Sika AG (SIKA) Earnings Call Transcript & Summary

Good morning, everybody online. I welcome you to our press conference this morning, and I want to thank you in advance for your interest in Sika. Today, I am opening this event because I want to take the opportunity to comment on the leadership changes we have announced this morning. Before then later, Paul Schuler will present the business year 2020. The Board of Sika and myself, we are very proud to announce that Thomas Hasler will be the successor of our CEO, Paul Schuler, as of May 1 this year. In our succession planning right from the beginning, we have focused on internal candidates as we wanted to ensure continuity of the Sika story. As you could see this morning from the results, we are on a successful path with our strategy 2023, and there is no reason to change that. But not only continuity in the implementation of the strategy is important to us, but also continuity in the development of our specific culture and organization. We want to assure that we can keep the entrepreneurial spirit in our organization. And that we can continue what Paul Schuler has started so well, namely the continuous development of our fine and also fragile balance between decentral local accountability and central support. We consider this to be the main strategic advantage of our organization, and it has proven its strength, which can be seen through our profitable calls but also during the crisis in the past year. And Thomas is the person who stands for this continuity. He has more than 30 years with Sika, and he can present a proven successful track record. In his career, he has served in several functions in our organization, and he has helped to shape the organization both from a local as well as from a global perspective. I congratulate Thomas, also in the name of the Board to his nomination, and I wish him all the success he deserves. I now want to hand over to Thomas, so he can introduce himself. Thomas?

Thank you, Paul. I'm very excited and honored by the trust of the Board in my ability to lead this company into the future. Let me explain a little bit who is standing in front of you, and how this 32 years have shaped me, and also how I contributed to the success of this company. 32 years ago, I started as a young chemist in the R&D of this company. I got exciting, challenging targets but I was missing the guidance how to achieve this. That soon realized that's up to me. The empowerment in this company to reach the targets is outstanding. And leaving the beaten tracks was one of the way to find new innovative solutions. It was then after 6 years in R&D that I moved into a commercial role. It was Paul Schuler that asked me to join his team and to build up the acoustic business in automotive in Europe. It was a one-man show to start with. And we had a clear vision on what we want to achieve, the path to this vision was still a bit open, and we formed the way and made, in 10 years, this business the cornerstone of our automotive business in Europe. During that journey, we also saw the power of successful bolt-on acquisition. We acquired a small company in Belgium in 2005. And while we integrated, we could unleash the powerful synergies of combining our businesses. It was then in 2005, when I was asked to take on a leadership role in the United States. And I relocated then with my family to the United States. Our business, our automotive business in the U.S. had some challenges, some severe challenges. I don't want to go into the details how we overcame and how we turned this into a beautiful growing business again, over the time, I was over there. I want to outline for me the personal experience living in the U.S. and enjoying the culture of the Americans, the positive inspiration that can achieve so much, the-can-do approach. It helped me a lot to succeed with the team over there. And it is still an inspiring moment, which I take with me wherever I go. Inspiration is the most powerful motivation. It was then at the end of my 5 years in the U.S., when I had the opportunity to present my vision of a global automotive. We had a strong European business, we had a strong North American business but, of course, in automotive, the new world is China. And I was able to address my vision to the group management and finally also to the Board and got, again, the approval to implement a global strategy for automotive, which then led again to outstanding growth, organic growth in China, again, acquisition growth in Brazil via an acquisition of a local family-owned business. Through and afterwards, in 2014, I was approached to go back to the roots, to R&D, to the technical parts, to the innovation part of our company. I had a clear message to my team when I started, it only matters when it matters for our customer. And that was also my mission to bring our innovation, our technical advancements in line with what the market and the customers value, and drive this as a force. It was also a pleasure for me to dive into our 5 core technologies and to see how exciting and how many opportunities we have. We just need to transform that into meaningful commercial innovation that then ultimately are well received by the market. We also saw that we had a great team of more than 1,000 chemists worldwide. And it was my pleasure to connect these 1,000 brains by other 20 global technology centers that we installed, giving them processes and platforms to collaborate and use the critical mass across the globe. And I'm honestly a bit proud also that the innovation and the new strategy is no longer just measured on the patents that we are applying every year. It is measured by the impact of the new products, which are introduced in the last 5 years, and we want to see top end material margin growth based on that innovation. Honestly, I love the technologies and the innovation, but my heart strongly beats for the commercial side. So in 2017, I moved back, and I had a pleasure to take over the global business, which was then the automotive business together with the acquired Exxon technology business. And then soon, it was also with the additional business of the Faist ChemTec technology, a further boost and an integration task ahead of me. I'm not going into the details of how that business is running. We will have that later on, on a separate slide where we stand and what the outlook is. Finally, I would like to share with you my 2 main priorities going forward. For me, it's very clear, our strong and successful Strategy 2023 needs to continue. And I will put all my energy into the continuation of the successful implementation and the execution of our strategy. I'm totally convinced that we will deliver the results and the targets that we have addressed in our strategy, and that's my main focus. On the other hand, we have this very strong strategy, but it is the people that make the strategy fly. And it is the spirit and the inspiration of our 25,000 people that deliver these results. And for me, the cultural part, our unique Sika culture is an obligation to take care, to protect, preserve and foster going forward. That's my pledge to the organization. That's my pledge to take care of the Sika spirit as such.

Thank you. Thomas, I'm looking forward to working with you. And this is now also the moment to thank Paul Schuler, also in the name of the full Board for his outstanding leadership and his accomplishments in the past 3 decades. As CEO in the last 4 years, Paul has led Sika to an accelerated growth and to new performance levels. Under his leadership, Sika has a significant profitable growth shown, and also a successful integration of the largest acquisition in the history of Sika, Parex. Furthermore, Paul was also crucial in the settlement of the issue we had with Saint-Gobain. But Paul does not only focus on goals. In the context of Strategy '23, he started to fine-tune the organization, and he did put emphasis on harvesting the internal synergy potential and efficiencies. He knows the potential of our organization in and out. With the aspect of continuity in mind, the Board wants to continue to rely on his insights and has therefore decided to present Paul Schuler as a candidate to be elected as a member of our Board at the next AGM. He will take the seat of Frits van Dijk, who will not stand for reelection anymore. The whole Board and myself, we are looking forward to welcome Paul as a member of our Board. On the other hand, unfortunately, I have to announce that Esther Berrozpe, who we had presented as a candidate last November has been thrown her candidacy this week. Against earlier plans, she has taken over a new CEO role as of first of January. And after a few weeks, in her new role, has decided to focus on this new challenge and not to take an additional mandate. We regret this decision very much as Esther would have been a very good fit to our Board. And we wish her all the success in her new executive role. Her decision now will lead to a delay in our plan to renew our Board and obviously also in our way to respond to expectations with regards to gender diversity. I can assure you, however, that we are committed to accelerate the renewal of our Board in order to catch up with the 4 years we lost during the conflict with Saint-Gobain. This would be my comments this morning to the changes in leadership we have announced. And I would like to allow now for questions on this particular topic before we continue, and we report on the business year 2020. Are there any questions?

Okay. The line for questions is open now, and please raise your hand. First question goes to Markus Mayer Baader Bank.

I have a question regarding this management change. Out of change and after his career also as a CTO, should we expect that innovations becoming more crucial for Sika? Is this assumption how we should read it?

Thomas, you want to answer?

I wouldn't deny that innovation is at the heart of what I see as a key competitive advantage of our company. The innovation needs to materialize into value for our customers, for the markets, but they are, especially in the coming times with a lot of challenges where our customers in construction, in the automotive, in the industrial applications, are facing. They need more innovation, new ways to manufacture, recycle or circular innovations. And I think Sika is a great enabler, and it will be my focus that the innovation power of this company, at least, stays, if not even growth in the future.

