A global housing shortage, stubbornly high interest rates, and pressure to build faster and smarter.
There are a lot of uncertainties. The only certainty is uncertainty.
For the CEO of a 360-year-old building materials giant, those are the challenges shaping real estate's future. What makes you most nervous about the future of global real estate?
We have a housing crisis everywhere we need to build. So affordability is a topic and it's our challenge.
But Saint-Gobain global CEO Benoit Bazin says the technology to solve some of those problems is already here. And what makes you optimistic?
What makes me optimistic is that the technical solutions do exist.
On this episode of Property Play, how AI, innovation, and new construction technology could reshape the way we build.
Benoit Bazin, chairman and CEO of Saint-Gobain. Welcome to Property Play. So glad to have you here.
Thank you. Glad to be here.
So your company, it's huge. A multinational leader in sustainable building materials. It was founded in 1665. So we clearly have a lot to talk about. A $45 billion market cap. You've been at this company for nearly your entire career.
We will get to why and how and how that happens. But I want to start because, you know, we're in the news right now and while this will stream probably a month from now, we're in the quarterfinals of the World Cup and France is in it to win it. Yes.
At least to play well. So, I know I have to get out of here soon. Get you out of here because the game starts soon. But there is a great real estate play, a development play within the World Cup and within other great sports venues and sports, you know, whether it's the Olympics or whether it's even world's fairs, etc. What do you see as the real estate angle to the World Cup?
Well, I think it's very important to build for the long term. So, you have to consider the asset life and therefore sustainable construction means a lot. So, for instance, we participated in some stadium. I think it's the Buffalo Bills stadium in New York. We participated a few years ago on the Olympic Village in Paris for the Olympic Games 2024. And the idea from day one actually was also to convert this athlete village to dwellings and housing. So I think on all those non-residential buildings, commercial buildings, infrastructure, you can think for the long term. You can make them sustainable. So better buildings that will last longer and that will provide benefits also for the users. Benefits it could be, you know, hotels around stadiums. Do you have a good air quality? Do you have good energy efficiency in those hotels and things like that? So it's all the ecosystem of sustainable construction that you can play with either on residential buildings but also commercial and infrastructure. So we are also participating on bridges, tunnels. I think we participated in New York on the, I think it's the Delaware Memorial Bridge.
Delaware Memorial Bridge.
JFK airport. So there are a lot of investments on those buildings to make them sustainable, valid also on the extreme weather patterns. You know, we are in a changing world, so it's important to care about.
And I want to get to climate because I know you are all about sustainable construction and that's, you know, I cover climate as well as real estate because they are inextricably linked. Real estate is entirely susceptible to climate. And so it's not just resilience, but it's in building in a sustainable manner. So we will get to that, but what should developers and investors be thinking about, strategizing when they see something like, okay, either the Olympics or the World Cup is coming to a certain area. Yes, we're going to have the games, yes, we're going to have the event, but where is the investment play going forward after that? You talked about conversions into residential. Is there anything else they should be thinking about?
I think all the accommodations, all the infrastructure, it could be railways, it could be highways. So I think build all the ecosystem. I think we know that urban planning, it's just not one stadium. It's not just housing, it's the overall ecosystem. So I think it's very important to plan ahead. I was in Australia four weeks ago and they already planned for the Brisbane Olympics in 2032. So I think you have to revamp and think big how and what it means for your city going forward. So, it's a full overall ecosystem, not only one infrastructure, one stadium, but everything that goes with it.
Now, I want to change gears to what's going on politically in the Middle East with the Iran war and how that is hitting oil prices. Obviously, materials, many of them are petroleum based or they're being shipped or transported. How is the Iran war affecting your business?
Well, first we have built over the years a very strong governance of Saint-Gobain by country. So we are organized by country with a bit more than 1,000 plants around the world and most of our supply chain is local. So we take raw materials in the US for our 125 plants in the US. So yes, there has been some increase notably on energy. I would say mostly in Europe because as you know we import a lot of energy, gas outside of Europe. So therefore we had to push up our prices and altogether it's going to be a kind of single-digit, you know, price increase on building materials. But as long as you can provide value and solutions, full set of products to your customers, I think it's valid. We have been able to not shut down any customer, so no shortage of materials, no problem of the supply chain, and it's I think a sign of the robustness of the governance and the setup of Saint-Gobain all over the world. So we have 82 sites in France and India, and this local governance, local for local, has been extremely robust so that we could continue to service well all the job sites around the world even with the war in Iran.
