Sika Ag Adr

Welcome to our annual results presentation. Thanks for joining us here in Zurich or online. We appreciate your interest in our company very much and look forward to an exciting two hours. Before I start with the presentation, I would like to share my deep appreciation and thanks to our organization, the 33,000 employees, which I have the privilege to lead. And I also stand here on behalf of all of them presenting our joint collaborative achievements in 2023. I believe it's a strong statement of the power of the organization, what we can do, and we go into the detail as we go. But it's not me. It's all of us in the company. Some of them are here in the room, mostly here. A big thank you for organizing just a perfect setting to guide us through the next hours here. It's a people company, and our people have made tremendous achievements possible in the last 12 months and also moving forward. Now, going into 2023, I think on a high level, the highlights on the top line we shared on January 10 already, 14.5% growth and organic in the local currency, 7.1% growth. In Swiss francs, a lot of Appreciation of the Swiss francs, of course, in here. Adrian will go into all the details in regards to those numbers. The EBIT reported slightly below last year. I think here we stay with our reported EBIT as a guiding principle. But at the same time, we know that here quite substantial one-time costs through the acquisitions are included. If we take those out, we have raised our EBIT performance by 80 base points. in 23, reaching a level of 15%. We are especially proud of the strong cash generation that has led to a record in operating free cash flow of 1.37 billion Swiss francs, a plus of almost 60%. I think this is a clear manifest of the power of the company to generate cash to the benefits of all. The key investment in 23 clearly is the closing of our transaction, the MBCC, which I will come in more details. We talk a lot about the cost of the transaction, but I believe it's significant to see that already in eight months we have been able to generate 41 million of synergies and more to come. Our innovation and sustainability drive, a key aspect of SICAS in the past and in the future, Also here, accelerating with the power that we gain by growing organically and through acquisition. 108 new patents, 188 new inventions. These are just signals of the power of this combined organization going forward. At the same time, we have done our homework and continue to do our own, let's say, improvements on the CO2 reduction, talking scope one and two, with a reduction of 4.4%. percent overall per ton sold. This picture is a picture that I don't know how, but magically all the regions are at 15 percent growth. So Adrian, thank you for balancing that so well. But of course, it's clear here this 15 percent growth in the region is fueled by the acquisition, which obviously then also has helped all the regions to reach new heights. The global business region, which is the last time that we report independent, without acquisition, reached double-digit growth, a clear sign also of the recovery of the automotive business overall, as well as our traction in gaining new applications, especially on the e-mobility side in that business. It's not just the numbers that matter. We also have high emphasis on The non-financial areas, I talked about the CO2 reduction, scope one and two, but also safety is a topic that we consider a key element to make sure we have a safe work environment. We reduced the accident rate by almost 24%. Waste is bad. Waste is something in multiple ways that we want to reduce. Also here, good progress. Water consumption reduction. I think here all the arrows show in the right direction. But we can't stand still. We have to go further also on that journey. And I come back to that when I talk about the strategy 28. As always, ZK is investing in the future, investing inorganically as well as organically. And I mentioned MBCC, the biggest investment. But we also did two other acquisitions, Thyssen in the U.S. and Gemma in Peru. And we also explore new ways of, let's say, tapping into interesting startup companies here, a company in Finland that has an excellent cementitious flooring system that we can leverage. And we took a share or a stake in that company that is going to fuel some exciting specialty floors in Sika. The investments organically are expansion of the footprint, reinforcing of strong hubs like the U.S. is a strong hub. More than 40 factories in the U.S. alone. And here we invest also into future growth. And the expansion in Sealy in Texas, the expansion in Chattanooga are a manifest also of our strong belief that North America is a place to be and a place to further invest. But that's not only there. India is mentioned here with a new factory in India. India is a booming market. I will show later on a bit more details on that. And innovation. Innovation, the opening of the technology center in Suzhou, in China. It's the second largest technology center of SICA. Behind Zurich, it's a clear statement that Asia, Asia Pacific, with this hub, building a strong competence level that influences the rest of the world as much as the rest of the world influences Asia Pacific. I think this is a slide just showing the base of our business in a way we talk more and more the vertical aspects of our business. And you see a strong balance. The infrastructure and the commercial are two very important segments for us. Vertical markets, the residential growing, not, let's say, being dominant, but clearly visible and relevant and a great opportunity for more. And then the automotive and the industry segment that is also an excellent addition to the three others. This is the base. where we come from, and this is the base where we also build the future. And it's a very strong mix of vertical markets that we focus on. Another angle to look at our business, the base business, is emerging and mature markets. We have always shared this view, but you see how the emerging markets are catching up 41%, while also mature markets are growing. So this is not the one or the other. Both of them can grow, and that's what we're aiming at. The same is with the New build versus refurbishment. Here you see the ratio as well. Our refurbishment is dominant. That comes from our strong position in Europe and in North America, where a lot of refurbishment of infrastructure and building is a core business. While as the new build also is, of course, in emerging markets, the majority and our priority to grow. So it's also here, this is an excellent balance, also hedging. let's say, besides the vertical through the geographical balance, the company. We are very proud of our historical performance status. We stand for market share gain. We stand for over-proportional profitability improvement, and we have delivered that over the past six years, starting 2018 as an indicator of growing in Swiss francs 9.7% annually and growing the EBIT 12.2% year over year. Here we took the liberty in 22 and 23 to show the EBIT evolution, excluding the one-timers, which Adrian will go into details, but it's the underlying strong operational performance of the company over these six years. And we intend to continue that, of course, also in the next years ahead of us. Many questions in this wild 20s came up. How do we explain this? How is that? And how are you doing and the markets are doing? I think we tried here to bring some clarity what happened in 2020 when we had a standstill of the economy worldwide. We had a negative organic growth. And we compare us, let's say, to our peers in the industry. This is about a dozen of players that are listed that we have data to that we can compare. We all went into this COVID, let's say, incident and we had to preserve our companies. And I think we did well, but everybody had to adapt. And you see our peer organic growth, our organic growth almost at the same level. But then the year 21 was the year where things came back, volumes came back. And in a volume positive market, we excel. We have clearly surpassed our peers in this race for the volume, and we delivered very well. 22, the year where pricing was an absolute mandatory topic to offset the ever-rising input cost, and here Looking for margin, looking for pricing has been clearly a main focus in that environment. But also we have to consider that our split is a little bit different than others, where the price increase in Asia has been a fraction of the price increase in Europe and in North America, even also the lower input cost variations there. So it is a strong performance there as well. And then we come into 23 last year, a year again with a lot of challenges, negative volumes to start into the year. Some of them have improved. Some have more or less stayed flat. But you see, we grew by acquisition, obviously, no secret. But then we compare our 1.2 organic growth with the Minus 3.5 of our peers, I think a substantial overachievement in a tougher market where less is available, but we succeeded to gain market share in a profitable way. Now, talking about NBCC, my favorite topic anyhow for quite a while. Now it's real. Now we are in execution mode, 6,000 employees on board on the 2nd of May. 2.1 billion Swiss francs. That's the number we communicated at the beginning of the journey. Converting it into today's Swiss franc is probably less than 2 billion, but still significant. And it's a major boost to the organization, but it comes from the, let's say, complementarity that we have in the field. The portfolios, the strengths of combining two major players offering to our customers a full range, the strongest range in the industry has shown huge potential, which leads to the next slide, an important slide, of course, the synergies that we are generating through this transaction. And as I mentioned, we already collected 41 million in 23, and we have a clear, let's say, pace up to 180 to 200 million in the years to come, and here outlining also how this segmentation goes in 24 and 25. Wonderful, but these numbers are the result of all the complementarity that we see, complementarity on the commercial side, on the sales side, as well as on the cost side, where we have a tremendous synergy potential, and we go after it, and we are doing very well on that journey. it's the people that make such a transaction work. And we have invested a lot and we still invest a lot into staying close to the organization, the new joiners, as well as the, the secret organization. We, we measure this constantly. We call it the pulse check to see how the organization is, is going along with the strategic direction. Is it understood? Is it a, Is it positively perceived? And here we see, you know, a pitch that overall is very encouraging. But of course, you also see points where we have to go and dial in and help the organization to improve. So it's an excellent tool for us to safeguard that the main asset of this transaction, the people on our side, on the new joiner side, are fully engaged in executing the initiatives that we have outlined for the future. Let's talk a little bit our midterm aspiration. I think it was presented at the Capital Market Day where we said, okay, yes, we are here in 23. This slide is updated with the 23 figures. Aspiration wise, we are very clear. We want to continue to grow, grow profitable, ultimately, We want to be in the 20% to 23% EBITDA range going forward and 6% to 9% CAGR in local currency growth going forward. I think we are well on track into this journey and a few aspects I would like to just remind us why we are so confident and why we have such a great opportunity ahead of us. The market is huge. 110 billion is our addressable market. We have 11% market share. As you can see, it's quite fragmented. Half of it is probably covered by the top 30, and the other half is individually in local players or regional players. There's a lot to gain for us. 89% are still up for us to go for, and we intend also to raise our market share going forward, organically and inorganically. I think the strategy, SICA-like, quite simple, four pillars that are the engine of driving the right-hand side, the financial results, the non-financial results, which we have clearly also brought in line with our expectation, what we as a company are committing ourselves to, say, on the SBTI targets to reduce the greenhouse gas emission, but also on the people side, the column that is driving everything we do, making sure that we maintain and build on the strong engagement of our employees, but also then the natural resources to do our own homework in helping to preserve the natural resources going forward. Now, this is a slide that shows how The 6% to 9% are built up and not so much on the underlying market or the acquisition. It's the core element, the key lever of the growth. It's the market penetration. And here for us, the leveraging of our strong position, which has been a key contributor in the past six years as outlined, still a lot more that we can expect there. If you just bring all the countries to a similar level like the average, we have more Magnificent growth potential. Frost selling on the buildings, on the structures. We have so much more we can do and we want to tap into that as well. Much more the vertical markets are a signal for how we are addressing as an additional dimension, also the potential that comes with the nature of the construction. Multi-channel, indirect, direct retail growth. which then, of course, goes more into the residential area. Huge opportunities. Our brand is the strongest brand in the industry. Let's leverage it. Let's bring it also more and more into the distribution, the retail. We can definitely take great advantage of there. Then Christoph's preferred slogan, go where the money is. I think, yes, absolutely right. We invest in key markets where we where we know there are activities and we want to tackle them and not waste our energy on things that are irrelevant. Key geographies, I will show another slide in this regards. That goes hand in hand with go where the money is. It's also focusing on not neglecting, but at the same time being aware where the key geographies of our companies. And then we have high potential markets, specialty markets where we can also Excel, and here I would say our adhesive business is a business that has, I say, outstanding opportunities going forward, our cementitious business, outstanding opportunities, so I think we want here also to leverage furthermore. The key geographies, as I mentioned, look at the map, not too much yellow, but the yellow represents 75% of the 110 billion. So, and we are in Europe, we are in the US, we are in China, very strong. Not to forget the US is our largest single market. 