The sector whose performance mostly mirrors the state of an economy is the construction sector. Investing in direct property typically requires confidence in future income and access to bank credit. These two factors are highly correlated to the state of the economy.

The European Building Materials sector is emerging from a weak period that was characterized by slow economic growth. The economic growth outlook in 2014 was consistently downgraded by various authorities.

Falling oil prices, a weakening Euro, loose monetary policy and the first signs of an economic turnaround in the Euro region may provide the base for a recovery in the European construction sector. Thus, especially when most other sectors are currently trading at all-time highs, it may be the right time to have a look at shares of companies like Cie de Saint-Gobain.

Saint-Gobain is a French multinational corporation, founded in 1665 in Paris. Originally a mirror manufacturer, it now also produces a variety of construction and high-performance materials. Today Saint-Gobain is organized into four Major Sectors;

Building Distribution (46 % of revenues) – Saint-Gobain’s building supplies division operates in France, the UK, Germany, the Nordic Countries and Eastern Europe. The division has over 4,000 stores in 24 countries and employs 63,000 people worldwide.

The Construction Products Division (26% of revenues) produces gypsum products, acoustic and thermal insulation, roofing, interior and exterior products, cast-iron pipes and lightweight aggregates.

The Innovative Materials (22% of revenues) conducts research into various areas of materials science, energy, the environment, and medicine. Final products include fuel cells, particle filters and innovative glass products such as self-cleaning, electro-chromic, low-emissivity and sun-shielding glass. The Skywalk attraction at the Grand Canyon was built by this division.

The Packaging (6% of revenues) produces glassware for the food and beverage industry.

Saint-Gobain plans to acquire Sika during the second half of 2015. Sika is an established manufacturer of chemical products for the construction sector. Sika specializes in waterproofing, soundproofing, sealing and bonding, and protecting and reinforcing structures, Their excellent products are well known in Malta.

At the same time the Group will be divesting its entire Packaging Business (Verallia). The deal will be financed through a hybrid bond and should provide Saint-Gobain with significant organic growth potential.

Recent 2014 financial results were mostly in line with expectations. In 2015, the Saint-Gobain should benefit from continued growth in the US as well as in Asia and other emerging markets. European performance will depend mainly on a French economic recovery.

Based on the assumption of a European turnaround as forecasted by the ECB, a weaker currency and supportive monetary policy, Cie de Saint-Gobain may be well placed to outperform in 2015.