In most of the 100 countries in which Sika is present, lengthy lockdowns have partially restricted construction activity. Furthermore, many of our customers in the automotive industry had to close their factories for a number of weeks. Thanks to our strong market position and the swift, targeted implementation of measures, we were able to record very robust results despite this challenging environment.
The focus of the measures we initiated was threefold: Employees, customers, and suppliers needed to be protected, operating activity was continued at a high level, and our strong customer focus was retained or even strengthened. For example, we implemented social distancing rules all around the world at a very early stage, introduced mask-wearing and protective clothing in production processes, and complied with rigorous travel restrictions. Our emphasis was on working from home wherever possible, and all meetings were held virtually. Our close contact with customers even increased during the crisis. We, for example, hosted online trainings for more than 150,000 of our customers worldwide.
Sika – Enabler of Sustainable Construction and Environmentally-Friendly Mobility
In addition to the pandemic, the climate change is presenting major challenges to society. As part of our growth strategy, we have committed to reducing CO2 emissions by 12% until 2023. The ultimate goal is for Sika to be climate-neutral by 2050 at the latest. Our interim target is to halve greenhouse gas emissions per ton of product sold by 2030 compared to the levels recorded in 2019. We are achieving this by increasing the energy efficiency of the production processes and obtaining an increasing proportion of the energy it requires from renewable resources (Scope 1+2). Already in the past fiscal year, we clearly exceeded our prescribed target of a 3% reduction in CO2 annually, reducing our CO2 emissions by 26%. Today, Sika releases 20kg of CO2 per ton of product sold (previous year: 27kg).
"In our clear commitment to sustainability, we are looking not only to reduce our own CO2 emissions, but also to help our customers reduce their CO2 footprint massively with innovative solutions and products."
In many respects, our technologies make us an “enabler” with the expertise to achieve the goal of climate neutrality in the construction and automotive industries. Our admixtures facilitate low-emission and resource-saving construction, our facade systems allow for energy-efficient buildings, and our adhesives contributes to climate-friendly vehicles.
Records for Profit and Cash Flow
We were able to achieve new record figures for both profit and cash flow in the fiscal year 2020. This shows that we can rapidly adapt to changing market conditions and work cost-efficiently even in a difficult year. Sika increased EBIT by 7.1% to CHF 1,130.5 million (previous year: CHF 1,055.1 million), while the EBIT margin came in at 14.4% (previous year: EBIT margin 13.0%). In keeping with this development, net profit rose by 8.8% to CHF 825.1 million (previous year: CHF 758.5 million). Yet another record was set by operating free cash flow, which amounted to CHF 1,259.4 million (previous year: CHF 1,026.1 million).
Market Share Expanded in All Regions
In an environment characterized by widespread temporary lockdowns, we were able to grow more strongly than the market in all regions. Furthermore, the distribution business posted considerable gains in all regions.
The EMEA region (Europe, Middle East, Africa) reported a sales increase in local currencies of 4.4% in 2020 (previous year: 11.6%). A strong improvement started to become apparent in the markets in the fourth quarter in particular. The countries that benefited from the biggest recovery were those of southern Europe – Italy, Spain, Portugal, and France – as well as the countries of Eastern Europe, Scandinavia, the Middle East, and Africa.
The Americas region recorded sales growth in local currencies of 1.0% (previous year: 19.2%). Despite the high COVID-19 infection rates recorded in Mexico, Brazil, and the United States, Sika recorded an uptrend in the Americas region in the last quarter of 2020. Many cities in North America continue to be affected by the pandemic and construction projects have slowed. The situation in Latin America has seen a clear improvement.
Growth in the Asia/Pacific region amounted to 12.6% (previous year: 35.1%). China in particular has performed impressively over the last few months, recording double-digit organic growth rates, and most target markets are on a clear growth trajectory. Australia was also able to contribute to the positive business development of this region. By contrast, India and a number of countries in the Southeast Asia region recovered only slowly from the far-reaching effects of the pandemic.
Global Business recorded a sales decline of -11.4% in 2020 (previous year: +3.0%). In the period under review, the automotive sector reported a global decline in output of -17%. Despite the pandemic-related decline in sales figures during the crisis year of 2020, Sika is convinced that the megatrends shaping modern automotive construction – which include e-mobility, further new drive concepts, and the trend toward lightweight construction – will help the Group to capture additional market share.
Dividend Increase and Outlook
Given the increase in net profit, the Board of Directors will be proposing an 8.7% increase in the gross dividend to CHF 2.50 at the Annual General Meeting of April 20, 2021 (previous year: CHF 2.30).
"Our business model has shown itself to be truly resilient in what has been a serious global crisis."
Particularly crisis-resistant in 2020 were the distribution business, the refurbishment business, and our building finishing activities. Furthermore, in the future we will be beneficiaries of stimulus programs designed to support the economy in the form of national subsidies for infrastructure projects. As an additional factor, the strong growth in demand for environmentally-friendly products is making its own contribution to our positive business development. Sika is leading in the development of solutions for sustainable construction and sustainable mobility. Already today, a large part of our sales is generated by technologies that provide sustainability benefits for customers, the environment, and society.
Despite the coronavirus crisis and its repercussions for operating results, Sika is confirming its 2023 strategic targets. The company remains aligned for long-term success and profitable growth.
With its focus on the six strategic pillars – market penetration, innovation, operational efficiency, acquisitions, strong corporate values, and sustainability – Sika is seeking to grow by 6%–8% a year in local currencies up to 2023. From 2021, the company is aiming to increase its EBIT margin to 15%–18%. Projects in the areas of operations, logistics, procurement, and product formulation should result in an annual improvement in operating costs equivalent to 0.5% of sales.
For the 2021 fiscal year, Sika is expecting an increase in sales in local currencies of 6%–8%, along with an over-proportional rise in EBIT. The EBIT margin should for the first time reach 15%.
With strong customer focus, Sika has managed to perform successfully in this challenging market environment and achieve above-average results. We are very well positioned in what remains a difficult environment – thanks to our innovative products and solutions, as well as to our employees, who with great dedication and identification with the company have continued to perform at a high level, even at times like these. Our special thanks go to them.
"Dear shareholders, Sika has managed to generate enduring added value and look after the well-being of its workforce of 25,000 people, despite the pandemic. We will do everything in our power to repeat this performance going forward. Our heartfelt thanks to you for your trust, your loyalty, and your enduring commitment even at a time of crisis."
Dr. Paul Hälg