Earnings call: Sika AG announces solid growth and record cash flow in 2023

In the recently held earnings call, Sika AG (SIX:SIKA.S) showcased its annual performance for the year 2023, reporting a robust 14.5% growth in organic local currency and a 7.1% increase in sales in Swiss francs. Despite a slight dip in EBIT from the previous year, the company improved its margin by 80 basis points, reaching 15%. A significant highlight was the operating free cash flow, which soared to a record CHF1.37 billion, marking a 60% increase. The MBCC transaction played a pivotal role, contributing CHF41 million in synergies within eight months. Sika's focus on innovation and sustainability was evident, with 108 new patents filed and a 4.4% reduction in CO2 emissions per ton sold. The company's outlook remains positive, aiming for an EBITDA range of 20% to 23% and a compound annual growth rate (CAGR) of 6% to 9% in local currency growth.

Key Takeaways

• Organic local currency growth of 14.5% and a 7.1% increase in sales in Swiss francs.
• EBIT margin improved by 80 basis points to 15%, despite being slightly below the previous year.
• Record operating free cash flow of CHF1.37 billion, up by 60%.
• MBCC transaction generated CHF41 million in synergies in 8 months.
• Filed 108 new patents and reduced CO2 emissions per ton sold by 4.4%.
• Aiming for 20% to 23% EBITDA and 6% to 9% CAGR in local currency growth.

Company Outlook

• Sika targets a material margin of 54% to 55% and overproportional EBITDA growth.
• The company plans to grow both organically and inorganically, with a strong focus on key geographies such as the U.S., China, and Japan.
• Sika anticipates a new plateau in raw material costs and a slight increase in personnel expenses.
• They expect synergies from acquisitions to be CHF80-100 million in 2024.

Bearish Highlights

• Net profit decreased by 8.6% to CHF1.626 billion.
• ROCE impacted by the MBCC acquisition, dropping to 16.3% from 21.6%.
• Net debt increased to CHF5.2 billion, with a focus on deleveraging.
• Market growth is cautious due to a 4% decline.
• Volume improvement in H1 is expected to be slight and still negative.

Bullish Highlights

• Strong cash flow and capital expenditure of CHF273 million, an increase from the previous year.
• Proposed dividend increase of 3.1% to CHF3.30 per share, marking the 12th consecutive year of dividend growth.
• Positive market exposure in the U.S., with significant opportunities in roofing, infrastructure, commercial, and automotive sectors.
• Optimistic about the global automotive industry rebound, especially in China.

Misses

• Gross margins for 2024 may not reach the top end of the 54-55% target range.
• EBITDA margins may not hit the low end of 20% until MBCC synergies are fully realized.
• Q4 performance in the U.S. impacted by MBCC, with expectations of improvement in the roofing business.

Q&A Highlights

• Asia Pacific and Global Business performance is improving, with no one-offs included.
• Wage inflation expected to be slightly lower than 5%.
• The tax rate for 2024 is projected to be around 23-24%.
• The company remains cautiously optimistic, aiming for top-line and bottom-line growth in 2024.
• Next interaction will be in summer, with Q1 top-line communication in between, and an invitation for attendees to join in Japan for a market overview.

Sika AG continues to demonstrate resilience and growth potential, navigating through a challenging environment with a clear strategy focused on innovation, sustainability, and strategic acquisitions. The company's ability to generate record cash flow and its commitment to shareholder returns, as evidenced by the proposed dividend increase, underlines its financial strength. With a cautiously optimistic outlook, Sika AG is positioned to capitalize on market opportunities and deliver growth in the coming year.

InvestingPro Insights

Sika AG (SIKA.S) has been maintaining a strong financial performance, as indicated by the reported increase in sales and improved EBIT margin. To provide further context to the company's financial health and stock performance, here are some insights based on real-time data from InvestingPro and InvestingPro Tips:

InvestingPro Data:

• Market Cap (Adjusted): 46.65B USD

• P/E Ratio (Adjusted) for the last twelve months as of Q4 2023: 33.95

• Revenue Growth for the last twelve months as of Q4 2023: 7.12%

InvestingPro Tips:

• Sika AG has demonstrated a commitment to shareholder returns, with a notable achievement of raising its dividend for 5 consecutive years.

• The company's stock generally trades with low price volatility, which may appeal to investors looking for stable investments in the construction materials sector.

These metrics and tips underscore the company's robust financial position and may be particularly relevant for investors considering Sika AG's stock. The low price volatility and consistent dividend growth could be seen as indicators of the company's stability and reliability as an investment. Additionally, the company's positive revenue growth aligns with the growth figures presented in the article, reinforcing the bullish outlook for the company.

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Full transcript - Sika ADR (SXYAY) Q4 2023:

