Benoit Bazin, Managing Director of Saint-Gobain: "We aim for a record operating result this year"

How do you look at the accounts of the first half?

Benoit Bazin : Nous avons dégagé des résultats records. Nous avons complètement dépassé la crise sanitaire et nous ne comparons plus nos indicateurs par rapport à l’an dernier mais par rapport au premier semestre 2019 : notre résultat d’exploitation s’est apprécié de 53% pour s’établir à 2,37 milliards à partir d’un chiffre d’affaires de 22,13 milliards, lui-même en croissance organique de 11,9%, matérialisant un gain significatif de 3,1 points de marge ressortie à un record de 10,7% contre 5,6% au 1^er semestre 2019. Autre performance, pour la première fois de notre histoire, le bénéfice net courant de Saint-Gobain dépasse sur un seul semestre le seuil des 1,5 milliard, en hausse de 60% par rapport à la même période pré-pandémique de 2019. Ces excellents résultats reflètent l’engagement et la mobilisation de nos équipes auxquelles je tiens à rendre hommage. Cette publication témoigne aussi de la réussite de notre plan de transformation « Transform & Grow » que le conseil d’administration de Saint-Gobain et son président Pierre-André de Chalendar m’avaient confié fin 2018. Il visait une nouvelle organisation du groupe, l’optimisation du portefeuille d’actifs et l’amélioration de la rentabilité. Ces trois objectifs sont aujourd’hui largement atteints et le groupe se trouve parfaitement positionné comme acteur de référence de la construction durable [ce que les anglo-saxons appellent « light & sustainable construction »]. Notre offre de solutions intégrées apporte à nos clients, de la construction comme de l’industrie, toutes les caractéristiques qu’ils attendent en matière de performance et de développement durable.Aujourd’hui, 120 pays représentant 70% du PIB mondial se sont engagés à l’horizon 2050 sur la neutralité carbone (et même 80% du PIB en intégrant la Chine qui s’est fixé cet objectif pour 2060) . Cette neutralité carbone ne pourra être atteinte qu’en décarbonant les bâtiments (40% des émissions), un marché sur lequel Saint-Gobain est le leader mondial. Ce qui devrait nous offrir trois décennies de croissance.

Has the strong dynamic already observed in the second half of 2020 still accelerated?How do you explain it?

B. B: Yes and for several reasons.The first is based on the resumption of all industrial and automotive markets, which was not yet the case on the second part of the last financial year.The second is due to the beneficial effect of government recovery plans which strengthen already very powerful fundamentals such as the needs for renovating buildings in Europe, new construction in the United States and urbanization in emerging countries.In France for example, 300,000 Maprime Renov files have been funded since the start of the year and the government has doubled its commitments on the subject;It is a device that works very well.

In other countries, are governments also very ambitious in their policy in favor of a more sustainable world (energy transition from clean buildings and mobility)?

B. B: Our Italian, British or German neighbors have also embarked on this virtuous path.The link is less immediate in the United States where the recovery plan of Joe Biden, which mobilizes considerable funds, is not also targeted directly on the theme of the energy transition, even if it is necessary to welcome that the States-UNIS have joined the Paris climate agreement.Ilexist nevertheless of tax support for first-time buyers for new construction in the United States.Europe is ahead and is more voluntary to reach a more sustainable world.In mid-July, the European Commission has set a new challenge, that of reducing greenhouse gas emissions by 55% over the period 2010-2030.This will require a doubling of the energy renovation efforts of buildings to achieve this.

The Saint-Gobain transformation plan has largely exceeded the initial objectives.What were the main lines?

B. B: It included 3 strong axes. First, a complete reorganization of the group by country to be both agile and closer to customers. Operational since the beginning of 2019, this new architecture is bearing fruit with a boss by country in charge of all Saint-Gobain's activities on the building market. Our ambition is to offer customers no longer products but a whole range of solutions. Then, concerning the evolution of our activity profile, we have exceeded the target of 3 billion in turnover by achieving 5.3 billion to date. We have sold around forty companies with very low profitability, including more than 10 of the start of the year. At the same time, we reinvested for the equivalent of 1.5 billion turnover in targets offering an average profitability of 20% like the OPA made at the end of 2019 on Continental Building Products to double our share of the In the American plasterboard, or more recently of the acquisition of Chryso, one of the world leaders in construction chemistry. Finally, the latest axis of the transformation plan aimed at improving 100 margin base points on the horizon at the end of 2021 compared to a level of 7.7% in 2018. Again, the target is widely exceeded with Record profitability of 10.7% at the end of the first half. Sur 12 months slippery, the margin stands at 10.4% and is improving 240 base points. In the end, Saint-Gobain was faster, stronger and further than what the initial transformation plan provided.

What remains to be done to complete the repositioning of the group?

