Compagnie de Saint-Gobain S.A. (EPA:SGO)

Earnings Call: Q4 2011

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Feb 17, 2012

Hello, everyone. I'm going to be presenting our results for 2011 with Laurent, as traditionally as possible. We're going to start by looking. I'll look at the highlights for 2011, and Laurent will go into detail for the results for 2011. Then I will come back to tell you about our strategy and tell you a little bit about our future prospects and objectives for 2012. To begin with, the key figures for 2011 that you were given in our press release yesterday evening. We have our sales that are up by 5%, 42.1. We have our operating income that is up by 10.4%, EUR 3,441 million. Recurring net income, EUR 1,736 million. Net income is up by 13.7%. Free cash flow represents EUR 1.4 billion, and net debt stands at a little over EUR 8 billion, almost EUR 8.1 billion. This means that we have really had a recurring net income that has gone up. All of this was achieved in an environment that was rather patchy, with acceleration in the first half of the year and then a slowdown in the second half of the year. Overall, throughout the year, and especially with the first half that was a little more vigorous, we had very high growth in Asia and in emerging countries. We had very good momentum in industrial markets in both Western Europe as well as in North America. With basis for comparison, given the growth in 2010 that was becoming more difficult, we did have a slight downturn in certain markets in industrial investments in the second half of the year. In construction markets now around Western Europe, we have a contrast that are really growing from one country to another within Western Europe, with very robust growth in France and in Scandinavian countries and in Germany. We had not seen this kind of growth in Germany for a very long time, actually. But the situation in the U.K. is more difficult, and of course, especially in Southern Europe, that is in Spain and Italy. Construction markets in North America for the whole year, we were at quite a low level. We had been, in as far as the new build segment is concerned, nothing has changed much, nothing significant anyway. For about the first half of the year, or at least the second and third quarters, we did have a temporary growth in the renovation markets because in North America, there had been rather severe storms in the early part of the year, and that helped us, especially for roofing activities. Given this context that is quite. We did achieve our objectives that were fixed at the beginning of the year. I'm quite proud of this. We didn't have to revise our targets. We were able to make our targets with organic growth of 5%, and Laurent will come back to that later on because the most important point here is that sales prices really contributed to our organic growth because they grew throughout the year. That was very important, of course, because of the steep rise in the cost of raw material and energy. We also had a double-digit growth in operating income, 11% at constant exchange rates, which was the target we had fixed for ourselves. Free cash flow, we had said that it should be higher than EUR 1.3 billion after EUR 486 million in capital expenditure. Our free cash flow actually was EUR 1.4 billion. That is EUR 100 million more than our target. We were able to keep a very solid financial structure. You can see that the net debt to equity ratio is 44%, and net debt to EBITDA is 1.6, which is a very good level. It is practically the same as last year. These are the main elements for 2011. This year was also a year in which, I think this is important because we indicated this last year with high growth in our investments, which will help us over the next few years, both industrial investment and return of acquisitions. If I add the two up compared to last year, total investment actually went up by more than EUR 1 billion over the year. It is actually EUR 2.6 billion compared to EUR 1.6 billion in 2010. That was both investment and acquisitions. Now, three main priorities. They are actually priorities in our strategy that I have already told you about. I will come back to that later on. We invested really in high growth countries, and we invested about EUR 1.1 billion. Energy efficiency, that is about EUR 900 million. We also consolidated our strengths in Building Distribution and Construction products, and basically in distribution, actually, to about the extent of about EUR 300 million. As we told you at the beginning of the year, we would start reinvesting, and that is what we did. These are the main points. Laurent is going to go into a little more detail. Hello, everyone. Thank you, Pierre-André. Let us start off with the revenues. Firstly, in real terms and on like-for-like basis, 5% is the change. As you see the foreign exchange rate impact Impacted the depreciations of certain currencies. We were impacted by the depreciation of certain currencies, and especially the emerging countries' currencies. The scope effect is slightly positive with the results here of the acquisitions gradually made throughout the course of the year in Construction products, in particular in emerging countries, but also in distribution in Nordic countries. For the very end of the year, the acquisition of Build Center that came into our accounts in November. Those two series of acquisitions, more than just offset the disposal of Advanced Ceramics that we made on the 1st of January last. That means that this disposal will not have any impact anymore next year in terms of the trend in our revenue figure. We will have the full effect of the acquisitions that were made. So on a like-for-like basis, plus 5%, as you see, with a very good performance price-wise and plus 2.7% and volume up as well. Quarterly-wise, you see here on the quarterly basis, we've got to note a couple of things. Firstly, the trend in volumes with the positive effect that you're all familiar with for the first quarter linked to the positive weather conditions we had compared with the negative conditions in the first quarter of 2010. But if you look at the following quarters that are more significant, as I told you, there'll be a negative impact in the number of days in the fourth quarter. But if you restate those figures on a comparable number of days basis, you have a growth of 1.7% in the second quarter, 1.7% in the third quarter and 1.3% in the fourth quarter. So no substantially important trend. A slight kind of slowing down. December was a terrible month, but it was a small month. Let's look at prices next. You see here clearly good price momentum in the group for several quarters now because we went from 2% price growth at the beginning of the year to 3.2% price growth in the fourth quarter. This is a priority for us in our strategy, as we told you before, and this strategy is now panning out. It's more than just necessary because this price evolution for the whole of the year didn't enable us to totally offset the upswing in raw materials costs and energy costs. What's the impact then on the operating income? You see plus 11% on a like-for-like basis at constant exchange rate. So double digits, as Pierre-André said, our objective has been achieved. If you look at the variation compared to last year, 2010, with 5% of growth in revenues, but 2.7% of growth in prices, which were not totally sufficient to offset the raw materials and energy price hikes. So the 2.3% of growth in volumes, plus the leaner cost base that we set up, enabled us to increase our operating income by 11%. So it's a good operational lever. If you compare with 2008, which is a worthwhile comparison, we almost came back to the level of profitability we had in 2008 for all of the group. Excluding distribution and in distribution, we see that we're still at 11% of volumes below 2008. The price in the period over the three years, the prices enabled us more or less to cancel out the strong inflation of raw materials cost and energy prices. The drop in volume we fully offset by our other measures, which were the leaner cost base measures. So about half of those are sustainable, are fixed. So if the volumes come in bigger numbers, we'll avail more of that. So what you see here then is excluding the asbestos related claim that I'll talk about in the next slide. You see the amount of other expenses, non-operating costs, EUR 395, you see the figure here, but it's slightly down compared with last year, but slightly up in the latter half of the year. The second half of the year since the change in trend in July and August, it was less buoyant than the first half. In certain countries, certain activities, business lines in the Southern countries, certain business lines like pipes and Flat Glass, we rolled out restructuring efforts, additional efforts I mean, leading us to have additional non-operating costs in our P&L. Also there are other operational charges as well, 383 million EUR in asset impairment. That is almost all the 400 million EUR that you have here. That mainly reflects it is not cash out, but it is impairment of goodwill or tangible assets. Here in this month, we got 201 million EUR of impairment to do with our gypsum business in the U.S., 60 million EUR for our distribution activities in Southern Europe, that is between Spain and Italy. And smaller size operations that are mainly to do with restructuring efforts put in in different countries and business lines. All told, the operational income goes up, as you see on the screen here. Concerning the asbestos related claims, we usually talk about that at this conference now. In the number of claims, the situation is fairly stable, 4,000 new claims compared with 5,000 the previous year, 4,000 the year before that. So set of claims you have 8,000 set of claims. So it is going down the whole time. The outstanding ones are going down the whole time. Last year, we talked about the increase in payments, and we talked about the $103 million. Those payments are now going down, coming back to a level that is more in line with our past experience, $82 million. And this will continue to fluctuate over time. So the earmarking provisions, actually, millions in 2011 compared with 97 the previous year. So you see here the net financial expense and income taxes. There are two main features to look at here. You have firstly the interest expenses that are stable in terms of the amounts between 2010, 2009. The average cost of gross debt is constant. We have a drop in our pension liabilities. That is not cash out. This is for reasons to do with the discounting of the pension liabilities going through our P&L. On the taxation income taxes, well, the taxes go up in line with our income going up. The underlying net income, 29%, in line with what you got by way of guidance in the longer term. All told, among these items, you have a drop in the net financial expenses, minus 14%. An increase in the operating income. Reduction in expenses below the operating income. The underlying or recurring net income is progressing, and the net earnings per share also going up EUR 3.30, and the net income going up by 14%. As Pierre-André said, we increased, as we announced, our CapEx over the course of the year by a bit less than EUR 500 million, +34% of the figures you see here. So EUR 486 million was the absolute figure. 