TIDMCOD
RNS Number : 6435I
Compagnie de Saint-Gobain
26 July 2012
First-half 2012: the Group rolls out a new action plan to address the deteriorating
economic climate.
Paris, July 26, 2012 - Publication of first-half 2012 results.
KEY FIGURES H1 2011 H1 2012 Change
(EURm)
------------------------- -------- --------- -------
Sales 20,875 21,590 +3.4%
------------------------- -------- --------- -------
EBITDA 2,479 2,284 -7.9%
------------------------- -------- --------- -------
Operating income 1,720 1,512 -12.1%
------------------------- -------- --------- -------
Recurring(1) net income 902 651 -27.8%
------------------------- -------- --------- -------
Net income 768 506 -34.1%
------------------------- -------- --------- -------
First-half 2012 highlights:
* Organic growth: down 0.8% over the first half, down
2.3% in the second quarter
* Sales prices: up 2.2% over the first half (up 2.6%
excluding Flat Glass)
* New cost cutting measures: savings of EUR170m in the
first half; EUR500m in 2012; full-year impact:
EUR750m
* Sharp improvement in operating WCR(2) over 12 months:
down 5.1 days, representing a gain of EUR340m
* Free cash flow(3) after changes in operating WCR
(over 12 months): up 21.0% to EUR1,367m
* Ongoing strong balance sheet: net debt/EBITDA ratio
at 2.1 and net debt/equity at 54%
Pierre-Andre de Chalendar, Chairman and Chief Executive Officer of Saint-Gobain,
commented:
"Besides the impact of one less working day and of very average weather
conditions in Europe, trading for the Group in the second quarter was also
affected by the general slowdown in the economic environment in Western
Europe - which the continued upturn in US construction markets could not
wholly offset. In this tough climate, we maintained our priority focus
on sales prices in order to pass on the rise in raw material and energy
costs over the full year, and also rolled out a new cost cutting program.
We expect the business trends observed in the second quarter to continue
through the second half, although Asia and emerging countries should witness
timid growth. Against this backdrop, in the second half of 2012 we are
firmly reinforcing our new action plan: focusing on sales prices, stepping
up our cost cutting program and scaling back our capital spending and financial
investments compared to second-half 2011, while maintaining a tight rein
on operating working capital.
Overall, in view of the deterioration in the economic climate since the
beginning of 2012, we are now expecting for the year as a whole a measured
rise in our sales prices, a limited decline in our volumes, and second-half
operating income to be moderately down on our first-half performance. In
addition, we confirm our target of maintaining high levels of free cash
flow and a strong balance sheet."
1. Excluding capital gains and losses on disposals, asset write-downs and
material non-recurring provisions.
2. Working Capital Requirement.
3. Excluding the tax effect of capital gains and losses on disposals, asset
write-downs and material non-recurring provisions.
Operating performance
Overall, after a broadly satisfactory first quarter in line with
the economic scenario anticipated by the Group early in the year,
the second quarter was hit by a deterioration in the economic
climate in Western Europe. This was particularly pronounced from
May onwards, and was exacerbated by fewer working days than in 2011
(one day less; three days less in France in May), and by very
average weather conditions. Sales were down 2.3% on a like-for-like
basis (down 4.2% in terms of volumes and up 1.9% in terms of
prices). With the exception of High-Performance Materials (HPM) and
Packaging (Verallia), all of the Group's Business Sectors and
Divisions suffered from a slowdown in the residential new-build and
automotive markets in Western Europe. In addition, Asia and
emerging countries showed no tangible signs of recovery in this
second quarter. Flat Glass - which generates almost all of its
sales in Western Europe and in Asia and emerging countries - was
particularly hard hit by these adverse market conditions.
On a more positive note, the gradual recovery in residential
construction across North America continued apace, while industrial
output and capital spending performed well.
Amid a tougher economic environment than at the beginning of
2012, and in view of the hike in raw material and energy costs in
this first half, sales prices remained a clear priority for the
Group throughout the six months to June 30, and gained 2.2% (2.6%
excluding Flat Glass).
Overall,like-for-like sales for the Group slipped 0.8% in the
first six months of 2012, with volumes down 3.0% and prices up
2.2%.
