Compagnie De Saint-gobain Sa · EURONEXT:SGO
Compagnie De Saint-gobain Sa — Saint-Gobain — H1 2007 Earnings Presentation
65 slides from Compagnie De Saint-gobain Sa's earnings presentation, Jun 27, 2007
Slide 1: First-half 2007 results
First-half 2007 results Analyst-Investor meeting July 2007
Slide 2: Contents
Contents 1 Highlights 2 Group results 3 Operating performance 4 Strategy 5 Outlook and objectives for 2007
Slide 3: Highlights
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Slide 4: Saint-Gobain in first-half 2007: Key figures
Saint-Gobain in first-half 2007: Key figures Amount Change H1-2007/H1-2006 At constant in €m Actual exchange rates** Net sales 21,779 +6.0% +7.4% Operating 2,093 +15.3% +16.6% income Recurring net 1,067 +31.2% income* * excluding capital gains, asset write-downs and provision for Flat Glass fines **
Slide 5: A mixed economic climate
A mixed economic climate > Robust trading in Europe boosted by favorable weather conditions in the first quarter > Sharp downturn in residential construction in the United States > Vigorous growth in emerging countries, particularly Eastern Europe > Good level of industrial activity across the globe
Slide 6: Solid upswing in Group performance
Solid upswing in Group performance > Organic growth of 6.9% (+3.7% price impact, +3.2% volume effect), powered by Flat Glass (up 12.9%) and Building Distribution (up 8.7%) > Strong growth in operating margin to 9.6% (versus 8.8% in H1-2006), driven by industrial businesses (12.6% versus 11.1% in H1-
Slide 7: Roll-out of strategy picking up pace
Roll-out of strategy picking up pace > 34 bolt-on acquisitions targeting construction markets, bringing in around €560m in full-year sales + Norandex (specialist distribution and siding in the United States, $860m in sales) > Sale of Desjonquères (€690m, March 31, 2007) and planned sale of Reinforce
Slide 8: Group results
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Slide 9: H1-2007: Key figures
H1-2007: Key figures In €m H1-2006 H1-2007 Change Net sales 20,551 21,779 +6.0% Operating income 1,815 2,093 +15.3% Non-operating costs (157) (126) -19.7% Provision for Flat Glass fines (650) Capital gains and losses and exceptional asset +13 +3 write-downs Business income 1,671 1,321 Net financial
Slide 10: Net sales
Net sales In €bn +3.2% 21.779 +3.7% +6.0% 20.551 +0.5% -1.4% +6.9% on a like-for-like basis H1-2006 exchange structure prices volumes H1-2007 sales rate sales
Slide 11: Organic growth
Organic growth % change in 2007/2006 net sales on a like-for-like basis volumes prices 8.0% 6.9% 5.8% 4.3% 3.2% 2.1% 3.7% 3.7% 3.7% Q1-2007/ Q2-2007/ Q1-2007/ Q1-2006 Q2-2006 Q1-2006
Slide 12: Operating income
Operating income In €m 2,093 +15.3% 1,815 8.8% 9.6% Total Group Operating margin as % of sales 11.1% 12.6% Excl. Distribution 5.0% 5.2% Distribution H1-2006 H1-2007 > +16.6% at constant exchange rates* * average exchange rates for H1-2006
Slide 13: Non-operating costs
Non-operating costs (en M€) H1-06 H1-07 Change Operating income 1,815 2,093 +15.3% Provision for asbestos litigation (50) (47.5) Restructuring costs (107) (78.5) Provision for Flat Glass fines (650) Non-operating costs (157) (776) Gain/(loss) on sales of non-current assets +141 +252 Asset write-down
Slide 14: Outstanding claims
Outstanding claims Asbestos claims against CertainTeed in the US > Approximately $78m* paid out (trailing 12-month basis) ($83m in 2006 and $88m in 2005) and a further €47.5m set aside to the provision (50% of the provision for full-year 2006) June 2007 2006 (trailing 12- H1-2006 H1-2007* month basi
Slide 15: Net income
Net income In €m 1,067 +31.2% 813 > Recurring net income* (weighted ave. no. of shares outstanding: > Recurring EPS* 2.40 +22.1% 2.93 338,648,777 at June 30, 2006 364,639,299 at June 30, 2007) (€) H1-2006 H1-2007 > Net income (€465m) down 41.7% due to the provision for Flat Glass fines * excluding c
