(News Bulletin 247) – The specialist in construction materials and chemicals delivered revenues in line with expectations in the third quarter and expects continued sequential improvement in its activity. The company now intends to increase its operating margin in 2024, after the 11% reached in 2023.

While the CAC 40 takes on the appearance of a red sea this Wednesday, with 35 stocks out of 40 falling, one stock manages to keep its head above water. It is neither more nor less than the oldest company in the Parisian index, namely Saint-Gobain, whose origins date back to the 17th century.

The construction materials specialist is weathering the storm, gaining 1.6% around 3:30 p.m., the only slightly notable increase in the CAC 40, after delivering activity in line with expectations in the third quarter.

From July to the end of September, Saint-Gobain generated revenues of 11.575 billion euros, up 0.1% on a published basis and down 2% on a comparable basis. The consensus expected revenues of 11.6 billion euros, according to Oddo BHF.

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Volumes are improving

If Saint-Gobain’s activity, obviously undermined by a sluggish new construction market, declines again, the company shows a sequential improvement since its revenues fell by 4.9% on a comparable basis in the second quarter and by 5.8% to the first.

The volumes are getting closer to balance. In the third quarter, they fell by 1.5% after a fall of 3.9% over the first six months of the year.

“After a second quarter at -3.1% in volume, the sequential improvement to -1.5% seems to us to be a solid performance given the context of the Paris Olympic Games and the dissolution of the National Assembly” in France , underlined Oddo BHF.

The broker also awards a “special mention” to construction chemicals, a segment in which the group has significantly strengthened in recent years, with growth of around 2-3% over the quarter when the Swiss rival (and former -prey of Saint-Gobain) Sika recorded a more limited increase, at 1.7%.

Otherwise, Saint-Gobain remains weighed down by the decline in new construction in Europe, particularly in France, while renovation (which represents 60% of sales in Europe) is doing better.

In detail, in Northern Europe, most countries have reached or approached their low point (like the United Kingdom), while Eastern Europe is experiencing growth in its volumes. In Southern Europe, with the exception of France, “most countries have reached their low point,” explains Saint-Gobain.

“Despite a political situation postponing the reaching of a low point by a few quarters, France displays encouraging leading indicators in terms of outstanding credit, driven by the fall in interest rates and the improvement in the power of real estate purchases by households”, argues the group.

A record already integrated by the consensus

At the end of this quarter, Saint-Gobain slightly modified its profitability outlook. The company previously simply expected to generate a double-digit operating margin. “Despite a context which remains difficult in certain markets, Saint-Gobain is targeting further growth in operating margin in 2024,” the group now declares.

Which would therefore amount to signing a new record margin after the 11% recorded in 2023. Not necessarily a huge surprise for the market given that the operating margin had reached 11.7% in the first half of 2024 (compared to 11.3 % over the same period of 2023). Moreover, Oddo BHF notes that the consensus is already at 11.5%.

According to the research office, the group’s management indicated during the post-publication conference call to expect a continuation of the sequential improvement in its activity over the coming quarters.

Oddo BHF confirms its “outperformance” advice on the stock, judging that it has significant potential to catch up, in terms of valuation, with its stock market peers.

“Slowly but surely, the group’s valuation multiples are recovering. We remain generally convinced that the changes of recent years have not yet been integrated into their fair value (green deal, sustainable ESG profile, strong pricing power, change in the group’s profile via acquisitions and new emblematic disposals)”, develops the design office.