Good morning, everyone. Thank you very much for coming. For us, an exciting day, and I'm always pleased that we see so many familiar faces, but also some new faces. Thanks, everyone, for joining this morning. Today, we will have a little bit the highlights, then Adrian will inform about the results. Then I show a little bit more about what's the way forward, and then the outlook together with my colleagues from the area, is Thomas Hasler is here, then also Christoph Ganz from the Americas, and Ivo Schädler, and also Philippe is here, Jost. When you have questions afterwards, very nice, and we are more than pleased to answer all your requirements. I guess if you look at the environment and if you look around the world, I think we have a great set of numbers. The sales, CHF 1.8 billion.
Last year, we got CHF 7 billion, and the year before, we got CHF 6 billion. With CHF 8.1 billion, I think it's a strong number in sales, 14.4% sales growth in local currency. EBITDA, 20% increase to CHF 1.3 billion, and the EBIT first time ever to CHF 1 billion 55 million. It's 11.5%, a little bit lower than our friends anticipated, but I guess we had some reasons to be a little lower, so we're still happy with the numbers. Very proud on the net profit, and with CHF 1.2 billion cash flow, it's really amazing that you can see Sika is a cash machine, and we can run this machine even in stormy weather. This is a number which pleases me very well. We did a lot of investments. We got seven new factories, and we did five acquisitions. That's the number set again.
Adrian will go closer to explain it. This one is the growth rate. We see the organic and the acquisition growth. It's clear our strategy is grow with acquisition as organic. Here also you see a little bit the challenge which brought 2019. If you look at our competitors, they are below these numbers, the most part. We have our peer groups. That was the challenge, really, in several markets. The market went down also in global business, in automotive industry, in certain markets. A little bit a challenging year for a lot of people, and with 3.3% is the results. If you look around the world, we had a strong momentum in Americas with 19.2% growth rate, up to CHF 2.1 billion now, so we have a strong position there.
EMEA with CHF 11.6 -CHF 3.4 billion sales in EMEA, also quite a nice number, and 35% in Asia to CHF 1.5 now. Global business, 16.3 in global business and 16.3 as a group. The seven plants where we produced in Senegal, Doha, in Douala, in Jakarta. We really build the factories, and these factories are most mortar or admixture. We want to be close to the customer where it really makes sense to build this factory, and that's just the way we want to explore the world. We had the five acquisitions. Parex, we signed a year ago, in January a year ago, then we could close it in end of May. We have a Belineco, a smaller one. We have a very nice one, King in Canada, around CHF 100 million.
Then we had the Crevo acquisitions in bonding in China. Then we closed end of the year, Adeplast in Romania, also a CHF 100 million company. A very strong foot set and a very good way there. I think we are worked hard the last year until we close it for the Parex integration, and Parex was at that time CHF 1.2 billion sales in 23 countries, 74 plants and around 4,600 employees and 13 R&D centers. Mainly in Asia, Americas 25% and EMEA, 33%. The sales was very nice on one side, the waterproofing products, then the tile setting materials and the facades. On the first day after signing, we had combined organization already ready, and since then, in all countries, they work as one team together and one organization. Interesting is the cross-selling integration and the first joint initiative.
For example, in Brazil, we just could get additional CHF 1 million sales because Parex had very nice contact to this builder, and we could sell our product additionally. It's a great move, and we have many, many examples like that where Parex or Sika brought the other company in. This will leverage now over the years in a fantastic opportunity for cross-selling. Another really nice development we have in formulation. As Parex really are the major producer of mortars, we had also, but having the cheapest formulation and then having this better technology in the house. We find a lot of synergies on the cost side, exchanging the best formulation for the best product. That's the huge advantage we find here, and it's really great. We have more than 100 initiatives around the world to really get the best benefit out with the formulation.
Another nice one is in China. There we could increase. They had 3,000 dealers. I explained it last time, 3,000 dealers, they sell only the Davco range. It's called Davco in China. Now we started immediately with selling our range as well. If you see on the right side of the picture is the Sika box. They start now to cross-sell in all their distribution, and we have the first real great success, and it's very nice. We are very confident that in future we will see a great improvement in this direction. For us, very nice integration, a lot of synergies, a lot of great products. The CHF 100 million synergies, we said CHF 80 million-CHF 100 million. We are confident we get at least CHF 200 million. Really good. The cost synergies are CHF 55 million, where we also feel that we are really good way.
The shop-in-shop concept is really beautiful. The cross-selling with CHF 230 million with over 100 projects, we are also confident we do. In over 20 countries now, Parex is history. We integrated them in our teams, in our factories. For example, in Chile, we had four warehouses. Two had Sika, two had Parex. Now we have one new one, which we built a lot of synergies. We had factories we converge. A lot of good synergies. The best is we have the organization and the control. We work very close together in the market, and we have one team. We have one HR team now. We have one finance team. It's fully integrated. As Parex was more the name of the group, but the products had different names, we really could integrate them very fast. We still have to do, bring now the synergies.
We know we have to work another 6- 12 months, really, to bring it in. The first step is clearly the 20 countries are integrated and fully aligned with our organization. From that side, I think we are on the way to prove that we could do a big acquisition, that we can manage it, and we really have a strong organization in all the countries where we have strong general managers, strong teams. I think it's an excellent example how we can integrate companies and make one, one to three . With the acquisition, we started to have a new target market that our people start to focus also on a new customer segment, which Parex brought in. The new target market is building finishing. In building finishing now we start to roll it out. We have an own sales organization there.
To understand a little bit more, on one side, you see our technical mortars, where we repair, the bridges, where we return, go to the job sites, direct sales. The other side, where Parex was strong was the tile adhesive, was the residential, where Sika never really played a role. If you look at this one, on one side, we have refurbishment and the other side, we have building finishing. We have now dedicated sales force, dedicated marketing teams, dedicated organization looking on building finishing and on the other side, pushing refurbishment. This runs very well, and it's just another great opportunity for Sika to win market share throughout the world in a new focused target market. The first five, six months went very well, and we are convinced that we can continue with this success. That's the building finishing. It's tile setting.
Everybody in Switzerland probably has it in his bathroom. Nice tile setting. Great opportunity for us. Sika was not really a strong player. We have access throughout the world. Imagine now we have the technology in 20 countries, but we are active in 100 countries. The target starts to roll it out, to make it everywhere happy, to build up new organization. A great opportunity to win market share, to get in another field. We are well prepared. Sika was never or very small in façade solution. They are very strong there in these 20 countries. On one side, we try to build now market share in the 20 countries. They active with façade. We have now the façade organization also integrated in our sales team.
Also here, the opportunity to roll it out in countries where Parex was not existent, and that's a lot in Europe. Another great opportunity and the same in interior walls. This is the building finishing organization. Excellent opportunities. If you look at this one now from 2011, we were very small in the building finishing. Now over years, we started to build it up, some with acquisition, some with our own efforts. Now with that acquisition, we just get a real strong market position and really changing the mortar market, which is very profitable from us and gives us, for the next years, a great opportunity to continue our path forward. Innovation, strong pipeline for new products. I think it's important that we have more than new product linked up around 100 major products launched in 2019.
For example, SikaProof A, that's a membrane for waterproofing. In all the buildings, everywhere you will see these membranes to make sure we have a protected home, that no water can come from outside. It's the underground and great effort and a great success here around the world. We do in Qatar, we do everywhere around the world now this new membrane, and it's excellent because adhesion with concrete is so fast and so good that we don't have to use the old method. It's excellent. We have a new roofing membrane, AT. Also very good outside there. We have new Sikaflex Arctic. Usually, you have to stop working when the temperature goes around 5 degrees. With this one, we can go down to below 10 degrees.
For the people, they can work longer, have more opportunities to work in cold condition or in where always is cold, we can use this product. Just a few examples where we really can help the customer to build longer, faster, and better. We are proud on the strong innovation award we got in Switzerland. I think that proves that we can also get recognition from other people. That's an adhesive. We call it SikaForce® Powerflex, and this is one of the award, which our people are very helpful, and our manager are happy to going to sell. If you look a little bit at this one, everybody tried to bond something or to use an adhesive at home. If you apply the adhesive, then it will get hard after whenever the adhesive will get hard.
In the meantime, you have to apply the second one you want to bond. You have to wait until it's hard, it's cured. If you look at that line, this line is the open line where you apply it. This line is usually the line it gets hard, and from here you can start to use it. That's very simple. Our adhesive is here where we can define this, and we can define how fast this goes here. What does it mean for the customer? We had a customer, bus producer. They, for probably 20 years or 15 years, they came to us and say, "We want to have aluminum on the roof. How can we bond it?" We developed a system which they could go away from welding and started to bond.
