GCC SAB de CV

BMV:GCC

Earnings Call Analysis

GCC Sees Strong Sales Growth and Margins

GCC closed the fourth quarter with a 17.8% year-over-year increase in net sales to $339.8 million, with U.S. market sales up 19.6% and Mexico sales growing by 13.8%. U.S. demand boosted concrete and cement volumes by 7.8% and 5.3% respectively. The company achieved a more profitable mix, reducing cost of sales to 61.8% of revenues, resulting in a 31% increase in EBITDA to $118.2 million and an EBITDA margin of 34.6% for the year. Consolidated net income saw a significant rise of 110.5% to $295.3 million. Despite a slight decrease in free cash flow, GCC bolstered its cash position to $958.7 million and reduced its net debt-to-EBITDA ratio to -0.99x. Looking ahead to 2024, GCC anticipates mid-single-digit increases in EBITDA, low single-digit growth in sales volumes, and expects capital expenditures of $470 million, with a free cash flow conversion rate before strategic and growth CapEx exceeding 60%.

GCC Rounds Off 2023 with Strong Revenue and EBITDA Growth

GCC had a year of robust growth with a 16.7% rise in annual revenue and a 30.6% increase in EBITDA, marking the 11th consecutive quarter of double-digit top line growth compared to the previous year. This performance is a testament to GCC's adherence to its three-fold vision for 2025, focusing on 'people, planet, and profit'. Safety remained a top priority with considerable advances, including a new fatality prevention system and comprehensive training that tallied over 10,300 hours.

Innovative Strategies Bear Fruit in Profit Pillar

In response to a softer residential market, GCC deftly pivoted towards infrastructure and oil and gas segments, which were key contributors to the 2023 results. Through operational flexibility and improved plant utilization, GCC is positioned to sustain solid EBITDA margins.

Weather and Pricing Strategies Boost End-of-Year Sales

Favorable weather conditions ushered in a 19.6% surge in fourth quarter sales, capped by record concrete volumes in December. This momentum is driven by an $8 per ton price increase for construction cement that commenced at the start of the year, setting a positive precedent for future sales amid the prediction of work being pulled forward from Q1 due to the season extension.

Infrastructure Act Stimulates Bidding Activity Despite Delays

The Infrastructure Investments and Jobs Act sparked increased bidding, though project starts were delayed. GCC has already secured several major infrastructure projects and remains agile in its pursuit of new opportunities. Despite challenges like cross-border trade disruptions due to the migrant crisis at the U.S. border, GCC's network connectivity and proactive logistics optimizations have safeguarded their market share.

Mexico Operations Overcome Challenges with Sales Growth

Despite setbacks like energy infrastructure delays and a contraction in the mining sector, sales in Mexico grew by 13.8% in the quarter. The resilience in this market is backed by a robust re-shoring trend, with significant project engagements signaling an overall positive environment, although GCC maintains a conservative stance on the mining segment.

2023 Financial Highlights Reveal Profitability and Investment Focus

The fourth quarter saw a 17.8% increase in consolidated net sales achieved through solid demand and strategic pricing. Costs of sales improved significantly, contributing to an impressive EBITDA margin of 34.8%. Net income skyrocketed compared to the prior year quarter, reflecting GCC's operational success. Investments focused on strategic expansion and sustainability projects, coupled with financial prudence, have led to a promising cash balance and a negative net debt-to-EBITDA ratio as GCC steps into 2024.

Optimistic 2024 Outlook Balances Growth and Sustainability

GCC's impressive performance in 2023 lays a strong foundation for the upcoming year. Expected volume and price increases in both the U.S. and Mexico markets will stimulate further growth. Notably, EBITDA is projected to rise by mid-single digits with careful capital expenditure planning, emphasizing strategic growth and maintenance. Free cash flow conversion rates are anticipated to be healthy and the net debt-to-EBITDA ratio is expected to remain negative, indicating continued financial health and effective cash management.

