Saint-Gobain has fundamentally undervalued BPBfiles.investis.com/bpb/pdfs/5271biddefence_final.pdf · Saint-Gobain has fundamentally undervalued BPB. ... Lafarge. AgendaAgenda 1

BPB plcResponse to Saint-Gobain’s offer

Saint-Gobain has fundamentally

undervalued BPB

5 years ago BPB was a good companyNow it is well on the way to becoming

a great company

BPB urges shareholders to reject the bid

720p substantially undervalues BPBand represents almost no premium

BPB is a scarce and valuable asset

Note (1): Implied premium of only 0.7%

(1)

1. BPB’s position today

2. Financial track record

3. Management strategy & future actions

4. Plasterboard market

5. Regional growth & drivers

6. 2005/06 profit forecast

7. Financial implications

8. Case for re-assessment

AgendaAgendaAgenda

The Directors of BPB accept responsibility for the information contained in these presentation materials, except that the only responsibility accepted by them in respect of the information contained in these presentation materials relating to Saint-Gobain, its subsidiary undertakings and the directors of Saint-Gobain and/or any such subsidiary undertakings, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the Directors of BPB (who have taken all reasonable care to ensure that such is the case), the information contained in these presentation materials for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of that information.

These presentation materials should be read in conjunction with, and subject to, the circular to BPB shareholders published on 14 September 2005 (the "Circular"). In particular, the information contained in these presentation materials is, unless otherwise stated, derived from the Circular and presented on the basis set out in Appendix 3 to thereto (Bases of calculation and sources of information).

These presentation materials contain statements that are or may be forward-looking with respect to the financial condition, results of operations and businesses of BPB. These forward-looking statements include risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could or may cause actual results or developments to differ materially from those expressed or implied by such forward-looking statements. The information contained in these presentation materials is provided as of the date of issue. All written and oral forward-looking statements attributable to the Directors of BPB or persons acting on their behalf are qualified in their entirety by these cautionary statements.









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No.1 EuropeNo.1

Canada

No.1South Africa

No.1Egypt

No.2 Thailand

No.3USA

No.1 India

No.1Brazil

Global leadership in core products

No.1 UK & IrelandNo.1 FranceNo.2 GermanyNo.1 Benelux

No.1 IberiaNo.1 ItalyNo.2 Eastern EuropeNo.1 Nordic

No.6 China

Global No.1 in Plasterboard and Building Plasters

BPB’s position today

Over 80% of salesin plasterboard and

building plasters

Productsales

Geographicsales

A broadly based geographic presence

65%Plasterboard

Other 19%

16%Plasters

18% UK

10%Central Europe

5% Eastern Europe

23%N America

Emerging 5%Markets

8% Iberia

16%France

15%Rest of Europe

Plasterboardmarket sectors

New Residentialc.33%

RMIc.33%

Commercialc.33%

Exposure to 3 market sectors

Competitive global position

• Key markets have undergone considerable consolidation

• Most markets have 2-3 competitors

• National, Georgia Pacific (gypsum) & USG operate mainly in North America

• Yoshino operates mainly in Japan

Plasterboard

18%USG

19%Other

7%Yoshino

19%BPB

12%NGC6%

GP

7%Knauf

12%Lafarge

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Strong sales growth

Sales + 53%

CAGR + 11%

Even greater operating profit growth

Underlying Op profit +105%

CAGR + 20%

1,6621,931

2,1712,317

2,535

2002 2003 2004 2005 2006(f)

180221

249304

369

2002 2003 2004 2005 2006(f)

£m

£m

Year end March

CAGR +11%

CAGR +20%

Group financial performanceDelivering record results


Impressive EPS performance

Underlying EPS +143%

CAGR + 25%

Strong EBITDA growth

EBITDA + 81%

CAGR + 16%

21.025.8

30.5

38.5

51*

2002 2003 2004 2005 2006(f)

CAGR +25%

268328 350

402

485

2002 2003 2004 2005 2006(f)

*2006 EPS is stated on a proforma (undiluted) basis to reflect the full year impact of the capital return

£m

pence

CAGR +16%

Year end March


Almost doubled ROIC

ROIC + 87%

CAGR + 17%

Significant dividend growth

Dividends per share + 76%

CAGR + 15%

14.212.5

9.98.8

7.6

2002 2003 2004 2005 2006(f)

13.10 13.55 14.2516.00

23.00

2002 2003 2004 2005 2006(f)

pence

%

CAGR +17%

CAGR +15%

Year end March

Europe: Core region continues to perform strongly

• Around 70% of2004/05 group profits

• Real progress over last 2 years in sales and margins

• 2005/06(f) profits up over 13%

• Restructuring helped margins

• Market expected to grow strongly

184.3 182.0193.9

213.8

242

0

100

200

300

2002 2003 2004 2005 2006(f)0

500

1,000

1,500

2,000

Underlying operating profit Sales

Sales (£m)

Underlying operating profit (£m)

