By John Revill
ZURICH (Reuters) - Sika (SIX:SIKA) expects market conditions to improve in 2024 but remain "challenging", the Swiss construction chemicals maker said on Friday after posting earnings in line with forecasts.
The company, whose additives are used to waterproof and strengthen roofs, floors and walls, said 2023 had seen subdued business activity in Germany while rising inflation and higher interest rates had weighed on construction in the U.S. residential sector.
Still, the company pointed to major construction and infrastructure projects which are expected to commence as reasons for optimism.
"I don't expect that this year will be more challenging than last year," Chief Executive Thomas Hasler told Reuters.
"The indication that monetary policy may loosen up a little bit is a positive sign for construction."
Hasler also highlighted trends like industrial reshoring as companies built factories in the United States as a positive, as well as government schemes like U.S. President Joe Biden's signature Inflation Reduction Act.
Sika's shares were up 4.3% in morning trade.
The fortunes of Sika, a big supplier for the construction and automotive industries, can be seen as a proxy for the health of the two sectors.
The company said it expected its local currency sales to rise by 6-9% in 2024 and to increase its core operating profit at a higher rate, in line with goals outlined last October.
Hasler said the construction market it supplies declined by 4% last year, but Sika still managed to increase its sales by 1.2% before the contribution of acquisitions.
Reported sales rose 14.5% in local currencies, boosted by the acquisition of MBCC, the former BASF construction chemicals business.
"The market will go north from the minus four, probably still minus for the full year, but it will improve," Hasler said.
"Our 6% to 9% growth outlook shows that we have ambitions to beat the market."
Sika reported a full-year operating profit of 1.55 billion Swiss francs ($1.76 billion), matching analyst forecasts.
Its net profit of 1.06 billion francs narrowly beat forecasts for 1.04 billion, while core operating profit of 2.04 billion francs was in line with estimates.