29th Jul 2005 07:01
Compagnie de Saint-Gobain28 July 2005 July 28, 2005 FIRST-HALF 2005 RESULTS: > SALES up 7.0% to €16,877 million (up 7.4% at constant exchange rates*) > OPERATING INCOME up 4.6% to €1,372 million (up 4.9% at constant exchange rates*) > NET INCOME up 13.9% to €632 million CONFIRMATION OF 2005 TARGET: > 6% GROWTH IN OPERATING INCOME at constant exchange rates (average exchange rates for 2004) * based on average exchange rates for first-half 2004 Consolidated first-half sales for the Saint-Gobain Group (six months ended June30, 2005) came in at €16,877 million, up 7.0%, or 7.4% at constant exchangerates*. The contribution of the Group's acquisitions to the growth figure, netof disposals, amounted to €848 million during the period, accounting for a riseof 5.4% in net sales. Like-for-like growth (constant structure and exchangerates) for the period was 2.0%, with 4.1% growth in the second quarter. * based on average exchange rates for first-half 2004 Consolidated net income for first-half 2005 advanced 13.9% over the year-earlierperiod, at €632 million. Excluding capital gains, consolidated net incomeclimbed 10.9% to €642 million, fueled mainly by the improvement in businessincome. • Performances of the Group's business sectors: Overall, despite a difficult first quarter, the Group's five sectors saw a rise in like-for-like sales over first-half 2005, with most businesses reporting a significant rise in sales prices and, in the second quarter, robust organic growth. Like-for-like second-quarter sales were up 4.1%, on the back of a 0.7% dip in the first quarter. Like-for-like sales for theGroup's Flat Glass and Building Distribution Sectors - hard hit by the severelate-winter weather in the first quarter - rebounded strongly in the secondquarter. Overall, the Group's first-half sales advanced 2.0% on a like-for-likebasis (including a +2.4% price impact and a -0.4% volume effect). Operating income for the Group gained 4.6%, driven by a further improvement in the Building Distribution and High-Performance Materials Sectors. On an actual structure and exchange rate basis, the Building Distribution Sectorreported a strong 13.7% rise in sales, thanks to the first-half contribution ofits recent acquisitions, particularly Dahl (consolidated as from May 1, 2004)and Sanitas-Troesch (consolidated as from March 1, 2005). A strong upswing inthe second quarter of the year (up 5.0% like-for-like), after a slow firstquarter due to bad weather conditions, fueled a 2.3% rise in sales. French andScandinavian markets were the main growth drivers, while Germany and, to alesser extent, the UK, remained on a downward trend. Operating margin for theBuilding Distribution Sector continued to improve, coming in at 4.9% comparedwith 4.8% for the same period in 2004. The High-Performance Materials Sector reported a 1.4% increase in sales on acomparable structure and exchange rate basis, with growth in volumes and salesprices in the Ceramics & Abrasives Division partially dampened by the drop insales volumes reported by the Reinforcements Division. The profitability of theHigh-Performance Materials Sector has further advanced, with operating marginaccounting for 11.2% of sales, compared with 10.4% for H1 2004. First-half sales for the Flat Glass Sector inched up slightly on a constantstructure and exchange rate basis, thanks to the upturn in the second quarter.However, increased start-up costs due to the fast expansion of the Flat GlassSector in emerging countries and Asia in particular, dented profitability. The Packaging Sector reported a slight rise in like-for-like sales, with pricerises across the sector offsetting the contraction in sales volumes in theUnited States and in Germany, while the European wine market is stabilizing.However, the profitability of the Group's Packaging business was trimmed byrising energy costs, particularly in the US. The Construction Products (CP) Sector posted the Group's strongest organicgrowth, up 3.9% despite the 3.9% drop in like-for-like sales for the PipeDivision following the last delivery under the Abu Dhabi contract at the end offirst-quarter 2004. Higher prices across the Pipe business helped to offset theimpact of spiraling raw materials costs on the division's operating income.Building Materials and Insulation Divisions posted organic growth of more than6.0%, as benefits from a buoyant US and European (excluding Germany)construction market continued to filter