20% of our revenue is generated in the US. China is 10% of our revenue. It's the second largest single country. Europe, okay, 27 countries. So we aggregate that, of course, the biggest single market by itself, but India, An emerging market, Japan, I would say an underestimated market for many Western companies, but we have the footprint in China, sorry, in Japan. And Japan is a significant market with very interesting specific, let's say, requirements. I will show that in a moment, how we tap into that and benefit from all these key markets leveraging our competencies across the globe. Looking into the U.S., I think everybody's aware that the U.S. is in a change mode. The outsourcing of manufacturing, which was the theme of the past 20 years, has come to a stop. It is coming back. Industry is coming home to the homeland. And it is called the reshoring and with significant projects. It's taking place. I mean, you see it in the statistics. This is an example of the Samsung factory in Austin, Texas. I was there in September. It's huge. 557,000 square meter plant. This factory has 1,250 acre size. For those that don't understand acres, this is five square kilometers is this factory. It will generate 50,000 jobs. And the jobs generate cities around and infrastructure around. So this is not just investment that happens, let's say, onsite. For those that live in Zurich, Zurich, the city has a size of 88 square kilometer. Five square kilometer is huge. I've never seen anything like that. They're building the first factory of plant of 10 factories on this location. This is when America goes big, you know, they go big. And there are multiple projects like that taking place. say the semiconductors, say the battery drive, say data centers. We see a lot of very positive momentum, and this is new build. Traditionally, U.S. is a market where refurbishment is a dominant theme like in Europe, but this is fascinating to see that this reshoring takes place, and we are part of that, and we benefit a lot of those activities. But talking about Japan, it's a 5 billion market potential. We all know Japan is not the growth engine. It's very stable, but it's very specific in competencies. Here, we show the high-rise building that we have. helped to build in an environment that is super challenging. And they always have a different approach to challenges. And those approaches make us a strong company, contributing in Japan and taking those elements out. Our footprint in Japan has substantially increased with the three acquisitions we did in the past. We've started with Diflex, HammerTight Adhesives, and lately then NBCC adding. We are a powerhouse in Japan and we want to share that and also in April when we do an investor event in Tokyo showing how we capture the Japanese but also Asian Pacific as a key geographic for the company. India, another key geography that is on the move. I think for me most fascinating is India has always been, let's say, a continent of hope. But ultimately, what makes me confident that it is different this time is the investments go into infrastructure. Infrastructure first. The country is investing in building up the infrastructure in transportation, energy. That's the foundation of any development in any country. We see it in China. China invested heavily 20 years ago in an infrastructure that is well advanced to probably mature markets like Europe or or the US, but India is now on that move. And that gives me confidence. We all know still there's election year and this may change, but we are optimistic that the current government will continue. And so also the continuation of that investment into a meaningful infrastructure is going to be very beneficial for the country, but also for our business. This is the famous slide that I like so much. We have the privilege to be active in a market that can only grow. That can only grow because the megatrends surrounding, we need more construction. We are loving mobility. We have to change the way we build. We have to change. We move around. And for this, the world gets more developed. let's say, challenging, it's more difficult, and to navigate through that, we are the enabler. We have the solutions for sustainable construction. We have solutions to tackle raw material scarcity. We have a lot of additional, let's say, accelerating elements besides the megatrends themselves, population growth, and so on to benefit from. That's fueling our confidence in our forward-looking 6% to 9% growth ambitions. If I look into some of those megatrends, the population growth, and back here to India, it's the largest single country with the largest population. This population has huge demands in infrastructure. This example here is one of them that I compare with China, 508-kilometer-long high-speed train systems. This is helping India a lot to connect while it is almost impossible to travel. If you have been to India in the last years, that's the most painful thing. This is tackling this challenge. And more roads, train, ports, airports are in the build-up. And that's required to have a sustainable long-term growth for the economy in India. And here we benefit immediately on these big projects, for instance – where we are at 20 different locations that are along the 500 kilometers, helping to create the required concrete with the admixtures that we provide, making this fast, sweet and efficient. Another population growth, Africa, is a growing continent or exploding continent. Some of the countries have average age of the population of 20 years. I would say in Switzerland, we are a bit above that. So that's something that will trigger, of course, future needs and demands. And here, this is an example out of Ethiopia, where this is a hydropower dam that is built to provide infrastructure energy to this growing population. We will see more of that in Africa because it's absolutely... connected to the growth of the population in this area. The urbanization, Tokyo has always been a crowded place and it had limitations in going upwards, but here, you know, the sky is the limit, you know, go further, go beyond. I was very proud to be on the Skytree several years back, all this building in Japan, 634 meters, I believe, you know, That's a landmark building, but now it goes more commercial. This building here, Dasabudai Hills building, where we also will have our investor event in, is a great example how Japanese engineering is stretching, let's say, the limits, goes beyond. And we are part of that. We enable that, our solution. developed in Japan for Japan are enabling this. For us, of course, this is a possibility then to leverage this, bring it to the west coast of the U.S., bring it to Turkey. Of course, not the same solution, but we have the competencies coming from, let's say, the most challenging environment and leveraging this across the globe. So here, fantastic activities that just so we benefit, first of all, of course, quite nicely on that building, but the competence that comes with it, our reputation as being the best source when it comes to the most challenging aspects of building, waterproofing, structural, you name it. I mean, we are clearly here a leader and building further on our leadership position. We also have, not to forget, we have built systems infrastructure, commercial buildings that are retuned. This famous icon in London, the Battersea Power Station has completely been repositioned. It's now a commercial center. It's a beautiful center, I believe. I haven't been there, but I'm here. So kind of, yes, we are retuning, not tearing down and rebuilding. We maintain. There's a lot of activity going on to make this a suitable place. for the new usage of that building. And you see here some examples of what goes in there. Hidden, of course, because what you see, that's the surface, that's the floors, that's the high-rise ceilings and so on. But behind, this structure needs to be from ground up re-engineered. And for this, our solutions are first choice. I talked about scarcity of raw material and here one example is sand. I think it's clear that the old days where sand out of the river was available in excess at no cost are over. And here we have the means to make also secondary less quality sources usable and still have high performing solutions for our customers, but also for our own consumption of sand in our products that we sell. Here we have a great competencies. Again, we leverage that. It is one that is located in Lyon in France. It is fantastic to see how this center together with the other centers that we have worldwide is tapping into new alternatives and make them, let's say, compatible for the future with the chemistry that we add to those products. Send alternatives. Labor shortages, skilled labor shortages is an element that is, let's say, mind-boggling, holding things back. When I was in the U.S. early in the year, talking to contractors, they said to me, I could hire 300 people immediately. I have the projects. I don't have the people. It is a major limiting factor for contractors to find. And it gets worse and worse. And it happens not only in Europe and in the US. It's a topic in China as well as in Japan anyhow. And what is the remedy to that? We need more simple solution, easy to apply. We need robustness that you also can work with less skilled labor and still do performing a job. Technological process. I think here that the transformation of the mobility, the car industry is, I think, evident. This opens up new opportunities for us. It started with the battery, but the batteries will also become more and more a means to level out demand peaks and become part of the grid structuring. So it may be at home, it may be in larger scale also for the energy provider, a mean to offset those peaks and level. So this is just, let's say, in an evolution, and it's not yet foreseeable where it will end, but we are part of this, and we are together with those battery producers, with those energy producers. We are working on the next generation, innovating the next generation of batteries efficiency, battery reliability, and so on. Another hot topic that I push very much is digital is the future. Construction will always be with something that is tangible, but how we construct will have a lot of digital elements in there. And here you see some example on the upper left side. Our digital tools help to characterize the input materials, sand aggregates that go into concrete. With that, we can then fine tune faster. We don't need, let's say, endless trial and error, we can immediately shortcut the definition of the optimal mix design through these digital tools. Then we are following, let's say, our products in the pre-cured stage until it is in place, making sure that there is no change in performance over the time until it is set in place. The third step is then that we want to see our cured material, how it is performing over lifetime. Sensors on the roof that detect early on that there might be some leakages help to prevent major damage. renovation cost because it's too late in the tech and when it comes through the ceiling, it's too late. When it's on top and you see there is a monitor that says, here is some humidity, you can go spotwise, fix it, and you save a lot of cost going forward. The same with infrastructure, bridges. Bridges are over the 50, 80 years of lifespan, aging, of course. And if we wait too long, The costs to remedy are outrageous, sometimes even not even possible to repair but rebuild. Sensors in the bridges can and will tell us going forward when things are starting to occur that we can selectively spot-wise repair. But I call it, you know, small invest in the beginning, saving big later. over lifespan. That's the theme. Digitalization will help us to bring this to the market and say, look, with us, we fix it in the beginning so that we over time have much less cost. This is the future in digitalization that we are driving. People, our 33,000 people, it is to me absolutely the core of everything. And I don't want to make nice statements. It's just very simple. Our people are all equal. My statement on day one with NBCC was very clear. You are as much Zika as I am. There is no difference. This is day one for you. This is day, I don't know, many days. It doesn't matter. It's not we look down, look back. We are together. We are equal. And I don't want any differentiation by any characterization in our organization, you know. We are absolutely equal in all aspects and discrimination or exclusion on any aspect is absolutely not allowed. And it is also against our performance drive. How could we exclude a certain, let's say, group of individuals? You know, this group of individuals represent diversity that makes us stronger. Very simple. My drive for equal opportunity, my drive for bringing this across is is also performance related. We are stronger in our diversity. And that's my message to my organization. That's my message to everybody. This is very clear. We have to live this every day. A slide that we shared multiple times, it's to me the accumulation of everything. We had nice evolutions, performance requirements were growing in the years from the 90s into the 2000 and so on. Very clear, we went higher, we had more density. But with these megatrends challenging us, the way we are building, the way we are moving is making life more difficult, more challenging. We are the remedy for that. We have solutions, smart solutions, that help to tackle those and turn those challenges into opportunities for our customer, but of course also for our company. Great opportunities. This acceleration on this penetration curve is going up every year, going into the next 20, 30 years. I'm fully convinced, and I call it a fantastic growth opportunity. Besides that, the growing need for construction overall. And with that, I would then hand over to Adrian for the financial aspects.

