TIDMCOD
RNS Number : 9343V
Compagnie de Saint-Gobain
26 July 2018
PRESS RELEASE
Paris, July 26, 2018
First-half 2018 results
Sharp uptick in sales in the second quarter
Acceleration of strategy
-- Organic growth at 4.9% (including 8.0% in the second quarter), with volumes up 2.4%
-- Prices up 2.5%, accelerating in line with the rise in raw material and energy costs
-- 4.4% negative currency impact, mainly due to the depreciation
of the US dollar and of certain Asian and emerging country
currencies; positive 1.4% structure impact
-- Operating income at EUR1,469 million (up 0.3% as reported),
an increase of 1.7% like-for-like
-- Recurring net income up 6.8% and net attributable income up
61.7% notably including a positive impact of EUR781 million
relating to the Sika transaction
-- 13 acquisitions for a total of EUR356 million (excluding Sika)
-- 8.8 million shares bought back in first-half 2018
-- Objectives for full-year 2018 confirmed
-- Acceleration of strategy: divestments representing at least
EUR3 billion in sales by the end of 2019, continued high level of
value-creating acquisitions, review of the Group's organizational
structure
(EURm) H1 2017 H1 2018 Change Change
like-for-like
Sales 20,409 20,787 1.9% 4.9%
EBITDA 2,071 2,070 0.0%
Operating income 1,465 1,469 0.3% 1.7%
Recurring net income(1) 751 802 6.8%
Net attributable income 754 1,219 61.7%
Pierre-André de Chalendar, Chairman and Chief Executive Officer
of Saint-Gobain, commented:
"The second quarter marks a return to supportive trends in all
our main markets. After a disappointing first quarter, affected by
harsh winter weather in Europe which weighed on results, the second
quarter was far more encouraging in terms of volumes and prices.
The Group succeeded in further raising sales prices amid continued
raw material and energy cost inflation. Despite a combination of
temporary one-off factors, our first-half results progressed once
again.
Saint-Gobain is therefore confirming its objectives for
full-year 2018 and for the second half expects the like-for-like
increase in operating income to be clearly above the level achieved
in the first half.
After having agreed a transaction with Sika on excellent
financial terms, the Group will accelerate the implementation of
its strategy: the roll-out of a divestment program representing at
least EUR3 billion in sales by the end of 2019, the continuation of
its policy of value-creating acquisitions, and the launch of a
review of the Group's organizational structure in order to give
greater priority to the regional dimension of its businesses with
the aim of enhancing its agility to drive growth and reinforce its
competitiveness."
1. Recurring net income excl. capital gains and losses on
disposals, asset write-downs, material non-recurring provisions and
Sika income.
Operating performance
First-half consolidated sales were EUR20,787 million, an
increase of 1.9% year-on-year on a reported basis and of 4.9%
like-for-like. Organic growth was driven both by volumes (up 2.4%)
and by prices (up 2.5%) with a progression in all Business Sectors
and all regions. Price rises accelerated in the second quarter, up
3.0% in a context of continued raw material and energy cost
inflation. The growth in our main markets, aided by a weak
prior-year comparison basis (June 2017 cyber-attack) and a positive
1% calendar effect, also contributed to the 5.0% uptick in volumes
in the second quarter. The calendar effect had a slightly negative
impact of around 0.5% over the half-year period as a whole.
The Group structure impact added 1.4% to overall growth,
essentially reflecting the consolidation of acquisitions in Asia
and emerging countries (KIMMCO, Megaflex, Tumelero, Isoroc Poland),
in new niche technologies and services (TekBond, Scotframe, Maris)
and to consolidate our strong positions (Glava, Kirson, Biolink,
Wattex, SimTek, bolt-on acquisitions in Building Distribution such
as Per Strand).
Overall growth was affected by a 4.4% negative currency impact
however, mainly due to the depreciation of the US dollar, Brazilian
real, Nordic krona and other Asian and emerging country currencies
against the euro.
The Group's operating income remained stable on a reported basis
(up 0.3%) and increased 1.7% like-for-like. The operating margin(1)
came in at 7.1% compared to 7.2% in first-half 2017.
