Reflecting the European auto glass business constriction company officials have been highlighting for some time, Paris-based Saint-Gobain announced plans to close a Belgium-based windscreen factory this week, impacting 263 jobs. Auto sales, upon which the auto glass unit is dependent, have continued to decline as the European market continues to deal with the fallout of the debt crisis. Christine Vander Heyden, communications director for Saint-Gobain in Belgium and Luxembourg, shared the official company statement with glassBYTEs.com™.
"The intention comes in the wake of profound deterioration of the automotive market in Europe (new car registrations down 24 percent in five years)," officials explain in the statement. "In Belgium, carmakers have recently announced the stoppage of assembly lines. The decline in car production has resulted in an additional drop in volumes for the Auvelais plant with its turnover down 60 percent since 2006, worsening an already seriously negative financial situation."
Though the management and staff have made ongoing efforts to adjust to the economic situation and improve manufacturing performance, their efforts have apparently been "insufficient," according to the management team.
"We are fully aware of the emotional impact of such an announcement on our staff and on their families, as well as the questions it raises," Vander Hayden says. "If this intention is confirmed, we shall lead the process ina socially responsible and respectful way, and we are counting on the employee representatives to ensure effective dialogue in a climate of openness and transparency."
Saint-Gobain management indicated such decisions could be imminent when the company released its latest 2012 fourth-quarter financials in late February.
Pierre-Andre Chalendar, chairman and CEO of Saint-Gobain, says in the report, "2012 saw a further general slowdown in economies across Europe, as well as slacker growth on our main markets, particularly flat glass [which includes auto glass] in Asia and emerging countries. Faced with this bleaker economic climate, which hit our trading and earnings' performances, we were very quick to react, cutting another $664.04 million U.S. dollars (€520 million) in costs and keeping a closer watch on cash."
In the financial report, he adds, "We remain firmly committed to our strategic goals, while continuing to keep an extremely tight rein on cash. In 2013, we anticipate operating income to recover in the second half of the year, after having bottomed out in the second half of 2012 or the first half of 2013."
Discussing sales, officials report 6.6 percent in like-for-like sales in flat glass, which they say is driven by tough economic factors, such as contraction in this unit's main markets, including automotive, construction and solar, in Western Europe, as well as slack trading in Asia and emerging countries, lower float glass prices and climbing raw material and energy costs.
"Only Latin America remained upbeat, with growth picking up pace in the second half," officials say. "Despite measures taken to address the deteriorating economic climate (significant capacity reductions, restructuring, etc.), the operating margin for the division was down sharply at 2 percent of sales from 8.8 percent in 2011."
The global company rolled out cost cutting measures which represent savings of $664.04 million U.S. dollars (€520 million), with $140.47 million U.S. dollars (€110 million) in flat glass. Officials reported that this program would be "extended and intensified in 2013." The full-year impact is expected to be $1.4047 billion in U.S. dollars (€1.1 billion) for the company, including $306.48 million U.S. dollars (€240 million) in flat glass. This is up from $957.7500 million in U.S. dollars (€750 million) initially forecast.
Looking to the future, officials say, "In Western Europe, industrial markets and particularly automotive, should continue to contract, while construction market trends should remain very uncertain for the time being."
In a breakdown of business segments, Saint-Gobain revealed sales for flat glass came in at $6.551 billion in U.S. dollars (€5.13 billion) for 2012, compared to $6.9724 billion in U.S. dollars (€5.46 billion) in the prior year. This a drop of 6 percent on an actual structure basis, a decline of 6.3 percent on a comparable structure basis and a downswing of 6.6 percent on a comparable structure and currency basis.
As for operating income, the flat glass unit reports $132.808 million in U.S. dollars (€104 million), down significantly from $610.406 million in U.S. dollars (€478 million) in the previous year. This is down 78.2 percent on an actual structure basis.
Meanwhile, business income for the flat glass segment also took a hit, coming in at a loss of $349.898 million in U.S. dollars (€274 million) in 2012, compared to a gain of $434.1800 million in U.S. dollars (€340 million) in 2011.
Reviewing cash flow, officials say the flat glass unit saw $282.217 million in U.S. dollars (€221 million), compared to $665.317 million in U.S. dollars (€521 million) in 2011.
Finally, when it came to capital expenditure, the glass segment was $586.143 million in U.S. dollars (€459 million), compared to $870.914 million in U.S. dollars (€682 million) in the previous year.