Very good. And thank you, Thomas, here for giving us the highlights of the very successful year 2023, but also showing here the opportunities and the initiatives going forward. A warm welcome also from my side to all of you here in the room and the ones joining online. I will now go into a bit more granularity on the financial result in 2023. We have heard it. We have been operating in a rather challenging environment, but SICA, again, has delivered a record set of numbers in terms of sales. cash flow, and underlying profitability. Here again, the highlights. We posted a record sales level of 11.24 billion in sales, passing here the 11 billion mark for the first time, representing a 14.5% growth in local currency, 7.1% in Swiss francs. we significantly improved underlying profitability on various levels, particularly strong material margin expansion from 49.4% to 53.6, an improvement of 420 base points, but also on EBITDA level, an absolute record $2.45 billion an increase of 4.1% in spite here of a significant M&A related one-offs. Also, if you exclude M&A related one-offs at 1.68 billion or 15% of net sales on a reported basis, as already heard, 1.55 billion a 1.9% decline compared to the previous year. And on net profit as well, 1 billion and 62.6 million, a decline of 8.6%. Record operating free cash flow, this is an all-time record, 1.373 million, almost 60% up. from the previous year, very strong cash generation overall throughout the year. ROSI was impacted by the acquisition of NBCC, 16.3%, down from 21.6% in the previous year. But we have, again, as part of this strong cash generation, also showed a very significant deleveraging from, let's say, the peak upon first-time consolidation at that EBITDA level at the end of the year, already down to 2.6 times EBITDA. And then lastly, as you have also seen, a continued increase of the dividend. Here, our board of directors again proposes a dividend increase of 3.1%. by 10 Robin, three Swiss francs, 30 compared to 320 in the previous year. I will now talk about some of the elements here more specifically, starting again here on the top line where overall sales growth of 14.5% in local currencies was clearly very heavily driven by acquisitions predominantly NBCC here with 13.3% adding a clear double digit contribution to top line growth, but also organically 1.2% growth in a negative market and also with an improving volume trend, a clear improving volume trend throughout the year 2023. On the negative, Currency effects, translation effects, very significant, minus 7.4%. And sometimes it's also good to see this in absolute terms, almost 780 million of translation impact given the strong Swiss franc, the appreciation against basically all currency across the world. But also putting this a bit in context here of the last three years, again, a double-digit growth as the two preceding years with a three-year average of more than 15% of growth, different driver and elements, but I think very clearly here also showing the resilience of our business model, the ability to grow strongly also in challenging And this is due to a strong balance, be it geographically, but also in terms of maturity of the markets and many different aspects as well. You're looking at organic growth throughout the three years, close to 10% organic growth per annum, while acquisition on average contributed 6% of additional growth. If you look at the P&L and move down here from the sales line, as mentioned, very strong delivery here on material margin, 53.6%, 420 base point improvement over previous year. If you look quarter on quarter, continued improvement also here in Q4. which marked a further expansion of the material margin 55.1% in Q4. Overall, across the year, solid pricing in combination with a gradual decline of material costs, but also ongoing structural initiatives here supporting and expanding material costs. margin overall. As a small negative, there was a small PPA-related effect. We'll come to this a bit later. But also here, procurement synergies in relation with the NBCC acquisition supporting all contributing here to this strong material margin expansion in 2023. On the operating cost side, and here I'm referring to both personnel costs as well as other operating expenses, these costs overall developed over proportionally, but include, as mentioned, significant one-offs related to the transaction integration of NBCC. These one-time costs I will then detail a bit later on. when we look at the EBIT bridge. Specifically on personnel cost here, we had an increase of 17.3% with the acquisition of NBCC, including here related one of severance cost as the main contributor. At the same time, organic headcount development was slightly negative. However, wage inflation accounted for about 5% a year of personnel cost increase on a like-for-like basis, leading to negative cost leverage. Other operating expenses here increasing significantly by 31%, but here the lion's share of the extraordinary One-time costs are included also in the previous year. One-time gain on our corrosion protection business sale also affecting here and obviously the integration and acquisition cost of MVCC, 131.5 million lion share here included in other operating expenses. If we exclude These items, these costs increased by 17% largely here driven by the addition of MBCC, but also due to the general inflation environment, higher energy costs, but particularly also the fact that we didn't reduce here marketing and travel costs. We maintained here a very strong customer engagement in all market-facing activities. As a result, and including all these items, EBITDA still grew, as mentioned, 4.1% to 2 billion and 45 million. On the depreciation and amortization line, here a growth of 28.9% here, primarily related to the additional intangible amortization relating to MBCC. while the overall increase in depreciation was largely in line with sales growth. Consequently, EBIT on a reported basis, 1.55 billion declined by 1.9% from 1.58 billion. However, excluding these M&A related one-timers, EBIT increased by 80 base points, 12.7% to 1.68 billion. The various elements here of the EBIT bridge from 22 to 23 are illustrated on that side. And given, let's say, all the impacts, it probably warrants here a bit of a closer look and some more granularity behind it. Again, if we start here on the left-hand side, we've reported EBIT 2022 at 15.1% net sales and eliminating both here the one-time gain and also in 2022 acquisition costs relating to NBCC. We arrive at an adjusted 2022 EBIT of 1.49 billion or 14.2% of net sales and doing the same, In 23, on the other side of the chart here, reported EBIT of 1.5 billion, adding back here the one-time impact of 131.5 million, arriving here at an adjusted EBIT of 15%, 1.68 billion. Here it is 80%. base points improvement. But if we unpack here this M&A cost-adjusted performance, further we see a significant organic like-for-like increase in EBIT margin from 14.2 to 15.8, strongly driven here by organic material margin, while inflationary driven cost leverage was negative, as already alluded to. And then we have the NBCC contribution, which overall in absolute terms was significantly, but is coming obviously as expected with an incoming lower profitability and additional purchase price allocation effects, particularly on intangible amortization. in here with a certain dilution, the incoming dilution effect, 50 base points on the PPA, both the short term as well as the ongoing amortization, 70 base points. But we can also see here the already strong impact of synergies here, 41 million. We have heard the number very well on track and already starting to reverse here, part of the initial dilution. If you go back to the P&L and looking below the EBIT line, also here, significant impact of NBCC-related elements, net interest cost increased by 135 million, which, or are 135 million, and this represents a $95 million Increase largely related to additional debt and higher interest cost in connection with NBCC, but also on the other financial expense side here, 78 million. This is an increase of 41 million up from 37. Here, the main drivers are hyperinflation accounting, Argentina and Turkey. but also higher hedging costs, particularly related to an increased interest differential, as well as valuation effects. As a result, net financial expenses in total increased by $131 million to $212.7 million overall. On the income tax side here, effective group tax rate, did see a decrease from 22.4% to 20.5%. Overall, we are seeing a slightly decreasing expected group tax rate, but the effect was compounded by a positive one-time impact related to a change in estimate in deferred taxes relating to the former Perixx China business and the planned here legal restructuring. This has essentially then led to a tax rate of 20.5% and overall a net profit of 1,062,000,000, a decrease of 8.6%. Turning to the balance sheet, obviously also here, NBCC with an impact with balance sheet total increasing by 33% to roughly 15 billion. The decrease in current assets primarily due to a reduced but still very solid cash position that was used as a partial financing of the NBCC transaction while working capital with accounts receivables and inventories decreased the ratios, albeit on the proportionally due to disciplined networking capital management and also to inventory valuation effects here. On the non-current asset side, also here, biggest contributor, NBCC, additional fixed assets, goodwill and amortizable intangible assets, non-current assets going up from 6.3 billion to 10.85. But given ongoing amortization, but also currency effects already reducing this balance since the initial consolidation in June by more than 500 million. Looking at the passive side here of the balance sheet, the current liabilities development mirroring accounts receivable. And here, obviously, also a big change. Financial liabilities did increase due to a 2.9 billion of Swiss franc and Euro bond offering and in 23 to finance the NBCC transaction, as well as the utilization of our RCF facilities, partially offset by the early conversion of our remaining convertible bond, 1.24 billion reduction. Total financial liabilities at the end of 23, stood at 5.86 billion, an increase of 1.9 billion overall, compared to the end of 22, and net debt at 5.2 billion, up from 2.1 billion a year earlier. Equity, as a result here of solid profit generation net of dividends, as well as the early conversion of The convertible bond increased by close to 1 billion or 19 percent, representing an equity ratio of close to 40 percent. And then lastly, as mentioned, ROSI decreased to 16.3 percent from 21.6. But if you adjust this for acquisition, the increase was about 200 base points to 20 percent. 3.5% overall. Turning to cash flow, one of the very strong elements of 2023. And here we see the strong increase and the components, obviously strong profitability as the basis, but also increased depreciation amortization, which is about 102 million higher than in the previous year. adding roughly 500 million, but particularly also here networking capital, very disciplined management here, adding 82 million of cash generation compared to about 326 million of build up in the previous year. So I think a very strong and important focus on this area generating significant upside here on the cash flow side, and then capital expenditure with 273 million on a net basis, about 40 million higher than in the previous year. As a result of the strong cash generation, We have already strongly delevered here from the peak in June 23, when we showed here the initial consolidation of NBCC, where our leverage momentarily stood at 4.1 net debt EBITDA, of course, without any profitability from NBCC against it. Another key contributor, obviously, of this strong deleveraging here in the second half of 23. was the convertible bond conversion with overall a debt reduction in the last six months from a net debt reduction from 7.3 billion in mid 23 to 5.2 billion at the end of 2023. And with our net debt EBITDA ratio at 2.6 times on a reported basis. Then lastly, this brings me to the dividend proposal. As mentioned earlier, the Board of Directors of SICA proposes again a higher dividend compared to the previous year, which marks the 12th consecutive year of dividend increases. It is proposed that to increase the dividend by 10 robin to three Swiss franc 30 per share or an increase of 3.1%. 50% of this proposed payout will come out of retained earnings and the other 50% out of the capital contribution reserve. The overall payout ratio here corresponds to roughly 50% of net profit attributable to shareholders. With this, I conclude here the financial part and we will now come to the outlook for 24.

