SALES IN ALL REGIONS SIKA INVESTOR PRESENTATION, JANUARY 15, 2015 - - PowerPoint PPT Presentation

DYNAMIC GROWTH CONTINUES – RECORD SALES IN ALL REGIONS

SIKA INVESTOR PRESENTATION, JANUARY 15, 2015

• 1. HIGHLIGHTS AND SALES 2014

HIGHLIGHTS SALES 2014

• Q4 with continued growth momentum
• 13.0% sales growth (8.3% in CHF) to CHF 5.57 billion (FY)
• Record sales in all regions
• Asia/Pacific with more than CHF 1 billion of sales for the first time
• Sales up 15.2% in emerging markets
• EBIT expected to exceed CHF 600 million
• 8 new factories in Brazil, Mexico, Indonesia, Singapore, India,

Serbia and USA (2)

• Strategy 2018 on track, exceeding financial targets

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+ 15.9% + 13.3% + 12.8% + 7.9%

13.0% SALES GROWTH FOR 2014 RECORD SALES IN ALL REGIONS

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0.75 0.64 1.04

North America Latin America EMEA Asia/Pacific

(in CHF bn, Growth at constant FX) 2013 2014

2.73

Growth of 15.2% in Emerging Markets

Opening of Sika plants:

• 7th plant in Brazil

(Aparecida de Goiânia, January 2014)

• 2nd plant in Indonesia

(Surabaya, May 2014)

• 6th plant in India

(Jhagadia, June 2014)

• New plant in Serbia

(Simanovci, September 2014)

• 2nd plant in Singapore

(Singapore, October 2014)

• 4th plant in Mexico

(Tijuana, October 2014)

ACCELERATED BUILD-UP OF EMERGING MARKETS INVESTMENTS 2014

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India Serbia

Opening of Sika plants in North America:

• 11th plant in the USA

(Denver, May 2014)

• 12th plant in the USA

(Atlanta, July 2014)

BUILD-UP OF SUPPLY CHAIN IN GROWTH MARKETS INVESTMENTS 2014

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USA USA

• 2. SALES PERFORMANCE 2014

• 1.3%

7.0% 7.3% 8.2% 14.1% 6.6% 6.3% 5.1% +1.1% 1.2% 3.3% 9.6% 9.2% 7.4% 5.4% 1.3%

SALES GROWTH BY QUARTER – 2013 / 2014 DYNAMIC GROWTH MOMENTUM

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• 0.2%

8.2% 10.6% 17.8%

Q1 PY Q2 PY Q3 PY Q4 PY Q1 CY Q2 CY Q3 CY Q4 CY

QuarterlyS

1’043.1 1’359.4 1’405.2 1’334.5 1’206.2 1’450.7

23.3% 14.0% 11.7% 3.8%

at constant currency acquisition

• rganic

Quarterly sales

1.04 1.36 1.41 1.33 1.20 1.45 1.52 1.40

In CHF bn

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SALES GROWTH BY REGION 2014

2.73 0.75 1.04 0.64

EMEA North America Asia/Pacific Latin America + 13.3% + 7.9% + 12.8% + 15.9% Growth (at constant FX)

• 2.6%
• 3.0%
• 6.0%
• 13.4% FX impact

+ 9.2% + 0.0% + 3.5% + 4.9% Acquisition

In CHF bn 81% 19% Construction Industry

FIVE-YEAR OVERVIEW NET SALES

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4.42 4.56 4.83 5.14 5.57

6.3% 3.2% 5.8% 6.5% 8.3%

10.2% 15.5% 5.3% 9.4% 13.0%

2010 2011 2012 2013 2014

In CHF bn Sales growth in LC Sales growth in CHF

• 3. STRATEGY 2018

MEGATRENDS DRIVE OUR GROWTH: URBANIZATION, NEW VEHICLE DESIGN & SUSTAINABILITY

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Higher demand for infrastructure and refurbishment solutions Sustainability: Increasing demand for safe-to-use and low-emission products Increased safety, fire, water, earthquake and quality requirements Increasing world population with urbanization and megacities New modular vehicle manufacturing concepts need fast, high strength bonding systems New vehicle design with material mix requires bonding solutions Rising demand for high performance concrete, sealing and waterproofing

6-8% GROWTH PER YEAR

STRATEGY 2018: SIKA’S GROWTH MODEL WILL DELIVER

13 | 13 |

MARKET PENETRATION INNOVATION EMERGING MARKETS ACQUISITIONS VALUES

42% - 45% OF SALES IN EMERGING MARKETS > 10% OPERATING PROFIT > 6% OPERATING FREE CASH FLOW > 20% RETURN ON CAPITAL EMPLOYED

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• 4. REJECTION OF PLANNED CHANGE OF

