TIDMCOD
RNS Number : 0874K
Compagnie de Saint-Gobain
24 July 2013
First-half 2013: The Group confirms its target of a recovery in operating
income in the second half.
Paris, July 24, 2013 - Publication of first-half 2013 results.
KEY FIGURES H1-2012* H1-2013 Change*
(EURm)
------------------------- --------- --------- --------
Sales 21,590 20,771 -3.8%
------------------------- --------- --------- --------
EBITDA 2,266 1,983 -12.5%
------------------------- --------- --------- --------
Operating income 1,494 1,260 -15.7%
------------------------- --------- --------- --------
Recurring(1) net income 608 422 -30.6%
------------------------- --------- --------- --------
Net income 463 332 -28.3%
------------------------- --------- --------- --------
First-half 2013 highlights:
* Sales prices hold firm: up 1.0%.
* First-half sales volumes hard hit by fewer working
days (1.8 days less, or a negative impact of around
1.4%) and by poor weather: down 4.2%.
* Asia and emerging countries deliver 3.9%
like-for-like growth.
* Cost cutting program: an additional EUR300m in cost
savings compared to first-half 2012.
* Free cash flow(2) : up 3.0% to EUR646m.
* 2013 targets confirmed.
Pierre-André de Chalendar, Chairman and Chief Executive Officer
of Saint-Gobain, commented:
"The continued upturn in US construction markets and a return to growth
for our businesses in emerging countries failed to offset the general
slowdown in the European economic environment, exacerbated by a negative
calendar impact and very poor weather. In this tough market climate,
we pressed ahead with our cost cutting efforts while successfully pursuing
our price-focused policy.
As announced previously, we expect trading to gradually improve in the
second half, based on the trends already observed in the three months
to June 30, and can therefore confirm our target of a recovery in operating
income in the second half."
* Items restated to reflect the impacts of the amendment to IAS 19.
1. Excluding capital gains and losses on disposals, asset write-downs,
and material non-recurring provisions.
2. Excluding the tax impact of capital gains and losses on disposals,
asset write-downs and material non-recurring provisions.
Operating performance
Overall, after a particularly tough first quarter hit by both
fewer working days than in the year-earlier period and by very poor
weather, the second quarter saw underlying trends stabilize on the
Group's main markets in Western Europe and market conditions
continue to rally in other regions. However, like-for-like, the
second quarter was down a slight 1.2% on the same period in 2012,
with volumes off 2.2% and prices up 1.0%. With the exception of
Flat Glass - buoyed by a pick-up in growth in Asia and emerging
countries - and Interior Solutions - lifted by the gradual
improvement in the US construction market - all of the Group's
Business Sectors and Divisions continued to suffer from sluggish
European economies, albeit far less than in the first quarter.
In this persistently tough economic climate and despite the
smaller rise in raw material and energy costs, sales prices
remained a key priority for the Group throughout the first half,
and gained 1.0%.
Overall, due to the ground lost in the first quarter,
like-for-like consolidated sales were down 3.2% in the first six
months of the year, with volumes losing 4.2% and prices gaining
1.0%.
Despite profitability gains in North America and in Asia and
emerging countries, the Group's operating margin narrowed, to 6.1%
in first-half 2013 compared to 7.0% for the same period in 2012 and
6.3% for second-half 2012.
1deg) Performance of Group Business Sectors
The deteriorating economic environment in Western Europe led to
negative organic growth for all of the Group's Business Sectors in
the six months to June 30, 2013.
Along the lines of the first quarter, Innovative Materials sales
fell 2.9% on a like-for-like basis in the first half, hurt by a
downturn in sales volumes, especially in Western Europe. The
operating margin for the Business Sector narrowed, to 6.7% from
8.4% in first-half 2012 and 6.9% in second-half 2012.
-- Like-for-like, Flat Glass sales lost 1.3% over the first
half, but were up 2.4% in the second quarter. In the three months
to June 30, the quicker pace of recovery in Asia and emerging
countries (double-digit growth) more than offset the downturn in
volumes and sales prices on Western European construction markets.