50% of it, that was dedicated to CapEx in high growth countries and capacity in Desmos mainly. And 20% CapEx to guarantee energy efficiencies in developed countries. So that is 15, 20. So investment in growth and in energy efficiency in high growth countries. So 50% in high growth countries, Asia and emerging countries, and 20% in energy efficiency in the developed world. In the amount of EUR 1.936 billion, you have about 47%, just a bit less than half of these capital expenditures that have to do with growth, to fuel growth. We are talking about EUR 1 billion worth of investments to maintain our existing plants and equipment. Next you have got the industrial expenditures, and we have an increase in our free cash flow by almost 12%. We did not totally offset the increase in the capital expenditures, but we did generate quite a lot of cash beyond our objectives of EUR 1.3 billion. Then let us look next at the EBITDA, achieving a level of EUR 4.952 billion. As I was saying, if you take away from that the capital expenditure for maintenance, you have an EBITDA minus maintenance CapEx, EUR 3.9 billion. That is quite a lot. Quite a tidy sum. The operating working capital requirement, you have a slight decline in the working capital requirement, the operating working capital requirement, as you see. Over time, this is how it trended, and our operating working capital requirement, we continue to keep a tight rein on. We are quite watchful about that at all times. The increase this year, well, there are some exceptional factors. You have the foreign exchange impact with the closing rate that is not the same as the average rate. That penalizes us a bit. The December impact, taking account of the weather conditions. Some raw materials prices too that we, I mean, raw materials that we stored because we anticipated the price hike. Nonetheless, there is a slight decline, especially regarding the inventories, regarding trade payables and receivables. No deterioration there. But we want to come back more on track towards our long-term objective. As you recall, we already told you that November 2010 is to come back gradually towards an operating working capital requirement of 30 days. Pierre-André did mention this too. We made some more acquisitions in the past year than the previous year, EUR 700 million worth of acquisitions. The EUR 700 million were focused mainly on our key growth drivers. That is acquisitions in Asia and the emerging countries, with less than EUR 300 million, with float activity in India, Abrasives in Argentina, Isover in Russia, and mortars in some countries. Plasterboard in Turkey. A substantial acquisition in energy efficiency too, with Solar Gard being acquired in the U.S. And consolidation in Building Distribution with the Build Center that you are familiar with, but also some small bolt-on acquisitions that are really value-enhancing ones, especially in France. I think you can answer. With improvement in the operating income, you see there is an improvement in the return on investment and return on capital employed. Up a point compared to the previous year, 19.5% of ROI and 11.3% for return on capital employed. Let's move on now to the balance sheet. You see, first of all, the debt that has gone up slightly compared with last year. This debt goes up by about EUR 900 million, from EUR 7.2 billion up to EUR 8.1 billion. That is mainly after taking account of our cash generation of EUR 1.4 billion worth. That is free cash flow generated. Clearly we see here the impact of the increase in the operating working capital requirement, EUR 600 million worth in there. The payout of the dividend, EUR 600 million too, and also the impact of our EUR 700 million of acquisitions. That explains the bulk of the increase in the debt. Shareholders' equity remained stable in spite of the incorporation of the net income minus the dividend. That stability can be explained mainly by a couple of reasons. Firstly, the purchases of our own shares. We purchased on a forward basis, on a futures basis, for 2012, about 6 million shares. That is EUR 200 million worth, and that is taken into account in pruning down the equity. Also, the incorporation of the variances in respect of discounting for our pension liabilities. The net debt to equity, 44% at the end of the year. That is a very sound ratio, we think. And the net debt over EBITDA, which is a more important ratio, of course, for our rating agencies. Well, that comes out at 1.6, which is indeed an excellent ratio, a financially sound ratio. The detailed business sector by business sector, you see internal growth in each of our business lines. Total group growth and growth in all of the individual business sectors, +3% in Packaging, +7.2% in High-Performance Materials. That were driven in the second half by the industrial markets in the U.S. in particular, and also in the emerging world. But I will go into that in some more detail. Look at the momentum there throughout the year. In the second quarter and the fourth quarter, there was some slowing down in Flat Glass and Exterior Solutions, especially piping. But conversely, we had Interior Solutions, Building Distribution, and in the fourth quarter, Packaging holding their own fairly well. We will go into the details of that as we walk through the different business sectors. I have put on this slide now the internal growth, the organic growth of the year, and I have separated out the first half and the second half. Here you see the slowing down of growth in Innovative Materials, especially in Flat Glass. Growth in the second half was only 1.4%. That can be explained by the shrinking of the solar markets that were present in Flat Glass, of course. Then the slowing down of certain emerging countries in a situation where Europe remains difficult. However, in Automotive, in the second half of last year, continued to fare well. And our strategy to focus on added value products is continuing to pay off because our Film Glass sales are up by 13%. In the second half, there was more pressure on prices. In June, it was about EUR 3.5, and at the end of the year, it stood at about EUR 3.16, and at the beginning of this year, EUR 3.01. There are price hikes planned in February and March there. For High-Performance Materials, +5.2%. That is good momentum in the second half, mainly driven by prices with a lot of price increases, 5.1% up as you see. The growth is in prices, really. It is really key so as to pass on the energy price hikes and the raw materials price hikes, and the High-Performance Materials managed to do that. However, between Ceramics and other parts of this business sector, there were differences. Ceramics and Plastics and Abrasives. Ceramics not doing as well as Plastics and Abrasives that grew quite a bit. On profitability, you can see here in Flat Glass a drop by one percentage point compared to last year. In the first half that is, and that can be explained by the fact that prices did not offset the raw materials and energy price hikes in Europe, but also in certain emerging countries like Brazil. The volumes were steady over the year, and our cost-cutting measures were not sufficient to offset that. All told, you can see in this difficult context, especially compared with other competitors, the performance and the soundness of our results. We are seeing quite markedly in the second half of 2011, in High-Performance Materials, results are steady in the second half year-on-year, minus 0.2. That is because of the product mix in High-Performance Materials with less sales in Ceramics. In High-Performance Materials, we managed to pass on the price hikes better, and that explains the steadiness of the operating income there. The EBITDA is high, up by 6.6% compared to the previous year, and capital expenditure running at a high level here, especially in Flat Glass. This capital expenditure was quite substantial in the emerging countries. A business line in India and Brazil. Also energy efficiency, capital expenditure in electrochromic glass and in solar panel glass. Construction Products. You have good growth overall in the year, 4.4%, and we got through the second half very well, +3.9%, with good momentum in Interior Solutions with +5.2% in the second half. With good price momentum, buoyant prices in the third quarter, and Interior Solutions came out at +3.7. Volumes that improved, especially in the U.S., remaining quite dynamic in France, quite buoyant, especially connected with the transition towards the RT 2012. We hope to make big price increases, up 35% in gypsum in the U.S., and there will be 20%-25% out there on the market. As you see, we have Exterior Solutions up 2.9%. That is weathering the storm pretty well, especially in piping. In the piping sector that I alerted you to in the past, but that was offset in the half year by the improvement of our Exterior Solutions in the U.S., and quite a buoyant market in mortars as well. All told, nonetheless, in Exterior Solutions, as you will see in our results, the prices were short of the mark and we could not pass on all of the energy and raw materials price hikes for the full year. Regarding our margin, our margin continued to progress in Interior Solutions, but for the whole of the business sector, the profitability comes out at a steady level, 9.3% as you see, compared to the previous year, with an improvement in Interior Solutions up 7 points or so. The cost in that division will go up in the coming year, but the margin progression comes in from the volumes achieved and the linear cost base. On Exterior Solutions, slight drop compared with the second half last year, minus 0.5 points, with raw materials prices that were not totally offset by our price hikes and also fixed cost absorption. Because of the drop in volumes in piping, we had to live with those higher costs. The EBITDA is a good EUR 1.59 billion. An increase in CapEx too, to be seen with Energy Efficiency doing fairly well. Distribution. Building distribution up 5.5% for the full year, +3.9% for the second half year-on-year. That's doing pretty well compared with 2008. As you see, the momentum in this business sector is building up. This breaks down differently region by region. 4% growth in France, 11% growth in Germany, 8% in the Nordic countries. That's the second half figure. Growth remains fairly buoyant in Northern Europe. That includes France, by the way, for us. But Southern Europe remains fairly negative, with a revenue trend that became negative in the double digits. Let's have a look at the operating income. The commercial margin remains fairly sound. It goes up by 0.1 points. Customer solvency, credit worthiness, has got better. We've came back to the level we had before the recession. But the improvement you see of 0.5% between 4.2 and 4.7, that differential comes from volumes, but also from the pursuit of our cost control program for that business line. That improvement, which is clearly visible for the whole of the business sector, is also to be seen in most of our major countries. We have the EBITDA going up quite substantially, up 22% as you see here. Capital expenditure under tight rein, 1.1% of revenue. The EBITDA minus capital expenditure, EUR 831 million you see on the slide. The next one is packaging. Growth in line with what we stated for the full year. That's up 3%. Growth that was stronger in the first half. But you will recall perhaps the third quarter was a zero growth quarter, especially because of the price increases we made at the beginning of July that led our customers to preempt purchases in the second quarter. The 1.7% in the second half shows a speeding up with the growth in the fourth quarter. That's more than 3.5% of that is. That's up 3.5%. That's a good omen for the progression of our sales in the European part of the business. But the biggest contribution of this growth, here you see the 3.5% in the fourth quarter. You've got 2.8% of that growth connected with price. Those price hikes are necessary and will be even more necessary in 2012, or will continue to be necessary rather, because of the raw materials and energy price hikes that we anticipate in the coming while. In terms of profitability, we got a further marked improvement compared with last year and compared to 2009 as well. Plus EUR 15 million of operating income in the second half compared with the previous year. Good profitability, too. This is a business plan that was resilient during the crisis, but also it even managed to improve its results and its cash generation. Regarding cash generation, if you look at the EBITDA minus CapEx, EUR 418 million. That shows a marked improvement compared to what we flagged up in the first half of 2011. In the guidance we gave you then, because we told you roughly the cash flow generation would be EUR 400 million. We've overshot that guidance figure, and we should underscore that all the more so as it's in marked contrast to other players, the performance of other players, the peer companies in this industry. Internal growth, organic growth per geographic zone. Here, you see in the different geographical areas, all the geographies, as we call them, all of our regions feed into the growth in our group. Take France. France shows a growth of 3.6%. In that figure, we should correct it because of the piping business. There's a lot of exports. They're exporting to the Mideast countries in particular, which this year suffered quite a lot. Otherwise, the other European countries, there's good momentum continuing into the second half in the Scandinavian countries. 