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Good morning, and welcome to GCC's First Quarter 2023 Earnings Call. Before we begin, I would like to remind you that this call is being recorded.
[Operator Instructions] Please also note a slide presentation accompanies today's webcast. The link is available on the company's IR website at gcc.com. At this time, I would like to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead.
Good morning, everyone, and thank you for joining our call. With me today are Mr. Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing our 2023 first quarter results was released yesterday afternoon and is available on the company's website. This conference call is also being brought live within the Investors section of the company's website at gcc.com. The webcast replay of the call will be available at the same time, approximately 1 hour after the end of today's call. Before we begin, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements.
Actual results may differ materially from those contemplated by these forward-looking statements, and factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the BMV. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique.
Good morning, everyone. Thanks to the hard work of the GCC team, we delivered solid first quarter results in what remains a challenging operating environment. The emotive outstanding service despite significant weather disruptions across the United States, which is so areas was the coldest winters in 1979 with exceptional amounts of snowfall during the quarter. Weather-related headwinds represented the single most substantial impact on GCC's results for the first quarter. However, our 2025 vision focused on 3 central pillars that will continue to guide GCC's performance and progress in the year ahead. These features are GCC's people, profit, and planet. We will provide relevant quarterly updates on these 3 pillars throughout the year. Starting with our people on Slide 4. GCC has demonstrated a track record of anticipating challenges and mitigating adverse effects. Along these lines, we were very enthusiastic about the significant nonresidential construction opportunities driven by the Biden administration's Infrastructure Investments and Jobs Act. We also expect significantly higher demand and a deepening labor shortage.
Entry-level laborers are in record high demand as contractor and construction employers in general thread to offset shortages of more seasonal workers. Previously announced, GCC is proactively investing in our proprietary in-house training through the GCC Cement Training Institute, which ensures our well-trained labor force can deliver operational excellence GCC's customers expect. During the first quarter, operations employees across all of our cement plants completed the required assessment and we began implementing 14 high-priority training programs for over 180 employees. We're also in the process of finalizing our 2023 annual training plans and designing plans for 2024, collaborating with plant managers specific to each plant priorities. GCC's investment in training and education is an important incentive for new hires, and a significant competitive advantage in what we believe to be a tight hiring environment, which will remain for the foreseeable future.
In the fourth quarter, GCC completed diagnostic phase of our safety strategy plan focused on safety excellence. We have seen identified the projects that will enable us to achieve this goal and officially began the second phase of our safety strategy plan aligned with our goal to become a world-class safety company through productive identification and control of exposures to hazards. The strategy of implementation includes training and coaching for more than 400 liters across the company, along with involvement in most of GCC's employees workforce. Turning to our profit pillar on Slide 7. Maik detailed discussion on the first quarter will follow them. I'd like to stress here that while GCC's volume decrease year-on-year due almost exclusively to the extremely challenging weather conditions I have described.
We are focused on improving margins to prudent but necessary price increases, operational excellence and with extensive intention of programs and technology throughout our organization to optimize operational productivity. Today, we are running our plants at the highest possible efficiency levels relative to gold industry best practices. For example, we have fully reviewed our plans production relative to optimal capacity for operational levels and set goals that often exceed rated capacity. It's also important to note that we continue to see strong volume demand. And today, all GCC plants are running at full capacity to address the demand. We're also leveraging all GCC facilities to ensure we're driving maximum benefit with an eye toward strengthening our margins and decreased volatility. We are creating a more efficient and marginal networks, not simply taking out costs, but are simultaneously focused on running our business more efficiently, flexibly and profitably, which will create value in the years to come.
