Compagnie de Saint-Gobain SA · EURONEXT:SGO
Compagnie de Saint-Gobain SA — Saint-Gobain — H1 2006 Earnings Presentation
53 slides from Compagnie de Saint-Gobain SA's earnings presentation, Jul 31, 2006
Slide 1: First-half 2006 results
First-half 2006 results Analyst – Investor meeting London, July 31, 2006
Slide 2: Contents
Contents 1 First-half 2006 highlights 2 First-half 2006 results 3 Operating performance in first-half 2006 4 Strategy 5 Outlook and targets for second-half 2006
Slide 3: First-half 2006 highlights
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Slide 4: Saint-Gobain in H1-2006: key figures
Saint-Gobain in H1-2006: key figures Amount in Change H1-2006/H1-2005 At constant €m Actual exchange rates* Net sales 20,551 +21.8% +19.8% Operating 1,815 +32.3% +29.8% income Net income excl. capital gains 813 +26.6% * average exchange rates for H1-2005
Slide 5: H1-2006: A robust economic environment
H1-2006: A robust economic environment > Buoyant construction markets in the US and most European countries, with the first signs of an upturn in Germany > Healthy levels of corporate spending and industrial output > Further strong growth in emerging countries > Continuing hike in the cost of energy
Slide 6: H1-2006: Strong upswing in Group performances
H1-2006: Strong upswing in Group performances > 6.3% organic growth (5.6% excl. Gypsum), reflecting: - a 3.0% hike in sales prices - a 3.3% upturn in sales volumes > Improved operating margin (8.8% versus 8.1% in H1-2005) > Further increase in cash flow from operations* (+22.9%) * excl. capital gain
Slide 7: H1-2006: Growth powered by Construction Products and Building Distribution
H1-2006: Growth powered by Construction Products and Building Distribution businesses > Vigorous growth of CP and Building Distribution sectors Net sales Op. inc. Building Distribution +14% +15% Construction Products +76% +149% Construction Products +12.9% +37.5% pro forma including Gypsum in 2005 >
Slide 8: H1 2006 milestones
H1 2006 milestones > BPB integration: €20m in cost synergies in H1-2006, €50m expected over the full year > Divestments: €715m (including Calmar and Synflex) > Continuing bolt-on acquisitions: ~ 40 operations bringing onboard ~€500m of full-year sales > 36% growth-driven increase in capital expendit
Slide 9: First-half 2006 Results
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Slide 10: H1-2006: Key figures
H1-2006: Key figures % change In €m H1-2005 H1-2006 Net sales 16,877 20,551 +21.8% Operating income 1,372 1,815 +32.3% Non-operating expenses* -108 -157 +45.4% Capital gains and losses and exceptional write-offs +4 +13 n.m. Business income* 1,268 1,671 +31.8% Net financial expense -266 -374 +40.6% I
Slide 11: Net sales
Net sales In €bn +3.3% 20,551 +3.0% +13.6% +6.3% +21.8% on a like-for-like basis +1.9% 16,877 end-June exchange scope price volumes end-June 2005 sales rate 2006 sales Strong organic and external growth
Slide 12: Trends in sales prices and volumes
Trends in sales prices and volumes Prices Volumes +3.3% +3.0% +1.9% +0.8% 2005/2004 H1-06/H1-05 2005/2004 H1-06/H1-05 Increased pace of sales Strong upswing in price rises sales volumes ▪ % annual change on a like-for-like basis ▪ Group composite index ▪ current prices in local currencies
Slide 13: Operating income
Operating income In €m 1,815 +32.3% 1,372 8.1% 8.8% Total Group Operating income as % of sales 10.4% 11.1% Excl. Distribution 4.9% 5.0% Distribution H1-2005 H1-2006 > up 29.8% at constant exchange rates
Slide 14: Net income
Net income Net income excl. In €m capital gains 797 813 +26.1% +26.6% 632 642 H1 2005 H1 2006 H1 2005 H1 2006 Accretive impact of BPB on net income for first-half 2006: ~ +18%