Next question goes to Priyal, Jefferies. SHe is not ready. Then to Xintong from On Site (sic) [ On Field ] Research.

Congrats on the results. And congrats, Thomas, with the new role. I've got a question. Because given your background in automotive, Thomas, do you expect more M&A in big global business, for example, looking at competitors in chemicals who are strong in automotive? And also, it would be great to get a view -- get your view on, let's say -- with your like technological background, do you expect like more innovation or more advanced technology, given the change in construction modes like modular construction, 3D printing, et cetera, do you expect an acceleration there?

Okay. Yes, thank you for the 2 questions. I believe that the M&A market is not only in the industrial or automotive business heating up, we see it across the board. Companies are refocusing, questioning the setup, and we see activities increasing. We see it, of course, in the automotive area where we have a new alliances, our consolidation latest with the [ Selantis ] group. And of course, this also influences the supply base into automotive. These are great opportunities for us, but it's too early to talk about anything specific, but there are many activities. But the same applies also to the construction business, where we see the same is happening. The challenges that you addressed in the second question are challenges where companies need to refocus and question where is their core. What is maybe, in other hands, better suited and better developed. And we see also there that this is going to drive the M&A market going forward. The innovation needs of the construction market are no less than the industrial market. These challenges of dealing with the circumstances of this coronavirus will stay. The modular concept that, the improvement in efficiency, also the possibility to recycle and reuse prefabricated elements is going to grow rapidly in importance. And we have, from our side, the technologies to support this trend.

[Operator Instructions] Next question goes to Christian Arnold from Stifel. There is the next one on the list, Patrick Rafaisz from UBS. Christian, you are now up. Okay. Christian? Wait a second, you're still muted. Okay.

I think now it should work, right?

Yep. Thank you.

Very good. Sorry for that. I have 2 questions. One the one side, so congrats to Thomas. I'm sure he was not the only candidate, internal candidate. So how do you make sure that the other candidates are not too disappointed, and remain very motivated to contribute to the success of Sika, that will be my first question. And the second question I have is on the nomination of Mr. Schuler become a Board member. I mean, sometimes, we see a cooling period, and it looks like that you are not going this COVID period. So how do you ensure that we will see here a good corporate governance, moving directly from the Executive Board to the Board of Directors.

Okay. That's -- my turn to answer this question. Okay. So to your first question, we had a very transparent process, also with external help combined with training and coaching. And we did everything to assure that we can keep everybody who was aspiring to take this role. At the end, obviously, is only 1 seat for 1 person. To your second question on Paul Schuler and cool-off period. We've discussed that, we've decided not to have this cool off period. First of all, the Board dynamic is quite strong. There is no risk that Paul would dominate a new CEO limiting his creativity. And we've also kind of done a step towards the direction of we will not have him in one of the committees. So we consider him as a dependent Board member. So he's not part of any committee.

Okay. Last question in this section goes to Tom Wrigglesworth from the Citibank.

Hopefully, you can hear me?

Yes.

Two questions. Well, firstly, well done to Paul, who must be in the room somewhere. And secondly, congratulations, Thomas. Thomas, you've talked a lot about doing things the same that the CEO has done before, but I wonder what you would like to do differently. And if we think 3 to 5 years down the road from here, now what does success look like for your in your role as CEO for Sika?

Okay. That's, of course, a very interesting question, and I'm also going to address and answer that the near future. But at the moment, it's very clear. We are well set. We have a strong strategy. The execution is priority, but it's clear. Our strategies have an expiry date. It's called 2023 for some reason. There will be room for another one at the right time. I will come back, and I will explain how that is shaping up.

Okay. Then I thank you for your interest. As there are no more questions to this topic, I'd like to hand over to Paul to present the business year 2020. And I'm personally very happy that he, again, despite the crisis, can present record numbers in all areas. And thank you, Paul.

