Grupo Mexico SAB de CV
BMV:GMEXICOB

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Grupo Mexico SAB de CV
BMV:GMEXICOB
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Price: 102.71 MXN -1.29% Market Closed
Market Cap: 799.6B MXN
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Earnings Call Analysis

Q3-2024 Analysis
Grupo Mexico SAB de CV

Grupo Mexico Reports Strong Financial Growth and Consistent Dividends

Grupo Mexico's third-quarter earnings for 2024 showcased impressive growth with cumulative revenues exceeding $20 billion, a 12.5% year-over-year increase. The mining division contributed significantly with $9.4 billion in revenue, reflecting a 13.2% rise. Despite challenges in transportation, revenues reached $2.6 billion, an 8% increase, supported by operational improvements. The company declared a quarterly dividend hike to MXN 1.30 per share, enhancing shareholder returns. Furthermore, the EBITDA surged by 17.3% year-to-date, indicating robust profitability across divisions, particularly in infrastructure, where EBITDA soared nearly 27%.

Grupo Mexico's Resilient Performance Amid Favorable Markets

In the third quarter of 2024, Grupo Mexico demonstrated strong financial resilience, ballooning its cumulative revenue to over $20 billion—a commendable 12.5% increase from the previous year. This growth is largely attributed to a surge in copper production, where production levels rose by 7.1% year-to-date, and an impressive 10% increase quarter-over-quarter. With the average LME copper price shooting up by 10% from $3.80 to $4.20 per pound, the favorable pricing environment contributed significantly to the overall performance.

Significant EBITDA Gains and Cost Control Initiatives

EBITDA showcased even more robust growth, climbing 17.3% year-over-year and 22% from the previous quarter, totaling around $5.1 billion. The company achieved an impressive EBITDA margin of 54.2% within its mining division due to efficient operations and effective cost management. The net cash cost of copper production was reported at $1.12 per pound, indicating a notable improvement of 7.2% compared to last year.

Transportation Division Faces Challenges but Remains Steady

Grupo Mexico's Transportation division reported revenues of $2.6 billion for the first nine months of the year, reflecting an 8% year-over-year increase fueled by a 9% rise in carloads. However, the EBITDA for this division experienced a slight decline of 0.8%, reflecting operational challenges, including disruptions from migration-related issues which resulted in a temporary decrease in average train speeds. Nevertheless, as of the report date, average train speed has rebounded from 27 km/h to 37 km/h, suggesting a return to more efficient operations.

Infrastructure Division Excels with Double-Digit Growth

The Infrastructure division highlighted its strength with revenues increasing by 9.1% year-over-year, thanks to successful integration efforts and enhanced operational efficiencies. The EBITDA surged nearly 27%, contributing to a robust EBITDA margin of 57.3%. This segment also reported significant growth in its Real Estate business unit, with an increase in revenues driven by boosted occupancy rates and newly integrated power centers.

Future Strategy: Sustainable Growth and Increased Dividend

Looking forward, Grupo Mexico confirmed its dedication to sustainable growth. The company expects copper production for 2025 to be around 117,500 metric tons at an estimated cash cost of about $3.10 per pound. Their recent Board approved a quarterly dividend of MXN 1.30 per share, raising the previous dividend of MXN 1.20. This reflects a 4.7% dividend yield, showcasing the company’s ongoing commitment to returning value to its shareholders while balancing capital allocation for future projects.

Strong Financial Foundations and Outlook

Grupo Mexico exhibits a solid balance sheet, with a net debt-to-EBITDA ratio of a mere 0.1x and no substantial payments exceeding $1 billion until 2035. The company ended the quarter with a $7.6 billion cash position, providing it with ample flexibility to invest in ongoing and future projects while maintaining healthy shareholder returns. Overall, Grupo Mexico's performance highlights not only its adaptability in fluctuating markets but also a robust strategy poised for continued growth.

