Strong Sales Growth in First Quarter – Slower in March Due to COVID-19

Thanks to a good start to the 2020 business year, Sika has continued its growth trajectory, reporting a new sales record of CHF 1,813.6 million in the first quarter. This equates to an increase of 15.4% in local currencies. A negative currency effect of –5.1% led to sales growth in Swiss francs of 10.3%, with an acquisition effect of 16.7%. Organic growth was thus slightly negative in the first quarter, at –1.3% This reflects the first repercussions on business of the COVID-19 pandemic. 

Slower Growth in March in All Regions

As the coronavirus pandemic gained ground in January 2020, first in China and then in the rest of Asia, followed by the EMEA region and the Americas region, from mid-March around 30 countries where Sika is present through subsidiaries and production sites found themselves in lockdown. The extent of the lockdown varies from country to country. Since the situation is changing constantly, Sika is adapting measures specifically in line with the new circumstances.

In the first quarter of 2020, the EMEA region recorded a sales increase in local currency of 13.3% (previous year: 8.2%). Business developed well in Germany, Austria, and Switzerland (the "DACH"area), the Nordic countries, Eastern Europe, and the Middle East. The impact of the pandemic made itself felt on the entire EMEA region from mid-March, with the first countries entering the lockdown phase. The acquisition of Adeplast (Romania) was concluded at the end of March. In addition, in the first quarter Sika also brought into operation in Sarnen, Switzerland, a new production facility for the manufacture of SikaProof® structural waterproofing membrane. 

The Americas region recorded growth in local currencies of 23.0% (previous year: 4.8%). Business was strong in the region until mid-March. The United States and Canada in particular saw double-digit growth rates, and many countries in Latin America recovered from the political tensions of the previous months. However, with the lockdown, growth momentum came to an abrupt halt in several Latin American markets from March 20. 

Sales in local currencies in the Asia/Pacific region increased by 29.8% (previous year: 2.8%), a figure which includes a significant acquisition effect from the Parex takeover (39.5%). China, where the COVID-19 outbreak started, was in lockdown from mid-January to March. Sika was able to restart business activities in the country from early March, with all factories recommencing production on a reduced scale. Australia, Japan, and Korea were less affected by the pandemic in economic terms, and construction activity continued in most areas with some restrictions. 

The automotive industry reported a decline of -25% in production figures in the first quarter. Despite the difficult environment, Sika was able to capture increased market share. The Global Business segment posted negative growth in local currencies of –7.1% (previous year: 13.3%). Most car manufacturers in Europe and North America halted production from mid-March, just as their Chinese counterparts were restarting their production operations. Despite the coronavirus-related forecasted decline in automotive sales, Sika expects the megatrends in modern auto manufacturing to generate growth stimuli in the long term, with electro-mobility and lightweight construction also dominating in future. 

Measures in the Current Situtation

From the outset, the central focus has been the health of employees, customers, and suppliers. Sika was able to react swiftly, with its local management teams developing and implementing targeted operational measures for the national subsidiaries. 

Cash management is a key issue. Non-business-critical investment has been postponed and cost structures have been adapted, without jeopardizing long-term growth. Close attention is paid to working capital management. Sika has a solid balance sheet and kicked off the 2020 business year with a high cash holding of CHF 995 million. On top of this, the Group has CHF 1.25 billion in credit lines.