Slide 16: Operating working capital
Operating working capital (in €m, as % of sales and in no. of days) 6,054 6,167 5,625 €m as % of sales 16.6% 15.0% 14.4% 60d 54d 52d No. of days 06/30/2005 06/30/2006 06/30/2007
Slide 17: Cash flow and capital expenditure
Cash flow and capital expenditure In €m (excluding the tax impact of capital gains and losses +23.2% and exceptional asset write-downs) 1,883 1,672 €1,061m €861m 811 822 8.1% 3.9% 8.6% 3.8% (% of sales) H1-2006 H1-2007 Cash flow Capital expenditure
Slide 18: Net debt and shareholders' equity
Net debt and shareholders’ equity (in €bn) 14.5 15.0 13.7 12.9 11.6 12.0 Net debt Shareholders' equity 06/30/2006 12/31/06 06/30/2007 > Net debt/equity 106% 80% 80% > Net debt/Ebitda 2.5 (2xH1) 2.2 2.2 > Interest cover 4.8 5.0 6.0
Slide 19: Acquisitions and disposals H1-2007
Acquisitions and disposals H1-2007 > Acquisitions €432m o/w Building Distribution €285m Construction Products €72m High-Performance Materials €15m > Disposals €542m* * including: sale of Saint-Gobain Desjonquères for €482m sale of non-current assets for €53m
Slide 20: Operating performance
Operating performance A. Sectors B. Geographic areas
Slide 21: Organic growth (at end-June 2007)
Organic growth (at end-June 2007) % change in H1-2007/H1-2006 sales on a like-for-like basis Group average: 6.9% +12.9% +8.7% +6.5% +4.1% +2.4% Flat Glass High-Performance Construction Building Packaging Materials Products Distribution Ceramics, Plast. Interior Solutions +6.6% & Abrasives +5.1% Exte
Slide 22: Flat Glass – Highlights
Flat Glass – Highlights Buoyant market conditions for all activities (automotive and construction) in Europe and emerging countries Sharp rise in prices on building markets in Europe Fast-paced growth of energy-efficient products: anti- reflective and low-emission glass (+20%) Ongoing investments in
Slide 23: Flat Glass (in €m and as % of sales)
Flat Glass (in €m and as % of sales) Sales Operating income Cash flow & Capex +12.0% 2,797 2,498 347 366 +60.5% 228 166 9.1% 13.1% 12.4% 5.9% H1-2006 H1-2007 H1-2006 H1-2007 Cash flow Capex 12.9% on a like-for-like basis
Slide 24: High-Performance Materials – Highlights
High-Performance Materials – Highlights Satisfactory industrial markets in Europe, North America and emerging countries Solid +5.1% organic growth for Ceramics, Plastics & Abrasives Further improvement in margins R&D efforts stepped up: +10% in H1-2007
Slide 25: High-Performance Materials (in €m and as % of sales)
High-Performance Materials (in €m and as % of sales) Sales Operating income Cash flow & Capex 2,544 -2.3% 2,486 +8.7% 300 276 304 Ceram. Plastics 1,833 Abrasives 1,825 13.8% 14.0% 73 Reinfor- 718 667 12.2% 2.9% cements 3.2% 6.7% H1-2006 H1-2007 H1-2006 H1-2007 Cash flow Capex +5.1% 10.8% 12.1% on a
Slide 26: Construction Products – Highlights
Construction Products – Highlights Excellent performances in Europe, boosted by favorable weather conditions in the first quarter Marked downturn in the US (24% of the sector) as predicted, in terms of both volumes and prices Sustained high margins Large-scale growth investments (around 60% of total
Slide 27: Construction Products (in €m and as % of sales)
Construction Products (in €m and as % of sales) Sales Operating income Cash flow & Capex +5.0% 739 +3.4% 5,644 704 5,460 577 Interior 3,183 3,393 Solutions 15.8% 15.9% 301 Exterior Solutions 2,288 2,267 10.2% 5.3% 8.8% 8.7% H1-2006 H1-2007 H1-2006 H1-2007 Cash flow Capex +4.1% 12.9% 13.1% on a like-
Slide 28: Building Distribution – Highlights
Building Distribution – Highlights Robust trading environment in all European countries and upturn in margins for the sector 29 acquisitions in 7 countries representing 91 outlets and €514m in full-year sales (excluding Norandex) Acquisition of a merchant trader in Italy (Vemac), following the openi