Despite profitability gains in North America, the Group's
operating margin narrowed to 7.0% for first-half 2012 compared to
8.2% for the same period in 2011, due mainly to sluggish sales
volumes (chiefly in Western Europe) and to a sharply negative
price/cost spread in Flat Glass.
1[deg]) Performance of Group Business Sectors
Along the lines of the first quarter, Innovative Materials sales
fell 3.1% on a like-for-like basis over the first half, reflecting
challenging market conditions in Flat Glass. High-Performance
Materials delivered timid growth gains amid robust trading on most
industrial markets worldwide - except automotive in Western Europe
and solar power. Hit by slack profitability in Flat Glass, the
operating margin for the Business Sector narrowed to 8.4% from
12.5% one year earlier.
-- Flat Glass sales retreated 6.5% on a like-for-like basis over
the first half owing to the combined adverse impact of several
factors: a contraction in automotive production in Western Europe,
the collapse of the solar market, a fall in prices (especially
float glass) and a steep rise in raw material and energy costs. As
a result, the operating margin for the business narrowed sharply,
to 2.1% of sales from 9.5% in first-half 2011.
-- HPM delivered timid 1.4% organic growth over the first half -
after an acceleration in the second quarter (up 2.6%) - thanks to
the upward momentum in its sales prices. The operating margin - up
against a record-high of 16.4% in the six months to June 30, 2011 -
advanced compared to second-half 2011 (14.9%), at 15.6%.
Construction Products (CP) sales inched down 0.3% on a
like-for-like basis, hit by the slowdown in sales volumes in
Western Europe and in Asia, particularly in the second quarter. As
a result, the operating margin fell to 8.8% from 9.7% in first-half
2011.
-- Interior Solutionssaw organic growth creep up 0.7% over the
first half, on the back of vigorous sales price momentum
(especially in the US), which helped offset the earnings impact of
rising energy and raw material costs. Volumes were upbeat in North
- and especially South - America, but retreated in both Western and
Eastern Europe, and to a lesser extent in Asia. The operating
margin improved, up to 8.7% of sales from 7.9% in first-half
2011.
-- Exterior Solutions saw sales slip 1.2% on a like-for-like
basis, hit by the steep decline in Pipe sales - which could not be
offset by growth in other Exterior Solutions businesses. Exterior
Products continued to benefit from the upturn in the US housing
market, reporting a robust rise in sales, owing chiefly to moves by
building merchants in the first quarter to build up inventories.
Industrial Mortars sales were once again driven by Asia and
emerging countries, where the business delivered double-digit
organic growth over the first half. For the Division as a whole,
sales prices remained upbeat over the six months to June 30, 2012,
but failed to fully offset the hike in raw material and energy
costs affecting the Pipe business. As a result, the operating
margin narrowed, to 8.9% of sales versus 11.1% in the same year-ago
period.
Building Distribution reported a slight 0.6% decrease in
like-for-like sales as organic growth retreated in the second
quarter (down 2.5%), with sales growth in Germany, Scandinavia and
the US more than offset by sluggish trading in France and the UK
along with persistent difficulties in Southern Europe and Benelux.
The operating margin for the Business Sector improved, up to 3.9%
from 3.6% in first-half 2011.
Packaging (Verallia) delivered 3.0% organic growth over the
first half, spurred by bullish trends in sales prices in its main
markets. Trading remained robust in the US, France and Germany, but
slackened in Southern and Eastern Europe. The operating margin fell
to 10.8% of sales versus 12.4% in first-half 2011, mainly
reflecting difficulties in Southern Europe and the time needed to
feel the full benefit of efforts to pass costs on to prices.
2[deg]) Analysis by geographic area
Along the lines of the first quarter, stark contrasts persisted
and deepened between Western Europe, where trading slowed, and
North America, which delivered buoyant organic growth over the
first half. Trading in Asia and emerging countries was up slightly,
concealing widely contrasting performances from one country to the
next. Profitability improved in North America but retreated in
Western Europe and in Asia and emerging countries.
