Sika Ag · SIX:SIKA
Sika — Investor Day (October 2023)
74 slides from Sika's investor day presentation, Oct 3, 2023
Slide 1: Sika Capital Market Day 2023 – Strategy 2028 – Beyond the Expected
SIKA CAPITAL MARKET DAY 2023 STRATEGY 2028 – BEYOND THE EXPECTED THOMAS HASLER, CEO TUEFFENWIES, OCTOBER 3, 2023
Slide 2: Agenda
1. HIGHLIGHTS YEAR TO DATE AND CURRENT PERFORMANCE 2. OUR NEW STRATEGY 2028 – BEYOND THE EXPECTED 3. OUTLOOK 2023
Slide 3: Highlights Year to Date and Current Performance
1. HIGHLIGHTS YEAR TO DATE AND CURRENT PERFORMANCE
Slide 4: Highlights Year to Date – Completion of MBCC Acquisition
HIGHLIGHTS YEAR TO DATE COMPLETION OF MBCC ACQUISITION Opening of a new mortar and admixture plant in Eastern India (June 2023) Acquisition of Thiessen Team USA (July 2023) Closing of the acquisition of MBCC Group (May 2023) New product line for macro fibers in Chattanooga, Tennessee (July 2023) Acq
Slide 5: Successful MBCC Integration – In Execution Phase Now
SUCCESSFUL MBCC INTEGRATION WE ARE IN EXECUTION PHASE NOW ▪ We passed Day 100 with strong team spirit and are in the execution phase now ▪ Regular steering and alignment meetings to continue ▪ 2nd pulse check survey continues to show high engagement 5
Slide 6: Increased MBCC Synergy Potential
INCREASED MBCC SYNERGY POTENTIAL UPDATED TO CHF 180 – 200 MILLION P.A. BY 2026 200 180 180 160 Initial guidance Updated guidance (in CHF million) 6
Slide 7: Highlights Year to Date – Strong Sales Growth
HIGHLIGHTS YEAR TO DATE – STRONG SALES GROWTH 12.2% SALES GROWTH IN LC (JANUARY TO AUGUST 2023) AUG YTD 2022 AUG YTD 2023 + 9.6% (growth in LC) + 12.2% + 13.5% + 14.3% + 15.6% Americas EMEA Asia/Pacific Global Business Group 7
Slide 8: Changes to Board of Directors and Group Management
CHANGES TO BOARD OF DIRECTORS AND GROUP MANAGEMENT AHEAD OF THE GROWTH STRATEGY 2028 ▪ Thierry F. J. Vanlancker to be proposed as new Chair of the Board of Directors at the Annual General Meeting 2024 ▪ Paul Hälg has decided to step down after twelve successful years ▪ Rotation in Group Management a
Slide 9: Strong Topline Growth and Profit in the Last Years
STRONG TOPLINE GROWTH AND PROFIT IN THE LAST YEARS PERFORMANCE FROM 2019 TO 2023 9
Slide 10: Our New Strategy 2028 – Beyond the Expected
2. OUR NEW STRATEGY 2028 – BEYOND THE EXPECTED
Slide 11: Strategy 2028 – What We Build Upon – What Will Change
STRATEGY 2028 WHAT WE BUILD UPON – WHAT WILL CHANGE What we build upon What will change/be reinforced ▪ People & Culture as strong backbone ▪ Build on 4 strong strategic pillars ▪ Decentralized market facing decisions, ▪ Balanced set of Financial & non-Financial targets agile organization ▪ Switch t
Slide 12: Sika Automotive & Industry Organization 2024
SIKA AUTOMOTIVE & INDUSTRY ORGANIZATION 2024 COMING TOGETHER Automotive Industry Automotive + Industry Automotive and Industry have been combined on a regional level to gain maximum momentum in a dynamic environment, increasingly driven by solutions for e-mobility and renewables. 12
Slide 13: Strategy 2028 – Profitable Growth to Continue
