Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sika AG (SKFOF, Financial) reported a record CHF8.9 billion in sales, marking a 5.5% growth in Swiss francs.
- The company achieved significant improvement in material margin, increasing from 53.1% to 54.7%.
- EBITDA margin improved from 17.8% to 19.1%, driven by strong synergy collection from the MBCC transaction.
- Sika AG (SKFOF) expanded its footprint with new plants in Latin America, the US, Germany, and Australia, enhancing its strategic offerings.
- The company confirmed its growth outlook of 6% to 9% in local currency, maintaining confidence in its strategic targets for 2028.
Negative Points
- Currency effects negatively impacted growth, reducing local currency growth by 3.6% to 5.5% in Swiss francs.
- Organic growth in Asia Pacific was slightly negative at -0.5%, with China experiencing a decline in the project business.
- The automotive and industrial manufacturing sectors in Europe faced volume declines due to a downturn in demand for new vehicles.
- Net interest expense increased by CHF34 million, largely due to the financing of the MBCC acquisition.
- The company faces ongoing investigation by the EU Commission on price fixing in concrete admixtures, which remains unresolved.
Q & A Highlights
Q: On the North American business, did you see any weather impacts on construction activity in the third quarter? How should we think about growth in the fourth quarter?
A: (Thomas Hasler, CEO) We refrain from attributing performance to weather unless it's extreme. While there were hurricanes in Florida, they didn't significantly impact us. The Q3 performance was strong, driven by infrastructure and reshoring activities. We expect this positive trend to continue into Q4, barring any major disruptions like elections.
Q: Could you provide a trading update for October and expectations for Q4 growth drivers by region?
A: (Thomas Hasler, CEO) The Americas showed strong growth with 4.3% organic growth in Q3, and EMEA is also moving in the right direction. Asia Pacific remains challenging, particularly in China, but we expect stabilization and growth opportunities in the future. Overall, we anticipate continued positive momentum in Q4.
Q: Can you explain the year-over-year decline in EBITDA margin in Q3 and expectations for Q4?
A: (Adrian Widmer, CFO) The 20 basis points difference is due to Q3 last year being exceptionally strong. We are managing costs well despite inflationary pressures, particularly on wages. We expect continued improvement in cost progression and efficiency in Q4.
Q: What are your expectations for the North America business's medium-term growth potential?
A: (Thomas Hasler, CEO) North America is a growth continent with opportunities in infrastructure, reshoring, and residential sectors. We expect higher single-digit growth, outperforming the global average. The infrastructure spend will provide incremental volumes for the next 3 to 5 years.
Q: Could you provide an update on the EU Commission's investigation into price fixing in concrete admixtures?
A: (Thomas Hasler, CEO) The investigation is ongoing, and we are cooperating fully. It is a time-consuming process, and we have nothing new to report at this stage. We support fair competition and will continue to collaborate with the authorities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
