Quarterly Report • Jul 30, 2015
Quarterly Report
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Including:
Half-year financial report
Consolidated financial accounts as at June 30, 2015
Following the execution of the agreement with Apollo and in accordance with IFRS 5, the Packaging business (including Verallia North America) was reclassified within "Net income from discontinued operations" in the 2014 and 2015 income statement.
| (in million €) | H1 2014 (restated) |
H1 2015 | Change |
|---|---|---|---|
| Sales | 18,946 | 19,860 | +4.8% |
| EBITDA | 1,767 | 1,886 | +6.7% |
| Operating income | 1,183 | 1,275 | +7.8% |
| Recurring1 net income | 441 | 552 | +25.2% |
| Net income2 | 671 | 558 | -16.8% |
| Free cash flow3 | 647 | 728 | +12.5% |
1. Recurring net income from continuing operations, excluding capital gains and losses on disposals, asset write-downs and material non-recurring provisions.
2. Consolidated net income attributable to the Group.
3. Free cash flow from continuing operations, excluding the tax impact of capital gains and losses on disposals, asset write-downs and material nonrecurring provisions.
First-half sales were up 4.8% to €19,860 million, after reclassification of the Packaging business (including Verallia North America) within "Net income from discontinued operations" in the income statement.
After this restatement (IFRS 5), changes in Group structure had a negative 0.3% impact on sales. Exchange rates continued to have a strong positive impact (4.6%), chiefly driven by the US dollar and pound sterling.
On a like-for-like basis, sales edged up 0.5%. Volumes were stable over the first half and rose 1.5% in the second quarter alone. Amid low raw material cost inflation and energy cost deflation, prices continued to rise slightly, up 0.5% over the first half.
After a slight decline in the first quarter, the three months to June 30 saw growth in all regions except France and Germany. By business, the first half confirmed the upturn in Flat Glass and the expected contraction in Exterior Solutions, related mainly to price levels in the Roofing business.
The Group's operating income climbed 7.8% on a reported basis and remained stable like-forlike versus first-half 2014 due to the absence of volume growth. Before the reclassification of the Packaging business and on a like-for-like basis, operating income moved up 1.2%. The Group's operating margin widened 0.2 points year-on-year, to 6.4%.
Innovative Materials like-for-like sales continued to improve, up 2.6% thanks to Flat Glass. The Business Sector's operating margin moved up to 10.2% versus 9.1% in first-half 2014.
The second quarter confirmed the upbeat trends seen early in the year in Flat Glass, which posted 5.6% organic growth over the six months to June 30. Automotive Flat Glass continued to report strong gains in all regions, excluding Brazil. Construction markets remained upbeat in Asia and emerging countries, but retreated in Western Europe where prices remained stable.
Rising volumes, together with the full impact of cost savings and an improved product mix, helped drive renewed growth in the operating margin at 7.4%.
High-Performance Materials (HPM) like-for-like sales slipped 0.8% over the first half, hit mainly by the downturn in ceramic proppants. Other HPM businesses continued to deliver organic growth.
Despite this decline in organic growth, the operating margin came in at 13.5% versus 13.3% in the same period one year earlier.
Construction Products (CP) like-for-like sales advanced 0.9% over the first half. The operating margin narrowed to 8.7% versus 9.0% in first-half 2014, affected by Exterior Solutions.
The operating margin fell to 8.3% from 9.5% in first-half 2014, due chiefly to prices for Exterior Products in the US: Roofing benefited from falling asphalt prices, mainly in the second quarter.
Building Distribution like-for-like sales stabilized in the second quarter, up 0.1%, limiting the decline over the six-month period to 1.1%. France was once again impacted by the sharp contraction in new-builds and by a renovation market yet to show signs of improvement. Germany declined over the first half, although the pace of decline slowed in the second quarter. In contrast, the UK reported further organic growth and a particularly upbeat trend emerged in the Nordic countries, the Netherlands, Southern Europe and Brazil. Overall, despite the downturn in France and Germany which together account for around half of the Business Sector's sales, the operating margin proved resilient, at 2.6% versus 2.9% in first-half 2014, thanks to the advances reported in all other regions.
The Group's organic growth and margins advanced, lifted by Asia and emerging countries, and by countries in the "Other Western Europe" region.
Packaging (Verallia) sales moved up 2.1% at constant exchange rates excluding Verallia North America. Organic growth over the first half was driven by small volume gains in Europe and by rising prices in Latin America in an inflationary environment. The operating margin came in at 9.7%.
The unaudited interim consolidated financial statements were subject to a limited review by the statutory auditors. They were approved by the Board of Directors on July 29, 2015.
Following the execution of the agreement with Apollo on June 6, 2015 (involving a binding and irrevocable offer from Apollo regarding the Packaging business and exclusive talks with Apollo) and in accordance with IFRS 5, the Packaging business (including Verallia North America) is shown within "Net income from discontinued operations" in the income statement for 2014 and 2015.
| H1 2014 Restated* |
H1 2015 | % change |
H1 2014 Published |
|
|---|---|---|---|---|
| (in million €) | (A) | (B) | (B)/(A) | |
| Sales and ancillary revenue | 18,946 | 19,860 | 4.8% | 20,446 |
| Operating income | 1,183 | 1,275 | 7.8% | 1,330 |
| Operating depreciation and amortization | 584 | 611 | 4.6% | 667 |
| EBITDA (op.inc. + operating depr./amort.) | 1,767 | 1,886 | 6.7% | 1,997 |
| Non-operating costs | (12) | (154) | n.s. | (16) |
| Capital gains and losses on disposals, asset write-downs, corporate acquisition fees and earn-out payments |
(51) | (41) | -19.6% | (54) |
| Business income | 1,120 | 1,080 | -3.6% | 1,260 |
| Net financial expense | (336) | (328) | -2.4% | (354) |
| Income tax | (158) | (236) | 49.4% | (212) |
| Share in net income (loss) of non-core business equity accounted companies |
(1) | 0 | n.s. | (1) |
| Net income from continuing operations | 625 | 516 | -17.4% | 693 |
| Net income from discontinued operations | 68 | 69 | 1.5% | 0 |
| Net income before minority interests | 693 | 585 | -15.6% | 693 |
| Minority interests | 22 | 27 | 22.7% | (22) |
| Net attributable income | 671 | 558 | -16.8% | 671 |
| Earnings per share2 (in €) |
1.19 | 0.98 | -17.6% | 1.19 |
| Recurring1 net income from continuing operations |
441 | 552 | 25.2% | 511 |
| Recurring1 earnings per share2 from continuing operations (in €) |
0.78 | 0.97 | 24.4% | 0.91 |
| Cash flow from continuing operations3 | 1,045 | 1,195 | 14.4% | 1,198 |
| Cash flow from continuing operations excl. cap. gains tax4 | 1,010 | 1,185 | 17.3% | 1,162 |
| Capital expenditure of continuing operations | 363 | 457 | 25.9% | 449 |
| Free cash flow from continuing operations 4 (excluding capital gains tax) |
647 | 728 | 12.5% | 713 |
| Investments in securities of continuing operations | 48 | 92 | 91.7% | 48 |
| Net debt | 8,519 | 7,995 | -6.2% | 8,519 |
* First-half 2014 figures have been restated to reflect the impacts of IFRS 5.
1 Excluding capital gains and losses on disposals, asset write-downs and material non-recurring provisions.
2 Calculated based on the number of shares outstanding (excluding treasury shares) at June 30 (569,364,905 shares in 2015, including the increase in capital following payment of the stock dividend on July 3, 2015, versus 564,079,733 shares in 2014).
3 Excluding material non-recurring provisions.
4 Excluding the tax impact of capital gains and losses on disposals, asset write-downs and material non-recurring provisions.
The comments below make reference to the restated financial statements for 2014, after reclassification of the Packaging business (including Verallia North America) within "Net income from discontinued operations" in the income statement.
Consolidated sales advanced 4.8% on a reported basis. Exchange rates had a positive 4.6% impact on sales, mainly due to gains in the US dollar and pound sterling against the euro. Changes in Group structure had a negative 0.3% impact, primarily reflecting sales of small, non-core businesses. Like-for-like (comparable structure and exchange rates), sales were up 0.5%, lifted by the price effect.
Operating income climbed 7.8% on a reported basis, driven chiefly by the currency effect. The operating margin improved to 6.4% of sales versus 6.2% in first-half 2014, buoyed by an improved margin in Innovative Materials.
EBITDA (operating income + operating depreciation and amortization) was up 6.7%. The Group's EBITDA margin came out at 9.5% of sales versus 9.3% of sales in first-half 2014.
Non-operating costs totaled €154 million, with a decrease in restructuring costs compared to the same period in 2014. The first-half 2014 basis for comparison (€12 million) included the €202 million write-back from the provision to reflect the reduction in the automotive Flat Glass fine. The €45 million accrual to the provision for asbestos-related litigation involving CertainTeed in the US is unchanged from the last few half-year periods.
The net balance of capital gains and losses on disposals, asset write-downs and corporate acquisition fees was a negative €41 million versus a negative €51 million in first-half 2014, which had benefited from the €375 million capital gain on the disposal of Verallia North America. Asset write-downs also represented €452 million in first-half 2014 compared to €24 million in the six months to June 30, 2015. Business income for the period fell to €1,080 million (down 3.6% on first-half 2014 which included the one-off €202 million provision write-back).
Net financial expense improved, down 2.4% to €328 million from €336 million one year earlier, reflecting the decrease in the cost of gross debt to 3.7% at June 30, 2015 (4.4% at June 30, 2014). The improvement came despite the increase in other financial expenses mainly due to the discounting of provisions with no cash impact.
The income tax rate on recurring net income remained stable at 30%. Income tax expense totaled €236 million, up from the exceptionally low €158 million in first-half 2014 resulting from asset write-downs in the period, capital gains on the disposal of Verallia North America and the write-back of the provision for the Flat Glass fine.
Recurring net income from continuing operations (excluding capital gains and losses on disposals, asset write-downs and material non-recurring provisions) jumped 25.2% to €552 million.
Net attributable income was down 16.8% to €558 million and includes net income relating to Verallia (attributable to the Group) for €65 million (€67 million in first-half 2014).
Capital expenditure totaled €457 million (€363 million in first-half 2014), representing 2.3% of sales compared to a particularly low 1.9% of sales in the same period one year earlier.
Cash flow from operations rose 14.4% to €1,195 million; before the tax impact of capital gains and losses on disposals, asset write-downs and material non-recurring provisions, cash flow from operations was up 17.3% to €1,185 million, while free cash flow (cash flow from operations less capital expenditure) advanced 12.5% to €728 million (3.7% of sales versus 3.4% of sales in first-half 2014).
The difference between EBITDA and capital expenditure improved, up 1.8% to €1,429 million (€1,404 million in the six months to June 30, 2014), representing 7.2% of sales (7.4% in first-half 2014).
Operating working capital requirements (WCR) totaled €4,448 million at June 30, 2015 (€4,888 million in the same year-ago period), representing 40.8 days' sales, an improvement of 2.5 days year-on-year (an improvement of around 1 day excluding the impact of Verallia and exchange rates).
Investments in securities were limited, at €92 million (€48 million in first-half 2014) and correspond to small-scale acquisitions in the three business sectors.
Net debt continues to improve gradually, down 6.2% year-on-year to €8.0 billion. Net debt represents 40% of consolidated equity, compared to 46% at June 30, 2014.
The net debt to EBITDA ratio came in at 2.1 (1.9 before the reclassification of the Packaging business), compared to 2.0 at end-June 2014.
The main risks and uncertainties that the Group could face in the second semester of 2015 are those described in section 1 "Risk Factors" of Chapter 6 of the 2014 registration document of April 22, 2015, filed with the French financial markets authority (Autorité des Marchés Financiers) under number D.15-0389 (the "2014 Registration Document"). There has not been any significant change in these risk factors in the first-half of 2015.
Changes related to ongoing litigations in the first semester of 2015 are presented in note 18 to the consolidated financial statements as at June 30, 2015.
Related parties mainly relate to equity consolidated companies, proportionately consolidated companies and certain subsidiaries of the Wendel group. In accordance with the Group policy, the transactions with these related-party entities are carried out at normal market conditions on an arm's length basis.
There has not been any significant change in these related-party transactions during the first semester of 2015.