Thomas Hasler: So good morning, and welcome to our annual results presentation. Thanks for joining us here in Zurich or online. We appreciate your interest in our company very much and look forward to an exciting 2 hours. Before I start with the presentation, I would like to share my deep appreciation and thanks to our organization with 33,000 employees, which I have the privilege to lead. And I also stand here on behalf of all of them presenting our joint collaborative achievements in 2023. I believe it’s a strong statement of the power of the organization, what we can do, and we go into the detail as we go. But it’s not me. It’s all of us in the company. Some of them are here in the room. Also here, a big thank you for organizing just a perfect setting to guide us through the next hours here. It’s a people company, and our people have made tremendous achievements possible in the last 12 months and also going forward. Now going into 2023, I think on a high level, the highlights on the top line we shared on January 10 already, 14.5% growth in organic – in the local currency, 7.1% growth in Swiss francs. A lot of appreciation of the Swiss franc, of course, in here, Adrian will go into all the details in regards to those numbers. The EBIT reported, slightly below last year. I think here, we stay with our reported EBIT as a guiding principle. But at the same time, we know that here, quite substantial onetime costs through the acquisitions are included. If we take those out, we have raised our EBIT performance by 80 basis points in ‘23, reaching a level of 15%. We are especially proud of the strong cash generation that has led to a record in operating free cash flow of CHF1.37 billion, a plus of almost 60%. I think this is a clear manifest of the power of the company to generate cash to the benefits of all. The key investment in ‘23 clearly is the closing of our transaction, the MBCC, which I will come in more details. We talk a lot about the cost of the transaction, but I believe it’s significant to see that already in 8 months, we have been able to generate CHF41 million of synergies, and more to come. Our innovation and sustainability drive, a key aspect of Sika in the past and in the future. Also here, accelerating with the power that we gain by growing organically and through acquisition. 108 new patents, 188 new inventions, these are just signals of the power of this combined organization going forward. At the same time, we have done our homework and continue to do our own, let’s say, improvements on the CO2 reduction, talking Scope 1 and 2, with a reduction of 4.4% overall per ton sold. This picture is a picture that I don’t know how, but magically, all the regions are at 15% growth. So Adrian, thank you for balancing that so well. But of course, it’s clear here, this 15% growth in the region is fueled by the acquisition, which obviously then also has helped all the regions to reach new heights. The Global Business region, which is the last time that we report independent without acquisition, reached double-digit growth, a clear sign also of the recovery of the automotive business overall as well as our traction and gaining new applications, especially on the e-Mobility side in that business. It’s not just the numbers that matter. We also have high emphasis on the non-financial areas. I talked about the CO2 reduction, scope 1 and 2. But also safety is a topic that we consider a key element to make sure we have a safe work environment. We reduced the accident rate by almost 24%. Waste is bad. Waste is something in multiple ways that we want to reduce. Also here, good progress. Water consumption reduction. I think here, all the arrows showing the right direction, but we can’t stand still. We have to go further also on that journey, and I’ll come back to that when I talk about the Strategy ‘28. As always, it’s – Sika is investing in the future, investing inorganically as well as organically, and mentioned MBCC, the biggest investment, but also did two other acquisitions, Thiessen in the U.S. and Chema in Peru. And we also explore new ways of, let’s say, tapping into interesting startup companies. Here, a company in Finland that has excellent cementitious flooring system that we can leverage, and we took a share in – or a stake in that company that is going to fuel some exciting specialty floors in Sika. The investments organically are expansion of the footprint, reinforcing of strong hubs. Like the U.S. is a strong hub, more than 40 factories in the U.S. alone. And here, we invest also into future growth and the expansion in Sealy, in Texas, the expansion in Chattanooga are a manifest also of our strong belief that North America is a place to be and the place to further invest. But that’s not only there. India is mentioned here with a new factory in India. India is a booming market. I will show later on a bit more details on that. And innovation, innovation, the opening of the technology center in Suzhou in China. It’s the second largest technology center of Sika behind Zurich. It’s a clear statement that Asia, Asia Pacific with this hub, building a strong competence level that influences the rest of the world as much as the rest of the world influences Asia Pacific. I think this is a slide just showing the base of our business in a way, we talk more and more, the vertical aspects of our business. And you see a strong balance. The infrastructure and the commercial are two very important segments for us, vertical markets. The residential, growing, not, let’s say, being dominant, but clearly visible and relevant and a great opportunity for more. And then the automotive and the industry segment, that is also an excellent addition to the 3 others. This is the base where we come from, and this is the base where we also build the future. And it’s a very strong mix of vertical markets that we focus on. Another angle to look at our business, the base business, is emerging and mature markets. We have always shared this view, but you see how the emerging markets are catching up 41%, while also mature markets are growing. So this is not the one or the other. Both of them can grow, and that’s what we’re aiming at. The same is with the new build versus refurbishment. Here you see the ratio as well. Our refurbishment is dominant. That comes from our strong position in Europe and in North America, where a lot of refurbishment of infrastructure and building is a core business, while as the new build also is, of course, in emerging markets, the majority and our priority to grow. So it’s also here, this is an excellent balance, also hedging, let’s say, besides the vertical through the geographical balance of the company. We are very proud of our historical performance status. We stand for market share gain, we stand for overproportional profitability improvement, and we have delivered that over the past 6 years, starting 2018 as an indicator, growing in Swiss francs 9.7% annually, and growing the EBIT 12.2% year-over-year. Here, we took the liberty in ‘22 and ‘23 to show the EBIT evolution, excluding the one-timers, which Adrian will go into details, but it’s the underlying strong operational performance of the company over these 6 years. And we intend to continue that, of course, also in the next years ahead of us. Many questions in this .Wild ‘20s came up. How do you explain this? How is that? And how are you doing and the markets are doing? I think we tried here to bring some clarity what happened in 2020. When we had a standstill of the economy worldwide, we had a negative organic growth. And we compare us, let’s say, to our peers in the industry, this is about a dozen of players that are listed that we have data to that we can compare. We all went into this COVID, let’s say, incident and we had to preserve our companies, and I think we did well, but everybody had to adapt. And you see our peer organic growth, our organic growth almost at the same level. But then the year ‘21 was the year where things came back. Volumes came back. And then in a volume-positive market, we excel. We have clearly surpassed our peers in this race for the volume, and we delivered very well. ‘22 the year where pricing was an absolute mandatory topic to offset the ever-rising input cost. And here, looking for margin, looking for pricing is – has been clearly a main focus in those – in that environment, while also we have to consider that our split is a little bit different than others, where the price increase in Asia has been a fraction of the price increase in Europe and in North America, even also the lower input cost variations there. So it is a strong performance there as well. And then we coming to ‘23, last year, here, again, with a lot of challenges, negative volumes to start into the year. Some of them have improved. Some have more or less stayed flat, but you see, we grew by acquisition. Obviously, no secret, but then we compare our 1.2% organic growth with the minus 3.5% of our peers, I think a substantial overachievement in a tougher market, where less is available, but we succeeded to gain market share in a profitable way. Now talking about MBCC, my favorite topic anyhow for quite a while, now it’s real. Now we are in execution mode. 6,000 employees onboarded on the 2nd of May, CHF2.1 billion. That’s the number we communicated at the beginning of the journey. Converting it into today’s Swiss franc, it’s probably less than CHF2 billion, but still significant. And it’s a major boost to the organization, but it comes from the, let’s say, complementarity that we have in the field. The portfolios, the strengths of combining two major players offering to our customers a full range, the strongest range in the industry has shown huge potential, which leads to the next slide, an important slide, of course, the synergies that we are generating through this transaction. And as I mentioned, we already collect CHF41 million in ‘23. And we have a clear, let’s say, pace up to CHF180 million to CHF200 million in the years to come. And here, outlining also how this segmentation goes in ‘24 and ‘25. Wonderful, but these numbers are the result of all the complementarity that we see, complementarity on the commercial side, on the sales side as well as on the cost side, where we have a tremendous synergy potential. And we go after it, and we are doing very well on that journey. It’s the people that make such a transaction work. And we have invested a lot, and we still invest a lot into staying close to the organization. The new joiners as well as the Sika organization, we measure this constantly. We call it a pulse check to see how the organization is going along with the strategic direction. Is it understood? Is it positively perceived? And here, we see a pitch that overall is very encouraging. But of course, you also see points where we have to go and dial in and help the organization to improve. So it’s an excellent tool for us to safeguard. That’s the main asset of this transaction the people on our side, on the new China side are fully engaged in executing the initiatives that we have outlined for the future. Let’s talk a little bit our midterm aspiration. I think it was presented at the Capital Market Day, where we said, okay, yes, we are here in ‘23. This slide is updated with the ‘23 figures. Aspiration-wise, we are very clear. We want to continue to grow, grow profitable. Ultimately, we want to be in the 20% to 23% EBITDA range going forward and 6% to 9% CAGR in local currency growth going forward. I think we are well on track into this journey. And a few aspects I would like to just remind us why we are so confident of what’s – why we have such a great opportunity ahead of us. The market is huge. CHF110 billion is our addressable market. We have 11% market share. As you can see, it’s quite fragmented. It’s – half of it is probably covered by the top 30, and the other half is then individually in local players or regional players. There’s a lot to gain for us. 89% are still up for us to go for. And we intend also to raise our market share going forward organically and inorganically. I think the strategy Sika like, quite simple, four pillars that are the engine of driving the right-hand side, the financial results. The non-financial results, which we have clearly also brought in line with our expectation what we as a company, are committing ourselves to, say, on the SBTi targets to reduce the greenhouse gas emission. But also on the people side, the column that is driving everything we do, making sure that we maintain and build on the strong engagement of our employees, but also then the natural resources to do our own homework in helping to preserve the natural resources going forward. Now this is a slide that shows how the 6% to 9% are built up and not so much on the underlying market or the acquisition. It’s the core element, the key lever of the growth. It’s the market penetration. And here, for us, the leveraging of our strong position, which has been a key contributor in the past 6 years as outlined, still, a lot more that we can expect there. If you just bring all the countries to a similar level like the average, we have magnificent growth potential. Cross-selling on the buildings, on the structures, we have so much more we can do, and we want to tap into that as well much more. The vertical markets are a signal for how we are addressing as an additional dimension, also the potential that comes with the nature of the construction. Multi-channel indirect, direct retail, which then, of course, goes more into the residential area, huge opportunities. Our brand is the strongest brand in the industry. Let’s leverage it. Let’s bring it also more and more into the distribution, the retail. We can definitely take great advantage of there. Then Christoph preferred the slogan, go where the money is. I think, yes, absolutely right. We invest in key markets where we know there is – there are activities. And we want to tackle them and not waste our energy on things that are irrelevant. Key geographies, I will show another slide in this regard. That goes in hand with go where the money is. It’s also focusing on not neglecting, but, at the same time, being aware where are the key geographies of our companies. And then we have high potential markets, specialty markets, where we can also excel. And here, I would say, our adhesive business is a business that has, I’d say, outstanding opportunities going forward, our cementitious business, outstanding opportunities. So I think we want here also to leverage furthermore. The key geographies, as I mentioned, look at the map, not too much yellow, but the yellow represents 75% of the CHF110 billion. So – and we are in Europe, we are in the U.S., we are in China, very strong. Not to forget, the U.S. is our largest single market. 20% of our revenue is generated in the U.S. China is 10% of our revenue. It’s the second largest single country. Europe, okay, 27 countries. So we aggregate that, of course. The biggest single market by itself. But India, an emerging market. Japan, I would say, an underestimated market for many Western companies, but we have the footprint in China – sorry, in Japan. And Japan is a significant market with very interesting, specific, let’s say, requirements. I will show that in a moment, how we tap into that and benefit from all these key markets, leveraging our competencies across the globe. Looking into the U.S., I think everybody is aware that the U.S. is in a change mode. The outsourcing of manufacturing, which was the theme of the past 20 years, has come to a stop. It is coming back, industries coming home to the homeland. And it is called reshoring and with significant projects. It’s taking place. I mean, you see it in the statistics. This is an example of the Samsung (KS:005930) factory in Austin, Texas. I was there in September. It’s huge, 557,000 square meter plant. This factory has 1,250-acre size. For those that don’t understand the acres, this is 5 square kilometer is this factory. It will generate 50,000 jobs. And the jobs generate cities around an infrastructure around. So this is not just the investment that happens, let’s say, onsite. For those that live in Zurich, Zurich, the city has a size of 88 square kilometer. 5 square kilometer is huge. I’ve never seen anything like that. They are building the first factory of plant of hand factories on this location. This is when America goes big, they go big. And there are multiple projects like that taking place, say, to semiconductors, say to battery, drive, say, data centers. We see a lot of very positive momentum, and this is new build. And traditionally, U.S. is a market where refurbishment is a dominant theme, like in Europe. But this is fascinating to see that this reshoring takes place, and we are part of that, and we benefit a lot of those activities. But talking about Japan, it’s a CHF5 billion market potential. We all know Japan is not the growth engine. It’s very stable, but it’s very specific in competencies. Here, we show the high-rise building that we have helped to build in an environment that is super challenging. And they always have a different approach to challenges. And those approaches make us a strong company, contributing in Japan and taking those elements out. Our footprint in Japan has substantially increased with the 3 acquisitions we did in the past. We’ve started with Dyflex, hematite adhesives and lately then MBCC adding. We are a powerhouse in Japan, and we want to share that also in April when we do a, let’s say, an investor event in Tokyo, showing how we capture the Japanese, but also Asia Pacific as a key geographic for the company. India, another key geography that is on the move. I think for me, most fascinating is India has always been, let’s say, a continent of hope. But ultimately, what makes me confident that it is different this time is the investments go into infrastructure, infrastructure first. The country is investing in building up the infrastructure in transportation, energy. That’s the foundation of any development in any country. We see it in China. China invested heavily 20 years ago in an infrastructure that is well advanced to probably mature markets, like Europe or the U.S. But India is now on that move. And that gives me confidence. We all know still that it’s election year, and this may change. But we are optimistic that the current government will continue. And so, also the continuation of that investment into meaningful infrastructure is going to be very beneficial for the country, but also for our business. This is the famous slide that I like so much. We have the privilege to be active in a market that can only grow, that can only grow because the megatrends surrounding. We need more construction. We are loving mobility. We have to change the way we build. We have to change, we move around. And for this, the road gets more, let’s say, challenging. It’s more difficult. And to navigate through that, we are the enabler. We have the solutions for sustainable construction. We have solutions to tackle raw material scarcity. We have a lot of additional, let’s say, accelerating elements besides the megatrends themselves, population growth and so on to benefit from. That’s fueling our confidence in our forward-looking 6% to 9% growth ambition. If I look into some of those megatrends, the population growth and back here to India, it’s a largest single country with the largest population. This population has huge demands in infrastructure. This example here is one of them that I compare with China, 508-kilometer long high-speed train system. This is helping India a lot to connect, while it is almost impossible to travel. If you have been to India in the last years, that’s the most painful thing. This is tackling this challenge. And more roads, train, ports, airports are in the buildup, and that’s required to have a sustainable long-term growth for the economy in India. And here, we benefit immediately on this big project, for instance, where we are at 20 different locations that are along the 500 kilometers, helping to create the required concrete with the admixtures that we provide, making this fast, swift and efficient. Another population growth, Africa is a growing continent or exploding continent. Some of the countries have average age of the population of 20 years. I would say, in Switzerland, we are a bit above that. So that’s something that will trigger, of course, future needs and demands. And here, this is an example out of Ethiopia where this is a hydropower dam that is built to provide infrastructure energy to this growing population. We will see more of that in Africa because it’s absolutely connected to the growth of the population in this area. The urbanization. Tokyo has always been a crowded place, and it had limitations in going upwards. But here, the sky is the limit. Go further. Go beyond. I was very proud to be on the Skytree several years back. Tallest building in Japan, 634 meters, I believe. That’s a landmark building. But now, it goes more commercial. This building here, Azabudai Hills building where we also will have our investor event in is a great example how Japanese engineering is stretching, let’s say, the limits, goes beyond. And we are part of that, we enable that. Our solution developed in Japan for Japan, are enabling this. For us, of course, this is a possibility then to leverage this, bring it to the West Coast of the U.S., bring it to Turkey. Of course, not the same solution, but we have the competencies coming from, let’s say, the most challenging environment and leveraging this across the globe. So here, fantastic activities that just so we benefit, first of all, of course, quite nicely on that building, but the competence that comes with it, our reputation as being the best source when it comes to the most challenging aspects of building. Waterproofing, structural, you name it, I mean, we are clearly here, a leader and building further on our leadership position. We also have – not to forget, we have built infrastructure, commercial buildings that are retuned. This famous icon in London, the Battersea Power Station has completely been repositioned. It’s now a commercial center. It’s a beautiful center, I believe. Never been there, but I hear. So kind of, yes, we are retuning, not tearing down and rebuilding. We maintain. There is a lot of activity going on to make this a suitable place for the new usage of that building. And you see here some examples of what goes in there. Hidden, of course, because what you see, that’s the surface, that’s the floors, that’s the high-rise ceilings and so on, but behind this structure needs to be, from ground up, reengineered. And for this, our solutions are first choice. I talked about scarcity of raw material. And here, one example is sand. I think it’s clear that the old days where sand out of the river was available in excess at no cost are over. And here, we have the means to make also secondary less quality sources usable and still have high-performing solutions for our customers, but also for our own consumption of sand in our products that we sell. Here, we have great competencies. Again, we leverage that. It is one that is located in Lyon in France. It is fantastic to see how this center, together with the other centers that we have worldwide, is tapping into new alternatives and make them, let’s say, compatible for the future with the chemistry that we add to those sand alternatives. Labor shortages. Skilled labor shortages is an element that is, let’s say, mind boggling, holding things back. When I was in the U.S. early in the year talking to contractors, they said to me, I could hire 300 people immediately. I have the projects. I don’t have the people. It is a major limitating factor for contractors to find, and it gets worse and worse. And it happens not only in Europe and in the U.S. It’s a topic in China as well as in Japan anyhow. And what is the remedy to that? We need more simple solution, easy to apply. We need the robustness that you also can with – work with less skilled labor and still do performing job. Technological process. I think here, the transformation of the mobility, the car industry is, I think, evident. This opens up new opportunities for us. It started with the battery. But the batteries also become more and more a means to level out demand peaks and become half of the grid structuring. So it may be at home. It may be in larger scale also for the energy provider, a mean to offset those peaks and level. So this is just, let’s say, in an evolution, and this is not yet foreseeable where it will end, but we are part of this. And we are together with those battery producers, with those energy producers. We are working on the next generation, innovating the next generation of battery efficiency, battery reliability and so on. Another hot topic that I push very much is digital is the future. Construction will always be with something that is tangible, but how we construct. We’ll have a lot of digital elements in there. And here, you see some examples. On the upper left side, our digital tools help to characterize the input materials, sand aggregates that go into concrete. With that, we can then fine-tune faster. We don’t need, let’s say, endless trial and error. We can immediately shortcut the definition of the optimal mix design through these digital tools. Then we are following, let’s say, our products in the pre-cured stage until it is in place, making sure that there is no change in performance over the time until it is set in place. The third step is then that we want to see our cured material how it is performing over lifetime. Sensors on the roof that detect early on, that there might be some leakages help to prevent major renovation cost because it’s too late in detect them. When it comes through the ceiling, it’s too late. When it’s on top and you see there is a monitor that says, here is some humidity, you can go spot-wise, fix it, and you’ll save a lot of cost going forward. The same with infrastructure, bridges. Bridges are over the 50, 80 years of life span, aging, of course. And if we wait too long, the cost to remedy are outrageous, sometimes even – not even possible to repair, but rebuild. Sensors in the bridges can and will tell us going forward when things are starting to occur that we can select spot-wise repair. But I call it small invest in the beginning, saving big over life span. That’s the theme. Digitalization will help us to bring this to the market and say, look, we fast – we fix it in the beginning, so that we, over time, have much less cost. This is the future in digitalization that we are driving. People, our 33,000 people. It is, to me, absolutely the core of everything. And I don’t want to make nice statements. It’s just very simple. Our people are all equal. My statement on day 1 with MBCC was very clear, you are as much Sika as I am. There is no difference. This is day 1 for you. This is day, I don’t know, many days. It doesn’t matter. It’s not we – don’t look back. We are together. We are equal. And I don’t want any differentiation by any characterization in our organization. We are absolutely equal in all aspects. And discrimination or exclusion on any aspect is absolutely not allowed, and it is also against our performance drive. How could we exclude a certain, let’s say, group of individuals? These group of individuals represent diversity that makes us stronger. Very simple, my drive for equal opportunity, my drive for bringing this is also performance related. We are stronger in our diversity, and that’s my message to my organization. That’s my message to everybody. This is very clear. We have to live this every day. A slide that we shared multiple times. It’s, to me, the accumulation of everything. We had nice evolutions. Performance requirements were growing in the years from the ‘90s into the 2000 and so on. Very clear, we went higher. We had more density. But with these megatrends, challenging us the way we are building, the way we are moving is making life more difficult, more challenging. We are the remedy for that. We have solutions, smart solutions that help to tackle those and turn those challenges into opportunities for our customer, but of course, also for our company. Great opportunities. This acceleration on this penetration curve is going up every year, going into the next 20, 30 years. I’m fully convinced, and I call it a fantastic growth opportunity besides the growing need for construction overall. And with that, I would then hand over to Adrian for the financial aspects.