Regarding our planned pillar on Slide 8, we completed our Rapid City facilities ramp up during the first quarter 2023, and Rapid City is now burning alternative fuels 24 hours a day and 7 days a week. The plant uses a combination of landfill waste streams and biomass from the local forestry industry. But we can see the most meaningful increases in alternative fuels used at our Samalayuca plant. The debottlenecking project completed last week enables the plan to increase the co-process capacity using alternative fuels. This will eventually provide 60% of the total terminal energy required to produce clinker. The installed and ramp-up period for the new equipment required to preprocess the alternative fuel materials will continue throughout 2023. Let me now share some highlights related to quarterly performance in our markets.
As I noted, extreme weather resulted in a late start to our season, particularly in the Northern U.S. But I will reiterate that volume demand remained strong. And while GCC's volumes for the first quarter were behind what we normally see, we are not seeing any cancellations and continue to have a substantial backlog that we're focused on moving. Construction spending in the U.S., again till in February, weighted by a decreased spending on residential projects in a subdued housing market. However, nonresidential construction continues to strengthen.
You will all recall that GCC anticipated this trend and will turn our focus to nonresidential work, including continued construction work on a runway in the Denver International Airport, a multilane widening project on I-10 El Paso, Texas in the first quarter. And we still see strong demand in South Dakota with an airport base, a large dairy farm project and 2 significant paving projects. During the quarter, we began seeing signs of the significant uptick we anticipated in wind farm projects, driving ready-mix demand as well as ethanol projects supported by the inflation Reduction Act funding. The IRA also combines a wide array of clean energy tax incentives into a single bill with an estimated $369 billion directed towards energy security and climate change over the next 10 years. The Biden administration recently commented that it is directing $6 billion in funding to speed the carbonization projects in industries, including steel, aluminum and cement.
Please turn to Slide 11. During the first quarter, we again achieved pricing growth across product lines in an effort to offset rising expenses. OPEC announced in April that it will cut oil production by more than 1.6 million barrels per day, starting in May through the end of the year. The news send both brand crude futures and West Texas, up 6% in training. It's also important to note that today's inflation levels remain well above the 2.1% average during the 3 years before the pandemic and the Fed's 2% target. In light of today's enduring reality, on April 3, we advised our customers on a second price increase of $7 on construction cement and $15 on oil well cement, which takes effect July 1. As noted earlier, we saw record no fall in our markets. In South Dakota, for example, which brought rail car transport to a standstill.
We don't expect no well flooding or river flooding at our terminals, and we will continue to monitor spring rainfalls that could worsen the current situation. However, GCC has again anticipated potential impacts. We monitor weather daily and plan in advance to stage product to those terminals potentially impacted by rail flooding, ensuring we have alternative rail and truck routes to mitigate supply disruptions by staging product on the receiving side of possible threats. Our terminal network is also configured with backup from a plant from another terminal to supply our customers. And among other 3 empty measures already in place, GCC ensures alternate plans in the event of a redisruption at GCC terminals or throughout the railway network, which could impact product delivery.
Turning to our Mexico operations. We continue to significantly benefit from near showing favorable impacts on the construction and cement industry, particularly in Northern Mexico with an ever-increasing number of global companies relocating production closer to North America following supply chain during the pandemic. Most agree that this trend is still in various stages of its potential. We are seeing cement demand not only for industrial manufacturing facility construction and related infrastructure, but also the hotels and apartments required to support the massive inflow of labor to the Northern Mexico quarries and Chihuahua markets. Finally, turning to Slide 14. GCC's Samalayuca debottlenecking and expansion project has concluded. I'm pleased to let you know that this week, we fired up the kiln and began production.
During the quarter, the Samalayuca debottlenecking project timing process and related plant shutdowns required GCC to support our Southern network 2 shipments from our Tijeras and Pueblo facilities. These require 9 additional unit trains transport product the majority during the first quarter. So while we take considerable pride in our ability to keep the system running to ensure seamless customer supply, this came at a $3 million onetime impact on our U.S. cost and as a result of our margin with the majority of the effect already absorbed in the quarter. As I have previously stressed, margin recovery is an important priority for our team. Closing, we are focused on creating strategic pillars which underpin GCC's 2025 vision, our people, profit and planet. And as always, we are planning for the dynamic operating environment to continue with confidence that we have the strategy in place to successfully navigate our path forward as we remain focused on operational excellence.
