Intervention de Benoit Bazin, Saint-Gobain

Thank you, Rémi. Hello everyone, delighted to be back for this Investir Day. I have a few slides if we can display them, so I can quickly go through a presentation of Saint-Gobain. Saint-Gobain is the world leader in sustainable construction. It is a strategic vision perfectly aligned with our reason for being: 'Making the world a better home'. We provide answers to the construction world, both in energy renovation and renovation in the broad sense, in new construction, especially with new lightweight construction methods that save a lot of materials and therefore a lot of CO2, and also a lot of know-how in materials to decarbonize industrial applications. So these are Saint-Gobain's solutions serving our strategic vision: world leader in sustainable construction. Some examples on this slide: for example, what we do for the renovation of a single-family home in France that can be rated G in its energy performance diagnosis, and we will bring it up to class C with about thirty Saint-Gobain products, thus reducing the energy bill by about 70%, naturally improving the value of the property through improved energy performance. That's what we do, for example, in new construction, sustainable new construction, in single-family homes in the United States or North America or Norway, where we have constructions with wooden frames, so lightweight constructions, and inside we put plasterboard, glazing, insulation. New construction, lightweight construction, fast construction, resistant construction, and therefore many prospects in new construction, especially in North America. We also have a very strong presence in emerging countries, whether in India, Southeast Asia, Brazil, Latin America, and there too many fast, productive, efficient construction systems to accompany the very high population growth in emerging countries and in the large metropolises of emerging countries. So these are some illustrations of Saint-Gobain's solutions as the world leader in sustainable construction. We launched a few years ago a plan called 'Grow and Impact'. We measure the impact of our solutions. I can show, for example, on the energy performance of a home renovation: naturally, the more positive and strong the impact, the more growth we will have because customers will ask for our solutions, and conversely, the more growth we have, the more positive impact we will bring in decarbonization, construction, and improving well-being in buildings. You know that we spend 90% of our lives in buildings, whether educational, health, or naturally at home. Our 'Grow and Impact' plan has been a tremendous value creator. We have shown strong resilience despite a difficult economic environment in new construction, especially in Europe, with 4 years of double-digit operating margin, and in 2024 a new progression of this margin, so a new record. We have capitalized on the fact that by selling solutions, i.e., integrated product systems, we have a pricing policy, a capacity to produce added value for our customers and for the group that is stronger, and therefore a capacity to increase our profitability. We have also been a leader in decarbonizing our own industrial footprint, as we have achieved several world firsts over the last three years: first zero-carbon production of flat glass, plasterboard. We can come back to that in the various questions. All this was made possible by a very rapid redeployment of the group's geographical profile. That's the next slide. The group's geographical profile has changed a lot: before 2018, before this transformation we launched in 2019, we had nearly 60% of our profit coming from Western Europe. Today, two-thirds of our profit comes from North America, Asia, and emerging countries. We have slightly grown in Western Europe, but we have tripled our profits in these high-growth geographies: North America, Asia, emerging countries, with for example two takeovers in the United States, a takeover in Australia that we closed last summer. In total, the group will have turned over, will have evolved 40% of its revenue between 2018 and 2024. We sold about 10 billion in revenue with EBITDA margins around 5%, and we bought 7 billion in revenue with margins at 20%, so a strong rotation of the group's profile to naturally generate more growth and profitability. This translated into Saint-Gobain's financial performance over the last few years: sales growth, an increase of about 4 points in our operating margin, a very strong improvement, a doubling of our current net profit, a tripling of cash generation, and roughly plus 50% in value creation. So financial results are on track, with new records again in 2024, since our margin in 2024 will be above the 11% we achieved in 2023, coming from an average during the decade 2010-2020 of around 7%. The stock price followed, tripling over the last 6 years, doubling over the last 3 years, with, if I take since 2021, a total return for you, Saint-Gobain shareholders, of 28% per year. So a good stock performance. We were number 2 in the CAC 40 last year, so far we are number 2 or number 3, but still on the podium, and it is our ambition to stay there. So a good stock performance, even if compared to our stock market peers, our multiples remain lower. So the group's mission is to continue to raise our stock market valuation multiples, which means strong potential for further stock price progression. So I end this short presentation that gives you a little overview of the activity and what happened in the profound transformation of Saint-Gobain over the last 5 years. Thank you.

