sain t-gobain annu al report 2008 annual report

Results by Sector
The Innovative Materials Sector
Innovative Materials sales grew 1.3% like-for-like over the year
despite a 7.8% fall in the fourth quarter triggered by the sharp
contraction in the automobile market and the worsening
global economic environment. The Sector’s operating margin
improved to 12.9% in 2008 from 12.6% the previous year.
Innovative Materials Sector - Flat Glass
Contribution to the Group 2008 2007 2006
% of net sales 13 13 12
% of operating income 19 17 13
% of cash flow from operations 21 18 16
Key figures
(in € millions) 2008 2007 2006
Net sales 5 549 5 611 5 083
Operating income 701 717 480
Cash flow from operations 733 677 529
Capital expenditure (1) 576 523 448
2008 business review
Flat Glass sales in 2008 totaled €5.5 billion, down 1.1% on
a reported basis from 2007 but up 1% like-for-like, reflecting
the euro’s appreciation against other currencies.
Sales of float glass rose 1.3% like-for-like. Unit sales
to the construction industry in Europe contracted slightly
year-on-year, undermined by a sharp drop in the fourth
quarter, and prices also softened. However, the impact on
income was partly offset by good growth in value-added
products, led by an 8.3% increase in layered glass sales.
Outside Europe, unit sales rose in Latin America – led by Brazil
– and in Asia, although demand weakened at the end
of the year.
Sales by Les Vitrages de Saint-Gobain in the building
transformation and specialty markets were slightly above
2007 levels. Trends were uneven, with falls in Spain, the United
Kingdom and Poland contrasting with resilient performances
in France, Germany and most other European countries.
The product mix continued to be enhanced, with the
development of layered glass products and specialty products
such as safety glass.
Sekurit’s sales declined 4.1% on a reported basis and 3.3%
like-for-like, due to sustained first-half growth in the
automobile market giving way to a sharp dive in the last
quarter.
Europe was particularly badly hit, with automobile production
plunging 26% compared with the same period of 2007.
The other car-producing countries also experienced
downturns, but to varying extents, with falls of 14% in China,
25% in Brazil and 14% in South Korea.
Flat Glass operating income held relatively firm at just over
€701 million. Improved manufacturing performance helped
to limit the consequences of low volumes and the cost
inflation experienced in the first half, while the restructuring
measures undertaken in 2007, particularly in South Korea
and China, drove a marked improvement in the region’s
results. Operations in India continued to grow at
a satisfactory rate.
Outlook for 2009
After the downturn observed in the automobile and habitat
and construction markets in the second half of last year, the
economic environment looks set to remain difficult in 2009.
However, the easing of inflationary pressures on feedstock
and energy costs should help to preserve margins. Priority
has been given to swiftly aligning production capacity with
market demand and speeding up implementation of programs
to cut production costs and overheads.
In order to maintain the level of free cash-flow, routine capital
expenditure will be scaled back, without however
compromising future growth drivers such as solar energy
solutions and intelligent glass. Despite the slowdown
observed in some countries such as Spain, the solar market
will play a key role in leading the development of
the Flat Glass business.
Research and Development spending will remain high,
to ensure that the Flat Glass Division remains at the forefront
of innovation, particularly in solar energy solutions
and in energy-saving solutions for the homebuilding
and renovation market and the automobile market.
Innovative Materials Sector –
High-Performance Materials
Contribution to the Group 2008 2007 2006
% of net sales 10 11 12
% of operating income 15 14 13
% of cash flow from operations 12 13 13
Key figures
(in € millions) 2008 2007 2006
Net sales 4 165 4 752 4 938
Operating income 543 585 500
Cash flow from operations 437 487 432
Capital expenditure (1) 223 238 225
MANAGEMENT REPORT
27
(1)
Excluding finance leases.
Sales data by Sector include inter-sector sales.
Saint-Gobain - 2008 Annual Report