Slide 15: Earnings per share excluding treasury stock
Earnings per share excluding treasury stock In € EPS EPS excl. cap. gains 2.32 2.37 +24.7% +25.4% 1.86 1.89 H1 2005 H1 2006 H1 2005 H1 2006 Number of shares making up capital stock (excluding treasury stock): 340,058,134 shares at June 30, 2005 343,262,396 shares at June 30, 2006
Slide 16: Net debt & shareholders' equity
Net debt & shareholders’ equity (in €bn) 13.7** 12.8 12.9* 11.8* 12.3* Net debt 7.5 Shareholders' equity 06/30/2005 12/31/2005 06/30/2006 Net debt/equity 64% 104% 106% Net debt/Ebitda 1.8 (2xH1) 2.6 (pf) 2.5 (2xH1) Interest cover 5.2 (actual) 4.2 (pf) 4.8 (actual) *Equity (IAS 8 impact) **Debt ▪ Cha
Slide 17: Operating working capital
Operating working capital (in €m and number of days) 6,054 €m 5,625 60 d Number of 54 d days 06/30/2005 06/30/2006 Further improvement in operating working capital
Slide 18: Cash flow and capital expenditure
Cash flow and capital expenditure In €m (excl. capital gains taxes) +22.9% 1,672 1,360 €861m €762m 811 598 8.1% 3.5% 8.1% 3.9% (% sales) H1 2005 H1 2006 Cash flow from operations Capital expenditure • Strong growth in cash flow from operations • Growth-driven increase in capital expenditure
Slide 19: H1-2006 acquisitions and disposals
H1-2006 acquisitions and disposals > Acquisitions €346m o/w Building Distribution €306m* Construction Products €33m > Disposals €715m* * o/w: acquisition of JP Corry paid in H2 disposal of Calmar - payment received in July 2006 for €560m asset disposals of €43m
Slide 20: Asbestos claims against CertainTeed in the US
Asbestos claims against CertainTeed in the US Trends 2004-2006 Trailing 12- month basis to 2004 2005 H1 2006* end-June 2006* New claims 18,000 17,000 4,000 11,000 Claims resolved 20,000 20,000 8,000 15,000 Claims pending 106,000 100,000 86,000** > Average cost of settlement at end-June 2006: USD 2,2
Slide 21: Asbestos claims against CertainTeed in the US: legislation reform update
Asbestos claims against CertainTeed in the US Legislation reform update Federal reforms State reforms > May 26, 2005: bipartisan vote by > Favorable developments in the Senate Judiciary Committee several States (OH, MS, TX, GA, on the Asbestos Trust Fund bill FL, KS, SC) > February 2006: failure to
Slide 22: Operating performance in first-half 2006
Operating performance in first-half 2006 A. Performance by sector B. Performance by geographic area C. BPB integration
Slide 23: Organic growth (at end-June 2006)
Organic growth (at end-June 2006) % change in H1-2006/H1-2005 net sales on a like-for-like basis +11.5% Group average: +6.3% +5.4% +4.2% +3.4% +3.3% Building High-Performance Flat Glass Packaging Construction Products Distribution Materials Ceramics, Plastics & Building Mat.+5.2% Abrasives +1.8% Ins
Slide 24: Flat Glass
Flat Glass Net sales Operating income Cash flow & Capex (in €m) (in €m and as % of sales) (in €m and as % of sales) +7.3% 2,498 2,329 -2.1% 261 233 228 166 10.0% 9.1% 10.4% 6.6% H1-2005 H1-2006 H1-2005 H1-2006 Cash flow Capex +4.2% like-for-like
Slide 25: Packaging
Packaging Net sales Operating income Cash flow & Capex (in €m) (in €m and as % of sales) (in €m and as % of sales) +7.7% 2,129 1,977 225 221 -7.2% 205 119 11.2% 9.6% 10.6% 5.6% H1-2005 H1-2006 H1-2005 H1-2006 Cash flow Capex +3.3% like-for-like
Slide 26: Construction Products
Construction Products Net sales Operating income Cash flow & Capex (in €m) (in €m and as % of sales) (in €m and as % of sales) 5,460 704 +12.9% +37.5% 552 4,838 1,963 512 17.0% Gypsum 1,724 13.2% 306 ** 1,224 Insulation 1,064 13.8% 11.6% Building 1,383 Mat. 1,361 7.6% 8.7% 10.1% 5.6% Pipe 700 905 8.