Earnings Call Transcript

Earnings Call Transcript
2024-Q3

from 0
Operator

Good afternoon. Thank you for holding, and welcome to Grupo Mexico's Third Quarter Earnings Conference Call. With us this afternoon are all of Grupo Mexico's top executives who will discuss the financial performance of the company during the third quarter 2024 results giving you a summary of the latest news and addressing any questions you may have at the end of the call.

Before we begin, I would like to remind you that information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements.

Grupo Mexico undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. [Operator Instructions]. A copy of the slides that the company will be reviewing today is available on the website at grupomexico.com. [Operator Instructions].

Now, we will begin with Ms. Marlene Finny.

M
Marlene de la Torre
executive

Thank you so much, Carmen, and good afternoon, everyone, and thank you for joining us today for Grupo Mexico's Third Quarter Earnings Conference Call. In line today are the top executives from our 3 divisions. So as Carmen already mentioned, we will be following the presentation that you can download from our website or following through the webcast.

So on slide -- beginning on Slide #3. I'll kick off with Grupo Mexico's ESG highlights, followed by the quarter's scorecard and financial highlights. Then Mr. Leonardo Contreras will provide detailed information regarding our Mining division's main highlights, project updates and comments on the industry's economic environment. He will then be followed by Mr. Fernando Lopez Guerra, who will go through the financial results and main events of our Transportation Division. Lastly, Mr. Francisco Zinser will comment on our Infrastructure division's relevant events, which occurred during the quarter. As usual, at the end, the line will be open for questions and answers.

Before continuing with our results, I want to highlight that as a result of our long-term investment, Grupo Mexico was able to benefit from a favorable copper price environment, which along with excellent production levels and strict cost control translated into excellent results this quarter. We will continue our long-term investment strategy to generate value for our shareholders and contribute to the development of the communities where we operate.

Now let's start with our main ESG highlights on Slide #5. Our continuous efforts to embrace responsible production has paid off as our 3 Mining operations in Peru have been awarded with The Copper Mark and Molybdenum Mark certification for responsible production. Now most of our copper and moly production is certified under these standards, which are very strict. Our Infrastructure division was recognized for its community development management modeled by [ bank and EY ] in its third edition of the sustainable innovation leaders awards, achieving the first place in the social category, acknowledging our commitment to our operations neighboring communities.

Now let's -- we have more information about our ESG highlights if you want to go through on our website or on our annual report. And continue to Slide #6. Here, you have our score card. Our cumulative revenue for the first 9 months of the year totaled over $20 billion, representing an increase of 12.5% when compared to the first 9 months of 2023, and 13.4% higher on a quarterly basis, this was mainly due to the higher copper and by-product volumes sold, higher volumes in our Transportation division and the remarkable performance of our Infrastructure division.

Following the same growth trend, our EBITDA showed important gains for the first 9 months of the year, increasing 17.3% when compared to the same period of last year, this increase is even higher when compared to the -- when comparing the quarterly results of 2023 versus 2024, and then there, our EBITDA improved 22%. Our net cash cost amounted $1.12 per pound, this is a more than 7% improvement versus 2023 on a cumulative basis.

As far as the production, we continue to have higher copper production, 7.1% increase when compared to the first 9 months of 2023, and 10% -- more than 10% increase on a quarterly basis. As you know, we revised our dividend on a quarterly basis, and this is a decision that our Board makes depending on our cash needs, our cash generation, projects, CapEx. So all in all, this is something that we have to revise on a quarterly basis. So this quarter, our Board approved a dividend of MXN 1.30 per share, increasing from MXN 1.20 last quarter and translating into a 4.7% implied dividend yield.

On Slide #7, you can find there our financial highlights in case you needed at any point during the presentation, like there for your reference. So moving on to Slide #8. As you can see here, we maintain a solid balance sheet with low leverage and a net debt-to-EBITDA ratio of 0.1x. As you might already know, our debt is mainly issued in U.S. dollars, representing 78% of the total debt, while the rest is denominated in Mexican pesos and 95% of our total debt was issued at a fixed rate.

