TIDMCOD
RNS Number : 3188L
Compagnie de Saint-Gobain
28 July 2011
First-half 2011: robust organic growth; strong growth in earnings.
Paris, July 28, 2011 - Publication of first half 2011 results.
KEY FIGURES
(EURm) H1-2010 H1-2011 Change
------------------------ -------- --------- -------
Sales 19,529 20,875 +6.9%
------------------------ -------- --------- -------
Operating income 1,445 1,720 +19.0%
------------------------ -------- --------- -------
Recurring(1) net income 580 902 +55.5%
------------------------ -------- --------- -------
Net income 501 768 +53.3%
------------------------ -------- --------- -------
Highlights of first-half 2011:
-- Organic growth: up 6.7% over the first half.
-- Sales prices: up 2.4% over the first half (up 2.0% in the first
quarter;
up 2.8% in the second quarter).
-- Double-digit growth in operating income (at constant exchange
rates*):
up 18.6%.
-- Free cash flow(2): up 7.0% to EUR1.1bn, against a target of
EUR1.3bn
for the full year.
-- Continued strong balance sheet: net debt/EBITDA ratio cut to
1.8 from
2.1 at end-June 2010.
-- Relaunch of capital spending (up 48.4% to EUR641m) and
acquisitions
(up from EUR36m to EUR182m).
Pierre-Andre de Chalendar, Chairman and Chief Executive Officer of
Saint-Gobain,
commented:
"Saint-Gobain's strong sales growth in the first half of the year
confirmed
the recovery in sales volumes observed in 2010 and our successful
focus
on sales prices. Based on significantly lower costs, this
performance
helped drive a double-digit rise in our earnings and curb the
impact of
soaring raw material and energy costs.
We expect the underlying trends observed since the beginning of
the year
to continue in the six months to December 31. Leveraging our
strong balance
sheet, we will continue to adopt a resolute, tempered development
strategy.
Capital expenditure and acquisitions will be stepped up and
focused primarily
on our three priorities: Asia and emerging countries, high
value-added
solutions for the Habitat market, and bolt-on and consolidating
acquisitions
in Building Distribution and Construction Products, following the
example
of the Build Center and Brossette acquisitions unveiled early this
week.
Overall for the year as a whole, we are confident about our
ability to
achieve our 2011 targets of robust organic growth and a
double-digit rise
in operating income (at constant exchange rates**). We also
confirm our
free cash flow target of EUR1.3 billion, after a EUR500 million
increase
in our capital expenditure."
1. Excluding capital gains and losses on disposals, asset
write-downs
and material non-recurring provisions.
2. Excluding the tax effect of capital gains and losses on
disposals,
asset write-downs and material non-recurring
provisions.
* Exchange rates for first-half 2010.
** Exchange rates for 2010.
Operating performance
The second quarter of 2011 confirmed the underlying trends seen
in the three months to March 31 (excluding the very positive impact
of mild winter weather and the number of working days which boosted
volumes in the first quarter). Organic growth for the Group came in
at 4.4%, with contributions from all of the Group's business
sectors and main geographic regions. This performance continued to
be powered by vigorous momentum in emerging countries and brisk
trading in industrial markets, and confirms the gradual improvement
in businesses linked to the residential construction sector in
Europe. High value-added solutions and especially businesses
related to energy efficiency in the Habitat market (Insulation,
Reinforced Thermal Insulation Glass, Industrial Mortars, etc.)
continued to spearhead the Group's organic growth on residential
construction markets in Europe, buoyed by new energy performance
standards and particularly Thermal Regulation "RT 2012" in France.
The growth push in these sectors continues to be driven by the
Group's largest national markets (France, Germany and Scandinavia),
with the exception of the UK where sales volumes slowed during the
second quarter.
Businesses related to household consumption (Packaging sector:
Verallia) continued to perform well.
Barring the renovation segment (Exterior Products), which saw
growth pick up pace over the last few months due to severe storms,
construction markets in North America remained in the doldrums.
With market conditions for the Group improving on the whole and
raw material and energy costs soaring, sales prices remained a key
focus for the Group throughout the first half, climbing 2.4% over
the period, including 2.8% in the second quarter alone (after 2.0%
in the three months to March 31).
Overall in the first six months of 2011, the Group posted 6.7%
organic growth (positive volume and price impacts of 4.3% and 2.4%,
respectively). However, trading levels were still well below their
pre-crisis levels of first-half 2008 (12.6% lower in volume
terms).
