Press Release: Sika: RECORD RESULTS FOR SALES, PROFIT, AND CASH FLOW

RECORD RESULTS FOR SALES, PROFIT, AND CASH FLOW

-- Sales reach CHF 8,109 million (+14.4% in CHF, +16.3% in local currencies)

-- EBITDA increased to CHF 1,388 million (+20.7%)

-- Operating profit (EBIT) increased to CHF 1,055 million (+11.5%)

-- Net profit recorded at CHF 759 million (+10.4%)

-- Operating free cash flow doubled amounting to CHF 1,026 million

-- Growth in all regions

-- 7 factories opened, 5 companies acquired

-- Dividend increase of 12.2% proposed

-- Outlook 2020: Due to the higher acquisition impact, Sika is expecting a

sales increase of more than 10% in local currencies, as well as an

over-proportional increase in profitability

-- Consistent implementation of Strategy 2023 for sustainable, profitable

growth

Sika once again delivered record results in 2019. Sales in Swiss francs

rose by 14.4% year-on-year to CHF 8,109 million, which equates to an

increase of 16.3% in local currencies. Operating profit increased by

11.5% to CHF 1,055 million, thereby surpassing the billion-franc

threshold for the first time. Net profit was recorded at CHF 759 million,

representing a year-on-year growth of 10.4%. Operating free cash flow

doubled versus the previous year, amounting to CHF 1,026 million.

Paul Schuler, CEO: "With strong growth of 16.3% and sales reaching CHF

8.11 billion, we surpassed our CHF 8 billion sales target for fiscal

2019. In a challenging market environment, we achieved record results in

operating profit, profit, and cash flow, and we are convinced that we

will be able to sustain our positive growth momentum over the coming

years. With our new Strategy 2023, we are moving the performance of our

organization to the next level. The business potential opening up for

Sika places us in an outstanding position for sustainable and profitable

growth. I would like to thank our worldwide workforce of over 25,000

people for their tremendous dedication and for the unique way they

identify with our organization."

Sika can look back on a highly successful 2019. It was a year in which

numerous projects were realized to set the course for an even stronger

performance, in particular the acquisition of Parex, the largest in

Sika's history. With sales of CHF 1.2 billion on an annualized basis and

more than 4,500 employees, this takeover makes a significant

contribution in bringing Sika to the next level of growth.

The new 2023 growth strategy was launched and publicly unveiled in

October 2019. The strategic targets include annual growth in local

currencies of 6--8% and an increased EBIT margin target of 15--18%,

which is to be achieved from 2021 onward. In addition to these ambitious

financial targets, the most important elements of the company's new

strategic direction include the introduction of an eighth Target Market,

"Building Finishing", a focus on operational efficiency, and the

targeted orientation of the Group toward sustainability.

SIKA WINS SWISS TECHNOLOGY AWARD FOR INNOVATION

In 2019, Sika launched around 100 important new products and confirmed

its innovation leadership. For example, new, sustainable solutions with

improved performance have been developed in the areas of low-emission

epoxy resin floor coatings and hemp-based, cement-free mortars. Sika has

also been making progress with new concepts for future building, such as

modular construction and 3-D concrete printing. At the end of 2019, Sika

won the Swiss Technology Award in the "Innovation Leaders" category for

a ground-breaking new adhesive technology. SikaForce(R) Powerflex, which

combines the properties of elastic and high-strength structural

adhesives in a single product, enables manufacturers of cars, rail

vehicles, buses, and trucks to implement new, lighter, more ecological

vehicle concepts while maintaining body stiffness, good elasticity --

and thus ideal mechanical properties.

GROWTH IN ALL REGIONS

In a challenging market environment, Sika has grown more strongly than

the market in all regions.

The EMEA region (Europe, Middle East, Africa) reported a sales increase

in local currency of 11.6% in 2019, amounting to CHF 3,432 million. A

strong development was seen with double-digit growth rates in Africa and

high single-digit growth in Eastern Europe. In Belarus, Sika acquired

Belineco, a specialist manufacturer of polyurethane foam systems. In

Romania, the company agreed to acquire Adeplast, a leading manufacturer

of mortar products and thermal insulation solutions. This deal is

expected to close in the first quarter of 2020. Production capacity was

expanded in Egypt, Qatar, Serbia, Senegal, Cameroon, and Ethiopia, with

new factories opened for concrete admixtures and mortars.

