Okay. Good morning, everyone, and thanks for coming. It's a pleasure to have you here, and a special pleasure that you had time to join us. With me, I have Adrian Widmer, our CFO, and then I ask also Thomas Hasler, our Head of Global Business, as well as Christoph Ganz, Head of Americas, to join us so you can ask them questions as well as they will give us a little bit an outlay view where we are going to go in the next few months. I would like to give you an overview on our highlights, then update on progress. The financial results will be done by Adrian. Then a little bit execution on our strategies as well as an outlook. Then we go to the questions and answer. The biggest highlight in 2018 was that we could win the nasty takeover battle from Saint-Gobain.
I think that was the biggest one we had in the history, and I am very pleased and the whole organization is relieved that we could solve it. On the sales side, we had an excellent year with 13.4% in Swiss francs growth rate, and the first time over CHF 7 billion. In 2015, we had 5.2%. So in three years, we did quite a jump, and we adapted our organization. EBIT CHF 945, 5.5% +. It's also a record year. However, the takeover battle also got a hit here. We had to pay around CHF 23 million-CHF 24 million to solve the resolution. So that's a part of the hit, and the rest is a little bit raw material and one-time impact. Adrian will explain it a little more in details. The net profit up by 5.9%. Without the resolution one-time impact, it would be by around 9%-10%.
So also great result from our side, special hit on one side. The key investments, we still want to grow, we still want to move, and we did one new national subsidiary, 11 new factories, four acquisitions, and the strategic outlook is we confirm our target 6%-8%, and what is important, we want to have an over-proposal profit growth increase as we did in the last few years. And we confirm the 2020 targets. We had a very nice grow around the world at global. We had 11.7% in Americas, where the U.S. were very strong and very dynamic. Then we had Latin America, where we had good results in Brazil. Argentina was very strong as well as Colombia. So very strong performance in Americas. Then we go to Asia with 5.5%, a little bit below the average.
Main reason is in Southeast Asia, we had some countries with really some difficulties. Malaysia, Thailand, part Vietnam, and mainly also Singapore, and that was a little bit lacking behind. But also China, very strong. Japan, traditionally strong. And we are quite happy with this result, but I hope that our friend Mike will increase the speed now this year to get also to 6%, 7%, 8% growth rate. In EMEA, very nice, 14.1%, and out of that, 7.2% organic growth. So very strong, good strong in EMEA. And I show later a little bit more in which areas, but also very strong. And then the global business, 29%. That's a big part of the Faist acquisition we did. So overall, a great growth rate of the whole around the world. And we are active, as you know, in 101 countries, and therefore, we have a very balanced situation.
If somewhere is a crisis, we have good market somewhere else. Overall, we have a very good platform to grow. We invested in emerging market. If you look at our impressive list, we really want to build the future. They are all growing markets, all strong markets. A new plant in Vietnam. We start in Senegal with our first production. We have another production line in Saudi. Excellent new factory in Azerbaijan. Strong market, strong position, and not too much competitors, so very good. United Arab Emirates, we have also a new factory. We moved there. We build in Mexico a factory for the automotive parts. Mexico is a good producer there, and it's very nice to have a new factory there. We are pushing Kazakhstan. We have new admixture in Russia and in Peru, Guatemala.
You see, we really go in the emerging market, build them up, make sure we are ready as soon as the boom is there. We are convinced this will pay off. We have a system that all the country manager can produce now locally, and we are not restricted on this import and export around the world. That's our new subsidiary in Honduras, and I think we are proud of it. That is a small one, but I think the future will show where we can go. We did four acquisitions. With Faist, we acquired around CHF 160 million-CHF 170 million in the automotive global business. It's nice to see how fast we could integrate and find the synergies. We are well ahead. In nine months, almost everything is integrated. It's only one organization.
Same customers, synergies are there, around the factories, around the world, are integrated in the local organization. Quite an achievement in nine months to integrate the company. We didn't lose any key people. They are very motivated, and together we're just a stronger team. Index in Italy, it's around CHF 120 million. It helps us now to get a strong Italy. Even Italy is probably not the best stable country in Europe, but with a CHF 220 million company in Italy from Sika, we have a strong foothold, and we can adapt on the local condition and also the integration goes very well. We are good way there, and final integration should be in six to seven months because there we went a little bit slower to make sure we use the growth potential on both sides.
We acquired a small company for the foam business, which is a huge business. Sika was never active there. The foam is sold to distribution, and we have good access to distribution. Instead of buying it from somewhere else, we're producing it ourselves using technology. It's a great leverage for future growth rate. We have the concrete fibers in the U.S., great business. Concrete fiber will be more and more, we will see in construction sites. Great to have it there. A small one in Romania to strengthen our position. This will be acquired then as soon as we have the closing. We have a strong momentum in organic growth. We don't just do it over acquisition. If you look at our organic growth, for example, in Eastern Europe in the last two years or three years, we went up by 18%.
We had excellent growth in the buildings. That's the Lakhta Center in Russia, but we have a lot of big towers in Russia. They build around 10 in the last time. We are very strong traditionally also in the tunnels, but everywhere in Eastern Europe, we have a strong market position. For example, Serbia went up from CHF 5 million in 2012 up to CHF 34 million now. Really great growth rate. Romania, we have a lot of good countries around. If you look at our organic growth in Eastern Europe, it's just a fantastic move. Also in big market. U.S., we explained last time how strong we are in the U.S., how good the double-digit growth rate is in the U.S. If you look at China, we also in the last three years are over 8.6%.
Very strong position, very strong in direct sales, also strong in many, many projects. It's also we have now a new distribution network, we try to push it, together with the new acquisition of Parex, we will have a very, very strong position in China. Also China for us was very good, we still feel China is going the right direction, whatever happens. Africa, very nice story. Probably people, they follow us for more than five, six years. We started to explore in Africa, we build it up from two companies, three companies, now up to 16. Everyone is now profitable. Usually takes us a year to invest, to build up the market, and return to profitability. Now the profitability in Africa is a little bit higher than in other areas. It's very surprising, very good.
We grow on average by 17%-18%. Very nice story. Very good to see in many countries. We are clearly the first mover there and by far number one in the market. It's a great story. They also have big projects, as you know, big projects, they have to follow international standards. We even can sell for a higher price in Africa because they need the right product. They need the right specification. Out of this, we have a very, very strong position. Also, international customers like to work with international player. In Africa, we really have a dominant position. That's a little bit the growth rate. Don't think that we only grow with acquisition. We grow with acquisition, but our major target is we want to have organic growth and we want to have over proportional EBIT.
This year didn't really happen. We know. There are several reasons. I think the biggest reason we discussed that now since 18 months, it's the raw material. It's the pressure of the raw material. If you look at the raw materials on the gray line, in 2015, 2016, then we went up. For example, silicone polymer, where we buy. In 2016, middle of 2017, the price was around CHF 195 per kilo. Today it's CHF 375. The problem is not the jump, the problem is the waves. They came in three, four waves in months. We go and increase our prices, then the next price increase comes. You always lag behind. If you look at the yellow one, you see the margin came down. Yes, we see that in the numbers.
