Francois de Beaupuy
Shares of Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, tumbled the most in almost 3½ years after Europe’s economic crisis prompted the company to cut its full-year outlook.
The shares slid as much as 12 percent, the biggest intraday drop since Feb. 20, 2009. At $30.10, this year’s tumble has totaled 17 percent. The stock was the biggest decliner on France’s benchmark CAC 40 stock index.
After the close of trading Thursday, Saint-Gobain Chief Executive Officer Pierre-Andre de Chalendar said in a statement that 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.”
Sain-Gobain has a variety of operations in Northeast Ohio.
Saint-Gobain said it is seeking an additional $197 million in cost savings. The added savings, to occur in the second half, are part of a planned $615 million in full-year cuts. The cost-savings plan will have a full-year impact of $922 million in 2013, the company said.
The positive effect of the cost-cutting “plan is more than offset by the deteriorating economic activity, which we found quite disappointing,” Sven Edelfelt, an analyst at Bryan Garnier in Paris, said in a research note. “We cut our 2012 forecasts to reflect lower guidance and reduce our 2013 estimates as we assume limited rebound in industrial activity linked to automotive.”
The company will have about $430 million in restructuring costs in 2012 as it cuts jobs, reduces spending on support functions and purchasing, and makes idle some glass production lines. Saint-Gobain also reduced its 2012 capital expenditure target by $184 million and froze acquisitions to protect its Baa2 credit rating at Moody’s Investors Service and BBB rating at Standard & Poor’s.
“Saint-Gobain’s rating is very important to us,” the CEO said in a presentation Friday. “It’s clear that the slowdown in investment and acquisition is partly linked to that issue.”
Saint-Gobain, based in Courbevoie near Paris, said in its statement Thursday that operating income fell 12 percent in the first half from a year earlier to $1.85 billion. Analysts surveyed by Bloomberg had expected on average a profit of $1.89 billion. Net income fell 34 percent to $622 million, trailing the average estimate of $855 million.