TIDMCOD
RNS Number : 6763D
Compagnie de Saint-Gobain
29 October 2020
PRESS RELEASE
Paris, October 29, 2020, 5:45pm
Sales for the first nine months of 2020
Strong recovery in trading in Q3 2020
Targets revised upwards
-- Strong rally in organic growth, at 3.2% in Q3 (negative 7.2%
for the nine-month period and negative 12.3% for H1)
-- Clear improvement in volumes in all segments, up 2.3% in Q3
(down 7.8% for the nine-month period)
-- Prices up 0.9% in Q3 (up 0.6% for the nine-month period)
-- Targets revised upwards with an increase in like-for-like
operating income expected in H2 2020 versus H2 2019, excluding a
major new impact from the recent deterioration in the health
situation
-- 9 million shares bought back in the second half to date of
the 12 million shares target, allowing the Group to reach at
end-2020 the medium-term objective of a reduction in the number of
its shares outstanding fixed at 530 million, from 542 million at
December 31, 2019
EURm Sales Sales Change on Change on Like-for-like
Q3 2019 Q3 2020 an actual a comparable change
structure structure
basis basis
--------- ----------- --------------
High Performance Solutions 1,859 1,678 -9.7% -10.0% -4.6%
Northern Europe 4,029 3,403 -15.5% -1.1% +0.3%
Southern Europe - ME
& Africa 3,230 3,318 +2.7% +6.7% +7.4%
Americas 1,459 1,553 +6.4% -1.8% +11.4%
Asia-Pacific 493 404 -18.1% -8.9% -3.6%
Internal sales and misc. -276 -229 --- --- ---
Group Total 10,794 10,127 -6.2% -0.5% +3.2%
--------- --------- ----------- --------------
EURm 9-month 9-month Change on Change on Like-for-like
2019 2020 an actual a comparable change
sales sales structure structure
basis basis
-------- ----------- --------------
High Performance Solutions 5,721 4,780 -16.4% -16.1% -13.6%
Northern Europe 11,755 9,493 -19.2% -6.8% -5.3%
Southern Europe - ME
& Africa 10,241 8,986 -12.3% -8.9% -8.6%
Americas 4,233 4,223 -0.2% -7.2% -0.3%
Asia-Pacific 1,388 1,059 -23.7% -14.6% -12.5%
Internal sales and misc. -867 -650 --- --- ---
Group Total 32,471 27,891 -14.1% -9.3% -7.2%
-------- -------- ----------- --------------
Sales for the third quarter were up 3.2% like-for-like, with a
clear improvement in all segments after the 12.3% decrease in the
first half, helping to limit the decline for the nine-month period
to 7.2%. After hitting a low in April when they stood at 60% of
2019 levels, Group sales rallied steadily, returning to normal
levels in most countries in the third quarter, which saw a 2.3%
rise in volumes and a 0.9% increase in prices in a slightly
deflationary environment for industrial businesses.
On a reported basis, sales for the nine months to September 30
were EUR27,891 million, with a negative currency effect of 2.1%
over the nine-month period and of 3.7% in the third quarter, mainly
reflecting the depreciation of the Brazilian real, other emerging
country currencies and the Norwegian krone. The deterioration in
the third quarter results from the depreciation of emerging country
currencies as well as the US dollar.
Changes in Group structure had a negative impact on sales of
4.8% over the nine-month period and of 5.7% in the third quarter,
resulting from disposals carried out as part of "Transform &
Grow", with negative structure impacts over the nine-month period
of 12.4% in Northern Europe (Distribution and Glassolutions in
Germany; Optimera in Denmark), 3.4% in Southern Europe - Middle
East & Africa (in France with DMTP and K par K in Distribution
and with the expanded polystyrene business; in the Netherlands with
Glassolutions) and 9.1% in Asia-Pacific (Hankuk Glass Industries in
South Korea). The structure impact also reflects acquisitions
carried out to consolidate our strong positions (Continental
Building Products in North America as from February) , the addition
of new niche technologies and services (HTMS), and expansion in
emerging countries (gypsum and mortars in Latin America). Note that
in light of the hyperinflationary environment in Argentina, this
country which represents less than 1% of the Group's consolidated
sales, is excluded from the like-for-like analysis.