Yes. Good morning, everyone. Thanks for participating on this call. We talked a lot about continuity. And for us, at Sika, continuity is measured also with the results. And I guess we could provide continuity in outstanding results in the last years. And I'm very pretty sure that we keep also this continuity in the future to present outstanding results. We go live with all the highlights, and then I would explain why we had the success factors in this corona time, Then the financial results from Adrian Widmer, our CFO. And then short information view why Sika is an enabler, and why we feel that is the right thing to go and how we can improve our environment with our great products. And then the outlook for my colleagues from the region, and then we have time for question and the answer. So the highlights, we had a record result for profit and cash flow. The sales are grow by 3.4% in local currency. We had CHF 1.13 million (sic) [ CHF 1.13 billion ] EBIT, that's plus 7.1%. Our EBIT margin improved by 13% -- from 13% to 14.4%. That's the record high we have had. And the net profit went along with CHF 825 million. And we are really proud on our cash flow. I think that's the number we always look at it. And this is a clear, clear, high record and gives us a lot of leverage in future ideas to do. Key investment. Six new expanded factories and 1 acquisition. Acquisition was a little difficult. And we had 1 extension of the partnership. Further achievements, I think we closed now the products integrate successfully around the world. And we had 83 new patents and 123 innovation. One of the highlights is our reduction of CO2. Our waste went down by 12.1%. The energy consumption per ton sold went down by 21%. CO2 emission, 25% or 26%, from 27 kilo per ton produced down to 20 kilo. This is still, for us, a good number, but still, we will work hard and need to even reduce it. Then our 25,000 employees, we had an average of 10 hours training in the last year, and it was important that we -- as we could not travel or had the work-in-home office that we really started to push these synergies. So here, the set of numbers, a CHF 7.8 billion. Our margin went up from 45 -- up to 45.8%. Then EBITDA went almost CHF 1,500 million, and CHF 1.1305 billion, plus 7 1%, and the net profit to a record high of CHF 825 million. Operation free cash flow, I mentioned already. And we look at the sales around the world, a local currency grow. And this picture, it's also a little bit challenging picture for us. If you look at these number set, I think it's a good number set in a corona time. But here, we lost around CHF 500 million on the exchange rate, and then we lost another CHF 500 million on the corona issue. So yes, we are happy with these numbers on the sales side as due to the corona and due to exchange rate. But it's not the picture we wanted to see, which we explained last year, where we're going to go. So time sometime change, but still, in Americas, we have 1% growth to almost CHF 2 billion. Then we had an excellent year in EMEA, regarding also profitability as well as the grow rate to 4.4%. And in Asia, mainly, mainly driven by China, which is excellent form now up to 12.6% to CHF 1.7 billion in sales. So real good momentum. The biggest challenge we had in automotive. We reduced the sales by almost 11.4%. Normals are clear. Many factors were closed in April. And in March, quite issue. The good news is, in the second half, we came back, and confident that we go in the right direction also there. So the group overall, in local currency, we had CHF 3.4 billion. The time line, we build a factory in Barranquilla in Colombia in January, open it, and we acquired Adeplast closing in Romania, very well on the integration path. Then an expansion in that mix in United Arabian Emirate (sic) [ United Arab Emirates ]. And then we acquired Modern Waterproofing in Egypt. Then we had investments in Switzerland, in Sarnen as well as in Düdingen with new membrane lines and production lines. And then we had an expansion in concrete admixtures in [ France ] as well as the partnership with Sika. So what are the success factors in this corona time, I think if you look at that chart, just an overview, we clearly see April, May, in many of our 100 countries, they had severe lockdowns, it was very difficult to do business. They were also the major part where they close factories as well as construction site. So this was the hardest time. Afterwards, you see the counties reopen it. And now we see in January, a little bit more red, which means more countries start to lockdowns. But overall was quite as heavy, heavy pandemic as every country also. I think the distribution business, we invested a lot in the last years really showed a little bit more stamina in this crisis. I think the booming home improvement market, then we establish Sika more and more as a household brand so more and more B2C customers. And we gained a lot of more market share, online sales and e-commerce. And if you look at the numbers on the right side, in April, the sales went really down. And then the great one is the construction, direct sales in construction. It was not so dynamic as the top line distribution. So we had double-digit growth rate in distribution. And today, we have around 40%, 41% of our growth from distribution. So a very strong system. And if you look at the nice picture on the left side, this looks around the world in many, many distribution center. And we are quite proud of it to have such strong position achieved in the last 5, 10 years. So that's a long-time project. And many years, we work on it. But on the other side, also refurbishment was very strong. A lot of structure has to be renewed. The security reason, also new regulation on the building standards. Complex refurbishment over new buildings, and we have a very strong position in this refurbishment market we have a lot of good knowledge, a lot of great products. And therefore, also in the pandemic time, we really had that as a growing and very strong pillar in the strategy. Then digitalization, you hear a lot about the data centers. I think they build around 200 data center last year around the world. And we have a very, very strong position. Also in Switzerland, they build 5, 6. And we really have a lot of products to secure, the great buildings they need, and the strong buildings. And we're very proud on it. So from the roof to ceiling, we have fire protection. We have waterproofing and flooring. So many applications, that's just a small thing where we benefit from also pandemic. So our low base, always, we have to go where the money is and we have to see who is investing, and then we try to be before they really spend the money buy the designers and buy the owners. So also one of the moves. And I think the really, really strong one is we are centralized a quick organization. We have a lot of good managers around the world. And they adapted the organization very swiftly on the current situation they had in the country. So there was no way that in Sika Switzerland, we could decide what to do in Brazil or in the Philippines or in China. So we are very proud on this local, strong management teams. And also on the long -- continue discussion we have together. So we understood each out there in phone calls, and we knew exactly what we expect from each other. So great. Also we really wanted to be close to the customers. We didn't want to go just in the home office or leave our sales force out at all. No, it was a must that we visit customers when we can or at least stay in contact with them. We wanted to be close and help the customers to do their job and this works very well. So we had daily calls with all the personnels in all the countries. And I think we had more than 150,000 customers on webcams, calls and on seminars. I think the results are clear. We have great results on our side. But if I compare it with our peers, we always have the same peer groups. So we outperformed the peers since years 2018. Nice picture. Then in 2019, helped by the acquisition of Parex. We really outperformed where they already saw minus as the peer group. And also here, the peers overall, they have a minus where we have, at least in local currency. The peer is also measured in local currency. We really control that. We can manage in [ tough ] times and we can manage in good times. So we can outperform our competitors by our setup and with our people and our great products. Parex integration is completed now. We integrate successfully, the 23 countries where they had our operations. They are one fully team now. We merged them together. So they are fully integrated, and they achieved together great results. And I think this could the synergies guidance we overachieved. We guided for around CHF 40 million, now we have CHF 55 million annual sales synergies in 2020. So great efforts from the whole team around the world. And the integration of the many brands, Parex has on local levels, we completed 9 brains completely to Sika. And on the 22 brands, we will develop over time to the Sika. First, we kept the Lanco brand, for example. Then we go to a semi branding in the middle where we see it's getting more and more yellow. It's getting more of Sika. And in the next 1 or 2 years, depends on the strength of the brand. We will be finally the real Sika brand out there without losing sales and turnover. So we do that around the world, and all these brands are in. So our brand will be even stronger in the next coming years because we integrate very fast. Efficiency during pandemic was very important. I mean we had less sales. So we really had to focus on our operational efficiency. We had that new in the Strategy 2023, when we started in '18. And this really shows that our team works together around the world. So material margin went up by 1.2%, then operation efficiency to 0.5%, where we promised to deliver albeit with less sales. And then the dilution of M&M were minus 7% -- [ 0.7% and 10% ], the synergies plus [ 0.4% ]. So overall, we ended up by 14.4%. And I think that's really done by a lot of small steps work and a lot of investments in efficiency. Next one, we focused on the supply chain alignment. We did a lot of acquisition in the U.S. So now we started to align the factories and made a big impact around the world, not just in U.S., but on the example, U.S., we still have some room to become better and are being stronger. Then the water reduction, we had the program in there, all the motors production, energy reduction also quite great projects. And one of the major one is the formulation efficiency where we really go after all the formulation around the world. I think we changed that a little bit our approach that every country can have their own formulation. We motivate now everyone to look on their best and most favorable formulation and adapt it and not just have own chemical formulation. So great improvement here and really supports strongly our initiatives to go towards more efficient and more profitable company. I guess short word on our Strategy 2023. It's now mid-time and despite also the pandemic, we are quite good around. We look at the megatrends. There is no change in the megatrends. Even the pandemic will go away in a few months, few years, whenever, but our megatrend still remains the same. We believe urbanization is still there. And the dynamic economy will remain. We have to work on the climate change. We have to see and understand the demographics and then technology and progress, we also have to work out. So the major mega driver still remain. Also, the strategy is quite robust. If you look at the results, we lost a little on the market penetration, then we really worked hard on the sustainability. You saw the results, how we improve, and there is more to go with all the focus on this one and the push to all the countries to reduce debt. Innovation, we talked a lot, and the measurement is 25% of all the new products must come from innovation. We go in the right direction, really good, all right. Acquisition, yes, not as much as we had. We had first, will be difficult to travel and to analyze as our style is to learn and understand the company we acquire. And then we had at least 3 or 4 companies on our desk where we considered either too expensive or doesn't fit in the strategy. So we walked away from 4 or 5, which one we really felt, that's the wrong thing to do. I think it's more important to buy the right thing and integrate and have the opportunity than just the numbers and acquisition. But be assured that we are still there. Our pipeline is still strong, and it's 1 year, a little bit less, but I'm sure in the next coming months, we will see some nice new results. Value principle remains the same. And this is what we said, continuity, prefer to each other, motivate the people and go for the next extra mile. Accelerator of automation still will be the same. So we feel this is we discussed also already before. This is a future trend. We will be there, and we are one of the -- in April where we really see the trends, and we are well positioned in the automatization of the building industry. Also, if you look at the survey, if you look at the urbanization, the trend to continue, we feel 75% will be a population in the urban areas, I think probably not just in Switzerland but if you look around the world, this trend will continue. And there, we need infrastructure, there they need even office build is, they need a lot of things where we are in the right position to provide it. Then we count on the trillions day planned for similar around the world. Just in the Americas, it seems to be CHF 1 trillion, CHF 750 billion in the EMEA and another CHF 6.8 trillion in Asia. And if just the part comes to the infrastructure where we have a great opportunity, we really have a great organization for these projects. And around the world, we are on top. So everywhere, they start to invest, we will be there and we'll conjure on the market going from transportation to senior pounding thing so, still strong there. With this, I hand over to Adrian Widmer, which goes closer to the financial numbers. Adrian?