On this slide, you can also see the dividends paid from 2022 to 2024 and the implied dividend yield, including the MXN 1.30 cash dividends for the quarter approved by our Board. We continue to have a comfortable debt maturity profile, as you can see on Slide #9, with no payments over $1 billion until 2035 and our cash and equivalent position ended the quarter $7.6 billion...

U
Unknown Attendee

Hello.

M
Marlene de la Torre
executive

[Foreign Language]

U
Unknown Attendee

Hello. [Foreign Language]

[Technical Difficulty]

U
Unknown Attendee

You may continue.

M
Marlene de la Torre
executive

Sorry for -- we have no payments over $1 billion until 2035. And we have a cash and equivalent position of $7.6 billion at the end of this quarter.

I will let now Mr. Leonardo Contreras, comment on the Mining division's performance.

L
Leonardo Contreras Lerdo de Tejada
executive

Thank you, Marlene. Good afternoon, everyone, and thank you again for joining us today. I will start today with some remarks on the current copper market on Slide 11. The LME copper price increased 10% from an average of around $3.80 per pound in the third quarter of 2023 to roughly $4.20 this quarter. Based on supply and demand dynamics, we are expecting a slight market Thank you, Marlene. Good afternoon, everyone, and thank you again for joining us today. I will start today with some remarks on the current copper market on Slide 11. The LME copper price increased 10% from an average of around $3.80 per pound in the third quarter of 2023 to roughly $4.20 this quarter. Based on supply and demand dynamics, we are expecting a slight market surplus of about 100,000 copper for 2024.

At this point, we estimate that the copper supply will register growth of 2.7%, and we expect demand to grow around 2.3%. Now looking at demand, although we still see a weak demand from China, we believe the recently announced economic measures will promote economic growth and fuel demand from the world's largest copper consumer. Furthermore, our resilient U.S. economy and new demand from decarbonization technologies, coupled with needs driven by artificial intelligence are expected to bolster support for long-term copper demand.

Now let's continue with the Mining Division's financial highlights on Slide 12. First, due to higher copper and by-product sales volumes along with increases in copper, gold and silver prices, it allowed us to reach over $9.4 billion of revenue for the first 9 months 2024. A 13.2% increase when compared to the same period of last year. Our year-to-date EBITDA totaled $5.1 billion which is 22.8% higher than 2023, and 32.3% higher on a third quarter basis, setting our EBITDA margins at 54.2%.

We ended the period with a total copper production of 819,638 tons, a 7.1% increase compared to the first 9 months of 2023, mainly driven by an increase in production in Southern Peru and Minera Mexico. On a quarterly basis, we saw an increase of 10.6% due to a general production increase in our operations. As a result of higher copper volumes and higher moly, zinc and silver byproduct credit, our net cash cost totaled $1.12 per pound year-to-date, a 7.2% improvement versus last year and 19.2% better on a quarterly basis, reinforcing us as a cost leader in the industry worldwide.

As for our CapEx, we invested $867 million during the first 9 months of 2024. Now let me give you a brief project update on Slide 13. I will start with Tia Maria, which as of September 30, 2024, we have generated over 422 jobs, of which 355 were filled with local applicants. In the upcoming months, we expect to have a busy schedule as we plan to build roads, access points, train operations, update the topographic network, install and delimit properties around the living fence, install a temporary camp, and begin earthmoving and shipping activities to begin the construction in 2025.

Now in regards to Los Chancas, our project in Apurimac, Peru. As of September 30, we continue to engage in coordinated efforts with the Peruvian authorities to eradicate the legal mining activities. Once this process is completed, we will restart the environmental impact assessment, initiate the hydrogeological and geological studies, and conduct a diamond drilling campaign to the other additional information on the deposits characteristics.

