The French group Saint-Gobain looking for new acquisitions as part of its sustainable development efforts


The French group Saint-Gobain looking for new acquisitions as part of its sustainable development efforts

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French group Saint-Gobain is looking for new acquisitions outside Europe as the construction equipment maker continues its transition to more environmentally friendly materials, its chief executive said.

Benoît Bazin, who is also expected to take over as chairman of Saint-Gobain next year, said the group still had “positions to take” in North America, Asia and emerging markets after a wave of acquisitions. ‘around 7 billion euros over the last five years.

The company, which makes materials such as skyscraper glass and soundproofing materials, has made dozens of divestitures in less profitable divisions or countries. At the same time, it has invested massively in chemicals like those used by cement manufacturers to reduce their emissions, as part of a sustainable development approach.

“Most of the work is done. That said, we still have ideas for acquisitions,” Bazin told the Financial Times, citing countries like India or Vietnam where the group does not offer the full range of materials in which it specializes, such as insulation.

The changes at Saint-Gobain, one of the world’s largest construction suppliers by turnover, with turnover of just over 51 billion euros last year, come as the sector faces higher borrowing costs. Rising interest rates globally have triggered a slowdown in the real estate sector, particularly in the United States, where the real estate market has cooled.

The construction sector is also facing a reckoning due to its environmental impact. Buildings themselves and the energy they consume account for almost 40% of all CO₂ emissions, according to numerous climate studies, including those from the United Nations.

Saint-Gobain, known for making the mirrors for the Palace of Versailles, struggled until recent years to increase its profit margin. The company, founded in the 17th century and one of the oldest in France, also got bogged down in a long and ultimately unsuccessful takeover battle for the Swiss chemical group Sika, which ended in 2018.

Since then, however, it has successfully completed dozens of other deals, including the $2.3 billion purchase of US chemical group and concrete additive maker GCP in 2021.

Saint-Gobain is now a specialist in “light construction”, focused on materials such as plasterboard used for partitions, or wooden or metal frames for buildings, designed to have a smaller environmental footprint. Nearly two-thirds of the approximately €5 billion in annual operating revenue that once came from Europe now comes from North America and emerging markets, with the European market increasingly focused on renovations rather than new constructions.

This shift, along with the push into chemicals, helped improve margins, which reached a record 11.3% in the first half of 2021.

Bazin, a company veteran who became chief executive in 2021, said new acquisitions would not represent “more than a billion euros” deals every time. He also shrugged off concerns that a market slowdown could weigh on future transactions, saying the housing market jolts were not universal or could turn a corner.

“I am confident that the United States will be resilient next year,” Bazin said, citing a promising job market and significant investments in factories and other areas.

Bazin will succeed Pierre-André de Chalendar next June, thus completing a succession demanded by certain investors to increase its share price. Chalendar has been at the helm of the company since 2007, including as just general manager.

Saint-Gobain shares are up 35 percent since the start of the year, although over two years they are more stable, closer to 2 percent.

The group’s sales are expected to fall in 2023, by around 6% according to average forecasts by Refinitiv analysts, before recovering in 2024, but rising prices have helped the group’s margins to resist better.

Some analysts have a darker view of the sector’s context, with those at Berenberg emphasizing that “trading remains difficult for the group”, although Bazin noted that cost inflation in areas like energy or raw materials s was also largely dissipated.

Additional reporting by Leila Abboud

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