TIDMCOD
RNS Number : 7094F
Compagnie de Saint-Gobain
22 February 2018
PRESS RELEASE
Paris, February 22, 2018
2017 Results
Further strong progress in results
-- Solid organic growth in all Business Sectors and regions (up 4.7%); acceleration in H2
(up 6.0%) and in Q4 (up 6.5%)
-- Positive trends in sales prices, up 2.0%; acceleration in H2 (up 2.3%) and in Q4 (up 2.7%)
-- Further rise in operating income, up 9.6% like-for-like, and
in operating margin, up to 7.4% from 7.2%
-- Further strong increase in recurring net income(1) , up 16.7%
-- Free cash flow(2) up 7.6% to EUR1,353 million
-- Ahead of our strategic objectives, with EUR641 million in
acquisitions and EUR290 million in cost savings
-- Net debt at EUR5.95 billion (versus EUR5.64 billion at
end-2016); buyback of 8.3 million shares during the year
-- 2017 dividend up at EUR1.30 per share, to be paid wholly in cash
(EURm) 2016 2017 Change Change
like-for-like
Sales 39,093 40,810 +4.4% +4.7%
Operating income 2,818 3,028 +7.5% +9.6%
Recurring net income(1) 1,398 1,631 +16.7%
Net attributable income 1,311 1,566 +19.5%
Free cash flow(2) 1,258 1,353 +7.6%
Pierre-André de Chalendar, Chairman and Chief Executive Officer
of Saint-Gobain, commented:
"Saint-Gobain's robust growth and the acceleration in our
performance over the course of the year illustrates the
effectiveness of our strategy. 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 EUR290 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."
1. Recurring net income: net attributable income excluding
capital gains and losses on disposals, asset write-downs and
material non-recurring provisions.
2. Cash flow from operations excluding the tax impact of capital
gains and losses on disposals, asset write-downs and material
non-recurring provisions, less capital expenditure.
Operating performance
The Group's 2017 sales totaled EUR40,810 million, up 4.4% on a
reported basis and up 4.7% like-for-like. Organic growth was driven
both by higher volumes (up 2.7%) and higher prices (up 2.0%) in all
Business Sectors and all regions, despite the adverse impact of the
June 2017 cyber-attack. 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 the Group's
stepped up its acquisitions 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 our strong 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, US dollar and
certain Asian and emerging country currencies against the euro.
The Group's operating margin(1) widened to 7.4% from 7.2% in
2016, with 7.7% for the second half (versus 7.4% in second-half
2016). There was a further like-for-like increase in operating
income, up 12.4% in the second half, bringing growth over the full
year to 9.6%.
The year was also marked by the cyber-attack on June 27; the
Group was able to react swiftly not only to re-establish a return
to normal in our operating activities, but also to reinforce our
defenses. The impact on 2017 is estimated at a negative EUR80
million on operating income. Overall, around half of the impact of
the cyber-attack 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.
Capital expenditure increased to EUR1.54 billion in 2017 from
EUR1.37 billion in 2016, and focused on growth capex outside
Western Europe, Industry 4.0 and digitalization.
The Group achieved EUR290 million in cost savings compared to
2016, exceeding its
objectives.
Free cash flow showed a clear improvement, up 7.6% to EUR1,353
million.
Operating working capital requirements remained stable at a good
level of 28 days.
The Group stepped up its acquisitions, which represented over
EUR500 million in full-year sales.
Legal proceedings initiated by Schenker-Winkler Holding to
restore its voting rights are in progress. Saint-Gobain remains
confident in the outcome of its plan to acquire a controlling
interest in Sika.
Performance of Group Business Sectors
Innovative Materials sales climbed 5.3% like-for-like over the
year 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% over the year
(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.
1. Operating margin = Operating income expressed as a percentage
of sales.
-- 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% versus 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 versus 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 US. In the second
half, this business benefited from additional weather-related
demand in the US, whilst 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 cyber-attack and of the acceleration in digital
investments, edging up to 4.1% in the second half (versus 4.0% in
second-half 2016).
Analysis by region
-- 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% versus 2.9% in 2016.