In regards to our Michiquillay project, as of September 30, 2024, we have a 30% completion ratio of the exploration project, where we have drilled 121,000 meters, out of a total of 148,000 and we have obtained 369,234 (sic) [ 39,234 ] drilled core samples for chemical analysis. The diamond drilling campaign is underway and will provide data for cross-section interpretation, geological modeling and resource evaluation. The geo-metallurgical studies are currently underway, and the hydrological and hydrogeological studies will begin shortly.

On Slide 14, you can see a summary of all of our upcoming projects under production and CapEx profile. We're all very excited about developing this robust pipeline of projects coming in line at such an exciting time for copper. Please, if you have any follow-up questions, we'd be pleased to address them during the Q&A session.

And now I will let Fernando comment from the Transportation division.

F
Fernando Guerra Larrea
executive

Thank you, Leo, and good afternoon, everyone. Thank you for joining us. Continuing with the Transportation results on Slide 16, I would like to talk about our financial highlights for the first 9 months of the year. Our revenues are up almost achieving almost $2.6 billion during the first 9 months of 2024, a 7.5% increase versus...

[Technical Difficulty]

M
Marlene de la Torre
executive

Sir, we cannot hear you.

Operator

Can you repeat the sentence? We lost your audio for a few seconds there.

M
Marlene de la Torre
executive

Sorry, I think we're having some technical issues, sorry for this. And can you just give us 1 minute to continue?

Operator

Thank you so much. Please standby, ladies and gentlemen.

M
Marlene de la Torre
executive

I think in the meanwhile, while we get the Transportation division on board again because of these technical issues, we will let Francisco Zinser comment on Infrastructure division, and then we will resume the Transportation division.

F
Francisco Gonzalez
executive

Perfect. Thank you very much, Marlene, and good afternoon, everyone. I will start by going through the financial highlights of the Infrastructure division shown in Slide #21. I am proud to announce that we continue to have a solid performance during 2024, and generating value and growth in our different business units, with revenues increasing over 9.1% on a cumulative basis year-over-year. Thanks to the integration of PlaniGrupo, the start of operations of our Fenicias wind farm, to enhance the daily rates across our 6 drilling platforms, an increase in revenue and traffic across our Toll Roads division and optimized production within our Construction and Engineering business unit.

Our EBITDA and net income showed double-digit growth on a cumulative basis when compared to 2023, with EBITDA growing almost 27% and net income growing 75%, totaling $331 million and $100 million, respectively. All of this, coupled with a 57.3% EBITDA margin over sales. To close the Infrastructure division highlights, I would like to go through some of our most relevant events depicted on Slide #22. Perforadora Mexico our Drilling division continues showcasing the highest operational efficiency as of the end of the third quarter of the year with a 99% availability rate and consistent profitability improvement.

Year-to-date, PEMSA has reached $178 million in revenues and an EBITDA of $97 million, a 17% and 30% increase, respectively, when compared to the same period of last year. These results were driven by daily quota adjustments and strict cost control measures. Continuing with the relevant updates by the end of the third quarter of 2024, our Fenicias wind farm reached total net sales of [ $13 million ] and an EBITDA of [ $15 million ] as the wind farm became supplying electricity to the mining and metallurgical operations in our underground Mining division in IMMSA as of August 1, marking a key milestone in the contribution to our energy sustainability strategy and reinforcing our long-term commitment to cleaner energy solutions.

Our Toll Road divisions delivered strong financial performance with a 9% increase in the equivalent of daily traffic year-over-year, driving revenue growth and enhancing profitability. Total net sales reached $54 million while EBITDA stood at $36 million, an 11% increase in both metrics when compared to the previous year.

Lastly, our Real Estate business unit achieved significant growth, reporting $58 million in revenues and $36 million in EBITDA, a 7% and 18% increase, respectively. These results were driven by increased rents and fees, an increase in occupancy rates, and the integration of 9 new power centers in September.

So I will now pass the word to Fernando so that he can continue with his summary of the Transportation Division. Thank you very much.