With that, let me now turn the call over to GCC's CFO, Maik Strecker, to discuss our financials in more detail. Maik?
Thank you, Enrique, and good morning to everyone. Starting with our financial results on Slide 17. Consolidated net sales for the first quarter increased by 18%. This was mainly driven by increases in concrete volumes in Mexico and the U.S., higher cement volumes in Mexico, coupled with strengthened prices in both markets. This was partially offset by lower cement volumes in the U.S. due to adverse weather conditions experienced in the quarter. Please turn to Slide 18. Cost of sales as a percentage of revenues decreased 190 basis points in the first quarter to 72.2%, mainly reflecting favorable cement prices in both divisions and higher fixed cost dilution. These were partially offset by higher cost of production as well as higher freight and maintenance costs.
As Enrique noted, due to the temporary shutdown of the Samalayuca plant, we incurred an additional freight cost of approximately $3 million to ensure uninterrupted customer supply. It's important to comment that GCC's natural gas hedge has enabled stability and predictability to our cost structure. With an average fixed price for 2023, that's 18% below that of 2022. SG&A expenses as a percentage of sales increased 60 basis points in the quarter to 11.4%. Please turn to Slide 19. As a result, first quarter EBITDA increased by 16% to $63 million, while the EBITDA margin contracted 50 basis points to 25.8%. As Enrique commented, we remain committed to improving our EBITDA margins, supported by our operational excellence and the pricing strategy that enables us to offset the impact of inflation on our cost structure.
Moving down the P&L on Slide 20. Net financial income totaled $3.7 million in the first quarter of 2023 compared to net financial expenses of $14.2 million in the prior quarter. This was mainly due to a higher cash balance and increased interest rates on our investments as well as lower cost of debt, the absence of our cost related to the prepayment of the notes due in 2024 and a decrease in the effective interest rate. In turn, consolidated net income increased by $19 million in the first quarter to $32 million, and earnings per share increased 149% year-on-year. Please note that during the quarter, we repurchased a net amount of 700,000 shares, equivalent to $6.3 million under our current share buyback program.
Moving to our cash generation on Slide 21. Due to the expected seasonality of our business, free cash flow was negative $17 million in the first quarter 2023 compared to negative $1 million in the prior year's quarter. This was mainly driven by lower accruals, working capital requirements, maintenance CapEx and cash taxes, partially offset by increased EBITDA generation and higher financial income. Turning to our balance sheet. We ended the quarter with $808 million in cash and equivalents and $500 million in total debt. Our net debt-to-EBITDA ratio stood at minus 0.86x, which is well below the industry's average.
Now I would like to share an update on our sustainability link bond. In February, we were pleased to announce that the science-based target initiative affirmed GCC's 2030 greenhouse gas emission reduction target, which is the sustainability performance target of our bonds. Importantly, this target will be annually verified by an independent reviewer and results will be available on our company's website. Finally, as part of our ongoing commitment to provide shareholders with multiple sorts of returns, GCC's Board of Directors has recommended to declare and pay an annual dividend of MXN 1.33 per share in May. This represents a 15% increase against last year's dividend.
Moreover, the Board recommended to increase the size of our current buyback program to $75 million. These recommendations will be submitted to vote on during our Annual Shareholder Meeting to be held tomorrow. In terms of our future growth, in addition to our previously announced expansion plans, we're also actively pursuing opportunities to create value through acquisition of cement assets located in the U.S. that could be brought into our network and are aligned with our long-term strategic vision. With that, I will now turn the call over to your questions. Operator, please begin with the first question.
[Operator Instructions] First question comes from Adrian Huerta with JPMorgan.
My question has to do if margins in the quarter were, as you guys were expecting and given the -- that you were not including the comprise increase on your guidance, are margins basically again behaving as expected or the second price increase should allow or will make your current guidance look conservative at the moment.
