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Good morning, and welcome to GCC's Fourth Quarter and Year-end 2020 Earnings Call. Before we begin, I would like to remind you all that this call is being recorded. [Operator Instructions]. Please note that a slide deck will accompany GCC's earning results webcast. The link is available on the company's website at gcc.com within the Investor Relations section. [Operator Instructions] At this time, I would like to turn the call over to Mr. Ricardo Martinez, Head of Investor Relations. Please go ahead, Ricardo.
Thank you, operator. Good morning, everyone, and thank you for joining GCC's earnings call. With me today are Enrique Escalante, Our Chief Executive Officer; and Luis Carlos Arias, our Chief Financial Officer.
As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. You can find more information about risks, uncertainties and other factors that could affect our operating results in our most recent filing with the Mexican Stock Exchange.
As seen on Slide 2, our forward-looking statements provide information on risk factors, including the effects related to COVID-19 that could affect our financial results. There is still significant uncertainty about the duration and anticipated effects of the pandemic. GCC's outlook could change. The effects on the company's business and its results are a best estimate based on information available today.
Let me now turn the call over to Enrique.
Thank you, Ricardo, and good morning, everyone. 2020 is behind us and wow, what a year it was. At the start of the year, the world was hit by the pandemic, which forced a sudden economic stop. We watched the protests against racial injustice and felt the economic and political uncertainty, just to name a few issues. Notwithstanding this challenging year, I can tell you with confidence that GCC entered 2021 even stronger than how we went into 2020.
Let me begin today's earnings call with a brief recap of the key highlights and achievements of our performance during this atypical year. In the middle of March, we quickly adopted our operations and processes to the disruption created by the COVID-19 pandemic. We took immediate measures focused on 2 main areas: health and safety as top priority, and GCC's business continuity and liquidity.
GCC develop mandatory health and safety protocols for each of our operations. We alternated shift and skeleton crews and anyone who could work from home began to do so. While some of our colleagues have contracted the virus, no cases appear to have been contracted at a GCC facility. These actions were important for keeping our teammates permanently employed for the long term.
Because the cement industry was deemed as an essential business, we focus on completely aligning all efforts on selling, producing, shipping our products and collecting receivables. In other words, business continuity. Our contingency plans ensure uninterrupted supply of product to our customers, none of all of the GCC facilities were ever shut down because of COVID. We deploy a successful -- we deployed and successfully executed a comprehensive plan to reduce $24 million in cost and expenses in addition to decreasing significantly working capital requirements. Our employees found ways to do more with less, showing our adaptability and what GCC is able to do in challenging time.
Our performance for the year was a strong demonstration of the outstanding enthusiasm and dedication that every GCC employee puts in daily. I could not be prouder to be part of this amazing organization.
We are very pleased with the results delivered in 2020. We increased top and bottom line growth and EBITDA margin. GCC generated a very strong cash flow despite several constraints, fewer resources and the headwinds already mentioned. In order to meet the global climate challenge, 2020 was a year of paramount progress in GCC's sustainability strategy work. We reached the first important milestone by reducing net CO2 emissions by 9% from 2005 levels.
GCC signed a long-term agreement with an energy provider to supply wind power to more than 50% of Rapid City cement plant consumption. We joined the global cement and concrete industry to state a collective ambition for a carbon-neutral concrete by 2050. And finally, GCC proudly joined the science-based target initiative, whereby we committed to set emission reduction targets aligned with the ambition of the Paris agreement.
I'm very pleased to share examples of how GCC is increasing the sustainability of our products and bringing value to customers. In Texas and New Mexico, GCC is the first cement company to have DOT approved blended cements containing natural pozzolans. Additionally, GCC had a record year of portland cement limestone sales or PLC, which is very similar to a traditional cement. However, it features a percentage of limestone added to the clinker, making it a greener cement with lower CO2 emissions. We believe PLC cement could and should become the standard of general new cement in our market. PLC provides our customers with equivalent performance and reduces, on average, 7% CO2 per ton. We experienced 6x the growth in 2020 and expect similar growth rates in 2021.
GCC's blended products feature a lower CO2 footprint, as much as 25% lower, and improved long-term durability versus general use cement in addition to being a more sustainable solution for our customers and ultimately, for our communities.
Let me now take this opportunity to review GCC's Q4 and year-end results as well as our performance drivers. Then Luis Carlos, our CFO, will review GCC's financial results, after which he will turn the call back to me for final comments. After that, we will take your questions.
Turning to Slide 5. We are very pleased with the strong operational results in both Mexico and the U.S. We leverage our cement and ready-mix expertise and took advantage of our sophisticated distribution network. We took advantage also of GCC's connected system of cement plants with terminals, reinforcing that it is one of our main competitive advantages.