Bolstered by the cost savings achieved over the last few years,
the Group's operating margin rose sharply, up to 8.2% from 7.4% in
first-half 2010. Each key geographical area contributed to margin
growth except North America, where profitability in the comparative
first-half 2010 period had been boosted by stockpiling by building
materials distributors who are Group customers.
1[deg]) Performance of Group Business Sectors
All business sectors reported robust organic growth in the first
half of 2011. Profitability improved in Innovative Materials and
Building Distribution, but dipped slightly in Construction Products
and Packaging (Verallia), squeezed by the hike in raw material and
energy costs. For these two sectors, the acceleration in sales
price increases throughout the first half failed to compensate
fully for cost inflation.
Innovative Materials continuedto enjoy the bullish trading
observed in 2010 and once again delivered the Group's best organic
growth performance, both in the first half (up 8.5%) and in the
three months to June 30 (up 5.5%). The contribution from the
sector's different divisions was roughly equal. Markets related to
industrial output and capital spending remained upbeat across all
regions, and particularly Asia and emerging countries. Innovative
Materials also benefited from an upturn in residential construction
markets across Europe during the first half. Combined with a
significantly leaner cost base thanks to the cost savings achieved
in the past few years, this drove further advances in the business
sector's operating margin, which rose to 12.5% from 10.4% in
first-half 2010.
-- Flat Glass reported 8.2% organic growth over the period,
including 5.8% in the second quarter, spurred chiefly by volume
advances in Asia and emerging countries as well as Western Europe
(France in particular). Volume growth in Western Europe reflects
the gradual recovery in residential construction markets across the
region. In an attempt to curb the impact of rising raw material and
energy costs, sales prices continued to rise over the first half,
with increases picking up pace between the first and second
quarters. The operating margin climbed sharply, up to 9.5% of sales
from 7.8% of sales in the same year-ago period.
-- High-Performance Materials (HPM) delivered a further 9.3%
rise in like-for-like sales (up 5.5% in the second quarter).
Industrial output and capital spending remained upbeat across all
regions, and particularly Western Europe. To keep up with spiraling
raw material and energy costs, sales prices were up significantly
over the period, with price increases across the sector also
picking up pace between the first and second quarters. Although HPM
volumes are not as yet back to their pre-crisis levels of
first-half 2008, very strong operating leverage sent the operating
margin well above its record first-half 2008 showing (13.9%), at
16.4% of sales versus 13.5% of sales in first-half 2010.
Construction Products (CP)like-for-like sales climbed 4.9% over
the first half (3.7% in the second quarter), buoyed by the rebound
in sales volumes across all divisions except Pipe and Interior
Solutions in the US. The business sector's operating margin edged
down to 9.7% from 10.1% in first-half 2010. This reflects narrower
margins in Exterior Solutions, due chiefly to the hike in raw
material and energy costs. The upward momentum in sales prices over
the six months to June 30 (up 2.8% for the business sector as a
whole and 2.7% for Exterior Solutions) failed to fully offset this
cost inflation.
-- After an excellent first quarter, Interior Solutions posted
robust 6.0% organic growth over the first half and more moderate
3.9% growth in the three months to June 30. The sharp recovery in
sales volumes over both periods in most Western European countries
(particularly in Insulation), along with ongoing vibrant trading in
Asia and emerging countries, more than offset the continuing
slowdown in North America. Sales price increases (up 3.0% over the
first half and 3.2% in the second quarter) - especially in the
Insulation business, helped offset the spike in energy and raw
material costs. Volume growth led to further advances in the
operating margin, up to 7.9% versus 6.8% in first-half 2010.
-- Like-for-like Exterior Solutions sales climbed 4.1% over the
first half and 3.9% in the second quarter. This improvement
reflects a very mixed performance from its different divisions.
Industrial Mortars delivered double-digit organic growth in the six
months to June 30, powered by bullish conditions in Asia and
emerging countries, but Pipe volumes were down sharply, hit by
austerity measures in most European countries and a decline in
export sales. Exterior Products benefited from a sharp upturn in
the US renovation market in the second quarter, on the back of
severe storms over the past few months. Despite an acceleration in
sales price increases in the three months to June 30 (up 3.4% after
a 1.8% rise in the first quarter), the operating margin narrowed to
11.1% from 13.0% in first-half 2010, squeezed mainly by the sharp
downturn in the Pipe business sector and soaring raw material and
energy costs.