So we will continue, both next year and in the coming years, to deepen our path as the world leader in sustainable construction. We really have a lot to do. We are in 76 countries today, but not all countries have the same offering: roofing, ceilings, facades, windows, flooring, partitions, energy performance, acoustic performance, air quality, visual comfort, aesthetics. That is Saint-Gobain's offering today, and we still have a long way to go to deploy it in all countries, enrich these solutions, gain market share, and continue to outperform thanks to these solutions because Saint-Gobain is unique. Sometimes we have competitors that have one or two feet in certain product lines but not across the entire spectrum. So that is really the engine of Saint-Gobain for the coming years: to provide even stronger, richer, deeper answers in a large number of countries, naturally with the financial results that follow, and always with this objective and duty to decarbonize our own footprint. We have reduced CO2 emissions (scope 1 and 2) by 34% since 2017, and in carbon intensity by 44% because revenue has grown. So we will continue this path of decarbonization, which is now becoming a competitive advantage commercially. When we offer customers the ability to recycle materials, we win projects, and it becomes competitive regardless of the geographic region. Is it more particularly European? No. Sometimes we have a ticket in Europe to believe we are far ahead of others, but for example in the United States, we already have nearly 70% of our electricity from green sources. When you do a non-residential project for a new hotel or headquarters of large American companies, they want to attract talent with the best acoustic quality, the best air quality, and therefore an exemplary building environmentally. It's also true in India. I was in India a few weeks ago; we have customers asking for our admixtures to decarbonize concrete on Indian infrastructure. So no, it's really a movement, with more or less catalysts of tax regimes, standards, but it's a movement because it's linked to the quality of construction and therefore to the value of the property when you own it.

So what we have indicated throughout the year, because you know the economic situation in Europe, especially in France, is far from simple in new construction, even though new construction in Europe is 13% of our revenue and half of that is in France, so it's relatively modest on the scale of Saint-Gobain. What we have seen quarter after quarter is a sequential improvement in the trend. For example, Germany in the third quarter returned to positive volumes. We have a number of countries like Eastern Europe, Poland, the Czech Republic that have been in positive volumes since the fourth quarter of last year. So sequentially, we see our European countries improving. France will take a little more time; we have created economic and political circumstances that are not very simple in terms of visibility in France. So France will take a little more time, but progressively we see this improvement. And when will we return to positive? We will communicate that at the beginning of 2025, but we already have regions that are in positive volumes: North America, Asia, India, all continue to advance. Brazil had been suffering for 3 years, but Brazil returned to positive in the third quarter. So the indicators are moving in the right direction. And on prices, they are also stabilizing, as they had become slightly negative. What is very important for us, more than absolute prices, is the price-cost gap. We have managed very well between our raw material costs, energy costs, the gap between our selling prices and our raw material and energy costs to maintain a solid margin. And that, plus very good tactical execution on the ground by our country general managers, who in 90% of cases are natives of the country: a Polish woman in Poland, an Indonesian in Indonesia, a Mexican in Mexico, an American in the United States. That is what gives them strength: very good tactical execution on the ground, including on the price-cost gap.

