Compagnie De Saint-gobain Sa · EURONEXT:SGO
Compagnie De Saint-gobain Sa — Saint-Gobain — FY2006 Earnings Presentation
67 slides from Compagnie De Saint-gobain Sa's earnings presentation, Jan 29, 2007
Slide 1: 2006 Estimated Results and Outlook for 2007
2006 Estimated Results and Outlook for 2007 Analysts – Investors Meeting London, January 29, 2007
Slide 2: Agenda
1 2006 Highlights 2 2006 Estimated Results 3 Operating Performance 4 Saint-Gobain’s Strategy 5 Outlook and Objectives for 2007
Slide 3: 2006 Highlights
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Slide 4: Saint-Gobain in 2006: Key figures
Saint-Gobain in 2006: Key figures 2005 2006 estimated Total Total Change 2006/2005 at actual at constant (€m) (€m) exchange exchange rates rates* Net sales 35,110 41,596 +18.5% +18.2% Operating income 2,860 3,714 +29.9% +29.8% Net income 1,264 1,637 +29.5% Net income excl. 1,284 1,702 +32.6% capital
Slide 5: 2006: A favorable economic climate
2006: A favorable economic climate > Robust construction markets - vigorous European markets with the start of a recovery in Germany - slowdown in US housing starts in the second half > High levels of industrial output and capital expenditure > Strong growth in emerging countries > Rise in cost of e
Slide 6: 2006: Further improvement in performance
2006: Further improvement in performance > Organic growth of 6.7% (3.5% price impact, 3.2% volume effect) > Rise in operating margin: 8.9% (versus 8.2%* in 2005) and 10.9% excluding Building Distribution (versus 10%* in 2005) > Sharp 24% increase in cash flow from operations** > Strong contribution
Slide 7: Key achievements in 2006
Key achievements in 2006 > Successful integration of BPB and strong performance of interior building solutions businesses (Gypsum and Insulation) > Strategic reorganization of businesses: Synflex, Calmar, Desjonquères, Reinforcements & Composites > 64 targeted acquisitions representing a total of €1
Slide 8: 2006 Estimated Results
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Slide 9: Key figures
Key figures in €m 2005 2006 % change Net sales 35,110 41,596 +18.5% Operating income 2,860 3,714 +29.9% Non-operating costs* (288) (367) Other business income and expenses (18) (25) Business income 2,554 3,322 +30.1% Net financial expense (569) (748) Income tax (701) (899) Minority interests (30) (4
Slide 10: Net sales
Net sales in €bn 41.6 +3.2% +3.5% +11.4% +6.7% +18.5% like-for-like 35.1 +0.4% 2005 sales Exc. rate Structure Prices Volumes 2006e sales
Slide 11: Organic growth
Organic growth % change in sales 2006e/2005 at comparable Group structure and exchange rates volumes prices 7.1% 6.7% 6.3% 2.7% 3.2% 3.3% 4.4% 3.5% 3.0% H1-2006/ H2-2006/ 2006/ H1-2005 H2-2005 2005 Increased momentum in H2
Slide 12: Operating income
Operating income +29.8% at (in €m and as % of sales) constant exchange rates 3,714 +29.9% 2,860 8.2%* 8.9% Group total Operating income as % 10.0%* 10.9% excl. Distribution of sales 5.7% 5.7% Distribution 2005 2006e up 32% in H1 and up 28% in H2 * excl. BPB in December 2005
Slide 13: Non-operating costs
Non-operating costs (in €m) 2005 2006 change Operating income 2,860 3,714 +29.9% Provision for asbestos-related litigation -100 -95 +5% Restructuring costs -188 -272 -45% Non-operating costs -288 -367 -27% Other non-operating costs -18 -25 -39% Business income 2,554 3,322 +30.1%
