SAINT-GOBAIN (EPA:SGO) - Sales for the first nine months of 2018

Transparency directive : regulatory news

25/10/2018 17:40

PRESS RELEASE
Paris, October 25, 2018

                    Sales for the first nine months of 2018

               Organic growth at 4.3% for the nine-month period
                             Objectives confirmed

* Organic growth at 4.3% for the nine-month period and at 3.1% in Q3

* Negative currency impact of 3.6% over the nine-month period and of -1.9% in
  Q3; positive Group structure impact of 1.1% over the nine-month period and of
  +0.6% in Q3

* Acceleration in pricing, up 3.5% in Q3 (up 2.9% over the nine-month period)
  amid continued cost inflation

* Volumes slightly down by 0.4% in Q3 against a high comparison basis in Q3
  2017

* 11.8 million shares bought back at the end of September 2018

* 2018 objectives confirmed

Pierre-André de Chalendar, Chairman and Chief Executive Officer of
Saint-Gobain, commented:

"Saint-Gobain continues along its growth trajectory despite a tough comparison
basis in Q3 2017. Our focus on increasing prices - critical in an inflationary
environment - continues to pay off. The industrial issues that had weighed on
our profitability in the first half of the year are largely behind us.
Saint-Gobain is therefore confirming its objectives for full-year 2018 and for
the second half expects the like-for-like increase in operating income to be
clearly above the level achieved in the first half.
The strategic initiatives announced in July are moving forward; they will help
accelerate the Group's profitable growth momentum. This new organization will
be outlined in a specific announcement on November 26th."

Consolidated sales for the first nine months of 2018 were EUR31,130 million
compared to EUR30,570 million for the first nine months of 2017.
The negative currency impact was 3.6% over the nine-month period, with a
smaller 1.9% negative impact in the third quarter resulting mainly from the
appreciation of the US dollar against the euro, despite the ongoing
depreciation of the Brazilian real, Nordic krona and other Asian and emerging
country currencies.
The Group structure impact added 1.1% to total growth over the nine-month
period, essentially reflecting the consolidation of acquisitions in Asia and
emerging countries (KIMMCO, Megaflex, Isoroc Poland, Tumelero), in new niche
technologies and services (TekBond, Scotframe, Maris, Logli Massimo) and to
consolidate our strong positions (Glava, Kirson, Wattex, Biolink, SimTek,
bolt-on acquisitions in Building Distribution such as Per Strand).
The smaller Group structure impact in the third quarter (+0.6%) reflects the
acceleration in the Group's portfolio optimization program, with in particular
the disposal of the EPS insulation foam business in Germany and glazing
installation operations in the UK. The Group has also launched a process to
sell the legal entity of its Pipe business in Xuzhou, China. It should be noted
that in light of the now hyperinflationary environment in Argentina, this
country which represented less than 1% of the Group's 2017 sales, is excluded
from the like-for-like analysis as of July 1, 2018.
On a like-for-like basis, sales were up 4.3% over nine months and 3.1% in the
third quarter. This reflects a further acceleration in pricing, up 3.5% after a
2.5% rise in the first half, in a context of continued raw material and energy
cost inflation. Volumes were up 1.4% over the nine-month period, and remained
almost stable in the third quarter (down 0.4%), affected in particular by a
high comparison basis in High-Performance Materials and Exterior Products in
the US.

                                              Change on  Change on a
                            9-month  9-month  an actual  comparable  Like-for-
                             2017     2018    structure   structure    like
EURm                         sales    sales     basis       basis     change
Sector and division:
Innovative Materials(a)      7,787    7,859      0.9%       0.4%       5.2%
Flat Glass                   4,247    4,229     -0.4%      -0.6%       3.4%
High-Performance Materials   3,559    3,646      2.4%       1.5%       7.3%
Construction Products(a)     9,512    9,668      1.6%       0.4%       5.6%
Interior Solutions           5,113    5,330      4.2%       1.7%       5.9%
Exterior Solutions           4,468    4,412     -1.3%      -1.1%       5.3%
Building Distribution       14,019   14,365      2.5%       1.5%       3.1%
Internal sales and misc.      -748     -762      ---        ---        ---