7% growth Germany, remaining pretty buoyant. Spain and Portugal, of course, suffering more substantially than other countries, and more so in the second half than the first half. Because in those countries, it is for that reason that we bolstered our reorganization plans in those countries. Asia and the emerging countries, you have growth of 8.5% for the full year, but slight slowing down in the second half, just up 5%. Because the less good performance levels of Asia, especially because of our piping business, showed relatively weak growth in the second half. North America, plus 5.5%, getting off to a new start here. The second half was 7.3%, plus 7.3%. Let's look at our operating income. Again, apart from North America, that suffered from the raw materials and energy price hikes in the first half and turned itself around in the second half. While all the other geographical areas are going up in 2011 compared to 2010. However, we should point out the progression, the progress we made in the first half for the profitability in Asia and the emerging countries. That was whittled away a bit in the second half. We're still quite profitable there. Of course, it's quite in line with the profitability of the group for these businesses that are concerned here. But especially when it comes to Flat Glass, we've got more pressure on profitability in Asia and the emerging world. Then cash generation and CapEx by geographical area. As usual, I would say all of our geographies generate positive cash. EBITDA minus CapEx, positive therefore. You see the strong level of CapEx that we have in the area, which is Asia and emerging countries. That's 9% of our total revenues. Now I give the floor back to Pierre-André for our strategy. Just take a quick look at our strategy. I am going to remind you of the positioning of Saint-Gobain and its fundamentals and try and illustrate our actions on the strategic priorities of the group. The strategy of the group is, of course, within the framework of the position that I outlined for you at the beginning of 2007, and that has not changed. It is still focused on residential markets or the habitat market, which has a lot of growth potential. We find innovative solutions. Of course, this has been reinforced by the crisis. We work in emerging countries as well. We are trying to find answers to the challenges of energy and the environment. More and more, Saint-Gobain is becoming the reference in terms of sustainable Habitat. This gives us a positioning that I think is quite unique and a very buoyant position, a very attractive position because Saint-Gobain is today positioned on growing markets at different positions within the development curve. We have taken up a very good position for residential and residential buildings for tomorrow and, of course, in solutions for developed countries where, of course, these curves are going upwards and in emerging countries as well. I do not need to explain this to you, but I just need to say that in the construction market, which is still a quite difficult one, the thermal renovation sector is a very dynamic one. We have come back to growth rates, for example, in France, which are pretty good, 5.5% in 2011. The group can, of course, also has the support of a certain number of advantages that we reinforce year after year. To date, we have demonstrated our ability to pass on the price of the rise in the prices of raw material and energy into our sales prices. This is a priority. We have to continue along these lines, of course, but I think we have clearly demonstrated that we were capable of doing this. It is also one of the big advantages of the group that we have a strong capacity to generate operating cash flow, EUR 3.4 billion in terms of operating cash flow before CapEx and EUR 1.4 billion after CapEx. Cost savings, of course, Laurent talked about this, but we have managed to really set up a much leaner cost base, and this has resulted in a lot of leverage. A very strong balance sheet as well that will make it possible for us to pursue a very dynamic growth strategy and to seize any opportunities that present themselves. For our development in high growth countries, in Asia and emerging countries, as far as our sales are concerned, as you can see, we have developed very quickly, but it has been very profitable as well. You can see the rise in sales here in this zone and operating income as well. As you can see, it is profitable because the profitability we have today in emerging countries is actually higher than the average of the group. It is very much in line with the weight of our industrial sectors in other geographical zones. The weight of this zone, given its development, of course, is higher today in the group than it was in the past. What is very significant here is because these are the main sectors in which we are developing most in these geographical zones. If you look at Innovative Materials and Construction products, we've already covered about a third of our sales from emerging countries. It's up 2% compared to last year, and we are very much on track to achieve the 39% that we set up for ourselves as a target for 2015. What about the CapEx that we've carried out in these countries? As you can see, 40% of our investment has been done there, and we have almost 50% up in 2011. These investments concern all of our industrial sectors and the main investments in terms of unitary amounts. For Flat Glass, we have invested in Brazil, where we're going to start up a new Flat Glass float very quickly in India, where we are building a float line in Rajasthan and Colombia as well, where we had interrupted the building of a float line because of the crisis. But now we've started up the work again, and we will be starting production in Colombia. We've also launched the building of a second plant in China in partnership with our Japanese partner, Central Glass. And we are extending our production capacity in Mexico as well, given that this is a very important country for the automotive sector in North America. We also have a new plant being built in India. We are also building a plant for Abrasives in China, and we've also started up a second plant in China. Well, at least we started the building of this new factory in China, and we've used a project that was actually scheduled to be made by Solaria that we bought last year. So the highest in CapEx that we have made is in China, also in plasterboard. We also have a whole series of new plants that are going to be built in mortars in lots of countries, especially in South America, because there is growth there, and we want to take advantage of it. In Verallia as well, we are continuing to invest in Verallia. And we are going to start up a second furnace that is new, and whose capacity has been increased in Argentina because the market is very buoyant there. As you can see, these high-growth countries have represented 50% in our CapEx. Flat Glass, we bought a third float line last year, and now we're going to have four of them. And that means that we cover India geographically in a very rational manner for the future because our main unit is in the south, next to Chennai. We bought another unit in Gujarat, and the float line that we are building today is in Rajasthan. So that's going to make it possible for us to really reinforce our leadership position in this country. And at the end of the year, we bought a very good company in Abrasives in Argentina. And I'm smiling because this is a company that we had been looking at for a very long time. In fact, I'd wanted to buy it about 10 years ago when I was in Abrasives. It's more difficult to program than in CapEx, because, of course, we are not alone. This company is going to very nicely round out our Abrasives production in Argentina. In Construction products, we buy small companies, mortars, for example, in Indonesia and Brazil and Turkey. We have made a strategically important acquisition in terms of plaster and plasterboard in Turkey, which is a country that is difficult to break into, but there is a lot of potential growth there. Also we bought a company in Russia. It is a very cold country, so of course Isover is a very good investment there. We bought a company that makes Rockwool. It is called LaineRock. For Packaging also, we made a small acquisition, but which is strategically important for Verallia. It is a small company, but we are planning to expand it. It is called Alver in Algeria. The second main strategic axis of the group is, of course, high value-added solutions for habitat and new energy efficiency, as far as solar panels are concerned. We know that there is a lot of growth there. We cannot really measure it perfectly, but certainly it has an increasing share of our group sales. I think it is about 30% today. Another thing has a significant impact on our group businesses, which is, of course, regulation. I told you that thermal renovation was up 5% in France. It is actually up 12.5% on a like-for-like basis. Isover in France is really developing insulation systems, thermal insulation with Exterior Solutions, in which actually France was lagging behind other countries in Europe. 12.5% this year. We have also made investments in energy efficiency, of course. We have just finished a plant in Germany, Avancis, and there is another Avancis plant that we are building with our partner Hyundai in South Korea. They both make thin film glass. We are also building a wonderful plant, the very first big worldwide plant for electrochromic glass with SAGE, in which we have taken out a stake. That is also a product that has a huge future. Last year, we decided very much, actually ahead of the schedule that we had in mind, the doubling of the capacity of our plant in Chemillé. You may remember that. We decided to do that at the beginning of last year. It is going to be operational in about a month's time. We also bought companies in this sector, a very good acquisition in a sector that we were not present in. That is technical plastics, films that have properties that are very much complementary to our Film Glass products. We bought a company that is based in the U.S., but that is also developing very strongly in China. We also rounded off our Italian presence with an acquisition in mortars. I talked about the importance of regulations. I have added a few other countries to this graph. Of course, there are more cold countries here than hot countries because that is where insulation is most important. Just to remind you that between 2008 and 2013, in new build in all of these countries, the energy consumption in new buildings will actually have been cut in half. It has to be cut in half, sorry. The only way to do that is to really insulate buildings from the outside, and that's going to be a very important market for us. The third axis for growth is still to consolidate our strengths. We do that, of course, by seizing any opportunities for growth that we have. I talked about that in the month of July. In 2011, we were very lucky because we were able to acquire two very big subsidiaries of the Wolseley Group, which are Build Center and Brossette, and they should bring us about EUR 1 billion worth of sales for a full year. For Build Center, we're going to consolidate that. It's been consolidated, sorry, since the 1st of November. Although, as we've had to do what is called hold separate because of the British legislation, we cannot integrate it completely. The second stage came last week, and that's a decision that we obtained from the OFT. They asked us, therefore, to sell a certain scope, a certain number of agencies. That was very much in line with what we expected to do actually, because about 20 regions in which we are having holding discussions with antitrust authorities. These negotiations should be over quite soon. For Brossette, because of the French system, we had to formally notify the antitrust authorities at the end of January, and now we are expecting their decision. We should get a decision from them by the end of March. As you know, Brossette has not yet been fully paid for. It's not really integrated into our accounts yet. We should be able to consolidate Brossette from the second quarter of 2012 onwards. In addition to these companies, we also made some bolt-on acquisitions, which were concentrated in countries where we already have a strong position. This is what I told you we would do last year. We made these acquisitions in Scandinavia and in France. The last very important access is in order, of course, to invent what we're going to need in the future for insulation and for energy efficiency is all about R&D. I've put in a graph here for you for the R&D expenses in the group over the last few years to show you that we have not reduced our effort. This is a sector that we continued to invest in spite of the crisis. We increased that by 7% in 2011. I expect a lot of new products that will be coming out onto the market. This is, of course, the most important indicator for me for what R&D actually