With this adhesive, we could bond the first time a roof to this bus. For this, they had an open time for 50 minutes, and they had to have four people to stay around the roof to bond it because it was only 50 minutes. They applied it, put it on the roof, and then they had to wait 24 hours until they can move the bus. Okay. We had the application 10 year, and then they said, "We have to improve it." Now the new adhesive gives them one worker can walk around, apply adhesive because we have a longer open time, 45 minutes. He can apply. Instead of four people, only one guy is around. He applied the roof, and then he can move the bus after 15 minutes, 20 minutes instead of waiting then a day.
A big improvement for this bus producer, and therefore we got that award, which we are proud. This technology we can use in other adhesive. We can also use it on the floor. It's a breakthrough technology for us where we really feel we can go on. That's a little bit the last year. With this, I would like to hand over to Adrian and explain a little bit more our data set. Please.
Thank you, Paul. Good morning, ladies and gentlemen. After the presentation of the highlights 2019 by our CEO, Paul Schuler, I will continue now with the financials in a bit more detail. I think it's fair to say that we have again delivered a strong set of numbers in 2019, most notably net sales of over CHF 8 billion, CHF 8,109,200,000 in sales, crossing this CHF 8 billion mark the first time. This represents a double-digit growth in local currencies of 16.3% and 14.4% in Swiss Franc. EBITDA is strongly increased by 20.7% to CHF 1,387,600,000 , partially supported by a change in the accounting treatment of the leases under IFRS 16. Also on EBIT level, there is a double-digit increase of 11.5% to CHF 1,055,100,000 . Again here, crossing the CHF 1 billion mark for the first time.
This is including CHF 44 million of acquisition and integration related one-time costs, which are included in this EBIT figure. An increase in interest cost was mitigated by a further reduction in the tax rate. Tax rate came down from 23%-21.5%. It has also resulted in a double-digit net profit increase of 10.4% to CHF 758.5 million. This also represents a double-digit EPS growth of 13% to CHF 5.3 per share on an undiluted basis. ROCE, return on capital employed at 19.2%. Here, impacted by the acquisition of Parex. The cash generation measured by operating free cash flow was extremely strong, more than CHF 1,026,000,000 in operating free cash flow, 12.7% of net sales, basically doubling the amount of last year. Here, primarily driven by a very strong working capital management.
Overall, this cash flow figure, I think is a clear testament to a very strong deleveraging profile, which the Sika business has. Let me now address the individual results in a bit more detail, starting at the top line. Here, sales growth of 16.3% was again very strong and across the board, as we have seen it across all the region. We achieved in terms of organic growth, particularly strong growth in the U.S., in Eastern Europe, the African continent, but also in a number of Latin American countries, Colombia, Peru, Brazil, and also very strongly in the U.S. and Canada and in India, in Asia Pacific. Acquisition growth contributed 13%, while organic growth was 3.3%. Currency translation effects had, I'm almost inclined to say, as always, a certain negative effect, minus 1.9%.
This was in particular owed to the relative weakness of the euro and also a number of emerging market currencies. If we look at growth across a number of years, we can see here a very strong momentum with 2019, even higher than in previous years. Of course, strongly supported by acquisition with this 13 percentage point in contribution to total growth, primarily driven by the Parex acquisition, but also the acquisition of King Packaged Materials in Canada, Arcon in Romania, Belineco in Belarus, and Crevo-Hengshui, an acquisition we did in the last quarter in China. Moving further down the P&L. Also here, 2019 was characterized by double-digit growth across the board. Gross result increased over proportionally by 15.8% with a corresponding expansion of the material margin, from 53% to 53.6% or 60 base points. This in spite and including an acquisition dilution of around 20 base points.
As we can see here, a clear upward development in 2019. If we look across the year, we saw a clear expansion and positive progression of the material margin. In Q2, we had a 20 pip improvement over the previous year period. This has gone up to 60 basis points for the full year, driven by solid pricing innovation, but also structural savings on the procurement side, and later in the year by flattening or decreasing material cost. On the cost side, operating expenses, which do include personnel cost as well as other OpEx increased slightly under proportionally by 13.6% vis-à-vis sales growth of 14.4%, but were impacted by a number of special effects. On the one hand, we did recognize CHF 32 million of acquisition and integration-related one-time costs for Parex.
This compares to CHF 23.3 million of one-time costs related to the dispute resolution with Saint-Gobain in the previous year. Secondly, also this accounting change under IFRS 16 in terms of lease treatments had an impact. Both on operating expenses with a like-for-like reduction of CHF 64.5 million, increasing basically depreciation and amortization and reducing other operating expenses by CHF 75 million. Organically and excluding one-time effect, operating expenses grew in line with organic sales growth. Slightly over-proportional personnel cost increase was driven by acquisitions, integration costs, and also an unfavorable foreign exchange development. Personnel cost as a percentage of sales, however, remained basically at the same ratio at 19%, in line with the previous year level. Other operating expenses as a percentage of sales decreased slightly by 20 basis points from 17.7% - 17.5%. Negative impact of acquisition and integration-related costs also here, but also pre-investments in our automotive business.
All this was countered by overall a very disciplined cost management and the shift of leasing related expenses. Correspondingly, EBITDA increased very strongly, 20.7% to CHF 1,387,600,000 as already indicated. If we look at the depreciation and amortization line here, we see two effects. On the one hand, this IFRS 16 effect, but also higher depreciation and particularly amortization expenses related to the acquisition activity, which over proportionally increased that cost line by 63% from 2.9% of net sales to 4.1% of net sales in 2019. EBIT increase was lower than EBITDA growth, but also double-digit 11.5% as already mentioned, 13% of net sales compared to 13.4% in the last year. Again here, if we exclude one time effects and the acquisition impact, EBIT growth organically would have been over proportional.
If we look below the EBIT line, here clearly net debt, which is on the one hand related to the share buyback in connection with the resolution of the Saint-Gobain situation mid last year, as well as the financing of the Parex acquisition in early 2019 led to an increase in interest cost, as well as in other financial expenses. Net interest cost increase was CHF 30.8 million. This amount also includes an interest component on this lease obligation, which now according to IFRS 16 is below the EBIT line. Other financial expenses increased by CHF 4.7 million, largely driven by a CHF 4.6 million non-recurring financing cost related to the Parex transaction. Here, this would have basically been the same amount without this effect.
On the income tax side, group tax rates saw another significant reduction as already indicated from 23% to 21.5% of profit before tax, which is a continuation of the favorable trend of the last years. Correspondingly, absolute tax expense only increased very modestly, and we can see here the development over the last few years. While in 2018, the reduction here from 24.7% - 23% was clearly related and structurally related to the lower income tax scheme in the U.S. following the U.S. tax reform. This is also something which will be continuing. While in 2019, the reduction was more one-off in nature, also here related to a tax reform here in Switzerland, which basically had a positive impact of CHF 12 million, increasing the deferred tax asset.
If we look at it from a like-for-like perspective, tax rate development in terms of percent of net profit before tax would have been basically flat. Overall, net profit also increased double digit to CHF 758.5 million, which is a 10.4% increase, and in terms of percentage of net sales, 9.4% versus 9.7% in the previous year. Moving on to the balance sheet. Our continued growth is, of course, also reflected here in the balance sheet with an expansion of the balance sheet total, primarily driven by acquisitions and related financing activities. On the asset side of the balance sheet, purchase price allocation led to an increase of non-current assets, which basically doubled from 2018. On the one hand, an increase of goodwill of CHF 1.98 billion- CHF 3.14 billion, as well as an increase in customer relationship trademark and IP intangibles of CHF 844 million.
These intangibles are being amortized over their useful lives. Pro forma annual P&L impact from this intangible amortization, and we have seen a larger part already in 2019, is CHF 60 million on an annualized basis. In addition, and as a number of times mentioned already, the new leasing standard also led to a recognition of additional assets, so-called right-of-use assets. At year-end, this was CHF 321 million, and the corresponding financial liability of CHF 330 million. In addition, purchase price for Parex was refinanced through a Eurobond issuance, a dual tranche Eurobond we did in April 2019, increasing here gross debt by EUR 1 billion with a maturity of eight and 12 years. Earlier in the year, we issued a mandatory convertible note of CHF 1.3 billion, with most of the effect being seen in equity. Equity increased by about CHF 1.14 billion due to this mandatory convertible bond.
