Discussion CEO and Chair of the Board of Directors

“Our corporate culture is our greatest competitive advantage”

Sika is strongly positioned. For Paul Hälg, Chair of the Board of Directors, and Thomas Hasler, CEO, the results achieved during the year under review confirm that the strategic objectives are realistic and that the Sika Spirit significantly contributes to their realization.

Sika delivered double-digit sales growth in all regions in 2023. What were the main drivers?

Hasler: The greatest boost came from the acquisition of MBCC Group. It has been consolidated since May 2, 2023, and contributed some 12% to overall sales growth. In 2023, Sika grew organically by 1.2%, compared to a negatively developing market.


And by how much did the EBIT margin increase, excluding costs related to the MBCC acquisition?

Hasler: As announced, we were able to achieve an over-proportional increase in EBIT. Our operating margin rose by 12.7% – excluding acquisition-related expenses, income, and divestment proceeds. The main reason is that we have succeeded in significantly expanding the material margin to 53.6% (2022: 49.4%).


How did the weakness of Europe’s residential construction markets and the real estate crisis in China impact the sales of Sika solutions?

Hasler: First of all I would point out that infrastructure projects are more important for Sika than residential construction. In the latter area, the EMEA region experienced a difficult start to the reporting year. High rates of inflation and rising interest rates affected markets. However, the plateauing of European interest rates then made it easier for companies to plan and budget for construction projects reliably. As a consequence, most EMEA markets recovered. Indeed, some of them started recording growth again. Growth rates in China remained at a consistently high level, which is primarily attributable to our powerful distribution model. We are using our strong brand in the tile adhesive segment to expand distribution outside of the large cities and into the more rural areas. This enabled us to buck the trend of market weakness and rapidly expand market share.

To what extent does the growth of the company depend on state support and subsidy programs? 

Hälg: Sika benefits from countries investing in infrastructure projects. Such investments have a stimulating effect on the economy and state support programs can accelerate this positive development. For example, we are observing this in Italy, France, and Spain, which are benefiting from funding under Europe’s Green Deal, and in the USA with projects triggered by the Infrastructure and Jobs Act and the Inflation Reduction Act. 

Hasler: One thing we are clearly noticing in the United States is the impact of state-backed reshoring initiatives, which are aimed at repatriating production in the high-tech segment. This includes facilities to produce electronic components, batteries, and components for e-vehicles. There are very high requirements on the construction of such factories, which works in Sika’s favor. 

How did Sika manage to achieve a record level of new orders in the automotive business?

Hasler: The COVID-19 pandemic and the shortage of electronic components triggered a decline in annual global production from 95 million vehicles to 75 million. Production figures picked up in 2023 to around 90 million vehicles. This development ensured good fundamental capacity utilization. Of key relevance for Sika is the transition from combustion engines to electric battery-driven vehicles. We have invested massively in solutions for e-mobility in recent years, and in thermal battery management in particular. This segment now accounts for a double-digit share of the conventional portfolio and has attractive growth potential.

Which markets were the main focus of investment last year?

Hasler: Initially primarily China, but then Europe also became a major focus, and now North America too.

Is Sika’s technology also in demand among Chinese car manufacturers?

Hälg: Sika has always worked very closely together with the leading European manufacturers in the area of innovation. However, China then took the lead in e-mobility technology. As a result, Sika has intensified partnerships with Chinese automotive manufacturers. European automotive producers are now also benefiting from our expertise.

So no preferential treatment for the Europe?

Hasler: No, we are keen to be an innovation leader – which means we collaborate with the innovation leaders in all technologies and geographies.

How can Sika’s momentum in the automotive area be expressed in figures?

Hasler: For each vehicle produced worldwide, the average Sika content rose from CHF 5.80 in 2017 to more than CHF 10.00 in the reporting year. The order intake for the next five years has increased by more than CHF 200 million, reaching a record level.

Hälg: One should not forget that our focus on the automotive area remains very much on the bodywork segment, particularly with structural adhesives and with technologies to reduce noise and strengthen crash-relevant parts, thereby increasing passenger safety. Where the drive trains are concerned, Sika is involved whenever components are required for batteries for electric engines, hydrogen solutions, or hybrid systems.

