Interview with the CEO

1|0|Successes and challenges in 2021
2|46|2021 Highlight 
3|99|Raw materials 
4|146|Sustainability achievements 
5|200|Sika as an Enabler 
6|235|Scope 3 
7|302|EBIT target  
8|364|Sika’s ideal size
9|444|Outlook 2022
00:00/00:00

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Paul Hälg, Chairman of the Board of Directors, and Thomas Hasler, Chief Executive Officer, evaluate the successes and challenges in fiscal 2021, take a look at the current year and explain why it makes little sense to set an upper limit for Sika’s sales. Learn more in the video interview with Thomas Hasler and in the online interview with the two top managers.

Sika is currently active with its own subsidiaries in 101 countries around the world. Which blank territory on the world map would you like to fill in next?

Thomas Hasler We already have Asia and Latin America well covered. We see considerable potential in Africa. In the fourth quarter of 2021 we opened a subsidiary in Ghana, and are now present in 18 countries on this continent. Other markets will follow. It’s likely that there will be considerable dynamism in African infrastructure projects and the continent’s construction economy generally over the next 20 years.

PAUL HÄLG We first rolled out our Africa strategy seven years ago. The first step to opening up a market typically begins with small local companies that manufacture admixtures for concrete production and mortar. The business is then gradually built up from there. The strategy of entering new markets at an early stage has proved very successful. We are operating profitably in almost all African countries.

How well is Sika represented with its product lines in the various markets?

HÄLG We estimate that the markets that are relevant for us have a volume of CHF 80 to 100 billion. With sales at CHF 13 billion – including the MBCC Group – there is therefore still considerable growth potential. You can also see this by looking at our solution offering in the individual countries. We have not come close to introducing all our product lines in many of our markets.

How do you manage the risks involved with expanding in Africa?

HÄLG The investment volumes are relatively low, and therefore so too are the financial risks. What is more challenging is dealing with political and reputational risks. But this is of course not just true of Africa – it applies generally in all countries without solid democracies.

Including the takeover of the MBCC Group announced in November 2021, you are expecting sales of more than CHF 13 billion for 2023.
When will Sika have reached the ideal size?

Hasler When I first started at Sika more than 30 years ago, sales were less than CHF 1 billion. Back then this figure was perceived to be the right kind of size. Our position today is that the absolute figure is not so meaningful. What’s much more important is that we preserve our agility, our ability to adapt to customer needs, and our innovative strength.

HÄLG We must always ensure that we preserve the core of our DNA. We are essentially driven by developments in the construction sector, always adopt a pragmatic and long-term approach, and take considerable care to ensure that the management of the company is continuously evolving, too. Our strategy of achieving market leadership through technology leadership has proven itself, and will remain in place. We must also remain pioneers when it comes to sustainability and other socially important issues. If all these prerequisites are met, it doesn’t make sense to set an upper limit for sales. For years we have clearly been growing more strongly than the market.

“We estimate that the markets that are relevant for us have a volume of CHF 80 to 100 billion. With sales at CHF 13 billion – including the MBCC Group – there is therefore still considerable growth potential.”

Paul Hälg

Chair of the Board of Directors

Might that be interpreted as an indicator of further growth through acquisitions?

Hälg Yes, we aim to be a consolidating force in our industry. We are financially strong, have an experienced and successful management team, and nurture an entrepreneurial culture that gives the managers of our subsidiaries a very free hand. The familiarity of these people with local parameters and constellations helps us to identify companies that can complement our existing business. When the right boxes are ticked, we implement these so-called “bolt-on” acquisitions and integrate the companies into our organization.

Sika has indicated the prospect of annual synergies of CHF 160 to 180 million as a result of the MBCC integration. What level of one-time costs will be incurred in order to properly exploit these synergies,
and how has the integration process been defined?

Hasler We are anticipating a one-time investment of some CHF 200 million. The process up to the full integration of the MBCC Group will run until 2025. As MBCC has companies in 60 countries and these all need to be integrated, the scheduled timeframe is quite ambitious. But when systematically exploiting synergies in the areas of research, development, procurement, production, and logistics, not to mention sales and cross-selling, we will take the greatest care to ensure that the level of services remains continuously high for customers in both companies. Day-to-day business must be in no way affected by the integration.

“The trend of making sustainable achievements measurable is very positive for Sika.”