Saint-Gobain continues to enhance its profitable growth profile
as part of " Transform & Grow", thanks to the optimization of
its portfolio and the success of the cost savings program, with the
Group meeting its EUR250 million target at the end of 2020, a year
earlier than planned. Thanks to these two drivers, the structural
improvement of more than 100 basis points in the Group's operating
margin (1) compared to 2018 (7.7%) should materialize in 2021
assuming volumes return to 2018 levels.
Segment performance (like-for-like sales)
High Performance Solutions (HPS): improvement in sales in the
third quarter
HPS sales fell just 4.6% in the third quarter (down 13.6% over
the nine-month period), with industrial markets gradually
recovering but remaining down overall compared to 2019.
- Mobility sales saw a moderate decline in the third quarter,
rebounding sharply compared to the second quarter. Europe remained
significantly down, while sales to China and North America rose
sharply. Mobility continued to outperform the automotive market in
all regions during the quarter, thanks mainly to its increasing
exposure to high value-added products and electric vehicles.
- Activities serving Industry again reported a marked fall in
sales in the third quarter, although there was a clear improvement
compared to the second quarter. In the context of the coronavirus
crisis, the slowdown in our customers' investment cycles is
particularly impacting related activities. In contrast, activities
relating to consumables rallied gradually, and returned to growth
in emerging countries.
- Activities serving the Construction Industry held up well in
the nine-month period, and in the third quarter when sales were
virtually stable thanks notably to external thermal insulation
solutions (ETICS).
- Life Sciences continued to enjoy a good growth dynamic in the
pharmaceutical and medical sector, benefiting from its recent
capacity investments.
1. Operating margin = Operating income divided by sales.
Northern Europe: trading getting back to normal and slight
growth in sales in the third quarter
Sales for Northern Europe were up 0.3% in the third quarter
(down 5.3% over the nine-month period), and were virtually back to
normal levels across the Region as a whole.
Nordic countries were up slightly over the nine-month period and
in the third quarter thanks to Distribution, which continued to
increase its market share and significantly benefited from its
exposure to the renovation market, despite a less dynamic market
for new construction. After a second quarter where sales were down
by nearly half compared to 2019, the UK was almost flat in the
third quarter, buoyed by a catch-up effect and a good performance
from Distribution on the back of the swift reorganization and store
network optimization. Germany limited its nine-month decline thanks
to trading in the third quarter getting closer to last year's level
despite the contraction in prices and volumes in the manufacturing
base serving Mobility markets, whereas the construction market
returned to 2019 levels. Eastern Europe progressed slightly, led by
Poland.
Southern Europe - Middle East & Africa: clear upturn in
sales in the third quarter
Southern Europe - Middle East & Africa saw a sharp 7.4% rise
in sales in the third quarter (down 8.6% over nine months), led by
the rally in construction markets.
France spearheaded the Region's momentum with energy efficiency
solutions and Distribution, reporting double-digit growth,
benefiting from gains on a supportive renovation market and a
catch-up effect following the second-quarter downturn. Spain, Italy
and Belgium also saw a clear improvement, with sales growth in the
third quarter. Only the Netherlands reported a small contraction in
sales in the quarter. The Middle East and Africa returned to
growth, despite different paces of recovery from one country to the
next.
Americas: strong sales growth with a double-digit rise in the
third quarter
The Americas reported 11.4% organic growth in the third quarter,
with an acceleration in volumes and prices, helping the Region to
regain stability over the nine-month period (down 0.3%).
North America posted strong growth driven by volumes in exterior
solutions and gypsum in a much better environment for prices, which
were up overall. The strong success of the Continental Building
Products integration enables the Group to exceed its initial
synergies target, with more than USD 15 million for 2020 as a
whole.
Latin America returned to growth over the nine-month period, led
by a very strong dynamic in all businesses in terms of both volumes
and prices, with a sharp increase in the third quarter which
capitalized fully on market share gains on the back of significant
local sales synergies.
