Ladies and gentlemen, good morning or good afternoon. Welcome to the Sika Healthier Report 2018 Conference Call. I'm Sherry, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session.
The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dominic Slapnik, Head Communications and Investor Relations of Sika. Please go ahead, sir.
Good afternoon, and welcome to the Sika first half results conference call. We published our figures at 5 this morning. Our CEO, Paul Schuller and our CFO, Adrian Wichtmer, will now provide further details on the results. Afterwards, they will be ready to take your questions. With this, I would like to hand over to Paul Schuhl to start with the highlights of the first half year.
Okay. Thank you, Dominik. Good morning, everyone. Thanks for you for joining the call. The highlight of the last month is surely the resolution of the takeover attempt by Sangobah and the fair solution we found to solve it.
This resolution Adrian and Reade will explain in more detail. Operationally, I'm happy to inform you about our very motivating half year closing. We had an excellent sales growth of 13.9% in local currency and 15.9% in Swiss francs with a new record to CHF 3,000,000,000,470,000. Nice to see that all our full region were able to grow. EMEA, this is in our case Europe, Middle East and Africa, increased by 13.6% in local currency.
We recorded double digit growth in many countries and areas. As example, Eastern Europe, Africa, the Middle East and strong solid growth also in Spain, U. K. And Turkey. The newly established region Americas has also an excellent run with also 13.6%, double digit growth in the U.
S, Mexico and Argentina. Zika Brazil posted a sales growth of 7.3 percent after some difficult years and Ecuador also with 12.5% as well as Peru are also back on the growth path. So Latin America is on the grow again. In Asia Pacific, we grew with 5%, double digit growth in India, in Indonesia and the part of Southeast Asia. China construction market picked up further in the first half year, enable us to grow high single digit, good growth in Japan and Australia.
The segment global business includes our automotive business with the new acquisition PHYZE in January and Sicra Axon Technology, our market lead in tooling and composite. With 28.5 percent an excellent run, driven by the acquisition effect and high single digit organic growth. The pressure from higher input cost was well managed throughout many price adjustments, however, lacking a bit behind. Volume growth, together with this proportional low cost development, also help to compensate the high raw material prices. The one off cost effect connection with the resolution of Stangopan of $23,000,000 impacted EBIT negatively.
Non NPLAZ EBIT improved by 10.6% to $444,000,000 In the 1st 6 months, we continued to invest in the future growth in the emerging market by opening 3 new factories in Senegal, Saudi Arabia and Vietnam. We also founded the new subsidiary in Honduras. With the takeover of index, we could acquire the market lead in the roofing waterproofing business in Italy and the closing of Faiz in February extended our access and offering to the automotive industry. The integration of the 2 companies runs excellent, and the synergies are even higher than expected. So overall, we had a great start to the year.
Now I would like to hand over to our CFO, Adrian Wichtmer. He will guide you through the financial information. Adrian?
Thank you, Paul, and good afternoon or good morning, everybody. Following our CEO's business summary and highlight presentation, I will now give you further insights into the financials and drivers of our strong first half year. In the 1st 6 months, the business showed an excellent growth on top of a strong first half twenty seventeen with sales growth of 13.9% in constant currencies, picking up further momentum in the second quarter with a growth of 16.3% in constant currencies and 19.3% in Swiss francs. Organic growth contributed 6.8%, also increasing from 4.7% in the first quarter to 8.6 percent in the 2nd quarter, while acquisitions added another 7.1% growth in the 1st 6 months. Currency effects were positive for a change with an additional growth contribution of 2%, primarily owed to a much stronger euro with and while a number of emerging market currencies such as the Brazilian reais, the Argentinian peso and the Turkish lira weakened significantly.