Building Distribution rebounded strongly over the first half,
posting 7.3% organic growth (of which 4.5% in the second quarter),
spurred by a strong rise in sales volumes in France, Germany, the
Netherlands and Scandinavia during the first six months of the
year. In contrast, trading was more uneven in the UK and Eastern
Europe, and remains very tough in southern Europe. The overall
trading upturn, combined with sharp cost reductions over the past
few years, led to a strong rise in the operating margin, up to 3.6%
from 2.4%.
Packaging (Verallia) reported 4.2% organic growth over the first
half, driven by improved conditions in Western Europe and buoyant
trading in Latin America. Despite the negative currency impact due
mainly to the fall in the US dollar against the euro, EBITDA
climbed to EUR347 million from EUR344 million in the same period in
2010, in line with Verallia's target for the full year. This
performance reflects Verallia's ability to pass on most of the
steep rise in its costs (mainly energy and raw materials) to
prices, which gained 2.6%. The EBITDA margin dipped to 19.1% from
19.5% one year earlier, reflecting the time lag before the full
impact of the sales price rises kicks in.
Taking the opportunity of the release of Saint-Gobain's
first-half results, Verallia's registration document (document de
base) was updated with the French financial markets authority (AMF)
on July 28, 2011.
2[deg]) Analysis by geographic area
As in the first quarter, all of the Group's regions delivered
strong organic growth over the six months to June 30, 2011.
Profitability improved sharply in Western Europe, Asia and emerging
countries, but edged down slightly in North America.
- In France and other Western European countries, organic growth
for the first half came in at 6.2% and 6.3%, respectively (3.9% and
3.2%, respectively, in the second quarter). During the second
quarter, the rebound observed in businesses related to residential
construction over the three months to March 31 continued apace,
particularly in Building Distribution and Interior Solutions,
despite a slowdown in the UK and persistent difficulties in
southern Europe. Businesses related to industrial markets remained
buoyant. As a result, the operating margin climbed sharply in both
France and other Western European countries, to 7.2% and 6.2%,
respectively (6.2% and 5.1%, respectively, in first-half 2010).
- North America reported 3.9% organic growth over both the first
half and the second quarter. This was essentially driven by fresh
advances in High-Performance Materials and rising volumes in
Exterior Products. The operating margin continued to perform very
well, despite narrowing to 11.2% (compared to 12.0% in first-half
2010, which had benefited from stockpiling by building materials
distributors).
- Asia and emerging countries once again delivered the Group's
strongest organic growth performance, both in the first half and
over the second quarter (up 12.4% and 9.7%, respectively). This
strong momentum was seen across all regions, and particularly
Eastern Europe. The operating margin continued on an upward trend,
at 10.1% of sales versus 9.1% one year earlier.
Analysis of the interim consolidated financial statements for
first-half 2011
The interim consolidated financial statements set out below were
authorized for issue by the Board of Directors on July 28,
2011:
H1 2010 H1 2011 % change
EURm EURm
Sales and ancillary revenue 19,529 20,875 +6.9%
Operating income 1,445 1,720 +19.0%
EBITDA (op. inc. + operating
depreciation/amortization) Non-operating 2,220 2,479 +11.7%
costs (193) (150) -22.3%
Capital gains and losses on disposals,
asset write-downs, corporate acquisition
fees and earn-out payments (51) (114) +123.5%
Business income 1,201 1,456 +21.2%
Net financial expense (387) (298) -23.0%
Income tax (279) (352) +26.2%
Share in net income of associates 3 4 +33.3%
Income before minority interests 538 810 +50.6%
Minority interests (37) (42) +13.5%
Recurring(1 ) net income 580 902 +55.5%
Recurring(1) earnings per share(2) (in
EUR) 1.09 1.68 +54.1%
Net income 501 768 +53.3%
Earnings per share(2) (in EUR) 0.94 1.43 +52.1%
Operating depreciation and amortization 775 759 -2.1%
Cash flow from operations(3) 1,431 1,721 +20.3%
Cash flow from operations excluding
capital gains tax(4) 1,419 1,697 +19.6%
Capital expenditure 432 641 +48.4%
Free cash flow (excluding capital gains
tax)(4) 987 1,056 +7.0%
Investments in securities 36 182 +405.6%
Net debt 9,081 9,055 -0.3%
----------------------------------------------- -------- -------- ---------
( )
1 Excluding capital gains and losses on disposals, asset
write-downs and material non-recurring provisions.
2 Calculated based on the number of shares outstanding at June
30 (535,334,213 shares in 2011 versus 530,786,373 shares in 2010).
Based on the weighted average number of shares outstanding
(526,306,335 shares in first-half 2011 versus 509,735,208 shares in
first-half 2010), recurring earnings per share comes out at EUR1.71
(versus EUR1.14 in first-half 2010), and earnings per share comes
out at EUR1.46 (versus EUR0.98 in first-half 2010).
