Slide 1: Record Results in 2018 – Sika Media and Investor Presentation
RECORD RESULTS IN 2018 SIKA MEDIA AND INVESTOR PRESENTATION FEBRUARY 22, 2019
Slide 2: Table of Contents
TABLE OF CONTENTS 1. HIGHLIGHTS PAUL SCHULER, CEO 2. UPDATE ON PAREX 3. FINANCIAL RESULTS ADRIAN WIDMER, CFO 4. STRATEGY EXECUTION PAUL SCHULER, CEO 5. OUTLOOK PAUL SCHULER, CEO THOMAS HASLER, GLOBAL BUSINESS AND INDUSTRY CHRISTOPH GANZ, AMERICAS 6. QUESTIONS & ANSWERS 2
Slide 3: 1. Highlights
1. HIGHLIGHTS PAUL SCHULER, CEO
Slide 4: Highlights 2018
HIGHLIGHTS 2018 1. Record results Sales growth of 13.6% in local currencies to CHF 7.09 billion in 2018 CHF 945.9 million EBIT (+5.5%) CHF 687.1 million net profit (+5.9%) 2. Key investments 1 new national subsidiary 11 new factories 4 acquisitions 3. Strategy and Outlook Outlook 2019:
Slide 5: Key Figures – Record Results
KEY FIGURES RECORD RESULTS in CHF mn 2017 2018 Δ% Net sales 6,248.3 7,085.4 + 13.4% EBIT 896.3 945.9 + 5.5% Net profit 649.0 687.1 + 5.9% ROCE 29.8% 26.2% 5
Slide 6: Strong Growth Momentum Continued in 2018
STRONG GROWTH MOMENTUM CONTINUED IN 2018 + 13.6% 13.6% SALES GROWTH IN LC (13.4% IN CHF) 7,085 + 14.1% + 5.5% + 11.7% Group + 29.2% 1,177 1,821 3,167 Americas 920 Asia/Pacific Global Business EMEA 12M 2017 12M 2018 (in CHF mn, growth in LC) 6
Slide 7: Investments in New Plants
HIGH OPERATING SPEED CONTINUED 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, July 2
Slide 8: Expansion in Emerging Markets
HIGH OPERATING SPEED CONTINUED IN 2018 EXPANSION IN EMERGING MARKETS New subsidiary: Honduras (February 2018) Now present in 101 countries with own national subsidiaries 8
Slide 9: Closing of 4 Acquisitions
HIGH OPERATING SPEED CONTINUED 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 Srl
Slide 10: Excellent Organic Sales Growth for the Group of 6.8%
HIGHLIGHTS 2018 EXCELLENT ORGANIC SALES GROWTH FOR THE GROUP OF 6.8% Above-average growth rates were achieved in Eastern Europe, Africa, USA, Indonesia, India, and China Net Sales Group (organic) MahaNakhon Building, Bangkok “The Circle” at Zurich Airport, Switzerland 7,085.4 2Y CAGR +6.5% One Van
Slide 11: Strong Organic Growth Momentum – China
HIGHLIGHTS 2018 STRONG ORGANIC GROWTH MOMENTUM - CHINA Enhancement of specification business and development of contractor network Implementation of megacities distribution business plan for Interior Finishing and Refurbishment Net Sales Area China (organic) Pudong Airport, Shanghai 247.4 2Y CAG
Slide 12: Strong Organic Growth Momentum – Eastern Europe
HIGHLIGHTS 2018 STRONG ORGANIC GROWTH MOMENTUM – EASTERN EUROPE Investments in local production sites and expansion of retail business as a base for strong growth Acquisitions generate momentum for future growth Net Sales Eastern Europe (organic) 388.2 Lakhta Center, Russia 2Y CAGR +18.0% Bar-Bo
Slide 13: Strong Organic Growth Momentum – Africa
HIGHLIGHTS 2018 STRONG ORGANIC GROWTH MOMENTUM – AFRICA Strong development of new subsidiaries in Africa thanks to participation in main infrastructure projects Consistent strategy execution in fast growing markets Net Sales Africa (organic) 186.9 Caculo Cabaça Dam, Angola 2Y CAGR +17.7% Water t
Slide 14: Counter Pressure from Rising Raw Material Prices
HIGHLIGHTS 2018 COUNTER PRESSURE FROM RISING RAW MATERIAL PRICES 65.0% 115.0% 110.0% 60.0% Gross Margin 105.0% 55.0% Raw Material Price Development 100.0% 50.0% 95.0% Sales Price Increases 45.0% 90.0% 2015 2016 2017 2018 Significant increase in raw material prices since end of 2016 with biggest im
Slide 15: Efficiency Improvements to Counter Pressure on Margins
HIGHLIGHTS 2018 EFFICIENCY IMPROVEMENTS TO COUNTER PRESSURE ON MARGINS 7’000 Efficiency gains from: 41.8% Net Sales Operating leverage 3Y CAGR +9.4% Lean corporate organization -220bp Various efficiency programs in 6’000 emerging countries with volatile currencies OPEX Prudent cost managemen
