GBM | GCC CEMENT

Lilian Ochoa
lochoa@gbm.com.mx
INITIATING COVERAGE +52 (81) 8152 4014
UNIQUE FOOTPRINT WITH PROFITABLE BUSINESS MODEL

We are initiating coverage on GCC with a Market Outperformer rating and a 2019 price
target of P$150.0, representing a 22.8% upside potential.

Our thesis on GCC is based on an overall appealing valuation, solid fundamentals and
short-term catalysts.

Strong discount signals a clear entry point.

• Despite the stock price rally (+35% YTD), GCC maintains an enticing valuation, trading
at EV/EBITDA ’19e multiple of 7.7x, well below our target multiple of 9.1x, which is
based on the company’s long-term FCF generation capabilities, reflecting the sustained
profitability expansion expected, even when volumes and prices should be adjusted for
the industry’s cyclicality.

Attractive business mix with sound fundamentals given high US concentration

• GCC maintains a robust presence in the US and nearly ~75.0% of dollarized revenues,
coming from rising demand in core markets that are shielded from seaborne competition.
• Favorable pricing dynamics should prevail in the US given the high capacity utilization
rates—~90.0% for the industry—and the increasing demand supported by higher
government spending going forward and a resilient housing sector.

Profitability improvements should continue, due to:

• Vertically integrated operations from Mexico to most US states with state-of-the-art
facilities, delivering cost reductions and greater efficiencies.
• Privileged product mix vs. peers, with ~67.0%—on a pro forma basis, considering the
purchase-sale transaction with CRH—of revenues coming from cement demand.
• Robust export capacity and operational flexibility that allows GCC to have a clear cost
competitive advantage in the industry.

Proven track record of adequate balance sheet management

• GCC has increased its installed capacity by ~33.2% in the last 5 years through organic/
inorganic expansions. However, its sound FCF generation led to a fast deleveraging over
the same period—net debt moved from 3.45x in 2013 to 1.82x in 2Q18.

Higher liquidity and rising free float

• High probabilities to enter into the IPC index on September, 2018.

INITIATING COVERAGE | 2
 INVESTMENT THESIS

STRONG DISCOUNT SUGGEST A CLEAR ENTRY POINT ATTRACTIVE BUSINESS MIX WITH STRONG FUNDAMENTALS

Attractive valuation, trading at a 15.1% discount vs. our GCC’s operations are highly defensive, thanks to its leading position in strategic US markets and its long
9.1x target multiple—based on GCC’s potential FCF USD-revenue structure.
generation in the long-term—and well below its US peers,
with an EV/EBITDA ’19e multiple of 7.7x, suggesting an Revenue Breakdown by EBITDA Breakdown by
attractive entry point. Country* Country*

15.0x
75% 66%

14.0x

VMC 25% 34%

13.0x

12.0x
MLM GCC should continue to benefit not only from its leading presence in key states of the US, where there is a
solid cement consumption growth, but also from a higher pricing environment, given the tight utilization
11.0x rates and the company’s competitive position landlocked from seaborne imports.
EV/EBITDA 2019e

10.0x
Volume Growth above industry levels Positive price dynamics in the US should prevail.
–USD
EXP
9.0x
30%
$180.0
8.0x
20% $160.0
SUM
7.0x GCC
$140.0
10%
6.0x $120.0
0.0% 10.0% 20.0% 30.0% 40.0%
EBITDA '17-20e CAGR 0% $100.0
2015 2016 2017 2018e 2019e 2020e 2015 2016 2017 2018e 2019e 2020e

GCC US US Industry GCC

INITIATING COVERAGE | 3
INVESTMENT THESIS
RELEVANT FOCUS ON PROFITABILITY WITH A STRONG FINANCIAL POSITION

GCC’s strategic and unique business model, which stands out in the industry, should lead to sustained margin expansions going forward, even when considering a further normalization
in prices and capacity utilization—industry’s mid-cycle—mainly because of the following:

Increasing its cement revenue share, divesting non-integrated ops,

Constant improvement in product mix
while venturing into higher value-added products.

Higher usage of alternative fuels, strategic logistics, and plant

Ongoing efficiencies & cost containment efforts
modernization.

Operational flexibility with extensive export Clear competitive advantage coming from lower production costs and
capacity in Mexico its strategic distribution network.

INITIATING COVERAGE | 4
INVESTMENT THESIS
RELEVANT FOCUS ON PROFITABILITY WITH A STRONG FINANCIAL POSITION
Historic EBITDA
–USD Million

450.0 Purchase-sale transaction with CRH 50.0%

Rapid City cement plant expansion
.4%
+11 369.7
384.2
GR 45.0%
e CA 344.3
Odessa acquisition 2
350.0 '2 313.7 40.0%

7-
GCC’s vertically integrated operations from Mexico to the US, with state- Aggregates

'1
273.8
of-the-art facilities that deliver cost reductions and greater efficiencies, plant in Chih.
35.0%
starts ops 32.8%
with a constant optimization of its portfolio mix have led to continuous 250.0 223.6 32% 32.7%
31%
improvements in profitability. 182.4 29.8%
30.0%
163.5 27.1%
149.2
25.0%
150.0 24.4%
21.7%
19.8% 20.0%

50.0 15.0%
2014 2015 2016 2017* 2018e 2019e 2020e 2021e 2022e
*Restated figures EBITDA EBITDA mg.

Despite the recent acquisitions, GCC has achieved a fast deleveraging, thanks to its solid FCF generation—average conversion rate of 57.8% expected
.2%
for 2018-2022.
+13
Fast Deleveraging Sound FCF Generation AGR
C
–USD Million –USD Million 2e
'2
800 6.3x 7.0x 10.1% 11.2% 12.0%

7-
300 7.7% 15.0%
8.2%

'1
5.1x 7.4%
6.0x 4.0% 4.8% 10.0%
600
200 1.7%
3.9x 5.0x 5.0%
400 3.4x 5.1%
2.9x 100 0.0%
4.0x
200 -5.0%
1.9x 3.0x 0
1.4x -10.0%
0 2.0x
0.7x -100 -15.0%
0.1x 1.0x -20.0%
-200 -0.4x -200
-1.0x 0.0x -25.0%
-23.8%
-400 -300 -30.0%
-1.0x
2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
-600 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e -2.0x
Net Debt Net Debt/EBITDA FCF FCF Yield INITIATING COVERAGE | 5
COMPANY SNAPSHOT
GCC is the sole cement producer in the state of Chihuahua, and has a strong presence in the US, where it has built an adjacent operation from northern Mexico to the US and Canada
border. It mostly produces and commercializes gray Portland cement, mortar, pre-mixed concrete, concrete blocks, plaster, aggregates, and other construction materials.

• In the US. The company has a solid position in Colorado, North and South Dakota, Wyoming, New Mexico and West Texas, harnessing its efficient distribution and logistics network
through terminals that are located nearby its customers.

• In Mexico. It is the sole cement producer in Chihuahua—state that concentrates most of its operations—where it enjoys the loyalty of its customers towards the GCC brand and its
retail distribution network. Moreover, it has a vertically integrated operation, with export capacity that serves to distribute special cement, among other products, to the US market.

GCC’s installed capacity GCC’s geographic presence

US: 3.1 MMT + 0.4 MMT Mexico: 2.3 MMT

Pueblo, CO Chihuahua, CH Larger sales

1.1 MMT 1.1 MMT
Midrange sales
AB
84% utilization 70.0% utlization
2008 startup 1941 startup - 2009 modernized
Fewer sales
#1
#3
Rapid City, SD
0.7 MMT + 0.4 MMT (expansion) MT ND #1
90.0% utilization (w/o expansion) Samalayuca and Juarez plants MN
~58.0% utilization (w/expansion)
Total Capacity in Chihuahua can supply SD WI
5.4 MMT + 0.4 MMT (expasion) #2 WY
'= 5.8 MMT the US market
Tijeras, NM Samalayuca, CH AI
0.4 MMT 1.1 MMT with 0.5-0.7 mmt NE
89.0% utilization Available Capacity 93.0% utilization CO
0.7 MMT UT #2
2015 modernized 1995 startup - 2002 modernized
(as of March'18) KS
Odessa, TX Coal mine Concrete
0.5 MMT (Oil-well cements) #1 OK
93.0% utilization NM W TX AR
#1 Market position Cement
2016 acquired in each state terminal #1

Cement E TX
Three Forks, MT Juarez, CH plant
0.3 MMT 0.1 MMT (Specialty cements)
~+90.0% utilization 89.0% utilization
2018 acquired 1972 startup - 2000 modernized

INITIATING COVERAGE | 6
COMPANY SNAPSHOT
Revenue Breakdown by Country 2017 EBITDA Breakdown by Country 2017 Historic Revenues
–USD Million

1,400 30.0%

24% 1,200 25.0%

34% 1,000 20.0%

800 15.0%
76% US$925 Mn. US$249 Mn.
600 10.0%
66%
400 5.0%

200 0.0%

0 -5.0%
US Mexico US Mexico 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
US Mexico % YOY
Revenue Breakdown by Product 2017 Revenue Breakdown
by Product Proforma* 2017 Historic EBITDA
–USD Million
9% 10% 450 35.0%
3%
3% 400
30.0%
1% 1%
350
25.0%
300
29% US$925 Mn. 58% 19% US$871 Mn. 67% 20.0%
250

200 15.0%
150
10.0%
100
5.0%
50

Cement & Mortar Ready -Mix Cement & Mortar Ready -Mix 0 0.0%
Concrete Blocks Aggregates Concrete Blocks Aggregates 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
Others Others
US Mexico % YOY
*Proforma figures consider purchase-sale transaction with CRH.

INITIATING COVERAGE | 7
Summary of GCC’s
Initiating Coverage
01. INDUSTRY OVERVIEW............................................................................................................................................ 10
Cement demand in the US is expected to outpace supply by 2020, due to the higher volumes coming from the
resilient expenditure in infrastructure and a strong residential segment, which should trigger further price
hikes. Meanwhile, demand in Mexico should remain propelled by a solid construction activity that is mostly
supported by the private sector, which compensates for the weaker infrastructure activity.

02. ASSET OVERVIEW.................................................................................................................................................... 23

GCC’s leading position in key states along with a strategic cement distribution network and diversified
portfolio mix sustain the company’s strong competitive advantage, enabling it to grow above industry levels.
This section details the company’s market positioning and portfolio mix, as well as its vertically-integrated
operations, plants and other asset characteristics. Moreover, management’s interests, corporate structure
and governance are shown.

03. PROFITABILITY......................................................................................................................................................... 34
GCC’s unique business model gives the company a clear competitive advantage over the industry, given its
leading position in key US states, which should translate into a favorable pricing environment. Moreover, its
robust operational flexibility and export capacity in Mexico and the constant improvement in its product mix
and cost containment efforts, lead to a strategy focused on increasing profitability levels.