3 Excluding material non-recurring provisions.
4 Excluding the tax effect of capital gains and losses on
disposals, asset write-downs and material non-recurring
provisions.
Sales advanced 6.9%. Exchange rate fluctuations had a minimal
0.2% positive impact, with gains in Scandinavian currencies and
most currencies of the Group's main emerging countries against the
euro almost fully offset by the decline in the US dollar. The
impact of changes in Group structure was neutral over the period,
with the sale of Advanced Ceramics at December 31, 2010 fully
offsetting sales contributions from acquisitions over the past 12
months.
Sales therefore climbed 6.7% on both a constant exchange rate
basis* and like-for-like (constant exchange rates and Group
structure). Volumes were up 4.3%, while sales prices gained
2.4%.
Thanks to sweeping cost cuts over the last three years,
operating income benefited fully from the growth in sales, surging
19.0%, or 18.6% at constant exchange rates*. The operating margin
therefore improved significantly, up to 8.2% of sales (11.3%
excluding Building Distribution), versus 7.4% of sales (10.7%
excluding Building Distribution) in first-half 2010.
EBITDA (operating income + operating depreciation and
amortization) advanced 11.7%. The consolidated EBITDA margin came
in at 11.9% of sales (16.4% excluding Building Distribution), up
from 11.4% (16.2% excluding Building Distribution) in the six
months to June 30, 2010.
Non-operating costs declined 22.3% from EUR193 million in
first-half 2010 to EUR150 million in first-half 2011 on the back of
lower restructuring costs. This amount includes a EUR48.5 million
accrual to the provision for asbestos litigation involving
CertainTeed in the US (half of the 2010 accrual).
The net balance of capital gains and losses, asset write-downs
and corporate acquisition fees was a negative EUR114 million. This
amount comprises EUR21 million in net gains on asset disposals and
EUR128 million in asset write-downs. Most write-downs relate to
restructuring plans and plant closures in progress and chiefly
concern certain Building Distribution businesses in Europe (mostly
southern Europe) and Construction Products businesses in the US
(write-down of property, plant and equipment at mothballed sites
where production is no longer considered likely to resume in the
short term).
Business income jumped 21.2% to EUR1,456 million after taking
into account the items mentioned above (non-operating costs,
capital gains/losses on disposals and asset write-downs).
Net financial expense fell EUR89 million, or 23.0%, to EUR298
million from EUR387 million in the same year-ago period, powered
chiefly by the fall in average net debt over the period and the
decrease in net interest costs on pensions (higher returns on plan
assets). The average cost of net debt in first-half 2011 came out
at 5.6%, as for full-year 2010.
Income tax was up 26.2%, from EUR279 million to EUR352 million,
reflecting the rise in pre-tax income. The income tax rate on
recurring net income came out at 28% versus 32% in the six months
to June 30, 2010.
Recurring net income (excluding capital gains and losses,
exceptional asset write-downs and material non-recurring
provisions) amounted to EUR902 million, soaring 55.5% year-on-year.
Based on the number of shares outstanding at June 30, 2011
(535,334,213 shares versus 530,786,373 shares at June 30, 2010),
recurring earnings per share came out at EUR1.68, a rise of 54.1%
on first-half 2010 (EUR1.09).
Net income came in at EUR768 million, up 53.3% on first-half
2010. Based on the number of shares outstanding at June 30, 2011
(535,334,213 shares versus 530,786,373 shares at June 30, 2010),
earnings per share came out at EUR1.43, up 52.1% on first half 2010
(EUR0.94).
Following the relaunch of the investment strategy announced at
the start of 2011, capital expenditure jumped 48.4% to EUR641
million (EUR432 million in first-half 2010), and accounted for 3.1%
of sales (2.2% in first-half 2010). Half of these investments
relate to growth capex, focused chiefly on selective growth
projects in Asia and emerging countries and activities related to
energy efficiency (Flat Glass - including solar power - and
Construction Products).
Cash flow from operations rose 20.3% year-on-year to EUR1,721
million. Before the tax impact of capital gains and losses on
disposals and asset write-downs, free cash flow rose 19.6% to
EUR1,697 million, from EUR1,419 million in the six months to June
30, 2010.
* Based on average exchange rates for first-half 2010.