Region:
France                       7,875    8,128      3.2%       3.1%       3.1%
Other Western European
countries                   13,216   13,632      3.1%       1.2%       3.0%
North America                4,179    4,183      0.1%      -0.5%       6.8%
Emerging countries and Asia  6,791    6,794      0.0%      -0.8%       7.9%
Internal sales              -1,491   -1,607      ---        ---        ---
Group Total                 30,570   31,130      1.8%       0.7%       4.3%

                                              Change on  Change on a
                                              an actual  comparable  Like-for-
                            Sales    Sales   structure   structure    like
EURm                        Q3 2017  Q3 2018    basis       basis    change

Sector and division:
Innovative Materials(a)      2,545    2,577      1.3%       0.9%       3.5%
Flat Glass                   1,382    1,377     -0.4%      -0.1%       3.2%
High-Performance Materials   1,172    1,205      2.8%       1.9%       3.5%
Construction Products(a)     3,183    3,192      0.3%       0.6%       3.0%
Interior Solutions           1,696    1,751      3.2%       1.1%       3.5%
Exterior Solutions           1,510    1,465     -3.0%       0.3%       2.7%
Building Distribution        4,675    4,815      3.0%       1.8%       3.0%
Internal sales and misc.      -242 -    241      ---        ---        ---

Region:
France                       2,477    2,559      3.3%       3.1%       3.1%
Other Western European
countries                    4,480    4,598      2.6%       0.6%       1.7%
North America                1,355    1,399      3.2%       2.6%       1.3%
Emerging countries and Asia  2,334    2,290     -1.9%      -0.4%       7.1%
Internal sales                -485     -503      ---        ---        ---
Group Total                 10,161   10,343      1.8%       1.2%       3.1%

(a) Including inter-division eliminations.

Like-for-like performance of Group Business Sectors

Innovative Materials sales rose 5.2% over the nine-month period, including 3.5%
in the third quarter.

- Flat Glass performed in line with first-half trends, reporting organic growth
  of 3.2% in the third quarter and of 3.4% over the nine-month period. The
  automotive business continued to enjoy good growth momentum, particularly in
  Asia and emerging countries, despite market disruptions relating to the
  introduction of the new automotive emission regulations in Europe. The recent
  capital expenditure and innovation investments continued to gather pace.
  Sales linked to the construction market continued along the lines of the
  positive trends seen in the first half in the Group's main regions, driven
  in particular by a better mix effect and an acceleration in price increases
  for transformed glass in Europe. Following the restart of production at the
  float glass facility in Romania in the second quarter, production resumed in
  Poland and Egypt in September as expected, and India started up its fifth
  float line.

- High-Performance Materials (HPM) sales were up 7.3% over the nine-month
  period and 3.5% over the third quarter, with advances in all businesses. This
  slower pace of growth reflects the high comparison basis, especially in
  Ceramics, which had reported exceptionally strong sales in the prior-year
  period. Over the nine months all businesses and regions progressed.

Construction Products (CP) sales were up 5.6% over the nine-month period,
including an increase of 3.0% in the third quarter.

- Interior Solutions delivered organic growth of 5.9% over the nine-month
  period and 3.5% in the third quarter, driven by pricing. Western Europe
  progressed slightly despite lower volumes in the UK. In North America, the
  acceleration in price increases in the quarter weighed on volumes. Asia and
  emerging countries reported good growth.

- Exterior Solutions sales rose 5.3% over the nine-month period and 2.7% in the
  third quarter, against a very high comparison basis in Exterior Products,
  which had been boosted by additional weather-related demand in the US in the
  third quarter of 2017. Despite a clear decline in volumes, Exterior Products
  implemented significant price increases in August. Excluding the Group
  structure impact relating to China, sales trends improved in the Pipe
  business, which is pursuing its restructuring program. Mortars progressed,
  particularly in Asia and emerging countries, despite uncertainties in Brazil.