Slide 29: Building Distribution (in €m and as % of sales)
Building Distribution (in €m and as % of sales) Sales Operating income Cash flow & Capex +13.3% 9,522 8,401 +18.2% 494 380 418 147 5.0% 5.2% 4.0% 1.5% H1-2006 H1-2007 H1-2006 H1-2007 Cash flow Capex +8.7% on a like-for-like basis
Slide 30: Packaging – Highlights
Packaging – Highlights Strong upswing in business over the first half of the year, in terms of both volumes and prices Saturation of production capacity and sharp improvement in margins Sale of Desjonquères at March 31, 2007 on highly favorable terms (€690m, i.e. 14x 2006 EBIT) to the Sagard and Cog
Slide 31: Packaging (in €m and as % of sales)
Packaging (in €m and as % of sales) Sales Operating income Cash flow & Capex 212 205 +3.4% 2,129 -12.1% 24 211 1,871 54 Flasks 468 149 & Plast. 125 Bottles 9.2% 11.0% 1,661 1,722 & Jars 11.3% 6.7% H1-2006 H1-2007 H1-2006 H1-2007 Cash flow Capex +6.5% 9.6% 11.3% on a like-for-like basis
Slide 32: Operating performance
Operating performance A. Sectors B. Geographic areas
Slide 33: Organic growth by geographic area
Organic growth by geographic area % change in sales H1-2007/H1-2006 on a like-for-like basis 19.0% 9.2% 6.5% -7.2% France Other western North Emerging countries Europe America and Asia % Group 29% 44% 13% 14% total
Slide 34: Operating income by geographic area
Operating income by geographic area (in €m and as % of sales) H1-06 H1-07 926 695 565 491 407 368 234 222 8.4% 9.3% 11.2% 11.2% 7.7% 7.8% 7.8% 8.0% France Other western North America Emerging European countries and Asia countries
Slide 35: Cash flow and capex by geographic area
Cash flow and capex by geographic area (in €m and as % of sales) 852 Free cash flow Capex 494 593 362 327 224 127 63 259 161 235 167 2.5% 2.6% 5.4% 7.1% France Other western North America Emerging countries European countries and Asia Free cash flow = Cash flow – Capex
Slide 36: Saint-Gobain's strategy
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Slide 37: Dynamic changes in Saint-Gobain's portfolio
Dynamic changes in Saint-Gobain’s portfolio Over the past two years, Saint-Gobain has increasingly focused on construction markets Acquisitions 12/05: Acquisition of BPB 17%: Industrial €6,500m (enterprise value) applications Since 07/2005: 115 acquisitions in Construction businesses €1,450m H2-07:
Slide 38: Planned sale of Reinforcements & Composites business
Planned sale of Reinforcements & Composites business Planned sale of Saint-Gobain’s Reinforcements & Composites business (excluding US activities) to Owens Corning (rather than joint venture as provided for in the agreement dated February 20, 2007) Transaction expected to be finalised at the end of
Slide 39: Saint-Gobain's ambition
Saint-Gobain’s ambition Worldwide leadership in construction markets, offering innovative solutions to meet the fundamental global challenges of growth, energy and the environment Worldwide leadership: local solutions tailored to the needs of both emerging and developed countries Solutions: associat
Slide 40: Construction markets: essential needs growing fast
Construction markets: essential needs growing fast … In developed countries Renovation of old buildings New building attributes (thermal insulation, acoustic comfort, etc.) User-friendly, easy to install In emerging countries Demographic growth and urbanization Infrastructures, housing Development o
Slide 41: Heightened by the search for energy-saving solutions
… heightened by the search for energy- saving solutions… Homes built before 1975 Current 2010 “Zero-emission” European European houses standards standards 60% of European homes €1,700 €800 €300 €100 Annual cost of heating 100 m2* *Saint-Gobain estimate based on $65/barrel
Slide 42: The challenge of reducing CO2 emissions