So in a way, Saint-Gobain has anticipated this a bit because since 2019 we have been organized by country. You might say that's relatively natural because we are in the construction world; you don't build in Vietnam like in France or Canada, and even in France, in Normandy like in Provence. So these are very local businesses. We have 90 factories in France, 125 in North America, 35 in India. We produce locally with local raw material supplies, local customers, and local teams. So in a way, we have already translated deglobalization into our governance, our organization by country for 6 years now. And I'll give you an example: Chinese sourcing for Saint-Gobain is less than 1% of our raw material supplies. So we are not dependent on a tariff issue between China and France or China and the United States, or on a closure of the port of Shanghai during COVID. So from that point of view, we are very robust, and I believe much more robust than other sectors. China represents 2.7% of Saint-Gobain's revenue; we don't have 30% of our profitability coming from China. Then, that also applies to the United States. That is, we produce in Canada; we are number 1 in building materials in Canada. We have tripled in size in Canada with three beautiful acquisitions of family companies over the last three years. We do 2.4 billion in revenue in Canada. We have about a hundred factories in the United States and 25-30 in Canada. So there too, we are very local. But for example, if there are taxes between Canada and the United States, are there flows? There are very few product flows. We make plasterboard; we have six plasterboard factories in Canada from Vancouver to Quebec, through Winnipeg and Montreal, for Canada. So in fact, there are very few flows Canada-US or US-Canada. And what is important for us is that the economies of these countries do well, and also that the population growth does well. If we went to Canada, it's because there are 400,000 immigrants each year in Canada; it's a vast country whose population is growing rapidly. Similarly, in Australia, we made a takeover; we are now number 1 in building materials in Australia. So we are not impacted. We are not on another planet; if geopolitics becomes even more complicated than it is today, we are really organized locally with local loops managed by local teams. So what's important is our market share in Kansas, our market share in Massachusetts, our market share in Calgary, Canada, from our local factories. So I am very confident in our resistance, much better than many other companies or sectors, vis-à-vis deglobalization. And Saint-Gobain is very internationalized; on the executive committee, we have eight nationalities, for example, and we will soon have six on the board of directors. So we have really anticipated this movement.

So we will continue these acquisition and divestiture movements for the group, each time with two objectives: first, coherence with our strategic vision as world leader in sustainable construction, and second, to always seek more growth and profitability. So deployment in very fast-growing geographies is important for us. We have about fifteen priority countries. For example, the Middle East: countries with high population growth, Turkey, Egypt, Saudi Arabia. Southeast Asia: the Philippines, Indonesia, Vietnam, high population, high growth. So we will continue to make either investments (70% of growth investments in new capacities are placed in these geographies) or acquisitions. So we will continue this movement both in terms of profitability and revenue to seek growth. In Europe, we don't need to make acquisitions because we already have a strong installed base in our building materials distribution and factory businesses. We have more of a reasoning and a path of enriching solutions. When we have the Saint-Gobain range with 82 products, we want all construction sites in France, Austria, Poland, and Germany to use 82 Saint-Gobain products; sometimes they start with 10, 15, 20. So we will continue this axis of enrichment. And construction chemicals: what is it? It is a set of segments for a market of about 100 billion euros, so a very large market, on which we weigh 6.5 billion. It globally brings performance in terms of durability, sustainability, so sustainable construction, to materials and constructions in several aspects. It can be waterproofing: now we build more and more with flat roofs, so special waterproofing membranes are needed. It can be admixtures to decarbonize concrete, for example in the civil engineering works of the Grand Paris Express, there is a lot of low-carbon concrete. About 35-40% of the planet's CO2 emissions come from construction; a quarter of that is concrete. We can decarbonize concrete by changing the concrete formulation while keeping the concrete's strength properties, with three to four times more admixtures from Chryso or Saint-Gobain. Similarly, additives to decarbonize cement. So there are many applications: concrete repair, waterproofing, external insulation. So it is a set of segments where we can bring a lot of performance, a lot of innovation, a lot of know-how, R&D at Saint-Gobain, and overall very attractive businesses that grow at 5-6% per year at least, with double-digit operating margins. So we are very happy to have moved the group from 2.8 billion in 2019 to 6.5 billion in 2024, which is about 12-13% of revenue. A very nice acquisition in Mexico, a very nice one we will close at the beginning of 2025, a very nice acquisition of Fosroc, which is a leader in the Middle East, India, and Asia. Typically, in India, we are number 1 in glazing, number 1 in plasterboard, number 1 in insulation, and now number 1 in construction chemicals. So it's a perfect complement to bring durability, environmental respect, and performance to construction materials.

