AI Strategies Driving Cemex’s Sustainable Business Transformation

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Maher Al-Haffar

Chief Financial Officer

CEMEX

AI and sustainability reshape business process optimization at Cemex

Business process optimization is undergoing a radical transformation as companies harness the power of digital technologies, artificial intelligence and sustainability-driven strategies to enhance efficiency and profitability.Organizations that embrace these advancements are moving beyond automation to completely rethink their operational models, unlocking new levels of resilience and financial growth. Cemex Inc., a global leader in building materials, exemplifies this shift by integrating AI, data-driven decision-making and eco-conscious innovations into its business strategy

play_circle_outline Overview of Cemex business verticals and growth trend

play_circle_outline Leadership changes and CEO retirement announcement

play_circle_outline Driving Sustainability: Financial Alignment for Decarbonization Success

play_circle_outline Use of AI in risk management and financial hedging strategies

play_circle_outline Maximizing Business Efficiency through FinOps, Technology, Data-Driven Decision Making, and Procurement Savings

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AI Strategies Driving Cemex’s Sustainable Business Transformation

Maher Al-Haffar

Chief Financial Officer CEMEX

Maher Al-Haffar, chief financial officer at Cemex, joins theCUBE to discuss AI-driven business transformations at one of the world's largest building materials companies. This session, hosted at the New York Stock Exchange, revolves around Cemex's strategic efforts to leverage artificial intelligence for operational enhancements, sustainability and growth.

In this video, Al-Haffar shares insights on Cemex’s initiatives and formidable journey in redefining the building materials industry. Al-Haffar, accompanied by theCUBE's Dave Vellante, delves into ... Read more

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What is Cemex and what are its main business verticals? add

What is the status of the CEO at the company and who has been chosen as the new CEO? add

What is the approach of Cemex towards sustainability and decarbonization? add

What strategies are used by the company for financial hedging and risk management? add

What are some strategies for transforming businesses in terms of data-driven decision making, capital allocation decisions, risk management, evaluating investments, operative support, and procurement/supply chain optimization? add

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AI Strategies Driving Cemex’s Sustainable Business Transformation

Dave Vellante

>> Hi everybody, welcome back to theCUBE special presentation where we're digging into business process optimization, and this is really the customer drill down. Of course, we're doing that here at the NYSE. I'm here with the CFO of Cemex, Maher Al-Haffar. Great to see you. Thanks so much for coming in.

Maher Al-Haffar

>> Hi, Dave. How are you doing? Great to be here with you, Dave.

Dave Vellante

>> Not your first time at the NYSE, I know.

Maher Al-Haffar

>> No, no. I think I've been here a few times. I love this place. It has such history.

Dave Vellante

>> Deeply embedded.

Maher Al-Haffar

>> Absolutely. It has such history.

Dave Vellante

>> It's such an interesting career and your company is quite amazing. I've been doing a little research on it, but tell the audience about Cemex and what you guys do.

Maher Al-Haffar

>> Sure. Well, Cemex is one of the largest building materials companies in the world. We have really four verticals. A cement vertical, which is the old ... that's how the business started, and we're also the biggest ready-mix producer around the world, and we're a very large aggregates producer. And then very recently in the last two or three years, we started a new portal, which is very complimentary to our core businesses that were there for many years, which is urbanization solutions. There, we do a lot of things that help U.S. decarbonize, recycle and do a lot of very profitable things at the margin, but also very complimentary to the core businesses that I just mentioned. We're a $16 billion company. Right now, we're about a $10 billion market cap. '24 was a great year, and so we've had a very nice growth trend over the last four or five years. We're one of the largest in the U.S. We're in the Sun Belt of the U.S. where we think that's where the best client metrics in the future are, because of demographics, because of growth. We're in Florida all the way to California. We're also the biggest in Mexico and South Central America, Caribbean. We're also have very large operations, producing and trading in Europe, Middle East, Africa as well. It's a global company. We have about 45,000 people around the world, and I'm the CFO of the company. Actually, June of this year, it'll be five years. My boss, our CEO, called me up literally in the middle of the pandemic and said, "We're having a little bit of a change in the executive committee. I would like you to take over the CFO position." We were all at home, and it took me about three seconds to say yes. And then after I thought about it for a couple more minutes, I said, "What the heck am I getting myself into?" In reality, it's been the most fun job I've had in my life, in my professional career. It's been really, really wonderful.

