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Flat Glass Industry - Executive Summary

The Flat Glass Industry and Global Market Structure

  • The global market for flat glass in 2006 was approximately 44 million tonnes. At the level of primary manufacture this represents a value of around USD 23 billion. Of this tonnage, around 70 per cent is consumed in windows for buildings, 10 per cent in glazing products for automotive applications and 20 per cent used in furniture and other interior applications. Over the long term, the market is growing in volume terms at around 4 per cent a year.
  • Europe, China and North America together account for 75 per cent of global demand for glass.
  • Europe is the most mature glass market and has the highest proportion of value-added products.
  • Just four companies; NSG Group, Saint-Gobain, Asahi and Guardian, produce 66 per cent of the world's high quality float glass. Much of the world’s lower quality float and sheet glass production is being replaced by high quality float.
  • There are only three glass groups with global automotive glazing capability and presence. NSG Group (as Pilkington Automotive), Asahi, Saint-Gobain/Central, together with their respective associates, supply around three quarters of the world’s Original Equipment (OE) glazing requirements.

Glass - A Growth Industry

  • Over the past 20 years, glass demand has grown more quickly than GDP. 2006 showed good growth globally, bolstered by China. Over the long-term, glass demand is still growing at just over 4 per cent per annum.
  • In 2006, the industry was running at around 90 per cent capacity utilisation globally, again heavily influenced by strong demand in China - a trend that looks set to continue.
  • Demand growth for glass is driven by economic growth and also by legislation and regulations concerning safety, noise attenuation and the response to the growing need for energy conservation.
  • Architects and car designers continue to increase the glass content in buildings and vehicles.
  • Demand for value-added products is growing at a faster rate than demand for basic glass, enriching the product mix and boosting the sales line.
  • Value-added products are delivering greater functionality to vehicle glazing and adding a further growth dimension to automotive glazing sales.

Pilkington - A Leading Brand in a Growth Industry

  • The Flat Glass business of NSG Group, trading under the Pilkington brand, is one of the world’s largest manufacturers of glass and glazing products for the building and automotive markets, with manufacturing operations in 27 countries on four continents and sales in 130 countries. Overall, the NSG Group had sales of $US 5.7 billion in the fiscal year ended March 31, 2007.
  • NSG Group is the most focused glass company and, together with its associates, has wide global reach. The Group’s Flat Glass Business, trading as Pilkington, has strong market positions in Building Products and Automotive OE and Automotive Glass Replacement (AGR) sectors.
  • The Pilkington brand is synonymous with Flat Glass manufacturing excellence and innovation, with a reputation for leading many important technological advances in the glass industry.
  • Within the NSG Group in FY07, 64 per cent of Flat Glass revenues were generated in Europe, 22 per cent in North America and 14 per cent in the rest of the world. Roughly half these revenues are generated in Automotive and half in Building Products.
  • E-Commerce is important to the NSG Group Flat Glass business, with almost 100 per cent of OE sales taking place online.

Geographic Positioning: Building and Automotive

  • The NSG Group has a wide geographic reach, enabling it to respond to customers whose operations, in the case of Automotive OE, are increasingly global.
  • The Group’s Flat Glass business, operating under the Pilkington brand, has manufacturing operations in 27 countries and sales in 130.
  • Worldwide, the NSG Group operates, or has interests in, 51 float plants
  • The Group’s Automotive business, Pilkington Automotive, is a leading supplier to the global automotive glazing industry.
  • In 2006, around 24 million new vehicles worldwide were fitted with glass from Pilkington Automotive.

Technical Leadership

  • Pilkington played a key role in the industry’s technological advances in the 20th century including Sir Alastair Pilkington’s invention of the 'float' glass process in 1952.
  • The Pilkington brand is synonymous with technological excellence, which is widely recognised by its competitors and customers alike.
  • Pilkington Activ™, the world’s first dual-action self-cleaning glass, is on sale in major markets worldwide. An extended range of Pilkington Activ™ derivatives now offers self-cleaning properties in combination with solar control coatings, low-emissivity energy-saving glass, laminated safety glass and noise-reduction laminates.

Strategic Direction

  • Following the acquisition of Pilkington, the NSG Group announced a three-phase, 10-year strategy, during which the newly expanded company will steadily implement growth strategies. The Flat Glass business, operating under the Pilkington brand accounts for around 87 per cent of the Group’s sales.
  • Synergies being attained through the acquisition include cost improvements, technological synergies and growth/profitability.
  • Sharing of advanced manufacturing technologies is leading to significant improvements in productivity, subsequently helping to reduce the unit cost of producing goods.
  • Sales of both companies’ architectural glass products are being expanded and global Automotive glass operations further developed in order to support market growth.
  • The target is to achieve synergistic effects totalling approximately JPY 19 billion (approximately USD 162 million) by the end of the fiscal year to March 31, 2015.
  • Under Pilkington’s existing growth strategy, the Pilkington-constructed fourth float line in Brazil for its South American joint venture is in full production.
  • A sound base has already been established in China as a platform for future growth, with Chinese Automotive plants now integrated into the Group's global Automotive glazing operations and a growing presence in Building Products.
  • An Automotive line is under construction in India, due to start production in 2008.
  • A second float line in Vietnam is due to come on stream in 2008.
  • The main strategic focus of the enlarged company is on the realisation of synergy benefits and on debt reduction.

 

November 2007