'Cash machine' Sika is growing rapidly

It was the largest takeover in the company's history - Sika took over the French company Parex for CHF 2.5 billion at the beginning of 2019, with the aim of broadening the mortar business. And the integration of Parex is progressing rapidly, said Sika CEO Paul Schuler. It is already fully integrated into the structures in 20 countries. "Sika is a cash machine, even in stormy weather," Schuler summarised the record 2019 result at the balance sheet media conference on Friday.

The turnover of the construction chemicals manufacturer, which is based in Baar and has 25,000 employees worldwide, rose by 14.4% in the previous year, to CHF 8.11 billion. The sales target of 8 billion was thereby exceeded. The Group's greatest growth was in the Asia/Pacific region, where Sika grew by 35.1%, to CHF 1.585 billion.

Last but not least, the acquisition of Parex contributed to this record result, which caused Sika's profitable mortar business to grow more by than double. With sales of CHF 1.2 billion projected for the full year and more than 4,500 employees, this makes a significant contribution to setting Sika up for the next growth level.

Photo 1: Sika Switzerland plant in Düdingen in the canton of Fribourg.
Photo 2: Sika CEO Paul Schuler at the balance sheet media conference on Friday in Zurich.

In total, Sika opened seven factories and acquired five companies last year. Organic growth adjusted for acquisitions in 2019 was 3.3%. Thanks to the good sales figures, an increase in the gross dividend from 12.2%, to CHF 2.30, will be proposed for the General Meeting. Investors snapped up Sika shares on the stock exchange yesterday, with a new all-time high of CHF 195.65 being reached in the early afternoon. The company expects growth of 10% for the current year, but points out that it is still unclear how the Corona Virus will affect the end markets. In this regard, Schuler said that employee health was a top priority. Neither the 2,500 employees in China nor their relatives are infected at the moment. Because of the situation, 25% of the employees there are currently carrying out their work via home office, while the rest are back at their normal workplaces. The import of raw materials and the export of goods from China are also currently not a problem.

As part of its growth strategy, the group plans to open new factories and take over more companies in the current year. When asked whether a major acquisition like Parex was planned again, Schuler said that the integration of Parex had to be completed first. The focus would be on medium-sized acquisitions, and Sika considers itself to be well positioned with regard to future-oriented products. 100 new products were brought onto the market in 2019 alone. The group won the Swiss Technology Award in the Innovation Leaders category for a new adhesive technology at the end of 2019.

The Modular Building sector, i.e. finished units, is becoming increasingly important for the Swiss construction-chemicals manufacturer. "In how many days was the hospital in Wuhan built?" Schuler asked the audience rhetorically. "In any case, the Germans were surprised at how quickly it went, because they are still carrying out their building work at the airport." Completion was possible within a few days thanks to the modular design - and Sika is at the forefront of this. The group will also benefit from the megatrends in automotive engineering, such as electromobility and lightweight construction - thanks to multi-material design, new adhesive technologies and heat management in modern battery technologies. The group was able to gain further market shares in this sector in 2019, despite declining production figures worldwide.