On June 8, 2015, the Saint-Gobain Group entered into exclusive talks with Apollo. Following a competitive process, the Saint-Gobain Group has granted funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, "Apollo") exclusivity, after having received a purchase offer for the Packaging Sector of €2,945 million (enterprise value). This firm and binding offer is not subject to any financing condition. The agreement between the Saint-Gobain Group and Apollo will be able to be finalized following completion of the customary information and consultation procedures with the Group's employee representative bodies. Completion of the transaction is subject to the approval of certain anti-trust authorities, including the European Commission, and should be effective before the end of the year.
Saint-Gobain continued during the first half of 2015 its proposed acquisition of the control over Sika, described in Section 4.3 of Chapter 2 of the 2014 Registration Document.
On July 22, 2015, the European Commission unconditionally authorized Saint-Gobain's acquisition of control over Sika.
After a first half penalized by tough prior-year comparatives, the Group will benefit from a more favorable climate in the six months to December 31:
The Group confirms its action plan priorities:
In line with its long-term objectives, Saint-Gobain repurchased 4.6 million shares over the last three months. To date, this almost entirely offsets the 2015 dilution resulting from the Group Savings Plan and the exercise of stock options.
Lastly, Saint-Gobain confirms its objectives and expects a further like-for-like improvement in operating income for 2015 and a continuing high level of free cash flow.
This press release does not constitute any offer to purchase or exchange, nor any solicitation of an offer to sell or exchange securities of Saint-Gobain.
For further information, please visit www.saint-gobain.com.
This press release contains forward-looking statements with respect to Saint-Gobain's financial condition, results, business, strategy, plans and outlook. Forward-looking statements are generally identified by the use of the words "expect", "anticipate", "believe", "intend", "estimate", "plan" and similar expressions. Although Saint-Gobain believes that the expectations reflected in such forwardlooking statements are based on reasonable assumptions as at the time of publishing this document, investors are cautioned that these statements are not guarantees of its future performance. Actual results may differ materially from the forward-looking statements as a result of a number of known and unknown risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond the control of Saint-Gobain, including but not limited to the risks described in Saint-Gobain's registration document available on its website (www.saint-gobain.com). Accordingly, readers of this document are cautioned against relying on these forward-looking statements. These forward-looking statements are made as of the date of this document. Saint-Gobain disclaims any intention or obligation to complete, update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATION REPORTING GROUP DEPARTMENT
| (in EUR million) | Notes | June 30, 2015 |
Dec. 31, 2014 |
|---|---|---|---|
| ASSETS Goodwill |
(4) | 10,897 | 10,462 |
| Other intangible assets | (4) | 3,229 | 3,085 |
| Property, plant and equipment | (4) | 11,776 | 12,657 |
| Investments in associates | 374 | 386 | |
| Deferred tax assets | (8) | 1,325 | 1,348 |
| Other non-current assets | 699 | 646 | |
| Non-current assets | 28,300 | 28,584 | |
| Inventories | (5) | 6,157 | 6,292 |
| Trade accounts receivable | (6) | 5,990 | 4,923 |
| Current tax receivable | 128 | 156 | |
| Other receivables | (6) | 1,658 | 1,356 |
| Cash and cash equivalents | (10) | 4,249 | 3,493 |
| Assets of discontinued businesses | (3) | 2,253 | 0 |
| Current assets | 20,435 | 16,220 | |
| Total assets | 48,735 | 44,804 | |
| LIABILITIES | |||
| Capital stock | 2,294 | 2,248 | |
| Additional paid-in capital and legal reserve | 6,785 | 6,437 | |
| Retained earnings and consolidated net income | 10,412 | 10,411 | |
| Cumulative translation adjustments | (173) | (953) | |
| Fair value reserves | 318 | (63) | |
| Treasury stock | (174) | (67) | |
| Shareholder's equity | 19,462 | 18,013 | |
| Minority interests | 406 | 405 | |
| Consolidated total equity | 19,868 | 18,418 | |
| Long-term debt | (10) | 8,495 | 8,713 |
| Provisions for pensions and other employee benefits | (7) | 3,426 | 3,785 |
| Deferred tax liabilities | (8) | 802 | 634 |
| Other non-current liabilities and provisions | (9) | 1,290 | 1,225 |
| Non-current liabilities | 14,013 | 14,357 | |
| Current portion of long-term debt | (10) | 2,096 | 1,389 |
| Current portion of other liabilities | (9) | 423 | 409 |
| Trade accounts payable | (6) | 5,854 | 6,062 |
| Current tax liabilities | 104 | 97 | |
| Other payables and accrued expenses | (6) | 3,770 | 3,460 |
| Short-term debt and bank overdrafts | (10) | 1,653 | 612 |
| Liabilities of discontinued businesses | (3) | 954 | 0 |
| Current liabilities | 14,854 | 12,029 | |
| Total liabilities | 48,735 | 44,804 |
| Notes | First-half 2015 |
First-half 2014 |
|
|---|---|---|---|
| (in EUR million) | restated* | ||
| Net sales | (19) | 19,860 | 18,946 |
| Cost of sales | (12) | (14,840) | (14,175) |
| General expenses including research | (12) | (3,765) | (3,608) |
| Share in net income of business associates | 20 | 20 | |
| Operating income | 1,275 | 1,183 | |
| Other business income | (12) | 14 | 421 |
| Other business expense | (12) | (209) | (484) |
| Business income | 1,080 | 1,120 | |
| Borrowing costs, gross | (228) | (259) | |
| Income from cash and cash equivalents | 15 | 16 | |
| Borrowing costs, net | (213) | (243) | |
| Other financial income and expense | (14) | (115) | (93) |
| Net financial expense | (328) | (336) | |
| Share in net income of non-business associates | 0 | (1) | |
| Income taxes | (8) | (236) | (158) |
| Net income from continuing operations | 516 | 625 | |
| Net income from discontinued operations | (3) | 69 | 68 |
| Net income | 585 | 693 | |
| Group share of net income from continuing operations | 493 | 604 | |
| Group share of net income from discontinued operations | (3) | 65 | 67 |
| Group share of net income | 558 | 671 | |
| Minority interests of net income from continuing operations | 23 | 21 | |
| Minority interests of net income from discontinued operations | (3) | 4 | 1 |
| Minority interests of net income | 27 | 22 | |
| Income per share (in EUR) | |||
| Weighted average number of shares in issue | 561,292,118 | 553,432,495 | |
| Net earnings per share, Group share | (16) | 0.99 | 1.21 |
| Net earnings from continuing operations per share, Group share | (16) | 0.88 | 1.09 |
| Net earnings from discontinued operations per share, Group share | (16) | 0.12 | 0.12 |
| Weighted average number of shares assuming full dilution | 563,600,566 | 556,289,646 | |
| Diluted earnings per share, Group share | (16) | 0.99 | 1.21 |
| Diluted earnings from continuing operations per share, Group share | (16) | 0.87 | 1.09 |
| Diluted earnings from discontinued operations per share, Group share | (16) | 0.12 | 0.12 |
*The adjustments made are presented in Note 3 "discontinued operations".
| (in EUR million) | First-half 2015 |
First-half 2014 |
|---|---|---|
| Net income | 585 | 693 |
| Items that may be subsequently reclassified to profit or loss | ||
| Translation adjustments | 783 | 229 |
| Changes in fair value | 381 | (53) |
| Tax on items that may be subsequently reclassified to profit or loss | (143) | 20 |
| Items that will not be reclassified to profit or loss | ||
| Changes in actuarial gains and losses | 446 | (211) |
| Tax on items that will not be reclassified to profit or loss | (155) | 100 |
| Income and expense recognized directly in equity | 1,312 | 8 5 |
| Total recognized income and expense for the year | 1,897 | 778 |
| Group share | 1,867 | 748 |
| Minority interests | 30 | 30 |
| Notes | First-half | First-half | |
|---|---|---|---|
| (in EUR million) | 2015 | 2014 restated* |
|
| Group share of net income | 493 | 604 | |
| Minority interests of net income | (a) | 23 | 21 |
| Share in net income of associates, net of dividends received | (12) | (10) | |
| Depreciation, amortization and impairment of assets | (12) | 633 | 1,036 |
| Gains and losses on disposals of assets | (12) | 10 | (402) |
| Unrealized gains and losses arising from changes in fair value and share-based payments | 21 | (17) | |
| Changes in inventory | (5) | (250) | (463) |
| Changes in trade accounts receivable and payable, and other accounts receivable and payable Changes in tax receivable and payable |
(6) | (1,128) 24 |
(1,097) 17 |
| Changes in deferred taxes and provisions for other liabilities and charges | (7)(8)(9) | 43 | (1,141) |
| Net cash from operating activities of continuing operations Net cash from operating activities of discontinued operations |
(3) | (143) 61 |
(1,452) 68 |
| Net cash from operating activities | (82) | (1,384) | |
| Purchases of property, plant and equipment [H1 2015: (457), H1 2014: (363)] and intangible assets | (4) | (511) | (412) |
| Increase (decrease) in amonts due to suppliers of fixed assets | (6) | (135) | (100) |
| Acquisitions of shares in consolidated companies [H1 2015: (85), H1 2014: (29)], net of cash acquired | (2) | (83) | (22) |
| Acquisitions of other investments | (7) | (19) | |
| Increase in investment-related liabilities | (9) | 4 | 1 |
| Decrease in investment-related liabilities | (9) | (14) | (1) |
| Investments Disposals of property, plant and equipment and intangible assets |
(4) | (746) 73 |
(553) 35 |
| Disposals of shares in consolidated companies, net of cash divested | (2) | 7 | 855 |
| Disposals of other investments | 0 | 0 | |
| Divestments | 8 0 |
890 | |
| Increase in loans, deposits and short-term loans | (84) | (55) | |
| Decrease in loans, deposits and short-term loans | 33 | 32 | |
| Changes in loans, deposits and short-term loans | (51) | (23) | |
| Net cash from (used in) investment and divestment activities of continuing operations Net cash from (used in) investment and divestment activities of discontinued operations |
(3) | (717) (107) |
314 (130) |
| Net cash from (used in) investment and divestment activities | (824) | 184 | |
| Issues of capital stock | (a) | 394 | 408 |
| (Increase) decrease in treasury stock | (a) | (104) | 0 |
| Dividends paid | (a) | (695) | (685) |
| (Increase) decrease dividends payable | 455 | 441 | |
| Transactions with shareholders of parent company | 5 0 |
164 | |
| Minority interests' share in capital increases of subsidiaries | 12 | 8 | |
| Dividends paid to minority shareholders by consolidated companies | (34) (22) |
(34) (26) |
|
| Transactions with minority interests Increase (decrease) in bank overdrafts and other short-term debt |
1,201 | 203 | |
| Increase in long-term debt | (b) | 496 | 209 |
| Decrease in long-term debt | (b) | (211) | (633) |
| Changes in gross debt | 1,486 | (221) | |
| Net cash from (used in) financing activities of continuing operations | 1,514 | (83) | |
| Net cash from (used in) financing activities of discontinued operations | (3) | 180 | 176 |
| Net cash from (used in) financing activities | 1,694 | 9 3 |
|
| Increase (decrease) in cash and cash equivalents | 788 | (1,107) | |
| Net effect of exchange rate changes on cash and cash equivalents | 25 | 20 | |
| Net effect from changes in fair value on cash and cash equivalents | (10) | 0 | |
| Net effect from changes in fair value on cash and cash equivalents of discontinued operations | (3) | (1) | (1) |
| Cash and cash equivalents classified as assets of discontinued businesses | (3) | (46) | 0 |
| Cash and cash equivalents at beginning of period | 3,493 | 4,350 | |
| Cash and cash equivalents at end of period | 4,249 | 3,262 |
*The adjustments made are presented in Note 3 "discontinued operations".
(a) Refer to the consolidated statement of changes in equity.
(b) Including bond premiums, prepaid interest and issue costs.