does. New products. Our definition is products that have been launched less than five years ago. As you can see, these figures have gone from 20% in 2010 to 22% in 2011, and we hope to push that up to 25% by 2015. I'll give you a few examples of successful launches. In 2011, we launched a new windscreen, which actually means that you don't have to scrape the ice off your windscreen. It's a special kind of glass. Of course, car makers are going to have different versions of this glass, which will be mid-range and will go up to the top of the range. We have the light plasterboard as well. This comes after the soundproof plasterboard that we launched last year. This is very light, and it's very useful in many sectors. As you can see, in 2011, Saint-Gobain was very much on track and continued to move forward. What about 2012? Of course, we don't know what's going to happen in 2012 given what's going on in Greece and in other European countries. I've just said assuming there is no further escalation in the economic and financial crisis, because we don't really know what's going to happen. As you know, the financial environment is not very stable. All of you know that better than I do. I just have to live with it like most other CEOs. We just have to react as best we can. In Asia and emerging countries, we expect that there's going to be a very good second half after the first half, which is probably going to be rather slow. This is really the kind of pattern we saw in 2011, and it's easy to explain because of the measures that were taken about a year ago in some very big emerging countries to cut down on inflation and stop the economy from overheating. Very often in autumn, other measures are taken to direct the economy in a different direction. We believe that in Asia and Latin America, the first half is going to be rather slow, but I believe that the second half will be better. North America now. We continue to have very good momentum in industrial markets. As far as the construction products market goes, I don't have to look into my crystal ball. We've been waiting for a recovery for many years. It hasn't come. The slight Bubble that we see on the surface may mean that the recovery is on its way, but may not. The results that we have today seem to be slightly higher than what we had about 2 months ago, but we must remain cautious. What about Western Europe? In Western Europe, there's going to be certainly a shrinkage in the car market. It's been announced by the car makers. But I believe that the rest of the industrial sector should remain at quite a satisfactory level. The indications that we have from abrasives, plastics, don't really lead us to believe that there is going to be a big deterioration. Construction. In Europe, we should have continued slight improvement in the residential segment, although we believe that there will continue to be contrasts like we had in 2011. We'll probably have a good first half of the year in France. The second half is a little more uncertain, but given the statistics we have on new build, we believe that the first half is going to be quite upbeat. Germany as well. We'll have a good first half in Germany, in the Benelux countries, and in Scandinavia. Last year, Sweden did quite well, but it's slowing down now. Norway's taken over, and Denmark, which was not doing too well, it's doing slightly better now. Scandinavia will continue to be good. The situation is going to be more difficult in other countries, whether it's the U.K. or above all, of course, Spain and Italy, which seem to be headed into a crisis. In 2012, we will once again have a rise in the prices of energy, especially energy, and, of course, electricity. We can't expect any miracles there because the decisions that were taken by Germans last summer are certainly going to translate through into higher prices for energy, not just in Germany. Then to a lesser extent, we will also have a continuing rise in raw materials costs. Now, what is that going to mean for the different business sectors of the group? Now, for Innovative Materials, I expect a moderate sales growth with clearly more challenging conditions for Flat Glass in Europe, because Flat Glass today has a slight overcapacity, because our sales volumes are not very good today. We should have a good operating margin in High-Performance Materials, but we believe that in Flat Glass, the operating margin is going to shrink. Construction products. We hope to have continued strong momentum in high-growth countries and in the market that concerns energy efficiency in Europe in 2012. And we saw in 2011, and probably that's going to continue into 2012, it's not very easy to predict. We believe that there's going to be an impact of the negative spread in a certain number of sectors between the price and the cost, and those, of course, are things like pipes or Exterior Solutions in the U.S., which are the sectors in which really raw materials prices have impacted us the most. Now, for Building Distribution overall, we're in a situation where when you really look at all the markets that we're positioned in Europe, we're doing quite well. We are present in Northern Europe as well as in Southern Europe, and I believe that most of our European markets will recover. Except the U.K., I think, where the situation is slightly more doubtful. And we believe that recovery will not have as quick a pace as it did in 2011, and I believe that we can continue to further improve our operating income. Now, Verallia. Verallia will have a faster organic growth this year because I believe that we've done what we needed to do in terms of sales prices. And volumes were more difficult to obtain last year, during a certain period last year. But we believe that volumes will grow this year in the three main geographical zones where Verallia is present, and that, I think, should translate into a very good level of profitability. So for all the business sectors of the group, if we do slightly better than what I've said for the economic environment, then I believe that our activity should be at a satisfactory level. Now, our priorities for 2012. As I told you, there aren't very many changes compared to what I said last year. The main priority is our price policy, with our targets being clearly to pass on the rise in raw material and energy costs to our customers. We are going to continue to maintain a very close eye on costs. Laurent told you that we have a certain number of business sectors and geographical zones where we have to continue to make an effort to reduce costs. We will restructure where necessary. We don't really have an overall plan for this year, but we will certainly tweak things wherever they need to be tweaked, especially in the zones where we are having more problems in our costs. Now, of course, as far as finances go, we're going to continue to keep a very tight rein on cash and we're going to keep up the group's financial strength. We're going to continue to invest as well in the group's main growth drivers, emerging countries, energy efficiency by adopting a policy that is quite selective in terms of CapEx and financial investments as well. We're going to target our financial investments. That will, of course, depend on the different companies that we believe we can afford to buy. Then we are going to continue to maintain and grow our efforts for R&D. In this context, which is quite uncertain in terms of the financial and economic conditions, we believe that we will have moderate organic growth, and it's going to be driven chiefly by sales prices. We hope that operating income and profitability will continue to prove resilient. We will have high levels of free cash flow. As I told you, we're going to stabilize our CapEx at the same level as in 2011. That's about EUR 2 billion. We are going to continue to preserve a very strong balance sheet. Let me say a few words also about the dividend. The board met yesterday and is going to propose to the shareholders meeting in June EUR 1.24 per share. That's up 8% compared to 2010. It's going to be paid out completely in cash, and it corresponds to the policy that we laid out because we said that we would have a 35%-40% of the recurring net income profit. As you can see, it's going to be about 3.65%. Now, to conclude, I believe that in 2011, the group has once again proved its very good financial health. It is due to our strategic positioning, which is very strong, and we have been able to seize all the opportunities for growth. We've had some good ones, and we've been able to seize them, and we have already proved our capacity, and we will continue to do so to pass on the rise in prices to our customers. We've managed also to have a cost base that is more lean than before. We have a balance sheet that is very strong, that is healthy, that's doing well. We will keep our capacity to adapt to changes in the economic conditions with surprises that might hit us, both pleasant and unpleasant. I would say that 2012 is. I think we are facing 2012 with a lot of confidence, but with prudence given the economic conditions that we have to work in. We can take your questions now. We first take questions from the room and then on the phone. Bonjour. J'ai trois questions, si vous me le permettez. Well, yeah. Good morning. I'd just like to ask a question about the disappointing business line in the past year. Seemed to be Flat Glass compared to the others. Could you tell us about the balance or imbalance between supply and demand in France and in Europe in that business segment? The other question is on the EUR 50 million of a dip in Exterior Solutions. Is it because of mortar products or piping or roofing products or what? The third question is between the first half and the second half, the trends weren't the same in France and the U.S. In the U.S., it got better in the second half, in France, it got worse. What led to that difference between those parts of the world in the second half, please? On Flat Glass, as Monsieur de Chalendar said, the volumes in Flat Glass, as you saw in Europe, did not trend in the right direction in the second half. Firstly, because there's a slowing down that we'll feel even more this year in the automotive side of the business, and that, of course, impacts our basic glass business, Flat Glass. Then the non-residential markets that are important for us, but that were a bit more difficult, more harsh. Regarding us as Saint-Gobain, as a group, what's the situation? We stopped four float lines during the crisis, as you recall, during the recession. We started off two again then last year. We restarted in Italy and in Poland out of the four we discontinued. In 2012, we've got repair work that's been planned. We have stopped float glass production because of repair work needing to be done, too, and that will be fine-tuned depending on the business cycle, the economic climate we find ourselves in. In recent announcements, some of our competitors have said they're also adjusting their capacity to take account of the difficulties they have on their markets. I'd point out also that for France, we recently actually did something that you may have heard about. We sold one half of the Saint-Gobain float line to an independent processing company. That will be reflected in a greater utilization ratio of the capacity. Because the Rio company then, that will hold 50% of the line, will be consuming one half of their production capacity. That will help us to get the balance right on our side. For Exterior Solutions, the drop in results in the second half is mainly attributable to our piping business, which suffered from the Arab Spring, as it has been called, the revolutions in North Africa and so on. Lots of contracts were frozen for export markets and also that has an impact on our French business because most of the exports for piping are products made in France. We classify per origin, not per destination there. That is why it made a dent in the revenues for France. Piping is suffering from that. Also the fact that the European markets, with the exception of France, I would say, which strangely is a market that held its own the best in 2011. With the exception of France, the markets in other European countries, because of local government finance problems, the European markets therefore were fairly difficult. The Chinese market was harsh in the latter part of the year because of the restrictions I referred to concerning the macroeconomic situation because of the measures taken by the Chinese government last springtime, so as to come to terms with the overheating risk in the economy. Then in Brazil, in the first half, however, we