After years, we really pushed our price around the world, and we have probably the highest price increase wherever. The raw material cost was around CHF 200 million higher, but we pushed the prices up by around CHF 160 million. We're still lagging a little bit behind, and it's a little bit better out there. I never really could judge the raw material price development in the last 12 months. I don't want to do it today. We're going to increase the price further. We have increased the price now in January, and we will increase the price in March again, and we will push our price increases, so we will get this margin down. What is really difficult was the force majeure. Force majeure is you have a contract with a supplier, and the supplier call you and tell you, "I cannot supply. My factory burned down.
I have a break in the equipment." We have to go out in the market, in a tight market where it's not enough raw material, and now we have to buy. Therefore, they pushed us. Our purchasing department working hard to get enough material. For example, end of the year, you remember Rhine water was not there, so they could not ship for BASF, for Evonik, for all the big suppliers on the Rhine material, and we had to find materials to continue to produce. Also, I think that was a little bit challenging. I think we are on top of it. All the organization are keen. We follow the margin, we follow the pricing, and we push pricing. That's the explanation why we probably had a tougher year than other years, and we will see how this year goes.
On the other side, we really pushed our efficiency. If you look around 2016 to 2015, the sales, we went up by 9.4%. If you look at our cost saving and our OpEx, from CHF 418 million, we went down to CHF 396 million. That's really efficiency. For example, we have a very lean corporate organization. As you know, we delegate all our responsibilities to the country. In corporate, in Switzerland, in Baar, we're 60 people. We are the same 60 people, more or less, in 2015. We manage CHF 1.5 billion to CHF 2 billion with the same amount of people in corporate, and we want to keep it. We want to keep it a lean corporate center, very efficient, and very stable, and we want to do that. We had a lot of efficiency program around the world in many countries.
We did already some reduction there, so we have some little reduction costs in our EBIT numbers last year. We are really ready to be more efficient else in the coming months and weeks. Cost management. The growth rate, if we go by 10%, we only allow to grow the half in cost. We will have a natural efficiency because we not allow the organization to go over proportional with the sales. 50% is the target from the sales goal. If you have 10%, you can grow max 5%. This gives an leverage in the organization, and if you look at our cost in the organic, we are lower than last year. A year before. Very good cost control, very good management, and quite efficient there. We also confident that we will go in the right direction.
What help is the urbanization. I think a lot of people know that, but I want to highlight it again, why we see and why we had an excellent 2018. All the high-rise building, for example, needs now increasing safety, fire, earthquake, quality requirements, better waterproofing solution or high-performing and special concrete demand. I think we have a very, very strong position there. Last year, we did many, many high-rise, and we feel very strong in this one. If you look at this picture, if you look in 2010, there were around 300 high-rise building, means higher than 300 meters. In 2020, we expect another 10 rows, a thousand. Then we have a huge for 2030. That's a planned and forecasted high-rise. We have a very strong position there.
If that just half comes through in 2013, I think we have a lot of opportunity to win market share, to have market share, we have a very, very strong position. If you look how they build now this high-rise. In the old days, they took them quite a while to build. Now they want to build it faster. They want to build it more strength and higher. Sometimes they go up to 1,000 meters. In the old days, they used steel. Now they started then with concrete, now concrete steel composite, I think that's all our potential we have in this high-rise.
If you see the amount of high-rise and how much more material we can sell in this high-rise, it's just fantastic to see how we have a great business model just in this one. What is so special in our concrete, I think, to pump concrete up to 300, 400, 500 meters, you have to have special concrete. To have buildings like that, you need really good, great concrete, otherwise your building will collapse. High pressure, but still cohesive. If you see in the city, this urbanization, we have to pump the concrete 500, 600 meters up, but usually there's no factory in a big city, so they come from outside and have to go to the job site. Usually, in New York, we have an example here, it took them one and a half hour to get from outside in the city to pump the concrete.
When the concrete is pumped, it should cure very fast. If it's not curing, we cannot work, so continuously. Then, it's 100 trucks a day, and every fifth truck was controlled in New York to see if the license are good and so. To have first that concrete, you can pump, you can transport, pump it up, then it should cure. Not everybody can do that. There's a few companies around the world that are able to do that, I think we are here in a very leading position. That helps us, One Vanderbilt was, well, is now finished this year, but we had a lot of concrete poured in last year, so that was one of our highlights. One Vanderbilt is just one of 300, 400 buildings around the U.S. I come a little bit to the update of Parex.
As you know, we wanted to acquire Parex. We signed a put option agreement on the 7th of January. We need the French consultation process. That means the unions and the people, the worker can decide, do they agree or not? They have five months' time to make their decision. We were not so sure how fast this goes, I think everybody knows a little bit, the French system is not always the most easiest one. We were not really sure how it goes. We are very pleased to announce that we could sign on the 12th of February. After two weeks consultation with the French unions, they approved the deal in France by Parex and approved the deal in Sika in France. For me, it's that a clear sign that the unions support this deal.
They see the advantage of this deal. Everybody supports it, that's a real good sign. We are very pleased to have that. It's another great sign for me. It's a sign that the people trust the Parex management. Otherwise, never happened that they would sign so fast without consultation. It was a great move of the Parex people to support this deal and also our employees in Sika support it very fast, they usually quite critical with acquisition. They understood the challenge of a growing platform, they saw immediately what kind of potential they have. Now we are signing for a non-compete around the world. We have already few in where we got approval. This could go from six to I don't know how long. We expect latest closing somewhere second quarter, we should go there.
In the meantime, we work hard on the integration. We can talk to the management. We have plans. We will visit all the countries, we will have busy travel weeks in the next few months to come or few weeks. For the first day where we have the closing, we will have clear plans for all employees, how we continue, what is the new role, what we should do. From that side, we prepare everything that for the first-day closing, we are ready to find the synergies, as we said before, it's a growing synergies. We want to grow. It's not a cost-cutting exercise. Therefore, it's easy, we will have cross-selling teams together travel to our customers from the first day of closing. We are optimistic here.
To remind you again what we're trying to do, as you know, we have these five technologies in our hand, the biggest one is thermoplastic for roofing with around 28% of our CHF 7 billion. We have our nice adhesive business for our construction in automotive and industry with around 26%. We have the concrete system, which I explained before, with around 17%. We have the coating system for the flooring business and for coatings with around 14%. We have a business of mortars with around 15%. If you look back the last five years, you saw a lot of investments in mortar plants. This is our fastest-growing target market, our fastest-growing technology, one of our more profitable technologies. If you look at Parex, they are in this technology. Profitable as we, high margin, very strong position. They build CHF 1.2 billion.
If you look at the lower level, you see they are strong in façade and tile adhesive. Sika is not in the façade market. The façade market is huge. If we go now and put one team together to focus on tile adhesive as well as façades of internal finishing, it's a great opportunity. Building finishing, with this one, we will have then an organization where we have more than 27 very profitable adhesive system, concrete, coating, and the thermoplastic system. We have a very balanced organization, but we focus on additional new big market, which we never had. With this one, we're very convinced and with the people that we can run a fast show, a very good integration, and build a real platform for future growth. Now I hand over to Adrian. He explains the number in more details.