-- Other Western European countries saw like-for-like sales
growth of 3.1%, with 3.6% growth in the second half. This reflects
advances in all our countries with the exception of Germany which
remains hesitant, affected by 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 cyber-attack
which primarily affected this region, and by the rise in raw
material and energy costs.
-- North America improved, posting like-for-like growth of 6.0%,
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.
Analysis of the 2017 consolidated financial statements
The 2017 consolidated financial statements were approved and
adopted by Saint-Gobain's Board of Directors at its meeting of
February 22, 2018. The consolidated financial statements were
audited and certified by the statutory auditors.
2016 2017 %
change
EURm (A) (B) (B)/(A)
------- ------- --------
Sales and ancillary revenue 39,093 40,810 4.4%
Operating income 2,818 3,028 7.5%
Operating depreciation and
amortization 1,180 1,206 2.2%
EBITDA (operating income +
operating depr./amort.) 3,998 4,234 5.9%
Non-operating costs (312) (337) 8.0%
Capital gains and losses on
disposals, asset write-downs,
corporate acquisition fees
and earn-out payments (202) (180) -10.9%
Business income 2,304 2,511 9.0%
Net financial expense (541) (448) -17.2%
Income tax (416) (438) 5.3%
Share in net income of associates 5 0 n.m.
Net income before minority
interests 1,352 1,625 20.2%
Minority interests 41 59 43.9%
Net attributable income 1,311 1,566 19.5%
Earnings per share(2) (in
EUR) 2.36 2.84 20.3%
Recurring(1) net income 1,398 1,631 16.7%
Recurring(1) earnings per
share(2) (in EUR) 2.53 2.96 17.0%
Cash flow from operations(3) 2,749 3,020 9.9%
Cash flow from operations
excluding capital gains tax(4) 2,628 2,891 10.0%
Capital expenditure(5) 1,370 1,538 12.3%
Free cash flow(6) 1,258 1,353 7.6%
Investments in securities 362 641 77.1%
Net debt 5,644 5,955 5.5%
, ,
----------------------------------- ------- ------- --------
1. Recurring net income: net attributable income excluding
capital gains and losses on disposals, asset write-downs and
material non-recurring provisions.
2. Calculated based on the number of shares outstanding at
December 31 (550,785,719 shares in 2017, versus 553,388,403 shares
in 2016).
3. Cash flow from operations = operating cash flow excluding material non-recurring provisions.
4. Cash flow from operations excluding capital gains tax = (3)
less the tax impact of capital gains and losses on disposals, asset
write-downs and material non-recurring provisions.
5. Capital expenditure: investments in property, plant and equipment.
6. Free cash flow = (4) less capital expenditure.
Consolidated sales increased by 4.7% like-for-like, led by both
volumes and prices. On a reported basis, sales were up 4.4% with a
negative 1.2% currency impact (even stronger in the second half at
-2.6%), due mainly to the depreciation of the pound sterling, US
dollar and certain Asian and emerging country currencies against
the euro. The positive 0.9% Group structure impact essentially
reflects the consolidation of acquisitions made in Asia and
emerging countries, in new niche technologies and services, and to
consolidate our strong positions.
Operating income increased 7.5% on a reported basis despite a
negative currency effect, and by 9.6% like-for-like. The operating
margin stood at 7.4% of sales versus 7.2% of sales in 2016. EBITDA
climbed 5.9% to EUR4,234 million, or 10.4% of sales (10.2% of sales
in 2016).
Non-operating costs were higher at EUR337 million versus EUR312
million in 2016, with a decrease in restructuring costs but a rise
in litigation-related expenses. Non-operating costs include a EUR90
million accrual to the provision for asbestos-related litigation
involving CertainTeed in the US, unchanged from 2016.
The net balance of capital gains and losses on disposals, asset
write-downs and corporate acquisition fees was an expense of EUR180
million compared to an expense of EUR202 million in 2016. In 2017,
this item includes EUR237 million in asset write-downs and EUR57
million in gains on disposals of assets less acquisition fees.
Business income rose 9.0%.