Adrian Widmer: Very good and thank you, Thomas, here for giving us the highlights of the very successful year 2023, but also showing here the opportunities and the initiatives going forward. A warm welcome also from my side to all of you here in the room and the ones joining online. I will now go into a bit more granularity on the financial result in 2023. We have heard it, we have been operating in a rather challenging environment, but Sika again has delivered a record set of numbers in terms of sales, cash flow and underlying profitability. Here again, the highlights. We posted a record sales level of CHF11.24 billion in sales, passing here the CHF11 billion mark for the first time, representing a 14.5% growth in local currency, 7.1% in Swiss francs. We significantly improved underlying profitability on various levels, particularly strong material margin expansion from 49.4% to 53.6%, an improvement of 420 points. But also on EBITDA level, an absolute record, CHF2.45 billion, an increase of 4.1%, in spite here of a significant M&A-related one-offs. Also record EBIT, if you exclude M&A-related one-offs, at CHF1.68 billion or 15% of net sales on a reported basis, as already heard, CHF1.55 billion, a 1.9% decline compared to the previous year. And the net profit as well, CHF1.062 billion, a decline of 8.6%. Record operating free cash flow. This is an all-time record, CHF1.373 billion, almost 60% up from the previous year, very strong cash generation overall throughout the year. ROCE was impacted by the acquisition of MBCC, 16.3%, down from 21.6% in the previous year. But we have, again, as part of the strong cash generation, also showed a very significant deleveraging from, let’s say, the peak upon first-time consolidation, net debt EBITDA level at the end of the year, already down to 2.6x EBITDA. And then lastly, as you have also seen, a continued increase of the dividend. Here, our Board of Directors again proposes a dividend increase of 3.1% by CHF0.010, CHF3.30 compared to CHF3.20 in the previous year. I will now talk about some of the elements here more specifically, starting again here on the top line where overall sales growth of 14.5% in local currencies was clearly very heavily driven by acquisitions, predominantly MBCC, here with 13.3%, adding a clear double-digit contribution to top line growth. But also organically, 1.2% growth in a negative market and also with an improving volume trend – a clear improving volume trend throughout the year 2023. On the negative currency effects, translation effects, very significant, minus 7.4%. And sometimes, it’s also good to see this in absolute terms, almost CHF780 million of translation impact given the strong Swiss franc, the appreciation against basically all currency across the world. But also putting this a bit in context here of the last 3 years, again, a double-digit growth, as the 2 preceding years with a 3-year average of more than 15% of growth in different driver and elements. But I think, very clearly here, also showing the resilience of our business model, the ability to grow strongly also in challenging environments. And this is due to strong balance, be it geographically, but also in terms of maturity of the markets and many different aspects as well. Here, looking at organic growth throughout the 3 years, close to 10% organic growth per annum, while acquisition on average contributed 6% of additional growth. If we look at the P&L and move down here from the sales line. As mentioned, very strong delivery here on material margin, 53.6%, 420 basis point improvement over previous year. If you look quarter-on-quarter, continued improvement also here in Q4, which marked the further expansion of the material margin, 55.1% in Q4. Overall, across the year, solid pricing in combination with the gradual decline of material cost, but also ongoing structural initiatives here, supporting and expanding material margin overall. As a small negative, there was a small PPA-related effect will come to this a bit later, but also, here, procurement synergies in relation with the MBCC acquisition supporting all, contributing here to this strong material margin expansion in ‘23. On the operating cost side, and here, I’m referring to both personnel costs as well as other operating expenses, these costs overall developed over proportionately, but include, as mentioned, significant one-offs related to the transaction and integration of MBCC. These onetime costs, I will then detail a bit later on when we look at the EBIT bridge. Specifically, on personnel cost, here, we had an increase of 17.3% with the acquisition of MBCC, including, here, related one-off severance cost as the main contributor. At the same time, organic headcount development was slightly negative. However, wage inflation accounted for about 5% here of personnel cost increase on a like-for-like basis, leading to a negative cost leverage. Other operating expenses here, increasing significantly by 31%. But here, the lion’s share of the extraordinary one-time costs, are included also in the previous year, a one-time gain on our Corrosion Protection business sale also affecting here. And obviously, the integration and acquisition cost of MBCC, CHF131.5 million lion share here included in other operating expenses. If we exclude these items, these costs increased by 17%, largely here driven by the addition of MBCC, but also due to the general inflation environment, higher energy cost, but particularly also the fact that we didn’t reduce here marketing and travel cost. We maintained here a very strong customer engagement in all market-facing activities. As a result, and including all these items, EBITDA still grew, as mentioned, 4.1% to CHF2.045 billion. On the depreciation and amortization line, here, a growth of 28.9% here, primarily related to the additional intangible amortization relating to MBCC, while the overall increase in depreciation was largely in line with sales growth. Consequently, EBIT on a reported basis, CHF1.55 billion declined by 1.9% from CHF1.58 billion. However, excluding these M&A-related one-timers, EBIT increased by 80 basis points, 12.7%, to CHF1.68 billion. The various elements here of the EBIT bridge from ‘22 to ‘23 are illustrated on that slide. And given, let’s say, all the impacts, it probably warrants here a bit of a closer look and some more granularity behind it. Again, if we start here on the left-hand side, we have reported EBIT 2022 at 15.1% net sales and eliminating both here the onetime gain. And also in ‘22, acquisition costs relating to MBCC, we arrived at an adjusted 2022 EBIT of CHF1.49 billion or 14.2% of net sales. And doing the same in ‘23, on the other side of the chart here, reported EBIT of CHF1.55 billion, adding back here the onetime impact of CHF131.5 million, arriving here at an adjusted EBIT of 15%, CHF1.68 billion here, this 80 basis points improvement. But if we unpack here this M&A cost adjusted performance further, we see a significant organic like-for-like increase in EBIT margin from 14.2% to 15.8%, strongly driven here by organic material margin, while inflationary driven cost leverage was negative, as already alluded to. And then we have the MBCC contribution, which, overall, in absolute terms was significantly, but is coming, obviously, as expected with an incoming lower profitability and additional purchase price allocation effects, particularly on intangible amortization in here with a certain dilution. Here the incoming dilution effect, 50 basis points on the PPA, both the short-term as well as the ongoing amortization, 70 basis points. But we can also see here the already strong impact of synergies here, CHF41 million. We have heard the number very well on track and already starting to reverse here part of the initial dilution. If you go back to the P&L and looking below the EBIT line, also here, significant impact of MBCC-related elements. Net interest cost increased by CHF135 million, which – or are CHF135 million, and this represents a CHF95 million increase, largely related to additional debt and the high interest cost in connection with MBCC, but also on the other financial expense side here, CHF78 million. This is an increase of CHF41 million, up from CHF37 million. Here, the main drivers are hyperinflation accounting, Argentina and Turkey, but also higher hedging costs, particularly related to an increased interest differential as well as valuation effects. As a result, net financial expenses in total increased by CHF131 million to CHF212.7 million overall. On the income tax side, here, effective group tax rate did see a decrease from 22.4% to 20.5%. Overall, we are seeing a slightly decreasing expected group tax rate, but the effect was compounded by a positive onetime impact related to a change in estimate in deferred taxes relating to the former Parex China business and the plant here, legal restructuring. This has essentially then led to a tax rate of 20.5% and overall, a net profit of CHF1.626 billion, a decrease of 8.6%. Turning to the balance sheet. Obviously, also here, MBCC with an impact with balance sheet total increasing by 33% to roughly CHF15 billion. The decrease in current assets, primarily due to a reduced, but still very solid cash position that was used as a partial financing of the MBCC transaction, while working capital balances with accounts receivables and inventories decreased the ratios, albeit on the proportionately due to disciplined net working capital management and also to inventory valuation effects here. On the non-current asset side, also here, biggest contributor, MBCC additional fixed assets, goodwill and amortizable intangible assets, non-current assets going up from CHF6.3 billion to CHF10.85 billion with the given ongoing amortization, but also currency effects already reducing this balance since the initial consolidation in June by more than CHF500 million. Looking at the passive side here of the balance sheet, current liabilities development mirroring accounts receivable. And here, obviously, also a big change financial liabilities did increase due to CHF2.9 billion of Swiss franc and eurobond offering in ‘23 to finance the MBCC transaction as well as the utilization of our RCF facilities, partially offset by the early conversion of our remaining convertible bond, CHF1.24 billion reduction. Total financial liabilities at the end of ‘23 stood at CHF5.86 billion, an increase of CHF1.9 billion overall compared to the end of ‘22. And net debt at CHF5.2 billion, up from CHF2.1 billion a year earlier. Equity as a result here of solid profit generation net of dividends as well as the early conversion of the convertible bond increased by close to CHF1 billion or 19%, representing an equity ratio of close to 40%. And then lastly, I’ve mentioned, ROCE decreased to 16.3% from 21.6%. But if you adjust this for acquisition, the increase was about 200 basis points to 23.5% overall. Turning to cash flow, one of the very strong elements of ‘23. And here, we see the strong increase and the components obviously, strong profitability as the basis, but also increased depreciation and amortization, which is about CHF102 million higher than in the previous year, adding roughly CHF500 million. But particularly, also here, net working capital, very disciplined management here, adding CHF82 million of cash generation compared to about CHF326 million of buildup in the previous year. So I think a very strong and important focus on this area, generating significant upside here on the cash flow side and then capital expenditure with CHF273 million on a net basis, about CHF40 million higher than in the previous year. As a result of the strong cash generation, we have already strongly delevered here from the peak in June ‘23, when we showed here the initial consolidation of MBCC, where our leverage material stood at 4.1x net debt-to-EBITDA, of course, without any profitability from MBCC against it. Another key contributor, obviously, of this strong deleveraging here in the second half of ‘23 was the convertible bond conversion with overall debt reduction in the last 6 months from a net debt reduction from CHF7.3 billion in mid ‘23 to CHF5.2 billion at the end of 2023, and with our net debt-to-EBITDA ratio at 2.6x on a reported basis. Then lastly, this brings me to the dividend proposal. As mentioned earlier, the Board of Directors of Sika proposes again a higher dividend compared to the previous year, which marks the 12th consecutive year of dividend increases. It is proposed to increase the dividend by CHF0.010 to CHF3.30 per share or an increase of 3.1%. 50% of this proposed payout will come out of retained earnings and the other 50% out of the capital contribution reserve. The overall payout ratio here corresponds to roughly 50% of net profit attributable to their shareholders. With this, I conclude here the financial part, and we will now come to the outlook for ‘24.

