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• Strong growth in operating performance : - Sales up 8.2% to EUR 32,025 million, - Operating income up 7.8% to EUR 2,632 million, up 10.3% at constant exchange rates*. On a like-for-like basis : - Sales up 4.6% - Operating income up 8.1% • Net income excluding capital gains and losses up by 10.0%, to eur 1,122 million. • Further decrease in net debt, to eur 5.6 billion. 2005 TARGETS • To achieve 6% growth in operating income at constant exchange rates (average rates for 2004) and based on comparable accounting standards. • To maintain strong free cash flow levels. * based on average 2003 exchange rates. Consolidated sales for the Saint-Gobain Group are estimated at EUR 32,025 million for 2004, representing an increase of 8.2% after a negative currency effect of 2.2%. The contribution of the Group’s acquisitions to the growth figure, net of disposals, amounted to EUR 1,717 million during the year, accounting for a rise of 5.8% in net sales. On a like-for-like basis, the Group’s consolidated sales grew by 4.6% in 2004. Saint-Gobain Group consolidated net income is estimated at EUR 1,083 million, up 4.2% on the year-earlier figure. Excluding capital gains and losses, net income is expected to come in at EUR 1,122 million, up 10.0% on 2003. This earnings growth was primarily fueled by an increase in operating income. This performance testifies to the Group’s robustness and the dynamics of its business model, which became even more visible in 2004 as new businesses (Building Distribution and High-Performance Materials) developed and emerging markets picked up significantly in all sectors.  Organization and presentation of financial statementsIn 2004, the Group modified its structure to bring it into line with its business model. As a result, the three existing business sectors (Glass, Housing Products and High-Performance Materials) have been reorganized into five new business sectors (two for new businesses, three for historic ones). The new structure stands as follows: New businesses : - Building Distribution sector - High-Performance Materials (HPM) sector, which includes Ceramics, Plastics and Abrasives, and now also Reinforcements Historic businesses : - Flat Glass sector - Packaging sector - Construction Products sector, which includes Building Materials, Insulation and Pipe Segment information (see appendix 1) and comments by business (see below) are now presented in accordance with this new structure, and the results of the Insulation and Reinforcements divisions are published separately (see appendices 2 and 3 for historic data). Performance of Group Sectors and Divisions: Overall, apart from the Pipe Division, all of the Group’s divisions reported sales growth on a like-for-like basis in 2004. In line with the economic scenario anticipated at the beginning of the year and the trends observed in the first nine months, the new businesses (Building Distribution and High-Performance Materials), as well as emerging countries in general (sales up 13.6% and operating income up 28.4%), proved to be the Group’s main growth and profitability drivers in 2004. New businesses :
Historic businesses :
ANALYSIS OF THE ESTIMATED 2004 CONSOLIDATED FINANCIAL STATEMENTS Based on the estimates presented at the Board of Directors’ Meeting of January 27, 2005, unaudited key consolidated data for 2004 are set out in the table below. The final 2004 consolidated financial statements will be approved by the Board of Directors on March 24, 2005.
Group sales are up by 8.2%. At constant exchange rates*, consolidated sales rose by 10.3% on an actual structure basis, and by 6.8% excluding Dahl. On a like-for-like basis, sales growth stands at 4.6%, with a 2.9% rise in sales volumes and a 1.7% rise in prices. The breakdown of like-for-like sales by geographic area reveals very robust business levels in France - despite the drop in sales of the Pipe division - and especially in the United States, which posted an increase of 10.1%. Growth in other western European countries – also affected by the decline in the Pipe division – showed little growth. Delivering like-for-like sales growth of 13.9%, emerging countries remain the Group’s biggest growth driver. By geographic area, France accounted for 31.7% of total sales, with other western European contributing 40.8%, North America 17%, and emerging countries and Asia 10.5%. * based on average 2003 exchange rates. Operating income is up by 7.8%. At constant exchange rates*, it rose 10.3% on an actual structure basis and 7.2% excluding Dahl, thus ahead of the 7% target. Like-for-like growth in operating income stands at 8.1%. Operating margin stood at 8.2% compared with 8.3% in 2003. This slight contraction is solely attributable to the increased relative weight of Building Distribution within the Group. This sector’s operating margin rose significantly, to 5.4% of sales in 2004, up from 5.0% in 2003. Excluding Building Distribution, the Group’s operating margin remained stable at 10.1%. Margins improved in all of the geographic areas where the Group operates except France, where the Pipe Division reported lower earnings as a result of significant increases in the cost of raw materials. The strongest growth in operating income (28.5%) was generated by the emerging countries, which also saw their operating margin rise from 10.5% to 11.8%. Net interest and other financial charges decreased 3.5% to EUR 441 million from EUR 457 million in 2003, primarily thanks to the favorable impact of converting interest