Pricing dynamics in the U.S. were more challenging than expected for the industry as a whole, mainly due to COVID-19 uncertainty and its related economic impact. In construction Cement, GCC postponed the effective date of the annual price increase by 60 days from April 1 to June 1. With respect to oil-well cement, as an effort to support our long standing customers, we offer a price reduction of $10 per ton from April to October. Still, without considering oil-well cement in 2020, cement price increased by around 3%. GCC achieved a 0.5% increase in the fourth quarter and 1.3% for the full year. In the quarter, sales rose 2%, while EBITDA decreased 6%.
And as we reported yesterday, our Q4 2020 results in the U.S. were mainly impacted by a tough comparison against an all-time high fourth quarter last year -- I mean, the year 2019, and a drop in oil-well cement volumes. On an accumulated basis in 2020, GCC sales were basically unchanged. However, EBITDA and margins had a solid increase, showing once again the continued and successful execution of our cost and expense reduction plan throughout the company. In Mexico, fourth quarter results show an impressive V-shaped recovery after a negative impact of the national lockdown when most of our customers remain closed.
I will now provide a more detailed review of our business main drivers by region and sector, starting in the U.S. And then I will review GCC's Mexico operations. Please turn to Slide 7.
During Q4, favorable weather conditions allowed GCC to continue to deliver product at a steady level until year-end. Thus, during 2020, we experienced an executed construct -- we experienced an extended construction season for the second year in a row. Despite a good weather shipment, due to a difficult year-on-year comparison in both businesses, cement and ready-mix volumes declined by 4% and by 9%, respectively. Whereas the full year volumes declined by 3% and ready-mix volumes increased by 4%.
However, I will draw your attention to the fact that excluding the shortfall felt from the oil-well cement market, our U.S. construction cement volumes showed a strong performance, growing around 5% against last year's levels. That growth was in an economy, which PCA was forecasting at the time to shrink 3.7%.
On a regional basis, during Q4, we didn't see any significant changes in our main business drivers from what we saw during previous quarters. El Paso, Texas and Southern Mexico markets were a bright spot. We saw strong shipments in the areas with some big projects that are worth highlighting. The restart of the [ big ] Air Force based runway and the construction of a new Amazon distribution center. These projects will continue through early 2021.
Regarding the Permian Basin market in West Texas, volumes somehow stabilized during the quarter, backed by the increase in oil prices. This market is showing signs that the market contraction has bottomed out. We are seeing a slight and gradual increase in volume. The oil-well cement market definitely diminished in GCC's relevance this year. Until the month for oil full year returns, we do not expect to recover to pre-pandemic volumes in the short term.
On Slide 8, in Colorado, we closed 2020 with a robust demand for public infrastructure and residential projects. Turning to our Northern Midwest operations. Our expertise there, safety track record and great customer relationship in the wind farm construction sector is bearing fruit. This sector was again a strong driver of our demand in the entire year.
GCC experienced [ bold ] levels of activity across our markets, with some doing better than others. The infrastructure sector, our most important segment, represented more than 50% of GCC's total U.S. cement volume in 2020. The fast 1-year extension and DOT's funding through the year, back this type of projects. In this regard, with the Democrats controlling both the house and the Senate as well as the executive branch, we are now more optimistic than before for further economic stimulus from the government, including a significant infrastructure package. Although we don't expect its main effect in demand would materialize until 2022.
In the residential sector, record low mortgage rates, tight inventory levels and families looking for more space supported the housing market. The nonresidential and commercial sectors showed mixed signs. On one hand, projects related to entertainment, hospitality, retail and office space were under pressure or put on hold. On the other hand, projects related to e-commerce, distribution centers and warehouses showed a positive trend. Historically, the non-res and commercial sectors are supported by the residential sector. Therefore, given the current positive housing market and the new homes being built, one would expect this sector will improve in the medium term. In terms of pricing for 2021, we have faced an increased competitive environment coupled by moderate customer pushback. Consequently, the already announced price increase of USD 8 per short ton went into effect in January 1 with a few markets sliding to April. After the price increase takes effect on these dates, we do not expect any further pushback given the tight supply and demand and the high utilization level in the cement industry.
To summarize, our U.S. business results were far better than what we expected when the COVID-19 pandemic started.
Turning to our operations in Mexico on Slide 10. The state of Chihuahua, our sole Mexican market, showed a sharp V-shape recovery, as I mentioned. We are very satisfied with our results in the fourth quarter and for the full year. GCC views the 2-month national lockdown as a temporary hindrance. Our fourth quarter began with good momentum and positive demand for our products. We leverage on our [ construed ] statewide retail store network and on our customer-focused culture. Cement volumes rose 14% and ready-mix volumes were unchanged in the quarter. On a yearly basis, cement volumes grew 3% and ready-mix volumes decreased 7%, as most of our ready-mix customers were not deemed essential. At the same time, the depreciation of the Mexican peso against the U.S. dollar reduced Mexico sales by approximately USD 5.5 million in the quarter and $28 million for the full year.