CONTROL TO SAINT-GOBAIN

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KEY EVENTS OF THE LAST 5 WEEKS

• Dec 5: In the evening board and management were informed of transaction by

family and Saint-Gobain

• limited discussions between Sika and Saint-Gobain during weekend, with

Saint-Gobain rejecting constructive suggestions to mitigate flaws of current structure

• Dec 8: Publication of independent position of Sika board and management on

transaction

• Planned transaction is not in the best interest of Sika or its public

shareholders

• Board and management do not support transaction in its planned form
• Dec 10: Schenker-Winkler Holding requested Extraordinary General Meeting to

replace 3 independent board members , including Chairman, with two nominees to gain majority in board

• Dec 10: Standard & Poor’s placed Sika on negative credit watch and will lower

the rating by two notches to 'BBB', equal to the rating of Saint-Gobain if the transaction would be closed

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KEY EVENTS OF THE LAST 5 WEEKS (CONT.)

• Dec 17: Sika presented alternative proposals to reverse value loss
• Dec 23: Ethos and 12 pension funds and investors representing 1.7% of the

capital, requested to include an item on the agenda of the Extraordinary General Meeting to delete the opting out clause

• Dec 28: Chris Tanner, who was one of the two board member nominees

proposed by Schenker-Winkler Holding, withdrew his candidacy stating: “The assurance I required with regard to an effective independence was not granted.”

• Jan 5: Schenker-Winkler Holding filed a petition at the cantonal court in Zug to

enforce the Extraordinary General Meeting

• Jan 14: The international investors Cascade Investment L.L.C., Bill & Melinda

Gates Foundation Trust, Fidelity Worldwide Investment and Threadneedle Investments together holding 8.61% of Sika's share capital (4.62% of the voting rights) expressed their active support for Sika's board of directors and management.

• Jan 14: Ethos launched support group for shareholder proposal to delete opting
• ut provision

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WHY SIKA CANNOT SUPPORT PROPOSED TRANSACTION

• Acquisition of control through majority of

votes

• Full consolidation of Sika
• Increasing (reported) growth, margins

and reduced capital intensity, as well as improved geographic footprint

• But only 16% of economic exposure
• Intention to keep Sika listed / no offer to public

shareholders

• Claimed benefits based on unsubstantiated

business plan to year 2019 as presented by Saint-Gobain(1) (no interaction with Sika, no due diligence)

• Sika 2019 EBIT of CHF 840-890m
• Plus EUR 180m additional synergies in

2019

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• Public shareholders (84% of capital)

deprived of adequate compensation for change of control / fundamental change in nature of investment

• Inherent conflicting interests on all

levels: shareholders, board, management and operations

• Significant implied complexities likely to

substantially slow down Sika’s

• rganization and impair Sika's successful

growth model

• Significant limitations to materialize

synergy potential especially stemming from combination of directly competing businesses

Note: (1) Saint-Gobain capital markets presentation Dec 8, 2014

Transaction structure as planned by Saint-Gobain Key implications & concerns Effective and efficient integration of businesses not possible under planned structure Significant risk of negative effects outweighing potential upsides

SIKA’S GROWTH MODEL DELIVERS

• Market penetration
• From roof to floor
• From new-build to refurbishment
• Push and pull market channels
• Global technology leadership
• Continuous innovations
• Economies of scale in core

technologies

• Accelerated build-up of Emerging Markets
• Acquisitions to strengthen market access,

technology, economies of scale

• Company values with entrepreneurial

spirit, high employee loyalty and lean structure

• De-centralized business set-up
• P&L responsibility by country
• Reduced complexity
• Limited co-operations

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• High growth (2010-2013 CAGR)(1)
• Sika:

+5.2%

• Saint-Gobain CP (ES): -0.6% / -4.4%(2)
• High profitability (2013A EBIT Margin)(1)
• Sika:

10.2%

• Saint-Gobain CP (ES): 8.3%(3)
• Share price performance (LTM)(4)
• Sika:

+34.1%

• SMI:

+14.8%

• Saint-Gobain : +2.9%
• Valuation multiples (2015E EV / EBITDA)(5)
• Sika:

9.4x

• Saint-Gobain : 6.5x
• Standard & Poor’s Credit Rating
• Sika:

A-

• Saint-Gobain: BBB

Source: Company filings, Capital IQ Notes: (1) In reporting currencies; (2) in CHF on like-for-like basis; (3) Business income margin as defined by Saint-Gobain, (4) Based on unaffected share prices as at Dec 5, 2014; (5) EV defined as market capitalization plus net financial debt, unfunded pensions and minorities, less equity investments; Saint-Gobain CP (ES) = Saint Gobain Construction Products Exterior Solutions

