Sika experienced dynamic growth and record sales in 2014, with 13% overall sales growth and sales increases in all regions. Sales grew 15.2% in emerging markets, with Sika opening 8 new factories globally during the year. Sika remains on track to achieve its Strategy 2018 targets of 6-8% annual growth, with 42-45% of sales in emerging markets and over 10% operating profit. While a planned change of control transaction with Saint-Gobain was rejected due to conflicts of interest and integration challenges, Sika remains open to constructive alternatives that allow it to continue successful growth and protect shareholder interests.
3. HIGHLIGHTS SALES 2014
Q4 with continued growth momentum
13.0% sales growth (8.3% in CHF) to CHF 5.57 billion (FY)
Record sales in all regions
Asia/Pacific with more than 1 billion of sales for the first time
Sales up 15.2% in emerging markets
EBIT expected to exceed CHF 600 million
8 new factories in Brazil, Mexico, Indonesia, Singapore, India,
Serbia and USA (2)
Strategy 2018 on track, exceeding financial targets
3
4. + 15.9%
+ 13.3%
+ 12.8%
+ 7.9%
13.0% SALES GROWTH FOR 2014
RECORD SALES IN ALL REGIONS
4
0.75
0.64
1.04North America
Latin America
EMEA Asia/Pacific
(in CHF bn, Growth at
constant FX)
2013 2014
2.73
Growth of 15.2% in Emerging Markets
5. Opening of Sika plant:
7th plant in Brazil (Aparecida de Goiânia, January 2014)
2nd plant in Indonesia (Surabaya, May 2014)
6th plant in India (Jhagadia, June 2014)
New plant in Serbia (Simanovci, September 2014)
2nd plant in Singapore (Singapore, October 2014)
4th plant in Mexico (Tijuana, October 2014)
ACCELERATED BUILD-UP OF EMERGING MARKETS
INVESTMENTS 2014
5
India Serbia
6. Opening of Sika plants in North America:
11th plant in the USA (Denver, May 2014)
12th plant in the USA (Atlanta, July 2014)
BUILD-UP OF SUPPLY CHAIN IN GROWTH MARKETS
INVESTMENTS 2014
6
USA USA
12. MEGATRENDS DRIVE OUR GROWTH: URBANIZATION,
NEW VEHICLE DESIGN & SUSTAINABILITY
12
Higher demand for
infrastructure and
refurbishment
solutions
Sustainability:
Increasing demand
for safe-to-use and
low-emission
products
Increased safety, fire,
water, earthquake and
quality requirements
Increasing world
population with
urbanization and
megacities
New modular
vehicle
manufacturing
concepts need fast,
high strength
bonding systems
New vehicle design
with material mix
requires bonding
solutions
Rising demand for
high performance
concrete, sealing
and waterproofing
13. 6-8% GROWTH PER YEAR
STRATEGY 2018:
SIKA’S GROWTH MODEL WILL DELIVER
13 |13 |
MARKET PENETRATION
INNOVATION
EMERGING MARKETS
ACQUISITIONS
VALUES
42% - 45% OF SALES IN
EMERGING MARKETS
> 10% OPERATING PROFIT
> 6% OPERATING FREE
CASH FLOW
> 20% RETURN ON
CAPITAL EMPLOYED
13
14. 4. REJECTION OF PLANNED CHANGE OF
CONTROL TO SAINT-GOBAIN (SGO)
14
15. KEY EVENTS OF THE LAST 5 WEEKS
Evening of Dec 5, board and management were informed of transaction by
family and SGO
limited discussions between Sika and SGO during weekend, with SGO
rejecting constructive suggestions to mitigate flaws of current structure
Publication of independent position of Sika board and management on
transaction Dec 8
Planned transaction is not in the best interest of Sika or its public
shareholders
Board and management do not support transaction in its planned form
Family requested EGM to replace 3 independent board members with two
nominees to gain majority in board (Dec 10)
Standard & Poor’s placed Sika on negative credit watch and will likely lower the
rating by two notches to 'BBB', equal to the rating of Saint-Gobain if the
transaction would be closed (Dec 10)