Now is that something that has been building over time at your company at Saint-Gobain? It's, I mean as I say it's a 400-plus year old company. What has your strategies been in leadership? Is that part of your vision?
Yes, we always took geopolitics into consideration in our strategy. Saint-Gobain has a particularity to reinvent itself regularly and I give you one example. For decades, we were organized by worldwide product line, quite a complex organization like many corporates, mostly vertical product line, French managers on the top. Six years ago when I became CEO, we transformed the organization by country so that considering that you don't build in Vietnam like in Poland like in Mexico like in the US, it makes sense to have country CEOs managing all the offer of Saint-Gobain. When we have a facade, you have glass, you have plasterboard, you have insulation, you have flooring system, partition, all the building envelope of Saint-Gobain, country CEOs manage everything. So we turned 90 degrees the organization from worldwide product lines in a global world to a country-based organization. So now we are multi-local and to some extent it was anticipating or taking into account the deglobalization of the world, saying that we don't live like 20, 30 years ago in a global world with global supply chain, we are in a fragmented world.
So you're a fragmented company.
We are a collection of multi-countries. Of course we have innovation for the group at the global scale. We have technology for the group at global scale like digital and IT, but supply chain, pricing, customer intimacy, management of the teams is by country.
And when did you implement that?
It was in early 2019. It helped us overcome the COVID which was managed by country. And now that we have a more fragmented world in terms of geopolitics, the fact that we are by country is a very, very robust robustness. For instance, we have less than 1% of global sourcing of materials coming from China. So when China's Chinese ports were locked down because of the COVID, we didn't suffer.
And is it hard to lead a company like that that's so fragmented?
It's not fragmented in the sense that we have a very clear strategy: be the worldwide leader in light and sustainable construction. Agility in the world of today, there are a lot of uncertainties. The only certainty is uncertainty. You know you will face uncertainty and the answer is to be agile and you are much more agile if you are close to the customers, close to the teams on the ground. And it's fine because we actually did perform very well in the last six years. You know we tripled the share price of Saint-Gobain. We doubled our results, tripled the free cash flow. So it has been a good journey on the strategic side and also on the financial side of course.
And I wanted to get to that because does that deglobalization make your company itself more sustainable and your product line more sustainable because you're not shipping it so you don't have those energy costs? You're producing it in each place where you are. But you are also very committed to sustainable products in general.
Absolutely. And for us, you know, sustainable construction just means better buildings. Of course we have to be exemplary on our side and it makes us more competitive. Why? I give you two examples. When for instance we recycle glass, when you do that you don't start from sand anymore. You start from recycled glass. You save one and a half times the amount of energy. So you improve your P&L and of course you emit less CO2, but it's better for your P&L and you provide the right solution for the customers. And second, when you are the first or the only one to do that, you have a commercial differentiation factor. We have been the first in the world in Canada and in Norway to go from gas to green electricity on wallboard manufacturing. It's hydropower in Canada. Hydropower in Norway. Exactly. And when you are the only one in the world to do that, it means you can differentiate yourself. So for us, sustainable construction means better buildings. Again, replacing your roof after a tornado in the US, you need a shingle that will resist 200 mph versus 125 20 years ago, otherwise you don't get any insurance. So it's sustainable construction, it's better, it's resilient construction against extreme weather patterns. And so it's fundamentally better buildings and therefore more value for Saint-Gobain. So we have been able to align what we bring in terms of benefits for the people: thermal comfort, better purchasing power. If I save on my energy bill, more real estate value. When you have a better building, it has more real estate value. So all these bring benefits for the people and of course benefits for the planet.
But I know like when you're making more sustainable concrete or other building materials, it can be more expensive to get either the power for it or the types of materials that are more sustainable.
It varies. Usually, you know, you could have from time to time a bit of upfront cost. But when you take the lifetime of the building, you will save on air conditioning, you will save on energy, you will improve the real estate value. So we can sell a bit higher cost because it will bring higher value for the customer. So I think all in all, it can be a win-win path and win-win strategy. It has been the case for Saint-Gobain. We have been leading and setting the tone on that regard and that we will continue to do. And we do that, you know, be it in Europe, in India, in the Middle East, in Latin America, everywhere.
