Ladies and gentlemen, good morning or good afternoon. Welcome to the Net Sales 2015 Conference Call. I'm Sarah, 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 at Corporate Communications and IR of Sika. Please go ahead, sir.
Thank you, Sara. Good afternoon and welcome to the 2015 preliminary sales results conference call. We published our figures this morning at 5 CET and we put an update of our strategy presentation on the Internet. Our CEO, Jan Jensch and our CFO, Adrian Littmer will give you now more details on the figures and on the strategy update. Afterwards, they will be ready to take your questions.
With this, I hand over now to our CEO, Jan Janisch.
Good afternoon, everyone, and thank you for joining our telephone conference today. As you can imagine, we are very pleased with the closing of the year. We had despite, to be honest, a difficult year when you look at currencies, when you look at markets like China, Brazil, Russia, we didn't have such easy markets, I think, which is true for all companies. So very pleased that our growth momentum continued throughout quarter 4 with such great results. So we are very really very happy to report a 6.2% growth at constant currencies for the full year.
You also see we give a little bit of background information how much our China business declined where we have reported before where we acted very, very fast to limit our risk exposures. But of course, we had a double digit decline in the Chinese market. I think maybe the best part of our numbers is that we have so many growth markets where we even grow double digits. We have in the U. S, I think we reported already over 1.5 years ago how confident we are for the market outlook.
You also know how much we invested in the markets with 1 acquisition with new factories. We really wanted to be ready to seize the opportunities here in the U. S. Market and we were very proud to have here double digit sales growth in the year 2015 in the U. S.
Same for the Mexican market where we also invested quite a lot into a new factory, into an acquisition and also here we get very, very good returns. We talked a lot about our Africa strategy in the past 3 years. And here we are extremely proud that the strategy is yielding results in such a fast manner. We have a growth of double digit is even a bit little to say. I think we are around 20% sales growth in Africa.
You see our investments in opening new countries and opening new factories. Also in 2015 alone, we opened 2 more countries in Africa, Tanzania and Ethiopia. And also we were adding factories in Ivory Coast and Nigeria. So we're very pleased what's happening in Africa for us. Same in the Middle East that we also grew double digit last year.
Southeast Asia is very rewarding for us with double digit and then of course also Australia and New Zealand. I think having said all this with the numbers, I think the most proud of I'm with our investments. We continue at the very high speed of the recent years with another 9 new factories. I just mentioned the ones in Africa, but also we were investing in the Middle East with a new factory in Dubai, in Sri Lanka, La Reunion, also with a new factory in Paraguay and Latin America, our 4 factory in Russia and then in Argentina the second one and also in the U. S.
A. Where we opened just in December our new Philadelphia factory. 3 new national subsidiaries. Now we have the number 93 countries with our wholly owned subsidiaries in Zika, Tanzania, Ethiopia I mentioned and then also we opened our first Sika company in Myanmar. Also we have 5 acquisitions with a total annual net sales of CHF 100 and 15,000,000.
So again, it was not an easy year from all the market conditions, but I'm really proud how well we finished, how strong we finished and how committed all our managers were in executing our strategy in the past years. I think with this Adrian can give us a bit more details on the numbers.
Very good. Thank you Jan and good afternoon, ladies and gentlemen. Following our CEO's business summary and the highlights, I will give you now further insights on 2015 sales performance. In looking at the last quarter, growth momentum in the 4th quarter with a strong top line growth of 8.3% in local currency have accelerated, while negative translation effects have increased slightly compared to the 1st 9 months, resulting in a Swiss franc growth of minus 0.2% for the quarter. In looking at the full year, sales increased by a strong 6.2% in local currency.
All regions contributed to the strong performance. Organic growth of 4%, while acquisitions contributed another 2.2%. Excluding China, as already mentioned, sales rose by 74% for the year. Foreign exchange effects with minus 7.7 percent were again significant and resulting sales growth in Swiss francs was therefore slightly negative at minus 1.5%. Sales in Swiss francs reached $5,490,000,000 Growth in emerging markets continued to be strong with 7.9% for the year in spite of the mentioned negative volumes in China.
Looking at the regions. Region EMEA achieved a full year growth rate of 5.6% in local currency, which accelerated in the second half of twenty fifteen. Double digit growth in the Middle East, Africa, strong growth in Eastern Europe were the drivers. Sales in Western Europe slightly exceeded the strong previous year level. North America saw a very strong year with sales growth of 8.4%, a continued resource and capacity buildup in the U.
