SIKA AG(US:SXYAY)2023-10-20 20:00Financial Data and Key Metrics Changes - Sika reported a net sales increase of 5.6% in Swiss francs, with local currency growth at 12.4% driven primarily by acquisitions [6][12] - The material margin improved to 53.1%, up from 49.3% in the previous year, indicating a strong recovery [6][17] - Reported EBIT margin decreased to 13.5%, but the underlying EBIT margin increased to 14.8%, reflecting a 100 basis points improvement year-over-year [6][22] - Net profit decreased by 16.9% to 736.5 million, down from the previous year, but showed improvement compared to the first half of the year [24] Business Line Data and Key Metrics Changes - Organic growth for the first nine months was 1.3%, with Q3 showing a stronger organic growth of 2.5% [12][13] - The Americas region recorded a significant growth of 40%, heavily driven by the MBCC acquisition [14] - The Asia-Pacific region saw a 13.5% increase, with solid growth in distribution business in China [15][16] Market Data and Key Metrics Changes - All regions delivered double-digit growth in the first nine months, with the exception of global business [13] - The DACH region showed a mixed performance, with Switzerland performing strongly while Germany and Austria faced challenges [62] - The Middle East and Southern Europe exhibited strong growth, while Northern Europe remained subdued [14] Company Strategy and Development Direction - The successful closing of the MBCC transaction in May 2023 is a significant highlight, with expected synergies now estimated at 180 million to 200 million [7][8] - Sika aims to exceed 15% sales growth in local currency for the fiscal year 2023, including the impact of MBCC [28] - The company is focusing on expanding its footprint in emerging markets, particularly in India, which is seen as a growth hotspot [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the organic growth trajectory, citing improvements in volume across reporting regions [31][32] - The company anticipates a challenging environment due to inflation and rising interest rates but remains optimistic about future performance [15][28] - Management highlighted the importance of maintaining strong customer relationships to navigate pricing pressures [57][58] Other Important Information - Operating free cash flow increased significantly to 877 million, more than double the previous year's amount, driven by effective working capital management [25][26] - The company reported a reduced net debt to EBITDA ratio of 3.0 times, down from 4.1 times in June [26] Q&A Session Summary Question: Expectations for Q4 organic growth acceleration - Management indicated confidence in organic growth due to improving volume trends and a weaker prior year quarter [31][32] Question: Impact of rising raw material prices on expenses - Management acknowledged the potential for increased material costs but emphasized that price adjustments would be more normalized compared to the previous 18 months [33] Question: Antitrust investigation details - Management confirmed an ongoing investigation by antitrust authorities in multiple regions, emphasizing their commitment to compliance [36][37] Question: Scope impact from acquisitions - Management confirmed that the acquisition impact for 2023 would largely come from MBCC, with minimal contributions from other bolt-on acquisitions [44] Question: Volume recovery in the Americas and Asia - Management noted a more resilient volume pattern in the Americas compared to EMEA, with positive trends expected in Asia, particularly in India and Japan [46][47] Question: DACH region performance outlook - Management indicated a slow recovery in the DACH region, particularly in Germany and Austria, with optimism for future growth [62][63] Question: Global business performance and automotive industry challenges - Management highlighted the impact of US strikes on the automotive sector and a flattening trend in build rates, affecting global business growth [64][65]