on dollar-denominated debt into euros. Non-operating costs came in at EUR 280 million, up slightly in relation to 2003 (EUR 275 million). This figure includes a EUR 108 million charge for the cost of asbestos-related claims filed against CertainTeed, compared to EUR 100 million in 2003 (see below). The Group has registered a EUR 44 million loss on sales of non-current assets, due to write-downs and disposal losses, and despite the capital gain realized on the sale of the Group’s remaining interest in Vivendi Universal. Goodwill amortization remained more or less stable at EUR 155 million. Minority interests rose by 42.3% due to the increase in the contribution from the Group’s Brazilian subsidiaries. It climbed from EUR 26 million in 2003 to EUR 37 million in 2004. Consolidated net income is estimated at EUR 1,083 million, up 4.2% on the year-earlier figure. Based on the 340,988,000 shares outstanding at December 31, 2004, earnings per share totaled EUR 3.18, which represents a rise of 6.4% on 2003 (EUR 2.99 for 347,824,967 shares). Based on the number of shares excluding treasury stock outstanding at December 31, 2004 (335,127,590 shares compared with 336,185,581 shares at December 31, 2003), earnings per share amounts to EUR 3.23, which denotes an increase of 4.5% on 2003 (EUR 3.09). Excluding profit and loss on sales of non-current assets, consolidated net income is estimated at EUR 1,122 million, up 10.0% on the 2003 figure. Based on the 340,988,000 shares outstanding at December 31, 2004, earnings per share excluding profit on sales of non-current assets amounted to EUR 3.29, compared with EUR 2.93 in 2003 (based on 347,824,967 shares), which represents an increase of 12.3%. Based on the number of shares excluding treasury stock outstanding at December 31, 2004 (335,127,590 shares compared with 336,185,581 shares at December 31, 2003), earnings per share excluding profit on sales of non-current assets amounts to EUR 3.35, reflecting a rise of 10.6% on 2003 (EUR 3.03). Cash flow from operations came to EUR 2,612 million, an increase of 5.7% on the prior-year figure. Excluding the tax impact of capital gains and losses, cash flow from operations rose by 2.7% in relation to 2003, coming in at EUR 2,608 million, compared with EUR 2,540 million a year earlier. Capital expenditure rose 13.8% to EUR 1,537 million, from EUR 1,351 million in 2003, and represented 4.8% of sales, compared to 4.6% in 2003. This rise was mainly fueled by the ramp-up of the capital expenditure program in emerging countries, particularly Asia. * based on average 2003 exchange rates Investments in securities totaled EUR 899 million, including EUR 658 million relating to acquisitions (value of shares acquired) – primarily concerning Building Distribution (EUR 529 million) – and EUR 241 million relating to share buyback programs. Net indebtedness stood at EUR 5.6 billion at December 31, 2004, down slightly from EUR 5.7 billion one year earlier, despite the increase in the amount spent on acquisitions. The gearing ratio – based on consolidated shareholders’ equity plus non-voting participating securities – stands at 47%. ASBESTOS CLAIMS IN THE UNITED STATES During 2004, around 18,000 new asbestos claims were filed against CertainTeed, including 2,000 in the state of Mississippi, representing a decline of approximately 70% in relation to 2003 (62,000 including 29,000 in Mississippi). Approximately 4,000 new claims were filed in the fourth quarter of 2004, which is more or less on a par with the number of claims filed in each of the first three quarters of the year. The number of new claims seems to have stabilized at around 4,000 to 5,000 per quarter. Approximately 20,000 claims were resolved during the year, including 3,000 in the fourth quarter. At December 31, 2004, some 106,000 claims were outstanding, slightly down on the 108,000 claims in progress at December 31, 2003. The average cost of claims settled in 2004 was approximately USD 2,900 per claim, compared with USD 2,100 in 2003. This increase was due to the lower number of mass claims as a proportion of overall claims settled and claims currently in the process of being settled. Based on all these trends, an additional accrual of USD 134 million (EUR 108 million) was recorded in 2004, increasing the total coverage for CertainTeed’s asbestos-related claims to USD 402 million for the period ended December 31, 2004. CertainTeed’s risk concerning asbestos-related claims is now exclusively covered by way of provisions as insurance coverage was exhausted in 2004. Driven by the new Chairman of the US Senate Judiciary Committee, further active negotiations have taken place during the last few weeks concerning the proposed legislation to create a National Asbestos Trust Fund in the United States. A new bill is expected to be put before the Senate in February. 2005 OUTLOOK AND TARGETS 2004 confirmed the efficiency of the business model implemented by the Group, which is based on three strategic drivers: a strong increase in Building Materials Distribution, growth dynamics in High Performance Materials and development of all businesses in emerging countries. Based on the same dynamics, and in an environment of moderate economic growth, the Group’s target for 2005 is to achieve 6% growth in operating income at constant exchange rates (average rates for 2004) and based on comparable accounting standards. The group also aims to maintain strong free cash flow levels. Forthcoming results announcements: |
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