New record operating margin
Significant milestones in strategic
repositioning
- Record operating margin of 11.7%
- Sequential improvement in volumes
- Positive price-cost spread with prices stable
sequentially
- Three strategic acquisitions focused on profitable
growth: CSR, Bailey and FOSROC, together adding around €2bn to
full-year sales and around €450m in EBITDA (including €100m of
synergies in year 3)
- More than 2/3 of the Group’s pro forma operating income is
now generated in high-growth geographies: North America,
Asia and emerging countries
- Strong free cash flow generation of €2.5bn, with a cash
conversion ratio of 75%
- Double-digit operating margin expected for H2 and full-year
2024, for the fourth consecutive year
Benoit Bazin, Chairman and Chief Executive Officer,
commented:
“Our first-half results once again demonstrate the success of
Saint-Gobain’s new profile, reflecting the Group’s ability to adapt
to different macroeconomic environments and to continue to
outperform. The roll-out of our comprehensive range of sustainable
and innovative solutions and the resulting enhancement in our mix,
together with our decentralized organization by country with
accountability on commercial performance and on proactive cost
management, have enabled us to deliver a new record operating
margin and strong free cash flow generation. I am very grateful for
our teams’ dedication and their contribution to the Group’s
consistent improvement in its performance.
Since the start of the year, Saint-Gobain has accelerated
efforts to reinforce its profitable growth profile with three
landmark acquisitions in light and sustainable construction: CSR in
Australia, Bailey in Canada and FOSROC in construction chemicals,
mainly in India and the Middle East. Pro forma for these changes in
structure, more than two-thirds of Group operating income is now
generated in North America, Asia and emerging countries, areas that
enjoy strong structural growth and where Saint-Gobain is achieving
an excellent performance.
New construction markets remain difficult in Europe but are
nearing a low point and we expect trading to continue to improve in
the second half. I am confident that 2024 will be another
successful year for Saint-Gobain, with a double-digit operating
margin in the second half and over the full year, for the fourth
consecutive year.”
Successful strategic execution: a new profitable growth
profile
The Group continues to outperform its markets thanks to the
pertinence of its strategic positioning at the heart of energy and
decarbonization challenges, and the strength of its local
organization by country, offering comprehensive solutions to its
customers.
- Almost 40% of Group sales rotated since 2018, with €9.4
billion in sales divested (EBITDA margin less than 5%) and €6.5
billion in sales acquired (EBITDA margin of around 20%);
- Acceleration in the Group’s repositioning towards North
America, Asia and emerging countries, which accounted for
67% of the Group’s operating income in the first half (pro
forma for recent changes in Group structure): 35% in North America,
32% in Asia and emerging countries, and 33% in Western Europe;
- Further strengthening of the Group’s presence in
construction chemicals, with €6.2 billion in annual sales (pro
forma). The acquisition of FOSROC (closing expected in first-half
2025) will reinforce Saint-Gobain’s presence in high-growth
emerging markets, particularly India and the Middle East, and will
perfectly complement the market positions of Weber, Chryso and
GCP;
- A comprehensive range of sustainable, differentiated and
innovative solutions – leveraging integrated systems and an
industry-leading low-carbon offer – broadening the range of
options offered to each customer and reinforcing the Group’s mix as
well as its capacity to capture a bigger part of the value chain.
Saint-Gobain has the broadest range of low-carbon solutions in the
world, particularly in terms of plasterboard (Klima), glass
(ORAÉ®), glass wool (LANAÉ®), additives and admixtures (Chryso
EnviroMix®);
- A local organization, with 90% of CEOs native to their
country, resulting in close proximity to customers, good pricing
power, strong adaptability, efficiency gains and accountability for
local teams;
- Strong operating margin growth in recent years, reaching a
new record-high in first-half 2024 despite a difficult
macroeconomic environment.
Group operating performance
Like-for-like sales were down 4.9% versus
first-half 2023 (an improvement of around two percentage points in
the second quarter with a decline of 3.9%, after a decline of 5.8%
in the first quarter), affected by the downturn in new construction
in Europe but supported by growth in the Americas and in
Asia-Pacific.