Very good. Thank you, Paul, and good morning, ladies and gentlemen. After the presentation of the highlights, and the update on Parex, by Paul, I would now like to continue and give you more insights on the financials. Sika has again delivered a very strong set of figures, most notably a turnover of more than CHF 7 billion. CHF 7,085,400,000 exactly in 2018, exceeding the CHF 7 billion mark for the first time. This represents a double-digit growth of 13.6% in local currencies, and including a slight negative foreign exchange effect of -2%, 13.4% growth in Swiss francs. EBIT increased by 5.5% to CHF 945.9 million, or by about CHF 50 million in absolute terms, which represents a 13.4% percentage of net sales. Excluding the resolution-related one-time costs, this increase would go up to 8.1% year-over-year.
An increase of financial expenses and interest cost, combined with a significantly lower tax rate of 23%, have resulted in a net profit increase of 5.9% to CHF 687.1 million. This represents an EPS growth of 10.9%, or CHF 4.69 per share, following the cancellation of roughly 7% of the outstanding shares of Sika. Capital efficiency remains strong at 26.2%. Last but not least, we continue to invest in future growth with a CapEx, including lease buybacks of CHF 239 million in 2018. Let me now address the individual elements more specifically. On sales growth, the 13.6% in local currency was again strong and very balanced across the regions as we have seen. We achieved double-digit growth in a number of markets, namely the U.S., Mexico, Eastern Europe, the Middle East, the African continent, India, as well as the whole global business, which grew double digit. Organic growth of 6.8% was complemented by an equal contribution from external growth.
Overall, as mentioned, currency translation effects were relatively minor at -2%. However, in the second half year, this foreign exchange effect was much more negative, reversing a positive translation effect in the first half year of 2018. This was in particular owed to the relative weakness of the euro, as well as weakness in many emerging market currencies. In general, volatility continues to be very prevalent in many of our markets. In 2018, again, we have executed basically on all pillars of our strategy. With growth in mature markets, which was around 5%, growth in emerging markets around 11%, as well as through acquisitions. With the 13.6% growth in 2018, this has further accelerated compared to the previous two years.
Particularly acquisition growth at 6.8% was significantly stronger than in the previous years, also organic contribution showed a slight uptick on an already very strong 2017. Also throughout the year, during the course of 2018, and excluding the calendar effects in Q1 and Q2, organic growth was solid throughout the year, also in the fourth quarter, with a growth of 6.3% organically, which was against very strong comps in the fourth quarter 2017 with 18.8%, a great achievement. Now, if we move further down the P&L, as mentioned, and as you have seen, 2018 was characterized by a significant increase in raw material cost, which in combination with partial shortages and the mentioned force majeure, have led to a significantly higher input cost.
Strong continued price increases close to 2.5 percentage points of sales year-over-year mitigated most of these increases, were not yet sufficient to fully compensate adverse material cost effects as increases came in waves, which was also again the case in the fourth quarter. In result, 2018 material margins contracted by 140 basis points from 54.4% to 53%, whereby the initial dilution effect from acquisitions accounted for about 30 basis points thereof. On the cost side, non-material costs, which are personnel costs, other operating expenses, as well as depreciation and amortization, have again increased under proportionally compared to sales growth in spite of these one-time costs relating to the resolution of the Saint-Gobain case, as well as the initial dilution from acquisitions. The non-material cost ratio has reduced further from 40.1% to 39.6% in 2018.
In Q4, we also had additional acquisition related expenses relating to the announced Parex transaction. Looking at the individual cost elements here, personnel costs decreased in relations to sales from 19.4% to 19% of sales, driven by operating leverage, some structural adjustment in selected countries, and in spite of a positive effect in 2017, where the reduction of the conversion rate of the Swiss pension plan led to a +CHF 10 million effect, which of course this year has fallen away. Overall, other operating expenses have also developed slightly below sales growth in spite of the CHF 23.3 million one-time resolution costs, which were fully recognized in other operating expenses. This again is thanks to the operating leverage efficiency improvements as well as disciplined cost management. On the other hand, energy and transportation costs have increased more strongly.
Also certain acquisition costs relating to the announced Parex transaction had a negative effect in Q4. Depreciation and amortization expenses have increased over proportionally by 18.5%, owing to higher amortization expenses relating to the purchase price allocation effects of the acquisitions consummated. As a result, EBIT has increased by 5.5%, as mentioned, to CHF 945.9 million or 13.4% of net sales, which compares to 14.3% in the last year. If we move below the EBIT line, as far as financial expenses are concerned, we saw an increase here compared to 2017. Firstly, on the interest expense side, there was an increase of CHF 8.5 million in absolute terms relating to the financing of the share buyback from Saint-Gobain and subsequent cancellation of about 7% of our stock.
Net other financial expenses increased by CHF 10.8 million, primarily due to higher hedging costs related to higher amounts of intercompany financing due to the increased size, but also due to still increasing interest differentials, particularly to the U.S. dollar and very volatile emerging market currencies. On the other hand, group tax rate reduced markedly to 23%. This is down from a ratio of 24.7% in the previous year. This was largely driven by significantly lower taxes in the U.S., which affected our group tax rate positively. Overall, net profit increased to CHF 687.1 million, which represents an increase of 5.9% and equals 9.7% of net sales. Now, having a look at the balance sheet. Our continued growth is also reflected in the balance sheet. With an expansion of the balance sheet total by roughly 10%.
The resolution of the Saint-Gobain dispute and subsequent cancellation of 6.97% of the Sika shares have led to a reduction in equity and a corresponding increase in outstanding bonds from CHF 700 million to roughly CHF 3 billion, including a CHF 1.65 billion convertible bond, which will mature in 2025. However, Sika continues to have a very prudent balance sheet policy with a net debt level of CHF 2.114 billion at the end of 2018, which represents a reported leverage of 1.8 x net debt over EBITDA. This commitment to a strong investment grade rating also remains unchanged in relation to the Parex transaction. In January 2019, we have issued a CHF 1.3 billion mandatory convertible note, which will mature in three years, providing an immediate equity credit of CHF 1.15 billion commensurate with an A-minus rating, which was also confirmed by Standard & Poor's on February 13 with a stable outlook.
This brings me to the cash flow statement, which shows the strong cash generation of the Sika business. In terms of cash flow, operating free cash flow was very solid and above CHF 500 million, CHF 513.2 million exactly, which is up from CHF 496.8 million in the previous year, but was impacted by this exceptional lease buyback in the amount of CHF 71 million. Cash from operating activities increased by 14% to CHF 744 million, driven by the higher profitability, higher amortization and depreciation and lower taxes, as well as a favorable impact from the rollover of our hedges, which was negative in the last year. Strong growth and related working capital build-up weighed negatively. On free cash flow level, the higher acquisition spend of CHF 474 million versus CHF 323 million had a negative impact while the cash outflow from financing activities was lower by CHF 140 million.
Net cash balance reduced by CHF 124 million to CHF 914 million of cash on the balance sheet at the end of 2018. Let's have a brief look at capital expenditures. We continued to invest in growth and efficiency improvements with a regular maintenance and expansion CapEx of 2.4% of sales in 2018. Historically, maintenance CapEx and capacity increases like in 2018, where we invested in 11 new factories, as Paul has set out, mostly in growth markets around the globe. This ratio shows about a 50/50 split historically over the last few years. As mentioned, exceptionally in 2018, we have bought back two operating leases, namely the R&D building in Zurich, as well as the PU adhesives factory in Düdingen to reduce operating costs and in light of the IFRS accounting changes regarding leases being applicable in 2019.
