Topic of the month in april: Float Glass Industry review 2002

Companies worldwide reported a gradual slowdown in demand in both the automotive and construction markets toward the end of the year 2002

According to Asahi Glass Co. Ltd., its sales of fabricated glass in Japan declined due to poor domestic demand and reduced exports. Likewise, demand for flat glass for construction use was also feeble in North America, mirroring the decelerated U.S. economy. Despite these slowdowns, the company was able to expand its market share by reaching new customers. Additionally, the company said that sales of flat glass products—especially high-value-added strategic products, such as tempered glass for automotive applications—increased in Europe, helping to offset lower demand in other regions.

Compagnie de Saint-Gobain saw flat glass sales rise by 7.5% in 2001, however its performance in 2002, achieved against the backdrop of a challenging economic environment, testifies to the Group’s resilience and its swift reaction to changing business conditions. The Glass Sector posted the strongest like-for-like growth within the Group in 2002, driven by high sales volumes across the board. Profitability eased back slightly however, due to a contraction in sales prices in the Flat Glass and Insulation/Reinforcements divisions.

For PPG Industries, the impact of the recession was significant. The company experienced continued weakness in many of its North American markets, including automotive original equipment, aerospace and other transportation products, and also saw demand weaken in its key markets in Europe, South America and Asia as the impact of the North American recession broadened.

"We expect the global economic environment to be challenging once again in 2003," said Raymond W. LeBoeuf, PPG chairman and chief executive officer. "Nevertheless, we remain committed to further improvements in our cost structure and cash flow. Last year we lowered manufacturing and overhead costs, reduced debt by more than $400 million and increased our dividend payments for the 31st consecutive year. We expect another year of strong cash flow in 2003, which will allow us to reduce debt and increase our financial flexibility." Glass sales increased slightly and earnings rose $7 million from overhead reductions and greater manufacturing efficiencies, despite lower prices and higher pension and retiree medical costs.

Pilkington’s Stuart Chambers, Group Chief Executive comments: "As has been the case for some time, trading conditions remain challenging in most of our major markets. Nevertheless, our achievements in improving the competitiveness of our manufacturing base, which is now as robust as any of our competitors, means that we are now much more resilient. Trading has been in line with expectations and our headline profitability is set to see a continuation of the consistent level reported in each of the last two financial half-years."

Building Products markets have continued to be weak, with the notable exceptions of the UK and Australia. Efficiency improvements and cost savings have helped offset some of the pressure, though Building Products trading profit in total will be down approximately 20 per cent on last year.

In Europe, sales had been adversely affected by the economic situation, particularly in Germany. Float prices are down by about 10 per cent on average, although the price falls were mitigated by reductions in capacity through plants being taken out of service for extended cold repairs. The European downstream business continues to demonstrate robustness in the prevailing economic conditions. Profits in this business will be above the levels achieved last year.

Building Products North America, representing 15 per cent of Building Products sales, has been adversely affected by weakness in commercial construction, where Pilkington is the leading North American glass supplier. The Ottawa float plant is now back in full production following a cold repair
and the benefits of the North American Step Change programme continue to come through, improving efficiencies and reducing costs, leading to a welcome improvement in profitability in the second half year.

Sales of Pilkington’s Mexican associate, Vitro Plan SA de CV (VVP), declined by approximately 5 per cent due to a slowdown in the domestic Mexican economy and in the non-residential construction sector in the US, as well as competitive pricing pressure. Profits were also impacted by a one-off charge for the write off of inventories. The impact of these factors was only partially compensated by increased sales at Vitro Cristalglass in Spain.

Despite difficult trading conditions in South America, exacerbated by political uncertainties, the Building Products businesses have continued to perform well. In Brazil the stabilised political climate following last year's elections is helping trading. Pilkinton’s joint venture float business, Cebrace, has had another successful year.

Most major industries in China reported positive growth rates in 2002. Out of the 13 core-Industries, the flat glass industry showed a flat and lacklustre performance due to the consequence of over supply.

The flat glass Industry in China constructed about 10 new float production lines each year from 1995 to 1997. This marked the beginning of a new round of over heated construction. In order to survive in the market flooded with over supplies of flat glass, the producers were forced to reduce the selling price.

For the first 10 months of 2002, there are 47 float lines in operation in China.
Sales of the Pilkinton’s 19 per cent owned Chinese associate, SYP, showed modest growth in 2002, due to the inclusion of a full year's production from the Guangdong plant, repaired last year. Profits were down, however, principally due to a reduction in glass prices.


As outlook it can be stated that the current geopolitical events give rise to significant uncertainty as regards global economic trends. During the two first months of the year, most company’s sales have been in line with the target of moderate growth for the full year, despite increased exchange-rate fluctuation.

Source: OGIS GmbH, www.glassglobal.com
(The foregoing information was compiled from publicly available information in annual reports and news releases)