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United States The market loses patience with Saint-Gobain -March 01, 2024 at 10:37 am EST
The financial results of the world leader in building materials, published yesterday, are always eagerly awaited by investors, who use it to take the pulse of the economy.
Three years ago, almost to the day, MarketScreener included the Saint-Gobain share in its European portfolio - it had long since left it - on the grounds that the group seemed well placed to absorb a hyper-inflationary context, thanks in particular to a restructuring and upmarket program in construction chemicals that was already bearing fruit.
On a more critical note, however, we emphasized the Group's lack of growth during the previous cycle. The company was emerging from a veritable decade of sluggishness, which had earned it the wrath of the dreaded Elliott activist fund, among other grievances.
Three years on, the results for the fiscal year just ended reveal three things: one, Saint-Gobain has indeed managed to pass on inflation, but without benefiting from it either; two, excluding acquisitions, organic growth continues to lag; three, optimization of the business portfolio continues and is producing fairly good results.
As proof of these elements, a price increase of 4.6%, which in 2023 will not fully offset a 5.5% drop in volumes; consolidated sales down by 6.4%, with a marked decline in Northern Europe but also a good performance in the US markets; and margins and operating profit that are holding up well in this challenging environment.
Not much has changed, then, and the market seems to be getting impatient, since the trend towards compression of Saint-Gobain's valuation multiple is not really reversing - despite a slight upturn of late.
It should be pointed out, however, that the process of moving upmarket is bound to take years, and that at the same time the Group is confirming its trajectory of improving profitability, while financial leverage continues to decline.
The work of the management team that has been at the helm for the past few years is therefore to be commended, without overlooking the difficult underlying business conditions - which the Swiss Sika Group has so far managed to avoid thanks to a remarkably well-managed acquisitions policy.