Automotive Flat Glass sales stabilized over the second quarter in
Western Europe, after a very tough first three months. Over the
first half as a whole, the price of commodity products (float
glass) in Europeremained lower on average than in first-half 2012,
despite the price increases implemented in the second quarter. As a
result, and despite the large-scale restructuring measures rolled
out, the operating margin for the Division slipped further, down to
1.5% of sales versus 2.1% of sales in first-half 2012.
-- High-Performance Materials (HPM) sales shed 5.1% on a
like-for-like basis, reflecting the decline in businesses related
to capital spending (Ceramics). HPM's other businesses (Abrasives,
Plastics, Textile Solutions) proved resilient, especially in the US
and in Asia and emerging countries. The operating margin, up
against a very tough basis for comparison (15.6% in first-half
2012) came in at 13.0%, an improvement on the six months to
December 31, 2012 (12.7%).
Construction Products (CP) sales retreated 1.7% on a
like-for-like basis, hit by the slowdown in sales in Western
Europe, not wholly offset by growth in Asia and emerging countries.
The operating margin narrowed slightly, to 8.5% from 8.8% in
first-half 2012.
-- Interior Solutions reported timid 1.0% organic growth over
the first half on the back of continued strong momentum in its
second-quarter sales in the US. After a very difficult start to the
year, the business in Western Europe leveled off at the end of the
first half, while trading in Asia and emerging countries remained
upbeat. Although sales prices moved up across the Division, the
operating margin dropped to 7.6% from 8.7% in first-half 2012 and
7.9% in second-half 2012, squeezed by the volume downturn in
Western Europe.
-- Exterior Solutions sales contracted 4.1% on a like-for-like
basis, hit by the fall in Exterior Products sales in the US. Unlike
the bullish first quarter, the three months to June 30, 2013 took
an exceptional hit resulting from the large-scale destocking by our
distributors. This destocking in no way reflects the underlying
momentum of the US market. Pipe continued to feel the pinch of
austerity measures in Europe, which the fledgling recovery in
export sales has not yet been able to fully offset (the first
deliveries under the USD 200 million contract with Kuwait began at
the very end of the second quarter). Industrial Mortars enjoyed
further vigorous growth in Asia and emerging countries, but were
hit in Western Europe by the impact of the economic slowdown and
poor weather conditions early in the year. Sales prices for the
Division as a whole remained upbeat over the first half. As a
result, the operating margin widened, to 9.3% of sales from 8.9% of
sales in first-half 2012 and 7.7% of sales in the six months to
December 31, 2012.
Building Distribution sales dropped 4.6% on a like-for-like
basis over the first half, hard hit by fewer working days than in
the year-earlier period (1.8 days less, representing a negative
impact of 1.4% on Business Sector volumes) and by very harsh
weather early in the year. However, the Sector's performance
improved sharply in the second quarter, driven chiefly by a strong
rebound in the UK, accelerated growth in Brazil, and stabilizing
sales in Scandinavia. In France, trading continued to prove fairly
resilient in a tough economic environment, with further gains in
market share. Overall, sales prices remained upbeat across the
Business Sector. The operating margin came out at 2.4% versus 3.9%
in first-half 2012, owing chiefly to the sharp downturn in volumes
in the first quarter.
Packaging (Verallia) sales slipped 2.9% on a like-for-like basis
over the six months to June 30, despite a 2.1% rise in sales
prices. Volumesretreated in the US and in Western Europe, and
remained stable in Russia and Latin America. Operating income
increased by EUR36 million, or 17.4%, as a result of applying IFRS
5 (assets and liabilities held for sale) to Verallia North America
(VNA) as of January 1, 2013, according to which depreciation of
VNA's fixed assets (EUR36 million in the first half) is no longer
charged to operating income. Excluding this one-off item,
Verallia's operating income would be stable, at EUR207 million, and
its operating margin - buoyed by a positive price/cost spread -
would be 11.4%, versus 10.8% in first-half 2012. Regarding the
planned divestment of VNA, Ardagh and Saint-Gobain are disappointed
by the complaint filed by the FTC (Federal Trade Commission) on
July 2, 2013, and intend to vigorously defend the transaction in
litigation, whilst at the same time working with the FTC to seek to
resolve its concerns.
