Sika Ag · SIX:SIKA

Sika — FY2018 Earnings Presentation

48 slides from Sika's earnings presentation, March 2019

  1. Slide 1: Record Results in 2018 - Sika Investor Presentation

    RECORD RESULTS IN 2018 SIKA INVESTOR PRESENTATION MARCH 2019

  2. Slide 2: 1. Highlights

    1. HIGHLIGHTS ® BUILDING TRUST Bs

  3. Slide 3: 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:

  4. Slide 4: 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) 4

  5. Slide 5: 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

  6. Slide 6: 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 6

  7. Slide 7: Closing of 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

  8. Slide 8: 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

  9. Slide 9: 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

  10. Slide 10: 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

  11. Slide 11: 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

  12. Slide 12: 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

  13. Slide 13: 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

  14. Slide 14: 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. 14

  15. Slide 15: Concrete – No. 1 structural material for high-rise buildings

    HIGHLIGHTS 2018 – URBANIZATION CONCRETE – NO. 1 STRUCTURAL MATERIAL FOR HIGH-RISE BUILDINGS Sika inside 15

  16. Slide 16: 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

  17. Slide 17: 2. Update on Parex

    2. UPDATE ON PAREX ® BUILDING TRUST Bs

  18. Slide 18: 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 18

  19. Slide 19: 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

  20. Slide 20: 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  Multi-step transaction  Sika signed exclusive put option agreement  Consummation of transaction subject to regulatory approvals, expected in Q2/Q3 2019 20

  21. Slide 21: 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

  22. Slide 22: Example China: channel complementarity and cross-selling potential

    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

  23. Slide 23: Example USA: facade and tile systems as new growth platforms

    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

  24. Slide 24: 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

  25. Slide 25: 3. Financial Results 2018

    3. FINANCIAL RESULTS 2018 ® BUILDING TRUST Bs

  26. Slide 26: 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

  27. Slide 27: 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 27

  28. Slide 28: 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 28

  29. Slide 29: 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 29

  30. Slide 30: 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

  31. Slide 31: 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

  32. Slide 32: 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

  33. Slide 33: 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

  34. Slide 34: 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

  35. Slide 35: 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 35

  36. Slide 36: Record dividend

    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 36

  37. Slide 37: 4. Successful Strategy Execution

    4. SUCCESSFUL STRATEGY EXECUTION

  38. Slide 38: 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

  39. Slide 39: 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 39

  40. Slide 40: 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 40

  41. Slide 41: 5. Outlook

    5. OUTLOOK ® BUILDING TRUST Bs

  42. Slide 42: 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

  43. Slide 43: 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

  44. Slide 44: 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

  45. Slide 45: 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

  46. Slide 46: 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

  47. Slide 47: Thank you for your attention

    aae~. . ees — = THANK YOU FOR YOUR ATTENTION ® BUILDING TRUST Bs

  48. Slide 48: 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

Sika — FY2018 Earnings Presentation on 6ix