… and the challenge of reducing CO2 emissions Potential CO2 reductions Thermal regulations in Europe (flat glass) 6 OECD +++ Emerging countries and 4 countries in --- In billion tce transition 2 0 E ne rgie T ra ns po rt s B â t im e nt s Indus t rie Energy Transport Building Industry Source GIEC Op
Slide 43: Products and services for energy and environmental challenges
Saint-Gobain: products and services designed to meet energy and environmental challenges Today Tomorrow Interior New distribution solutions formats Flat glass Ultimate glass wool Building distribution Particulate filters Ceramics for energy-related applications Photovoltaic glass
Slide 44: Local solutions tailored to each stage of development
Saint-Gobain: local solutions tailored to each stage of development Potential market per inhabitant • Coated glass ls Innovative materia • Renewable energy sources • High-performance materials for construction and industrial applications es Solutions/Servic • Building Distribution ns • Insulation In
Slide 45: A refocused Group to achieve stronger growth
A refocused Group to achieve stronger growth Building Distribution Innovative materials* Consolidation R&D in energy/ environment New countries, new store formats Emerging 30% 30% countries 40% Breakdown of operating income 2006 pf Construction Products Energy and environmental * Flat Glass & perfor
Slide 46: Construction Products: accelerated growth momentum
Construction Products: accelerated growth momentum Revision of standards in developed ~ 5% – 6%/p.a. and emerging countries Energy, Estimated impact on growth for Environment Insulation: > +4%/p.a. ~ 4%/p.a. Emerging Positive impact on Gypsum and countries Mortars Standards on acoustic comfort Fast-
Slide 47: Construction Products: numerous development opportunities
Construction Products: numerous development opportunities Interior Solutions > 20 major new facilities between 2007 and 2010 Gypsum: India, France, Hungary, Abu Dhabi, US, etc. Insulation: Spain, Denmark, France, Poland, Russia, etc. Chemillé plant (France) 2009 New projects expected to generate sig
Slide 48: Innovative materials: accelerated growth momentum
Innovative materials: accelerated growth momentum Numerous innovative projects being developed New glass offering enhanced thermal ~ 5 %/p.a. insulation Particulate filters R&D Ceramic substrates for new energy ~ 3%/p.a. Emerging technologies countries Photovoltaic glass Rapid growth of emerging cou
Slide 49: Innovative materials: coated glass
Innovative materials Coated glass Fundamentals Helps reduce greenhouse gas emissions Renewable energy sources Comfort, active glass SGG PLANITHERM® Enhanced Thermal Insulation Saint-Gobain, market leader No. 1 in Europe, joint no. 1 worldwide Significant technological advance Substantial contributio
Slide 50: Innovative materials: high-performance plastics
Innovative materials High-performance plastics High value-added plastics 2006 sales: €690m Organic growth of 6% p.a. since 2003 Sheerfill® architectural membrane Fabrasorb® acoustical membrane Translucid, versatile membrane resistant to Applications in industrial niche markets temperatures of betwee
Slide 51: A new approach to innovation
A new approach to innovation Combine ideas stemming from innovative SMEs with the industrial strengths of Saint-Gobain Variety of working methods: licenses, partnerships, financial investments A dedicated team in place for over a year: Nova Around 300 potential start-ups analyzed 3 partnerships sign
Slide 52: Building Distribution: continuing strong growth
Building Distribution: continuing strong growth ~ + 10%/p.a. 11%/p.a. Organic growth: +5% p.a. 25.0 Market growth +2.7% 17.6 Sector outperforming market 15.5 growth by 2.3% 10.1 Sales 2001 2005 2006 2010 Total growth >15% Acquisition potential: +5% p.a. Expertise in integration €514m of acquisitions