Even though there was an increasingly competitive environment in the industry, our results demonstrate once again that we achieved price and volume growth on top of a challenging comparison. This has been a robust market for several years now that led to a 9% sales increase in Mexico during the fourth quarter and a decrease of 3% annually. Without considering the FX effect, Mexico sales would have increased 18% in the fourth quarter and 8% for the year.
GCC experienced solid demand of bag cement since the beginning of the pandemic. We believe that the self-construction segment will continue to benefit from ongoing quarantines and work from home policies. We have seen an increase in demand for industrial warehouses construction projects, particularly in the U.S. border area in Juarez City, which is a reflection, of course, of the favorable conclusion of the USMCA negotiations.
In this market, several sizable projects are being bid or have already been announced. As we have said in previous calls, with the USMCA already in place, the state of Chihuahua geography means that GCC is likely to benefit from both the U.S.-China trade and tech wars as well as the reshoring of manufacturing processes from Asia. We're encouraged by the opportunities that this situation will generate in the midterm in our Mexico operations.
Finally, the mining industry remains a strong driver for us. We develop a robust logistics system that enables us to deliver our products in a very challenging environment, opening remote areas with difficult terrain. We continue to build a long-term relationship with our mining customers.
Thank you for your attention. I will now turn the call over to Luis Carlos to review this quarter's financials and full year results.
Thank you, Enrique, and good morning, everyone. GCC's financial results for the year were a strong testament that our hard decisions taken during these uncertain times worldwide, accurate and strengthen GCC even more. We were always focused on increasing shareholder value. We believe that the market recognizes GCC as a solid investment. As a result, GCC's share price increased by 19% in 2020 with a bullish trend early in 2021. We are cognizant that our valuation continues to be attractive. Therefore, we will continue to deliver positive results and our commitments to continue building investors' confidence. We are confident that eventually, the market will completely recognize GCC's fundamentals, risks and capabilities and that ultimately, GCC shares will achieve a fair valuation. To our investors, we encourage you to keep confidence in GCC, maintaining and sharing our long-term perspective.
GCC has maintained a remarkable and healthy balance sheet and continues to be financially strong, thanks to the diligent efforts of our teams, a prudent capital allocation and a clear growth strategy. We know where we are headed and how we can reach our goals. Although the road ahead is not always straightforward, we will hold on to our ultimate objective to keep creating value for all of our stakeholders. While we were figuring out what we will be dealing within 2020, at GCC and in the cement industry, M&As were put on hold.
Given our very strong financial position, we are actively looking for new opportunities for growth. That being said, we will not leave behind the lessons learned during the pandemic and previous downturns. We will resume our goal of finding the perfect opportunity to enhance our core business cement. Any decision will be aligned with a disciplined approach to acquisition and growth investments. This approach continues to be increasing presence in existing markets and/or expanding to adjacent markets where synergies can be generated. If we do not find an appropriate asset by year-end 2021, we may pay down debt, saving in interest expenses.
Changing subjects, I am thrilled to share with you that we surpassed our target of annual savings in cost and expenses announced in April. We ultimately saved 20% more, a total of $24 million in savings from the original $20 million.
I would like to reiterate that we expect to maintain $10 million of this year savings, having found a sweet spot between short and long-term profitability without compromise to our operations, employee safety or taking unnecessary risks.
Please turn to Slide 16. For the fourth quarter, consolidated net sales increased by 2% and were basically flat year-on-year. During Q4, we saw a sharp increase in cement volumes in Mexico, which were somewhat offset by U.S. cement and ready-mix volumes. Excluding the FX effect, consolidated net sales will have increased by 4%.
On Slide 17, cost of sales as a percentage of revenues increased 1.8 points to 67% in the quarter. While in 2020, cost of goods sold decreased 2.3 percentage points to 69%, mainly reflecting better cement and ready-mix prices in both countries. Lower freight costs due to lower cement shipments to the Permian region as well as the absence of 2019 onetime expenses associated with increased cement freight due to well challenges and purchased cement and coal.
SG&A expenses as a percentage of sales were basically unchanged in the quarter to 8.2%, and in the comparable period of 2019, decreased 0.5 percentage points. This was mainly due to the execution of the cost and expense reduction initiatives and the depreciation of the Mexican peso relative to the U.S. dollar.
