Renewed record result based on continued growth dynamic
The Sika success story continued in 2016, another record year. In local currencies, sales increased by 5.5% to CHF 5,747.7 million. Growth momentum coupled with disciplined cost management produced new record figures of CHF 795.3 million (+18.1%) for the operating profit, CHF 566.6 million (+21.8%) for net profit and CHF 586.5 million (+29.9%) for operating free cash flow. 17 key investments made in the period under review will drive future growth further forward.
Growth in all regions
Sales in the EMEA region (Europe, Middle East, Africa) rose by 4.6% in local currencies. The core markets Germany, France, Spain and Italy achieved good growth rates. Strong above-average growth was seen in the UK, Russia, Eastern Europe and Africa.
Sales in the North America region rose by 7.8% in local currencies. This is due in particular to the accelerated expansion of the supply chain and the investments in the sales force in fast-growing metropolitan areas.
The Latin America region recorded a 5.1% sales increase in local currencies. Mexico, Argentina and Chile all developed strongly. By contrast, the continuing economic crisis in Brazil and a significant fall in the value of some local currencies led to a downturn in business activity.
Growth in the Asia/Pacific region was reported at 3.6% in local currencies. The extremely dynamic performance of the markets in Southeast Asia and the Pacific area translated into substantial sales gains. Sika also posted stable second-half growth rates in China, Asia’s largest economy.
In the business area “Other segments and activities”, Sika clearly outpaced the market with double-digit growth of 10.3% in local currencies. This includes the sales figures for the Automotive segment, whose global operations Sika controls centrally. The increased use of adhesive technologies in modern vehicle construction resulted in a significant rise in the proportion of sales generated by Sika products per new vehicle.
In local currencies, Sika increased sales of special chemical products for the construction industry by 3.1%. Sales of solutions for industrial manufacturing were up 4.7% in local currencies.
Nine new factories, four more national subsidiaries, four acquisitions
Sika’s accelerated development of emerging markets continued to generate very good results, with sales rising by 6.7%. As reflected in a 6.0% sales upturn, business activities were also scaled up in the high-margin mortar business – a core component of Sika’s growth model. Production capacity was increased, with new factories in all regions. The rapid expansion into highgrowth markets continued in 2016 as well, with a total of 17 key investments in nine new factories, four further national subsidiaries and four acquisitions.
In the EMEA region, a new concrete admixture plant was opened in the Ethiopian capital Addis Ababa and a mortar factory came on stream in Kyroni, near Athens. New national subsidiaries were established in Kuwait, Cameroon and Djibouti.
To provide fresh growth stimuli going forward, three acquisitions were made in the North America region: L.M. Scofield, a leading producer of color additives for ready-mix concrete, and FRC Industries, a manufacturer of fibers for concrete, both joined the Group. The Rmax acquisition enables the expansion of the portfolio for building envelope, wall and roofing insulation technologies.
Investments in Latin America included a new plant for mortar products in Guayaquil, Ecuador, an automotive factory for adhesives and acoustic solutions in São Paulo, Brazil, as well as the establishment of a new national subsidiary in Nicaragua in the capital Managua.
In the Asia/Pacific region, leading mortar producer Ronacrete Ltd. in Hong Kong was acquired. New factories were also commissioned in Perth, Australia, in Saraburi, Thailand, in Phnom Penh, Cambodia, and in Yangon, Myanmar.
The growth momentum produced disproportionately high increases in operating profit and net profit. The continual margin improvement for the 20th consecutive quarter and sustained cost management were the key positive drivers. As a result, Sika posted record EBIT (CHF 795.3 million, +18.1%) and net profit (CHF 566.6 million, +21.8%) for the 2016 business year. Operating free cash flow totaled CHF 586.5 million (+29.9%).
The tax rate decreased slightly to 25.0% (previous year: 25.2%).
Focused investments, improved key balance sheet figures
To be able to act fast and tap into the business potential offered by high-growth markets, Sika invested in production capacity expansion. At CHF 154.9 million, investments in new factories in the period under review were higher year-on-year (previous year: CHF 142.6 million).
At 18.4%, the ratio of net working capital to net sales was maintained at a low level in 2016 (previous year: 18.6%). The management of inventories and accounts receivable remains a major priority. Year-end cash and cash equivalents amounted to CHF 1,155.0 million (previous year: CHF 1,074.4 million). The net credit balance increased to CHF 415.6 million (previous year: CHF 82.5 million), while gearing improved further to -14.1% (previous year: -3.7%). Return on capital employed (ROCE) came to 28.7% (previous year: 24.3%), also a new record level.
The equity ratio now stands at 57.8% (previous year: 51.8%), attesting to Sika’s solid financing.