Demand and Maintenance Capital Expenditures

Well cement demand saw a marginal 6% increase in 2023, with similar expectations for 2024. Maintenance CapEx rose in 2023 with an outlook for $70 million in the new year. This level of expenditure is deemed appropriate to keep GCC's operations in top condition for continued high performance and ensuring asset longevity.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. Welcome to GCC's Fourth Quarter 2023 Earnings Results Conference Call. [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. I would now like to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead.

[Sahory Ogushi, executive]

Good morning, everyone, and thank you for joining. With me today are Mr. Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing our 2023 fourth quarter results was reviewed yesterday after market dose and is available on the company's website. This conference call is also being broadcast live within the Investors section of the company's website at gcc.com and both the webcast replay of the call and transcripts will be available on the same site approximately 1 hour after the end of today's call. Before we begin, I would like 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. Factors that could cause these results to differ materially are set for 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.

[Enrique Escalante, executive]

Thank you, Sahory, and good morning, everyone. GCC had an outstanding year with 16.7% and 30.6% increase in full year revenue and EBITDA, respectively. Our fourth quarter results contributed to this growth. GCC has delivered double-digit top line growth for the 11 consecutive quarters compared to the prior year quarter. Importantly, we remain focused on our vision and on our strong execution of related pillar, which resonate on GCC's performance. I'd like to take this opportunity to thank the GCC team for their hard work throughout 2023. We achieved these results, thanks to their motivation and dedication. Along these lines, I would like to share some highlights on the 3 pillars aligned with our 2025 vision, our people, planet and profit. Starting with people, we achieved 3 key objectives in 2023. First, we were laser focused on developing a culture where safety is our #1 priority. During the year, we worked on the implementation phase of our safety strategy plan and put in place a serious injury and fatality prevention system. As a result, we have increased safety awareness and the impactive participation in sharing and identifying potential hazards. We completed training for all supervisors and managers as part of overall progress throughout this organization. This continues in 2024 as we further build out our safety culture and continue to improve our safety, health injected statistics. Second, we strengthened our commitment to fostering a skilled workforce throughout the GCC cement training institute. We identified gaps within our operations and built a customized training plan aligned with each of our plants needs. During 2023, we dedicated more than 10,300 hours, training nearly 400 employees. As an initial result, GCC formed new ways to improve the efficiency of some equipment positively impacting our profitability. We are finalizing our 2024 annual training plans and artesigning plans for 2025. And third, we maintained and motivated a stable workforce. This was particularly noteworthy given a tight labor market and was critical to our ability to ensure stable operations and deliver products, strengthening GCC's outstanding client relationships. We are proud to have again been recognized as a great place to work certified company in 2023, aligned with our focus on identifying improvement areas and ensuring talent and attention. Turning to an update on our strategy associated with the planned pillar. This past year, we focused on 3 initiatives to lower our CO2 emissions. First, we advanced our blended cement strategy and double the share of vended cement within our portfolio. I'm pleased to report that vendor cement represented 73% of our overall cement sales portfolio as of December 2023. Second, strong execution of our flexible fuel strategy, embracing cleaner options such as alternative fuels and natural gas. In 2023, we increased the use of natural gas by 35% and GCC's U.S. plant increased the alternative fuel usage by almost 30%. Our [indiscernible] represented the most significant steady increase of GCC's plan, increasing the transfill substitution by 6 percentage points in 2023. This strategy also enables important cost savings. We saved $12 million in fuel cost during 2023. Third, we continue executing our operational efficiency strategy by improving temperature controls, replacing equipment and stabilizing operations, which reduced our overall energy consumption. As a result, during 2023, our Scope 1 CO2 emissions decreased 4.6% year-on-year and by 7.8% compared to our 2015 baseline. Finally, we are proud that our Pueblo, Colorado and Rapid City, South Dacotah plant have been