Group prices were down 1.0% over first-half 2024 (stable
sequentially between the first and second quarters), with a
positive price-cost spread thanks to robust pricing
discipline and the reduction in certain raw material and energy
costs.
Volumes were down 3.9% over the period, representing a
sequential improvement on fourth-quarter 2023 (down 4.5%).
This reflects a contrasting situation, with a marked decline in new
construction in Europe but good resilience overall in renovation.
In each local market, the Group has taken the proactive
commercial and industrial measures necessary to maintain its strong
operating performance.
On a reported basis, sales were down 6.0% to €23.5
billion, with a negative currency impact of 0.3%. The negative
Group structure impact of 0.8% resulted from the optimization of
the Group’s profile, thanks to both disposals – mainly in
distribution (UK), glass processing activities, foam insulation
(UK) and railing and decking (US) – and acquisitions, mainly in
construction chemicals (Izomaks, Adfil, Menkol Industries, Drymix,
Technical Finishes, IDP Chemicals), in North America (Building
Products of Canada, Bailey in Canada, ICC in the US) and in
Asia-Pacific (U.P.Twiga in India, Hume in Malaysia). The
integration of recent acquisitions is progressing well; synergy
plans have been confirmed and are being executed
successfully.
Operating income was €2,751 million, near to its
record-high, once again demonstrating the resilience of the Group’s
results in a difficult environment. The Group’s operating
margin improved again, reaching a new record-high of 11.7%
in first-half 2024 versus 11.3% in first-half 2023, thanks to
advances in the Americas and Asia-Pacific, and with stability in
Europe and in High Performance Solutions.
Segment performance (like-for-like sales)
Europe, Middle East & Africa: sequential improvement in
volumes, close to a low point; operating margin stable at a record
level
Sales in Europe were down 7.9% over the first half, with
a negative volume effect of 5.9%, representing a clear improvement
in volumes between the first quarter (down 8.2%) and the second
(down 3.7%), beyond the technical impact of working day effects.
New construction remained strongly down while renovation (around
60% of sales) proved more resilient. The operating margin
maintained its record level at 8.7%, thanks to an optimized
business profile and very well-managed costs and industrial
efficiency.
- Northern Europe was down 7.1% over
the first half, with a clear sequential improvement in the second
quarter, down 3.2% (after a decline of 11.0% in the first quarter),
with most countries at or near a low point. Nordic countries
and Germany were affected by the slowdown in new
construction, while renovation proved more resilient. Our
activities in the UK troughed, benefiting from a good
commercial dynamic thanks to the Group’s comprehensive range
of solutions and systems with quantified benefits. In Eastern
Europe, volume growth accelerated for the third
consecutive quarter. A power purchase agreement was signed in
Romania which will enable the Group to cover its entire electricity
requirements in the country from 2026.
- Southern Europe, Middle East &
Africa contracted 8.6% over the first half, seeing a slight
sequential improvement in the second quarter with a decline of 7.1%
(following a 10.1% decline in the first quarter), as new
construction remained significantly down in France.
Saint-Gobain nevertheless continued to outperform its market thanks
to its strong exposure to renovation and its comprehensive range of
solutions. In the context of French regulations which require large
non-residential buildings to reduce their energy consumption by 40%
by 2030, Saint-Gobain Solutions France is currently proposing
complete energy renovation projects, enabling reductions of more
than 50% in energy consumption, thanks to high performance façade
systems (EnveoVents) and glazing offering high levels of solar
control (COOL-LITE®) in particular. Spain and Italy reported
good growth, supported by growing renovation markets. Middle
East and African countries delivered strong growth, led
by the Middle East thanks to the success of recent investments.
Americas: sales growth in North America and record operating
margin
The Region delivered 1.2% organic growth over first-half
2024, driven by the outperformance in North America and despite the
downturn in Latin America. Operating income hit a new record-high
over the period, along with the operating margin which reached
19.0% (versus 17.8% in first-half 2023), supported by rigorous
pricing and cost management, and volume growth in North
America.
