Saint-Gobain Sees Sales Grow over 4% in 2017
Organic growth was reportedly driven both by higher volumes (up 2.7%) and higher prices (up 2.0%) in all business sectors and regions, despite the adverse impact of the June 2017 cyberattack.
Saint-Gobain recently announced 2017 group sales of €40.8 billion (approximately $49.9 billion), an increase of 4.4% on a reported basis compared to 2016 (and up 4.7% like-for-like). Organic growth was reportedly driven both by higher volumes (up 2.7%) and higher prices (up 2.0%) in all business sectors and regions, despite the adverse impact of the June 2017 cyberattack. The price effect continued to grow (up 2.3% in the second half), against a backdrop of rising raw material and energy costs over the course of the year.
The group structure impact added 0.9% to growth as acquisitions increased with the consolidation of companies in Asia and emerging countries (Emix, Tumelero, Solcrom, Megaflex), in new niche technologies and services (H-Old, France Pare-Brise, Scotframe), and to consolidate the group’s positions (Glava, Pietta Glass, SimTek, bolt-on acquisitions in Building Distribution). However, overall growth was tempered by a negative 1.2% currency effect over the year (a negative 2.6% in the second half), mainly reflecting the depreciation of the pound sterling, U.S. dollar and certain Asian and emerging country currencies against the euro.
The year was also marked by the cyberattack on June 27; the group reports it was able to react swiftly not only to reestablish a return to normal in its operating activities, but also to reinforce its defenses. The impact on 2017 is estimated at a negative €80 million (~ $ 97.9 million) on operating income. Overall, around half of the impact of the cyberattack concerned Building Distribution, while the rest concerned the group’s industrial businesses, particularly Construction Products. From a geographical perspective, Western European countries were the hardest hit, especially Nordic countries, Germany, and France.
“Saint-Gobain’s robust growth and the acceleration in our performance over the course of the year illustrate the effectiveness of our strategy,” said Pierre-André de Chalendar, chairman and CEO. “All business sectors and regions contributed to this good set of results, especially France which confirmed its recovery. In line with our focus on pricing in an environment where inflation is increasing once again, sales prices rose significantly, particularly in the second half of the year. Cost savings, another priority for the group, exceeded objectives at €290 million (~ $268 million). The group pursued its profitable growth strategy by stepping up both its financial investments, with 28 small and mid-sized acquisitions in the year, and its capital expenditure, with a focus on emerging countries, Industry 4.0, and digitalization, particularly in Building Distribution. In 2018, we expect the economic climate to remain supportive. We will continue to implement our strategic objectives and are targeting a further like-for-like increase in operating income.”
Innovative Materials sales climbed 5.3% like-for-like in 2017 and 6.5% in the second half. The operating margin for the Business Sector improved significantly, to 12.4% from 11.2%, spurred by both Flat Glass and High-Performance Materials.
Flat Glass like-for-like sales increased 5.2% in 2017 (up 4.7% in the second half). Automotive glass advanced in all regions in terms of both sales and orders, bolstered in particular by strong momentum in Asia and emerging countries. Sales linked to the construction market in Western Europe improved, with float glass price trends stabilizing and higher prices for transformed glass in the second half; Asia and emerging countries continued to grow. Organic growth, along with a positive price-cost spread for raw materials and energy, drove a further rally in the operating margin, up to 10.1% from 9.1% in 2016.
High-Performance Materials (HPM) sales rose 5.8% on a like-for-like basis (up 9.2% in the second half), lifted by all regions and especially Asia and emerging countries. After a hesitant start to the year, North America saw good momentum in the second half. All HPM businesses reported growth over the year, particularly Ceramics on the back of strong sales in the second half. The operating margin continued to improve, up to 15.1% from 13.7% in 2016 driven by volumes, amid limited increases in raw material and energy costs.
Construction Products (CP) reported 6.2% organic growth, with 8.8% in the second half. The operating margin was 9.1% vs. 9.3% in 2016, affected primarily by the timelag between pricing and cost increases, with however a more significant pricing effect at the end of the year.
Interior Solutions like-for-like sales moved up 5.9% over the year and 7.6% in the second half, spurred by growth in Asia and emerging countries. Volumes continued to pick up in Western Europe and especially France. Trading in North America improved in the second half. Prices rose significantly, with an acceleration over the course of the year, but remained behind the sharp increase in raw material and energy costs. This led to a decline in the margin, at 9.5% in 2017 vs. 10.3% in 2016.
Exterior Solutions reported 6.7% organic growth in 2017, driven by an improvement in all businesses in the second half (up 10.1%) and particularly Exterior Products in the U.S. In the second half, this business benefited from additional weather-related demand in the U.S., while the pricing environment remained tough. Pipe began to recover, led by the rise in prices amid strong inflation in raw material costs; volumes were down over the year, hit by the lack of major export contracts, but stabilized in the second half thanks to the upturn in Brazil and the improvement in China. Mortars had a very good year, reporting an acceleration in growth in the second half thanks to Asia and emerging countries, with an improved performance in Brazil in a construction market that nevertheless remains uncertain. The operating margin moved up to 8.4% from 7.9% in 2016 despite raw material and energy cost inflation.
Building Distribution posted 3.6% organic growth for the year, with 4.1% in the second half. Trading in France continued to recover, led by good momentum in new-builds and the progress in renovation. Nordic countries enjoyed robust growth throughout the year, as did the Netherlands and Spain. The UK grew at the same rate in the second half as in the first half, with prices rising but volumes down. Germany and Brazil contracted slightly. The operating margin for 2017 remained stable at 3.4%, despite the impact of the cyberattack and of the acceleration in digital investments, edging up to 4.1% in the second half (versus 4.0% in second-half 2016).
Regionally, France confirmed its recovery over the year with 3.5% organic growth, including 4.8% in the second half buoyed by dynamic new-build activity and progress in renovation. The operating margin for 2017 widened, at 3.1% vs. 2.9% in 2016.
Other Western European countries saw like-for-like sales growth of 3.1% in 2017, with 3.6% growth in the second half. This reflects advances in all countries in the region, with the exception of Germany which remains hesitant due to production transfers. The UK delivered further growth driven by prices, despite volumes settling and a lack of visibility. The operating margin was down, at 5.9% compared to 6.2% in 2016, hit by the impact of the cyberattack, which primarily affected this region, and by the rise in raw material and energy costs.
North America improved, posting like-for-like growth of 6%, including 9.8% growth in the second half. Construction volumes continued to trend well, boosted namely by additional weather-related demand in the second half; industry also saw a good improvement overall. The price effect improved slightly in an inflationary cost environment. The operating margin gained ground, up to 11.3% from 10.5% in 2016.
Asia and emerging countries continued to advance, posting robust organic growth of 9.2% led by all regions. Growth came in at 11.4% in the second half, driven by an improved performance in Brazil in particular. The operating margin continued to rise, up to 11.5% from 10.9% in 2016.
Additional details are available at www.saint-gobain.com.