All elements resulted in a total Swiss franc growth of 15.9% in the first half year. As highlighted by Paul, again, all regions contributed to our growth in the 1st 6 months of the year. Region EMEA grew sales at the rate of 13.6% at constant currencies, also here picking up quite considerably from the Q1. Organic growth was 6.1%, while the acquisition of KVK in the Czech Republic, ABC in Turkey and the index in Italy contributed 7.5% of acquisition growth. The core markets, UK and Spain as well as Eastern Europe, the area Africa and Near East contributed strongly to the organic growth, while FX effect were most pronounced in this region with an additional growth of more than 6% and to a total regional growth of almost 20% in Swiss francs.
Region Americas continued to record strong growth, also at 13.6% in local currencies, beating the strong growth of 11.7% in the same period of last year. In North America, we have again been able to leverage the robust activity in the U. S. Construction sector in our key target markets, while Canada has found back to solid growth. Double digit growth, as mentioned, in Mexico, Argentina as well as Ecuador has been driving a pickup in Latin America with overall organic growth in the Americas at 8.5% in the first half year, while the acquisition of M Seal and Butterfield contributed another 5% growth.
Foreign exchange effects in this region were quite negative at minus 4%. Growth in Asia Pacific was a solid 5%. Most dynamic growth was achieved in India and parts of Southeast Asia. China grew in the high single digit on the back of a robust construction market, while foreign exchange impacts at plus 0.7% were rather minor. The new segment global business achieved a very strong growth at 28.5 percent in local currencies compared to 9.2% in the previous year period.
The global business includes our existing automotive OEM OES business, which was previously reported as part of other segment and activities. Organic growth in this segment was 7.8%, while the acquisition of 5 Chemtech contributed more than 20 percentage points of additional growth. Positive foreign exchange effects contributed another 3.5% leading to an overall growth in this segment of 32% in Swiss francs. Moving down the P and L. The gross result as a percentage of net sales decreased by 150 basis points from 55.1% to 53.6 percent.
Price increases as well as various initiatives on the procurement and R and D side limited the impact of significantly higher raw material costs, while the dilution effect from acquisitions accounted for about 40 basis points of this material margin contraction. Offsetting this and driven by strong volume growth as well as further efficiency improvements, we showed a strong operating leverage with both personnel cost as well as other operating expenses growing significantly below sales growth at around 70% of sales in spite of a certain dilution effect from acquisitions. Organically, cost growth was less than 50% of organic sales growth. The successful resolution of the long standing dispute led to a onetime cost of around CHF 23,000,000, which are included in other operating expenses. In consequence, EBITDA increased double digit by 11.6 percent to CHF 544,800,000.
This is up from CHF 488,200,000 in the same period of last year. If onetime costs related to the dispute resolution and distaff include the Board remuneration for the period 2015 to 2018 were excluded, EBITDA growth would have been over proportional compared to sales growth with an increase of 16.4%. Driven by increased intangible amortization coming from acquisitions. Depreciation and amortization expenses increased also by 16.4% versus the previous year period. Resulting EBIT growth was also double digit with an increase of 10.6% year on year, Excluding onetime costs, also here EBIT growth would have been lower proportional at 16.4% growth.
In absolute terms, EBIT is up by $42,500,000 to $444,600,000 on a reported basis. Net profit after tax increased 11.4 percent from $285,700,000 to CHF 318,200,000 Net interest costs were higher by about CHF 1,300,000 in the first half year related to the bridge financing for the share purchase of the 7% of the Sika shares from Saint Gobain for CHF 2,080,000,000 and the subsequent partial takeout through a convertible bond. Net other financial expenses also increased due to higher hedging costs related to increasing interest differentials, particularly compared to the U. S. Dollar.
Group tax rate, on the other hand, reduced markedly from 25.9% in the previous year 24.7% in the first half year, primarily related to lower tax rates in the U. S. Seasonality in the business provides for the lion's share of the cash flow being generated in the second half year. First half year operating free cash flow was CHF 11,500,000. Cash generation from operating activities increased by CHF 35,000,000 to CHF 160,000,000 while CapEx was at €148,700,000 including a one off CapEx related to 2 operating lease buyouts in Switzerland for around €71,000,000 leading to lower operating costs going forward and which was done in anticipation of the upcoming changes in the accounting standard regarding leases.