29.4

40.1

71.1

104

(11.8)

-30

0

30

60

90

120

2002 2003 2004 2005 2006(f)-200

0

200

400

600

800

North America: Excellent profit growth

• Improved performance driven by cost savings and price increases

• Operating at high utilisation levels

• Targeting lower operating costs

• Good margins despite cost inflation

Sales (£m)



7.59.1

15.2

23

19.0

0

10

20

30

2002 2003 2004 2005 2006(f)0

50

100

150

200

Emerging Markets:Exceptional growth potential

• Profit growth in excess of 20% pa

• Some start-up costs at new plants

• Achieving margins of 14-15%

• Region exhibiting very high growth rates

Sales (£m)











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A straightforward model

• Focus on plasterboard systems and building plasters

• Exploiting growth in our core products

• Investing in Europe, North America and the Emerging Markets

• A strong management team

• Spreading best practice to improve performance

Implying …

• Driving development of the global market

• Investing in excess of twice depreciation

• Spreading best practice through our “7i’’ change programme launched in 2002

1. Safety 2. Marketing3. Product management4. World class manufacturing5. Purchasing & supply chain6. People development7. Information systems & technology

Safety

• Moral responsibility and good management

• BPB’s performance was disappointing

• First “7i’’ initiative to be launched

• Excellent improvement

17.015.5

9.5

5.74.9

02 03 04 05 ytd 06

No. of 1 day lost time accidentsper 1,000 employees

Improving Safety Performance

(year to March)

World Class Manufacturing

• WCM is an excellent Japanese methodology

• 4 pilot plants in 2002/03

• Global roll out from 2004/05

• Initial results outstanding

• As an example, Chambery net efficiency up from 87% to 96% over 3 years

• Tremendous potential over next 3-4 years

Efficiency improvements

Factory & general overheads(% turnover)

135

151

168183

2002 2003 2004 2005

18.4%

19.7%20.1%

21.4%

2002 2003 2004 2005

Sales per employee(£000s)

14% reduction 35% increase

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560 550

2,371

3,500

803

1,600

387

1,050

1995 2005

Plasterboard is a growth product

• Strong growth across all stages of market development

• Since 1995 global market has grown over 60% (CAGR over 5%)

• BPB’s organic growth 6.5% pa since 1995

High growth rates and attractive market dynamics

4.1bnsq m

Emerging & other markets

Europe

6.7bnsq m

+171%

+99%

+48%

Japan(2)%

North America

Plasterboard growth drivers

• Economic growthUSA

Plasterboardvolume + 46%

GDP + 34%

UK

Plasterboard volume + 71%

GDP + 29%

EU

Plasterboardvolume + 47%

GDP + 21%

• Population growth and demographics

• Product substitution

• More stringent building regulations

1995 2000 2004 1995 2000 2004 1995 2000 2004100

125

150

100

125

150

175

100

125

150

Slide 24

s7 MASTERS OF THESE SLIDES AT END OF THE PRESENTATIONshowcase, 13/09/2005

0.3 0.6 1.0 1.11.6 1.9 2.0 2.2 2.3 2.7

3.3 3.6 3.94.6 4.7 4.8

9.5

10.8

<0.1

Indi

a

Chin

a

Sout

h Af

rica

Thai

land

Ital

y

Chile

Pola

nd

Spai

n & P

ort.

Net

herla

nds

Ger

man

y

Belg

ium

Aust

ria

Den

mar

k

Swed

en UK

Fran

ce

Finl

and

Cana

da

USA

Future market potential

Plasterboard consumptionm2 per capita in 2005

Demographic trends, economic growth & product penetrationexpected to underpin an acceleration of historic global market growth rate

Future market growth

• Global plasterboard market expected to increase by c.33% to almost 9bn sq metres by 2010

• Implied growth rate up from 5% to 6% pa

• Increasing product penetration

• BPB to increase capacity by c.45% by 2010 - emerging market capacity to treble

Exciting growth prospects

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• Excellent housing prospects

• More stringent building regulations

• New board plant at Sherburn

• New plaster plant at East Leake

• Strong position in Ireland

Population: 64mPopulation growth: 0.4% paPenetration per capita: 4-5 sq m Market growth: 5%-6% pa Market position: No.1

UK and Ireland

Plasterboard plantPlaster plantFuture plasterboard plant

Key:

Future plaster plant

• Attractive demographics

• Growth driven by new housing and RMI

• Excellent gypsum deposit near Paris

• Plaster plant upgraded at Vaujours

• Vaujours rebuild will increase plasterboard capacity by 25% in 2008

Population: 60mPopulation growth: 0.5% paPenetration per capita: 4-5 sq mMarket growth: 5%-6% paMarket position: No.1

France


Key:


• Plasterboard markets still under-developed, so growing faster

• Plasterboard capacity in Spain almost doubling

• Moving to higher value plasters in Spain

• Significant opportunity in east of region

The Mediterranean

Population: 215mPopulation growth: 0.5% paPenetration per capita: 1-2 sq m Market growth: c.10%-12% paMarket position: No.1