Adrian, this is Maik. Thank you for your question. So our margins developed as expected in the first quarter. As we had mentioned, we had this onetime impact the $3 million to supply our southern network. That cost us. That cost us a little bit on the -- of course, the cost side and the margin side. Without that, we were pretty much in line with what we expected to start the year in the first quarter from a margin perspective. Regarding the second price increase, again, the second price increase is driven by -- we still see some inflationary pressures, and we want to be prudent and proactive managing that aspect because as we stated, besides managing the business, the margin recovery is a key element for us, and that's why we're proactive in that second price increase.
Understood. And just one follow-up and a quick question. Are you also looking at potential investments in aggregates? Is there a pipeline that you have? And can we expect some investments even if small on aggregates during this year?
So Adrian, as we stated in the last call, cement assets is the first priority to find those assets to plug in, we believe we can make the biggest difference there, and we're very, very active on that end. But we also stated that within our footprint, in our network, we're more actively looking for aggregate opportunities. And as we said, we have a smaller sized access business today. So we have some good experience there. And to build on that, we believe, is another opportunity to grow the company. So in short, yes, we're actively looking at aggregate opportunities within our footprint.
Next question comes from Nikolaj Lippmann with Morgan Stanley.
Congratulations on these really good results in such a difficult and cold environment. Just 2 questions for me, if I may. The -- can you talk about -- can you do a guesstimate perhaps of what volumes would have been under sort of similar weather to 2022? How big was the negative impact from the colder and wetter weather in your region in the first quarter '23. So that's question number one. Question number 2 is related. Do you have any sort of changes to the timing or the cost of the Odessa expansion? Are we still looking at roughly the same time line, roughly the same cost? And when do you think that we will start seeing that in terms of the cash position, the actual deployment of cash?
Thank you for both of your questions. Let me start with the second one first on Odessa. We're expecting to move forward with the project in the next month. We're in final discussions with OEMs and contractors and we have a good expectation that we can start mobilizing in the next 3, 4 months into the site. And with an estimated mean time line today of around 20 months of construction for the plant. So that will put us more or less at the end of 2025. We have been successful so far in reducing -- our total investment there.
I'm not at liberty of saying the number at this moment because we're still in final negotiations with some of the related parties for the projects. But we're very close, I mean, to have a final number, and I can say that the print is going to cost us less than what we originally anticipated. Especially in light of the fact that's my comment that inflation continues to press us on hard on several fronts. So we're pleased with the progress we're making in that regard. Now in terms of the numbers for the quarter, I will let Maik answer that question for you.
So Nick, yes, on the volume side, again, it was mainly focused on the northern network in the U.S. And we saw that roughly 10% delta compared to the first quarter of last year. In tonnage terms, for us, we believe we can catch it up. It's somewhere between 20,000 and 30,000 tonnes that we can -- we believe we can catch up. And if we hadn't had that weather, that would have been the positive volume impact for that quarter.
Next question comes from Carlos Peyrelongue with Bank of America.
Maik, congratulations on the strong results. 2 questions. On the second price increases that you're announcing, is that for all your regions, both countries? If you could clarify that? And the second, with regards to costs, you mentioned that there's still some inflation pressures there. If you could elaborate a bit further? And what would -- should we expect to be the benefit of using your coal plants? And when is that going to start showing in the results.
Well, the first question, yes, it's what Maik alluded to, it's basically the U.S. Mexico has been performing very well both in cement and concrete in the first quarter. So all the volumes that Maik talked about is for the U.S. market. Price has been also a great story so far with Mexico, I mean, announcing and implementing a strong -- I mean price increment. And as Maik also mentioned, I mean, the U.S., I mean, Worldway announced our second price increase for the year. The information that I have is that it's going pretty well so far with customers. I think they understand that we're having to look for ways to improve our margin that we lost last year, and they are, I mean, mostly, I mean of the understanding that we're just trying to recover costs here.