The resolution of the dispute and introduction of a Unit 3 share structure also had an effect on the balance sheet. Obviously, the repurchase, CEACA shares of 6.97% of the outstanding capital voted for cancellation at the EGN is reducing equity by €2,080,000,000 with a resulting equity ratio of 22 percent at the end of June. Corresponding bridge financing of SEK 2,100,000,000 initially put in place has already been fully financed by July 12 through a convertible bond in the amount of SEK 1.6 5,000,000,000 as well as a triple tranche straight bond issuance for the remainder of the amount. As a result, undiluted EPS increased over proportionally by 14% versus a total net profit growth of 11.4%. And we'll continue and this will continue to be highly accretive on an EPS basis as annual incremental financing cost will be about SEK 14,000,000 only or less than 70 basis points of the principal amount.
With this, I conclude my remarks and hand back over to Paul Schuler for the outlook.
Okay. Thank you, Adrian. The strong start to the reissue towards our full year target. We have an outstanding pipeline of big newly won construction projects, many new products and initiatives as well as several acquisition candidates throughout the world. We are well on track to increase sales by more than 10% to exceed SEK 7,000,000,000 for the first time.
It's nice to note this last year was SEK 6,000,000,000. Now we tried to go for SEK 7,000,000,000, so we're on a good run there. Volatile and rising commodity prices continue to present a challenge in the next 5 months. However, with the efficient improvements and continued price adoption, we expect EBITDA net profit to further increase in line with our guidance. Thanks to the commitment of our employees and the strength of CECO Growth Model, we can look forward with high confidence to the second half of twenty eighteen.
Thank you, Paul. I think we can now open our Q and A session.
We will now begin the question and answer session. The first question is from Markus Mayer, Badger RBA. Please go ahead.
Good afternoon, gentlemen. And first, congratulations to resolving of the dispute. I have 3 questions, if I may. The first one is related to your guidance, how I should read it. So it doesn't mean that in any case, that EBIT will grow faster than sales?
Or does it mean that it will grow faster than the guided 10% sales growth? That's the first question. 2nd question of Global Businesses. This 8% organic growth we saw at Global Business in the first half, is this a good run rate going into the second half? And as well, this 50% EBIT margin, What was the effect from the integration costs there?
And what would be a good underlying EBIT margin for this business? And then lastly, in EMEA, the organic growth in the second quarter looks like it was nearly double digit. Was this due to a catch up effect from the stronger and longer than normal winter effect in the Q1? Or is this high growth driven by price increases? Thanks so much.
I'll take the first one here on So depending on the sales growth, it's obviously going to be more than 10%. On maybe the second one on the global business, yes, this is heavily impacted by acquisitions here. As usual, there is an initial dilution effect. It also depends a bit on some other factors. So there is no clear underlying margin guidance yet, but integration is well on track.
And the underlying EBIT percent net sales will improve over time.
And on the organic growth at Google Business?
On the organic growth here, clearly, the automotive part, as we have said, will grow basically about 10% over market growth. Car build rate growth in the first half year was very minor, around 1%.
So we're well on track there.
Maybe a word to EMEA. Last question here. There is a certain element of, let's say, more working days included here. That's the difference between the 1st and the second quarter in terms of growth. But underlying organic growth is also very strong in many markets as just indicated
previously. And I had a question. This one, is organic growth mainly volume or also, to some extent, price driven?
It is, to some extent, price driven as, of course, we are increasing prices in EMEA but across the board, but there is also a price element in there.
Okay, perfect. Thanks so much. Okay. Thank you, Meyer.
Next question is from Martin Hissler, ZKB. Please go ahead.
Yes, good afternoon. I have 2 or 3 questions, if I may. First of all, maybe looking a bit at your gross profit margin decrease by 150 basis points and then maybe just looking at the 110, dollars which you lost because of raw material price increases, can you maybe give us your view what's going to happen here in the second quarter, I. E, how will you catch up with price increases compared to raw material price increases? And then the second one is just a minor one.