Performance of Group Business Sectors
Innovative Materials sales climbed 6.0% on a like-for-like
basis, driven by High-Performance Materials. The operating margin
for the Business Sector remained stable at 12.3%.
-- Flat Glass reported 3.5% organic growth over the six months
to June 30. The automotive business advanced in all of its regions,
particularly in Asia and emerging countries, and continues to ramp
up its capital expenditure and investments in innovation. Sales
linked to the construction market were penalized by float repairs
in Poland and Romania. Higher prices in Europe continue to be
driven by transformed glass, with a smaller rise in float glass
prices. Asia and emerging countries progressed slightly despite the
stoppage of the Egyptian float line owing to flooding at the end of
April and the 10-day truck drivers' strike in May in Brazil. The
operating margin narrowed to 8.0% versus 9.9% in first-half 2017,
affected by the one-off operational issues.
-- High-Performance Materials (HPM) sales rose 9.2%
like-for-like over the first half, in all businesses and
particularly in Ceramics, buoyed by exceptionally strong sales of
refractories. All regions contributed to the trading momentum, with
strong increases in Asia and emerging countries, the US and Western
Europe. The operating margin benefited from the significant volumes
and hit a new record high of 17.3% compared to 15.0% in first-half
2017.
Construction Products (CP) sales were up 6.8% like-for-like in
first-half 2018. The operating margin for the Business Sector was
8.6% versus 9.3% in first-half 2017, affected by Exterior
Solutions.
-- Interior Solutions reported 7.1% organic growth, with an
acceleration in sales prices over the period (up 4.1%) amid
continued inflation in raw material and energy costs. After a first
quarter affected by harsh weather conditions, activity in Western
Europe regained good levels in the second quarter. North America
confirmed its positive pricing dynamic and delivered volume
improvement. Asia and emerging countries continued to post strong
growth. The operating margin remained stable at 9.9%, held back by
harsh weather conditions in Europe over the first quarter and by
the ongoing shift from synthetic to natural gypsum, but benefited
over the half-year period from a positive price-cost spread in
terms of raw materials and energy.
1. Operating margin = operating income expressed as a percentage
of sales.
-- Exterior Solutions sales moved up 6.6% like-for-like.
Exterior Products in North America reported a significant
improvement in volumes, aided by an easier comparison basis in
second-quarter 2017; prices, after stabilizing in the first
quarter, were back on an upward trend at the end of the half-year
amid higher inflation in asphalt and transportation costs. Pipe
successfully raised prices, while volumes remained down overall. In
a tough profitability environment, the business continued to
restructure its European and Chinese plants. Mortars had a good
first half, driven by a strong upturn in the second quarter,
particularly in Europe which had been hit by harsh weather
conditions early in the year. Asia and emerging countries continued
to benefit overall from bullish growth, despite the truck drivers'
strike in Brazil at the end of May. The overall operating margin
was down at 7.0% versus 8.4% in first-half 2017, affected by a lag
between prices and raw material and energy costs for Exterior
Products in the US, despite an improvement at the end of the
half-year period.
Building Distribution like-for-like sales rose 3.1%, benefiting
from a strong 6.7% upturn in the second quarter, partly buoyed by a
positive 1% calendar effect and a weak comparison basis (June 2017
cyber-attack). After a strong negative impact resulting from harsh
weather conditions in Europe at the beginning of the year, trends
returned to good levels in the second quarter. France continued to
recover thanks to growth in both new-builds and renovation. Nordic
countries returned to dynamic underlying growth in the second
quarter in both Norway and Sweden. The UK improved, with a
significant price effect and a smaller decline in volumes, likely
benefiting from a partial catch-up of the weather impact at the
start of the year. Germany reported slight growth after a difficult
first quarter, while Brazil remained sluggish. The operating margin
remained stable at 2.7%: the return of upbeat market conditions in
the second quarter failed to offset the lag established at the
beginning of the year owing to bad weather.
