Sika recently announced that it had a good start to the 2020 business year and has continued its growth trajectory, reporting a new sales record of CHF 1.8 billion (approximately $1.9 billion) in the first quarter. This equates to an increase of 15.4% in local currencies. A negative currency effect led to sales growth in Swiss francs of 10.3%, with an acquisition effect of 16.7%. Organic growth was thus slightly negative in the first quarter (down 1.3%). This reflects the first repercussions on business of the COVID-19 pandemic.
“Since the start of the coronavirus pandemic, Sika has been quick to react in all markets affected, implementing the necessary measures swiftly and rigorously,” said Paul Schuler, CEO. “This has been done with a view to safeguarding the health of employees, maintaining business activity, and adapting to the new market conditions through targeted cost management. The crisis will affect Sika, too, but—thanks to our proximity to customers in all countries—we are able to move fast in order to grasp opportunities and thus capture further market share. I want to thank all of our employees for their great dedication at this difficult time.”
As the coronavirus pandemic gained ground in January 2020, first in China and then in the rest of Asia, followed by the EMEA region and the Americas region, from mid-March around 30 countries where Sika is present through subsidiaries and production sites found themselves in lockdown. The extent of the lockdown varies from country to country. Since the situation is changing constantly, Sika reports that it is adapting measures specifically in line with the new circumstances.
In the first quarter of 2020, the EMEA region recorded a sales increase in local currency of 13.3% (previous year: 8.2%). Business reportedly developed well in Germany, Austria, and Switzerland (the DACH area); the Nordic countries; Eastern Europe; and the Middle East. The impact of the pandemic made itself felt on the entire EMEA region from mid-March, with the first countries entering the lockdown phase. The acquisition of Adeplast (Romania) was concluded at the end of March. In addition, Sika also brought into operation a new production facility for the manufacture of SikaProof® structural waterproofing membrane during the quarter.
The Americas region recorded growth in local currencies of 23% (previous year: 4.8%) in the 2020 first quarter. Business was strong in the region until mid-March. The U.S. and Canada, in particular, saw double-digit growth rates, and many countries in Latin America recovered from the political tensions of the previous months. However, with the lockdown, growth momentum came to an abrupt halt in several Latin American markets from March 20.
Sales in local currencies in the Asia-Pacific region increased by 29.8% (previous year: 2.8%), a figure that includes a significant acquisition effect from the Parex takeover (39.5%). China was in lockdown from mid-January to March. Sika was able to restart business activities in the country from early March, with all factories recommencing production on a reduced scale. Australia, Japan, and Korea were less affected by the pandemic in economic terms, and construction activity continued in most areas with some restrictions.
The automotive industry reported a decline of 25% in production figures in the first quarter. Despite the difficult environment, Sika was reportedly able to capture increased market share. The Global Business segment posted a decline of 7.1% (previous year: 13.3%). Most car manufacturers in Europe and North America halted production from mid-March, just as their Chinese counterparts were restarting their production operations. Despite the coronavirus-related forecasted decline in automotive sales, Sika expects the megatrends in modern auto manufacturing to generate growth stimuli in the long term, with electro-mobility and lightweight construction also dominating in the future.
Given the volatility of the current backdrop, Sika reports that it is not possible to issue any concrete forecast regarding the course of business for the remainder of 2020. Much will depend on when individual large countries exit lockdown and how the further spread of the virus can be contained over the year. Although Sika will not be able to escape a global recession entirely unscathed, it is convinced that it will be able to continue to further improve its position due to the measures taken and its proximity to the market, emerging from the current situation strengthened as a company.
For more information, visit www.sika.com.