04. VALUATION.................................................................................................................................................................. 40
We introduce our 2019 price target of P$150.0, which results from an equally-weighted average using DCF and
SOP approaches. Alternative valuation exercises are also included.

05. MAIN RISKS................................................................................................................................................................ 48

Potential headwinds and tailwinds that could either affect or benefit GCC’s operations going forward.

INITIATING COVERAGE | 8
TABLE OF CONTENT

01. INDUSTRY OVERVIEW 03. PROFITABILITY

Glossary 11 • 3.1 Ongoing Improvements in product mix 35
• 1.1 Introduction – Cement types & products 12 • 3.2 Leading position in key US states 36
• 1.2 US Snapshot 13 • 3.3 Operational flexibility with extensive export
• 1.2.1 Strong US fundamentals suggest capacity 37
positive demand and pricing dynamics 13 • 3.4 Cost containment efforts & efficiencies 38
• 1.2.2 Rise in infrastructure spending to • 3.5 Cementing profitability levels going forward 39
further boost cement volumes 15
• 1.2.3 The US residential sector, one of the
main catalysts for growth 16 04. VALUATION
• 1.2.4 Cement dynamics in GCC US’ key 17 • 4.1 GCC historical figures and GBM estimates 41
• 1.2.5 Booming construction market with • 4.2 Valuation 43
no signs of deceleration 20 • 4.3 Global peer comparison 45
• 1.3 Mexico Snapshot 21 • 4.4 Alternative valuation exercises 47
• 1.3.1 Recovery in Mexican construction
activity to underpin cement demand ahead 21 05. MAIN RISKS
• 1.3.2 Chihuahua’s cement demand
• 5.1 Downside risks 49
tainted by lower infrastructure spending 22
• 5.2 Upside risks 50

02. ASSET OVERVIEW

• 2.1 Company timeline 24
• 2.2 Geographic footprint 25
• 2.3 Portfolio mix 26
• 2.4 Vertically integrated operations 27
• 2.5 Distribution network 28
• 2.6 Debt profile 29
• 2.7 Shareholding 30
• 2.8 Corporate structure 31
• 2.9 Board of directors 32
• 2.10 Management 33

INITIATING COVERAGE | 9
01 INDUSTRY
OVERVIEW
Glossary
1.1 Introduction – Cement types & products
1.2 US Snapshot
1.2.1 Strong US fundamentals suggest
positive demand and pricing dynamics
1.2.2 Rise in infrastructure spending to
further boost cement volumes
1.2.3 The US residential sector, one of the
main catalysts for growth
1.2.4 Cement dynamics in GCC US’ key
1.2.5 Booming construction market with no
signs of deceleration
1.3 Mexico Snapshot
1.3.1 Recovery in Mexican construction
activity to underpin cement demand ahead
1.3.2 Chihuahua’s cement demand tainted
by lower infrastructure spending

INITIATING COVERAGE | 10
GLOSSARY

MMT: Million metric tons of cement.

Capacity Utilization Rate: Measures the proportion of potential economic output that is
actually realized.

Housing Starts: Number of new residential construction projects that have begun. Start
of construction occurs when excavation begins for the footings or foundation of a project.

Building Permits: Type of authorization that must be granted by a government or other

regulatory body before the construction of a new or existing building can legally occur.

Single-Family Housing: The single-family statistics include fully detached, semidetached

(semi attached, side-by-side), row houses, and townhouses.

Multi-Family Housing: Residential buildings containing units built one on top of another
and those built side-by-side, which do not have a ground-to-roof wall and/or have
common facilities.

PCA (Portland Cement Association): Non-profit organization that conducts and sponsors
concrete research projects, participates in the setting of industry standards of cement
manufacturing, and disseminates free designs of concrete-based architectural structures
and its elements, etc.

Cement Distribution Terminal: A low cost logistics system for the distribution of Portland
cement. The first leg of distribution is done where possible by water transportation,
however rail transportation is generally the next best option, where the cement is
transferred from the port or plant by rail to the distribution terminal.

Alternative Fuels (AF): Known as non-conventional and advanced fuels, made through
the co-processing of industrial waste and can be used as substitutes for coal, oil, natural
gas, etc.

Source: US Census Bureau, Portland Cement Association (PCA), PEC Consulting, International Finance Corporation
(IFC) and GBM estimates.

INITIATING COVERAGE | 11
1.1 INTRODUCTION – CEMENT TYPES & PRODUCTS

Oil-well cement are used for

cementing work in the drilling
Used as binder in construction. Construction of oil wells, where it is subject
cement is usually inorganic, often lime or to high temperatures and
calcium silicate based. pressures.

Ready-mix concrete is the mixture of cement, Higher value-added

stone aggregates, and water that may contain Oil-well
Specialty cement
chemical or mineral additives. cement
Construction
cement

Aggregates

Ready-mix
concrete

Concrete block is a right
rectangular prism-shaped
pre-fabricated piece, with
one or more vertical
hollow cores to be used in
simple or structural
masonry systems.
Prefabs
These cementing products were developed to
Concrete
provide special characteristics to concrete and,
blocks therefore, offer specific solutions to customers.
Aggregates are materials, like
stone, sand and gravel, used as
the main ingredients in concrete.
Prefabs are made of pre-stressed
concrete, offering solutions for the
construction of infrastructure and
commercial and industrial buildings.

Source: Company data and GBM estimates.

INITIATING COVERAGE | 12
1.2 US SNAPSHOT
1.2.1 STRONG US FUNDAMENTALS SUGGEST POSITIVE DEMAND AND PRICING DYNAMICS
US’ current economic fundamentals suggest a positive outlook for the cement industry, given a buoyant construction market and the stronger household formation that has resulted from
a greater job creation. Even without any further stimulus to the economy (tax reform or infrastructure plan), the construction activity and the cement consumption in the US may record
sustained gains, in the ballpark of a ‘17-’22e CAGR of 2.9%, according to the PCA.
US Cement Industry Market Share (in terms of capacity) US Cement Production & Consumption Forecast
–Million tons 20.0%
3% 3% LHN 120 Installed Capacity 18.0%
5%
HEI 16.0%
5% 27% 100
CX 14.0%
5% BZU 80 12.0% Cement demand is expected to surpass its practical
10.0% capacity over the next years.
5% ARGOS 60
CRH
8.0%
40 6.0% Therefore, a rising demand along with tight capacity
9% TAIHEIYO
4.0% utilization rates in the industry will translate into robust
EXP 20
2.0% pricing dynamics.
17% Others 0 0.0%
9%
GCC 2016 2017 2018e 2019e 2020e 2021e 2022e
14% ELEMENT Consumption Production Imports Import Share (%)
Source: Companies’ data and GBM estimates Source: PCA and GBM estimates

According to the PCA, domestic cement capacity is currently at 109 MMT. Aside from domestic supply, the industry operates roughly 125 import terminals with a total capacity of 45 MMT
(est. utilization rate ~30%). Thus, as capacity utilization rises, domestic demand should be met by imports, primarily through local producers. Still, GCC’s market position is notably
defensive against seaborn competition given the high freight costs.

US Capacity Utilization Rate vs. Imports share US Cement Price Dynamics

30% –USD
94% 100%100% '17-'20 CAGR
90% $180.0 Industry: +2.4%
25% 92% 90% GCC: +5.4%
82% 84% Therefore, the outlook of the US cement price is highly $170.0
80%
20% 25% 74% 18%
16% 70% favorable, as the capacity utilization is expected to tighten $160.0
68% 14%
15% 12% 56% 61% 60%
in 2019, which would drive producers to command price $150.0
10% hikes above inflation. Altogether, we remain confident that
10% 8% 8% 8% 50% $140.0
cement consumption will continue to grow at a sustained
40% rate through 2018 and onwards. $130.0
5%
30% $120.0
0% 20% $110.0
2018e
2019e
2020e
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

$100.0
2014 2015 2016 2017 2018e 2019e
Imports Share as a % of Total Cement Production
Capacity Utilization Rate Industry GCC
Source: PCA, United States Geological Survey (USGS), and GBM estimates Source: GBM with PCA data
INITIATING COVERAGE | 13
1.2 US SNAPSHOT
1.2.1 STRONG US FUNDAMENTALS SUGGEST POSITIVE DEMAND AND PRICING DYNAMICS

The infrastructure and residential sectors will drive cement demand growth in the US.
One of the main growth drivers for cement demand should be the infrastructure sector, supported by a higher state and local expenditure as well as a strong construction market,
followed by a resilient residential sector.

US Cement Demand Forecast US Cement Demand by Sector GCC US' Demand Breakdown by Sector
CAGR '17-'22
14%

41.7 43.4 44.8 35%

39.1 +3.4%
37.8 38.2
38.7 Residential Residential

18.7 19.0 Non-Residential Non-Residential

17.3 17.8 18.3 +2.9%
53%
15.4 16.5 45%
Infrastructure Infrastructure
33%
27.4 29.1 30.5 31.6 32.3 32.9 33.3 +2.7%
20%
2016 2017 2018e 2019e 2020e 2021e 2022e
Residential Non-Residential Infrastructure

Expected rebound in infrastructure spending Housing demand on the rise

Infrastructure Construction Expenditures Total Housing Starts
-Thousand Units

2,500

2,000

1,500

1,000

500
’11-’16 CAGR +1.8%
0

2018e

2019e

2020e
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017
’17-’22e CAGR +3.4%

The public sector is expected to recover throughout 2018, underpinned by the recent
government plans, which include a higher state and local spending in infrastructure
under the FAST Act, and the US$1.5 trillion infrastructure plan whose potential impact
should start to reflect as of 2020.
Source: US Census Bureau, PCA and GBM
A rise in housing starts, mostly driven by the single-family housing, coupled with an
increase in credit availability and disposable income due to the recent tax reform should
bolster private construction in the US, which would in turn have a positive impact on
demand coming from the housing segment.
INITIATING COVERAGE | 14
1.2 US SNAPSHOT
1.2.2 RISE IN INFRASTRUCTURE SPENDING TO FURTHER BOOST CEMENT VOLUMES

The FAST Act brightens the outlook for demand. Deficient roads
The new highway bill named the Fixing America’s Surface Transportation Act (FAST Act) raises the current funding levels, —Lane miles rated 'poor' as a share of total lane miles
which ensures a more stable financing environment, thereby enabling a greater engagement in long-term projects, which
tend to be highly cement intensive.