Analysis by region
-- France reported further growth over the first half (up 3.1%
like-for-like), benefiting from a return to supportive trends in
the second quarter in new-build and renovation markets, after a
first quarter affected by harsh weather conditions. The operating
margin widened sharply, up to 3.3% from 2.5% in first-half
2017.
-- Other Western European countries progressed 3.6% over the
first half, reporting further organic growth with a sharp uptick in
the second quarter led mainly by more normal weather conditions and
by a favorable comparison basis (June 2017 cyber-attack). Nordic
countries reported good growth in both Norway and Sweden. The UK
delivered slight organic growth with a strong price effect but a
decline in volumes that nevertheless slowed in the second quarter
in a still uncertain environment. Germany progressed slightly over
the first half. The region's operating margin fell to 5.4% from
6.0% in first-half 2017, hit by the harsh weather conditions at the
start of the year.
-- In North America, like-for-like sales were up 9.4% in the
first half, buoyed by strong momentum in industrial markets and
robust growth in construction against a favorable comparison basis.
The operating margin was 11.1% versus 11.8% in first-half 2017,
with a rise in prices for Exterior Products which lagged behind
costs.
-- Asia and emerging countries continued to advance in all
regions, posting organic growth of 8.2% with an acceleration in the
second quarter to 9.7%. Latin America advanced significantly in all
main countries, including in Brazil despite the strike in May. Asia
benefited from strong momentum in India. Eastern Europe achieved a
good performance led by Poland. The operating margin was up
slightly at 10.8% versus 10.7% in first-half 2017.
Analysis of the consolidated financial statements for first-half
2018
The unaudited interim consolidated financial statements for
first-half 2018 were subject to a limited review by the statutory
auditors and were approved and adopted by the Board of Directors on
July 26, 2018.
H1 2017 H1 2018 %
change
EURm (A) (B) (B)/(A)
-------- --------
Sales and ancillary revenue 20,409 20,787 1.9%
Operating income 1,465 1,469 0.3%
Operating depreciation and amortization 606 601 -0.8%
EBITDA (operating income + operating
depr./amort.) 2,071 2,070 0.0%
Non-operating costs (166) (54) -67.5%
Capital gains and losses on disposals,
asset write-downs, corporate acquisition
fees and earn-out payments 7 (296) n.s.
Business income 1,306 1,119 -14.3%
Net financial income (expense) (231) 392 n.s.
Income tax (297) (265) -10.8%
Share in net income (loss) of associates (1) 0 n.s.
Net income before minority interests 777 1,246 60.4%
Minority interests 23 27 17.4%
Net attributable income 754 1,219 61.7%
Earnings per share(2) (in EUR) 1.36 2.23 64.0%
Recurring net income(1) 751 802 6.8%
Recurring(1) earnings per share(2)
(in EUR) 1.35 1.47 8.9%
Cash flow from operations(3) 1,407 1,410 0.2%
Cash flow from operations (excluding
capital gains tax)(4) 1,410 1,398 -0.9%
Capital expenditure(5) 427 561 31.4%
Free cash flow(6) 983 837 -14.9%
Investments in securities 136 1,289 n.s.
Net debt 6,816 9,294 36.4%
1. Recurring net income: net attributable income excluding
capital gains and losses on disposals, asset write-downs, material
non-recurring provisions and Sika income.
2. Calculated based on the number of shares outstanding at June
30 (546,918,263 shares in 2018, versus 554,424,460 shares in
2017).
3. Cash flow from operations = operating cash flow excluding material non-recurring provisions.
4. Cash flow from operations excluding capital gains tax = (3)
less the tax impact of capital gains and losses on disposals, asset
write-downs and material non-recurring provisions.
5. Capital expenditure: investments in property, plant and equipment.
6. Free cash flow = (4) less capital expenditure.
Consolidated sales advanced 4.9% like-for-like, led by both
prices (up 2.5%) and by volumes (up 2.4%). On a reported basis,
sales were 1.9% higher, with a negative 4.4% currency impact
resulting mainly from the depreciation of the US dollar, Brazilian
real, Nordic krona and other Asian and emerging country currencies
against the euro. The positive 1.4% Group structure impact
essentially reflects the consolidation of acquisitions in Asia and
emerging countries (KIMMCO, Megaflex, Tumelero, Isoroc Poland), in
new niche technologies and services (TekBond, Scotframe, Maris) and
to consolidate our strong positions (Glava, Kirson, Biolink,
Wattex, SimTek, bolt-on acquisitions in Building Distribution,
including Per Strand).
