Sika Ag · SIX:SIKA
Sika — Investor Presentation (January 2020)
56 slides from Sika's investor presentation, January 2020
Slide 1: Sika on track for record results – strong sales growth of 16.3% for 2019
SIKA ON TRACK FOR RECORD RESULTS – STRONG SALES GROWTH OF 16.3% FOR 2019 SIKA INVESTOR PRESENTATION JANUARY 2020
Slide 2: Highlights Sales 2019
HIGHLIGHTS SALES 2019 ® BUILDING TRUST Bs
Slide 3: New sales record of CHF 8.11 billion – growth of 16.3%
NEW SALES RECORD OF CHF 8.11 BILLION – GROWTH OF 16.3% HIGHLIGHTS SALES 2019 1. New records in sales for the 2019 business year +16.3% sales growth in local currencies (+14.4% in CHF) to CHF 8.11 billion Organic growth of +3.3% 2. Key investments Acquisition of Parex (Global) Crevo-Hengxin (Ch
Slide 4: Strong growth momentum continues: 16.3% sales growth in 2019
STRONG GROWTH MOMENTUM CONTINUES + 16.3% 16.3% SALES GROWTH (14.4% IN CHF) IN 2019 + 11.5% + 35.1% 8.11 + 19.3% Group + 3.0% 1.59 2.16 Asia/Pacific Americas 3.43 0.93 EMEA Global Business 12M 2018 12M 2019 (in CHF billion, growth in LC) 4
Slide 5: Sales 2019: growth in all regions
SALES 2019 GROWTH IN ALL REGIONS +8.3% +18.7% +34.7% +1.1% Growth in CHF +11.5% +19.3% +35.1% +3.0% Growth in LC -3.2% -0.6% -0.4% -1.9% FX impact +9.4% +13.4% +30.3% +2.6% Acquisition 20% 80% Construction Industry EMEA Americas Asia/Pacific Global Business 5
Slide 6: High operating speed continued in 2019: investments in new plants
HIGH OPERATING SPEED CONTINUED 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 7: Acquisitions in 2019 – integration on track
HIGH OPERATING SPEED CONTINUED IN 2019 5 ACQUISITIONS IN 2019 – INTEGRATION ON TRACK Company Country Target Market Parex Global Building Finishing, Waterproofing, Flooring King Packaged Materials Company Canada Concrete, Refurbishment Belineco Eastern Europe Sealing & Bonding Crevo-Hengxin China Sea
Slide 8: 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 2,000 STORES savings estimated FAST ORGANIZATIONAL INTEGRATION CROSS-SELLING Over 20 countries in CHF 230 million of fully
Slide 9: Sika clearly outperforms competitors
SIKA CLEARLY OUTPERFORMS COMPETITORS ORGANIC GROWTH SIGNIFICANTLY ABOVE PEERS IN THE PAST YEARS 2017 Organic 2018 Organic 9M 2019 Organic Constant Currency Growth Constant Currency Growth Constant Currency Growth +6.3% +6.8% +4.1% +3.6% +3.9% -0.9% Sika Peers Sika Peers Sika Peers 9
Slide 10: Strong topline growth and EBIT growth in the past years
STRONG TOPLINE GROWTH AND EBIT GROWTH IN THE PAST 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 11: Strategy 2023
STRATEGY 2023 BUILDING THE FUTURE
Slide 12: 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 Core Technologies Market Penetration and Emerging Markets as growth drivers Drive innovation to stay
Slide 13: 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 14: Sustainability
SUSTAINABILITY AT THE CENTER OF WHAT WE DO
Slide 15: 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 16: Sika offers many sustainable products and solutions
SIKA IS COMMITTED TO SUSTAINABILITY SIKA OFFERS MANY SUSTAINABLE PRODUCTS AND SOLUTIONS Sika® ViscoCrete® SIKA WATERPROOFING USING LESS WATER, SIKA SYSTEMS PREVENT LEAKAGE TECHNOLOGY ENABLES CONCRETE, AND UP TO 40% WATERPROOFING AND CONTAMINATION OF CEMENT WITH Sika® REDUCTION OF WATER SYSTEMS PROTE
Slide 17: Sustainability as a basic principle of the strategy
SUSTAINABILITY AS A BASIC PRINCIPLE OF THE STRATEGY SUSTAINABILITY TARGETS 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
Slide 18: Market penetration
MARKET PENETRATION INCREASE OUR MARKET SHARE TO 12%
Slide 19: 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 19
Slide 20: 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 Approx. CHF 70 billion Approx. CHF 80 billion Sika 12% Sika 9% +2.5% p.a. Others 58% market growth Others 88% Top 12: 33% 20
Slide 21: 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 21
Slide 22: 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 23: 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 23
Slide 24: 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 26