Highways will
receive more than
US$205 billion—an
US$305 billion increase of roughly Average addition
5-year 11.0% in current of 835k tons

GCC
transportation spending annually to the
bill cement industry,
according to PCA
GCC’s state presence
figures
Highest Concentration
Average Concentration GCC’s key states will receive ~20%
Lowest Concentration of total DOT spending authorization.
Source: US Department of Transportation, PCA and GBM estimates

Trump’s infrastructure plan, an upside risk for US cement demand

The US$1.5 trillion infrastructure plan proposed includes a US$200 billion federal contribution over the next decade to spur another US$1.3 trillion expenditure by cities, states and the private
sector.

10
BY
Year Lower the US$15 billion for US$100 billion US$25 billion
NUMBERS average permit US$200 billion transformational for local for rural
time from 10 to infrastructure projects prioritization of infrastructure
2 years. funding infrastructure
2 needs
Year

However, while the new infrastructure policy proposed by the Trump administration should boost construction activity, a robust expenditure is not likely to materialize until 2020, which
would represent an upside risk for cement volumes in the years to come. Thus, the potential impact of the infrastructure spending plan is not being incorporated into our estimates
for demand.

Source: DOT, PCA , company data and GBM estimates INITIATING COVERAGE | 15
1.2 US SNAPSHOT
1.2.3 THE US RESIDENTIAL SECTOR, ONE OF THE MAIN CATALYSTS FOR GROWTH
Housing demand has been growing at a fast pace, as a solid labor market has boosted income gains and increased credit availability, which has translated into a promising outlook for the
sector, where both single-family houses and apartment buildings have consistently increased to twice as much the crisis levels. Particularly, the housing segment in Midwestern US has
ramped up construction, suggesting solid fundamentals for states where GCC has a strong presence.
Housing starts Housing Permits by Region Housing Permits 2017 %YOY Growth by State
—Thousand Units —Thousand Units

-0.7%
700 KT 8.7%
3.9 15.8% 16.7% ME
347 351 355 600 WA MI 4.8% NY 8.8%
344 342 3.2%
MT
-14.3% 2.3%
ND OH
MA
2.4
392 355 500 OR 16.6%
MN
1.4%
-6.0%
RI
-4.9%
394 ID 11.5% SD WI -17.4%
400 8.9% 8.9%
WY
9.7% 2.6% -3.1% CT
IA PA 6.4%
NA NE 10.6% NJ
300 12.1 UT 4.4%
CO -8.4% -1.0% IL 13.7%
CA
1,020 1,003 980
KS MO 4.8% DE
914 964 200 10.7%
784 840 10.9% -2.5% -8.3% 13.9% NC 28.7% MD
712 AZ NM OK AR -1.3% D
100 8.6% AL -8.0% 10.4%
MS GA SC GCC’s state presence
5.6%
0 TX <-10%
5.0% >-10%-0%

1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
2015 2016 2017 2018e 2019e 2020e 2021e 2022e LA 5.6%
FL >0%-10%
>10%-<20%
Single-Family Multi-Family Midwest South West Northeast >20%
Source: PCA , US Census Bureau and GBM estimates

The favorable expectations for the housing segment, and in particular for the single-family housing starts, suggest positive demand dynamics for cement, as they are the most cement-
intensive projects within the residential sector, which should bring a sustained growth for cement volumes going forward.
US Residential Cement Consumption Average tons of cement US Residential Cement
—Million tons per housing start Consumption Breakdown
30.0 2.9 2.9 Single-Family
2.9 2.9 3.0
25%
3.0
25.0 3.3 7.0 7.1 7.1
3.3 7.4 7.0
21.3
7.2
Unemployment rate 20.0 6.4
6.2
Core CPI 15.0 65%
DRIVERS: Multi-Family
Income 10%
Mortgage rates 10.0 20.5 21.7 21.4 20.9
17.9 19.5
15.2 16.7
Housing starts
5.0

0.0 8.4
Single-Family
2018e

2019e

2020e

2021e

2022e
2015

2016

2017

Multi-Family
Single-Family Improvements Multi-Family Improvements
Source: PCA , US Census Bureau and GBM estimates
INITIATING COVERAGE | 16
1.2 US SNAPSHOT
1.2.4 CEMENT DYNAMICS IN GCC US’ KEY STATES
Texas Texas’ Cement Consumption
17.0 6.0%
16.5 4.3% 4.1%
• 15.0% of US cement consumption
GCC’s strategic geographic footprint is mainly 16.0 2.9% 3.0% 4.0%
• GCC’s market share (in terms of 15.5
concentrated in the “Center-Cut” of the US, with capacity) 4.0% or 0.5 MMT 15.0 2.0%
presence in key states with a solid outlook for • Cement Consumption ‘17-’22e 14.5
cement consumption and that are landlocked 14.0 0.0%
CAGR: +2.7% 13.5 -0.1%
from seaborne imports that are likely to increase • Main catalyst: Infrastructure 13.0 -2.0%
Odessa Plant sector 2016 2017 2018e 2019e 2020e
in the coming years given the rising demand. Cement Consumption (MMT) % YOY

Colorado Colorado’s Cement Consumption

3.0 10.0%
• 2.4% of US cement consumption 7.8% 8.1%
2.5 8.0%
GCC US’ Volume Breakdown by State • GCC’s market share (in terms of
2.0 5.7% 6.0%
capacity) 34.4% or 1.1 MMT
• Cement Consumption ‘17-’22e 1.5 3.3% 3.8% 4.0%
CAGR: +3.2% 1.0
0.5 2.0%
• Main catalyst: Non-residential
2% Pueblo Plant sector 0.0 0.0%
3% 2016 2017 2018e 2019e 2020e
4% Cement Consumption (MMT) % YOY
2%
5%
South Dakota South Dakota’s Cement Consumption
31% 0.6 7.0% 8.0%
6% 3.5% 4.6%
• 0.5% of US cement consumption
0.5 4.0%
• GCC’s market share (in terms of
capacity) 100% or 1.1 MMT 0.4 -2.3% 0.0%
• Cement Consumption ‘17-’22e
0.3 -6.4% -4.0%
13% CAGR: -1.8%
• Main catalyst: Infrastructure 0.2 -8.0%
Rapid City Plant sector 2016 2017 2018e 2019e 2020e
Cement Consumption (MMT) % YOY

New Mexico New Mexico’s Cement Consumption

13% 21%
0.7 30.0%
0.6 20.1%
• 0.5% of US cement consumption 13.1% 20.0%
0.5
Texas North Dakota • GCC’s market share (in terms of 0.4 4.8% 3.3% 10.0%
Colorado Iowa capacity) 100% or 1.1 MMT 0.3 0.0%
South Dakota Nebraska • Cement Consumption ‘17-’22e 0.2
New Mexico Wyoming
-
0.1 -11.6% -10.0%
CAGR: +4.9%
Minnesota Others • Main catalyst: Commercial sector 0.0 -20.0%
Tijeras Plant 2016 2017 2018e 2019e 2020e
Cement Consumption (MMT) % YOY
Source: PCA and GBM estimates
INITIATING COVERAGE | 17
1.2 US SNAPSHOT
1.2.4 CEMENT DYNAMICS IN GCC US’ KEY STATES
Colorado’s Cement Demand Dynamics Main catalysts for cement demand
Cement Consumption Breakdown by Sector
Non-Residential Sector Infrastructure Sector
‘18e-’22e Cement Demand CAGR +5.2% ‘18e-’22e Cement Demand CAGR +4.4%
Mostly driven by significant expenditure coming from Boosted by higher state highway expenditures
office construction and retail developments
26%

39% Cement Demand for Office Buildings Cement Demand for Highways & Streets

120.0 26.8% 30.0% 540.0 20.1% 25.0%

100.0 25.0% 520.0 20.0%
20.0% 15.0%
80.0 15.0% 500.0 10.0%
6.9% 3.8%
60.0 5.6% 7.6% 10.0% 480.0 3.0% 5.0%
35% 5.0% 3.8% -4.9%
40.0 5.0% 460.0 0.0%
0.0% -7.5% -5.0%
20.0 -6.9% 440.0
Residential -5.0% -10.0%
Infrastructure 0.0 -10.0% 420.0 -15.0%
Non-Residential 2017 2018e 2019e 2020e 2021e 2022e 2017 2018e 2019e 2020e 2021e 2022e
Cement Consumption (KMT) % YOY Cement Consumption (KMT) % YOY

West Texas’ Cement Demand Dynamics

Main catalyst for cement demand
Tijeras Palo Duro NEW
Basin MEXICO
TEXAS
As oil prices climb, cement demand in the Permian Basin is expected Oil-Well Cement
to keep growing. ‘18e-’22e Cement Demand CAGR +13.9%
Central Basin Eastern
Platform Shelf
Average Crude Oil Spot Price Oil-Wells Cement Demand
Delaware Odessa 1800 45.0%
Basin 70.0 38.2% 40.0%
Samalayuca
1600
1400 30.9% 35.0%
65.0 30.0%
1200
Val Verde
19.5% 25.0%
Permian Basin Basin 60.0 1000
20.0%
800
GCC’s Plants 15.0%
55.0 600 10.0%
400 4.8% 5.0%
The Permian Basin has the lowest 50.0 200 1.4% 0.3% 0.0%
development cost of any field in the US. So, 0 -5.0%
45.0 2017 2018e 2019e 2020e 2021e 2022e
demand for oil-well cement is expected to
keep rising, as the Permian Basin is growing Cement Consumption (KMT) % YOY
40.0
into the largest oil patch in the world. 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
Source: PCA, World Bank, company data and GBM estimates
INITIATING COVERAGE | 18
1.2 US SNAPSHOT
1.2.4 CEMENT DYNAMICS IN GCC US’ KEY STATES

New Mexico’s Cement Demand Dynamics Main catalysts for cement demand
Cement Consumption Breakdown by Sector
Non-Residential Sector Infrastructure Sector
‘18e-’22e Cement Demand CAGR +3.5% ‘18e-’22e Cement Demand CAGR +3.4%
Favorable dynamics in the retail and tourism- Benefited by increased public building construction
related construction. and higher highway spending.
27%
Retail & Commercial Cement Demand Cement Demand for Public Buildings
39%
16.0 45.0% 30.0 50.0%
39.4% 40.0% 39.2%
25.0 40.0%
12.0 35.0%
30.0% 20.0 30.0%
25.0% 15.0 12.2% 20.0%
8.0 9.5% 8.9%
34% 34% 20.0% 4.6% 10.0%
15.0% 10.0
4.0 7.4% 10.0% -8.0% 0.0%
2.9% 3.2% 3.5% 3.4% 5.0% 5.0 -10.0%
Non-Residential
0.0 0.0% 0.0 -20.0%
Residential 2017 2018e 2019e 2020e 2021e 2022e
2017 2018e 2019e 2020e 2021e 2022e
Infrastructure Cement Consumption (KMT) % YOY Cement Consumption (KMT) % YOY

South Dakota’s Cement Demand Dynamics
Cement Consumption Breakdown by Sector
22%
Main catalysts for cement demand
Infrastructure Sector Non-Residential Sector
‘18e-’22e Cement Demand CAGR +4.2% ‘18e-’22e Cement Demand CAGR +2.4%
Given higher in state transportation funding. Due to strong commercial building construction.

