Group Report

Coronavirus Pandemic and Measures taken in Response

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 its strong market position and swift, targeted implementation of measures, Sika was able to achieve very impressive results despite this challenging market environment.

The focus of the measures initiated was threefold. Employees, customers, and suppliers needed to be protected, operating activity was continued at a high level, and the Group’s strong customer focus had to be retained or even strengthened. Sika therefore 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. The emphasis was on home working wherever possible, and meetings were held virtually. But Sika’s close contact with its customers was actually increased during the crisis. For instance, more than 150,000 customers worldwide have been trained in webinars.

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 its growth strategy, Sika has committed to reducing CO₂ emissions by 12% by 2023, with the ultimate goal of being climate-neutral by 2050 at the latest. The interim target is to halve greenhouse gas emissions per ton of product sold by 2030 compared to the levels recorded in 2019. This is being achieved by increasing the energy efficiency of the production process, and obtaining an increasing proportion of the energy it requires from renewable resources (Scope 1+2). Already in the fiscal year just ended, Sika clearly exceeded its prescribed target of a 3% reduction in CO₂, reducing emissions by no less than 26%. Today, Sika releases 20 kg of CO₂ per ton of products sold (previous year: 27 kg).

In its clear commitment to sustainability, Sika is looking not only to reduce its own CO₂ emissions, but also to support customers in a targeted way so that they can massively reduce their CO₂ footprint with innovative solutions and products. In many respects, Sika’s technologies make it an “enabler” – a trailblazer with the expertise to achieve the goal of climate neutrality in the construction and automotive industries. Sika’s admixtures facilitate low-emission and resource-saving construction, its facade systems allow for energy-efficient buildings, and Sika adhesives form an integral part of climate-preserving vehicles.

Market Share Gains in All Regions

In an environment characterized by widespread temporary lockdowns, Sika managed to grow more strongly than the market in all regions. It also expanded its distribution business 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 these 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. Although many cities in North America continue to be affected by the pandemic and construction projects have slowed, the situation in Latin America has improved markedly.

Growth in the Asia/Pacific region amounted to 12.6% (previous year: 35.1%). China in particular 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 same period, the automotive sector reported a global decline in output of -17%. Despite the pandemicrelated 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.

Records for Profit and Cash Flow

The Group was able to post new records for both profit and cash flow in fiscal 2020. This proves that Sika is able to adapt to market parameters rapidly and work cost-efficiently even in a difficult year. The material margin recorded a year-on-year increase from 53.6% to 54.8%. 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).

 

High Dividend to be Proposed

In keeping with 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. In the future, we will additionally benefit from stimulus programs designed to support the economy in the form of national subsidies for infrastructure projects. Moreover, the strong growth in demand for environmentally friendly products is making its own contribution to our positive business development. Sika is the global leader in 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.

 

Key Balance Sheet Figures

The ratio of net working capital to net sales once again declined substantially in 2020, to 16.9% (previous year: 18.1%). This reduction was achieved through improved inventory management and a modified sales mix in acquired companies. At the end of 2020, cash and cash equivalents amounted to CHF 1,318.7 million (previous year: CHF 995.1 million). Net debt was reduced to CHF 2,855.8 million (previous year: CHF 3,407.8 million), while gearing fell to 86.9% (previous year: 107.8%). The equity ratio increased slightly and now stands at 33.6% (previous year: 31.7%). Return on capital employed (ROCE) came to 16.6% (previous year: 19.2%). Adjusted for acquisitions, ROCE for 2020 would be 29.3% (previous year: 31.3%).

Continuation of Successful Growth Strategy

Despite the coronavirus crisis and its repercussions for operating results, Sika is confirming its strategic targets for 2023. 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%.