Discussion CEO and Chair of the Board of Directors

A WINNING MENTALITY PAYS OFF

Sika generated records in sales and profit. Thierry Vanlancker, Chair of the Board of Directors, and Thomas Hasler, CEO, explain the reasons for the strong 2024 performance and why they are convinced that Sika is very well positioned for the coming year’s opportunities.

Sika achieved new record sales in 2024. Which of Sika’s Target Markets contributed most to this success? 

Hasler:The organic growth has mainly been driven by concrete, engineered refurbishment, roofing, and waterproofing. They have been the Target Markets that performed best in 2024. I am particularly proud of the fact that even in challenging market conditions, we grew and gained market share in all regions, demonstrating a strong performance.

What were the drivers of the higher EBITDA margin? 

Hasler:First and foremost, there was an improvement in the material margin, with all Target Markets contributing substantially. Sika achieved a strong and steady increase in the material margin, from 49.4% in 2022 and 53.6% in 2023 to 54.5% in 2024. In addition, the MBCC integration generated incremental synergies and supported our performance. And finally, our operational efficiency initiatives contributed to the improvement in the EBITDA margin.  

Has Sika defined a long-term target for the material margin? 

Hasler:We have defined 54–55% as a healthy range. But it is only an indication and not a target. We have seen very good profitability in the past, even with material margins below 53%. In the end, our strategic profitability target is the EBITDA margin. 

What made you proud in 2024 beyond financial achievements? 

Hasler:Our strong commitment to health and safety has resulted in a significant reduction of our Lost Time Accident (LTA) rate to 3.4 a decrease of 36.6 compared to 2023. This accomplishment reflects our employees’ collective efforts to prioritize safety in their daily tasks. It demonstrates the effectiveness of the Sika Vision Zero program and of the Safety Campaign, along with training initiatives, and an additional focus on safety prevention.  

Which of the eight megatrends in Sika’s Strategy 2028 have particularly benefited the Group’s development? 

Vanlancker:Urbanization is one of the most significant. The proliferation of megacities and the growth of their populations require infrastructure, transportation, water management, as well as working and living space. The scarcity of resources – in terms of workforce or materials – is becoming an increasingly crucial factor in the building industry, driving the demand for smart solutions that use less resources or are easy to apply. Of course, climate change continues to accelerate certain trends in construction and mobility.  

Where is the infrastructure market thriving? 

Hasler:We see potential in the infrastructure segment in almost all markets – including the USA, Europe, and emerging markets. In the USA, for example, the Infrastructure Investment and Jobs Act has authorized more than one trillion US dollars for infrastructure projects. In addition, with up to 40% of the world’s bridges in need of major repair or replacement, the infrastructure market is projected to grow at a CAGR of 4.9% by 2028.

Where do you see the strongest growth potential in 2025: in industrialized countries or in emerging markets? 

Hasler:Besides the USA, I see great opportunities in emerging markets. India invests heavily in its infrastructure development. It looks a little bit like China 20 years ago, with the construction of rail systems, ports, and airports. We are also seeing very large infrastructure projects in Africa. 

Do you expect the infrastructure business to accelerate under the Trump administration? 

Hasler:Yes, we do. Projects amounting to approximately USD 400 billion have already been funded in the last few years, but there is still USD 600–700 billion to be allocated in the coming years. 

The new US administration favors local suppliers and partners. What does this mean for Sika? 

Hasler:For us as a locally embedded company, it is a great opportunity. All our products and solutions are manufactured locally, our people are local, and they are familiar with the challenges, expectations, and business opportunities in the US market.  

In general terms, what are the decisive factors when a customer awards a project? 

Hasler:I think it is trust, based on our long-standing relationships with customers: trust in the quality of the products and solutions, the best price-performance ratio, the competence, the service – including after sales – and, in particular, our ability to continuously offer innovations that help them perform better.  

It has been known for years that around 40% of all water supply systems and bridges globally are in poor to extremely poor condition. Why is this rate not declining? 