got off to a badish start because of the budget restrictions. Piping went through a year in 2011 that was fairly difficult. Then we have the first half and second half differences. I gave an answer for France, but for the U.S., industrial activity was sustained throughout the year. We had in the U.S., as I said in my presentation, for roofing products, we had a second and third quarter that were strong, buoyant because of the adverse weather conditions, the storms, the windstorms that they had more of in 2011 than the previous year. The first half and second half, it is the first and second were strong and the third and fourth quarters were more difficult for construction in the U.S. Thank you. I would like to ask a question, if I may. I am over here. I can hear your voice as the President, as the Chairman, but I cannot see you. Where are you? Oh, you are on the other side. I am sorry. I do apologize. I know your voice, but I could not see you. Thank you. I have three questions, please. The first one has to do with the selling price and energy price and raw materials price. Well, those different prices. Do you think that you will offset everything? Could you be more precise about the raw materials and energy price hikes that you would estimate for the coming year? Last year, you gave an estimate on that. Can you give us some kind of guesstimate for 2012 on that? The next question has to do with your free cash flow and your cash from operations. Yesterday in the press release, there was a miscellaneous point about EUR 300 million worth. It was EUR 200 million in 2010, the previous year. Could you detail out that other or miscellaneous point? It is not in the division. I would like to know what it reflects. Is it recurring or what? The third question has to do with the working capital requirement. You mentioned the tight rein on the working capital requirement and so on, but could you tell us if it's paid off or will pay off in 2012, or is it going to be later on? When will it bear fruit, the tight rein you're keeping on working capital requirements? I'll require the working capital requirement, and Laurent will answer the others. On the working capital requirement, I talked about Piping. Piping, given the drop in volumes in the second half. It's business line by business line, the working capital requirement evolved differently, trended differently. Distribution continued to go down. So there was a slight increase that was located in particular industrial niches. Piping, given the drop in the business volume, there was an increase in the inventories at the end of the year in Piping. There are other things that I think that are cyclical rather than anything else, but the divisional managers and the business sector managers are working on this. There were some increases in the High-Performance Materials. I think the problems will be overcome in the first few months. There's something I'm not worried about, which is the furnace repair work in Isover, for example, that in Brazil, in Saint-Gobain as well, that were scheduled at the beginning of the year, February or March. Therefore you to stockpile, so to speak, at the end of the year, so as to come to terms with the needs to hold the road, so to speak, while the repair work was being done in those facilities. I'm not overly worried. I'm not unduly concerned about that. The slippage you think you noticed there isn't really meaningful. It's at the level it should be at, roughly, and some exceptional phenomena that Laurent touched on. The reaction plans were where they're needed set up in respect of all that. Laurent. On the working capital requirement, as it's mainly inventories. It's mainly inventories, by the way. We should say that as the Chairman. There's no overrun on the trade receivables or anything. Inventories, that's something we have under control. It's not under somebody else's influence, so to speak. Also raw materials are expensive, as Laurent said, but I'm not too worried. In certain business lines, just like we have price hikes on the 1st of January, and some of our suppliers have price hikes on the 1st of January, and we kind of stockpile our raw materials in December for that reason. But that will also be absorbed as we go forward. On the price of raw materials and energy. Last year at this period, we talked about EUR 600 million and we revisited the figure. It was EUR 650 million. As we said in the first half, it's now closer to EUR 700 million. The end-of-year actual figure is closer to EUR 700 million rather than anything else. We gradually increased the prices as the year went on, our necessary price. So had to offset those increases. We do that, and that is slightly negative, as I said, not by a huge amount, but slightly negative for 2011. For 2012, as Pierre-André intimated, we have quite substantial increases in the raw materials and energy prices, that we think will take place given the current status. But of course, depending on the business cycle, it would be about EUR 450 million we're looking at. With an important expense on the energy side, as Pierre-André said, electricity prices are going up, the taxation on energy, especially for electricity, that we factored in, that is also going up. Also there is the impact of the Forex rate, the exchange rate between the EUR and the dollar. So the EUR price of our oil that we have to buy, of course, would go up in respect to that. Then we have about 40% of the EUR 450 million there, and the other 60% would be mainly raw materials. You have the fact that we managed to postpone the impact of the increase in our cost by negotiating good deals with our suppliers. If the raw materials prices stay at the current levels on the full-year basis, we will have an additional impact. Now, there are some raw materials that are starting to go down, but it is mainly the ones that have nothing to do with energy. Things like soda and so on that are not going down because of the energy impact in their price. But we might make gains on other raw materials like paper. All told, there will be a substantial increase. The amount will be a substantial increase, but I cannot give you a hard and fast answer, on whether or not we are going to pass on all of these price increases to our clients. It is early days yet. There is good price momentum in the first few months of the year. But as Pierre-André already said, it is our priority. It remains an operational priority, and we will be doing our level best to make sure that we do our best anyway to pass on these price hikes to our customers. Oh yes, on the free cash flow, you asked a question. The cash from operations. Well, this is a bit technical, but most of this, it is not 100% cash, even a lot of it is not cash. But the reason for that, the provisions set aside in the books, it is variations because of our pension liabilities and the accruals for pension liabilities. So it is in the cash flow statement and in the P&L as a financial charge or in the operating income. You have the IFRS rules you see on the way in which you account for pension liabilities. It is fairly sophisticated, and we will not go into the details of the IFRS rules there. But there is a non-cash expenses, non-cash income also in our P&L. You have and in our financial earnings in particular, that are restated after that under the IFRS rules, and it depends on the way in which the ratios or the rates perform our funds. But if you look at the operational numbers there, I hope that is something of an explanation for you. It makes the situation clear. Three questions, if I may. Firstly, on High-Performance Materials. Has the improvement in U.S. PMI data that we've seen recently been reflected in a stronger order book in HPM in the U.S.? I wonder if you can comment a bit more on the volume outlook for the different business lines within HPM. Secondly, on guidance. I am not sure whether you are able to say more on this, but does resilience mean flat? Thirdly, on Packaging. Would you consider looking again at an IPO of the Verallia business if conditions continue to improve? Thank you. Regarding High-Performance Materials, I said that we did not have any deterioration. We've had a sound business pace in the U.S. at the moment in our different product lines, be it the Abrasives, be it plastics, or even a certain number of businesses connected with investments, CapEx. We haven't any change to report on the order books for Abrasives, but for Ceramics, there are order books that we can talk about. There is a segment for refractories, for flat screens, for TVs, TV flat screens, and that business sector, it skyrocketed for quite a while. Now it's slowing down just a bit. So there's a bit of a slackening there in that particular field. Otherwise, with nothing in particular to flag up on the order books compared with what we might have feared some months ago. It's actually holding its own pretty well. The other thing that you mentioned is resilience. Well, resilience is resilience. That's my answer. On Verallia. On Verallia, there's no change in our strategy there. We review that as a function of the market conditions, and the market conditions are such that we're not revisiting that particular situation right now. It might change in the future, but I don't think in the very short term. Yes. I have a couple of questions, please. Firstly, the adjustments of asset value that you made for plaster and gypsum in the U.S. I'd like to know if, on a residual basis, those assets have some residual value, and to what extent, if so. Knowing that you also told us that the prices are swinging back fairly well in the U.S. in particular, and I was just wondering if you could give some details on that, please. Secondly, on the Southern European and Central European assets, do you consider that given the outlook on those markets, that in your balance sheet you have the fair value of those assets in your balance sheet? Well, they're questions for Laurent, says the chairman. The impairment test. Have you done them properly? He wants to know, says the chairman. You'll get the answer, though. Well, the auditors are with us if necessary. My other question has to do with the guidance you gave us. When you talk about moderate organic growth driven by prices mainly, should we understand that for volume then, that the volumes will go down? What should we read into that on volumes? That's the first point, and the situation in France. I'd like to understand construction in France, building in France. You've got some embedded growth because of the housing starts and the office building starts and so on last year. What about renovation? Not new builds, but renovation, and we're sensitive to the short-term cyclical developments there in the immediate term. What about the French renovation market? Is that at risk this year, do you think, because of taxation changes, different governmental measures, and so on? Laurent will answer you first of all, says the chairman, on the impairment test. On the impairment test for the assets, to our knowledge, to the best of our knowledge at the end of the year, these asset levels are totally justified, so they're fair value. On gypsum in the U.S., yes, in our balance sheet, the U.S. assets featured there for gypsum, that is. We did depreciation at the end of December on that because the most recent impairment went back to 2009. Since then, the scenario that was taken on board back then for a quick recovery of the economy hadn't taken place. We had to, therefore, revisit that scenario as you normally do in these circumstances regularly. Clearly, our current scenario then incorporates price hikes, substantial price increases. We had important price hikes at the beginning of the year, but we also had very high price increases throughout all of last year, and ultimately at the end of the year, we had to take account of the new situation. So in terms of the appreciation of the value of our assets, we've just got to be realistic. We try to be prudent, of course, and cautious in that context, and that's what guided us so as to impair the assets a bit there. When we talk about moderate growth driven by prices, implicitly, says the chairman, the contribution of volumes would be low implicitly, wouldn't it? We see the contribution of volumes in Asia and the emerging countries being substantial, but in Europe it will be very low. For France, for the renovation market, I don't see any downturn at the moment. In the very short term, because you're talking about the very short term, the trend in our sales is more governed by the weather than by tax measures. The weather was particularly good and mild in