Oh, good morning, everyone. Pleasure for me to present to you for the first time on Europe, Middle East and Africa. I'm running the region now for four months, so I'm still a bit in the learning phase. But it's a real pleasure to get to know the new colleagues and to see also the opportunities that also EMEA has. You know, often it's been forgotten a bit and it's standing a bit in the shadow of But there is a lot going on. I'm amazed. And we just have to align now the organization to get to these opportunities here as well. So last year, the focus, you heard it also from Thomas and Adrian, the focus was on margin and pricing. And I think EMEA has been doing quite a good job there. And this year, the clear focus is on growth and on growth. volume. And you heard about this famous concept of go where the money is, which created a lot of growth in the Americas. I'm bringing this now to EMEA and we're doing a lot of workshops now with the companies trying to find out where these opportunities are, where is the money in the next two years, and then accordingly align the organization towards these opportunities that that are around. It's interesting, EMEA is a very heterogeneous region. So you've got the growth engines, Africa, Middle East, Europe East, and there it's very clear we will continue seeing very good, strong, double-digit growth. Also this year, there is a lot going on. And then, you know, we have the DACH region, we have also a bit Europe North, for example, where I tell my guys, look, this is where we have to create growth. Growth is not falling from heaven. We have to create it. It's maybe a little bit more challenging in these areas, but it is absolutely also possible. And there is a lot of money. I'm amazed. So infrastructure pops up all over the place. Also in Germany, I'm really impressed, you know, how much money European Union has For example, also the Deutsche Bahn, you know, they're going to invest in Germany this year and of course in the months or in the years to come to renew their infrastructure system. There is investment into nuclear plants in France. They have six projects that are ready to be built and they're talking about eight additional nuclear plants that they want to build. In the UK, they talk about The second one, these are huge projects for us. This is where the money is. Water. I mean, you've seen hydro plants projects, not only in Africa, but also in Europe, of course. You know what's going on in Saudi Arabia. This is really unbelievable. Even for an American, this is seeing what's going on there. You know, this is really, really impressive. And then, for example, data centers. Interesting for me to learn, you know, what has started in the U.S. would say three, four, five years ago is now just starting in Europe because companies want to have their data in the local company. They don't want to have their data somewhere sitting in a U.S. data center. And it's really impressive how many data centers are going to be built by U.S. companies, actually. It's interesting. Are going to be built all over Europe. all over Europe. Semiconductors, what you've seen from Thomas in Texas, these are now US companies going to build also semiconductors in Europe, in Germany, for example, Intel, I'm sure you heard about that, but it's not the only one. There are other semiconductors and these are big businesses for SICA because we contribute all over these projects. So there is money to win. In EMEA, no doubt. And of course, we're ambitious people. We will try to get as much as possible to participate here. Then the whole distribution topic, retail and e-commerce in particular. Here, we want to make a big step forward. I must say, NBCC is a very good completion of what we're doing. So in Germany, for example, we're not really strong in in retail. Now, these guys come with a strong brand, for example, PCI. You might have heard of it. Check yourself when you have a little job site at home. I'm sure you're going to see PCI branded tile adhesives, leveling mortars, tile grouts. It's a real strong brand. And these guys will help us now to build further our footprint in retail in Germany or in the DACH region here, for example. the whole CO2 or sustainability topic. It's on one side, of course, we're trying to reduce our own footprint. On the other side, we are pushing very strongly to turn this trend into business for us. And there is on the one side, the newly integrated automotive and industry business. So this is the EMEA part is now run by us or by me here also. And here, of course, I think we presented this before. It's e-mobility, it's the battery assembly. There are a lot of battery plants being built in Europe, also by non-European company or car manufacturers or battery manufacturers. And of course, the whole topic of renewable energy, wind, solar. Wind is an absolute fantastic business for SICA because we help building the blades with our industry technologies. We also help to build the molds for producing these plates. But of course, we're also heavily involved in building the tower. There's a lot of concrete involved. There's a lot of grouting mortars involved, anchoring adhesives involved. And here, Seek and I, together with MBCC, we have an absolute fantastic footprint. On the construction side, we have a very strong initiative. So we go now and visit all these companies and institutions, universities, cities that made net zero pledges. And we present them our technologies, helping them to bring their CO2 footprint down. So we have, for example, we are a leader in green roofs or, of course, also in thermal insulation of buildings, houses, etc. And we have many other technologies helping these companies and institutions to reduce their CO2 footprint. Digital lead generation, it's something where I think Europe has a bit of a backlog. This is, of course, this I bring with me from America, where we started this very early and I mean, really unbelievable, very good success we have here. You know, winning projects through digital channels where our customers contact us digitally. It's not the SICA salesperson going there anymore. It's a request coming through these channels. And we turn that then into business for us. And this is something we're going to push now very strongly also in EMEA. People... I think I said this also many times before. You heard it from Thomas. This is not just a saying or a blah, blah. This is key. And SICA is a fantastic place to work at for talented people. But sometimes we are maybe a bit too humble, too Swiss, and do forget to talk about it also towards a bit the outside in social media. And this is something we want to do a bit more strongly here now in EMEA. We have a project which we call Cool SICA. So we want to really position SICA as the coolest place to work for in the industry among, let's say, talents coming from universities, et cetera. And last but not least, NBCC integration is progressing very, very well. It's a pleasure to work with these guys. Originally, we thought they had come with a different culture than our culture, but it's totally wrong. I think they were just waiting for being part of a company like SICA where they can – live their, their entrepreneurial culture, their professional culture, uh, much stronger than before being part of a huge conglomerate. They're never really knowing what, uh, what's going on. It's super professional people. They know what they're doing. Uh, they have very good products, uh, actually in the combination now, SICA and, and, and NBCC. And that was always our target is making this one plus one, uh, uh, three, no doubt. So, uh, very well progressed and, uh, pleasure to see how this is now further, uh, developing. And I think now we go to Asia. Americas, I'm sorry. Hey, Mike.

