REG - Compagnie St-Gobain - 3rd Quarter Results
26/10/2023 18:15
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RNS Number : 4651R Compagnie de Saint-Gobain 26 October 2023
The worldwide leader
in light & sustainable construction
Solid performance in Q3 2023
New record margin expected in 2023
· Sequential price stability in Q3 2023, generating a positive price-cost
spread
· Volumes in Q3 2023 in line with expectations for the year
· Further proof of the Group's resilience in a difficult environment
· Share buyback of €540m so far this year, ahead of target
· 2023 outlook: new record operating margin expected in 2023,
double-digit for the third consecutive year
Like-for-like sales were stable over the nine-month period to September 30,
2023 despite a contraction of 3.1% in the third quarter of the year versus
third-quarter 2022 given the more difficult pricing comparison basis due to
the price increases implemented proactively in the last few years. In a less
inflationary environment prices rose by 5.9% over the nine-month period and by
1.9% in the third quarter, reflecting overall sequential price stability since
the start of the year, generating a positive price-cost spread once again.
In a difficult macroeconomic environment, the Group continued to outperform
its markets thanks to the pertinence of its strategic positioning at the heart
of energy and decarbonization challenges and to the strength of its local
organization by country, which enables it to offer comprehensive solutions to
its customers.
Thanks to its recent acquisitions and investments, the Group has successfully
repositioned itself on North America, Asia and emerging countries, and
construction chemicals. These markets with strong growth outlooks now
represent two-thirds of the Group's operating income. Construction chemicals
overall posted organic growth of 3.1% over the nine-month period.
In line with expectations for the year, volumes were down by 5.9% over the
nine-month period and by 5.0% over the third quarter (including a negative
working day effect of around 2%), with a moderate slowdown in markets
reflecting a contrasting situation: a marked decline in new construction but
good resilience overall in renovation. In each local market, the Group is
taking the proactive commercial and industrial measures necessary to continue
to outperform its markets and maintain its excellent operating performance
achieved since 2019.
On a reported basis, sales were down by 4.9% to €36.5 billion over the
nine-month period and by 10.5% to €11.6 billion over the third quarter, with
negative currency effects of 2.2% over the nine-month period and 3.9% in the
third quarter, and negative Group structure impacts of 2.7% over the
nine-month period and 3.5% in the third quarter.
Group structure impacts result from the ongoing optimization of the Group's
profile, both in terms of disposals - mainly in distribution (UK, Poland and
Denmark), glass processing activities, Crystals & Detectors and ceramics
for the steel industry - and in terms of acquisitions, mainly in construction
chemicals (GCP Applied Technologies "GCP", Impac in Mexico, Matchem in Brazil
and Best Crete in Malaysia), exterior products in Canada (Kaycan and Building
Products of Canada) and insulation (U.P. Twiga in India). The integration of
recent acquisitions is progressing well, helping us to achieve the expected
synergies.
Segment performance (like-for-like sales)
Northern Europe: limited decline in sales thanks to better resilience in
renovation
Sales in the Northern Europe region were down by 5.0% over the nine-month
period and by 7.6% in the third quarter (including a negative working day
effect of around 2%) amid a continued slowdown in new construction, while
renovation (around 55% of sales) proved more resilient. After several quarters
in which volumes fell sharply, the volume decline eased in the third quarter
of 2023 compared to the second against a lower comparison basis. Prices
continued to be well managed against a higher comparison basis and in a less
inflationary environment.
In Nordic countries, the sharp drop in the new construction market, especially
in Sweden and Norway, was partly offset by our strong exposure to the
renovation market. The world's first carbon-neutral (scope 1 and 2)
plasterboard production at the Group's Fredrikstad plant in Norway allowed
Saint-Gobain to further differentiate its offer. The UK progressed slightly
and captured market share thanks to its strong positioning in façade and
interior solutions, and also benefited from an optimized portfolio following
the divestment of its distribution businesses. Germany continued to suffer in
a difficult macroeconomic context which weighed on new construction. After a
sharp decline in volumes of around 15% in the first half, Eastern Europe
improved in the third quarter, driven by its comprehensive range of interior
and exterior solutions.
Southern Europe - Middle East & Africa: slight growth in sales supported
by resilience in renovation
The Southern Europe - Middle East & Africa Region saw a slight rise of
1.0% in sales over the nine-month period and a fall of 2.7% in the third
quarter (including a negative working day effect of around 2%), thanks to good
resilience in renovation (almost 70% of sales), while the new construction
market continued to slow. Prices continued to be well managed against a higher
comparison basis and in a less inflationary environment.
Saint-Gobain continued to outperform its market in France, thanks to its
strong exposure to renovation, supported by a favorable regulatory
environment. The announcement by the French government in October that it is
to double its MaPrimeRénov' household renovation stimulus package to €5
billion in 2024, along with its objective of a three-fold increase in the
number of complete renovations to 200,000 per year from 2024, illustrate the
country's commitment to accelerate energy-efficiency renovation of existing
buildings and to reduce CO(2) emissions in the construction sector. The
rollout of Saint-Gobain's low-carbon, high value-added solutions for its
customers is also accelerating.
