Compagnie de Saint-Gobain SA · EURONEXT:SGO
Compagnie de Saint-Gobain SA — Saint-Gobain — H1 2008 Earnings Presentation
53 slides from Compagnie de Saint-Gobain SA's earnings presentation, Jul 24, 2008
Slide 1: 1st Half 2008 Results
1st Half 2008 Results Analysts-Investors Meeting July 2008
Slide 2: Contents
Contents 1 Highlights 2 Group Results 3 Priorities for Action 4 2008 Outlook and Objectives
Slide 3: Highlights
Highlights 1
Slide 4: First-half 2008 key figures
First-half 2008 key figures Amount Change H1-2008/H1-2007 At constant in €m Actual exchange rates** Sales 22,141 +1.7% +4.9% Operating 2,005 -4.2% -2.3% income Recurring net 1,101 +3.2% income* A solid performance despite a high comparison basis * excluding capital gains on disposals and asset write
Slide 5: Challenging economic conditions
Challenging economic conditions > Continued downturn in residual construction in the US > Slowdown in Europe in the 2nd quarter, amplified by a high comparison basis (H1 2007) > Ongoing strong growth momentum in Asia and emerging countries > Good level of industrial activity worldwide > Volatile and
Slide 6: Results hold firm in first-half 2008
Results hold firm in first-half 2008 Despite a high comparison basis (first-half 2007) > Organic growth of 2.2% and fresh increases in sales prices (up 3.1%) > Operating income at constant exchange rates* close to the high level achieved in first-half 2007 (down 2.3%) > Moderate growth in recurring
Slide 7: Priorities for action
Priorities for action 1. Strong capacity to adapt to economic climate - Accelerated roll-out of structural cost savings programs as announced in 2007 (€85m in 2008) - Enhanced competitiveness drive (€215m of cost savings in 2008 - €350m on a full-year basis) - Management of prices, capacity and fina
Slide 8: Group Results and Operating Performance
Group Results and Operating Performance A. Group B. Sectors C. Geographic areas
Slide 9: Sales
Sales €bn +3.1% 22.141 -0.9% +1.7% 21.779 +2.6% +2.2% on a like-for-like basis -3.1% H1-2007 sales exchange rate structure prices volumes H1-2008 sales
Slide 10: Organic growth
Organic growth % change in 2008/2007 sales on a like-for-like basis volumes prices 3.4% 2.2% 0.9% 3.5% 3.1% 2.6% -0.1% -0.9% -1.7% Q1-2008/ Q2-2008/ H1-2008/ Q1-2007 Q2-2007 H1-2007 Further price increases in Q2
Slide 11: Operating income
Operating income €m 2,093 2,005 -2.3%** 1,815 +16.6%* 8.8% 9.6% 9.1% Total Group Operating margin as % of sales 11.1% 12.6% 12.1% Excl. Distribution 5.0% 5.2% 4.7% Distribution H1-2006 H1-2007 H1-2008 * at constant exchange rates (H1-2006 average) * * at constant exchange rates (H1-2007 average)
Slide 12: Outstanding claims
Outstanding claims Asbestos claims against CertainTeed in the US > Approximately $70m* paid out (trailing 12-month basis) ($73m in 2007 and $83m in 2006) and a further €37.5m set aside to the provision ($489m provision at end-June 2008 versus $473m at end-December 2007) June 2008 * estimates 2007 (t
Slide 13: Non-operating items
Non-operating items €m H1-07 H1-08 Change Operating income 2,093 2,005 -4.2% Non-operating costs (776)* (79) Other operating costs +3 (31) Business income 1,321* 1,897 +43.6% * after €650 provision for Flat Glass fines at 06/30/07 Net financial expense (351) (352) Income taxes (491) (444) Tax rate o
Slide 14: Recurring net income / Net income
Recurring net income* Net income €m +3.2% 1,101 1,076 1,067 813 797 465 H1 2006 H1 2007 H1-2008 H1 2006 H1 2007 H1-2008 > Recurring EPS*: €2.88 (+1.0%) EPS: €2.81 (+127%) * excluding capital gains on disposals, asset write-downs and provision for Flat Glass fines
Slide 15: Operating working capital
Operating working capital (€m, as % of sales and in no. of days) 6,054 6,167 6,234 €m 5,625 16.6% 15.0% 14.4% 13.9% 13.9% as % of sales 60d 54d 52d 50d No. of days '06/30/2005 06/30/2006 06/30/2007 06/30/2008 Further advances: -10 days in 3 years