Well, thank you, Paul, and good morning, with afternoon to all of you out there participating in this earnings call. As Paul has said, and after the highlights and success factors of the corona year 2020, I will now focus more on the specific financial results. As you have seen, and in spite of the pandemic, Sika has delivered a strong set of numbers. Firstly, top line, CHF 7.878 billion in sales, which represents a local currency growth of 3.4% and a small decline of minus 2.9% in Swiss francs owed to the adverse foreign exchange development. But also, and most importantly, a very solid margin development on all levels with a strong EBITDA growth of 7.9% to almost CHF 1.5 billion. A very strong improvement of the respective EBITDA margin to 19.0%. Likewise, a strong EBIT improvement to a new record of CHF 1.131 billion of EBIT, also here, an increase of 7.1%, and a strong margin expansion on that level. Lower financial expenses and a moderately increasing tax rate has also led to a record net profit of CHF 825.1 million in 2020. If you look at DBS growth on a diluted basis, there is almost a 10% increase to CHF 5.82 per share in 2020. ROCE at 16.6%, again and further impacted by the acquisition, particularly of Parex. While cash generation was very strong and other more than CHF 230 million increase vis-à-vis the already record 2019, strong improvement of 22.7% to CHF 1.26 billion of operating free cash flow, which again is a testament to a very strong deleveraging profile. Let's now address the individual elements more specifically, starting with the top line. As you have seen here, the 3.4% percent local currency growth was supported by acquisitions while organic development was negative at minus 3.8%. But a very solid recovery throughout the years from quite a big impact in Q2, recovering in Q3 and particularly in Q4, where we already showed an organic growth of 4.1% in the last quarter. Acquisitions contributed 7.2% for the full year. And currency translation effects, as already mentioned, they were significantly negative -- most negative impact since a number of years, knocking off more than CHF 500 million on the top line in Swiss francs and the percentage impact of minus a 6.3%. This was particularly owed to a weakness in our core currencies, particularly the U.S. dollar and the British pound to a somewhat lower extent, the euro. But also to many emerging market currencies, particularly in Latin America, which depreciated very strongly. Looking across the last years, we have continued with our growth in local currency in spite of the corona pandemic, by limiting the organic sales decline to minus 3.8%. And while leveraging acquisition growth on the one hand, a residual impact from the Parex acquisition in 2019 as well as Crevo-Hengxin in China, and adding here with Adeplast in Romania and Modern Waterproofing in Egypt and other 2 companies contributing here not only to the top line, but to an improving margin. If we move further down the P&L, the year 2020 was, in spite of the pandemic characterized by strong margin improvements across the board. Starting here with the material margin, which expanded by 120 basis points from 30 -- 53.6% to 54.8%. We also saw an upward trend throughout the year with 80 basis points of improvement in the first half year, expanding to 120 basis points for the full year. But particularly also on the cost side, operating expenses, which include personnel costs and other OpEx decreased over proportionally by 4.7% vis-à-vis a net sales decline in Swiss francs of 2.9%. Following the significantly negative impact of the pandemic in late Q1 and particularly in Q2, we have been able to react quickly, apply a very tight cost management, while at the same time, progressing and driving forward operational efficiency and integration activities, which resulted and supported our overall EBIT margin in the second half year by 200 basis points on the cost side, which also includes lower travel cost by about CHF 35 million in the second half year. But we were also faced with higher transportation and logistics cost, particularly owed to the supply chain disruptions, we're seeing here worldwide. In Q4, we also recognized a onetime impact, a positive one relating to a land sale in Switzerland, which had a positive impact of CHF 10 million in Q4. On a like-for-like basis, we were able to decrease operating expenses in line with the sales decline in Swiss francs. So here, fully absorbing this impact. And slightly on the proportional decrease in personnel costs were driven by M&A and also foreign exchange development as a result, personnel cost as a percentage of sales increased slightly by 40 basis points. Other operating expenses as a percentage of sales, on the other hand, decreased quite significantly by 100 basis points from 17.4% to 16.4%. In spite of also here a slight dilution effect from acquisitions. But particularly the disciplined cost management, but all these operational efficiency and integration activities reduced OpEx very significantly. As a result, strong EBITDA improvement to close to CHF 1.5 billion to 19% of sales, very strong increase. If we move down on line, we also see here that depreciation and amortization expenses have again, significantly increased is related to the first half year of residual M&A impact, particularly relating to Parex. But if you look at the second half year, basically development in line with the sales development. But for the full year, an increase of 10.4%. This is the reason why EBIT has developed a bit less dynamic than EBITDA, but still a very strong improvement, strong growth of 7.1%, significantly above here, the sales development. Now summarizing and translating this into the respective margin drivers as already alluded to by Paul, earlier on talking specifically about operational improvement efficiency impact as part of our strategy. But looking across all the buckets here, particularly the expansion of material margin well into our target band of 54% to 55%, 54.8% in 2020, was supported by decrease in raw material cost but very much in combination with disciplined pricing where we added 50 basis points in price effect, particularly also to counter some of the negative and adverse foreign exchange impacts. In addition, these structural saving projects, procurement initiatives, formulation efficiency, but also the positioning of new products were contributors to this strong margin expansion. Operational efficiency, again, a strong contribution of the 50 basis points as targeted here through the many initiatives on global, regional and particularly also on local level. There -- and again, we had an initial dilution of M&A of around 70 basis points. This is particularly related to the first 5 months. We also coincided with the worst impact of the pandemic, which led to a dilution of 70 basis points. But on the other hand, very strong development of the impact of the synergies, contributing here 40 basis points. We have achieved annual synergies through the integration of Parex of CHF 55 million in 2020. This is an incremental CHF 46 million versus 2019. Now moving back to the P&L and below the EBIT. We had also due to the reduction in the net debt level or in the debt level, a decrease in interest costs. But more importantly, other financial expenses decreased very strongly by more than 40%. This was particularly relating to significantly lower hedging cost driven by the decrease of the interest rate differential, but also to lower intercompany lending in foreign currency. As a result, financial expenses, net financial expenses decreased by more than CHF 18 million or almost 21%. On the income tax side, the effective group tax rate saw a slight increase from 21.5% to 22.2%. This is largely owed to a onetime benefit we had last year. Relating to the Swiss tax reform, while sort of the underlying estimated group tax rate stayed virtually the same. Overall, net profit increased very strongly due to this CHF 825.1 million, which represents a very solid increase of 8.8% to 10.5% of net sales. Now moving to the balance sheet. You can see here that a disciplined asset management and foreign exchange. Impact, reduce the balance sheet total by about CHF 170 million compared to 2019. On the asset side of the balance sheet, a focused working capital management, lower M&A and capital investments below the depreciation and amortization rate as well as foreign exchange reduced here, the total, while the cash balance increased significantly by CHF 223 million year-on-year compared to the previous year. Current liabilities remained flat year-on-year, but financial liabilities declined quite significantly. On the one hand, this is owed to a repayment of a bond in Q1 as well as reduction -- continued reduction in other financial liabilities. In total, overall, financial liabilities stood at CHF 4.17 billion, and net debt at CHF 2.86 billion, which is a significant decrease of CHF 552 million versus the end of 2019. The ROCE on a reported basis was 16.6% as I already mentioned, this compares to 19.2% was, again, related to the residual impact of the Parex acquisition, but it's already up more than 300 basis points compared to June 2020. So strongly on the upward trend as well and again. Looking at the cash flow, one of the clear highlights of 2020. And here, driver of the significant net debt reduction is the strong cash generation of the Sika business, which was again at an absolute record level and exceeded even the strong operating free cash flow in 2019, with an increase of more than CHF 230 million or 22.7% to an all-time record, not only in absolute figures, but also representing 16% of sales, by far exceeding our target of 10%. Now the record operating free cash flow of CHF 1.259 billion was driven by a focused working capital management and corresponding positive cash effect, which was CHF 124 million in 2020, higher profitability but also higher depreciation and amortization expenses while cash taxes had a negative impact. They were also a bit higher. All this included here in cash flow from operating activities. On top of this, a very disciplined capital allocation with an additional cash impact vis-à-vis the previous year of CHF 75 million, also contributed to this strong development. Then operating free cash flow was, therefore, more than sufficient to finance our M&A spend in 2020 as well as being able to repay financial liabilities and paying the dividend for 2019, and still resulting in an increase of our cash balance of CHF 323.6 million. Now the strong cash conversion and corresponding net debt reduction is also strongly contributing to our continued deleveraging post the Parex acquisition, which is well on track. As you can see here on this chart, similar to the buyback of the Sika shares from Saint-Gobain, back in mid-2018, where the multiple, the net debt-to-EBITDA multiple went up to 2.3x as well as since the initial consolidation of Parex in mid-2019. We have been able to decrease our leverage on a reported basis by between 1 and 1.5 turns within basically a 12- to 18-month period. Therefore, operating or leverage here -- financial leverage at the year-end 2020 with 1.9x net debt-to-EBITDA is now, again, well in line with our A- rating. Last but not least, coming to the dividend here, in line with the solid increase in net profit, and also following the dividend policy of the previous year. The Board of Directors of Sika proposes a dividend increase of CHF 0.20 from CHF 2.30 to CHF 2.50 per share. This represents an increase of 8.7% versus the previous year on a per share basis. With this, I like to hand back to Paul for further comments on the business. And then later on, for the outlook. Thank you very much.