If we look at total financial liabilities at year-end 2019, CHF 4.41 billion and net debt of CHF 3.41 billion with a cash of almost CHF 1 billion on the balance sheet. In terms of net debt, this is an increase compared to the CHF 2.1 billion in 2018, but already significantly down from mid-2019 by CHF 700 million. Here, we can really see the strong cash generation as well, where net debt was basically CHF 4.2 billion, and now we're down to CHF 3.4 billion at the end of 2019. ROCE on a reported basis was 19.2%, or is 19.2% at year-end, compared to 26.2% in the previous year. Cash flow statement, clearly here, the reason for this net debt reduction in the second half, strong cash generation of the Sika business, which was particularly strong in 2019.
Operating free cash flow doubled to CHF 1,026,000,000 and together with cash from net financing activities, basically the bonds we have issued, which I have just alluded to, was more than sufficient to cover the net acquisition spend of CHF 1.74 billion and resulted in an increase in liquid funds of CHF 81 million compared to the end of 2018 to almost CHF 1 billion. Here, the strong cash conversion we can see here with an operating free cash flow doubling the amount of the previous year. This was driven, on the one hand, by higher profitability, by somewhat lower CapEx we had in 2018, one-off CapEx spend due to the buyback of a number of operating leases of CHF 70 million, which compared positively, but also very, very strongly driven by a very good working capital management. We reduced net working capital by CHF 88 million year-on-year.
This is versus an increase of 2018 of CHF 162. A cash flow impact of CHF 250 million compared from 2019 - 2018. Also here, the treatment of the leases had a somewhat positive impact, CHF 85 million basically moved to the depreciation line, contributing to operating free cash flow. Last, we also saw a positive cash flow effect from the rollover of hedging transactions due to the strong Swiss franc. This is relatively similar to the previous year. The strong cash conversion, of course, has also an impact here on our deleveraging corresponding to the net debt reduction in the second half of 2019.
Upon the initial consolidation of Parex mid-year, we had a reported leverage of 3.6 x net debt to EBITDA, of course, the full purchase price and no corresponding profitability against it. Particularly also due to the strong cash generation in the second half year, we're already down to 2.6 x net debt to EBITDA and well on track towards the two times targeted leverage by the end of 2020, of course, absent larger M&A. This already brings me to the dividend proposal in line with the double-digit net profit increase and our strong cash generation. The board of directors of Sika proposes another double-digit dividend increase of CHF 0.25 per share - CHF 2.30 per share. This is up from CHF 2.05, and this represents another double-digit dividend increase of 12.2% per share.
With this, I would hand back to Paul for an update on Sika's strategy execution as well as for the outlook.
Okay, thank you. I would like to show a little bit in the future what we want to do and where we want to go, I think we are excited to explain on the new strategy. This one is rather for the long-term investors and the people that like more the long-term view than just the short-term view. If we look back on our sales history, in 2015, we were CHF 5.5 billion. Today, we are CHF 8.5 billion. Over all the years, we had a great growth rate, over all the years, we had a quite an improvement in EBIT. We think we will do the same in the next few years. This is for the long-term investments. If you look 10 years back, we see in Americas, we had CHF 1 billion 10 years ago. Today, we are by CHF 2.2 billion.
EMEA, CHF 2.5 billion, today CHF 3.4 billion. Asia, we were CHF 500 million, one of the biggest Swiss companies active in China and everywhere with CHF 500 million. Now we went up to CHF 1.6 billion, a great growth rate. In global automotive, we were around CHF 200 million at that time. Now we are CHF 900 million, going close. If you look at their EBIT grow, if you look at the net profit grow, if you look at the headcount and the countries, we have a good track record and we're confident that we continue with the track record, demanding a little bit movements in the top numbers. As you know, we are measured on beating the competitors. We always have to fight with our competitors, and we have a clear set of peers which we measure, and also bonuses on competing with the competitors.
If you look on our average sales of the peers in the last years, in 2017, we beat them by 4%, we beat them in 2018, and also this year, where other peers were minus, we beat them also by around 4%. Our aim is, as a management, our aim is as a team to beat our competitors and grow faster than this. That is our daily motivation to go out in the market and get the next project every day, and therefore Sika is so strong. This is a little bit the past. We look in the future. We developed an organization, a new strategy in 2023. Last October, we rolled it out. We had many workshops, and our teams are aligned. We want to grow again 6%-8% and increase our EBIT margin to 15%-18%.
That's the major commitment from us that we go in this direction. Besides the strong financial numbers, we adapted operational efficiency. I think we can improve there. We also want to continue with acquisition, and we have our strong set of values. Another important point is on sustainability. We want to increase our sustainability footprint as well as our new product focus much more on developing more sustainable products. Our aim is to reduce 12% our CO2 emission. I will come back to that a little bit more in details. First, we want to say that Sika is on the forefront of the construction. For example, in the year 2000, we started the structural glazing of all these high towers.
This changed the world, and if we travel around the world to see all these high-rise building now with this glazing facade and glazing structure, new technology. We could develop admixtures for super tall skyscraper. We are one of the leading companies that do it around the world, and not many can compete with us. Now we start on the future. It's a small but important future. We feel that more and more goes into 3D printing. I think we are on technology lead. The main reason is labor work getting more and more difficult. It's getting more and more difficult to work and produce in big cities. I think that's a new trend, and we are on the forefront, and we will see in the next three to five years very dense, but very confident.
If the trend goes in this direction, Sika is one of the major player. Modular building is the new trend. A lot of new buildings will be produced in factories and shipped then to the job site. Also there, we are very on the forefront. Main reason is increased process efficiency, automatization, bulk handling. Main opportunity is less people on the job site, producing automatic in factories. We are on the forefront. We also want to see where it goes. For example, we had the first breakthrough with modular bathroom, and they produced in factories, shipped to job site, and installed in big factories, hotels, and this goes very fast. Now, recently, Europe or a lot of people were amazed how China built a hospital in how many? Two weeks. All Modular building. Only possible with Modular building, was the trend. No way others.
I think the Germans were impressed. They're still working on their airport. Imagine it's only possible with modular buildings, and that will be the trend. That will be the new trend, and we are on the front line because we know automatization from the car manufacturer, and we know the construction site. We will work on that, we support them, and that will be a part where we are on the forefront. Also here, Sika is in the game. Also in innovation automotive. Even automotive produced 5 million car less last year, we could increase the content per vehicle which we sold. Every year, we increased, and we have a lot of nice technologies. For example, in e-mobility, we have products for thermal management. We have product for protection. We can bond it. It's a great opportunity for us.
Even they produce less car, we could increase, and we will be there with new technologies, and we will be there with new adhesive and whatever car they build, I'm confident Sika will be a big supplier because we know the technology, and we have our sales organization close to the customer with our R&D to adapt. Also here on the trend side, we feel quite confident. Even if they produce more or less cars, we will be a big player and profitable player there. Committed to sustainability. Reduction of 12% in the 2023. The Paris Agreement told we have to go down to 15% in year 2030, and with 12% over 2030, we would achieve that. Our commitment is clear. We want to overachieve this goal, and therefore, 12% is the numbers. We also want to have more sustainable solutions.
Climate performance, as I said, energy reduction by 15%. We want to have at least 50% renewable electrics and rates. That's a challenge, especially in certain countries where they don't have that, but we will work, and we will motivate them to go there. We want to be careful with the waste, and we have a big community engagement now that we really want to have 10,000 working days volunteered per year. We really motivate our people to go to certain support, and it's 10,000 days where we motivate our people to participate on this engagement. Overall safety, and that's their sustainability target. We want to bring it down, and today, we have around 27 kg CO2 per ton produced. If you look around the construction industry, cement, as a comparison, produces 750 kg per ton produced or even more.
Just to get the level, 750kg -1 ton CO2 for 1 ton produced compared to 27 kg from Sika. It's a completely different world, but we still have to work on it, and we still want to bring it down, and each year, we will work on reduction of this one. The biggest challenge or the biggest opportunity Sika has also here is to help our people and our customers to bring better solution that they can reduce their CO2 footprint. We have two examples I would like to explain a little bit in shorter, is the first one for the highways. We developed the new mixtures where we reduce 25% of the cement in one or if they produce 750 kg, we help them to reduce 25% cement by changing with our mixtures, ash and slag.