B. B: I presented my roadmap to our shareholders at the last general meeting. Our strategy is resolutely turned towards growth. For this, we go from a product offer, formerly sold in isolation, to a offer of solutions, which we deploy all over the world to meet the challenge of carbon neutrality of buildings. To achieve this, we are assessing an extraordinary brands and know-how portfolio for the specific needs of our customers (craftsmen, architects, construction company), served by talented teams. We also bet on innovation and digital by transposing industrial innovations to building applications. For example, electrochrome glazing, which is a brightness transition glazing, was originally developed to equip vehicles with a sunroof. It is now used in the building and will equip the whole seat of Google in India. With Digital, we can as best as possible the data of our customers-artists to provide them with the best solutions.

Has a lot of optimization of the cost structure been widely carried out?Are there still improvement levers?

B. B: We are constantly having operational, industrial or logistical excellence programs, intended to always do better.In terms of structures, simplification efforts have been made well and are behind us.And today, the group fully harvested fruit with exceptional growth of 53% of operating profit in the first half and an increase of 11.9% of turnover compared to 2019.

The particularly solid group's financial structure offers it a significant room for maneuver to seize external growth opportunities?In which field and which geographic area?

B. B: Indeed, we endeavored from the start of the health crisis in 2020 to preserve and strengthen our balance sheet to be in position as soon as the crisis is released quickly. 19 acquisitions have been finalized since the start of the year and we are very satisfied with the strong performance of Continental Building Products. We remain ready to seize external growth opportunities creating value, but above all we continue to develop the group by internal growth. 13 factories have been opened over the last 12 months. Our priorities remain to strengthen the group in North America, a market on which we achieve 15% of turnover but which is our largest profits center, and in emerging Asia (20% of sales) at the same time by external growth and internal dynamics. By trade, the objective is to enrich our portfolio of solutions focused on sustainable construction. This is the case with the acquisition of Chryso for example, which we carried out in record time last May and which offers adjuvants to decarbonize concrete and therefore fully responds to our strategic positioning on the decarbonization of the world of the construction.

In terms of innovation, what are the main axes of the strategy?

B. B : Ils sont au nombre de trois : le premier autour de l’éco-innovation visant à apporter des solutions durables à nos clients, un deuxième reposant sur l’innovation ouverte à travers des partenariats avec des starts-up (31 ont été signés l’an dernier) et la présence de huit grands centres de recherche & développement implantés au contact de nos clients dans six pays majeurs (la France, les Etats-Unis, l’Allemagne, le Brésil, la Chine et l’Inde). Enfin, le dernier axe de travail consiste à trouver des nouveaux matériaux de spécialités,permettant à nos clients dans de nombreuses applications industrielles d’être plus performants et plus respectueux de l’environnement.

Are asbestos complaints in the United States definitively settled?

B. B: The situation has not changed particularly since 2020, an exercise during which litigation was suspended in the United States.We are waiting for a final legal resolution but which will not intervene for a few years.Our accounts have been the subject of significant provisions on this subject, which have not changed.

What is your ESG strategy?

B. B: ESG is at the heart of our activity model: being a leader in sustainable construction. In terms of environment, the objective is to minimize the group's carbon footprint and maximize our impact through our solutions, to allow our customers to reduce their greenhouse gas emissions. Our products (glass wool, glazing, plaster, ceilings, facades coatings, etc.) allow their lifespan to save, once installed in the building, 40 times more carbon than what is necessary for their manufacture . In the automobile, we are working on reducing the weight of glazing to lighten electric vehicles and thus increase the battery life, while guaranteeing good acoustic performance. We are therefore at the heart of decarbonation solutions for green mobility or sustainable construction. Within our production apparatus, several initiatives were taken in the first half with the launch for example in Norway from the first factory to the world of production of neutral plasterboard in carbon emission or in India of a sixth line of manufacture of Glazing reduced by 25% the emissions per square meter product. More generally, the group is committed by 2030 to reduce its carbon footprint by 33% compared to 2017 and to reach carbon neutrality in 2050. On a social level, absolute priority concerns the safety at work of our employees . We also have objectives of feminization of our teams (more than 25% of women executives within the group at the end of 2020 and 38% within the executive committee) and internationalization (50% of the members of the management team are Non-French and approximately 90% of country owners are premises) and more generally inclusion. Finally, the group, in France, is recruiting 2,000 work -study students and trains 5,000 craftsmen per year.

Do you give prospects for this year?Longer term ?

B. B: We revise our prospects for the financial year to target a record year in terms of operating results.We will reveal our medium -term objectives on October 6 on the occasion of a day with investors.

Remind us of your group's distribution policy?

B. B : Saint-Gobain a toujours été attaché à la rémunération de ses actionnaires. Environ 40% du résultat net leur est reversé chaque année et cette politique sera poursuivie avec la perspective d’une augmentation du dividende en ligne avec la trajectoire de notre performance. S’ajoute à la rémunération des actionnaires le parcours de l’action. Celle-ci a vu son cours de bourse doubler depuis le lancement fin 2018 du plan de transformation du groupe « Transform & Grow ». Et je suis confiant que son potentiel estencore élevé !