Building Distribution like-for-like sales advanced at the same pace in the
third quarter (3.0%) as in the first half, rising 3.1% over the nine-month
period. France delivered a good quarterly performance, and the Nordic countries
continued the good trends seen in the first half of the year. The UK reported
further growth, still driven by a strong price effect despite declining
volumes. Germany and Brazil were down over the third quarter.

Like-for-like analysis by region

- France enjoyed further good momentum in the quarter and over the nine-month
  period, with sales up 3.1%, benefitting from robust markets in new
  construction and renovation where growth remains nevertheless constrained by
  the lack of skilled labor.

- Other Western European countries progressed 3.0% over the nine-month period
  and 1.7% in the third quarter. Nordic countries continued to report a good
  pace of growth. The UK was up slightly thanks to sales prices but with
  declining volumes in an uncertain environment. Germany remained hesitant.

- North America climbed 6.8% over the nine-month period and 1.3% in the third
  quarter, against a very high comparison basis in Exterior Products and HPM.
  Construction and industrial markets remained robust.

- Asia and emerging countries continued to enjoy good momentum in the third
  quarter, up 7.1% (up 7.9% over nine months), reporting growth in all regions.

Strategic priorities and 2018 outlook

Saint-Gobain continued its pace of small and mid-sized acquisitions during the
third quarter. Over the nine months to September 30, 2018, the Group acquired
17 companies for a total amount of EUR561 million. These acquisitions will
enable Saint-Gobain to:
- consolidate its leading positions and unlock synergies (e.g. Per Strand in
  Norway);
- accelerate its growth in emerging countries (e.g. KIMMCO in Kuwait);
- acquire additional technological bricks to be combined with its portfolio of
  innovative solutions (e.g. HKO in Germany).

The additional strategic initiatives intended to accelerate the Group's
transformation are moving forward. They involve in particular:

- accelerating the renewal of the Group's portfolio by the end of 2019 through
  divestments representing sales of at least EUR3 billion, resulting in a
  positive impact of around 40 basis points on the operating margin;

- defining a new organization closer to the markets, offering greater agility
  and unlocking more synergies. A specific announcement on this subject will be
  made on November 26, 2018.

The Group expects the following trends for the fourth quarter:
- a robust construction market in France, but which remains constrained by the
  lack of skilled labor;
- progression in other Western European countries, despite continued
  uncertainty in the UK and temporary disruption from the automotive market;
- growth in North America in both construction markets and industry;
- good momentum in Asia and emerging countries.

The Group confirms its action priorities for the year as a whole:
- 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% in 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.

Saint-Gobain confirms its objective for full-year 2018 of a like-for-like
increase in operating income and for the second half expects the like-for-like
increase to be clearly above the level achieved in the first half.

Glossary:
Organic growth and like-for-like changes in sales and operating income reflect
the Group's underlying performance excluding the impact of:
* changes in Group structure: indicators for the period concerned and those for
  the previous period are calculated based on the scope of consolidation for
  the previous period (Group structure impact);
* changes in exchange rates: indicators for the period concerned and those for
  the previous period are calculated using exchange rates for the previous
  period (currency impact);
* changes in applicable accounting policies.

Operating income: see Note 3 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
Free cash flow: 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.
Capital expenditure: investments in property, plant and equipment.

Financial calendar

- Announcement of the new organization: November 26, 2018, before open of
  trading on the Paris Bourse.

- 2018 results: February 21, 2019, after close of trading on the Paris Bourse.

Analyst/Investor Relations
Vivien Dardel           +33 1 47 62 44 29
Floriana Michalowska    +33 1 47 62 35 98
Christelle Gannage      +33 1 47 62 30 93

Press relations
Laurence Pernot         +33 1 47 62 30 10
Susanne Trabitzsch      +33 1 47 62 43 25

A conference call will be held at 6:30pm (Paris time) on October 25, 2018: dial
+33 (0) 1 72 72 74 03 followed by the code 49602867#.

Important disclaimer - forward-looking information:
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 to 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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