Really a reduction where we can offer our customers. Also, if we build, we have to go to LEED points and so on. This is a big one. Also possible thinner, so less concrete, also a great advantage, and then reduction of the 40% water reduction. With this new technology, we really can make an impact. That's just one example. I think this is something where we really can help to go in a better future by developing more sustainable products to help other people reducing their CO2 footprint. Many years ago, we had the roofing. When you have to reroof a roof, you have to take the membranes away, and usually they landed on the landfill. Today, almost impossible and unbelievable, but really today, a lot of landfills still around in this world.
Probably 10 years ago, we started to recycle, got back to the customers, put their membranes and recycle it, then put 10% in our membranes. Instead of bringing 30,000 tons to landfill, we could recycle it over the years. We also take products from our competitors. We really try to make an impact. That's not even break even, really invest here. We don't make money with it, but we feel it's responsible for Sika to go in this direction, and we started this project probably 10 years ago, or 15 years. Strong innovation pipeline. Nothing change than our customers, nothing change faster how they have to adapt to the world, and therefore, they always need innovation and a good product. We have a big pipeline. We have around 25% of our product we really want to have younger than five years old.
Really push that. All we want to sell is new products to our customers, and this has to be always an advantage, as we explained before, or as we had with adhesive. Always something which will help either environment or our customer to become better. That's an important number. Where we worked many, many years, Sika is now 110 years old, on performance on better products. We really want to extend now, increase the performance, but also sustainability benefits. Each product which come out has to show that it's not just a better product performance. No, it has to also have a sustainability impact that we really can support, as explained before with our admixtures. We have another strong new products. We have a new sealants technology, which is really better on health and safety, lower VOC emissions, so really going in this direction.
We have new epoxy floors, also reducing VOC LEED confirmance in this direction. One of the nice one we have, we produce around 5 million tons mortars now together with Parex. We are very happy that we start now to launch our first mortar cement-free. It's really something which we have a big impact in the environment, and also same behavior, even better thermal insulation and reducing cement in our products. It will be the future. We work there. We have to go. This is a little bit a challenge for us because every country has their own specifications, so it will take a while to convince all the specification to change. This is one of the highlight we see will change also construction industry towards more sustainable products. We on the pipeline, and we have a lot of new in here.
In operation improvements, we getting bigger and better, and also here we can have more operational efficiency. We have four levels where we do. Looking at the people, very difficult to find in factories. We go for high-level automatization. We really push that because it's difficult to get people, also sometimes hard work. We try to educate our people, running machines instead of running bags and things around. This is good. The next one, smart packaging, aligning, reducing materials, consumption combined. Also there, we see some impact. We optimize our logistics. On one side, we will build new factories close to the customer. Also make sure that we work along our countries and region to improve this one. Great opportunities. Of course, the global expert teams, where we really try to optimize our product formulation, as explained before.
This is a huge impact. Confident that we will achieve our goals of 0.5% reduction. That's the plan. Here we work on. Every year it's our target to reduce our cost and our efficiency compared to the normal net sales. That's then the other pillar now. That's for Sika, one of the most important is values and principles. We saw it now by integration of these 4,600 people from Parex. We trained them. We had discussion. We explained it, how we treat our people. We always make sure customer first. We have the courage for innovation, sustainability, integrity, and most important, empowerment and respect for people to make sure we are everywhere, have the fastest decision close to the customers, that we really make sure in all countries we make the smart decisions. Of course, we have to manage for results, and this is very strong.
We can keep that. I think we have a long culture in building that up, and we're convinced, even with the 4,600 people divided then in bigger organization, we can adapt them, we integrate them, and we're very pleased to see how fast they like the style we work. Those that didn't like it, probably one or two left, but out of this one, the majority really liked it, and they really supported us. This is one of our strong points. To the outlook. I would like first we start with global business. Thomas, please.
Good morning, everybody, and welcome back to this nice setting here. It is a bit of a Deja vu. It is also a bit of a Deja vu when I talk about the outlook of global business. The market conditions are still very fragile. We expect a declining market in terms of production volume. Unfortunately, the issues which bothered us a year ago are still lingering around. We still have the tariffs open. The Brexit is still not resolved. On top of that, we have a new situation with the China outbreak of the coronavirus, which is also a big question mark how it will impact 2020. We expect a declining market condition and no let's say, tailwind in these regards. We are, at the moment, watching carefully how China is impacting the car production.
Short term, we will see, of course, that the supply chain, which is very well connected globally, will have some downturn and shutdowns. This is, in our field, let's say, less critical because with an inventory level of two to three months on cars, this can be buffered quite easily by the OEMs. The more important and relevant question will be how the consumer confidence will reestablish in China, especially after the crisis is over. This is much more vital, and it is also there. The expectations are varying, expecting a big boost like after the SARS virus, but who knows? These are the circumstances in the markets that are challenging us. Also, the e-mobility topic, which is a huge topic everywhere, has not yet found its roots in the real registration of e-cars anywhere in the world.
We expect also here this year to be a difficult year. Eventually, in the second half, we will see some high volume car models reaching the showrooms, and this could then give a trend for the future in e-mobility. The outside is quite difficult to predict. It is certainly not a boost for the business. On the inside, which is much more where we can measure ourselves against our peers, and as Paul has shown, we want to outperform our peers. We want to gain market share. For this, we are building on the pipeline of projects in execution, nominations which we won in the last years, which are now in execution and will fuel also the growth, the double-digit growth in content per vehicle that we expect also for 2020 and beyond.
The reasons why we are so confident about outperforming the market is we are on the megatrends that are fueling the car manufacturer. It is not to forget a long-lasting trend that consumers expect better cars every year, which means a better ecological footprint, of course. At the same time, we also expect more comfort, which means acoustics. We also expect more safety, which means more complex constructions. A safer car means more weight. Lightweight solutions are still very much in demand, and we have the solutions there, and we are committed also to further innovate that field. The topic of e-mobility is a hot topic everywhere. We started this three years ago. We have great progress there.
We see that this is an expansion of our potential of more than 20% to the traditional produced cars, and we have made nice inroads in this field. Here on the screen, you see an example which is launching this year. It's a BYD bus and car. You see in the middle, you see the battery pack of that vehicle. This battery pack has our materials in it and around it. It's the thermal management. It is the bonding, it's the sealing, and the fire protection of that battery. The beauty of that is one of these battery packs is used on the car. You see on the lower side the cars that are going to be built by BYD, and six to eight of those battery packs are used the same way in a bus.
BYD as a car producer as well as a bus producer, is using this common platform. For us, this is a field that we have not, let's say, touched two, three years ago, and we have great inroads now on the e-mobility side. It is, of course, a topic for all our customers, all our OEMs today, the well-known brands, as well as the new players like Tesla. Also here, we have seen an opportunity for us to expand and go to customers we were not even contacting three years ago. We are talking here about Panasonic, we are talking here about Gotion, we are talking here about battery producers that are now all of a sudden pulled into this e-mobility topic by the OEMs.
We see here a nice leverage of our innovation power at the OEM, which plays very well with these battery producers that are also looking for smarter, better solutions to be fast in implementing more efficient battery solutions. I would say in these five years that you have seen on the screen where we have constantly built up our footprint and market penetration, we have expanded also our technical and production footprint and leveraged that everywhere in the industrialized markets for automotive, for industry. We have, in the meantime, more than 20 mega factories that are producing multiple technologies like adhesives, sealants, acoustic products, and they are producing not only for automotive, they produce for industry, they produce for the construction target markets, and they are powerful resources for us to expand in all the relevant markets where industry, automotive, and the construction markets are present.
We are positive about 2020 in terms of our organic growth that we can outperform. We are skeptical about the market itself. We don't expect it to be such a negative market like last year, where we had almost 6% decline, but it's only February and too many variables are still unknown. We think we continue our path to invest, commit ourselves on the mega trends, build on market share growth, and we let the market then take its course. With that, I hand over to Christoph to talk about the region Americas.
Good morning. I would like to start my outlook on region Americas with some remarks on our recent acquisitions from last year on Parex and King. Both companies integrate really very well. I think we used to say that we use acquisitions as growth platforms, and this is really also what we're doing. You've seen some examples from Paul for that Brazilian example where Parex helped us to sell more on a particular project where usually we probably would not have been able to participate. It also goes the other way around. In North America, for example, we very much work on stadiums. Sika is present in all big stadium projects in the U.S. Now you must imagine, so far we were able to supply epoxy floors in these areas where the audiences are sitting.