Thomas Hasler

Chief Executive Officer

Is Sika’s 15% to 18% target range for the EBIT margin jeopardized by the takeover and integration of the MBCC Group?

Hasler The EBIT margin may come under pressure as a result of one-time costs and amortizations, but this will not require us to adjust the target range. Following the integration, we will benefit from synergies and the range in question will then be realistic. What makes me particularly optimistic is the strong sales base of the MBCC Group and its impressive proximity to its customers. We are convinced that Sika’s decentralized structure and the expanded opportunities that will come from the MBCC tie-up will release new stimuli and boost sales.

Sika has earned great respect from its various stakeholder groups with its sustainable solutions. How can this respect be preserved and strengthened?

Hasler It’s an ongoing process that requires the awareness of the whole organization and improvements as we go along. With this in mind, we have now created the new position of Chief Innovation and Sustainability Officer at Group Management level. This step has sent out an important signal and resulted in the challenge of sustainability being even more  internalized, as well as being perceived as an opportunity for win-win constellations.

Strategically, the Board of Directors is responsible for Sika’s ESG performance too. How can it influence this?

HÄlg The Board of Directors lays down the values that need to be championed at operating level, and evaluates the findings it receives from regular exchanges with stakeholder groups. This makes Board members who hold executive roles in other companies important providers of stimuli.

“Various sustainability themes and digitalization will have a stronger weighting in our 2028 strategy.”

Paul Hälg

Chair of the Board of Directors

What interactions take place in this respect between the Board of Directors and Group Management?

Hälg We have set up a Sustainability Committee in the Board of Directors to accompany and support management on ESG issues. Its primary task is to determine the materiality of the various aspects and set priorities.

Do Environmental, Social, and Governance issues all have the same relevance for Sika?

Hälg Yes, in principle. Differences emerge in implementation. On the governance side we’re in good shape – I might even go so far as to say exemplary in terms of investor relations. We still have a lot of work to do in the environmental and social areas, but the key areas of focus have been defined and are being worked on. We are moving forward and constantly improving our performance.

One of the areas in which Sika appears to have a certain amount of ground to make up is health and safety. How do you see the situation here?

Hasler “Safety first” is a principle to which everyone in our organization is committed without any caveats, but in some countries this is insufficiently put into practice in day-to-day work. We therefore need to strengthen the safety culture and integrate it into everyday processes more consistently.

Are regional or country-specific differences in the safety culture a consequence of Sika’s decentralized management structure?

Hasler Such a connection cannot simply be dismissed. The onus is therefore on Group Management to support country managers, make the appropriate tools available to them, and lead by example.

International organizations and governments are continuously laying down new regulations and guidelines in the areas of climate protection and CO2 neutrality. What is Sika’s position on the
more rigorous regulatory environment?

Hasler It is for us to adapt to this trend as good corporate citizens rather than make judgments about the right way forward, particularly as regulations differ in Europe, the United States, and China. However, it is not surprising that the European path is the one that is closest to us, particularly as it seeks to create a level playing field for all market participants and generally promote fair play. We adhere to the prevailing guidelines and parameters in all our markets. Our decentralized structures and strong local roots give us a clear advantage here.

So you’re not against more rigorous regulatory requirements?

Hasler More rigorous requirements also increase the need for innovative solutions and the pressure to deliver on that front. For example, the higher requirements set for chemicals might increase our expenses, but they also lead to the elimination of damaging substances, which benefits all stakeholder groups. For an innovation-driven company like Sika, stricter regulations and guidelines that are binding for all market participants are always an opportunity. We are very agile, and in many cases can come up with well-engineered solutions more quickly than other players.

To what extent has COVID-19 impacted the demand for products and solutions?

Hasler The various disruptions to flows of goods and supply chains has resulted in companies increasingly building up regional production structures. A number of semiconductor factories are currently being built in the United States alone. Given Sika’s strong local presence, such developments are very much in its favor. We can guarantee global multinationals that the same systems and products will be used worldwide – with the same adherence to quality standards.

“Had we announced five years ago that we would be selling Sikaflex® cartridges via Amazon or Alibaba, we would not have been taken seriously.”

Thomas Hasler

Chief Executive Officer

Which implications is the pandemic-related boost to digitalization having for Sika?