through. Operating margin for thesedivisions also advanced, fuelling the improvement in operating margin for thesector as a whole. • Detailed review of interim consolidated financial statements: The Group's interim consolidated financial statements prepared in accordancewith IFRS, which were reviewed by the Board of Directors on July 28, 2005, aresummarized below: H1 2004 H1 2005 % change (IFRS) (IFRS) • millions • millions (1) (2) (2)/(1) Net sales* 15,768* 16,877* +7.0%Operating income 1,312 1,372 +4.6%Non-operating costs (133) (108) -18.8%Other business income and expenses (31) 4 n.m.Business income 1,148 1,268 +10.5%Financial income (expense) (261) (266) +1.9%Income taxes (316) (359) +13.6%Share in net income of equity investees 3 5 +66.7%Income before minority interests 574 648 +12.9%Minority interests (19) (16) -15.8%Net income 555 632 +13.9%Earnings per share (in •) 1.61 1.83 +13.7%Net income excluding profit (loss) on sales ofnon-current assets 579 642 +10.9%Earnings per share excluding profit (loss) on sales ofnon-current assets (in •) 1.68 1.86 +10.7%Cash flow from operations 1,263 1,355 +7.3%Cash flow from operations excluding capital gains tax 1,252 1,360 +8.6%Capital expenditure 554 598 +7.9%Investments in securities 534 563 +5.4%Net debt 7,431 7,463 +0.4% * including ancillary revenue for €118 million for first-half 2005, comparedwith €91 million for first-half 2004 Consolidated first-half sales climbed 7.0% on an actual structure basis and 1.5%based on a comparable structure. At constant exchange rates*, sales were up 7.4%on an actual structure basis and 2.0% on a comparable structure basis. Salesprices rose 2.4% on average, while volumes dipped slightly by 0.4%. France accounted for 32.7% of total sales, with other western European countriescontributing 40.1%, North America 16.1% and emerging countries and theAsia-Pacific region, 11.1%. Business remained buoyant, on a like-for-like basis,in each of these areas, with the exception of western Europe, hampered by theslowdown in Germany and the UK. First-half operating income advanced 4.6%, and by 4.9% stripping out thecurrency effects. Operating income represents 8.1% of sales, compared with 8.3%of sales over the same period in 2004. In accordance with IFRS, operating incomenow includes the cost of stock option programs and the Group Savings Plan,representing a total of €26 million, compared with €23 million for first-half2004. This slight dip in operating margin reflects the increased relative weightof the Building Distribution Sector in the Group (despite the further advance inthe sector's profitability, to 4.9% compared with 4.8% for first-half 2004), aswell as higher start-up costs due to the fast expansion of the Group in emergingcountries. Excluding Building Distribution, the Group's operating margin slippedto 10.4% from 10.5% in first-half 2004. The Group's operations in the US and western Europe reported an improvement inprofitability, with the exception of France, where it remained flat. In emergingcountries and Asia, first-half profitability was dented by the large-scaleinvestments made over the period. * based on average exchange rates for first-half 2004 First-half business income jumped 10.5%, mainly thanks to the increase inoperating income and in profit on sales of non-current assets during the period,coupled with the fall in non-operating costs. Non-operating costs were scaled back slightly, to €108 million from €133 millionfor the six months ended June 30, 2004. Non-operating costs include a €54million charge in respect of asbestos-related claims against CertainTeed(compared with a charge of €50 million in the year-earlier period). Financial expense remained virtually flat at €266 million, against €261 millionin first-half 2004, reflecting the stability of net debt at June 30, 2005compared with June 30, 2004. Minority interests slipped slightly to €16 million, from €19 million in theprior-year period. Consolidated first-half net income came in at €632 million, a rise of 13.9% overfirst-half 2004. Based on the 345,255,470 shares outstanding at June 30, 2005,earnings per share jumped 13.7% to €1.83, compared with €1.61 in first-half 2004(based on 345,124,327 shares). Excluding profit and loss on sales of non-current assets, net income climbed10.9% to €642 million, compared with €579 million for first-half 2004. Based onthe 345,255,470 shares outstanding at June 30, 2005, earnings per share rose10.7% to €1.86, compared with €1.68 in the prior-year period. Cash flow from operations totaled €1,355 million, up 7.3% on first-half 2004.Excluding the tax effect of capital gains and losses, cash flow from operationsadvanced 8.6% to €1,360 million, compared with €1,252 million for the six monthsended June 30, 2004. Capital expenditure increased 7.9% to €598 million, compared with €554 millionin first-half 2004. The rise in capital spending was fueled by the ramp-up ofthe capital expenditure program in emerging countries and in particular Asia (up30.7% over the same period in 2004). Investments in securities totaled €563 million, including €336 million in theBuilding Distribution Sector. Net debt after payment of the 2004 dividend remained virtually stable incomparison with the year-earlier period, at €7,463 million compared with €7,431million at June 30, 2004. The gearing ratio - based on consolidatedshareholders' equity - was 62.2%, compared with 69.1% at June 30, 2004. • Update on asbestos claims in the United States: some 10,000 new claims were filed against CertainTeed in the six months to June 30, 2005, on apar with the last two half-yearly periods. Approximately 3,000 mass claims werefiled in the State of Kentucky, for which no proof of medical impairment hasbeen provided. During the same period, some 13,000 claims were resolved(compared with 11,000 over first-half 2004), and 3,000 claims were transferredto an "inactive docket". Therefore, the number of pending claims at June 30,2005 continued on a downward trend, standing at 100,000 at June 30, 2005,compared with 106,000 at December 31, 2004. The average cost of claims settledover the last twelve months was approximately US$ 2,500 per claim, lower thanthe average cost of settlement at March 31 (approximately US$ 3,000 per claim),due to a more favorable claims mix than the earlier period. On the legislative front, the bipartisan vote by the US Senate JudiciaryCommittee on May 26, 2005 concerning the Asbestos Trust Fund Bill has sinceprompted much debate between the Bill's advocates and its opponents. The Billmay be put before the full Senate as from the Fall. • Outlook and targets: The Group expects the recovery observed inthe second quarter of 2005 to pick up pace over the next six months, andtherefore confirms, for the full year, its target of 6% growth in operatingincome at constant exchange rates (average rates for 2004). • BPB: On July 22, the Chairman of Compagnie de Saint-Gobain contacted the Chairman of the Board of BPB, seeking his recommendation for a cash offer at 675p per share. The proposal was fully financed and subject tolimited due diligence. The offer was rejected by BPB's Board of Directors.Whilst Compagnie de Saint-Gobain was surprised by this response and disappointedthat the management of BPB did not wish to enter into discussions, its objectiveremains to seek an agreement with BPB, for a recommended deal. Interior fittings solutions (including partitions, ceilings and insulation) arethe core businesses of both BPB and Saint-Gobain's Insulation activity. Thesebusinesses have the characteristics that Saint-Gobain focuses on, such as stronggrowth, profitability and high potential for free cash flow generation, togetherwith a multi-regional market approach. BPB's businesses present an excellent strategic fit with Saint-Gobain's "Construction Products" Sector, which includes Insulation. They cater to asimilar client base (contractors, distributors, craftsmen), and offercomplementary products. Furthermore, their respective geographical locationswould help to step up expansion in emerging markets. Compagnie de Saint-Gobain has noted BPB's first quarter 2005/2006 tradingstatement. It continues to examine its options in respect of BPB, which might ormight not lead to a cash offer being made for BPB. Compagnie de Saint-Gobainbelieves there is strategic merit in combining the businesses and reaffirms itshigh regard for BPB's executives and senior management team. However, it willonly enter into a deal at a price it believes creates value for itsshareholders. Forthcoming results announcements: - Sales for the first nine months of 2005: October 25, 2005, after close oftrading on the Paris Bourse. Investor Relations Department Florence Triou-Teixeira Tel.: +33 1 47 62 45 19Alexandre Etuy Tel.: +33 1 47 62 37 15Fax: +33 1 47 62 50 62 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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