Hasler:The main reason is the perceived lack of urgency among stakeholders. This diverts funding and initiatives to more visible issues while critical infrastructure continues to degrade. The deterioration is not so visible, especially underground. People do not notice when 20–30% of freshwater is leaking from the system. Or let’s take a bridge, for example: from a distance it looks robust, but when you inspect the actual construction, you can see the deterioration. The damage may be hard to identify and not call for immediate repair. The tendency is to postpone repairs, often because funds are lacking, or because they are not considered priorities.  

As observed in the USA… 

Hasler:Exactly. In the past, every government promised to spend more, but until recently this did not happen. Now we are seeing some fundamental changes, given not only the needs but also the commitment of the government. I strongly believe we will see more infrastructure initiatives in the USA. 

What role does the circular economy play in infrastructure projects? 

Vanlancker:While circular streams are driven by regulatory aspects, the scarcity of natural resources also makes them essential. Being open to new raw materials, which in the past were waste streams, is important. A good example is the concrete demolition waste that can be totally recycled and reused in new construction and new infrastructure. Another one is our roof recycling program, where old membranes are used in the production of new ones. In addition, we should emphasize the economic impact, which is a valid argument to convince people who are investing in circular projects.  

Which argument is stronger: regulatory pressure or economic efficiency? 

Vanlancker:That is difficult to say. Infrastructure that was built many decades ago must inevitably be renovated or renewed to extend their lifespan. For bridges, tunnels, and similar infrastructure projects, we now assume a lifespan of 100 years or more. From an economic standpoint, infrastructure that lasts more than 100 years, or at the minimum 50, makes an enormous difference in the total life cycle cost.  

How does the durability of the building materials affect the price? 

Vanlancker:It is obvious that you have to invest more in a bridge or house that will last 100 years instead of only 30. But the premium is more than compensated by the cost savings over the entire lifespan of the building. In fact, the demand for chemicals that contribute to a better sustainability profile and prolong durability is growing fast.  

Digital solutions and real-time data are becoming increasingly important to customers and to Sika. Where does Sika acquire the necessary know-how and find the right partners? 

Hasler:When it comes to our digitalization strategy, we rely on the strength of our own systems and the expertise of our suppliers and partners. When we talk about interactions with customers, we are promoting an open approach to innovation. With this in mind, we are looking to get closer to start-up companies that specialize, for example, in digital monitoring solutions. Digital tools can be an excellent way to meet the complex challenges of the construction industry and use data to steer and guide our work.  

Which country is leading in this respect? 

Hasler:Our organization in China is probably the most advanced in utilizing data and digital ecosystems that holistically connect all stakeholders with Sika. That’s a key benefit for the Group and we are currently expanding this expertise across our organization. 

How has the split between indirect and direct sales developed over the years? 

Vanlancker:Over the past five years, Sika has undergone an exciting change by expanding its indirect, or distribution, channel without weakening the direct business. The fact that the direct and distribution businesses have a slightly different cyclicality in many markets also makes us more robust. In just five years, there has been a notable change in the company’s sales content from indirect sales, with the distribution business increasing from 30% to around 45%. This change was, to a large extent, driven by the Parex acquisition. 

What has been the margin impact of this change? 

Hasler:It is insignificant. In the project business, you put more effort into preparations and specifications, whereas in distribution you have more promotional activities.  

Regarding the automotive business, why did the recovery that began in 2023 not continue in 2024? 

Hasler:When we look at the total output of vehicles in 2024, the number is clearly behind the figures for 2023. In Europe especially, the automotive business has slowed down mainly because of a lack of consumer confidence and the cut in subsidies for electric vehicles (EVs). The dilemma for Europe is that consumers are not sure about the prospects of combustion engines, EVs, or hybrids. Consumers are not willing to pay EUR 10,000–20,000 more for an EV. China is advancing faster because the EV business is clearly a priority for the government and heavily subsidized.

How is the shift in production from combustion engines to EVs affecting Sika? 