2deg) Analysis by geographic area
In line with the economic scenario presented by the Group in
February and consistent with the first quarter's underlying trends,
trading by geographic area in the first six months of 2013 reveals
a sharp contrast between Western Europe - which slowed despite some
improvement towards the end of the period - and Asia and emerging
countries which, on the whole, returned to growth. North America
continued to enjoy strong trading momentum, fueled by the upturn in
the construction market, although Exterior Products suffered the
fall-out in the second quarter of its very strong start to the
year.
Consequently, profitability improved in Asia and emerging
countries and in North America, but declined in both France and in
other Western European countries.
- France and other Western European countries saw like-for-like
sales decline 6.3% and 4.8%, respectively. This downtrend reflects
the very tough market conditions in the first quarter and, to a
lesser extent, the general slowdown in European economies over the
six months to June 30, 2013. These factors impacted all of the
Group's Business Sectors and Divisions (particularly Innovative
Materials), which all reported volume declines over the period. In
contrast, sales prices held up well. In the second quarter, while
Southern Europe, Benelux and to a lesser extent France continued to
slow (albeit far less than in the first quarter), trading
stabilized in Germany and Scandinavia and picked up in the UK,
spurred by the rebound in the construction market at the end of the
period. The operating margin narrowed, both in France and in other
Western European countries, to 4.9% and 3.1%, respectively (5.7%
and 6.0%, respectively, in first-half 2012).
- North America posted a 2.0% drop in like-for-like sales, with
trading down 6.6% in the second quarter after growing 3.1% in the
first. The reversal in the trend is wholly due to Exterior Products
which, after a very strong start to the year, suffered in the
second quarter from exceptionally high destocking by building
materials distributors. This destocking in no way reflects the
underlying momentum of the US market. Sales prices were up sharply
over the first half, buoyed by further rises implemented since the
beginning of the year in Construction Products. The operating
margin continued to recover, up to 13.2% from 11.6% in first-half
2012.
- After a fledgling recovery in the first quarter (up 1.5%),
Asia and emerging countries saw trading pick up pace in the three
months to June 30 (up 6.1%), and reported 3.9% like-for-like sales
growth over the first half. This increase, which outpaced growth in
the Group's underlying markets in the region, chiefly reflects the
investments made in these countries over the past few years and
continues to be led primarily by Latin America, with steep gains in
Flat Glass and Interior Solutions. In contrast, Asia continued to
decrease in the six-month period, despite advancing 2.7% in the
second quarter, while Eastern Europe stabilized as vigorous
momentum in Russia and the Baltics offset difficulties in Poland
and the Czech Republic. The operating margin recovered, up to 7.1%
of sales versus 6.1% of sales one year earlier.
Analysis of the interim consolidated financial statements for
first-half 2013
The interim consolidated financial statements set out below were
approved and adopted by the Board of Directors on July 24, 2013.
The comparative consolidated P&L presented in the financial
statements for first-half 2012 has been restated to reflect the
amendment to IAS 19 regarding employee benefits.
If the amended standard had been applied at January 1, 2012, it
would have had the following impacts on the financial statements
for the six months ended June 30, 2012 and for the year ended
December 31, 2012, respectively:
- an increase of EUR44 million in financial expenses (EUR31
million after tax) for the six months ended June 30, 2012 and of
EUR88 million for the year ended December 31, 2012 (EUR62 million
after tax), as a result of applying a rate of return on plan assets
equal to the discount rate used for employee benefit obligations,
instead of the expected rate of return;
- an increase of EUR18 million in operating expenses (EUR12
million after tax) for the six months ended June 30, 2012 and the
year ended December 31, 2012, due to the impacts of employee
benefit plan amendments;
- a decrease of EUR14 million in equity (EUR9 million after tax)
at January 1, 2012, due mainly to the immediate recognition of past
service cost (EUR8 million impact). The combined impact of all
these adjustments on closing equity at December 31, 2012 would have
been a negative EUR32 million (EUR21 million after tax).
