TIDMCOD
RNS Number : 8927F
Compagnie de Saint-Gobain
25 February 2015
Paris, February 25, 2015
2014 Results
Operating income up 7.0%
on a like-for-like basis excluding VNA
* Organic growth at 2.2%; at 0.2% in H2 with a slowdown
in volumes
* Negative 1.5% currency impact on sales but positive
0.3% impact in H2; negative 2.4% Group structure
impact with the disposal of Verallia North America
(VNA)
* Sharp 60% rally in net income
* Net debt reduced to EUR7.2 billion
* 2014 dividend: stable at EUR1.24, 50% payable in cash
and 50% in cash or in shares at shareholders'
discretion
(EURm) 2013* 2014 Change Change
(like-for-like
excluding
VNA)
Sales 41,761 41,054 -1.7% +2.2%
EBITDA 4,161 4,151 -0.2% +3.9%
Operating income 2,754 2,797 +1.6% +7.0%
Recurring(1) net income 1,027 1,103 +7.4%
Net income 595 953 +60%
Free cash flow(2) 1,176 1,002 -15%
Pierre-André de Chalendar, Chairman and Chief Executive Officer of
Saint-Gobain, said:
"2014 confirmed the improvement in the Group's results despite a challenging
macroeconomic climate in France and uncertainty in Germany. Other regions
reported good levels of growth. We continued to cut costs on all fronts.
During the year, Saint-Gobain embarked on a significant reorganization
of its business portfolio, with the plan to acquire a controlling interest
in Sika and the launch of a competitive bidding process for the sale of
Verallia. This marks an acceleration in the roll-out of the strategy we
unveiled in November 2013.
In 2015, we will continue to implement our strategic priorities and we
are targeting a further like-for-like improvement in operating income
along with continuing high levels of free cash flow."
* 2013 figures restated in this document to reflect the impacts of IFRS
10 and IFRS 11, and of IFRIC 21 (Levies) for the half-year analysis.
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
Sales climbed 2.2% on a like-for-like basis in 2014. Based on
reported figures, sales were down 1.7% due to the negative 1.5%
currency impact and the negative 2.4% impact resulting from changes
in Group structure - chiefly related to the disposal of Verallia
North America.
Volumes moved up 1.1% over the year despite retreating 0.7% in
the second half. Sales prices rose 1.1% over the year, in spite of
a less inflationary environment and declining prices for Exterior
Products in the US in the second half.
All of the Group's businesses reported organic growth in 2014.
In the second half, Exterior Solutions were affected by the
contraction in the Roofing business, while Building Distribution
and Interior Solutions were hit by the downturn in construction in
France and Germany.
Out of our four regions, only France failed to advance, down
1.3% year-on-year.
The Group's operating margin increased to 6.8% from 6.6% in
2013, and came in at 7.1% for the second half. Operating income
climbed 7.0% on a like-for-like basis excluding Verallia North
America, and remained stable in the six months to December 31
despite a 0.7% dip in volumes.
The Group's focus on its action plan priorities continues to pay
off:
- sales prices increased despite a less inflationary environment;
- costs were scaled back by EUR450 million in 2014 compared to
2013, with a significant impact in Flat Glass which saw its margin
rally at 5.9% versus 2.6% in the previous year;
- capital expenditure remained in check at EUR1.4 billion, with
a strong focus on growth capex outside Western Europe;
- net debt was reduced to EUR7.2 billion thanks to an ongoing tight rein on cash.
Performance of Group Business Sectors
Innovative Materials sales moved up 3.9% in 2014 on a
like-for-like basis, and advanced 4.2% in the second half. The
operating margin for the Business Sector widened, from 7.2% to 9.4%
(9.6% in the second half), driven by the improved performance for
Flat Glass.
-- Like-for-like, Flat Glass sales were up 3.4% both over the
full year and in the second half. In Western Europe, construction
markets remained fragile with prices for commodity products - float
glass - stable, but an improved price effect owing to the growing
share of high value-added products; the automotive Flat Glass
business continued to report small gains. Healthy trading was
confirmed in Asia and emerging countries, despite the slowdown in
Brazil, fuelled in particular by the downturn in the automotive
market.
Thanks to increased cost cutting efforts, the operating margin
rallied, at 5.9% of sales in 2014 (6.3% in the second half) from
2.6% in the previous year.
-- High-Performance Materials (HPM) delivered a 4.5%
year-on-year improvement, up 5.0% in the second half. Performance
gains were recorded in all regions, particularly in North America,
buoyed by continued upbeat trends in industrial markets. All HPM
businesses delivered good organic growth, including Ceramics with a
favorable basis for comparison.