Christoph Ganz: Hello. Good morning, everyone. Pleasure for me to present you for the first time on Europe, Middle East and Africa. I’m running the region now for 4 months, so I’m still a bit in the learning phase. But it’s a real pleasure to get to know the new colleagues and to see also the opportunities that also EMEA has. Often, it’s been forgotten a bit, and it’s standing a bit in the shadow of Americas, but there is a lot going on. I’m amazed. And we just have to align now the organization to get to these opportunities here as well. So last year, the focus – you heard it also from Thomas and Adrian, the focus was on margin and pricing. And I think EMEA has been doing quite a good job there. And this year, the clear focus is on growth and on volume. And you heard about this famous concept of go where the money is, which created a lot of growth in the Americas and bringing this now to EMEA. And we’re doing a lot of workshops now with the companies, trying to find out where these opportunities are, where is the money in the next 2 years and then, accordingly, align the organization towards these opportunities that are around. It’s interesting; EMEA is a very heterogeneous region. So you got the growth engines, Africa, Middle East, Europe East. And there, it’s very clear, we will continue seeing very good, strong double-digit growth. Also this year, there is a lot going on. And then we have the DACH region. We have also a bit Europe North, for example, where I tell my guys, "Look, we got – this is where we have to create growth. Growth is not falling from heaven. We have to create it. It’s maybe a little bit more challenging in these areas, but it is absolutely also possible." And there is a lot of money, I’m amazed. So infrastructure pops up all over the place. Also in Germany, I’m really as impressed how much money European Union, for example, also the Deutsche Bahn; they’re going to invest in Germany this year and, of course, in the months and the years to come to renew their infrastructure system. There is investment into nuclear plants in France. They have 6 projects that are ready to be built. And they’re talking about 8 additional nuclear plants that they want to build in. In the U.K., they talk about a second one. These are huge projects for us. This is really – this is where the money is. Water I mean you’ve seen hydro plants projects, not only in Africa, but also in Europe. Of course, you know what’s going on in Saudi Arabia. This is really unbelievable. Even from for an American, this is – seeing what’s going on there, this is really impressive. And then, for example, data centers. Interesting for me to learn what has started in the U.S., would say, 3, 4, 5 years ago is now just starting in Europe because companies want to have their data in the local company. They don’t want to have the data somewhere sitting in a U.S. data center. And it’s really impressive how many data centers are going to be built by U.S. companies, actually, it’s interesting, are going to be built all over Europe. Semiconductors. What you’ve seen from Thomas in Texas, these are now U.S. companies going to build also semiconductors in Europe, in Germany, for example. Intel (NASDAQ:INTC), I’m sure you heard about that, but it’s not the only one. There are other semiconductors. And these are big businesses for Sika because we contribute all over these projects. So there is money to win in EMEA, no doubt. And of course, we’re ambitious people. We will try to get as much as possible to participate here. Then the whole distribution topic, retail and e-commerce, in particular, here, we want to make a big step forward. I must say, MBCC is a very good completion of what we’re doing. So in Germany, for example, we are not really strong in retail. Now these guys come with a strong brand. For example, PCI, you might have heard of it. Check yourself in – when you have a little job site at home, I’m sure you’re going to see PCI branded tile adhesives, leveling mortars, tile grouts. It’s a real strong brand. And we will – these guys will help us now to build further our footprint in retail in Germany or in the DACH region here, for example. Then the whole CO2 or sustainability topic, it’s – on one side, of course, we’re trying to reduce our own footprint. On the other side, we are pushing very strongly to turn this trend into business for us. And there is, on the one side, the newly integrated automotive and industry business. So this is – the EMEA part is now run by us or by me here also. And here, of course, I think we presented this before, it’s e-mobility. It’s the battery assembly. There are a lot of battery plants being built in Europe also by non-European company or car manufacturers or battery manufacturers. And of course, the whole topic of renewable energy, wind, solar. Wind is an absolute fantastic business for Sika because we help building the blades with our industry technologies. We also help to build the molds for producing these blades. But of course, we’re also heavily involved in building the tower. There’s a lot of concrete involved. There’s a lot of grouting, mortars involved, anchoring adhesives involved. And here, Sika now together with MBCC, we have an absolute fantastic footprint. On the construction side, we have very strong initiatives. So we go now and visit all these companies and institutions, university, cities that made net zero pledges, and we present them our technologies, helping them to bring their CO2 footprint down. So we have – for example, we are a leader in Green Roofs or, of course, also in thermal insulation of buildings, houses, etcetera. And we have many other technologies helping these companies and institutions to reduce their CO2 footprint. Digital lead generation, it’s something where I think Europe has a bit a backlog. This is, of course, this I bring with me from Americas, where we started this very early. And I mean, really unbelievable, very good success we have here, winning projects through digital channels where our customers contact us digitally. It’s not the Sika salesperson going there anymore. It’s a request coming through these channels, and we turn that then into business for us. And this is something we’re going to push now very strongly also in the EMEA. People. I think I said this also many times before, you heard it from Thomas, this is not just saying or a blah, blah. This is key. And Sika is a fantastic place to work, add for talented people. But sometimes, we are maybe a bit too humble to Swiss and do forget to talk about it also towards a bit the outside in social media. And this is something we want to do a bit more strongly. Here now in EMEA, we have a project which we call Cool Sika. So we want to really position Sika as the coolest place to work for in the industry among, let’s say, talents coming from universities, etcetera. And last, but not least, MBCC integration is progressing very, very well. It’s a pleasure to work with these guys. It’s – originally, we thought they had come with a different culture than our culture, but it’s totally wrong. I think they were just waiting for being part of a company like Sika where they can lift their entrepreneurial culture, their professional culture much stronger than before being part of a huge conglomerate and never really knowing what’s going on. It’s super professional people. They know what they are doing. They have very good products, actually. And the combination now, Sika and MBCC, and that was always our target is making this 1 plus 1, 3, no doubt. So very well progressed, and pleasure to see how this is now further developing. And I think now we go to Asia – Americas, I’m sorry. Hey, Mike.