15
16. KEY EVENTS OF THE LAST 5 WEEKS (CONT.)
Alternative proposals from Sika and presentation to shareholders (Dec 17)
Request for agenda item and proposal to delete opting out by Ethos (Dec 23)
Withdrawal of candidacy of Chris Tanner, who was one of the two board
member nominees proposed by the family (Dec 28)
Family filed a petition at the cantonal court in Zug to enforce the EGM (Jan 5)
16
17. WHY SIKA CANNOT SUPPORT PROPOSED TRANSACTION
Acquisition of control through majority of
votes
Full consolidation of Sika
Increasing (reported) growth, margins
and reduced capital intensity, as well as
improved geographic footprint
But only 16% of economic exposure
Intention to keep Sika listed / no offer to public
shareholders
Claimed benefits based on unsubstantiated
business plan to year 2019 as presented by
SGO(1) (no interaction with Sika, no due
diligence)
Sika 2019 EBIT of CHF 840-890m
Plus EUR 180m additional synergies in
2019
17
Public shareholders (84% of capital)
deprived of adequate compensation for
change of control / fundamental change
in nature of investment
Inherent conflicting interests on all
levels: shareholders, board, management
and operations
Significant implied complexities likely to
substantially slow down Sika’s
organization and impair Sika's successful
growth model
Significant limitations to materialize
synergy potential especially stemming
from combination of directly competing
businesses
Note: (1) SGO capital markets presentation 8 Dec 2014
Transaction structure as planned by SGO Key implications & concerns
Effective and efficient integration of businesses not possible under planned structure
Significant risk of negative effects outweighing potential upsides
18. SIKA’S GROWTH MODEL DELIVERS
Market penetration
From roof to floor
From new-build to refurbishment
Push and pull market channels
Global technology leadership
Continuous innovations
Economies of scale in core
technologies
Accelerated build-up of Emerging Markets
Acquisitions to strengthen market access,
technology, economies of scale
Company values with entrepreneurial
spirit, high employee loyalty and lean
structure
De-centralized business set-up
P&L responsibility by country
Reduced complexity
Limited co-operations
18
High growth (2010-2013 CAGR)(1)
Sika: +5.2%
SGO CP (ES): -0.6% / -4.4%(2)
High profitability (2013A EBIT Margin)(1)
Sika: 10.2%
SGO CP (ES): 8.3%(3)
Share price performance (LTM)(4)
Sika: +34.1%
SMI: +14.8%
SGO: +2.9%
Valuation multiples (2015E EV / EBITDA)(5)
Sika: 9.4x
SGO: 6.5x
Standard & Poor’s Credit Rating
Sika: A-
SGO: BBBSource: Company filings, Capital IQ
Notes: (1) In reporting currencies; (2) in CHF on like-for-like basis; (3) Business income margin as defined by SGO, (4) Based on unaffected share prices as at 5-Dec-
14; (5) EV defined as market capitalization plus net financial debt, unfunded pensions and minorities, less equity investments; SGO CP (ES) = Saint Gobain
Construction Products Exterior Solutions
19. DEAL IMPAIRS SUCCESS OF SIKA
19
Significant downside risk for Sika and its public shareholders
Increased complexity: numerous “at arm’s length” contracts envisaged in all
countries with dual presence
Each transaction needs to fully comply with transfer pricing rules
Significant implementation and ongoing monitoring effort and cost
Protection of business secrets, incl. formulations
Various conflicts of interest on all levels
Direct competitors in mortars
Allocation of synergies
Balance sheet management
Successful practice of keeping majority of board members independent set to
change
Distraction from focus on profitable growth
Absorption of management resources
Allocation of synergies and dis-synergies
Risk of paralyzing organization
20. Weber
€ 2.3bn
Other
Construction
Products
€ 8.8bn
Innovative
Materials -
Flat Glass
€ 4.8bn
Innovative
Materials -
HPM
€ 3.9bn
Building
Distribution
€ 17.9bn
Packaging
€ 3.5bn
OVERLAPS AND TOUCHPOINTS SIKA AND SGO
20
SGO mortar business (Weber) is a direct
competitor to Sika
Sika’s mortar business is operationally fully
integrated in the organization and core
element of growth strategy
Core to supply chain management and
marketing approach
14 new plants recently
4 acquisitions recently
Certain non-mortar revenue synergies
possible in complementary businesses, but
EBIT-impact difficult to quantify outside-in
SAINT GOBAIN PORTFOLIO
Source: Company financials, SGO 2014E financials based on broker consensus
Total: €41.1bn (2014E)
21. OVERSTATED SYNERGY POTENTIAL
Integration of Weber into Sika
Our preliminary views on run rate synergy potential (impact on EBIT in EURm)
Currently planned structure
We believe that synergies from at arm’s
length agreements will be offset by dis-
synergies in similar magnitude
21
in EURm in EURm
Improved structure will deliver approx.
