EUR 850.00 For Business Accounts Only

Morningstar | We are encouraged to see Saint-Gobain tackling strategic issues.

Compagnie de Saint-Gobain is a global giant in the building materials industry. Given its significant exposure to European construction markets, the company's financial performance was depressed after the credit crisis, but is now improving again. Key business segments include innovative materials (flat glass, high-performance materials), construction products (interior solutions, exterior solutions), and building distribution.In addition to increasing exposure to construction-related end markets, major corporate goals include expanding operations in emerging markets and increasing the number of differentiated products. We think these are both valuable endeavours. During the past decade, sales in emerging markets have grown at a 9% clip, while developed markets have essentially flat-lined. In addition, margins in emerging markets tend to be meaningfully higher. Differentiation is primarily seen in the high-performance materials segment, where products are often codeveloped with customers. As a result, this segment benefits from switching costs and arguably the best returns on capital; we would be pleased if it were to become a bigger component of the company’s business portfolio.While emerging markets continue to increase in importance at Saint-Gobain, the company’s near- to medium-term fortunes are still largely tied to a recovery in European construction markets, particularly France. France is now beginning to improve, setting up Saint-Gobain for strong performance in the next few years. Saint-Gobain is well positioned to benefit from the rebound in the economic environment. The company has removed more than EUR 4 billion from its cost structure since 2008, and we think roughly half of these savings are structural.