Each of these stadiums, of course, they have a lot of bathrooms where tiles are being applied. Now we can also offer tile adhesives from Parex into the same projects. Of course, we use also Parex now in countries where they were not present so far. As we're rolling out the tile adhesive business in Mexico now, in Colombia, but also in Canada. We're preparing this now, but we believe that towards the end of this year, we should already see some sales coming in there. King, I would say, was a jewel. Performed extremely well. I always say maybe just a coincidence, since now they're part of Sika, but I don't think so. Family company, very similar culture like us, integrate very well, and they really brought the know-how in tunneling and mining. I'll come to this later.
This is really one of the booming sectors in all of the Americas. King teaches us now the right products, the contacts to get into this industry. Sika has also a lot of products for this industry. We were just never really able, in Americas, to sell these ones. Also nice synergies on the operation side. You must imagine Parex and King, they have mortar plants that are, some of them, 5x larger than us due to the nature of their business. They just have higher volumes going through these plants. Consequently, they have lower production costs. We have now started to move some of our mortars, not all, move them and produce them in their plants. It's just fantastic to see, of course, lower production costs that we're facing now also for our own products.
We see this already, and we will continue seeing these lower material costs now in our material margin. All in all, really two beautiful acquisitions and integrations and just starting now to integrate and really harvest now also the fruit. Talking about a bit numbers and markets. You heard it from Adrian and Paul. I think we're looking back to a pretty good year, 2019, and pretty satisfying also in terms of organic performance sales and EBIT. Of course, if you look a bit deeper, most of it came from North America, really booming. Canada, I must say, is fantastic. It was the strongest performance last year we had in Canada, but also U.S. doing very well. Latin America, a challenging environment. First half was very good. It started with all these turmoils in Chile, in Bolivia, in Ecuador.
It swapped over to Colombia, elections in Argentina. It was a bit challenging. We still finished the year more or less okay, but it was a challenge. Looking into this year, I think it's pretty clear, we see a very similar situation. We see positive environments in North America, U.S. and Canada, we also had a good start, I must say. In Latin America, this is always a bit a surprise box, huh? Situations have calmed down now a bit, but new strikes have been announced in some countries, a new government in Argentina is now in place. We will see. The good thing is Sika knows how to handle crisis situations, and we also have proven that we can produce growth in very difficult environments. One secret of our success is the distribution channels.
We have a pretty strong position in retail, in small distribution shops in Latin America, and even if there is a large crisis, there's always money that is being spent. You must imagine in Argentina, they were faced with an inflation of 54% last year, and devaluation to the dollar of some 64%. It's unbelievable, I think, for European conditions. You have an interest to spend the money, right? Every month you get some salary, you want to spend it because a few days later it's already worth less. Where do you spend the money? You spend it in your apartment, you refurbish your house, et cetera. That's why the distribution business, also in several of the last crisis, is still going pretty well.
We have, I think, very good product offering for these kind of refurbishment jobs in Argentina, but of course also in other high inflation countries in Latin America. Brazil is a good example. Inflation is okay, but it's also not the greatest environment, I must say. Brazil grew close to 10% last year. Brazil is definitely back on track. Last 15 months, each month with growth, so we're pretty positive there. Of course, we have also regular business initiative. This is very important. I very much believe that initiatives are drivers of profitable organic growth. I mentioned tunneling and mining before. We really push this now throughout all of the Americas, and these are high double-digit growth rates that we see there now. Very good profitabilities also, and we're so small yet in this segment that, for the next years, I think we have great opportunities.
Roofing initiative, where we bring the PVC membrane technology from North America down to South America, on all these big roofs of investors in Latin America. Infrastructure, very important. All these bridges in the U.S. that have to be repaired, we have perfect product offering for this. Modular buildings we heard, we invest quite a bit there, but also online sales, very important. There's not just Amazon. There is, for example, Mercado Libre in Latin America, a similar kind of company, much bigger than Amazon in Latin America, where we're selling or starting to sell our products through as well. On the operation side, you also heard it from Paul, operational efficiency. We've done already quite a lot the last years. We invested a lot in automation. It's nice to see the fruit coming back now from these initiatives.
You heard about consolidations that we're doing in relation to Parex. The Chile examples of Santiago de Chile has been mentioned. We're closing right now four warehouses and move them into one larger one and save a lot of money there from the leases. Then also sustainability. Yes, everybody talks about it. We've been doing already quite a lot regarding sustainability the last years. Now it becomes a specific focus. I think my guys are very excited. One nice example we have, good experience like in one of our high energy consuming factories, where we produce these PVC membranes in Boston, Massachusetts. Most of the energy comes from solar panels that we have installed on our roof, so pure renewable energy. This is, for example, something we've been doing for a long time, also the recycling.
We're trying now to roll this out also in other factories in other parts of the U.S. I must maybe add, even if, let's say, U.S. politics is not really supporting or it's not the biggest topic for U.S. politics, sustainability, there are a lot of big customers, big investors in automotive industry, the Googles, the Apples, when they build their data centers, they very much care for this. They only want to have sustainable solutions, yet they don't care what politics say. I think here, this is one reason or one additional reason why I think we have to invest really in this. The last point is people. It's really not the least one. I keep saying, I think the difference from Sika to most of our competitors is really the quality of our people.
Here, of course, now with North and South America being united in one region, it gives us great opportunities to move our talents around. We have several people, of course, now from Latin America filling open positions in North America, where it's challenging to find people. It gives me great pleasure to see also now that we have people from the U.S. moving also southwards, now helping our people there in a lot of challenges that we have. All in all, I would say 2020 should become a pretty good year. Again, we had a good start, and I'm quite positive that next year when we hopefully meet here again, I will be able to report another good performance from region Americas.
Thank you, and now Ivo on EMEA.
Thank you, Christoph. Also, good morning from my side. Maybe I click here. Good, okay. Outlook on EMEA, also exciting year ahead of us in Europe, Middle East, and Africa. First point here also the opportunities cross-selling and also all the synergies we have with Parex, a very important initiative and very important objective for us this year. The largest operation in EMEA is in France, and there now we see also a good development going further now and really using the synergies. It is also here we have much better access to distribution channels thanks to Parex and also great completion of our total range with the building finishing. You saw it before on the slides. Sika was always very strong in the more civil engineering part of the construction, but now really with Parex, we go into the finishing.
We really complete our range, and that is great to see in all our operations, in all our teams we have, how we also work together and how our offer to the market in construction is really much larger. In most construction markets, in most markets, we see good development in Europe, mainly Eastern Europe, for example. In 60 countries, you can imagine it's always a little bit different. We have different situations, but all in all, we see a positive development. Even further also when we look also our position, we have in many markets still under, let's say, proportional market shares. We have still great room for improvement in all parts of the construction sectors, in new buildings, but also in the very important part, refurbishment, especially if you look into the more mature markets like here in Central Europe.
The infrastructure is mostly built, but there is a strong demand for refurbishment. Take infrastructure, take water industry, wastewater, for example. There is always, of course, a strong demand to refurbish such infrastructure. There we are really positive. Also, the industry business in EMEA plays an important role, and here I'm really glad to see that we have really great opportunities. We have many projects now secured. It's not just the pipeline, it's really new projects coming, like in the transportation industry, in the marine industry, in modular building as well, come to that as well. We have really a good pipeline, good opportunities in the industry business as well. In general, in all project pipeline is really good in all sectors, as I said. We are pleased there.
In larger markets like here in Central Europe, like in Germany for example, we see good projects where we are in. The point here, you see also some examples here. Cross-selling plays an important role. We have substantial projects now, such as, for example, data centers. This is an increasing trend. Of course, everybody has the data in the cloud. People ask themselves, "Where is the cloud?" Cloud, for example, are data centers like this one you see here, right? Huge ones. Great opportunities for us. Specification selling. We work very nicely together inter-regional across the regions.
For example, these data centers often are specified in the U.S., then our systems are already in the specification, this is a great opportunity and great advantage then to really come then when it comes to the realization of such projects, to really have an advantage compared to our direct competitors here. Cross-selling for us means, of course, you've seen the target markets, the eight target markets, to sell as many Sika products as possible. For example, on such a big project, we start maybe with the basement, with the waterproofing, then we continue with flooring. Of course, the roof is always important here. It's sometimes 100,000 sq metres, 200,000 sq metres of roofs which have to be waterproofed, that's great opportunities here. You see here some examples in the electronic industry, also large tunnel projects are being built currently in Grand Paris in France.