As a result, as we illustrate on Slide 18, EBITDA decreased 6% in the quarter, largely due to a difficult year-on-year comparison. EBITDA margin was 35%. We ended the year with an EBITDA growth of 6% with a 160 basis point margin expansion, climbing to 32.9%. As we have previously said, we are highly focused on recovering the 34% EBITDA margin, which GCC generated prior to the financial crisis. GCC's track record shows that we are on the right path. EBITDA margin has increased uninterrupted for 7 years. It has increased approximately 16 percentage points, placing GCC on one of the top tiers in the industry regarding profitability.
Turning to Slide 19. Net financial expenses increased $5 million as a result of higher debt balance from drawing on one of our revolving credit lines, partially offset by lower interest rates on the variable portion of GCC's debt. Income tax decreased $3 million in the quarter and increased $6 million annually, a reflection of higher income before taxes. As a result of these factors and with the benefit of strong operating and financial results, earnings per share and consolidated net income increased 11% to $130 million in 2020.
Moving to our cash generation on Slide 20. Free cash flow was $100 million in the fourth quarter 2020 compared to $83 million in 2019, and $250 million for the full year compared to $138 million in 2019. This translates into a free cash flow conversion rate of 120% in the fourth quarter and 81% for the full year. This was mainly driven by increased EBITDA generation and much lower working capital requirements as well as decreased interest expenses, [ cash ] taxes and maintenance CapEx.
I would like to point out GCC's improvement in controlling payables, receivables and inventories. Based on the last 12 months of sales as of year-end, we reduced days in net working capital from 58 to 47, a total reduction of 11 days.
Turning to our balance sheet. We ended the year with $562 million in cash and equivalents after paying back $50 million withdrawn from the revolving credit line. This amount is, by far, the highest cash hold in GCC history. In light of this, our 2024 $260 million bond starts being callable in June. We are constantly analyzing the global bond market to see we can further strengthen GCC's balance sheet, lowering the coupon or extending the maturity profile, while we take advantage of the current positive market conditions.
Turning the page, our net debt-to-EBITDA ratio dropped to 0.2x as of the end of the year, supporting our balance sheet as one of the strongest and healthiest in our industry. Thus, we are starting 2021 with advantageous and solid financial position.
I am pleased to share a crucial outcome of our excellent financial results as well as of an ongoing process of optimizing operations for value generation. GCC's return on invested capital, ROIC, for the full year, jumped to 12.4%, well above our weighted average cost of capital and higher than most of our global industry peers.
With that, I will now give the call back to Enrique for his closing remarks.
Thank you, Luis Carlos. 2020 was a unique year. The pandemic disrupted multiple areas of our personal and professional lives. And I firmly believe that it would permanently change the way we work in the future. But it is precisely during major crisis and challenging times that our values as a company and our long-term focus motivates us to spring forward and outperform expectations. That's why at GCC, we recently launched our 2025 vision statement, to be the best cement company in North America with the proper balance of people, profit and the planet. This statement is what we want to be and we'll guide what we need to do to get there. At GCC, we want to do everything with excellency. And we understand that we must balance and rebalance these 3 areas to ensure we keep flexibility and adaptability in a fluid environment without losing sight of our 2025 destiny.
An example of this proper balance is how, in 2020, we refocus quickly on the people area to protect their health during the pandemic. Naturally, some of these challenges we face in 2020, most likely will continue in 2021, like the lasting effects of the pandemic and looming global recession. Therefore, in the short term, we will continue with focus to looking intensely at efficiencies, costs and expenses and operating with the same rigorous approach to keep delivering strong results.
But this year, we are also rebalancing the 3 areas of our vision, changing the emphasis of the 2020 priority on cash preservation to a 2021 emphasis on growth. Both internally and through M&A. Certainly, in 2021, we can see a light at the end of the tunnel. How soon we get out of the tunnel still hinges on the virus development, the vaccine rollout effectiveness, specific stimulus measures as well as government's policy response to address the pandemic and of course, the economy in both countries and globally.
For this reason, our short-term visibility is still blurry. Therefore, our full year guidance will remain temporarily suspended until we have improved visibility. We will provide updates as they become available. In a year of discoveries like 2020, we realize we don't need to predict the future in order to say that we are prepared. We believe GCC is prepared for any challenge or opportunity we may face this year.
Finally, I would like to thank again and again, all of our teammates for their effort and dedication during this challenging time. The positive results we deliver belong entirely to them. I would also like to thank our Board and shareholders for the trust and confidence they have placed in us. With that, our prepared remarks are concluded.
Let me now turn to your questions. Operator, please go ahead.
[Operator Instructions] Our first question comes from the line of Adrian Huerta with JPMorgan.