Slide 27: High-Performance Materials
High-Performance Materials Net sales Operating income Cash flow & Capex (in €m) (in €m and as % of sales) (in €m and as % of sales) +1.8% 276 +5.3% 2,544 271 2,415 211 Ceram. Plastics 1,833 Abrasives 1,788 13.4% 13.8% 76 Reinforce- 8.3% 3.0% 638 718 ments 4.9% 3.2% H1-2005 H1-2006 H1-2005 H1-2006 Ca
Slide 28: Building Distribution
Building Distribution Net sales Operating income Cash flow & Capex (in €m) (in €m and as % of sales) (in €m and as % of sales) +14.1% 8,401 7,364 310 +15.2% 418 363 134 4.9% 5.0% 3.7% 1.6% H1-2005 H1-2006 H1-2005 H1-2006 Cash flow Capex +5.4% like-for-like
Slide 29: Operating performance in first-half 2006
Operating performance in first-half 2006 A. Performance by sector B. Performance by geographic area C. BPB integration
Slide 30: Organic growth by geographic area
Organic growth by geographic area (end-June 2006) % change in like-for-like sales: H1-2006-H1-2005 Group average: +6.3% +10.9% +7.4% +5.8% +4.9% France Other Western European North America Emerging countries countries and Asia
Slide 31: Operating income by geographic area
Operating income by geographic area (in €m and as % of sales) H1-05 H1-06 695 491 490 440 407 269 222 173 7.7% 7.8% 11.2% 8.7% 7.6% 6.9% 9.4% 8.0% France Other Western North America Emerging European countries and Asia countries
Slide 32: Cash flow and capex by geographic area
Cash flow and capex by geographic area (in €m and as % of sales) 658 Free cash flow Capital expenditure 347 414 304 267 267 27 191 311 240 147 113 2.3% 3.5% 3.1% 8.7% France Other Western North America Emerging countries European countries and Asia Free cash flow = Cash flow – Capital expenditure
Slide 33: Operating performance in first-half 2006
Operating performance in first-half 2006 A. Performance by sector B. Performance by geographic area C. BPB integration
Slide 34: Update on the BPB integration
Update on the BPB integration > Better-than-expected performances > Cost synergies implemented ahead of schedule > Retooled operational organization since early-March 2006 and excellent integration of teams > High potential for commercial synergies > Attractive growth prospects
Slide 35: Better-than-expected results for Gypsum in H1-2006
Better-than-expected results for Gypsum in H1-2006 H1-2005 Change H1- 2006 In €m pro H1-2006 2006 target** forma /H1-2005pf Net sales 1,724 1,963 +13.9% +8% Operating income 227 334* +47.1% +20% Operating margin 13.2% 17.0% 14% * Including €20m in cost synergies ** as published in January 2006 Initi
Slide 36: Vigorous growth in the Gypsum business
Vigorous growth in the Gypsum business > +13.7% organic growth in H1-2006, including: an 8.2% price impact a 5.5% volume effect > €207m of capital spending in H1-2006 (10.5% of sales) of which : - €88m new capacity in the UK and Spain - €18m new capacity in Asia (China, India) > Capital spending ove
Slide 37: Cost synergies implemented ahead of schedule
Cost synergies implemented ahead of schedule 2006 2007 H1-06/H1- H2-06/H2- Total Total In €m 05 05 2006/2005 2007/2005 Impact of cost +20 +30 +50* +100 synergies on op. inc. * versus initial target of €40m • Confirmation of synergies worth €100m in 2007 • Estimated synergies for 2006 raised to €50m
Slide 38: Attractive growth prospects for interior building solutions
Attractive growth prospects for interior building solutions > Creation of a joint strategic marketing department with the Insulation business in April 2006 > Accelerated expansion in emerging countries Some examples: - Gypsum/Industrial mortars synergies - Turkey: investment by the mortars business
Slide 39: Attractive growth prospects for interior building solutions
Attractive growth prospects for interior building solutions > Expanded range of products and solutions > Regulatory measures in Europe promoting energy efficiency Insulation: an example EnVG, EID New 2006 standard RT 2005, energy savings certificates > United States: no significant additional capaci