Mike Campion: Okay. Friends, good morning. Good morning. Best regards from here in Boston, Massachusetts. It’s really my pleasure to briefly discuss with you our outlook for the region Americas. Maybe beginning with North America. In 2024, we had a slightly negative organic market development overall, while maintaining a really stable development in both our infrastructure and commercial construction activities. In manufacturing activities, we will remain solid. Development in residential construction will be a bit negative due to continuing high interest rates. But certainly, we will be improving in the second half of the year here in North America, particularly. For Latin America, on the other hand, we will continue to deliver very positive organic development across all sectors of our business. So we’ve had a fantastic year of previous year, and we see that to continue now for us in Latin America. Now looking at the surge in manufacturing facility investment, driven initially by the CHIPS Act and the Inflation Reduction Act subsidies. We see here continuing huge opportunities. As you’ve already heard about from Thomas on this fantastic Samsung project in Texas, where the Phase 2 of that project is now already underway. And many phases still to come, and we’re active in all of those. So now here in the top image on the right side, you see a picture of our data center. This is one of over 2,500 data centers in the United States. These data centers play a crucial role in supporting our digital infrastructure, enabling connectivity and powering various online services and applications. Data centers are just one of the many targeted markets in our vertical market approach. You heard a little bit from Christoph in his vertical market approach. This approach utilizes our unique cross-selling potential to maximize the turnover and return on each and every available project. So we pull as much turnover from those projects as possible, while simplifying the construction process for our customers. Also on sustainable energy, you also heard this from Christoph, it’s similar. We have these projects that are really gaining steam now in the Americas, with various onshore and offshore wind applications. Also hydropower projects underway in the U.S., in Mexico and Colombia. We really have here on these facilities numerous applications for green roofing, facade insulation, solar and EV battery plants. And these EV battery plants, of course, we not only build the factories, but we put products into the finished goods coming from those factories. We see these applications continuing to gain momentum really throughout the region. With our acquisition now of MBCC and Thiessen in the U.S. market, we see excellent opportunities in the underground business, with mining activities in Canada, where we really see a big boom now in underground mining activities in Chile and Peru. But while we also see tunneling activities offer huge cross-selling opportunities across the region. Again, we’re really uniquely positioned to benefit from these underground applications due to our diverse range and the experienced people. In the automotive business, here, once again, we’ve reached the pre-COVID levels for the car build rates. This, we can combine with our transformational activities in e-Mobility. And we will continue to provide higher content potential for each and every vehicles that’s coming off, particularly in these e-vehicles of the batteries. So here, we would like to help in the construction of the facilities and also what goes in them by making them lighter, stronger and, of course, more sustainable. You also heard briefly about the MBCC integration activities. Here, we’re well on track. The synergies are coming. You heard from Adrian, these synergies continue to expand. And we’re really excited by the strength of the people that we picked up from MBCC. You heard from Christoph already, these people are really like us and in our culture. So we’ve been able to put these two teams together, and we drove many, many synergies, particularly in the commercial side to continue to grow this business. So we’re really excited where we are now with this team. So briefly, I guess, the region is well prepared. We’re ready for another great year in 2024. And of course, I would be negligent to also mention, of course, the best people in the construction industry. I’m really, really proud of our Sika team and what we’ve been able to accomplish. And I’m very confident that we will continue this great performance now to lead the industry in 2024.

Thomas Hasler: Then we have Philippe.

Philippe Jost: Good morning, Thomas. Good morning, Adrian. Good morning, everybody, in Zurich. I’m joining remotely as well and take the opportunity to present the future in Asia Pacific. I think we’ve seen over the last past years that Asia Pacific has been always a strong contributor to organic growth, and we see that trend to continue in the years to come. It’s a very young region from a population point of view. Over 50% of the world’s population lives in Asia. And the continuation of urbanization and also the strong trend of those megacities continuing to grow really gives us a lot of opportunities in the construction market in Asia. We see a continuing underlying market trend. We also – from a market share point of view, Asia Pacific is probably the region with the lowest market share and, therefore, plenty of project opportunities. And we also see a lot of increasing building standards in the years to come. And as those megaprojects, whether it’s tunnel, subways, wastewater treatment plants emerge, the need for higher-end products, where our products come into play, are really increasing. So we see – in essence, we see opportunities on all areas, whether it’s infrastructure projects, whether it’s commercial projects, but also in the residential market. As my colleagues from two other regions presented as well, MBCC integration is really going well. We were lucky to have a very strong team join us in May of last year. And so we start to see combined opportunities mainly in the infrastructure projects that I mentioned earlier, but also in concrete production and also in the flooring application for commercial projects. If I go into a little bit more detail of the countries. We see in China, especially the continuous growth. This is driven especially by our distribution business. But also flooring projects in the commercial area are adding to the strong opportunities. And we see another strong year in these particular areas also coming up this year. Thomas already mentioned the infrastructure needs of this growing region, and Thomas specifically highlighted India, which the airport projects, infrastructure projects in bridges, roads, tunnels, the high-speed trains, these are all being unlocked. You see funding. When I visited Mumbai, it’s a tremendous change from 3, 4 years ago with all those roads being built around the city, that eased transportation, and we see continuous projects coming up, lining up. We’re adding – also, as you see in the one plant that we built last year, we’re adding capacities to be able to deliver those projects across the country that has huge needs in infrastructure. And also in Southeast Asia, another similar trend. The success that we’ve had in distribution business in China the last few years, we also see that as a model to roll that out into other countries in the region. We see India, as I mentioned, but also many countries in Southeast Asia, whether it’s Malaysia, Vietnam, Indonesia, that are a few years behind in the trends. And where we’ve taken the learnings out of China and bringing this retail leadership journey, as we call it, within the region, to other countries, and we see tremendous results already now by opening new points of sales, really copying the success that we had the last 4, 5 years in the Chinese market. Then the other opportunities that I would like to highlight is you see for many – whether it’s tariffs or other geopolitical reasons, you see many manufacturing companies, they have a China Plus One strategy, meaning that they want to build outside of China at least one other manufacturing hub. Often, you see plants being built in Vietnam or other Southeast Asian countries, but also India profiting from here. These are EV production. These are battery production, semiconductors, other manufacturing. They all need special flooring products. And here, we are extremely well positioned to work with these investors, to work with these projects, to supply our products into those projects and really enabling and profiting from this trend of additional manufacturing hubs being built in the region. The other area Mike mentioned it as well is in the car production rates that are going back up to pre-COVID levels. We see also our take in e-vehicles is higher than in traditional combustion engine vehicles. And the contacts that we have with Japanese, Chinese, Korean or even in Vietnam, producers of such e-vehicles really allows us to sell products into these markets in a higher growth rate. So overall, very positive outlook for the years to come for Asia Pacific. And also we have a strong team that I inherited from Mike that was built over the years, as I mentioned, joined in May by the MBCC team, unique in the markets. And therefore, we’re really well positioned to profit from growing underlying markets. And I would like to thank – take the opportunity to thank all team members out of – in Asia Pacific that contributed to the results of last year and already started working full speed on the results of this year. So back to Zurich now. Thomas, I think, you’re up next.

Thomas Hasler: Thank you, Philippe. This brings me to the last slide and combining all the regions together. Our guidance for this year, early in the year, still a lot of uncertainty around us. So we have concluded 6% to 9% in local currency, all in is the guidance on the top line. And on the bottom line, we stay a bit boring with our statement, but meaningful, overproportional EBITDA growth is our aspiration. And that’s what we are going to deliver in ‘24 again. The strategic targets outlined in our ‘28, which are mid-term targets are clearly a focus for us to deliver in ‘24. The first set of directive results, which will then, over time, lead into the range that we have indicated in the strategy. With that, I would now open up for the Q&A for the next half an hour. Good. Do we have microphones?

Q - John Revill: It’s working. Super. John Revill, Reuters. I’ve got a couple of questions, if I may. MBCC was the biggest acquisition, I think, in Sika’s history. And now, that’s been completed. So I was just wondering, are big acquisitions possible moving forward now? Or what’s going to be the acquisition strategy moving forward? Is it going to be like a lot of little things? Or could you do something big? That’s my first question. And then the second question is a lot of Swiss industrial companies have raised concerns about franc in recent months and the problems it’s causing for them. Now I know you guys do local for local, so it probably doesn’t affect you directly that much. But I mean, what’s your views on the franc at the moment? And is it a concern? Thank you.

Thomas Hasler: Okay. I think I’ll work on the first one and Adrian on the second. Well, I think the acquisition strategy hasn’t changed. We are doing bolt-on transaction, as the fragmentation of the market is offering these opportunities across the globe. Big transactions are absolutely part of our mid-term strategy. We will, of course, balance those, not going ballistic in our leveraging. We want to maintain our A- rating as a very solid foundation of the company. But as you can see on the chart from Adrian, our leverage is now at 2.6. It will come further down in the years ahead of us, which then will open up also possibility to finance another big transaction. So we are clearly also spotting and looking out and evaluating large transaction. But given our current, let’s say, debt level and also the deleveraging, I would say it is not something which we come tomorrow forward with a big transaction. But within our period that we have guided, I certainly see opportunities for that.

Adrian Widmer: On the Swiss franc, I don’t want to sort of evade this question, but at the same time, it’s probably the most difficult question. You can ask what is the forecast on currency movements. I think for us, obviously, as a Swiss-based group with the largest part of the business outside of Switzerland, this is a topic. This being said, as in previous year, we continue to believe that, obviously, the direction will not change. If anything, Swiss franc will rather continue to strengthen. I think in our case, very clearly, the challenge is the translation. We have a very strong natural hedge due to the, let’s say, decentralized nature of both revenue and cost with, let’s say, relatively little Swiss franc cost overhang. So it is here a question of, let’s say, managing this year more from a translation perspective overall, and that’s just what we have to live with. This is not changing anything, but we don’t have a big impact on, let’s say, more the transactional side given the very strong advantage.

Thomas Hasler: Good. Chris?

Unidentified Analyst: Hello. Thank you for taking my question. I have two, if I may. The first one is about your material margin assumption on your guidance. And the second one is about, maybe if you can answer this question, the market share of Sika in the U.S., especially on infrastructure business.