Hasler:Our technology is found in every second car produced in the world. However, Sika’s content per vehicle is about 40% higher with EVs, as Sika has no products or solutions in a combustion engine, but it does have specific solutions in and around a battery. With our innovative solutions, we can increase the content in both types of cars. 

In terms of the 2025 financial year, where will the greatest opportunities come from? 

Hasler:We have very good momentum in North America, in particular in the USA, but also in Africa, the Middle East, Southeast Asia, Asia and Brazil. We believe that these markets will be key contributors to our business success in 2025. At the same time, we are observing dynamic development in India.

Do you see signs of recovery in the Chinese construction market? 

Hasler:While the market is still soft, we are convinced of the longer-term potential and have no reason to change our strategy. Despite the challenges of zero growth after years of double-digit growth, Sika is focusing on stability and long-term market potential. 

Sika has significantly increased its forecasts for the synergies from the MBCC integration. In 2026, these synergies could even reach around CHF 200 million, 67% more than the CHF 120 million gained in the 2024 financial year. What drives this optimism? 

Hasler:The integration is proving to be more powerful than expected. Most of our activities in the first 18 months of the integration focused on generating cost synergies. Increasing our revenue synergies is now our focus in the second half of the integration phase. Overall, we are convinced that we will reach total annual synergies of CHF 180–200 million by 2026.

In light of this successful integration, is the organization ready for the next big acquisition? 

Vanlancker: Acquisitions for Sika are in general a platform for growth. For this reason, there are important criteria when it comes to acquisitions. One is the net-debt-to-EBITDA ratio, which now stands at roughly 2.2. We want to bring the debt leverage down further before considering a large transaction.  

When will the deleveraging target be achieved? 

Vanlancker: We have no specific target, but with the debt leverage expected to move towards 1 during 2026, we will have more flexibility to act in the M&A space. However, it’s important to mention that we don’t feel pressured to make the next big move. The market is very fragmented and we have ample potential to grow organically and by doing small to mid-sized transactions. 

You have been a member of the Sika Board of Directors since 2019 and Chair since 2024. Which strategic decisions have proven to be crucial to Sika’s performance over the past five years? 

Vanlancker: First let me mention acquisitions like Parex, which really changed our view on the distribution business, and MBCC, which has been so successfully integrated. On top of this, Sika has been able to not only increase profitability and market penetration through bolt-on acquisitions but also to align major acquisitions with our strategic targets. A second element has been to focus on sustainability as a positive driver for the business model. Sustainability runs through the entire organization and value chain. It is practiced at all levels and not simply embraced for advertising purposes.The third element is Sika’s highly respected position in the global markets. In these five years, Sika has almost doubled in size – which makes the company quite different! Today, we manufacture in over 400 factories and have 33,000 employees. But even if we have grown, our size has not changed our DNA. At Sika, we always want to know what has and has not contributed to our success, and what we have to adjust to keep the company growing. Sika has a very performance-oriented corporate culture. 

Do you think that Sika has the right mindset for further growth? 

Vanlancker: Absolutely. Sika has a growth gene combined with a certain “Swissness” – which stands for high quality, innovation, pragmatism, and an efficient way of delivering value to the market which is absolutely unique. 

When you consider the expertise of the current Board of Directors, what are your thoughts about its future direction? 

Vanlancker: Sika should have a fair number of people with a connection to Switzerland on the Board to avoid becoming a generic international company. We also need to make sure that the Board really is a resource for the management team, acting as a sounding board with a wealth of experience and expertise.

In 2024, right in the middle of the integration of a major acquisition, Sika managed to achieve a very high employee engagement rate of 86%. How do you explain this rather atypical measure of non-financial performance? 

Vanlancker:The winning mentality, which is part of becoming a larger organization, has played a decisive role. Not to be underestimated is Sika’s unique corporate culture, the strong empowerment that we have in our organization and the entrepreneurial spirit. When people feel that they are winning, it is the company’s biggest asset. What has also been important is the way that the integration was implemented with honest communication on all levels – what has worked, what has not, and what needs to be done next. A winning mentality pays off.