Sika grows again under its own steam
Published: Friday, Oct 25th 2024, 10:10
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The construction chemicals and adhesives manufacturer Sika is currently growing, mainly thanks to a major acquisition. However, the economic environment remains difficult and negative currency effects are having a negative impact. Nevertheless, the Central Swiss company is also growing under its own steam.
From January to September, Sika increased its sales in local currencies by 9.1 percent to 8.91 billion Swiss francs. The main contributor to this was the competitor MBCC from Germany, which was acquired in May 2023: Sika put the acquisition effect at 8.1 percent in a communiqué on Friday.
On the other hand, the strong Swiss franc had a major impact: Calculated in Swiss francs, sales grew by just 5.5 percent.
Own growth accelerated
When the construction industry falters around the globe, its suppliers such as Sika also suffer. However, organic growth improved to 1.7 percent in the third quarter, Sika emphasized in the communiqué.
At the beginning of the year, Sika had barely grown organically. Now the Group has once again gained market share with its products, which are used to reinforce and seal building materials, for example.
High raw material costs digested
In terms of profitability, Sika was able to make significant gains - thanks in part to efficiency improvements and synergy effects from the MBCC takeover. Operating profit at EBITDA level rose by 13.2 percent to CHF 1.70 billion. The corresponding margin reached 19.1 percent (previous year 17.8%).
On the bottom line, Sika recorded an even more significant jump. Net profit rose by 25.3 percent to 922.6 million.
In this context, the company emphasized the recent significant improvement in the material margin to 54.7%. Two years ago, this was still below 50 percent. The material margin expresses how much of net sales remains as gross profit after deducting the cost of materials.
As a result, Sika has returned to profitability levels seen before the sharp rise in raw material prices in the wake of the coronavirus crisis.
Light and shadow
Analysts cite the US infrastructure business and business performance in the Middle East, Africa and South East Asia as "highlights" in the current set of figures. In the USA, for example, the Group benefited from government-funded infrastructure projects.
But where there is light, there is also shadow: The infrastructure business in China and deliveries to European car manufacturers remained decidedly weak. Nevertheless, Sika reported "initial positive growth impulses" from Germany.
Sika has confirmed its forecasts for the current year: the company aims to grow by 6 to 9 percent in local currencies in 2024 and achieve a disproportionately high increase in operating profit EBITDA. Analysts expect a strong last quarter of the year.
The figures hardly make a ripple on the stock market: Just over an hour after the start of trading, Sika shares are trading 0.2 percent lower.
©Keystone/SDA
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