Slide 14: Asbestos claims against CertainTeed in the US
Asbestos claims against CertainTeed in the US Outstanding claims New/settled claims New claims 120,000 80,000 Settled claims Outstanding claims* 70,000 100,000 60,000 80,000 50,000 60,000 40,000 30,000 40,000 20,000 20,000 10,000 0 0 2000 2001 2002 2003 2004 2005 2006 Total payouts ($m) 103 153 140
Slide 15: Outstanding claims
Outstanding claims Asbestos claims against CertainTeed in the US > Approximately $83m paid out* ($88m in 2005 and $140m in 2004) and a further €95m set aside to the provision in 2006 (€100m in 2005; total coverage of $451m at end-2006 versus $422m at end-2005) 2005 2006* H1 2006* H2 2006* New claims
Slide 16: Net financial expense and income taxes
Net financial 2005 2006 expense (€m) Average cost of Cost of net debt (413) (625) gross debt: Pensions and other 4.5% (4.9% in 2005) misc. costs (156) (123) Net financial expense (569) (748) Inc. taxes (€m) 2005 2006 H1-06 H2-06 Pre-tax income excl. cap. gains 2,015 2,616 Income taxes 706 873 Averag
Slide 17: Net income
Net income Net inc. exc. cap. gains (in €m) (in €m) 1,702 1,637 +32.6% +29.5% 1,264 1,284 2005 2006e 2005 2006e
Slide 18: EPS
EPS EPS excl. cap. gains (in €) (in €) 4.44 4.62 +21.3% +24.2% 3.66 3.72 2005 2006e 2005 2006e No. of shares 345.3m 368.4m 345.3m 368.4m at 12/31
Slide 19: Cash flow and capital expenditure
Cash flow and capital expenditure (in €m, excl. capital gains tax) 3,374 2,730 €1,183m 2,191 €974m 1,756 5,0% 8.1% 5.3% 4.5% (% sales) 7.8% 5.0% excl. Gypsum 2005 2006e Cash flow from operations* Capital expenditure • Continuing high levels of cash flow from operations • Large-scale investments in e
Slide 20: Operating working capital
Operating working capital (in €m and number of days) 4,951 4,773 5,123 4,529 4,642 €m 59d 54d 51d 49d 44d No. of days 31/12/02 31/12/03 31/12/04 31/12/2005* 31/12/06e -15 days 2002 and 2003 under French GAAP 2004 and 2005 under IFRS * 2005 excl. Gypsum
Slide 21: Net debt and equity
Net debt and equity in €bn 14.5 12.9 12.3 11.6 Net debt Equity 31/12/2005 31/12/2006e Net debt/equity 104% 80% Interest cover 4.2* 5.0 Net debt/EBITDA** 2.6* 2.2 * 2005: proforma BPB ** EBITDA = Op.inc. +depr.
Slide 22: Return on capital
Return on capital ROCE before tax ROI 21.3% 12.5% 19.8% 11.2% 2005 2006e 2005 2006e Op. inc./Total capital employed Op. inc./Op. capital (inc. goodwill) Weighted average cost of capital: 7%
Slide 23: Acquisitions and divestitures in 2006
Acquisitions and divestitures in 2006 > Acquisitions €584m o/w Building Distribution €355m* Construction Products €142m Packaging €67m > Divestitures €891m* * including: sale of Calmar and Synflex for €670m asset disposals for €208m
Slide 24: Operating Performance
3 Operating Performance A. Results and developments by sector B. Results by geographic area
Slide 25: Organic growth
Organic growth % change in sales 2006e/2005 at comparable Group structure and exchange rates Group average: 6.7% 8.7% 7.8% 7.0% 3.3% 3.6% Flat Glass High-Performance Construction Building Packaging Materials Products Distribution Ceramics, Plast. Gypsum 12.1% & Abrasives 3.3% Insulation 10.4% Reinf.
