Sika Speeds Latin America Expansion Amid Europe Slump
(Corrects earnings definition in sixth paragraph; company corrects stake and voting rights in last paragraph.)
Sika AG (SIK)’s chief executive officer said the world’s largest maker of construction chemicals can reach sales of 8 billion Swiss francs ($8.5 billion) in five to six years by edging out smaller competitors in emerging markets.
“We have initiated an acceleration of this expansion” in emerging markets, CEO Jan Jenisch, 46, said in a telephone interview. “Last year we only had one factory in Brazil. When I look at the footprint and the potential, we should have five or six factories there.”
The maker of concrete admixtures and mortars has plans for new production lines and factories in Brazil, Argentina, Chile, Uruguay, Colombia and Mexico, Jenisch said. Baar, Switzerland- based Sika plans acquisitions worth 1.5 billion francs over the next five years, including purchases in emerging markets, where local competitors are greater rivals than multinationals such as BASF SE (BAS) and Henkel AG, he said.
The CEO, who joined Sika in 1996 and took the top job in January is looking to new areas for growth amid a construction slump in Europe, which accounted for about half of the company’s 4.56 billion francs in revenue last year, according to data compiled by Bloomberg. Sales from emerging markets advanced to more than 36 percent of the total last year from less than 10 percent in 1990.
For acquisitions “we have a few bigger targets, but at the moment there’s no super-big target,” Jenisch said. “For us a big target is 200 million.” Sika isn’t considering targets as large as 500 million francs and Jenisch may talk more about its deal pipeline in a couple of months, he said.
Sika will be “well within” a target for earnings before interest, taxes, depreciation and amortization at 12 percent to 14 percent of sales next year and will come close to the lower end of that range this year, Jenisch said. Sika has raised prices to counter higher costs for raw materials such as crude oil derivatives which led to unsatisfactory margins in 2011, he said.
Sika has grown to become part of the 30-stock Swiss Leader Index by acquiring 50 businesses since 2000. They included Switzerland’s Sarna Kunststoff Holding AG in 2005 for 407 million francs excluding debt. This year, Sika acquired only two companies because of high asking prices, Jenisch said.
“We have a couple of companies in the market, owned by financial investors, and it looks like their price expectations are quite high,” Jenisch said.
This year, investment firm Wendel’s sale of part of building materials supplier Materis SA stalled after bids didn’t meet expectations, three people with knowledge of the matter said in July.
Sika has been majority-controlled by Switzerland’s Burkard family for 102 years and Urs F. Burkard of the fourth generation of the founding family sits on the board of directors. The family has a 15 percent stake and 53 percent voting rights via holding company Schenker-Winkler Holding AG, said Dominik Slappnig, a spokesman for Sika.
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