Disclosure 103-1: Explanation of the material topic and its Boundary

Financial solidity and long-term profitability ensure that Sika remains a reliable and value-adding partner for all its stakeholders now and in the future, and they represent important cornerstones to maintain global technology leadership and market penetration from design and construction to refurbishment.

By evaluating economic impacts, risks and opportunities deriving from investments in assets and innovation, Sika strives to focus on the most promising opportunities that deliver optimized value for its customers, in the form of durable solutions, and create returns that benefit shareholders.

Further, economic health enables Sika to share value created with its various stakeholders, be a reliable employer, an attractive long-term investment opportunity, a responsible taxpayer, and a good corporate citizen, helping communities to flourish. Eventually, economic value creation simultaneously helps improve the economic, environmental, and social conditions of Sika and its stakeholders and is therefore an aspect of high importance.

Disclosure 103-2: The management approach and its components

The Sika Growth Model is synonymous with long-term success and profitable growth. By focusing on market penetration, innovation, emerging markets, and acquisitions, and driven by its strong corporate values, Sika is growing successfully. Since the targets of Strategy 2018 had been achieved two years early, Sika’s strategic goals were reviewed in the second half of 2016 in conjunction with senior managers worldwide. This review resulted in a confirmation of the growth model and a raising of the strategic targets.

Sika is now aiming for an EBIT margin of 14–16% (previously 12–14%) and an operating free cash flow greater than 10% (previously over 8%). The aim is to achieve a return on capital employed in excess of 25%. By 2020, 30 new factories are to be commissioned and 8 new national subsidiaries established. The annual sales growth target remains at 6–8%. Sika intends to increase EBIT to more than CHF 1 billion by 2020.The management approach for economic performance within Sika includes the following components:

  • Commitment: Sika’s success directly benefits all stakeholders.
  • Building Trust: The Sika Growth Model ensures the long-term success and the profitable growth of our company.  

 

GOALS AND TARGETS

Sika has defined financial targets that are tailored to the Group’s strategy of growth. These targets include net sales growth, profit, cash flow, and return on capital employed. With regard to the More Value – Less Impact campaign, Sika’s 5-year target plan for 2014-2018 has been defined in 2013. At group level it includes the following target for profitability, which enables the company to distribute economic value: Net Profit > 6% = sustainable profitability (Baseline 2013).

The five strategic pillars market penetration, innovation, emerging markets, acquisitions, and values are not only the foundation for growth but also drive improvements in margins, cash flow, and return on capital. Within the framework of the growth model, various initiatives contribute to the achievement of the strategic targets.

  • Key investments in the accelerated expansion of the supply chain in growth markets, new national subsidiaries, and acquisitions drive growth and margins. Since 2012, Sika has invested in 51 new plants, 20 new national subsidiaries, and 20 acquisitions – a total of 91 key investments.
  • Investments in R&D lead to the launch of a large number of new products in all target markets every year. Sika spends approximately 3% of sales on R&D annually.
  • Globally organized procurement coordinates purchasing in all regions, resulting in more price efficient sourcing.
  • Focus on pricing with global pricing tools and monthly pricing reporting.
  • Transparent performance management focused on well-defined KPIs.
  • Strict cost management: Fast efficiency measures in countries which are not growing.
  • Operating leverage: Sales growth of 6-8% generates higher margins as costs increase at a disproportionately lower rate.

 

RESPONSIBILITIES

Overall responsibility with regard to financial performance at group level remains with the Group CFO, CEO, and the Board of Directors.

Since Sika’s international expansion first began, Sika has organized its global activities by country. The national units were later consolidated into Regions with higher-level management functions. The heads of the regions are members of the Group Management. The regional and national management teams bear full profit and loss responsibility, and – based on the Group strategy – set country-specific growth and sustainability targets, and allocate resources.

Disclosure 103-3: Evaluation of the management approach

Sika evaluates its management approach through a process steered by the Board of Directors. The company audits and publishes the results accordingly in the quarterly and annual reports.