Sika AG /
Sika on track - Net Profit up 37.7%
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Sika posted a 6.3% increase in sales in the 2010 business year, achieving net
sales of CHF 4.416 billion. In local currencies, Sika lifted sales by 10.2%.
Consolidated net profit amounted to CHF 310.9 million, 37.7% above the previous
year's level of CHF 225.7 million.
Despite mixed market performances, reticence on the part of public sector
customers and rising raw material prices, Sika succeeded in lifting sales and
net profit and is confident about 2011. The emerging markets in Latin America
and Asia offer the greatest potential.
The 6.3% increase in annual net sales to CHF 4.416 billion comprises organic
growth (6.1%), growth through acquisitions (4.1%) and a negative currency effect
Sika's performance in the year under review varied considerably from Region to
Region. While the high turnover Regions Europe and North America achieved only a
very hesitant recovery, Sika posted substantial gains in the emerging markets
throughout the entire year. Growth rates in the individual Regions in local
currencies: Europe North 4.5%, Europe South 1.7%, North America 8.5%, Latin
America 18.0%, IMEA (India, Middle East, Africa) 9.5%, Asia/Pacific 41.4%.
Particularly developments in North America and Asia/Pacific were additionally
influenced by acquisitions.
Owing to the significant increase in sales achieved in emerging markets, the
proportion of Sika Group sales generated by these countries rose to 36%.
In local currencies, Group sales of products for the building and construction
industry were up by 8.7% in the 2010 business year; of this figure, 4.9% were
attributable to acquisitions. Sales of products for industrial manufacturing
increased 16.7% in local currencies, including an acquisition effect of 0.6%.
The strong franc was not without influence on the sales figures. The overall
currency effect of -3.9% almost exclusively corresponds to a translation effect.
The currency effect was particularly substantial in the final quarter of 2010.
The Group's decentralized regional structuring and the largely local-based
generation of value added at Sika's 120-plus locations in 74 countries provides
a good natural hedge against exchange rate movements.
During the reporting period Sika acquired six companies: The auto glass
replacement business of ADCO Products, Inc., USA, the construction sealants
operations of Henkel Japan Ltd., Czech-based flooring manufacturer Panbex Group,
structural waterproofing manufacturers Dyflex HD Co. Ltd. Japan, Greenstreak
Group, Inc., North America, and US-based silicone and polyurethane products
manufacturer May National Associates, Inc.
Raw material prices witnessed increases in 2010, owing primarily to low supplier
capacity at the beginning of the year coinciding with increased demand. The fact
that higher raw material prices could only be passed on to sales prices after a
certain time lag squeezed the gross margin. Overall, Sika increased its gross
profit to CHF 2.385 billion (2009: 2.295 billion), corresponding to a gross
margin of 54.0%.
Sika improved operating profit before restructuring by 9.7% to CHF 439.5 million
(2009: CHF 400.6 million; 2009 operating profit after restructuring: 344.0
million), resulting in an operating profit margin of 10.0%. At CHF 310.9 million
(2009: CHF 225.7 million), consolidated net profit was up 37.7% year on year.
One-off tax effects also had a positive impact on consolidated net profit.
Investments, liquidity and balance sheet
Sika's unchanged investment strategy is geared to consolidating its global
presence, built up during the last few years, and unlocking new markets or
expanding its existing activities. To encourage focused growth, selected
markets, customers, technologies and products are prioritized. Given the changed
economic climate triggered in many parts of the world by the financial crisis,
Sika has reviewed all investment plans and adjusted these to the new conditions.
The volume of investment during the period under review therefore remained below
the level of the previous years at CHF 100 million.
Operating free cash flow reached CHF 332.2 million (2009: CHF 368.7 million) in
the year under review. Cash and cash equivalents increased from CHF 801.6
million to CHF 938.4 million as of the end of the year. Net debt could be pared
from CHF 264.8 million to CHF 164.5 million, reducing the ratio of net debt to
shareholders' equity (gearing) from 16.6% to 9.4%. The equity ratio increased
from 43.9% to 44.6%. The syndicated credit limit of CHF 450 million was not
drawn on in 2010. It expired on November 15, 2010. Given the company's high
level of cash holdings, Sika opted not to have the limit extended.