F
Fernando Guerra Larrea
executive

Thank you, [ Pancho ]. I think our connection was lost. Going back to the Transportation division. Our revenue totaled $2.6 billion for the first 9 months of the year. This is almost an 8% increase versus last year, driven by a 9% increase in carloads and a 4% increase in net ton kilometers. Our EBITDA closed total to $1.1 billion for the first 9 months of the year, a slight decrease of 0.8% compared to previous year and a 7% decrease versus last year on a quarterly basis.

This is -- this translates into a 43% EBITDA margin. This is a 360 basis point contraction year-over-year. As we have been mentioning on the previous quarters, the main impact to us was -- the most significant impact, the migrant prices, where we have to stop trains to allow the Mexican authorities to do the operatives and send the migrants back into the Southern border of Mexico. Hundreds of trains were stopped. Our network got completely collapsed, and we're backing into our speedy stack up. We dropped the average speed. It dropped from 39 kilometers per hour to 27. As of last week, we are back at 37 kilometers per hour.

For us, speed is everything. It's our capacity. It also translates into a reduction of speed translates into more diesel being burned, into more car hire being paid for the railcars from other railroads, as we pay on a per hour basis and a kilometer basis, and also extra time for the crews and recruits that we have to use for the same amount of train. So for us, speed is of the essence, and that's where our main focus comes to.

Returning to the good notes. Net income totaled $389 million on a cumulative basis, this is a 4% increase versus 2023. Lastly, as you might already know, a dividend of [ $0.50 ] per share was approved by our Board, this is -- as we have managed to remain consistent with the dividend for the past 3 years, offering an attractive shareholder return.

Continuing with the main valuations of our revenue on Slide 17, we see a mix of results throughout our different segments in the quarter with Intermodal segment being above the rest with an increase of 33% due to volume increase in our cross-border and domestic operations as we continue to gain market share versus our competitors. We have brought from our competitors, the largest Intermodal marketing companies. So we now have J.B. Hunt with us, we have Hub. We have APL and Matson. And with this, we have built the frequencies that we need between Mexico and the U.S. We started with short trains, which are also -- they also have an impact on our margins, but as the trains continue to add scale that the margins can become healthier and so on.

As a reminder of these variations, we are considering results in Mexican peso, so this might vary using a different currency. In relative terms, this quarter, second top performer was Agricultural segment, which we saw an increase of 19% as we saw local crops being substituted by grain imports, this as well as the Intermodal, these trains are dedicated trains so they do not allow us to consolidate into the remainder trains of our network. So that it's more trains into the networks that we see now have the ability to consolidate them. Therefore, we don't have a benefit of scale on the current network.

Another segment which we saw double digit was Chemicals driven by volume increase and better car cycles. And the last segment with double-digit growth was Energy, with growth in fuel oil and LPG volumes during the quarter. Next, the Industrial segment ended quarter in line with the volume seen last quarter as we have normalized volume after a 2023 inventory backlog. The segment where we saw a revenue decrease are Cement with a 4% decrease due to reduced demand in the United States, Automotive with a 5% decrease in revenue as we mitigate the decline by capturing additional market share from [ Holloway ] services and the other competitors.

Metals with an 8% decrease as we observed lower production of volumes in finished goods. And lastly, Minerals, where we saw a 13% decrease with a significant national project in southern region of the country being concluded and one of our major customers that suffered the production set back.

Now taking a look at our operating metrics on Slide 18, this quarter has been complicated, as I just mentioned on some of our operating metrics due to the congestion of the migrant crisis and what followed as our network slow down, theft and vandalism kicks up. So that is also another challenge we're now addressing.

Our average train speed decreased from 39 all the way to 27 kilometers per hour than the average is 33.7 now. But as I was mentioning also last week, we are up at 37, which is a significant increase and improvement. Dwell time terminals gets directly impacted by the lack of fluidity in the network, the fact that we are slower on the trains -- on the trains moving throughout the network. Then we need to hold some of our products and some of our railcars at the terminals and these also translate into a railcar velocity decrease of 13%.