Operating income was stable based on reported figures (up 0.3%)
and increased 1.7% like-for-like. The operating margin came in at
7.1% of sales versus 7.2% of sales in first-half 2017.
EBITDA (operating income plus operating depreciation and
amortization) remained stable at EUR2,070 million and the EBITDA
margin represented 10.0% of sales compared to 10.1% of sales in
first-half 2017.
Non-operating costs totaled EUR54 million, down from EUR166
million in first-half 2017, benefiting from a one-off gain linked
to the Sika transaction and despite a rise in restructuring costs
relating mainly to Pipe. The EUR45 million accrual to the provision
for asbestos-related litigation involving CertainTeed in the US
remained unchanged from the last few half-year periods.
The net balance of capital gains and losses on disposals, asset
write-downs and corporate acquisition fees represented an expense
of EUR296 million compared to income of EUR7 million in first-half
2017. In first-half 2018, this item includes EUR267 million in
asset write-downs, mainly in Pipe, and EUR29 million in losses on
asset disposals and acquisition fees. Business income was therefore
down 14.3% to EUR1,119 million.
Net financial income (expense) represented income of EUR392
million compared to an expense of EUR231 million in first-half
2017. Besides the improvement resulting from a lower interest cost
on pensions (thanks to contributions in previous years) and a
decrease in the cost of gross debt (2.5% versus 2.7% at June 30,
2017), net financial income was boosted by a EUR601 million gain
relating to the Sika transaction.
Income tax totaled EUR265 million (EUR297 million in first-half
2017).
The income tax rate on recurring net income was 25% compared to
27% in first-half 2017, due mainly to the reduction in the US tax
rate.
Recurring net income (excluding capital gains and losses, asset
write-downs, material non-recurring provisions and Sika income)
rose 6.8% to EUR802 million.
Net attributable income increased sharply, up 61.7% to EUR1,219
million.
Capital expenditure totaled EUR561 million, representing 2.7% of
sales compared to a particularly low 2.1% of sales in first-half
2017.
Cash flow from operations remained stable at EUR1,410 million
(EUR1,407 million in first-half 2017); before the tax impact of
capital gains and losses on disposals, asset write-downs and
material non-recurring provisions, cash flow from operations was
EUR1,398 million (EUR1,410 million in first-half 2017) and free
cash flow decreased 14.9% to EUR837 million (4.0% of sales versus
4.8% of sales in first-half 2017).
The difference between EBITDA and capital expenditure fell 8.2%
to EUR1,509 million (EUR1,644 million in first-half 2017),
representing 7.3% of sales (8.1% in first-half 2017).
Operating working capital requirements (WCR) came in at EUR4,598
million (EUR4,333 million at June 30, 2017), a rise of one day to
40 days of sales.
Investments in securities totaled EUR1,289 million (EUR136
million in first-half 2017), including EUR933 million relating to
the Sika transaction (on a net basis after the disposal of 6.97% of
shares) and EUR356 million in targeted acquisitions made to
consolidate leading positions, notably Per Strand in Norway
(Building Distribution), to develop innovative niches with Micro
Hydraulics Pharma, HyComp and Logli Massimo (Innovative Materials),
and to establish a foothold in new countries with KIMMCO in
Insulation in Kuwait (CP).
Net debt rose from EUR6.8 billion to EUR9.3 billion at June 30,
2018, with in particular the Sika transaction for EUR933 million
and EUR389 million in share buybacks over the period. Net debt
represents 48% of consolidated equity compared to 36% at June 30,
2017. The net debt to EBITDA ratio over the last 12-month rolling
period was 2.2 at end-June 2018 compared to 1.7 at end-June
2017.