The Americas region continued to focus its business activities on the

largest metropolitan areas and generated impressive sales growth in

local currency of 19.2% in 2019, amounting to CHF 2,162 million. Growth

momentum was particularly pronounced in North America. In Latin America,

political tensions in countries such as Mexico, Chile, and Ecuador, are

leaving their mark on local construction industries. Brazil, Colombia,

and Peru all posted strong growth rates. In Canada, the acquisition of

King Packaged Materials in the reporting period brought a market leader

in concrete repair systems into the Group.

Growth in the Asia/Pacific region in local currency reached 35.1%,

amounting to CHF 1,585 million. This figure includes a significant

acquisition effect of 30.3%, in particular deriving from the Parex

acquisition. The highest organic growth rates were recorded in China,

India, and the Philippines. In China, Sika acquired Crevo-Hengxin, a

manufacturer of silicon-based sealants and adhesives. The newly acquired

range of products opens up cross-selling opportunities in the extended

distribution channels. Furthermore, a new factory in the Bekasi district

on the outskirts of Jakarta commenced operations in Indonesia in the

reporting period. Sika now produces concrete admixtures and mortar

products for the local construction market in three factories.

The Global Business segment recorded a growth rate in local currency of

3.0% with sales amounting to CHF 930 million. Sika gained further market

share in the Automotive area in 2019, despite the sharp decline in

global production figures in this sector. The megatrends in modern

automotive construction, which are dominated by electro-mobility and

lightweight construction, are opening up new avenues with significant

long-term growth potential for Sika, thanks to multi-material designs

and new adhesive technologies, as well as heat management in modern

battery technologies for electric vehicles.

RECORD PROFIT

With sales of CHF 8,109.2 million in 2019, Sika was able to surpass the

sales mark of CHF 8 billion for the first time. This equates to growth

of 14.4% in Swiss francs and 16.3% in local currencies. Organic growth

reached 3.3% (previous year: 6.8%). The material margin recorded a

year-on-year increase from 53.0% to 53.6%. Operating profit (EBIT)

improved by 11.5% to CHF 1,055.1 million (previous year: CHF 945.9

million). The operating result includes one-time costs incurred in

connection with the takeover of Parex. Excluding one-off and acquisition

effects in 2019, EBIT would have recorded an over-proportional increase.

The tax rate was brought down further and amounted to 21.5% in the year

under review (previous year: 23.0%), which meant that net profit also

set a new record of CHF 758.5 million, equivalent to a rise of 10.4%.

KEY BALANCE SHEET FIGURES

The ratio of net working capital to net sales improved substantially in

2019 reaching 18.1% (previous year: 19.6%). This reduction was achieved

through optimized inventory management and a modified sales mix due to

acquired companies. At the end of 2019, cash and cash equivalents

amounted to CHF 995.1 million (previous year: CHF 914.0 million). Yet

another record was set by operating free cash flow, which doubled

amounting to CHF 1,026.1 million (previous year: CHF 513.2 million). In

order to finance the acquisition of Parex, net debt was increased to CHF

3,407.7 million (previous year: CHF 2,114.1 million), while gearing was

reduced thanks to the higher equity ratio and now stands at 107.8%

(previous year: 126.2%). At the end of 2019, the equity ratio stood at

31.8% (previous year: 26.2%). Return on capital employed (ROCE) reached

19.2% (previous year: 26.2%).

HIGHER DIVIDEND TO BE PROPOSED

In keeping with the double-digit increase in net profit and the strong

development of operating free cash flow, the Board of Directors will be

proposing a 12.2% increase in the gross dividend to CHF 2.30 at the

Annual General Meeting of April 21, 2020.

OUTLOOK

Strategy 2023, which was unveiled in October, is designed to expand the

company's growth model and align the organization for continued

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 by 2023. It is

aiming for a higher EBIT margin of 15--18% from 2021 onward. 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.

The prerequisites for further dynamic growth have been put in place with

the launch of the new 2023 growth strategy and investments in seven new

factories and five acquisitions. Thanks to these twelve key investments,

pronounced innovative strength, and a clear sales focus, Sika is in an

outstanding position for the future.

For the 2020 financial year, due to the higher acquisition impact, Sika

is expecting a sales increase of more than 10% in local currencies, as

well as an over-proportional increase in profitability. The unknown

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February 20, 2020 23:00 ET (04:00 GMT)