STRATEGY 2028 – BEYOND THE EXPECTED PROFITABLE GROWTH TO CONTINUE 23.0% 20.0% EBITDA 18.7% EBITDA 16.4% 10.5 bn 7.1 bn 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 13 Note: Historical Sales represent actual CHF values, growth figures in LC
Slide 14: Megatrends Driving Sustainable Growth
MEGATRENDS DRIVING SUSTAINABLE GROWTH FURTHER ACCELERATION POPULATION GROWTH URBANIZATION DEMOGRAPHIC RESOURCE SCARCITY CHANGE CLIMATE CHANGE & INCREASING TECHNOLOGICAL DIGITALIZATION SUSTAINABILITY REGULATIONS PROGRESS 14
Slide 15: Construction Chemicals Outgrow Construction Market
CONSTRUCTION CHEMICALS OUTGROW CONSTRUCTION MARKET MEGATRENDS ACCELERATE DEMAND AND DRIVE PENETRATION Construction chemicals penetration (1991 = 100) 600 500 400 300 200 100 2x penetration 2.5–4.0x penetration increase increase 0 1990 2000 2010 2020 2030 2040 2050 Source: IHS, Freedonia | 1) penetra
Slide 16: Market Share in Construction Chemicals and Industry
MARKET SHARE IN CONSTRUCTION CHEMICALS AND INDUSTRY TOTAL ADDRESSABLE MARKET 2023: CHF 110 BILLION 11% 45% Top 30 competitors Competitive landscape (incl. Sika) account for remains very fragmented 55% of market share despite ongoing M&A activity 16
Slide 17: Four Pillars of Growth Strategy 2028
FOUR PILLARS OF GROWTH STRATEGY 2028
Slide 18: Sika's Growth Strategy 2028 – The Pillars
SIKA’S GROWTH STRATEGY 2028 THE PILLARS OF THE STRATEGY 6-9% 20% annual growth in LC GHG emission reduction MARKET PENETRATION Scope 1 & 2 (absolute reduction vs. 2022 base line) INNOVATION & 20-23% EBITDA* Scope 3 reduction in line with net-zero pledge SUSTAINABILITY >80% ACQUISITIONS >10% Operatin
Slide 19: Strong Execution and Benefits of Megatrends
STRONG EXECUTION AND BENEFITS OF MEGATRENDS SIKA STRONGLY POSITIONED IN 2023 AND BEYOND URBANIZATION CLIMATE CHANGE AND SUSTAINABILITY Our growth ambition 6-9% DIGITALIZATION INCREASING REGULATIONS Sika’s average annual growth rate DEMOGRAPHIC CHANGE in local currencies TECHNOLOGICAL PROGRESS RESOUR
Slide 20: Market Penetration and Its Levers
MARKET PENETRATION AND ITS LEVERS THE ART OF INCREASING MARKET SHARE Leveraging Cross- Multi-channel Go where Key High potential strong position selling approach the money is geographies markets 20
Slide 21: Innovation & Sustainability
INNOVATION & SUSTAINABILITY
Slide 22: Innovation & Sustainability – Transforming Innovation and Effective Sustainability
INNOVATION & SUSTAINABILITY – TRANSFORMING INNOVATION AND EFFECTIVE SUSTAINABILITY PRESERVE NATURAL CLIMATE CHANGE INNOVATION RESOURCES MITIGATION Increase water and waste Reduction direct and All new product developments efficiency. indirect emissions. to be SPM validated. Reduce usage of hazardous
Slide 23: Sika's Net Zero Pathway
INNOVATION & SUSTAINABILITY – STRATEGIC PILLARS 2028 SIKA’S NET ZERO PATHWAY – DRIVING THE TRANSFORMATION OUR KEY LEVERS Education and capacity building to improve material efficiency and circularity Accelerated use of Continued focus alternative low on operational carbon supplies efficiencies Partn
Slide 24: Sustainability Portfolio Management (SPM)