What prompted you to set up an Automotive & Industry area in each geographical region? 

Hasler: It used to be the case that demands in the automotive sector were very different to those of other industry sectors. Requirements in the automotive area were shaped by international standards, whereas industrial production tended to be governed by local regulations. But the e-mobility trend is now sweeping through the entire manufacturing sector. The overlap between automotive and industry is becoming evermore apparent. We have therefore adapted our regional structure to the dynamics of the market environment. This is increasingly shaped by solutions for e-mobility and renewable energies, and by new industrial applications in the area of construction – such as modular construction and 3D concrete printing.

Sika is the first company in the specialty chemicals business worldwide to have all new product development validated by Sustainability Portfolio Management (SPM). How do customers benefit from this?

Hasler: They receive comprehensible information about the capture and evaluation of data, similar to the Science Based Targets initiative (SBTi). Through Sustainability Portfolio Management (SPM), we are providing customers with great transparency. With Sika’s support, they can demonstrably reduce their own CO2 emissions as well as their environmental risks.

Hälg: Sika has now decisively answered the question that used to be posed so frequently – does sustainability or economic performance take priority? From both a strategic and operational perspective, sustainability is an opportunity – and above all for our customers too. 

Hasler: Our own organization challenges us and motivates us in questions of sustainability. And our focus is on developments that have a positive impact. It is this practice-related, performance-oriented understanding of sustainability to which we have committed. Simply working through lists of criteria and sticking labels on products is at odds with our culture. 

As we all know, by far the greatest share of Sika’s CO2 footprint is in its upstream and downstream supply chain, i.e., at third parties. How does this affect the scope of action available to you?

Hasler: That is correct – 98% of our CO2 footprint is to be found upstream and downstream. That is why we take active and measurable steps to reduce CO2 emissions on the supplier and customer side, too. Our suppliers are likewise determined to reduce their footprint, which automatically reduces ours.

Hälg: In this context, it is important to point out our active membership of Together for Sustainability (TfS). This initiative, which was launched by the chemical industry, focuses on improving sustainability in the supply chain and motivating suppliers to improve their environmental and social standards on an ongoing basis. TfS pursues a very pragmatic approach, which suits us well. In addition, Sika is working intensively on increasing its use of alternative raw materials and bio-based products.

Hasler: In parallel, we are always on the lookout for alternative sources of procurement. For example, we are seeing that huge amounts of waste materials are still being disposed of in linear fashion, even though they could be retained within the circular economy. We are very active in this area, collaborating with start-ups and new providers. The resulting competition of ideas is both refreshing and stimulating. Moreover, our reCO2ver® technology is having a strong signal effect. This novel concrete recycling process allows old concrete to be entirely reused while at the same time facilitating the sequestration of CO2.

“We take active and measurable steps to reduce CO2 emissions on the supplier and customer side.”

Thomas Hasler


And what is Sika doing on the customer side?

Hasler: We are part of their value chain. For example, we enable customers to reduce CO2 emissions significantly when producing concrete. Our solutions facilitate clinker reduction and the use of recycled aggregates, therefore measurably improving customers’ sustainability footprints. Enabler solutions of this kind are an important part of Sika’s business.

Hälg: We combined Innovation & Sustainability with the aim of being able to impact scope 3 emissions more directly by using new types of raw materials and promoting circularity in the value chain. At the same time our customers receive products that are both innovative and sustainable, which improves both their and our environmental

Sika has committed to the Science Based Targets initiative (SBTi) and the submitted targets will be validated in the first half of this year. Can the net zero target be reduced without taking part in compensation projects?

Hasler: The SBTi obliges companies to reduce emissions by 90% in absolute terms by 2050. Only the remaining 10% may be compensated for. Sika signed up to the SBTi in September 2022 and recently submitted its short-term scope 1, 2, and 3 targets to the SBTi validation team. Specifically, our aim is to reduce scope 1 and scope 2 emissions by 42% and scope 3 emissions by 25% in absolute terms by 2032. 

What are the strongest brands that MBCC has brought to Sika’s portfolio? 