But if I look on Page 13, where you elaborate on the acquisition of Faist, it just strikes me that you say Faist added a net profit of CHF 2,200,000 euros for more or less 5 months. But in the 1st month, which you haven't consolidated yet, the share of profit would have been 1.9%. And I was just wondering why is the margin for the part of the year that is not consolidated yet so much higher? So that's mainly my two questions.
Okay. Maybe the second one, good observation. I mean that's a bit related to, let's say, the IFRS disclosure. Here, of course, the sort of the integration and onetime cost profitability is obviously higher in this business, and that's what makes this difference and how it is being disclosed. Okay.
And on the raw material, Martin, I would like to say that everywhere, there are heavily price increase in certain materials more, in certain material less. We see also some signs out there, which we have more stabilization now. And with few products, few product group, we see still an increase. The challenge in the 1st 6 months was the waves. We had 3 major waves of price increases, And we luckily be behind to go to the customer and increase the price also by 3 times.
So it's a little bit of leverage, but we are confident that we will have a better result end of the year. And also on the efficiency, we are strong. So we think on the final EBIT, it's we can handle it. It tells always that decision management on volume against just gross margin. Think I think that's always the same way.
We need to fill the factory on one side and decide we want to be fair partners to our customers. Then we are able to increase the prices in a fair amount to keep our result.
Okay. So I read into this that in the second half of the year, the burden on the gross profit margin will probably be lower than this 110 basis points seen in the first half.
Working hard on it, yes,
you can assume.
Okay. Thank you.
Next question is from Erik Karlsson, Industrial Equity Partners. Please go ahead.
You have an amazing track record of acquisitions going back many decades. Perhaps this episode with an unclear shareholder situation slightly dampened your opportunities, at least for larger deals over the last couple of years here. How is the pipeline now for deals in general and for larger deals specifically?
Okay. Thank you, Erik. Yes, fair observation. I fully believe that we can have increased speed now as our current board is more willing to go for the
bigger acquisition. I'm having trouble with the connection.
Sorry, with the shareholders on the Board. So we will go for biggest acquisition. We have 1 or 2 resolution, and the pipeline is quite full. But as it is with acquisition, it always takes some time. And willing, but we are very, very confident that we can we'll show more acquisition and bigger acquisition, as I said, in the round of EUR 300,000,000 EUR 400,000,000 EUR 500,000,000.
Very encouraging. Thank you very much.
Thank you, Eric.
Next question is from Phil Roseberg from Bernstein. Please go ahead.
Good morning. Good morning. Good afternoon, gentlemen. Just a couple of quick questions, please. We saw the acceleration in like for like growth of sales in the 1st well, in Q2, which is even higher than the full year of 2017.
But there were a lot
of sort of effects going on between Q1 and Q2. Can you sort of give us an idea of where the run rates of like for like growth should be sort of going into the second half of this year? Second question, just a little bit digging a little bit more on the last question about the acquisition pipeline. We had over many years sort of a 2% 1.5% to 2% growth in the sort of the bolt on from acquisitions every year. How should we think about that going forward?
Is there a sort of a I know it's very difficult with lots of different deals at different times, but are we expected to double that? Are we expected to go much further? It's just to try and understand the sort of the run rate we can expect.
Okay. Thanks, Phil. I'll take the second one on acquisition. As you mentioned by yourself, it's always difficult to predict but their aim is to grow faster. So we as we said, we had 2% acquisition But it's difficult to predict.
But it's clear, we like to go But it's difficult to predict. But it's clear, we like to go for a bigger acquisition, and we like to go a little faster.
Understood.
Thanks, Phil. I'll take
the first one on the run rate. As you correctly point out, Phil, there is always a number of influencing factors here. I mean,
if you just look at the
sales days in the previous year. Now in the second one, I think it was around 1% or not even. I think it's in terms of organic growth, the first half year run rate is probably a fair run rate going forward.