January. In Europe, in construction, it was a good month of January. As we speak, I have no indication for February, of course, but the first fortnight of February will not be as good as January was this year. It all boils down to saying that quite apart from the weather conditions, the order books for the people working and using our products in Northern European countries and in France for renovation, the tradesmen who buy our products, their order books are going fairly well. Those contractors are working quite a lot. I don't see any major dent in our numbers because of these tax measures. There've been so many changes and all that it's difficult to see clearly a preemptive impact in France because people make all sorts of statements, and declarations are being made. Sorry to the non-French people here, but in the run-up to the French presidential elections, the candidates are making all sorts of statements, contradictory statements, and so on and so on. It's not a clear-cut landscape, but for the renovation market, I don't think it's only the tax measures that govern the situation. It's not a percentage and a half of VAT that make a big change there. For the moment, I just know that being the situation, don't know what happened in the second half in France, but in the first half, there's quite a buoyant market out there for renovation. Oui, Mike Betts. Yes, Mike Betts. Yeah. Mike Betts at Jefferies. I will stick with the three, which seems to be the number for today. Firstly, just on Flat Glass. I guess my question is how bad is it when you look in 2012? You have seen the Nippon Sheet Glass and the Asahi significant profit warnings relating to their glass businesses. I know the geography is not the same, but related to that question, could you give us an idea of any margin differential between the auto and the building business? Because presumably it is the auto glass business that probably is going to have the biggest volume decline anyway, maybe. My second question is around U.S. insulation. Owens Corning produced some pretty awful numbers for that, at least for last year, significant losses. Is it as bad for you? I guess also as a general question on the U.S., the natural gas price has declined significantly. This will not just impact that, I suspect, also wallboard. Have you hedged that for 2012, or will you benefit from that as we go through the year? Nobody has asked the question about H1 versus H2. I presume H1 is a particularly tough comparison at group level when you look at operating income. We must assume that when you talk about resilient, you are talking about a decline in H1 and recovery in H2. Is that the way you look at it? I presume so. Thanks. So, of course, the first thing I am going to do is to not answer your second question because I told you that I am not going to redescribe the two halves of the year because I told you about an economic outlook. I just said that in H1, certain things are going to be better in H1 and worse in H2, and other things are going to be better in H2 and not so good in H1. I am not really going to give you a prediction on the two halves of the year right now. Given that the two halves of 2011 for operating income, we had practically a difference of just 1 million EUR between the two, and otherwise they were more or less the same. I am not going to go into any more detail on that. Now, as far as Flat Glass is concerned, first of all, I thought you were talking about a profit warning. It is really the results announced that were in the past that were bad. It is true that our two competitors have also announced reductions in capacity. The situation in Flat Glass in Europe is not a good one. I told you saw that margin crumbled a little bit in 2011. We expect that it is going to continue to shrink in 2012. But we still have quite a difference in our margins compared to our two competitors, and I have every intention of keeping ahead of them as far as that is concerned. We also have a significant difference in our margins compared to our competitors in Europe as well. I am not going to go into detail. We do not differentiate in our margins between the Building sector and the Auto sector, so I am not going to go into that. You have to keep in mind that a large part of the cost price of a car is, of course, the glass. That is why auto glass is a fundamental part of sales in Flat Glass. Each glass maker has their own policy concerning the transfer price between the base unit and auto glass. This is a question that is very difficult to look at objectively when you do not know the details of each competitor. The weight of the cast auto sector compared to the whole of the Flat Glass. Jean-Pierre Floris will correct me if I am wrong, but I think it is slightly more unbalanced for our competitors than for us. No, apparently no. There is not much of a difference either. As far as insulation is concerned, you are right, we are doing badly in insulation products in the U.S. We are not a leader there. Our activity in insulation in the U.S. is much smaller than that of Owens Corning, and so we are being hit in terms of volumes as well as in terms of prices, because prices have gone down over the last few years. The momentum right now is not as good as the one we have in plasterboard. Given the positioning of Saint-Gobain in insulation in the U.S., we do not have a leadership position. Claude, have we hedged natural gas in the U.S.? No. Neither for plasterboard nor for insulation. [Foreign language] Muriel Fellous. Yes. Muriel Fellous from Societe Generale. I have several questions. I have one question concerning internal growth. I would like to know whether organic growth. I would like to know if you could give me a little bit of detail about what you think you can do in 2012. Do you have so it is external growth, actually. Do you have a certain budget? Are you going to just go into any opportunities you get? My second question is about 2012. Can you give us a little more detail? Where do you think that there are going to be rises in the price of energy and raw materials? On the price of Flat Glass, can you tell us what is going to be? How much overcapacity do you think there is going to be? As far as margins go in Flat Glass, you said that there would be a few measures. Given that Flat Glass was the worst affected activity in 2011, do you think that in 2012 there's going to be a slight reduction in the margin? Can we say that the margin in the second half of 2011 is going to be the reference for your margin for 2012? My last question concerns regulations in Europe concerning energy savings and energy efficiency, and especially in France with the presidential elections due very soon. Do you think that there's going to be a regulation that will be decided on for the next few years? Is this a challenge for the elections? Could that maybe speed up renovations for energy efficiency? Mr. De Chalendar, I'll start with the last question. As far as new build goes, I showed you the graph concerning the main countries, and we have France in there as well. Regulations in different countries on new build are actually simply the translation of the Energy Performance of Buildings Directive. In France, nothing's going to change. The legislation has been voted in, and it's going to be applied. We can see that the builders are already putting that through into office buildings and also in new build residential in the year. I think what might change is for renovation. For renovation, it's not just about regulations. You can't really force, at least for the moment, government authorities cannot force people to renovate their homes, and make them more energy efficient. A few changes were introduced by the 2010 European Directive. What could change is that you can say that when you renovate your home beyond a certain threshold, you have to ensure a certain degree of thermal insulation. The threshold, which was 1,000 square meters, has now been pushed out to 400 square meters at the European level, and that limit might change, because the lower it is, of course, the better it is for us. The second point, still concerning regulations. The compulsory displaying of energy performance when you sell or you rent out a home is certainly moving in the right direction, and that could be reinforced. You might imagine that when a home is being sold, you have to have a certain level of energy efficiency performance. That's not the case today, but it might happen. There may be changes. There are some interesting ideas that have been thrown up in different countries. I don't know what the French government is going to do, whoever is elected president. I think that politically, no matter what the political party involved, there is a limit to what they can impose on citizens. Your first question, you said internal growth, but I think you meant external growth. We have what I call the embedded external growth that is quite high because we've already committed to two very significant acquisitions. The first one is that of Brossette, which will become final in a few weeks' time. The second one is also quite a big one that we announced last year in India, in pipes, that we have signed the papers for, but we haven't yet paid. The deal hasn't really been closed completely yet. We're expecting administrative authorizations for that. In India, it's not always easy to know how long that's going to take. If I add the two up, that brings us to about EUR 310 million. I do not want to give you a budget for that, but given that these two acquisitions will probably come to an end this year, it is about EUR 310 million over 2012 already. There will be other operations, but we are going to be very choosy this year. I am not going to give you an overall budget because I think as far as these things are concerned, you have to remain flexible, depending on what kind of opportunities present themselves. You know that we are very watchful. We are very careful about our financial situation. You had another question on prices. That is for you, Laurent. Go ahead. Your first question on prices, no, we cannot really tell you what the gaps are going to be between prices and cost division by division. I cannot really answer that question, but what I can say is that where raw material and energy prices put the highest pressures on us to increase prices, that is in Packaging, very clearly, and in Isover, where both energy prices are going up very strongly and raw materials that are involved there as well. Clearly, there are other business sectors where prices increased last year, and the spread was negative last year. For example, for Exterior Solutions and Flat Glass. Where there again, in order to offset the gap for this year, we are going to have to try and push through as many price increases as possible. But very clearly, where we are going to have a lot of pressure is Interior Solutions and Packaging. Your second point, I think, was on the overprice in Flat Glass. It is about one third. You cannot really consider that. For Flat Glass, Flat Glass is an activity in which Europe represents, for the group, about 60%, and emerging countries, Latin America, and Asia represent about 40%. The European situation does count, but what happens in other countries counts as well. In other countries, we very clearly, as far as prices go, we had a more difficult situation in Brazil in H2 2011. We also had a slowdown in our volumes in Asia in H2. That led us about 2 weeks ago, to stop production in one of our Korean units. We reacted to that. There will be cost adjustments, but not just in Europe. Today, clearly, these adjustments are forecast to take place. We did have some in 2011, but in 2012 as well. In certain processing units, we have to look at that site by site. We do have a few sites that are not doing too well, and we will have to restructure this year. I am sorry. I would just like to add one little thing on pipes. I would like to know whether in 2012, you think that things could go slightly better, or do you think that in France especially, there is going to be restrictions with local authorities? For 2012 for pipes, I am going to ask Claude Imauven to answer your question. As Pierre-André said, 2011 was a very tough year. I am sorry, I cannot see who once asked the question. Ah, you did. Okay. A very tough year, as I said. As he said, France was not worst affected. We do not really think that the pipes market is going to deteriorate in France in 2012. Given the specific financing method for water supply projects in France, I think that 2012 has started off rather well. We believe, of course, we will have an impact on our activity