Saint-Gobain: 1Q 2011 sales up

Saint-Gobain posted a strong rise in its consolidated sales for first-quarter 2011, an increase of 12.2% to EUR 9,799 million from EUR 8,737 million in the first-quarter of 2010.
Exchange rates accou…

Saint-Gobain posted a strong rise in its consolidated sales for first-quarter 2011, an increase of 12.2% to EUR 9,799 million from EUR 8,737 million in the first-quarter of 2010. Exchange rates accounted for a 2.6% increase in sales, mainly attributable to sharp gains in Scandinavian currencies and most emerging country currencies (particularly the Brazilian real) against the euro. Changes in Group structure had a neutral impact overall, with sales contributions from acquisitions carried out over the past 12 months fully offset in the first quarter by the impact of the Advanced Ceramics divestment at 31 December 2010. Sales trends at both constant exchange rates (based on average exchange rates for first-quarter 2010) and like-for-like (comparable Group structure and exchange rates) were therefore identical, up 9.6%. Volumes increased 7.6% while sales prices were up 2.0% (compared to a rise of 1.4% in the second-half of 2010). Overall, and in line with the Group“s economic assumptions as presented at the end of February, Saint-Gobain benefited in the first quarter of 2011 from a combination of favourable trends on most of its main markets, as well as an additional working day compared to 2010: – emerging countries and Asia continued to enjoy vigorous trading, bolstered by a clear return to growth across Eastern European countries; – industrial markets remained vibrant, with further double-digit growth; – residential construction and renovation markets in Western Europe continued the recovery begun in 2010, with sales up sharply compared to the same period in 2010, helped by much better weather conditions, particularly in the first two months of the year. Saint-Gobain“s growth on these markets was driven chiefly by high value-added solutions, and particularly businesses related to energy efficiency in the Habitat market (Insulation, Reinforced Thermal Insulation Glass, Industrial Mortars, etc.). These businesses delivered double-digit growth over the quarter, buoyed by new regulations in force, and in particular Thermal Regulation RT 2012 in France. In addition, growth in the Group“s biggest markets (France, Germany, UK, Scandinavia) picked up pace. Businesses related to household consumption (Packaging Verallia) also reported growth gains in both Europe and the US, on the back of an improved economic environment. In contrast, construction markets in North America are not yet showing any tangible signs of improvement. Trading in these markets remained very slack but did not decline any further. All the Group“s Business Sectors reported robust growth for the quarter, with Innovative Materials and Building Distribution reporting double-digit gains. Innovative Materials continued to enjoy very positive trading along the lines of 2010 and once again delivered the Group“s best organic growth performance, at 11.8%. Markets related to industrial output and capital expenditure continued to benefit from robust momentum across all regions, particularly emerging countries and Asia. The Business Sector was also boosted by the upturn in construction markets across Western Europe, amplified by the highly favourable basis for comparison provided by first-quarter 2010 figures. Flat Glass reported 10.8% organic growth, powered mainly by volume gains. The strong recovery of the global automotive market, and strong economic conditions in Asia and emerging countries, have now been joined by the gradual pick-up in construction markets in Western Europe. Sales prices therefore increased over the period, for both commodity products (float glass) in Europe and processed products. High-Performance Materials (HPM) posted a further 13.5% rise in sales, following its already strong showing in first-quarter 2010 (up 11.9%). Industrial output and capital expenditure remained very upbeat across all regions, and especially Asia and emerging countries. Construction products sales moved up 6.4%, reflecting improved market conditions and sales price advances in most Western and Eastern European countries, as well as ongoing robust momentum in Asia and emerging countries. In contrast, persistent weakness in the construction market continued to affect trading in the US. Interior Solutions reported strong 8.4% organic growth. This performance results chiefly from an upturn in sales in Western Europe, driven by much better weather conditions than in 2010 and by stricter energy-efficient housing regulations (which led Insulation to report double-digit growth over the period, including growth of 13.6% in France). Sales prices were up sharply across the business, particularly in Europe. Exterior Solutions posted moderate 4.7% organic growth, reflecting starkly contrasting performances from each of its businesses. Industrial Mortars delivered very good growth figures, but Pipe was hit both by budgetary tightening in most European countries and reduced export sales, triggering a decline in sales volumes. Exterior Products stabilized at a low level, as US construction markets failed to recover. Sales prices remained upbeat, but could not fully