- France and other Western European countries reported a decline
in like-for-like sales, of 2.9% and 3.2%, respectively, due mainly
to a double-digit fall in Flat Glass and Pipe sales. Other
Construction Products divisions were also impacted overall in the
second quarter by the souring economic environment in Western
Europe, exacerbated by very average weather conditions and by fewer
working days than in first-half 2011. In contrast, HPM, Building
Distribution and Packaging (Verallia) sales held firm. The
operating margin slipped both in France and in other Western
European countries, down to 5.7% and 6.0%, respectively (versus
7.2% and 6.2%, respectively, in first-half 2011).
- North America delivered 4.7% organic growth. This reflects a
positive contribution from all Business Sectors and particularly
Construction Products (CP), lifted by the gradual recovery of the
residential construction market. This upturn was especially strong
in the first quarter, as builders' merchants built up their
inventories. Sales prices advanced sharply over the first half, on
the back of further price rises implemented since the beginning of
the year. Theoperating margin continued to recover, up to 11.6%
(from 11.2% in first-half 2011).
- Sales for Asia and emerging countries inched up 1.2% on a
like-for-like basis, as the downturn in our Asian operations -
particularly Flat Glass and Pipe - was offset by a resilient
performance from Latin America and by a timid recovery in Eastern
Europe. The operating margin fell sharply, due mainly to
challenging market conditions in Flat Glass, to stand at 6.1% of
sales compared to 10.1% one year earlier.
Analysis of the interim consolidated financial statements for
first-half 2012
The interim consolidated financial statements set out below were
authorized for issue by the Board of Directors on July 26,
2012:
H1 2011 H1 2012 % change
EURm EURm
Sales and ancillary revenue 20,875 21,590 +3.4%
Operating income 1,720 1,512 -12.1%
EBITDA (op. inc. + operating depreciation/amortization) 2,479 2,284 -7.9%
Non-operating costs (150) (224) +49.3%
Capital gains and losses on disposals,
asset write-downs,
corporate acquisition fees and earn-out
payments (114) (135) +18.4%
Business income 1,456 1,153 -20.8%
Net financial expense (298) (356) +19.5%
Income tax (352) (285) -19.0%
Share in net income of associates 4 4 +0.0%
Income before minority interests 810 516 -36.3%
Minority interests (42) (10) -76.2%
Recurring(1) net income 902 651 -27.8%
Recurring(1) earnings per share(2) (in
EUR) 1.68 1.23 -26.8%
Net income 768 506 -34.1%
Earnings per share(2) (in EUR) 1.43 0.95 -33.6%
Operating depreciation and amortization 759 772 +1.7%
Cash flow from operations(3) 1,721 1,462 -15.0%
Cash flow from operations excluding capital
gains tax(4) 1,697 1,424 -16.1%
Capital expenditure 641 754 +17.6%
Free cash flow (excluding capital gains
tax)(4) 1,056 670 -36.6%
Investments in securities 182 277 +52.2%
Net debt 9,055 9,828 +8.5%
-------------------------------------------------------------- -------- -------- ---------
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 (531,052,614 shares in 2012 versus 535,334,213 in 2011). Based
on the weighted average number of shares outstanding (526,833,258
shares in first-half 2012 versus 526,306,335 shares in first-half
2011), recurring earnings per share comes out at EUR1.24 (versus
EUR1.71 in first-half 2011), and earnings per share comes out at
EUR0.96 (versus EUR1.46 in first-half 2011).
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 3.4% to EUR21,590 million, compared to EUR20,875
million in first-half 2011. Exchange rate fluctuations had a
positive 1.6% impact, mainly resulting from gains in the US dollar
and pound sterling against the euro. Changes in Group structure
also had a positive 2.6% impact, chiefly reflecting the
consolidation of Build Center and Brossette with effect from
November 1, 2011 and April 1, 2012, respectively, and the
acquisition of Solar Gard in October 2011.
On a like-for-like basis (constant Group structure and exchange
rates), sales edged down 0.8%, with the 2.2% rise in sales prices
failing to fully offset the 3.0% decline in volumes.
