Dynamic economic region Southeast Asia includes countries such as Vietnam, Indonesia, Malaysia and Singapore. Numbering 650 million inhabitants and covering an area of 4.4 million km2, it is roughly as large as the EU. Sika established a foothold in this market at an early stage and, due also to the successful acquisition of Singapore-based LCS Optiroc, is benefiting from the region’s economic growth. Additional production facilities, new national subsidiaries and targeted marketing efforts are part of Sika’s drive to sustain the high growth momentum.
Southeast Asian gross national product has risen by an average of 6.5% per annum over the past decade. Thanks to direct foreign investment, ongoing urbanization, an increase in people’s purchasing power and higher government spending on infrastructure and utilities, national construction markets in the territory will continue to enjoy strong growth potential. Recognizing this, Sika stepped up investments in the region in recent years and has witnessed average annual sales growth of above 20% since 2012.
Acquisition of LCS Optiroc
Sika acquired LCS Optiroc in 2014. The Singapore-headquartered company, which has production facilities in its home market and Malaysia, specializes in cementitious powder products and boasts a wide range of mortars, including floor screeds, tile adhesives, plasters, grouts, as well as internal and external skim coats. These products ideally complement Sika Singapore’s offering of high-performance construction chemicals established prior to the acquisition of LCS Optiroc. “From the very outset, it was important for me to know that my life’s work was being placed in the hands of a credible partner that shares my goal of driving the company forward – not just in Singapore, but in the entire Southeast Asia region” explains Choong Fee Chong, Managing Director of Sika LCS Optiroc and Head of Building Mortar Asia/Pacific. He founded the company in 2004 with a partner and has been leading it very successfully ever since. LCS Optiroc’s broad product portfolio meant it was already the market leader in Singapore before being acquired by Sika. The firm has continued to expand its position by bringing new, innovative products to the market. Over the past few years, the portfolio has been augmented with sustainable mortars that have won Singapore’s Green Label certification in recognition of their sustainable eco-friendly properties.
Bayu Budi Prasetyo, Construction Manager from the contractor PT Wijaya Karya, and Muhammad Anshori, Sales Engineer for Key Projects at Sika, examine the progress of the Semanggi Interchange 2. The project comprises the addition of an elevated road section at a length of 1.6 km, without supporting columns, which is built above the existing interchange in the heart of Jakarta to help relieve congestion. A comprehensive portfolio of Sika admixtures, mortars and adhesives helps to create this challenging structure.
Bayu Budi Prasetyo, Construction Manager from the contractor PT Wijaya Karya and Muhammad Anshori, Sales Engineer for Key Projects at Sika, examine the progress of the Semanggi Interchange 2. The project comprises the addition of an elevated road section at a length of 1.6 km, without supporting columns, which is built above the existing interchange in the heart of Jakarta to help relieve congestion. A comprehensive portfolio of Sika admixtures, mortars and adhesives helps to create this challenging structure.
Residential construction in Singapore
Acquiring the mortar specialist not only bolstered Sika’s offering with new, high-quality volume products that are very much in demand in the region, it also ensured the company a strong market position in Singapore’s regulated construction market. The majority of residential properties in the city state are built by the government-run Housing Development Board (HDB). Singapore established the HDB to provide affordable housing for the general population. Construction targets are set under a five-year program. In the 2011-2015 period, close to 25,000 dwelling units per annum were built. A good 10,000 new units per annum were funded by private investment in the same time span. Over 80% of Singapore’s residents live in state-subsidized housing. LCS Optiroc enjoys an excellent reputation with the HDB and certified construction companies alike, and has supplied to numerous projects. “When it comes to quality and on-time delivery, LCS Optiroc is a dependable partner,” says Wilson Wong, General Manager of building contractor LC & T, one of the largest HDB contractors in Singapore. He remarks that LCS Optiroc responds fast and is solution oriented, which is in part attributable to the company’s efficient, large-volume production.
Combined growth platform
The Sika national subsidiary in Singapore is today located in the LCS Optiroc building and produces concrete admixtures for the local market in the LCS Optiroc plant. United as one company, LCS Optiroc and Sika also share product formulations and production know-how for their mortar products and round out each other’s product ranges and distribution channels. Sika’s international organization also provides a conduit to distribute LCS Optiroc products outside Singapore. Products from the LCS Optiroc portfolio are already being sold in Vietnam and Thailand.
Local Sika staff are currently being trained up in preparation for market launches in Indonesia and China. Strong population growth and urbanization in Southeast Asia spell large potential for mortars, explains Choong Fee Chong. But it is not the region’s macroeconomic development alone that holds out promise and prospects for structural growth. Technical developments in the mortar business also open up opportunities for Sika. Mounting wage costs, a heightened sense of quality, and a growing trend to build high-rises are bolstering demand for prepacked mortar products such as those manufactured by Sika and Sika LCS Optiroc. This technology shift offers enormous potential: around 90% of the mortars used today in Southeast Asia are mixed at the construction site. This compares with developed markets such as Australia, where 85% of the mortar employed is prepacked. A mere 15% of mortar is mixed on site. This trend prompted Sika not only to acquire LCS Optiroc, but also to invest in further mortar plants in Thailand and Malaysia in the past few years. Beyond that, sales organizations have been upscaled in the interior finishing sector, and marketing efforts have been intensified with the primary goal of positioning Sika as a technology and solutions provider.
The Sika Spirit
Choong Fee Chong had originally intended to continue running Sika LCS Optiroc for just two years after the takeover. The fact he is still there has a lot to do with Sika’s corporate culture. “The last three years have been enriching and new perspectives have opened up both for LCS Optiroc and for me as a person. For Sika employees, everything is possible,” comments Choong Fee Chong, pointing out that Sika LCS Optiroc staff are in regular contact with colleagues in the region and throughout the world, and they benefit from lively technology discussions as well as training activities. “Sika was and still remains the best choice,” reflects Choong Fee Chong.