As for average train length, it only increased 5% to 1.8 kilometers and gross tons per train 5% as well. As I was mentioning a little bit before, the fact that our growth is mainly in Intermodal and Agricultural products has not allowed us to have bigger efficiencies on these train length and tonnage per train.

On Slide 19, we show our expected CapEx for 2025, as a result of the volume growth, we have estimated for 2025 of between 5% and 7% in net ton kilometers. The Board of Directors authorized as a new investment plan that includes several expansions, safety and efficiency projects that will enable us to grow and improve our service. As well as to optimize the productivity and performance indicators. The investments to be made include an increase of 15% in the fleet of locomotive, 16,000 additional railcars, incremental capacity at our yards and terminals as well as important safe rail safety programs that will improve coexistence within the locations where we operate.

I believe that is also the Transportation, and I will give the call back to Marlene.

M
Marlene de la Torre
executive

Thank you so much, Fernando. And thank you, Francisco, Leonardo and everybody for being here today.

Now we will let -- we will open the line for any questions we might have, and we'll try to answer the best we can. Thank you so much for you time.

Operator

[Operator Instructions] It's from Gabriel Simoes with Goldman Sachs.

G
Gabriel Simoes
analyst

I have 2 questions on capital allocation actually. So the first one is, given that the comfortable balance sheet position you find yourselves in, how do we -- how should we think about capital allocation in the future? So are you considering potential new acquisitions? And if so, should we see new acquisitions be within the current portfolio scope? Or are there other sectors you would consider going for? Any geographies worth highlighting? So this is on the first front.

And the second one would be on the dividends. So you have been distributing for a period of time. You distributed less dividends than those received from Southern Copper. And in the past few quarters you've been distributing an amount that's close to the one you've been receiving in cash. Just wanted to check if there are any plans to change the magnitude of your distribution at some point, once again, given the comfortable balance sheet position that you find yourselves in?

M
Marlene de la Torre
executive

Thank you so much for your questions, Gabriel. Regarding capital allocation is a complicated question because -- complicated answer because we have to be reviewed on a quarterly basis. So in terms of our balance sheet, we are not actively looking to diversify, but we are always looking to opportunities. But as of now, what we are -- we're giving priority to our organic growth mainly as we discussed this morning the Southern Copper, the Tia Maria project and all the other projects. We have projects in infrastructure and transportation divisions as well. So we are -- our focus right now is on our organic growth. And at the same time, we keep on giving a very good dividend, dividend yield we have increased that.

I know that -- and I think you were referring to Souther Copper dividend that was happened in -- stock dividend we have in cash. That is also one of the reasons in Grupo Mexico that we have to take care of the cash because we don't know and we have some maturities next year at the Southern Copper level at all of the 3 divisions. So we have to take into consideration cash generation and CapEx needs, prioritizing our projects, and I think the dividend yield is -- continues to be very solid, and it's like 50% of our Grupo Mexico's income. So I think that's a very good -- normally, it is around 50% of Grupo Mexico's income dividend.

Operator

Our next question comes from Camilla Barder with Bradesco BBI.

C
Camilla Barder
analyst

Just a quick question on Asarco. Could you provide your expectations for copper production and cash costs before -- by progress for Asarco in 2024 and '25?

L
Leonardo Contreras Lerdo de Tejada
executive

In regards to your -- to the guidance for 2024 for Asarco in production, we should be around 116,000 metric tons of copper. And in cash cost before by-products, we should be around -- before by-products $3.25 and after by-products around $3.10.

C
Camilla Barder
analyst

This is for '24. Do you have any outlook for '25 as well?

L
Leonardo Contreras Lerdo de Tejada
executive

Yes. For '25, we should be around 117,500 metric tons of copper and the cost should be more along the -- in line with what we have for 2024. So around $3.10 as per that product.