Despite the sharp rise in capital expenditure:
- free cash flow (cash flow from operations less capital
expenditure) rose 8.0% to EUR1,079 million. Before the tax impact
of capital gains and losses and asset write-downs, free cash flow
moved up 7.0% to EUR1,056 million, at 5.1% of sales (as in
first-half 2010). More than 80% of the Group's full-year EUR1.3
billion free cash flow target has therefore already been met in the
first half.
- the difference between EBITDA and capital expenditure was up
2.8%, to EUR1,838 million in first-half 2011 (from EUR1,788 million
in first-half 2010), representing 8.8% of sales (9.2% in the same
year-ago period).
After eight years of continuous improvements, operating working
capital requirements inched up 1.1 day to 46.6 days' sales at June
30, 2011, to stand in between operating WCR at June 30, 2010 (45.5
days) and at June 30, 2009 (47.2 days). This trend chiefly reflects
the upturn in trading and increase in raw material inventories amid
spiraling raw material costs over the first half of 2011.
Consistent with the relaunch of the Group's acquisitions
strategy announced at the start of 2011, and in parallel with the
rise in capital spending, investments in securities were up sharply
at EUR182 million, a five-fold increase on first-half 2010(EUR36
million). In all, 85% of these investments (EUR154 million) related
to acquisitions in Asia and emerging countries.
Net debt remained stable year-on-year, at EUR9.1 billion, with
all of the cash flow generated over the past 12 months (net of
changes in operating WCR) used to relaunch capital spending and
acquisitions projects and to pay dividends (2009 dividend paid in
July 2010 on top of the 2010 dividend paid in June 2011 for a total
of EUR746 million) and share buy-backs. Net debt came out at 50% of
shareholders' equity, versus 51% at June 30, 2010. The net debt to
EBITDA ratio came out at 1.8 versus 2.1 at end-June 2010.
Update on asbestos claims in the US
Some 2,000 claims were filed against CertainTeed in the first
six months of 2011, on a par with first-half 2010. A total of 4,000
claims were settled during the period (2,000 in first-half 2010),
bringing the total number of outstanding claims to 54,000 at June
30, 2011, compared with 56,000 at December 31, 2010.
A total of US$ 96 million in indemnity payments were paid in the
US over the year to June 30, 2011, compared with US$ 103 million in
the year to December 31, 2010.
Outlook and objectives for full-year 2011
After a very encouraging first half, the Group expects the
conditions observed on its various markets since the beginning of
the year to continue apace:
- growth should remain vigorous in Asia and emerging
countries;
- industrial markets should remain upbeat in North America,
while construction markets are likely to remain fairly
sluggish;
- industrial markets should continue to perform well in Western
Europe, while the residential sector (new-builds and renovations)
is expected to continue on an upward trend. Trading is expected to
remain upbeat in France, Scandinavia and Germany;
- household consumption markets should hold firm across all
regions.
Against this backdrop, all of the Group's business sectors
should continue to benefit from a positive growth momentum, despite
a higher basis for comparison in the second half.
To drive growth in its different businesses, Saint-Gobain will
therefore continue to:
- pursue its resolute and tempered development strategy,
underpinned by strict financial discipline. It will step up capital
spending and acquisitions, focusing on the Group's main growth
drivers (emerging countries, energy efficiency and solar power -
which should account for more than 80% of growth capex in 2011 as a
whole - as well as consolidation in Building Distribution and
Construction Products business sectors). Along these lines, early
this week the Group announced its acquisition of Brossette and of
the Build Center network in the UK;
- leverage its price-focused policy and endeavor to pass on the
rise in raw material and energy costs through sales price
increases, particularly amid rising inflation;
- maintain a tight rein on costs;
- keep a close watch on cash management and on maintaining a
strong balance sheet;
- maintain R&D efforts.
Consequently, Saint-Gobain is confident about its ability to
achieve its full-year 2011 targets:
- robust organic growth;
- double-digit growth in operating income (at constant exchange
rates*), despite the rise in raw material and energy costs;
- EUR1.3 billion in free cash flow, after a EUR500 million
increase in capital expenditure;
- a persistently strong balance sheet.
* average exchange rates for 2010.
Forthcoming results announcement
- Sales for the first nine months of 2011: October 25, 2011,
after close of trading on the Paris Bourse.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3188L_-2011-7-28.pdf
* * *
Analyst/Investor relations Press relations
----------------------------------- -----------------------------------------
Florence Triou-Teixeira +33 1 47 Sophie Chevallon +33 1 47 62 30 48
62 45 19
Etienne Humbert +33 1 47 62 30 49
Vivien Dardel +33 1 47 62 44 29
----------------------------------- -----------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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