sain t-gobain annu al report 2008 annual report

30
The Division also continued to expand its geographic reach
in 2008, with the acquisition of MAG, Japan’s leading
glass wool manufacturer, and the successful integration
of Fiberglass Colombia and Fivenglass Venezuela.
Outlook for 2009
In 2009, the Insulation Division will be faced
with the challenges of a declining newbuild market in Europe
and increased capacity in Central Europe.
In North America, the Division’s latest acquisition – OFI –
will allow it to expand significantly in Canada
while generating synergies in the areas of procurement
and overheads.
The main objectives for the year are to implement structural
cost reductions while continuing to invest in Research
and Development and innovation in order to fully leverage
the opportunities offered by the renovation market
and the stricter energy efficiency standards applicable
to newbuilds.
Exterior Solutions
The Exterior Solutions Division reported like-for-like sales up
10.8% over the year and 6.4% in the fourth quarter.
Growth was led by a sharp 10.1% rise in prices and sustained
Pipe and Industrial Mortars volumes throughout the year.
In North America, Exterior Solutions volumes contracted
in the last three months of the year after rebounding strongly
in the second and third quarters, as a result of a further
decline in the US homebuilding market. Operating
margin increased to 8.1% from 7.4% in 2007.
Exterior Fittings
2008 business review
In the United States, the building market began to run out
of steam in 2006 and the downward trend steepened in 2008
due to the high levels of household debt and the tightening
of bank lending conditions. Housing starts stood at
an estimated 930,000 units, the lowest level for fifty years.
The situation was made worse by the financial crisis and
its effects on the entire economy. At the same time, rising
prices of crude oil and feedstocks in general severely
impacted production and logistics costs at CertainTeed
and its suppliers.
During the year, the industrial rationalization program
went ahead according to plan, with the closure of four plants
and implementation of measures to align headcount
with production levels.
Despite the unfavorable environment, the Exterior Fittings
business exceeded its objectives, with hurricane damage
leading to increased demand for roofing products,
which are primarily designed for the renovation market.
Outlook for 2009
The US economy shows no signs of recovering in 2009.
Housing starts are currently very low and Exterior Fittings
sales volumes are expected to plummet during the year.
Industrial Mortars
2008 business review
Overall sales by the Industrial Mortars, Expanded Clay
Pellets and Site & Plant Equipment businesses were generally
stable in 2008 based on a comparable scope of consolidation.
Industrial Mortars sales rose slightly, thanks to sustained
growth in South America and Eastern Europe.
Sales of Expanded Clay Pellets declined as a result
of the business’s greater sensitivity to trends in the newbuild
market. The Site & Plant Equipment business also experienced
a sharp drop in sales in the second half of the year.
Based on a comparable scope of consolidation and excluding
purchase accounting adjustments, Industrial Mortars
operating income was up slightly on 2007, reflecting
the impact of cost-cutting measures in Western Europe
and synergies between Weber and Maxit. Operating
income reported by the Expanded Clay Pellets and Site & Plant
Equipment businesses was down on the previous year,
due to lower sales.
Outlook for 2009
Business volumes look set to remain on a downward path
in Western Europe, particularly in the first half, and demand
is also expected to soften in all emerging markets,
with some countries such as Russia likely to experience a
significant fall-off. Overall, the Industrial Mortars Division
should hold up better in falling markets.
In response to the lack of visibility of the crisis’s magnitude
and its effects on the construction markets in 2009,
we will step up the cost-cutting and synergy programs
in this Division. These measures should help to keep operating
margins at a satisfactory level in the current environment.
While there will be no let-up in the drive to develop new
products, in order to maintain the innovation dynamic,
capital expenditure will be further scaled back in Western
Europe but will remain stable in emerging markets.
Pipe
2008 business review
A combination of buoyant end-markets and a competitive
product line-up enabled the Pipe Division to tap new
growth opportunities in 2008. The Division delivered very
good performances in emerging markets such as Brazil,
Africa (with strong advances in Libya and ongoing deliveries
in Mauritania and Algeria), Qatar (with a specific sanitation
systems offer), China and Eastern Europe (Serbia, Slovenia
and Romania).
Saint-Gobain - 2008 Annual Report