Key:


• Growth driven by economic modernisation and penetration

• Current plants sold out

• Romanian board plant on stream later this year

• 3 further plants planned for the region by 2010

Population: 300mPopulation growth: - 0.5% paPenetration per capita: <1 sq mMarket growth: c.10% paMarket position: No.2

Eastern Europe


Key:


• Demographics and economic background mixed

• Restructured German business

• Upside potential when German economy improves

• No major growth investment planned

Population: 147mPopulation growth: 0.1% paPenetration per capita: 2-3 sq mMarket growth: Modest

(exc. Germany)

Market position: No.1-2

Central Europe, Benelux & Nordic


Key:


• Strong demographic factors support continued growth

• Industry capacity utilisation above 95%

• BPB beginning to broaden product mix

• Building two new plants in Eastern USA

Population: 320mPopulation growth: 1.0% paPenetration per capita: 10+ sq mMarket growth: 3%-4% paMarket position: No.3

North America


Key:


• Exceptionally strong demographics

• Rapidly improving economy

• BPB investing ahead of growth

• 7 board plants by 2010

• Exciting plaster opportunity

Population: 1,000mPopulation growth: 1.5% paPenetration per capita: <0.1 sq m Market growth: c.30% pa Market position: No.1

India


Key:


• Strong demographics and economic prospects

• Malaysian plant on-stream early 2006

• Second Thai plasterboard line near completion

• Opportunities elsewhere in the region

Population: 460mPopulation growth: 1.2% paPenetration per capita: 0.3-0.4 sq mMarket growth: over 15% paMarket position No.2

South-East Asia


Key:


• Strong demographics and exceptional economics

• Industry structure changing

• BPB investing in very low cost plant network

Population: 1,300mPopulation growth: 0.7% paPenetration per capita: 0.3 sq m Market growth: c.20% paMarket position: No.6

China


Key:


Current & planned BPB capacity(million square metres)

550

690

2005 2010 (f)

120

360

2005 2010 (f)

NorthAmerica

EmergingMarkets

700

940

2005 2010 (f)

Europe

+200% +25%+34%

c.45% increase in capacity by 2010









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2005/06 Profit Forecast Year to 31 March

+23.8%282.6350Underlying PBT £m (2)

(before impact of capital return)

+9.4%2,316.82,535Turnover £m (1)

Change2005 (A)2006 (F)

Another record resultwith underlying proforma EPS of 51p

up almost a third

Notes(1) 2006 turnover around £2,535m(2) 2006 underlying PBT not less than £350m(3) Assuming a full year impact of the capital return

(3)

Regional Results Forecast Year to 31 March 2006

+21.4%+9.4%

13.114.6653692182,535Group

-

23

104

242

£m

Underlyingoperating profit

6

38

78

96

Change £m

(2)

164

610

1,763

£m

Turnover Return on sales

---Less inter-area

15.014.04Emerging Markets

13.417.033North America

12.813.728Europe

2005 (A) %

2006 (F) %

Change £m

Note(1) 2006 turnover around £2,535m

(1)

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Capital return and dividend

Capital return

• c. £350 million (70p per share)

• Proforma 2005/06 interest cover 9.1x

• Earnings enhancing

More efficient balance sheet and re-based dividendreflecting confidence in the future

Dividend

• 2005/06 23p per share (+44%)

• Base for future dividends

Implied trading value

Applying only the average peer group PE multiple:

Saint-Gobain has fundamentally undervalued BPB

51p2005/06 underlying proforma EPS (undiluted)

3.2%Implied dividend yield (based on 23p per share)

715pImplied trading value per BPB share(1)

14.3xAverage peer group PE multiple

50p2005/06 underlying proforma EPS (diluted)

(1) Implied trading value per BPB share is calculated on the basis of the assumed issued share capital of BPBfollowing the capital return

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BPB – Case for re-assessment

• Lots of positive new information

• Superior financial performance

• Diversified risk (geographic spread)

• Impact of industry consolidation

Earnings ratios failed to properly reflect long-term potential

BPB – A unique investment

• Clear strategy

• Exceptional growth prospects

• World leader

• Highly profitable

• Very cash generative

• The right team

Stay with BPB

Conclusions

5 years ago BPB was a good companyNow it is well on the way to becoming a great company

BPB urges shareholders to reject the bid

720p substantially undervalues BPBand represents almost no premium

BPB is a scarce and valuable asset

Note (1): Implied premium of only 0.7%

(1)

BPB plcResponse to Saint-Gobain’s offer

Saint-Gobain has fundamentally

undervalued BPB

Documents

Saint-Gobain has fundamentally undervalued BPBfiles.investis.com/bpb/pdfs/5271biddefence_final.pdf · Saint-Gobain has fundamentally undervalued BPB. ... Lafarge. AgendaAgenda 1