Dr. Paul J. Haelg, Chairman of the Board of Directors and Paul Schuler, CEO
Image: Dr. Paul J. Haelg, Chairman of the Board of Directors and Paul Schuler, CEO

Dear Shareholders

The Sika success story continued in 2018. Sales in local currencies rose by 13.6% year-onyear to CHF 7,085 million, while operating profit increased by 5.5% to CHF 945.9 million. Net profit also exceeded the previous year’s value by 5.9%, totaling CHF 687.1 million.

2018 was a historic year for Sika, during which the course was set for further growth and sustainable success. The three-anda- half-year takeover dispute between the Burkard family, Saint- Gobain, and Sika ended in May with a solution that is fair to all parties. The end of the legal dispute brought independence for Sika and its employees. The difficult feat of balancing a battle to fend off a takeover attempt by a competitor, against driving the continued business success and safeguarding employees’ welfare, has been consigned to the past. With sales reaching a record CHF 7,085 million, and our operating result coming in at over CHF 946 million we look back at a successful year 2018 where we proved our strength and growth capabilities after the takeover dispute ended. EBIT was affected by one-off expenses, as well as higher raw material costs, which had a greater impact in 2018 than expected, even though prices were adjusted continuously. We achieved local currency growth of 13.6% in an economic environment that was at times challenging. We would like to sincerely congratulate our 20,060 employees and thank them for their hard work and tremendous dedication.

 

Growth trajectory in all regions

All regions contributed to Sika’s growth, with EMEA achieving the highest rate of 14.1% growth in local currencies. We took successful advantage of business opportunities in the regions’ emerging economies with high double-digit growth in Eastern Europe (27.3%) and Africa (23.9%).

In the Americas region, North America achieved a growth in local currencies of 12.9% and significantly exceeded the one billion sales mark posting excellent EBIT. Latin America also achieved very good growth in local currencies at 9.6%.
Asia/Pacific put in a solid performance, growing both sales – by 5.5% in local currencies – and EBIT. The result in China was particularly pleasing, with growth of close on 10%.

Growth in local currencies in the new Global Business segment amounted to 29.2%, while the acquired Faist ChemTec, a leading provider of acoustic systems for the automotive industry, contributed 23.1% of sales. The integration of Faist ChemTec and the synergies that it should unleash will have a positive impact on the 2019 result.

Next growth accelerator

We are particularly pleased that the planned takeover of Parex, which we announced at the start of this year, will enable us to create a first-class growth platform. The acquisition marks a very important strategic step forward in efforts to secure our long-term market position, and is also the biggest acquisition in Sika’s history.

With sales of CHF 1.2 billion and an EBITDA margin of 16.3%, Parex is a leading mortar producer with a first-class market position, especially in facade mortars, tile adhesives, and waterproofing systems.

Parex is particularly strong in the distribution business, and combines reputable brands with innovative technical solutions. The company operates in 23 countries and holds a key position in eight of these. In total, Parex operates 74 production plants worldwide and employs 4,600 people.

By using Parex’s technologies as a growth platform in the 101 countries in which Sika operates, and by cross-selling Sika products through Parex’s established distribution channels, we will be able to generate sustainable, profitable growth and substantial synergies. Our goal is to combine two “growth engines” that have highly complementary product portfolios and distribution channels. By doing so, we will be setting our future course and gearing the organization up for the next level of growth.

One key task this year is to prepare the Strategy 2023 and roll it out throughout the company. The Board of Directors and Group Management initiated the process last September, and will complete the strategy in the first half of 2019.

Dividend increase and outlook

The Board of Directors will be proposing a 10.8% increase in gross dividend to CHF 2.05 per share at the Annual General Meeting of April 9, 2019.

"By investing in eleven new factories, one additional national subsidiary, and four acquisitions, Sika has laid the foundations for continued growth. These 16 key investments, the well-filled product pipeline, and the strong sales organization give us reason to look ahead with optimism."

Sika expects sales to increase by 6–8% in 2019, in accordance with the Group’s 2020 growth strategy, and anticipates an over-proportional rise in profits. Depending on when the Parex transaction is completed, sales are expected to exceed CHF 8 billion. Implementation of the growth strategy will continue in 2019, with the opening of seven to nine new factories and further acquisitions.

We are committed to continuing the Sika success story, to generating sustainable growth in value, and to enhancing Sika’s excellent reputation among customers, shareholders, and business partners.

We are looking forward to tackling the business challenges that await us this year, and would like to assure you, our shareholders, that we will do so with dedication, enthusiasm, and tenacity so that 2019 becomes another successful year for all of us.

 

Sincerely,

Dr. Paul Hälg

Chairman of the Board

Paul Schuler

Chief Executive Officer