Sika Ag · SIX:SIKA
Sika — Investor Day (September 2019)
54 slides from Sika's investor day presentation, September 2019
Slide 1: Strategy 2023
STRATEGY 2023 PAUL SCHULER CEO SIKA CAPITAL MARKETS DAY 2019
Slide 2: Achievements September 2019
ACHIEVEMENTS SEPTEMBER 2019 ON TRACK TO MEET AMBITIOUS TARGETS
Slide 3: Strong topline growth and EBIT growth in the last years
STRONG TOPLINE GROWTH AND EBIT GROWTH IN THE LAST YEARS PERFORMANCE FROM 2012 TO 2019 Sales 16.1% EBIT 13.4% 13.4% 13.6% 14.3% 13.8% 12.3% 9.0% 11.4% 8.2 10.2% 1.1 13.0% 5.5% 9.0% 0.9 0.9 6.2% 7.1 0.8 9.4% 0.7 6.2 0.6 5.3% 0.5 5.7 5.6 0.4 5.5 5.1 4.8 2012 2013 2014 2015 2016 2017 2018 FC 2019 2012 2
Slide 4: Strong growth momentum continues in 2019
STRONG GROWTH MOMENTUM CONTINUES IN 2019 9.6% SALES GROWTH (7.6% IN CHF) IN FIRST 6 MONTHS + 7.7% + 15.6% + 4.9% + 11.4% 996 642 478 Americas 1,617 Asia/Pacific Global Business EMEA 6M 2018 6M 2019 (in CHF mn, growth in LC) 4
Slide 5: High operating speed continues in 2019: investments in new plants
HIGH OPERATING SPEED CONTINUES IN 2019 INVESTMENTS IN NEW PLANTS Opening of Sika plants: Mortar plant in Senegal (Dakar, March 2019) Expansion of mortar plant in Egypt (Alexandria, April 2019) Concrete admixture plant in Qatar (Doha, May 2019) Expansion of mortar plant in Serbia (Belgrade, J
Slide 6: 4 acquisitions in 2019 – integration on track
HIGH OPERATING SPEED CONTINUED IN 2019 4 ACQUISITIONS IN 2019 – INTEGRATION ON TRACK Company Country Target Market Parex Global Refurbishment, Waterproofing, Flooring King Packaged Materials Company Canada Concrete, Refurbishment Belineco Eastern Europe Sealing & Bonding Crevo-Hengxin China Sealing
Slide 7: Fast and successful integration of Parex
FAST AND SUCCESSFUL INTEGRATION OF PAREX EXCELLENT PROGRESS TOTAL SYNERGIES First SHOP IN SHOP CHF 100 million PROCUREMENT concept launched in China identified CHF 12 million in 1,500 STORES savings estimated FAST ORGANIZATIONAL INTEGRATION CROSS-SELLING Over 15 countries in CHF 230 million of fully
Slide 8: We clearly outperform our competitors
WE CLEARLY OUTPERFORM OUR COMPETITORS ORGANIC GROWTH IS 3% POINTS ABOVE PEERS IN THE PAST YEARS 2017 Organic 2018 Organic 1 HY 2019 Organic Constant Currency Growth Constant Currency Growth Constant Currency Growth +6.3% +6.8% +3.1% +3.6% +3.9% +0.1% Sika Peers* Sika Peers* Sika Peers* 8
Slide 9: Strategy 2023: Building the future
STRATEGY 2023 BUILDING THE FUTURE
Slide 10: Strategy 2023
STRATEGY 2023 Keep and build on the success story Values and Principles Sales driven organization – decisions close to the customers Target Market concept remains Focus on the current 5 key Technologies Market Penetration and Emerging Markets as growth drivers Drive Innovation to stay
Slide 11: Sika's growth strategy 2023: the pillars of the strategy
SIKA’S GROWTH STRATEGY 2023 THE PILLARS OF THE STRATEGY 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-materia
Slide 12: Sustainability
SUSTAINABILITY AT THE CENTER OF WHAT WE DO
Slide 13: Sika is committed to sustainability
SIKA IS COMMITTED TO SUSTAINABILITY SUSTAINABILITY HAS BEEN THE FOCUS FOR A LONG TIME CDP (Carbon Disclosure Project) disclosure since 2007 Member of UN Global Compact since 2009 Member of the World Business Council for Sustainable Development since 2010 «More Value – Less Impact» Strategy d
Slide 14: Our sustainability targets
OUR SUSTAINABILITY TARGETS SUSTAINABILITY IN THE CENTER OF WHAT WE DO Overall target: 12% CO2 emission reduction per ton sold Our «More Value Less Impact» targets: SUSTAINABLE SOLUTIONS CLIMATE PERFORMANCE All new product developments with «Sustainable 12% reduction of CO2-emissions per ton