H1 2012* H1 2013 % change H1 2012
EURm EURm EURm
(A) (B) (B)/(A) (C)
-------------------------------------------------- --------- -------- ---------- --------
Sales and ancillary revenue 21,590 20,771 -3.8% 21,590
Operating income 1,494 1,260 -15.7% 1,512
EBITDA (op. inc. + operating depr./amort.) 2,266 1,983 -12.5% 2,284
Non-operating costs (224) (260) +16.1% (224)
Capital gains and losses on disposals,
asset write-downs, corporate acquisition
fees and earn-out payments (135) (26) -80.7% (135)
Business income 1,135 974 -14.2% 1,153
Net financial expense (400) (403) -0.8% (356)
Income tax (266) (231) -13.2% (285)
Share in net income of associates 4 7 +75.0% 4
Income before minority interests 473 347 -26.6% 516
Minority interests (10) (15) +50.0% (10)
Recurring(1) net income 608 422 -30.6% 651
Recurring(1) earnings per share(2)
(in EUR) 1.14 0.76 -33.3% 1.23
Net income 463 332 -28.3% 506
Earnings per share(2) (in EUR) 0.87 0.60 -31.0% 0.95
Operating depreciation and amortization 772 723 -6.3% 772
Cash flow from operations(3) 1,419 1,146 -19.2% 1,462
Cash flow from oper. excl. cap.
gains tax(4) 1,381 1,165 -15.6% 1,424
Capital expenditure 754 519 -31.2% 754
Free cash flow
(excluding capital gains tax)(4) 627 646 +3.0% 670
Investments in securities 277 41 -85.2% 277
Net debt 9,828 9,497 -3.4% 9,828
-------------------------------------------------- --------- -------- ---------- --------
* Accounts restated to reflect the impacts of the amendment to IAS 19.
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 (552,755,774 shares in 2013, including the capital increase
following the payment of a share dividend on July 5, 2013, versus
531,052,614 shares in 2012). Based on the weighted average number
of shares outstanding (527,978,739 shares in first-half 2013 versus
526,833,258 shares in first-half 2012), recurring earnings per
share comes out at EUR0.80 (versus EUR1.15 in first-half 2012), and
earnings per share comes out at EUR0.63 (versus EUR0.88 in
first-half 2012).
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.
The comments below refer to the restated interim financial
statements for first-half 2012.
Consolidated sales fell 3.8% to EUR20,771 million, from
EUR21,590 million in first-half 2012. Exchange rate fluctuations
had a negative 1.3% impact, chiefly resulting from the depreciation
against the euro of the currencies of the main emerging markets
where the Group operates (particularly Latin America) and, to a
lesser extent, the US dollar and British pound. In contrast,
changes in Group structure had a positive 0.7% impact over the
first half (but a negative impact in the second quarter), mainly
reflecting the consolidation of Brossette as of April 1, 2012.
Like-for-like (constant exchange rates and Group structure),
sales therefore declined 3.2%, with the 1.0% rise in sales prices
failing to offset the 4.2% downturn in volumes.
Operating income shed 15.7%, hit by slowing sales volumes.
Consequently, the operating margin narrowed, to6.1% of sales (8.6%
excluding Building Distribution), versus 6.9% of sales (8.9%
excluding Building Distribution) in first-half 2012 and 6.3% in
second-half 2012 (8.0% excluding Building Distribution).
EBITDA (operating income + operating depreciation and
amortization) retreated 12.5%. The consolidated EBITDA margin came
in at 9.5% of sales (13.5% excluding Building Distribution), versus
10.5% of sales (14.0% excluding Building Distribution) in
first-half 2012.