Slide 40: Overview of first-half 2006
Overview of first-half 2006 > Sharp increase in sales prices offsetting spiraling raw materials and energy costs > Marked upturn in sales volumes > Highly satisfactory performances reported by the Construction Products and Building Distribution sectors > Improved profitability and strong contributio
Slide 41: Strategic avenues for development
Strategic avenues for development
Slide 42: Saint-Gobain: H1-2006
Saint-Gobain: H1-2006 (after the sale of Calmar) Sales Operating income 10% 10% 23% 12% 15% 40% 12% 13% 26% 39% Building Distribution Packaging Construction Products High-Performance Materials Flat Glass
Slide 43: Strategy: major avenues for development
Strategy: 3 major avenues for development Worldwide leader in housing > Prioritizing development of construction and housing related businesses Î > 80% of Group sales > Fast-paced expansion in emerging countries Î ~ 30% of Group sales (excl. Distribution) > Ongoing R&D and innovation initiatives, pa
Slide 44: Expanding presence in construction markets
Expanding presence in construction markets % 2006 pro forma sales 6% 4% Household 1% consumption (11%) 7% 4% 3% Industry (14%) 29% 4% 3% Renovation Construction (36%) (75%) 27% 5% 7% New construction (39%) Western North Asia and Europe America emerging countries (69%) (17%) (14%)
Slide 45: Active portfolio management
Active portfolio management > Significant divestments through to mid-2007, in line with the Group’s business model and its growth and profitability prospects > Process already started with the completion of the sale of Calmar (USD 745m, >10xEbitda) and Synflex > Other projects in progress, namely a
Slide 46: Saint-Gobain's Reinforcements: two different businesses
Saint-Gobain’s Reinforcements: two different businesses Reinforcements & Composites Textile Solutions 2005 sales ~ €850m 2005 sales ~ €550m UPSTREAM (2/3 OF SALES): PLASTICS UPSTREAM (1/3 of sales): TEXTILES DOWNSTREAM (1/3 of sales): COMP. & INDUSTRY DOWNSTREAM (2/3 OF SALES): CONSTRUCTION > Compet
Slide 47: Alliance project with Owens Corning
Alliance project with Owens Corning Agreement between Saint-Gobain and Owens Corning to form a joint venture in order to maximize the value of the Reinforcements & Composites business: Estimated sales of USD 1.8bn (€1.5bn) Owens Corning to take majority stake and assume management powers (JV 60/40)
Slide 48: Outlook and targets
Outlook and targets A. Outlook for second-half 2006 B. Targets for 2006
Slide 49: A generally satisfactory macro-economic environment
A generally satisfactory macro-economic environment Construction > Booming market in France, Scandinavia and Spain. Upturn in the UK and Germany > Slowdown (in terms of volumes) in residential construction in the US (as forecast), but uptrend in the non-residential market > Vigorous demand in emergi
Slide 50: H2-2006 outlook for Saint-Gobain's businesses
H2-2006 outlook for Saint-Gobain’s businesses > Building Distribution expected to continue expansion and improve profitability > Construction Products (CP): - robust growth in interior building solutions (BPB and Insulation), despite an unfavorable comparison basis versus H1-2006 - strong business l
Slide 51: H2-2006 outlook: continued roll-out of the business model
H2-2006 outlook: continued roll-out of the business model > Ongoing implementation of synergies related to the BPB integration > Price effect to remain favorable, offsetting rise in raw materials and energy costs > Further bolt-on acquisitions (Building Distribution and Construction Products) > Cont
Slide 52: 2006 targets raised
2006 targets raised* > 27%-28% growth in operating income at constant exchange rates** > 25%-26% growth in net income excluding profit/(loss) on sales of non-current assets > Strong organic growth momentum versus 2005 > Sustained high levels of free cash flow and strong balance sheet structure * aft
Slide 53: First-half 2006 results
First-half 2006 results Analyst – Investor meeting London, July 31, 2006