Operator

And it's from the line of Alejandro Demichelis with Jefferies.

A
Alejandro Anibal Demichelis
analyst

Three questions if I may, please. First, could you please give us an update on how you're seeing the potential changes in regulation in the Mexico mining industry and a potential ban for open-pit mining. That's the first question.

Second question is, could you also give us an update on how you see the cargo railways sharing some of the infrastructure with the passenger railways in Mexico? And how you see that developing?

And then the third question is your discount to your net asset value of some of the parts still looks very wide. How are you thinking about that discount?

L
Leonardo Contreras Lerdo de Tejada
executive

If you don't mind, Marlene, I will answer his first question in relation to the open-pit mining regulation in Mexico.

We've been following it closely. And as far as we know, I mean, what has been in discussion and nowadays is not necessarily advancing. That's one of the things that we follow. But overall, if there were to be a movement or regulation, it would be basically for any new concession for open-pit mining. So for us, for example, a lot of our organic growth and so forth, it's for concessions that we already have and we won't have any issue at all going forward.

I don't know if that would answer your question.

A
Alejandro Anibal Demichelis
analyst

Yes, that answers the question. And what happens in a situation like El Arco project?

L
Leonardo Contreras Lerdo de Tejada
executive

Yes. El Arco, we already have the concession. So we don't have any issues at all.

F
Fernando Guerra Larrea
executive

I can answer your question regarding passenger service. The government has announced a couple of projects, 1 Mexico, Pachuca. The other one is Mexico City to Queretaro. Those projects that they have in the presentations that they did was that they will be built by the Mexican army, and this is a double track built in the same light of weight. These are new, completely new tracks that will be built in the same highway, respecting and being completely independent from the cargo network. I think I believe this government has very clear that they should not put them together if they want to have a network that's fluid and working for the near-shoring and all the projects that we need to continue to grow as a country. So that -- I think it's good. They now will have a good passenger service with high-speed rail, and we will continue to invest and deploy capacity for cargo on our own network.

Operator

And our next question is from the line of Sofia Martin with GBM.

S
Sofía Martin
analyst

I have 2 questions, one on GMXT and one on infrastructure. The one for GMXT, we would -- we've witnessed favorable dynamics in railroads specifically. How much of this is due to transferring cargo from highway cargo to rail cargo? And what should we expect going forward?

And for the Infrastructure division question, we saw a significant increase in CapEx. Just trying to understand what drove these dynamics? And what should we expect going forward?

F
Fernando Guerra Larrea
executive

I'll take the transportation, Marlene. As you probably read, there's one of the points of our President's new focus for our government was to convert cargo from highway into rail. And so that there are 5 main topics to be addressed that. One is the fluidity of the network. And I'm talking about migrants and theft and vandalism for that. The government has been very, very supportive and the continuity of that support throughout -- between one term and the other one, government on the other has been very, very good.

The second one, the second item is the hubs and the terminals that need to be built. By that, I mean new capacity at the ports. I mean certain inland terminals that will bear with that capacity at the ports as well. And they're also working on borders and customs processes and to be fixed and improved throughout our country, you'll see this, and we're already looking at it. And you'll probably feel it at the airports. We're feeling it at the ports as well and at the borders. So we're working closely with them.

The third item that needs to be addressed is to have competitive energy sources, competitive diesel for us. As of right now, our diesel in Mexico is 80% more expensive than what it is in the U.S. and 40% the rail diesel versus over the road diesel as the trucking companies have -- they are enabled to credit yet the specialty tax versus the other income tax and [ we're not ]. So that's another item.

The fourth item, it's weight -- there's -- the law in Mexico is very clear, but it's not enforced. There's 1 scale, every 3,000 kilometers in Mexico and none of them work. So that's why you see our highways so destroyed, they were designed, built and maintained for other specs versus what there is actually put on them.