recognized by the EPA and where energy are certified for another consecutive year, revenue internal awareness about energy efficiency opportunities and responsibility that drive our emissions reductions. Going forward, we will continue focusing on carbon capture projects on an investment plan to further our use of alternative fuels and on advancing in the integration of vendor cement within our portfolio. Turning to our profit pillar. We anticipated the softer residential market in 2023, shiftly pivoting our strategy of supply to growing segments such as infrastructure and oil and gas. The execution of this commercial strategy was an important driver of GCC's 2023 results and was enabled by the flexibility of our operations, one of our key competitive advantages. We are therefore confident that we will sustain EBITDA margins also benefiting from improved plant utilization and by leveraging increased capacity to address demand. Further, execution of our commercial strategy also enables flexibility in the verticals we serve. Turning to an update on our markets and starting with our U.S. operations. Favorable weather conditions extended the 2023 construction season into late December, driving a 19.6% surge in sales compared to the prior year quarter. This can was reflected in record concrete volume delivered during December. However, it's important to note that it's likely the extended fourth quarter construction season has pulled forward work which was previously planned for the first quarter. We're also seeing a cold first quarter start as more normal weather patterns returned. 2023 sales also benefited from successful pricing during the year. Additionally, we decided to implement an $8 per ton price increase for construction cement, which took effect on January 1. To touch upon relevant updates related to the infrastructure investments and Jobs Act, we saw strong activity levels for infrastructure bidding work in the fourth quarter, but further delays to project starts. GCC remains well positioned. We are actively pursuing new opportunities in the infrastructure sector, and we're encouraged that quote activity is higher than normal for this time of year. GCC was awarded several infrastructure projects in the fourth quarter of 2023, including participation in the construction of the largest clean energy infrastructure project in U.S. history, one which we have already begun work, an airport basis in Gualomin and Rocket City, South Dakota and projects related to the Energy gateway transmission line running to Wyoming, Colorado and Utah. Also during the year, we will continue to work at the Denver International Airport. Fourth quarter residential sector demand shows signs of stabilizing, with housing market growth expected should mortgage rate interest continue to increase. Colorado remains the metropolitan area most adversely impacted by the softer market. Cement deliveries with the U.S. border have been adversely impacted by the U.S. shutdown of the border crossing at Paso on December 21 due to the migrant crisis. While this did not significantly impact GCC's fourth quarter results, after long closure of major U.S. Mexico ran bridges right to cross-border trade could affect GC's first quarter results if this continues. GCC differentiated network connectivity enables us to offset this effect by supplying 90,000 tons from our [indiscernible] operations with basic cement shipments from Samalayuca while protecting our market share during the quarter. The flexibility of network connectivity is an important competitive advantage, enabling us to ensure our clients' product supply despite social and weather-related challenges. We have moved forward to preemptively book railway capacity and ensure our logistics are fully optimized in the current context. Turning to our Mexico operations. Sales grew by 13.8% during the quarter despite the adverse effect on volumes due to the lack of energy infrastructure inquiries and permitting delays on our industrial projects as well as the mining segment contraction we have experienced since 2022. On bridge slowdown aside, the positive outlook for our Mexican operations remains unchanged. This confidence is supported by a continued robust reassuaring trend, which is expected to continue to drive growth as demand for infrastructure continues. During the fourth quarter, we worked on an important related projects associated with this tailwind, notably 22 industrial parts in Juarez and 3 in Chihuahua together with 5 apartment building projects. We anticipate an overall positive environment in Mexico. However, as noted on prior calls, we remain conservative on the mining segment as 2 of our biggest customers reserves to treat. In summary, for GCC 2023 was a year characterized not only by strong growth and margin, but also by the strengthening of our meaningful competitive advantages with continued progress in 2024. Let me now turn the call over to Maik, who will share financial highlights on the fourth quarter and we'll provide guidance for 2024.