Okay. Thank you very much.
Next question is from Jon Ravall from Reuters. Please go ahead.
Afternoon, gentlemen. A couple of quick questions just regarding the outlook. You're targeting €700,000,000,000 sales this year And you've had a very good start to the year so far. So I was wondering how much higher than €7,000,000,000 do you think you can get to in 2018? And also then moving into 2018, any indications of what you might be aiming for next year?
Thank you.
Thank you, John. It sounds like Board member asking me to give more in. I guess with our lines, with SEK 7,000,000,000, we're on the very positive side. We can go there. But we don't know what's really coming.
So I think we still stick to be 10% grow rate. We stick to this one. And for going on, we can keep a pace of this 6% to 8% or even go to €10,000,000,000 in the coming years, I think that's also very fair in the growth rate. So in the moment, you stick to our general guidelines €6,000,000,000 to €8,000,000,000 and across the EUR 7,000,000,000 first.
Right. Thank you.
Thanks, Sean.
Next question is from Bernd Pomrehn from Vontobel. Please go ahead.
2, if I may. Firstly, on the CapEx. CapEx more than doubled in the first half. I think this includes 1 or 2 kind of special projects. Could you please provide an update for the absolute CapEx guidance for this year?
And then also a relative guidance of CapEx to sales ratio going forward? That's the first question. And then the second one, your implicit EBIT margin guidance for this year sounds a little bit more cautious as you introduced this slightly comment. So what has changed really in the last 3 months? Is it the continued high raw material price level?
Or do you already include the potentially negative impact of further margin dilutive acquisitions in the second half? Thank you.
Thanks, Bernd. Maybe on the CapEx, yes, roughly EUR 150,000,000 of CapEx in the first half year, indeed was quite a bit higher than in the previous year. But this is really owed to this one factor I was mentioning. We did buy out 2 plants out of operating leases for about CHF 71,000,000 which will lead to lower operating expenses going forward. But this is really a one off, if you will.
In terms of the absolute CapEx this year, without this onetime effect of around SEK 71,000,000 is slightly higher than in the previous year, sort of keeping around the same percentage of sales as in previous years.
Okay. Thank you, Adrian.
On the EBIT guidance, maybe I mean there is, of course, this one effect, the SEK 23,000,000 of, well, onetime expenses, which we have to absorb. And this is really fundamentally the difference to well, the slight change in wording In terms of acquisitions coming and the effects, I think we will take it when it comes.
Excellent. Very clear. Thank you, Adrian.
Next question is from Patrick Rafaisz, UBS. Please go ahead.
Thank you and good afternoon everyone. Two questions remain and two follow ups actually. The one is on the organics in the second quarter. Adrian, you talked a bit about the working day effects. Can you also talk about weather effects and how you feel these influence your performance, especially in Europe, where organics were very strong?
And then the second question around the gross margin again. You gave us the split between M and A dilution and the raw material impact. Can you talk about your assumption for M and A dilution in the second half? And can you split the raw material impact across the segments of the regions and and global business to get a feel which regions were impacted the most? Thank you.
Okay. And maybe on the weather effect first, of course, yes, there is always an influence. It's typically, let's say, in the first and the last quarter where you have most weather effects potentially. But as always, we don't like to talk so much about the weather because the weather is as it is. It was probably a rather bit of a harsher winter in North America but also in parts of Europe.
So there's probably also a little element of this year in the Q1. But other than that, as I said, I think sort of the first half year organic growth is a fair assessment here. Maybe then on the raw material side or raw material margin rather, I would expect what the acquisitions are concerned based, of course, the ones that have already been secured, that this dilution is rather going to reduce in the second half year to a lower rate. These effects are typically initially the bigger ones. In terms of price effect across the regions, across applications, that's very difficult to divide out because there is also foreign exchange effects.
And as Paul had mentioned, there have been different waves. And also, the raw materials not moving very uniformly. There was certainly an impact or a bigger impact in Asia Pacific and to some extent in EMEA.