This is why we have positioned Saint-Gobain as the world leader in sustainable construction: to respond to colossal challenges for the planet regarding environmental respect. About 35-40% of total CO2 emissions come from construction. A little less than a third, a big quarter, is during construction: extraction of raw materials, manufacturing of materials, and installation, erection of buildings. The other two-thirds is the life of the building: do I have good energy efficiency, or am I heating the roof for the birds? Do I have too much air conditioning and not enough insulation against cold and heat, also in summer? So we have a lot to contribute to decarbonize buildings, reduce the weight of materials, and that is Saint-Gobain's trajectory. We can also contribute a lot in terms of well-being for populations. For example, we can correlate the acoustics of a classroom with teacher absenteeism. So if we want to help this difficult profession, we need to improve the building and the acoustics of a classroom, and additionally, it allows children to learn better when they are in 3rd or 4th grade. So there are many benefits we can bring in sustainable construction: both for the planet and for the well-being of inhabitants, because once again, we spend a lot of time in buildings. So that is our mission, our trajectory. We have succeeded over the last 3 years in having a day dedicated to buildings at each COP. We have spent a lot of time over the last 25-30 years talking about fossil fuels: gas, coal, oil. We just forgot that buildings account for 40% of emissions. For example, in France, 45% of the energy consumed in the country is consumed in public and private buildings. That is more than the installed nuclear fleet of EDF when it operates at 100% nominal capacity. If we saved 10% of energy in public and private buildings—nurseries, hospitals, town halls, ministries, etc.—we would save 10 nuclear reactors. We saw that the EPR that just started took 20 years to build. So saving 10% energy efficiency in buildings over the next 10 years is more than accessible, and that is Saint-Gobain's mission with its solutions. Naturally, being virtuous with our solutions for customers, we want to be virtuous ourselves in our footprint. We have worked a lot on the circular economy, increasing the recycled content of our materials. We have materials with 50% recycled gypsum in plasterboard in France, 70% recycled materials in our glass wool in France. We have a low-carbon glass offering from the world first we did in France of zero-carbon flat glass production in 2022. Since then, we have a low-carbon offer at RAE with 42% less carbon in glazing. It has been installed in clinics in Normandy, it has been installed on the Carré des Invalides, which was rehabilitated by Nexity. So it is already a commercial reality. Naturally, we invest a lot; we invest a little over 200 million euros per year to decarbonize our processes. We built the world's first plant in Norway, which started in May, for plasterboard...

A zero-carbon plate entirely electric, from gas to electricity to hydroelectricity. The second is in Canada, $120 million in Montreal, entirely with Hydro-Québec, hydroelectricity. So we are making a lot of progress, and our four priorities of R&D are around sustainability: decarbonizing our processes, advancing the circular economy, reincorporating recycled materials, inventing lightweight, high-performance building systems to reduce carbon weight, and using our materials, especially ceramics, for hydrogen, electric batteries, zero-carbon aluminum. We have many new applications for our materials and know-how.

We have progressed: we were at 4.5 times EBITDA in 2019, and now we are between 7.5 and 8. We still have significant potential. Many of our competitors trade at double-digit multiples, so that is our ambition. We have outperformed them in profitability growth and internal growth in recent years. I think it takes time. Saint-Gobain has evolved a lot in four or five years in terms of results and geographic repositioning. The stock price, which was €30 in 2019, is now around €90 or €87. There is awareness of this strong evolution. One analyst even wrote a very nice note with a target price of €147 and €200 in the best case. We have many analyses already above €100. Overall, we have strong support from our shareholders, especially American investors who left Europe after the Ukraine war in 2022 and have now returned strongly over the past 18 months.

Yes, it is very important for us. We regularly increase the dividend, by 10% per year over recent years. We have a total shareholder return, including share buybacks. We had a 2-billion-euro buyback program over 5 years from 2021 to 2025; we will finish it in 4 years, faster than expected. So we have an important shareholder return policy, balanced with our investments: about 2 billion euros in our plants and capacity additions in growth zones, plus acquisitions. The return on capital employed has gone from 10% to 15% in recent years. And total shareholder return has been 28% per year since 2021. Our ambition is to maintain good progression and returns.