And the fifth item, it's the hours of the drivers, which there's also a regulation, but it is not enforced. So it's probably this last item, the most dangerous part of why highways have certain hidden subsidies. These are drivers that have been driving for 12, 14, 16 hours straight, and they're tired and sometimes they're under the influence of certain substances.

So by addressing those 5 items, right now, rail has about 26%, 27% of the land transportation share. We could achieve what the U.S. and Canada have, which is the mid-40s. This is 2x for us, plus the growth of Mexico itself. Sorry for taking so much, but I think it was good to be clear.

F
Francisco Gonzalez
executive

And for your second question, Sofia, for the Infrastructure division regarding the increase in CapEx, this was driven by the incorporation of 9 new power centers that we included in the Real Estate division, which used to be PlaniGrupo. These were power centers that we administered or managed before -- once we bought the company we bought 27 power centers, and these 9 remaining ones, we were only managing them, but we were not the owners. And we have the option to purchase them at the same methodology and valuation that we used to acquire PlaniGrupo, and so we exercised that so that we could have the control of the 36 power centers. That's the reason why you can see the increase.

Operator

It's from the line of Alfonso Salazar with Scotiabank.

A
Alfonso Salazar
analyst

I have just 1 question on Grupo Mexico. We have seen how Southern Copper has been paying a hybrid dividend, cash and stock for 3 quarters now. So just wondering what is the strategy behind or the rationale behind this decision from Grupo Mexico's standpoint? What is the goal of doing this? And is it likely to continue? Or will you go back to only cash? Just wondering if you can give us some color on this, please.

M
Marlene de la Torre
executive

Thank you, Alfonso. Yes, I think it's been 2 quarters now that Southern Copper has been paying half in stock dividend, but that's a decision made at Southern Copper's Board depending also on Southern Copper's cash generation, CapEx maturities that they have to pay. So that's not a decision made on Grupo Mexico's Board, but more on Southern Copper's Board. So it's on their standpoint. And this is -- they want to preserve liquidity. We have a maturity next year during the second quarter of $500 million. They are going of advancing at a very good pace with Tia Maria and all the other projects. So I think that is one of the reasons why the Board -- I'm just saying the reasons I think. But that was one -- that is why Southern Copper -- on Southern Copper's standpoint data.

On the Grupo Mexico standpoint, we continue to increase our dividend. So you can see now MXN 1.30, but we have to always take into consideration as well the percentage -- how much it represents of our net income. And I have to also take into consideration of what we're going to need some -- we want to spend more CapEx on other projects, which, as I mentioned before, we are not looking to diversify, but it is -- we are not going to pay 150% of our net income in dividends neither. So it's like we try to have a balance and this is obviously a decision from the Board and that's why we try to translate to you on every quarter. I hope that answers.

A
Alfonso Salazar
analyst

Yes. Just a follow-up. So if I understand correctly, the plan with -- again, from Grupo Mexico standpoint, the plan is to maintain your position in Southern Copper unchanged, meaning that all the shares that you get, you are not planning to sell any of them.

M
Marlene de la Torre
executive

See, Alfonso, that's correct. Sorry, I didn't get that part of the question, but that's correct.

Operator

[Operator Instructions] Our next question is from Henrique Braga with Morgan Stanley.

H
Henrique Braga da Silva
analyst

I just had a follow-up on Asarco. If you could please just close what was the cash cost before and after byproducts during the third quarter?

L
Leonardo Contreras Lerdo de Tejada
executive

Yes, Henrique. In regards to the cash cost during the quarter, give me 1 second. Yes. The cash cost before byproducts was $3.40 and after byproducts, $3.26 during the third quarter 2024.

Operator

And sir, I do not see any further questions in the queue.

M
Marlene de la Torre
executive

Thank you so much for your time, and thank you, Caroline, for everything. I hope you have a good day. Thank you.

Operator

And thank you, everyone, for participating in today's conference. You may now disconnect. Everyone, have a great day.