Can I just follow-up on one question regarding the M and A that has already been announced? In your EBIT guidance, do you model a significant uplift from these M and A contributions? I don't mean the absolute number, but from increasing the margins and bringing them to CECO levels? Or would you say everything that's been announced will see the impacts more in 2019?
Well, I guess we have a strong track record of integration in these companies. It takes us then a while until we have them on our margin. It's always the target to bring us to the same margin. But it always depends on the business, depends a bit on the region. But in general, you can assume that we will bring the companies to our level.
Okay. And it's still like a 2 or 3 year period?
It's correct. It depends on it, but it's always fair assumption over this period.
Yes. Thank you very much.
Okay. Thank you, Patrick.
Next question is from Martin Pukiger, Kepler Cheuvreux. Please go ahead.
Yes. Good morning, gentlemen. Thanks for taking my questions. Actually, I have 3. Firstly, I was wondering whether you could talk about the what you see in terms of market environment in North and but also in Latin America.
And particularly, I was interested, do you see any ramp up yet in the infrastructure projects in the U. S? And what do you see in Brazil? Are you still bullish on that market? That would be my first question.
Then the second question is with regards to your track record for acquisitions. And what do you think is your, let's say, recipe or secret in terms of maintaining management's external focus in spite of several acquisitions being integrated at the same time? That will be my second question. And my third question, apologies, I must have overheard that statement on the split for the raw material price sorry, for the gross margin decline, the split to the dilution and raw material price effects. If you could repeat that very quickly.
Thank you so much.
Okay, Martin. Thanks. I'll take the one with the environment. First with U. S, I think U.
S. Has a strong run overall. They have a fair, strong base. However, the big infrastructure program, we don't see yet for Mr. Trump's initiatives.
But we have a good run. And I think at double digit growth rate, we gained market share. We have strong position and a strong pipeline. But it's not so that we really see an impact now. We still hope on it, but it's not yet given.
If we go to Latin America, I guess, we have a strong run-in Argentina, Mexico. So we think the environment is very good, also Ecuador. So overall, Latin America seems to be stronger than the last few years. In Brazil, we have a very nice role. I guess they are seems to be out of to really decline.
However, future will tell, but we are more confident to have a very strong results this year in Brazil. So overall, Latin America, Americas are very on a good run. If you look then to the second question on the management, I think the acquisition, we always have different areas, different countries, different people. We make sure that the general manager and the whole team focus on the integration. We also try not to change too much for the customers of the company we acquire.
So therefore, we have time for our own business as well as leave this company running their business, and we go step by step to find then the synergies.
That's a little
bit the model we try to work with, which works well.
And question 3, Adrian, maybe I'll one, Martin. On the breakdown of the 150 basis points, about 110 basis points is basically, well, the net effect of higher raw material costs and about 40 basis points is the dilution from acquisitions.
Okay. Thanks. And just a quick follow-up, if I may. That 110 bps raw material price impact, what does that correspond to in terms of average raw material price increase for H1?
Again, it has been across the board very different in terms of the raw materials. The net effect on the or the effect on the raw material price increases has been around 4% or a little bit more.
Okay. And you see that declining for H2, maybe 3% or something like that?
I don't quite have my crystal ball with me. But as Paul had mentioned, there has been several waves. We see in some areas some plateauing, others are continuing to go up. It also depends on the foreign exchange movements. But it rather looks a little bit less steep, the increase than in the previous months.
Thank you very much.
And the
next question is from John Fraser Andrews, HSBC. Please go ahead.
Good afternoon, gents. I've got four questions, please. The first one is the accounts receivable, particularly, but also stocks, seem to accounts payable, not so strongly. Perhaps there's something going on in the accounts payable not so strongly, perhaps there's something going on in the acquisitions, if perhaps if you could explain that please, Adrian.
Yes.
