Compagnie de Saint Gobain : Half Year Financial Report 2022 - PDF

Half-year financial report 2022

Including:

• Half-yearmanagement Report 2022
• Condensed consolidated Financial Statements as of June 30, 2022
• Statutory Auditors' review report on the 2022 half-year financial information
• Statement by the persons responsible for the 2022 interim financial report

Compagnie de Saint-Gobain

Tour Saint-Gobain • 12, place de l'Iris • 92400 Courbevoie • France • Tél. [phone] • www.saint-gobain.com

S.A. with a share capital of € 2 080 248 152 • 542 039 532 R.C.S. Nanterre - APE 7010 Z

PRESS RELEASE

July 27, 2022, 6:00pm

Excellent first-half 2022 results

2022 outlook confirmed

• Sales up 15.1%, with dynamic organic growth of 15.0% versus H1 2021 (double- digit growth for all segments)
• Positive price-cost spread at the Group level in H1 2022
• Successful execution of our "Grow & Impact" plan thanks to the development of energy efficiency and decarbonization solutions for construction and industry
• Operating income up 17.5% on H1 2021 to €2,791 million (up 13% at constant exchange rates); record margin at 11.0%
• Record recurring net income, up 20.5% to €1,814 million
• Robust free cash flow of €1,686 million, with a conversion ratio of 51%
• Share buybacks: €431 million in H1 2022, net of employee shareholding transactions

A transformed and resilient Group

2022 outlook confirmed: further increase in operating income in 2022

compared to 2021 at constant exchange rates

Saint-Gobain

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Tour Saint-Gobain • 12 place de l'Iris • 92400 Courbevoie • France • Tel. [phone] • www.saint-gobain.com

Benoit Bazin, Chief Executive Officer of Saint-Gobain, commented:

"Our excellent first-half 2022 performance reflects the profound changes made in the Group, the successful execution of our "Grow & Impact" plan, and good momentum on our underlying markets. Thanks to our comprehensive range of sustainability solutions - for energy efficiency and decarbonization of construction and industry - and extensive exposure to the renovation market, the Group is ideally positioned on robust market fundamentals.

Over the coming quarters, we are ready to adapt as needed to the consequences of rising interest rates and inflation along with the geopolitical and energy situation in Europe. Each country CEO has designed action plans, focusing especially on margins and cash flow. In this more uncertain environment, our target is to continue to outperform our markets and our deep transformation will enable us to demonstrate greater resilience.

Over the past three years, our teams have successfully risen to the challenges of the coronavirus pandemic, supply chain disruptions, and a strong inflationary environment. With portfolio rotation of almost €10 billion in sales since the end of 2018, and with a local organization keenly aware of immediate realities on the ground, Saint-Gobain has significantly increased its value creation.

Against this backdrop, I am confident in the Group's 2022 outlook which targets a further increase in operating income compared to 2021 at constant exchange rates."

Like-for-like sales rose sharply in first-half 2022, up 15.0% on first-half 2021. This strong performance reflects the Group's position as worldwide leader in light and sustainable construction thanks to its unique range of innovative solutions offering sustainability and performance rolled out as part of the "Grow & Impact" plan. It also reflects good momentum across our segments, which all reported double-digit organic growth, driven in particular by renovation in Europe and by construction in the Americas and in Asia.

Thanks to the added value of the Group's solutions, the increase in prices was 15.3% over the first half (14.5% in the first quarter and 16.1% in the second) - in a far more inflationary raw material and energy cost environment - enabling the Group to generate a positive price-cost spread in the first half.

Faced with a high comparison basis last year, the Group's volumes stabilized over the first half (down 0.3%), and progressed 8.2% on first-half 2019 (pre-Covid), with the good first-quarter trends continuing in the second quarter (up 8.2% on 2019).

On a reported basis, sales hit a new record-high of €25,481 million, up 15.1% year-on-year. The 3.3% positive currency effect mainly reflects the appreciation of the US dollar, pound sterling, Brazilian real and other emerging country currencies.

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The Group structure impact reduced sales by 3.2% due to the ongoing optimization of the Group's profile, in terms of both disposals (mainly Lapeyre in France, distribution in the Netherlands and Spain, specialized distribution in the UK, Glassolutions in Germany and Denmark, and pipe in China) and acquisitions (mainly Chryso in construction chemicals and Panofrance, a French specialist in modular timber solutions). Overall, since the launch of its transformation at the end of 2018, Saint-Gobain has signed or closed divestments and acquisitions representing around €6.2 billion and €3.5 billion in sales, respectively.

The integration of Chryso is progressing particularly well, with strong organic growth of 24%, an increase in EBITDA to more than €50 million in the first half (after €87 million in EBITDA over 2021 as a whole) and a margin that remains best-in-class.