EUR150m of synergy potential
-100
0
100
200
Revenue synergies
Capex savings
Cost synergies
General overhead
synergies
Purchasing synergies
Dis-synergies
-100
0
100
200
Total synergy
potential
Dis-synergies
22. POTENTIAL ALTERNATIVES TO REVERSE VALUE LOSS
22
Responsibility of both Sika and SGO to consider and (jointly) develop alternative solutions to
reverse significant value destruction
Note: (1) c. 14% based on unaffected market capitalisation of public shareholders as of 5 Dec divided
INTEGRATION WITH SGO
MORTARS UNDER SIKA
UMBRELLA
Leading independent Construction Chemicals & Adhesives player with strong anchor
shareholder and proven management
Removes key areas of market conflicts, but key implementation risks remain
Appropriate governance to safeguard public shareholders’ interests critical
Value creation potential from synergies and rerating
FULL BUSINESS
COMBINATION
Requires appropriate value recognition of Sika’s growth and profitability, potentially offering
Sika public shareholders optionality to monetise or remain invested
Creates leading Construction Chemicals player under SGO umbrella
Risk of value de-rating from absorption of high-multiple Sika into lower-multiple SGO
OTHER SOLUTIONS
Sika board and management receptive to other proposals
ENVISAGED TRANSACTION
ABANDONED
Possible value recovery
23. SIKA OPEN FOR CONSTRUCTIVE DIALOGUE
…that addresses obvious flaws of planned transaction
…that allows Sika to continue to flourish and that supports integrity of our
business approach
…that allows optimal materialization of synergy potential
…that allows Sika’s public shareholders to (at least partially) recover experienced
substantial value losses
…that converts currently planned ‘lose-lose’ transaction into a ‘win-win’
situation for both sides
23
Sika board and management act in the best interest of the company and its
shareholders
24. This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words
such as ‘expects’, ‘believes’, ‘estimates’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘future’ or similar expressions or by
discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ
materially in the future from those reflected in forward-looking statements contained in this presentation, among others:
Fluctuations in currency exchange rates and general financial market conditions
Interruptions in production
Legislative and regulatory developments and economic conditions
Delay or inability in obtaining regulatory approvals or bringing products to market
Pricing and product initiatives of competitors
Uncertainties in the discovery, development or marketing of new products or new uses of existing products, including
without limitation negative results of research projects, unexpected side-effects of pipeline or marketed products
Increased government pricing pressures
Loss of inability to obtain adequate protection for intellectual property rights
Litigation
Loss of key executives or other employees
Adverse publicity and news coverage.
Any statements regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Sika’s
earnings or earnings per share for this year or any subsequent period will necessarily match or exceed the historical published
earnings or earnings per share of Sika.
For marketed products discussed in this presentation, please see information on our website: www.sika.com
All mentioned trademarks are legally protected.
FORWARD-LOOKING STATEMENTS
24