S. With a new plant in Philadelphia and a mortar plant in California through the acquisition of BMI as well as a positive economic environment, which is driving investments in infrastructure and commercial buildings, led to significantly higher volumes and a double digit growth in the U. S. Currency translation here had a positive effect and led to a growth of more than 12% in Swiss francs for the region. Region Latin America posted a strong growth in spite of a very demanding business environment in Brazil.
Market share gains in other countries in Latin America led to a sales growth of 9.5% in local currency. However, negative currency translation effects here were quite significant resulting in lower Swiss franc sales compared to previous year. Growth in region Asia Pacific was 2.1% in local currency compared to the full year period of 2014, this was considerably lower, but picked up in the Q4 of 2015. Lower sales growth compared to previous year was driven by declining growth in China, while Southeast Asia and the Pacific Rim increased double digit. A brief outlook for the EBIT.
For the full year, we are expecting an over proportional increase in the operating result and an EBIT margin in the range of 11.5% to 12%. We will be reporting the full year financials 2015 on February 26. With this, I conclude my comment on Seeker sales performance and hand back to Jan Janisch for further remarks and an update on the strategy.
Thank you, Adrian. We have as you have seen, we have updated a review that updated our strategy 2018. We have considerably higher results compared to the targets which we have set. And with 3 full business years until 2018, it was time for us to make a proper review, a comprehensive review of the strategy. We performed this with all our 160 senior managers and involving all countries.
So this was not a top down exercise. We did a bottom up exercise to really ensure that our growth model, our key investments are really aligned, are well defined and we also came up with some areas where we believe we can further improve and we can further reinforce some key initiatives. We have, I think, listed a comprehensive list of our growth model and showed you a bit what has been done just in the last 4 years with almost 300 new patents coming from our technology centers. We opened 30 new factories in emerging markets, plus 2 new factories in the growth market of the U. S.
We opened 60 new countries, so 60 new Sika companies were founded in new countries, so bringing the number from 77 countries to 93 countries just in these last four years. We successfully continued our acquisition strategy of small and midsized company adding over CHF 500,000,000 in sales. And I think we successfully continued with our strong corporate culture with high
a high
commitment and employee loyalty. So we believe we can continue our model. We have plenty of ideas for new investments and we have raised our targets for 2018 accordingly. So first of all, I'm happy to report that we will continue to open 6 to 8 new plants per year. We also have various plans for new countries to be open.
So we believe we go to 100 national subsidiaries by 2018. And then on the operating profit side, we increased now from 10% plus to the range of 12% to 14%, which we want to achieve every single year. Same for the operating free cash flow, which we raised from 6% plus to 8% plus. On return on capital employed, we also have a new higher target and we target 25% for the year 2018. So we are again very confident that we can continue not only our growth strategy, but we also believe we can continue our year on year improvement in margins.
And I'm very excited and look forward here to implementing the updated strategy 2018. I think Adrienne, I think Dominik this is maybe enough telephone presentation and we can go to the Q and
A. Exactly. Thank you very much, Jan. So the question the floor is open for questions now. Please hand in your questions.
We will now begin the question and answer The first question is from Martin Flueckiger from Kepler Cheuvreux. Please go ahead, sir.
Yes. Good afternoon, gentlemen. Martin Flueckiger from Kepler Cheuvreux. Three questions, I'll start off with. Firstly, looking at your sales growth numbers and particularly the regional sales growth that you've reported, I think there's one segment missing, and I was wondering whether you could shed some light on that.
I'm talking about your segment other segments and activities. Firstly, could you provide us with the sales growth number local currencies that you've achieved there for 2015 and for the Q4? And then on the operating profit for that segment, if you could shed some light on what you think the development here is going to be because it's a kind of a black box. It's several activities together, I think, including the corporate line. So if you could give us an idea on how we should think about operating profit development in that segment for 2015 going forward?
That's my first question. And my second question would be on raw material prices. If you could talk a little bit about the average or weighted average raw material price developments in 2015. We've seen oil prices plunge. And I was just wondering what kind of impact that had on your average raw material price for the full year?
