Saint-Gobain Group Results

The Saint-Gobain Group enjoyed upbeat trading activity in 2007, delivering 5% organic growth (including a 3.7% price impact and a 1.3% volume effect) despite the slowdown observed in the second half of the year, which compares to buoyant business levels in the second half of 2006.

The Group's five sectors all contributed to this performance, particularly activities linked to construction markets in Europe (Flat Glass, Building Distribution, Interior Solutions), which enjoyed vigorous demand bolstered by new regulations promoting energy efficiency in buildings. This strong momentum more than offset the downturn in US construction activities. Emerging countries and Asia, which account for 15% of Group sales and 19% of its operating income, continued to deliver robust growth (+16.6%) across all Group businesses. Lastly, industrial output and capital expenditure held firm in all regions.

The Flat Glass sector turned in the Group's strongest performance, both in terms of sales (+10.4% on a reported basis and +11.2% like-for-like) and operating income (+49.4%). This reflects vibrant demand across all of its markets (construction and automotive industries) in Europe as well as in emerging countries, sales price increases implemented in the construction glass business, and a rise in contributions from high value-added products. As a result, the sector's operating margin jumped to 12.8%, from 9.4% in 2006.

Within the High-Performance Materials (HPM) sector, Ceramics, Plastics & Abrasives reported 4.5% organic growth on the back of healthy capital expenditure and industrial output worldwide. Organic growth for the sector as a whole came in at 2.2% given the 4.2% downturn in the Reinforcements business, a significant part of which was sold to Owens Corning on November 1, 2007. The sector's operating margin improved significantly, up to 12.3% versus 10.1% in 2006.

Sales for the Construction Products (CP) sector edged up 2.5% like-for-like (+2.2% on a reported basis), spurred by vigorous growth in demand across western Europe and emerging countries (77% of total sales). This performance comfortably offsets - in both Interior and Exterior Solutions divisions - the downturn in the US housing market (23% of total sales). In this more difficult climate, operating margin held up well, coming in at 11.8% (compared to 12.7% in 2006): the operating margin for the Interior Solutions division stood at 14.8% (versus 16% in 2006), while Exterior Solutions reported an operating margin of 7.4% (down from 7.8% in 2006).

Building Distribution delivered a 10.8% jump in sales on a reported basis, boosted partly by acquisitions carried out in 2006 and 2007, coupled with solid 5.7% organic growth. Business held firm in most western European countries except Germany. As in previous years, the best like-for-like sales performances were achieved in Scandinavia, Spain, France and, to a lesser extent, the United Kingdom. Emerging countries continued to enjoy robust trading conditions, with sales in excess of the billion-euro mark, bolstered by organic growth of around 20% in both eastern Europe and Latin America. The Building Distribution business also delivered double-digit growth in operating income (+10.1%), which represents 5.7% of sales.

The Packaging sector posted a 5.5% rise in like-for-like sales, thanks chiefly to an increase in sales prices on the back of strong demand in Europe and emerging countries. Excluding the impact of the disposals of Calmar and Desjonquères, operating income for the sector surged 24% and operating margin for the year edged up to 11.1% from 9.1%. Taking into account the impact of the Calmar and Desjonquères divestments, which were completed on July 1st, 2006 and March 31st, 2007 respectively, operating income advanced 6.6% and operating margin edged up to 11.3% in 2007 from 9.2% a year earlier.

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