[Maik Strecker, executive]

Thank you, Enrique, and good morning to everyone. Our colleagues focused on expanding and strengthening the foundation, which underpins our growth pillars, is truly taking the base for continued strong performance in 2024 and beyond. Consolidated net sales for the fourth quarter increased 17.8% year-over-year to $339.8 million, which is a 19.6% sales increase within the U.S. market. As Enrique commented, demand in the U.S. was strong with a 7.8% and 5.3% increase in concrete and cement volumes, respectively, as favorable weather conditions enabled an extended construction season. Additionally, GCC's 2023 pricing remained consistent with an 8.4% and 9.6% increase in cement and coffee pricing, respectively, on a year-over-year basis. Mexico sales increased by 13.8% in the fourth quarter compared to prior year quarter to $102.7 million, representing 30% of GCC's total sales as both cement and concrete prices gain rate by 8.2% and 12.5%, respectively. Price increases offset lower volumes delivered due to project delays as Enrique has described. For the full year 2023, net sales increased 16.7% led by growth in both markets. Notably, sales in Mexico grew 29.9% on a year-over-year basis. Fourth quarter cost of sales as a percentage of revenues decreased by 540 basis points year-over-year to 61.8%, underpinned by a successful pricing strategy, our enhanced operational stability, favorable effect of continued optimization as well as lower energy costs during the final quarter of the year. For the full year 2023, the cost of sales was 63.2% of revenues, a 560 basis point year-over-year decrease. Fourth quarter 2023 SG&A expenses as a percentage of sales remained flat at 9.2% and while full year SG&A expenses as a percentage of sales increased 50 basis points to 8.8%. Fourth quarter EBITDA increased 31% compared to the prior year quarter to $118.2 million, reaching an EBITDA margin of 34.8%. U.S. operations contributed 78% of EBITDA generated for the fourth quarter, with Mexico's operations generating the remaining 22%. EBITDA generation for 2023 reached $472.4 million, representing 30.6% increase compared to 2022. EBITDA margin for the full year reached 34.6%. Moving down the fourth quarter income statement. Net financial income reached $7.4 million compared with net financial expenses, which were essentially 0 in the prior year's quarter as GCC continues to benefit from higher interest rates in both the U.S. and Mexico on an increased cash balance. Net financial income for the full year was $25.3 million compared to net financial expenses of $18.3 million in 2022. Fourth quarter consolidated net income increased to $75 million from $4.4 million in the prior year quarter while earnings per share increased to $0.23 from close to 0 in the fourth quarter of 2022. Moving to our full year results. Consolidated net income increased 110.5% to $295.3 million, and earnings per share reached $0.09. Turning to our cash generation. Free cash flow was $107.1 million in the fourth quarter of 2023, a 2% decrease compared to the same period in 2022, reflecting increasing working capital needs, maintenance CapEx and cash taxes. These cash requirements were partially offset by increased EBITDA generation during the quarter. For the full year, free cash flow was $233.7 million, a 16.2% decrease also due to increased working capital requirements, cash taxes and maintenance CapEx. These were partially offset by increased EBITDA generation and higher interest income, as I described above. GCC ended 2023 with a cash balance of $958.7 million. At the end of December 2023, our net debt-to-EBITDA ratio dropped to minus 0.99x. During the year, we prioritized capital allocation on our Odessa plant expansion on maintenance CapEx, sustainability projects and on the debottlenecking projects of our Samalayuca plant. Importantly, during the year, we completed a new terminal north of Minneapolis, enabling us to strengthen GCC's position in the Minneapolis and Paul area while securing an outlet for rapid City expanded capacity. Furthermore, we allocated capital towards our share buyback program in the amount of $13.2 million and dividends paid in 2023 in the amount of $24.6 million. In 2024, we will continue investing in our existing assets. We will further strengthen our distribution network, an important competitive advantage as Enrique has described. And we'll continue to allocate CapEx towards ESG-related initiatives but which we will be updating you later in the year. With that, I will now hand the call back to Enrique to share his closing remarks.

