Preview | Sika AG | 17 Oct 2025

Margin Resilience and Synergy Delivery Expected to Offset Softer Top-Line Headwinds

Overall ●●●●● | ReadX ●●●●● | News ●●●●●

Q3 FY25 Results: 24 Oct 2025

Margin step-up is the key focus – Consensus expects a second-half EBITDA margin above 20%, a step-up from H1's 18.9%. This relies on the ramp-up of MBCC synergies, which management has already guided higher, alongside a generally favourable input cost environment.
Top-line constrained by FX and mixed demand – Consensus revenue forecasts for H2 have been trimmed on the back of a strong Swiss Franc, persistent weakness in European buildings, and softer new-build activity in North American roofing.
Data centers and refurbishment provide resilient growth – Strong demand from data center construction is a key bright spot, supporting Sika's high-spec roofing, waterproofing, and flooring systems in the Americas. Refurbishment activity also remains firm.
China remains a drag, partially offset by Automotive – The deflationary construction market in China continues to pressure regional sales and margins. However, strong growth in electric vehicle production provides a partial offset for the Automotive & Industry division.
Cash flow inflection expected in H2 – Following a build in working capital in H1, particularly in China, a significant unwind is anticipated in the second half, which is critical for meeting the full-year operating free cash flow target.

Refresher | Margin resilience, synergy delivery and US project flow vs China deflation

Sika is a global leader in specialty chemicals for the construction and industrial sectors, with strong positions in concrete admixtures, roofing, sealing & bonding, and automotive adhesives. The company has recently navigated a mixed construction cycle, maintaining its track record of outperformance despite headwinds. Europe is showing signs of a gradual recovery from a low base, while the Americas are supported by strong infrastructure and data center investment, though some manufacturing projects have paused. The Asia-Pacific region remains weighed down by China's housing downturn.

For the first half of 2025, Sika delivered modest local currency sales growth (+1.6%) against a significant currency headwind. Critically, margin discipline was maintained, with the EBITDA margin expanding slightly to 18.9% as cost efficiencies and synergies from the MBCC acquisition offset low operating leverage. For the full year, management has guided to a "modest" sales increase and reaffirmed its 19.5–19.8% EBITDA margin target, implying a significant step-up to over 20% in the second half. This margin bridge, alongside the normalization of cash flow, remains a central debate for investors.

Consensus Revisions (FY25E)

Metric	Apr-25	Oct-25	Delta	Comment
Revenue (CHF bn)	12.10	11.45	-0.65	FX and softer US/APAC
EBITDA (CHF bn)	2.38	2.23	-0.15	Margin preserved within guide
EBITDA margin	19.66%	19.53%	-13 bps	Synergies offset lower volumes
EBIT (CHF bn)	1.82	1.69	-0.13	Flow-through
EPS (CHF)	8.22	7.58	-0.64	Lower EBIT; FX; tax ~25%

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News | Data-center strength and easing costs offset EMEA/roofing softness ●●●●●

Data center demand remains a key resilient driver – The North American data center market continues to see record-low vacancy rates (1.6%) and accelerating capex from hyperscalers. With a high proportion of the construction pipeline already pre-leased, this provides strong, visible demand for Sika's specified roofing, waterproofing, and flooring packages. Power constraints are elongating project schedules but also sustaining pricing power.
US non-residential planning shows mixed signals – Forward-looking indicators are divergent. The Dodge Momentum Index, which tracks projects in planning, has re-accelerated, suggesting an improving bid pipeline for late 2025 and into 2026. However, the Architecture Billings Index remains in contractionary territory, pointing to lumpy project starts in the near term. Contractor backlogs are steady, particularly for firms exposed to data centers.
European construction activity remains weak, especially in buildings – The Eurozone Construction PMI deteriorated further in September, with sharp declines in commercial building activity. While year-over-year production data has improved from a very low base, the near-term outlook for new building work appears challenging. Civil engineering and infrastructure work seem to be holding up better.
China's property market continues to contract – Official data through August shows property investment and new starts remain in a deep downturn, with cement output also falling. This suggests pricing pressure will persist in Sika's Chinese construction channels.
Automotive provides a bright spot, led by EVs – In contrast to construction, the Automotive & Industry segment should benefit from strong electric vehicle trends. Global EV sales hit a record in September, and production forecasts have been nudged higher, supporting demand for Sika's higher-value content in EV batteries and structures.
Input costs are providing a modest tailwind – Ocean freight rates are down year-on-year, and prices for key chemical inputs like epoxy and acrylic resins have been easing. This backdrop should support gross margins, helping to offset volume softness and fund the synergy-led EBITDA margin expansion in H2.