Okay. Thank you, Adrian. Great results. Thanks for the good work here. Why we feel our big future is Sika's enabler for the environment? I think the sustainable future for our planet, but also for Sika is most important. We know that in construction side, 40% of the CO2 emission starts. And also 1/5 comes from automotive. And if you look at our portfolio, we are the best enabler to help the construction industry, to help the people involved in here to reduce their own carbon footprint. Looking on cement, we really can reduce with our products or looking at other car manufacturers, we can build softer cars, lighter cars. So great, great potential we have, and we work hard on innovation to even improve that in the next coming years. So I think that's the next 5-step move where we really want to focus our innovation and go in the transformation in this -- towards a more sustainable future. Just a few examples, heat loss, the temperature raise the -- on the world, on the planet. We can reduce, if we use the right products and the right systems, just the heat loss on houses by 35%. For example, we have green roof systems. We have great first aid systems. We have great windows, where we bond so the heat loss is less. We have good flooring system to keep the heat. And of course, also the waterproofing helps there. So great, great systems. And I think that's just one of the potential where we have with the heat loss, which is a great problem around the world. Another great one is the -- which we are really proud of. We have the first roofing system from cradle to cradle, means we produce a membrane, and we have membranes now around the world since 30, 40 years. Now they want to be exchanged. So we take these membranes, we recycle it and put it in as a new membrane. And so we really can use these membrane to recreate. And so we have a really full circle, and therefore, we got the first membrane worldwide. And I think also some certificates and some nice awards. So that's another point on the roofing. Clean water, also a huge problem around the world. With our really great products, we really can make sure that this water sewage plants, we can do much better. We can produce it better. Water leakage, water car management is much improved. And also there we really feel we have the right products. We work harder on that one. And these also initiatives where we want to launch worldwide, also third-world countries, but they're also in mature countries that with our products and with our support, we can improve the clean water concept of the United Nations. Here we are very proud of. We just have a new patent on how we recycle demolished concrete. Usually, you see the truck running down the old buildings, then they try to bring it in smaller pieces. And then they try to use it or landfilled or do something else with it. And our new patent is now we take the demolished concrete. We put CO2 to it, then we mix it, then we have Sika additives; they then split it to sand, so we have clear sand on one side; then we have the limestone, the cement, on the other side; and then we have to gravel, so we really bring it apart before you it was just one small knuckle, but now we have 3 different products. And with this one, I feel we really can help the environment to really go in the right direction instead of land filled or try to reduce it a little bit in concrete. If we can roll out these initiatives around the world, and we have now the first prototypes running. So this will be a game changer in construction for renewable buildings and also for refurbishment. So very proud on this one, and you will hear more about this. I think that's of the great initiatives we're running to be the enabler of the construction industry and automotive industry. If you look at our own target sheets in a scope 1 and scope 2, we are at 74 out of 100. That's a Sika's top class. If we look around our peers, no one is as high or just close. So also many -- our [indiscernible] rates are really helped us, rating candidates, and we got everywhere nice good ratings. So we are proud on this one. However, I challenge my friend. I want to see a aid in front. And we're working on it and then probably go higher. So it's a clear target to improve this course. We are very happy with it, but that's not the end. We will work harder to go in this direction. So if I look at the future, if I look a little bit on the next 5, 6, 10 years. This will be a big driver to really be the best enabler around the world in construction and automotive industry. The point is we really have to care about our people. I think this is what Sika is built for. This is that we are strong. We have a strong culture. We want to continue this culture and also we want to help outside. We have to admit that pandemic not really supported this -- all these projects. We had a few, but this is one point where we want to improve further. We want to invest more to really be good citizens around the world. We had only 1,200 working days, which we could spare because we could not meet with the people, but the target is here clearly go towards 10,000 days. We want to spend for community. And we are on a good way. And as soon as we feel the pandemic is over, we will really push that throughout the world. So good achievements, but we can improve here. But it's -- Sika is proud to be a part of all these partners, and we are proud to really make this happen. With this, I would like to ask our friends to give you the outlook per region, and to have it firsthand. And then afterwards, we make Q&A. Thomas?

Okay. Thank you. And as promised before looking into the global business and the industry as we started the year. I think it's obvious the automotive business is not coming really to a rest. It is recovering. We expect also that China will reach pre-COVID levels this year. But in parts of North America, in Europe, we still have a very slow catch up. We have a high volatility, uncertainty. I guess you have heard about semiconductor shortage which will have an impact in Q1, but we are optimistic that the industry will catch up the loss in these volumes. As the consumer demand is still improving and should recover if supply chain disruptions. Most important for us is our internal work where we can contribute. Our pipeline is full. We have lots of projects nomination, which will fuel our future organic growth. Most pronounced is that already 25% of the last year's nominations are battery, e-vehicles and even 10% of our nominations are pure e solutions. These are solutions which 3 years, 4 years ago, were inexistent and are already contributing 10% of the nominations and which will then go into production in the coming years. But we have also seen that some of our markets, the renewal energy market, the modular construction market were not as heavily impacted last year, and we also see a continuation of that positive trend. The same applies to the more distribution-oriented manufacturers of home appliance and building components. Also here, we have seen a nice improvement last year as end consumers are focusing on home improvements rather than on buying cars. So this has been 2 positive elements where we expect also in 2021 to see further improvements. Overall, the global business and the industry is, again, well positioned to outperform the market. The electrification of anything that is mobile has further accelerated and is supported by the governmental interventions. We also see that the global industries of global markets like automotive, transportation, renewable energy and so on, are requiring a full range of products which we can offer and most important, under the current supply disruptions. We have a footprint in all key markets to make our customers less dependent on the supply chain issues that currently are all over the globe visible. These are the few things I wanted to share about global business and industry, and I hand over to Christoph to talk about the Americas.

