A., reflecting the group's commitment and expected ability to reduce debt and consistently bolster its financial profile in the short to medium term.The outlook remains negative.
The ratings continue to reflect Saint-Gobain's very strong business profile--attributable to the group's extensive product, geographic, and end-market diversification--as well as its leading competitive positions in all of its activities. These strengths translate into solid and consistent free cash flow generation (before acquisitions). These positive factors are tempered, however, by the group's exposure to asbestos claims-related liabilities, and its moderately acquisitive strategy. The ratings assume that the company's asbestos liability exposure will not materially increase in the future.
"The negative outlook reflects uncertainties stemming from Saint-Gobain's exposure to asbestos claims-related liabilities," Standard & Poor's credit analyst Nicolas Baudouin said. "Any material developments that would increase potential cash outlays, such as an increase in the number of new claims or in average settlement costs, could result in a downgrade," he added.
With sales of EUR30.3 billion in 2002, Saint-Gobain operates in diversified industries such as flat glass, industrial and building materials, and building materials distribution. Net financial debt was EUR8.4 billion at year-end 2002 (including adjustments of EUR0.4 billion for securitization and an estimated EUR1 billion for operating leases).
The ratings assume that lease-adjusted ratios of FFO to net debt (including securitization and unfunded pensions) and free operating cash flow to net debt will reach, and be sustained at, 35%-40% and 15%, respectively, in the medium term.