Okay, friends, good morning. Good morning. Best regards from here in Boston, Massachusetts. It's really my pleasure to briefly discuss with you our outlook for the region of Americas. Maybe beginning with North America in 2024, we expect a slightly negative organic market development overall while maintaining really a stable development in both our infrastructure and commercial construction activities. In manufacturing activities, it will remain solid. Development in residential construction will begin a bit negative due to continuing high interest rates, but certainly will be improving in the second half. of the year here in North America, particularly. For Latin America, on the other hand, we'll continue to deliver very positive organic development across all sectors of our business. So we've had a fantastic year, previous year, and we see that to continue now for us in Latin America. Now, looking at the surge in manufacturing facility investment, driven initially by the CHIPS Act and the Inflation Reduction Act subsidies. We see here continuing huge opportunities, as you've already heard about from Thomas on this fantastic Samsung project in Texas, where the phase two of that project is now already underway, and many phases still to come, and we're active in all of those. So now here in the top image, On the right side, you see a picture of our data center. This is one of over 2,500 data centers in the United States. These data centers play a crucial role in supporting our digital infrastructure, enabling connectivity, and powering various online services and applications. Data centers are just one of the many targeted markets in our vertical market approach. You heard a little bit from Christoph in this vertical market approach. This approach utilizes our unique cross-selling potential to maximize the turnover and return on each and every available project. So we pull as much turnover from those projects as possible while simplifying the construction process for our customers. Also on sustainable energy, you also heard this from Christoph. It's similar. We have these projects are really gaining steam now in the Americas. with various onshore and offshore wind applications. Also hydropower projects underway in the US and Mexico and Colombia. We really have here on these facilities numerous applications for green roofing, facade insulation, solar, and EV battery plants. And these EV battery plants, of course, we not only build the factories, but we put products into the finished goods coming from those factories. We see these applications continuing to gain momentum really throughout the region. With our acquisition now of NBCC and Thyssen in the U.S. market, we see excellent opportunities in the underground business with mining activities in Canada, where we really see a big boom now in underground mining activities in Chile and Peru, while we also see tunneling activities offer huge cross-selling opportunities across the region. Again, we're really uniquely positioned the benefit from these underground applications due to our diverse range and the experienced people. In the automotive business, here once again, we've reached the pre-COVID levels for the car build rates. This we can combine with our transformational activities in e-mobility and we'll continue to provide higher content potential for each and every customer that's coming off, particularly in these e-vehicles with the batteries. So here, we'd like to help in the construction of the facilities and also what goes in them, making them lighter, stronger, and of course, more sustainable. You also heard briefly about the NBCC integration activities. Here, we're well on track. The synergies are coming. You heard from Adrian, these synergies continue to expand, and we're really excited by the strength of the people that we picked up from NBCC. You heard from Christoph already, these people really like us and in our culture. So we were able to put these two teams together and we drove many, many synergies, particularly in the commercial side, to continue to grow this business. So we're really excited where we are now with this team. So briefly, I guess that the region is well prepared. We're ready for another great year in 2024. And of course, I would be negligent to also mention, of course, the best people in the construction industry. I'm really, really proud of our SICA team and what we've been able to accomplish. And I'm very confident that we'll continue this great performance now to lead the industry in 2024.

And we have Philippe.

Good morning, Thomas. Good morning, Adrian. Good morning, everybody in Zurich. I'm joining remotely as well. I take the opportunity to present the future in Asia-Pacific. I think we've seen over the last past years that Asia-Pacific has been always a strong contributor to organic growth, and we see that trend to continue in the years to come. I know it's a very young region from a population point of view. Over 50% of the world population lives in Asia. And the continuation of urbanization and also the strong trend of those megacities continuing to grow really gives us a lot of opportunities in the construction market in Asia. We see a continuing underlying market trend. We also, from a market share point of view, Asia Pacific is probably the region with the lowest market share and therefore plenty of growth opportunities. And we also see a lot of increasing building standards in the years to come and add those mega projects, whether it's tunnels, subways, wastewater treatment plants emerged. The need for higher end products where our products come into play are really increasing. So we see in essence, we see opportunities on all areas, whether it's infrastructure projects, whether it's commercial projects, but also in the residential markets. You know, as my colleagues from two other regions presented as well, MBCC integration is really going well. You know, we were lucky to have a very strong team join us in May of last year. And so we start to see combined opportunities, mainly in the infrastructure projects that I mentioned earlier, but also in concrete production and also in the flooring application for commercial projects. If I go into a little bit of more detail of the countries we see in China, especially the continuous growth This is driven especially by our distribution business, but also flooring projects in the commercial area are adding to these road opportunities, and we see another strong year in these particular areas also coming up this year. Thomas already mentioned the infrastructure needs of this growing region. Thomas specifically highlighted India, which the airport projects, infrastructure projects in bridges, roads, tunnels, The high-speed trains, you know, these are all being unblocked. You see funding. And when I last visited Mumbai, it was a tremendous change from three, four years ago, with all those roads being built around the city that ease transportation. And we see continuous projects coming up, lining up. We're adding also, you know, as you see in the one plant that we built last year, we're adding capacities to be able to deliver those projects across a country that has huge needs in infrastructure. And also in Southeast Asia, another similar trend. And the success that we've had in distribution business in China the last few years, we also see that as a model to roll that out into other countries in the region. We see India, as I mentioned, but also many countries in Southeast Asia, whether it's Malaysia, Vietnam, Indonesia, that are a few years behind in a trend, and where we're taking the learnings out of China and bringing this retail leadership journey, as we call it, within the region to other countries, and we see tremendous results already now by opening new points of sales, really copying the success that we had the last four or five years in the Chinese market. Then the other opportunities that I would like to highlight is You see for many, whether it's tariffs or other geopolitical reasons, you see many manufacturing companies, they have a China plus one strategy, meaning that they want to build outside of China at least one other manufacturing hub. Often you see plants being built in Vietnam or other Southeast Asian countries, but also India profiting from here. These are EV production. These are battery production, semiconductors, other light manufacturing. They all need special flooring products. And here we're extremely well positioned to work with these investors, to work with these projects, to supply our products into those projects and really enabling and profiting from this trend of additional manufacturing hubs being built in the region. The other area Mike mentioned as well is in the car production rates. that are going back up to pre-COVID levels. We see also our take in e-vehicles is higher than in traditional combustion engine vehicles. And the contacts that we have with Japanese, Chinese, Korean, or even in Vietnam, producers of such e-vehicles really allows us to sell products into these markets in a higher growth rate. So overall, very positive outlook for the years to come for Asia-Pacific. And also, we have a strong team that I inherited from Mike, that was built over the years, as I mentioned, joined in May by the MVCC team, unique in the markets, and therefore we're really well positioned to profit from growing underlying markets. And I would like to take the opportunity to thank all team members in Asia Pacific that contributed to the results of last year and already started working full speed on the results of this year. So back to Zurich now, Thomas, I think.

you're up next thank you philip this brings me to the last slide and combining all the regions together our guidance for this year early in the year still a lot of uncertainty around us so we have concluded six to nine percent in local currency all in is the guidance on the top line and on the bottom line We stay a bit boring with our statement, but meaningful overproportional EBTA growth is our aspiration. And that's what we are going to deliver in 24 again. The strategic targets outlined in our 28, which are midterm targets, are clearly a focus for us to deliver in 24. The first set of targets, directive results, which will then over time lead into the range that we have indicated in the strategy. With that, I would now open up for the Q&A for the next half an hour. Good. Do we have microphones?

It's working. Oh, super. John Revel Reuters. I've got a couple of questions, if I may. NBCC was the biggest acquisition, I think, in Seeker's history. And now that's been completed. So I was just wondering, are big acquisitions possible moving forward now? Or what's going to be acquisition strategy moving forward? Is it going to be like lots of little things? Or could you do something big? That's my first question. And then the second question is... A lot of Swiss industrial companies have raised concerns about the franc in recent months and the problems it's causing for them. Now, I know you guys do local for local, so it probably doesn't affect you directly that much. But I mean, what's your views on the franc at the moment? And is it a concern? Thank you.

Okay, I think I'll work on the first one and Adrian on the second. So I think the The acquisition strategy hasn't changed. We are doing a bolt-on transaction as the fragmentation of the market is offering these opportunities across the globe. Big transactions are absolutely part of our midterm strategy. We will, of course, balance those, not going ballistic in our leveraging. We want to maintain our A-minus strategy. rating as a very solid foundation of the company. But as you can see on the chart from Adrian, our leverage is now at 2.6. It will come further down in the years ahead of us, which then will open up also possibility to finance another big transaction. So we are clearly also spotting and looking out and evaluating large transaction. But given our current, let's say, debt level and also the deleveraging, I would say it is not something which we come tomorrow forward with a big transaction. But within our period that we have guided, I certainly see opportunities for that.

On the On the Swiss franc, I don't want to evade this question, but at the same time, it's probably the most difficult question you can ask. What is the forecast on currency movements? I think for us, obviously, as a Swiss-based group with the largest part of the business outside of Switzerland, this is a topic. This being said, as in previous years, we continue to you know, to believe that obviously the direction will not change. If anything, Swiss franc will rather continue to strengthen. I think in our case, very clearly, you know, the challenge is the translation. We have a very strong natural hedge due to the, let's say, decentralized market. nature of both revenue and cost with, let's say, relatively little Swiss franc cost overhang. So it is here a question of, let's say, managing this year more from a translation perspective overall. And that's just what we have to live with. This is not changing anything, but we don't have big impacts on let's say, more the transactional side, given the very strong natural edge.

Good.

Hello, thank you for taking my question. I have two, if I may. The first one is about your material margin assumption on your guidance. And the second one is about, maybe if you can answer this question, the market share of SICA in the US, especially on infrastructure business. Okay.