In Austria, Italy, great big tunnel project there as well. Paul has shown one example, the SikaProof A+ membrane. We just did one of the first largest projects down in Qatar related to the football World Cup. More than 200,000 square meters of waterproofing with our innovative systems there. You see everywhere we have always opportunity to go on. The modular building, I would also like to mention again now what Paul also showed. Now we see really in Europe, it started. The first projects we had in Scandinavia, mainly with these modular bathrooms. Just these wet cells were just prefabricated in factories off-site, not on the job site. Now we see more and more full buildings being built. We really see this year a strong pipeline here.
In more and more countries, we see these manufacturers who do the modular building style really picking up and growing very nicely. The distribution here, see it on the last picture here. Maybe it was also reported earlier. We still have areas, for example, Eastern Europe, where our position in the market is still under proportional when it comes to distribution channels. We have seen some good improvement, good development in Eastern Europe, for example. For example, Russia. Russia is, as you know, of course, a huge market with huge potential. Now we see more and more that we can really enter into the distribution channels there. We do, of course, special marketing campaigns. We address our offer directly to the end user, of course, make it easier to get the Sika product, make it easier also to apply.
This is still a great opportunity for us, and we see really in 2020 here strong growth we expect here. Also, the online business in EMEA plays an important role, a more and more important role, if we see this as an additional channel. We go, it was mentioned before, Amazon, but also other of these so-called pure Internet players. It's a great way to just do additional business for us. It's an additional channel. It's not conflicting with our existing channels. For us, really an opportunity to just extend the market with more and more products which can be bought just directly online. Also our Africa strategy, we continue. We further expand our footprint there. We saw it already also what we did 2019. We opened new factories, and we will continue. It's very successful. We have now more than 18 companies in Africa growing nicely.
We start there with the concrete admixtures, with mortars in project business, but more and more also in distribution channels where we can really build up our position in this growing market also in Africa. With this, I would like to hand over then I think to Paul for Asia.
Okay, thank you. Our regional manager, Mike Campion, decided to stay in China or in Singapore. He didn't want to come and infect all of you. I thanked him. I make Asia Pacific. We still feel we have a great market there. It's not something we have to say. Of course, the coronavirus makes everyone nervous now. We have to see how long this goes. Overall, I think integration with Parex in China goes well. We explained it. We have big potential in the target market. We still feel we have a small market share. Also there, we feel quite positive that we will expand our market share and our growth. Okay, we come to the final page before the questions.
We still feel it's a difficult time, but we're confident it depends how long the coronavirus and how big this impact is for us. If it's not the real, real truth, we're still confident we deliver double-digit growth, more than 10%. Over proportion EBIT increase expected for this year. We have a good set up. We have value build up, so over proportion EBIT grow, and still try to have seven to nine new factories. I like my colleagues always very bullish, and I know they're going to deliver the results. We feel we have a strong position. We feel we have a strong organization, and therefore, the outlook is 10% growth rate and over proportional EBIT growth for next year. With this, sure there is no question? Okay, please. Right.
John Revill, Reuters. I've got a couple of questions, if I may. I know you say it's early days yet with coronavirus, but could you give us a bit more color on how it's affected you so far and any kind of projections you've got for the rest of the year in China? That's my first question.
Thank you, John. I didn't expect that question, I have to admit.
Okay.
Go to the second one now.
John, thank you. The good news is we have 2,500 people, and no one is affected, including the families. That's the good news. 75% of these customers are back at work or in home office, and 25% are restricted to traveling. It's quite challenging. We do around CHF 900 million in China, and it means around CHF 15 million-CHF 20 million per week if they close. We started to sell. We are out there. It's very, very slow. We know that operation-wise, we are there. We have no impact on the raw material, so we are good on raw materials. We also can export out of China. We export to our companies, so it's still going. From that side, we have to see how it works out. We have everything as good as we can control to make sure our people get all the protection, we have enough material.
Really our main issue is protect the people, make sure nothing goes wrong, and then we see how this goes. Probably the biggest impact will be transportation. If imagining when you work in Zug and you want to travel to Zurich, you have to go two weeks in the home office. Sometimes it's really difficult. We have to see how this develops. We restricted traveling for the whole region. We don't let traveling around the region, and then we go from there. We have to see. It gives an impact probably in the first quarter for China, but for the whole group, in the moment, we are not getting nervous. We can manage it for the whole group. If it then goes longer, then you have the numbers down there. We will see.
Can I ask a second one?
Oh, yes. Sorry. Yeah.
Last year, you said you'd look at seven to nine new factories this year, and last year you made five acquisitions. You seem to have kind of digested Parex now. Is there any kind of scale of M&A you might be doing this year? How many deals you might be looking at?
I think it's a great time to beat a little bit our competitors. The money is cheap, we will have in our range, as we did always, this three, four, CHF 500 million in the budget. We will be very opportunistic. We will buy competitors or we buy great opportunity, which will help me continue our strategy like the last years, we go from there.
Another question? Okay. Patrick first, I think. Sorry.
Thank you.
That's for you.
Two questions, please.
Sure.
The first one is on your guidance. Usually you guide for 6%-8% in local currency, so that's a narrow 2% range. Now you left it open, right? Should we assume more than 10% means 10%-12% as an indication? Related to that, what's your assumption here for the organic within that? The second question is around cash flow in 2020. Obviously, 2019 was very strong. You had working capital benefits. CapEx was lower. How should we think about CapEx in 2020 as a percentage of sales? How much of the working capital benefit do you expect to reverse this year? Thanks.
Adrian.
Okay. I'll talk about cash flow first. Yes, indeed, 2019 was very strong. I would say, of course, we're expecting for 2020 higher profitability, also higher depreciation. Clearly on the working capital side, I would not expect with the growth in other, let's say, reduction or positive cash flow impact. Partially there is a reversal there, but with the over proportional profit growth also in terms of CapEx will continue to be between the 2.5%-3% of net sales. In line with growth, tick higher. You should certainly not add another few hundred million Swiss francs on top of that number. We will continue to generate cash. Maybe on the sales growth question, clearly, we're guiding within our strategy for 6%-8% growth. We will have another particularly residual Parex impact. The acquisition impact is higher.
That's why we feel confident to say it's going to be 10% plus. How big that plus is going to be, I think that's too early to tell.
Okay. Now Martin. Sorry.
Yeah. Thanks for taking my questions. Martin Flueckiger from Kepler Cheuvreux. I've got three. I'll go one at a time. Let me just come back to the China question from earlier on. I realize that there's a lot of uncertainty still going around, but I was just wondering whether you could give us a trading update on Parex, because I believe in Q3 and Q4, Parex contributed quite nicely to your organic growth, in 2019. Regarding Q1 in that respect, if you could be a little bit more specific about the negative impact that you're expecting. I realize there's various scenarios, but if you could just show the sensitivity to your assumptions.
Sure. Parex was very strong growing two last quarters. Yes, around 25% growth rate, really good. The positive is they have nine, 10 factories around the country, and they is a local business. They have local distribution, they can travel in the region. They don't have cross region. From this side, I feel we are a little bit on the better position on. If they can travel, they can sell. As soon as they come back in a little bit more, this business should be better than, for example, automotive business, which we expect a lot longer time and to resolve. As we said, I think the Johns Hopkins Hospital assumes now that latest in end of March, everything should be on the better side.
If that is true, then it's a little bit small pit in China for the first quarter, and then afterwards we're confident we go there. As I said, we don't know when it is finished.
Okay, thanks. My second question would be on the Parex integration. You were giving us a flavor here, but I was just wondering, what are the targeted key milestones for you in 2020, and what are the targeted incremental synergies for this year and integration costs that would be useful?
Oh, integration costs, Hugo.
In terms of integration costs, we had CHF 44 million in 2019. We're expecting another CHF 15 million-CHF 20 million in 2020. In terms of the synergies in 2020, between CHF 25 million and CHF 30 million positive impact.
Okay, thanks. My final question, just coming back to that automotive business remark that you made. Okay, I understand that the automotive industry is more impacted currently as a result of the coronavirus outbreak. Just coming to your business model there, how many new car models are you envisaging to supply to in 2020, and how does that compare with 2019? Also, in that respect, what kind of an increase in vehicle content do you expect for this year?
Thomas?
Our activity is such a way that we kind of replace model year-over-year. Every model has a continuation incumbency. On top of that, we have a target of 20% by each account to conquer more platforms and contents on those platforms. It is for us, a key driver of our growth is to expand and secure the incumbency status and expand to the platforms left and right. VW is an excellent example. We have a high penetration in VW, which was fueling our growth in the last five, seven years. We are doing the same with other OEMs, with Toyota, with Ford. We have a very nice growth path there. It's exactly fueling our growth by going from existing platforms to the next platform, penetrating plant by plant by plant, model by model.