offset the steep rise in raw material costs. Building Distribution rallied sharply, reporting double-digit organic growth of 10.8%. Besides the positive impact of weather conditions, the Business Sector“s main markets (France, UK, Germany and Scandinavia) enjoyed a significant acceleration in growth over the quarter, especially Germany. Sales prices remained upbeat, in line with the Group average. Packaging (Verallia) also benefited from the improvement in the global economic environment, posting a 7.2% jump in sales. Sales volumes were up across all geographic regions (particularly Europe and Latin America), while prices remained upbeat, reflecting the rise in the cost of energy and raw materials. For the first time in three years, all the Group“s main geographic areas reported strong organic growth in the first quarter, particularly Western Europe (helped by favourable weather conditions) and to a lesser extent, North America. In France, organic growth came in at 8.8%, powered by the sharp rebound in construction related businesses and ongoing robust trading for businesses related to industrial markets. The sales performance in other Western European countries was even better, up 10.2%, on the back of vigorous growth in Germany and to a lesser extent Scandinavia. Furthermore, for the first time in three years, all countries in this region reported growth for the quarter, including Spain and Italy. As in France, a return to growth in construction markets came on top of further double-digit gains in industrial markets. North America delivered 4.4% organic growth, thanks chiefly to continued brisk trading for High-Performance Materials and sales increases for Packaging (Verallia). Asia and emerging countries continued to post double-digit growth, at 15.6%. On top of persistently bullish economic conditions in Latin America and Asia, Eastern Europe rebounded sharply. Some 1,000 claims were filed against CertainTeed in the first quarter of 2011, in line with the same period in 2010. Taking into account the number of claims settled in the period (around 3,000, versus 1,000 in first-quarter 2010), the total number of outstanding claims continued to fall, down to 54,000 at 31 March 2011 from 56,000 at end-December 2010. Following on the procedure launched by Compagnie de Saint-Gobain in October 2010, Verallia (Packaging Business Sector) filed its registration document (document de base) with the French financial markets authority (AMF) on 18 April 2011. This is the first stage in the initial public offering of Verallia“s shares on the regulated market NYSE Euronext in Paris. Subject to market conditions and to the grant by the AMF of its visa on the prospectus relating to the offering, the Group is planning the listing of a minority stake in Verallia as from the second quarter of 2011. After a very encouraging first quarter, boosted nevertheless by particularly mild winter weather especially compared to first-quarter 2010, the Group expects the underlying trends observed in the past three months to continue over the next few quarters, although the basis for comparison will be much tougher than for the three months to 31 March. In particular: – Asia and emerging countries should see ongoing vigorous growth, bolstered by a strong contribution from Eastern European countries; – in Western Europe, there should be confirmation of the overall economic recovery, particularly in new construction and renovation markets. High value-added Habitat solutions, particularly in terms of energy efficiency (Insulation, Insulating Glass, Mortars, etc.), should deliver a superior growth performance. Industrial markets should also remain upbeat in the short term; – in North America, industrial markets should continue to see brisk trading, while conditions in the construction market will remain challenging. However, some signs of improvement should emerge by the end of the year; – household consumption markets should hold firm in all geographic areas. The Group therefore confirms its targets for full-year 2011: – robust organic growth; – double-digit growth in operating income (at constant exchange rates), despite the rise in energy and raw material costs; – free cash flow of EUR 1.3 billion, after the EUR 500 million increase in capital expenditure; – a persistently robust financial structure. Pierre-Andr de Chalendar, Chairman and CEO of Saint-Gobain, commented: Saint-Gobain“s strong first-quarter organic sales growth confirmed the recovery in sales volumes observed in 2010. The volume upturn is now also driven by the rebound in residential construction and renovation markets in Europe, amplified by much better weather conditions than in first-quarter 2010. Thanks to our strategic positioning in high value-added Habitat solutions, we achieved higher growth than our underlying markets and have been able to successfully pursue our pricing policy, with sales prices up 2% over the quarter. Building on this encouraging first-quarter performance, and despite a tougher comparison basis over the next few quarters, we confirm our 2011 targets of robust organic growth and double-digit growth in operating income (at constant exchange rates -average exchange rates for 2010). First-half 2011 sales will be reported 28 July 2011, after close of trading on the Paris Bourse.