- North America was up by 4.1% over
the first half thanks to both prices and volumes, driven by a
dynamic renovation market and with new construction having
stabilized at a good level. The Group saw further market share
gains thanks to its comprehensive, differentiated range of
interior and exterior light construction solutions. Despite the
expected high comparison basis in roofing in the second quarter,
the roofing business reported robust growth in the first half
overall. The recent integrations of Kaycan, Building
Products of Canada and Bailey are helping to drive this
strong sales momentum.
- Latin America contracted 7.6% over
the first half as markets remained down, but began to stabilize in
the second quarter with volumes almost flat. In Brazil, some
macroeconomic indicators continued to improve. The Group’s
operations in the country are benefiting from a new plasterboard
line opened near São Paulo, capturing market share from more
traditional products with a comprehensive range of light
construction solutions. The other countries in the Region benefited
from the enhanced offering and mix, especially Mexico.
Asia-Pacific: sales growth and record operating
margin
The Region delivered 1.2% organic growth in first-half
2024, driven by strong momentum in India in particular. The
operating margin hit a record-high in the period, at 13.0% (versus
12.5% in first-half 2023), supported by volumes and well-managed
pricing.
India continued to outperform, delivering
volume growth once again driven by its comprehensive and
innovative range of solutions. The Group is seeing the benefits of
its numerous recent sustainability-driven initiatives in the
country, including the production of low-carbon glass (ORAÉ®,
reducing CO2 emissions by 42%) and very low-carbon plaster. In a
difficult new construction market in China, the Group
continued to capture market share against a high comparison
basis in the second quarter, extending its footprint towards inner
China thanks to the success of its highly digitalized sales model.
South-East Asia remained at a good level, led by
Malaysia, Indonesia and Singapore, owing mainly to the
enhancement of its offering and a strong innovation drive.
High Performance Solutions (HPS): sequential improvement in
organic growth and stable operating margin
HPS reported like-for-like sales down 3.5% over the first
half, with a sequential improvement in the second quarter, down
1.6%. The operating margin remained stable at 12.3%, as
well-managed costs and prices offset the downturn in volumes.
- Businesses serving global construction
customers reported a 2.7% decrease in sales over the first half
due to the sharp decline in Adfors reinforcement solutions, but a
progression in the second quarter (up 1.2%) against an easier
comparison basis (Adfors) and driven by the Construction Chemicals
business unit (sales up 3.1%). The upbeat trends in Chryso and
GCP sales continued, driven by infrastructure projects and the
innovation drive for decarbonization in the construction sector.
The signature of a definitive agreement to acquire FOSROC in June
marks an acceleration in the Group’s construction chemicals
presence in countries with strong structural growth (India, Middle
East and Asia-Pacific).
- Mobility sales stabilized (down
1.0%) against a high comparison basis following the rebound in
sales in 2023, with further investments for innovation and the
continued optimization of its industrial facilities with the
closure of the Avilès plant in Spain in June 2024.
- Businesses serving Industry
contracted 5.9%, affected by a decline in industrial markets,
especially those linked to investment cycles.
Analysis of the consolidated financial statements for
first-half 2024
The unaudited interim consolidated financial statements for
first-half 2024 were subject to a limited review by the statutory
auditors and adopted by the Board of Directors on July 25,
2024.
