- THE MAGAZINE
The Saint-Gobain Group delivered consolidated sales of €33,435 million (~ $43,192 million) for the first nine months of 2008, vs. €32,630 million (about $42,152 million) for the same year-ago period, representing a rise of 2.5% on a reported basis and 5.6% at constant exchange rates. Changes in the scope of consolidation over the first nine months of the year accounted for a 3.1% increase in sales, offset by a broadly equivalent negative exchange rate impact (3.0%) stemming from the decline in value of the U.S. dollar and pound sterling.
On a like-for-like basis (constant Group structure and exchange rates), the Group’s sales advanced €755 million (approximately $975 million) over the nine-month period, or 2.4%, buoyed by a significant 3.3% rise in sales prices. Sales volumes fell back slightly by 0.9%. In the third quarter alone, the Group reported organic growth of 2.8% (including a positive 3.8% price impact and a negative 1.0% volume effect).
All of the Group’s business sectors saw a rise in like-for-like sales over the first nine months of 2008. Third quarter figures for the residential construction market in the U.S. benefited from a favorable basis for comparison and a momentary rebound in renovation businesses related to siding and roofing products. In Western Europe, business tailed off in the third quarter with a deceleration in volumes in most countries and a recession taking hold and intensifying in Spain and the UK. Overall, demand related to industrial output and capital spending held firm at satisfactory levels in both Europe and the U.S. Broadly speaking, demand across all of the Group’s businesses remained satisfactory in France (organic growth of 3.2%, boosted by sales price increases) and vigorous in emerging countries and Asia (up 11.4%).
The Flat Glass sector achieved further sales growth in both the nine months to September 30, 2008, and in the third quarter of the year (respectively, 4.5% and 4.0% on a like-for-like basis), powered by ongoing vigorous organic growth in Asia and emerging countries. Against a backdrop of persistent inflation in energy and commodities, sales prices held firm overall in Western Europe, despite a dip in volumes (with the exception of energy-efficient glass, which once again reported double-digit growth).
On the automotive markets, the continued strong growth in emerging countries did not entirely offset the third quarter slowdown observed in Western Europe. The High-Performance Materials sector stepped up its organic growth (4.5% over the first nine months of 2008, including 7.8% over the third quarter). This performance was driven by solid capital spending in all geographic areas, with operations directly related to industrial output or construction markets growing more modestly.
In the third quarter of 2008, the Group’s sales held up satisfactorily overall, underpinned essentially on an operational level by the priority given to raising sales prices. In addition, the Group boasts a number of key strengths that will help it withstand the increasingly challenging economic environment.
Firstly, Saint-Gobain has a solid financial structure and healthy liquidity position, especially given that most of the Group’s debt is in the form of bonds, with no maturities before July 2009 (€ 1 billion, ~ $1.3 billion). In addition, from an operational standpoint, the Group has continued to generate high levels of free cash flow by paying close attention to working capital requirements and rigorously controlling capital spending. In the year to June 30, 2008, the Group posted free cash flow (net cash flows from operating activities less capital spending) of €1.4 billion (about $1.8 billion). This trend continued into the third quarter.
Nevertheless, the economic environment has sharply deteriorated over recent weeks due to the magnitude of the financial crisis. Against a backdrop of lower visibility, the Group is anticipating an overall decrease in its business volumes in the fourth quarter in Western Europe (particularly in the UK and Spain), and to a lesser extent, Eastern Europe. Accordingly, the Group considers it prudent to revise its earnings assumptions downward and is now expecting results for full-year 2008 slightly below the targets announced at the end of July (operating income at constant exchange rates and recurring net income close to the high 2007 levels).
In light of this situation, the Group will continue to demonstrate its swift responsiveness by intensifying, in those countries concerned, its purposeful and vigorous cost saving, workforce reduction and economic adaptation programs, as announced in July 2008. Lastly, Saint-Gobain will continue to exploit the front-ranking positions it holds in all of its businesses and territories in order to pursue a resolute policy on sales prices.
Additional details are available at www.saint-gobain.com.