Dave Vellante

>> Your CEO is stepping down after 35 years?

Maher Al-Haffar

>> 35 years. Yeah, exactly.

Dave Vellante

>> Amazing.

Maher Al-Haffar

>> He just announced, effective end of March, he will be retiring. As he said it, "Retiring to go to another set of things," that he wants to do in his career, and that we've announced already. The board already chose our new CEO, Jaime Muguiro, who was the president of our U.S. operations, which has been doing terrifically well. I mean, between the U.S. and Mexico, that probably accounts for almost 85% of our operating cashflow generation, and the U.S. is the area of single focus in terms of growth over the next few years. We've been investing a lot over the last decade, decade and a half. We think it's the best place to be in, in the world, on a risk-adjusted basis. And the markets that we are in, in the southern parts of the U.S., you hear huge companies moving into Texas and to Florida-

Dave Vellante

>> Moving-...

Maher Al-Haffar

>> to Arizona. It's just absolutely booming.

Dave Vellante

>> Data center build out.

Maher Al-Haffar

>> Absolutely.

Dave Vellante

>> The whole thing .

Maher Al-Haffar

>> The housing market is also very interesting there. So we're very excited. Ever since I've been in the company, we've always been allocating capital to the U.S., but we're accelerating that and we think that it's probably the place to be of all of the rest of the world.

Dave Vellante

>> And you're locating proximate to those areas because you're moving your products, so that's-

Maher Al-Haffar

>> Absolutely. Cement doesn't lend itself to a lot of transportation. The cost per ton when you compare to cost of transportation is fairly low, so you tend to produce where you're going to consume.

Dave Vellante

>> Plus it turns into a rock.

Maher Al-Haffar

>> Well, that's the ready-mix we talked about. The cement or clinker, you can transport it. But generally speaking, you don't want to be beyond a couple of hundred miles away. In the case of ready-mix, you're talking within three to four hours of batching it, you need to be pouring it, otherwise it starts losing cementitious qualities. Aggregates can travel, but again, very local businesses, so we need to be very local and we're very much a function of local demographics, local business supply and demand conditions in our markets.

Dave Vellante

>> Now, you have your $16 billion company with a roughly $10 billion valuation. I'm sensing upside there.

Maher Al-Haffar

>> Absolutely.

Dave Vellante

>> And you guys have a big sustainability initiative.

Maher Al-Haffar

>> Absolutely.

Dave Vellante

>> When I think about sustainability, there's big backlash on DEI and all that stuff, but you guys aren't in it for virtue signaling. You're in it as a CFO. It's dropping. There's business value in that sustainability. I wonder if we could just talk about it.

Maher Al-Haffar

>> Yeah. Look, the reality is we are in it for both. I mean, we are in it because we think it's the right thing to do. We do believe that the world is heating up, and we do believe that our business does contribute to greenhouse gas emissions, particularly CO2, part of the industrial processes and the fuels that we use.

Dave Vellante

>> So it's the responsible thing to do to take that on.

