The French glass and building materials group Saint-Gobain has announced relatively unchanged 1996 net profits of FFr 4.3 billion (US$ 776 million), after a year of acquisitions and a consequent four-…
The French glass and building materials group Saint-Gobain has announced relatively unchanged 1996 net profits of FFr 4.3 billion (US$ 776 million), after a year of acquisitions and a consequent four-fold increase in net debt from FFr 3.94 billion in 1995 to FFr 15.1 billion. Earnings per share decreased from FFr 50.40 to FFr 50. Turnover rose almost 30%, from FFr 70.3 billion to FFr 91.35 billion while operating margins fell from 11.1% to 10.3%. The group said the figures demonstrated its solidity in a “mediocre European business environment” which is particularly poor for the building sector, and claimed that the European results were “offset by sustained activity in the American continent”. The review of results by business activity shows a decrease for flat glass, and, to a lesser extent, insulation, due to the difficult economic conditions in the construction market in Europe. Mr. Jean-Louis Beffa, group chairman, said the overall results had been achieved in spite of restructuring costs that had reached about FFr 1 billion – nearly double the previous year“s levels. He also said the group had secured productivity improvements of about 5%. The improved group sales, stated Saint-Gobain, were mainly due to the consolidation of Poliet since 1 July 1996 and to the consolidation of operations in the Industrial Ceramics and Abrasives Division, as well as the inclusion for the whole year of US operation Ball Foster Glass in the Containers Division, which has been 100% owned since 1 October 1996. Sales are split between France 35%, other European countries 32%, America and Asia 33%. In Europe, despite the difficult context and excess capacity in certain sectors, the Group said that, as a whole, it maintained volumes at 1995 levels, but could not avoid a drop in prices. Commenting on why the group had decided to take on more debt at a time when many large French companies were trying to reduce it, Mr. Beffa said he thought the company had previously not had quite enough debt. The acquisitions represented good opportunities, he said, and interest rates were reasonably low. In Paris, the brokerage firm UBS judged the 1996 results disappointing and lowered its recommendation on Saint-Gobain to “sell“ from “neutral“, also cutting its earnings estimates for the group. Another broker, Natwest Sellier, maintains its “hold” recommendation on Saint-Gobain after the group announced 1996 results in line with its expectations. Dupont Denant maintains its “overperform” recommendation on the group“s stock.