In Spain and Italy, sales were stable in broadly resilient construction
markets. Middle East and Africa posted strong growth, especially in Egypt and
Turkey.
Americas: slight sales growth driven by North America
The Americas delivered organic growth at 2.2% over the nine-month period and
at 0.1% in the third quarter, buoyed by the volume increase in North America.
- North America progressed by 5.0% over the nine-month period (up 11.0% as
reported, with the integration of Kaycan, Building Products of Canada and
GCP's waterproofing membranes) and by 4.0% in the third quarter. The price
effect gradually lessened due to the high comparison basis but rose
sequentially thanks to the price increase in the roofing business this summer.
Volumes were stable over the nine-month period but have returned to growth
since the second quarter. The Group saw further market share gains thanks to
its comprehensive, differentiated range of interior and exterior light
construction solutions. The new construction market has stabilized since the
start of the year. The integration of GCP and Kaycan is progressing well,
helping us to achieve the expected synergies. We finalized the Building
Products of Canada acquisition more quickly than expected, as of September 1,
2023, allowing Saint-Gobain to reinforce its unique industry-leading position
in Canada, with a comprehensive range of interior and exterior solutions. In
light of the favorable growth outlook, investments in additional capacity are
continuing in North America. In September 2023, the Group signed a new
renewable electricity supply agreement, its third since 2021: these three
agreements will allow it to cover more than 70% of its electricity
requirements in North America by the end of 2024 and to achieve a 70%
reduction in its scope 2 emissions (versus 2017).
- Latin America was down by 5.5% over the nine-month period and by 10.7% in
the third quarter. Brazil continues to weigh on sales in a difficult
macroeconomic environment, although the Central Bank's interest rate cut as
from early August, along with inflation coming under control and the
announcement of the "New Growth Acceleration Program" - incorporating a large
construction sector component with financing for social housing - point to an
improvement as from the end of the year. Mexico continued to benefit from the
successful integration of Impac in construction chemicals (waterproofing) and
its comprehensive solutions offer. The other countries in the Region were
driven by an increase in sales prices, an enriched offer and mix, and a
geographic footprint and product range extended by bolt-on acquisitions.
Asia-Pacific: good sales momentum
The Asia-Pacific Region reported organic growth at 5.1% over the nine-month
period and at 3.0% in the third quarter, with good momentum in volumes and a
high comparison basis for prices.
India posted another strong performance and captured market share on the back
of its global solutions-based approach, its integrated and innovative range of
solutions, the successful integration of recent acquisitions in insulation
(Rockwool India Pvt Ltd. and U.P. Twiga) and the start-up of new capacity.
Through its sustainable construction solutions, Saint-Gobain continues to play
a pioneering role in promoting low-carbon buildings in the country. China
enjoyed further good growth momentum despite a more difficult market, on the
back of market share gains in light construction and renovation with the
successful start-up of new capacity in the center of the country. South-East
Asia stabilized against a high comparison basis and in Malaysia benefited from
an enriched range of solutions, helping to strengthen its presence on the
light construction market.
High Performance Solutions (HPS): good resilience in sales
HPS sales progressed 3.5% over the nine-month period and fell 2.1% in the
third quarter in slowing markets overall.
- Businesses serving global construction customers saw a 40% rise in sales
as reported, mainly due to the integration of GCP as of October 1, 2022. The
upbeat trends in Chryso and GCP sales continued, spurred by the innovation
drive for decarbonization in the construction sector, notably with innovative
solutions (for example CO2ST(®) and EnviroMix(®)) for developing cement and
concrete mixes with a much lighter carbon footprint. Chryso reported further
strong growth, up double-digit over the quarter, led by emerging countries.
GCP's margins rallied sharply in line with its integration plan, thanks to the
efficiency of the new organization and to global supply chain and industrial
optimizations. By the end of the year, Chryso will finalize the acquisition of
Adfil (fibers for concrete reinforcement) helping to reduce the concrete's
carbon footprint. However, Adfors' reinforcement solutions contracted amid the
marked slowdown in new construction in Europe.
- Mobility sales progressed, buoyed by both the continued gradual catch-up
in sales prices and by an outperformance linked to its strong technological
positioning on electric vehicles. The growth dynamic slowed in Europe at the
end of the period against a higher comparison basis resulting from the sharp
upturn in the same prior-year period, but remained favorable in the Americas
and Asia.
- Businesses serving Industry held firm in slowing industrial markets,
mainly in Europe, thanks to sales prices and to demand for cutting-edge
materials and decarbonization technologies.
2023 outlook
In a difficult macroeconomic environment, Saint-Gobain continues to
demonstrate its resilience and its strong operating performance, achieved year
after year since 2019 thanks to its focused strategy and its proactive
commercial and industrial initiatives. The Group continues to focus on
developing sustainable and innovative solutions with a positive impact,
supported by strong innovation and investments for growth.
2023 will therefore mark another successful year for Saint-Gobain, with the
continued implementation of its "Grow & Impact" priorities.