Net financial expense improved sharply, down 17.2% to EUR448
million from
EUR541 million in 2016. This primarily reflects the decrease in
the cost of gross debt to 2.8% at December 31, 2017 from 3.4% at
end-2016.
The tax rate on recurring net income was 25% compared to 27% in
2016, owing mainly to items such as the reimbursement of the 3% tax
on dividends in France. Income tax expense was EUR438 million
versus EUR416 million in 2016, with the US tax reform resulting in
a non-recurring gain of EUR91 million.
Recurring net income (excluding capital gains and losses, asset
write-downs and material non-recurring provisions) jumped 16.7% to
EUR1,631 million.
Net attributable income climbed 19.5% to EUR1,566 million in
2017.
Capital expenditure totaled EUR1,538 million (EUR1,370 million
in 2016), representing 3.8% of sales (3.5% of sales in 2016).
Cash flow from operations improved, up 9.9% to EUR3,020 million
(EUR2,749 million in 2016). Before the tax impact of capital gains
and losses on disposals, asset write-downs and material
non-recurring provisions, cash flow from operations climbed 10.0%
to EUR2,891 million and free cash flow increased 7.6% to EUR1,353
million (3.3% of sales versus 3.2% of sales in 2016).
Operating working capital requirements (WCR) remained stable at
a good level of 28 days' sales, a rise of EUR130 million in value
terms (to EUR3,140 million).
Investments in securities picked up pace, at EUR641 million
(EUR362 million in 2016), and relate to targeted acquisitions in
Asia and emerging countries (Megaflex, Isoroc, Tumelero), in new
niche technologies and services (TekBond, Maris, Scotframe), and to
consolidate our strong positions (Glava, Biolink, Kirson, Wattex,
SimTek, bolt-on acquisitions in Building Distribution).
Net debt rose to EUR5.95 billion from EUR5.64 billion, due
mainly to the acceleration in acquisitions and to share buybacks
for EUR403 million. Net debt represents 32% of consolidated equity,
compared to 29% at December 31, 2016.
The net debt to EBITDA ratio remained stable at 1.4 at
end-2017.
Update on asbestos claims in the US
Some 3,100 claims were filed against CertainTeed in 2017, down
slightly on 2016. At the same time, around 3,900 claims were
settled (versus 3,700 in 2016), bringing the total number of
outstanding claims to around 34,300 at December 31, 2017, a
decrease of around 800 compared to end-2016.
A total of USD 76 million in indemnity payments were made in the
12 months to December 31, 2017, compared to USD 97 million in 2016.
In light of these trends and of the EUR90 million provision accrual
in 2017, the total provision for CertainTeed's asbestos-related
claims amounted to USD 555 million at December 31, 2017, compared
to USD 562 million at December 31, 2016.
Dividend
At today's meeting, Compagnie de Saint-Gobain's Board of
Directors decided to recommend to the June 7, 2018 Shareholders'
Meeting to pay in cash an increased dividend of EUR1.30 per share
(versus EUR1.26 in 2016), demonstrating once again our focus on
shareholder returns in the context of our strong 2017 results and
our confidence looking ahead. This dividend represents 44% of
recurring net income and a dividend yield of 2.8% based on the
closing share price at December 29, 2017 (EUR45.98). The
ex-dividend date has been set at June 11 and the dividend will be
paid on June 13, 2018.
Strategic priorities and outlook
The Group continued to implement its strategic priorities in
2017:
- EUR290 million in cost savings versus 2016, ahead of our
objectives, as part of the EUR1.2 billion cost reduction program
for 2017-2020. Our focus on Industry 4.0 and digitalization is
beginning to bear fruit;
- 28 acquisitions of small and mid-sized companies for a total
of EUR641 million and disposals for a total of EUR213 million, as
part of the portfolio optimization strategy targeting EUR2 billion
in acquisitions for 2017-2020;
- 8.3 million shares bought back (EUR403 million) in line with
long-term objectives, and 7 million shares cancelled, thereby
reducing the number of outstanding shares to 550.8 million at
December 31, 2017 (553.4 million at December 31, 2016).