Slide 26: Flat Glass
Flat Glass Net sales (in €m) Operating income (in €m and as % of sales) +8.6% 5,083 +6.0% 480 4,680 453 9.7% 9.4% 2005 2006e 2005 2006e H1 H2 H1 H2 +7.8% like-for-like 10.0% 9.4% 9.1% 9.8% +15%
Slide 27: Flat Glass
Flat Glass Cash flow from operations Capital expenditure (in €m) (in €m and as % of sales) +0.2% 529 528 485 -7.6% 448 10.4% 8.8% 2005 2006e 2005 2006e
Slide 28: Flat Glass
Flat Glass > Positive evolution of sales prices, particularly in Europe > Favorable sales structure trends Coated glass: 19% market share and threefold increase in sales in five years > Ongoing expansion in emerging countries 15% growth Ultra N Planitherm glass 60% of capital expenditure Start-up of
Slide 29: High-Performance Materials
High-Performance Materials Net sales (in €m) Operating income (in €m and as % of sales) 4,880 +1.2% 4,938 511 500 Ceram. +1.3% 3,591 3,589 Plastics Abrasives 12.9% 13.0% Reinfor. 1,306 1,365 -35% 3.8% 2.3% 2005 2006e 2005 2006e +3.3% like-for-like 10.5% 10.1%
Slide 30: High-Performance Materials
High-Performance Materials Cash flow from operations Capital expenditure (in €m) (in €m and as % of sales) 446 432 271 225 Ceram. +6.1% -13.9% Plastics 363 342 5.2% 4.5% Abrasives -23.8% -33.7% Reinfor. 104 6.4% 4.7% 69 2005 2006e 2005 2006e 5.6% 4.6%
Slide 31: High-Performance Materials
High-Performance Materials > Very good operating margin (13%) for Ceramics, Plastics & Abrasives, difficulties in Reinforcements > Fast-growing presence in businesses related to energy and the environment Strong 8% growth: proppants, catalytic Ceramic particulate filters for ceramics diesel engines
Slide 32: Construction Products
Construction Products Net sales (in €m) Operating income (in €m and as % of sales) +8.9% 10,876 9,986 1,376 +23.6% 3,895 1,113 Gypsum 3,521 13.8% 16.7% 2,542 2,280 Insulation Ext. fittings 2,694 13.0% 14.9% 2,733 & mortars 8.2% 7.7% Pipe 1,474 1,783 7.3% 7.9% 2005pf 2006e 2005pf 2006e +8.7% like-for
Slide 33: Construction Products
Construction Products Cash flow from operations Capital expenditure (in €m) (in €m and as % of sales) 1,048 844 +15.4% +26.5% 908 368 667 Gypsum 323 10.3% 12.5% 358 Insulation 282 6.4% 5.7% Ext. fittings 204 & mortars 212 3.7% 5.3% Pipe 91 118 3.8% 3.9% 2005pf 2006e 2005pf 2006e 6.7% 7.8% 2005: prof
Slide 34: Construction Products
Construction Products > Sustained organic growth in Europe and emerging countries Western Europe: +10% Emerging countries: +17% > A mixed situation in the US Price mix: +11% over the year Volumes: -8% over the year (H1: -1%, H2: -14%) > 52% of capital expenditure in 2006 earmarked for new capacity
Slide 35: Integration of the Gypsum business
Integration of the Gypsum business Targets met > Cost synergies: > €50m in 2006, on track to generate €100m in cost synergies in 2007 > Growth synergies: numerous local initiatives (sales, marketing, acquisitions) > Geographical synergies: higher than expected > Measured management of capacity in li
Slide 36: Examples of synergies
Examples of synergies A comprehensive range of products in step with potential regulatory changes > Insulation: thermal and acoustic regulations as part of the fight against global warming > Plasterboard: regulations on fire resistance and acoustic insulation > A catalyst for growth Gypsum: Headquar
Slide 37: Gypsum business 2005 - 2006
Gypsum business 2005 - 2006 > Better-than-expected 2006 Organic results: 2006 growth obj. actual (€m) Jan. 2006 2006/2005 Net sales ~3,850 3,895 + 12% Synergies +40 +52 Op. inc. after synergies ~550* 649* + 32% Op. inc. as % of sales >14% 16.7% > Accretive impact on net income: +15% * after estimate
Slide 38: Building Distribution
Building Distribution Net sales (in €m) Operating income (in €m and as % of sales) +13.8% 17,581 +12.7% 1,001 15,451 888 5.7% 5.7% 2005 2006e 2005 2006e +7.0% like-for-like
Slide 39: Building Distribution
Building Distribution Cash flow from operations Capital expenditure (in €m) (in €m and as % of sales) 817 327 -3.7% +22.5% 315 667 2.1% 1.8% 2005 2006e 2005 2006e
Slide 40: Building Distribution