The second is a clarification of what you said earlier on the call about working days. I thought I heard you say in Q2, one day less. I certainly heard 2 days less in Q1, but I'm thinking you might have meant one day more in Q2 to explain the difference in those sales rates? The third question is have you finished now price increases after these raw material rises? Or are there more price rises to come in the second half?
And the final and fourth question is in Asia. It's a more moderate growth than some of the other EM areas. Are there any countries in double digits or the star performers, India, China, is it limited to high single digit growth in that region? Thank you.
Okay. Very good. Thanks, John. Maybe the second one. And first, on the working days, that's what I at least meant to say, yes, the second quarter had one working day more and not less.
Maybe on the working capital, there is quite a number of effects here. If you look at the overall, there has not been, let's say, an increase or a deterioration in any kind. Of course, you have some valuation effects here on ForEx, but also in terms of inventory, the fact that raw material prices have gone up also means that the same volume, the inventory value is also higher in the books. And then you have also the effect that due to the fact that we did or closed 2 larger acquisitions in the first half year, well, there is a higher balance and not full year sales against it if you look at the ratios. So all in all, continued disciplined management, but also, of course, the receivables are most related to the last 2 to 3 months of turnover.
And here, the growth has been quite significant and hence also the increase a bit more pronounced than in previous quarters. Sure.
Okay. Now John, regarding the prices, no, we are not finished. As I mentioned before, we're luckily behind because there were 3 waves. We will continue price increases. We had just in several countries additional price increases less for July.
But this will go on, and we will follow the development of the prices in the next 6 months very closely. And wherever necessary and possible, we go and increase the price. That's a continuous management job of all the general manager around the world and the salespeople. So it's not finished now. Then to the region, Asia, I think we are locked a little bit on the growth rate mainly in 4 countries, Malaysia, Singapore, Korea and Thailand.
That's a little bit lacking. We have to see Thailand as last year an excellent run, so we are a little behind there. Korea, difficult in the moment to several projects locking a little bit. And Malaysia and Singapore stack us down. Where we have a strong run is in Indonesia, double digit in India, double digit and strong, strong high single digit in several countries.
Also Japan, we are strong. And so we are we'll act a little bit in 4 countries, but also the same run around the region and confident probably we can pick up 1 to 2 points in the next 6 months.
Can you talk to China please as well, Paul?
China, the construction market, also the car industry market is nice. We are around 9% growth rate there, so very solid position. The real challenge in this market is this environment, the cleanup of the Chinese government. They really start to close now many competitors due to Ireland reason. We so far are working close together with the government.
So we are good. But that could be a challenge in the future. So that's a little bit where we have to watch. But in the moment, the construction market and the automotive market are strong.
Thank you.
We have a follow-up question from John Ravell. Please go ahead. Mr. Ravell, your line is open.
Yes, thanks for taking my follow-up. Was wondering, I'm quite interested in the moment at about, obviously, the trade tensions
and things like that.
And I was wondering if you see any kind of spillover effect into your business in terms of, I know, raw materials, you see them getting more expensive because of this or any effects on demand out there? Thank you.
Interesting question, Elsvaraj. I think we see the dark clouds around the world. We will follow if there is really a trade war. We believe it will slow down the whole economy. However, in the thick respect, we have a very nationalized or local production around the world.
So for example, U. S, we do almost 100% own production in U. S. So for us, it's a little bit not so critical as long as the whole economy not turns down. So we are very local organized, local strong position and local production.
But we, of course, follow very closely the development and react where we have to.
Do you see any kind of increases in raw material prices as a result of tariffs? Does that affect you guys
more broadly? No, not really. Unfortunately, Sky has push that's already hard enough with the price increases. I think it's not really to the tax reason there.
No. Thank you.
We also purchased local.
Okay, good stuff. Thank
you. Thanks, Sean.
That was the last question.
Okay. So thanks very much for joining the call. Nice to hear you guys with the questions. We always learn a little more about our business while you're tough questions. So thank you.
And with this, we close the call. Okay. Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.