Sika once again posted record results in the first half of 2021, despite the COVID- 19 pandemic continuing to seriously impact business in all regions.
The company generated strong growth rates and continued its growth trajectory, with a new sales record of CHF 4,448.7 million. This equates to an increase of 23.5% in local currencies. Sales growth in Swiss francs amounted to 23.1%, which includes a slightly negative currency effect of -0.4%. The acquisition effect was 1.1%. Organic growth in the first half of the year amounted to 22.4%. Compared with the same period in 2019, organic growth is already at 11.3%.
Increased Raw Material Costs, Higher Operating Leverage, Enhanced EBIT Margin
The increase in the costs of raw materials fueled by supply bottlenecks resulted in a lower material margin of 53.3% (previous year: 54.6%). Thanks to higher volume and improved efficiencies of production processes, operating leverage increased. With a margin of 19.5% (previous year: 16.4%), operating profit before depreciation and amortization (EBITDA) markedly increased.
Operating profit (EBIT) amounted to CHF 685.9 million (previous year: CHF 410.2 million), an increase of 67.2% on the previous year. Alongside operating leverage, EBIT was positively impacted by efficiency-enhancing measures as well as additional synergies from acquisitions. The focus on liquidity and cash management resulted in a record high operating free cash flow of CHF 318.4 million (+26.4%).
Double-Digit Growth in All Regions
The COVID-19 pandemic is still very much present in all regions. In Africa, Asia, and Latin America in particular, economic output continues to be impacted by low vaccination rates. In addition, there has been a deterioration in the availability of raw materials. Thanks to its leading market position, strong procurement organization, and rapid, targeted implementation of measures, Sika was able to capture market share in all regions and achieve record results.
In the first half of 2021, the EMEA region recorded a sales increase in local currencies of 24.1% (previous year: 3.2%). As in 2020, growth in the distribution and renovation business was stronger than in the other business segments. The private residential sector in particular turned in a highly dynamic performance. Nearly all countries in the region achieved double-digit growth rates. The countries of southern Europe, along with Italy, France, the UK, and Africa, benefited from a boost in growth. In general, purchases of Sika product solutions via e-commerce platforms witnessed an above-average increase.
The Americas region recorded growth in local currencies of 19.5% (previous year: 2.6%), finding its way back to clear, double-digit growth in the first half of 2021. Canada, Colombia, Brazil, Peru, and Chile saw a strong development. In the United States, the business gained momentum after initially experiencing a more muted pace. The main growth drivers were larger-scale maintenance projects and newbuild projects in the area of distribution and data centers. In the Americas region, the strategic focus of business activities on big cities and urban centers paid off, as did the concentration on major infrastructure projects and the successful cross-selling.
Sales in local currencies in the Asia/Pacific region increased by 26.0% (previous year: 21.8%). China in particular enjoyed strong momentum with double-digit organic growth rates. The number of sales outlets was further expanded to 120,000, making a substantial contribution to the strong growth with a focused shop-in-shop strategy for additional, selected products. Business activity in countries such as India and Australia developed at a dynamic pace, and Sika saw a return to double-digit growth rates in the countries of Southeast Asia, despite the substantial impact of coronavirus. The situation proved to be more difficult in Japan. In a bid to keep infection rates low in the run-up to the Olympic Games, the government stepped up lockdown measures and shut down construction activities over the first half of the year.
In the Global Business segment, Sika achieved growth in local currencies of 27.6% (previous year: -23.1%). In the first half of 2021, the automotive industry experienced major bottlenecks in the electronic parts supply chain, and it was only toward the mid-point of the period under review that production rates for new vehicles recorded an uptrend in all regions. In particular, the transition from traditional drive systems to electromobility has picked up momentum during the pandemic, underpinned by various local support programs. Growth of 10% is forecast for the automotive sector for full-year 2021. Sika anticipates long-term growth stimuli from the megatrends evident in modern automotive construction – electromobility and lightweight construction.
Successful Growth Strategy – Information on Annual Targets
Despite the COVID-19 pandemic and its repercussions for operating results, Sika is confirming its 2023 strategic targets. The company is still clearly 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 sales growth in local currencies of 13%–17% (previously: double-digit sales growth in local currencies) as well as an over-proportional EBIT increase. The EBIT margin will reach 15% for the first time, despite a challenging raw material price development.
Dr. Paul Hälg
Chairman of the Board
Chief Executive Officer