And Ricardo, first of all, congrats on the great results on a challenging year. I have 2 questions. One is just on working capital, very good performance, as you said, down to 47 days. Is there room for more? Is there initiatives? Have you found ways in which we can see working capital days being even lower this year? That's my #1 question. And the #2 question is, what happened to the energy cost per ton during full year '20? And given the increase that we have seen on pet coke and other energy costs, what can we expect for this year?
Thank you, Adrian. In terms of working capital, although we -- as we expressed, we advanced a lot of -- in the project to have a better -- or optimizing the working capital, we still think that there's room for improvement going forward, more in the inventory and accounts payable. I will not give details, but I can confirm that we are continuously or we are going to be very focused on the -- achieving a better working capital management going forward.
Good morning, Adrian. This is Enrique. On your second question on energy cost for 2020. I can tell you that our cost has been very well controlled and has remained very stable. And Ricardo later on can try to look for more [indiscernible] information to provide to you. But this is the result again of the hedge -- the internal hedge that we have with our coal mine. And gas prices even though we have seen some increases in some markets, they have not really affected us in 2020 yet. We don't consume any pet coke. So again, having the coal mine operating constantly during the year, gave us a constant cost for our fuel.
Our next question comes from the line of Nikolaj Lippmann with Morgan Stanley.
Congrats on the numbers. Two questions, if I may. First, on -- great numbers, one little spot of weakness, of course, is oil cement. Can you talk a little bit about what you're seeing there, if the pricing discounts have expired and you're rolling back a normalization of pricing in that space? So that's number one. Number two, in terms of the U.S. market looks to getting increasingly tight. When you're thinking about M&A, would that also include additional logistical assets?
Thank you for the question, Nikolaj. First, on your pricing on the oil-well cement. Yes, we did take away or recover the $10 discount that we gave to the customers during last year. So we started to basically recover that around October. And by year-end, it was basically done. We have announced price increases on top of that recovery for this year and so far, the market is taking it well. So we're very positive that oil-well cement prices will have an improvement against last year. In terms of the M&A-related to logistics, yes, you're absolutely right with the market getting more tighter and as a result of the expansion of our South Dakota plant we are working on 2 projects, I mean to install 2 new terminals this year. So in different markets, but precisely, I mean, for the reason of giving room to the additional cement that is going to be produced in South Dakota.
Our next question comes from the line of Carlos Peyrelongue with Bank of America.
Two questions, if I may. First one on oil-well cement. Can you give us an idea of what is the percentage of U.S. cement demand that comes from oil-well cement? I assume it dropped quite a bit last year. So it would be great to know as of 2020, how much of the cement in the U.S. comes from oil-well cement? That would be the first one. And the second one, do you expect to provide guidance at some point this year for the full year? Or you're planning to go most of the year without guidance?
Thank you, Carlos, for the 2 questions. Number one, on oil-well cement. As we have said in our top year for oil-well cement in '19 was 17% of the total output. Last year, we experienced a decrease of about between 40% and 50% of that volume. So that will mean that the most in this 2020, the share of oil-well cement of -- as a percentage of the total U.S. sales will be close to 10%. On your second question, yes. Yes, we will obviously be very open and look forward to give guidance in the future during the year. Of course, I mean, we expect this blurring that I spoke about, is going to start, I mean, getting clear as the year progresses. So hopefully, the second quarter, we can give you -- I'm sorry, on our first quarter report, we can give you some guidance.
An additional question, if I may, on U.S. infrastructure. As you mentioned, it's 50% of your total cement demand in the U.S. And what should we expect in terms of cement demand from infrastructure? Are there any large projects that you're finishing? Should we expect something similar to last year? Could you comment a bit more on that particular driver of your cement demand in the U.S.?
Yes. We're -- as I said in my remarks, I mean, optimistic about the change, I mean, in infrastructure. I can tell you that this month, in a sales meeting, our salespeople were informing me that we're seeing a very strong infrastructure demand, for example, in Colorado. So probably above of what we expected at the end of last year. So we continue to see projects bidding in that segment. So we don't think that it's going to be -- that is not going to have any negative effect compared to what we were last year. On the other hand, as I also mentioned, if there is a new infrastructure bill that passed by Congress, obviously, I mean, and we think that's very likely, we're going to benefit from it although the question is, if that would start to take place in the second half of the year or really in 2022.
Our next question comes from the line of Francisco Suarez with Scotiabank.
Congrats on your results. Also congrats on seeing your blended cement approved by the local authorities. A question on the blended cement. First, how easy it is to source with pozzolan that cement? Will that require any investment from your side? How comfortable do you feel with sourcing that blended cement with pozzolan? And secondly, do you think that other types of blended cement would be worth seeking for approval, namely with the use of fly ash or perhaps with a slag or something else?