Cement Demand for Highway & Streets Retail & Commercial Cement Demand
250.0 15.0% 16.0
55% 10.2% 21.7% 30.0%
9.9%
14.0 13.5%
200.0 10.0% 20.0%
5.1% 12.0
150.0 5.0% 10.0 0.9% 10.0%
23% 2.2% 0.4% 0.3%
8.0 0.0%
100.0 0.0% 6.0
-10.0%
4.0
50.0 -5.4% -6.6% -5.0% -20.0%
2.0
Infrastructure -24.6%
0.0 -10.0% 0.0 -30.0%
Residential 2017 2018e 2019e 2020e 2021e 2022e 2017 2018e 2019e 2020e 2021e 2022e
Non-Residential Cement Consumption (KMT) % YOY Cement Consumption (KMT) % YOY
Source: PCA and GBM estimates
INITIATING COVERAGE | 19
1.2 US SNAPSHOT
1.2.5 BOOMING CONSTRUCTION MARKET WITH NO SIGNS OF DECELERATION

The good… The bad…

Construction activity in the US should pick up going forward, with GDP rising
and strong job conditions that propel growth across all segments in the sector,
supporting solid cement demand.
Per the US Chamber of Commerce Commercial Construction Index, 93%
of the total contracts in the country would see a surge in profit margins
by 2019.
Growth in the construction sector should be mainly supported by increasing
government expenditure and a strong housing sector, forecasting a 2.5%
CAGR in the next five years.
Labor shortages will continue to plague construction activity, as the industry recovers, less-
experienced workers are being used to support increased demand.
Construction laborers is among the 10 occupations with the highest job growth, with a
projected ‘16-26e CAGR of 12.4%.
Residential construction worker wages are growing 5% per year, almost doubling the 2.9%
wage growth pace for all workers.
According to the PCA, shortage of skilled workers is already slowing housing starts by
around 100-125k per year.

3 of the top 10 industries with the highest sales growth rate in 2017 were
related to construction, where the following stood out:
• Heavy & Civil Engineering Construction +17.1%
• Building Finishing Contractors +15.5%
• Offices of Real Estate Agents and Brokers +15.1%
Nearly two-thirds (60%) of contractors working primarily in the South, Midwest and West
regions report difficulties finding skilled workers.
In specific, ready-mix concrete producers are struggling to find qualified truck drivers, the
need for whom is rising in line with the increase in construction activity.

Construction Put in Place 21% of skilled workers are 55 years 29% of skilled workers are between the
—USD Billion and up ages of 45-54
300
450 Unemployment rate among construction workers
280
430
25.0%
260
410 20.0%
240 15.0%
390 6.1%
10.0%
370 220
5.0%

350 200 0.0%

2015 2016 2017 2018e 2019e 2020e 2021e 2022e 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e
Residential (Right-axis) Non-Residential Infrastructure

Source: PCA , US Census Bureau ang GBM estimates Source: PCA , US Census Bureau ang GBM estimates

INITIATING COVERAGE | 20
1.3 MEXICO SNAPSHOT
1.3.1 RECOVERY IN MEXICAN CONSTRUCTION ACTIVITY TO UNDERPIN CEMENT DEMAND AHEAD

The industrial output increased at its fastest pace since
2016, mainly propelled by construction, given:
• Completion of the National Infrastructure Plan
• Reconstruction activity after the September
earthquakes
• First private investments in the energy sector, with
modest rebound during 2018
Mexican construction industry should continue to grow
at a steady pace, mainly boosted by:
• Hospitality and tourism-related construction,
• Strong self-construction sector, and
• AMLO’s proposals of increasing investment significantly
over the coming years.
Construction GDP is poised to expand at an annual
average of 2.8% over the next decade—above the total
economy, which is expected to grow 2.4% per annum in
real, inflation-adjusted terms.

Industrial Production % YOY Construction GDP (% YOY) Mexico's GDP Forecast by Sector
–'17-'27e CAGR
9.0%

4.0%
2.5% 2.5% 2.8%
2.0% 1.8% 1.90% 2.00% 2.10% 2.20% 2.40%
-1.0% 1.0% Agriculture Mining Chemicals Financial Total
Manufacturing Services Economy
-6.0%
-1.0%
-11.0%

-16.0% 2.60% 2.80% 2.90% 3.00% 4.50%

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 -4.8% Retail Construction Travel and Banking Automotive
(Excl.) Tourism Manufacturing
Industrial Manufacturing Construction Mining 2013 2014 2015 2016 2017 2018e 2019e 2020e Wholesale)

Housing sector acting as main catalyst, with higher subsidies and credit from
INFONAVIT, and stable private bank lending. 2.7% 10.0%
44.0 AGR+
C 8.0%
'22e
Thus, a recovery in the An expected recovery in the economic cycle, coupled with greater remittances 42.0 '17- 6.0%
Mexican construction from the US should propel demand from the informal sector. 40.0 4.0%
industry should drive 38.0 2.0%
0.0%
cement demand going AMLO’s proposals to boost infrastructure spending and private investment 36.0
-2.0%
forward, together with could be an upside risk for demand. 34.0 -4.0%
specific catalysts, 32.0 -6.0%
such as: Volumes for the NAIM project (~1.3 MMT), representing 1% of the total
30.0 -8.0%
annual domestic demand.

2018e
2019e
2020e
2021e
2022e
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Favorable outlook within the industrial & commercial sectors, given a
higher manufacturing and export activity. Consumption (MMT) % YOY

Source: INEGI and GBM estimates

INITIATING COVERAGE | 21
1.3 MEXICO SNAPSHOT
1.3.2 CHIHUAHUA'S CEMENT DEMAND TAINTED BY LOWER INFRASTRUCTURE SPENDING

GCC’s Mexican operations are concentrated in the State Construction activity hit by a limited infrastructure spending due to the state's hefty indebtedness.
of Chihuahua, where it is the sole producer. Chihuahua Construction activity in the state of Chihuahua outperformed the national dynamics/industry in 2016, thanks to a sudden
accounts for ~3.0% of Mexico’s total cement consumption. uptick mostly driven by privately funded developments.
We estimate that GCC has ~90.0% of market share in
Chihuahua, making it highly representative of the state’s However, the construction activity has lost traction mainly
Construction Activity (%YOY)
dynamics. because of the low investment in infrastructure that has
20.0% been a consequence of the state’s hefty debt, which saw a
Cement Volume Growth (% YOY) GCC vs. Mexico substantial increase during the last term of office.
15.0%
20% 10.0% Chihuahua’s Public Debt
17%
15% 5.0%
0.0%
10% 8% 9%
7% P$49.4 Bn.
5% 5% -5.0% 8.9% of GDP
5% 3%
2% -10.0% 2016
0%
0%
-15.0% %
95
-2% -2% +2
-5% -20.0%
-6% P$12.5 Bn.
-10% -25.0% 1.9% of GDP
1Q15
2Q15

2Q16
3Q16

3Q17
4Q17
1Q16

2Q17
3Q15
4Q15

4Q16
1Q17

1Q18
2012 2013 2014 2015 2016 2017 2010

Mexico GCC National Chihuahua

Cement Price Dynamics We believe that construction activity could be impacted by the concerning financial situation of Chihuahua and its strong
public influence, nevertheless, demand for cement going forward should be sustained by the following:
P$2,400
GCC’s Revenue Breakdown by Sector
P$2,200 Rising US exports

P$2,000 6% Self-Construction
8%
More developments funded by the private Constructors
P$1,800
sector, which rose at a 12.4% CAGR over 9% Mining
the last five years. 34%
P$1,600 Exports
11% Residential
P$1,400
Infrastructure
2014 2015 2016 2017 2018e Strong manufacturing activity 12%
Mexico GCC 20% Other
Source: SAT, INEGI, company data and GBM estimates
INITIATING COVERAGE | 22
02 ASSET OVERVIEW
2.1 Company timeline
2.2 Geographic footprint
2.3 Portfolio mix
2.4 Vertically integrated operations
2.5 Distribution network
2.6 Debt profile
2.7 Shareholding
2.8 Corporate structure
2.9 Board of directors
2.10 Management

INITIATING COVERAGE | 23
2.1 COMPANY TIMELINE

Acquisition of the Acquisition of the

cement plant in Tijeras, cement plant in South Expansion of Rapid City
New Mexico, and the Dakota, US cement plant in South
distribution centers in Acquisition of Alliance
Dakota
El Paso, Texas and Concrete Inc. assets, a
Albuquerque, New Acquisition of coal mine concrete operation in
Secondary offering of
Mexico, US assets in Colorado, US Iowa and Minnesota
13.5% of CEMEX’s 23%
direct stake in GCC. The
Investment in concrete Acquisition of 47.02% of Operations start in the Operations start
remaining 9.5% is sold
block production Sociedad Boliviana de cement plant located in in the Corte Oriente
Listed on the Mexican to two financial
capacity Cemento (SOBOCE) Pueblo, Colorado aggregates plant.
Stock Exchange institutions.