INNOVATION & SUSTAINABILITY – ENABLING SUSTAINABLE SOLUTIONS SUSTAINABILITY PORTFOLIO MANAGEMENT (SPM) ▪ The SPM evaluates solutions based on All new product 12 sustainability and 6 performance developments to be categories. SPM validated with a ▪ SPM is used to classify, and market positive validat
Slide 25: Innovation & Sustainability – Roadmap
INNOVATION & SUSTAINABILITY – ROADMAP MERGE DURABILITY, DECARBONIZATION, AND CIRCULARITY TRANSFORMING CREATING NEW INNOVATIVE MARKET STRATEGY PROACTIVE VALUE LOCAL PROPOSITION QUICK AND IMPACTFUL DEFENSIVE COMPLIANCE DRIVEN CIRCULAR ECONOMY CONCEPTS REDUCE CO2 DEVELOP REPLACE HAZARDOUS SUSTAINABILIT
Slide 26: Acquisitions
ACQUISITIONS ® BUILDING TRUST By
Slide 27: Acquisitions – Strategic Lever with Multiple Dimensions
ACQUISITIONS STRATEGIC LEVER WITH MULTIPLE DIMENSIONS Expansion Bolt-ons 27
Slide 28: Acquisitions from 2018 to 2022
ACQUISITIONS – FROM 2018 TO 2022 ADDITIONAL GROWTH PLATFORMS IN ALL TARGET MARKETS 2018 2019 2020 2021 2022 2023 in CHF mn 4 5 2 7 2 2 L L Concrete Waterproofing S&B Refurbishment Roofing Flooring Building Finishing Industry 28
Slide 29: People & Culture
PEOPLE & CULTURE ® BUILDING TRUST By
Slide 30: Investing in Our People & Culture
WE BUILD TRUST EVERYDAY INVESTING IN OUR PEOPLE OUR EMPLOYEES FEEL VALUED, EMPOWERED AND PROUD TO WORK FOR SIKA & CULTURE IS INVESTING SAFE ENGAGED INCLUSIVE IN OUR FUTURE SUCCESS. Be effective leaders that build a safe, attractive and inclusive LEADERS ARE IN CHARGE. environment where people feel i
Slide 31: People and Leadership Development
PEOPLE & CULTURE – PEOPLE AND LEADERSHIP DEVELOPMENT CAPABILITY BUILDING POWERS TRANSFORMATION Focus Areas Leadership Sika Business People Business People Development L&D MEGATRENDS Strategy & Talent Strategy Strategy Strategy 2028 Functional Technical Building capabilities for future 31
Slide 32: Community Engagement – Sika Day
PEOPLE & CULTURE – COMMUNITY ENGAGEMENT OUR EMPLOYEES AROUND THE WORLD AT SIKA DAY Sika Mexico Sika Germany Sika Mongolia 32
Slide 33: Outlook 2023
3. OUTLOOK 2023 ® BUILDING TRUST Bs
Slide 34: Outlook 2023
OUTLOOK 2023 CONTINUATION OF SUCCESSFUL GROWTH STRATEGY ▪ For 2023 Sika expects a sales increase of above 15% in local currencies, Expected sales including the effect of the MBCC acquisition increase in LC >15% ▪ Confirmation of anticipated over-proportional EBIT increase for the year, excluding the
Slide 35: Strategy 2028 – Strategic Targets and Value Drivers
STRATEGY 2028 – STRATEGIC TARGETS AND VALUE DRIVERS ADRIAN WIDMER, CFO CAPITAL MARKET DAY - OCTOBER 3, 2023
Slide 36: Sika's Growth Strategy 2028 Targets
SIKA’S GROWTH STRATEGY 2028 TARGETS 6-9% 20% annual growth in LC GHG emission reduction MARKET PENETRATION Scope 1 & 2 (absolute reduction vs. 2022 base line) INNOVATION & 20-23% EBITDA* Scope 3 reduction in line with net-zero pledge SUSTAINABILITY >80% ACQUISITIONS >10% Operating free cash flow (as
Slide 37: 1. Financial Targets
1. FINANCIAL TARGETS ® BUILDING TRUST Bs
Slide 38: Sales Growth
SALES GROWTH ® BUILDING TRUST By
Slide 39: Financial Targets – Megatrends Underpin Growth