The operating margin for the year widened to 13.4% from 12.7% in
2013.
Boosted by its first-half performance, Construction Products
(CP) sales moved up 2.9% on a like-for-like basis in 2014 and 0.4%
in the second half, owing chiefly to a deterioration in the US
Exterior Solutions market. The operating margin improved slightly,
at 9.0% versus 8.8% in 2013.
-- Interior Solutions reported 4.7% organic growth, on the back
of continued strong volume and price momentum in the US and a good
performance in Asia and emerging countries. In Western Europe,
after a first quarter buoyed by mild winter weather, trading proved
resilient thanks to our strategic positioning in energy efficiency
and despite the downward pressure on prices in a deflationary
environment.
The operating margin advanced during both halves of the year,
coming out at 8.8% for 2014 compared to 8.3% one year earlier.
-- Exterior Solutions posted 1.0% organic growth, advancing 3.9%
in the first half but retreating 1.6% in the second following a
downturn in both volumes and prices for US Exterior Products. Pipe
was boosted by export contracts and continued to improve, despite a
tougher basis for comparison in the second half and the closure of
cast iron production capacity in China in the middle of the year.
Mortars posted double-digit growth in Asia and emerging countries,
but continued to suffer from the macroeconomic climate in Western
Europe.
The operating margin held firm at 9.1% of sales despite the
sharp deterioration in Exterior Products: margin growth was strong
in both Mortars and Pipe, spurred by a positive price-cost spread
(commodities and energy).
Building Distribution posted 0.8% organic growth, helped by mild
winter weather in the first quarter and despite a 1.8% decline in
the second half due to the downturn in the French and German
markets.
In France, sales declined over the year despite increased market
share, hurt by the sharp contraction in the new-build market and
sluggish renovation activity. Germany, which was stable over the
year, retreated in the second half amid a persistently uncertain
economic climate. The upbeat momentum in the UK and Scandinavia was
confirmed over the year as a whole. Brazil continued to report good
growth despite the general economic slowdown in the country.
Operating income for the Business Sector improved, at EUR661
million compared to EUR638 million in 2013, owing to strict cost
discipline and a resilient commercial margin. Although the
operating margin fell to 4.2% in the second half (versus 4.6% in
2013), hit by slack volumes in France and Germany, Building
Distribution still managed to deliver annual margin growth, at 3.5%
versus 3.4% in 2013.
Packaging (Verallia) sales were up 1.6% on a like-for-like
basis. In Europe, volumes rose 1.4% over the year, thereby
confirming the recovery begun in the six months to June 30 in a
competitive pricing environment. Latin America continued to deliver
good growth, with price trends reflecting the impact of
inflation.
Excluding VNA, which was sold on April 11, 2014, the operating
margin came in at 9.6%. The margin was 10.6% in the second half,
confirming the upturn in results in line with expectations, after a
first half affected by non-recurring items.
Analysis by geographic area
Over the year as a whole, the Group's organic growth was powered
by Asia and emerging markets. Profitability improved despite a
slowdown in France and the deterioration in the US, attributable
solely to Exterior Products.
-- France posted negative 1.3% organic growth as volumes
declined in the construction market, even though the Group
continues to outperform its markets. Despite a further decline in
volumes, the operating margin held firm at 4.7% (5.0% in 2013).
-- Other Western European countries reported 2.6% like-for-like
sales growth, with sales stable in the second half due to the
strong downturn in Germany. The recovery over the year reflects
good market conditions in the UK and to a lesser extent in
Scandinavia. Trading improved in Southern European countries and
particularly Spain, while volumes in Benelux were hit by
restructuring operations in Flat Glass. The operating margin
rallied, at 5.3% from 4.3% previously.
-- North Americasaw continued brisk trading on the construction
market and a significant improvement in the Group's industrial
activities, as the region posted 2.8% organic growth. Only Exterior
Products had a negative impact on sales and margin. The operating
margin came in at 10.4% in 2014 (excluding VNA: 10.1% versus 11.7%
in 2013).
-- Asia and emerging countries reported good 7.7% organic growth
over the year, and 4.9% growth in the second half. This slower pace
of growth was mainly seen in Brazil, Eastern Europe (Poland and the
Czech Republic) and in China, which was hit by a plant closure. In
contrast, trading in India and Mexico picked up pace during the
year. The operating margin was up from 8.0% to 9.3% in 2014.
