Slide 1: Strategy 2023 – Strategic Targets and Key Figures
STRATEGY 2023 – STRATEGIC TARGETS AND KEY FIGURES ADRIAN WIDMER CFO SIKA CAPITAL MARKETS DAY 2019
Slide 2: Sika's Growth Strategy 2023 Targets
SIKA’S GROWTH STRATEGY 2023 TARGETS SUSTAINABILITY Market Penetration 6-8% annual growth 15-18% EBIT margin Until 2020: <15% Innovation Operational Efficiency 25% of sales with new >10% products Operating free cash flow per year as % of net sales Acquisitions 0.5% pts non-material >25% cost improvem
Slide 3: Reduce CO2 Emission by 12% per Ton Sold
REDUCE C02 EMISSION BY 12% PER TON SOLD
Slide 4: Sustainability: Reduce CO2 Emission per Ton Sold by 12% by 2023
SUSTAINABILITY REDUCE CO2 EMISSION PER TON SOLD BY 12% BY 2023 Managed via Scope 1 (fossil fuels) and 200 45 Scope 2 (energy consumption) 40 Improving energy efficiency by reducing energy consumption per ton 35 100 Using electricity from renewable sources 30 (Scope 2) 25 Initiating EHS progr
Slide 5: Sales Growth, New Products
SALES GROWTH, NEW PRODUCTS ® BUILDING TRUST Bs
Slide 6: 6-8% Annual Top Line Growth
6-8 % ANNUAL TOP LINE GROWTH OPERATING MODEL BASED ON MULTILAYERED GROWTH Capturing structural growth driven by mega- 6-8% sales growth p.a. trends, conversion, building standards etc. Key Project Management, Cross-selling and multi-channel approach driving market penetration M&A to close mark
Slide 7: 25% of Sales with New Products
25% OF SALES WITH NEW PRODUCTS INNOVATION AS KEY GROWTH AND PROFIT DRIVER Innovation Target 2023 Market penetration with Major New Product Developments 25% of innovative products sales with new products Higher profitability with Key Updates released in the products offering unique past 5 years U
Slide 8: External Growth: Deal Flow and Acquisition Funnel
EXTERNAL GROWTH DEAL FLOW AND ACQUISITION FUNNEL Basic Review Formal Analysis Due Diligence Signed / Executed 2016 ~70 >40 8 4 2017 ~90 >50 10 7 2018 ~80 >40 8 5 2019 YTD ~70 >40 7 5 8
Slide 9: Profitability Targets
PROFITABILITY TARGETS ® BUILDING TRUST Bs
Slide 10: EBIT Margin of 15%-18%: Improving Margin Profile
EBIT MARGIN OF 15%-18% IMPROVING MARGIN PROFILE EBIT 15%-18% NS 946 EBIT 2018 Organic Growth Material Margin Operational M&A EBIT 2023 Improvements Efficiency 10
Slide 11: EBIT Margin: Organic Growth Driving Profit Growth
EBIT MARGIN OF 15%-18% ORGANIC GROWTH DRIVING PROFIT GROWTH Organic volume growth through market growth and market penetration 946 Basis for fixed cost leverage EBIT 2018 Organic Growth Material Operational M&A EBIT 2023 Margin Efficiency Improvements 11
Slide 12: EBIT Margin: Material Margin in 54%-55% Range
EBIT MARGIN OF 15%-18% MATERIAL MARGIN IN 54% - 55% RANGE Mid-term Material Margin target range of 54-55% Price increases to counter adverse material cost effects, smart pricing 946 EBIT 2018 Organic Growth Material Operational M&A EBIT 2023 Structural procurement savings Margin Efficiency Imp
Slide 13: EBIT Margin: Operational Efficiency with Strong Profitability Impact
EBIT MARGIN OF 15%-18% OPERATIONAL EFFICIENCY WITH STRONG PROFITABILITY IMPACT Improved Factory efficiency through automatization/digitalization Supply Chain/Factory Footprint 946 improvements to reduce logistics and warehousing cost EBIT 2018 Organic Growth Material Operational M&A EBIT 2023 Ma
Slide 14: Operational Efficiency with Strong Profitability Impact
EBIT MARGIN OF 15%-18% OPERATIONAL EFFICIENCY WITH STRONG PROFITABILITY IMPACT -0.5 % pts -0.5 % pts -0.5 % pts -0.5 % pts -0.5 % pts Year-on-year reduction of Operating Expenses by 0.5 % points of Net Sales 14. 0 40. 0% 39.6% 12. 0 39. 0% 10. 0 38. 0% 8.0 37. 0% 6.0 36. 0% 4.0 35. 0% 2.0 34. 0% 0
Slide 15: EBIT Margin: M&A Increasing Margin Profile After Initial Dilution
EBIT MARGIN OF 15%-18% M&A INCREASING MARGIN PROFILE AFTER INITIAL DILUTION M&A as growth platform, lifting margin profile over time Parex impact plus further M&A 946 Parex with strong stand-alone EBIT 2018 Organic Growth Material Operational M&A EBIT 2023 growth and contribution Margin Effici
Slide 16: Parex Contribution to EBIT Growth
PAREX CONTRIBUTION TO EBIT GROWTH Parex with strong «standalone» growth & profitability pre-PPA EBIT in CHF mn PPA PPA One-time costs of 70 – 75 MCHF One-off PPA Synergies skewed towards 2019 (45 MCHF) Synergies PPA Synergies Initial annual PPA amortization Synergies effect of about 4% of Sale
Slide 17: Strong Cash Conversion
STRONG CASH CONVERSION ® BUILDING TRUST Bs
Slide 18: Operating Free Cash Flow >10% of Net Sales
STRONG CASH CONVERSION OPERATING FREE CASH FLOW >10% OF NET SALES Increasing profitability Footprint alignment driving efficient inventory 10.2% management 8.2% 8.0% 7.2% Automation/digitalization supporting disciplined NWC Management CapEx spend of approx. 3% of Sales 2015 2016 2017 2018 20
Slide 19: Strongly Cash Generating Operating Model Driving Rapid Deleveraging
STRONGLY CASH GENERATING OPERATING MODEL DRIVING RAPID DELEVERAGING BELOW 2.0 TURNS Expected Net Debt/EBITDA Net Debt/EBITDA (S&P adjusted) of 2.7-2.9 YE 2019 Rapid deleveraging post Parex transaction, at 2.1 around 2.0x by end of 2020 Deleveraging of about 0.4 turns per year therefater (absen
Slide 20: Capital Efficiency
CAPITAL EFFICIENCY ® BUILDING TRUST Bs
Slide 21: ROCE to Increase to 25% by End of Strategy Period
CAPITAL EFFICIENCY ROCE TO INCREASE TO 25% BY THE END OF THE STRATEGY PERIOD 2019/2020 impacted by additional capital employed through M&A (mainly Parex) 29.8% 28.7% 24.3% 26.2% ROCE to increase to 25% (absent large M&A) Driven by higher EBIT and efficient Capital Management 2015 2016 2017 201
Slide 22: Thank You for Your Attention
—— THANK YOU FOR YOUR ATTENTION ® BUILDING TRUST By
Slide 23: Forward-Looking Statement
FORWARD-LOOKING STATEMENT This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘expects’, ‘believes’, ‘estimates’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘future’ or similar expressions or by discussion o