Summary of Sika AG H1 2024 Earnings Conference Call Company Overview - **Company**: Sika AG (OTCPK:SXYAY) - **Date of Call**: July 30, 2024 - **Participants**: - Thomas Hasler (CEO) - Adrian Widmer (CFO) - Dominik Slappnig (Head of Communications and Investor Relations) - Christine Kukan (Head of Investor Relations) Key Financial Highlights - **Net Sales**: CHF 5.8 billion, an increase of 9.2% in Swiss francs and 12.8% in local currency [5][10] - **Material Margin**: Expanded to 55.1%, up from 52.7% year-on-year, driven by cost management and synergies from MBCC acquisition [6][15] - **EBITDA**: Increased by 24% to CHF 1.093 billion, with an EBITDA margin of 18.7%, up from 16.5% [18] - **Net Profit**: CHF 577.1 million, a growth of over 40% compared to the previous year [20] - **Operating Free Cash Flow**: CHF 401 million, an increase of CHF 79 million from 2023 [20] Market and Operational Insights - **Market Share Gains**: Sika has gained market share across all markets, with a strong performance in challenging conditions [5][23] - **Acquisition Impact**: The MBCC acquisition contributed 13.1 percentage points to growth, while the Kwik Bond acquisition added 12.3% [10][12] - **Regional Performance**: - **EMEA**: Grew 13.5% at constant currencies, with a focus on infrastructure projects [11] - **Americas**: Strongest growth at 15.1%, driven by state-funded infrastructure projects [12] - **Asia Pacific**: Sales increased by 8%, but organic growth was slightly negative at -0.3% [13][14] Strategic Initiatives - **Synergy Guidance**: Increased synergy guidance for 2024 to CHF 100 million to CHF 120 million, up from previous estimates [6][17] - **Employee Engagement**: Achieved an engagement rate of 86% in a global employee survey, indicating high employee morale [7] - **Sustainability Goals**: Net-zero implementation roadmap validated by SBTi, aligning with the 2028 strategy [8] Future Outlook - **Sales Growth Projection**: Sika maintains a sales growth outlook of 6% to 9% in local currency for the second half of 2024 [23] - **Market Conditions**: Anticipates continued market share gains, particularly in infrastructure and commercial construction [23][36] - **Cost Management**: Expectation of improved cost management and operational efficiency to drive profitability [30][58] Additional Insights - **Acquisition Strategy**: Focus on integrating acquisitions like MBCC and Kwik Bond to enhance market presence and operational efficiency [6][10] - **Regional Expansion**: Plans for further expansion in the Middle East and Latin America, with new factories in Peru and China [9][55] - **Automotive Sector**: Facing challenges due to declining vehicle production, but increasing content per vehicle is expected to offset some losses [43][45] Conclusion Sika AG demonstrated strong financial performance in H1 2024, with significant growth in net sales and profitability. The company is well-positioned to continue gaining market share through strategic acquisitions, operational efficiencies, and a focus on sustainability. The outlook for the second half of the year remains positive, with expectations for continued growth and improved margins.

cost) Synergies CONSOLIDATED BALANCE SHEET 2023 NET DEBT/EBITDA DEVELOPMENT (AS REPORTED) STRONG DELEVERAGING PROFILE ▪ Net debt reduced to CHF 5.2 bn Dividend payment of CHF 3.30 per share (+3.1% vs. previous year) 2. SUCCESSFUL MBCC ACQUISITION, THOMAS HASLER (CEO) 6. OUTLOOK, THOMAS HASLER (CEO), CHRISTOPH GANZ (EMEA), PHILIPPE JOST (ASIA/PACIFIC), MIKE CAMPION (AMERICAS) ▪ Clear focus on "go where the money is" – targeting opportunities for growth and developing a vertical market approach in our regiona ...

Financial Data and Key Metrics Changes - The company reported record sales of CHF11.24 billion, marking a 14.5% growth in local currency and a 7.1% increase in Swiss francs [76][80] - The underlying profitability improved significantly, with a material margin expansion from 49.4% to 53.6%, an increase of 420 basis points [80] - Operating free cash flow reached a record CHF1.373 billion, up almost 60% from the previous year [77][30] - Net profit declined by 8.6% to CHF1.062 billion, while reported EBIT was CHF1.55 billion, a 1.9% decrease compared to the previous year [76][78] Business Line Data and Key Metrics Changes - The organic growth was 1.2% despite a negative market environment, with a clear improving volume trend throughout 2023 [81] - The acquisition of MBCC contributed significantly to top-line growth, adding 13.3% to the overall sales growth [81] - Other operating expenses increased by 31%, largely due to extraordinary one-time costs related to the MBCC acquisition [82] Market Data and Key Metrics Changes - The U.S. remains the largest single market, contributing 20% of revenue, while China accounts for 10% [13] - Emerging markets are catching up, with 41% of revenue coming from these regions, indicating a balanced growth strategy [37] - The company is optimistic about India’s infrastructure investments, which are expected to drive future growth [25] Company Strategy and Development Direction - The company aims for a 6% to 9% CAGR in local currency growth, focusing on market penetration and leveraging its strong brand [50][27] - The strategy includes expanding into key markets where significant infrastructure investments are occurring, such as the U.S. and India [15][25] - The company emphasizes innovation and sustainability, with 108 new patents and a commitment to reducing CO2 emissions [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential driven by megatrends such as population growth and urbanization [26][48] - The company is well-positioned to benefit from the reshoring trend in the U.S., which is expected to create significant infrastructure opportunities [24] - Management highlighted the importance of digitalization in construction, aiming to integrate more digital tools into their processes [61] Other Important Information - The company has made significant investments in expanding its footprint, including new factories in India and expansions in the U.S. [32][33] - The integration of MBCC is progressing well, with CHF41 million in synergies already realized within eight months [30][49] - The company is committed to maintaining a strong workplace culture and diversity, emphasizing equal opportunity for all employees [66][71] Q&A Session Summary Question: What is the material margin assumption on your guidance? - The company aims for a material margin of 54% to 55%, having achieved 53.6% for the whole year, with expectations for a flattish development going forward [21] Question: How much of the growth potential is at risk if Donald Trump returns to the White House? - Management noted that the U.S. is in a reshoring phase, with significant projects underway, indicating a positive momentum that should continue regardless of political changes [24] Question: Would Sika consider a spin-off similar to Holcim's U.S. business separation? - Management stated that such a move would weaken the company, emphasizing the benefits of their global diversity and integrated business model [28]

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