Asia-Pacific: gradual rally with sales growth in September
Asia-Pacific posted like-for-like sales declines of 3.6% in the
third quarter and 12.5% over the nine-month period, improving month
after month in a persistently competitive pricing environment.
September saw a return to growth across the Region, led by further
double-digit advances in China and a gradual improvement in
India.
In the third quarter, China continued on the growth trajectory
already observed in the second quarter, driven by a sharp increase
in gypsum which continued to capture market share over other
building solutions. In India, despite another significant
contraction in the third quarter, the situation is improving month
by month. South-East Asia reported a mixed picture over the
quarter, with ongoing growth in Vietnam but a more fragile
situation in Thailand and Indonesia.
Priorities and outlook for 2020
The Group recalls its priorities:
1) Ensure the health and safety of all in a health environment
which remains very challenging .
2) Enhance the Group's profitable and sustainable growth profile
, driven by:
- the continuation of its portfolio optimization as part of
"Transform & Grow" (divestments and acquisitions), according to
market conditions;
- the strategy of differentiation and innovation with enhanced
data, digital and customer productivity, as well as new services to
adapt our solutions to the needs of the post-coronavirus world;
- a comprehensive portfolio of green solutions produced or
distributed by Saint-Gobain.
3) Continue to implement operational measures to optimize
earnings and the operating margin:
- unlock sales synergies made possible by the new organisation
under "Transform & Grow";
- continue to optimize the price-cost spread;
- reduce costs in the context of additional post-coronavirus
adaptation measures , which should generate EUR200 million in
full-year savings by 2021, including EUR50 million in second-half
2020 ;
- generate EUR130 million in additional cost savings in 2020 (of
which EUR50 million in the second half), thanks to the successful "
Transform & Grow " program , after EUR120 million in 2019,
enabling the Group to meet its EUR250 million target a year earlier
than planned ;
- continue the operational excellence program aimed at
offsetting wage inflation and other fixed costs: around EUR300
million in additional cost savings in 2020 (of which EUR155 million
in the first half) calculated on the 2019 cost base; continued
discipline on cost structure .
4) Increase free cash flow generation by :
- reducing capital expenditure by more than EUR500 million in
2020 versus 2019 which saw an investment peak and thanks to
continued optimization of maintenance capital expenditure in the
context of the pandemic ;
- continuing to optimize working capital requirement.
5) Maintain a strong balance sheet . In light of its robust cash
position, at the end of September the Group cancelled the
short-term syndicated credit line it had arranged in March 2020 for
an initial amount of EUR2.5 billion, which had been subsequently
reduced to EUR1.0 billion (undrawn) at the end of June.
In fourth-quarter 2020 , amid a lack of visibility as to the
impact of the coronavirus pandemic, Saint-Gobain should benefit
from ongoing favorable trends on most of its markets, particularly
renovation, which accounts for around half of the Group's sales and
is a market on which the Group is strategically very well
positioned. The catch-up effect reported in certain countries in
the third quarter should however diminish. The Group remains
cautious as to the outlook for the UK ahead of Brexit, and for
industrial markets, which are expected to remain down on 2019.
In terms of profitability, the price increases implemented in
the summer should result in an ongoing positive price-cost spread;
the adaptation measures taken in the automotive segment in Europe
and in the UK are progressing well.
Based on our sales and results growth in the third quarter, the
Group now expects a like-for-like increase in operating income for
second-half 2020 compared to second-half 2019, excluding a major
new impact from the recent deterioration in the health
situation.
The Group's extensive exposure to the renovation market means it
is ideally placed to benefit from national and European stimulus
plans focused on the energy transition, which should support
Saint-Gobain's structural growth.
Saint-Gobain's medium and long-term outlook is robust thanks to
its successful strategic and organizational choices: sustainability
- thanks to our solutions to protect our planet while offering
comfort and wellbeing - and enhanced customer performance. This
strategy is perfectly in tune with the Group's purpose: "Making the
world a better home".
Financial calendar
- 2020 results: February 25, 2021, after close of trading on the
Paris Bourse.