FINANCIAL TARGETS STRATEGY 2028 MEGATRENDS UNDERPIN GROWTH URBANIZATION CLIMATE CHANGE AND SUSTAINABILITY Our growth ambition 6-9% DIGITALIZATION INCREASING REGULATIONS Sika’s average annual growth rate DEMOGRAPHIC CHANGE in local currencies TECHNOLOGICAL PROGRESS RESOURCE SCARCITY POPULATION GROWTH
Slide 40: Acquisitions Will Continue to Reinforce Organic Growth
ACQUISITIONS WILL CONTINUE TO REINFORCE ORGANIC GROWTH ACQUISITIONS 2018 - 2023 2018 2019 2020 2021 2022 2023 in CHF mn 4 5 2 7 2 2 L L Concrete Waterproofing S&B Refurbishment Roofing Flooring Building Finishing Industry 40
Slide 41: Market Remains Highly Fragmented
MARKET REMAINS HIGHLY FRAGMENTED TOTAL ADDRESSABLE MARKET 2023: CHF 110 BILLION 11% 45% Top 30 competitors Competitive landscape (incl. Sika) account for remains very fragmented ~55% of market share despite ongoing M&A activity 41
Slide 42: Profitability
PROFITABILITY ® BUILDING TRUST By
Slide 43: Increase in Profitability Target – EBITDA to Replace EBIT
FINANCIAL TARGETS STRATEGY 2028 INCREASE IN PROFITABILITY TARGET - EBITDA TO REPLACE EBIT 23.0% EBITDA Target 20-23% 21.0% 19.0% 18.7% EBIT Target Strategy 2023 Increased Profitability targets 2028 17.0% 15%-18% 3.6% 15.1% 15.0% EBITDA to replace EBIT 13.0% EBITDA better reflects local business 11.0
Slide 44: EBITDA Margin of 20-23%
EBITDA MARGIN OF 20-23% IMPROVING MARGIN PROFILE ALONG VARIOUS BUCKETS 20% - 23% 18.7% EBITDA 2022 Organic Growth Material Margin Operational M&A EBITDA 2028 Improvements Efficiency 44
Slide 45: Organic Growth Driving Profit Growth
EBITDA MARGIN OF 20-23% 1. ORGANIC GROWTH DRIVING PROFIT GROWTH 20% - 23% ▪ Organic volume and profit growth through market penetration initiatives 18.7% ▪ Economies of scale ▪ Leveraging existing cost base EBITDA 2022 Organic Growth Material Margin Operational M&A EBITDA 2028 Improvements Efficie
Slide 46: Material Margin Expansion to 54-55%
EBITDA MARGIN OF 20-23% 2. MATERIAL MARGIN EXPANSION TO 54-55% OF NET SALES 20% - 23% ▪ Reclaim 54-55% Material Margin levels 18.7% ▪ Pricing and value selling ▪ Innovation (at higher margin) ▪ Structural procurement initiatives EBITDA 2022 Organic Growth Material Margin Operational M&A EBITDA 202
Slide 47: Operational Efficiency Remains a Profitability Driver
EBITDA MARGIN OF 20-23% 3. OPERATIONAL EFFICIENCY REMAINS A PROFITABILITY DRIVER 20% - 23% ▪ Not a specific strategic pillar anymore but significant potential remains 18.7% ▪ Footprint alignment, optimization and automation ▪ Increasing digitalization of customer EBITDA 2022 Organic Growth Materia
Slide 48: Footprint and Supply Chain Optimization
FOOTPRINT AND SUPPLY CHAIN OPTIMIZATION EXAMPLES: EUROPE AND NAFTA Examples: Europe and NAFTA ▪ Reduction of overlaps ▪ Benefit from economies of scale, drive automation ▪ Site specialization to improve production efficiency ▪ Optimize warehousing and logistics footprint 48
Slide 49: M&A: Increasing Margin Profile After Initial Dilution
EBITDA MARGIN OF 20-23% M&A: INCREASING MARGIN PROFILE AFTER INITIAL DILUTION 20% - 23% ▪ M&A as growth and profit accelerator, lifting margin profile over time 18.7% ▪ MBCC impact plus further bolt-on acquisitions EBITDA 2022 Organic Growth Material Margin Operational M&A EBITDA 2028 Improvements
