Continuation of Dynamic Growth, Net Profit Surges 24.8%

Net Profit Up 24.8%

The positive margin development of the last five years continued in the first half of 2016. The Sika growth model, with its emphasis on volume growth together with disproportionately low cost development, resulted in a further improvement in margins. A more stable exchange-rate situation and lower commodity prices strengthened this effect, with the result that operating profit, net profit, and cash flow all posted new record values in the first half of the year. Operating profit (EBIT) improved by 22.6% (+ CHF 65.1 million) to CHF 353.7 million (previous year: CHF 288.6 million). Net profit rose by as much as 24.8% to CHF 246.3 million (previous year: CHF 197.3 million).

Jan Jenisch, CEO: “Our investment in new products, national subsidiaries and the expansion of production capacity is paying off. All regions contributed to the record result in the first half of 2016, and with sales up by 7.6% we have continued to deliver impressively on our growth strategy. We posted double-digit growth rates in the USA, Canada, Argentina, Chile, UK, Africa, Southeast Asia, the Pacific area, and Automotive.

We have rigorously pursued our growth strategy, with two additional national subsidiaries and six new factories. The commitment and performance of our employees in what is now 95 countries are the cornerstones of our success. I would like to express my thanks to our global team for their tremendous dedication under partly difficult circumstances. Thanks to this dedication and the strength of our growth model, we can look forward to the future and to the second half of 2016.”

Growth in all regions

The EMEA region (Europe, Middle East, Africa) saw sales increase in local currencies by 6.6%. Good growth rates were achieved in Southern Europe and the Middle East. The strongest rise in sales was achieved in Africa, with an increase of more than 20%. Sika's presence in Africa consists of 16 national subsidiaries and 14 production locations. Demand in the Western European market came in at a healthy level. A new mortar factory was opened in Kryoneri, near Athens, while a new national subsidiary was opened in Kuwait – Sika's 13th in the Middle East.

The North American region generated a sales increase of 12.7% in local currencies, a record result. Growth drivers here include the accelerated expansion of the supply chain and investments in sales force in the growing metropolitan areas, together with robust activity in the construction sector.

The number of production sites for mortar and concrete admixtures has been increased to a total of 20 in the past two years, with four new factories in Denver, Atlanta, Philadelphia, and Vancouver, plus the acquisitions of BMI and Scofield.

The Latin America region recorded a 5.9% sales increase in local currencies. Mexico, Argentina, and Chile all developed strongly. By contrast, the economic crisis in Brazil and a significant fall in the value of some local currencies led to a downturn in business activity. Investment in the region included a new mortar factory in Ecuador and the establishment of a new national subsidiary in Nicaragua.

Growth in the Asia/Pacific region increased to 4.6%. Significant, double-digit sales gains were once again achieved in Southeast Asia and the Pacific area. Market demand in China remained at a low but significantly more optimistic level than a year earlier. The first factory in Myanmar was opened in February 2016. Sika is positioning itself to derive maximum benefit from the construction boom in this burgeoning market through a new production site for concrete admixtures in the Yangon metropolitan region. In Thailand, a second factory for mortar and concrete admixtures was opened. The market expansion in Asia is completed by a new plant in Phnom Penh, Cambodia, which is also Sika's first manufacturing plant in that country.

Outlook for 2016

Strategy 2018 was successfully continued in the first half of the year, with new record results achieved. The annual targets for 2016 can be confirmed. Sales growth of 6–8% is expected for the current business year, along with a disproportionately strong rise in margins. The growth strategy will continue in 2016 with the opening of between eight and ten new factories and three to four national subsidiaries. The unknown outcome of Saint-Gobain’s hostile takeover attempt remains an element of uncertainty for the future.

¹ As of December 31, 2015/June 30, 2016.
² Shareholders’ equity divided by balance sheet total.
³ Capital employed = current assets, PPE, intangible assets less cash and cash equivalents, current securities, current liabilities (excluding bank loans and bond).

 

¹ including acquisitions