Update on asbestos claims in the US
Some 1,300 new claims were filed against CertainTeed in
first-half 2018 (versus 1,600 in first-half 2017).
At the same time, around 1,500 claims were settled (versus 2,300
claims in first-half 2017), bringing the total number of
outstanding claims to around 34,100 at June 30, 2018, a decrease of
200 compared to end-2017 (34,300).
A total of USD 74 million in indemnity payments were made in the
12 months to June 30, 2018, compared to USD 76 million in the 12
months to December 31, 2017.
Strategic priorities and outlook
The Group continued to implement its strategic priorities in
first-half 2018:
- EUR150 million in cost savings versus first-half 2017;
- 13 acquisitions in the first half and 3 being finalized in
July;
- 8.8 million shares bought back in the first half, an
acceleration compared to last year (8.3 million over full-year
2017), contributing to a reduction in the number of shares
outstanding to 546.9 million at June 30, 2018 (554.4 million at
June 30, 2017).
In the second half, the Group should continue to operate in a
supportive economic environment:
- France to continue to enjoy robust momentum in construction
markets;
- progression in other Western European countries, despite
continued uncertainty in the UK;
- growth in North America, in both construction markets and
industry;
- good momentum in Asia and emerging countries.
The Group confirms its action priorities for the year as a
whole:
- its focus on sales prices amid continued inflationary pressure
on costs;
- its cost savings program, with the aim of unlocking additional
savings of around EUR300 million (calculated on the 2017 cost
base);
- its capital expenditure program of around EUR1.7 billion
(representing around 4% of sales, in line with our objectives),
with a focus on growth capex outside Western Europe and also on
productivity (Industry 4.0) and digital transformation,
particularly in Building Distribution;
- its commitment to invest in R&D to support its
differentiated, high value-added strategy;
- its focus on high levels of free cash flow generation.
Saint-Gobain confirms its objective for full-year 2018 of a
like-for-like increase in operating income and for the second half
expects the like-for-like increase to be clearly above the level
achieved in the first half.
After having agreed a transaction with Sika on excellent
financial terms, the Group will continue and accelerate the
roll-out of its strategy:
- Acceleration in divestments by the end of 2019, representing
sales of at least EUR3 billion, with a positive impact of around 40
basis points on the operating margin.
- Ongoing value-creating acquisitions policy representing over
EUR500 million per year on average through to 2020, with three
focuses: Asia and emerging countries, new niche technologies and
services, and the consolidation of the Group's strong
positions.
- Launch of a review of the Group's organizational structure to
give greater priority to the regional dimension of construction
businesses in order to: increase market proximity, enhance agility
in order to drive growth, leverage new opportunities from our
digital transformation programs and reinforce our competitiveness,
while maintaining business synergies. The new organizational
structure that results from this review will be unveiled before the
end of 2018. In line with our culture of social dialog, employee
representative bodies will be kept informed.
Financial calendar
- An information meeting for analysts and investors will be held
at 8:30am (GMT+1) on July 27, 2018 and will be broadcast live on
www.saint-gobain.com
- Sales for the first nine months of 2018: October 25, 2018
after close of trading on the Paris Bourse.
Analyst/Investor relations Press relations
+33 1 47 62 44
29
+33 1 47 62 35 +33 1 47 62 30
Vivien Dardel 98 10
Floriana Michalowska +33 1 47 62 30 Laurence Pernot +33 1 47 62 43
Christelle Gannage 93 Susanne Trabitzsch 25
------------------------ ------------------ -------------------------------------------- -----------------
All indicators contained in this press release (not defined in
the footnotes) are explained in the notes to the financial
statements in the interim financial report, available by clicking
here:
https://www.saint-gobain.com/en/finance/regulated-information/half-yearly-financial-report
The glossary below shows the notes in which you can find an
explanation of each indicator.
Glossary:
Cash flow from operations Note 4
Net debt Note 9
EBITDA Note 4
Non-operating costs Note 4
Operating income Note 4
Net financial income (expense) Note 9
Recurring net income Note 4
Business income Note 4
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 any further information, please visit
www.saint-gobain.com
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END
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