Slide 50: MBCC Contribution to EBITDA Growth
MBCC CONTRIBUTION TO EBITDA GROWTH EXPECTED SYNERGIES LIFTED TO CHF 180–200 MILLION BY 2026 0.22 EBITDA % NS 00 12 MBCC incl. Synergies ▪ MBCC with strong «standalone» 0.2 00 10 EBITDA % NS Sika organic 0.18 0 80 contribution 18.7% 0.16 Synergies 0 60 ▪ Run-rate synergies fully validated ~15% Synerg
Slide 51: Revenue and Cost Synergies
REVENUE AND COST SYNERGIES EXPECTED SYNERGIES LIFTED TO CHF 180–200 MILLION BY 2026 ▪ Expected run-rate ▪ Cross-selling initiatives across portfolio/geographies – synergies of CHF 180-200 Revenue initial contribution already expected in 2023 million p.a. by 2026 Synergies ▪ Reinforced sustainability
Slide 52: MBCC Synergy Development
MBCC SYNERGY DEVELOPMENT EXPECTED RAMP UP UNTIL 2026 CHF 180-200 mn CHF 140-160 mn CHF 80-100 mn CHF ~25 mn 2023 2024 2025 2026 8 months 52
Slide 53: Strong Cash Conversion, Capital Efficiency
STRONG CASH CONVERSION, CAPITAL EFFICIENCY
Slide 54: Strong Cash Conversion
STRONG CASH CONVERSION OPERATING FREE CASH FLOW >10% OF NET SALES Operating Free Cash Flow >10% of Net Sales 16.2% 12.7% ▪ Profitability improvements 9.8% ▪ Footprint alignment and supply chain efficiency driving effective 7.2% 8.2% NWC management ▪ CapEx spend of to remain at approx. 3% o
Slide 55: Net Debt/EBITDA Development
NET DEBT/EBITDA DEVELOPMENT STRONG DELEVERAGING PROFILE 4.1 ▪ Strong cash conversion 3.4 driving rapid deleveraging 2.5 2.6 - 2.8 from post M&A-peaks ▪ Clear ambition to keep A- S&P credit rating 1.0 1.1 ▪ Flexibility to act on M&A opportunities 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 55
Slide 56: Capital Efficiency – ROCE Targeted at 20%-25%
CAPITAL EFFICIENCY ROCE TARGETED AT 20%-25% Return on Capital Employed 20-25% 26.2% ▪ 2019 and 2023 impacted by additional capital employed 21.6% 19.2% 20.1% through M&A (i.e. Parex and MBCC) 16.6% ▪ ROCE to increase to 20-25% (absent further large M&A) 2018 2019 2020 2021 2022 2023 2024 2025 2026 2
Slide 57: 2. Non Financial Targets
2. NON FINANCIAL TARGETS ® BUILDING TRUST Bs
Slide 58: GHG Emissions – Scope 1, 2, and 3
NON-FINANCIAL TARGETS STRATEGY 2028 GHG EMISSIONS - SCOPE 1, 2, AND 3 Scope 1 and 2 Scope 3 -20% in line with net zero pledge absolute emission reduction Reduction of use of fossil fuels in Optimizing formulations: production processes and Cement reduction, bio-based raw transportation materials, re
Slide 59: Employee Engagement – Reconfirm Our High Score
NON-FINANCIAL TARGETS STRATEGY 2028 EMPLOYEE ENGAGEMENT - RECONFIRM OUR HIGH SCORE ▪ Engagement as key performance metric to measure resilience and sustainability of an organization. Highly engaged employees drive performance and business success. ▪ Sika’s strong Corporate culture as most competitiv
Slide 60: Natural Resources – Water, Waste and Circularity