Hasler Besides the astonishingly rapid proliferation of digital communication and meeting tools, our e-commerce area has experienced a real boom due to COVID-19. Had we announced five years ago that we would be selling Sikaflex® cartridges via Amazon or Alibaba, we would not have been taken seriously. But now we are very active in these channels. E-commerce is a rapidly growing distribution channel, and we are very well positioned to play a pioneering role in our industry here too.

Which should make the Sika brand even more important ...

Hasler Yes, that’s right. The selection process in e-commerce is unforgiving, and the traditional strength of the Sika brand is of particular help to us in this distribution channel. There’s no doubt that Sika is one of the strongest global brands in the construction economy.

How important are the products and solutions that qualify and position Sika as an enabler?

hälg They are hugely important, as they make the positive impact on sustainability comprehensible and measurable for all stakeholder groups. Our offering for customers is broad and grows out of the core business. Sometimes it might not be all that colorful or eye-catching, but we are known for delivering on what we promise – for being true to ourselves. “Building trust” is deeply rooted in our culture, and is so much more than just a slogan.

Hasler The trend of making sustainable achievements measurable is very positive for Sika. Our production is not particularly energy-intensive, and gives rise to relatively few CO2 emissions. However, our products have a strong leverage effect for the sustainability of the construction economy and structures. And this is absolutely not restricted to new-builds – 60% of the CO2 emissions issued during the lifecycle of a building relate to its actual use. Here we want to develop solutions that go beyond themes such as waterproofing and insulation. The aim is to materialize the products used for floors or walls in such a way that they save as much energy as possible and can be cleaned and maintained with as few chemicals as possible

Can you give us a research and development project that highlights Sika’s enabler quality particularly well?

HaslerA good example would be the development of concrete admixtures for the manufacture of LC3 cement. LC3 stands for limestone calcined clay cement. With this cement, the clinker can be partly replaced by calcined clay and limestone, which significantly reduces CO2 emissions. Sika offers special cement additives and concrete admixtures with which customers can adapt their materials to the new LC3 characteristics – without any negative repercussions for water consumption, workability, curing, or durability when compared to conventional products. These innovative concrete admixtures are a fine example of how Sika helps its customers shrink their CO2 footprint.

Thanks to “reCO2ver”, Sika has made the breakthrough in concrete recycling. What kind of potential do you perceive here?

Hasler The answer to that question depends to a significant extent on the regulatory environment. If the linear material flow from a building remains virtually free of charge at the end of its lifecycle, recycling is going to struggle to make rapid headway. By contrast, if the fabric of a building is viewed as a source of raw materials at the end of its lifecycle, the potential is huge. Concrete that is no longer required can then be reused as concrete. The situation in Switzerland at the moment is that concrete is crushed and used as cheap gravel in road-building. Or the concrete waste ends up directly in a gravel bed as filler material. Alongside regulatory requirements, rising prices for cement and CO2 emissions could also prove conducive to recycling.

Who produces the facilities, and how does Sika collaborate with the builder of these facilities?

Hasler The pilot facility was built by the Austrian company Cemtec – the world’s largest manufacturer of cement mills. The company is prepared to build large, commercially viable facilities commissioned by third parties. Sika makes the patented procedure available and supplies the necessary additives. We act as neither investor nor operator. Facility operators could also be cement manufacturers looking to recycle old concrete.

What innovative developments does Sika have to offer the automotive industry?

Hasler Here I would point to our fire protection coatings for battery casings in electric vehicles. This coating is significantly lighter than other fire protection agents, which helps keep battery weight low. Furthermore, it only takes a few seconds to spray on, which facilitates high manufacturing efficiency. The first country to have issued binding fire protection standards for battery casings is China, by the way. And China’s strict rules are now being adopted by automotive manufacturers around the world.

hälg Thanks to innovations of this kind, Sika has been able to broaden its customer base. In the example in question, these are battery manufacturers who were not part of any of our customer segment a few years ago.

The current strategy runs until 2023. What new focal points will Sika incorporate into its strategy going forward?

hälg The process of developing our subsequent strategy should really have started by now. But we have decided to push back the start of this process by a year in order to focus fully on the integration of the MBCC Group this year. This will give us the great advantage of being able to develop our strategy for 2028 together with representatives from the MBCC Group, and incorporate their experiences and assessments into the process. But even as things stand, I can tell you that the various sustainability themes, the issue of the circular economy, and digitalization will have a stronger weighting in our 2028 strategy.