Slide 15: Market penetration
MARKET PENETRATION INCREASE OUR MARKT SHARE TO 12%
Slide 16: Major megatrends supporting Sika's growth
MAJOR MEGATRENDS SUPPORTING SIKA’S GROWTH NO NEGATIVE DISRUPTION – UNLOCKING FURTHER POTENTIAL TECHNOLOGY EXPLODING ADVANCEMENT URBANIZATION ECONOMIC POWER CLIMATE CHANGE, SHIFT SHORTAGE OF RESOURCES CHANGING DEMOGRAPHICS 16
Slide 17: Construction chemicals market will grow to CHF 80 billion
MARKET PENETRATION CONSTRUCTION CHEMICALS MARKET WILL GROW TO CHF 80 BILLION Construction chemicals market 2018 Construction chemicals market 2025 Ca. CHF 70 billion Ca. CHF 80 billion Sika 12% Sika 9% +2.5% p.a. Others 58% market growth Others 88% Top 10 33% 17
Slide 18: Sika's market potential
GROWTH MODEL WITH EARLY MARKET PENETRATION FROM NEW-BUILD TO REFURBISHMENT SIKA HAS SOLUTIONS FOR ALL MARKETS Long-term market potential Sika Repair and Sika’s market potential refurbishment Higher building standards Infrastructure Emerging markets Developing markets Mature markets 18
Slide 19: Market penetration: driver for future growth
MARKET PENETRATION DRIVER FOR FUTURE GROWTH Key facts current New Target Market market penetration at Building Finishing Sika Strong Global Brand How we Clear Market Leader increase market Solution-driven and share Initiatives close to customer Key Project 1 Emerging Markets 2 3 Cross-Selling 4 Chan
Slide 20: Building Finishing as our 8th Target Market
MARKET PENETRATION BUILDING FINISHING AS OUR 8TH TARGET MARKET Building Finishing Concrete Waterproofing Roofing Flooring & Coating Sealing & Bonding Refurbishment Industry 20
Slide 21: Development in Building Finishing 2011 to 2019
MARKET PENETRATION DEVELOPMENT IN BUILDING FINISHING 2011 TO 2019 Building Mortars Engineered Mortars in CHF mn 2,400 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 22: Building Finishing with strong exposure to refurbishment
BUILDING FINISHING WITH STRONG EXPOSURE TO REFURBISHMENT Technical Mortars / Other Sika Target Markets Building Finishing – Tile Adhesives and Facade Mortars Highly-technical building and infrastructure projects Residential and light commercial focus Direct sales to large contractors and concrete pr
Slide 23: 3 systems comprise the Building Finishing target market
BUILDING FINISHING 3 SYSTEMS COMPRISE THE BUILDING FINISHING TARGET MARKET Tile Setting Materials (TSM) Facade Solutions Interior Walls Ready mix grey mortar or skim Skim coats, fillers Tile care & coat used for substrate Tile grout (as needed) sealants preparation/ leveling Decorative wall coatings
Slide 24: Market penetration – emerging markets
MARKET PENETRATION – EMERGING MARKETS GROWTH THROUGH RISING PENETRATION AND SOPHISTICATION Sika as early mover in frontier markets Early opportunities due to high infrastructure build-up Increasing penetration of higher end solutions over time Increasing regulations and sophistication drivin
Slide 25: Market penetration – cross-selling
MARKET PENETRATION – CROSS-SELLING INCREASE PROJECT PENETRATION Sika is the only “full range” offering construction chemicals company: from below ground to the roof Cross-selling with opportunities in all Target Markets Set up organization to coordinate and increase project penetration PROJECT
Slide 26: Market penetration – channel penetration
MARKET PENETRATION – CHANNEL PENETRATION DISTRIBUTION: LARGE POTENTIAL TO GROW Distribution Direct Global Channels Global Markets 53% 47% Builders' Merchants Sika 2015 31% 69% 27% Home Centers 44% Hardware Stores/Mom and Pop Sika and Parex 38% 62% Stores 10% Specialists Sika 2023 > 40% < 60% 19% 4 m