Income tax paid amounted to €222 million in first-half 2015 (first-half 2014: €197 million). Interest paid net of interest received amounted to €213 million in first-half 2015 (first-half 2014: €231 million).
| number of shares | in EUR million | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Issued | Outstanding Capital | stock | Additio nal paid in capital and legal reserve |
Retained earnings and consolida ted net income |
Translation adjustments |
Fair value reserves |
Treasury stock |
Sharehol ders' equity |
Minority interests |
Total equity |
|
| At January 1, 2014 | 555,176,790 551,417,617 | 2,221 6,265 | 10,677 | (1,481) | 7 | (147) | 17,542 | 345 | 17,887 | ||
| Income and expense recognized directly in equity Net income for the period Total income and expense for the |
0 | 0 | (91) 671 |
221 | (53) | 0 | 77 671 |
8 22 |
85 693 |
||
| period | 0 | 0 | 580 | 221 | (53) | 0 | 748 | 30 | 778 | ||
| Issues of capital stock Group Savings Plan Stock option plans Dividends paid in shares Other |
4,303,388 1,753,254 6,601,189 |
4,303,388 1,753,254 6,601,189 |
17 7 26 |
128 12 218 |
145 19 244 0 |
8 | 145 19 244 8 |
||||
| Dividends paid (EUR 1,24 per share) Shares purchased Shares sold Share-based payments Changes in Group structure |
(631,381) 635,666 |
(685) 5 |
(26) 26 |
(685) (26) 26 5 0 |
(35) 26 |
(720) (26) 26 5 26 |
|||||
| At June 30, 2014 | 567,834,621 564,079,733 | 2,271 6,623 | 10,577 | (1,260) | (46) | (147) | 18,018 | 374 | 18,392 | ||
| Income and expense recognized directly in equity Net income for the period |
0 | 0 | (437) 282 |
307 | (17) | 0 | (147) 282 |
4 25 |
(143) 307 |
||
| Total income and expense for the period |
0 | 0 | (155) | 307 | (17) | 0 | 135 | 29 | 164 | ||
| Issues of capital stock Stock option plans Dividends paid in shares Other |
160,945 | 160,945 | 1 | 4 (1) |
5 (1) 0 |
4 | 5 (1) 4 |
||||
| Dividends paid (EUR 1,24 per share) Shares purchased Shares sold Shares canceled Share-based payments Changes in Group structure |
(6,100,000) | (4,454,666) 599,954 |
(24) | (189) | (4) 5 (12) |
(161) 28 213 |
0 (161) 24 0 5 (12) |
(4) 2 |
(4) (161) 24 0 5 (10) |
||
| At December 31, 2014 | 561,895,566 560,385,966 | 2,248 6,437 | 10,411 | (953) | (63) | (67) | 18,013 | 405 | 18,418 | ||
| Income and expense recognized directly in equity Net income for the period |
0 | 0 | 148 558 |
780 | 381 | 0 | 1,309 558 |
3 27 |
1,312 585 |
||
| Total income and expense for the period Issues of capital stock |
0 | 0 | 706 | 780 | 381 | 0 | 1,867 | 30 | 1,897 | ||
| Group Savings Plan Stock option plans Dividends paid in shares Other |
4,449,939 545,781 6,559,204 |
4,449,939 545,781 6,559,204 |
18 2 26 |
126 8 214 |
144 10 240 0 |
12 | 144 10 240 12 |
||||
| Dividends paid (EUR 1,24 per share) Shares purchased Shares sold Share-based payments |
(3,217,465) 641,480 |
(695) 3 4 |
(130) 23 |
(695) (130) 26 4 |
(35) | (730) (130) 26 4 |
|||||
| Changes in Group structure | (17) | (17) | (6) | (23) | |||||||
| At June 30, 2015 | 573,450,490 569,364,905 | 2,294 6,785 | 10,412 | (173) | 318 | (174) | 19,462 | 406 | 19,868 |
The interim consolidated financial statements of Compagnie de Saint-Gobain and its subsidiaries ("the Group") have been prepared in accordance with the accounting and measurement principles set out in the International Financial Reporting Standards (IFRSs), as described in these notes. They are condensed financial statements prepared in accordance with IAS 34 – Interim Financial Reporting.
These notes should be read in conjunction with the consolidated financial statements for the year ended December 31, 2014, prepared in accordance with the IFRSs adopted for use in the European Union and with the IFRSs issued by the International Accounting Standards Board (IASB).
The accounting policies applied are consistent with those used to prepare the financial statements for the year ended December 31, 2014 except for the application of the new standards and interpretations described below. The consolidated financial statements have been prepared using the historical cost convention, except for certain assets and liabilities that have been measured using the fair value model as explained in these notes.
The standards, interpretations and amendments to published standards applicable for the first time in 2015 (see table below) do not have a material impact on the Group's consolidated financial statements. For the record, in 2014, the Group had already adopted interpretation IFRIC 21 – Levies.
The Group has not adopted in advance any new standards, interpretations or amendments to published standards that are applicable for accounting periods beginning on or after January 1, 2015 (see table below).
These interim consolidated financial statements were adopted by the Board of Directors on July 29, 2015. They are presented in millions of euros.
The preparation of consolidated financial statements in compliance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the period. These estimates and assumptions are based on past experience and on various other factors in the prevailing deteriorated economic and financial environment, which makes it difficult to predict future business performance. Actual amounts may differ from those obtained through the use of these estimates and assumptions.
The main estimates and assumptions described in these notes concern asset impairment tests (note 4 "goodwill, other intangible assets and tangible assets"), the measurement of employee benefit obligations (note 7 "provisions for pensions and other employee benefits"), deferred taxes (note 8 "current and deferred taxes"), provisions for other liabilities and charges (note 9 "other current and non-current liabilities and provisions"), financial instruments (note 11 "financial instruments") and share-based payments (note 13 "share-based payments").
| Standards, interpretations and amendments to existing standards applicable in 2015: | ||||
|---|---|---|---|---|
| IFRIC 21 | Levies | |||
| Amendment to IFRS 1 | First-time Adoption of International Financial Reporting Standards sets the requirements for | |||
| entities that apply IFRSs for the first time | ||||
| Amendment to IFRS 3 | Business combinations - Clarifies that IFRS 3 excludes the accounting for the formation of a |
|||
| joint arrangement in the financial statements of the joint arrangement itself* | ||||
| Amendment to IFRS 13 | Fair value measurement - Clarifies the scope of the portfolio exception defined in paragraph 52 of IFRS 13 |
|||
| Amendment to IAS 40 | Investment property - Clarifies the interrelationship of IFRS 3 and IAS 40 when classifying |
|||
| property as investment property or owner-occupied property | ||||
| Standards, interpretations and amendments to existing standards applicable in advance to 2015 financial statements: |
||||
| Amendment to IAS 19 | Employee benefits | |||
| Amendment to IAS 1 | Disclosure requirements for assessment of going concerns |
|||
| Amendment to IFRS 2 | Share-based payment - Definitions of vesting conditions** |
|||
| Amendment to IFRS 3 | Business combinations - Accounting for contingent consideration in a business combination* |
|||
| Amendment to IFRS 8 | Operating segments - Reconciliation of the total of the reportable segments' assets to the |
|||
| entity's assets | ||||
| Amendment to basis for | Short-term receivables and payables | |||
| conclusion IFRS 13 |
||||
| Amendment to IAS 16 | Plant, equipment, and intangible assets - Revaluation method - proportionate restatement of |
|||
| and IAS 38 | accumulated depreciation/amortisation |
|||
| Amendment to IAS 24 | Related party disclosures - Key management personnel |
*For business combinations occurring on or after 1 July 2014 - prospective application. **For share-based payments granted on or after 1 July 2014 - prospective application.
Standards adopted by the European Union may be consulted on the European Commission website, at http://ec.europa.eu/internal\_market/accounting/ias/index\_en.htm
The interim financial statements, which are not intended to provide a measure of performance for the full year, include all period-end accounting entries deemed necessary by Group management in order to give a true and fair view of the information presented.
Goodwill and other intangible assets are systematically tested for impairment during the second half of the year as part of the preparation process for the business plan. Tests are generally performed for the interim financial statements only in the event of an unfavorable change in impairment indicators.
For the countries where the Group's pension and other post-employment benefit obligations are the most significant – i.e. the United States, the United Kingdom, France and the rest of the euro zone – actuarial valuations are updated at the end of June and the related provisions are adjusted accordingly (note 7 "provisions for pensions and other employee benefits"). For the other host countries, actuarial valuations are performed as part of the annual budget procedure and provisions in the interim balance sheet are based on estimates made at the end of the previous year.
The Group's consolidated financial statements include the accounts of Compagnie de Saint-Gobain and of all companies controlled by the Group, as well as those of jointly controlled companies and companies over which the Group exercises significant influence.
Significant changes in the Group's scope of consolidation during the first-half of 2015 are presented in note 2 "changes in group structure" and a list of the principal consolidated companies at June 30, 2015 is provided in note 20 "principal fully consolidated companies".
The accounting principles used to prepare these interim consolidated financial statements are identical to those used to prepare the consolidated financial statements for the year ended December 31, 2014 (see note 1 "accounting principles and policies" of the Notes to the consolidated financial statements for the year ended December 31, 2014).
| France | Outside France |
Total | ||
|---|---|---|---|---|
| Fully consolidated companies | ||||
| At January 1, 2015 | 160 | 643 | 803 | |
| Newly consolidated companies | 8 | 8 | ||
| Merged companies | (16) | (16) | ||
| Deconsolidated companies | 0 | |||
| Change in consolidation method | 0 | |||
| At June 30, 2015 | 160 | 635 | 795 | |
| Companies accounted for by the equity method | ||||
| At January 1, 2015 | 5 | 84 | 89 | |
| Newly consolidated companies | 22 | 22 | ||
| Merged companies | 0 | |||
| Deconsolidated companies | (1) | (1) | (2) | |
| Change in consolidation method | 0 | |||
| At June 30, 2015 | 4 | 105 | 109 | |
| Total at January 1, 2015 | 165 | 727 | 892 | |
| Total at June 30, 2015 | 164 | 740 | 904 |
On June 8, 2015, the Saint-Gobain Group entered into exclusive talks with Apollo. Following a competitive process, the Saint-Gobain Group has granted funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, "Apollo") exclusivity after having received a purchase offer for the Packaging Sector of €2,945 million (enterprise value). This firm and binding offer is not subject to any financing conditions. The agreement between the Saint-Gobain Group and Apollo will be able to be finalized following completion of the customary information and consultation procedures with the Group's employee representative bodies. Completion of the transaction is subject to the approval of certain anti-trust authorities, including the European Commission, and should be effective before the end of the year. See note 3 "discontinued operations".
Saint-Gobain continued during the first half of 2015 its proposed acquisition of the control of Sika, described in Section 4.3 of Chapter 2 of the 2014 Registration Document. On July 22, 2015, the European Commission unconditionally authorizes Saint-Gobain's acquisition of control over Sika.
Plan to acquire a controlling interest in Sika
On December 8, 2014, the Group announced its plan to acquire the control of Sika, the global leader in construction chemicals. The plan consists of the Group acquiring the holding company Schenker Winkler Holding AG, which holds 16.1% of Sika's share capital and 52.4% of its voting rights. This deal is subject to authorization by the competent anti-trust authorities and is envisioned for no later than the second half of 2015. In accordance with the Group's currency risk hedging policy, an amount of CHF 2.75 billion was hedged in euros.
Project for sale of the Packaging Sector
Following authorization given by the Board of Directors, on 8 December 2014 the Group also announced a plan to launch a competitive process for the sale of the Packaging Sector. As at December 31, 2014, however, no active plan for the sale had commenced, as a result of which the sale of the Packaging Sector did not meet the criteria for classification as a "disposal group held for sale" according to the IFRS 5 definition. The Saint-Gobain Group had structured itself over the first quarter of 2015 in order to have the elements required for launching the active sale of this business. The formal competitive process was commenced at the beginning of March 2015 and, after consultation with staff representative bodies, it is intended that an agreement with a purchaser will be reached before summer 2015.
On January 17, 2013, Compagnie de Saint-Gobain signed an agreement with Ardagh for the disposal of Verallia North America (Saint-Gobain Containers, Inc. and subsidiaries), concluded April 11, 2014, through the effective sale of all shares of Verallia North America to the Ardagh group based on an enterprise value of US\$1,694 million (€1,275 million). Saint-Gobain, Ardagh, and the Pension Benefit Guaranty Corporation (PCBG) have also reached a settlement agreement regarding financing of the defined benefit plans for employees of Saint-Gobain Containers, Inc.