Shall I take the material margin? Yes. I mean, if you sort of look at overall, let's say, margin progression here, sort of the material margin element is obviously one of the pillars, one of the buckets we have here also guided and will continue to do that, you know, where we see the business sit. Overall, it's 54% to 55% year material margin. We had 53.6% for the whole year. Clearly here, the ambition is to push that further here to 54% or slightly above. Obviously, there are several elements. We continue also to see Here, volatility on the input cost side, although there has been a gradual reduction, more of a plateauing here now with some of the materials, for example, cement, you know, increasing here and there. We have obviously topics such as the Red Sea, which is currently not having a big impact. But obviously this does infuse here you know, some uncertainty on the progression. But our assumption today is probably more sort of a flat dish development going forward, which should also, with, let's say, continued pricing here, support that journey going forward with all, let's say, the other elements playing here into the material margin.

Okay. And on the U.S. infrastructure market share, That's a loaded question. It's a very granular. I can say there are probably three, four main players in that field. We are one of them. I wouldn't now rate them. I think it's a healthy market for us where we have room to grow. So we are taking advantage of that. But it would be wrong to say we are by far the largest or It is a particular market, a few players, strong players, and we are one of them. Good. Yeah.

Thank you. Benjamin Treve from NZZ. Also, two points regarding North America, if I may. The first one, you talked about the growth potential due to the infrastructure programs. how much of this support and how much of the potential for SICA would be at risk in case of a return of Donald Trump into the White House? That would be the first one.

Okay, that's very speculative. But short term, I don't think that we would see a stop for this already in execution. There might be shifts. There might be different priorities. It might be that other areas would benefit. Biden, as well as Trump, have a very clear focus on the U.S. economy. Maybe they have a different approach how to stimulate the economy. But I'm not at all afraid and I don't take any part in this. But I would say many of these infrastructure activities have been planned and are in execution now. it would be very, let's say, cumbersome to stop them in mid-execution. So I'm not concerned about that.

Thank you. And secondly, if I may, Holcim is splitting off its U.S. business. It's separating it completely and saying that would be the best way to serve the market. Would that be an option for SICA as well? And why not?

Okay. I would say I don't want to comment on those strategic moves. This is a different company. This is a different business. It's a heavy material business. We are in the construction chemicals. I think when we presented our numbers of the past, you know, this company, our company has benefited a lot of our global diversity. The markets are different, you know. We leverage that across the board. Our tremendous growth and also profitability gain is based on our diversity that we have not one or two pillars, we have multiples. And it's not just the three regions. You heard it also, you know, the Middle East is a powerhouse. We benefit. Japan is different. China is, of course, a huge market. India, I think we benefit from diversity everywhere. Of course, our products are locally produced and locally adapted to the needs. But behind that, we have a great leverage. So if we were to spin off one of that, we would weaken our company. And as we say, when we acquire one plus one equals three, we believe three divided by two is less than 1.5. So this is not something that we would consider. Thank you.

Looking at your guidance of 6% to 9% growth in local currencies, including acquisitions, of course. NBCC should add 4% to 5% alone. You had also a few other smaller acquisitions, so let's say 5%. So at the lower end of this guidance, you only expect 1% growth or basically nothing in 2024. I mean, that contradicts to all you said the last one and a half hours, basically. I mean, listening to all these presentations, it doesn't sound like 0% growth, you know, aside of the acquisition. So could you elaborate on this lower end of the – and even the higher end is not that high, right?

Sure. I think we cannot change the world to the liking that we have. Our midterm strategy shows nicely what is the evolution of our growth. It has base growth from the market. It has the market penetration and acquisition. But we are at the moment in a world where we have minus 4% market evolution. We delivered 1.2 on top. So we have a gap of 4%. And this, we cannot neglect and say 24, everything is at zero. Now the market will give us one or 2% and then we add and then we add. We have to be cautious that the market hasn't overnight changed into a neutral or positive. We still have this minus four that we are going into the year. And we just have to be a bit cautious that we don't expect that this is now in the next six months going crazy and we have, let's say, boost from the market. So this is guiding us to say, let's not be ignorant. The market is still overall, besides all the fantastic elements that are there, we do have impact that are holding back, let's say, our industry, and we cannot neglect that. So this 4% that the market is down when we compare to our peers is also going into 24, let's say, the starting base. Yes, I believe that the markets will, pick up. Markets like EMEA and Christoph mentioned, we are hopeful. At the same time, shall we now in the second month of the year bet on the huge recovery of Germany? I don't think so. China is for us a solid contributor, but it is running below its potential. And the Chinese government is doing a lot to go back to, let's say, growth rates like in the past. but it is not that easy. It's more complex. And also, let's say, the geopolitical differences are not helping. I think we are just, let's say, well advised to not neglect where we come from and how fast things can change. But that doesn't change my midterm view. These are wild 20s where things go a little bit crazy, but the demand is there. The need to transformation is there. So I'm very optimistic in this regards, but This guidance is a guidance, you're right. 4% to 5% is probably coming. That's fair. There's organic growth in it. But one thing I can assure you, when we go on the field, we don't go on the field to tie. We go to the field to win. That's Zika. This is our spirit. We did it last year. We outperformed. We will outperform this year, but we can't make the world... let's say, a growing environment just like that.

Okay, fair enough. Thank you. My second question on the targeted margin improvement, let's assume you get to 54% gross margin, which would be 40 basis points more. However, is it fair to assume that the bigger positive element should come from OPEX and from personnel costs, which have increased quite a lot last year due to the known factors of NBCC. So there is, I mean, the bigger part of the margin improvement should stem from OPEX and personnel, right?

I mean, probably here also in looking at sort of the margin progression, yes, the material margin part is one thing. There is the, let's say, call it OPEX or the leverage or the efficiency improvements. I mean, we continue to work here on many aspects, you know, throughout the value chain with very, let's say, good projects on the way. I mean, you have the leverage element relating to, let's say, the overall cost. I think we have seen a bit of a step up, although inflation has not gone away. It will also depend a bit on the overall growth driving here leverage. So that is one element where I think there is obviously upside. And then we have, let's say, the NBCC or acquisitions, where on the one hand, we will still see a certain element of additional dilution given, let's say, four more months, particularly from a seasonality perspective. Not a strong quarter, the first one, but at the same time, increasing synergy contribution overall. And we'll obviously not have most of these one-time costs in 2024. So I think there is a clear progression, but also here, I think we want to be sort of clear and simple and not take one or the other out. But similarly as to, let's say, the top line early in the year, I think we'll drive all the initiatives, but we will then be later in the year also to be a bit more specific what that means. Thank you.

Morning, it's John Bell at Deutsche Bank. Could you just broaden your comments slightly on raw material costs? What would be your base case, admittedly, at this early stage for the year-on-year movement, or perhaps give us some kind of indicative range? Thank you.

Yeah, maybe here we have seen a huge increase, of course, but we also noticed that we have a flattening of the raw material cost. Last year, we had some, let's say, support from decreasing input cost, but this has leveled out. So I would say going into 2024, here we have rather a new plateau that has been established over these three years. And we see also some commodities like cement, for instance, still going up. So the trend to, let's say, reduce slightly has stopped. And it's rather something where we have to be agile in adjusting as it comes. And certain price adjustments are, of course, important. We also have non-material inflation costs that also needs to be translated into the pricing strategy. So I would say it is on a higher level and it is rather flattish, but always there are exemptions that we need to address and not to underestimate the non-material inflation costs that we also have to address.

Christian Arnold, Steve Will, just following that, personnel expenses. I mean, we had an increase of 150 basis points, and you also talked about a one-off. Maybe you can quantify the one-off, and what do you expect for 2024? Are we going to see a further increase in personnel expenses in relation to sales?

Yeah. In terms of the personnel cost, I commented on, let's say, the underlying, let's say, inflation, wage inflation in 23, which was around 5% on a life-like basis. The one-off that is included is to do with severance cost on the integration. Here, the level is about 20 million. That is included in the one-off cost here. For 24... the expectation is that, let's say, wage inflation to some extent will continue, probably not quite at the level of 5%, but it will also not be back to, let's say, more normal levels, what we typically have across the group, 2% to 3%. I would still think that's going to be a bit more elevated, given the fact that, obviously, there is a certain lag particularly in some of the European countries in terms of wage inflation.

Thank you. And the second question would be on operating free cash flow generation, which was great last year. Big swing factor here was networking capital, plus 80 million last year was a minus 320, so 400 million swing factor, so to say. For 24, do we have to assume... normal development of networking capital in line with sales? Or what do you expect?

Yeah, I think you're absolutely right. Working capital has in the last few years been a big swing factor, as you call it. I would see clearly here continued, let's say, potential in terms of, you know, optimizing on the inventory level, for example. I Big focus is always on receivables, also from a risk point of view. I think also here, continued effort. The payable side, I think an area where, again, there is some improvement. So I would rather see continued improvements of the ratio. The, let's say, overall absolute impact, I don't think it will be, again, let's say, an absolute positive contribution. But as you say, this will depend on growth going forward.

Thanks. Martin Fuki from Kepo Shiburo. I have two questions, please. First one is an additional question, clarification question on your guidance for organic growth or sales growth in local currencies. I was just wondering, based on your comments or Thomas's comments regarding raw material prices, what is your expectation for the selling price development in 2024? And, you know, I'm just trying to figure out what kind of, what the implications are for expected volume growth going forward. Because if I remember correctly, in Q1 22, sorry, 23, you had minus 8% volume growth So the comps are getting rather easy now. And if I remember correctly as well, volume turned positive in Q4, slightly positive. So is that a trajectory that we're going to continue to see? That's my first question.