Slide 27: Innovation
INNOVATION MORE PERFORMANCE – MORE SUSTAINABLE
Slide 28: Sika's core technologies: key innovation moves 2023
SIKA’S 5 CORE TECHNOLOGIES KEY INNOVATION MOVES 2023 Launch first new basic PU with unique performance New Sika Hybrid Technologies Expand Adhesion Range Next generation concrete Adhesives additives 23% Industry leading cement Concrete additives Launch of best in class membrane 14% 3D
Slide 29: 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 30: Innovation – increased focus on product sustainability
INNOVATION – INCREASED FOCUS ON PRODUCT SUSTAINABILITY MORE PERFORMANCE, MORE SUSTAINABLE PERFORMANCE 30
Slide 31: New solutions: more performance, more sustainable
INNOVATION – INCREASED FOCUS ON PRODUCT SUSTAINABILITY NEW SOLUTIONS: MORE PERFORMANCE, MORE SUSTAINABLE HYDROFLEX SEALANTS NEW EPOXY FLOOR COATINGS HEMP BASED MORTARS Better stretchability, adhesion Improved blushing resistance, Thermal and phonic insulation and application properties significantly
Slide 32: Innovation: new construction – 3D printing, digital construction
INNOVATION NEW CONSTRUCTION – 3D PRINTING, DIGITAL CONSTRUCTION Construction only incremental Automotive Industry in the third CHF 2 BILLION EXPECTED GROWTH OF DIGITAL innovation BUT no revolution industrial revolution CONSTRUCTION IN THE NEXT FIVE YEARS SIKA’S INVESTMENTS FOR THE FUTURE 3D Process
Slide 33: Operational efficiency
OPERATIONAL EFFICIENCY MORE THAN OPERATING LEVERAGE
Slide 34: Operational efficiency: actual situation vs future approach
OPERATIONAL EFFICIENCY ACTUAL SITUATION VS FUTURE APPROACH Sika’s footprint significantly expanded since 2015 + 11 + 116 > 7,000 + 24 subsidiaries factories employees acquisitions To increase operational efficiency we focus on the following areas Operations / Logistics Procurement Formulation Sales
Slide 35: Operational efficiency – automation
OPERATIONAL EFFICIENCY - AUTOMATION OPERATIONS / FACTORY EFFICIENCY AUTOMATION TO DRIVE PRODUCT EFFICIENCY AUTOMATED GUIDED VEHICLE FOR WAREHOUSING Sika US investing in automation Driverless fork trucks for equipment for its roofing membrane line shipping warehouses New automated packaging lin
Slide 36: Operational footprint
OPERATIONAL FOOTPRINT LOOK BEYOND A COUNTRY - FROM INEFFICIENT PLANTS/ FLOWS & HIGH COMPLEXITY … … TO 1 MORTAR PLANT PER CITY & EFFICIENT SUPPLY CHAIN 10 plants (of which 9 mortar plants) 6 plants (of which 4 mortar plants)* 9 FG warehouses 5-6 FG warehouses 45% utilization 67% utilization 15k t of
Slide 37: Operational efficiencies – procurement
OPERATIONAL EFFICIENCIES – PROCUREMENT HOW TO GENERATE YEARLY SAVINGS HOW TO INFLUENCE OPERATIONAL EFFICIENCY LOGISTICS COST PACKAGING COST OPTIMIZATION REDUCTION • Professional negotiation • Development of cost with logistic vendors effective packaging • Effective contracting sources • Close monito
Slide 38: Operational efficiency – formulation efficiency
OPERATIONAL EFFICIENCY - FORMULATION EFFICIENCY DIRECTLY IMPACTING OPERATIONAL EFFICIENCY Sika is a product solution company = formulations are continuously > 20,000 active registered formulations invented, adjusted and adopted to local customer needs > 1,200 added every year globally Purchasing
Slide 39: Overall operational efficiency: yearly improvement