The acquisition of Kaycan, a leading exterior building materials player in North America and the top siding player in Canada, is expected to close on July 29, 2022. The acquisition of GCP Applied Technologies in construction chemicals is expected to close before year- end.

Operating income hit a new record in first-half2022, at €2,791 million, a rise of 17.5% as reported and of 13.0% at constant exchange rates (up 11.1% like-for-like) versus first-half 2021.

The Group's operating margin hit another all-timehigh of 11.0% in first-half2022 versus 10.7% in first-half 2021, a rise of 370 basis points since the start of the transformation (first-half 2018).

Amid accelerating inflation, Saint-Gobain now expects its energy and raw material costs to increase by almost €3 billion in 2022 compared to 2021 (versus €2.5 billion previously). This inflation concerns raw materials, freight and energy, especially in Europe. The Group has hedged around 80% of its natural gas and electricity purchasing needs for 2022 as a whole and around 60% for 2023. Saint-Gobain's total energy bill amounted to €1.5 billion in 2021, representing 3% of Group sales.

In light of its proactive energy cost hedging policy, the positive price-cost spread in the first half and the acceleration of the price effect to 15.3% in the first half, Saint-Gobain is confident that it will be able to offset the estimated inflation in raw material and energy costs for 2022.

In those countries most sensitive to Russian gas supplies for Saint-Gobain, namely Germany, the Czech Republic and Poland (the latter to become independent of Russian gas at the end of 2022), the Group has continued to formulate various plans for continuing its operations, enabling it to significantly mitigate the direct impact of a potential scenario in which all supplies of Russian gas are terminated to approximately 2% of consolidated sales through various levers:

• Classification of priority industries, particularly in glass and insulation;
• Use of alternative energy sources (heavy fuel or diesel) at certain sites. In Germany for example, the Group has four float lines: one has already been converted, and three are currently being prepared for a conversion by the end of the year;
• Increasing the flexibility of our plants to function with less energy.

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For the whole of Europe, the Group is putting into place logistics plans for the substitution of production between countries and has also set up a business continuity plan for the main gas- consuming manufacturing activities in the event of an exceptional reduction in supply:

• Glass: in all, Saint-Gobain has 13 float lines in Europe that are already or will soon be able to operate without Russian gas - four are already able to operate using alternative energy sources; four are currently being prepared for a possible conversion by the end of 2022; and five have very limited exposure to Russian gas;
• Insulation: more than half of the Group's European plants have an electricity-powered furnace; additional investments are being undertaken to use alternative energy sources and thereby maintain production at facilities where needed;
• Plasterboard: production facilities are extremely flexible; investments are in progress to convert certain processes to diesel or liquefied natural gas.

Northern Europe: strong sales growth driven by renovation; record margin

Sales in the Northern Europe Region were up by 15.2% against a high comparison basis. Despite some signs of a slowdown in new construction, renovation markets remained supportive on the back of demand driven by both government assistance measures and stricter regulations. Compared to first-half 2019 (pre-Covid), volumes progressed by around 6% over first-half 2022. The operating margin for the Region came in at a new record high of 8.2% (versus 7.9% in first-half 2021 and 6.0% in first-half 2019), thanks to an optimized business profile, good volume levels and especially successful efforts to pass on inflation to sales prices.

Nordic countries (13% of consolidated sales) reported further growth thanks to their successful presence across the entire trade professional value chain and to a renovation market supported by energy efficiency projects. The investment to create the world's first carbon-neutral plasterboard plant in Norway made good progress, with the plant scheduled to open in 2023. The UK (9% of consolidated sales) - which has been very active recently in optimizing its portfolio - reported a satisfactory performance in a market broadly down on first- half 2021, which had seen a very strong post-Covid rally. Germany (3% of consolidated sales) benefited from its solid market positions in energy efficiency renovation, with enhanced stimulus measures, and is preparing for increasing uncertainty as to the supply and cost of energy. Eastern Europe (4% of consolidated sales) reported very strong momentum thanks to very supportive markets and to market share gains in its main countries, particularly Poland, the Czech Republic and Romania.

Southern Europe - Middle East & Africa: strong sales momentum driven by renovation; robust margin

The Southern Europe - Middle East & Africa Region enjoyed good momentum, with sales up 13.6% driven by prices owing to a very high comparison basis for volumes in first-half 2021. Despite some signs of a slowdown in new construction, all countries in the Region reported double-digit organic growth as our comprehensive solutions enabled us to outperform the renovation market. Volumes progressed by around 7% in first-half 2022 compared to first-half 2019 (pre-Covid). The Region posted an excellent operating margin of 8.9% (a clear sequential increase after 7.4% in second-half 2021 and 5.0% in first-half 2019), supported by a strongly optimized profile post-transformation, a good level of prices and volumes, and productivity gains from our teams.

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