Proposals of the Board of Directors
The Board of Directors proposes to the Annual General Meeting payment of an
unchanged gross dividend of CHF 45.00 per bearer share and CHF 7.50 per
registered share. In addition, the Board proposes to reduce the nominal value of
the bearer shares from CHF 9.00 to CHF 0.60 and that of the registered shares
from CHF 1.50 to CHF 0.10. The payout sum amounts to CHF 134.0 million,
representing approximately 43% (2009: 50%) of consolidated net profit. The
proposal is an expression of the consistency of Sika's dividend payout policy.
Furthermore, the Annual General Meeting is recommended to reelect current Board
member Urs F. Burkard and to newly elect Monika Ribar, CEO of Panalpina, to the
Board of Directors.
The markets are likely to present a similarly mixed picture in terms of
performance in 2011 as they did in 2010. Economists are predicting modest growth
for Europe. Much hinges on how the real economy is impacted by the high
sovereign debt levels in various European countries, austerity programs and the
euro crisis. The trend toward a moderate recovery should continue in North
America. There is a backlog of demand from the infrastructure sector in
particular. Unlike Europe and North America the emerging markets continue to
witness strong growth. The Asian markets will gain further in significance; the
potential for structural growth has not been exhausted by a long way yet.
Renovation work will become an increasingly important factor in the construction
sector - in particular in the roofing and waterproofing sectors. Investments in
commercial buildings will probably persist at a low level, whereas investments
in infrastructure are more likely to increase.
The market recovered surprisingly fast in the industrial sector in 2010 -
especially in the motor vehicle segment. Further growth is expected for 2011 as
well, albeit at a lower level owing to the higher baseline for comparison. The
order books are full, and Sika has won market share with new products.
Sika will continue to consistently pursue its acquisition strategy in 2011,
focusing on expanding market access and market penetration in emerging markets
and buying new technologies which fit in well with the existing portfolio and
can be globally marketed via Sika's network.
Sika's medium-term growth targets envision an 8 to 10% increase in sales per
year, with an EBITDA margin in the order of 12 to 14%. Sika seeks to win further
market share in its key sales markets, to attain a 20% share in all Regions and
target markets in the longer term and to achieve an annual turnover totaling CHF
8 billion in the medium term.
Key figures 2010
as % of as % of Changes in
in CHF mn net sales 2009 net sales 2010 %
Net sales Â 4'154.9 Â 4'416.0 6.3
Impairment -3.4 -139.3 -3.1 -137.5
Operating profit before
restructuring 9.6 400.6 10.0 439.5 9.7
Net profit after tax 5.4 225.7 7.0 310.9 37.7
Net profit per share (EPS) in
CHF Â 91.03 Â 124.6 36.9
Cash flow from operating
activities 12.7 526.3 9.6 424.8 -19.3
Free cash flow 7.5 312.5 5.5 243.9 -22.0
Operating free cash flow 8.9 368.7 7.5 332.2 -9.9
Balance sheet total Â 3'629.4 Â 3'931.7 8.3
Shareholders' equity Â 1'593.0 Â 1'752.2 10.0
Equity ratio in % Â 43.9 Â 44.6
NWC 20.1 836 18.2 802 -4.1
ROCE in % Â 19.3 Â 21.3
Number of employees Â 12'369 Â 13'482 9.0
The Annual Report and the presentation held at the media conference and analyst
meeting covering business in 2010 can be retrieved at www.sika.com.
Link Annual report
Sika AG Contact: Dominik Slappnig
Zugerstrasse 50 Corporate Communications & Investor Relations
CH-6341 Baar, Switzerland Tel.: +41 58 436 68 21
www.sika.com Fax: +41 58 436 68 50
Sika AG Corporate Profile
Sika AG, located in Baar, Switzerland, is a globally active specialty chemicals
company. Sika supplies the building and construction industry as well as
manufacturing industries (automotive, bus, truck, rail, alternative energies,
building components). Sika is a leader in processing materials used in sealing,
bonding, damping, reinforcing and protecting load-bearing structures. Sika's
product lines feature high-quality concrete admixtures, specialty mortars,
sealants and adhesives, damping and reinforcing materials, structural
strengthening systems, industrial flooring as well as roofing andÂ waterproofing
systems. Worldwide local presence in 74 countries and some 13 500 employees link
customers directly to Sika and guarantee the success of all partners. Sika
generates annual sales of CHF 4.4 billion.Visit our website atwww.sika.com.
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Zugerstrasse 50 Baar
WKN: 858573;ISIN: CH0000587979;
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