Thomas Hasler: Okay.

Adrian Widmer: Shall I take the material margin? Yes. I mean, if you sort of look at overall, let’s say, margin progression here, sort of the material margin element is obviously one of the pillars, one of the buckets we have here also guided. And we will continue to do that where we see the business hit overall is 54% to 55% material margin. We had 53.6% for the whole year. Clearly, here, the ambition is to push that further here to 54% or slightly above. Obviously, there is several elements. We continue also to see here volatility on the input cost side, although there has been a gradual reduction, more of a plateauing here now with some of the materials, for example, cement increasing here and there, we have, obviously, topics such as the Red Sea, which is currently not having a big impact. But obviously, this does infuse here some uncertainty on the progression. But our assumption today is probably more sort of a flattish development going forward, which should also with, let’s say, continued pricing here supports that journey going forward with all, let’s say, the other elements playing here into here the material margin.

Thomas Hasler: Okay. And on the U.S. infrastructure market share, that’s a loaded question. It’s very granular. I can say there are probably three, four main players in that field. We are one of them. I wouldn’t now rate them. I think it’s a healthy market for us where we have room to grow. So we are taking advantage of that. But it would be wrong to say we are, by far, the largest or – it is a particular market, a few players, strong players, and we are one of them. Good. Yes?

Benjamin Triebe: Thank you. Benjamin Triebe from NZZ. Also two points regarding North America, if I may. The first one, you talked about the growth potential due to the infrastructure programs. How much of this support and how much of the potential for Sika would be at risk in case of a return of Donald Trump into the White House? That will be the first one.

Thomas Hasler: Okay. That’s very speculative. But short-term, I don’t think that we would see a stop for this already in execution. There might be shifts. There might be different priorities. It might be that the other areas would benefit Biden as well as Trump have a very clear focus on the U.S. economy. Maybe they have a different approach how to stimulate the economy. But I’m not at all afraid, and I don’t take any part in this. But I would say, many of this infrastructure activities have been, let’s say, planned and are in execution. It would be very, let’s say, cumbersome to stop them in mid-execution. So I’m not concerned about that.

Benjamin Triebe: Thank you. And secondly, if I may, Holcim (SIX:HOLN) is splitting off its U.S. business. It’s separating it completely and saying that would be the best way to serve the market. Would that be an option for Sika as well? And why not?

Thomas Hasler: Okay. I would say, they – I don’t want to comment on those strategic moves. This is a different company. This is a different business. It’s a heavy material business. We are in the construction chemicals. I think when we presented our numbers of the past, this company, our company has benefited a lot of our global diversity. The markets are different. We leverage that across the board. Our tremendous growth and also profitability gain is based on our diversity that we have, not one or two pillars. We have multiples. And it’s not just the three regions. You heard it also, the Middle East is a powerhouse. We benefit. Japan is different. China is, of course, a huge market. India, I think we benefit from diversity. We are local. Of course, our products are locally produced and locally adapted to the needs. But behind that, we have a great leverage. So if we were to spin off one of that, we would weaken our company. And as we say, when we acquire 1 plus 1 equals 3, we believe 3 divided by 2 is less than 1.5. So this is not something that we would consider. Yes, Remo?

Remo Rosenau: Thank you. Remo Rosenau, Helvetische Bank. Looking at your guidance of 6% to 9% growth in local currencies, including acquisitions, of course, MBCC should add 4% to 5% alone. You had also a few other smaller acquisitions, so let’s say 5%. So at the lower end of this guidance, you only expect 1% growth or basically nothing in 2024. I mean, that contradicts to all you said the last 1.5 hours, basically. I mean, listening to all this presentation, it doesn’t sound like 0% growth, aside of the acquisition. So could you elaborate on this lower end of the – and even the higher end is not that high.

Thomas Hasler: Sure. That’s – I think we have to – we cannot change the world to the liking that we have. Our mid-term strategy shows nicely what is the evolution of our growth. It has base growth from the market. It has the market penetration and acquisition. But we are at the moment in a world where we have minus 4% market evolution. We delivered 1.2% on top, so we have a gap of 4%. And this, we cannot neglect and say ‘24, everything is at zero. Now the market will give us 1% or 2%, and then we add, and then we add. We have to be cautious that the market hasn’t overnight changed into neutral or positive. We still have this minus 4% that we are going into the year. And we just have to be a bit cautious that we don’t expect that this is now, in the next 6 months, going crazy and we have, let’s say, boost from the market. So this is guiding us to say, let’s not be ignorant. The market is still overall, besides all the fantastic elements that are there, we do have impact that are holding back, let’s say, our industry, and we cannot neglect it. So this 4% that the market is down, when we compare to our peers, is also going into ‘24, let’s say, the starting base. Yes, I believe that the markets will pick up, markets like EMEA. And Christoph mentioned, we are hopeful. At the same time, shall we now, I think, at the second month of the year bet on the huge recovery of Germany, I don’t think so. China is for us a solid contributor, but it is running below its potential. And the Chinese government is doing a lot to go back to, let’s say, growth rates like in the past. But it is not that easy. It’s more complex. And also, let’s say, the geopolitical differences are not helping. I think we are just, let’s say, well advised, do not neglect where we come from and how fast things can change. But that doesn’t change my midterm view. These are wild ‘20s where things go a little bit crazy, but the demand is there. The need to transformation is there. So I’m very optimistic in this regards. But this guidance is the guidance. You’re right, 4% to 5% is probably coming. That’s fair. There is organic growth in it. But one thing I can assure you, when we go on the field, we don’t go on the field to tie. We go to the field to win. That’s Sika. This is our spirit. We did it last year, we outperformed. We will outperform this year. But you can’t make the world, let’s say, a growing environment just like that.

Remo Rosenau: Okay. Fair enough. My second question on the targeted margin improvement. Let’s assume you get to 54% gross margin, which would be 40 basis points more. However, is it fair to assume that the bigger positive element should come from OpEx and from personnel costs, which have increased quite a lot last year due to the known factors of MBCC? So there is – I mean, the bigger part of the margin improvement should stem from OpEx and personnel, right?

Adrian Widmer: I mean, probably here also, in looking at sort of the margin progression, yes, the material margin part is one thing. There is the, let’s say, call it, OpEx or the leverage or the efficiency improvements. I mean, we continue to work here on many aspects throughout the value chain with very, let’s say, good projects on the way. I mean, you have the leverage element relating to, let’s say, the overall cost. I think we have seen a bit of a step-up, although inflation has not gone away. It will also depend a bit on the overall growth driving here leverage. So that is one element where I think there is obviously upside. And then we have, let’s say, the MBCC or acquisitions, where, on the one hand, we will still see a certain element of additional dilution given, let’s say, 4 more months, particularly from a seasonality perspective, another strong quarter, the first one, but at the same time, increasing synergy contribution overall. And we will obviously not have most of these one-time costs in 2024. So I think there is a clear progression. But also here, I think we want to be sort of clear and simple and not take one or the other out. But similarly, as to, let’s say, the top line, early in the year. I think we will drive all the initiatives, but we will then be, later in the year, also to be a bit more specific what that means. Thank you.

Jon Bell: Good morning. It’s Jon Bell at Deutsche Bank (ETR:DBKGn). Could you just broaden your comments slightly on raw material costs? What would be your base case admittedly at this early stage for the year-on-year movement? Or perhaps, give us some kind of indicative range. Thank you.

Thomas Hasler: Yes. Maybe here, we have seen a huge increase, of course, but we also noticed that we have a flattening of the raw material cost. Last year, we had some, let’s say, support from decreasing input cost, but this has leveled out. So I would say, going into ‘24, here, we have rather a new plateau that has been established over these 3 years. And we see also some commodities like cement, for instance, still going up. So the trend to, let’s say, reduce slightly has stopped. And it’s rather something where we have to be agile in adjusting as it comes. And certain price adjustments are, of course, mandated. We also have a non-material inflation cost that also needs to be translated into the pricing strategy. So I would say, yes, it is on a higher level, and it is rather flattish. But always, there are exemptions that we need to address and not to underestimate the non-material inflation cost that we also have to address.

Christian Arnold: Christian Arnold, Stifel. Just following that personnel expenses. I mean, we had an increase in – of 150 basis points. And you also talked about a one-off. Maybe you can quantify the one-off and what do you expect for ‘24. Are we going to see a further increase in personnel expenses in relation to sales?

Adrian Widmer: Yes. In terms of the personnel cost, I commented on, let’s say, the underlying, let’s say, inflation, wage inflation in ‘23, which was around 5%. On a like-for-like basis, the one-off that is included is to do with severance cost on the integration here. The levels is about CHF20 million. That is included in the one-off cost here. For ‘24, the expectation is that, let’s say, wage inflation to some extent will continue, probably not quite at the level of 5%, but it will also not be back to, let’s say, more normal levels. What we typically have across the group, 2% to 3%. I would still think that’s going to be a bit more elevated given the fact that, obviously, this – there is a certain lag, particularly in some of the European countries in terms of wage inflation.

Christian Arnold: Thank you. And the second question would be on operating free cash flow generation, which was great last year. Big swing factor here was net working capital, plus CHF80 million. Last year was a minus CHF320 million. So CHF400 million swing factor, so to say. For ‘24, do we have to assume normal development of net working capital in-line with sales? Or what do you expect?

Adrian Widmer: Yes. I think you’re absolutely right. Working capital has in the last few years been a big swing factor, as you call it. I would see clearly here continued, let’s say, potential in terms of optimizing on the inventory level, for example. Big focus is always on receivables also from a risk point of view. I think also, here, continued efforts. The payable side, I think, an area where, again, there is some improvement. So I would rather see continued improvement of the ratio, the, let’s say, overall absolute impact. I don’t think it will be again, let’s say, an absolute positive contribution. And – but as you say, this will depend on growth going forward.

Martin Flueckiger: Thanks. Martin Flueckiger from Kepler Cheuvreux. I have two questions, please. First one is an additional question – clarification question on your guidance for organic growth or sales growth in local currencies. Just wondering, based on your comments, or Thomas’ comments regarding raw material prices, what is your expectation for the selling price development in 2024? I’m just trying to figure out what kind of – what the implications are for expected volume growth going forward. Because if I remember correctly, in Q1 ‘22 – sorry, ‘23, you had minus 8% volume growth. So the comps are getting rather easy now. And I’m – and if I remember correctly as well, volume turned positive in Q4, slightly positive. So is that a trajectory that we’re going to continue to see? That’s my first question.

