PARIS — Saint-Gobain Flat Glass Sales Decrease, Devises Action Plan to Face 'Deteriorating Economic Climate'
July 27, 2012

Saint-Gobain has developed a plan of action to endure the hardships felt by the global economic downturn, according to a report of the company's activity thus far in 2012. The Paris-based company says with flat glass sales decreasing by 6.4 percent, its operating margin fell from 9.5 percent in 2011 to 2.1 percent and innovative materials sales declined by 3.1 percent.

Company officials say for the second half of 2012, they plan to "focus on sales prices, step up [their] cost-cutting program, and scale back [their] capital spending and financial investments compared to the second half of 2011, while maintaining a tight rein on operating working capital."

According to Saint-Gobain, the 2012 second quarter "was hit by a deterioration in the economic climate in Western Europe" and economic hardships felt in Asia and neighboring regions have adversely affected the company - especially its flat glass segment. The decrease of flat glass sales is attributed to "a contraction in automotive production in Western Europe, the collapse of the solar market, a fall in prices (especially float glass) and a steep rise in raw material and energy costs."

Sales prices overall declined by 2.3 percent, according to the company, stemming from weak residential construction and automotive markets in Western Europe. However, North American residential construction positively impacted the company.

"Besides the impact of one less working day and of very average weather conditions in Europe, trading for the group in the second quarter was also affected by the general slowdown in the economic environment in Western Europe - which the continued upturn in U.S. construction markets could not wholly offset," says chairman and CEO Pierre-André de Chalendar. "In this tough climate, we maintained our priority focus on sales prices in order to pass on the rise in raw material and energy costs over the full year, and also rolled out a new cost cutting program."

Chalendar says Saint-Gobain expects second-quarter international business trends to carry through the rest of the year with possible slight upturns for Asia and other regions.

"Against this backdrop, in the second half of 2012 we are firmly reinforcing our new action plan: focusing on sales prices, stepping up our cost cutting program and scaling back our capital spending and financial investments compared to second-half 2011, while maintaining a tight rein on operating working capital," Chalendar says. "Overall, in view of the deterioration in the economic climate since the beginning of 2012,we are now expecting for the year as a whole a measured rise in our sales prices, a limited decline in our volumes, and second-half operating income to be moderately down on our first-half performance. In addition, we confirm our target of maintaining high levels of free cash flow and a strong balance sheet."

Subscribe to USGlass magazine.
Subscribe to receive the free e-newsletter.