Non-operating costs rose 16.1% to EUR260 million (EUR224 million
in first-half 2012), driven by an increase in restructuring costs
(particularly in Flat Glass). Non-operating costs for first-half
2013 include a EUR45 million accrual to the provision for
asbestos-related litigation at CertainTeed in the US, unchanged
compared to the first-half 2012 accrual.
The net balance of capital gains and losses on disposals, asset
write-downs and corporate acquisition fees was a negative EUR26
million compared with a negative EUR135 million in the year-earlier
period. This item includes EUR85 million in gains on disposals of
assets relating mainly to the sale of the PVC Pipe &
Foundations business, and EUR109 million in asset write-downs. The
bulk of these write-downs are inherent to the restructuring plans
and site closures implemented over the period, especially in Flat
Glass (EUR87 million) and, to a lesser extent, in certain
Construction Products businesses in Spain.
Business income fell 14.2%to EUR974 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 was practically unchanged, up 0.8% to
EUR403 million from EUR400 million in first-half 2012, as the cost
of gross debt stabilized over the period. Thanks to the Group's
recent bond issues, the average cost of gross debt over the first
half fell to 4.7% from 4.9% in first-half 2012.
In line with pre-tax income trends, income tax was down 13.2%,
from EUR266 million to EUR231 million. The tax rate applicable to
recurring net income was 32.7%, as in first-half 2012.
Recurring net income(excluding capital gains and losses,
exceptional asset write-downs and material non-recurring
provisions) fell 30.6% on first-half 2012 to EUR422 million. Based
on the number of shares outstanding at June 30, 2013 (552,755,774
shares including the capital increase following the payment of a
share dividend on July 5, 2013, versus 531,052,614 shares at June
30, 2012), recurring earnings per share came out at EUR0.76, 33.3%
lower than in first-half 2012 (EUR1.14).
Net income was down 28.3% year-on-year at EUR332 million. Based
on the number of shares outstanding at June 30, 2013 (552,755,774
shares including the capital increase following the payment of a
share dividend on July 5, 2013, versus 531,052,614 shares at June
30, 2012), earnings per share came out at EUR0.60, down 31.0% on
the year-earlier period (EUR0.87).
Capital expenditure was down 31.2% to EUR519 million (EUR754
million in first-half 2012), representing 2.5% of sales (3.5% in
first-half 2012). The bulk of these investments consisted of growth
capex focused on Asia and emerging countries and on markets related
to energy efficiency in Western Europe and in the US.
Cash flow from operations came in at EUR1,146 million, down
19.2% on the year-earlier period (EUR1,419 million). Before the tax
impact of capital gains and losses on disposals and asset
write-downs, cash flow from operations contracted 15.6%, to
EUR1,165 million from EUR1,381 million in first-half 2012.
Given the decrease in capital spending:
- free cash flow (cash flow from operations less capital
expenditure) fell 5.7% to EUR627 million. Before the tax impact of
capital gains and losses on disposals and asset write-downs, free
cash flow advanced 3.0% to EUR646 million, representing 3.1% of
sales (2.9% in first-half 2012);
- the difference between EBITDA and capital expenditure was
EUR1,464 million, 3.2% less than in first-half 2012 (EUR1,512
million), and represented 7.0% of sales, as in the previous
year.
Operating working capital requirements continued to improve in
value terms (down EUR44 million to EUR4,982 million) and remained
largely unchanged in terms of days' sales compared to first-half
2012, at 42.4 days versus 41.5 days in the year-earlier period.
Investments in securities were down sharply, to just EUR41
million compared to EUR277 million in first-half 2012. They
primarily concerned selective bolt-on acquisitions consistent with
the Group's strategic goals, namely development in Asia and
emerging countries and energy efficiency markets and consolidation
in Building Distribution.
Net debt was down 3.4% year-on-year to EUR9.5 billion, spurred
by the sharp reduction in capital expenditure and financial
investments over the past 12 months. Net debt represented 52% of
consolidated equity versus 54% at June 30, 2012. The net debt to
EBITDA ratio came out at 2.3, compared to 2.1 at end-June 2012.