On June 8, 2015, Saint-Gobain Group entered into exclusive talks with Apollo. As a result, in compliance with IFRS 5 "Non-current assets held for sale and discontinued operations", the Packaging Sector has been reported in Saint-Gobain Group's consolidated financial statements as discontinued operations.
In accordance with IFRS 5, the following terms were applied:
In the first-half 2014, Compagnie de Saint-Gobain signed the disposal of Verallia North America. Until the effective disposal date of April 11, 2014 it was consolidated in the Packaging Sector. The net result of discontinued operations of the first-half of 2014 reflects the results of Verallia North America.
The consolidated income statement, consolidated balance sheet and consolidated statement of cash flows on the scope of the Packaging Sector are as follows:
| June 30, | |
|---|---|
| (in EUR million) | 2015 |
| Intangible assets and goodwill | 60 |
| Property, plant and equipment | 1,075 |
| Other non-current assets | 69 |
| Inventories, trade accounts receivable and other receivables | 1,003 |
| Cash and cash equivalents | 46 |
| Assets of discontinued businesses | 2,253 |
| Provisions for pensions and other employee benefits | 114 |
| Deferred tax liabilities and other non-current liabilities and provisions | 109 |
| Trade accounts payable, other payables and accrued expenses | 585 |
| Short-term debt and bank overdrafts | 146 |
| Liabilities of discontinued businesses | 954 |
| First-half | First-half | |
|---|---|---|
| (in EUR million) | 2015 | 2014 |
| Group share of net income | 6 5 |
6 7 |
| Other profit or loss items | 75 | 86 |
| Change in working capital | (99) | (97) |
| Changes in deferred taxes and provisions for other liabilities and charges | 20 | 12 |
| Net cash from operating activities | 6 1 |
6 8 |
| Purchases of property, plant and equipment [H1 2015: (67), H1 2014: (86)] and intangible assets | (68) | (87) |
| Increase (decrease) in amonts due to suppliers of fixed assets | (36) | (40) |
| Investments | (104) | (127) |
| Divestments | (2) | (3) |
| Change in loans, deposits and short-term loans | (1) | 0 |
| Net cash from (or used in) investing and divestment activities | (107) | (130) |
| Dividends paid to Compagnie de Saint-Gobain | (127) | (128) |
| Transactions with minority interests | (1) | (2) |
| Change in gross debt | 180 | 176 |
| Net cash from (or used in) financing activities | 5 2 |
4 6 |
| Increase (decrease) in cash | 6 | (16) |
| Net effect of exchange rate changes on cash and cash equivalents | (1) | (1) |
| Cash and cash equivalents at beginning of period | 4 1 |
4 1 |
| Cash and cash equivalents at end of period | 4 6 |
2 4 |
| Goodwill Other intangible | Property, plant | Total intangible | ||
|---|---|---|---|---|
| assets | and equipment | and tangible | ||
| (in EUR million) | assets | |||
| At January 1, 2015 | ||||
| Gross value | 11,899 | 4,425 | 33,809 | 50,133 |
| Accumulated impairment and depreciation | (1,437) | (1,340) | (21,152) | (23,929) |
| Net | 10,462 | 3,085 | 12,657 | 26,204 |
| Movements during the period | ||||
| Acquisitions | 0 | 54 | 457 | 511 |
| Disposals | 0 | 0 | (27) | (27) |
| Translation adjustments | 436 | 128 | 332 | 896 |
| Depreciation and impairment | (5) | (47) | (581) | (633) |
| Transfer to assets of discontinued businesses | (55) | (5) | (1,075) | (1,135) |
| Changes in Group structure and other movements | 59 | 14 | 13 | 86 |
| Total movements | 435 | 144 | (881) | (302) |
| At June 30, 2015 | ||||
| Gross value | 12,398 | 4,609 | 31,655 | 48,662 |
| Accumulated impairment and depreciation | (1,501) | (1,380) | (19,879) | (22,760) |
| Net | 10,897 | 3,229 | 11,776 | 25,902 |
In first-half 2015, movements in goodwill corresponded mainly to translation adjustments.
When the annual impairment test reveals that the recoverable amount of an asset is less than its carrying amount, an impairment loss is recorded.
The breakdown of impairments on assets by Sector for first-half 2015 and 2014 is provided in the segment information tables in note 19 "segment information".
Different assumptions measuring the method's sensitivity are systematically tested using the following parameters:
As at December 31, 2014, a 0.5 point decrease in the discount rate for all the CGUs would lead to approximately €98 million in additional write-downs of intangible assets, while the impact of a 0.5 point decrease in the average annual cash flow growth rate, projected to perpetuity, applied to all the CGUs would result in additional writedowns of intangible assets of around €83 million. The impact of a 1 point decrease in the operating profit rate for all industrial CGUs would have generated additional write-downs of the Group's intangible assets of roughly €29 million, and a 0.5 point decrease of the rate for distribution activities would have generated an additional writedown of €80 million.
| Impact of | ||||||||
|---|---|---|---|---|---|---|---|---|
| (in EUR million) | +0.5% in the discount rate applied to cash flows |
-0.5% in the growth rate |
-1 point in the operating profit rate |
-0.5 point in the operating profit rate |
||||
| Flat Glass* High Performance Materials |
(28) | (24) | (29) | (21) | ||||
| Construction Products Building Distribution Packaging |
(70) | (59) | (59) | |||||
| Total | (98) | (83) | (29) | (80) |
*The €21 million refers solely to the distribution activity of Flat Glass (Glassolutions).
Property, plant and equipment, goodwill and other intangible assets are tested for impairment on a regular basis. See description in note 1 "accounting principles and policies" of the Notes to the consolidated financial statements for the year ended December 31, 2014.
| June 30, | December | |
|---|---|---|
| (in EUR million) | 2015 | 31, 2014 |
| Gross value | ||
| Raw materials | 1,348 | 1,483 |
| Work in progress | 297 | 261 |
| Finished goods | 4,934 | 4,983 |
| Gross inventories | 6,579 | 6,727 |
| Provisions for impairment in value | ||
| Raw materials | (141) | (153) |
| Work in progress | (11) | (10) |
| Finished goods | (270) | (272) |
| Provisions for impairment in value | (422) | (435) |
| Net | 6,157 | 6,292 |
The net value of inventories amounted to 6,157 million euros at June 30, 2015 compared to 5,755 million euros at December 31, 2014 (after adjustments of Packaging Sector). The increase in inventories mainly reflects seasonal fluctuations in business.
| June 30, | December | |
|---|---|---|
| (in EUR million) | 2015 | 31, 2014 |
| Gross value | 6,471 | 5,393 |
| Provisions for impairment in value | (481) | (470) |
| Trade accounts receivable | 5,990 | 4,923 |
| Advances to suppliers | 491 | 537 |
| Prepaid payroll taxes | 36 | 26 |
| Other prepaid and recoverable taxes (other than income tax) | 360 | 367 |
| Other | 776 | 431 |
| Provisions for impairment in value | (5) | (5) |
| Other receivables | 1,658 | 1,356 |
| Trade accounts payable | 5,854 | 6,062 |
| Customer deposits | 750 | 861 |
| Payable to suppliers of non-current assets | 112 | 307 |
| Grant received | 89 | 90 |
| Accrued personnel expenses | 1,054 | 1,163 |
| Accrued taxes (other than income tax) | 617 | 396 |
| Dividends payable | 456 | 1 |
| Other | 692 | 642 |
| Total other payables and accrued expenses | 3,770 | 3,460 |
Excluding the effect of reclassification of the Packaging Sector, the increase in trade accounts receivable is primarily attributable to seasonal fluctuations in business.
| June 30, | December | |
|---|---|---|
| (in EUR million) | 2015 | 31, 2014 |
| Pension commitments | 2,493 | 2,818 |
| Length-of-service awards | 326 | 371 |
| Post-employment healthcare benefits | 460 | 453 |
| Total provisions for pensions and other post-employment benefit obligations | 3,279 | 3,642 |
| Healthcare benefits | 28 | 26 |
| Long-term disability benefits | 21 | 19 |
| Other long-term benefits | 98 | 98 |
| Provisions for pensions and other employee benefits | 3,426 | 3,785 |
Provisions for pensions and other social commitments consist of the following:
The following table shows defined benefit obligations under pension and other post-employment benefit plans and the related plan assets:
| (in EUR million) | June 30, 2015 |
December 31, 2014 |
|---|---|---|
| Provisions for pensions and other post-employment benefit obligations | 3,279 | 3,642 |
| Pension plan surpluses | (153) | (137) |
| Net pension and other post-employment benefit obligations | 3,126 | 3,505 |
The Group's main defined benefit plans are identical to those disclosed in the consolidated financial statements December 31, 2014.
Provisions for other long-term employee benefits amounted to €147 million at June 30, 2015 (December 31, 2014: €143 million), and covered all other employee benefits, notably long-service awards in France, jubilees in Germany and employee benefits in the United States. The related defined benefit obligation is generally calculated on an actuarial basis using the same rules as for pension obligations.
Assumptions related to mortality, employee turnover and future salary increases take into account the economic conditions specific to each country and company.
| France | Other European Countries | United | ||
|---|---|---|---|---|
| Eurozone | United | States | ||
| (in %) | Kingdom | |||
| Discount rate | 1.90% | 1.90% | 3.55% | 4.00% |
| Salary increase | 2.40% 2.00% to 2.60% | 2.00%* | 3.00% | |
| Return on plan assets | 1.90% | 1.90% | 3.55% | 4.00% |
| Inflation rate | 1.80% 1.80% to 2.00% | 1.95% | 2.00% |
The assumptions used for the main plans in first-half 2015 were as follows:
*Cap on reference salaries for calculating benefit entitlements
The discount rates applied to calculate pension obligations were adjusted to take into account changes in interest rates and their level at June 30, 2015. The euro zone rate was changed from 1.90% to 2.50%, the UK rate from 3.55% to 3.80% and the US rate from 4% to 4.40%. In the UK zone, the inflation rate was changed from 1.95% to 2.20%. As these three regions account for almost all of the pension obligation, the discount rate adjustments led to a €470 million decrease in the obligation and related provision.
Sensitivity calculations were not updated at June 30, 2015; if they had been, the results would not have been materially different to the analyses presented in the 2014 Annual Report (in note 15 "provisions for pensions and other employee benefits" to the consolidated financial statements).
The actual return on plan assets for almost all plans amounted to €80 million. This was €53 million less than the expected return (calculated using the discount rate), leading to an increase in the provision of the same amount.
Furthermore, other revaluation elements led to the recording of an-additional actuarial gain of €29 million in lower provision.
In accordance with IFRS 5, the provisions for pensions and other post-employment benefits excluding other employee benefits for employees of the Packaging Sector were classified as assets and liabilities of discontinued businesses at June 30, 2015, for an amount of €108 million. Including pension plan surpluses of €3 million, the total amount reclassified as liabilities of discontinued businesses is €114 million, adding other long-term benefits amounting to €3 million. This information is presented in note 3 "discontinued operations".
Movements in provisions for pensions and other post-employment benefit obligations, excluding other employee benefits
| (in EUR million) | Net pension obligations |
|---|---|
| At January 1, 2015 | |
| Net pension and post-employment benefit obligations | 3,505 |
| Movements during the period | |
| Service cost | 71 |
| Interest costs | 48 |
| Actuarial gains and losses recognized during the period* | (446) |
| Contributions to plan assets and benefit payments | (75) |
| Transfer to liabilities of discontinued businesses | (108) |
| Other (reclassifications and translation adjustments) | 131 |
| Total movements | (379) |
| At June 30, 2015 | |
| Net pension and post-employment benefit obligations | 3,126 |
| *The total impact on equity is an increase of €446 million before tax (€291 million after tax). |
The pre-tax income of consolidated companies is as follows:
| First-half | First-half | |
|---|---|---|
| (in EUR million) | 2015 | 2014 restated |
| Consolidated net income | 585 | 693 |
| Less: | ||
| Share in net income of associates | 20 | 19 |
| Net income from discontinued operations | 69 | 68 |
| Income taxes | (236) | (158) |
| Pre-tax income of consolidated companies | 732 | 764 |
The effective tax rate breaks down as follows:
| First-half | First-half | |
|---|---|---|
| (in %) | 2015 | 2014 restated |
| Tax rate in France | 34.4 | 34.4 |
| Impact of tax rates outside France | (11.8) | (6.1) |
| Impact of Finance Law in France | 3.6 | 3.6 |
| Capital gains and losses and asset impairments | 0.4 | (10.0) |
| Provisions for deferred tax assets | 1.7 | 0.6 |
| Effect of changes in future tax rates | 0.0 | 0.0 |
| Research tax credit | (1.0) | (0.6) |
| Other deferred and miscellaneous taxes | 4.9 | (1.2) |
| Effective tax rate | 32.2 | 20.7 |
The impact of the change in taxes abroad (-11.8% in first-half 2015 compared with -6.1% in first-half 2014) is explained by the contribution of some countries with low tax rates. The main contributing countries are the United Kingdom, Czech Republic, Poland, Sweden, Netherlands, and Norway.