Slide 25: 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 26: The Building Finishing target market comprises 3 systems
BUILDING FINISHING THE BUILDING FINISHING TARGET MARKET COMPRISES 3 SYSTEMS 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 coating
Slide 27: 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 28: Market penetration – cross-selling
MARKET PENETRATION – CROSS-SELLING INCREASE PROJECT PENETRATION Sika is the only company offering the full range of construction chemicals: from below ground to the roof Cross-selling with opportunities in all Target Markets Set up organization to coordinate and increase project penetration PR
Slide 29: 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 30: Innovation
INNOVATION MORE PERFORMANCE – MORE SUSTAINABLE
Slide 31: 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 32: 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 33: Innovation – increased focus on product sustainability
INNOVATION – INCREASED FOCUS ON PRODUCT SUSTAINABILITY MORE PERFORMANCE, MORE SUSTAINABLE PERFORMANCE 33
Slide 34: 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 35: Operational efficiency
OPERATIONAL EFFICIENCY MORE THAN OPERATING LEVERAGE
Slide 36: Fast expansion: potential to increase operational efficiency
OPERATIONAL EFFICIENCY FAST EXPANSION: POTENTIAL TO INCREASE OPERATIONAL EFFICIENCY 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 Procu
Slide 37: 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 38: Logistics – a closer look at Australia
OPERATIONAL EFFICIENCY LOGISTICS – A CLOSER LOOK AT AUSTRALIA 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 warehouses 5-6 warehouses 45% utilization 67% utilization
Slide 39: Operational efficiency – procurement
OPERATIONAL EFFICIENCY – 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 monitori
Slide 40: 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 41: 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 42: Acquisitions
ACQUISITIONS GROWTH PLATFORMS
Slide 43: 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 4 2019 ~80 >45 10 5 43
Slide 44: Successful strategic lever: acquisitions in the last 7 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 45: Acquisitions – high market potential
ACQUISITIONS – HIGH MARKET POTENTIAL LARGE, GROWING AND FRAGMENTED MARKET Construction chemicals market 2018 Approx. 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
Slide 46: Values and principles
VALUES AND PRINCIPLES WHAT WE STAND FOR
Slide 47: Strong corporate culture: Sika's values and principles
STRONG CORPORATE CULTURE SIKA’S VALUES AND PRINCIPLES Customer first Courage for innovation Sustainability & integrity Empowerment and respect Manage for results Sika’s Values and Principles are the foundation for the Code of Conduct. They are put into action through strong leadership and
Slide 48: Profitability targets
PROFITABILITY TARGETS ® BUILDING TRUST Bs
Slide 49: EBIT margin of 15%-18%
EBIT MARGIN OF 15%-18% IMPROVING MARGIN PROFILE EBIT 15%-18% of net sales by 2021 946 EBIT 2018 Organic Growth Material Margin Operational M&A EBIT 2023 Improvements Efficiency 49
Slide 50: Parex contribution to EBIT growth
PAREX CONTRIBUTION TO EBIT GROWTH Parex with strong “stand-alone” PPA growth & profitability pre-PPA EBIT in CHF mn PPA One-time costs of CHF 70 – 75 million PPA One-off Synergies skewed towards 2019 (CHF 45 million) Synergies PPA Synergies Synergies Initial annual PPA amortization effect of a
Slide 51: Strong cash conversion
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 52: Capital efficiency: ROCE to increase to 25%
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 53: Outlook
OUTLOOK ® BUILDING TRUST Bs
Slide 54: Strong outlook
STRONG OUTLOOK CONTINUATION OF SUCCESSFUL GROWTH STRATEGY Double-digit EBIT growth for 2019 New Strategy 2023 will ensure Sika’s success in the upcoming years with sustainable, profitable growth 54
Slide 55: Thank you for your attention
THANK YOU FOR YOUR ATTENTION
Slide 56: 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