Thomas Hasler: And here, I mean, it’s clear, we won’t have a ‘22 situation where pricing will be the main contributor. We will see here a minor contribution from pricing. It is also very clear to us that our, let’s say, smart pricing approach needs to stimulate that we can grow on the volume side, safeguarding our material margin, of course. So here, we don’t want to go excessive. We have launched price increases, selected price increases, but the magnitude is rather minor in the overall assumption for the 6% to 9%. As here, we have to take a balanced approach, and that’s clearly volume driven, not price driven, if you exclude the acquisition part for the 6% to 9%.

Martin Flueckiger: Okay. And historically, your pricing has been at around 1%. Is that a ballpark number that we should reckon with for ‘24?

Thomas Hasler: That’s a good ballpark number, yes.

Martin Flueckiger: Okay, thanks. That’s helpful. My second question is on the synergies. Seems to me the synergies you’ve achieved with the integration of MBCC, the number that pops up in my head is CHF41 million. Seems a little bit larger than what you had anticipated. I thought the guidance was around CHF25 million or somewhere around there. So could you elaborate a little bit on the delta? Why you were able to achieve the CHF41 million, instead of the CHF25 million? And what you’re expecting for ‘24? Thanks.

Thomas Hasler: Maybe here, it’s quite simple. I think we have quite significant one-time costs, and each of it – and it’s one of them. With the start of the integration in May and then, let’s say, working together with the organization over 100 days, we saw this – we can move faster. The CHF25 million were our original plan to execute. So why should we delay? And yes, we will rather take the hit and are blamed this year that the reported EBIT is lower than last year, while we spent that, let’s say, on making sure that the synergies and the acceleration of the integration are a top priority. And that led then also to, let’s say, significant achievements already this year, which we, of course, expect and also to deliver in the following years, and that’s beneficial. So to your question, we have front loaded, I would say, the integration purposefully because we saw we can do it. We have the alignment, and we have the meaningful actions. And some of them are really, let’s say, high contributor, and that changed a bit the view on the aggregation of the synergies. The guidance? On the synergies...

Adrian Widmer: Yes, please.

Thomas Hasler: Yes. What do we have...

Adrian Widmer: CHF80 million to CHF100 million run rate, which is basically CHF40 million to CHF60 million incremental in ‘24. Thanks.

Thomas Hasler: Alessandro?

Alessandro Foletti: Yes. Good morning, everybody. Alessandro Foletti, Octavian. Thank you for taking my question. You mentioned the interest rates being a bit of a headwind, I think, in America. I wonder if there is a way for you to quantify how big this headwind is and if there is nothing like that similar also in Europe or maybe not in Asia because maybe that’s not relevant, but Europe and U.S.

Thomas Hasler: That’s a very difficult question, and I wonder how I can answer that. How to quantify how much it would be, if we would have, let’s say, the interest of before, it’s not as simple. I mean, we see, of course, that some businesses are super strongly impacted by the raise of the interest. Others maybe underlying trends. Like the commercial, let’s say, the office building, construction has probably nothing to do with the interest rate that is weak because of a change in pattern that you don’t need these buildings. These buildings are retuned into apartments. So I think it’s more complex than that, but it’s a headwind. And we see immediately when the interests are, let’s say, talked down, that’s then there comes immediately to the service activities that could then be, let’s say, unleashed. So it has an impact, but I cannot quantify how much that would be.

Alessandro Foletti: And then a second one on the automotive side of the business, kind of surprised to hear a lot of optimism for your side, at least that’s my interpretation. Definitely, for Europe, I personally, I’m not very, very positive this year. But also in general for EVs, particularly the Europeans and Americans, are in big troubles there. So why are you so much more optimistic?

Thomas Hasler: Look, we had a terrible time in automotive. The industry was down to 75 million units. But of course, this is an industry that runs on capacity. We are back at 90 million units globally. That’s positive. That’s kind of – that’s healthy. That’s what the industry needs. And you also can see it in our numbers that our numbers, we covered very nicely in that segment because it is back to, let’s say, pre-COVID build rates. That is positive. The transformation and, let’s say, the different region or, let’s say, the different accounts, taking advantage of that, pushing for electrification, that’s maybe a little bit less positive, especially when we look at, let’s say, the German car industry that is losing momentum. The Chinese are gaining a lot of momentum on the e-vehicle side. This is very well noticed, and this is also impacting our automotive business in Europe going forward. At the same time, we have a very strong organization in China. And in China, we work heavily on the battery side with the Chinese OEMs, and we want to expand that furthermore. So – but the industry itself is super challenged. And I would say, yes, some of the traditional OEMs are having not yet found the magic key to pass the way into the future. Besides that, that we have a lot of incentives that are distributed around the electrification. If that stops, the pure cost of the vehicles come to the forefront, this can also be, let’s say, a delay in the expected buildup of the e-fleet in Europe, in North America. In China, not so much. China has a very clear strategy to drive the e-vehicle. One way or the other, they will make it. They will push it. But it’s a different environment. It’s clearly a strategic target of the government to drive that as a leading technology in China.

Unidentified Analyst: [indiscernible] question here. Thank you for taking my question. I have two, please. The first one, can I go back to U.S. end market 101? So could you please remind us what is the U.S. end market exposure? So for example, commercial, infra, residential manufacturing. And I think did I hear correct that Mike started his section by saying infrastructure, he expected to be slightly negative or maintain stable? So can I get a bit more color on that? And then within the end market, full residential, could you please remind us what are the main products you sell in residential? Is that more directed to homebuilders for new build? Or is that for via distribution channel for remodeling? So that’s the first question. Thank you.

Thomas Hasler: Many questions in one question. I’ll try my best. So maybe I’ll start at the end. The 20% residential that I have shown as a group average is far lower in the U.S. than in the rest of the world. It’s far less than 10% in the U.S. And it is, let’s say, business that has built up with the big box players. So it is clearly, let’s say, family – single family home oriented, multifamily home-oriented business. It has a good growth traction. But compared to infrastructure, which is a strong leg in the U.S., roofing is a very strong leg in the U.S. Commercial is a very strong. And then not to forget, the U.S. market is a market with a lot of refurbishment. 70% of our business in the U.S. is refurbishment. 30% is new build. So that’s a bit to characterize our U.S. organization. The automotive business that is now also, let’s say, back in the region is, of course, a substantial part here also of the U.S. contribution. But this would be the – number one is roofing, then infrastructure, commercial, automotive and then residential probably being the smallest contributor on that scale.

Unidentified Analyst: Okay. Understood. And can you just clarify, did Mike say that he expect infrastructure to be negative or maintain stable or he...

Thomas Hasler: I don’t think so because it is positive.

Unidentified Analyst: Okay. I’ll clarify offline. Thank you. The second question is a follow-up on the EV-related question. I think even if we believe there will be strong EV growth globally next year – or this year, particularly driven by China, I think there is a very good doubt that there will be a price war in order to stimulate that demand. And I think that put a lot of pressure on the automotive, the EV supply chain, particularly actually on the battery side. So can you tell us what are the conversations you’re having with your EV battery customers? Are you already feeling the pinch or you notice anything in the way they place order and take inventory? Thank you.

Thomas Hasler: Our automotive business is a profitable business. That’s like where we are. We have to be profitable. It’s one of the most toughest businesses. My personal experience, if you come in with nothing relevant for the future, you will be pushed down in your margins probably even below zero. They don’t care. So it is very clear. The push on, let’s say, efficiency on the batteries, the next generation, it’s all driven by how can we, together as a key supplier with the OEMs, bring cost down out of the battery, bring efficiency in. And that conversation is super key to preserve that what we deliver today is not knocked down to a level where you are no longer happy with your business. So it is a business where you have constantly demonstrate that as a prime supplier, as a preferred supplier, you are working with them on their challenge in a very competitive market. And you mentioned it, the price war is out there, not only on the e side. It’s in every vehicle. It’s this efficiency and this drive for leanness, I would say, we stand to steam in the kitchen, and we – this is what we have done. It’s no different in the e-Mobility, but the e-Mobility has a bit faster cycle. This is not a 5 to 10-year cycle. This goes in 3 to 5-year cycles, and we have to stay relevant. And therefore, we invest in innovation. That’s why we stay low – close to those OEMs, so that we are the preferred source also going forward.

Dominik Slappnig: Okay. Thank you very much. There is – sorry to interrupt. There are still about 100 people joining online, and we have several question as well from the online people. And I’d like to ask here, first one, Cedar Ekblom from Morgan Stanley (NYSE:MS) to come up with your question, please. And wait until you are on screen before you shoot your question. Thank you.

Thomas Hasler: We can’t hear you yet.

Dominik Slappnig: The sound is not yet hear.

Thomas Hasler: You can now [indiscernible].

Dominik Slappnig: Can you check the sound? Is the sound alright with you? Yes? Okay. Basically, Martin tells me here from the back that the sound is turned on.

Thomas Hasler: Probably in between, we just go with Elodie as well that is ready. And sorry for letting you waiting for a moment from JPMorgan (NYSE:JPM). So – and we try with this. And Cedar, we will come back to you as far – as soon as we have the sound ready.

Elodie Rall: Can you hear me?

Thomas Hasler: Yes, yes.

Elodie Rall: Okay. So if we – my first question would be on the U.S., if you don’t mind that we come back on this – on the performance there. I think it was a big disappointment last year, and I think you’re still a bit cautious in the near-term, but we haven’t really talked about the near-term trends. So it would be helpful if you could develop a little bit on what has caused the weakness, really. What has been the impact of destocking cycles on your like-for-like performance in the U.S.? If it was a headwind in ‘23, will it be more of a tailwind this year? And how long do you think this weak performance will last? Like is it H1? Do you see a scope for that to stabilize at the end of Q2? What’s the timeframe there, please?

Thomas Hasler: Okay. That’s maybe – the first one, the Q4 performance has quite a strong impact from MBCC. MBCC had difficulties in ‘22 in – during the year to overcome delivery problems and had a very strong Q4 to catch up. Also increased prices in Q1 this year, which was accelerating, let’s say, buildup of sales in Q4, this has quite a substantial impact. It’s roughly 1.5% to 2% of the total U.S. growth that has been negatively impact, but it is organic comparison based on the MBCC. Underlying debt, Q4 has been kind of similar to Q3, so no significant improvement, but also no deterioration in the – on the volume side. Going into this year, yes, we expect that we will have some uplift, as we had in the roofing business quite a significant destocking element in the first half of ‘23. At the same time, we have just – must also notice that the roofing business had outstanding results in ‘22. ‘23 has normalized. We saw it also in the second half of the year that the business hasn’t, let’s say, picked up so much. So, I would say underlying, we expect in roofing a normal year, so to say, with some uplift from the destocking side, but not a major boom like we have seen in ‘22. We should also not be misled by the construction volume in the U.S., which is quite high. And this is, of course, driven as more new build goes into construction, you have a much higher volume in construction than when you traditionally have more on the refurbishment side. We participate on the new build, but the ratio on a new build compared to the total volume that the building or the structure builds is, of course, lower than on a refurbishment shop, where not the whole structure is built, but rather the roof is replaced, the waterproofing is upgraded. This is deteriorating a little bit, the ratio. When you look how much has the construction business grown in the U.S., there is a shift in going into re-shoring, going into infrastructure, new build that is a bit misleading. Nevertheless, we expect the U.S. to improve. So, this stagnation in Q3, Q4, we don’t take as a baseline for the full year ‘24.