In the balance sheet, changes in the net deferred tax asset and liability break down as follows:
| Net deferred tax | |
|---|---|
| (in EUR million) | assets/(liabilities) |
| At January 1, 2015 | 714 |
| Deferred tax (expense)/benefit | 10 |
| Changes in deferred taxes on actuarial gains and losses recognized in accordance with IAS 19 (Note 7) | (155) |
| Translation adjustments | 28 |
| Transfer to assets and liabilities of discontinued businesses | 60 |
| Impact of changes in Group structure and other | (134) |
| At June 30, 2015 | 523 |
| Provision | Provision | Provision | Provision | Provision | Provision | Total | Investme | Total | |
|---|---|---|---|---|---|---|---|---|---|
| s for | s for | s for | s for | s for | s for | provisions | nt-related | ||
| claims | environm | restructur | personnel | customer | other | for other | liabilities | ||
| and | ental | ing costs | costs | warrantie | contingen | liabilities | |||
| (in EUR million) | litigation | risks | s | cies | |||||
| At January 1, 2015 | |||||||||
| Current portion | 95 | 32 | 76 | 32 | 119 | 50 | 404 | 5 | 409 |
| Non-current portion | 418 | 131 | 98 | 44 | 140 | 257 | 1,088 | 137 | 1,225 |
| Total provisions for other debts and investment-related | |||||||||
| liabilities | 513 | 163 | 174 | 76 | 259 | 307 | 1,492 | 142 | 1,634 |
| Movements during the period | |||||||||
| Additions | 75 | 3 | 33 | 17 | 30 | 46 | 204 | 204 | |
| Reversals | (3) | 0 | (10) | (4) | (14) | (6) | (37) | (37) | |
| Utilizations | (39) | (3) | (43) | (7) | (32) | (34) | (158) | (158) | |
| Changes in Group structure | 0 | 0 | 0 | 1 | 0 | 0 | 1 | 1 | |
| Other (reclassifications and translation adjustments) | 41 | (4) | (4) | (5) | 16 | (2) | 42 | 27 | 69 |
| Total movements during the period | 74 | (4) | (24) | 2 | 0 | 4 | 52 | 27 | 79 |
| At June 30, 2015 | |||||||||
| Current portion | 129 | 33 | 69 | 27 | 112 | 48 | 418 | 5 | 423 |
| Non-current portion | 458 | 126 | 81 | 51 | 147 | 263 | 1,126 | 164 | 1,290 |
| Total provisions for other debts and investment-related | |||||||||
| liabilities | 587 | 159 | 150 | 78 | 259 | 311 | 1,544 | 169 | 1,713 |
Long- and short-term debt consists of the following:
| June 30, | December | |
|---|---|---|
| (in EUR million) | 2015 | 31, 2014 |
| Bond Issues and Medium-Term Notes | 7,604 | 7,690 |
| Perpetual bonds and participating securities | 203 | 203 |
| Long-term securitization | 400 | 400 |
| Other long-term debt including finance leases | 293 | 380 |
| Fair value of interest rate hedges | (5) | 40 |
| Total long-term debt (excluding current portion) | 8,495 | 8,713 |
| Current portion of long-term debt | 2,096 | 1,389 |
| Short-term financing programs (US CP, Europe CP, Billets de trésorerie ) | 936 | 0 |
| Securizations short-term | 191 | 107 |
| Bank overdrafts and other short-term bank borrowings | 526 | 508 |
| Fair value of derivatives not qualified as hedges of debt | 0 | (3) |
| Short-term debt and bank overdrafts | 1,653 | 612 |
| TOTAL GROSS DEBT | 12,244 | 10,714 |
| Cash at bank | (1,310) | (1,285) |
| Mutual funds and other marketable securities | (2,939) | (2,208) |
| Cash and cash equivalents | (4,249) | (3,493) |
| TOTAL DEBT, INCLUDING ACCRUED INTEREST | 7,995 | 7,221 |
The fair value of gross long-term debt (including the current portion) managed by Compagnie de Saint-Gobain amounted to €10.4 billion at June 30, 2015, for a carrying amount of €9.6 billion. The fair value of bonds corresponds to the market price on the last day of the year. For other borrowings, fair value is considered as being equal to the amount repayable.
Debt at June 30, 2015 can be analyzed as follows by maturity:
| Within 1 year | 1 to 5 years | Beyond 5 | Total | ||
|---|---|---|---|---|---|
| (in EUR million) | Currency | years | |||
| Bond issues and Medium Term Notes | EUR | 1,699 | 3,593 | 2,701 | 7,993 |
| GBP | 421 | 768 | 1,189 | ||
| JPY | 36 | 36 | |||
| NOK | 85 | 85 | |||
| Perpetual bonds and participating securities | EUR | 203 | 203 | ||
| Long-term securitization | EUR | 104 | 400 | 504 | |
| Other long-term debt including finance leases | All curencies | 120 | 121 | 172 | 413 |
| Fair value of interest rate hedges | All curencies | (5) | (5) | ||
| Accrued interest long-term debt | All curencies | 173 | 173 | ||
| TOTAL LONG-TERM DEBT | 2,096 | 4,656 | 3,839 | 10,591 | |
| TOTAL SHORT TERM-DEBT | All curencies | 1,653 | 0 | 0 | 1,653 |
| TOTAL GROSS DEBT | 3,749 | 4,656 | 3,839 | 12,244 |
On March 13, 2015, Compagnie de Saint-Gobain completed the issuance of a private placement of €500 million maturing in September 2016 with a variable coupon of 3 month EURIBOR + 0.27%. This operation allows the Group to optimize its average financing cost.
In 1985, Compagnie de Saint-Gobain issued 25,000 perpetual bonds with a face value of ECU 5,000 per value today of €5,000.
Up to June 30, 2015, 18,496 perpetual bonds had been bought back and canceled, and 6,504 perpetual bonds were outstanding, representing a total face value of €33 million.
The bonds bear interest at a variable rate (average of interbank rates offered by five reference banks for deposits in euro at six months).
The bonds are not redeemable and the interest on them is classified as a component of finance costs.
In June 1983, Compagnie de Saint-Gobain issued 1,288,299 non-voting participating securities with a face value of FRF 1,000. Their face value is now €152.45, following their conversion into euros in 1999.
Some of these securities have been bought back over the years. At June 30, 2015, 606,883 securities were outstanding with an aggregate face value of €92.5 million.
Interest on the securities ranges from 75% to 125% of the average corporate bond rate ("TMO"), based on the Saint-Gobain Group's consolidated income.
In April 1984, Compagnie de Saint-Gobain also issued 194,633 participating securities with a face value of ECU 1,000 (now €1,000).
Some of these securities have been bought back over the years. At June 30, 2015, 77,516 securities were outstanding with an aggregate face value of €77.5 million.
Interest comprises (i) a fixed portion of 7.5% per year applicable to 60% of the nominal amount of the security, and (ii) a variable portion applicable to the remaining 40% of the nominal amount of the participating security, which is linked to consolidated net income of the previous year and to the LIBOR 6-month reference rate +7/8%.
These participating securities are not redeemable and the interest paid on them is reported under "Borrowing costs".
The Group has a number of medium- and long-term financing programs (Medium-Term Notes) and short-term financing programs (Commercial Paper and Billets de Trésorerie).
At June 30, 2015, issuance under these programs was as follows:
| Authorized drawings |
Authorized limits at June 30, 2015 |
Outstanding issues at June 30, |
Outstanding issues at December |
|
|---|---|---|---|---|
| (in EUR million) | 2015 | 31, 2014 | ||
| Medium Term Notes | 15,000 | 8,719 | 8,219 | |
| US Commercial Paper | Up to 12 months | 894 * | 0 | 0 |
| Euro Commercial Paper | Up to 12 months | 894 * | 0 | 0 |
| Billets de trésorerie | Up to 12 months | 3,000 | 936 | 0 |
*Equivalent to USD 1,000 million based on the exchange rate at June 30, 2015
In accordance with market practices, Billets de Trésorerie, Euro Commercial Paper and US Commercial Paper are generally issued with maturities of one to six months. They are treated as variable-rate debt, because they are rolled over at frequent intervals.
Compagnie de Saint-Gobain has various syndicated lines of credit that are intended to provide a secure source of financing for the Group (including as additional backing for its US Commercial Paper, Euro-Commercial Paper and Billets de Trésorerie programs). They include:
An initial €1.5 billion syndicated line of credit expiring in December 2017, which was obtained in December 2012. The facility was renegotiated in December 2013 and rolled over until December 2018;
A second €2.5 billion syndicated line of credit expiring in December 2018, with two one-year rollover options that was obtained in December 2013. As part of the first rollover option, this syndicated line of credit was extended in December 2014 by one additional year, bringing its maturity to December 2019.
Based on the Saint-Gobain Group's current credit rating for long-term debt issues, the two facilities are not subject to any hard covenants.
Neither of these two lines of credit was drawn down at June 30, 2015.
The Group has set up two receivables securitization programs, one through its French subsidiary GIE Point-P Finance, and the other through its US subsidiary, Saint-Gobain Receivables Corporation.
The €600 million French program was set up on December 2, 2013. At June 30, 2015, it amounted to €504 million (December 31, 2014: €516 million). Based on observed seasonal fluctuations in receivables included in the program and on the contract's features, €400 million of this amount was classified as non-current and the balance as current.
The US program, which is rolled over each year, amounted to €191 million at June 30, 2015 (December 31, 2014: €107 million).
This item includes bank overdrafts, local short-term bank borrowings taken out by subsidiaries, and accrued interest on short-term debt.
At June 30, 2015, €2 million of Group debt was secured by various non-current assets (real estate and securities).
| Fair value at June 30, 2015 | Fair value at Nominal value broken down by maturity at June 30, 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Derivatives | Derivatives | Total | December 31, | Within 1 | 1 to 5 years | Beyond 5 | Total | |
| recorded in | recorded in | 2014 | year | years | ||||
| (in EUR million) | assets | liabilities | ||||||
| Fair value hedges | 0 | 0 | 0 | |||||
| Cash flow hedges | ||||||||
| Currency | 351 | (5) | 346 | (7) | 2,874 | 20 | 0 | 2,894 |
| Interest rate | 12 | (7) | 5 | (40) | 0 | 0 | 446 | 446 |
| Energy and commodities | 2 | (4) | (2) | (9) | 41 | 3 | 0 | 44 |
| Other risks | 5 | 0 | 5 | (1) | 0 | 63 | 0 | 63 |
| Cash flow hedge - total | 370 | (16) | 354 | (57) | 2,915 | 86 | 446 | 3,447 |
| Derivatives not qualifying for hedge accounting | ||||||||
| Currency | 4 | (4) | 0 | 3 | 1,703 | 0 | 0 | 1,703 |
| Interest rate | 0 | 0 | 0 | |||||
| Energy and commodities | 0 | 0 | 0 | |||||
| Derivatives not qualifying for hedge accounting - total | 4 | (4) | 0 | 3 | 1,703 | 0 | 0 | 1,703 |
| TOTAL | 374 | (20) | 354 | (54) | 4,618 | 86 | 446 | 5,150 |
| of which derivatives used to hedge net debt | 16 | (11) | 5 | (37) |
Currency swaps
The Group uses currency swaps mainly to convert euro-denominated funds into foreign currencies for cash management purposes.
Forward foreign exchange contracts and currency options
Forward foreign exchange contracts and currency options are used to hedge foreign currency transactions, particularly commercial transactions (purchases and sales) and investments.
Interest rate swaps
The Group uses interest rate swaps to convert part of its fixed (variable) rate bank debt and bond debt to variable (fixed) rates.