in € million
H1 2023
H1 2024
% change
Sales
24,954
23,464
-6.0%
Operating income
2,813
2,751
-2.2%
Operating margin
11.3%
11.7%
Operating depreciation and
amortization
980
1,026
4.7%
Non-operating costs
-55
-125
-127.3%
EBITDA
3,738
3,652
-2.3%
Capital gains and losses on
disposals, asset write-downs and impact of changes in Group
structure
-464
-164
64.7%
Business income
2,294
2,462
7.3%
Net financial expense
-196
-215
-9.7%
Dividends received from
investments
1
1
n.s
Income tax
-607
-546
10.0%
Share in net income of
associates
3
2
n.s
Net income before
non-controlling interests
1,495
1,704
14.0%
Non-controlling interests
45
44
-2.2%
Net attributable
income
1,450
1,660
14.5%
Earnings per share2 (in
€)
2.84
3.31
16.5%
Recurring net income1
1,821
1,706
-6.3%
Recurring1 earnings per share2
(in €)
3.57
3.40
-4.8%
EBITDA
3,738
3,652
-2.3%
Depreciation of right-of-use
assets
-340
-351
-3.2%
Net financial expense
-196
-215
-9.7%
Income tax
-607
-546
10.0%
Capital expenditure3
-616
-583
-5.4%
o/w additional capacity
investments
274
255
-6.9%
Changes in working capital
requirement4
-61
248
n.s
Free cash flow5
2,192
2,460
12.2%
Free cash flow
conversion6
65%
75%
ROCE
15.7%
14.4%
Lease investments
442
425
-3.8%
Investments in securities net of
debt acquired7
228
847
n.s
Divestments
857
60
n.s
Consolidated net debt
8,922
9,443
5.8%
- Recurring net income = net attributable income excluding
capital gains and losses on disposals, asset write-downs and
material non-recurring provisions.
- Calculated based on the weighted average number of shares
outstanding (501,808,814 shares in H1 2024, versus 510,080,726
shares in H1 2023).
- Capital expenditure = investments in tangible and intangible
assets.
- Change in working capital requirement over a rolling 12-month
period (see Appendix 4, bottom of “Consolidated cash flow
statement”).
- Free cash flow = EBITDA less depreciation of right-of-use
assets, plus net financial expense, plus income tax, less capital
expenditure excluding additional capacity investments, plus change
in working capital requirements over a rolling 12-month
period.
- Free cash flow conversion ratio = free cash flow divided by
EBITDA, less depreciation of right-of-use assets.
- Investments in securities net of debt acquired: €847 million in
H1 2024, of which €784 million in controlled companies
EBITDA came in at €3,652 million, close to its
all-time high. EBITDA includes non-operating costs of €125
million.
The net balance of capital gains and losses on disposals, asset
write-downs and the impact of changes in Group structure
represented an expense of €164 million (versus an expense of €464
million in first-half 2023). It reflects €35 million in asset
write-downs essentially relating to site closures and disposals
(€65 million in first-half 2023), €103 million in Purchase Price
Allocation (PPA) intangible amortization (€85 million in first-half
2023), and €26 million in disposal losses and other net business
expense (€314 million in first-half 2023 including translation
adjustments on the UK distribution assets sold).
Recurring net income was close to its record-high, at
€1,706 million.
The tax rate on recurring net income was 24%.
Capital expenditure represented €583 million (€616
million in first-half 2023). 72% of growth capex was invested in
North America, Asia and emerging countries. The Group opened 11 new
plants and production lines in first-half 2024, focused on the
fast-growing construction chemicals and light construction
markets.
Free cash flow came in at €2,460 million – a 12%
increase on first-half 2023 – with a free cash flow
conversion ratio of 75% (65% in first-half 2023). This was
attributable to a good level of EBITDA and to very good management
of operating working capital requirement (WCR), which represented
23 days’ sales at end-June 2024 versus 25 days’ sales at end-June
2023.
Investments in securities net of debt acquired totaled
€847 million (€228 million in first-half 2023), primarily
reflecting the acquisitions of Bailey in Canada, Glass Service
(digital solutions to accelerate the decarbonization of glass
furnaces), ICC in technical insulation in the US, and acquisitions
in construction chemicals (Izomaks in Saudi Arabia, IMPTEK in
Ecuador, Technical Finishes in South Africa and R.SOL in
France).
In line with the aim of completing the €2 billion share
buyback program in 2024 – one year earlier than expected – the
Group allocated around €200 million to share buybacks in first-half
2024 (net of offsetting employee share creation). This reduced the
number of shares outstanding to around 499.5 million at end-June
2024 from 502 million at end-December 2023.