Building Distribution > Ongoing consolidation in Europe: 53 acquisitions adding €601m (incl. 10 in Nordic countries, €174m in sales) > New avenues for growth: Acquisition of JP Corry in Ireland: 2006 sales €151m 4 acquisitions of regional-based general retailers in Spain: 2006 sales €78m Acquisition
Slide 41: Packaging
Packaging Net sales (in €m) Operating income +1.8% (in €m and as % of sales) 4,008 4,080 385 -2.3% 376 9.6% 9.2% 2005 2006e 2005 2006e H1 H2 H1 H2 +3.6% like-for-like 11.2% 8.1% 9.6% 8.8% +4.3% (+20% excl. Calmar)
Slide 42: Packaging
Packaging Cash flow from operations Capital expenditure (in €m) (in €m and as % of sales) -6.9% 432 335 402 +9.8% 305 7.6% 8.2% 2005 2006e 2005 2006e
Slide 43: Packaging
Packaging > Development in emerging countries: new furnace in Ukraine (110 kt in a full year) additional capacity in Russia (115 kt in a full year) construction of a plant in Chile (target capacity: 95 kt) > Rising costs passed on with a time-lag effect in the second half, particularly in the US > I
Slide 44: Operating Performance
3 Operating Performance A. Results and developments by sector B. Results by geographic area
Slide 45: Sales growth by geographic area
Sales growth by geographic area external growth organic growth 33.5% 21.4% 20.8% 14% 14.3% 9.5% 3.8% 10.9% 12.7% 5.7% 7.1% 3.1% France Other western North Asia & emerging Eur. countries America countries H1 H2 H1 H2 H1 H2 H1 H2 5.3% 6.1% 5.8% 8.5% 7.4% -1.4% 10.9% 14.5%
Slide 46: Operating income by geographic area
Operating income by geographic area (in €m and as % of sales) Sales Op.inc 2005 2006e dev. 1,506 countries +16% +29% em.coun. & Asia +34% +36% 1,090 1,028 930 701 487 537 394 8.2% 8.2% 10.3% 9.1% 8.1% 8.2% 8.9% 7.2% France* Other western North America Emerging European countries and Asia • excl. imp
Slide 47: Capital expenditure by geographic area
Capital expenditure by geographic area (in €m and as % of sales) 2005 2006e 749 574 594 535 485 391 363 256 5.3% 12.0% 4.1% 4.3% 10.0% 3.9% 3.4% 3.8% France Other western North America Emerging European countries and Asia countries
Slide 48: 2006 Estimated results in a nutshell
2006 Estimated results in a nutshell > Strong organic growth > Results driven by: - Building Distribution: operating income up 12.6% - Construction Products: operating income up 124% (up 24% on 2005 proforma) > Improvement in performance of Packaging and Flat Glass sectors in the second half, after
Slide 49: Saint-Gobain's Strategy
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Slide 50: A decade of transformation
A decade of transformation Flat Glass Building Materials Building Flat Glass Distribution Pipe HPM 1995 2006 Ceramics, Packaging Packaging plastics, abrasives Insulation Reinforcements Construction Products A Group mainly focused on A Group focused on glass manufacturing construction markets (more t
Slide 51: Further repositioning in 2006
Further repositioning in 2006 Around €2bn assets involved so far > Sale of Calmar and Synflex completed > Process underway to source partners for the Flasks business > Completion of the JV with Owens-Corning (Reinforcements & Composites) expected H1 2007 Strategic momentum set in motion > In line wi
Slide 52: Three major avenues for development
Three major avenues for development Strengthening worldwide leadership > Geographic expansion: growth capex in emerging countries 25%-30% of the Group’s sales (excl. Distribution) > Acquisitions to consolidate businesses related to construction and housing markets > 80% of the Group’s sales > In
Slide 53: High-potential businesses
High-potential businesses Sales growth 2006 operating income Packaging* ~4-5% Flat Glass + 9% HPM ~4-5% 27% Construction Group ~3% 37% Products ~5-6% 27% ~5% Building ~2% Distribution 1996-2005 >2006 Acceleration of organic Balanced contributions to growth operating income * excl. Calmar
Slide 54: Geographic expansion in emerging countries and Asia