In addition, acquisitions not only provide a growth platform in terms of market access and cross-selling opportunities, but also add to our ability to produce and deliver products closer to our customers. In 2018, as part of the acquisitions, we have consummated CHF 114 million worth of fixed assets, representing 10 additional factories were added to our supply chain. A quick look at return on capital. Return on capital stayed well above the targeted hurdle rate of 25% with a ratio of 26.2%, but impacted by the acquisitions consummated in 2018. This ultimately brings me to the dividend proposal. The board of directors of Sika proposes a dividend of CHF 2.05 per share, up from CHF 1.85 in the previous year. This represents another double-digit increase of 10.8% per share. With this, I hand back to Paul Schuler for further insights on Sika's successful strategy execution.
Okay. Thank you, Adrian. As you know, Sika has delivered in the last few years in the right, and we believe that our growth model really delivers. Our growth model is market penetration. We focus on the market, we focus on customers. We have seven target markets, and they provide that we go in the right direction, and it's very successful. We have the mega trends, for example, the urbanization, with thriving growth. Innovation is one big thing we need. We have a lot of innovation, and we need innovation to bring an advantage to the customers. We have around 300 new patents and developed out of the 20 global technology centers. We have a really good track record on innovation. We aim that 25% of our new products comes from products not older than five years.
A great new innovation, and I think Sika is known in the market for strong innovation. Emerging market is one of the big themes we have. We built 37 new factories around this area and 11 new national subsidiaries. Saying that, it's clear now with 101, we will reduce the speed a little bit in new countries, as we have to figure out what is now a safe and a good and a stable country. After 100, 105 is a little bit challenging. Acquisition. We did good acquisitions, 20 acquisitions since 2015, with around CHF 800 million. Very well integrated. We have no failure there, and I think we have a great track record on this side. What is still very important is for us the values. I think strong corporate culture and high employee loyalty. Now, with the Parex, that will be one of our challenges.
We are now 24,000 people with CHF 8 billion turnover, and the management and all the general manager are focused to keep and help to support the Sika spirit. I think we are good there and it's one of our challenge, but we want to keep it, and I think we will focus and support this one. Looking back also last years, I think at the net sales we delivered, and also on the EBIT side over the last five, six years we delivered. On both sides we can say it's a great track record. If you look at the small dip in 2015, I just realized it was the Swiss franc, and this is already three years gone. Remember when the Swiss franc changed from the Swiss banks. Great track record on EBIT and the net sales.
For 2020, as you know, we have our, and we confirm our annual goal, 6%-8% growth. We want to build until then, certain new factories. We are already almost there. 105 national subsidiaries. Not sure if we go there, but one or two more probably. We want to have 14%-16% EBIT margin per year, 10% operating free cash flow, 25% ROCE per year, and we can confirm that these are the target for 2019, 2020. Outlook. I will hand over to Thomas. He gives an outlook on the global business. Thomas?
Good morning, everybody. Before I go into the market and the global business, maybe just a short explanation about what is global business. Global business is an integral part of the target market industry. It is focusing on global industrial manufacturer, typically where few global players are dominating an industry. Most prominent, the automotive industry and the tiers, but as well, the home appliance industry with BSH, Whirlpool, Electrolux, also similar structure of the business, as well as some parts of wind and marine business. It is clear it is dominated by the automotive business, and that is where I start with. The market condition in automotive can be described easily in very volatile and unpredictable. We have seen a very challenging 2018. Good momentum in the first half, and then in the second half with the trade war discussions heating up, the tariffs, the discussions about the Brexit.
Q3 and Q4, we all know, have shown clearly an impact on the car build rates in China, in Germany, as well as in Great Britain. This uncertainty is not over. As we all know, the Brexit is still ahead of us. The trade discussions between China and the U.S. are not over, and Germany is heating up as well on the car industry discussions with the Americans. It is volatile, it is unpredictable. For us, we expect that the first half, we will still face some headwind, but then we expect to see a turn, and in the second half, that we get some volume increase, and over the whole year, we expect a flat evolution of the car build rates, which is roughly 95 million units per year. Enough about the market. Let us talk about our activities.
Here I would like to outline the record level of nominations which we achieved last year. This is also in combination to what Paul mentioned before. The acquisition of Faist is really delivering synergies on the sales side. We integrated the company on the sales front in June. Three months after the acquisition, we had only one sales team going to all our key accounts. The key accounts perceive this acquisition as a powerhouse of acoustic for the car body acoustics, and we have seen significant uplift in nominations in 2018. We can even put it in perspective, comparing it to the last three years before. We have about a 20% increase purely related to the power that we now have as one organization offering additional technologies to the automotive industry.
Our pipeline is full, and we have things that are delivering 2020, 2021. I would like to outline, and you see it on the picture on the upper part, the Ford Explorer. This is also something which is, for us, incremental business in North America. The Ford Explorer is a car where we have more than 100 parts on it, more than CHF 50 for each car. It's going to launch in March. It will have also more models that are built on it. For us, this is a major launch during 2019, and it will contribute to our expected over-proportional growth in automotive. What do we mean with over-proportional growth? If you go to the annual report on page 47, you will see how we measure ourselves.
It is the content per car that has been increasing over the last 10 years, and we intend to further increase, and we talked about that at the Capital Markets Day, and we will continue to talk about that, as this is, for us, the ultimate measure, that we are increasing our content on every vehicle built here on the globe. Driving besides the acquisition, the very nice acquisition with Faist and the synergies we have, we also have very positive trends in the market, or let's say, needs of the market where we are more than willing to be the painkiller and help our customers to overcome their challenges. A big challenge, of course, is the electrification. That is a major game changer, and as you can guess, the OEMs see this as a most important differentiation topic, and everybody's investing heavily.
There is no common way or common path to this topic, and we are engaged with all our existing current traditional car makers, as well as newcomers, to find for them the best way to deal with this challenge and, of course, ultimately have a competitive advantage also with the new powertrain system. They require a lot of our products. As you may remember, last year, we mentioned 20% is roughly the expected potential that we gain in addition to our conventional. We can see with the many nominations we have achieved in 2018 and ongoing, that we are far above this 20% so far. This is very volatile.
This is very in demand, and we are also focusing on it with a special team, which is forcing all our activities in cars, in trucks, in buses, batteries, tiers and so on, so that we capture this momentum best possible. Not to forget, besides the electrification, cars need to become more fuel efficient, which means lighter, so this mega trend of increasing fuel efficiency by decreasing the weight of the car, by also increasing the comfort aspects, which is very much in favor of our acoustic competence. This is also driving additional growth for us, and we are very optimistic and positive about the general outlook in automotive. On the lower part, you see a car, or let's say it's not really a car, it's more like a Hoover. This is a project we booked last year as well. It's Dyson.
It's the Dyson project, where they plan to build 20,000 vehicles to start with. It won't look like the one you see there. They are very secretive about what they're going to build. I can give you a hint. It looks much more like the one above. Anyhow, for us, we made a bet in 2009 when Tesla approached us, if we want to be their full system integrator for adhesive sealants and acoustic. We made the bet and said, "Yes, we are with you." They had about 200 engineers at that point of time. As you may know, we really succeeded together with Tesla, and Tesla, in the meantime, is one of our top 12 customer. Last year, outstanding growth with the Tesla 3. The bets on Dyson , I don't know if Dyson will make it or not, but for us, we are committed.