1943 1992 1994-2000 2001-2006 2008-2014 2015-2016 2017-2018

Cement manufacturing Acquisition of four The modernization of Acquisition of CEMEX’s

operations start with a ready-mix facilities in the cement plant in cement plants in Odessa,
60-kton capacity. northeastern South Chihuahua City is Texas and Lyons, Colorado,
Dakota and completed. in addition to other assets
southwestern in El Paso and Las Cruces.
Minnesota, US Operations start in the
new limestone aggrega- Purchase-sale
Operations start in the
Acquisition of tes, concrete prefab transaction
Samalayuca cement plant,
Mid-Continent panels and dry mixes with CRH
located in Chihuahua.
Concrete, Co. and plants in Samalayuca,
Alliance Transportation, Chihuahua.
Inc., with operations in
Oklahoma and Sale of stake in SOBOCE
Acquisitions/Investments Arkansas, US to CCS

INITIATING COVERAGE | 24
2.2 GEOGRAPHIC FOOTPRINT

Annual Production
Capacity
MMT
Trident Plant Rapid City Plant Cement Production Plants 8 5.8
Montana South Dakota
Inst. Capacity 315K MT Inst. Capacity 727K + 440K (expansion) MT Mexico 3 2.3
Ut. Rate +90% Ut. Rate 90% (w/o expansion)
~58% (w/expansion)
• Chihuahua, Chih.
UNITED STATES OF AMERICA • Ciudad Juarez, Chih.
• Samalayuca, Chih
Pueblo Plant
Colorado US 5 3.5
Inst. Capacity 1.1 MMT
Ut. Rate 84% • Tijeras, New Mexico
Tijeras Plant
New Mexico
• Rapid City, South Dakota
Inst. Capacity 436K MT • Pueblo, Colorado
Ut. Rate 89% • Odessa, Texas
• Three Forks, Montana
For cement distribution, the
21 Cement Terminals
company has:

Odessa Plant • Colorado • Kansas • Nebraska

Texas • North Dakota • Minnesota • Texas
Juarez Plant Inst. Capacity 514K MT
Ut. Rate 93% • South Dakota • Montana • Wyoming
Chihuahua
Inst. Capacity 123K MT • Iowa • New Mexico
Ut. Rate 89% GCC's PRESENCE
Mexico US Total
Chihuahua Plant Concrete plants 40 92 132
Chihuahua Ready mix concrete trucks 247 489 736
MEXICO Inst. Capacity 1.1 MMT
Ut. Rate 70% Aggregate plants 4 6 10
Samalayuca Plant Transport trucks 155 276 431
Chihuahua
Inst. Capacity 1.1 MMT Railway hoppers 1,900 1,900
Coal mine Cement plant
Ut. Rate 93% Employees 1,392 1,634 3,026
Concrete Cement terminal

INITIATING COVERAGE | 25
2.3 PORTFOLIO MIX

Consolidated Revenue Breakdown by Product Type−Proforma Revenue Breakdown by Region EBITDA Breakdown by Region

10%
3%
24%
1% Cement &
Mortar 34%
Ready-Mix US 66% US
19% 67% Aggregates 76% Mexico Mexico
Concrete Blocks
Others

US Revenue Breakdown by Product Type Cement Volume Breakdown by Type Revenue Breakdown by Sector

11% 14%

30%
Cement & Mortar Infrastructure
29% 60% 70% Gray, Specialty 53%
Ready-Mix Non-Residential
Asphalt, Coal & & Masonry
Residential
Other Cement 33%
Oil-Well Cement

Mexico Revenue Breakdown by Product Type Revenue Breakdown by Format Revenue Breakdown by Sector

11% 6%
8%
5%
Self-Construction
4% 32% 9% Mining
Cement & Mortar 34% Residential
Ready-Mix Bulk
Aggregates 68% Others
53% Bagged
Concrete Blocks Constructors
11%
Other Exports
27% Infrastructure

12%
20%

INITIATING COVERAGE | 26
2.4 VERTICALLY INTEGRATED OPERATIONS

GCC's operations are vertically integrated in the Mexican and US markets where it operates, which allows for higher efficiencies at each stage of production, distribution and sale
of its products.

GCC’s Vertically Integrated Process

GCC owns quarries from which it supplies

the necessary raw materials for the
production of cement. These include most
of the limestone supply required, as well as
all the clay and gypsum necessary for
operations in Mexico, which represents
94% of the raw material required for the
production of cement.

QUARRY GYPSUM

GCC has a coal mine in Hesperus, Colorado,

with an installed capacity of 870 KMT,
which meets all the coal needs of its
cement plants. This makes it possible to
lower the impact of energy cost volatility that
tends to harms profitability.

AGGREGATES CEMENT COAL MINE

CONCRETE OPERATION

DISTRIBUTION CENTERS CONCRETE CONCRETE BLOCK PREFAB

AND CENCRETE TERMINALS

INITIATING COVERAGE | 27
2.5 DISTRIBUTION NETWORK

Through its distribution network, GCC self-supplies efficiently nearly 100% of the cement
required for the production of ready-mix concrete from its plants.

GCC’s distribution network makes it possible to have cement inventories closer to its
customers, which reduces delivery times, freight and distribution costs, and enables it to
better meet the needs of its customers.

736 Ready-mix trucks

431 Transport trucks ALBERTA

1,900 Railway hoppers

ND
MT
MN

SD WI
ID WY
IA
NE

KS
UT
CO

MT MT
MT
NM W TX

E TX
Cement terminal

Cement plants
CHIHUAHUA

INITIATING COVERAGE | 28
2.6 DEBT PROFILE

Maturity Profile Debt Breakdown by Currency Debt Breakdown by Instrument Type

–USD Million
260

37%

176
Total Debt: Total Debt:
US$660 Mn. US$660 Mn.
104
92

63%
100%
24
4
USD Bank Notes
2019 2020 2021 2022 2023 >2024 Debt Breakdown by Interest Rate

Net Debt vs. Net Debt/EBITDA

–USD Million
800 6.3x 7.0x

5.1x 6.0x 37%

600
5.0x
Cost of Debt:
3.9x 4.34%
400 3.4x
2.9x 4.0x

200 3.0x 63%

1.9x
1.4x
0 2.0x
0.7x
0.1x 1.0x
-200 Variable (Libor + 1.75%) Fixed (5.25%)
-0.4x
-1.0x 0.0x
GCC’s Credit Ratings
-400
-1.0x Rating Outlook
-600 -2.0x
S&P BB+ Stable
2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
Net Debt Net Debt/EBITDA Fitch BB Stable

INITIATING COVERAGE | 29
2.7 SHAREHOLDING

GCC’s controlling shareholder is CAMCEM, which CEMEX’s stake in GCC has declined from 43.72% to 20.7%
is controlled by the Terrazas and Marquez families. In August 2016, GCC signed a deal whereby, among other things, they agreed to the simultaneous merger and absorption
CEMEX still has a 20.7% indirect stake through of Imin and CAMSA into GCC, for the purpose of simplifying GCC’s control structure.
CAMCEM.

Pre-merger Post-merger
CAMSA* 250,000,000 75.2% CAMCEM 171,658,588 51.6%
CEMEX** 68,902,041 20.7%
Float 82,535,508 24.8% Promotora 102,756,547 30.9%
CEMEX 76,483,332 23.0%
Total Shares 332,535,508 100.0%
Float 84,393,588 25.4%
Total Shares 332,535,508 100.0%
*CAMSA: Control Administrativo Mexicano, S.A. de C.V.

**CEMEX to own 40.139% of CAMCEM, reaching a total ownership of 43.72%.

In February 2017, CEMEX announced the pricing of its In September 2017, CEMEX sold  its remaining 9.47%
secondary offering of its interest in GCC, involving this direct interest in GCC for around US$168 million to two
Free Float CAMCEM time 51.75 million shares (15.6% stake), at a price of financial institutions.
48.4% 51.6% P$95.0, each, including 6.75 million shares available to the
underwriters of the offerings pursuant to a 30-day option. Simultaneously, CEMEX entered into 18-month equity
forward contracts on the stock price of GCC, with the option
CEMEX ended up selling only a 13.5% stake in GCC, to unwind them early.
keeping a 9.5% direct share, while holding 20.7% through
CAMCEM.
38.9% of free float Promotora
9.5 % of financial 59.9% GCC's shareholding structure after GCC's shareholding structure after CEMEX
institutions’ stake 40.1%
CEMEX's secondary offering sold the remaining direct interest.
CAMCEM 171,658,588 51.6% CAMCEM 171,658,588 51.6%
CEMEX 68,902,041 20.7% CEMEX 68,902,041 20.7%
Promotora 102,756,547 30.9% Promotora 102,756,547 30.9%
CEMEX 31,483,332 9.5% Float 160,876,920 48.4%
Float 129,393,588 38.9% Financial Institutions 31,483,332 9.5%
Total Shares 332,535,508 100.0% Total Shares 332,535,508 100.0%

INITIATING COVERAGE | 30
2.8 CORPORATE STRUCTURE

Grupo Cementos de Chihuahua, S.A.B. de C.V.

Cementos de Chihuahua, S.A. de C.V. GCC Comercial, S.A. de C.V.

(99.99%) (99.99%)

GCC Comercial, S.A. de C.V. GCC Concreto, S.A. de C,V, GCC Transporte, S.A. de C.V. Construcentro de Chihuahua, Materiales Industriales GCC of America, Inc.
(99.99%) (99.99%) (99.50%) S.A. de C.V. de Chihuahua, S.A. de C.V. (99.99%)
(99.99%) (99.96%)

Consolidated
GCC Sun City GCC Alliance Mid Continent GCC Permian, LLC. GCC Rio Grande, Inc. GCC Dacotah, Inc.
GCC Energy, LLC. Ready-Mix, Inc.
Materials, LLC. Concrete, Inc. Concrete Company, Inc. (99.99%) (99.99%) (99.99%)
(99.99%) (99.99%)
(99.99%) (99.99%) (99.99%)

INITIATING COVERAGE | 31
2.9 BOARD OF DIRECTORS

Board of Directors
Name Position Description
GCC's Chairman since 2013, he is also Chairman of GCC’s majority shareholder, CAMCEM, and several other companies, while serving as a member of
Federico Terrazas Becerra Chairman
the Board at Inmobiliaria Ruba. He holds a BS from ITESM and postgraduate management degrees from Harvard.

Founding member of GCC’s Board of Directors, he served as Chairman from 1991 until 2013. He is father of the current Chairman. He is also Chairman of
Federico Terrazas Torres Regular Member
several other organizations in different industry segments. He holds a BS from ITESM and postgraduate degrees from IPADE.

Founding member of GCC and uncle of the current Chairman of the Board. He is a Board member at several GCC subsidiaries and of its majority
Miguel Márquez Prieto Regular Member
shareholder, CAMCEM. He studied at Babson College of Business in Boston, Massachusetts.

Founding member of GCC and many of its subsidiaries. He is a civil engineer graduated from Cornell University and performed postgraduate studies at
Enrique Terrazas Torres Regular Member
IPADE.

Luis Márquez Villalobos Regular Member Member of GCC’s Board of Directors since 1991, he serves as advisor to Grupo Cofiasa's general management.

Member of GCC's Board of Directors since 1991. He is Secretary of Cemex’s BOD. He has worked for Cemex since 1987, and currently performs as the
Ramiro Villarreal Morales Regular Member
company’s Legal Executive VP. He holds a Law degree from the University of Nuevo León and an MBA from the University of Wisconsin.

Member of GCC’s Board of Directors since 2010. He serves as Cemex’s Executive VP of Administration and Organization. He holds a degree in Civil
Luis Hernández Echávez Regular Member
Engineering from ITESM and an MBA from the University of Texas.

Fernando González Olivieri Regular Member Member of GCC’s Board of Directors since 2010. He has been the CEO of CEMEX since 2014. He earned his BA and MBA from ITESM.