Francisco, thank you for your questions. On the first one, the pozzolan that we are working on and now it's a deposit that we have in the state of Chihuahua and the cement has been produced in Samalayuca with very good results. And as I said, based on that, it was approved by the Texas and New Mexico DOT. That's a natural pozzolan, and we feel very comfortable with its performance and what we can do. It will not add a significant investment in the sourcing side, perhaps, and we are discussing it. We will require an extra silo at the Samalayuca plant, I mean, to work with that additional product. So that's still under discussion.
In terms of other type of pozzolans, fly ashes, slag, et cetera, well, we are very open and looking forward to get -- I mean, supply from any of these materials, although it's not likely that we can get these 2 specific materials in the short term. Obviously, fly ash is very scarce in the market now. And in the case of slag, we're very far in our in [indiscernible] facilities to the sources of slag for it to be an economically feasible, I mean, ingredient for portland cement. But we are continuing to work in searching other areas for other natural pozzolans too.
Very clear. And also on the commercial side of the question on your blended cement, how will that change the future sales mix between the typical portland cement and this blended type of cement? Do you think that the market will receive the blended product with ease? Or do you think that you would may be experiencing some pushback? And a question along with that is that at the end of the day, that would actually, for a particular purpose, could actually be a way to increase your overall cement capacity with the use of blended cement. So my question is to how extent the rate of acceptance of blended cement in the U.S. market may affect or not your overall plans for future organic expansion in either Samalayuca or other plants?
That's a very good question, Francisco, a little bit difficult to answer. It's definitely a long-term process. The U.S., in my experience, it's been a slow in changing the standards for their construction materials, specifically cement. I think that there is more and more pressure from the sustainability point of view, also for the builders and contractors and that's helping us, I mean, to make faster inroads in the market. So it's going to be a matter of time. I mean there was a pushback, years back, with the introduction of limestone cement. I think that limestone cement, in our case, it's going to be very promising because, obviously, it's really available for us in the region. And the market is appreciating more and more, I mean, having a cement that performs at least as well as the portland cement. But in addition, I mean, having it -- having also more readily available -- more capacity available. Because this will go to answer your second question. By adding limestone, long term, we can at least increase our capacity by 10% in our plan from where we are today. So it's a win-win, I mean, for us and for the market.
Our next question comes from the line of Alberto Valerio with UBS.
Quick one on my side. I would like to know if you could provide more color on the current exposure by segment of GCC in the U.S. and Mexico. You said that you have 30% exposure to infrastructure in the U.S. In case of increasing demand in-house that you see that with low inventories and people searching for larger places for living, how challenges to migrate to that segment in both markets? And congrats for the results.
Thank you, Alberto. Exposure by segment, we have been saying that infrastructure in the U.S., it's around 50%. And Luis Carlos will elaborate on this a little bit more.
Yes, the infrastructure is around 50%. The residential goes between [ 20% ] and [ 25% ]. Commercial goes between 8% and 10%. Well -- and for us, as we have said, the oil-well cement has been decreasing in PAS yield from 16%, 17% to 10% in the U.S. and we also have exposure to agricultural in Iowa, South Dakota, Minnesota. So that's how -- and we're exposed to every single segment. We are not focused in one specific segment. So we cover the whole industry.
Alberto, on your second question, could you repeat that for me, please? I didn't quite get it.
No problem, no problem. In case of increasing demand of housing, how you guys can manage it like you could move from one segment rather easily? Or it's a challenging way to capture this demand? And if you could also give some color on the exposure of Mexico in the fourth quarter?
Okay. Thank you, Alberto. Yes. Moving from segment to segment, actually, it's not difficult for us because in the regions where we operate, we go to every segment. So it's just a matter of -- I mean, it's the same -- basically the same cement can vary very little. So it's just a matter of having enough capacity, I mean, to attack every segment, which we don't see a problem this year. We have some plans that are sold out basically like Pueblo, but with the expanded capacity in Rapid City, we can move cement along our network. In terms of Mexico, so Mexico, also, Luis Carlos is going to give you the main segments and drivers.
In Mexico, one big segment is, of course, the [ self-construction ] that we cover with our very strong distribution chain [ cost rep ]. Then housing is around -- it goes between 16% and 10%, depending on the year. Mining is a very -- also all of our mining customers, it's also a very strong segment. On the other side, infrastructure in Mexico, I mean, in the state of Chihuahua is not as strong as the rest of the country. So that segment is not as important as the previous ones that I explained.
Our next question comes from the line of Coleman Clyde with HSBC.
I was just wondering if you could give a little bit more color on margins. You've obviously made some great improvements, particularly in the U.S., on the margin side. I was just wondering if you could give any color on your outlook for next year and maybe the medium term. I know you've stated previously 34% as a long-term goal, if you think that this is still realistic and where we can expect to see the remaining improvement on that front.
