EuroBusiness Media (EBM): Pierre-André de Chalendar, hello
Pierre-André de Chalendar: Hello.
EBM: You are the Chairman and CEO of Saint-Gobain and you are publishing your annual results today. How did Saint-Gobain perform in 2018?
Pierre-André de Chalendar: In 2018, Saint-Gobain performed well. We are posting good, solid and improving operating performance. If you take the main figures, good sales growth, throughout all the year, with overall 4.4% increase in organic sales, which led also to an improving operating profit: 4.5% through the whole year, but with an acceleration in the second half at +7.2% and an increase in the operating margin. Below the operating line, we have some negative impact on our P&L, on net income, linked with the revaluation of a certain asset in line with our transformation programme. But our recurring net income, which is more an operating measure, is up 6% which is leading the board to propose an increase in the dividend to 1.33 euros per share. So, all in all, good operating, solid and improving performance for Saint-Gobain in 2018.
EBM: And what drove this growth?
Pierre-André de Chalendar: Well this growth, throughout the year in terms of sales and operating income, comes first from a good price. We put a lot of emphasis on price, so a good price effect and what is very important is that we have a good exit rate. So the fourth quarter is even higher than the average. We had also reasonably good markets in the various geographies where we operate. We benefit from a strong, disciplined cost management. We realise €300 million of cost savings, as expected and the operating performance of our plants which was where we had some problems in the first half, these problems are behind us and that’s why we had a significantly better second half.
EBM: What were the most dynamic sectors?
Pierre-André de Chalendar: What is interesting in terms of volume and sales is that all our activities registered growth and all our geographies registered growth. So Innovative Materials; we had very significant growth led by our High-Performance Materials division which had a very good performance and a record operating profit. Our Flat Glass business within Innovative Materials, was impacted in the second half from a slowdown in the automotive market, especially in China and Europe, but we had overall growth. Construction Products benefitted from good growth everywhere and the same for Distribution.
In terms of geographies, we had growth in all our regions. France, which is still our biggest market, we had good organic growth in France as well as in the rest of Europe, driven mostly by the Nordics and Southern Europe. Germany and the UK were more mixed. We had very a good performance in terms of growth in North America and in Asia and in emerging countries where we also benefit from the fact that’s where we have invested significantly in the last few years, and we are getting the benefit of our investments in those regions, both in terms of growth and in terms of profitability.
EBM: In November 2018 you launched the “Transform & Grow” programme, can you tell us more about the components of this plan?
Pierre-André de Chalendar: This programme “Transform & Grow”, if there is one single objective; which is in the name of this programme, it is growth. We want to achieve more growth in the long term for Saint-Gobain through two main plans. One which is an acceleration of our portfolio rotation and second a radical transformation of Saint-Gobain in terms of organisation, to be more aligned with our customers, to benefit more from the digital revolution and to be more agile. All in all, this plan “Transform & Grow” will lead to an operating income improvement of 100 base points by the end of 2020.
EBM: Where are you with the implementation of the new organization?
Pierre-André de Chalendar: We went very fast since November 23rd when we announced this organisation. By the 1st of January, all appointments had been made. We appointed more than 250 people, so all is in place, with four new geographic regions and a new worldwide organisation, High-Performance Solutions. So, all the organisation is in place together with the central functions and now they are working to deliver the synergies and to unleash growth at the same time and to increase agility through some delayering and speeding up the decision process. So, I would say we are in good speed and compared to our plan we are progressing very fast. In the framework of this new organisation, we have also a new Chief Operating Officer, Benoït Bazin whose main task is to lead the implementation of this programme, “Transform & Grow” and he is well on his way to do that.
EBM: The “Transform & Grow” plan includes a portfolio rotation pillar with expected acquisitions and disposals, where do you stand on those today?
Pierre-André de Chalendar: We have been very active in terms of acquisitions in 2018, with 27 acquisitions and a volume which is a bit higher than what we had planned on average for the next few years. And on the disposal plan, we have an objective of €3 billion by the end of 2019, we are well on our way with around €2.5 billion already signed or launched and we have a number of new projects in the framework of a full review, within the framework of our organisation of our portfolios and activities which will lead to more acquisitions and more disposals.
EBM: Beyond the transformation plan we just discussed, what are the other main achievements of Saint-Gobain in 2018?
Pierre-André de Chalendar: I would say there are two basic things which are driving our actions on a daily basis which are real key ingredients of our DNA: innovation and sustainability. In the front of innovation, Saint-Gobain is every year more active, and I am very proud that we are - every year in the last 8 years - part of the top 100 innovative companies in the world, and we are continuing to launch a number of new products, new solutions for our main markets, whether it is a new dynamic glass, whether it is a new type of plasterboard… in all of our businesses and this is a major element of our future growth: innovation. Second, sustainability which is also a part of our DNA. You know that a big part of the solutions that Saint-Gobain are putting on the market are helping our customers to reduce their energy spend, especially in buildings where we work on the envelope of the buildings. Sustainability is key, but also in the way we work internally, we are reducing our environmental footprint, we are improving that, we have got some good recognition also from outside and so sustainability is at the core of what we do and I am proud of our achievements in 2018.
EBM: Let’s take a look now at the digital transformation of the company? How does that translate?
Pierre-André de Chalendar: I would say that the digital transformation, we have it on three fronts. First, in our plants, where we have a huge number of initiatives which are under this Industry 4.0 concept and we have made a lot of progress with pilot plants in all our businesses. Second, the relationship with our customers and from that standpoint our new organisation is going to help us to benefit from the fact that we are quite unique, especially in the construction world, and digital is giving us many tools that, with the new organisation, we are going to seize to help our customers more. Third, internally it changes the way we work so all functions of Saint-Gobain are impacted. To give you an indication of the progress we are making, a key part, if you want go faster, is to have a more digitalised workforce. So we train our people a lot but every year in Saint-Gobain we hire around 30,000 people. Very close to 50% of these people are very young, so they are, I would say, “digital natives”. And if I take the executive, more than 10% of the people we hire are specifically strong in digital and are going to help us also to move faster.
EBM: Let’s conclude now, what are the Group’s outlook and perspectives and objectives for 2019?
Pierre-André de Chalendar: First of all, it’s early in the year, but the year is starting well, which is really good to take. I would say that our markets in 2018, there are some uncertainties, but they should globally remain robust and whether it is in the United States, whether it is in Europe, where I think that overall we will have good markets, and also in emerging markets. So, in this framework, Saint-Gobain is going to continue to implement its strategy and today I expect a further increase in our operating profit on a comparable basis compared to 2018. So we enter the year with a very good level of confidence in the future.
EBM: Pierre-André de Chalendar, thank you very much.
Pierre-André de Chalendar: Thank you.