We have our solutions on that car. We have to also see this market a bit more volatile in the participants, and Dyson is a good example of a customer that likes to buy full range, everything, adhesives, acoustics, reinforcement. Everything we can do, we're working on that. Coming back to the market that is volatile and difficult, there are also markets that are pretty consistent and growing very attractive. That's the Indian market.
The Indian market has a momentum. We are present in the Indian market. We just recently made a decision that we are going now also to build a factory and a tech center in Pune, the heart of the industry of India, to also show our commitment that we are not only present, but we are bringing technology, that we are bringing all our production for adhesive sealants, for the acoustics, for resins into that facility. We're going to build it over the next 18 months. Next year, we want to open that factory and demonstrate to the customers in India our commitment, just as we did in Mexico, as we did in Brazil, as we did in China, Japan, the U.S., and so on. I'm excited about 2019. The order book is full. We have a bit of wind in all directions.
Doesn't bother us too much. We are winners. We are going to bring our content per car up. The customer needs us. I need to go to the customer as we speak. Thank you.
Good morning. It's my pleasure to report on the outlook for the Americas. I guess you have learned this now. This is the youngest region that we have in Sika. It's a combination of North and South America, which basically took place sometimes around March. Most of my time last year I spent traveling in Latin America, getting to know new environments and of course, also our people. Therefore, I think it's also a bit challenging to make a general outlook for all of Americas because, of course, Americas is a pretty heterogeneous region. Starting with North America, I think in general, we are positive for this year, I must say. We have seen a little bit a slowdown, maybe not the right word, but it was a bit a strange mood in the second half of last year.
Some investors that were holding back a little bit with announced investments already, mainly due to uncertainties in the market, the trade war. Then another thing not to underestimate is, and we heard this very often from customers, is labor shortage. Our customers, they had the project, but they didn't find enough labor to execute this project. Now, situation seems to change or has changed a little bit. I mean, basically everyone I talked to in the beginning of the year is very positive again. We also had a very good start, I must say, into 2019, and businesses like the concrete business, for example. You've seen it in Paul's presentation. High-rise buildings where a lot of our concrete admixtures are going in. They performed very strongly at the beginning of the year. That's always a very good signal for us how the year could go.
Also, order books are more full than they have been already at the beginning of last year. We had a good start also in 2018. That we take also as a strong signal for this year. In Latin America, it's a bit a roller coaster, as you all know. I have to learn it a bit the hard way, but I think it also offers a lot of opportunities for us. Challenging environment, as you can imagine. You read it yourself. If you talk about an outlook, Argentina is back in the recession very clearly. We see this. We still grow nicely, but of course, projects have basically stopped. We grow in distribution business a lot. Also Mexico with the new president, where we do not really know yet where this is going. Also announces itself as a bit a challenging environment this year.
This gentleman, for example, has stopped this CHF 10 billion Mexico City airport project. CHF 2 billion of the ten were already built, and now it's just been stopped. It's just one example. We don't really know where it's going, but there are also some bright spots. I think Brazil, which has been in a crisis for several years now, last several months showed nice recovery, double-digit growth. We're quite positive that Brazil, we should see a recovery this year. Also in Colombia, and these two markets are among the strongest markets for us in Latin America. I think with all these turmoils that are going on in Latin America, Venezuela, of course, we're there. We're still there. One of the few Swiss companies or one of the very few international companies. We're there. We're surviving. We believe maybe now a change might come.
Who knows? We've been saying this a long time, but we're ready. Once this is really happening, we're ready. We stayed, and we're pretty proud that we stayed. With this, I would say despite all of these difficult environments, we've been in Latin America for many years. In Brazil, for example, for 80 years. Our people, they know how to deal with crisis. They know how to deal with hyperinflations like in Argentina. Actually, I'm learning from them now, how to handle that. We have a strong position in distribution markets, for example. They always grow. They're always small businesses, small projects, which we can supply to. We have proven over several crises that we can also grow in challenging environments simply by focusing on where we're strong, and this is innovation. Now, I bring the big city approach, of course, from North America into Latin America.
There is always growth in cities, even if it's the largest crisis that's happening. Maybe not the big infrastructure projects that are being built, but there are always small, mid-size projects where we can supply Sika products into. Also, I would like to mention, while maybe others are talking about building walls, we're tearing down the walls in Sika Americas between North and South. It's really a pleasure for me to see how all of a sudden, my U.S. friends, and I was responsible for the U.S. before as well, starting to talk now with our Mexican friends, with the Brazilian friends. They help each other. We're supplying each other now all of a sudden, and this is really a pleasure to see.
I can really, and I would like to report already, some very nice, call it synergy projects or benefits, where the North profits from the South, but of course, also vice versa. We have a lot of U.S. companies investing in Latin America. Of course, now my U.S. guys are helping in Brazil or helping in Chile, for example. Data centers from U.S. companies are being built in Chile, and we're helping our Latin American friends to get these projects. Mining. We're way stronger in mining in Latin America. It's a growing business, huh? It's roller coaster as well, but now it seems that we're growing again. My LatAm friends now are helping North America, Canada, and U.S. to establish a business there as well.
We're selling Mexican acrylic waterproofing technology that we produce in Mexico and that we supply now into, we call it the Sun Belt of the U.S., so the Southern California, Texas, Florida, where you could say is kind of a Latin culture within the U.S. culture that's been established. There are Latin owners refurbishing their houses by Latin American applicators. Lots of really very nice synergy projects that are going on here. Also one more reason that makes me positive for 2019 is, Paul mentioned it, we have increased sales prices really a lot in all of Americas last year. The issue was the raw material prices, they've been increased in phases, so we were always running a little bit behind.
Now it seems that this year we will not see the same spikes in raw material prices anymore like last year. Our sales prices are on the right level now, and this, of course, we will profit from now in 2019. First effects we've seen in January, of course, on our margin already. That makes me quite positive that we will come back to strong margin growth also this year. Also new customers that we won last year in North America. Some significant customers, I must say. Cannot mention the names, of course, here in the concrete business, but also in the waterproofing business, for example. We will see these sales coming through now this year. New plants that we built. It's part of our strategy, part of our market penetration strategy. Very important. Last year, we mainly focused on Latin America.
Also this year, focus on Latin America. We have a new plant in Peru, Guatemala. We will extend our footprint in Colombia, for example, this year, but also in Ecuador. In the U.S., concerning market penetration, Parex will help us quite a bit. I just come to that in a second. Online selling, big topic for us in the U.S. Living in the U.S., basically organize your life through your little mobile phone. You order everything online. Of course, our customers more and more are ordering Sika products also online. Here we really work now with all the big guys. Starting with Amazon, which is I would like to say we're almost a bit surprised by the orders that are coming through online for Sika products. You wouldn't think that this is the first product you order online, but very interesting.
Of course, also with some of our other big customers like The Home Depot or Lowe's. Basically, you find all our product range that we have on the shelf with these companies, with these distributors, you'll find them now, of course, also on their online platforms. Of course, we are present now there, and it's nice to see how this new distribution channel, electronic distribution channel, is developing nicely. Amazon is now penetrating into Latin America, Mexico and Brazil. These are the first two countries they're attacking. We have already signed a contract with them. There's a big interest from Amazon to work with Sika in Latin America because Sika is a brand that is known, that brings obviously some traffic on that site. They basically contacted us in Mexico, which was the first country, whether we would like to go with them.