Member of GCC's Board of Directors since 2011. He is currently President of CEMEX Mexico and he is also in charge of the company’s Global
Juan Romero Torres Regular Member
Procurement area. Mr. Romero graduated from the University of Comillas, where he studied Law, Economics, and Management.

Member of GCC’s Board of Directors since 2013. He currently serves as CEMEX’s CFO. Mr. González holds a BS in Industrial Engineering from ITESM and
José Antonio González Regular Member
an MBA from Stanford University.

Independent Mr. Ruiz has been an independent member of GCC’s Board of Directors since 2006. He is a founding partner at Chevez, Ruiz, Zamarripa law firm. He
Fernando Ruiz Sahagún
Member participates in the BOD of several public companies in Mexico, including Grupo Mexico and Santander. He is an accountant graduated from UNAM.

Independent Independent member of GCC’s Board of Directors since 2006. He is founding partner of Gossler accounting firm. He is an accountant graduated from the
Romulo Jaurrieta Caballero
Member University of Chihuahua.

Independent Independent member of GCC’s Board of Directors since 2009. Since that year he has served as CEO of Comercializadora de Origen Natural. He holds a
Pedro Escobedo Conover
Member degree in Engineering from ITAM.

Independent Member of GCC’s Board of Directors since 1995. He has held management positions at CEMEX, including CFO. He is a Chemical Engineer graduated from
Hector Medina Aguilar
Member ITESM and holds an MBA from Bradford University.

INITIATING COVERAGE | 32
2.10 MANAGEMENT

GCC Management
Name Position Description Years in GCC

Mr. Escalante joined the company in 1999 and was appointed CEO in January 2015. His former positions at the
company include President of both the US and Mexico divisions. His external experience includes General Director
Enrique Escalante CEO 18
at Plywood Ponderosa and Chairman of the PCA. He is an Industrial and Systems Engineer from ITESM and holds
an MBA from Cornell University.

Mr. Arias joined GCC in 1996, working at the Strategic Planning department. From 2001 to mid-2017, he was
Luis Carlos Arias CFO headed the Corporate Treasury and Investor Relations departments. In May 2017, he was appointed CFO. He 21
holds a BS and an MBA from ITESM and postgraduate degrees from IPADE.

Mr. Henley joined the company in 2012 and was appointed to his current post in 2014. His external experience
President of the includes VP of Growth and Improvement and VP of Finance at Boral Industries, where he led the company’s M&A
Ron Henley 5
US Division activity and organic expansion. He holds a BA in Finance and Accounting from the University of Missouri and
became a CPA in 1983.

Mr. Gonzalez joined the company in 1973 and has held several positions in the Mexican operations, including
President of the
Rogelio González Director of the Samalayuca and Juarez plants and Product Manager at the Juarez plant. He was appointed to his 44
Mexico Division
current post in 2001. He holds a BS in Chemical Engineering and an MBA from ITESM.

Mr. Martínez joined the company in 2013, working first as a Risk analyst, and a year later, at the Funds & Grants
Head of Investor
Ricardo Martínez Procurement area in the Finance department. In May 2017, he was appointed Head of Investor Relations. He holds 5
Relations
a BS and an MBA from Universidad Autonoma de Chihuahua.

INITIATING COVERAGE | 33
03 PROFITABILITY
3.1 Ongoing improvements in product mix
3.2 Leading position in key US states
3.3 Operational flexibility with extensive
export capacity
3.4 Cost containment efforts & efficiencies
3.5 Cementing profitability levels going
forward

INITIATING COVERAGE | 34
3.1 ONGOING IMPROVEMENTS IN PRODUCT MIX

GCC is constantly focusing on improving its sales mix by increasing its cement revenue share—highest margin—and building a network that is fully vertically integrated. Moreover,
the company is also venturing in new markets like specialty cement & oil-well cement, higher value-added products.

GCC US' Cement Volume Breakdown by Type

Recent M&As have been aligned to the company’s strategy of
improving its product mix and have been highly value accretive.

2015 2017

1. Odessa acquisition, a good move with perfect timing. In 4Q16, 30%

GCC bought from CEMEX several assets in West Texas, including an
oil-well cement plant located in Odessa. Given the current oil price
levels, demand in the Permian Basin has intensified and, given that Introducing higher
it is a 100% oil-well cement facility, it is improving GCC’s product value-added products
mix substantially. GCC has a 30% share of the total oil-well cement
volumes in the US. The cement used for oil-well drilling is more 100% 70%
expensive than the cement used for construction (~+US$25 per ton).
Gray, Specialty & MasonryCement Oil-Well Cement

2. Purchase-sale transaction with CRH. In 2Q18, GCC disposed

of 1/3 of its ready-mix and transportation assets in Oklahoma and GCC's Consolidated Revenue Breakdown by Product Type
Arkansas that had the lowest margins in its portfolio as they were Divesting non-integrated
non-integrated operations. At the same time, the company acquired operations and increasing
cement operations 2015 2017* 2022e
a cement plant in Montana, increasing its cement revenue share
while expanding its distribution network into new markets. 3% 9% 3% 10% 3% 9%
1% 1% 1%
17%

3. Rapid City plat expansion. A 0.4 MMT capacity expansion (14.2%

of total US capacity) in the South Dakota-based plant should reach 19%
29%
the market in 2019 and will help address US’ growing demand. The 58% 67% 70%
expansion will contribute to GCC’s strategy of rising its cement Increasing cement revenue
sales, while increasing its efficiencies and lowering its costs. We share Cement & Mortar Concrete Block Others
are expecting Rapid City plant to reach a utilization rate of ~80.0% Ready-Mix Aggregates
by 2022, leading GCC's sales mix to have a cement share of 70.0%.

*2017 are pro forma figures considering the purchase-sale transaction with CRH.
INITIATING COVERAGE | 35
3.2 LEADING POSITION IN KEY US STATES

GCC’s unique geographic footprint in the central region of the US, which goes from Northern Mexico to the Canadian border and comprises twelve contiguous states, provides the
company with a strong competitive advantage as it is the only producer in most states.

Plus, these are markets with limited exposure to imports and large entry barriers, as these states are far from the coast and need to incur in high freight costs, which allows for an
even more favorable pricing environment.

GCC's position in core markets

Colorado N Mexico N Dakota S Dakota W Texas Wyoming
GCC's market
#2 #1 #3 #1 #1 #2
position
GCC's in-state
—
cement plants
Competitors'
LHC, CX none none none BZU* EXP
in-state plants
Other principal HEI,LHN,
EXP LHN LHN,AG ** —
competitors AG
*Refers to West Texas only **Approx. 12 MMT of capacity in East and Central Texas

GCC’s Cement Plants

Competitors’ Cement Plants

GCC’s State Presence

INITIATING COVERAGE | 36
3.3 OPERATIONAL FLEXIBILITY WITH EXTENSIVE EXPORT CAPACITY

GCC’s strategic distribution network and proximity to the US border has given the company a clear competitive edge due to lower production costs. GCC highly benefits from the export
capacity in its plants located in the state of Chihuahua, which help supply the US market, mostly meeting the demand of New Mexico and Texas.

Export share is ~65% of total production of Juarez & Samalayuca is exported to supply Texas and New
roughly 95% Mexico’s demand in the US.
Plants exporting Juarez
to supply the US market Current export
share ~50%
Samalayuca
GCC’s strategy is to keep leveraging Mexican operations to supply US demand through
solid margins and competitive costs.
Chihuahua

Going forward, organic growth should be mostly concentrated in its Mexico-based

plants, taking advantage of the spare capacity, strategic distribution network and lower
costs to supply the US market. The Chihuahua plant is running at 70.0% of capacity
utilization, with two kilns that are temporarily inactive. GCC’s plan consists of:

Rising exports driven by a strong US demand…

Export Share of Samalayuca & Juarez production (KMT)
1,083
Reactivating two kilns in the Chihuahua plant (90 KMT, each):
1,039 1,067 1,072
1,004
936
799
733
Export share has
increased due to the
rising demand,
81% mostly in Texas and
78% 80% 83%
71% New Mexico
64%
53% 53% 1. Fully dedicated to oil-well cement 2. Expected to be reactivated so that 100%
production, helping supply demand in of Samalayuca’s production can be used
the Permian basin in Texas, as the Odessa exclusively for exports given the rising
2015 2016 2017 2018e 2019e 2020e 2021e 2022e
plant is running at full capacity. demand in the US.

INITIATING COVERAGE | 37
3.4 COST CONTAINMENT EFFORTS & EFFICIENCIES

GCC’s solid operating efficiencies and cost containment efforts have provided the company with a clear competitive edge in the industry, enabling it to post continuous profitability
expansions. The company is able to deliver one of the highest margins in the industry, mainly thanks to the following:

COGS Breakdown by Type

7%
10% GCC’s costs
Plant Higher
29% containment
modernization operating
efforts &
15% leverage
efficiencies

15%
24%
Strategic Usage of
logistics Alternative Fuels
Labor Electricity
Energy Maintenance
Raw Materials Others
Vertical integration
throughout all the
COGS Breakdown by Currency production process

26%

74%
Recent Rapid City plant GCC US’ expansion GCC owns quarries that More than US$5.0 Higher consolidated
expansion should bring strategy seeks to meet its raw material million in savings utilization rate going
greater efficiencies and enter US markets needs and supply 100% in 2017 using AFs. from ~79.0% in 2018e
will require less that can be later of the cement required up to ~90.0% in 2022e.
maintenance. integrated into its for its ready-mix ops.
network.
USD MXN
INITIATING COVERAGE | 38
3.5 CEMENTING PROFITABILITY LEVELS GOING FORWARD

GCC should continue to post strong profitability improvements in the coming years, given its solid and strategic asset base and leading position in most markets. We are estimating an
EBITDA ‘17-’22e CAGR of 11.9% and a 420bp margin expansion, mainly explained by the following:

Favorable Higher Rising exports + Rapid City

pricing & efficiencies & 180 KMT plant
demand cost capacity from 2 expansion
dynamics containment kilns in
efforts Chihuahua plant
Purchase-sale
transaction with +89 bps +9 bps
+99 bps
CRH +224 bps
+176 bps

32.8%
28.6%
26.9%

2017 2017 Proforma 2022e

INITIATING COVERAGE | 39
04 VALUATION
4.1 GCC historical figures and GBM estimates
4.2 Valuation
4.3 Global peer comparison
4.4 Alternative valuation exercises