Carlos, just to build on that, yes, at the moment, that second price is focused on the U.S. I believe that was your final question there. Regarding the cost and specifically at the fuel cost. So yes, we are back on our own call, which you should see throughout the year as a positive impact. In addition, we also were able to hedge the gas specifically for Odessa, better than last year. As I mentioned, on average, below last year, about 18%. So that, again, should help us from the fuel perspective. Now we're still seeing some pressures more on electricity. And we see that across the network, electricity has some inflation pressures. So we're marketing that very careful and trying to be more efficient how we use it, and that's a specific program. And I think Enrique mentioned our operational excellence, we'll address that, but we still see some cost pressure, specifically from the electricity side.
And adding to what Maik just mentioned, Carlos, on the efforts we're doing to recover margin. I think there are also some -- besides those pressures, you mentioned some good stories that we're taking advantage of, like the gas price in Mexico, which has really decreased compared to last year. So we have been taking advantage of the hedging position we have with our coal mine and the gas prices on the spot market and have been using more gas in the Mexican prices this quarter to offset some of the cost increases that Maik mentioned in some of the other plants. And that puts us also in the -- or give us the opportunity to sell in the spot market, also some of the core that we're producing a very good margins. So we're trying to -- I mean, uses arbitrage, I mean, opportunities to continue lowering our costs and improving our margin here.
Understood. A follow-up on prices, if I may. In the case of Mexico, volumes are strong. You're operating at full capacity, should we expect that at some point in the second half of the year to also see further price increases in Mexico? Or is there any reason to hold on further price increases in Mexico to try to recover the margins lost last year?
I think that the price increases are very robust so far, as I said. I think we -- I mean reported increases are around 11%. I mean, year-over-year for Mexico between 11% and 12%. And there were robust price increases announced at the beginning of this year. So we're going to be prudent here, Carlos, and we're going to just continue monitoring, I mean, where the inflation is and what are the expectations. And based on that, we can -- the term we continue with the efforts to increase prices or depending on inflation goals, I mean, we don't. So stay tuned, but we'll -- we will be monitoring this very closely every week here.
Next question comes from Vanessa Quiroga with Credit Suisse.
I apologize if you already commented on this, I was unable to connect later to the call, but can you give us an update on the plant expansion? What is the status? [indiscernible], if you are seeing a better sales pace in the second quarter stage?
This is Enrique. You were -- I mean we were having a little bit of problems to hear you here. Can you repeat the question? You're talking about the expansion?
If you can provide an update on the expansion.
Okay. Yes, I was explaining that we're moving forward as planned with the project, and we expect to, I mean, probably mobilizing contractors to start, I mean, in about 4 months from now, more or less, we're still in final negotiations with several contractors. We basically, I mean, finished, I mean our contracts with equipment suppliers and everything is looking very nice. I mean, actually, we have an increase a little bit the scope of the freight with better equipment in 2 main areas in the clinker cooler area and in the cement mill. So we have a larger, more robust and more efficient equipment and it's coming at a lower cost than what we initially announced here. So everything is looking good, and we expect to be, I mean in production basically by the end of 2025.
Okay. And the other -- the second question that I had was about the U.S. volumes, right? So there was the weather. I'm just wondering if at this point, you are already seeing a normal volume please.
So as everybody knows, we have had an extreme weather in some of our markets, I mean, including as we speak, we are still having some unusually, I mean, wet cold and wet weather. But we're still -- I mean our teams think that we're still time to complete shipping everything that we've been in backlog for the rest of the year. It's going to be a little bit more challenging. We expect also not to have disruptions from flooding or anything related to that. And if that happens and the rest of the year, I mean, we have more, I mean, kind of normal weather. We're still on pace. We will still be in place to recover that volume that Maik mentioned were behind. And so the market looks very bright. I mean, again, very robust. It's just a matter of a little bit -- having more base available to ship out the product. So I'll tell you the dumbfeeling still very, I mean, optimistic that this is going to be a good year for GCC and that we're going to deliver results according to the guidance that we gave at the beginning of the year.