Net debt was €9.4 billion at June 30, 2024 and amounts to
39% of consolidated equity (versus 38% at June 30, 2023). The
net debt to EBITDA ratio on a rolling 12-month basis was 1.4 at
end-June 2024.
2024 outlook and strategic priorities
In a geopolitical and macroeconomic environment that remains
challenging, Saint-Gobain will once again demonstrate its
resilience and its excellent operating performance in 2024,
thanks to its focused strategy and its proactive commercial and
industrial initiatives allowing it to outperform its markets.
Saint-Gobain expects some of its markets to remain difficult
over 2024 overall, but in the second half should benefit from
an easier comparison basis and a sequential improvement in certain
countries:
- Europe: resilience in renovation; new construction remaining
difficult before gradually reaching a low point country by
country;
- Americas: construction to hold firm in North America (new build
and renovation); recovery expected in Latin America;
- Asia-Pacific: good growth led mainly by India and the
integration of CSR;
- High Performance Solutions: Construction Chemicals to see
dynamic growth; Mobility to hold firm and a contrasting situation
on industrial markets in terms of demand.
Against this backdrop, in 2024 the Group will continue to
implement the strategic priorities set out in its “Grow &
Impact” plan for 2021-2025:
1) Continue our initiatives focused on profitability and free
cash flow generation
- Constant focus on the price-cost spread;
- Productivity initiatives and swift adjustments from country to
country where necessary;
- Capital expenditure slightly above 4% of sales, with strict
allocation to high-growth markets.
2) Outperform our markets by strengthening our profitable
growth profile
- Enrich our comprehensive range of integrated, differentiated
and innovative solutions offering sustainability and performance
for our customers;
- Continue our value-creating targeted acquisitions and
divestments dynamic, and benefit from the successful integration of
recent acquisitions.
3) Continued focus on our ESG roadmap as leader in
sustainable construction
- Promote our positive-impact and low-carbon solutions among our
customers;
- Extend the decarbonization of construction to the entire value
chain, playing our full role as leader in light and sustainable
construction.
Despite a context which
remains difficult in certain markets, Saint-Gobain expects a
double-digit operating margin for second-half and full-year 2024,
for the fourth consecutive year
Financial calendar
A meeting for analysts and investors will be held at 8:30am (GMT
+ 1) on July 26, 2024 and will be streamed live on Saint-Gobain’s
website: www.saint-gobain.com
- Sales for the third quarter of 2024: Tuesday October 29, 2024,
after close of trading on the Paris stock exchange.
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 (currency
impact);
- changes in applicable accounting policies.
- EBITDA = operating income plus operating depreciation
and amortization, less non-operating costs.
- Operating margin = operating income divided by
sales.
- ROCE (Return on Capital Employed) = operating income
for the period under review adjusted for changes in Group
structure, divided by segment assets and liabilities at
period-end.
- ESG = Environment, Social, Governance.
- Purchase Price Allocation (PPA) = the process of
assigning a fair value to all assets and liabilities acquired and
of allocating the residual goodwill as required by IFRS 3 (revised)
and IAS 38 for business combinations. PPA intangible amortization
relates to amortization charged against brands, customer lists, and
intellectual property, and is recognized in “Other business income
and expenses”.
- Pro forma = sales or operating income including the
impact of changes in Group structure (signed or closed) over the
period.
All indicators contained in this press release (not defined
above or in the footnotes) are explained in the notes to the
interim financial statements available by clicking here:
https://www.saint-gobain.com/en/finance/regulated-information/half-yearly-financial-report
Net debt Note 10 Non-operating costs Note 5 Operating income
Note 5 Net financial expenses Note 10 Recurring net income Note 5
Business income Note 5 Working capital requirements Note 5
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 Universal Registration
Document and the main risks and uncertainties presented in the
half-year 2024 financial report, both documents being available on
Saint-Gobain’s 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, 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
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ANALYST/INVESTOR RELATIONS Vivien Dardel, (+33) 1 88 54 29 77
Floriana Michalowska, (+33) 1 88 54 19 09 Alix Sicaud, (+33) 1 88
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