And maybe also if you could highlight Q4 and maybe also talk a little bit about your thoughts for the upcoming 12 months, I. E, for 2016? And let us know what you think are realistic working assumptions for analysts covering Sika. Then thirdly and finally, for the time being, I would like to talk a little bit about the U. S.
Infrastructure construction market, what your experience has been there over the last 3 months and what your thoughts are going forward? Thank you very much.
Oh, Matti, now that's some questions. Let me take them. I'll try to take them all. First you're asking about the other segments, which is mainly our automotive business. As you know and as you maybe wonder, we don't really disclose the numbers of this field.
However, I think I always make a comment regarding our automotive business and we were very pleased with the results 2015. And also we maybe could add it to the double digit growth countries, so to say, where we are having a very good demand for our new innovations in structural adhesives in sound dampening. So here we have a very good situation. But please don't allow me not to comment on the operating margin, which we haven't done until now. Raw material pricing, I think was your second question.
Here, I think we had a good situation in 2015 with some tailwind from the raw materials. However, I'm always a bit cautious. We had a very heavy headwind from the raw materials. The raw material pricing is in U. S.
Dollar and then we have so many markets from Ecuador, Colombia to Brazil, from Japan to other Asian markets to Russia to other Eastern markets where we have heavy impacts by the strong U. S. Dollar. So while a lot of people believe, wow, there's a huge tailwind from raw materials, you have to consider that we were struggling in many markets where we had actually an increase in input cost because they are based on U. S.
Dollar and the invoice to the customer is in local currency. So we have to do a very significant job in trying to safeguard the margins in many, many countries, while we had in other markets, of course, a bit of tailwind. So this is not so much black and white. We for 2016, we don't want to talk too much about the outlook today. We want to do that in February.
But nevertheless, let me say, we believe if we can have a stable raw material situation with all these potential crisis and actual crisis and all the questions we have for the ForEx, we are quite happy. I think we can operate our model with stable raw material cost and we believe this is the most likely scenario for us. For the U. S. Market, again, you can see we are very pleased.
We have achieved double digit sales growth in 2015. We see very active construction markets in the U. S. However, they are not in one place. They are in specific places.
So we have huge demands in the metropolitan areas, for example, Philadelphia, where therefore we just opened a new factory. We have, of course, still very strong demand in markets like Texas, Colorado, in the metropolitan areas in California, in Chicago, then Upper East Coast. These are very, very beneficial markets. And I think you can when you visit these cities, you can feel there's a lot of construction activities, while other parts of the country are not really so beneficial. So what we have done in the last three years is we focused more on these hotspots in the U.
S. And obviously we are rather successful of this strategy.
Okay. Thank you very much.
The next question is from Tobias Luscamp, HSBC. Please go ahead, sir.
That I have is on your upgraded EBIT margin target to 12% to 14%. I mean, you hinted in your answers beforehand that the margin improvement is not so much material cost driven. Can you, let's say, outline for us a bit more what internal measures you are taking to bring the margins up organically? And what would a 14% EBIT margin let's say, what would it need to reach 14% EBIT margin target in terms of your end markets? And then maybe can you give us a bit of some flavor in Q4?
We have seen slightly more positive growth trends in Europe, also in Asia, I believe. Therefore, Latin America was a bit worse. Can you give us a bit more color on how you think the market may have turned a bit in the last 3 months? Thank you.
All right. Let me take the last question first, so I don't forget it Tobias. For the outlook is quite when you look at our quarterly results 2015, we were actually very, very stable in most of the markets. So it was not that so the U. S.
Had a strong growth trend throughout the year. Europe, Europe, you are right. We had of course, we had a good quarter 4. On the other hand, we also had the negative developments in Latin America. They came in, in the second half of the year.
China continued to be negative throughout the year. So we have actually quite, how to say, stable trends month for month for this year, maybe more stable than in other years. So also for the outlook for next year, I'm it's in today's world, it's very difficult to make economic forecasts with all these fast developments. But let me say this, we have done so many investments in 2015 and also in the 3 years before that I'm quite confident that our model will also generate some growth even if markets are difficult. Now for your margin, where is our margin improvement coming from?
And I like again draw also your attention to the development which we have. We are coming from an EBIT margin of 7.6%. In 2011, went to 9%, went to 10.2%, went to 11.4% and now are somewhere 10.5% to 12% for 2015%. So we have really a year on year margin improvement, which is first of all due to our net leveraging our sales growth. I think we are able to grow over proportionally not only to the market, but also to our cost development.
