Saint-Gobain Cuts Profit Outlook as French Demand Weakens

Updated on
  • Company trims 2015 capital expenditure by EU100 million
  • Saint-Gobain reaffirms plan to buy controlling stake in Sika

Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, cut its full-year profit outlook and reduced investment plans on weak demand in France and slowing growth in Brazil.

Saint-Gobain expects to “at least maintain operating income on a like-for-like basis,” the Courbevoie, France-based company said in a statement Wednesday. In July, the company forecast an “improvement” in like-for-like operating income.

“The third quarter reflects a disappointing economic climate versus our expectations,” Chief Executive Officer Pierre-Andre de Chalendar said in the statement. He cited a contraction in France and “plunging” sales in the U.S. oil and gas industry as well as a slowdown in Brazil.

Third-quarter sales climbed 2.2 percent to 10 billion euros, Saint-Gobain said. The company trimmed 2015 investment to about 1.4 billion euros from a July forecast of 1.5 billion euros.

To boost business in faster-growing markets, Saint-Gobain is selling its European glass packaging unit Verallia and has signed a binding agreement to buy a 16 percent stake and 52 percent of the voting rights of Swiss adhesive and mortar maker Sika AG.

The 2.75-billion franc ($2.8 billion) Sika deal is mired in a legal battle pitting the Swiss seller and the French glass maker against Sika’s management and some minority investors, who are seeking to block the transaction or force Saint-Gobain to make a public offer for the rest of the company.

Saint-Gobain will “pursue its plan to acquire a controlling interest in Sika pending the decision in first instance of the Zug court expected during first-half 2016,” according to the statement.

(Updates with comment from CEO in third paragraph.)
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