2014 consolidated financial statements
The Group's consolidated financial statements were approved and
adopted by Saint-Gobain's Board of Directors at its meeting of
February 25, 2015. The comparative income statement for 2013 shown
below has been restated to reflect the impacts of IFRS 10
(Consolidated Financial Statements) and IFRS 11 (Joint
Arrangements) and of IFRIC 21 (Levies) for the half-year
analysis.
Key consolidated data are shown below:
2013 2014 % 2013
restated* change published
-----------
EURm (A) (B) (B)/(A)
----------- ------- -------- -----------
Sales and ancillary revenue 41,761 41,054 -1.7% 42,025
Operating income 2,754 2,797 1.6% 2,764
Operating depreciation and amortization 1,407 1,354 -3.8% 1,425
EBITDA (operating income + operating
depr./amort.) 4,161 4,151 -0.2% 4,189
Non-operating costs (490) (190) -61.2% (492)
Capital gains and losses on disposals,
asset write-downs, corporate acquisition
fees and earn-out payments (381) (398) 4.5% (381)
Business income 1,883 2,209 17.3% 1,891
Net financial expense (790) (696) -11.9% (795)
Income tax (463) (513) 10.8% (476)
Share in net income of associates 2 0 n.s. 11
Income before minority interests 632 1,000 58.2% 631
Minority interests 37 47 27.0% 36
Net income 595 953 60.2% 595
Earnings per share(2) (in EUR) 1.08 1.70 57.4% 1.08
Recurring(1) net income 1,027 1,103 7.4% 1,027
Recurring(1) earnings per share(2)
(in EUR) 1.86 1.97 5.9% 1.86
Cash flow from operations(3) 2,520 2,510 -0.4% 2,537
Cash flow from operations excl. capital
gains tax(4) 2,493 2,439 -2.2% 2,511
Capital expenditure 1,317 1,437 9.1% 1,354
Free cash flow 1,176 1,002 -14.8% 1,157
(excluding capital gains tax)(4)
Investments in securities 102 95 -6.9% 100
Net debt 7,513 7,221 -3.9% 7,521
* 2013 figures restated to reflect the impacts of IFRS 10 and IFRS 11.
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
(excluding treasury stock) at December 31 (560,385,966 shares
in 2014 versus 551,417,617 shares in 2013) following the
cancellation of 6,100,000 shares on November 28, 2014.
3 Excluding material non-recurring provisions.
4 Excluding the tax impact of capital gains and losses on
disposals, asset write-downs and material non-recurring
provisions.
The comments below were drawn up based on restated 2013
figures.
Consolidated sales were down 1.7%. The currency impact was a
negative 1.5%, resulting primarily from the fall in Latin American
and Scandinavian currencies against the euro. The currency impact
breaks down as a negative 3.2% impact in the first half and a
positive 0.3% effect in the second, owing mainly to the
depreciation of the euro against the US dollar. The impact of
changes in Group structure was a negative 2.4%, primarily
reflecting the disposal of VNA on April 11, 2014, along with the
sale of certain non-core Exterior Solutions and Building
Distribution businesses. Like-for-like (comparable Group structure
and exchange rates), sales moved up 2.2%, with both sales prices
and volumes gaining 1.1%.
Operating income rose 1.6%, despite the negative currency and
Group structure impact (up 7.0% like-for-like excluding VNA). This
drove a rise in the operating margin, which came in at 6.8% of
sales from 6.6% in the prior-year period, bolstered by cost cutting
efforts. Excluding Building Distribution, the operating margin
increased from 8.9% to 9.3% in 2014.
The EBITDA margin (EBITDA = operating income plus operating
depreciation and amortization) stood at 10.1% of sales (10.0% in
2013).
Non-operating costs fell sharply to EUR190 million (EUR490
million in 2013), reflecting a provision write-back in the first
half linked to the reduction in the automotive Flat Glass fine,
along with lower restructuring costs, particularly in second-half
2014. Non-operating costs include a EUR90 million accrual to the
provision for asbestos-related litigation involving CertainTeed in
the US, unchanged from 2013.
The net balance of capital gains and losses on disposals, asset
write-downs and corporate acquisition fees was a negative EUR398
million, versus a negative EUR381 million in 2013. This line
includes EUR408 million in gains on disposals of assets relating
mainly to the VNA divestment, and EUR802 million in asset
write-downs, of which EUR350 million was recorded in the second
half. Most of the write-downs taken in the six months to December
31 reflect restructuring plans in Europe and the EUR235 million
write-down recorded against goodwill and brands relating to Lapeyre
(Building Distribution) following the deterioration in the French
market in the second half. Business income jumped 17.3%.
