Sika Ag · SIX:SIKA

Sika — Investor Presentation (January 2019)

39 slides from Sika's investor presentation, January 2019

  1. Slide 1: 2018 Sales Exceed CHF 7 Billion for the First Time

    2018 SALES EXCEED CHF 7 BILLION FOR THE FIRST TIME SIKA MADE BINDING OFFER TO ACQUIRE PAREX SIKA INVESTOR PRESENTATION JANUARY 2019

  2. Slide 2: Agenda

    AGENDA 1. HIGHLIGHTS SALES 2018 2. SUCCESSFUL STRATEGY EXECUTION 3. SIKA MADE BINDING OFFER TO ACQUIRE PAREX 4. TARGETS 2020 AND OUTLOOK 2

  3. Slide 3: 1. Highlights Sales 2018

    1. HIGHLIGHTS SALES 2018 ® BUILDING TRUST Bs

  4. Slide 4: Strong Growth of 13.7%

    STRONG GROWTH OF 13.7% 2018 SALES EXCEED CHF 7 BILLION FOR THE FIRST TIME  Sales growth of 13.7% in local currencies to CHF 7.09 billion in 2018  Strong growth in all regions  Continued investment in supply chain expansion with opening of 11 factories, 1 national subsidiary, and 4 acquisitions 

  5. Slide 5: Sales 2018 Growth in All Regions

    SALES 2018 GROWTH IN ALL REGIONS +15.8% +8.1% +5.0% +30.1% Growth in CHF +14.2% +11.7% +5.5% +29.2% Growth in LC +1.6% -3.6% -0.5% +0.9% FX impact +6.7% +4.7% +0.0% +23.1% Acquisition 23% 77% Construction Industry EMEA Americas Asia/Pacific Global Business 5

  6. Slide 6: Strong Growth Momentum Continues

    STRONG GROWTH MOMENTUM CONTINUES + 13.7% 13.7% SALES GROWTH (13.4% IN CHF) IN 2018 + 14.2% + 5.5% 7.09 + 11.7% Group + 29.2% 1.18 1.82 Asia/Pacific Americas 3.17 0.92 EMEA Global Business 12M 2017 12M 2018 (in CHF billion, growth in LC) 6

  7. Slide 7: Closing of 4 Acquisitions

    CONTINUING HIGH OPERATING SPEED IN 2018 CLOSING OF 4 ACQUISITIONS Company Country Target Market Faist ChemTec Global Global Business Index Construction Systems and Italy Roofing & Waterproofing Products Polypag Switzerland Sealing & Bonding Fibermesh Concrete Fibers Global Concrete Arcon Membrane Sr

  8. Slide 8: Expansion in Emerging Markets

    CONTINUING HIGH OPERATING SPEED IN 2018 EXPANSION IN EMERGING MARKETS New subsidiaries:  Honduras (February 2018) Now present in 101 countries with own national subsidiaries 8

  9. Slide 9: Investments in New Plants

    CONTINUING HIGH OPERATING SPEED IN 2018 INVESTMENTS IN NEW PLANTS Opening of Sika plants:  New mortar plant Vietnam (Hanoi, March 2018)  1st admixture plant Senegal (Dakar, April 2018)  New admixture factory Saudi Arabia (Dammam, June 2018)  New admixture and mortar plant Azerbaijan (Baku, Juily

  10. Slide 10: 2. Successful Strategy Execution

    2. SUCCESSFUL STRATEGY EXECUTION

  11. Slide 11: Sika's Growth Model Delivers: Key Investments Since 2015

    SIKA’S GROWTH MODEL DELIVERS KEY INVESTMENTS SINCE 2015  - Successful Target Market concept Market Penetration  - Megatrends driving growth  - 217 new patents filed Innovation  - 20 Global Technology Centers Emerging Markets  - 37 new plants opened  - 11 new national subsidiaries Acquisitions

  12. Slide 12: Continued Growth in Sales and Profit

    SIKA’S GROWTH MODEL DELIVERS CONTINUED GROWTH IN SALES AND PROFIT (FULL YEAR) NET SALES NET 7000 SALES 16.0% EBIT 1100 14.3% 16.0% 1000 13.8% % growth in local currencies as % of net sales 14.0% 6500 14.0% 900 12.3% 5.3% 9.4% 13.0% 6.2% 5.5% 9.0% 11.4% 12.0% 800 12.0% 6000 10.2% 700 10.0% 9.0% 10.0%

  13. Slide 13: Continued Increase in ROCE

    SIKA’S GROWTH MODEL DELIVERS CONTINUED INCREASE IN ROCE (FULL YEAR) RETURN ON CAPITAL EMPLOYED (ROCE) in % * 29.8% 28.7% 24.3% 23.3% 21.0% 18.5% 15.6% 2011 2012 2013 2014 2015 2016 2017 13

