solid waste. It is also a business for the intermediary that is processing that waste. They are also successful companies that are working in that field. So you create new business opportunities for new players in the market, in the value chain. And when you create that virtuous cycle, obviously, we have all the incentives to do it. We get paid for that. And given the very high level of substitution that we have, which is at 90%, it has become now an income instead of a cost. So the fuel cost, which is one of our highest or the highest element in our cost structure goes down to 0 and even to a positive. And we believe when you put together all these parts of the equation and the puzzle, this can happen. And I think these examples in Europe, also in the U.K. and also Germany, so there are more places, if you do the same things that happened there, for sure, we can extrapolate to other places. And by the way, we make a big effort through the different industry associations to take experiences from Europe and to take them to other parts of the world and then explain authorities in many other geographies of how these regulatory framework has to be put in place for this to work in an ideal way and properly.

Well, Juan, Vicente and Davide, I thank you for taking the time to speak with the financial community today. I hope this is just the first of many conversations that we'll be having. I would like to thank everyone in the audience for joining us for the Climate Action Panel. We hope that you found it informative, and we welcome further discussion on this very important initiative in the future. Many thanks, and happy holidays.

Thank you. Happy holidays.

Thank you. Happy holidays.

Thank you.