And here, I mean, it's clear we won't have a 22 situation where pricing will be the main contributor. We will see here a minor contribution from pricing. It is also Very clear to us that our, let's say, smart pricing approach needs to stimulate that we can grow on the volume side, safeguarding our material margin, of course. So here we don't want to go excessive. We have launched price increases, selected price increases, but the magnitude is rather minor in the overall assumption for the 6% to 9%. As here, we have to take a balanced approach and that's clearly volume driven, not price driven, if you exclude the acquisition part for the six to nine.

Okay, and historically your pricing has been at around 1%. Is that a ballpark number that we should reckon with for 24?

That's a good ballpark number, yeah. Okay, thanks.

That's helpful. My second question is on the synergies. seems to me like the synergies you've achieved with the integration of NBC, the number that pops up in my head is 41 million, seems a little bit larger than what you had anticipated. I thought the guidance was around 25 million or somewhere around there. So could you elaborate a little bit on the delta, why you were able to achieve the 41 instead of the 25, and what you're expecting for 24? Thanks.

Maybe here it's Quite simple. I think we have quite significant one-time costs to one of them. You know, with the start of the integration in May and then, let's say, working together with the organization over 100 days, we saw, you know, we can move faster. You know, the 25 millions were our original plan to execute. We saw, why should we delay? You know, and yes, we'd rather take the hit faster. And I blame this year that the reported EBIT is lower than last year while we spent that, let's say, on making sure the synergies and the acceleration of the integration are a top priority. And that led then also to, let's say, significant achievements already this year, which we, of course, expect and also to deliver in the following years. And that's beneficial. So to your question, you know, we have front loaded, I would say, the integration strategy. purposefully because we saw we can do it. We have the alignment and we have the meaningful actions. And some of them are really, let's say high contributor. And that changed a bit the view on the aggregation of the synergies. The guidance. On the synergies, what do we have?

80 to 100 million run rate, which is basically 40 to 60 incremental in 24. Thanks.

Yes, good morning, everybody. Alessandro Poletti, Octavian. Thank you for taking my question. You mentioned the interest rates being a bit of a headwind, I think, in America. I wonder if there's a way for you to quantify how big this headwind is and if there is nothing like that similar also in Europe or maybe not in Asia because maybe that's not relevant, but Europe and US.

That's a very difficult question and I wonder how I can answer that, how to quantify how much it would be if we would have, let's say, the interest of before It's not as simple. I mean, we see, of course, that some businesses are super strongly impacted by the raise of the interest. Others may be underlying trends like the commercial, let's say, the office building construction industry. has probably nothing to do with the interest rate that is weak because of a change in pattern that you don't need these buildings. These buildings are retuned into apartments. So I think it's more complex than that, but it is headwind. And we see immediately when the interests are, let's say, talked down that then there comes immediately to the surface activities that could then be, let's say, unleashed. So it has an impact, but I cannot quantify how much that would be.

And then a second one on the automotive side of the business. I'm kind of surprised to hear a lot of optimism for your side, at least that's my interpretation. Definitely for Europe, I personally am not very, very passionate positive this year, but also in general for EVs, particularly the Europeans and Americans are big troubles there. So why are you so much more optimistic?

We had a terrible time in automotive. The industry was down to 75 million units. But of course, this is an industry that runs on capacity. We are back at 90 million units globally. That's positive. You know, that's kind of that's healthy. That's what the industry needs. And you also can see it in our numbers that our numbers recovered very nicely in that segment because it is back to, let's say, pre-COVID build rates. That is positive. The transformation and, let's say, the different region or, let's say, the different accounts taking advantage of that, pushing for electrification, that's maybe a little bit less positive, especially when we look at, let's say, the German car industry that is is losing momentum. The Chinese are gaining a lot of momentum on the e-vehicle side. This is very well noticed, and this is also impacting our automotive business in Europe going forward. At the same time, we have a very strong organization in China, and in China we work heavily on the battery side with the Chinese OEMs, and we want to expand that furthermore. But the industry itself is super-challenged, And I would say, yes, some of the traditional OEMs are having not yet found the magic key to pass the way into the future. Besides that, that we have a lot of incentives that are distributed around the electrification. If that stops, you know, the pure cost of the vehicles come to the forefront. And this can also be, let's say, an opportunity. a delay in the expected buildup of the E-fleet in Europe, in North America. In China, not so much. China has a very clear strategy to drive the E-vehicle. One way or the other, they will make it. They will push it, but it's a different environment. It's clearly a strategic target of the government to drive that as a leading force. technology in China.

Good question here. Thank you for taking my question. I have two, please. The first one, can I go back to U.S. and market 101? So could you please remind us, what is the U.S. and market exposure? So, for example, commercial, infra, residential manufacturing. And I think, did I hear correct that Mike started his section by saying infrastructure he expected to be slightly negative or maintain stable. So can I get a bit more color on that? And then within that end market for residential, could you please remind us what are the main product you sell in residential? Is that more directed to home builders for new build or is that for via distribution channel for remodeling? So that's the first question. Thank you.

There's many questions in one question. I try my best. So maybe I'll start at the end. The 20% residential that I have shown as a group average is far lower in the U.S. than in the rest of the world. It's far less than 10% in the U.S. And it is, let's say, a business that has built up with the big box business. So it is clearly, let's say, family, single family home oriented, multifamily home oriented business. It has a good growth traction, but compared to infrastructure, which is a strong leg in the U.S., roofing is a very strong leg in the U.S., commercial is very strong. And then not to forget, the U.S. market is a market with a lot of refurbishment. 70% of our business in the U.S. is refurbishment, 30% is new build. So that's a bit to characterize our U.S. organization. The automotive business that is now also, let's say, back in the region is, of course, a substantial part here also of the U.S. contribution. But this would be the number one is roofing, then infrastructure, commercial, automotive, and then residential probably being the the smallest contributor on that scale.

Okay, understood. And can you just clarify, did Mike say that he expected infrastructure to be negative or maintain stable?

I don't think so, because it is positive.

I'll clarify. Okay, thank you. The second question is a follow-up on the EV-related question. I think even... If we believe there will be strong EV growth globally next year or this year, particularly driven by China, I think there's very little doubt that there will be a price war in order to stimulate that demand. And I think that put lots of pressure on the automotive, the EV supply chain, particularly actually on the battery side. So can you tell us what are the conversations you're having with your EV battery customers? Are you already feeling the pinch or you notice anything in the way they place order and take inventory? Thank you.

Our automotive business is a profitable business. That's like where we are, we have to be profitable. It's one of the most toughest businesses, my personal experience. If you come in with nothing relevant for the future, you will be pushed down in your margins, probably even below zero. They don't care. So it is very clear. The push on, let's say, efficiency on the batteries, the next generation, it's all driven by how can we, together as a key supplier, with the OEMs, bring costs down out of the batteries, bring efficiency in. And that conversation is super key to preserve that what we deliver today is not knocked down to a level where you are no longer happy with your business. So it is a business where you have constantly demonstrate that as a prime supplier, as a preferred supplier, You are working with them on their challenge in a very competitive market, and you mentioned it. The price war is out there, not only on the e-side. It's in every vehicle. It's this efficiency and this drive for leanness. I would say we stamp the steam in the kitchen, and this is what we have done. It's no different in the e-mobility, but the e-mobility has a bit faster cycles. This is not the five to 10 year cycle. This goes in three to five year cycles and we have to stay relevant and therefore we invest into innovation. That's why we stay low, close to those OEMs so that we are a preferred source also going forward.

Okay, thank you very much. There is, sorry to interrupt. There are still about 100 people joining And we have several questions as well from the online people. And I'd like to ask here, first one, Cedar Eggbloom from Morgan Stanley to come up with her question, please. And wait until you're on screen before you shoot your question. Thank you. Perfect. We can't hear you yet. The sound is not yet here.

It's on our side.

Can you check the sound? Is the sound all right with you? Yeah. Okay. Basically, Martin tells me here from from the back that the sound is turned on. Probably in between, we just go with LOD as well that is ready. And sorry for letting you waiting for a moment from JP Morgan. So, and we try with this and see if we come back to you as soon as we have the sound ready.

Can you hear me? Yes. Yes. So if we, my first question would be on the US, if you don't mind that we come back on this. On the performance there, I think it was a big disappointment last year, and I think you're still a bit cautious in the near term, but we haven't really talked about the near-term trends. So it'd be helpful if you could develop a little bit on what has caused the weakness, really, what has been the impact of the stocking cycles on your life for, like, four months in the U.S., if it was a headwind. in 23 will be more of a tailwind this year. And how long do you think this weak performance will last? Like, is it H1? Do you see a scope for that to stabilize at the end of Q2? What's the timeframe there? Please.

Okay. That's maybe the first one. You know, the Q4 performance has a, quite a strong impact from MBCC. MBCC had difficulties in 22 during the year to overcome delivery problems and had a very strong Q4 to catch up. Also increased prices in Q1 this year, which was accelerating, let's say, buildup of sales in Q4. This has quite a substantial impact. It's roughly 1.5 to 2% of the total U.S. growth that has been negatively impacted by this organic comparison based on the NBC seeds. Underlying that Q4 has been kind of similar to Q3. So no significant improvement, but also no deterioration on the volume side. Going into this year, yes, we expect that we will have some uplift as we had in the roofing business, quite a significant destocking element in the first half of 2020. At the same time, we just must also notice that the roofing business had outstanding results in 2022. 2023 has normalized. We saw it also in the second half of the year that the business hasn't, let's say, picked up so much. So I would say underlying, we expect in roofing, a normal year, so to say, with some uplift from the destocking side, but not a major boom like we have seen in 2022. We should also not be misled by the construction volume in the US, which is quite high. And this is, of course, driven as more new build goes into construction, you have a much higher volume in construction than when you traditionally have more on the refurbishment side. We participate on that new build, but the ratio on a new build compared to the total volume that the building or the structure builds is, of course, lower than on a refurbishment shop where not the whole structure is built, but rather You know, the roof is replaced. The waterproofing is upgraded. This is deteriorating a little bit. The ratio, when you look how much has the construction business grown in the U.S., there is a shift in going into reshoring, going into infrastructure new build. That is a bit misleading. Nevertheless, we expect the U.S. to improve significantly. So this stagnation in Q3, Q4, we don't take as a baseline for the full year 24.