Net financial expense improved sharply, at EUR696 million versus
EUR790 million in 2013, with the cost of gross debt falling to 4.3%
at December 31, 2014 from 4.4% at end-2013. Income tax expense on
recurring net income came out at 34% versus 32% in 2013. Income tax
increased from EUR463 million to EUR513 million, chiefly as a
result of the improvement in pre-tax earnings.
Recurring net income (excluding capital gains and losses, asset
write-downs and material non-recurring provisions) jumped 7.4% to
EUR1,103 million.
Net income soared 60.2% to EUR953 million.
Capital expenditure totaled EUR1,437 million, in line with
forecasts, representing 3.5% of sales (3.2% in 2013).
Cash flow from operationsheld firm at EUR2,510 million (EUR2,520
million in 2013). Before the tax impact of capital gains and losses
on disposals, asset write-downs and material non-recurring
provisions, cash flow from operations retreated 2.2% to EUR2,439
million.
Due to the acceleration in the capital spending program compared
to the low point in 2013, free cash flow (cash flow from operations
less capital expenditure) was down 10.8% to EUR1,073 million.
Before the tax impact of capital gains and losses on disposals,
asset write-downs and material non-recurring provisions, free cash
flow dropped 14.9% to EUR1,002 million, at 2.4% of sales (2.8% of
sales in 2013).
Operating working capital requirements (WCR) continued to
improve in value terms (down EUR61 million to EUR3,356 million),
representing 30 days' sales or 29 days' sales at constant exchange
rates. This equals the record 29-day low at end-2013 and testifies
to the Group's ongoing efforts to main strict cash discipline.
Investments in securities totaled just EUR95 million (EUR102
million in 2013) for small acquisitions focused on the Group's
strategic growth drivers.
Net debt continues to fall, down 3.9% (to EUR7.2 billion) versus
December 31, 2013, after decreasing 11.4% in the prior-year period.
Net debt represents 39% of consolidated equity, versus 42% at
end-2013.
The net debt to EBITDA ratio was 1.7 compared to 1.8 at December
31, 2013.
Update on asbestos claims in the US
Some 4,000 claims were filed against CertainTeed in 2014,
slightly less than in 2013 (4,500). At the same time, some 6,500
claims were settled (versus 4,500 in 2013) and around 3,500 claims
were placed in inactive dockets. As a result, the total number of
outstanding claims at December 31, 2014 was around 37,000, a
decrease of approximately 6,000 compared to end-2013.
A total of USD 68 million in indemnity payments were made in the
12 months to December 31, 2014, down on the USD 88 million paid out
in 2013 due to certain settlements relating to 2012 that were
postponed to 2013. In light of these trends and of the EUR90
million provision accrual in 2014, the total provision for
CertainTeed's asbestos-related claims amounted to USD 571 million
at December 31, 2014 compared to USD 561 million at December 31,
2013.
Dividend
At its meeting of February 25, Compagnie de Saint-Gobain's Board
of Directors decided to recommend to the June 4, 2015 Shareholders'
Meeting a dividend of EUR1.24 per share, 50% payable in cash and
50% in cash or in shares, at shareholders' discretion.
For the payment of dividends in shares, the Board will recommend
that the shareholders set the issue price for the new shares by
applying a 10% discount to the average opening share price during
the 20 trading days preceding the June 4, 2015 Shareholders'
Meeting, after having deducted the dividend amount.
The dividend represents 62% of recurring net income, and a
dividend yield of 3.5% based on the closing share price at December
31, 2014 (EUR35.230).
The ex-date, set at June 10, will be followed by an option
period of 15 days, running from June 10 to June 24. Consequently,
the dividend will be paid in cash or in shares on July 3, 2015.
2015 strategic priorities
2015 will be dedicated to firmly rolling out the strategy
defined at the Group's November 27, 2013 Investor Meeting according
to its three main goals:
-- Improving the Group's growth potential by focusing more
sharply on high value-added, asset-light activities; expanding its
footprint in emerging countries; and further strengthening its
business portfolio;
-- Creating a stronger presence in differentiated products and
solutions, with R&D efforts focused on local and co-developed
projects with its customers and on the fast-growing markets of
sustainable habitat and industrial applications. Marketing
initiatives will also be stepped up, with an ambitious digital
strategy and the development of ever stronger brands;
-- Continuing to work towards management's priorities of
achieving operational excellence, and further progress in Corporate
Social Responsibility (CSR); attractive returns for shareholders;
and a persistently solid financial structure.
