Dear Shareholders

The Sika success story continued in 2017 with another record year. In local currencies, 2017 sales increased by 9.0% to CHF 6,248.3 million. Strong growth momentum and disciplined cost management led to new record fi gures of CHF 896.3 million (+CHF 101.0 million, +12.7%) for operating profi t and CHF 649.0 million (+14.5%) for net profi t. In the reporting year, 19 key investments were realized with a view to driving future growth. The strategic targets for 2020 were confi rmed, and the growth target for 2018 raised to more than 10%.

All regions reported higher sales and were able to further increase market share. Particularly high growth rates were achieved in the USA, Mexico, Argentina, China, Southeast Asia, the Pacifi c area, the Middle East, Eastern Europe, and Africa, as well as in the automotive area. In cumulative terms, sales were up 9.0% in local currencies. The strength of the franc led to conversion eff ects of -0.3%, and thus to an 8.7% increase in sales in Swiss franc terms to CHF 6,248.3 million.

Record profit

The high growth momentum produced above-average increases in the operating result and profi t. Raw material price increases and volatility posed a challenge, with access to raw materials in China, for example, being impaired by environmental constraints introduced by the government. Thanks to persistent cost management, margins were boosted further, while record figures were recorded for both EBIT (CHF 896.3 million, +12.7%) and net profit (CHF 649.0 million, +14.5%).

Growth in all regions

Sales in the EMEA region (Europe, Middle East, Africa) increased by 7.5% in local currencies (previous year: 4.6%). The major EU countries with the core markets of France, Italy, and the United Kingdom, recorded strong growth rates. The Middle East, Eastern Europe, and Africa all delivered double-digit growth.

At 18.4%, it was the North America region that posted the strongest growth (previous year: 7.8%), of which 8.5% was through acquisitions. Sika reported a signifi cant increase in its business volume in the USA, growing much more rapidly than the local construction market in the reporting year. The positive development of the North American business was attributable in particular to the targeted investment in this region over the last few years.

The Latin America region increased sales by 3.3% (previous year: 5.1%). Both Mexico and Argentina generated above-average growth. By contrast, construction activity continued to develop modestly in the countries that are more dependent on the raw material sector, such as Brazil, Peru, and Chile.

Sales in the Asia/Pacific region rose by 5.2% (previous year: 3.6%). High growth rates were recorded in China, while double-digit growth was achieved in Australia, New Zealand, and Thailand.

Continuity in the management

Following the departure of Jan Jenisch, the Board of Directors appointed Paul Schuler as new CEO of the Group with eff ect from July 1, 2017. Paul Schuler has worked for Sika for some 30 years, and has been a Member of Group Management since 2007. His responsibilities have included the build-up of the industry business as well as management of the North America and EMEA regions.

19 key investments and 74 new patents

The Group’s accelerated expansion into growth markets continued under Paul Schuler’s leadership in 2017, with a total of 19 key investments in nine new factories, three additional national subsidiaries, and seven acquisitions.

More than 900 employees working on basic research and the development of new products at 20 regional technology centers are the key drivers of our innovative strength. 74 new patent applications were fi led in the 2017 business year, and numerous new products were launched in all target markets. Heralded by the slogan “From patents to world-class products”, more than 20 products and innovations from all target markets were presented on Capital Markets Day 2017, including products for higher building standards, 3D concrete printing, and electric vehicles.

2020 strategic targets set to be met

Along with its annual growth target of 6–8%, Sika is seeking to achieve an EBIT margin of 14–16% and operating free cash flow of more than 10% of net sales by 2020. At the same time, the return on capital employed (ROCE) should amount to more than 25%.

The Group’s international expansion is to be further driven forward over the same period by 21 additional factories and five new national subsidiaries. The unknown outcome of Saint-Gobain's hostile takeover attempt remains an element of uncertainty for the future.

Dividend increase of 15.6% proposed

For the Annual General Meeting of April 17, 2018, the Board of Directors is proposing to shareholders a 15.6% increase in the gross dividend to CHF 111.00 per bearer share (2016: CHF 96.00) and CHF 18.50 per registered share (2016: CHF 16.00).

Our strong sales organization, our well-fi lled product pipeline, and the 19 key investments give us reason to look to the future with optimism. Our thanks go to the global management team and our more than 18,400 employees, whose eff orts are responsible for Sika achieving another record year. We would like to thank all of them for their great dedication and loyalty over the past year.

A special debt of gratitude is due to our customers, business partners, and suppliers for their outstanding cooperation and the strong business relations we enjoy with them.

We would especially like to thank our shareholders for their enduring loyalty to Sika and the extraordinary trust they place in the Board of Directors and management.

 

Sincerely,

Signature Haelg

Dr. Paul Hälg

Chairman of the Board

Signature Jenisch

Paul Schuler

Chief Executive Officer