Last but not least, just a few words on Parex. I think you heard it from Paul, about 1/3 of Parex is in region Americas. I would say it's a real beauty for us that we can acquire here. In North America, they bring us into a new business we have not been present in. On one side, it's the tile adhesive business. We've never been active in that business. On the other side, it's the facade business. You must understand, we are very strong on the roof, we're strong on the floor, we're strong on the waterproofing of basements and joint sealant, for example, but we almost did not have products for the facades. The facades, of course, is an integral part of a building structure.
With Parex now, we can offer now a wider package to specifiers and of course to distributors and other customers. In North America, they also bring us new plants. For example, we had a project in Florida to build a new Sika plant. Now with Parex, they already have a large plant in Orlando, for example, which we can use now to produce also Sika products. Or in Southern California, where we will now, for example, don't have to invest in renewal of our own plant, but can use their large plant to produce Sika products. In Latin America, I must say, Parex is a real leader. For example, in Argentina, they have a stronger position than we have. Very strong, well-known brands. Klaukol, for example, is one of their brands for tile adhesives. They really help us moving into the house.
Sika's been present outside of building structures, again, basements, but never in, let's say, in tile adhesives, for example. In Brazil, Argentina and Chile, they really strengthen now substantially our offering in these countries. All in all, we're very excited. Also, the people we met so far from Parex, they fit perfectly also into our culture. They offer us now new opportunities for people also. It's always been a bit an issue in America, especially North America, find enough good people for our growth and our development. I think Parex brings a lot of also very good talented people, which we can use now and put into several positions that we have. All in all, think positive for Americas. It's also my job to be positive, and I think we know how to grow in, let's say, in booming economies, but also in difficult economies.
No complaining. We just have to do it because we have to come here again in a year and report to you guys how great we did in 2019. Always have this in mind. Thank you.
Okay. Just shortly now, EMEA, we're also positive on EMEA. I think we have a big pipeline with a lot of great products, and there are a lot of big project out there. We're very positive, and we can see that it can, our adoption, how the organization runs. Also, we want to have some new factories. Positive on EMEA and also Asia Pacific. We're quite positive in all the target markets. I think China, India, Japan, Saudi should be stable. Distribution should go up and big projects, Tokyo with the 2020 Olympics. Overall, we see strong market there. Every market is a little different, and we have a little bit less stronger, but also growth rate, which we in our expected range from 6%-8%. The outlook, summary, if you have more questions, we have question and answer afterwards.
We confirm our target is 6% to 8% growth in local currency. This does not include Parex, of course. We have to see when we can close Parex. The number could be over CHF 8 billion next year. CHF 6 billion to 2016, CHF 7 billion to 2018, CHF 8 billion to 2019. That's a little bit the target, the speed we want to go. One thing is also very clear. We want to have an overproportional profit increase for the year. That's an operational level. We want to push that. Depending when we have Parex, we will see how much dilution we get. We're confident for the operational business we will deliver overproportional profit. Opening with seven to nine new factories and the new strategy, where we want to go, how we want to go there, and what our succession is.
We want to communicate it on the Capital Markets Day on October 3rd. With this, I open now question and answer. Bent.
Good morning. Thank you for the very inspiring presentations. Two questions on your margin. The first one. It seems that the consolidation of Faist ChemTec was quite margin dilutive. According to your report, Faist ChemTec achieved a net income margin of below 1% last year. Was this mainly driven by one-time costs, integration costs? What do we expect going forward for the underlying profitability development of Faist ChemTec?
Adrian.
Yes, I can take this. Good observation, yes. Clearly, it was on the one hand, of course, the acquisition cost, one-time cost initially. You always have, through the purchase price allocation in the first few months, quite a significant impact. What you're mentioning here is basically down to the bottom line with all the also integration we did. This is clearly a level which is a one-off, and we are seeing very good signs on the synergy on operational improvements. Overall on the global business, this had a margin impact as we can see in the segment reporting.
Okay, thank you. Secondly, on the general margin outlook for this year, you are quite confident that the margin will improve this year. On the other hand, you're facing some further headwinds, integration costs for Parex, slightly negative impacts from IFRS 16. What makes you really so confident that you can restore margins this year? Can you give an indication by how much you have started to increase prices? What do you really expect from efficiency gains, et cetera? Thank you.
You take this one.
Maybe I'll start with, well, what you're mentioning here on the IFRS impact. This will actually not have a negative impact on EBIT level. It rather will have a bit of a positive one. There will be a shift between, let's say, operating expenses towards depreciation. EBITDA will actually go up as a result, and there is an interest element which will move below EBIT. There is a slight positive effect on EBIT, but it's relatively minor. On the margin side, as Paul said, we are not daring to predict the timing. Clearly, it's been a very volatile situation, but we are continuing focusing on price increases. There was another round early this year. There will be more going into the year. Eventually, all this will flatten out and come back. This will then be when it is throughout the year.
It's tough to predict when it is. Clearly, I would say that the worst is certainly over.
From my side, we really pushed the prices. We increased the price in January again. We see some relief, but we are really ready now to go with the price increases. If you saw in the last years, price increase was just necessary in certain part of the world, was more or less flat or coming down, and we really trained the organization. Therefore, we are confident that for the operational business, we know today we will be increasing to the same level we had at least last year.
January gives you hope that you are on track to achieve the margin development?
January is a very short month, you know. It's January. You remember last year, everybody was pulling in January last year, and then we had something else in the stock market and everything changed. I'm confident that we can increase the price if we have more price increases. I'm confident that's the first time we are above the curve. We picked up with the curve, and now if the price increase, we should be with the curve. We are a little bit above the curve of the price increase. That makes us quite confident. A few more force majeure, we have to adapt. That's the business. Confident that we measure it.
Excellent, thank you.
Martin.
Yeah, thanks for taking my question, Martin Flueckiger, Kepler Cheuvreux. Actually three. I'll take one at a time, please. Just coming back to what Thomas was talking about on the outlook for the global business. Looking at the global light vehicle production being down in January, the Brexit nearing, U.S.-EU tariff negotiations not looking very encouraging, I find. I remember in the past you've been talking about targeted 10 percentage point outperformance versus the OEM underlying market. Is that a target you're still holding up? How do you view that these days?
I think we're holding up with the 10% outgrowth like Thomas explained. If you look at automotive market, you have to see we are good in automotive market. That's a CHF 600 million business for us. We have another CHF 600 million-CHF 700 million in the industry, which outlook is very good. Is good. Boat is good. All and the aftermarket is good. If you look at the whole global business, yes, automotive, we will have a tough time probably in the next three, four, six months. As Thomas explained, we listen to the smart guys out there, the production will pick up again. We have a good pipeline. We will probably suffer a little bit. Overall, in the global business as also in the industry, we don't see this downturn.
Yes, we still want to have this 10% outgrow the competition, but I also want to grow.
Okay, thanks. Now coming back to Bent's question on the margin, just a little bit more granularity, please. What kind of raw material price scenario, I realize it's hard to predict. What kind of scenario do you have in your mind, at least for, let's say, the first half, if the full year is too difficult to predict, which I agree. What kind of idea do you have for with regards to the squeeze that's going to have on your EBIT or on your margin, at least for the first half? That would be very helpful.
