Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Compagnie de Saint-Gobain SA (CODGF, Financial) achieved a record operating margin of 11.7% in H1 2024, surpassing the previous record of 11.3% in H1 2023.
- The company reported strong recurring net income of EUR 1.7 billion and record levels of free cash flow at EUR 2.5 billion, up 12% from the previous year.
- Strategic repositioning towards high-growth markets and construction chemicals has been successful, with significant acquisitions in North America, Asia, and emerging markets.
- The acquisition of FOSROC is expected to add EUR 2 billion in sales and EUR 450 million in EBITDA after synergies, enhancing the company's construction chemicals platform.
- Compagnie de Saint-Gobain SA (CODGF) has maintained a strong balance sheet with a net debt to EBITDA ratio of 1.4 times, even after recent acquisitions.
Negative Points
- Sales volumes were impacted by weakness in new construction in Europe, although there was growth in the Americas and Asia Pacific.
- The European new construction market remains down, with France experiencing significant declines, although the renovation market is resilient.
- Latin American markets remain down, although there was stabilization in Q2 with flat volumes.
- The company expects a smaller price-cost spread in H2 compared to H1 due to a tougher comparison basis.
- The mobility segment faces potential challenges due to a slowdown in the automotive market, although the company expects stable performance.
Q & A Highlights
Q: Can you provide an update on your volume and pricing forecasts for the rest of the year?
A: We have reached a floor in volumes and expect a low single-digit volume decrease for the full year. We anticipate a sequential improvement in volumes in the second half. On pricing, we expect a slightly negative price effect in the second half, but less negative than in the first half. We remain confident in delivering a positive price-cost spread for the full year. - Benoit Bazin, CEO
Q: How do you plan to manage costs and CapEx as volumes potentially grow?
A: We have been proactive in adapting our cost structure and will continue to do so. We expect some positive leverage effects as volumes return. CapEx will be allocated based on growth opportunities, and we remain disciplined in managing working capital. - Sreedhar Natarajan, CFO
Q: Can you elaborate on the performance of the GCP and CHRYSO acquisitions?
A: We have improved the margin of the combined GCP and CHRYSO entity by 400 basis points last year and continue to make progress. We delivered 3% organic growth in this segment in the second quarter, maintaining a good momentum. - Benoit Bazin, CEO
Q: What are your expectations for the mobility segment in the coming quarters?
A: We expect our performance in the mobility segment to remain stable in the second half, benefiting from innovation and previous model wins across various regions, including Europe, North America, and Asia. - Benoit Bazin, CEO
Q: How do you view the potential for further M&A activity given your current leverage?
A: We aim to maintain a disciplined approach to leverage, staying below our target range of 1.5 to 2 times. We will continue to pursue strategic M&A opportunities aligned with our geographic and construction chemicals growth axes, ensuring cultural and financial alignment. - Benoit Bazin, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