Elodie Rall: Thank you. Can I just push just a little bit on H1? Would you expect we see a positive – an improvement as in H1? Should we expect positive performance on a like-for-like basis in H1?

Thomas Hasler: Positive in volumes.

Elodie Rall: Okay.

Thomas Hasler: Yes. I mean it will be – it will not be positive in volumes because we still have a negative volume there. I expect that to improve, but it will still be negative. So, we have roughly, let’s say, 3%, 4% negative volume. This will not turn into positive in H1, but it will improve.

Elodie Rall: Okay. That’s clear. And then can I just have a follow-up on MBCC, just a little bit of housekeeping? I think on the synergies, you weren’t quite clear. On integration costs, you had guided, I think at the CMD, about CHF230 million. And you did already CHF200 million there. Is it ballpark okay to think CHF30 million for ‘24?

Adrian Widmer: Yes. I mean this – I don’t see this to go higher. Thomas mentioned it. I mean this has been sort of heavily sort of front loaded in terms of the activity, so yes, and that – I would see CHF20 million to CHF30 million in ‘24.

Elodie Rall: Thanks very much.

Thomas Hasler: Are we back to Cedar, or…?

Dominik Slappnig: Let’s try it once again. Yes, Cedar? We just take you up, and then let’s check whether we have now some sound. We see you. We hear – we don’t hear you. So, otherwise, you text us and then…

Cedar Ekblom: Can you hear me now?

Thomas Hasler: Yes.

Dominik Slappnig: Yes. It’s solved. Perfect. Now we can hear you.

Cedar Ekblom: Sorry, you would have thought off to the pandemic, I know how to use Zoom (NASDAQ:ZM). Anyway, I just have a question on your margin comments. I am surprised that you are not more ambitious on gross margins for ‘24. And the reason, I think that is ultimately in the fourth quarter, you did 55% gross margin. You are telling us that there is a little bit of tailwind from pricing to think about into 2024, that your raw material costs are no longer going down, but I don’t think you are giving us an impression that there is a lot raw material cost inflation coming through. So, what are we missing in terms of why your gross margin is not closer to the top end of the 54% to 55% range that you would say, rather than at the bottom end? So, that’s the one question on gross margins. And then just on your EBITDA margin, if we think about the moving parts into next year, you have probably got a 90 basis point tailwind on the fact that your MBCC cost will be a lot lower. You have probably got at least 60 basis points on gross margin. Then potentially, a little bit of operating leverage if we get volume growth into the second half of the year. So, the question is, is the 20% EBITDA low end of the range, really something that we need to wait for, for the full MBCC synergies to be realized, which is where the current guidance is, or is that something that we could actually potentially realize in ‘24 if we get operating leverage, which clearly is an open debate at the moment? Thank you.

Adrian Widmer: Yes. I was – well, thanks for that challenge, Cedar. I was kind of expecting that. And if – obviously, you look at the progression, and I was talking about this, there is these different elements. We also said, as you pointed out, that the 20% to 23% target range is the target once MBCC synergies have realized. I don’t think you should expect for 2024 that we are at the 20% already, although we are making good progress on the synergy side. But there is, as I was pointing out, let’s say, these, let’s say, moving parts. There will be an additional incoming dilution due to sort of the full consolidation of the 12 months. On the material margin side, this is probably a bit a cautious guidance here, understood. But I think, again, here, there is a level of volatility. Uncertainty will certainly progress in that direction. But early in the year, many, let’s say, different factors, also foreign exchange plays a role and so on. But I think we are making clear progress. But I would at the same time also defer a more, let’s say, clearer guidance than to later on in the year.

Thomas Hasler: Okay. You are pleased, Cedar?

Dominik Slappnig: Let’s go on and have another question from HSBC, Brijesh, please.

Unidentified Analyst: Hi. Can you hear us, can you hear me?

Dominik Slappnig: Yes. Super.

Unidentified Analyst: Thank you. So firstly, just to understand your strategy for emerging markets. It’s great that you are talking about there is a significant potential in India, and we do see that in China already. But when you look at the penetrations, can you give us an idea of how the business kind of evolves? Can – for example, you have put in a plant in East of India. If you were to put 5 plants, 10 plants in probably 1 year, 2 years, is that something a possibility you could do it? Because I am just understanding, if there is significant growth, what is stopping you to put four plants, five plants, or just putting one plant, I mean the cost wise is not high. Just wanted to understand how you are thinking behind getting into a market and growing that. And the second question is more about China. We do see that things have not kind of improved much. So, distribution, you had growth. If you could give us a little more color about 2024, what you expect in terms of Distribution and Project segment. Sorry, if this question is already answered.

Thomas Hasler: Okay. Thank you. Thank you for the questions. And in India, I think we do have a footprint with 12 factories at the moment. We have significantly increased our footprint with the MBCC transaction. We want to move fast. It’s an economy on the move. And you are right, go little one by one is probably not the right recipe. So here, it’s very clear, we want to cover more of the market organically. But also inorganically, that would be an exciting, let’s say, bolt-on to further tap into that market potential. But we have a solid footprint in India. And as we make further investments, organic and inorganic as we see that here, let’s say, time is of essence, this is fast moving. There are local competitors that are also ready to take advantage. So, we are up to that. And we will use all the means that we can, let’s say, mobilize to get ahead and win market shares in India. In China, our distribution business in China, which has been very resilient, despite the residential downturn, we expect also to deliver strong growth in ‘24. We expect double digit growth plus/minus from that unit alone. But we also expect that the more traditional Sika business will benefit from a clear drive towards more qualitative construction given the 5-year plan of the government addressing, let’s say, some of the weak spots of the past buildup of infrastructure with, let’s say, with specifications, which are not up to what they should be. So, I think we will benefit as a clear leader in influencing the GB standards in China for new construction. This gives me also confidence as one of the only global players being active in China, that we can influence and benefit from, let’s say, the upgrading of the standards and construction quality overall. So, both the distribution as well as the more direct business, I see good opportunities, but China is in, let’s say, in different mood at the moment. The government tries to stimulate. It hasn’t yet found the magic key to unlock former growth patterns, so that is probably still something which will prevail in ‘24. But in the longer run, we are also in China, for China. And we contribute with our means, with our R&D center that we have built, with our connections to the specifiers in creating here also a business base for our future growth.

Unidentified Analyst: Can I ask a supplementary on China, please? Would you be able to help us the split between distribution and project segment business there?

Thomas Hasler: Distribution business, with its great growth traction, has clearly surpassed the direct business. So, it is quite sizable, and it is dominant in our application.

Unidentified Analyst: Okay. Thank you very much.

Dominik Slappnig: Okay. Thank you very much and thank you very much for everybody for waiting. We still have more than 180 people now joining online. And then we have a lot of questions. We can’t take all the questions. Sorry for that. But Arnaud Lehmann from Bank of America (NYSE:BAC), please, as well join us with your question.

Arnaud Lehmann: Very good. Can you hear me?

Dominik Slappnig: We can hear you, yes.

Arnaud Lehmann: Excellent. Good morning to everybody or good afternoon actually now. Three questions, if I may. Hopefully, they are quite brief. Just coming back on your margins in Asia Pacific and the Global Business in the second half, very strong delivery, much higher than in the first half of both divisions, was there any one-offs, or do you think that was the underlying business, do you think that’s sustainable into the first half and 2024? My second question is on wage inflation. Can you discuss – I think you discussed your view, like up to 5%? But in the Q4 and the second half, that was the underlying wage inflation. And what was the integration of MBCC? And lastly, can you give us an indication of the tax rate for 2024? I think it came down quite a bit in ‘23, but there was effect from the various moving parts, so the guidance for ‘24 would be helpful. Thank you.

Adrian Widmer: Yes. Thanks Arnaud for the question. Let me try to address them one by one here on the performance of Asia Pacific and Global Business. No, there is no one-off included here in the second half year. It’s an ongoing, let’s say, improvement progression here as we have seen sort of across here, the Board of the business, particularly in Global Business, having been challenged in the 2 years before on various fronts. Let’s say, volumes and margin also taking a bit longer to establish the pricing level. Again, also taken here the opportunity to improve and optimize. So, that’s an ongoing improvement of the business. And also in Asia Pacific, there is no one-offs included. On the wage inflation, I commented on the effect that – on the full year ‘23 and econd half of Q4 was not marginally different to the 5%. Going forward, as said, I would still assume a certain elevation of that level, but most likely a bit lower than the 5% overall. And then on the tax rate, yes, there was this one-off effect. If you look at underlying expected tax rate without any one-offs for ‘24, we are sort of looking at 23% to 24%.

Arnaud Lehmann: Very good. Thank you very much.

Thomas Hasler: Thank you, Arnaud.

Dominik Slappnig: We had questions here in the room? Alessandro?

Alessandro Foletti: [Technical Difficulty]

Adrian Widmer: Yes. We will do that.

Thomas Hasler: Okay. Dominik, so we are at the end. Thank you a lot for joining us for this discussion here, the presentation of our results ‘23, but also our expectation for ‘24. I sense, you get the feeling that we are always optimistic, but we are also cautious that we can’t make the world the way we would like it to be. It is in still very volatile environment, good trends, offset by not so good trends. Overall, we believe, we, in Sika, we have the luxury and we have the future in our hand. The destiny is in our hands. We can create, and we will also, in ‘24, drive towards the goal, delivering top line growth and delivering over proportional bottom line growth. That’s our DNA. That’s where we go up for. And I look forward to our next interaction then in summer when we will share then again the full set of numbers. In between, we will have our Q1 top line communication, and we can then further elaborate. I look forward, for those that are sitting here, to have a quick bite together. And for the others, I might see you next week in London or somewhere else on this planet in the near future, in Japan. You are all invited to come to Japan, of course. It will be exciting to spend some moments there, understanding better the nation and especially the Japanese markets. So, thanks for joining us today and looking forward to the next time to interact. Thank you.

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