Slide 16: Cash flow from operations and Capital expenditure
Cash flow from operations (excluding capital gains tax) and Capital expenditure €m 1,883 1,887 1,672 €1,061m €1,015m €861m 811 822 872 8.1% 3.9% 8.6% 3.8% 8.5% 3.9% (% of sales) H1 2006 H1 2007 H1 2008 Cash flow Capital expenditure
Slide 17: Net debt and shareholders' equity
Net debt and shareholders’ equity (€bn) 15.0 15.3 15.4 13.3 Net debt 12.0 9.9 Shareholders' equity '06/30/2007 12/31/2007 06/30/2008 > Net debt/equity 80% 65% 86% > Net debt/EBITDA 2.2 1.7 2.4 > Interest cover 6.0 5.9 5.7
Slide 18: Acquisitions and disposals in first-half 2008
Acquisitions and disposals in first-half 2008 > Acquisitions €2,178m o/w: Construction Products* €1,567m Building Distribution €503m Innovative Materials €55m Packaging €53m > Disposals** €77m * including Maxit for €1,526m ** including sales of non-current assets for €32m
Slide 19: Group Results and Operating Performance
Group Results and Operating Performance A. Group B. Sectors C. Geographic areas
Slide 20: Innovative Materials (Flat Glass-HPM)
Innovative Materials (Flat Glass-HPM) (€m and as % of sales) excluding divested businesses Sales Operating income Cash flow from operations & capex 4,926 4,993 706 644 661 +5.2%* +11.8%* Flat Glass 2,797 2,885 13.1% 14.2% 14.3% 306 +5.1%* +12.2%* 7.6% HPM 2,139 2,123 13.0% 13.9% 11.7% 4.1% H1-2007 H
Slide 21: Construction Products
Construction Products (€m and as % of sales) Sales Operating income Cash flow from operations & capex +10.5%* 5,988 739 -16.9%* 5,644 604 479 3,170 Interior 3,393 Solutions 15.9% 12.0% 314 8.7% 7.3% Exterior Solutions 2,835 2,267 8.7% 7.9% 7.2% 2.9% H1-2007 H1-2008 H1-2007 H1-2008 Cash flow Capex Li
Slide 22: Building Distribution
Building Distribution (€m and as % of sales) Sales Operating income Cash flow from operations & capex 10,039 9,522 494 470 335 +7.7%* -2.7%* 129 5.2% 4.7% 3.3% 1.3% H1-2007 H1-2008 H1-2007 H1-2008 Cash flow Capex +1.2% like-for-like * at constant exchange rates
Slide 23: Packaging
Packaging (€m and as % of sales) excluding divested businesses Sales Operating income Cash flow from operations & capex 1,733 233 1,723 189 259 +25.8%* +5.0%* 11.0% 13.4% 115 15.0% 6.7% H1-2007 H1-2008 H1-2007 H1-2008 Cash flow Capex +6.5% like-for-like * at constant exchange rates
Slide 24: Group Results and Operating Performance
Group Results and Operating Performance A. Group B. Sectors C. Geographic areas
Slide 25: Organic growth by geographic area
Organic growth by geographic area % change in H1-2008/H1-2007 sales on a like-for-like basis +11.7% o/w: Scandinavia (10%) : +5.8% Germany (10%) : +3.2% UK (10%) : -3.8% +2.9% Spain-Port. (6%) : -3.4% +0.6% -3.4% France Other Western North Asia and Europe America emerging countries % Group 29% 44% 1
Slide 26: Operating income by geographic area
Operating income by geographic area (€m and as % of sales) -0.5%* H1-07 H1-08 926 893 +1.9% 565 576 +11.2%* 414 368 -40.8%* 234 8.5% 9.3% 11.7% 7.8% 122 8.4% 8.7% 11.2% 4.6% France Other Western North America Asia and emerging Europe countries * at constant exchange rates
Slide 27: Cash flow and Capex by geographic area
Cash flow and Capex by geographic area (€m and as % of sales) 913 Free cash flow Capex 642 403 435 125 208 143 271 310 195 47 96 8.7% 2.9% 2.6% 3.6% France Other Western Europe North America Asia and emerging countries Free cash flow = Cash flow – Capex
Slide 28: Priorities for Action
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Slide 29: Significant downturn in global economic climate
Significant downturn in global economic climate > Subprime crisis followed by financial crisis → squeeze on credit and gradual rise in interest rates > Upward spiral in energy and commodity prices → significant impact on inflation > Continued decline in outlook for US Construction market > Gradual s