So our target each year is to increase the efficiency and the margins through our overproportion sales growth. Then second, I think we made a huge improvement over the last 4 years in our gross margin management. And this is a whole set of tools, which we implemented from pricing, pricing reporting, but also to the input cost, which means establishing a global procurement organization and many other tools. And lastly, I think we are quite strong in some individual efficiency measurements. So we address slow movers or slow performers and try to improve the situation, which we have done also in the recent years I think quite efficiently.
Okay. Well then from your point of view to reach the 14%, is it more what would it need to get there? Is it booming end markets? Or is it something that can be managed internally when growth is on an okay ish level?
Yes. We have I think, Tobias, we have
a realistic scenario. We made
also scenarios, defensive ones, very solid scenario, which is coming bottom up from the country plan. So this is not the fantasy of Adrian, the CFO, but Dominic from communication and the numbers maybe would be much higher. But this is a really realistic scenario where our 160 senior managers not only develop the plans, but they are really the owners of the plan. So they committed to these new targets and we see them very realistic. And to come back to your upper margin target of 14%, we believe we have a realistic opportunity not next year, but maybe at the end of the period to come to the higher range of this 12% to 14% through these three leverages, which we have from the growth from pricing input cost and also from some efficiency projects.
Okay. And maybe one last question from my end on the pricing side. Can you comment a bit on whether pricing is in all of the markets still stable or up? Or do you see, let's say, pressure in some markets that lower input costs need to be passed on to some extent at least?
This is really the exciting part of our industry. It's so fragmented. We talked before about the strong ForEx impact we have especially in the emerging market. You can imagine if you are in a country like Ecuador or Colombia where the pesos dropped 20% to 30% against the U. S.
Dollar and you have your input costs are entirely in U. S. Dollar and you are selling in pesos, you can imagine you are fighting a 20% to 30% cost increase. And we do a great job to almost maintain margins under such severe situations. And then on the other hand, we have mature markets where the situation is then totally different and we still try to push for price increases.
So we believe in 2015, we of course measure the pricing exactly and we have a slight sales price increase which I think is remarkable because we have maybe a bit more tailwind from the raw materials.
Okay. All right. Many thanks.
The next question is from Christian Arnold, Bank Von Tobel. Please go ahead.
Yes. Good afternoon, gentlemen. I have questions on 2 regions. First on Asia Pacific. Early in the year, you gave some more detail about China that it was down, I think, some 20%.
Now for the full year, could you give us here some more color how much down is actually your Chinese business? Then in your comments this morning, you were also referring to the Southeast Asia growing double digit, But you haven't commented on Japan, which I think is still your most important market in that area. So could you give us some little insight on your Japanese business? And then on Latin America, the organic or the sales growth in local currency of 9.5% is very impressive given the difficult environment there. Could you give us here maybe a split up about volume and pricing development, if that is possible?
And is that correct? I mean, you mentioned it now several times about your invoice to customers in local currency. So in Latin America, you can't do your business in U. S. Dollar.
Is that right?
All right. Yes. Thank you. Let's start with Latin America. Yes, it's think it's a strength of us that we invoice the customer like he prefers to be invoiced.
And of course, it's I hear this a lot. Why don't you make euro prices in Russia? Why don't you make U. S. Dollar prices in Brazil?
And this is a nice theory. But let me say at the end of the day, the local customer, he prefers to pay local currency. So I rather satisfy the customer with this and then of course have my measures behind to not lose any money because I want to transfer that extra customer service into margin. This is a bit our philosophy and we sometimes for big projects or for long term things, sometimes we do U. S.
Dollar or euro based pricing in some emerging markets. This is correct. But overall, we believe it's a strength that we have all these local Sika companies following the customer. Now Latin America, I don't have the exact numbers you wish to have, what was pricing, what was volumes. I can just say this depends very much on each of the markets.
I maybe have to say you saw the slowdown we had in the second half and that was maybe the biggest negative development we saw globally that Latin America really cooled down for us in the second half led by Brazil, where the market clearly in construction became negative. And while other markets like Mexico was still very satisfying, Colombia was still solid. And then the oil or the oil backed up markets like Ecuador, they are also very much into the minus. So anyway, the good news is I think that we had other markets who made up for this slowdown in Latin America. But we have to be honest, Latin America slowed down in the second half significantly.