Good morning, everyone. So after 2020, it was quite struggle for us. I must say, I'm still quite satisfied that we were able to end the year with a little growth of 1% and as well as a full percentage point on profitability that we were able to add. And therefore, this, I would like to take this opportunity to publicly thank my over 5,000 people for this achievement. They deserve my full respect. I've seen tremendous spirit during this last year. People still coming to work in our factories and making this result possible. About 2021, which has already started, we remain optimistic, mainly for the reason because we learned how to deal with this co with crisis. We still visit our -- we visit our customers and our customers also learned how to deal with this crisis. We adapted our strategy to a new slogan, go where the money is. Money has moved a little bit. I mean there are less department stores, for example, repairing their roofs, but their more other type of projects, for example, where there is still a lot of investment going in. Looking a bit into the different areas. Canada had a very strong year last year. And this will continue. We're quite positive for that. I think we have also a very strong setup with the King acquisition that we did last year. U.S. will see rather a slow start. February, I guess, everybody knows, driven by heavy snowstorms. But this snow will go away, and then we will -- we believe very much in an acceleration of the market environment. And we have a very strong setup in the U.S., as you know. So we will see a good result by the end of this year. And then Latin America is really a bit my highlights, I'm saying, we went through a really tough months in Q2, Q3. But the last 5 months, we're coming back very strong. And this year, I'm -- say, I am very confident. We're going to see good results, excellent results led by Brazil, Peru and Chile. Still very challenging environment as you heard from Adrian also, exchange rates, et cetera. But our people know how to deal with that situation. And therefore, I remain positive. Distribution, retail, e-commerce has helped us a lot in all of the Americas last year. This business was growing close to double digits. There's been a lot of activity, while, of course, projects during many lockdowns, they almost stopped. Now they're -- of course, they're coming back. And distribution will also help us this year. We've seen already this business going very well in the first weeks and months of this year. Also projects will come back. They have already come back. And I said we adapted our strategy towards go where the money is. And there is money in projects. So infrastructure, I would mention first. It's coming back now and we hope for stimulus money, particularly also in relation to, I would say, the new presidency in the United States. So there is a lot of really interesting, very large projects waiting to be built. I'd like to mention New York City airports, LaGuardia, Newark. These 2 projects alone worth USD 7 billion. So there is a lot of money in there for us here. In California, water tunnels in the range of $20 billion waiting to be built. Texas, speed train, for example, from Dallas down to Houston, in all these projects. And we're on all of them working. There is a lot of money for Sika. I would like to mention data centers this is booming right now, also during COVID. We are very strongly involved in these projects. So we have right now, 15 projects in the U.S., 10 in Canada, and there are always several million of Swiss francs or dollars in each of these projects for us. And then I would say one of the most booming project areas are the distribution centers or warehouses, and here, without naming the customer, but the largest online distributor in the United States. We're tracking right now over 100 projects of this 1 particular customer and sees very well positioned there for the roof, for the floor. It seems they really like our products and our specifications. Of course, hospitals, very big in Latin America, very important project type for us, pharmaceutical companies and food and beverage. These industries have money, they profited during the crisis and they are now investing also money into their infrastructure and into their buildings. Other initiatives, which we have launched in Americas, and these are the ones contributing to our performance. Mentioned the mining. Mining is coming back. The copper prices, for example -- just coming from a call with our Chilean friends, copper prices are rocket high. And we have a very strong position in the mines in Latin America, and we see this business now coming back which will help us a lot with our growth next year. I'd like to mention building finishing from Parex, which we bought. We roll out now this business in countries where Parex was not present before, namely in Mexico or in Colombia or also, let's say, the tile-adhesive business, a new business, which we launched right now in the United States. Wind. Wind is an initiative we have invested a lot. In [ 2 ], there is not only -- we learned the blade business, which we've been involved in, in the industry for quite some time. Every wind park has a lot of towers, steel towers, but also concrete towers. And each of these concrete towers requires a lot of Sika products: grouts, anchoring adhesives, et cetera. Operation. You've seen it. Paul has helped us a lot on the profitability side. We ran important consolidation projects. Last year, and this will continue. We overachieved our targets. And then sustainability. I must admit this is rather a new topic for us in Americas, but we used last year to really excite the whole organization for it. We've done a lot. We were surprised by the impact that these initiatives have caused, and we have a very nice section last for this year now to achieve a beautiful CO2 reductions in region Americas. And last but not least, not at all. Our people, most important asset of Sika and in particular, also of Sika Americas, we pushed, we promoted, we developed despite COVID, virtually, not face-to-face. We promoted a lot of people, also helping the gender diversity. I must say, on the top management level of the Americas. And this will continue and will also be our most important success factor in 2021. Thank you.

Okay. Thank you very much, Christoph. I hand over now to Ivo.

Good morning, good afternoon to everybody. Like Christoph before, I would also going -- very quickly back to 2020. I think it was, as you all know, a very special year, a very challenging year. And I would like also to express my thanks to all my colleagues out there in about 60 countries we are operating in EMEA. I think thanks to a very, very agile and fast reaction to the new situation. We were able to deliver good results. First of all, we were able to protect all our employees. Still, as Paul also said, keeping the contact to our customers using, of course, all, let's say, the new tools, virtual meetings and so on. And I think with all that, the disciplined cost management, also on the pricing side, defending or even increasing the margin we were able to really after in March, April, things were, of course, a little bit more concerning. We're really able to then deliver this year. For '21, we are also positive in EMEA. So we see a recovery of the construction business. So in most markets actually. And especially, as it was said before, in infrastructure, I mean, the infrastructure, as we heard, I mean, I personally strongly believe in the water management, for example, because this is a need everywhere. We see the data centers. We see one example this year on top, right. I mean, these are a really substantial railway project in Norway. You see we are active in all areas. Here, it's about tunnels, it's about bridges, it's about stations, railway station. So this is really looking very promising across actually the areas. And we are, of course, then we are proactive. We are proactive in the project business, the second point here, specification selling, as we call it. So really, our goal is to be as early as possible in the project, really talk to the engineers, talk to the owners, talk to the architects because there, we can also act as enablers in a very, very early project stage. And maybe we have the first contact with the waterproofing of a project or with the roof or the facade. And then from there, we are in the project, and then we do the cross-selling. And then it's our, as we call it, basement to roof approach. You see here one example, the new -- or actually the extended Bernabéu Stadium in Spain, the Real Madrid stadium. They still have money to spend. So I think we have -- here, we are very well positioned with the facade. It's a special glass facade. And then we go also in the other parts of this project like the roof, like the coatings. And this really helps us to sell the value of our systems. We do not talk about only a single product, but really systems, value selling. And then we can clearly differentiate also to competition because, again, we are not just dealing in one specific part of a building, and this is, of course, of a great, great advantage. Then we heard it before, I mean, distribution. Distribution, really 2020, showed, again, much more resilience. We heard it, the home improvement helped a lot. And in EMEA, we still have, I think, potential to further grow. We have countries where we have -- we are quite well balanced with the indirect and the direct business. But in areas like Eastern Europe, for example, we still can grow. You heard about our recent acquisition in Russia with Kreps. This will give us a much better access to distribution channels. And of course, we will benefit from this and extend wherever we can. We do also a very systematic marketing approach now. We call it the category management, where we fill the gaps in the stores. And we do it really with a very, let's say, proper analysis, we go there the right way. And then the online business, I would like to mention as well. We heard it before from Christoph, I mean, helped us tremendously in some countries this year with the pure Internet players. One was mentioned by Christoph. Of course, I will not mention the name, but you can imagine. That is one that we have different channels to really benefit from, of course, the trend into the online business. And we see this more and more -- also in our industry, we see more also professional users buying online. This is a strong trend. And of course, we want to -- and we will participate on this trend. Then the applications in the industry, heard it from Thomas. We also now combined the advanced racing business in the local organizations. There, we see many synergies in tooling part of business and finding additional applications for our systems and industry. And then I personally really strongly also believe in the modular building. I mean the building industry will become or have to become more efficient. I mean if we compare it to automotive, it's still not the same level of efficiency. And here Sika is definitely playing or will play an even more important role because we bring all our solutions together. Sometimes, we start with the roof, sometimes we replace screws and nails with adhesives and then we can also do the cross-selling. We have some very promising examples now in Scandinavia and Eastern Europe, in the U.K., just one -- another one on the -- another customer on the modular building, and I think we can really strongly benefit from this trend as well. Then in the emerging markets, Africa, our Africa strategy, we continue. It's still growing very successfully. We saw mainly also in the newer companies or in the smaller, let's say, companies for us in this, as we call them, start-ups. We saw actually still a very good development also in 2020. Of course, we continue that. We also built or increased also our capacity in the countries where we further grow. The integrations in EMEA are also well on track. The latest one, the big one, Adeplast, in Romania is really developing very well. We can really gain the synergies there. Parex in France, which was the biggest part in EMEA, is well on track. We see now more and more cross-selling coming. The customers really see also the benefit with us, with the additional mortar business there and that's helping a lot to further build on the synergies. Modern Waterproofing in Egypt also goes very well. I mean, it was, of course, it was all 2020 done, not so easy with the travel restriction center, but we do now use this bituminous membranes in Egypt, but also in neighboring countries. We also do intercompany business, and this is going really in the right direction. Operational efficiency and sustainability in EMEA is, of course, a key topic, key initiative, key moves for this year for '21. We are building on this even more now. We see now more and more potential there. And often, the efficiency improvement has also been a very good impact on the sustainability improvement as well. Sometimes, you reduce complexity, you need maybe less different articles to produce. And this has an effect on the efficiency -- on the energy savings and then, of course, also on the efficiency. And then people, of course. It's always a little bit repeated, that it's the last point on the slide because, clearly, people are the basis of our business. We can only be successful if we have the right people. Well, I think we are doing a lot in really developing our internal talent, working on succession planning and obviously, also on the gender diversity. Thank you.

