July 23, 2020 / 3:27 AM / 12 days ago

Construction chemical-maker Sika sees COVID-19 recovery starting

(Reuters) - Swiss chemicals maker Sika (SIKA.S) said on Thursday it was seeing an improvement in construction markets and sales volumes after its business was hit in the first half by the coronavirus shutdown and a stronger Swiss franc.

FILE PHOTO: The logo of Swiss chemical group Sika is seen at a plant in Zurich, Switzerland January 8, 2019. REUTERS/Arnd Wiegmann/File Photo

The company, whose products are used to strengthen and waterproof building materials, said it expected better market conditions in the second half and said operating profit would rise at a faster rate than sales.

“In June, Sika has seen a further improving trend in construction markets and sales volumes are steadily returning to normal levels,” Sika said.

“Global construction activity is gaining momentum thanks to the gradual reopening of construction sites around the world,” it added.

The brighter outlook came after Sika reported a drop in first half sales and profit in the first six months of 2020 as the coronavirus crisis stalled building and industrial activity.

Chief Executive Officer Paul Schuler said about 35 of the 100 countries where Sika is present were in full lockdown for about two months and the rest had been strongly hit by the pandemic.

The safe-haven Swiss franc’s rise in the first half, driven by coronavirus uncertainties, also reduced the firm’s results.

Sales fell 3.2% to 3.61 billion Swiss francs (3.05 billion pounds) in the first half, with the stronger franc reducing reported sales by 225 million francs.

In local currencies, sales rose 2.9% for Sika, whose admixture products have been used in the Gotthard Base Tunnel under the Alps, which extends 57 km (36 miles). Net profit fell 16.7% to 275.6 million francs.

Sika, which earlier this year ditched 2020 guidance, reconfirmed its goal of growing sales by 6%‐8% a year in local currencies by 2023 and for a higher operating profit margin of 15%‐18% from 2021 onward, cheering analysts.

“The ... numbers were slightly better than feared,” said Baader Bank’s Markus Mayer, saying the guidance reiteration and expectation of a stronger second half sent a “very strong positive signal.”

Reporting by Ismail Shakil in Bengaluru and John Revill in Zurich; Editing by Subhranshu Sahu and Edmund Blair

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