Press Release: SIKA DEFIES CORONAVIRUS CRISIS WITH GROWTH IN LOCAL CURRENCIES OF 2.9%

SIKA DEFIES CORONAVIRUS CRISIS WITH GROWTH IN LOCAL CURRENCIES OF 2.9%

-- Sales growth of 2.9% in local currencies to CHF 3,614.6 million (--3.2%

in CHF)

-- High negative currency effect of --6.1% (impact of minus CHF 225 million

in sales and CHF 29 million in EBIT)

-- Maintained high EBITDA margin of over 16% (currency adjusted absolute

EBITDA was flat)

-- Operating profit (EBIT) at CHF 410.2 million (--14.8%)

-- Increased operating free cash flow amounting to CHF 254.7 million

(+41.7%)

-- Closing of acquisition of Adeplast (Romania), takeover of Modern

Waterproofing Group (Egypt), and buildup of a new factory in Barranquilla

(Colombia)

-- Outlook for the second half of the year: Sika is expecting more favorable

market conditions. With the anticipated improvement in sales volumes, the

company expects an over-proportional EBIT increase for the second half of

the year

-- Confirmation of 2023 strategic targets for sustainable, profitable

growth

Despite the substantial impact of the coronavirus pandemic, the company

was able to continue its growth trajectory, reporting a sales growth of

2.9% in local currencies to CHF 3,614.6 million for the first half of

2020. A high negative currency effect of --6.1% led to a decline in

sales of --3.2% in Swiss francs (which corresponds to around CHF 225

million). Acquisition effect contributed 13.4% to growth. At --10.5%,

organic growth was negative in the first half of the year. In March,

April, and May, the business was impacted by the ongoing coronavirus

pandemic in almost all subsidiaries. In June, Sika recorded a positive

organic sales growth for the first time since February, as lockdown

measures ended or were significantly relaxed in many countries. Business

activities started to normalize, and the dynamics in the construction

sector picked up.

Paul Schuler, Chief Executive Officer: "Around 35 of the 100 countries

Sika is present in experienced a full lockdown for about two months in

the first half of the year, and the rest of our countries have been

strongly impacted by the pandemic. With our local management structure

in place, we quickly adapted globally to the changing market conditions

in the respective countries. We swiftly implemented the necessary

measures to protect our employees, customers, and suppliers, whilst

simultaneously maintaining our supply chain and business activities with

a focus on consistent cost management. Thanks to our high speed of

implementation and the proximity to our customers in all countries, we

were able to quickly grasp business opportunities and thus capture

further market share. I would like to thank all of our employees

worldwide for their great efforts and never losing focus during this

challenging time."

INCREASED MATERIAL MARGIN -- STRONG FOCUS ON CASH FLOW AND LIQUIDITY

The reduced sales volumes in the months March, April, and May had a

negative impact on profitability. Nevertheless, the material margin

increased to 54.6% (previous year: 53.8%) in the first half of the year.

Operating profit before depreciation and amortization (EBITDA) was

maintained on a high level with the EBITDA margin reaching 16.4%

(previous year: 16.7%). On a currency adjusted basis, absolute EBITDA

was flat.

Operating profit (EBIT) amounted to CHF 410.2 million (previous year:

CHF 481.7 million) a decline of --14.8%. EBIT was impacted by a negative

operating leverage (March to May), initial expenses in connection with

structural adjustments and efficiency measures, as well as integration

costs in connection with the acquisition of Parex. The negative currency

effect of --6.1% further reduced the EBIT by CHF 29 million.

Strong focus on liquidity and cash management resulted in a high

operating free cash flow of CHF 254.7 million which exceeded previous

year by CHF 75 million. Key drivers of this were an optimized inventory

management, a focus on accounts receivables, and reduced capital

expenditures.

GROWTH IN LOCAL CURRENCIES DESPITE NUMEROUS LOCKDOWNS

Sales in the first half year includes a substantial acquisition effect

of Parex, with the total acquisition effect amounting to 13.4%.

The EMEA region grew by 3.2% in local currencies in the first half of

the year. In June, the region achieved single-digit organic growth after

already exhibiting a considerable improvement in May compared to April.