Cross-currency swaps
The Group uses cross-currency swaps to convert foreign currency debt (euro debt) into euro debt (foreign currency debt).
Energy and commodity swaps
Energy and commodity swaps are used to hedge the risk of changes in the price of certain purchases used in the subsidiaries' operating activities, particularly energy (fuel oil, natural gas and electricity) purchases.
Equity derivatives are used to hedge the risk of changes in the Saint-Gobain share price in connection with the performance units-based long-term incentive plan.
Credit value adjustments to derivative instruments are calculated in accordance with IFRS 13 based on historical probabilities of default derived from calculations performed by a leading rating agency and on the estimated loss given default. At June 30, 2015, credit value adjustments were not material.
At June 30, 2015, the cash flow hedging reserve carried in equity in accordance with IFRS had a credit balance of €317 million, mainly corresponding to the fair value of hedging Swiss franc/euro for acquisition of control of SIKA.
Derivatives classified as cash flow hedges showed no material effectiveness.
The fair value of derivatives classified as financial assets and liabilities at fair value through profit or loss represented a non-material value at June 30, 2015 (December 31, 2014: €3 million gain).
The weighted average interest rate on total debt under IFRS, after hedging (using currency swaps, crosscurrency swaps and interest rate swaps) was 3.7% at June 30, 2015 (December 31, 2014: 4.3%).
The table below presents the breakdown by interest rate (fixed or variable) of the Group's gross debt at June 30, 2015, after giving effect to interest rate swaps, cross-currency swaps and currency swaps.
| Gross debt after hedging | |||||
|---|---|---|---|---|---|
| (in EUR million) | Variable rate | Fixed rate | Total | ||
| EUR | 2,482 | 7,869 | 10,351 | ||
| Other currencies | 617 | 1,096 | 1,713 | ||
| Total | 3,099 | 8,965 | 12,064 | ||
| 26% | 74% | 100% | |||
| Fair value of restated derivatives | (5) | ||||
| Accrued interest | 185 | ||||
| Total gross debt | 12,244 |
| First-half | First-half 2014 | |
|---|---|---|
| (in EUR million) | 2015 | restated |
| Net sales | 19,860 | 18,946 |
| Personnel costs: | ||
| Salaries and payroll taxes | (3,938) | (3,774) |
| Share-based paymentss (a) | (11) | (8) |
| Pensions and other employee benefits (b) | (82) | (86) |
| Depreciation and amortization | (611) | (584) |
| Share of net income of business associates | 20 | 20 |
| Other (c) | (13,963) | (13,331) |
| Operating income | 1,275 | 1,183 |
| Other business income (d) | 14 | 421 |
| Negative goodwill recognized in income | 0 | 0 |
| Other business income | 14 | 421 |
| Restruturing costs (e) | (70) | (146) |
| Provisions and expenses relating to claims and litigation (f) | (73) | 142 |
| Impairment of assets and other business expenses (g) | (55) | (472) |
| Other | (11) | (8) |
| Other business expense | (209) | (484) |
| Business income | 1,080 | 1,120 |
(a) Details of share-based payments (IFRS 2 expense) are provided in note 13 "share-based payments".
€19 million) and acquisition costs incurred in connection with business combinations for €7 million (firsthalf 2014: €1 million).
Compagnie de Saint-Gobain has stock option plans available to certain employees. No stock options were granted in the first half of 2015. Under IFRS 2, the expense attributable to the amortization of stock options granted under previous plans totaled €1 million in first-half 2015 (first-half 2014: €1 million).
The Group Savings Plan ("PEG") is open to all Group employees in France and most other countries where the Group is present. Eligible employees must have completed a minimum of three months' service with the Group. Eligible employees are able to invest in Saint-Gobain shares at a preferential subscription price. These shares are held either directly or through the employee savings plan's mutual funds, depending on local legislation; they are subject to a mandatory five or ten-year lock-up, except following the occurrence of certain events. The subscription price of the shares, as set by the Chairman and Chief Executive Officer duly authorized by the Board of Directors, corresponds to the average of the opening share prices quoted over the 20 trading days preceding the pricing date, to which is applied a 20% discount, in accordance with applicable laws and the resolutions of the Shareholders' Meeting.
The compensation cost recorded in accordance with IFRS 2 is measured by reference to the fair value of a discount offered on restricted stock (i.e. stock subject to a lock-up). The cost of the lock-up for the employee is defined as the cost of a two-step strategy that involves first selling the restricted stock forward five or ten years and then purchasing the same number of shares on the spot market and financing the purchase with debt. The borrowing cost is estimated at the rate that would be charged by a bank to an individual with an average risk profile for a general purpose five- or ten-year consumer loan repayable at maturity.
In 2015, 4,449,939 new shares with a par value of €4 were issued to employees under the PEG at an average subscription price of €32.44 (2014: 4,303,388 shares at an average price of €33.89), representing a share capital increase of a global amount of €144 million (€145 million in 2014).
The plan cost recorded in the income statement amounted to €0 in 2015 and 2014, net of the lock-up cost for employees of €24 million (€23 million in 2014).
The following table shows the main features of the plans, the amounts invested in the plans and the valuation assumptions applied in 2015 and 2014:
| 2015 | 2014 | |
|---|---|---|
| Plan characteristics | ||
| 2013, June 6 | 2013, June 6 | |
| (16th | (16th | |
| Date of the Shareholders' Meeting | resolution) | resolution) |
| Date of the Chief Executive Officer's decision fixing the subscription price | March 23 | March 21 |
| Plan duration (in years) | 5 or 10 | 5 or 10 |
| Reference price (in EUR) | 40.54 | 42.36 |
| Subscription price (in EUR) | 32.44 | 33.89 |
| Discount (in %) | 20.00% | 20.00% |
| (a) Total discount on the date of the Chief Executive Officer's decision (in %) | 20.02% | 19.29% |
| Employee investments (in EUR million) | 144.4 | 145.8 |
| Total number of shares subscribed | 4,449,939 | 4,303,388 |
| Valuation assumptions | ||
| Interest rate applicable to employees* | 5.40% | 6.00% |
| 5-year risk-free interest rate | 0.05% | 0.96% |
| Repo rate | 0.46% | 0.41% |
| (b) Lock-up discount (in %) | 23.42% | 22.20% |
| Total cost to the Group (in %) (a-b) | -3.40% | -2.91% |
*A 0.5-point decline in borrowing costs for the employee would have no impact on first-half 2015 cost as calculated in accordance with IFRS 2.
Various performance share plans have been set up by Saint-Gobain since 2009. No new performance share or performance unit plans were set up in first-half 2015. The expense recognized during the period in respect of the earlier plans amounted to €3 million (first-half 2014: €4 million).
Performance unit plans were set up in 2012, 2013 and 2014. The units will not give rise to the allocation of new or existing shares of the Company, but will entitle grantees to deferred cash compensation determined by reference to the Company's share price. The expense recognized during the period in respect of the three plans amounted to €7 million (first-half 2014: €3 million).
| First-half | First-half | |
|---|---|---|
| (in EUR million) | 2015 | 2014 restated |
| Interest cost - pension and other post-employment benefit obligations | (196) | (191) |
| Expected return on plan assets | 148 | 145 |
| Interest cost - pension and other post-employment benefit obligations - net | (48) | (46) |
| Other financial expense | (75) | (54) |
| Other financial income | 8 | 7 |
| Other financial income and expense | (115) | (93) |
EBITDA amounted to €1,886 million in first-half 2015 (first-half 2014: €1,767 million), calculated as follows:
| (in EUR million) | First-half 2015 |
First-half 2014 restated |
|---|---|---|
| Operating income | 1,275 | 1,183 |
| Depreciation of intangible assets and property, plant and equipment | 611 | 584 |
| EBITDA | 1,886 | 1,767 |
Recurring net income from continuing operations totaled €552 million in first-half 2015 (first-half 2014: €441 million). Based on the weighted average number of shares outstanding at June 30 (561,292,118 shares in 2015, 553,432,495 shares in 2014), recurring earnings per share amounted to €0.98 in first-half 2015 and €0.80 in first-half 2014.
The difference between net income and recurring net income (attributable to equity holders of the parent) corresponds to the following items:
| (in EUR million) | First-half 2015 |
First-half 2014 restated |
|
|---|---|---|---|
| Group share of net income from continuing operations | 493 | 604 | |
| Less: | |||
| Gains on disposals of assets | (10) | 402 | |
| Impairment of assets and acquisition costs incurred in connection with business combinations | (31) | (453) | |
| Provision for anti-trust litigation and other non-reccurring provision charges | (27) | 187 | |
| Impact of minority interests | (1) | (8) | |
| Tax impact | 10 | 35 | |
| Recurring net income from continuing operations attributable to equity holders of the parent | 552 | 441 |
Cash flow from operations from continuing operations for first-half 2015 amounted to €1,195 million (first-half 2014: €1,045 million). Excluding tax on capital gains and non-recurring provision charges, cash flow from operations from continuing operations came to €1,185 million in first-half 2015 (first-half 2014: €1,010 million). These amounts are calculated as follows:
| First-half | First-half | |
|---|---|---|
| (in EUR million) | 2015 | 2014 restated |
| Group share of net income from continuing operations | 493 | 604 |
| Minority interests in net income | 23 | 21 |
| Share in net income of associates, net of dividends received | (12) | (10) |
| Depreciation, amortization and impairment of assets | 633 | 1,036 |
| Gains and losses on disposals of assets | 10 | (402) |
| Provision for anti-trust litigation and other non-reccurring provision charges | 27 | (187) |
| Unrealized gains and losses arising from changes in fair value and share-based | ||
| payments | 21 | (17) |
| Cash flow from operations from continuing operations | 1,195 | 1,045 |
| Tax on capital gains and losses and non-recurring charges to provisions | (10) | (35) |
| Cash flow from operations before tax on capital gains and losses and | ||
| non-recurring charges to provisions from continuing operations | 1,185 | 1,010 |
The calculation of earnings per share is shown below.
| First-half | |||||
|---|---|---|---|---|---|
| 2015 | 2014 restated | ||||
| Basic | Diluted | Basic | Diluted | ||
| Earnings (in EUR million) | |||||
| Group share of net income from continuing operations | 493 | 493 | 604 | 604 | |
| Group share of net income from discontinued operations | 65 | 65 | 67 | 67 | |
| Group share of net income | 558 | 558 | 671 | 671 | |
| Number of shares | |||||
| Weighted average number of shares outstanding | 561,292,118 | 553,432,495 | |||
| Weighted average number of shares assuming full dilution | 563,600,566 | 556,289,646 | |||
| Earnings per share (in EUR) | |||||
| Group share of net income from continuing operations, per share | 0.88 | 0.87 | 1.09 | 1.09 | |
| Group share of net income from discontinued operations, per share | 0.12 | 0.12 | 0.12 | 0.12 | |
| Group share of net income, per share | 0.99 | 0.99 | 1.21 | 1.21 |
The weighted average number of shares outstanding is calculated by deducting treasury stock (4,085,585 shares at June 30, 2015) from the average number of shares outstanding during the period.
The weighted average number of shares assuming full dilution is calculated based on the weighted average number of shares outstanding, assuming conversion of all dilutive instruments. The Group's dilutive instruments consist of stock options and performance share grants corresponding to a weighted average of 972,579 shares and 1,335,869 shares respectively at June 30, 2015.
Changes in commitments under operating leases in first-half 2015 were not material. At June 30, 2015, they amounted to €3,260 million. Non-cancelable purchase commitments increased by €42 million. At June 30, 2015, pledged assets amounted to €843 million (December 31, 2014: €819 million). This item mainly concerned fixed assets in the United Kingdom. At June 30, 2015 guarantee commitments amounted to €3,041 million and mainly concern the sale of the Packaging Sector.
The legal risks to which the Group is most exposed are risks of asbestos-related litigation, in France and the United-States, and competition-related risks.
In France, further individual lawsuits were filed in first-half 2015 by former employees (or persons claiming through them) of Everite and Saint-Gobain PAM ("the employers") – which in the past had carried out fibercement operations – for asbestos-related occupational diseases, with the aim of obtaining supplementary compensation over and above the amounts paid by the French Social Security authorities in this respect. A total of 787 such lawsuits have been issued against the two companies since 1997.