DEAL IMPAIRS SUCCESS OF SIKA

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Significant downside risk for Sika and its public shareholders

• Increased complexity: numerous “at arm’s length” contracts envisaged in all

countries with dual presence

• Each transaction needs to fully comply with transfer pricing rules
• Significant implementation and ongoing monitoring effort and cost
• Protection of business secrets, incl. formulations
• Various conflicts of interest on all levels
• Direct competitors in mortars
• Allocation of synergies
• Balance sheet management
• Successful practice of keeping majority of board members independent set to

change

• Distraction from focus on profitable growth
• Absorption of management resources
• Allocation of synergies and dis-synergies
• Risk of paralyzing organization

   

Weber € 2.3bn Other Construction Products € 8.8bn Innovative Materials - Flat Glass € 4.8bn Innovative Materials - HPM € 3.9bn Building Distribution € 17.9bn Packaging € 3.5bn

OVERLAPS AND TOUCHPOINTS SIKA AND SAINT-GOBAIN

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• Saint-Gobain mortar business (Weber) is a

direct competitor to Sika

• Sika’s mortar business is operationally fully

integrated in the organization and core element of growth strategy

• Core to supply chain management and

marketing approach

• 14 new plants recently
• 4 acquisitions recently
• Certain non-mortar revenue synergies

possible in complementary businesses, but EBIT-impact difficult to quantify outside-in SAINT GOBAIN PORTFOLIO

Source: Company financials, Saint-Gobain 2014E financials based on broker consensus

Total: €41.1bn (2014E)

OVERSTATED SYNERGY POTENTIAL

Integration of Weber into Sika Our preliminary views on run rate synergy potential (impact on EBIT in EURm) Currently planned structure

We believe that synergies from at arm’s length agreements will be offset by dis- synergies in similar magnitude

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in EURm in EURm

Improved structure will deliver approx. EUR150m of synergy potential

• 100

100 200 Revenue synergies Capex savings Cost synergies General overhead synergies Purchasing synergies Dis-synergies

• 100

100 200 Total synergy potential Dis-synergies

POTENTIAL ALTERNATIVES TO REVERSE VALUE LOSS

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Responsibility of both Sika and Satin-Gobain to consider and (jointly) develop alternative solutions to reverse significant value destruction

Note: (1) c. 14% based on unaffected market capitalisation of public shareholders as of Dec 5 divided

INTEGRATION WITH SAINT- GOBAIN MORTARS UNDER SIKA UMBRELLA

• Leading independent Construction Chemicals & Adhesives player with strong anchor

shareholder and proven management

• Removes key areas of market conflicts, but key implementation risks remain
• Appropriate governance to safeguard public shareholders’ interests critical
• Value creation potential from synergies and rerating

FULL BUSINESS COMBINATION

• Requires appropriate value recognition of Sika’s growth and profitability, potentially offering

Sika public shareholders optionality to monetise or remain invested

• Creates leading Construction Chemicals player under Saint-Gobain umbrella
• Risk of value de-rating from absorption of high-multiple Sika into lower-multiple Saint-

Gobain OTHER SOLUTIONS

• Sika board and management receptive to other proposals

ENVISAGED TRANSACTION ABANDONED

• Possible value recovery

SIKA OPEN FOR CONSTRUCTIVE DIALOGUE

• …that addresses obvious flaws of planned transaction
• …that allows Sika to continue to flourish and that supports integrity of our

business approach

• …that allows optimal materialization of synergy potential
• …that allows Sika’s public shareholders to (at least partially) recover experienced

substantial value losses

• …that converts currently planned ‘lose-lose’ transaction into a ‘win-win’

situation for both sides

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Sika board and management act in the best interest of the company and its shareholders

This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘expects’, ‘believes’, ‘estimates’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘future’ or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this presentation, among others:

• Fluctuations in currency exchange rates and general financial market conditions
• Interruptions in production
• Legislative and regulatory developments and economic conditions
• Delay or inability in obtaining regulatory approvals or bringing products to market
• Pricing and product initiatives of competitors
• Uncertainties in the discovery, development or marketing of new products or new uses of existing products, including

without limitation negative results of research projects, unexpected side-effects of pipeline or marketed products

• Increased government pricing pressures
• Loss of inability to obtain adequate protection for intellectual property rights
• Litigation
• Loss of key executives or other employees
• Adverse publicity and news coverage.

Any statements regarding earnings per share growth is not a profit forecast and should not be interpreted to mean that Sika’s earnings or earnings per share for this year or any subsequent period will necessarily match or exceed the historical published earnings or earnings per share of Sika. For marketed products discussed in this presentation, please see information on our website: www.sika.com All mentioned trademarks are legally protected.

FORWARD-LOOKING STATEMENTS

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THANK YOU FOR YOUR ATTENTION