Yes. Thank you, Colin. Well, definitely, we are continuously focused on increasing margins. Of course, there is all the several levers that we can pull. Of course, one and one of the most important is, of course, pricing. So as long as we can continue to push out for better pricing in our markets, we will be delivering higher margins. Also, while we continue to optimize our logistic systems by sending cement closer from our cement plants to our customers, we will be reducing, of course, the freight cost of the company. Another one is the sustainability initiative of increasing alternate fuels in all the plants. We've been expanding the percentage of alternate fuel use, and we will continue increasing that percentage. And of course, as we demonstrated in 2020, controlling fixed costs and being very conscious about the cost and expenses, we will be, of course, pulling that lever of operating leverage going forward.
And an additional comment to what Luis Carlos said, obviously, the more we progress on PLC cement, Portland-limestone cement, of course, that also, I mean, will help the margin.
Makes sense. And a quick follow-up, if I may. In the U.S., particularly on the environment, you guys have obviously been focusing a lot on that area. I was wondering. With the change in administration to Democratic leadership that's clearly focused a lot on green energy, do you guys expect to see any tighter restrictions on the cement side, on the cement industry? And what would be some of the risks or opportunities you expect to come from that?
Well, we have not heard of any specific changes in the legislation or regulations regarding emissions limits, but I will not be surprised that, with time, the Biden administration will lean towards there. But there is nothing short term that I know of.
Of course, the main challenge today continues to be the carbon capture and sequestration and usage, which we're working very closely with the Global Cement and Concrete Association on being very close to the latest technology developments to solve that issue for the industry as a whole. So that's a more medium-term solution on that regard, but in other, shorter term, I mean, contaminants, I haven't seen anything coming out yet.
Our next question comes from the line of Froylan Mendez with JPMorgan.
Congrats on the results. So following up on the blended cement that you mentioned, which other DOTs do you see following a similar path as Texas and New Mexico?
And is this blended cement coming from the PLC product that you mentioned? I mean, if that is the case, how prepared are you in terms of capacity to serve this blended cement in case we see other DOTs changing their requirements?
And additionally, how much of your U.S. volumes do you expect this blended cement to represent given the changes in the DOT requirements? And what could be the margin implications?
Thank you, Froylan. Most of the DOTs are moving towards, I mean, this type of standards, and some of them have already adopted them. For example, we are shipping PLC cement in Montana as we speak. We have also started, I mean, the efforts in Colorado. So I think that the duties will continue to change in the case of those that have not approved some specific type of cement, I mean, again, because there is a lot of demand from the users on more sustainable products.
In terms of our blended cement, we're talking here 2 different types: the pozzolan that I referred to that are being produced now in Mexico, and we have also done that in the Rapid City plan for paving projects in Nebraska; and the PLC which is most likely what is going to be more successful for us given obviously the availability of limestone for our plants. We don't have yet a number to give you in terms of, I mean, how fast and what will be the percentage of our total sales mix, but we are continuing working on that as we develop the market. A short-term target that we have, I mean, for this year, it's 75,000 tonnes. But that's just, I mean, 2021, which is, of course, I mean, still a low number of what we would expect to get in the future.
And Enrique, is there a big difference in the margins of this type of product versus the typical Portland cement?
Well, it will depend obviously on the raw materials, on the pozzolans and where you can get them because, again, I mean, the challenge here is how close to your plant you can, I mean, have these natural pozzolans. So it will be very variable. It will be case by case depending on what you can find and where you can find. As I said, in this moment, we're working with the ones that we have here in Chihuahua and with a very good margin.
In terms of PLC, of course, I mean, Portland-limestone cement, what you do is that you substitute ground limestone for clinker. So the margin comes from the cost that you don't incur in burning, I mean, the limestone in a kiln, and so all the fuel costs and associated power to burn it, because you add the limestone directly in your process, I mean, in your finished mill. So that's basically the difference, the cost difference, of the clinker that you substitute.
Our next question comes from the line of Enrico Galassi with PAAMCO.
It's Federico Galassi from PAAMCO. Just one question. Luis Carlos, you mentioned that in the case that you don't find this year M&A opportunities, you will pay more debt. Well, we looked at the numbers that you showed in the presentation, net debt-to-EBITDA is close to 0.2 at the end of the year. And if nothing happened, next year will be net cash at your position. What are you thinking in pay dividends, increase the dividends, extraordinary dividends, something like that, buybacks for this year? And what do you believe is the right level of net debt that you're seeing for the company in the next years?
Thank you, Federico. Yes, yes. As we said, we're going to continue looking for opportunities. That's one of the main priorities of the company in 2021 in M&A opportunities. And yes, if we don't find an opportunity, we're going to pay down debt. We want to have the right amount of cash going forward to take advantage of those market opportunities. Right now, it's the strategy that we have.