[Enrique Escalante, executive]

To summarize, GCC's 2023 performance and started the new year further solidifies and reinforces our confidence in both 2024 and the long-term growth objectives guided by our 3 figures. Turning to Slide 24. I would like to now take this opportunity to discuss our 2024 outlook. We are expecting a favorable environment in our markets for the upcoming year, projecting growth in both volumes and prices. Our operational flexibility will continue to allow us to capitalize on the positive trend and navigate market dynamics. Therefore, we expect GCC's cement and concrete sales volumes to increase low single digits year-over-year in both countries. In terms of prices, considering the announcement we have already made, we anticipate a year of price increases in the mid-single-digit range for cement and concrete in Mexico and in the U.S. Regarding profitability, we expect 2024 EBITDA to increase mid-single digits against the 2023 level. We approximate our capital expenditures at $470 million, including $400 million allocated to strategic and growth projects, including the Odessa expansion and $70 million related to maintenance expenses. As a result, the free cash flow conversion rate before strategic and growth CapEx is expected to reach more than 60% with a net debt-to-EBITDA ratio, which would remain negative. With that, this concludes our prepared remarks, and I will turn the call over to your questions now. Operator, please begin with the first question.

[Operator]

[Operator Instructions]. Our first question is from Carlos Peyrelongue with Bank of America.

[Carlos Peyrelongue, analyst]

Thank you, Enrique and Mike for the call, congratulations on the great year. My question is related to margins for this year. If you could provide some color, you highlighted the price increases and volume expectations for this year. But just wondering what's your view on costs and whether we could expect some further margin expansion.

[Enrique Escalante, executive]

Carlos, thank you very much for the question. As a general statement, I want to tell you that we still see some cost improvement opportunities in 2024 that reflects on what Maik is going to address more specifically.

[Maik Strecker, executive]

Yes. Thanks for the question, Carlos. So yes, I will start with pricing. As Enrique said, the momentum is still there. We're working very closely with the customers, making sure we're communicating properly and really also paying attention to their needs from a logistics, technical and product support of all. So we see still a good momentum there. That will help, #1. #2, on the cost side, we still plan with relatively stable input costs, fuel energy. Again, the flexible fuel strategy is really paying dividends there with these investments that we have made in the past years around alternative fuels, also proactively working on the market for gas with some hedging and then as you know, we have our own coal mine back in full operation, which is an important stabilizing aspect. So that is important on the fuel side. On the energy side, similar, we're very proactive. We have some projects around solar that will help us a little bit in 2024 and then proactively looking at the contracts on energy. So all these combined on the cost side should help us. And then the last comment I would make, the teams are really working very diligently utilizing the network and redefining the best and optimal distribution routes, which again will help us to sustain what we accomplished on the margin side and then to continue to build it out. So those are a little bit of context on how we probably look at margin 2024.

[Operator]

Our next question is from Adrian Huerta with JPMorgan.

[Adrian Huerta, analyst]

Two questions. One is if you can just tell us how was the performance on volumes from construction and oil well cement in 2023 and which one you expect to perform better in 2024? And the other one is just maintenance CapEx. In the past, has been running around $30 million, $50 million a year. Last year was $65 million, now you're guiding for $70 million. Is this $70 million the new run rate going forward as well?

[Enrique Escalante, executive]

This is Enrique. We are pulling some numbers for you here on the early World cement. On the fourth quarter of 2023, our demand for well cement grew approximately a little bit below 6%. And so we expect, I mean, these levels to continue going forward. The plant has been running very well the planting of that. And as we have been supplementing from Chihuahua and now moving the network so we can substitute more cement, I mean, also from the U.S. plants. So in summary, around 6%, and with a plan to continue at least at this level, we don't see any indication of softening on that market. I will allow Maik to answer on your CapEx question.

[Maik Strecker, executive]

Yes. Adrian, thanks for the question. So regarding the maintenance CapEx, again, if you go back to 2022, we'll be at 34.9%. Again, '22 was still a year with a lot of supply chain challenges and getting certain pieces of equipment to the plants to execute the maintenance. So we had a lot of a delay there. '23 was better with our 64.8% execution on the maintenance CapEx. That's the number $64 million to $70 million is a number that the current setup of plants and operations will keep us in very good shape. We'll pretty much keep those assets in like new conditions and really allow us to perform. So in your model, the 65 to 70 is probably a proper number as what we mean for in CapEx.

[Operator]

Our next question is from Alejandra Obregon with Morgan Stanley.