Operating income was down 12.1%, hurt by lower sales volumes and
a sharply negative price/cost spread in Flat Glass. As a result,
the operating margin narrowed, to 7.0% of sales (9.1% excluding
Building Distribution), versus 8.2% (11.3% excluding Building
Distribution) in first-half 2011.
EBITDA (operating income + operating depreciation and
amortization) retreated 7.9%. The consolidated EBITDA margin came
in at 10.6% of sales (14.1% excluding Building Distribution),
versus 11.9% (16.4% excluding Building Distribution) in the first
six months of 2011.
Non-operating costs rose almost 50%, driven by the rise in
restructuring costs, up to EUR224 million from EUR150 million in
first-half 2011. This amount includes a EUR45 million accrual to
the provision for asbestos-related litigation at CertainTeed in the
US (i.e., 50% of the 2011 accrual).
The net balance of capital gains and losses on disposals, asset
write-downs, and corporate acquisition fees was a negative EUR135
million. This amount includes EUR66 million in gains on asset
disposals and EUR193 million in asset write-downs. Most of these
write-downs result from the restructuring plans and site closures
implemented during the period, and chiefly concern Flat Glass (for
EUR116 million) as well as certain Building Distribution and
Construction Products businesses in Spain.
Business income fell 20.8% to EUR1,153 million after taking into
account the items mentioned above (non-operating costs, capital
gains and losses on disposals and asset write-downs).
Net financial expense increased 19.5% or EUR58 million to EUR356
million, up from EUR298 million in first-half 2011, due chiefly to
the increase in average net debt over the period. The average cost
of gross debt remained stable year-on-year, at 4.9%.
In line with pre-tax income trends, income tax was down 19.0%,
from EUR352 million to EUR285 million. The tax rate applicable to
recurring net income was 32.7%, versus 28% in first-half 2011.
Recurring net income (excluding capital gains and losses, asset
write-downs and material non-recurring provisions) fell 27.8% on
first-half 2011 to EUR651 million. Based on the number of shares
outstanding at June 30, 2012 (531,052,614 shares versus 535,334,213
shares at June 30, 2011), recurring earnings per share came out at
EUR1.23,down 26.8% on the same year-ago period (EUR1.68).
Net income totaled EUR506 million, a decline of 34.1% on
first-half 2011. Based on the number of shares outstanding at June
30, 2012 (531,052,614 shares versus 535,334,213 shares at June 30,
2011), earnings per share came out at EUR0.95, down 33.6% on
first-half 2011 (EUR1.43).
Capital expenditure climbed 17.6% to EUR754 million from EUR641
million in first-half 2011, representing 3.5% of sales (3.1% of
sales in first-half 2011). Almost half of capital spending
consisted of growth Capex, around 80% of which related to selective
growth projects in Asia and emerging countries and to businesses
related to energy efficiency markets.
Cash flow from operations came in at EUR1,462 million, down
15.0% on first-half 2011. Before the tax impact of capital gains
and losses on disposals and asset write-downs, cash flow from
operations contracted 16.1% to EUR1,424 million, from EUR1,697
million in first-half 2011.
Given the increase in capital spending:
- free cash flow (cash flow from operations less capital
expenditure) was down 34.4% to EUR708 million. Before the tax
impact of capital gains and losses on disposals and asset
write-downs, free cash flow fell 36.6% to EUR670 million, or 3.1%
of sales (versus 5.1% of sales in first-half 2011);
- the difference between EBITDA and capital expenditure was
EUR1,530 million, 16.8% less than in first-half 2011 (EUR1,838
million), and represented 7.1% of sales (8.8% in the same period
one year earlier).
Operating working capital requirements (WCR) improved sharply:
amid a trading downturn, operating WCR fell 5.1 days over 12 months
to stand at 41.5 days' sales at June 30, 2012, a figure never yet
achieved by the Group at June 30. This represents a gain of EUR340
million over 12 months, primarily as a result of action taken on
inventories in the six months to June 30.
Consequently, cash generation (free cash flow + change in
operating WCR) jumped 21% over the last 12 months to EUR1,367
million, versus EUR1,129 million at June 30, 2011.