We're not seeing a special dividend. In terms of buybacks, we've been -- actually, this year, we bought back some shares at the beginning of the pandemic. We use it, the buyback program, more for liquidity purposes. As of now, that's the strategy. That's the current strategy. Again, we are confident, and we're pushing for M&A opportunities, and that's the main focus. So we want to have the right balance sheet to take advantage of those.
And sorry, another question, if I may, for the continuation. If the final opportunity, big opportunity again, to go to net debt, what do you believe is your target? Or what is your maximum net debt-to-EBITDA that you believe that would be the high number for the company?
Oh, yes. Federico, yes. 3x is what we're comfortable with. So that's the number. If we find an opportunity, a very good opportunity, we may -- that is bigger than that threshold, we may go above those 3x, but we have a clear plan, business plan, to delever as quick as possible. We have done that in the past. So that may be a possibility also.
Okay. Okay. And then last question. I think that was, 2 years ago, CEMEX sold some stocks of the company. Do you know if their -- CEMEX still have this position? This is the first question. And the second one is, if they still have this position, do you believe that will be our new opportunity to buy that?
Well, CEMEX has announced that they have sold most of the shares that they -- that were part of the re-IPO 3 years ago, 4 years ago, I think. And -- but again, that may be a question that you have to make to CEMEX. We don't see any actions of investing in those shares on our side.
Okay. Congrats for the results.
[Operator Instructions]. Our next question comes from the line of [ Yassin Touray ] with [ Enfield ].
Yes. Just I will have 3 questions. On the U.S., you mentioned the price increase of $8 per ton. Is it fair to assume that half of it would stick and that you could, in the end, get a price increase of, let's say, 3%, 4%?
Then my second question is on Mexico. We understand that some of your competitors are facing substantial cost inflation because they're using petcoke and have increased prices by more than 5%. Is it something that you see in your regions in 2021?
And then my last question is -- I was actually impressed by your commitment to carbon neutrality by 2050. And here, do you have any indication that the Biden administration could consider implementing a tax on the CO2 that is emitted by the U.S. cement industry in the next 4 years? And could also the Biden administration put in place a carbon border tax to protect the industry from cheap import from countries with no CO2 regulation.
Thank you for your questions. In terms of pricing in the U.S., what I said is that the $8 price increase went into effect on January 1. And we had a few areas, I mean, sliding into April 1, but we expect most of the price, I mean, to get materialized -- of the price increase. So we're seeing a strong, as we said, and so we don't see a big problem in the majority of this increase taking place.
I'm sorry. I don't know if you heard me well. I still have my mask on. So sorry for that.
In petcoke, as I said, in Mexico, I understand, I mean, the scarcity of it and other companies having to, I mean, take that -- those cost increases, which were not affecting us. So the price increase of around 5%, I think it's possible for us in the Chihuahua market, too. We have already started, I mean, with that process in our market, and we believe it's going to be, I mean, if not that, perhaps a little bit above in certain products in 2021.
In terms of our commitment to carbon neutrality -- concrete -- neutrality in carbon for 2050, of course, we're fully committed to it, and we're working with the industry and in our plants to find out what exactly, I mean, is going to be our solution but definitely committed to it.
And on your fourth question, I couldn't hear it well. In terms of the Biden administration, I think I heard, I mean, if there is going to be a border tax or -- can you...
The question is that, from what I understand, for the -- if you want to become carbon neutral, you will have to invest into carbon capture. And for carbon capture to be profitable, you need to have some form of a tax on CO2, like you have in Europe. So my question was, do you think that the Biden administration could introduce the tax on the CO2 emitted by the U.S. cement industry?
I think it's very -- yes, it's very possible. And of course, as an industry and through PCA, we are, I mean, doing everything we can to convince, I mean, the regulators and legislators that this needs to be a federal legislation and not a state-by-state one, which will complicate things a lot. So we need this to be federal. And we, of course, need a carbon border adjustment tax, I mean, to have a playing level field. And we're working on that through the industry.
And do you think this is something that could be implemented in the next 4 years? Or do you think it's something which is going to happen more in the longer term or you have no visibility?
Well, it's hard to say at this -- it's just been, I mean, a few weeks since the new administration took over, but I think it's something that is likely. I would not be able to say what percentage of certainty, I mean, we will place on it at this moment.
Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Ricardo Martínez for closing remarks.
Thank you for your interest in GCC and for joining us today. We appreciate your questions this morning and look forward to talking with you again in the months ahead.
This concludes our conference call, but our team is, of course, available for any follow-up questions you may have. Goodbye, and stay safe.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.