Sika AG (SWX:SIKA)

Intro

Sika is a Swiss specialty chemicals company founded in 1910 – originally to sell a waterproofing admixture for mortar. That product, Sika-1, is still sold today. Over the past 115 years, the company has expanded into a global leader in construction chemicals and industrial adhesives, operating more than 400 factories across over 100 countries with roughly 34,000 employees.

For decades, Sika was controlled by the founding Burkard family through a dual-class share structure. That changed after a dramatic – and very public – takeover battle. In late 2014, the Burkard heirs attempted to sell their 16% capital stake (carrying 53% of voting rights) to France's Saint-Gobain for CHF 2.75 billion. Sika's board and management fought the deal tooth and nail, arguing it undervalued the company and disadvantaged minority shareholders. What followed was the longest takeover battle in Swiss corporate history – 41 months of litigation, boardroom tension, and shareholder activism. The resolution in May 2018 saw Sika buy back a 7% holding, Saint-Gobain retain a 10.75% stake (which it later sold in 2020 at a handsome profit), and the dual-class structure abolished in favour of one-share-one-vote. It was a textbook case of management acting as stewards rather than spectators.

Valuation

Sika has never been a deep-value stock. This is a company that has roughly doubled its revenues from CHF 5.5 billion in 2015 to over CHF 11.7 billion in 2024, while steadily expanding margins – EBITDA hit a record CHF 2.27 billion in 2024, with an EBITDA margin of 19.3%. Innovation drives much of this: around 25% of sales come from products launched in the previous five years, and the company has filed over 425 patents. Its M&A track record is equally impressive – more than 25 acquisitions since 2015, culminating in the CHF 5.5 billion purchase of MBCC Group (formerly BASF Construction Chemicals) in May 2023, which added CHF 2.1 billion in annual sales and is on track to deliver CHF 200 to 220 million in annual synergies by 2026.

But the share price has been punished. From a 52-week high around CHF 227, the stock has fallen to about CHF 132 – a decline of over 40%. Construction markets in Europe and China remain weak, and fiscal year 2025 saw revenues flat in local currencies and net profit fall to CHF 1.05 billion (from CHF 1.25 billion), partly weighed by CHF 108 million in one-off costs from the Fast Forward efficiency programme. The trailing P/E sits around 20x, with a forward P/E closer to 17x. EV/EBITDA is approximately 12x. The dividend has been raised to CHF 3.70 per share, yielding roughly 2.8%. These are not screaming-value multiples, but for a company of this quality – market leader in a fragmented industry, global scale, consistent innovation, proven M&A discipline – you rarely get to buy in at these levels.

What's next?

The near-term backdrop is difficult. European construction is in a downturn, the Chinese residential market shows few signs of recovery, and the strong Swiss franc continues to erode reported numbers. Sika itself guided for only 1–4% local currency sales growth in 2026. These are real headwinds.

But Sika's positioning is built for the other side of the cycle. Structural tailwinds – urbanisation, infrastructure renewal, energy-efficient renovation, and the decarbonisation of cement production – play directly into the company's product portfolio. Management has set medium-term targets through 2028 and is investing accordingly, including expanding production capacity with new plants from Singapore to Morocco to Brazil. The Fast Forward programme is designed to take costs out permanently, not just to defend near-term margins. If history is any guide – and with a track record stretching back to 1910, there is plenty of history to guide by – this is a company that tends to emerge from downturns stronger and with greater market share than it entered them.

For patient investors willing to look past a cyclical trough, Sika at CHF 132 is an unusual opportunity to own a world-class compounder at a price the market has not offered in years.

Current price

CHF 132.00 per share

Disclosure

The author is currently not long Sika.

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