At June 30, 2015, 731 of these 787 lawsuits had been completed in terms of both liability and quantum. In all these cases, the employers were held liable on the grounds of "inexcusable fault".
Compensation paid by Everite and Saint-Gobain PAM in settlement of these lawsuits totals approximately €1.5 million.
Concerning the 56 lawsuits outstanding against Everite and Saint-Gobain PAM at June 30, 2015, the merits of three have been decided but the compensation awards have not yet been made, pending issue of medical reports or Appeal Court rulings. A further 24 of these 56 lawsuits have been completed in terms of both liability and quantum, but liability for the payment of compensation has not yet been assigned.
Out of the 29 remaining lawsuits, at June 30, 2015 the procedures relating to the merits of 27 cases were at different stages, with four in the process of being investigated by the French Social Security authorities, 23 pending before the Social Security courts. The final two suits have been struck down, the plaintiffs being allowed to ask for them to be re-activated at any time within a two-year period.
In addition, as of June 30, 2015, 223 similar suits had been filed since the outset by current or former employees of fifteen other French companies in the Group (excluding Saint-Gobain Desjonquères and Saint-Gobain Vetrotex, which have been divested), in particular involving circumstances where equipment containing asbestos had been used to protect against heat from furnaces.
As of June 30, 2015, 156 lawsuits had been completed. In 83 of these cases, the employer was held liable for inexcusable fault.
Compensation paid by the companies totaled approximately €1.53 million.
For the 67 suits outstanding at June 30, 2015, legal action was being prepared by the French Social Security authorities in two cases, 46 were being investigated – including 37 pending before the Social Security courts and 9 before the Courts of Appeal – and eleven had been completed in terms of liability but not in terms of quantum or liability for paying the compensation, seven of which were pending before the Courts of Appeal and four before the French civil Supreme Court (Cour de Cassation). The final eight suits have been struck down, the plaintiffs being allowed to ask for them to be re-activated at any time within a two-year period.
Ten of the Group's French subsidiaries, including six that operate or have operated facilities in France classified as presenting an asbestos hazard, are the subject of damages claims that are different from those described above.
"Facilities classified as presenting an asbestos hazard" are defined as manufacturing facilities that have been closed or are still operating which previously manufactured materials containing asbestos or used asbestos protection and insulation equipment and are included in the official list of facilities whose current or former employees are entitled to asbestos workers benefit (ACAATA).
At June 30, 2015, a total of 846 suits had been brought by current or former employees claiming compensation for various damages suffered as a result of their alleged exposure to asbestos. None of these plaintiffs were suffering from an asbestos-related disease and some of them were not receiving the ACAATA benefit. Out of these 846 suits, 374 have been terminated. Three plaintiffs had their claims dismissed, while the 371 others were recognized as having been exposed to an asbestos risk, and their claims were accepted, leading to payment of total compensation of €4.1 million. Out of the remaining 472 suits, 153 are pending before the competent Courts of Appeal - 17 are pending before the labor tribunals conciliation board, 151 are pending before the competent labor tribunals, 144 have been struck down by the labor tribunals and six have been considered by the labor tribunal's conciliation board as having lapsed and one suit has been withdrawn.
In the United States, several companies that once manufactured products containing asbestos such as asbestoscement pipes, roofing products, specialized insulation or gaskets, are facing legal action from persons other than their employees or former employees. These claims for compensatory – and in some cases punitive – damages are based on alleged exposure to the products, although in many instances the claimants cannot demonstrate any specific exposure to one or more products, or any specific illness or physical disability. The vast majority of these claims are made simultaneously against many other non-Group entities that have been manufacturers, distributors, installers or users of products containing asbestos.
The estimated number of new asbestos-related claims filed against CertainTeed in the United States in the firsthalf of 2015 came to approximately 2,000. On a rolling 12 month basis, new claims remain stable at approximately 4,000 at end-June 2015 compared to 4,000 end-December 2014.
Some 2,000 claims were resolved in the first six months of 2015, bringing the total number of outstanding claims to approximately 37,000 at June 30, 2015, same level as at December 31, 2014 and down from 43,000 at December 31, 2013.
An additional estimated provision of €45 million (USD 50 million) was recorded in the consolidated financial statements for the first-half of 2015 in relation to CertainTeed's asbestos claims. As in every year since 2002, a precise assessment of the provision required for the full year will be performed at the year-end.
Total compensation paid during the twelve-month period ending June 30, 2015 for claims against CertainTeed (including claims settled prior to June 30, 2014 but only paid during the past twelve months), as well as compensation paid (net of insurance coverage) during the twelve-month period ending June 30, 2015 by other U.S. Group businesses involved in asbestos litigation, amounted to about €64 million (USD 71 million), versus €51 million (USD 68 million) in full year 2014.
In Brazil, former employees of Group companies suffering from asbestos-related occupational illness linked to asbestos are offered, depending on the case, solely financial compensation, or otherwise lifetime medical assistance combined with financial compensation; only a small number of former employee litigants or their legal successors were outstanding at June 30, 2015, and they do not present a material risk for the subsidiaries concerned.
In November 2011, the Swiss Antitrust Commission (Commission Suisse de la Concurrence) opened an investigation for anti-competitive practices in the sanitary products wholesale sector. In May 2014, the Commission Secretariat issued a notification of complaints against Sanitas Troesch and against other wholesalers in the sector. According to the terms of this notification, the Secretariat requested the Commission to declare a fine of approximately CHF 117 million on Sanitas Troesch, on grounds that Sanitas Troesch and some of its competitors had, among other things, agreed in 2005 and 2012 to lower gross prices.
The Commission stated in a press release dated July 3, 2015 that the total fine decided for all companies concerned will be 80 million Swiss Francs. For Sanitas Troesch, it will be 28.5 million Swiss Francs. The decision itself will not be available for several months. Sanitas Troesch firmly denies the accusations; nevertheless, a provision for litigation was made on June 30, 2015 of €27 million.
On August 6, 2014, Saint-Gobain Isover and Compagnie de Saint-Gobain (as parent company for the Saint-Gobain Group) received a notice of complaints from the French Competition Authority (Autorité de la concurrence française). The only complaint made was of having exchanged allegedly strategic and confidential information, between 2002 and 2007, relating to a certification request lodged by Actis for one of its products, and to a dispute before the Versailles Commercial Court between Actis and the Mineral Insulation Wool Manufacturer's Association (FILMM), of which Saint-Gobain Isover is a member.
Saint-Gobain Isover and Compagnie de Saint-Gobain are challenging this complaint and submitted their statement of defense on November 6, 2014. They are now waiting for the report from the Competition Authority.
In the civil law area, in March 2013, Actis served a civil liability writ on Saint-Gobain Isover, the Centre Scientifique et Technique du Bâtiment and the FILMM before the Paris Civil Court (Tribunal de Grande Instance de Paris) for the adverse consequences of facts forming the subject of the investigation by the Competition Authority. In an order dated December 16, 2014, the pre-trail judge declared a stay of proceedings while waiting for the decision from the Competition Authority.
In July 2015, the Anti-trust Division of the United-States Department of Justice initiated a criminal investigation into potential anti-competitive practices, in particular price-fixing, in the United-States drywall industry. The investigation follows complaints lodged at the end of 2012 in the form of class- actions before the civil courts against eight drywall manufacturers, including CertainTeed, by some of their clients.
Based on testimonies and documents provided during the civil proceedings, CertainTeed and its attorneys did not identify any element that could render CertainTeed liable and thus lodged a motion for summary judgment in May 2015 to put an end to the civil proceedings.
The main risks and uncertainties that the Group could face in the second semester of 2015 are those described in section 1 "Risk Factors" of Chapter 6 of the registration document 2014 of April 22, 2015 filed with the French financial markets authority (Autorité des Marchés Financiers) under the number D.15-0389 ("Registration Document 2014"). There have been no significant changes in these risk factors in the first-half of 2015.
Segment information is presented as follows:
Management uses several different internal indicators to measure operational performance and to make resource allocation decisions. These indicators are based on the data used to prepare the consolidated financial statements and meet financial reporting requirements. Intragroup ("internal") sales are generally carried out on the same terms as sales to external customers and are eliminated in consolidation. The accounting policies used are the same as those applied for consolidated financial reporting purposes, as described in note 1 "accounting principles and policies" of the Notes to the consolidated financial statements for the year ended December 31, 2014 . The column "Other" corresponds solely to holding companies and certain corporate support functions (tax, cash management, purchasing, etc.)
| (tax, cash management, purchasing, etc.) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| First-half 2015 | INNO VATIVE MATERIALS |
CO NSTRUCTIO N PRO DUCTS |
B UILDING DIS TRIB UTI O N |
Other* | Total | ||||||
| (in EUR million) | Flat Glass | High Performance Materials |
Intra segment eliminatio n s |
Total | Interior Solutions |
Exterior Solutions |
Intra segment eliminatio n s |
Total | |||
| External sales | 2,616 | 2,239 | 4,855 | 2,906 | 2,757 | 5,663 | 9,337 | 5 | 19,860 | ||
| Internal sales | 17 | 58 | (8) | 67 | 291 | 156 | (31) | 416 | 1 | (484) | 0 |
| Net sales | 2,633 | 2,297 | (8) | 4,922 | 3,197 | 2,913 | (31) | 6,079 | 9,338 | (479) | 19,860 |
| Operating income/(loss) | 194 | 310 | 504 | 288 | 241 | 529 | 242 | 1,275 | |||
| Business income/(loss) | 181 | 282 | 463 | 258 | 217 | 475 | 196 | (54) | 1,080 | ||
| Share in net income/(loss) of associates | 15 | 1 | 16 | 3 | 2 | 5 | 0 | (1) | 20 | ||
| Depreciation and amortization | 153 | 74 | 227 | 160 | 76 | 236 | 132 | 16 | 611 | ||
| Impairment of assets | 2 | 3 | 5 | 9 | 7 | 16 | 1 | 22 | |||
| Capital expenditure** | 91 | 74 | 165 | 110 | 73 | 183 | 82 | 27 | 457 | ||
| Cash flow from operations | 465 | 415 | 188 | 127 | 1,195 | ||||||
| EBITDA | 347 | 384 | 731 | 448 | 317 | 765 | 374 | 16 | 1,886 |
*"Other" corresponds to the elimination of intragroup transactions for internal sales and holding company transactions for the other captions.
**Capital expenditure does not include the cost of acquiring non-current assets under finance leases.
| Consolidated financial statements of the Saint-Gobain Group | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| First-half 2014 restated | INNO | VATIVE MATERIALS | CO | NSTRUCTIO | N PRO DUCTS |
B UILDING DIS TRIB UTI O N |
Other* | Total | |||
| (in EUR million) | Flat Glass | High Performance Materials |
Intra segment eliminatio n s |
Total | Interior Solutions |
Exterior Solutions |
Intra segment eliminatio n s |
Total | |||
| External sales | 2,377 | 2,037 | 4,414 | 2,663 | 2,558 | 5,221 | 9,285 | 26 | 18,946 | ||
| Internal sales | 21 | 54 | (5) | 70 | 291 | 161 | (30) | 422 | 2 | (494) | 0 |
| Net sales | 2,398 | 2,091 | (5) | 4,484 | 2,954 | 2,719 | (30) | 5,643 | 9,287 | (468) | 18,946 |
| Operating income/(loss) | 131 | 278 | 409 | 251 | 257 | 508 | 265 | 1 | 1,183 | ||
| Business income/(loss) | 131 | 228 | 359 | 235 | 88 | 323 | 105 | 333 | 1,120 | ||
| Share in net income/(loss) of associates | 9 | 3 | 12 | 3 | 4 | 7 | 0 | 0 | 19 | ||
| Depreciation and amortization | 143 | 74 | 217 | 152 | 72 | 224 | 129 | 14 | 584 | ||
| Impairment of assets | 96 | 30 | 126 | 20 | 156 | 176 | 150 | 0 | 452 | ||
| Capital expenditure** | 75 | 54 | 129 | 79 | 71 | 150 | 76 | 8 | 363 | ||
| Cash flow from operations | 344 | 369 | 199 | 133 | 1,045 | ||||||
| EBITDA | 274 | 352 | 626 | 403 | 329 | 732 | 394 | 15 | 1,767 |
*"Other" corresponds to the elimination of intragroup transactions for internal sales and holding company transactions for the other captions.