  14. Slide 14: 3. Sika Made Binding Offer to Acquire Parex

    3. SIKA MADE BINDING OFFER TO ACQUIRE PAREX

  15. Slide 15: Transaction Highlights (1/2)

    TRANSACTION HIGHLIGHTS (1/2)  Sika made binding offer to acquire Parex from CVC Fund V  Parex, an excellent company  A leading mortar manufacturer – great expertise in facade, tile adhesives, waterproofing  Impressive track record of profitable growth (7 year growth CAGR of 7%; 2018E sales: CHF

  16. Slide 16: Transaction Highlights (2/2)

    TRANSACTION HIGHLIGHTS (2/2)  Financial parameters  Enterprise value of CHF 2.5 billion  Annual synergies of CHF 80 – 100 million expected  Bridge loan facility for the full amount committed by UBS/Citi  Multi-step transaction  Sika signed exclusive put option agreement  Consummation of trans

  17. Slide 17: Parex – A Leading Mortar Manufacturer

    PAREX – A LEADING MORTAR MANUFACTURER 80% OF SALES THROUGH DISTRIBUTION CHANNEL Key facts Key figures 2018  Strong position and expertise in mortar solutions for Sales CHF 1,204 million renovation and new builds EBITDA approx. CHF 195 million  Addressing increasing urbanization, growing market Wat

  18. Slide 18: Parex – A Portfolio of Strong Brands in Key Markets

    PAREX – A PORTFOLIO OF STRONG BRANDS IN KEY MARKETS Segments Brands 8 Key Markets Ceramic Tile  Self-leveling compounds Setting  Ceramic tile adhesives Materials China France  Grouts (incl. epoxy 40% grouts)  Grey mortars Facade USA Argentina Protection &  Mineral mortars Decoration  Organic r

  19. Slide 19: Parex – Track Record of Consistent Profitable Growth

    PAREX – TRACK RECORD OF CONSISTENT PROFITABLE GROWTH Strong organic and acquisitive revenue growth (in EUR bn) … and EBITDA growth (in EUR mn) 1.1 200 1.0 0.9 0.8 150 0.7 0.6 100 0.5 0.4 0.3 50 0.2 0.1 0.0 0 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 19

  20. Slide 20: Transaction Rationale: Expand Highly Profitable Mortar Business

    TRANSACTION RATIONALE EXPAND HIGHLY PROFITABLE MORTAR BUSINESS Combined Adhesive Systems Thermoplastic Adhesive Mortars 23% Systems Systems 100% Concrete 28% 26% Systems 14% CHF7.1bn CHF1.2bn CHF1.1bn CHF8.3bn Coating Systems Coating Concrete Thermoplastic 12% Systems Systems Systems 14% 17% 24% Mor

  21. Slide 21: Sika and Parex Combined - Global Player in Mortars

    TRANSACTION RATIONALE SIKA AND PAREX COMBINED - GLOBAL PLAYER IN MORTARS Double sales in mortars and significantly increase expertise in key technology (in CHF bn) 2x  Mortar is a key growth technology for Sika and one 2.3 of its most important earnings contributors  In line with past acquisitions

  22. Slide 22: Transaction Rationale: Strengthening Across All Regions

    TRANSACTION RATIONALE STRENGTHENING ACROSS ALL REGIONS + 13% + 43% + 17% + 17% 1.18 1.68 7.09 8.29 1.82 2.12 Americas 3.17 3.57 Asia/Pacific Total1 Sika 2018 Sika 2018 (in CHFm) post acquisition EMEA (in CHFm) Note: 22 1 Including Global Business segment

  23. Slide 23: Transaction Rationale: Broaden Global Production Footprint

    TRANSACTION RATIONALE BROADEN GLOBAL PRODUCTION FOOTPRINT EMEA + 1,300 employees + 20 plants Americas + 1,250 employees + 30 plants APAC + 2,050 employees + 24 plants Sika factories (mortar) Parex factories 23

  24. Slide 24: Channel Complementarity – 80% Sales in Distribution

    SIKA AND PAREX COMBINED CHANNEL COMPLEMENTARITY – 80% SALES IN DISTRIBUTION (SIKA: 31%)  Cross-selling opportunities through access to new sales channels for construction chemicals:  Sika gains access to extensive distribution network of Parex  Parex gains access to Sika’s well established direct

  25. Slide 25: Sika and Parex Technology: Many Synergies

    SIKA AND PAREX TECHNOLOGY MANY SYNERGIES FROM COMPLEMENTARY APPLICATIONS Sika Traditionally Strong in Engineered Mortars Traditional  Low shrinkage Example  High durability Cementitious Precision Grout  Low heat build-up SikaGrout 212  Excellent pumpability  Superior freeze/thaw resistance Pare