because of the rise in prices of raw materials, especially in countries around the Mediterranean. There's going to be a lot of budgetary restrictions voted through. Of course, you've seen that the Spanish government, for example, has reinforced its plans. We don't expect that things are going to improve there. The other aspect that Pierre-André talked about was emerging countries where actually the states and governments had decided to hold back credit to local authorities, especially in Brazil at the beginning of the year. It got a little better in the second half of the year. In China as well, where we hope that loans and credit to local authorities will be relaunched this year. It's difficult to see because, of course, in China we had the New Year recently and all that. In the Middle East, we hope that all the disruptions that were due to the Arab Spring will come to an end. Of course, apart from Syria and Libya. At least in other countries in that zone, Abu Dhabi, for example, Kuwait, Qatar, Iraq, all the contracts that are being negotiated right now, at least some of them will be signed. I don't think that in H1 things are going to improve much, but certainly in H2 they should. Yes, we have a question there. Hello. Sven Edelfelt. I have three questions. I'd like your opinion on the development of acrylic glass. It's a safety glass, so it might have an impact on the security glass that your group makes. I don't think so, but I'd like your opinion on this anyway. You also talked about the number of working days in Q4, which was lower. Can you also tell us about the climate impact? Because it seems to me that the comparison base was very much in your favor, especially in Germany. Also third question on solar panels. I think that you've put a lot of CapEx into it over the last few years. It seems to me that there's a lot of competition coming from the Chinese in Europe. Mr. De Chalendar. Now, the climate impact in Q4, we had the second half of November and the month of December, where the weather was much milder in 2011 than in 2010. But as Laurent told you, these are not very important months for us. We don't really know, we can't really tell you exactly what the figures are. But it certainly had a positive impact on our sales for December. But really, I can't give you figures. I'm sorry. I can't tell you. For the last 10 years, I have tried to measure whether or not what's lost is lost, or whether we're going to make up for it later on. I started by doing that for three years in the U.K., where people talk about the weather every single day of the year, but I didn't manage it. So there's certainly a positive impact, but we can't tell you how much it is and whether what we've got is going to stay got or not. What I can say is that we had a very good first quarter last year. It's difficult to compare with 2011, beginning of the year and end of the year. We've had a good January this year, but February is going to be more difficult. Apparently, it's just the first 2 weeks of February. Things seem to have come back to normal since the beginning of this week. What about solar energy? As I already told you, we have a policy that is based on 3 pillars. The first one is to manufacture solar panels based on the thin film glass technology. We started up a pilot factory 2 years ago, and it was very satisfactory in technical terms. We decided, therefore, to build 2 other plants, one that started off over the last few weeks, and the next one that will come online in Germany at the end of the summer. That's in Germany and in Korea. Plants that make solar panels using a technology that is not the dominant technology, including the Chinese technology that you talked about. We consider that in the medium term, that is based on silicon, sorry, the Chinese technology. We consider our technology will give us a better yield on cost compared to that of the silicone technology, depending on the markets. The technical progress that we've made and the conditions of the startup of the second production line is very satisfactory. We are holding our course. But it's quite clear that the sales price of these solar panels are not what we expected them to be. We think that we will be better positioned in the longer term. But when you look at what's happened over the last 18 months, prices have really collapsed, very much in advance of the reduction of costs, actually. This is really dictated by overcapacity in China rather than the lowering of costs of building Chinese solar panels. Today, our Chinese competitors are losing money, so they're not really selling their solar panels at a proper price today, and that's why there are so many political discussions on that. That is not going to bring into question our strategy, but it might change the rate of development that we had in mind. We are starting these factories, given the levels of prices on this market. This year, we made the decision not to start up the additional plant this year. We've sort of inverted our priorities in the sense that we are paying a lot more attention to cutting down the cost of production in the existing plants rather than accelerating the speed of production. Today, the good news is that we think we should be able to cut our costs to a much larger extent than we expected to be able to do 2 years ago, because 2 years ago, what we were trying to do was really to bring production onto the market as quickly as possible. But in 2012, we are not going to be making money on our Advanced Ceramics solar panels, given the sales prices, because, of course, we are starting up our production, and obviously, our cost prices are higher today than they will be in a year's time. Our main target for the end of the year is to whittle down our cost as much as possible. This is why we came into solar panels. We wanted to sell components, whether it is glass components or plastic parts or ceramic, to the solar panel industry. Right now, given this extra capacity that exists, demand has actually been reduced over the last six or three months. 2012 is going to be even tougher. From that point of view, we have certain special glass production units for solar panels that have been stopped. But overall, this is an activity that is still profitable. It is not as profitable as it was a year ago, but it is still profitable. The third axis in our strategy, which is a strategy that was to process and distribute panels. There again, given that prices have been lower in Western Europe, we are reorienting our strategy. We built up units that seem quite interesting given what we know about the markets, but there is no growth there. We had built up a sort of traditional distribution network with costs that vary quite a lot depending on subsidies in different European countries. Our activity of transformation and distribution is going to be transformed into a sales force for Avancis. But it is quite clear that the solar energy industry certainly does have a future, but the curves are not what we expected them to be. We are going to grow more slowly than we expected to grow two years ago. Your question on acrylic glass, I am going to give the floor to Jean-Pierre Floris because I think he is better positioned to answer than I am. Let me reassure you, we are also leaders in acrylic glass. We have a company in Germany that manufactures this product. They are very interesting products that are lighter than glass, but they are much more expensive than glass. We were not able to develop as fast as we expected to in that. I think that for automakers, they are going to use this acrylic glass for parts that are very difficult to mold in because of their shape. We do not think it is going to develop spectacularly. For us, the solution to lighten glass is light glass. Therefore, we propose to automakers models that make it possible for them to bring down the weight, that is by about 15%-20%. We believe that these new products will become the standard of the industry, with the price that is just slightly higher, weight that is 15%-20% lower, and therefore that helps them to bring down their CO2 emissions. As Pierre-André said, there is all the other glass that we make with thermal protection. That is for building. There again, it is going to bring down the CO2 emissions for consumers. In that context, acrylic glasses are just a little proportion. Yes. I'd like to ask you a question about the financial earnings you reported here. Unless I'm mistaken, you've improved your earnings by 15% or so this year, EUR 100 million better, if I'm not mistaken. But you also seem to intimate that the average cost of debt remains stable, steady. Also, you seem to say that the net debt has increased. Could you explain how it works out mathematically, please? Mr. Guillot. Well, as I was saying a while ago, I referred to the composition of our P&L under the IFRS rules and the way in which we account for pension liabilities. In our financial earnings, or in any group, especially our group, there are two main components. You've got the results in respect of the financial expenses, that's the burden of debt. The burden of debt is stable. That remains steady because you've got the cost of the gross debt that remains stable. Also, if the net debt at the end of the period is higher than the net debt at the end of the period in the previous year, the average debt taken altogether is a little bit lower. Mr. Chanda. Sorry about that. My son. Sorry. So Mr. Guillot, the financial expenses that have to do with the cost of the debt are steady. But what increases by EUR 100 million, so it gets better by EUR 100 million, it's the expenses accounted for mainly and with the expenses accounted for in the P&L in respect of pension expenses, pension liability. That's the discounting that must be done. We have our pension liabilities that have to be computed on a discounted basis because of the discount rate that we take on board because of the evolving interest rates. Also, it stems from the performance of our funds. This is a non-cash result, you see. Once again, if you wish, I can spend more time on it, but perhaps not with such a large audience. I could tell you the details if you like, about how we compute the impact of the pension liabilities in the P&L under the IFRS rules. But it would take rather longer than we have planned to stay here today for the conference. All this is operationally speaking, it hasn't got any clear meaning for us, operationally speaking. Yes. I'm from Recherche Crédit from Crédit Agricole CIB. I would like to say, you said a while ago you're very attentive to your financial status. Are you still aiming at improving your credit rating, BBB+? It's what you mentioned several times in the past. Also, as you're talking about pensions, could you tell us a little bit about the situation of pension schemes? Did that situation remain stable at the end of 2011, compared with the end of 2010, in terms of off-balance sheet deficit? Well, as we said at the investor presentation, we talked about our 2015 strategy, a strong BBB, in the upper part of BBB+, towards 2015. That remains our goal by that date. Regarding pensions, what I said was that our liabilities in the balance sheet were increased in the balance sheet, not off the balance sheet, and that was increased in the past year by about EUR 500 million worth, in the balance sheet, on the balance sheet. That stems from a bigger increase in the discounted value of our future liabilities, which went up substantially because of the drop in the interest rates. It's the drop in the interest rates, in the short term, that has an impact on our long-term pension liabilities. I won't make any comments on what I think myself of that way of valuing things, but anyway. The other thing is that conversely, the profitability of our funds, the yield of our funds, especially given the turnarounds in the stock markets in the U.S., that went up quite a bit. That cushions the increase in the liabilities a bit, but there is a difference of EUR 500 million that we had to take from our equity as we usually do in these circumstances. I think everybody has got the point. It's very simple and clear-cut, says the Chairman. I think Laurent knows all about this from the inside, and I have to relearn it every year from the inside because it is rather involved. So there are questions also I see. Somebody told me on the telephone. Luis Prieto from Deutsche Bank is on the phone, seemingly, on the telephone line. Yes, sir. Has he gone? Is he still with us on the telephone line? On the conference call. Luis Prieto from Deutsche Bank. Please go ahead, sir. questions because the rest have been already