Analyst/Investor relations Press relations
+33 1 88 54 +33 1 88 54 23
2977 45
+33 1 88 54 +33 1 88 54 26
Vivien Dardel 19 09 Laurence Pernot 83
Floriana Michalowska +33 1 88 54 Patricia Marie +33 1 88 54 27
Christelle Gannage 15 49 Susanne Trabitzsch 96
----------------------- ------------- -------------------- ----------------
A conference call will be held on October 29, 2020 at 6:30pm
(GMT + 1): dial +33 1 72 72 74 03 followed by the code
84352912#
Glossary :
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.
Operating income : for further details see Note 4 to the
financial statements in the interim financial report, available by
clicking here :
https://www.saint-gobain.com/en/finance/regulated-information/half-yearly-financial-report
EBITDA = operating income plus operating depreciation and
amortization, less non-operating costs.
Free cash flow = EBITDA less depreciation of right-of-use
assets, plus net financial expense, plus income tax, less
investments in property, plant and equipment and intangible assets
excluding additional capacity investments, plus change in working
capital requirement.
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 Universal Registration Document available on its
website ( www.saint-gobain.com ) and the main risks and
uncertainties for the second-half 2020, presented within the
half-year 2020 financial report. 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 to purchase or
exchange, nor any solicitation of an offer to sell or exchange
securities of Saint-Gobain.
For further information, please visit www.saint-gobain.com .
Appendix 1: Contribution of prices and volumes to organic sales
growth by Segment
Q3 2020 Like-for-like Prices Volumes
change
High Performance Solutions -4.6% +0.2% -4.8%
Northern Europe +0.3% +0.5% -0.2%
Southern Europe - ME
& Africa +7.4% +1.0% +6.4%
Americas +11.4% +3.1% +8.3%
Asia-Pacific -3.6% -1.3% -2.3%
-------------- ------- --------
Group Total +3.2% +0.9% +2.3%
-------------- ------- --------
9-month 2020 Like-for-like Prices Volumes
change
High Performance Solutions -13.6% +0.4% -14.0%
Northern Europe -5.3% +0.2% -5.5%
Southern Europe - ME
& Africa -8.6% +1.0% -9.6%
Americas -0.3% +0.9% -1.2%
Asia-Pacific -12.5% -1.3% -11.2%
-------------- ------- --------
Group Total -7.2% +0.6% -7.8%
-------------- ------- --------
Appendix 2: Breakdown of organic sales growth and external
sales
Q3 2020 Like-for-like % Group
change
High Performance Solutions -4.6% 16%
Mobility -3.3% 7%
Other industries -5.5% 9%
Northern Europe +0.3% 33%
Nordics +0.5% 13%
United Kingdom - Ireland -0.1% 10%
Germany - Austria -1.8% 3%
Southern Europe - ME &
Africa +7.4% 32%
France +8.7% 25%
Spain-Italy +3.6% 4%
Americas +11.4% 15%
North America +5.3% 11%
Latin America +25.2% 4%
Asia-Pacific -3.6% 4%
Group Total +3.2% 100%
9-month 2020 Like-for-like % Group
change
High Performance Solutions -13.6% 17%
Mobility -19.2% 6%
Other industries -9.9% 11%
Northern Europe -5.3% 33%
Nordics +2.6% 14%
United Kingdom - Ireland -18.5% 9%
Germany - Austria -4.5% 4%
Southern Europe - ME &
Africa -8.6% 31%
France -8.6% 24%
Spain-Italy -11.5% 4%
Americas -0.3% 15%
North America -1.7% 11%
Latin America +3.0% 4%
Asia-Pacific -12.5% 4%
Group Total -7.2% 100%
Appendix 3: Industry and Distribution Europe
EURm 9-month 9-month Change Change on Like-for-like
2019 2020 on an actual a comparable change
sales sales structure structure
basis basis
-------- -------------- --------------
Industry Europe 7,664 6,791 -11.4% -9.5% -8.6%
Distribution
Europe 14,675 11,919 -18.8% -6.9% -6.0%
-------- -------- -------------- -------------- --------------
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