Yes. I said before, I couldn't predict it last year, the whole year. I was always a little bit wrong. It's hard to predict. We know that there are more capacity now in every, in the epoxies. Silicone really slowed down in the market. I think on the polymers, we see some relief on the production side. I think we have to see how the Chinese carry the government. If the Chinese release a little bit the pressure, then we have immediately enough raw material around. If we have enough raw material around, the price will go down. That's the question. That's hard to predict what they do in China. If China relieves the pressure, then we will have enough raw material, and then we know what to do.
Okay, but I seem to re-
I would say take it stable. My best is next six months stable. Don't be surprised if I tell you it's up. I hope it's down. But it's-
Sure.
The market, last year, the supply chain is on the volume, how much other people produce. We are a part of this, and we can control it as they don't have force majeure, for example. Without force majeure, we predict straight or down.
I seem to remember that in October at the Q3 conference call, you used to talk, or somebody talked about the expectation of Q1 seeing a positive squeeze on the prices.
Yes. As I said, I could not manage it.
Okay.
I was so surprised when the Rhine water was so low that they could not ship. Yes, it is difficult. They could not ship raw material to BASF, not to Evonik, nothing. Of course, decrease were there. Even we hoped in October that it will flatten out. We increased the price in the meantime twice.
Thanks. My final question on net working capital, and maybe that's for Adrian. As a percentage of sales, if I remember correctly, it is up now at 19.6%. What are your plans and targets for net working capital in 2019? Thanks.
Yes. On working capital, I think it is slightly up. It is, of course, also partially owed to the fact that on the inventory side, if you have the same tonnage, but the value is higher, there is a certain impact there. I also see opportunities overall. Our target is to have a slightly lower level, in percentage of sales, in 2019.
Patrick Rafaisz, UBS. Thank you. A question on 2019 and the comparables. You mentioned it will be maybe a challenging start in H1 for certain businesses, especially automotive, but comparables should be also quite easy now in terms of growth for Q1, especially in EMEA. Would you think you're getting off to a very solid start in terms of organics in the first quarter?
Confident, yes. We don't judge January, but if everything comes like January, then we are very happy. January is the first month. The first month, if everything comes like that, yes, then you're right. We should have some support from lower last year in EMEA.
The second question on the Capital Markets Day in October, where you provide the new midterm targets. Have you already put more thought into how you will guide or steer your business? Will reported EBIT remain your main steering tool within the organization, or are you considering switching to adjusted?
I explained it already the target. We have a special way where we go, we do bottom-up and top-down targeting, and then we have to see the impact. Until then, and we will provide the numbers, we stick to our 2020 rules, the 6%-8% and 14%-16% EBIT. We have to see then what's coming out on the Capital Day for next five years.
Maybe if I can add, I think it's rather unlikely we'll switch to an EBITDA guidance.
Oh.
We will probably stick with the-
Sorry, I got the question wrong. Sorry.
Okay, thanks. The last question, a follow-up on margins. Sorry for that. With Parex coming up, do you still expect SG&A as a percentage of sales to be lower in 2019, or will your profitability improvement come primarily from the gross margin?
In relation to Parex, it is difficult to say in relation to also the one-time cost. It depends really on the time of consolidation, basically, when we can close it. It is clearly, both on the organic as well as on the Parex side, the efficiency and the leverage on SG&A costs, this will continue to go on. It is certainly not all coming from a material margin impact.
Thank you both. Thank you both.
John. Sorry. Oh, no, you have the mic. Sorry.
Okay. Thank you. Remo Rosenau, Helvetische Bank. Many companies talked a lot about wage increases the recent month. Basically, in a lot of regions in the world, particularly Eastern Europe, but basically everywhere. We haven't heard anything from your side about wages. Haven't you any pressures on your side?
We have, for example, 3.5% in Germany, we have everywhere. It's a big issue of wage increase, but also transportation is a big issue around. The target is clearly we have to be more efficient, and we have a lot of more efficient programs out there. Yes, we have to fill the efficiency with producing more with less people and selling with the same amount. It's an issue, of course.
Okay. On the financial side, we had last year CHF 53 million negative financial result. There were a few extra elements in there, of course. Now we have more bonds. We have the mandatory convertible with 3.75% for the time being, which adds around CHF 49 million annually. With the other bonds and other six, we have probably around CHF 55 million higher interest costs. What would your best guess be where the financial result will be in 2019?
Maybe if we take 2018 as a basis, relating to the resolution of the Saint-Gobain case, there is probably another, let's say, CHF 7 million on a run rate basis regarding to the financing there. In terms of the P&L effect, it's still, of course, dependent how we do the additional takeout now of the bridge facility for the Parex acquisition. You can assume that we're talking about roughly CHF 20 million of additional interest, which will hit the P&L. The mandatory convert, the large part of the coupon is actually equity and not P&L.
Okay. Good. Thank you. The last question, I'm not quite sure if I understood you correctly on the Capital Markets Day of 6th October. Will you or will you not give new financial targets as well along with the strategic goals until 2022?
Oh, we will.
We will.
Of course.
Okay.
Yes, we will. Sorry for that. No, we will. I didn't get the question right. We will, of course.
Okay.
You see, with CHF 20 million more to finance a business of CHF 2.1 billion, it is not so bad, right?
No doubt about it. Thank you.
John now. Here.
Thank you. It is John Fraser-Andrews from HSBC. Three questions from me, please. The first one, in emerging markets, can you provide an organic growth figure from EM of within the 6.8% group organic growth and say sort of how many countries are left to see that Malaysia, Philippines, one or two more in Asia still in the laggard camp. It seems that some have come out, like Brazil, Indonesia. How many sort of problem EM countries do you have within that figure? Is the first question. The second is the differential in global business on sales growth. What you have reported, organic sort of 6% or 7% growth. What differential is that to the market in automotive? Appreciate there is a mix in that number. The final question is on acquisitions. We have seen a big pickup in bolt-ons in the last 18 months or so under your leadership, Paul.
What's the outlook on bolt-ons, given you've got Parex to digest later this year? Thank you.
Okay.
I'll take the growth question. The emerging market organic growth was around 11%, and there is an additional acquisition component to it, but organic growth is 11%. On the market itself, there is always a number of markets doing not so well. It's actually been, not in terms of the markets, but sort of the ups and downs, relatively consistent across the last few years. The target, and will continue to be the target, is a double-digit growth in these markets. Do you want to take the acquisition?
I take the acquisition question. Yes, the opportunity comes with the market. I think Parex was a great one. Faist, a year ago was excellent, and the index also. It's also very clear now we have to do the homework now and integrate Parex fast, professional, and then we see what comes next. There are 23 countries in Parex. Therefore, six or seven are important. We already there, we focus, we are confident that end of this year we will have a big step in the integration and how to work together. We use that as a growth platform, as said before. Yes, do we go for the big ones? Everybody knows that BASF is still on the market or comes on the market.
Clearly statement last time that due to the market share BASF and Sika would have, there's no possible that we can acquire that mixture business. Now we have to see when they come on the market, how they come on the market to see what else Sika could do. It's a timing point. If you're not really good on the integration and not stable in the organization with Parex, we won't do further bigger acquisition or even mid-size acquisition. First task is now clearly integrate, make it profitable, and then we go from there.
