Sika optimistic about China’s outlook despite concerns from Evergrande
- CEO says company can further boost sales in China
- The company confirms its forecast for 2021
- Sika sees raw material costs increase by 4% this year
ZURICH, Oct. 7 (Reuters) – Sika can weather rising global commodity costs and uncertainty in China over debt problems at developer China Evergrande (3333.HK) to meet its 2021 targets, said Thursday Managing Director Thomas Hasler.
The Swiss maker of construction chemicals plans to increase sales measured in local currencies by 13% to 17% this year after construction projects slowed due to last year’s pandemic.
The company also expects to achieve an operating profit margin of 15% for the first time this year, confirming the forecast it gave in July.
Hasler, who took over as CEO of Sika in May, said he remains optimistic about China despite uncertainties surrounding China Evergrande.
“There is a lot of speculation, but our Chinese organization is much more relaxed. The exposure is rather low,” Hasler told Reuters at the company’s investor day in Zurich.
Sika, whose products are used to strengthen and waterproof building materials, is more involved in high-end projects like bridges, ports and tunnels than the mass market like housing, where Chinese companies mainly operate, did he declare.
“Our value is that if you build a nuclear power plant or a bridge, then they rely on high technology, so they want reliability,” said the 56-year-old executive.
“This type of construction is going to be strengthened and accelerated in the future,” added Hasler. “Our growth strategy in China is well balanced; our goal is to grow in China as in other regions.
Sika now achieves about 10% of its annual sales in China, a share that “could increase a bit,” Hasler added, although the company’s goal is not to double that level.
Sika has confirmed its targets for 2021 “despite difficult raw material prices and supply chain restrictions”.
Sika expects a four percentage point increase in its raw materials bill this year, as polymer suppliers, for example, have had problems restarting large-scale production.
The company would respond with price increases in the fourth quarter and early next year, CFO Adrian Widmer said at the event.
Reporting by John Revill Editing by Riham Alkousaa and Steve Orlofsky
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