Slide 30: Priorities for Action
Priorities for Action A. Strong capacity to adapt to changes in the economic climate B. Search for growth opportunities stepped up
Slide 31: Roll-out of structural programs related to new Group strategy
Roll-out of structural programs related to new Group strategy Ahead of schedule > Summary of objectives estimated 85 300 180 initial 80 2008 2009 2010 > Savings in H1-2008 and projects for H2-2008 - More than 230 projects launched - Finance-HR: launch of shared services in all major countries - IT:
Slide 32: Measures swiftly put in place to address a challenging economic climate
Measures swiftly put in place to address a challenging economic climate > United States: continuation of restructuring measures implemented since the onset of the Construction crisis ▪ Production stopped at 19 sites/lines (14 in 2007, 5 in H1-2008) ▪ New measures planned for upcoming months > UK and
Slide 33: Substantial cost savings
Substantial cost savings > Around 40% of measures already launched at end-June 2008 2008 Full-year impact impact Workforce reductions* (estimated) 4,000 6,000 o/w ▪ US 1,550 2,200 ▪ UK 1,100 1,500 ▪ Spain 270 560 Cost savings (€m) (estimated) 300 435 o/w ▪ Adjustments/Productivity 215 350 ▪ Structur
Slide 34: Continued productivity efforts
Continued productivity efforts 133 +4.9% per year Operating > Average productivity gains of 100 income/ around 4% per year for the employee past 15 years (volumes/workforce, on a 2001 2007 comparable structure basis) 100 90 > Efficiency measures regarding Example of energy consumption float glass 76
Slide 35: Price management
Price management A stronger operating priority Average yearly price increase (%) > Further price increases in the 3.4 2nd quarter (+3.5%) compared with 1st quarter (+2.6%) 1.7 > Fresh initiatives planned for H2 0.3 > Numerous projects for optimizing pricing policy -0.2 1991- 1996- 2001- 2006- 1995 2
Slide 36: Improved product mix and added value
Improved product mix and added value 4mm glass in Europe > Flat Glass as % of SG Glass sales - Enhanced product mix (value-added products: 23% >2/3 of business sector sales) 13% <10% > HPM - Gain of 5 pts in gross margin (2003-2008) - PPL: 30% new products each year 1997 2007 2013 > Gypsum - Systems
Slide 37: Capacity management / Cash management
Capacity management Cash management > Selective capital expenditure and > Continuing high level of free cash acquisitions flow > Capacity optimization: . 100% of new Flat Glass capacity in emerging countries > Working capital gains . Saturation of Pipe capacity (Brazil, France, China) . Capacity str
Slide 38: Priorities for Action
Priorities for Action A. Strong capacity to adapt to changes in the economic climate B. Search for growth opportunities stepped up
Slide 39: Accelerated development in emerging countries
Accelerated development in emerging countries Almost 50% of growth capex in H1-2008 Sales (€bn) Operating income (€m) in emerging countries in emerging countries > 880 CAGR 15% CAGR 28% 800 7.7 6.9 33% 26% 430 3.6 24% 2.5 17% 11% 125 2000 2004 2007 2008 est obj. 2010 2000 2004 2007 2008 est % in eme
Slide 40: Emerging countries: Highlights (first-half 2008)
Emerging countries: Highlights (first-half 2008) Eastern Europe Latin America Slight growth due to high Very strong momentum comparison basis +17% like-for-like > Mexico > Poland (CAGR: 25% since 1997) . New multi-functional high-performance . Start-up of 2nd float line plastics plant > Romania . Co
Slide 41: Emerging countries: Highlights (first-half 2008)
Emerging countries: Highlights (first-half 2008) Asia Africa and Middle-East Vigorous growth New regional bases for +22% like-for-like Group businesses > India (CAGR: 25% for the past 10 years) > Egypt: construction of new float line . Flat Glass: launch of a 3rd float line . 4th Abrasives plant > A