The impact of the pandemic was limited in most Central European

countries, such as Germany, Austria, Switzerland, Eastern European

countries, and Nordic countries. The UK and the Middle East, which still

show a very diverse picture, slightly improved in June. In May, Southern

Europe showed the biggest improvement versus the previous month, with

most lockdown restrictions being eased in Italy, Spain, Portugal, and

France, with the latter returning to growth in June. Across the entire

EMEA region, direct sales activities can again be supported with

customer visits. Digital sales support measures, such as webinars,

continue to be used to maintain close contact with customers.

In the first half of the year, the Americas region recorded growth in

local currency of 2.6%. Despite higher COVID-19 infection rates in the

USA, Mexico, and Brazil, Sika saw an improvement in the Americas region

in June. Canada in particular recorded a strong performance with

positive organic growth. In the USA, operating profit remained unchanged

in June compared to the previous year, with the distribution business

even recording double-digit growth in sales. The business in the

Americas region was most heavily impacted by the pandemic in May. During

this month, many major cities in North America were affected by

stringent restrictions and several Latin American countries were in a

complete lockdown. In Latin America, the development continues to be

uncertain, as most countries are still in a partial or total lockdown,

with repeated transitioning between reopening and more restrictive

measures.

The Asia/Pacific region reported a growth of 21.8% in local currencies

in the first half of the year. Despite numerous extended lockdowns,

several key countries were back to growth in June. China in particular

recorded double-digit growth and most Target Markets are also back to

growth. The Parex business, with its granular distribution channels,

has proven to be quite resilient throughout the crisis. The operating

business in Japan is slowly recovering. In parts of Southeast Asia, many

countries remained in lockdown for a longer period of time, whereas the

situation in Vietnam and Thailand improved more quickly. Australia

recorded organic growth in the first half of the year.

Global Business: In the first half of the year, the automotive industry

reported a decline of --35% in car build rates. While some signs of

improvement are visible in June, it is expected to take some time until

the numbers climb back to 2019 levels again. Sika has therefore focused

the business on lower capacity requirements and invested in process

improvements. Most car manufacturers in China, Europe, and North America

halted production for a longer period of time during the first six

months of the year, with Chinese manufacturers being the first to

restart their operations. From May onwards, car production in China is

back on the growth trajectory and incentives are boosting customer

demand. For the first half of the year, Global Business posted negative

growth in local currencies of --23.1%, therefore developing more

favorably than the global automotive sector.

Despite the coronavirus-related forecasted decline in automotive sales,

Sika is confident that the megatrends in modern auto manufacturing, such

as electromobility and lightweight construction, will help Sika to

continue to gain market share and generate profitable, long-term growth.

OUTLOOK

Despite the coronavirus crisis and its impact on business operations,

Sika confirms its strategic targets 2023. The organization will continue

to be aligned for sustainable, long-term success and profitable growth.

By targeting 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 until 2023. It is aiming for a higher EBIT margin of 15%--18%

from 2021 onwards. 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.

In June, Sika has seen a further improving trend in construction markets

and sales volumes are steadily returning to normal levels. Global

construction activity is gaining momentum thanks to the gradual

reopening of construction sites around the world.

For the second half of the year, Sika is expecting more favourable

market conditions. With the anticipated improvement in sales volumes,

the company expects an over-proportional EBIT increase for the second

half of the year.

KEY FIGURES HALF-YEAR 2020

1/1/2019 - 1/1/2020 -

in CHF mn 6/30/2019 6/30/2020 Change in %

----------------------------------------- ---------- ---------- -----------

Net sales 3,732.4 3,614.6 -3.2

----------------------------------------- ---------- ---------- -----------

Gross result 2,008.9 1,973.2 -1.8

----------------------------------------- ---------- ---------- -----------

Operating profit before depreciation

(EBITDA) 623.8 593.6 -4.8

----------------------------------------- ---------- ---------- -----------

Operating profit (EBIT) 481.7 410.2 -14.8

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July 22, 2020 23:00 ET (03:00 GMT)