We were still, I think, 13% growth in the first half and now we end up with 9.5%. So you can do the math that we are down in the second half 5 something percentage sales growth in local currency. So then of course in Swiss francs a big minus. So Latin America was a tough year for us and I tell you our people did an amazing job in securing the margin and in fighting these currency losses. Asia Pacific, yes, was a great year except for China.
But let me say even in China, I'm so proud and I reported that to you before that our people already came in 2014 and said there is a serious slowdown in the construction market and there will be a serious problem with payments in the short term future. So we already made the plan in 2014 how to lower our risk profile in this market and we implemented from start of the year credit policy, pricing, securing margin and I think they did this very, very successfully. And we well, the biggest slowdown was actually in businesses where the margin was already very, very low. The volume drop continued throughout the year and in its double digit minus also for the full year. We have in contrast to that, we had many people then said, yes, Southeast Asia will be infected by China and will be very bad year for Southeast Asia.
And honestly speaking, this did not happen at all, also not in the last quarter. We have a very strong double digit growth in every almost every single country. We have double digit growth in Vietnam, in Malaysia, in Indonesia, in Singapore, in the Philippines. So very satisfying and I always like to say that Southeast Asia for me these markets became strong economies, while in the future they were very much depending on foreign investments. They are now strong economies with strong consumers with all industries and we can see this now in the China crisis that these markets are affected, but obviously can continue to run very strongly.
Japan. Japan has we had a light growth in Japan, a light sales growth in Japan, which I think for yes, I was always a big supporter of the Japanese market. It's a very sophisticated construction market and also from the chemical industry sophisticated. So we decided many years ago to be stronger in Japan also to make this big Diflex acquisition. And again, I think we got rewarded with a light growth this year and good situation.
When you go to Japan, everything is saying now 2020 for this Olympics. So most companies have some plans, strategies for the next 5 years how they want to prepare for the Olympics and this is including a lot of construction activities. Thank you. Thank you.
The next question is from Alessandro Foletti, Bankambalvo. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. But they have already been asked, so I will give over to the next one. Thank you very much. Hello?
Yes. Any further question? Who is the next one on the line?
It's Mr. Alessandro Foletti.
Yes. I'm still on line. Okay. Thank you very much. My question has already been asked.
Thank you for taking my line.
Thank you, Alexandre. The next one then.
The next question is from Per Johansen from Bodenholm Capital. Please go ahead.
Yes, hi there. Per Johansen here from Bodenholm Capital. My question is regarding M and A, which has helped you guys create a lot of value over the longer term. How does the pipeline looks how does it look right now? And maybe compared to 12 months ago in light of maybe tougher emerging markets, are there more companies that are looking to sell themselves and the negotiations are easier.
Also maybe understanding this in light of the ownership question marks that maybe some of these sellers have been seeing in the newspapers, etcetera? How does the M and A pipeline look like?
Yes. Thank you for the question. As you have said, I think the acquisition was is a vital element of our growth model and we were, I think, quite happy in 2015. We had not huge targets, but we had 5 companies we could welcome with a total of also extra factories, especially in our most rewarding field of mortars. We could buy companies and added 5 new factories here in 2015.
So I'm quite happy 2015. Of course, we couldn't buy an AkzoNobel building adhesives, but we had 5 very nice companies we welcome. The pipeline is always full in our case. So we are always having a project to work on. And to be honest, we always you need the right timing, the right pricing, the right partner and not every and it's very hard to predict when we can announce the next deal.
But believe me, we always have a pipeline of targets we work on, we negotiate, we discuss and hopefully we're also going to have some good ones in 2016. That well answered?
Yes. Thank you very much.
The next question is from Martin Husler from the Zurcher Kantonalbank. Please go ahead.
Yes, good afternoon. Basically some add on questions. First of all, in order to better understand your explanation on why you don't benefit more on the raw material side, can you maybe shed some light on what first question.
Okay. U. S. Dollar, it's always U. S.
Dollar or euro based. But as the crude oil comes U. S. Dollar based, I would say fair to say that the raw material market is a U. S.