Okay. Thank you very much. We go now to Mike in Singapore.

Okay. Good morning, friends, and welcome to Sika in Asia Pacific from our offices here in Singapore. It's really my pleasure to share with you the outlook for the coming year. After a challenging 2020, strongly affected by the COVID-related topics in the first half of the year. We saw a really strong improvement in the second half in many areas throughout the region, ending with a positive double-digit sales growth and strong efficiencies leading to an overproportional EBIT development. In 2021, we clearly see a significant recovery in the economic momentum of the region, with the easing of pandemic-related lockdowns and travel restrictions throughout most of Asia Pacific, particularly in Southeast Asia, in India, which were by far our hardest hit areas. Despite these lockdowns and these restrictions, our people stay close to the customer. And this enabled us to have a really quick restart to the business when restrictions were lifted. So this constant connection with our customers is really the key. So I'd like to thank our people. I mean first and foremost, it would not be possible to deliver strong results in a pandemic time without the great people, really committed to taking care of their customers and their company. So I thank you, team. Well, China was the first hit by pandemic. They really did an outstanding job of protecting our people and quickly recovering the business in support of our customers. They'll continue to lead our comeback in 2021, with the expansion of our retail market ecosystem. So when we couple this with our strong cross-selling activities in the channel, we have unlimited potential. Large government infrastructure investments and commercial, construction remains strong in China, and it will continue to grow. I mean as you heard from Paul, this will run through our presentation bit, CHF 8.6 trillion investment in Asia is amazing. Our distribution business will continue its strong growth in the second half of 2020 with strategic initiatives in China, Southeast Asia, the Pacific and India. And we do this with our retail model, which we call the Sika retail leadership journey. This is a really successful model, which has led now to 140,000 points of sale throughout Asia with a 20% growth in 2020. And we're expecting a better than 20% growth again in 2021. So we have very bright hopes for our distribution team. We've really strengthened our key project management and key specification management organizations throughout the region, to drive specification and cross-selling into the [ linked ] projects within the region, with a focus on infrastructure, electronics, data centers and other related projects. These projects in Asia Pacific has always been a big part of our DNA in the region. And we'll continue to develop this during this period of recovery. So [indiscernible] in this market are incredible. They're huge for cross-selling opportunities. And again, with this CHF 8.6 trillion in projects, the possibilities are endless in all of our target markets. So again, growth will be a key focus for us. However, our growth largest coming from construction, [indiscernible] construction. We're also very excited about the innovation initiatives from our TM industry. The TM industry's team has brought a lot of new products and systems for wind applications, e-Mobility, electronics and transportation markets. And then with this innovation, we not only bring great solutions to our customers but also greener solutions to our customers. We all live in a digital world now, and we'll continue to invest in digital solutions to improve our customer centricity and also our overall efficiency. We've created a new digitalization team here in Asia Pacific and also on a global basis, to focus on these areas. So we have a lot more digital tools than we've ever had in the past. And we link these digital tools to our relationship and interaction with our customers. So the closer we can keep this connection especially during these kinds of lockdowns and integrity in travel, it allows us to continue that strong relationship with growing the business. With all these initiatives, we expect to once again deliver strong double-digit sales growth and an over-proportional EBIT development in 2021. Of course, in order to see these growth developments, we need also additional investments in the back of the house, not just sales. So we'll continue our capacity expansion and automation innovations in waters, sealant, epoxies and our BU technology to optimize our supply chain in numerous countries throughout the region. So we'll continue to invest. We'll continue to increase the supply chain and service our customers. Further, we're going to drive for our operational efficiencies and sustainability -- you've heard this from my friends earlier. And this is to increase our productivity and efficiency while still reducing our CO2 footprint. Sustainability is now part of everything we do with Sika. From green products, the green power initiatives. We want to create a greener role. And I think we have the horsepower to do that. Finally, really, for me, none of this would have been possible, you heard it from my friends before, without the best people in the construction industry. And as Ivo mentioned, we always hate to say that people last. But we're in an important race, you always have the anchorman last. So these are the anchormen that really bring the results for us. So we'll continue to train and develop our people to support themselves, their families and Sika business. And then really, for us, it's our goal to be a premier employer within the industry. I really believe the future is bright, and we expect to deliver outstanding results in 2021 and beyond. And really, I'm very proud of our team in Asia Pacific. They go to show you they're fit and focused and ready for the challenges ahead. So this completes my report for Asia Pacific. Thank you.

Okay. Thank you very much, Mike. Good luck, and I'm fully believed that you're going to deliver these results. Coming now to the outlook, we still confirm our strategic targets and where we had in '18. So we go for the same amount and sustainability, profitably to grow. The outlook is sales grow by 6% to 8% in local currency, over-proportional EBIT grow increase expected for the year and we aim for EBIT margin the first time by 15%. I think we are in a very good way and convinced that this strong team will deliver the results. If we are in the thanking phase, I thank you first for joining this call. We open now for Q&A.

Okay. I see many hands up. [Operator Instructions] First question goes to Cedar Ekblom from Morgan Stanley.

I've just got one question on M&A. Obviously, M&A wasn't a massive feature in 2020 because of COVID. But it's always been a key feature of Sika's long-term growth story. How do we think about the size of M&A that you could be looking to deliver in 2021, the markets and products, where you see particular interest. And then talking more generally around you see your M&A profile evolving now that your business is a lot bigger. Obviously, it's easier to deliver 2% to 3% revenue growth from M&A when you're a CHF 5 billion revenue business. But now you're an CHF 8 billion revenue business. So if you can just talk to us a little bit more about how the M&A strategy is evolving, and then key focus areas for 2021.