Geographic expansion in emerging countries and Asia Organic growth > 34% growth in sales in 2006 > Significant capital expenditure: 10% of sales Plasterboard plant in Malaysia > Recent milestones Flat Glass: float-lines in Romania and India CP: plasterboard plant in Malaysia, Insulation facility in
Slide 55: Increased pace of geographic expansion
Increased pace of geographic expansion Distribution Potential market for Saint-Gobain per inhabitant Insulation Plasterboard Flat Glass – building Plaster, mortars Pipe GDP per capita Emerging Countries in Developed countries transition countries A product and service offering tailored for each stag
Slide 56: Strong growth through acquisitions
Strong growth through acquisitions Building Distribution > Building Distribution has proved its ability to grow rapidly 1997-2006 CAGR: +22% (organic and external growth) Scandinavia: 34% annual growth since 2004 (Dahl) Poland: 32% annual growth since 2001 Spain: 59% annual growth since 2001 > 2006
Slide 57: Strong growth through acquisitions
Strong growth through acquisitions Construction Products > Acquisitions in all businesses Insulation: acquisition of Izocam in Turkey Mortars: acquisitions in South Africa, Italy, Argentina, Slovakia Gypsum: acquisitions in Algeria and Argentina > The addition of the Gypsum business has helped accel
Slide 58: Organic growth through innovation
Organic growth through innovation > Innovation initiatives focused on High- Performance Materials and Flat Glass R&D costs: up 11% in 2006 Construction of a research center in Shanghai and extension of the Aubervilliers center > Three major target markets Housing Environment Energy
Slide 59: Promising results
Promising results Examples > Photovoltaic glass JV with Avancis/Shell to produce solar captors at reduced cost > Particulate filters for diesel engines > New functional products for building applications Woodprotect – Lapeyre: “revolutionary” hydrophobe treated wood Ultimate: fire-resistant glass wo
Slide 60: A dynamic strategy
A dynamic strategy > Evolving Group businesses > Enhanced synergies on construction markets > Fast-paced geographical expansion, particularly in emerging countries > A powerful technological platform to drive growth Clear growth and profitability levers
Slide 61: Outlook and Objectives for 2007
5 Outlook and Objectives for 2007
Slide 62: Economic assumptions for 2007: economic climate to remain favorable
Economic assumptions for 2007: economic climate to remain favorable Construction (residential, commercial and renovation): > Buoyant demand in Europe with the recovery in Germany taking hold > Slowdown in housing starts in the US, but the trend in commercial construction and renovation markets shoul
Slide 63: 2007: Continuing uncertainties
2007: Continuing uncertainties In particular: > Developments in the US economy > Cost of energy, transport and raw materials > US dollar and Asian currency trends > Political instability and/or uncertainty as regards energy policies
Slide 64: Outlook for Saint-Gobain businesses in 2007
Outlook for Saint-Gobain businesses in 2007 > Building Distribution: sustained growth and further improvement in profitability > Construction Products (CP): - vigorous growth in interior building solutions (BPB and Insulation) - continuing improvement in Pipe - soft landing for Building Materials in
Slide 65: 2007 Objectives: ongoing roll-out of the business model
2007 Objectives: ongoing roll-out of the business model In particular: > Pursuing the disposal program > Completing the BPB integration: €50m of additional cost synergies > Stepping up acquisitions (CP and Building Distribution) > Continuing to invest heavily in interior building solutions and emerg
Slide 66: 2007 Objectives
2007 Objectives > Sustained good level of organic growth > Robust increase in operating income at constant exchange rates* > Double-digit growth in net income excluding capital gains and losses on sales of non-current assets > Ongoing high level of free cash flow and strong balance sheet structure T
Slide 67: 2006 Estimated Results and Outlook for 2007
2006 Estimated Results and Outlook for 2007 Analysts – Investors Meeting January 29, 2007