NON-FINANCIAL TARGETS STRATEGY 2028 NATURAL RESOURCES - WATER, WASTE AND CIRCULARITY Natural Resources: Waste disposed and water discharged -15% reduction Per ton sold Transition from a linear to a circular approach Focus on diverting non-recoverable waste to approaches in which resources are reused
Slide 61: Build on the Sika Spirit and Our Culture
BUILD ON THE SIKA SPIRIT AND OUR CULTURE
Slide 62: 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
Slide 63: Sika Capital Market Day 2023 – MBCC Update
SIKA CAPITAL MARKET DAY 2023 MBCC UPDATE PHILIPPE JOST TUEFFENWIES, OCTOBER 3, 2023
Slide 64: MBCC Is Complementary in Many Ways
SUCCESSFUL MBCC INTEGRATION MBCC IS COMPLEMENTARY IN MANY WAYS Solutions Channel Geography Supply Chain 64
Slide 65: Revenue and Cross-Selling Synergies
SUCCESSFUL MBCC INTEGRATION REVENUE AND CROSS-SELLING SYNERGIES 500+ CHF >350 million Acceleration of cross-selling Incremental revenue and specification selling INITIATIVES by 2026 initiatives B ▪ Initiatives centered around new opportunities in multiple vertical markets, including industrial floor
Slide 66: Xolutec Technology – Durability by Design
XOLUTEC® TECHNOLOGY – DURABILITY BY DESIGN SOLUTIONS FOR WATER MANAGEMENT & INDUSTRIAL FLOORING 66
Slide 67: Sika Ucrete Industrial Flooring System
SIKA® UCRETE® INDUSTRIAL FLOORING SYSTEM THE SUCCESS OF A FOCUSED APPROACH IN INDUSTRIAL MANUFACTURING 67
Slide 68: MBCC Integration Timeline
MBCC INTEGRATION TIMELINE Day 1 celebrations Day 100 reviews Pre-close carve out Integration planning Implementation ▪ Anti-trust Clearance ▪ Integration master plans ▪ Implementation of submitted by 60 integrated organizations ▪ Carve out of EBC business countries, covering: in European ▪ Future or
Slide 69: Closing of the MBCC Acquisition, May 2, 2023
CLOSING OF THE MBCC ACQUISITION, MAY 2, 2023 “TODAY IS A BIG DAY” Sika and MBCC together ▪ More than 33,000 employees ▪ Active in more than 400 factories ▪ Present in 103 countries ▪ Strong Global Player in Construction Chemicals Together, we are stronger! Together we will create an exciting future
Slide 70: MBCC Integration – 2026 Synergy Target by Country
MBCC-INTEGRATION – 2026 SYNERGY TARGET BY COUNTRY > 1,400 SYNERGY INITIATIVES HAVE BEEN IDENTIFIED EMEA AMER APAC
Slide 71: MBCC Integration – Operations and Supply Chain Moves
MBCC-INTEGRATION OPERATIONS AND SUPPLY CHAIN MOVES 415 PLANTS COMBINED PRODUCTION 60+ TRANSFERS WAREHOUSE OPTIMIZATION AND AUTOMATION INCREASE 71
Slide 72: MBCC Integration – Pulse Check Survey
MBCC-INTEGRATION “PULSE CHECK” SURVEY CONDUCTED EVERY 2 MONTHS August Average scores Key observations (1 – Strongly disagree; 5 – Strongly agree) Sika MBCC ▪ Based on >5,500 4.3 4.2 4.2 4.1 4.0 4.0 responses (Response rate of >30%) across 60 countries ▪ Overall positive feedback from employees on cu
Slide 73: MBCC Integration Conclusions
MBCC INTEGRATION CONCLUSIONS ▪ Overall excellent progress in integration of MBCC entities into local Sika entities. ▪ Planning completed by all 60+ country coordinated by a central Intergration Management Office ▪ Excellent cooperation between local MBCC and Sika teams, as well as on group level ▪ V
Slide 74: Thank You
Me i uaa THANK YOU ® BUILDING TRUST Bs