The Group confirms its assumptions for its markets in 2023, with contrasting
trends: a marked decline in new construction in certain regions but good
resilience overall in renovation.
Amid a moderate market slowdown, Saint-Gobain is targeting for full-year 2023
a new record operating margin, double-digit for the third consecutive year.
Financial calendar
A conference call will be held at 6:30pm (Paris time) on October 26, 2023:
please dial +44 12 1281 8004 or +1 718 705 8796 or +33 1 70 91 87 04.
- Site visits for investors and analysts: November 13 and 14, 2023 in France
(Paris region).
- 2023 results: February 29, 2024, after close of trading on the Paris stock
market.
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 indicators for the
year under review and those for the previous year based on identical foreign
exchange rates for the previous year (impact at constant exchange rates);
· changes in applicable accounting policies.
- Operating margin = operating income divided by sales.
- Share buyback: amount of shares bought back in 2023, as of October 26, net
of offsetting employee share creation
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
Saint-Gobain's control, including but not limited to the risks described in
the "Risk Factors" section of Saint-Gobain's 2022 Universal Registration
Document and the main risks and uncertainties presented in the half-year 2023
financial report, both documents being available on Saint-Gobain's website
(www.saint-gobain.com (http://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, except as required by applicable laws
and regulations.
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
(http://www.saint-gobain.com)
Appendix 1: Sales by Segment
9m 2022 sales 9m 2023 sales Change on Change on a comparable Like-for-like
(in €m)
(in €m)
actual structure
structure basis
change
basis
Northern Europe 12,556 9,696 -22.8% -8.9% -5.0%
Southern Europe - ME & Africa 11,317 11,337 +0.2% +0.1% +1.0%
Americas 6,791 7,264 +7.0% +1.0% +2.2%
Asia-Pacific 1,601 1,587 -0.9% -2.0% +5.1%
High Performance Solutions 7,085 7,624 +7.6% +2.1% +3.5%
Internal sales and misc -948 -988 --- --- ---
Group Total 38,402 36,520 -4.9% -2.2% +0.0%
Q3 2022 Q3 2023 Change on Change on a comparable Like-for-like
sales
sales
actual structure
structure basis
change
(in €m)
(in €m)
basis
Northern Europe 4,157 3,022 -27.3% -12.1% -7.6%
Southern Europe - ME & Africa 3,491 3,361 -3.7% -3.8% -2.7%
Americas 2,514 2,480 -1.4% -4.9% +0.1%
Asia-Pacific 588 551 -6.3% -7.4% +3.0%
High Performance Solutions 2,485 2,461 -1.0% -5.7% -2.1%
Internal sales and misc -314 -309 --- --- ---
Group Total 12,921 11,566 -10.5% -7.0% -3.1%
Appendix 2: Contribution of prices and volumes to organic sales growth by
Segment
9-month 2023 Like-for-like change Prices Volumes
Northern Europe -5.0% +6.4% -11.4%
Southern Europe - ME & Africa +1.0% +7.7% -6.7%
Americas +2.2% +4.5% -2.3%
Asia-Pacific +5.1% +0.5% +4.6%
High Performance Solutions +3.5% +5.2% -1.7%
Group Total +0.0% +5.9% -5.9%
Q3 2023 Like-for-like change Prices Volumes
Northern Europe -7.6% +1.5% -9.1%
Southern Europe - ME & Africa -2.7% +3.6% -6.3%
Americas +0.1% +0.1% +0.0%
Asia-Pacific +3.0% -3.5% +6.5%
High Performance Solutions -2.1% +3.3% -5.4%
Group Total -3.1% +1.9% -5.0%
Appendix 3: Breakdown of organic sales growth and external sales
9-month 2023, in % of total Like-for-like % Group
change
Northern Europe -5.0% 25.5%
Nordics -5.1% 11.7%
United Kingdom - Ireland +1.3% 4.7%
Germany - Austria -12.5% 2.9%
Southern Europe - ME & Africa +1.0% 30.3%
France +0.2% 23.6%
Spain - Italy +0.8% 3.7%
Americas +2.2% 19.5%
North America +5.0% 14.5%
Latin America -5.5% 5.0%
Asia-Pacific +5.1% 4.1%
High Performance Solutions +3.5% 20.6%
Construction and industry -3.0% 13.0%
Mobility +15.2% 7.6%
Group Total +0.0% 100.0%
Q3 2023, in % of total Like-for-like % Group
change
Northern Europe -7.6% 25.2%
Nordics -7.7% 11.6%
United Kingdom - Ireland -2.4% 4.0%
Germany - Austria -18.7% 3.0%
Southern Europe - ME & Africa -2.7% 28.3%
France -3.5% 21.8%
Spain - Italy -6.3% 3.6%
Americas +0.1% 21.0%
North America +4.0% 15.6%
Latin America -10.7% 5.4%
Asia-Pacific +3.0% 4.5%
High Performance Solutions -2.1% 21.0%
Construction and industry -7.0% 13.0%
Mobility +6.5% 8.0%
Group Total -3.1% 100.0%
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