OVERALL OPERATIONAL EFFICIENCY YEARLY IMPROVEMENT 14.0 39.6% 0.5% 0.5% pts non-material cost 40.0% Additional efficiency gains from: NS improvement Sales growth Operating leverage 39.5% as % of net sales p.a. 12.0 6-8% p.a. 12.0 39.0% 38.5% Lean corporate organization 10.0 38.0% Various effici
Slide 40: Acquisitions
ACQUISITIONS GROWTH PLATFORMS
Slide 41: Successful strategic lever: acquisitions in the last years
SUCCESSFUL STRATEGIC LEVER ACQUISITIONS IN THE LAST 7 YEARS Sika Group Sales in MCHF 5 number of transactions per year 33 Major growth 9’000 acquisitions driver enabling 8’000 4 market penetration Successful 5 through: 7’000 integration 6’000 7 • Market share 4 4 5 • Technology 5’000 4 Contribution
Slide 42: Acquisitions – high market potential
ACQUISITIONS – HIGH MARKET POTENTIAL LARGE, GROWING AND FRAGMENTED MARKET Construction chemicals market 2018 Ca. CHF 70 billion Sika 9% Competitor A 4% Fragmentation offers acquisition Competitor B 4% opportunities Competitor C 4% Acquisitions as growth platforms Competitor D 4% Competitor E 3%
Slide 43: Values and Principles
VALUES AND PRINCIPLES WHAT WE STAND FOR 43
Slide 44: Values and principles: what Sika stands for
VALUES AND PRINCIPLES WHAT SIKA STANDS FOR Customer First Courage for Innovation Sustainability & Integrity Empowerment & Respect Manage for Results 44
Slide 45: Values and principles: Customer first
VALUES AND PRINCIPLES CUSTOMER FIRST Think win-win cooperation Respond fast to customer’s request Gain trust by keeping promises and being open Provide professional service Put yourself into customer’s shoes 45
Slide 46: Values and principles: Courage for innovation
VALUES AND PRINCIPLES COURAGE FOR INNOVATION Speak freely and listen patiently Go new paths and have tolerance for failure Actively challenge and accept being challenged Consider total innovation of our business; including a diverse workforce to foster innovation Benchmark the best within
Slide 47: Values and principles: Sustainability & integrity
VALUES AND PRINCIPLES SUSTAINABILITY & INTEGRITY Comply with Sika’s Code of Conduct Reduce carbon footprint with “More Value - Less Impact” Act with respect and responsibility Walk the talk, keep promises Be active in the community Put safety first 47
Slide 48: Values and principles: Empowerment & respect
VALUES AND PRINCIPLES EMPOWERMENT & RESPECT Building trust and allow mistakes Delegation with clear objective instead of detail actions. More encouragement and reward Think and support decisions in others’ position; be prepared and on time Talk with the people not about the people Give pri
Slide 49: Values and principles: Manage for results
VALUES AND PRINCIPLES MANAGE FOR RESULTS Leadership/Initiatives - Lead by example Performance oriented - Commitment to targets - Transparency in KPIs Accountability/Be accountable - Clear definition of responsibilities and objectives Benchmarking/Best Demonstrated Practice (BDP) - Outperform
Slide 50: First global employee survey 2019
FIRST GLOBAL EMPLOYEE SURVEY 2019 VERY HIGH DEDICATION TO WORK AND IDENTIFICATION WITH SIKA RESPONSE RATE STRENGTHS 78% of Sika Top ratings for immediate working environment incl. collaboration with superior High participation expresses overall loyalty to Job: Very high sense of responsibility
Slide 51: Our new strategic targets
OUR NEW STRATEGIC TARGETS ® BUILDING TRUST Bs
Slide 52: Sika's growth strategy 2023: the pillars of the strategy
SIKA’S GROWTH STRATEGY 2023 THE PILLARS OF THE STRATEGY 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-materia
Slide 53: Thank you for your attention
THANK YOU FOR YOUR ATTENTION
Slide 54: 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