**Capital expenditure does not include the cost of acquiring non-current assets under finance leases.
| First-half 2015 | France | Other Western European Countries |
North America |
Emerging countries and Asia |
Internal sales |
TOTAL |
|---|---|---|---|---|---|---|
| (in EUR million) | ||||||
| Net sales | 5,282 | 8,574 | 2,738 | 4,219 | (953) | 19,860 |
| Capital expenditure* | 69 | 107 | 119 | 162 | 457 | |
*Capital expenditure does not include the cost of acquiring non-current assets under finance leases.
| First-half 2014 restated | France | Other Western European Countries |
North America |
Emerging countries and Asia |
Internal sales |
TOTAL |
|---|---|---|---|---|---|---|
| (in EUR million) | ||||||
| Net sales | 5,547 | 8,204 | 2,326 | 3,851 | (982) | 18,946 |
| Capital expenditure* | 72 | 95 | 63 | 133 | 363 |
*Capital expenditure does not include the cost of acquiring non-current assets under finance leases.
The table below shows the Group's principal consolidated companies, typically those with annual sales of over €100 million.
| FLAT GLASS | Country | Percentage held directly and indirectly |
|---|---|---|
| Saint-Gobain Glass France | France | 100.00% |
| Saint-Gobain Sekurit France | France | 100.00% |
| Saint-Gobain Glass Logistics | France | 100.00% |
| Saint-Gobain Sekurit Deutschland GmbH & CO Kg | Germany | 99.99% |
| Saint-Gobain Glass Deutschland GmbH | Germany | 99.99% |
| Saint-Gobain Deutsche Glas GmbH | Germany | 99.99% |
| Saint-Gobain Glass Benelux | Belgium | 99.97% |
| Saint-Gobain Sekurit Benelux SA | Belgium | 100.00% |
| Saint-Gobain Autover Distribution SA | Belgium | 100.00% |
| Cebrace Cristal Plano Ltda | Brazil | 50.00% |
| Saint-Gobain Do Brasil Ltda | Brazil | 100.00% |
| Hankuk Glass Industries Inc. | South Korea | 80.47% |
| Hankuk Sekurit Limited | South Korea | 90.13% |
| Saint-Gobain Cristaleria S.L | Spain | 99.83% |
| Saint-Gobain Glass India Ltd | India | 99.00% |
| Saint-Gobain Glass Italia S.p.a | Italy | 100.00% |
| Saint-Gobain Sekurit Italia | Italy | 100.00% |
| Saint-Gobain Glass Mexico | Mexico | 99.83% |
| Koninklijke Saint-Gobain Glass Nederland | Netherlands | 100.00% |
| Saint-Gobain Innovative Materials Polska Sp Zoo | Poland | 98.61% |
| Glassolutions Saint-Gobain Ltd (Solaglas) | United Kingdom | 100.00% |
| Saint-Gobain Glass UK Limited | United Kingdom | 100.00% |
| HIGH PERFORMANCE MATERIALS | Country | Percentage held directly and indirectly |
| Saint-Gobain Abrasifs | France | 99.98% |
| Société Européenne des Produits Réfractaires | France | 100.00% |
| Saint-Gobain Abrasives GmbH | Germany | 100.00% |
| Saint-Gobain Do Brasil Ltda | Brazil | 100.00% |
| Saint-Gobain Abrasives Canada, Inc. | Canada | 100.00% |
| Saint-Gobain Abrasives, Inc. | United States | 100.00% |
| Saint-Gobain Ceramics & Plastics, Inc. | United States | 100.00% |
| Saint-Gobain Performance Plastics Corporation | United States | 100.00% |
| Saint-Gobain Solar Gard, LLC | United States | 100.00% |
| Saint-Gobain Abrasivi S.p.a | Italy | 99.98% |
| SEPR Italia S.p.a | Italy | 100.00% |
| Saint-Gobain Abrasives BV | Netherlands | 100.00% |
| Saint-Gobain Abrasives Ltd | United Kingdom | 100.00% |
| Saint-Gobain Adfors CZ S.R.O. | Czech Republic | 100.00% |
| INTERIOR SOLUTIONS | Country | Percentage held directly and indirectly |
|---|---|---|
| Placoplatre SA | France | 99.75% |
| Saint-Gobain Isover | France | 100.00% |
| Saint-Gobain Rigips GmbH | Germany | 100.00% |
| Saint-Gobain Isover G+H AG | Germany | 99.91% |
| Saint-Gobain Construction Products Belgium | Belgium | 100.00% |
| Saint-Gobain Construction Products South Africa Ltd | South Africa | 100.00% |
| Certain Teed Gypsum Canada, Inc. | Canada | 100.00% |
| Saint-Gobain Placo Iberica | Spain | 99.83% |
| CertainTeed Corporation | United States | 100.00% |
| Certain Teed Gypsum & Ceillings USA, Inc. | United States | 100.00% |
| Gypsum Industries Ltd | Ireland | 100.00% |
| Saint-Gobain PPC Italia S.p.a | Italy | 100.00% |
| Mag-Isover K.K. | Japan | 99.98% |
| BPB United Kingdom Ltd | United Kingdom | 100.00% |
| BPB Plc | United Kingdom | 100.00% |
| Saint-Gobain Construction Product Russia Insulation | Russia | 100.00% |
| Saint-Gobain Isover AB | Sweden | 100.00% |
| Saint-Gobain Ecophon AB | Sweden | 100.00% |
| Thai Gypsum Products PLC | Thailand | 99.69% |
| Izocam Ticaret VE Sanayi A.S. | Turkey | 47.53% |
| Celotex Group Limited | United Kingdom | 100.00% |
| EXTERIOR SOLUTIONS | Country | Percentage |
| held directly | ||
| and indirectly | ||
| Saint-Gobain Weber | France | 100.00% |
| Saint-Gobain PAM | France | 100.00% |
| Saint-Gobain Weber GmbH | Germany | 100.00% |
| Saint-Gobain PAM Deutschland GmbH | Germany | 100.00% |
| Saint-Gobain Do Brasil Ltda | Brazil | 100.00% |
| Saint-Gobain Canalizaçao Ltda | Brazil | 100.00% |
| Saint-Gobain (Xuzhou) Pipe Co., Ltd | China | 100.00% |
| Saint-Gobain Pipelines Co., Ltd | China | 100.00% |
| Saint-Gobain Weber Cemarksa SA | Spain | 99.83% |
| Saint-Gobain PAM España SA | Spain | 99.83% |
| CertainTeed Corporation | United States | 100.00% |
| Saint-Gobain PAM Italia S.p.a | Italy | 100.00% |
| Saint-Gobain PAM UK Ltd | United Kingdom | 100.00% |
| Saint-Gobain Byggprodukter AB | Sweden | 100.00% |
| Saint-Gobain Weber AG | Switzerland | 100.00% |
| held directly | ||
|---|---|---|
| and indirectly | ||
| Distribution Sanitaire Chauffage | France | 100.00% |
| Lapeyre | France | 100.00% |
| Saint-Gobain Distribution Bâtiment France | France | 100.00% |
| Saint-Gobain Building Distribution Deutschland GmbH | Germany | 100.00% |
| Saint-Gobain Distribuiçao Brasil Ltda | Brazil | 100.00% |
| Saint-Gobain Distribution Denmark | Denmark | 100.00% |
| Saint-Gobain Distribucion Construccion, S.L | Spain | 99.83% |
| Norandex Building Material Distribution, Inc. | United States | 100.00% |
| Optimera As | Norway | 100.00% |
| Saint-Gobain Distribution The Netherlands B.V | Netherlands | 100.00% |
| Saint-Gobain Building Distribution Ltd | United Kingdom | 100.00% |
| Saint-Gobain Building Distribution CZ, Spol S.R.O. | Czech Republic | 100.00% |
| Saint-Gobain Distribution Nordic Ab | Sweden | 100.00% |
| Sanitas Troesch Ag | Switzerland | 100.00% |
| PACKAGING SECTOR | Country | Percentage held directly |
| and indirectly | ||
| Saint-Gobain Emballage | France | 100.00% |
| Saint-Gobain Oberland Aktiengesellschaft | Germany | 96.67% |
| Saint-Gobain Vidros SA | Brazil | 100.00% |
Saint-Gobain Vicasa SA Spain 99.75% Saint-Gobain Vetri S.p.a Italy 99.99%
None.
| CONSOLIDATED BALANCE SHEET1 | |
|---|---|
| CONSOLIDATED INCOME STATEMENT2 | |
| CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE3 | |
| CONSOLIDATED STATEMENT OF CASH FLOWS4 | |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 5 |
|
| NOTE 1 – ACCOUNTING PRINCIPLES AND POLICIES 6 |
|
| NOTE 2 – CHANGES IN GROUP STRUCTURE8 |
|
| NOTE 3 – DISCONTINUED OPERATIONS 10 |
|
| NOTE 4 – GOODWILL, OTHER INTANGIBLE ASSETS AND TANGIBLE ASSETS 12 |
|
| NOTE 5 – INVENTORIES13 |
|
| NOTE 6 – TRADE AND OTHER ACCOUNTS RECEIVABLE AND PAYABLE 14 |
|
| NOTE 7 – PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS15 |
|
| NOTE 8 – CURRENT AND DEFERRED TAXES 17 |
|
| NOTE 9 – OTHER CURRENT AND NON-CURRENT LIABILITIES AND PROVISIONS |
19 |
| NOTE 10 – NET DEBT19 |
|
| NOTE 11 – FINANCIAL INSTRUMENTS23 |
|
| NOTE 12 – BUSINESS INCOME BY EXPENSE TYPE25 |
|
| NOTE 13 – SHARE-BASED PAYMENTS26 |
|
| NOTE 14 – NET FINANCIAL EXPENSE28 |
|
| NOTE 15 – EBITDA – RECURRING NET INCOME – CASH FLOW FROM OPERATIONS |
28 |
| NOTE 16 – EARNINGS PER SHARE30 |
|
| NOTE 17 – COMMITMENTS31 |
|
| NOTE 18 – LITIGATION 31 |
|
| NOTE 19 – SEGMENT INFORMATION35 |
|
| NOTE 20 – PRINCIPAL FULLY CONSOLIDATED COMPANIES 37 |
|
| NOTE 21 – SUBSEQUENT EVENTS40 |
|
STATUTORY AUDITORS' REVIEW REPORT ON THE 2015 HALF-YEAR FINANCIAL INFORMATION
The Statutory Auditors
PricewaterhouseCoopers Audit Crystal Park 63, rue de Villiers 92208 Neuilly-sur-Seine Cedex
KPMG Audit Tour Eqho 2, Avenue Gambetta 92066 Paris La Défense
KPMG Audit Tour Eqho 2, Avenue Gambetta 92066 Paris La Défense
This is a free translation into English of the Statutory Auditors' review report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders,
Following our appointment as Statutory Auditors by your Shareholders' Meeting and in accordance with article L. 451-1-2 III of the French Monetary and Financial Code ("Code monétaire et financier"), we hereby report to you on:
These condensed half-year consolidated financial statements are the responsibility of the Board of Directors. Our role is to express a conclusion on these financial statements based on our review.
We conducted our review in accordance with professional standards applicable in France. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed half-year consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 - the standard of the IFRS as adopted by the European Union applicable to interim financial information.
We have also verified the information given in the half-year management report on the condensed half-year consolidated financial statements that were subject to our review. We have no matters to report as to its fair presentation and consistency with the condensed half-year consolidated financial statements.
Neuilly-sur-Seine and Paris La Défense, July 29, 2015
The Statutory Auditors
PricewaterhouseCoopers Audit
KPMG Audit Division of KPMG S.A.
Pierre Coll Cécile Saint-Martin
Jean-Paul Thill Philippe Grandclerc
I hereby declare that, to the best of my knowledge, the condensed interim consolidated financial statements for the six-month period ended June 30, 2015 have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and results of Compagnie de Saint-Gobain and its consolidated subsidiaries, and that the interim management report gives a fair description of the material events that occurred in the first six months of the financial year, their impact on the financial statements and the main related-party transactions, as well as a description of the main risks and uncertainties for the second half of 2015.
Courbevoie, July 29, 2015
Chief Executive Officer Chief Financial Officer Pierre-André de CHALENDAR Laurent GUILLOT Compagnie de Saint-Gobain Compagnie de Saint-Gobain
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