Compagnie de Saint-Gobain

The stable outlook indicates that we expect Saint-Gobain to display robust operating performance through 2021 and 2022. This should be supported by good volume demand in Europe and the U.S., and continued cost-saving efforts. We forecast funds from operations (FFO) to debt of 28%-30% in 2021-2022, similar to 2019 and following a peak in 2020. This reflects improving profitability coupled with strong merger and acquisition (M&A) activity and high shareholder remuneration. We believe that the company's credit metrics will remain comfortably commensurate with our 'BBB' rating. We could lower our ratings if Saint-Gobain underperforms our base-case scenario and its credit ratios weaken materially, specifically if debt to EBITDA weakens toward 3.5x or FFO to debt trends toward 20%, with no

...Rating headroom will remain very strong, supported by favorable markets, internal efficiency gains, and prudent perimeter changes. The building materials market's recovery in second-half 2020 was significant leading to better than expected resilience in operating profit and record free cash flow for the year. Compagnie de Saint-Gobain reported S&P Global Ratings-adjusted funds from operations (FFO) to debt of 35.4% in 2020, higher than the 20-30% range we see as commensurate with the rating. This also reflects cost initiatives outperforming targets, working capital management, and lower discretionary spending leading to record free cash flow; and the benefit from the disposal of its 10.75% stake in Sika AG for about 2.4 billion. Cash on the balance sheet at end-2020 was a strong 8.4 billion, also supported by the suspension of dividends for the year. For 2021, we expect adjusted FFO to debt of about 30%, well in line with the rating, factoring in announced disposals and prudent acquisitions....

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