Update on asbestos claims in the US
Some 2,000 claims were filed against CertainTeed in the first
half of 2013 (as in first-half 2012). At the same time, 2,000
claims were settled (versus 7,000 in first-half 2012), bringing the
total number of outstanding claims to 43,000 at June 30, 2013,
unchanged from December 31, 2012.
A total of USD 87 million in indemnity payments were made in the
US in the 12 months to June 30, 2013, versus USD 67 million in the
year to December 31, 2012.
Action plan to address the deteriorating economic
environment
To address the deteriorating economic environment observed in
Western Europe in first-half 2013, Saint-Gobain:
- continued to give priority to sales prices, which rose 1.0% over the first half;
- rolled out new cost cutting measures, with additional cost
savings of around EUR300 million in first-half 2013 compared to
first-half 2012, chiefly in Western Europe (and Flat Glass in
particular). These measures will be continued and stepped up in the
second half, leading to total annual cost savings of EUR580 million
in 2013, and of EUR1,100 million compared to the 2011 cost
base;
- stabilized its operating working capital requirements (WCR) at 42 days' sales;
- slashed its capital spending and financial investments by
EUR471 million year-on-year, driving net debt lower by 3.4%.
This action plan will be continued and intensified in the six
months to December 31, 2013.
Outlook and objectives for full-year 2013
The first six months of 2013 remained tough, hit by a
significantly negative calendar impact and by very poor weather
early in the year, particularly in Europe. In the next few
quarters, the Group expects trading to gradually improve,
especially in North America and in Asia and emerging countries
(regions which together represented 44% of consolidated operating
income and 46% of the Group's fixed assets in 2012):
- in North America, the residential new-build and renovation
markets should continue on a steady upward trend, while industrial
output should remain at a good level;
- in Asia and emerging countries,trading should continue to
improve, but stark contrasts will persist from one country to the
next, with robust growth in Latin America, moderate growth in India
and China, and stability in Eastern Europe;
- in Western Europe, industrial markets (particularly
automotive) should stabilize, while construction market trends
should remain challenging on the whole, albeit with sharply
contrasting patterns from one country to the next. Regulatory
measures promoting energy efficiency in new and existing homes
should shore up demand, however, and allow the Group to outperform
its underlying markets;
- lastly, household consumption markets should remain upbeat overall.
Against this backdrop, over the next few quarters the Group will
press ahead with its action plan, focusing particularly on:
- increasing its sales prices, in a context of a slower rise in raw material and energy costs;
- pursuing its cost cutting program, in order to achieve
additional cost savings of EUR160 million in the second half
compared to the first six months of 2013 (or EUR280 million
compared to second-half 2012). This will represent EUR580 million
in cost savings in 2013 as a whole and EUR1,100 million in
cumulative cost savings calculated on the 2011 cost base;
- keeping a close watch on cash management and financial strength.
Saint-Gobain will also continue to pursue its strategic goals
(development in Asia and emerging countries, energy efficiency and
energy markets, and consolidation in Building Distribution and
Construction Products). Profitability will remain a constant focus,
underpinned by strict financial discipline.
The Group is therefore confirming its targets for full-year
2013:
- a recovery in operating income in the second half, after
having bottomed out in first-half 2013;
- a high level of free cash flow, thanks mainly to a EUR200
million reduction in capital expenditure;
- a robust balance sheet, further strengthened by the disposal
of Verallia North America.
Forthcoming results announcement
- Sales for the first nine months of 2013: October 24, 2013,
after close of trading on the Paris
Bourse.
* * *
Analyst/Investor relations Press relations
----------------------------------------- ---------------------------------------------------------------
+33 1 47 62
32 52
+33 1 47 62 +33 1 47 62 30
Gaetano Terrasini 44 29 48
Vivien Dardel +33 1 47 62 Sophie Chevallon +33 1 47 62 43
Alexandra Baubigeat 30 93 Susanne Trabitzsch 25
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