- THE MAGAZINE
Saint-Gobain’s consolidated sales for the first nine months of 2009 came in at €28,435 million (approximately $42,246 million) vs. €33,435 million (~ $49,675 million) for the year-earlier period. This represents a decline of 15.0% on a reported basis and of 14.5% like-for-like (constant group structure and exchange rates).
Changes in group structure over the first nine months of the year resulted in a 1.0% increase in sales. This was more than offset by the 1.5% negative currency effect, resulting chiefly from the slide in the pound sterling and Brazilian real. On a like-for-like basis, consolidated sales contracted by 14.5% over the nine months to September 30, 2009. Sales prices continued to prove resilient (up 1.2%) despite a 15.7% drop in volumes.
In the third quarter, consolidated sales came in at €9,720 million (~ $14,441 million) vs. €11,294 million (~ $16,780 million) for the year-earlier period, representing a decline of 13.9%. Organic growth declined by12.7% (reflecting a 0.2% price increase and a negative 12.9% volume effect), following negative organic growth of 15.9% in the second quarter and 14.9% in the three months to March 31, 2009.
After extremely tough conditions in all of the group’s markets and geographic areas over the first half of the year, third quarter figures show a relative improvement. However, although the overall climate is no longer deteriorating, economic conditions remain very depressed in most of the group’s markets, and signs of recovery are weak for the time being. Only Latin America and Asia reported a significant pick-up in trading (delivering organic growth of close to 9% between the second and third quarters) and appear to have put the crisis behind them. In contrast, while business appears to be broadly stabilizing in both western and eastern Europe, as well as North America (with improvements in some industrial sectors such as automotive), trading remains at a low level in both housing and industrial markets. Household consumption continued to hold firm in all areas where the group has operations.
All of the group’s business sectors and divisions, except Packaging, continued to report sharp declines in sales volumes over the nine-month period, although the pace of decline slowed compared with the first half. With the exception of Flat Glass, sales prices remained upbeat across all sectors and divisions. The group therefore continued to benefit from a positive spread with respect to raw materials and energy costs. As expected, the increase in prices was smaller than in the first half of 2009, due mainly to the high basis for comparison (3.8% price increase in the third quarter of 2008).
Sales in the Innovative Materials business sector declined 20.6% over the first nine months of the year and 17.4% in the third quarter (vs. a decline of 22.8% in the second quarter). The relative quarter-on-quarter improvement is mainly attributable to Flat Glass. Flat Glass sales fell 18.1% over the nine-month period and 13.1% in the third quarter (vs. a 20.0% drop in the three months to June 30). The relative improvement in the third quarter was driven by a smaller decline in sales volumes across all divisions in Asia and Latin America, as well as for automotive glass in Europe. Despite a sharp 44% recovery since the beginning of June, average prices for commodity products (float glass) in the first nine months of the year and in the third quarter were down 37% and 29%, respectively, compared with the same prior-year periods. Prices for construction glass and for the Flat Glass Sector as a whole also remained weaker than in 2008.
High-Performance Materials (HPM) sales contracted by 24.1% over the nine months to September 30, 2009, in line with the 24.7% fall over the first six months of the year. Trading stabilized at a subdued level during the third quarter, with sales retreating 22.9%. The downward momentum in Industrial Ceramics picked up pace, particularly in the Refractories division linked to the investment cycle. However, this was offset in the same quarter by a relative improvement in Abrasives and High-Performance Plastics businesses, which are more directly related to industrial production.
Most of the geographic areas where the group operates were strongly affected by the economic crisis throughout the first nine months of 2009. However, the downward trend in sales slowed during the third quarter in Asia and Latin America, as well as in most western European countries.
In France, business contracted at a slightly slower pace over the three months to September 30, 2009 (down 12.5% compared with 13.6% in the second quarter), due chiefly to the relative improvement in Flat Glass sales. This improving trend was even more noticeable in other western European countries, where sales fell 12.9% in the third quarter vs. 19.8% in the second. The slowing pace of decline was observed across all regions and particularly the UK and Spain, which began to benefit from a more favorable basis for comparison. Germany continued to show greater resilience.
In North America, the pace of the downturn steadied, with sales retreating 17.2% in the third quarter vs. 17.3% in the three months to June 30. The relative improvement in sales volumes was offset by smaller sales price increases, which compared unfavorably with the third quarter of 2008 (prices up 10.5%).
In emerging countries and Asia, the decline slowed markedly, with sales down 11.7% compared with 13.3% in the second quarter. This improved performance was fuelled mainly by a sharp pick-up in trading between the second and third quarters in Asia and Latin America (organic growth of close to 9%). The trading environment in eastern European economies remained in the doldrums.
Although third quarter figures were still significantly below the same period in 2008 (down 12.7% like-for-like), the downward spiral has slowed compared with the second quarter of 2009, when the like-for-like decline came in at 15.9%. This relative improvement should gain momentum in the fourth quarter, thanks mainly to a much more favorable basis for comparison.
The group will also benefit throughout the second half of the year from an acceleration in the cost-cutting program introduced and extended since the onset of the crisis. It will also continue to enjoy a positive price/cost spread, with a slightly greater fall in the cost of raw materials and energy than in the first half. The group can therefore confirm that operating income and recurring net income for the second half of 2009 will outperform first half figures.
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