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Saint-Gobain sees positive price-cost trend after Q1 sales beat

The logo of Saint-Gobain is seen on a banner on a building construction site in the financial and business district of La Defense, outside Paris

By Enrico Sciacovelli and Luca Fratangelo

(Reuters) -French construction materials group Saint-Gobain on Thursday forecast a slower yearly increase in energy and raw material costs for 2023 while reporting better-than-expected first quarter sales on the back of its resilient renovation business.

The firm said during a conference call that it expects its energy and raw material costs to increase by 800 million euros ($881.60 million) in 2023, compared with a 3 billion euros rise last year.

"For 2023, our embarked price effect should offset the expected inflation and prevent margin dilution from inflation", Chief Financial Officer Sreedhar Natarajan said in the call.

While the housing market bore the brunt of aggressive interest rate hikes by global central banks in their battle against high inflation, Saint-Gobain is betting on continued growth in lighter building materials for the renovation market to offset a moderate slowdown in new constructions this year.

Price increases implemented last year reflected on the quarter's overall prices, which grew 10.2%, generating a positive price-cost spread for the group.

"This is the number one priority for every single country, and within each country, all the different product lines", Chief Executive Benoit Bazin said.

The group, which designs, manufactures and supplies materials for the building and industrial market, confirmed its full-year forecast of an operating margin between 9% and 11%.

Quarterly revenue totalled 12.4 billion euros, up 4.7% on a like-for-like basis from the same period in 2022, beating the 12.15 billion euros forecast in a company poll of analysts.

Renovation activities lifted Saint-Gobain's performance in the Southern European, Middle East & Africa region which became the group's main market in the quarter - accounting for almost 70% of sales in the area.

In Northern Europe, accounting for 31.2% of revenues in 2022, refurbishment materials represented around 55% of sales as the region saw a sharp slowdown in new constructions.

($1 = 0.9074 euros)

(Reporting by Luca Fratangelo and Enrico Sciacovelli in Gdansk; Editing Kirsten Donovan, Elaine Hardcastle, Alexandra Hudson)