Significant volume increases and gains in market share were achieved in all regions despite a very strong prior-year period (sales growth of 18.1%). At constant exchange rates, sales rose by 5.6% to CHF 2.625 billion. The strong Swiss franc produced negative currency effects of 6.8%, leading to a sales result of -1.2%. The strength of the Swiss franc was more than compensated by volume growth, ongoing efficiency improvements and lower commodity prices which lead to margins increasing by an above-average amount. Operating profit rose by 8.3% to CHF 288.6 million (previous year: CHF 266.4 million) while net profit increased by 11.1% to CHF 197.3 million (previous year: CHF 177.6 million).
Sika CEO Jan Jenisch: "Once again, the successful first half shows that the rigorous implementation of our growth model is delivering outstanding results. Despite the challenging environment, our 17,000 employees have demonstrated their competence and commitment and achieved a record result. An increase in net profit of 11.1% is a very convincing result, given the appreciation of the Swiss franc. Double-digit sales growth in the core markets of the USA, Latin America, Africa, the Middle East, Eastern Europe, Southeast Asia and the Pacific underlines the strength of our growth model and allows us to face the future and the second half of 2015 with confidence."
Growth in all Regions
In the region EMEA (Europe, Middle East, Africa), sales grew by 3.8% in the first half of 2015. Growth accelerated in the second quarter thanks to good performance in Eastern Europe, Africa and the Middle East. Sales in Western Europe did not quite match the extremely strong prior-year result. The expansion of production capacity resulting from the opening of new factories in Dubai and La Réunion will generate additional growth momentum in the region in the future.
Latin America and North America recorded the strongest sales growth. Despite a difficult market environment in Brazil, gains in market share led to a 13.1% increase in sales in Latin America. Investment in a new factory in Paraguay and the launch of new products are paving the way for future growth. In North America, the healthy US construction sector resulted in an 8.2% increase in sales. Expansion of the production capacities is in line with the positive outlook and is a significant growth driver for the future.
Growth in the region Asia/Pacific slowed to 1.7% owing to the negative market development in China. On the other hand, double-digit sales increases were achieved in Southeast Asia and the Pacific. Sika opened its first factory in Sri Lanka and founded its 91st national subsidiary in Myanmar.
Growth driven by Emerging Markets and Mortar Business
Despite the negative market trends in China, accelerated expansion in the emerging markets continued to generate strong results, with sales up by 8.7%. The high-margin mortar business - a core component of Sika's Strategy 2018 - put in an above-average performance, with sales growth of 12.4%. Sika has further expanded its fast-growing mortar business in recent months by making three acquisitions - BMI in the USA, CTA in Australia and Duro-Moza in Mozambique.
Above-average Profit Growth
Both operating result and net profit reached record highs in the first half. The strength of the Swiss franc was more than compensated by volume growth, ongoing efficiency improvements and lower commodity prices which lead to margins increasing by an above-average amount. The gross result rose to 54.4% (previous year: 53.3%). Operating profit increased by 8.3% to CHF 288.6 million (previous year: CHF 266.4 million). There was a substantial rise in operating profit margin, to 11.0% (previous year: 10.0%). Net profit climbed by 11.1% to CHF 197.3 million (previous year: CHF 177.6 million).
Outlook for 2015
The accelerated development of the growth markets will continue. It is planned to open between seven and nine factories in 2015. In line with Strategy 2018, Sika expects sales growth of 6% to 8% at constant exchange rates. Margins for the year as a whole are expected to rise at above-average rates thanks to continued volume growth, efficiency improvements and lower commodity prices. The unknown outcome of Saint-Gobain's hostile takeover bid means that this forecast must be regarded as uncertain.
Key Figures Half-year
- Net sales: 2,625.2 (2,656.9)
- Gross result: 1,428.0 (1,417.4)
- Operating profit before depreciation (EBITDA): 370.2 (347.7)
- Operating profit (EBIT): 288.6 (266.4)
- Net profit after taxes: 197.3 (177.6)
- Earnings per share in CHF: 76.53 (69.39)
- Operating free cash flow: 43.0 (36.6)
- Balance sheet total1: 4,817.9 (4,671.4)
- Shareholders' equity1: 2,223.4 (2,383.3)
- Equity ratio in %1,2: 47.6 (49.5)
- Return on capital employed (ROCE) in %3: 22.8 (20.9)
1 As of December 31, 2014/June 30, 2015
2 Shareholders' equity divided by balance sheet total
3 Capital employed = current assets, PPE, intangible assets less cash and cash equivalents, current securities, current liabilities (excluding bank loans and bond)
Net Sales4 by Region 1/1/2015-6/30/2015 (1/1/2014-6/30/2014) in CHF mn
- EMEA: 1,242.0 (1,335.8)
- North America: 380.9 (335.2)
- Latin America: 303.7 (295.6)
- Asia/Pacific: 483.9 (485.0)
- Other segments and activities: 214.7 (205.3)
Net Sales for Construction Industry and industrial Manufacturing in CHF mn
- Net sales: 2,625.2 (2,656.9)
- Products for construction industry: 2,072.1 (2,124.5)
- Products for industrial manufacturing: 553.1 (532.4)
4 Including acquisitions
Conference call July 27, 2015 at 3 pm (CET)
In connection with the publication of the half-year results a conference call will be held on July 27, 2015.
Source: Sika AG
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