Maher Al-Haffar

>> So it's a responsible thing to do. But having said that, when we are investing in decarbonization, it has what I call double materiality. In other words, it reduces, it decarbonizes the business. That also has a very positive impact on the bottom line. Most of our investments are really retrofitting our plants to be able to use alternative fuels, to be able to come out with different products that have low carbon cementitious materials in them or low cement content in them. They're very profitable, payback periods between three to four years. We have IRRs in those businesses that are well in excess of 30%. So, very exciting stuff. Again, double materiality is really what I would say is the buzz phrase here. It's good for our decarbonization strategy and it's good for our profitability. If we take a look at what we have done in the last four years, we've reduced our carbon emissions, CO2 emissions, by about 15%, which is probably ... and I may be off by one or two percentage points on that, but that's the equivalent of what we could have done in 15, 16 years in the past. We've made it a real front and center target and goal to decarbonize. We follow it every month in our executive committee. Even our compensation, frankly, is partially connected to how we perform on our decarbonization targets. So, everybody's aligned in the company, not just emotionally, but financially, to make sure that we get those targets in place. We're very happy. Without exaggeration, I think we're probably one of the most aggressive, in a good sense, in reducing our carbon emissions in the industry today, and so we're very happy with that. From the financial side, Cemex is one of the co-founders of the UNGC CFO Coalition, and I actually sit on the advisory board of the CFO Coalition. One of the things that we have done as well is aligning our financial strategy to decarbonization. Cemex has the most aggressive, in a good sense, target to align our funding to decarbonization metrics by 2030. We're targeting about 80% by 2030. That's by far the highest within the industry.

Dave Vellante

>> Now, that's a big part of the transformation that you guys have undergone since you took over. You've expanded the TAM, maybe not. I mean, you've got these four lines of business, so you're getting those fine-tuned. How would you summarize the transformation over the past, say, two to three years?

Maher Al-Haffar

>> Well, I think it's been great. If I take a look at the new portal that we started, the Urbanization Solutions business, that's been growing double digits. It's now representing slightly more than 10% of our operating cashflow generation in the company. It's super profitable. It's increasing the profit margin quite nicely. We're probably going to continue allocating capital to that business, and it's helping us get into really develop many inroads and developing low carbon products for our customers. It's also helping us do what I call urban mining, recycling buildings that are having to be torn down and reconstructed, especially in very large urban mature geographies like Europe, to some extent in the US. We take some of the demolition waste, recycle it, and we can use it either as aggregates or use it as raw materials. That's really very exciting because not only it's very profitable, but also you're recycling, so you're part of being good with society and making sure that we're not just dumping everything, burying everything, which is not the best thing in our view.

Dave Vellante

>> I want to tap your CFO brain in terms of how you look at investments and capital allocation.

Maher Al-Haffar

>> Sure.

Dave Vellante

>> You mentioned a 30% IRR in your businesses. Oftentimes technology investments are risky and they've got a higher hurdle rate because of that risk, so that brings me to the topic of AI and automation. How do you think about that? There's certainly a lot of hype, there's a lot of talk about uncertain ROI. How are you thinking about it?

Maher Al-Haffar

>> That's a great question, Dave. I have to tell you that when I took over as CFO back in June of 2020, after spending some time, maybe, I don't know, a month or two, thinking about the world and all of that, one of the things I thought, what should define my being CFO at the company in the areas that I'm responsible with? I told my team I really would like us to be the guys who ushered in the digital CFO. So, we looked at it. I'm responsible for all of the accounting, controllership, legal, a significant amount of the shared services, back office areas, procurement. And so what we did is we went through all of these areas and we said, "Where can we adopt state-of-the-art technologies?" To me, I gave a very big instruction to the team. I said, "I don't want to digitize existing processes. It's very important that we get the data in a massageable, in a analyzable format." So we spent a couple of years taking all of our data from our ERP systems, which are not necessarily connected to each other, put it in a data lake, cleaned it up, came out with all of the cleaned up consolidated numbers, which then was giving us the ability to use middleware to do a bunch of analytics, trend analysis, process, redesigns. That's where we started getting together with people like IBM, frankly. To me, the use of technology in the finance function and virtually everywhere in the company, but in the finance function from my perspective, is pervasive. We're using artificial intelligence. We're using ARPs. We're using a digitized process flow platforms, for instance, like ServiceNow. We used to do a lot of this stuff either manually or quasi-manually. Now it's all digital. And now, we have tons of data that we can use digital technologies and artificial intelligence technologies to actually run through millions of transactions and come out with analytics that tells us these processes can be changed this way, can be redesigned this way. It's not just using digital for digital's sake, it's really kind of redesigning the workflow process in the company. We use a lot of, for instance, analytics in operative support, for instance, for the commercial guys. My guys produce all that numbers and support all of the commercial guys and their interactions with their clients. Tons of analytics go on there. It saves heads, but really at the end of the day, we're not looking at using AI to reduce head count. It's really to take average capable people to superlative capabilities within the organization, so becoming substantially more efficient, being able to be substantially more productive, value added to the whole set of stakeholders that are within the company. I think we're just scratching the surface, frankly. I mean, we're just starting to do that. I am very excited about the future of using technology, and particularly AI. The faster computing, the cheaper the computing gets, the more we can use it to almost as a second brain for us while we're conducting our business. Now, of course, the human mind will never be redundant. It's just becoming significantly more superior because of this kind of Copilot concept, which is the AI facility.