Thank you. Can I just push just a little bit on H1? Would you expect to see a positive, like an improvement as soon as H1? Should we expect positive performance and the like for like basis in H1?

Positive in volumes. Okay. Yeah, I mean, it will not be positive in volumes because we still have a negative volume there. I expect that to improve, but it will still be negative. So we have roughly, let's say, 3%, 4% negative volume. This will not turn into positive in H1, but it will improve.

Okay, that's clear. And then can I just have a follow-up on MBCC, just a little bit of housekeeping. I think on the synergies, you were quite clear. On integration costs, you had guided, I think, at the CMD about 230 million, and you did already 200 million. So is it back okay to think 30 million for 2014?

Yes, I mean, I don't see this to go higher. Thomas mentioned it. I mean, this has been sort of heavily sort of front loaded in terms of the activity. So yes, that I would see 20 to 30 million in 24. Okay, great.

Thanks very much. You're welcome. So are we back to Cedar or?

Let's try it once again. Yes, Cedar. We just take you up and then let's check whether we have now some sound. We see you.

We hear you. We don't hear you.

Otherwise, you text us. Can you hear me now? Yes. Perfect.

Sorry. Sorry. You would have thought after the pandemic I'd know how to use Zoom. But anyway, I just have a question on your margin comments. I'm surprised that you're not more ambitious on gross margins for 24%. And the reason I think that is ultimately in the fourth quarter, you did 55% gross margin. You're telling us that there's a little bit of tailwind from pricing to think about into 2024, that your raw material costs are no longer going down. But I don't think you're giving us an impression that there is a lot of raw material cost inflation coming through. So what are we missing in terms of why your gross margin is not closer to the top end of the 54 to 55% range that you'd say, rather than at the bottom end? So that's the one question on gross margins. And then just on your EBITDA margin, if we think about the moving parts into next year, you've probably got a 90 basis point tailwind on the fact that your MVCC costs will be a lot lower. You've probably got at least 60 basis points on gross margin, then potentially a little bit of operating leverage if we get volume growth into the second half of the year. So the question is, is the 20% EBITDA low end of the range really something that we need to wait for for the full MBCC synergies to be realized, which is where the current guidance is? Or is that something that we could actually potentially realize in 24 if we get operating leverage, which clearly is an open debate at the moment. Thank you.

Yeah, I was, well, thanks for that challenge, Cedar. I was kind of expecting that. If, obviously, you look at the progression, and I was talking about this, there is these different elements. We also said, as you pointed out, that, you know, the 20 to 23 percent, you know, target range is is the target once NBCC synergies have realized. I don't think you should expect for 2024 that we're at the 20% already, although we're making good progress on the synergy side. But there is, as I was pointing out, let's say moving parts, there will be an additional incoming dilution due to sort of the full consolidation of the 12 months. On the material margin side, this is probably a bit a cautious guidance here, understood, but I think, again, here there is a level of volatility, uncertainty, but we'll certainly progress in that direction But early in the year, many, let's say, different factors, also foreign exchange plays a role and so on. But I think we're making clear progress, but I would at the same time also defer more, let's say, clearer guidance then to later on in the year.

Okay, if you're pleased, Cesar. Let's go on and have another question from HSBC. Breaches, please.

Hi, can you hear us?

Yes, super, thank you.

Great, thank you. So firstly, just to understand your strategy for emerging markets, it's great that you're talking about there is a significant potential in India and we do see that in China already. But when you look at the penetrations, can you give us an idea how the business kind of evolves? Can, for example, you have put in a plant in East of India, If you were to put five, 10 plants in probably one year, two year, is that something a possibility could do it? Because I'm just understanding if there is significant growth, what is stopping you to put four or five plants just or just putting one plant? I mean, the cost is not high. I just wanted to understand how you're thinking behind getting into a market and growing that. And the second question is more about China. We do see that things have not kind of improved much. So distribution, you had growth. If you could give us a little more color about 2024, what you expect in terms of distribution and project segment? Sorry, if this question has been already answered.

Okay, thank you. Thank you for the questions. And in India, I think we do have a footprint with 12 factories at the moment. We have significantly increased our footprint with the NBCC transaction. We want to move fast. It's an economy on the move, and you are right. You know, go little one by one is probably not the right recipe. So here it's very clear we want to cover more of the market organically, but also inorganically that would be better. an exciting, let's say, bolt on to further tap into that market potential. But we have a solid footprint in India. And yes, we make further investments, organic and inorganic, as we see that here, let's say, time is of essence. This is fast moving. There are local competitors that are also ready to take advantage. So we are up to that and we will use all the means that we can let's say, mobilize to get ahead and win market shares in India. In China, our distribution business in China, which has been very resilient despite the residential downturn, we expect also to deliver strong growth in 2024. We expect double-digit growth plus minus from that unit alone. But we also expect that the more traditional Zika business will benefit from a clear drive towards more qualitative construction, given the five-year plan of the government addressing, let's say, some of the weak spots of the past build-up of infrastructure and with, let's say, with specifications which are not up to what they should be. So I think we will benefit as a clear leader in influencing the GB standards in China for new construction. And this gives me also confidence as one of the only global players being active in China that we can influence and benefit from, let's say, upgrading of the standards and construction quality overall. So both the distribution as well as the more direct business, I see good opportunities. But China is in, let's say, in different mood at the moment. You know, the government tries to stimulate. It hasn't yet found the magic key to unlock former growth patterns. So that is probably still something which will prevail in 24, but in the longer run, we are also in China for China and we contribute with our means, with our R&D center that we have built, with our connections to the specifiers in creating here also a business base for future growth.

Can I ask a supplementary on China, please? Would you be able to help us to split between distribution and the project segment business there?

Distribution business, with its great growth tractionary, has clearly surpassed the direct business. So it is quite sizable and it is dominant in our aggregation.

Okay. Thank you very much.

Okay, thank you very much. And thank you very much for everybody for waiting. We still have more than 180 people now joining online. And we have a lot of questions. We can't take all the questions. Sorry for that. But Arnold Lehmann from Bank of America, please as well join us with your question.

Very good. Can you hear me?

Yes.

Excellent. Good morning to everybody. Good afternoon, actually. Now, three questions, if I may. Hopefully they're quite brief. Just coming back on your margins in Asia-Pacific and the global business in the second half. very strong delivery, much higher than in the first half of both divisions. Was there any one-offs or do you think if that was the underlying business, do you think that's sustainable into the first half and 2024? My second question is on wage inflation. Can you discuss, I think you discussed your view like up to 5%, but in the Q4 and the second half, what was the underlying wage inflation and what was the integration of MBCC? And lastly, can you give us an indication of the tax rate for 2024? I think it came down quite a bit in 23, but there was effect from the various moving parts. So guidance for 24 would be helpful. Thank you.

Yeah. Yes. Thanks, Arno, for the question. Let me try to address them one by one here on the performance of Asia-Pacific global business. No, there is no one-offs included here in the second half year. It's an ongoing, let's say, improvement progression here, as we have seen sort of across Asia. here the board of the business, particularly in global business, you know, having been challenged in the two years before on various fronts, let's say volumes, margin also taking a bit longer to establish the pricing level again, also taken here the opportunity to improve and optimize. So that's an ongoing improvement here. of the business and also in Asia Pacific, there is no one-offs included. On the wage inflation, I commented on the effect on the full year 23, second half of Q4 was not marginally different to the 5% going forward. As I said, I would still assume a certain elevation of that level, but most likely a bit lower than the 5% overall. And then on the tax rate, yes, there was this one-off effect. If you look at underlying expected tax rate without any one-offs for 24, we're sort of looking at 23 to 24%.

Very good, thank you very much.

Thank you, Arno.

Good. Any other questions here in the room?

Cassandra? Yes, we will do that.

Okay, Dominic, so we are at the end. Thank you a lot for joining us for this discussion here, the presentation of our results 23, but also our expectation for 24. I sense you get the feeling that we are always optimistic, but we are also cautious that we can't make the world the way we would like it to be. It is still very volatile environment, good trends offset by not so good trends. Overall, we believe we in SICA, we have the luxury and we have the future in our hand, the destiny is in our hands. We can create and we will also in 2024 drive towards the goal delivering top-line growth and delivering over-proportional bottom-line growth. That's our DNA. That's what we go up for. And I look forward to our next interaction then in summer when we will share then again the full set of numbers. In between, we will have our Q1 top-line communication and we can then further elaborate I look forward for those that are sitting here to have a quick bite together. And for the others, I might see you next week in London or somewhere else on this planet in the near future in Japan. You're all invited to come to Japan, of course. It will be exciting to spend some moments there, understanding better the nation and especially the Japanese markets. So thanks for joining us today and looking forward to the next time to interact. Thank you.

Yeah.