The Group's plan to acquire a controlling interest in Sika
announced on December 8, 2014 is fully aligned with this strategy.
Sika's range of niche products presents an excellent fit with
Saint-Gobain's own product offer, particularly chemical products
for the construction market and adhesives. Sika's products and
services draw on extensive technological expertise in
waterproofing, soundproofing, sealing and bonding, and protecting
and reinforcing structures. The transaction is subject to clearance
from the competent anti-trust authorities.
Over the past few years, Sika has delivered remarkable growth
(more than 8% average annual growth between 2007 and 2013) and
capacity for development in emerging countries (38% of its sales
are made in emerging countries). This strategic move therefore
meets Saint-Gobain's dual aim of continuing to develop in emerging
markets, Asia and the US (where Sika has a strong presence) and
focusing on highly technical solutions offering significant value
added.
Saint-Gobain wishes to continue developing the company with
respect for its corporate culture, reputation and historical roots.
Given the complementary nature of both groups' activities, the deal
is expected to generate a large number of growth synergies, thanks
chiefly to the geographic fit of our industrial sites and the
combination of very strong brands. The synergies are estimated at
EUR100 million as from the second year (2017) and at EUR180 million
per year as from 2019.
On the same date as it announced its plan to acquire a
controlling interest in Sika (December 8, 2014), the Group also
unveiled its intention to divest its entire Packaging business
(Verallia). This move is in line with Saint-Gobain's aim to
reorganize its portfolio in order to increase its growth
potential.
Following these two transactions, the Group's profile will be
greatly enhanced and refocused on its target markets.
2015 outlook
In 2015, the Group should benefit from continued upbeat trading
in the US as well as in Asia and emerging markets. In Western
Europe, the recovery will be dampened by the decline in France. The
first half will be impacted by a tough 2014 basis for comparison.
Household consumption is expected to remain firm.
Saint-Gobain will continue to keep a close watch on cash and
financial strength and aims to maintain a high level of free cash
flow. In particular, it will:
- keep its priority focus on increasing sales prices amid a
small rise in raw material costs and energy deflation;
- unlock additional savings of EUR400 million (calculated on the
2014 cost base) thanks to its ongoing cost cutting program;
- pursue a capital expenditure program of under EUR1,600
million, focused on growth capex outside Western Europe;
- renew its commitment to invest in R&D in order to support
its differentiated, high value-added strategy.
In this setting, the Group is targeting a further like-for-like
improvement in operating income for 2015 and a continuing high
level of free cash flow.
In line with its strategy, Saint-Gobain will firmly pursue its
plan to divest Verallia and also intends to finalize the
acquisition of a controlling interest in Sika in the second half of
2015, as announced in December 2014.
Financial calendar
- Sales for the first quarter of 2015: April 28, 2015, after
close of trading on the Paris Bourse.
- First-half 2015 results: July 29, 2015, 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
Marine Huet 30 93 Susanne Trabitzsch 25
--------------------- ---------------- -------------------------------------------- -----------------
An information meeting for analysts and investors will be held
at 8:30 a.m. (GMT+1) on February 26, 2015 and will be webcast live
on Saint-Gobain's website, at:
www.saint-gobain.com
Important disclaimer - forward-looking statements:
This press release contains forward-looking statements with
respect to Saint-Gobain's financial condition, results, business,
strategy, plans and outlook. Forward-looking statements are
generally identified by the use of the words "expect",
"anticipate", "believe", "intend", "estimate", "plan" and similar
expressions. Although Saint-Gobain believes that the expectations
reflected in such forward-looking statements are based on
reasonable assumptions as at the time of publishing this document,
investors are cautioned that these statements are not guarantees of
its future performance. Actual results may differ materially from
the forward-looking statements as a result of a number of known and
unknown risks, uncertainties and other factors, many of which are
difficult to predict and are generally beyond the control of
Saint-Gobain, including but not limited to the risks described in
Saint-Gobain's registration document available on its website
(www.saint-gobain.com). Accordingly, readers of this document are
cautioned against relying on these forward-looking statements.
These forward-looking statements are made as of the date of this
document. Saint-Gobain disclaims any intention or obligation to
complete, update or revise these forward-looking statements,
whether as a result of new information, future events or
otherwise.
This press release does not constitute any offer to purchase or
exchange, nor any solicitation of an offer to sell or exchange
securities of Saint-Gobain.
For further information, please visit www.saint-gobain.com.
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