INITIATING COVERAGE | 40
4.1 GCC'S HISTORICAL FIGURES AND GBM ESTIMATES

P&L
USD Million 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
% YOY -0.3% -0.5% 10.1% 11.5% 10.2% 6.2% 5.2% 3.3%
Revenues 753 748 824 919 1,013 1,076 1,132 1,170
% YOY -1.5% -4.2% 7.1% 9.5% 7.4% 4.3% 3.9% 2.8%
COGS 571 75.8% 547 73.0% 585 71.0% 641 69.7% 688 67.9% 718 66.7% 746 65.9% 768 65.6%
% YOY 3.8% 11.1% 18.2% 16.6% 16.7% 10.3% 7.6% 4.3%
Gross Profit 182 24.2% 202 27.0% 239 29.0% 278 30.3% 325 32.1% 358 33.3% 386 34.1% 402 34.4%
% YOY -8.9% -3.0% 3.4% 11.0% 11.4% 7.3% 5.2% 4.9%
SG&As 78 10.3% 75 10.1% 78 9.4% 86 9.4% 96 9.5% 103 9.6% 109 9.6% 114 9.7%
% YOY 20.4% 17.2% 20.1% 32.8% 19.1% 11.5% 8.6% 4.1%
Operating Profit 103 13.6% 120 16.1% 145 17.5% 192 20.9% 229 22.6% 255 23.7% 277 24.5% 288 24.6%
% YOY 6.3% 11.6% 22.6% 22.4% 14.6% 9.7% 7.4% 3.9%
EBITDA 164 21.7% 182 24.4% 224 27.1% 274 29.8% 314 31.0% 344 32.0% 370 32.7% 384 32.8%
% YOY -9.1% -2.1% 56.5% -37.5% -18.1% -10.5% -21.6% -25.3%
Net Financial Expenses -36 -36 -56 -35 -29 -26 -20 -15
% YOY 44.9% 27.9% 5.8% 30.5% 69.6% 14.6% 11.9% 6.4%
Profit Before Taxes 67 8.9% 86 11.5% 91 11.0% 119 12.9% 201 19.8% 230 21.4% 258 22.8% 274 23.5%
% YOY 213.7% 64.3% -27.6% 132.8% 69.6% 14.6% 11.9% 6.4%
Income Taxes 10 17 12 28 48 55 61 65
% YOY 31.9% 21.5% 21.2% 8.1% 69.7% 14.6% 11.9% 6.4%
Majority Net Income 57 7.5% 69 9.2% 84 10.1% 90 9.8% 153 15.1% 176 16.3% 197 17.4% 209 17.9%

Return
2015 2016 2017 2018e 2019e 2020e 2021e 2022e
ROA 3.6% 3.7% 4.3% 4.5% 7.2% 7.9% 8.3% 8.4%
ROE 6.6% 7.9% 9.0% 9.1% 13.7% 13.9% 13.9% 13.2%
ROIC 7.1% 6.6% 8.4% 9.6% 11.5% 12.9% 14.2% 15.0%
FCF Yield 3.2% -10.4% 3.8% 4.8% 8.2% 10.1% 11.2% 12.0%
Dividend Yield 0.4% 0.4% 0.5% 0.8% 0.8% 1.4% 1.6% 1.8%

Valuation
2015 2016 2017 2018e 2019e 2020e 2021e 2022e
EPS 0.17 0.21 0.25 0.27 0.46 0.53 0.59 0.63
P/E 37.8x 31.1x 25.7x 23.8x 14.0x 12.2x 10.9x 10.3x
EV/EBITDA 16.5x 14.7x 11.7x 9.2x 7.5x 6.3x 5.3x 4.6x
P/BV 2.5x 2.5x 2.3x 2.2x 1.9x 1.7x 1.5x 1.4x
P/Sales 2.9x 2.9x 2.6x 2.3x 2.1x 2.0x 1.9x 1.8x

INITIATING COVERAGE | 41
4.1 GCC'S HISTORICAL FIGURES AND GBM ESTIMATES

Balance Sheet
USD Million 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
Cash 147 164 233 260 366 495 639 794
Accounts Receivable 69 73 91 91 106 103 120 123
Inventory 101 106 113 108 130 114 139 121
Current Assets 368 397 499 520 663 774 961 1,100
Fixed Assets 808 925 936 991 994 988 979 967
Total Assets 1,568 1,867 1,944 1,998 2,126 2,211 2,365 2,484
Accounts Payable 53 71 89 78 98 98 113 104
Current Liabilities 131 155 187 171 200 174 204 182
Interest Bearing Liabilities 438 690 683 606 536 450 354 250
Total Liabilities 712 996 1,019 1,001 1,006 951 947 898
Maj. Equity 856 871 925 997 1,120 1,260 1,418 1,585

Free Cash Flow

USD Million 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
EBITDA 164 182 249 274 314 344 370 384
Change in WK 2 0 -5 -8 -8 -4 -5 -4
Interests -30 -31 -62 -36 -28 -25 -21 -16
Taxes -8 -7 -13 -18 -30 -35 -39 -41
CAPEX -51 -358 -75 -120 -71 -65 -65 -65
FCFE 69 -224 81 104 177 216 240 258

INITIATING COVERAGE | 42
4.2 STRONG FUNDAMENTALS AT AN ATTRACTIVE ENTRY POINT

We are initiating coverage on GCC with a Market Outperformer rating and a 2019 price target of P$150.0, representing a 22.8% upside potential.

Our investment thesis on GCC is based on an appealing valuation—trading at 15.1% discount to our 9.1x target multiple—and strong fundamentals, as its high concentration in US core
markets with increasing demand and favorable pricing dynamics supports our optimistic expectations going forward. Moreover, a privileged product mix, and a robust export capacity from
Mexico should allow the company to improve its profitability, while its sound FCF generation should enable a fast deleveraging.

Our price target is derived from an equally-weighted average using DCF and SOP approaches, as we believe it better reflects GCC’s high participation in the US market and captures the
company’s growth fundamentals going forward.

Our DCF exercise is discounted at a 9.4% WACC and considers the expected results after the purchase-sale transaction with CRH, as well as the additional investments to expand the
capacity of its Rapid City plant, keeping a maintenance CAPEX of US$65.0 million for the coming years. Moreover, given that the cement industry is cyclical, we are estimating an adjusted
perpetual EBITDA to reflect our mid-cycle forecast for GCC.

DISCOUNTED FREE CASH FLOW APPROACH VALUATION ASSUMPTIONS

Figures in USD millions 2018e 2019e 2020e 2021e 2022e Perpetual CF
Revenues 17-22 CAGR 7.3%
EBITDA 274 314 344 370 384 322
EBITDA 17-22 CAGR 11.4%
Taxes -29 -34 -38 -42 -43 -61
Tax Rate 23.7%
CAPEX -120 -71 -65 -65 -65 -65
Avg. CAPEX (% of Revenues) 7.6%
Working Capital -8 -8 -4 -5 -4 0
Growth
FCF to the firm 117 200 237 258 272 196
g% 2.0%
WACC
WACC 9.4% % of Debt 24.5%
Net debt'19e 221 Cost of Debt 3.3%
Minority equity @PBV 0.1 % of Equity 75.5%
DCF 128 200 216 216 208 2,034 Beta 1.2
Risk-free Rate 4.0%

THEORETICAL MKT CAP $2,653 Market Risk Premium 6.3%

Cost of Equity 11.3%
2019e Theoretical price $149.2
WACC 9.4%
Upside 22.1%

INITIATING COVERAGE | 43
4.2 STRONG FUNDAMENTALS AT AN ATTRACTIVE ENTRY POINT

PERPETUITY EXCERCISE For the perpetual EBITDA, we are using an approach based on the industry’s 20-year average utilization rate of
Mid-cycle expectations
83.3% applied to GCC’s installed capacity after the Rapid City plant expansion, with normalized prices adjusted
to historical inflation rate. We are considering a long-term EBITDA margin of 30.5%, which comes in line with the
Implicit US Cement Consumption 90.8
company’s recent performance at an 83.3% capacity utilization rate, adjusted for the profitability improvements
Installed Capacity 109.0 that we believe should be sustainable even in the industry’s mid-cycle, coming from a better product mix, higher
Utilization rate-Avg 20Y 83.3% efficiencies, cost containment efforts, and synergies that should become part of GCC’s cost structure.
GCC's volumes @83.3% 4,846
Normalized cement prices* 165
GCC's Revenues 1,055
EBITDA 322
EBITDA Mg 30.5%
*Average of GCC’s historical prices adjusted for inflation.

Moving on, our SOP analysis is based on an EV/EBITDA target for US and Mexico, assuming a normalized FCF generation for each country, a long-term WACC of 8.1% for the US and 10.1%
for Mexico, and a perpetual growth of 2%. For the US, the exercise displays an EV/EBITDA target of 10.5x. Meanwhile, according to this approach, the Mexican operation deserves an EV/
EBITDA target of 6.8x, which implies a ~15% discount vs. the 20Y average of Mexican peers. In our view, the latter evidences the high concentration of the company in the Chihuahua state
as well as its reliance on Chihuahua’s public spending.

All in all, we strongly believe that GCC represents an attractive vehicle to participate in the momentum of the US construction sector, with limited risk, given the company’s long position
in USD and its solid financial standing.

Sum-of-the-parts US' EV/EBITDA Target Breakdown Mexico' EV/EBITDA Target Breakdown

EV/ EV Net Equity Normalized figures Normalized figures
Figures in USD millions EBITDA'19e EBITDA Debt Value EBITDA 209 EBITDA 113
Target Taxes -36 Taxes -25
GCC USA 205 10.5x 2,161 NA 2,161 CAPEX -40 CAPEX -25
GCC Mexico 109 6.8x 742 NA 742 Working Capital 0 Working Capital 0
134 62
WACC 8.1% WACC 10.1%
Total Value US$ 2,903
g 2.0% g 2.0%
Net debt'19e 221
Theoretical EV 2,203 Theoretical EV 770
Minority equity @PBV 0.1 EV/EBITDA Target 10.5x EV/EBITDA Target 6.8x
SOP Value 2,682
Shares Outstanding 332.5
DCF $149.2
2019e Price Target 150.8
SOP $150.8
Upside 23.5% AVERAGE PRICE $150.0
Impricit multiple target 9.1x Upside 22.8%
INITIATING COVERAGE | 44
4.3 GLOBAL PEER COMPARISON