Next question comes from Laisha Zaack with GBM.
I have a couple. The first one would be regarding CapEx. Could you give us some color on why is the number for the first quarter, so low compared to the guidance that you gave for the full year? And also, there were some accounts in accruals and other accounts in your free cash flow that was abnormally high. Could you give us some color on why is that?
Laisha, this is Maik. Let me start with the CapEx question. So what we see our CapEx flow for the first quarter might have some small delays, again, executing specifically some of the growth projects. We anticipate it to have a little more going in that first quarter. And reminder growth project for us is not only the Samalayuca debottlenecking, Odessa plant, but we're also working on some logistics opportunities with terminals, some energy-related projects and so on. So I think that's just timing from that aspect. Our regular maintenance CapEx was developed and executed pretty much as planned. So we're still targeting to further invest and reinvest in the network and the business from a CapEx perspective. And your second question, can you repeat the second question? We didn't catch that.
Yes, sure. You have -- in your free cash flow statement, you have an abnormally high amount of accruals in other accounts. It's around $54 million. Can you give us some color on why is this number high -- well, that high? And what can we expect this number to be as we go on.
Yes. That accounted comprised I'm sorry, several super accounts related to taxes and -- another one is that it's included there. It's the settlement effect of our agreement with SIMSA on the Sovosoliven issue. So that's also been absorbed already in the first quarter of the year.
Okay. And we are not going to see that number again, right? It was just like a onetime effect.
Exactly.
Okay, okay. And if I may, can you give us some color on how is residential looking so far? I know that you gave already some during your first remarks, but can you give us a little bit more color on what is happening with residential?
I'll give you my perspective first, and then I will ask Maik to give you some specific numbers. But in my opinion, and I was commenting with our team in the U.S. last week. I think that we're seeing, I mean, an effectively at as concerning as it was for us 6 months ago. So obviously, I mean, we're seeing a decrease in residential. I mean cement for residential than the segment. But still, I think that talking towards, I mean, our sales guys and then in turn to our customers, they are seeing, I mean, a milder effect compared to what they expected before. So that's good news. And that's the only segment that was a little bit more in question for us. Everything else is full steam ahead in every other section.
Yes. And Alicia to add on what Enrique said. So the spring forecast from the PCA states that the residential segment is going to be down this year, roughly 16%. For our footprint for our business, we expect a bit less than that because our exposure is less compared to the country's average. And as we stated, we see very strong momentum in those other segments. Oil and gas, specifically, the nonresidential side, the projects that Enrique mentioned. So we still believe we will be able to compensate any slowdown in residential in the residential segment and follow our guidance on that volume.
Next question Alberto Valerio, with UBS.
Just 2 quick follow-ups. The first one, I would like to know if the Odessa plant CapEx is on the budget or with the inflation cost that you saw in the past year, you might have some adjustments? And my second one also a quick one is about the infrastructure plan of the U.S. I know that you mentioned on the initial remarks, but I would like to know if you can expect something to come in the second half of this year or maybe be delayed for them for 2024.
Alberto, this is Maik. So to start with the Odessa question on the CapEx, yes, we have planned Odessa to be executed or starting to execute this year with a substantial number regarding CapEx. And we're not moving away from that. As Enrique mentioned, we're very close to signing all the needed contracts and continuing the construction of the project. So that's staying on target.
With respect to the infrastructure projects, we haven't seen anything yet Alberto and we don't expect to see -- I mean we hear of any specific information perhaps until close to the end of the year. So we're not that the potential demand in our forecast for this year.
Just to make sure the CapEx expected from this is $750 million, right?
Say that again, part to the last number I didn't hear.
The total CapEx for this expansion would be $750 million. Is that correct?