[Alejandra Obregon, analyst]

Enrique, Maik Sahory. I guess it's a follow-up to the 2 earlier questions. The first one is on oil well cement. I would like to dive a little bit more on your 2024 expectations, both on the pricing and on the volumes, is perhaps the halt on U.S. LNG permitting something that could risk some of your expectations on this vertical. So that will be the first question. And then the one is a little bit -- the second one is a little bit more strategic and on the CapEx front. So you have laid out several objectives so you have decarbonization, you have efficiencies on your plants, Odesa and perhaps some potential inorganic opportunities ahead. So if you could just lay them out and help us understand how you're prioritizing these objectives, both from, I guess, your focus and from CapEx and cash management perspective, that would be very helpful.

[Enrique Escalante, executive]

This is Enrique. Thanks for the questions. Again, I'll address, I mean, the question on the [indiscernible] market, as I was telling Adrian, I mean, we think it's going to continue more or less at the current levels. We, of course, are having our plans, I mean having a price increase in that segment was not determined yet, and we believe that it's going to be most likely around midyear. So we have a number for you at this moment. But of course, I mean, we will announce it as soon as possible.

[Maik Strecker, executive]

Okay. And again, thanks for your question. If I understood you correctly, a little bit of context on our priorities, on execution and how that translates to the capital allocation. So yes, first, for us, is to keep the existing network and plants in the vegetate hospital. So executing on our maintenance CapEx is key and critical because that allows us to be the supplier of choice and really be the solution provider in a still very dynamic market. So that's the top priority. Second, I would say the execution of Odessa. You saw our growth CapEx has increased for this year 2024, and we really have great momentum on the Odessa projects. So we expect good execution. A large portion of that guided $400 million will be executed to build with Odessa. So that's very important for us. And then the third one that I would mention within the existing operation is further strengthening the logistics network and really taking advantage of what we have built and really optimizing that. And there are small optimization investments around some of our clients needed. So if you move them forward, growth, as we have said in previous calls, M&A is our top priority, M&A cements the United States. That's where the next level of CapEx allocation for growth. And then a more and more important element of our capital growth will be around sustainability. We have some important initiatives and projects in the works, as we mentioned. We'll talk more about that in detail later in the year, but we have reserved some CapEx there to work on, for example, carbon capture privates, further enhancing again the alternative fuel opportunities and blended cement. So those would be the highlights and kind of priorities, how we look at capital allocation.

[Alejandra Obregon, analyst]

And congratulations on the numbers.

[Operator]

Our next question is from Sylvia [indiscernible] with 2 assets.

[Unknown Analyst]

It's Silvia here from [indiscernible]. I have a couple of questions. One strategic question, which is are you guys -- how are you thinking about the use of your ample balance sheet resources in terms of M&A? Are you open to a transformational acquisition and that acquisition in the U.S.? Or are you thinking more about bolt-on acquisitions? I mean you definitely have a lot of space in your balance sheet? And then I have a couple of other questions, if you don't mind.

[Enrique Escalante, executive]

Sylvia, this is Enrique. Thanks for the question. Well, I think we're very firm and committed to, I mean, our strategy. And as Maik described, it's to continue looking for growth in the U.S. market and we can view market first priority cement. But as we had last year, we're now opening up the scope also to order materials like aggregates. So capital, I mean, in M&A, it's going to be obviously directed to cement at first and aggregates I mean also as a new priority for us. And we also said that we're moving forward from investing not only exclusively in the current network, but open also to see if there are opportunities in other markets where we can start I mean, the second network within the U.S. In terms of -- I mean, how we would use -- I mean, the cash, of course, I mean, this will be, I mean, mostly financed, I mean, with debt and cash from our balance sheet. And we're very careful and very conservative, as you know, I mean, maintaining the investment grade for us, it's a top priority. So we will continue to work on M&A, I mean projects with that in mind. I want to be very open here and transparent. I mean, we've been working last year, very diligent image on that on that M&A, I mean, our space and have been, I mean actively, I mean, engaging with other companies in that effort, and we're currently doing it and planning to continue doing it permanently in 2024. So I mean it since I'm a line abort this study that I'm describing, I mean, which should be, I mean, growing, I mean, in 2024 through those efforts.