Dave Vellante

>> It's like Ray Kurzweil says. AI makes you smarter. Nobody wants to give that up and nobody wants to be dumber.

Maher Al-Haffar

>> Absolutely.

Dave Vellante

>> But so much to unpack there, Maher, from what you said. The first thing that really I want to ask you about it, which is really interesting to me, is you're not looking to, I call it, pave the cow path on process. You're not looking for little tiny incremental improvements. You're using your data to reimagine workflows, and you're able to identify that because you've consolidated the data, you've harmonized it so that whether it's your Salesforce data, your ERP data, or your finance data, whatever it is, you now have trust in that data. It's governed, and then you can make decisions that drive massive productivity gains.

Maher Al-Haffar

>> Well, and traceability. The other thing is now, we have real traceability of all workflow processes through the whole process. And so then we're able to say, okay, who's best to actually undertake those processes? Is it internal people? Is it better to team up with partners like IBM, for instance, that help us co-process some of these workflows at a much lower cost, at a much faster pace? They have many clients, they have different technologies that they can bring to the table, so it reduces the need for R&D in AI for us, for instance. There's a lot of, I would say, synergies as a consequence of having these data and data analytics that allows us to think differently, very significantly differently about these processes.

Dave Vellante

>> You mentioned you're not using AI to reduce headcount, but is it correct to think that AI will reduce your requirement for future human labor?

Maher Al-Haffar

>> Potentially, yeah. Potentially. I mean, absolutely. I think obviously we're going to make our existing team much more powerful and much more sophisticated in terms of the services and analytics that they could provide to the organization. Of course, it will probably slow down the growth of that element of our business enablers. But at the end, I mean, of course if the business continues growing the way it has been growing, obviously we'll continue to grow our headcount.

Dave Vellante

>> But it could give you more operating leverage.

Maher Al-Haffar

>> Absolutely. Absolutely. I mean, the operating leverage of technology in the business is super powerful, and it's not just risk management. The ability to use AI in risk management, and for instance, in energy hedging, for instance, electricity hedging, fuels hedging. One of my procurement guys, for instance, is using AI to minimize the inventory of fuels by constantly calculating cost of fuels, distance of fuels, cost of transportation. If the Panama Canal is being bottlenecked, if the Suez Canal is shut down because of political factors, all of this stuff is constantly ... Scenarios are being run. And then we talk to our operating partners and we say, "You know what? You don't need this much inventory. You need this much inventory." We modulate. That all translates to working capital needs, which translates to costs in the business, so to the extent that we can fine-tune that. We use that in insurance. We use that in our financial hedging strategies. For instance, a big chunk of our operating cashflow, for instance, comes from outside of the US. We're a dollar-denominated company, so the finance guys that are running our derivatives, hedging strategies, for instance, one of the first things that we said when I first joined, I said, "Look, I don't want guys who are trading emotionally. I want a rules-based process that is very data-driven and very digitally-driven on when we put in and when we take off hedges based on a number of factors." We work with a bunch of our banks doing simulations on 20, 30 years' worth of historical data, which now gives us the ability to kind of doing it with quantitative, with artificial intelligence tools. That gives us a much more robust and much more stable risk management perspective.

Dave Vellante

>> And do the what-ifs.

Maher Al-Haffar

>> Absolutely. Absolutely.

Dave Vellante

>> Kind of off-the-wall question, but-

Maher Al-Haffar

>> There's no such thing.

