Saint-Gobain: 3Q 2005 gain below expectations as higher costs bite

Saint-Gobain, the world“s largest building materials supplier, adjusted its 2005 profit growth goal on 25 October 2005, saying high energy and transport costs were eating into profitability at some o…

Saint-Gobain, the world“s largest building materials supplier, adjusted its 2005 profit growth goal on 25 October 2005, saying high energy and transport costs were eating into profitability at some of its businesses. Reporting a 6.9% increase in nine-month revenue, the company said it now expected full-year operating profit on a constant currency basis to be slightly below the 4.9% increase achieved in the 1H 2005. It had been expecting a 6% rise. Saint-Gobain said the business recovery seen in the 2Q 2005 had not continued with the strength it had expected in the 3Q, and that this trend was likely to continue for the rest of 2005. “Elsewhere, the profitability of some businesses, particularly packaging, was affected by very high increases in energy and transport costs over the summer, notably in the United States,” it said. “For these two reasons, the full-year goal for operating profit growth at constant currencies has been reined back to a pace slightly below that of the 1H,” Saint-Gobain said. The company said in July 2005 it expected its 2Q recovery to accelerate over the 3Q, enabling it to reach its 6% operating growth target for the year. Saint-Gobain Chairman and Chief Executive Jean-Louis Beffa said the company had been unable to quickly pass high energy costs onto clients. He estimated that these costs would rise to EUR 200 million, EUR 50 higher than previously expected. “Due to the structure of our contracts we cannot increase our prices straight away but we do hope to do so before the end of the year,” he said. Disruption in logistics due to Hurricane Katrina had also increased transport costs, the company said. Saint-Gobain generated January-to-September sales of EUR 25.743 billion (USD 30.77 billion), versus EUR 24.08 billion a year earlier, thanks to demand for its materials from the new housing and renovation markets.