In 2018, the Group should benefit from a supportive economic
environment:
- further growth in France, led by the new-build market and by progress in renovation;
- progression in other Western European countries, despite continued uncertainty in the UK;
- growth in North America, in both construction markets and industry;
- good momentum in Asia and emerging countries.
For 2018, the Group expects the following for its Business
Sectors:
- continued growth and a good margin level in Innovative Materials;
- better volumes and prices, focus on the price-cost spread in Construction Products;
- Building Distribution should benefit from volume growth in Western Europe.
Saint-Gobain will continue its disciplined approach to cash
management and financial strength. In particular, it will
pursue:
- its focus on sales prices amid continued inflationary pressure on costs;
- its cost savings program, with the aim of unlocking additional
savings of around EUR300 million (calculated on the 2017 cost
base);
- its capital expenditure program of around EUR1.7 billion
(representing around 4% of sales, in line with our objectives),
with a focus on growth capex outside Western Europe and also on
productivity (Industry 4.0) and digital transformation,
particularly in Building Distribution;
- its commitment to invest in R&D to support its differentiated, high value-added strategy;
- its focus on high levels of free cash flow generation.
The Group is targeting a further like-for-like increase in
operating income in 2018.
Financial calendar
- An information meeting for analysts and investors will be held
at 8:30am (GMT+1) on February 23, 2018 and will be broadcast live
on www.saint-gobain.com/en/full-year-2017-results
- Sales for the first quarter of 2018: April 26, 2018, after
close of trading on the Paris Bourse.
- First-half 2018 results: July 26, 2018, after close of trading
on the Paris Bourse.
Analyst/Investor relations Press relations
-------------------------------------- ------------------------------------------------------------
+33 1 47
62 44 29
+33 1 47 +33 1 47 62
Vivien Dardel 62 30 93 30 10
Florent Nouveau +33 1 47 Laurence Pernot +33 1 47 62
Floriana Michalowska 62 35 98 Susanne Trabitzsch 43 25
------------------------ ------------ -------------------------------------------- --------------
Indicators of organic growth and like-for-like changes in
sales/operating income reflect the Group's underlying performance
excluding the impact of:
-- changes in Group structure, by calculating indicators for the
year under review based on the scope of consolidation of the
previous year (Group structure impact);
-- changes in foreign exchange rates, by calculating the
indicators for the year under review and those for the previous
year based on identical foreign exchange rates for the previous
year (currency impact);
-- changes in applicable accounting policies.
All indicators contained in this press release (not defined in
the footnotes) are explained in the notes to the 2017 consolidated
financial statements, available by clicking here:
www.saint-gobain.com/en/full-year-2017-results
The glossary below shows the note of the financial statements in
which you can find an explanation of each indicator.
Glossary:
Cash flow from operations Note 3
Net debt Note 8
EBITDA Note 3
Non-operating costs Note 3
Operating income Note 3
Net financial expense Note 8
Recurring net income Note 3
Business income Note 3
Important disclaimer - forward-looking statements:
This press release contains forward-looking statements with
respect to Saint-Gobain's financial condition, results, business,
strategy, plans and outlook. Forward-looking statements are
generally identified by the use of the words "expect",
"anticipate", "believe", "intend", "estimate", "plan" and similar
expressions. Although Saint-Gobain believes that the expectations
reflected in such forward-looking statements are based on
reasonable assumptions as at the time of publishing this document,
investors are cautioned that these statements are not guarantees of
its future performance. Actual results may differ materially from
the forward-looking statements as a result of a number of known and
unknown risks, uncertainties and other factors, many of which are
difficult to predict and are generally beyond the control of
Saint-Gobain, including but not limited to the risks described in
Saint-Gobain's registration document available on its website
(www.saint-gobain.com). Accordingly, readers of this document are
cautioned against relying on these forward-looking statements.
These forward-looking statements are made as of the date of this
document. Saint-Gobain disclaims any intention or obligation to
complete, update or revise these forward-looking statements,
whether as a result of new information, future events or
otherwise.
This press release does not constitute any offer of purchase or
exchange, nor any solicitation of an offer to sell or exchange
securities of Saint-Gobain.
For any further information, please visit
www.saint-gobain.com
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view the associated PDF document.
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