Company Headquarters Market Cap EV/ EBITDA P/E Net Debt/ EBITDA EBITDA Mg.
Company Description
(US$ 2018e 2019e 2018e 2019e EBITDA 5-yr. 5-yr. Avg.
Million) TTM CAGR
US
Eagle Materials United States 4,563 10.0x 9.0x 15.8x 13.5x 1.6x 27.9% 26.3% Manufactures and distributes cement, gypsum wallboard, recycled paperboard, and
concrete and aggregates in the US. 
Martin Marietta United States 14,763 13.3x 11.7x 21.4x 17.8x 3.1x 16.1% 21.2% Supplies aggregates and heavy building materials to the construction industry in the
US and internationally.
Vulcan Materials United States 17,071 15.1x 12.9x 25.6x 21.0x 3.0x 21.8% 21.4% US largest producer of aggregates,primarily crushed stone, sand and gravel.
Summit Materials United States 2,420 9.1x 8.0x 23.6x 14.2x 4.1x 35.8% 16.4% Produces construction materials, including aggregates, cement, ready-mix, asphalt
paving mixes, and concrete. 
US Weighted Average 13.4x 11.7x 22.7x 18.5x 3.0x 21.9% 21.3%
LatAm
Cemex Mexico 11,080 8.6x 7.3x 10.8x 10.6x 4.0x -0.3% 18.4% Global building materials company, such as cement, ready-mix concrete, aggregates,
and related building materials.
GCC Mexico 2,145 9.5x 7.7x 23.7x 14.0x 2.1x 15.8% 21.1% Largest cement producer in the state of Chihuahua, with a strong presence in the
Center-Cut of the US.
Cemex Latam Holdings Colombia 1,203 6.7x 5.8x 11.2x 10.1x 3.2x -10.7% 32.0% Regional leader in the building solutions industry that provides building products in
Latin America.
Cementos Argos Colombia 4,130 11.6x 10.3x 43.6x 20.3x 4.4x 7.3% 23.9% Multinational company that produces cement and ready mix through its operations in
Colombia, the US, Central America.
Elementia Mexico 793 6.7x 5.8x 18.4x 9.1x 3.6x 5.8% 16.6% Produces and commercializes building materials for the construction sector in
Mexico, the US and Latin America.
Cementos Moctezuma Mexico 3,597 8.7x 8.1x 13.7x 12.9x -0.6x 8.2% 40.2% Manufactures and commercializes cement and concrete in Mexico.
Cementos Pacasmayo Peru 922 9.3x 8.4x 23.0x 18.7x 2.8x 1.5% 29.0% Produces cement, lime, aggregates, ready-mix concrete, prefabs other construction
materials in Peru.
LatAm Weighted Average 9.1x 7.2x 18.9x 12.1x 2.9x 2.9% 23.7%
Europe
Lafargeholcim France 29,858 8.0x 7.6x 14.9x 12.7x 3.2x 4.6% 20.5% Global construction materials company serving masons, builders, architects and
engineers all over the world.
Buzzi Unicem Italy 3,998 7.0x 6.5x 12.2x 11.0x 1.3x 3.1% 17.7% Produces and markets building materials, such as cement and ready-mix in Italy and
the US.
HeidelbergCement Germany 16,283 7.7x 7.2x 11.1x 9.7x 3.3x -0.4% 17.7% World’s largest building materials companies. #1 in aggregates production, #2 in
cement, and #3 in ready-mix.
CRH Ireland 28,265.1 9.4x 8.5x 15.2x 13.2x 1.9x 9.6% 10.4% Global diversified building materials group that operates in 32 countries
Europe Weighted Average 8.4x 7.8x 14.1x 12.2x 2.0x 5.2% 16.2%

INITIATING COVERAGE | 45
4.3 GLOBAL PEER COMPARISON (REVENUE MIX’17)
US
Eagle Materials Martin Marietta Vulcan Materials Summit Materials US Concrete
14% 34%
27%
17% 7%
9%
55% 10%
48% 42% 73% 93%

22%
23%

10% 16%
Cement Aggregates Aggregates Ready-Mix Aggregates
Ready-Mix & Aggregates Ready-Mix Ready-Mix Aggregates Ready-Mix
Others Cement Others Cement
Others Others

LatAm
CEMEX GCC Cemex Latam Holdings Cementos Argos Elementia Cementos Moctezuma Cementos Pacasmayo Loma Negra
3% 8% 16% 8%
19% 42%
9% 26% 3% 12% 12%

65% 35%
29%

84% 88%
38% 43% 59% 63% 58% 80%
Cement Cement Cement Cement Cement Cement Cement, Ready Cement
Ready-Mix Ready-Mix Ready-Mix Ready-Mix Others Ready-Mix -Mix & Blocks Ready-Mix
Aggregates Aggregates Aggregates Others Others
Others Others

Europe
Lafargeholcim Buzzi Unicem Heidelberg Cement CRH
15%

13% 8%
36%
18%
36% 64%
43%

18%
64%
61% 24%
Cement Cement Cement Aggregates, Cement,
Ready-Mix Ready-Mix & Aggregates Ready-Mix Lime & Ready-Mix
Aggregates Aggregates Others
Others Others INITIATING COVERAGE | 46
4.4 ALTERNATIVE VALUATION EXERCISES

Relative valuations support our strong conviction on GCC.

SENSITIVITY ANALYSIS

US/Mexico 6.0x 6.5x 7.0x 7.5x 8.0x 8.5x

9.5x 135.5 138.6 141.7 144.7 147.8 150.9

10.0x 141.3 144.4 147.5 150.6 153.7 156.8

10.5x 147.2 150.3 153.3 156.4 159.5 162.6

11.0x 153.0 156.1 159.2 162.3 165.4 168.5

11.5x 158.8 161.9 165.0 168.1 171.2 174.3

12.0x 164.7 167.8 170.9 174.0 177.0 180.1

INITIATING COVERAGE | 47
05 MAIN RISKS
5.1 Downside risks
5.2 Upside risks

INITIATING COVERAGE | 48
5.1 DOWNSIDE RISKS

Non-accretive acquisitions Decline in oil prices

Given GCC’s strong FCF generation and solid balance sheet, the company has plenty of Given the current level of oil prices, the demand in the Permian Basin has intensified.
room to make acquisitions. If the company were to invest in an asset that is not integrated However, given GCC’s large exposure to the oil sector (~30.0% of US cement volumes),
into the company’s strategic distribution network and that does not provide operational if oil prices plunge our estimates could be negatively affected, as the demand for oil-well
efficiencies, margins could be potentially hampered. Moreover, the company could be at cement would decrease too, highly pressuring margins.
risk of overpaying for an asset, given the current high valuations in the US market. Thus,
we believe GCC needs to hasten the investment process in order to harness potential Oil prices vs. Oil-Well Cement Demand
opportunities before the cycle comes to an end.
70.0 40.0%
Slower-than-expected ramp-up of the Rapid City plant expansion 65.0 30.0%
20.0%
60.0 10.0%
The 0.4 MMT capacity expansion (14.2% of total US capacity) in the South Dakota-based plant
should reach the market in 2019 and will help meet US’ increasing demand. Currently, ~0.3 55.0 0.0%
MMT are being shipped from the Pueblo plant to Rapid City to cover the region’s demand. 50.0 -10.0%
However, as the new capacity enters the market, no more production will be shipped from -20.0%
45.0 -30.0%
Colorado to South Dakota, leading us to expect a positive impact on profitability coming
from lower freight costs and the rising demand. If there were a delay in the expansion’s 40.0 -40.0%
2015 2016 2017 2018e 2019e 2020e 2021e 2022e
ramp-up, our margin expectations for 2019 and onwards could be affected.
Avg. Crude Oil Spot Prices (US$/bbl) Oil & Gas Wells Cement Demand (% YOY)
Tariffs on US imports Source: World Bank, PCA and GBM estimates

In July 2018, the Office of the US Trade Representative proposed a 10.0% tariff on Chinese
cement imports effective as of August. Given the uncertainty around the US trade, and
considering that GCC exports a large amount from Chihuahua to supply the demand in
New Mexico and West Texas, a potential tax on US imports could seriously hamper the
company’s profitability.
Deceleration in Mexico’s residential activity
The demand for cement products in Mexico depends, to a large extent, on the self-
construction sector in the northern region. In 2017, this sector represented 34% of GCC’s
cement sales in Mexico. So, any slowdown in the construction activity of the region would
hit GCC’s volumes in the country.

Labor shortage in the US’ construction industry

The booming US construction industry is facing an adverse labor shortage—ready-mix

concrete producers, for instance, are having difficulties to find qualified truck drivers—as
the pool of workers remains very tight, which may curb the industry’s growth.

INITIATING COVERAGE | 49
5.2 UPSIDE RISKS

Higher liquidity and rising free float Trump’s Infrastructure Plan

GCC’s stock liquidity has increased substantially since CEMEX’s secondary offering in Given the lack of clarity on how funds from the infrastructure plan are going to be
February 2017. In our view, the company’s efforts to improve its exposure to investors have allocated and how the US$200 billion federal investment is expected to be multiplied by
paid off, as in June 2018, GCC was included in the MSCI indexes, while we believe there is the states and private sector to reach US$1.0-1.5 trillion, and more importantly, when
a high probability that it joins the IPC index in September 2018, which would be an upside is all these funding going to take place, we have decided not to incorporate a potential
risk for the stock. impact from the infrastructure plan into our estimates, as we do not expect a robust
expenditure to materialize until 2020. However, if the spending is deployed faster than
Market Capitalization and Float we foresee, it would. give a major boost to cement volumes in the years to come
Feb 2018 P$34 bn.
2015 P$15 bn. US$1.7 bn.
AMLO’s proposals to boost investment
US$0.9 bn.
48% Free Float
25% Free Float As part of his campaign proposals, Mexico’s President-elect Andrés M. López Obrador
Public investors (AMLO) pledged to increase infrastructure spending to 1% of GDP (vs. the current 0.6%)
and the private investment from 19 to 22% of GDP. Moreover, AMLO’s estimated amount for
infrastructure flagship projects stands at ~US$500 billion, which would mainly come from
savings and higher public investment. All the latter should translate into a higher cement
demand in Mexico.
Control Group

Dec-15 Dec-16 Jun-18 Strategic M&A and potential inorganic growth

Average daily value traded nearly doubled Given GCC’s strong FCF generation (avg. conversion rate of 57.8%), the company is looking
for M&A opportunities in adjacent markets to complement its current distribution system.
ADVT ADVT We are expecting GCC to pursue an acquisition in the US or Canada, expanding to new
P$16.4 million 06/30/17 – 12/31/17 P$30.3 million 01/01/18 – 06/30/18 geographies that complement and strengthen its leading position in current markets.

GCC has climbed ~10 positions in the Mexican Stock Exchange's Marketability Index and we
expect it to join the IPC index in the coming months.

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STOCK PRICE PERFORMANCE VS. ANALYST ESTIMATES

170.0

150.0

130.0 27/07/2018 | 150.0 Market Outperformer

110.0

90.0

70.0
Aug-17

Mar-18

May-18
Sep-17

Nov-17

Aug-18
Dec-17

Feb-18
Jan-18

Apr-18

Jun-18
Oct-17

Jul-18
Price Price Target

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