Saint-Gobain Boosts Cost-Savings Plan as It Trims 2012 Outlook

Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, is seeking an additional 160 million euros ($197 million) in cost savings as it reduced its full-year outlook because of Europe’s economic crisis.

“In view of the deterioration in the economic climate since the beginning of 2012, we are now expecting for the year as a whole a measured rise in our sales prices, a limited decline in our volumes, and second-half operating income to be moderately down on our first-half performance,” Chief Executive Officer Pierre-Andre de Chalendar said in a statement today.

The CEO forecast in June that 2012 revenue growth excluding exchange rates and acquisitions would be “moderate,” mainly led by price increases, while operating income and profitability “should prove resilient.”

The additional savings, to occur in the second half, are part of a planned 500 million euros in full-year reductions, the company said. The CEO said last month that first-half earnings would drop on lower glass sales as government austerity measures and rising unemployment hurt Europe’s car market. Japan’s Asahi Glass Co. on July 11 cut its 2012 forecast for sales and profit, citing a drop in European construction and solar-panel markets.

Saint-Gobain, based in Courbevoie near Paris, said in the statement that operating income fell 12 percent in the first half from a year earlier to 1.51 billion euros. Analysts surveyed by Bloomberg had expected on average a profit of 1.54 billion euros. Net income fell 34 percent to 506 million euros, trailing the average estimate of 695 million euros.

‘Scaling Back’

“We expect the business trends observed in the second quarter to continue through the second half, although Asia and emerging countries should witness timid growth,” de Chalendar said. “Against this backdrop, in the second half of 2012 we are firmly reinforcing our new action plan: focusing on sales prices, stepping up our cost cutting program and scaling back our capital spending and financial investments compared to second-half 2011, while maintaining a tight rein on operating working capital.”

The cost-savings plan will have a full-year impact of 750 million euros in 2013, the company said.

De Chalendar also confirmed “a target of maintaining high levels of free cash flow and a strong balance sheet” for the full year.

Saint-Gobain rose 4.4 percent to 27.48 euros at the close in Paris, before the company announced its earnings. The shares have declined 7.4 percent this year.

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