Hasler: Most notably the PCI tile setting materials, which are very popular with building professionals in the DACH region and benefit from an outstanding distribution network. PCI will be continued as a co-brand alongside the Sika brand. We are therefore preserving the recognition effect of PCI while at the same time making Sika visible to the buyer. This will also underscore the synergies and complementarity of the former MBCC brand and Sika’s own brand portfolio. 

We will likewise be keeping the globally recognized Sika®  Ucrete® brand. This is used for synthetic resin flooring, which is particularly popular in the food, drinks, chemicals, and pharma industries, as it is extremely resilient and meets the most rigorous hygiene requirements. This product line will now be distributed under the Sika® Ucrete® brand. 

Have Sika’s acquisition criteria changed following the takeover of MBCC?

Hälg: Our focus remains on small and medium-sized companies that complement our business model (bolt-on acquisitions). As before, the allocated investment volume for acquisitions stands at some CHF 300 million per year. 

How long is the “longlist” of potential candidates?

Hasler: Very long indeed. The market is highly fragmented, and all sorts of opportunities are opening up for us in local markets. Takeover candidates usually generate between CHF 50 million and CHF 150 million in annual sales. Major acquisitions such as Parex and MBCC are the exception to the rule. 

A typical case would be Chema in Peru, an acquisition we announced last August. This family-run company with annual sales of CHF 50 million is a leading mortar producer with an extremely efficient distribution and logistics organization. Chema represents an ideal platform for further growth. Transactions of this type are possible in all of the 103 countries in which Sika is active.

Regional responsibilities at Group Management level have been redefined since October 1, 2023. What prompted this rather unusual rotation?

Hälg: The reassignment of responsibilities will allow us to take successful initiatives such as “Go where the money is” or “Distribution journey” to new regions and markets. At the same time, this rotation indicates that the agility so valued by Sika is also put into practice at executive level. Such a rotation motivates the entire organization.

“Rotation at Group Management level indicates that the agility so valued by Sika is also put into practice at executive level.”

Paul Hälg

Chair of the Board

But how does this kind of switching fit with the desire for continuity?

Hasler: A bit of shake-up is healthy and desirable, as continuity can lead to an element of complacency. We can bring other perspectives to the regions without the organization losing its orientation. The rearrangement of Group Management was obviously preceded by intensive discussions. Colleagues were unanimous that, following a five-year term of responsibility for any given region, it would be more exciting and valuable for responsibility to be shifted to another region, rather than the individual remaining in the same post for another half decade. Our initial experiences demonstrate clearly that this has resulted in additional dynamism – both in the regions themselves and at head office.

What does the rotation mean for the private lives of the affected managers?

Hasler: The repercussions are very limited, as managers will continue to spend the lion’s share of their working lives in the markets for which they are responsible. What matters is not the location of the hubs, for example, Singapore, but the country in which we do most of our business, such as China or India.

Hälg: I am convinced that only very few companies could contemplate such a rotational strategy. Sika has made this decision from a position of strength, without being forced into it in any way. This rotation will generate added value for the Group as a whole, while at the same time accelerating the implementation of our new strategy.

With its new strategy, Sika is striving to achieve an over-proportional increase in EBITDA. What makes you so optimistic?

Hasler: The building blocks for EBITDA growth are primarily the expansion of the material margin, economies of scale, an improvement in operational efficiency, and annual synergies from acquisitions such as the MBCC acquisition, which we see at CHF 180–200 million from 2026 onward.

But is the EBITDA margin target of up to 23% too ambitious?

Hasler: It is, indeed, ambitious – but realistic nonetheless. We have a very balanced portfolio with our eight target markets and five core technologies. Feedback from the markets confirms that we are well-positioned and have strong margin potential. The targeted bandwidth for the EBITDA margin, namely 20% to 23%, makes sense in this context.
Hälg: Sika is extremely good at increasing benefits for its customers and contributing to their value creation. Ongoing innovation and a strong sustainability focus are two very important success factors here.

What can be improved?

Hälg: Our decentralized structure means that synergies in production, supply chain management, and services have not yet been fully leveraged everywhere. In some cases, operating efficiency is below the level it should be, which we intend to gradually improve with our Strategy 2028.