Dave Vellante

>> Where are autonomous vehicles in your future? Is it decades away, do you think? Or is it something that you guys think about in the more near term?

Maher Al-Haffar

>> It's an issue. We would love to have autonomous vehicles. One of the things that the company ... It's the most top of mind thing is health and safety of our employees. Over the last number of years, we have become the best health and safety company by virtually any metric in the industry.

Dave Vellante

>> Really?

Maher Al-Haffar

>> Absolutely. I mean, our CEO ... Again, that's the first thing that every month ... We have a monthly executive committee. First thing we start with is health and safety. Very important because we have this motto, Zero4Life. One life's lost is too many. One, because it's the right thing, but also because it's also the most financially good thing. Third, our executives and employees really appreciate that we understand that each one of them needs to go back to their families at the end of the day. There are so many families dependent on these folks, and so we want to make sure they're doing that. Now, why am I saying that? Because let's face it, a lot of the injuries come from mobile situations, and so we would like to get into autonomous vehicles, but I think we're far away from that. Number one, because of the technology. Number two, because of the cost. We're looking at going to EVs, for instance. Again, we'd love to do it and there's some very interesting offerings out there, but still an EV is probably two to two and a half times the cost of a traditional vehicle. But we are starting to pilot some EVs. Definitely in our quarries, it would be interesting to start looking at autonomous vehicles, for instance, but these are big yellow iron type of vehicles. They're not yet there. We're not there yet.

Dave Vellante

>> But it's a more predictable environment in the quarries .

Maher Al-Haffar

>> Absolutely. Much more predictable. It's like we're sitting here in the studio, for instance. There's a lot of technology or there's a lot of remote work that is being done here. There's no reason why we cannot replicate this kind of technology outside in our quarries, for instance, or delivering ready-mix or in our plants, for instance. But I do think that's a few years down the line, frankly.

Dave Vellante

>> Yeah, I tend to agree with you. I know you got to get up , so my last question is, how do you think about the role of FinOps as a strategic enabler for the business, aligning with the business? I wonder if we could summarize there and give our audience your take, your philosophy, any advice you'd give to other folks, your peers trying to transform their businesses?

Maher Al-Haffar

>> Yeah. Look, I think we can deliver in many ways. We talked about data-driven decision making. That's probably the most organic, most robust thing that we can give. Capital allocation decisions, very important as well. How do we make capital allocation decisions? What-if scenarios, working with our planning and strategic planning partners, for instance. Risk management. We've already talked about that. Whether it's hedging strategies, whether it's insurance risk management, for instance. Evaluating investments. Another part that we partner up with. Operative support to our frontline folks on how to manage their business by giving them trend analysis, what-if scenarios, drill down, trend analysis, for instance. These are all very important areas that we can deliver to optimize not only facing out the customers, but also facing internally to our internal stakeholders. The other thing is on the procurement side. Procurement side and supply chain. I'm responsible for the procurement side in the company, and one of the things that in the last year and a half, we've identified significant opportunities, not only using technology, but also identifying who we buy stuff from, at what time, when, what price, are we buying from original manufacturers? Are we buying from intermediaries? What can we do to close those gaps? What can we do to identify goods or services that should be negotiated locally, regionally, globally? What kind of synergies we can get from those things? These are all powerful value contributors. The procurement thing, we just said just the other day at our fourth quarter results call, we're expecting close to $250 million worth of savings on our procurement over the next three years, and I think we're just scratching the surface. I think there's a lot more opportunity in doing that. We could not do that three, four years ago without the use of state-of-the-art technologies and artificial intelligence, especially artificial intelligence in this process. It's critical to success.

Dave Vellante

>> Remarkable business and a remarkable career. Thanks so much for spending some time with us.

Maher Al-Haffar

>> Thank you very much. Thank you very much.

Dave Vellante

>> Appreciate it.

Maher Al-Haffar

>> Nice being here. Thank you very much.

Dave Vellante

>> All right. Thank you for watching. We're just thinking about this transformation. As Maher had said, we're just at the beginning, on the cusp of this new wave of business process optimization. Thanks for watching. This is Dave Vellante for theCUBE.