Maybe on the automotive business, that was the last one. The car build rates, I think they were slightly negative throughout the year, more strongly negative towards the end of the year. We suffered a bit over proportionally, of course, on the high content German cars, but still a very significant growth above the market with the 6%-7% organic growth we have shown in 2018.
Okay, thank you. Alessandro Foletti, Octavian. I also have a few questions. Maybe on the operating leverage, the efficiency improvements. Let's forget about personnel cost. There is this CHF 1.2 billion OpEx that has been sort of trending down lately. Is that trend going to continue? First question, and second, what should happen for that trend to reverse? That would be my first question.
The trend is as in, also the personnel cost side is clearly continuing. We will have certain one-time costs, of course, relating to the Parex transaction, which can have a spike. The leverage, the efficiency improvements, also apply on the other operating expenses. It's certainly not only on the personnel side. There is a lot of efficiency programs when it comes to logistics, transportation, other type of costs. This is very much applicable as well to the other operating expenses.
Okay. The second question, if you can quantify the effect of the force majeure, like that one alone.
That's a good question. Can you?
I cannot quantify it specifically. Of course, there is several elements to it. In such a situation, the first focus is, of course, to get enough material in the right place. This is the biggest focus. It has a certain, of course, price impact as well, but to really single that out, we cannot do.
What I tell is cumbersome.
I take it as significant. I would like my last question to come back again on the M&A 2019 outlook for bolt-ons, because in the press release, there was a specific mention that you will go again for M&A, or let's say to go back to normal. That's somehow the formulation that you have in the press release. Now I look at the outlook that you give 6%-8%. In the past years, you made north of six, maybe six and a half, seven purely organically. Let's say to reach the 6%-8% in a weaker environment, maybe you need a 1% or 2% bolt-on. Now I wonder, your answer that you just give to my previous colleague seems to indicate you will not look at bolt-ons in the beginning.
No.
How do I have to?
If we talk about big ones. We talk about CHF 5 million, CHF 800 million, big ones. That's the bigger ones. For smaller ones, where we can make a strong position in a country, of course, we will continue. It's not that we stop now acquisition. We keep on where we have great opportunities, and it's not correlated with the Parex areas, then we still do acquisition. We probably go a little bit slower because our focus is now on Parex, but we will have one or two smaller ones.
Thanks.
Hi. This working? Yeah, good. Hi. John Revill, Reuters here. You seem very sort of confident and upbeat about sort of 2019. I'm just a bit concerned because I've looked at the Ifo Institute for Economic Research from Germany, and that's gone down for the sixth month in a row. Global PMIs are going down as well. Also we've still got Brexit to be resolved, if ever. Generally, also the trade war thing there. Can you just give me a bit more detail on why do you think you're so optimistic when everyone else seems to be a bit more cautious out there? That's my first question.
We are cautious as well, of course. We are not feeling that the blue sky and everything is great. We look at our current supply chain, we look how many projects are in the pipeline, how many projects throughout the world they're working on. If they stop, for example, in Mexico, the airport, okay, then we are too optimistic. I'm not seeing that every big project in this world will be stopped tomorrow. If I look at that pipeline, if I look where we are and bit more position we have, and then how strong we are in the smaller distribution, I think we are confident to measure the certainty. It's not the first time different countries have a problem. Sometimes China went down, we could manage, then Brazil. We have to lever how we do it.
We are cautious, but not so pessimistic that we will say the world will fall apart.
A follow-up one was just on the answer to the question about BASF. You said, obviously, competition concerns would rule out a takeover of the whole business. Does that mean you're completely out of it, or are you still interested in looking at it? Because we understand now that BASF have sent out the kind of packs, and they've appointed bankers to help with the sale. Are you guys in the running for a part of it then, perhaps?
Yes. The question is there, how they want to do it. In the moment, no one knows. The package is not out there. It's clear we cannot acquire the whole thing. We don't want to. We have to look what's coming out. We are the market leader, and at least I want to look at the opportunity. Of course, as I said before, timing is an element. Daniel?
Thanks. Just on Parex. Would you be so kind to maybe give us the number for the acquisition costs for Parex booked already in last year?
The acquisition-related cost is close to CHF 10 million.
Okay, thanks. You flagged in January that the total cost is CHF 70 million, including integration costs. I guess the rest of the transaction costs will be booked probably in the first half, right?
Um-
If you can already guide us.
Depending on closing. Certainly, the larger part of the remaining cost, or a large part of the remaining cost, is likely to be included in 2019, which already includes certain integration expenses as well. The timing, it really depends on how quickly we can close.
Okay. The last question is on China. You mentioned that you had an acceleration of organic growth in the fourth quarter in Asia Pacific, and one of the key drivers was China.
Correct.
Now if I look at automotive, which is rather negative in China, everything you read about China is negative, you have an acceleration in China. Which is very good, of course, I cannot understand exactly why.
Yeah. If you look back the last three years, I showed how strong we are in the market.
Obviously.
Obviously, yes. We also have to see, it's a huge market, and I said before.
Hi, Tobias Raymond, Morgan Stanley. Two from my side. Firstly, on the tax rate, obviously it decreased quite a bit to 23%. You had guided for 24% initially. What can we expect there for 2019? You said already there will be some headwinds from Parex. That was my first question.
Yes. On the, again, here, Parex, depending on the time of closing, also how quickly we can move there in terms of the integration, will have a certain impact there, a bit higher on average. If we look at our organic business or current business, you can expect sort of a similar type of tax rate. This impact, as I set out, was largely driven by the change in the U.S. tax regime, which will continue. That's basically around an organic rate we're predicting going forward.
Okay. Thank you. Second one, sorry, it's again on the margins. You said excluding the one-offs, we had 13.7% this year, and you said raw materials will be flat to slightly down during the first half. Given that we have, I guess, at least 60 basis points headwinds from the Parex one-offs, where do you get the additional 100 basis points or so improvements to close the gap to 14%?
The one element is, of course, the pricing. As we said, this is our main focus to really continue to drive pricing, the raw materials will basically be what they are. Secondly is the operating leverage. Clearly, we had on the organic side, cost growth of 55% of sales growth. As we continue to grow, as we continue to drive these operational efficiency initiatives, there will be an element coming from there.
Okay, thank you. Just a very quick follow-up on this. On the personnel expenses, obviously, that was mentioned earlier, they have been coming down over the years. Given that Parex is more personnel-intensive business, can we expect those to go up once consolidated?
It's actually not that much more personnel-intensive, if you will. Material margins are very similar to our business, as they have a similar profitability, a little bit lower, but this is more driven by then the initial purchase price allocation cost, additional amortization. Overall, it's not more personnel-intensive overall.
Thank you.
Okay. Oh, Antosh.
Thank you. Can I just take the opportunity for one last question? With respect to the Parex acquisition, how do you judge the risk that you may have to give up on some pieces for antitrust reasons or so?
No risk.
Thank you.
Okay. I would like to thank you very much for coming. Thanks for all the good question. I think it's interesting. I hope we have a little bit time. We would like to invite you to a small lunch and to discussion. We will be around, and please ask if you have more question. Thanks for coming.