Remo Rosenau, Helvetische Bank. You're deleveraging quite nicely, very fast. By the end of 2020, if you wouldn't do any acquisition, you would probably go quite well below 2 x net debt EBITDA. Does it mean that if you had another opportunity like Parex, that you could well do it? Given your deleveraging capacity, you could well go again to 3.5 x. You wouldn't not do a deal because it would go to 3.5 x net debt EBITDA for a short period of time. Is that the right assumption?
A good assumption. First of all, we have to finish the integration of Parex, as we always said. We have to deliver the results, we have to make sure, then we have to deleverage. If the great opportunity comes, then we have to discuss. It's not something that we say no, but it's not the target that we say we go for a bigger deal. It's clear, we go for the normal, bolt-on, and then we will see.
Okay.
Okay, Hugo.
Thank you.
Afterwards, John.
Bernd Thoman from Vontobel. You again achieved a pretty impressive growth in many regions. One region where you are a little bit struggling is Europe, and especially the largest market in Europe, Germany, where you had declining sales last year. What is your main challenge in Germany? Some peers are growing in Germany. In general, the residential construction market is pretty healthy in Germany. The infrastructure market is pretty healthy in Germany. What is your main challenge really in Germany to grow, and how are you tackling this challenge?
We grew in Germany.
Sorry, Paul.
We had a certain growth. We have still in many areas, I'm sorry, still under proportional market share. I think we can still improve there. I just mentioned, our project pipeline looks really promising for this year. The distribution channels where we still have an under proportional position in Germany. We are now improving there as well. I see that's mainly what we're doing in Germany. We see still in our situation we have there are still opportunities there.
If you look at our peers, look at Henkel or look at Sto, look at MC-Bauchemie, look at our competitive peers, they are real behind us. We didn't really outperform in the growth rate in Germany. We have 2.6 something, still grow. Our competitors, our peers are far behind.
Okay. Thank you.
Thank you. It's John Fraser- Andrews, HSBC. My first question was also on EMEA, just to follow up, because after that turned slightly negative in Q4, I think Spain and Italy were new countries that were negative. U.K. was still negative. Wondered, I can say the good news from the U.K. is the property market has picked up after the election. Obviously, Brexit's that much closer now being sold. I just wondered if you could say how the year started in EMEA, whether you do see you can see some growth this year. That's the first question. The second is around the Parex sales synergies. Clearly, China's a difficult market. That was your first emphasis in terms of the sales synergies.
Could you say a little bit on sort of what you're doing there in China in terms of rolling out those points of sale, or are you shifting the emphasis now into the other countries?
EMEA?
On EMEA, you mentioned the U.K. Of course, their Brexit 2019, we saw a certain impact. We had a little bit slower. What is happening, of course, like many, we don't have the full picture. There is a certain investment now announced of the new government. We will see that. As I say, we always work on our strategy. We work on the projects. Some projects come a little bit later. All in all, I'm positive for this year for EMEA.
Okay. The question in Spain, rather slow also the first month. It's very early, but it's also quite January is a difficult month anyhow in construction. Brexit, we have to see. Overall, we have countries that run well, we have countries that go slow, so no one makes really a big impact here. It's something we have to deal with. Brexit, we'll see, but overall, it won't hurt us overall in percentage. Good, John? You look skeptical.
Question on the-
Parex? No, we don't get nervous now because the coronavirus. We push, we go, and we wait. As soon as we can go, then we go full steam ahead again. No change in strategy just because it's a little bit nasty weather out there. We go and stay behind. We roll it out in the region. We motivate our sales organization. We roll it out to the other countries, and in China, we'll do exactly the same. Yes, we will go through that. I think this side now.
Christian Arnold. Mine first. A follow-up question on the networking capital. Did I understand you correct that it's a fair assumption that networking capital as a percentage of sales is probably can be kept stable around 18%?
Yeah, if you look at the networking capital ratio, it did come down year on year. That's one thing. There is also a positive effect from Parex. If you look across the board, there's a number of markets which have lower working capital ratios overall. I would say for the future, we continue to, of course, work, be very disciplined on particularly the receivable side, but there is still also opportunities on the inventory side as we more strongly integrate and align the network. You should assume that from a ratio point of view, we are targeting a further slight reduction year on year. Of course, end of the year is always a point in time. This is a continuous process improvement. With the expected and targeted growth, of course, the cash flow impact will not be, again, that positive.
The second question I have is on the raw material cost. You said that you had some tailwind in the second half. We have also seen the gross margin development in Q4, a nice rebound from Q3. Can we expect further tailwind going into 2020?
Raw material costs, of course, prediction. We deliberately don't do this because that's very difficult to predict. It is clear that the trend throughout the year has been positive. Particularly in the last few months, we have seen, let's say, bigger impact from that side. Year-on-year, it was still only sort of a marginal impact. We have very much also focused on pricing with a good trajectory there and all the initiatives basically improving our material margin. In terms of the situation from today's perspective, and here again, sort of the nasty weather out there excluded, what impact that could have is difficult to say, but certainly not as challenging as it used to be at the beginning of 2019.
Thanks.
Yep.
Philippe Reilhac, FI. You have launched the first shop-in-shop concept in China.
Yep.
Do you see other possibilities on other markets with such concept, or is typically for China?
We see a lot of potential. Now it's.
We have to prove it. We have to make it happen. We have to see how much we resale. One-time filling is okay, but how often they resale. As soon as we have the right product mix, as soon as we have the right strategy, we want to go to Indonesia. That's a similar market. We want to go to India. There are huge other similar markets where we have the same trend. First, we want to make sure we have the right product mix, the right thing to sell, the right story, and yes, big opportunities. Yeah.
Two questions. One, for currency-wise. Swiss franc strengthened even more than last year. What's your best assumption at actual current rates impact on maybe sales but also on margin, as you might have a bit of a Swiss cost overhang? That's the first question.
Okay. Well, that's even more challenging than raw materials, I guess, currencies. Clearly, this is something we do and have to live with, and I think we can live quite well with, in terms of, let's say, our cost base. We have a very good natural hedge in terms of basically the cost base in the selling country. There is a certain overhang of the Swiss cost base, but that's, I would say, relatively small in comparison. What is more difficult, of course, to deal with is then the translation effect. Here I'm not volunteering any prediction. The euro, for example, which is one of our key foreign currencies, is currently, if you compare it to beginning of 2019, quite weak. I would expect another negative translation effect for 2020. How big and how it develops, really difficult to tell.
On the cost base, relatively insignificant unless it's a huge swing.
Okay. Thank you. The second question I have is to France. You showed the absolute numbers in sales 2019. What actually was the organic growth? I think it was quite impacted by Parex. What's your assumptions for this year? How is France doing?
Organic growth in France was relatively similar to Germany. In terms of the expectation, it's not a bad market in France. I'm not sure, Ivo, if you want to comment on it. This, of course, is always without the sales synergies we're expecting from Parex.
We see this about of the same range. It was about 3%, so will be the expectation.
Thank you.
Good morning, Xintong Ouyang from On Field Investment Research. I have a couple of questions. The first one is on price and cost. I'm just wondering, in Q4, do you still see the around 2% price increase as you've mentioned before? You mentioned that there is a cost deflation in H2. I'm wondering, could you please provide a little bit more quantified color on the cost deflation? Also, I'm wondering, looking into 2020, do you see a margin improvement when you have a lower one-off cost and where that improvement can come from? That's my first question.
On the pricing side, we had for 2019 about 1.5% pricing impact. Talking about cost inflation, we always have to deal with sort of 2% or 3% across the board. Of course, that varies. That's why all these efficiency initiatives are important. There has not been a meaningful change in 2019. It's also not something I'm expecting to materially change in 2020. Again, it shows improvement and efficiencies are important, which we can typically deal with quite well.
Margin-wise, when you look into 2020?
Clearly with the target to over proportionally improve or increase EBIT, this goes along with an increased margin on EBIT level. On the material side, we have clearly said that we are moving back into this sort of 54%-55% material margin bracket. To what extent and how quickly that goes again is dependent on various factors, last but not least on the raw material situation as alluded to before. Yes, we are targeting an improved margin for 2020.