answered. The first one is, in the context of the U.S. Gypsum right now we've been talking about, and the price increases that you were talking about for early this year, where would that leave you in terms of profitability? Just a rough idea of where the profitability of this business would be at the moment after those price increases you're talking about. The second question is, just coming very quickly to the November 2010 targets that you provided, are you still comfortable with the earnings targets that were told at the time in terms of like-for-like sales, EBIT margin, et cetera? Thank you. The first question has to do with the price hikes and the profitability of Gypsum in the U.S. Well, we're in the same situation as all the other players really in the business sector. The profitability of that business isn't yet acceptable, not just yet. But we do hope that it will look up with the price hikes, and we'll see to what extent those prices increase satisfactorily throughout 2012. Regarding 2015, our objectives for 2015, says Mr. De Chalendar, we flank those objectives with an economic scenario you may recall. At this stage, it's probable that there will be a divergence between that scenario and the one we see going forward in 2012. In 2011, there was no major divergence, but it's quite possible that there may be divergences with respect to the initial scenario taken on board. It's too early to revisit the scenario, so we have a five-year plan. We adjust it in the springtime, and we can take stock of that situation in July regarding the year to date at that point in time, and to what extent that scenario still holds water, still is valid, the scenario we mentioned in the past. So for the moment, those 2015 objectives, we think are still topical, still of current importance. Next question, please. We have a question from Ian Osborne, ING. Sir, please go ahead. Good morning, gentlemen. The last question that remains for me, the R&D investment that you expect to be 25% of sales. Do you have the equivalent in gross profit, which I think will be of more interest to shareholders to show the value creation from the R&D. If the sales contribution is expected to be 25%, if you have the equivalent gross profit. Thanks. Well, it's not the R&D spend that would be 25%, of course, of the sales. Our CFO was starting to get a heart attack almost. No, it's the new products, of course. That would be 22%. The research manager is here. He was getting happy, but sorry, unfortunately, no, it wouldn't be quite like that. I haven't, however, got any hard and fast figures to give you about the contribution in terms of profitability or anything, but the actual gross margin that we achieve in respect to new products is significantly superior to the average in the group, otherwise. This would be an improvement factor for our results in the medium term. Next question. Is there another question there? Mark Kuglisch, UBS. Sir, please go ahead. Hello. I have two questions. One is really when you talk about margin pressure in the Flat Glass business, do you use the second half as your benchmark, or do you use the full year? Just because obviously, there was already a pretty big step down in the margin in the second half in that business. The first question. The second question was just really on asbestos. I think there was a court ruling not too long ago relating to asbestos in Italy for European asbestos cases. Do you see any risk to yourselves as a result of that court ruling? Thank you. I'm not totally certain I got all that, says the Chairman. I'd just like to say the first question concerns the margin ratio in Flat Glass in 2012. When I said it was going down, you want to know if I'm comparing with the second half or the whole of the year. Well, it was the whole of the year was the comparison base there. I didn't compare with the second half. No, no. The other question Laurent will answer, perhaps. It concerns the asbestos related claim in Italy. Or claims. No, we're not concerned about that. No. In Italy, says the Chairman. Next question then, please. We have a question from Sandra Pereira, Morgan Stanley. Madam, please go ahead. Yes. Hi, good morning. Only one question left, too, and it is regarding High-Performance Materials. It does feel the business continues evolving very strongly. Margin continues expanding. You are guiding for, again, robust margin in 2012. So I was wondering if you could give us the split in 2011 between volume and price growth, and also if you could give us a bit more color in terms of what is really driving the margin expansion. Is it pricing? Is it the cost base being substantially lower? New products? Any help in assessing the future of this division will be appreciated. Well, I think you gave the answer in your own question, madam. In fact, it's the summing up. It's the sum of the parts here. That's what we're talking about. It's a lot of technological niche markets we're talking about here. There were price hikes that, in those business lines, quite covered the cost hikes in raw materials and energy prices, and there were positive mix effects because clearly, this is a sector where the number of new products is quite substantial, and those new products then enhance the margin. We have a very strong contribution from the cost-cutting plans that we launched in 2008 and 2009. Insofar as the volumes have got off to a head start faster than in the construction industry because, as Laurent said earlier, we were at minus 11 compared with 2008. But in the High-Performance Materials, we stand at almost the level we had in 2008. We have the full effects now of the cost-cutting measures we enacted for the recession. Which was a good omen, isn't it, really, for what might happen in the other businesses regarding the sustainability of our cost-cutting plans that we instituted because of the downturn. These are all the measures taken together. As I said, the sum of the parts that feed into the operating margin for 2011, that shows up a lot of progress compared to 2010, knowing that 2010 was an all-time high. I do not know if I told you that. Well, last year I said 15 wasn't a ceiling, and we overshot the 15 mark throughout 2011. The volume and price impact, Laurent. Yes, for 2011, it was 7.2% of total growth, and that's more or less broken down half and half between price and volumes. Price is 3.9% and volume is 3.3%. Next question, please. Peter Andrews, HSBC. Sir, please go ahead. Good morning. Two questions, please. The first one is on the raw material and energy costs. I think the guidance started the year at EUR 500 million to EUR 600 million as an increase. It pushed up to just over EUR 600 million. Could you tell me what the outturn was, please, and also what the total raw material and energy cost bill is? Thank you. The second question is just the scope of the solar revenue. I think you were pushing for EUR 300 million of revenue. I just want to have that clarified to put that business in context. Thank you. I think Laurent gave you the answer. It is more like EUR 700 million, Laurent, in 2011. Yes, indeed. For 2011, says Laurent Guillot. For 2011 at the end of the year, it turned out in total at something around EUR 700 million. It was about one-third energy and two-thirds raw materials. For the bill you mentioned, the invoicing for raw materials and energy together, we are running at about EUR 6.5 billion total bill for raw materials and energy total in the group. For solar, it is more EUR 250 million rather than EUR 300 million, says the Chairman, with an impact which was fairly substantial because the prices are quite a bit lower than what they were in the previous year. Next question. Goldman Sachs. Sir, please go ahead. Hi there. Just a couple of very quick questions. First of all, just back to your guidance. Obviously, the energy cost bill you assume is going to be EUR 450 million. If we assume you can raise prices to offset it, that would suggest about 1% or so from price increases. Is it therefore, given you are expecting a modest improvement in organic growth, that we might expect underlying volumes to be broadly stable or maybe even slightly improving overall? The second question, obviously you have got to make some disposals out of Build Center, but I just wondered elsewhere whether or not there were businesses that you are potentially thinking about their strategic relevance to the group. You mentioned issues like U.S. insulation and some of the competitive issues there. I just wondered how you are thinking about that as you face the sort of current economic outlook. Thank you. On the first question, the EUR 450 million in raw materials and energy, that once again, it is mainly, or nearly all industrial business lines in the group we are talking about here. It is not cost increases in products that we resell. These are raw materials that are used for production, of course. So EUR 450 million, look at that in the context of the revenues of the group. That is what you did, but you should look at it in the context of the industrial activities of the group rather than the total revenues of the group. I did not fully get your second question, Sir Chairman, could you repeat that, please? I was just wondering whether or not you were examining the relevance of some business units to the group. Are you thinking about potential disposals going forward of certain businesses? I guess related to that, you talked about some of the issues in U.S. insulation and your positioning there. I just wondered how you were thinking about addressing that going forward. Yes, indeed. Sorry. We keep on revisiting, of course, the whole time, anything that's on our radar screen or anything that's within the company, to see if it makes sense to keep it in our portfolio or not. Regarding Isover in the U.S., situation is not satisfactory, that we can say. We think firstly that we have to make efforts in-house for a start, and that's underway. We have action plans up and running, quite substantial ones, quite far-reaching ones, and even recently more measures were enacted on that. Regarding the strategic positioning in the medium term, it's not extremely satisfactory. But in the situation we're in the moment, it's not necessarily the time to take that kind of decision. I got the same question on plasterboard too. In situations where the majority of players are losing money, it's not very easy to really strike a price if you want to sell or if you want to buy. We've got questions that have come in through the internet. A series of questions, Mr. Claous from Citigroup says, "Could you give us details on the main cost increases for 2012?" I think we've already covered that point, seems to me. The price hikes, what are the trends for the first quarter of 2012? We've I think more or less covered that. Prices are continuing to be our priority, as I said, and we have a faster pace in the fourth quarter of last year, as we said. For 2012, we have seen substantial price increases already since the beginning of the year in Verallia and in plasterboard in the U.S. and in Flat Glass. We said it's in the coming weeks. In Interior Solutions for all of the European countries. The next question has to do with Russia, the prospects for the construction market there. That's a country, Russia, where our growth was very sustained in 2011, following good growth too in 2010. But there was a big dip in 2009. So it's a very responsive kind of market. So we've a sustained development policy there, mainly for construction products in that particular division or business sector. We acquired Elinvar, and so it's Rockwool and Glasswool, and we've, of course, been involved in building a plasterboard plant in Nizhny Novgorod. Then there's another question from Seedbank. "How about prices? How have they evolved in Isover in 2011? What are the price trends you think, what will they be in 2012?" But, well, it varies from one country to the other. Interior Solutions more or less offset the cost price hikes by 2% or 3%, for insulation a bit more than 3%. For 2012, we are passing on increases too, and have started since the beginning of the year because of the raw materials price hikes. We are trying to pass that on indeed the whole time. The raw materials and energy price hikes, as we said, we try to pass on the whole time. That is all from the internet. If that is all in the room too, I would like to thank you for attending this meeting, and we will meet again in July for the first half. Firstly, we have the shareholders meeting, of course. Sorry to have forgotten that. That will be on the 7th.

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