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 in maintaining 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. Moreover, economic health enables Sika to share created value with its various stakeholders, be a reliable employer, an attractive long-term investment opportunity, a responsible taxpayer, and a good corporate citizen that helps communities to flourish. Ultimately, economic value creation simultaneously helps improve the economic, environmental, and social conditions for Sika and its stakeholders and is therefore an aspect of high importance.
DISCLOSURE 103-2: THE MANAGEMENT APPROACH AND ITS COMPONENTS
GOALS AND TARGETS
The Sika growth model is synonymous with long-term success and profitable growth. By targeting the six pillars of market penetration, innovation, operational efficiency, acquisitions, strong corporate values, and sustainability, Sika plans to grow by 6-8% a year up to 2023. At the same time, it is aiming for a higher EBIT margin of 15-18%, instead of today’s 14-16%.
Various initiatives contribute to the achievement of the strategic targets:
- Key Investments: To expand the supply chain in growth markets, new plants and acquisitions drive growth and margins. Since 2015, Sika's market presence has been strengthened by 11 new national subsidiaries, 116 new factories and 24 acquisitions.
- Investments in R&D: Investments in R&D lead to the launch of many new products in all target markets every year. Sika spends approximately 3% of sales on R&D annually.
- Globally Organized Procurement: Globally organized procurement coordinates purchasing in all regions, resulting in more price-efficient sourcing.
- Focus on Pricing: Focus on pricing with global pricing tools and monthly pricing reporting.
- Transparent Performance Management: 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.
The new corporate strategy was developed and launched in the past financial year. In addition to even more ambitious financial targets, important elements include a focus on operational efficiency, an increase in market penetration, and the targeted orientation towards environmentally friendly products and sustainability.
With its newly defined sustainability targets for the reduction of energy and water consumption, as well as waste, Sika will be minimizing its need for resources and the environmental impacts of the production process. Sika’s overriding goal is to reduce CO2 emissions per ton sold by 12% by 2023.
- Market Penetration: One strategic pillar of the new Strategy 2023 is an increase in market penetration. In addition to the establishment of the eighth target market – “Building Finishing” – the focus will be above all on the intensification of key project management, the further development of distribution channels, and an expansion of the product portfolio and its distribution in emerging markets.
- Innovation: By 2023 the company aims to generate 25% of sales with products that have been launched on the market in the last five years. Innovation at Sika is always determined by the needs of customers. These needs feed into both fundamental and applied research. Furthermore, the company has committed itself to ensuring that every new product must offer a higher performance as well as additional sustainability benefits. Even today, Sika offers its clients a broad spectrum of sustainable products and technologies.
- Acquisitions: Acquisitions are an important element of Sika’s growth strategy, enabling the company to enhance its core business with complementary technologies, improved market access, or expanded distribution channels. The focused approach allows Sika to establish the acquired businesses as platforms for additional growth.
- Operational Efficiency: To a significant extent, the improvement in margins will be achieved through operational efficiency. Projects in the areas of operations, logistics, procurement, and product formulation should result in an annual improvement in operating expenses equivalent to 0.5% of sales.
- Values: Sika’s strong corporate culture lays the foundation for its success. Customer First, Courage for Innovation, Sustainability & Integrity, Empowerment & Respect, and Manage for Results – these are the values that drive business activity and are put into practice by employees every single day, all around the globe.
Overall responsibility for 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 regions are EMEA (Europe, Middle-East, and Africa), Asia Pacific (APAC), Americas and Global Business. 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
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.