Saint-Gobain

17,3% Saint-Gobain
Production, transformation and distribution of building materials

SAINT-GOBAIN FOCUSES ON ENERGY EFFICIENCY

SAINT-GOBAIN IN BRIEF

Why did we invest in Saint-Gobain?

Saint-Gobain bases its expansion on value-added segments in developed markets and the strong activity in high-growth countries, by offering solutions adapted to construction markets at varying stages of development. With its strategy focusing on housing markets, Saint-Gobain aims to become the leader in Sustainable Habitat and a model of environmental protection. Accordingly, it develops solutions to help its business customers build and renovate energy-efficient buildings that are healthy, attractive and comfortable, while protecting natural resources. Saint-Gobain is uniquely positioned to meet the above challenges and answer the needs of high-growth markets, with:
• global or European leadership positions in all its businesses, with solutions suited to the needs of local markets;
• solutions combining products and services;
• exceptional potential for innovation, driven by its industrial expertise and acquired skills in Materials;
• a unique portfolio of products and solutions in the energy efficiency sector.
The Group has built leadership positions in three main businesses, which are building products, innovative materials and specialized distribution. It benefits from extremely strong growth drivers in the current environment: highly innovative products, increasingly demanding energy efficiency standards in developed countries, and exposure to Asia and high-growth countries.

What were the highlights of 2011

Significant events in 2011 were:
• an acceleration of the improvement observed in 2010, despite a slowing of growth in the second half, enabling the group to reach its targets;
.• a resumption of financial investments and capital expenditures focusing on Saint-Gobain’s growth areas: fast-growing economies ( 1,100 million), energy and energy efficiency markets ( 900 million) and consolidation in the Construction Products and Building Distribution businesses ( 300 million).
• targeted acquisitions promising rapid value creation: investment in securities was five times higher than in 2010 ( 702 million vs. 129 million) and included the acquisition of the Build Center network and Brossette from Wolesley (1) for around 350 million, as well as the acquisition of Electrotherm’s Pipes division(2) in India.
In a still-fragile economic environment, the Group confirmed its capacity for growth in 2011, delivering a 5.0% rise in like-for-like sales (comparable Group structure and exchange rates). All of the Group’s geographic areas and Business Sectors contributed to this performance, led by vigorous momentum in emerging countries and Asia as well as further advances in markets related to industrial output in both North America and Western Europe. In contrast, markets related to capital spending slowed in the second half, particularly across Western Europe and in Asia and emerging countries.
Sales growth also reflects the gradual upturn in residential construction and renovation markets in most major European countries in which the Group operates. In particular, the Group’s healthy trading on construction markets in Western Europe continues to be powered by high value-added solutions and especially businesses linked to energy efficiency in the Habitat market. These activities reported further strong growth gains throughout the year, buoyed by new regulations. Despite a temporary rebound in renovation reflecting the positive impact of early-year storms, the US construction market remained stable, with trading at a record low.
Businesses related to household consumption (Packaging, Verallia) reported moderate growth, spurred chiefly by sales prices. Overall, the group reported organic growth of 5.0% (positive volume and price impacts of 2.3% and 2.7%, respectively).
In line with targets, and despite the impact of spiraling raw material and energy costs, the Group reported a double-digit rise in operating income (10.4%) to 3.441 billion. Consequently, the operating margin continued to improve, up to 8.2% of sales (10.9% excluding Building Distribution), versus 7.8% (10.7% excluding Building Distribution) in 2010. The operating margin is virtually back at its 2008 level despite sales volumes being 11.0% lower than in 2008.
The plan to list Verallia on the stock exchange, which was initiated in the fall of 2010, was postponed due to unfavorable market conditions, despite strong interest from both European and US institutional investors. After three years of fruitful collaboration, in May 2011 Wendel and Saint-Gobain defined a set of principles and objectives for cooperation over the next ten years, founded on support for the strategy approved by Saint-Gobain’s Board of Directors, respect for Saint-Gobain’s independence, and a stable shareholding.

Outlook for development

Saint-Gobain’s targets for 2012:
• moderate organic growth, driven chiefly by sales prices;
• operating income and profitability to prove resilient;
• high levels of free cash flow and capex to stabilize at its 2011 level (around 2 billion);
• a persistently strong balance sheet.

(1) Subject to approval by the European competition authorities.
(2) Subject to approval by the Indian competition authorities.