  26. Slide 26: Example France

    EXAMPLE FRANCE HIGH PRODUCT AND CHANNEL COMPLEMENTARITY Highly complementary applications Well Known Products and positioning in distribution  Technical mortars  50% sales through distribution with  Industrial Flooring focus on: Sealing & Bonding, technical mortars, Waterproofing  Roofing & Wate

  27. Slide 27: Example China

    EXAMPLE CHINA HIGH CHANNEL COMPLEMENTARITY AND CROSS-SELLING POTENTIAL Parex strong in distribution, Sika strong in direct business Expanded footprint in China  Technical mortars  Sika with 90% of direct business in  Industrial Flooring China  Roofing & Waterproofing  High complementarity in di

  28. Slide 28: Example USA

    EXAMPLE USA FACADE AND TILE SYSTEMS AS NEW GROWTH PLATFORMS  Refurbishment  Expand factory footprint for mortars with Parex plants in  Industrial Flooring Florida, California, New York and New Mexico  Roofing & Waterproofing  Parex’s Facade/EIFS business connects well with Sika’s wall insulatio

  29. Slide 29: Example Latin America

    EXAMPLE LATIN AMERICA HIGH COMPLEMENTARITY IN KEY MARKETS  Technical Mortars, Tile Adhesives  Parex’s strong position in Facade Mortar and Tile Adhesive  Industrial Flooring business fills important gap for Sika  Roofing & Waterproofing  Sika footprint in all of Latin America will multiply Pare

  30. Slide 30: Financial Considerations

    FINANCIAL CONSIDERATIONS  Financial parameters  Enterprise value of CHF 2.5 billion  Annual synergies of CHF 80 – 100 million expected  11.3x EV / pro forma EBITDA 19E multiple, less than 8.5x EV / EBITDA incl. full run-rate synergies  EPS accretive from first full year post closing  Financing

  31. Slide 31: Financial Benefits from Transaction

    FINANCIAL BENEFITS FROM TRANSACTION SYNERGIES TO DRIVE SUSTAINABLE MARGIN ENHANCEMENT EBITDA margin 17.1% 16.2% >17.5% + 25% EBITDA 2017 (CHFmillion) 80-100 1,330 – 1350 180 1,070 Parex Run-rate synergies1 Pro-forma Note: 31 1 Based on 2017 actuals, full run-rate revenues and cost synergies (EBITDA

  32. Slide 32: Revenue and Cost Synergies

    REVENUE AND COST SYNERGIES EXPECTED RUN-RATE SYNERGIES OF CHF 80-100M  Cross-selling of Sika products through Parex distribution  Expected run-rate channels (Acrylics, PUs, Epoxies etc.) synergies of Revenue CHF 80-100m p.a.  Leverage Sika’s direct access to jobsites for Parex products synergies

  33. Slide 33: Tentative Timeline to Closing

    TENTATIVE TIMELINE TO CLOSING Regulatory approvals French consultation process Regulatory approval process 7-Jan-2019 Q1 / Q2 2019 Q2 / Q3 2019 Signing of put option Signing of SPA Closing agreement 33

  34. Slide 34: Summary: Stronger and More Competitive

    SUMMARY: STRONGER AND MORE COMPETITIVE  Bringing two growth engines together  Product offerings are highly complementary. No overlaps in sales channels  Strong player in construction chemicals and industrial adhesives with sales in excess of CHF 8 billion  Excellent footprint with more than 300

  35. Slide 35: 4. Targets 2020 and Outlook

    4. TARGETS 2020 AND OUTLOOK ® BUILDING TRUST Bs

  36. Slide 36: Sika's Growth Strategy 2020 Confirmed

    SIKA’S GROWTH STRATEGY 2020 CONFIRMED TO BE UPDATED IN 2019 MARKET PENETRATION 6 - 8% ANNUAL GROWTH 30 NEW PLANTS INNOVATION 105 NATIONAL SUBSIDIARIES EMERGING MARKETS 14 - 16% EBIT MARGIN PER YEAR ACQUISITIONS > 10% OPERATING FREE CASH FLOW PER YEAR VALUES > 25% ROCE PER YEAR 36

  37. Slide 37: Strong Outlook for 2019

    STRONG OUTLOOK FOR 2019 CONTINUATION OF SUCCESSFUL GROWTH STRATEGY  Volatile and rising raw material prices will continue to be a challenge  For business year 2018, a record EBIT in the range of CHF 940 million to 960 million expected  For business year 2019, sales increase in line with Growth St

  38. Slide 38: Thank You for Your Attention

    5, RO i 7 =) i, 2 Ot | THANK YOU FOR YOUR ATTENTION — uw =) (4 = =) = a = 2 --]

  39. Slide 39: 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

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