Dollar market around the globe. And again, I just would like to draw to your attention that we have now 37% of our sales coming from emerging markets plus the weak euros. So we really have had quite some trouble with the ForEx in 2015. So meaning that not all raw material prices were as convenient as people were hoping. It wasn't such an easy situation.
Okay. And then my second question is turning to Western Europe. If I calculate it correctly in the 4th quarter for the whole region, EMEA, you showed some organic growth of about 5%. And I was just wondering whether Western Europe was in about the same range or if it was weaker or stronger? And added to that, do you think that you saw a huge weather related impact there?
Yes. Martin, it's fair. Actually, it's 5.4% for the Q4. So and I know Arsen doesn't give the Q4 numbers you always have to calculate. Yes, we had a pleasing closing quarter for EMEA.
I think to the weather question, I'm not sure. We had also like no winter last year when you remember. So maybe the situation was rather comparable, I think. So we had a good situation. To your question, Western Europe versus other markets you see in EMEA, of course, we have the double digit growth areas of Africa and the Middle East.
So let's say if they are double digit, then Continental Europe is not 5.4%, it's a little bit below. But nevertheless, these are our huge markets, of course. I mean, Germany at this point is bigger than the Middle East and Africa altogether, so in our situation. So we have quite a pleasing EMEA situation and maybe rather an optimistic note also for next year.
Okay. Thank you. And then the last one on your new midterm target, actually one that stayed the same, the sales growth of 6% to 8%. What is the external growth part there? What is a good assumption?
Is it about 2% so you would basically have organic growth between 4% to 6% if it's a fair assumption?
Yes. That's fair, Martin. We always said that about we want to focus on 2 third of the growth coming organically from new products, new CICA companies and then we want to have one around 1 third from acquisitions. However, as you know, this is very difficult to guide. But yes, so your assumption is about correct.
Okay. Thank you very much.
The next question is from Patrick Rafaisz from UBS. Please go ahead.
Good afternoon, gentlemen.
A few questions. The first one is very easy, just a clarification because I missed parts of the call. Your new 2018 guidance, is that for 2018 as a target? Or do you attempt to achieve these KPIs every year until then as well? And then the second question, I'm sorry to still stick around on the margin, but you mentioned all the reasons that will that your confidence on the margin is based on.
But would you agree that actually the mix is also a big driver of that with you mentioning the growth of the high margin mortise business, but also a relative good growth in North America where I believe your admixtures have above average margin. And then staying with the U. S, again related to the growth, do you think you're gaining market share here versus BASF, especially in the infrastructure segment? And then lastly, on China, did the weakness you had there, was it a market driven contraction in sales? Or would you say that the purchasing behavior of your customer has changed?
They've buying different products as well, maybe cheaper ones or moving from admixtures away buying additives or whatever? Thank you.
Yes. Thanks, Dan. I start with the last question. So the China market is a huge slowdown. I was in China 2 months ago and we discussed the situation also with some competitor data and we believe the market we are in, in construction depending on the segment is down 10% to 35%, depending on the segment.
So the market is really down. And then the market is down and you still have so many competitors, you have a lot of pressure and you have to be very careful with credit policy, credit terms and also with the pricing you do. And I think here we did a good job. But the market is tremendously down. I don't think you'll find any competitor of us with growth in 2015 in China.
The third question was with BASF and you wanted to ask for a specific country?
Yes, North America.
Active in North America?
Oh, yes.
Just joking. I have to unfortunately, I don't have the number of BASF and you know we I never really comment on the competitor. BASF is a great company and but honestly I don't know how well they did in North America this year. I just know that we did a very good job and I don't know where they are.
But would you agree that you gain market share in North America? And if you gain market share, would it be versus the big competitors? Or is it maybe versus smaller companies, regional players?
Yes. I think we I shared with you we had a double digit sales growth in the U. S. Market in U. S.
Dollars. I don't think the market grew 10% in North America, so in the U. S. So we had a market share gain. And again, I don't we have good competitors.
I don't really want to comment where we gain or where I think we take it from everyone.
Okay. Thanks.
We have the margin mix and this is of course, it is a very complex question. We have as you mentioned, we have a variety of markets. We have a variety of technology and products and all of them have different margins. Of course, it's been a range. So this is actually again part of our daily business that we try to gear the company towards products which where we have a better benefit.