So that's still a number that we're optimizing. The team that really is negotiating that has progressed on that. We expect that number to be lower. Again, there's a few more open items to confirm. But if you remember, that was a high watermark that during very high inflationary environment, lots of logistics challenges we have to build, and we expect that number to come in lower. And as soon as we have the contracts confirmed and we're having more clarity how to move this forward, I think we're going to discuss in more detail.
[Operator Instructions] Your next question comes from Lucila Gomez with Compass Group.
In case of Mexico volumes and how well they performed during this quarter, are you may be seeing a similar trend for the rest of the year at this high volumes?
Lucila, this is Enrique. Thank you for the question. Yes, Mexico, it's looking very robust. I mean in all segments. I mean, especially the commercial segment, as we have discussed, I mean, related to near-shoring, but also that the effect of that into the housing market in both quarters, especially quiet but also in Chihuahua. The other segments are, I mean also going strong. I mean that it's improving over last year in mining study lives and it's also with a little bit of a better forecast for this year. So I mean, we're going -- I mean all positive from the low point of last year for every segment. So we're feeling very -- I mean, optimistic about the Mexico market for us.
Next question, Daniel Rojas with Bank of America.
I'm sorry for taking you back to the Odessa question. I was wondering if the protracted negotiations with the OEMs might be also due to the fact that you might be trying to include carbon captive technology. And by that, I mean, you could be able to take advantage of the tax credits that are considered within the IRA bill. Is this the case? Could we also start to consider that this might be a cash flow positive in the years to come maybe beyond 2025?
Daniel, it's Enrique. The Odessa today does not have, I mean, a capture piece, carbon capture piece. We're still, obviously, I mean, company-wide, I mean trying to understand what's the right technology that is developing for one of the plans that we have. Specifically for Odessa, we think there are great opportunities for us there because we're very close to an area that consumes, I mean, CO2 or oil production. And so there are a lot of-- I mean advantages for that plant to be, I mean, a leader in capturing project and then put that CO2 for a good use there. In that regard, I mean, what I can tell you is that we're being, I mean, very proactive and have submitted concept paper to the Department of Energy, along with some other owners and associates to try to build a pilot plant at the Odessa facility and start researching those technologies.
Out of respect or I mean potential partners and associates here, I'm not going to mention them at this moment. But we think that we can be, I mean, eligible for those grants. And so we are resuming that concept paper. And in the following weeks, we're going to know if we go to the next stage to the next step with the DOE approval of that matter. So far, so good. I'm looking very, I mean, enthusiastically about developing those mean have pilot plant opportunities.
Okay. And my second question is regarding oil well cement. I think in the last question, we were talking about demand increasing over 30%, if I'm right. Could you give us an update on how demand is shaping up in the first quarter? And how are you seeing it moving in the next following quarters?
So yes, we still see very strong demand on the oil well cement. So our guidance from the January call still remains. We have all the cans that can produce overall cement pretty much fully utilized to service that demand. So no changes. As Enrique mentioned, with some of the geopolitical decisions where they're cutting some production globally. We see that as a positive trend here for the U.S. And as we had mentioned, the markets where we operate are very low-cost oil-producing markets. So the demand for that product is high. Therefore, the demand for our cement products are very high. So same guidance.
And my last question, if I may. Are you seeing any hesitation from mining clients in Mexico, given the mining law initiative that's moving around Congress? And have you seen any potential impact? Or have you studied any potential impact that, that law might have?
Daniel, no, I mean, it's call it too soon, too early. As you know, I mean this law, is still in discussion of the Senate. Actually, I mean, I got news this morning that there is a lot of going back and forth in discussion about the terms it would this law is having proposed. So probably too soon to tell, we expect it to be better than what, of course, was originally, I mean design. And so we'll remain here cautiously optimistic and just very attentive to see how things develop at the Senate.
Thank you, Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Miss Ogushi.
Thank you, everyone. We appreciate everyone taking the time today to join us and for your interest in GCC. We look forward to speaking with all of you soon.