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Saint-Gobain: 2008 results in line with revised objectives

Post Time:Mar 25,2009Classify:Company NewsView:378

Amid a difficult economic climate, Saint-Gobain delivered 2008 sales in line with 2007 figures, which marked a record year for the Group. Organic growth came in at 0.3% (including a positive 3.4% price impact and a negative 3.1% volume effect) and reflects the stark contrast between a satisfactory erformance in the first nine months of the year (2.4% organic growth, including a positive 3.3% price impact and a negative 0.9% volume effect) and a sharp downturn in the fourth quarter (5.5% negative organic growth including a positive 3.8% price impact and a negative 9.3% volume effect). The last few months of 2008 were affected by the deepening financial crisis, which compounded the decline in the construction sector in most developed countries and took its toll on the world’s industrial markets, in particular the automotive industry. The crisis also began to take hold of emerging economies. Despite the sharp slowdown in sales volumes over the last few months of the year, the Group was able to maintain its price increases across each of its businesses throughout 2008.

1) Performance of Group sectors
All of the Group’s sectors with the exception of Packaging were hit by the downturn and reported a singledigit fall in like-for-like sales in the fourth quarter of the year. This bucks the growth trend observed over the first nine months of 2008 (see appendices 1 and 2). Activities related to construction markets in Europe (Flat Glass, Building Distribution and Interior Solutions) were particularly affected, dragged down by the deeper contraction in the UK and Spanish markets and by a lackluster trading environment in other
European countries.

Innovative Materials posted like-for-like growth of 1.3% over the full year, despite a 7.8% drop in the fourth quarter due to the sharp downturn in the automotive industry and the increasingly sluggish world economy. However, the sector’s operating margin edged up to 12.9% from 12.6% in 2007.

• Flat Glass delivered organic growth of 1.0% for the full year, reflecting firm business momentum over the first nine months of the year (up 4.5%) and a sharp fall in the fourth quarter (down 8.8%) prompted by the collapse in the global automotive industry, and to a lesser extent by the continuing deterioration in construction markets across Western and Eastern Europe. Despite a fall in the price of commodities (float glass) at the end of 2008, sales prices edged up 2.3% on average over the full year, allowing the operating margin to remain at a high level of 12.6% versus 12.8% in 2007.

• High-Performance Materials (HPM) also suffered a sharp 6.1% downturn in business on a like-forlike basis during the fourth quarter, but still reported 1.9% organic growth for the year as a whole. The sector posted further gains in its operating margin on the back of a robust performance in the first nine months of the year (4.5% organic growth) and the uptrend in sales prices, from 12.3% in 2007 to 13.0% in 2008. Sales for the Construction Products (CP) sector advanced 1.4% on a like-for-like basis over the full year, but retreated 3.3% in the fourth quarter owing to downbeat Interior Solutions markets in both North America and Western Europe. The sector’s operating margin came in at 8.9%, versus 11.8% in 2007.

• Interior Solutions saw like-for-like sales drop 5.0% over the full year and 9.9% in the fourth quarter, hit by a further decline in construction markets in North America and Europe.This, combined with higher energy and commodity prices, drove operating margin down to 9.6% (versus 14.8% in 2007).

• In contrast, Exterior Solutions reported strong like-for-like growth (10.8% over the full year and 6.4% in the fourth quarter), buoyed by a sharp rise in sales prices (up 10.1% over the year) and vigorous year-long demand in Pipe and Industrial Mortars markets. Concerning North American Exterior Products, after a strong recovery in the second and third quarters, business volumes shrank on the back of a renewed slide in the US housing market. Operating margin performed well, up from 7.4% to 8.1% in 2008.

Building Distribution was directly impacted by the downturn in European construction markets (especially in the UK and Spain) and reported a decrease in like-for-like sales of 1.9% over the full year and 7.7% in the fourth quarter alone. The sector’s operating income came in at €894 million, representing 4.5% of sales versus 5.7% in 2007.

Source: Saint-GobainAuthor: shangyi

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