Okay. Thank you, Cedar. It's very clear that this remains a strong focus. Yes, we agree that it was a little bit more difficult in this 2020. But as I said before, we also led the 3 or 4 opportunities around the way, too expensive or didn't fit. We have a strong pipeline now, and we are -- changed a little bit the strategy that we delegated a little bit more to the local organization to close the deal. And we are more on the Internet to prove it and make sure that it works. If you look at the potentials to acquire, I think we always need acquisition as a growth platform to really getting more market share, going better to the market, having new technologies. And we really try to use it as a growth platform. If you look at the technology, I guess, we like to acquire always motor companies recently. We are also very keen on adhesives. We also opened another technology if it really fit, but that's probably the major 2, 3 technology where we would like to go. If you look out in the market, I guess we are very keen everywhere. However, it's probably easier in the mature market to win market share and to get new contracts than in the emerging market, as in emerging markets, we are clear number one. And so we want to make the market share by our own mainly, but we take the opportunity. But it's surely rather for the bigger ones in this. If you look at the size, we like the size between CHF 50 million to CHF 100 million, CHF 200 million, CHF 300 million. But we're also capable to have bigger ones as we proved with the Parex. Hope this answers your question, Cedar?

Yes. One follow-up. Can you remind us the type of multiples that you would be willing to pay? And if you have seen a shift in the markets in terms of what you need to pay to get the right assets?

Cedar, I rather see lower ones, as you can imagine. I'd rather go to 6, 7. However, I think the multiples in the moment, a little bit up, and we have to see what is the synergy. So I don't like to talk just on multiples if I don't see the synergies we have. But be assured we like to pay as little as possible but still have a good deal also for the seller. So we try to find a good compromise.

Next question goes to John Fraser-Andrews from HSBC.

Yes. Dominik, can you hear me?

Yes. We hear you well.

Excellent. Yes. So greetings, everybody, and congratulations call on a fantastic tenure as CEO, and to Thomas for his appointment. I'll have 3 questions, please. First one is, could we have some comments on current trading. At the start of this year, we've heard from Christoph that the U.S. is slow, Asia is -- sounds like it's booming. But could we have a wider group comment on current trading, please? The second question is on Parex. The sales synergies. You hear, the cost synergies have gone extremely well. But where are you with the Parex sales synergies? Do you have a number in terms of millions of franks that you've booked already? And what are the long-term prospects for that? Perhaps you can give some color on how the rollout of Sika products into the Parex systems and vice versa is, please? And then finally, on the carbon reduction. It looks like you achieved your target, half your target in 1 year. So well done on that. Can you say how that was achieved, and what there is more to do on that, please?

Okay. I'll take the first one with trading. We have the understanding construction is difficult to judge January and February, Chinese New February or in January. Then more snow, less snow. So we don't like to do the weatherman here. But so far, we are happy with the trading. We are on a good track. And -- but we clearly understand it's not a trend where we say it goes 20 up or 20 down. We're just in line as expected, and the balance from Americas, therefore, China is booming. We always have a little bit this opportunity. But the trading for the first 2 months is -- we are like it. So I hand the second question and the third one to Adrian.

Yes. On firstly, John, on the Parex synergies, as reported, we're well on track here. I mean on the sort of the CHF 55 million we have achieved in 2020. There is about 75% attributable to cost synergies and the 25% of the EBIT impact is relating to sales. This is actually pretty much in line with the planning, probably a little bit slower on the sales impact while on cost, overachieving on the time line, also a bit related to the situation, the pandemic situation in the market. And this will now continue to shift more towards a greater impact on the cross-selling side. So well in track overall to hit this CHF 100 million annual contribution in 2022. Then on the sustainability targets, yes, we have provided a number of targets also here relating to Scope 1 and 2. On the time line here, we have obviously the clear ultimate goal to -- at least by 2050, to become climate neutral here. I think we have made already a big step. It is quite significant reduction was also partially owed to also the fact that -- particularly the Parex business, acquisitions overall, have a lower overall CO2 per ton footprint here in terms of our own processes. So this had an impact, but then particularly also driving energy mix initiatives. And here, we're probably even a bit underestimated what is possible, so a lot of initiatives there. And then the initiatives relating to improvement on the production side, making it not only more efficient, but also consuming less energy. A lot of ideas, I must say, have been developed and are being executed here. So I think on a very good track here.

Okay. Thank you, John. I fully feel that Sika really can improve here. I think Thomas will come up then recently or in a few years or a few months or a few days -- not days, months, with probably a better outlook. I think we really want to push it. I fully believe that we can get better, and it just shows the potential we still have, even if we are just 20 kilos. I think we can reduce that, and it's on the management team then to bring up new targets for the new strategy, which they will start to work probably next or over next year.

2 Next question to Priyal Woolf from Jefferies.

I'm glad it works this time. So the main question I've got left is, obviously, you've given guidance for 15% margin in 2021. Should we see this as a floor for this year or more of a realistic target in this year as well? And also could you just give us a bit more detail in terms of how you get from the 14.4% in 2020 to that 15% with particular focus on what you think raw materials and prices will do? And then I just had a very quick follow-up on the M&A strategy. I think you previously mentioned there was a bit of a hiatus or obstacle because of the inability to travel, does that mean that we shouldn't expect a larger scale deal such as Parex this year, even if there is a decent pipeline for that? Or actually, are you getting to a stage where you just need to push your head with that M&A?

I'll take the travel one, and you take the numbers. No. I guess, we adapted our approach a little bit. We want to be more active. We also have to change a little bit the approach. We have a strong pipeline. And I think we also can handle bigger ones. But we have to come first up with it, and we have to see it first.

On the EBIT guidance, Priyal, I mean, we clearly said, and we basically very much continue to say so that in the year 2021, we will be moving into this sort of 15% to 18% bracket. And it is clearly at this point in time, too early to pinpoint exactly where we will be landing. But maybe if you look at sort of the elements driving this very much as in this year, it will basically be coming down to these 4 pillars. Obviously, material margin management will continue to be extremely important, particularly now. And when we look at the input, not only cost situation, but really availability, which is currently quite challenging given the supply chain disruptions and clearly, combining this with the right price management, the pricing strategy. So that will be one element, which will continue to be a clear focus. Operational efficiency. We are quite confident that we will be seeing another 50 basis points of improvement on the EBIT level coming from these initiatives, which is really a continuous improvement program across the value chain, across our organizations. We will have another incremental benefit on the M&A side. And then clearly, let's say, growth -- or the level of growth is then also driving the leverage. So quite confident here that we will continue to move at least to 15%, to what extent we will be able to overachieve it, and we will see throughout the course of the year.

There is another question from Martin Flueckiger, Kepler Cheuvreu.

I've got 2 actually, I'll go one at a time. First question is really on infrastructure projects that are targeted by Sika in Asia Pacific and Europe. I was just wondering, how important are those projects already for the company's growth in 2021? That would be my first question.

Well, we feel there is a lot of projects out there. Of course, we hope and like that the stimulus tops in and even more project out. But if you look at the current pipeline, I think it was in 2020, important, and will remain in 2021 important. And our pipeline is full. So we don't have to wait until the new bridges are released. We already have a strong pipeline in infrastructure in tunneling. So we are quite positive in this segment. As long as the construction sites are open, as long as they close it, we have a good run in this infrastructure and repairment market.

Okay. But these infrastructure projects ringing in the company's pipeline. Are these post COVID -- or COVID-related stimulus programs or are these programs that were already initiated pre-COVID?

It's initiated. They're all initiated. They're all already running or starting to run. So don't test wait until they release it. But it's already there, and we are strong there, and we see a strong pipeline. It's not -- I hope they will release it, but we don't have to wait until they're really there. That's more than for '20, '22, '23. And I think -- but we're well positioned.