So we bring new innovative products. We try to expand into market segments like the mortars where the margins are more rewarding. And this is our part of our I would say part of our job here at Zika. And maybe we should add that to the list I mentioned before where we talked about the volume leverage, efficiency and the pricing and so on. Maybe you can summarize it under pricing or maybe we have to also talk a bit about product portfolio.
But this is something we always have here as managers and try to find ways to have more rewarding products with the customer. Your first question was regarding the targets. I have we have provided you the slide with the new targets and also updated our growth model with the race targets. And for each of the 6 targets we have now, we indicated if this is per year or is to be reached only by 2018. So for the sales growth, for the 6 to 8 new plants, for the operating profit, operating free cash flow, these four targets we aim to reach every single year.
So 2016, 2017, 2018, while the 100 national subsidiaries and the 25% return on capital employed we want to reach in 2018.
Excellent. Thank you very much. Very clear.
The next question is from Johannes Brinkmann from SDA. Please go ahead, sir.
Good afternoon. How many new jobs did you create in the last year?
That's the question. Yes. This question I give over to the CFO. Don't want to make mistake, but we have several new jobs. We added the headcount.
Did you close the book on the headcount already,
Adrien? It's about 450 to 500 including acquisitions.
Okay. Thank you.
The next question is from Raimo Rosenau from Neue L'Vetice Bank. Please go ahead.
Yes. Thank you. I would also like to talk a little bit about the Saint Gobain situation here. Could you just remind us at this point which are the different court cases which are currently open? And what the expected time line is there when you expect decisions to be taken here?
And are there any known data points, which we should keep in mind here?
Okay. Well, I think the main court proceeding is the one with the voting right limitation and this is now in the hands of the court of Zug. And again, I have no opinion on the timeline. I just I don't know Dominik what the time expectation is, but officially
mid of the year probably you will have a ruling by the Continental Court of Zug.
But this can have a big variation. So this could have a couple of months range when this first ruling comes out. And then obviously this ruling can be appealed twice, first to the higher court in Zug and then to the federal court.
So that means that the I mean if we if both parties go to the end here, we talk about another 2 years at least, right?
That's what I also read in the press.
Okay. Then another question, do the contract of several of its zagopen is to be renewed by mid year. Is that correct? Do you know the exact date here?
I'm very careful. I have never seen the contract. I'm obviously was never involved in any discussion negotiation or contract signing. So I'm very careful to comment on anything which is out in the press or I have no idea what kind of context. Okay.
So
you have the same information as we have basically out of the press in that sense?
Yes.
Okay. Then the last question here. I mean, could you just repeat? I mean, should assuming that the takeover would take place of Saint Gobain as the family and Saint Gobain plan, You have all declared your resignation in that sense. That is correct, right?
So you will not be there anymore. However, you also there was once kind of a statement that quite a high number of upper and middle management people basically expressed the same kind of intention. Is that still the case that basically most of the upper and middle management would probably also leave the company in that case? Or is that not the case anymore?
Well, to be honest, for my me personally, I'm still always shocked how the situation can go on now already for 13 months. And I'm really surprised how the parties want to push this through. I think this is not creating value for anyone involved here. That's of course still my position and the position of the Board and the management team. As you maybe have read, we have from our public shareholders to the Board of Directors to the group management, but also our senior managers around the globe, they are very opposed against this hostile takeover bid.
And I think they all believe that this is fundamentally against the Sika success story. So I think our job is here to act in the best interest of the company and for all stakeholders and this is what we will continue to do. Yes. If who will eventually what kind of solution will be created at the end of the day, I cannot tell you. This is all scenarios and assumptions, but this is the situation at the moment.
Yes. I understand that. I just want to kind of know what in a what if analysis, what happens if it doesn't turn out as you would like it to turn out. And I mean, it's clear obvious that the top management will not be there anymore. But my question is what will be the impact?
Just on the assumption again that the takeover would take place on the upper and middle management, is there a huge loss on that field to be expected as well? Or would you not give any indication here?
I don't want to speculate on this, but I think your question implies that really Saint Gobain as one of our main competitors control our company with only 16% of the capital. I think this is a very unsatisfying situation for most people and I really can only hope that there will be a different solution. This I don't think this can be a good solution.
Okay.
And the last question, I assume listening to you that there has still not been any contact between you and the other parties since the last update we heard?
