The coronavirus outbreak has thrown the market into turmoil. The impact of the virus has made the future uncertain and it is very likely that the market could fall again. However now is the time to examine potential buys for the time when the market settles.
I was throwing my slide rule over the investment potential of the famous old French group Saint-Gobain recently and got to thinking about the wealth of history that the Gallic glass-maker has stashed away in its ledgers. Its longevity alone (350 years - and still going strong) makes it remarkable. An early patron was the Sun King himself, Louis XIV, whose agents spectacularly broke the age-long Venetian monopoly on mirror making; but what, I asked myself, would the Sun King think of the possibility that activist investors are tricking about with the structure of his favourite glass firm? Remembering the short shrift he gave to many European rivals, he would probably be less than happy to hear Saint-Gobain described as 'unwieldy, bureaucratic and under-performing'.
The sheer scale and diversity of Saint-Gobain ensures that the financial engineering specialists have it under regular scrutiny. It has revenues of €42bn and a market value of €14bn, employing 200,000 people with operations in 50 countries. It is Europe's largest flat glass producer, a world leader in plaster board and one of Europe's largest builders' providers. The group is also a manufacturer of iron pipes, ceramics, insulation, bicycle bearings and seals for space craft. It also operates gypsum quarries, one of which is in Kingscourt in Co Cavan.
The company is a major provider of building materials, with a number of well-known brands including gypsum. Its building material products account for one-third of the group's revenue and operating profit. The group is also famous for flat and specialty glass used in cars, trains and planes, and of course skyscrapers, which accounts for 15pc of revenues. Its automotive glass sales in Europe are challenging while sales in Asia are increasing, reflecting the worldwide shift of car production. Its building providers division accounts for over 45pc of sales but operating profits only 20pc. Its most profitable division is its high-performance materials, with a quarter of operating profits on only 12pc of the group's revenue.
The group depends on Europe with almost half of its sales and particularly France, which accounts for one-third of all European sales. Interestingly this is exactly the position the company had a decade ago. While North America's sales are 13pc of the group, they account for 20pc of operating profits and emerging markets including Asia now contribute one-third of sales and operating profits.
Today the group is trying to shake off the reputation its critics have been mouthing about. Its CEO Pierre-André de Chalendar is implementing a new structure while at the same time flogging off parts of the group, including a pipe operation in China, a foam insulation business in Germany, glazing insulation business in the UK and a glass processing operation in Sweden and Norway. Recently he spent €1.4bn for a US plaster board operation and while the deal was received positively it reminded some observers of the company's old acquisition ways.
Up to recently Saint-Gobain's share price was ahead of last year but trailed similar stocks like CRH, Lafarge and Heidelberg Cement. Recent market unrest, inspired by the coronavirus uncertainties, saw the share price plunge to €24 per share less than its share price a decade ago. Its price earnings multiple is now below 10. Some analysts think Saint-Gobain's turnaround should have been done years ago, the cuts do not go far enough and disposals should be larger. It is hard to disagree, so don't rule out more urgent action; as for investing, stay clear.
Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.