Okay, thank you. My second question is also on China. I understand that it's a very challenging situation and it's also very uncertain, but I'm wondering, so for example, now you don't have a specific timeline on when will the distribution points in China will resume working, and then also what's different from 2003 is that the Chinese economy is less they're growing at a lower pace, and also the government is Let's say the real estate market is not as strong as it was in 2003. I'm just wondering, given all the factors and the underlying markets, do you think this coronavirus will delay your synergy realization progress in China? If that is the case, how do you want to solve it?
I think it's a question how fast they come back to speed. China is still a strong market. We still feel on China, they do a lot of good things. China, even if they say it's slower, it's still the most growing economy in the world, still. We have a weak position. We can get more market share, and we have a great organization there, so we are there. Time on the coronavirus, I think, is not probably my biggest comment there. I don't know.
Okay. Thank you.
Can I go?
Yes.
I have two questions, probably one each. One on the free cash flow, which was at 12% of sales. Obviously, you had mentioned this sort of tailwind from IFRS 16, CHF 85 million. I imagine this is sort of a number that we can continue to add on the depreciation, okay? Is there any counter position in the cash flow? Before IFRS 16, it was pure expense, right? It was above the line.
No.
Where does the counter position go? Do we expect CapEx at some point in the future, or is it purely financial?
The leasing payments are recognized in the financial part of the cash flow section. It was a clear shift driven by the standard, and you're right. This is the level or the approach that will continue going forward. In that sense, it's not a one-off, but of course, it's sort of structurally improving operating free cash flow. In 2019, the effect was CHF 85 million out of this, even if you exclude this very strong underlying development.
All right. On the CapEx side, can you explain why it was 4% of sales and now you're guiding at 2.5%-3%? I would have expected to stay a little bit higher now.
Was it 4%?
This year, I think. You mentioned in 2019.
In 2018, we had a somewhat higher ratio, above 3%, because we bought three, basically, factories and building out of an operating lease. If you look this year, we were actually slightly below 2.5% of sales. We continue to look at a CapEx ratio of around 2.5%-3% going forward. More, let's say, geared towards efficiency investment automation as opposed to capacity, as we have a very strong network also integrating our Parex footprint, aligning it. That's a bit the nuance. In terms of actual spend, you should expect a similar ratio going forward.
All right. My second question, probably for you, Mr. Schuler. A topic we never talk about in these reunions and also in the capital market days, the industry business. Not the global one. If I'm not mistaken, it's around CHF 1 billion as well. Can you give a little bit an indication of how that is doing and how that is growing, and what's the outlook of that part of the business?
Thomas?
It was mentioned in the EMEA update. The industry business is a core business. It is slightly smaller than the automotive business. Altogether, they have a lot of synergies across. What we implement in automotive can be leveraged into industry. For us in industry, the key markets are Germany, the U.S., and China, and all three key markets are developing very nicely. We have a lot of momentum there. Ivo mentioned in Germany. In China, it's going to be wind. Wind is going to boost our sales this year quite a lot in China. In the U.S., it is the transportation business, the modular building business, which is also topic globally. For us in the industry, it's the big markets in China, in Germany, and in the U.S., which are indicative.
There are other markets in Europe which we are also capturing, France, U.K., and so on, but Germany is kind of the lead industry market for us.
Compared to our peers, we have a really good run in industry. Industry is one of the good profitability of our market segments.
So-
After you.
Okay. Could you just break out by how much percent of Parex sales came from China last year, and by how much it did increase your exposure to the country?
Total sales on an annual basis coming from that side in China is about CHF 400 million. As indicated before, our total sales, including automotive and the construction side, is about CHF 900 million. CHF 400 million has come through the Parex acquisition.
Okay, and the second one, I think you mentioned cheap money earlier. You wanted to take advantage of that. Why is financing so cheap at the moment? Why are you looking into M&A and not rather than investments in new technology or?
I think we have some smart investor banker here. Probably they can answer the question, why money is so cheap in the break. Probably not the right one. To invest, I think we build factories, we build our own infrastructure, but we also want to benefit from the market consolidation. Market consolidation, construction will go on, will continue, and we would not be just to wait and see. It's a time where Sika is strong, and it's a time where we can change, build a strong Sika for the future. Therefore, we participate whenever we see it's a good fit for our company.
You think it's more important to buy than to invest?
No. If you talk to our people, organic growth is our driver. There's no discussion. It's not that we lay back and say No, all our management, all our people are paid to make organic growth. That's the message. Nothing else. Additional, we benefit, and we appreciate the tailwind from acquisition, but for the management, for the salespeople, for everyone, it's organic growth.
R&D is also a priority?
Of course. Without innovation, we have nothing to sell. If we have nothing to sell, the customer will pick us on the pricing if we cannot bring a better solution. Therefore, innovation, R&D, but also operation, are really important to support our growth.
Thank you.
Thank you. Oli?
Yeah.
Yeah.
Just on Japan, maybe I've overheard it, but there was the hiccup in the fourth quarter with the VAT increase, the stocking and the hurricane. How is Japan behaving, doing at the moment, the first starting to this year? The second question also to Thomas, to the global business. I mean, the margin was down two percentage points, and your friendly competitor in Graubünden had a margin increase. I know it's not comparable, but is the possibility for the margin decrease maybe because you invest more in the EV topic, or just curious on that one?
I give him some time to think about. I answer the Japanese one. Japan is for us a good market, a stable market. It's not something really changing. The hiccup with the VAT, yes, they slowed us down a little bit. Now we are in a normal stream of the growth rate. First month is difficult to tell in Japan. I rather expect a stable growth, some growth, but not double-digit. It's stable growth in Japan.
Maybe just to add to this, Daniel, I mean, the shift was really from the third to the fourth quarter because of this pre-announcement of the VAT increase. That was also the effect of the different growth rates in the quarters in this country and partially in Asia.
That's not, let's say, structurally something that has changed now.
Yeah. No, that is clear that the Q4 was weaker.
Yes.
Just curious if it has recovered in Q1.
At the expense. Well, Q3 was really at the expense of Q4.
Yes.
We expect stable.
On the margin side, if you compare the company in Graubünden with us, it's a bit different business. They are much more upstream. They have a niche on the polyamide, which is a key raw material for the automotive business, and not so easy to replace. The pricing pressure is a different one when it comes to the specialty chemicals which we sell. We have seen that the car manufacturers are under, of course, high pressure, and price concessions are expected, and we fight those. We have a demanding pricing situation. At the same time, we were also, let's say, challenged by raw material prices still going up. One of them which hurt us is the polyamide. For Matula and ABS, for us it is rather a significant raw material which we use for our acoustic products. We were hit there.
We were a bit in this sandwiched situation in 2019, but I think we hold off quite well compared to others. When you look and compare us more to the chemical supplier in automotive, then Henkel would be a good reference point to look at the evolution. Also DuPont is in there, PPG is in there. We think outperform those quite well.
We have to see, we want to invest in future growth. We don't cut cost. We cut cost, but not people. We want to stay there. We need them, and if it's a little bit harder out there, we want to continue. We build it up, a new factory in Mexico and the one in improvement in. We invest in the future. We really believe it's a challenging market out there. Now we had a little bit hit due to raw materials. If you go to Yes, I think we invest. On the other side, we had a little bit of downturn, but it will turn around. Thanks. No more questions.
Yeah, if I may. Natalie Handel from the Agence France-Presse. I have a follow-up question on acquisitions. The money is cheap, as you said. You're deleveraging quickly.
Yeah.
If you look at your portfolio today, at your portfolio of activities, what would make strategic sense if you were to buy anything? What would you like to add or strengthen in your portfolio?
If you look at Sika, it's very simple organization. We look everywhere, but we have five core technology. One of these acquisition has to be in five, this core technology. Outside of this core technology, I don't think we're going to acquire anything. It has to stay in our backbone. In the backbone, we have to see if it's really additional for us to get access to another application field or the customer field where we are not in, or we gain in a country where we are not so strong. That's a little bit the main, but we will stay with our five core technologies, and then we look at the landscape, and then we pick what we feel fits us well, but inside these five core technology.
Specifically, you increased in mortar. A few years ago, you increased your exposure to acoustic products. In practice, these five pillars were with that lead you to?
Yes. Oh, yeah. If I would have a wish list, I always like adhesives. I think that's a big of our CHF 2.5 billion, very profitable business. We have profitable business with mortars, we have now a strong there. We take the best thing what we have, it has to fit our organization, there we leave it open. Okay. I guess all my colleagues are here around for our lunch. It's more than happy to share our view and our ideas. In this moment, I'd really like to thank you for coming. It was always nice to discuss with you, have a safe return, enjoy the weekend. Okay. Thank you.