How has Sika fared at the start of this new year, and what are your expectations for the year as a whole?

Hasler: We anticipate that the momentum gained in 2023 will continue. We want to gain further market share, and are expecting a normalization of inflation and price developments. The target of an over-proportional increase in profitability is realistic from today’s standpoint, and is important for our future. 

What if the unexpected occurs in the form of an economic slowdown?

Hälg: We are flexible enough to cope with that. Our Profit and Loss Management (P&L) is divided globally between some 100 General Managers, who respond quickly to critical developments in their markets and adapt to new parameters – just like independent entrepreneurs. The Sika Spirit is alive and well. This gives us a huge advantage
over centrally managed groups.

Does that mean that a disruptive environment would actually be advantageous for Sika as it would be easier to win market share?

Hasler: We definitely see change as something positive. Given constant parameters, many companies can position themselves correctly and benefit accordingly. In contrast, when the geopolitical environment changes, many companies get bogged down in the complexity of it all, or initiate changes based on an excessively short-term mindset.

For example?

Hasler: The intensive outsourcing of production capacity to China up until a few years ago under the flag of globalization is a good example. The pendulum then began to swing back among other things due to the coronavirus pandemic which caused severe supply chain disruptions. All of a sudden, a presence with proprietary local production once again became a competitive advantage. Sika benefits from this. We can be found wherever our customers need us, and we fulfill our promise of “Building Trust” locally. 

Hälg: The quality of our products is another factor that builds trust. We welcome the tightening of construction standards all around the world. The fact that we have been consulted about the developing of standards in several countries is a source of considerable pride. This is something that can only be done by companies that are agile, well-rooted in the area, and possess state-of-the-art technology. 

Mr. Hälg, at the 2024 Annual General Meeting you will be stepping down from the Board of Directors after 15 years, 12 of which you
served as Chair of the Board. What milestones are you particularly proud of?

Hälg: In figures, I suppose it is our sales growth of over CHF 7 billion between 2009 and 2023, from CHF 4.16 billion to CHF 11.24 billion, together with the parallel increase in EBIT from CHF 344.0 million to CHF 1,549.1 million. A key prerequisite for this successful development was our independence, which we were able to preserve by successfully fending off the takeover attempt by Saint-Gobain. Another lasting milestone was the introduction of the single share class. This resulted in one vote for each share held, epitomizing our exemplary corporate governance. And last but not least is the successful further development of Sika´s corporate culture.

To what extent has the culture changed?

Hälg: Sika had a global setup even when I took on the role as Chair of the Board, but it still had a slightly centralized approach. That has all changed. In accordance with the subsidiarity principle, we have delegated decision-making freedom as far down the hierarchy as possible and facilitated the greatest possible customer proximity. The corporate culture we have established is our greatest competitive advantage. Country managers have been both empowered and emboldened. They are the ones that initiate investments, innovations, and acquisitions. It is now a given in the company that acquisition ideas come from the individual countries. By contrast, in my early years with Sika it was the headquarters that dictated which acquisitions would take place, and where.

But what’s good for a country may not actually be good for the Group...

Hälg: Our around 450 Senior Managers have a very good understanding of what the best thing is for Sika. Every member of management is aware that they are not just responsible for their own market, but for Sika as a whole. Accordingly, there is a strong willingness to provide mutual support. 

Do international analysts and investors understand this approach?

Hälg: Yes, our impression is that we convey this approach credibly, and that it is very well-received.

Mr. Hasler, what do you consider to be the core elements of the Sika culture?

Hasler: To strive for performance, the emphasis on “togetherness”, mutual respect, and encouraging all employees to contribute as individuals and strengthen the work of the team.

Mr. Hälg, how will Thierry F. J. Vanlancker, your designated successor as Chair of the Board of Directors, influence the Sika culture? 

Hälg: Thierry has 30 years of experience in the chemicals sector. He comes from a similar industry, with similar markets and distribution structures, and has also faced similar challenges with respect to technology and sustainability. He has also promoted decentralized management structures and strengthened local markets. He has been a Member of Sika’s Board of Directors since 2019 and has already played a role in shaping our culture over recent years.