Investments in securities totaled EUR277 million, a 52.2% rise
on first-half 2011(EUR182 million), mainly reflecting selective
acquisitions signed in late 2011 on energy efficiency markets and
in Building Distribution.
Net debt came in 8.5% higher year-on-year at EUR9.8 billion.
Over the last 12 months, although free cash flow generation (after
changes in operating working capital requirements) was 21% up on
first-half 2011, it was unable to fully finance financial
investments, the 2011 dividend payment of EUR646 million, and share
buybacks for EUR183 million. Net debt represented 54% of
consolidated equity versus 50% at June 30, 2011. The net debt to
EBITDA ratio came out at 2.1, compared to 1.8 at end-June 2011.
Update on asbestos claims in the US
Some 2,000 claims were filed against CertainTeed in the first
half of 2012 (as in first-half 2011). At the same time, 7,000
claims were settled (versus 4,000 in first-half 2011), bringing the
total number of outstanding claims to 47,000 at June 30, 2012
versus 52,000 at December 31, 2011.
A total of USD 70 million in indemnity payments were made in the
US in the 12 months to June 30, 2012, versus USD 82 million in the
12 months to December 31, 2011.
Action plan to address the deteriorating economic
environment
To address the deterioration in the economic environment
observed in the second quarter of 2012, Saint-Gobain:
- continued to give priority to sales prices, which rose 2.2%
over the first half (and 2.6% excluding Flat Glass);
- rolled out new cost cutting measures (particularly in Flat
Glass), with cost savings in the first half totaling EUR170 million
in Western Europe and in Asia and emerging countries (chiefly in
Flat Glass and Pipe). For the year as a whole, this program will
lead to cost savings of EUR500 million, and its full-year impact
(in 2013) will be EUR750 million (calculated on the 2011 cost
base);
- slashed its operating working capital requirements (WCR), with
a gain of 5.1 days (EUR340 million) over the last 12 months,
representing an improvement of 21% in cash generated (free cash
flow + change in operating WCR) over the past 12 months, at
EUR1,367 million;
- put any new acquisition projects on hold (after having
completed the acquisitions signed in late 2011 during the first
half of 2012, for example Brossette).
This action plan will be pursued and firmly reinforced
throughout the second half of 2012.
Outlook and objectives for full-year 2012
After a second quarter dampened by the deteriorating economic
climate, especially in Europe, the Group expects the economic
environment to remain tough overall in the second half of the
year:
- in Western Europe, the automotive market should remain
sluggish, while trading on other industrial markets should hold
firm. The new-build and renovation markets should continue to slow,
with stark contrasts persisting from one country to the next;
- in North America, industrial markets should enjoy further
strong momentum, while construction markets look set to continue
their gradual recovery;
- in Asia and emerging countries, growth is expected to pick up slowly;
- lastly, household consumption markets should hold firm across all regions.
Against this backdrop, trading for the Group is expected to
remain subdued, despite a more favorable basis for comparison and
positive seasonal effect than in the first six months of 2012.
In the second half, the Group will therefore press ahead with
its action plan, by:
- continuing to give priority to sales prices in order to pass
on the rise in raw material and energy costs over the year as a
whole;
- pursuing its new cost cutting measures, with additional
savings of EUR160 million in the second half, representing total
cost savings of EUR500 million over the year as a whole and a
full-year impact (in 2013) of EUR750 million (calculated on the
2011 cost base). This program will remain primarily focused on
Europe;
- maintaining a strict cash management policy, with a decrease
in capital expenditure and financial investments (down EUR200
million and EUR350 million, respectively, in the second half
compared to second-half 2011);
- keeping a tight rein on operating working capital.
As a result of the above, and given the deterioration in the
global economy since the start of the year, for full-year 2012 the
Group is now expecting:
- a measured rise in its sales prices;
- a limited decline in its volumes;
- second-half operating income to be moderately down on
operating income for first-half 2012;
- continuing high levels of free cash flow and a strong balance
sheet.
Forthcoming results announcement
- Sales for the first nine months of 2012: October 25, 2012,
after close of trading on the Paris Bourse.
http://www.rns-pdf.londonstockexchange.com/rns/6435I_-2012-7-26.pdf
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