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ReadX | Reroof steady and refurb firm, but Europe/China remain mixed ●●●●●

North American activity is a tale of two markets – Peer results highlight a divergence. Roofing peer Carlisle noted that while reroofing demand remains steady (driven by retrofits and data centers), new construction activity has softened, with distributors becoming more cautious on inventory. Conversely, RPM reported strong growth in its high-performance flooring and protective systems, suggesting robust activity in refurbishment and specialized projects.
- This implies Sika's Americas performance will be heavily dependent on mix. The Roofing division may see pressure on new-build volumes, but this could be offset by strength in Flooring, Refurbishment, and systems specified into data centers and infrastructure.
Europe is improving sequentially from a low base – Commentary from cement giant Holcim and façade specialist Sto points towards stabilization in Europe. Holcim noted robust infrastructure demand and early signs of a residential recovery, helping it expand margins. Sto's sales decline moderated in H1 versus Q1, though its core façade business remains soft.
- The read-through for Sika is that a gradual recovery is underway, but it is not a sharp rebound. Infrastructure-related products (admixtures, waterproofing) and renovation should outperform new-build finishing products.
Adhesives peers confirm margin resilience despite soft volumes – Both H.B. Fuller and Arkema reported flat-to-slightly negative volumes in their construction adhesives businesses, citing weak demand in European and US distribution channels. However, both demonstrated strong margin performance, benefiting from pricing discipline and lower raw material costs. This supports the thesis that Sika can protect its material margin in Sealing & Bonding.
AMEA region shows the strongest momentum – Holcim reported strong growth and margin expansion in its AMEA and Latin America businesses. In India, consumer adhesives peer Pidilite posted double-digit volume growth, pointing to healthy underlying demand in a key market for Sika. This suggests AMEA should be a source of relative strength for the group.
Automotive read-across is positive on EV content – Tesla's Q3 deliveries rebounded strongly quarter-on-quarter, and Henkel highlighted that content gains in EVs are offsetting weaker overall auto builds. This reinforces the positive outlook for Sika's A&I division, which benefits from higher-value adhesive and thermal management solutions for EVs.

Peer Estimate Revisions (since 17 Jul 2025)

Company (segment)	Metric	17 Jul	17 Oct	% chg	Read‑across
Carlisle (Roofing proxy)	FY25E EBIT ($Bn)	1.21	1.08	−10.7%	Softer roofing margin outlook
RPM – Construction Prod.	FY26E Revenue ($Bn)	2.77	3.01	+8.7%	Firmer floors/refurb/CPG pipeline
RPM – Construction Prod.	FY26E EBIT ($M)	439	472	+7.3%	Mix/pricing discipline supportive
Arkema – Adhesives	FY25E Op. Inc. (€M)	294	278	−5.3%	EU/US demand soft, pricing deflation
Henkel – AT	FY25E EBIT (€Bn)	1.85	1.81	−2.2%	Margins resilient; modest top‑line trim
Saint‑Gobain (Group)	FY25E EPS (€)	6.82	6.65	−2.5%	Europe steadying but not accelerating

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Uncertainty / Limitations

This analysis relies on publicly available data, some of which is lagged by one to two months (e.g., construction spending). Peer read-across is useful but imperfect, as segment definitions and geographic mixes differ. Volatility in specific raw material costs (e.g., isocyanates) may be transient and hard to predict. The timing of large data center projects can be lumpy and dependent on external factors like power grid availability.

Sources

[1] CBRE, North America Data Center Trends H1 2025, 8 Sep 2025
[2] Dell'Oro Group via PR Newswire, Hyperscaler AI Deployments Lift Data Center Capex to Record Highs in 2Q 2025, 16 Sep 2025
[3] CBRE, North America Data Center Trends H1 2025: AI and Hyperscaler Demand Lead to Record-Low Vacancy, 19 Aug 2025
[4] The Wall Street Journal, AI Data Centers, Desperate for Electricity, Are Building Their Own Power Plants, 16 Oct 2025
[5] Construction.com, Dodge Momentum Index Increases 3% in September, 7 Oct 2025
[6] AIA, ABI August 2025: Softness persists at architecture firms, 24 Sep 2025
[7] ABC via GlobeNewswire, ABC: Construction Backlog Stable, Contractors Remain Optimistic, Fueled by Data Center Growth, 14 Oct 2025
[8] ConstructUK, HCOB Eurozone Construction PMI: Downturn in activity worsens in September, 6 Oct 2025
[9] Eurostat, Production in construction up by 0.5% in the euro area, 18 Sep 2025
[10] National Bureau of Statistics of China, National Real Estate Market in the First Eight Months of 2025, 16 Sep 2025
[11] Global Cement, China's cement output falls by 6% in August 2025, 16 Sep 2025
[12] Reuters, Global EV sales hit record 2.1 million in September, research firm says, 14 Oct 2025
[13] S&P Global Mobility, 2025 Light Vehicle Production Forecast, Sep 2025
[14] Drewry via AirFreight News, Drewry World Container Index, 16 Oct 2025
[15] IMARC Group, Epoxy Resin Pricing Report, Sep 2025
[16] Carlisle Companies, Carlisle Companies Reports Second Quarter Results, 30 Jul 2025
[17] RPM International Inc., RPM Reports Record Fiscal 2026 First-Quarter Results, 1 Oct 2025
[18] Holcim, H1 2025 results, 31 Jul 2025
[19] Sto SE & Co KGaA via MarketScreener, H1 2025 press release, 27 Aug 2025
[20] H.B. Fuller, H.B. Fuller Reports Third Quarter 2025 Results, 24 Sep 2025
[21] Arkema, Second-quarter 2025 results, 31 Jul 2025
[22] Pidilite Industries Ltd., Transcript of Earnings Call Q1 FY26, 14 Aug 2025
[23] Tesla, Inc., Tesla Third Quarter 2025 Production & Deliveries, 2 Oct 2025
[24] Henkel AG & Co. KGaA, Henkel with sales growth acceleration in the first half of the year, 8 Jul 2025

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