I don't want to comment on this. This is always only giving rise to speculation. Yes. Obviously, we are engaged in court with each other. So it's all getting context there and then but the rest I don't want to comment.
Okay. Fair enough. Thank you. Thank you.
The next question is from Christian Korth from MainFirst. Please go ahead, sir.
Thank you very much, gentlemen. I just would like to ask or clarify 2 things. First of all, on China, you indicated in the call earlier that you see some very early indications that the market might make a turnaround in the second half of twenty sixteen. I just wanted to ask if that idea has, let's say, further developed into the right direction or if there's any change of this view? And secondly, on Latin America, I just would like to ask if you could give us some more ideas about the development of volumes and prices, and especially as we have fairly high inflation in some of these markets, partly up to double digit inflation, what that could mean for price increases in 2016?
Thank you very much for your help.
All right. Let me take China and Airsoft and America. You really want to know all the details. I will hand that to Adria. China, yes, we indicated the second half of the year.
And I believe, at least for us, this is our best forecast still. So we believe that we made our new strategy in China. We implemented beginning of 2015. We took our hit and we believe that at least our business will be not further decreasing from middle of the year onwards. Yes.
Then if I can add on Latin America, after 9.5% local currency growth, roughly 1% is acquisition and the organic volume growth is below 5%. So there is a significant pricing component as well.
Thank you very much. And regarding the currently high inflation, what could that mean for price in 2016 just as a rough indication? Do you think you can match that?
I think the hit we took with the currencies that was very drastic in Latin America. I would hope that the markets are more stable this year and we always have to keep in mind that our managers in the emerging markets, they are very used to these volatile situations. So they make very day to day pricing, flexible pricing. So they are really the artists in our business to react to such a situation. So I'm not so worried for the margins in 2016 for Latin America.
Okay. Just a small follow-up, if I may. If we could, let's say, extend that discussion of volume and price development into Q4 as well as we obviously have declining development in the local currency growth in the course of the year 2015. Would it be possible to get an idea how that broke down into volume and price in the Q4?
Well, you can assume in the Q4 that the organic volume growth was lower than the average I indicated. It's probably close to 0.
Okay, perfect. Thank you very much. Very kind.
We have a follow-up question from Martin Flutiger from Kepler Cheuvreux. Please go ahead.
Yes. Thanks for taking my question, gentlemen. Just going back to Latin America. You've mentioned the difficult situation in Brazil, and you've highlighted, if I remember correctly, at the beginning of your presentation, the market of Mexico as being strong. I was wondering whether you could give us a little bit more insights on other countries that are strong in LatAm and which are obviously offsetting more than offsetting the weakness in Brazil?
And that's the first part of my question. And then the second one would be, of course, how you think the situation will pan out this year. If we've seen volume growth of close to 0% in Q4, what do you think is going to be the likely development for 2016 for the entire region? Thank you very much.
Yes. Latin America, I think the biggest or the most difficult market is Brazil. I would also believe that Brazil will stay difficult at least throughout the entire 2016. We have the Olympic Games there, the Summer Games in this year and I think it's going to be a very tough year for our markets in Brazil. We have then other markets, which are very commodity price driven like Ecuador or partially Peru.
These markets have been good to us in the past. Now also they will see a difficult next year and they had also already difficulties in 2015. Then I think on the brighter side, we have maybe better situation in Colombia, which is a big market for us. And of course, we have a very exciting business in Mexico, where we are very well within the double digit range throughout the year and also here driven by a lot of investments coming also from the U. S.
A. So and here also we are positive that this will continue this year.
Okay. Thanks. For the region overall, can you make a statement at this stage? Do you think LATAM is going to be positive in 2016?
In local currencies, yes. Yes. Yes, yes, I think so.
Okay. And we're talking below single or high single digit or
I also here, I think the markets are not so great as you also probably see from other companies or other studies. However, you also have to see that also we made a lot of investments in these markets in the last 4 years. So I think I would be very disappointed if we are not able to at least see some volume growth. Based on we talked in February about maybe a better guidance, but I would say maybe single digit is safe to say at this point.
Perfect. Thank you so much.
There are no more questions at this time.
Okay. So thank you very much for the interest in Zika. This call ends now. Goodbye and thank you.
Yes. Thank you very much and I hope I see you in February. Thanks very much.
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