Slide 53: Building Distribution
Building Distribution New countries, new store formats Accelerated geographic expansion (Sp, It, Ir, Eastern Eur., South Am.) 16% Recent geographic development of sales Spain, Italy, Ireland, Eastern Europe, 8% of South America sales Acquisition of Norandex in the US 2006 Obj. 2010 New store formats
Slide 54: Norandex: a targeted acquisition in the US
Norandex: a targeted acquisition in the US $866m of 2006 sales, 2,200 Norandex sales outlets in the US employees Enterprise value: $343m Specialized distributor of sidings: 153 outlets No. 3 US manufacturer of vinyl sidings CertainTeed’s leadership reinforced in the manufacture of sidings Acquisitio
Slide 55: Three major avenues for the Group's development
At a glance: three major avenues for the Group’s development Strengthening worldwide leadership Geographic expansion: growth capex in emerging countries 25% of the Group’s sales in 2010 Acquisitions to consolidate businesses related to construction markets Innovation and increased R&D initiatives to
Slide 56: An integrated Group
An integrated Group Optimizing operational performance Synergies between businesses to step up the pace of growth Streamlining, cost savings and industrial optimization (€300m of cost savings by 2010)
Slide 57: Synergies between businesses
Synergies between businesses Interior Solutions Products and systems Epsitoit: product in Placoplâtre plants, but sold under the Isover brand Exterior insulation (ETICS): insulation, mortars, glass fabrics Marketing Joint training school for Insulation /Gypsum/Mortars in Italy Improved customer serv
Slide 58: Cost savings and industrial optimization
Cost savings and industrial optimization Objective: €300m in cost savings in 2010 Operational synergies Reduce administrative expenses Scale back transport and energy consumption Pursue centralized procurement policy Ongoing industrial optimization Roll-out the “World Class Manufacturing” approach t
Slide 59: Strict rein on capital employed
Strict rein on capital employed 3 – 4% Capital expenditure of sales <3% of sales 2002-2006 Objective 2010 Maintenance expenditure 44d Working capital 40d Gain of around €500m 2006 Objective 2010 Working capital in no. of days More than 2,000 managers offered attractive financial incentives to improv
Slide 60: Objectives for 2010
Objectives for 2010 Accelerate growth Sales growth: +5% p.a. excluding acquisitions EPS: >10% p.a. Increase profitability ROI: 22-25% ROCE: 13-14% ROI ROCE ~22- ~13- 25% 14% 21% 12.5% 17% 11.0% 2002 2006 Objective 2002 2006 Objective 2010 2010
Slide 61: Outlook and objectives for 2007
Outlook and objectives for 2007 A. Outlook for second-half 2007 B. 2007 objectives
Slide 62: Macro-economic environment
Macro-economic environment Construction > Residential and commercial building markets in Europe should remain healthy, for both renovation and new construction projects > No upturn in residential construction in the United States; German market losing momentum > Demand in emerging countries should r
Slide 63: H2-2007 outlook for Saint-Gobain's businesses
H2-2007 outlook for Saint-Gobain’s businesses > Building Distribution: continued expansion and rise in profitability > Construction Products (CP): - Interior Solutions: globally stable with robust markets in Europe offsetting the downturn in the US - Exterior Solutions: uptrend in Mortars and Pipe s
Slide 64: 2007 objectives raised
2007 objectives raised* > Strong organic growth momentum versus 2006 > Double-digit growth in operating income* at constant exchange rates** > At least 20% growth in recurring net income* > Continued high levels of free cash flow and a solid balance sheet structure * These objectives are based on th
Slide 65: First-half 2007 results
First-half 2007 results Analyst-Investor meeting July 2007