Slide 16: Urbanization – High Requirements Favor Sika Solutions
HIGHLIGHTS 2018 URBANIZATION – HIGH REQUIREMENTS FAVOR SIKA SOLUTIONS Demand for high- More waterproofing performing and specialty solutions needed concrete Innovative roofing solutions for challenging Functional sealing of construction conditions: building envelopes liquid applied membranes Increas
Slide 17: Urbanization – Supertall Buildings on the Rise
HIGHLIGHTS 2018 URBANIZATION – SUPERTALL BUILDINGS ON THE RISE Projected +1,200% in 20 years. Sika solutions are the driving force of this trend. 17
Slide 18: Concrete – No. 1 Structural Material for High-Rise Buildings
HIGHLIGHTS 2018 – URBANIZATION CONCRETE – NO. 1 STRUCTURAL MATERIAL FOR HIGH-RISE BUILDINGS Sika inside 18
Slide 19: Managing Tight Concrete Logistics: One Vanderbilt, NYC
HIGHLIGHTS 2018 – URBANIZATION MANAGING TIGHT CONCRETE LOGISTICS: ONE VANDERBILT, NYC 1.5 hrs ride from plant to >400 m height job site easy to pump, hardens quickly 100 rides a day and 70,000 m3 concrete 200 bar high pressure, still Every fifth cohesive truckloadMixing is Plant officially being Man
Slide 20: 2. Update on Parex
2. UPDATE ON PAREX PAUL SCHULER, CEO
Slide 21: Consultation Process Concluded – SPA Signed
UPDATE ON PAREX CONSULTATION PROCESS CONCLUDED – SPA SIGNED Regulatory approvals French consultation process Regulatory approval process 7-Jan-2019 12-Feb-2019 Q2 / Q3 2019 Signing of put option Signing of SPA Closing agreement 21
Slide 22: Expand Highly Profitable Mortar Business
UPDATE ON PAREX 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% Mortars M
Slide 23: 3. Financial Results 2018
3. FINANCIAL RESULTS 2018 ADRIAN WIDMER, CFO
Slide 24: Financial Highlights 2018
FINANCIAL HIGHLIGHTS 2018 New and all-time records in: Net sales: CHF 7,085.4 million (+13.6% in LC, 13.4% in CHF) EBIT: CHF 945.9 million (+5.5%) reaching 13.4% of net sales, +CHF 50 million in absolute terms Excluding SGO resolution cost, EBIT is at 13.7% of net sales Net Profit: CHF 687
Slide 25: Revenues 2018 – 13.6% Growth in Local Currencies
REVENUES 2018 13.6% GROWTH IN LOCAL CURRENCIES in CHF mn 2016 2017 -0.2% 6.8% Net sales 6,248.3 7,085.4 6.8% 7,085 Organic growth +426.2 Acquisition effect +427.8 6,248 Currency effect -16.9 2017 Org. Acq. FX 2018 25
Slide 26: Revenues 2018 – Execution on All Pillars of the Strategy
REVENUES 2018 EXECUTION ON ALL PILLARS OF THE STRATEGY -17 428 248 7,085 179 6,248 2017 Organic Growth Organic Growth Acquisitions Translation Impact 2018 Mature Markets Emerging Markets 26
Slide 27: Sales Growth 2016 to 2018
SALES GROWTH 2016 TO 2018 STRONG ORGANIC GROWTH 13.6% 9.0% 6.8% in LC 2.7% acquisition 5.5% organic 0.9% 6.3% 6.8% 4.6% 2016 2017 2018 in CHF mn Sales 5,747.7 6,248.3 7,085.4 27
Slide 28: Sales Growth by Quarter
SALES GROWTH BY QUARTER DYNAMIC GROWTH MOMENTUM 16.3% 18% 16% 14.5% 14% 12.3% 12.5% 12% 11.0% 7.7% 10% 3.5% 7.1% 7.4% 6.2% in LC 8% 6.3% acquisition 6% 2.4% organic 4% 8.8% 8.6% 7.4% 5.0% 6.3% 2% 4.7% 0% Q3 CY Q4 CY Q1 CY Q2 CY Q3 CY Q4 CY in CHF mn Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Quarterly 1,63
Slide 29: Income Statement
INCOME STATEMENT STRONG GROWTH AND OPERATIONAL IMPROVEMENTS in CHF mn 2017 NS 2018 NS Growth Net sales 6,248.3 100% 7,085.4 100% 13.4% Gross result 3,399.1 54.4% 3,751.7 53.0% 10.4% Personnel costs -1,212.1 -19.4% -1,345.4 -19.0% 11.0% Other OPEX -1,118.5 -17.9% -1,256.4 -17.7% 12.3% Depreciation an
Slide 30: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET CONTINUED PRUDENT BALANCE SHEET POLICY in CHF mn 31.12.2017 31.12.2018 Δ% Cash and cash equivalents 1,037.9 914.0 -11.9 Other current assets 2,047.2 2,262.7 10.5 Current assets 3,085.1 3,176.7 3.0 Non-current assets 2,710.7 3,205.5 18.3 Total assets 5,795.8 6,382.2 10.1 Cu
Slide 31: Cash Flow Statement