[Unknown Analyst]

Got it. Are we talking about a bolt-on, a series of bolt-ons? Or are you potentially considering something big, transformational, which perhaps could require a listing in the U.S. or not. But what are you thinking in terms of size and risk because for us, transformational acquisitions could be good, but they could also pose a lot of risk.

[Enrique Escalante, executive]

We're open to both alternatives, Sylvia. Of course, bolt-on has been in the past. I mean what has made us very successful. So we are not going to forget about that and continue our efforts. I mean talking to prospects within the region on of plans that we can connect synergistically to our network. Having said that, and we know -- I mean, a plant in the U.S. will continue to be in demand in high demand. And so we are now open to do also transformational M&A projects, probably sometimes in combination with other companies that would be, I mean, looking for the same thing that we were looking. So we're pretty much open to any alternative in the U.S. in relationship with cement.

[Unknown Analyst]

Okay. Perfect. If I could see one or... Sorry. Can I continue with that?

[Enrique Escalante, executive]

No go ahead, please.

[Unknown Analyst]

Okay. Perfect. On your comments on the lack of energy infrastructure in Juarez, could you give more color? Are we talking about a one-off blackout or are we talking about a situation that is more structural and it could potentially become a recurring problem in Juarez?

[Enrique Escalante, executive]

Yes, Sylvia. We had a couple of projects in the Juarez in the new construction of [indiscernible] plants and just codabuildings that were delayed from this year from the last quarter of 2023 and have moved to 2024 because those developers are expecting, I mean, connection from CFE in the power supply. Since the filing, apt was not ready with the request for this, I mean developers they decided not to invest this year, but to invest next year once they were, I mean closer to having the power supply. So this is, as we understand it, in this case, just a delay on those 2 projects, and that's what we were referring to in terms of, I mean, a slowdown in some of the construction of industrial buildings and infrastructure in quarter during the fourth quarter of 2023.

[Operator]

Our next question is from Federico Galassi with TRG.

[Federico Galassi, analyst]

Congrats for the results. Two questions. The first one is some of your U.S. competitors have been talking about that they believe that the residential market in U.S. is close to the bottom. Are you agree with this comment? And the second one, if you can give us some comments on how the new capacity is the CapEx, the CapEx will continue to grow next year, if there are some delays, et cetera, et cetera.

[Enrique Escalante, executive]

Federico this is Enrique. On your question about the residential marketing well, so was a little bit of adjustment call right? I mean it's a market, I mean, a touch bottom or not. My personal opinion is that we're -- I mean not there very close to there. And what we would see potential for growth from that level up. As we said, I mean it seems like our mortgage rates are starting to react positively towards that end, and we expect no further decreases in that segment. But on the other hand, we think that the potential for growth starts now. And with obviously, variations within markets, as we said, members probably the market that has been within our markets are probably the one that has suffered a little bit more or going down deeper. However, I mean, I spent a lot of time in November and I'll tell that there is no inventory of houses, and there's still a lot of demand for houses. So I think that, that, combined with a the potential penninterest rate, it's going to motivate also I mean, builders get a little bit more aggressive on the market. I'll leave the second question now for Maik.

[Maik Strecker, executive]

So CapEx execution, we are really laser-focused to continue a very strong execution, therefore, like I said, the maintenance earlier, but also for the growth projects. And of course, the important one for us is Aveta. We're right on track for a critical path and a construction path perspective. So that's why we're very convinced that this year will be a strong year of execution there to get that done. And then the other project that I mentioned briefly around the distribution network around our energy or alternative fuel projects. Here again, we have more people on staff to work on those to execute those. So we're pretty good positioned to really have a strong year on that and again set the company up for further growth within '24, but then also beyond. So we're pretty positive on the execution on CapEx.

[Operator]

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back over to Ms. Ogushi for closing comments.

[Sahory Ogushi, executive]

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.

[Operator]

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.