Slide 42: European regulations to be significantly reinforced by 2020
European regulations to be significantly reinforced by 2020 Relative trends in thermal regulations (2000-2020) basis of 100 in 2000 100 P o land Finland -25% Denmark 75 Netherlands RT 2010 UK RT 2005 Germany France 50 -50% 25 Positive energy 50 kWh/m2/year 0 2000 2002 2004 2006 2008 2010 2012 2014 2
Slide 43: Growing profitability of energy-driven renovation projects
Growing profitability of energy-driven renovation projects Individual house Profitability of insulation solutions based on energy costs 8 • 100 m², fuel heating • Built before 1975 Payback in years 6 • Renovation work: €5,000 - €15,000 4 2 Barrel in $ kWh pe / m2 80 115 150 Source: PROMODUL calculat
Slide 44: All Group business sectors actively partnering market trends
All Group business sectors actively partnering market trends > Regulations - Direct presence in public institutions and professional associations - Institutional partners: Fraunhofer Institute, CSTB, ADEME, CAH > Research > Training - Training for sales teams: 30,000 employees trained across Europe
Slide 45: Solar technology: Saint-Gobain present across all ranges
Solar technology: Saint-Gobain present across all ranges Involved in each stage of the value chain > Photovoltaic - Upstream components: quartz crucibles, abrasive grains, special refractories - Components: front glass and films, back glass and other materials - Modules: thin film CIS technology - S
Slide 46: Solar technology: ambitious growth plan for an attractive market
Solar technology: ambitious growth plan for an attractive market ~260 > Sharp rise in demand for glass Glass demand (millions of m2) - across all technologies ~60 - CAGR 08-13: 35% 2008 2013 Thermal solar Concentrated solar power Photovoltaic > Saint-Gobain’s target: more than Sales trends €2bn by 2
Slide 47: Targeted acquisitions in "Habitat" market
Targeted acquisitions in “Habitat” market > Maxit: successful integration - Cost synergies in excess of targets 36 30 Cost synergies: €36m, versus initial forecast 6 of €30m 2008 2009 2010 - New organization of Mortars in each country since end-March 2008 - Merger of 50 legal structures (countries)
Slide 48: 2008 Outlook and Objectives
WN SAINT-GOBAIN 2008 Outlook and Objectives —
Slide 49: Ability to stand firm in challenging climate
Ability to stand firm in challenging climate Saint-Gobain’s end markets New construction* 10% 15% 3% 6% 34% Renovation/ Infrastructure** 15% 21% 4% 5% 45% Other 21% 4% 8% 5% 4% France West. Eur. North Asia & * Residential: 24% * Non-residential: 10% excl. France America emerg. coun. ** Renovation: 3
Slide 50: H2-2008 outlook
H2-2008 outlook I. Construction markets (Europe + US) Western Europe: moderate decrease Slowdown in France, Germany and Scandinavia Significant downturn in Spain and the UK North America: no improvement in sight II. Other markets (Europe + US) Industry & Household consumption: Satisfactory in Europe
Slide 51: H2-2008 outlook for Saint-Gobain's business sectors
H2-2008 outlook for Saint-Gobain’s business sectors > Flat Glass: - market should hold firm, thanks chiefly to emerging countries - rise in energy, transport and commodity prices should have greater impact on operating margin > High-Performance Materials (HPM): - ongoing profitable growth - healthy
Slide 52: 2008 objectives
2008 objectives > Recurring net income* and operating income (at constant exchange rates**) close to 2007 figures > Ongoing high level of free cash flow and solid financial structure * excluding capital gains and losses on disposals, asset write-downs and Flat Glass fines ** average exchange rates f
Slide 53: 1st Half 2008 Results
1st Half 2008 Results Analysts-Investors Meeting July 2008