CASH FLOW STATEMENT STRONG CASH FLOW DEVELOPMENT DESPITE ONE-OFF EFFECT in CHF mn 2017 2018 Cash flow from operating activities 651.9 744.0 CapEx/sale of assets/acquisitions -478.2 -705.2 Free cash flow 173.7 38.8 Acquisitions/financial assets 323.1 474.4 Operating free cash flow 496.8 513.2 Free ca
Slide 32: Investments – Efficient Capital Management
INVESTMENTS EFFICIENT CAPITAL MANAGEMENT Lease buyback • R&D building in Switzerland 353 • Production facilitiy in Switzerland 114 204 Fixed Assets 160 40 71 11 new Factories through Acquisitions 5 A mortar plant in Hanoi, Vietnam Capacity Increase 82 85 75 A new plant in Dakar, Senegal A new
Slide 33: Return on Capital Employed (ROCE 2012 – 2018)
RETURN ON CAPITAL EMPLOYED (ROCE 2012 – 2018) STRONG ROCE WITH IMPACT FROM ACQUISITIONS 29.8% 28.7% 26.2% 24.3% 23.3% 21.0% 18.5% 2012 2013 2014 2015 2016 2017 2018 33
Slide 34: Record Dividend – Board Proposes 10.8% Dividend Increase
RECORD DIVIDEND BOARD PROPOSES 10.8% DIVIDEND INCREASE Dividend payment CHF 2.05 per share (+10.8% vs. PY) in CHF mn 2017 2018 Group profit (after minorities) 643.5 682.9 Dividend out of retained earnings 281.8 290.6 Dividend per share 1.85* 2.05* Total payout ratio 43.8% 42.6% *in CHF 34
Slide 35: 4. Successful Strategy Execution
4. SUCCESSFUL STRATEGY EXECUTION PAUL SCHULER, CEO
Slide 36: 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 - 302 new patents filed Innovation - 20 Global Technology Centers Emerging Markets - 37 new plants opened - 11 new national subsidiaries Acquisitions
Slide 37: Continued Growth in Sales and Profit
SIKA’S GROWTH MODEL DELIVERS CONTINUED GROWTH IN SALES AND PROFIT (FULL YEAR) NET NET SALES SALES EBIT in CHF mn, % growth in local currencies in CHF mn 13.6% 900 9.0% 5.5% 13.0% 6.2% 600 9.4% 5.3% 7,085.4 945.9 300 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 37
Slide 38: Strategic Targets 2020
SIKA’S GROWTH MODEL DELIVERS STRATEGIC TARGETS 2020 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 38
Slide 39: 5. Outlook
5. OUTLOOK PAUL SCHULER, CEO THOMAS HASLER, GLOBAL BUSINESS & INDUSTRY CHRISTOPH GANZ, AMERICAS
Slide 40: Outlook Global Business
OUTLOOK GLOBAL BUSINESS Volatile market conditions driven by uncertainty created by “Trade war”, Brexit and regulatory confusion (Diesel, EV, Hybrid) leading to delayed consumer decisions Record high level of projects and nominations in execution fueling over- proportional sales growth in 2019 a
Slide 41: Outlook Americas
OUTLOOK AMERICAS Positive market environment expected for the USA and Canada Challenging markets in Latin America (Argentina, Mexico) with some bright spots (Brazil, Colombia) Sika also able to deliver profitable growth in challenging markets by focusing on innovation, big city approach, distr
Slide 42: Outlook EMEA
OUTLOOK EMEA Positive construction market development and promising new opportunities for industry business Excellent development in Eastern Europe thanks to numerous infrastructure projects and strong growth in distribution business Specification and cross-selling in substantial projects such
Slide 43: Outlook Asia/Pacific
OUTLOOK ASIA/PACIFIC Market in Asia/Pacific remains strong with huge growth potential in all Target Markets Strong growth likely in China, India and parts of South East Asia. Challenging markets will continue in Malaysia, Hong Kong and the Philippines. Continued development of distribution cha
Slide 44: Strong Outlook 2019
STRONG OUTLOOK 2019 CONTINUATION OF SUCCESSFUL GROWTH STRATEGY 6 to 8% sales growth in local currencies (excluding Parex) Sales to exceed CHF 8 billion for the first time, depending on closing date of Parex transaction Over-proportional profit increase expected for the year Opening of 7 to 9
Slide 45: 6. Questions and Answers
6. QUESTIONS AND ANSWERS ® BUILDING TRUST Bs
Slide 46: Thank You for Your Attention
aae~. . ees — = THANK YOU FOR YOUR ATTENTION ® BUILDING TRUST Bs
Slide 47: 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