Overview of key figures for the first half of 2011 (January – June)
(millions of CHF) | 1H 2011 | 1H 2010 | Δ | Δ adjusted1 |
Order intake | 1 824.4 | 1 622.0 | 12.5% | 20.6% |
Order backlog (June 30/Dec. 31) | 1 876.8 | 1 799.8 | 4.3 % |
|
Sales | 1 600.6 | 1 471.5 | 8.8% | 15.7% |
Operating income before depreciation/amortization (EBITDA) | 227.0 | 204.2 | 11.2 % | |
Operating income (EBIT) | 177.1 | 154.9 | 14.3 % | |
Return on sales (ROS)2 | 11.1% | 10.5% | | |
Net income3 | 124.8 | 111.7 | 11.7 % |
|
Basic earnings per share (in CHF) | 3.69 | 3.32 | 11.1 % |
|
Free cash flow | –67.1 | 37.0 | | |
Net liquidity (June 30/Dec. 31) | 372.6 | 552.8 | | |
Employees (June 30/Dec. 31)
(number of full-time equivalents) | 14 809 | 13 740 | 7.8% | |
Sulzer had a strong start in 2011 with higher orders, sales, operating income, and improved profitability compared with the first half of the prior year. On an adjusted1 basis, the company achieved a significant increase in orders of 20.6% (12.5% nominal). All divisions supported this increase. The emerging markets contributed to the growth. North and South America developed positively, while order intake in Europe remained stable. Growth was driven by continuously strong early-cycle markets and by recovering orders in some of the late-cycle markets. The automotive, aviation, and other industrial markets remained strong. The oil and gas segment grew, while the hydrocarbon processing industry remained at a low level with some large project orders booked. The power generation market stabilized, although nuclear projects suffered delays due to the incident in Japan.
Sales substantially increased to CHF 1 600.6 million in the first half of 2011 due to a high order backlog at the beginning of the year and an increased order intake. This represents an adjusted1growth of 15.7% (8.8% nominal) compared with the first half of 2010. Operating income increased by 14.3% and net income2 by 11.7%, primarily driven by the higher sales volume operational improvements, and positive contributions from the acquired businesses. The strong Swiss franc continued to have a negative translation effect on absolute figures, while the company's global presence again proved to be a natural hedge against material impacts on profitability. Return on sales improved from 10.5% in the first half of 2010 to 11.1%, including some costs related to the Cardo Flow Solutions acquisition. All divisions achieved double-digit return on sales levels and contributed to the EBIT growth. Three divisions also improved their return on sales.
Net income attributable to Sulzer shareholders totaled CHF 124.8 million in the first half of 2011. This represents an increase of 11.7% compared with the first half of the previous year. The free cash flow, consisting of cash flow from operating activities as well as capital expenditures was negative at CHF –67.1 million, mainly due to higher net working capital requirements. Measures have been initiated to reduce the net working capital requirements in the second half of the year.
With the intended acquisition of Cardo Flow Solutions (sales of CHF 463 million in 2010, approx. 1 900 employees, headquartered in Sweden), the company is to become a leading player in the attractive wastewater pumps market. Water and wastewater will become one of Sulzer's key markets, accounting for approximately 16% of total sales. The acquisition is expected to close in the third quarter of 2011. A bond of CHF 500 million with a 2.25% coupon rate was successfully launched in June to partly finance the acquisition.The acquisition of the service specialists C.L. Engenharia in Brazil and Black Magic Crew in Canada increased the competitiveness of Sulzer's tower field service activities. Sulzer's balance sheet and capital structure will remain solid after all these acquisitions and will allow further external growth.
Outlook for 2011:double-digit growth rates for order intake and sales on an adjusted1 basis
The impact of the development in the financial markets can currently not be fully assessed. Based on present knowledge, the positive environment in the early-cycle markets is still expected to continue. The automotive industry is likely to remain at its current high level. For the aviation and other general industries, we anticipate further growth. Activity in the oil and gas industry is expected to continue at similar levels, while the hydrocarbon processing industry is likely to recover only slightly. The power generation market is forecast to remain at a low level. As a consequence of the nuclear incident in Japan, increased future activity is predicted for combined-cycle and conventional fossil plants. Geographically, the emerging markets are expected to remain growth drivers for the company.
The significant negative translation effect of the strong Swiss franc is likely to persist and will continue to impact absolute figures and nominal growth rates. However, with its global network, the company is naturally hedged against material currency impacts on profitability.
The following outlook does not include any effects from the intended acquisition of Cardo Flow Solutions:
On an adjusted1 basis, Sulzer expects double-digit growth rates for order intake and sales, albeit at a lower rate than in the first half of the year. Profitability is forecast to remain at a double-digit level. The extraordinary income from the divestiture of real estate reported in 2010 will not reoccur. Cash flow from operating activities is expected to be positive for the full year.
Results in detail
Sulzer Pumps: Major strategic acquisition
Sulzer Pumps' higher order intake compared with the first half of the prior year was mainly driven by increased investment activities in the oil and gas industry. In the hydrocarbon processing industry, project activity remained at a low level in general, with some ongoing activities in emerging markets. In the power generation industry, strong activity was seen in India, whereas in established economies the market remained flat. Nuclear projects suffered delays as a consequence of the nuclear incident in Japan. The general industry segments showed higher project activity levels compared with the first half of the prior year. The division increased sales by 13.2% on an adjusted1 basis. The operating income and the return on sales improved as well. Excluding acquisition-related costs of CHF 3.0 million, the operational return on sales increased from 11.3% in the first half of 2010 to 11.9%. The global service network was further strengthened with an additional service center in China. A major test facility for subsea pumping systems was completed. With the intended acquisition of Cardo Flow Solutions, the division is to become a leading player in the wastewater market, which offers strong growth prospects.
Activity in the oil and gas industry is expected to continue at similar levels, while the hydrocarbon processing industry is likely to remain flat throughout 2011. The power generation market is expected to remain at a low level.
The following outlook does not include any effects from the intended acquisition of Cardo Flow Solutions: On an adjusted1 basis, the division anticipates double-digit growth in order intake and sales for the full year, while profitability is predicted to remain at double-digit level.
Sulzer Pumps key figures
millions of CHF | 1H 2011 | 1H 2010 | Δ | Δ adjusted1 |
|
Order intake | 838.5 | 824.1 | 1.7% | 16.2% | |
Order backlog (June 30/Dec. 31) | 1319.6 | 1336.6 | –1.3 % | | |
Sales | 743.2 | 746.9 | –0.5% | 13.2% | |
Operating income before depreciation/amortization (EBITDA) | 97.3 | 97.4 | –0.1% | | |
Operating income (EBIT) | 85.4 | 84.6 | 0.9% | | |
Return on sales (ROS)2 | 11.5% | 11.3% | | | |
Employees(June 30/Dec. 31)
(number of full-time equivalents) | 6 184 | 5 904 | 4.7% | |
Sulzer Metco: substantial growth and improved profitability
Sulzer Metco further increased its order intake, driven by growth in most of its end markets. Higher raw material prices added somewhat to the higher volumes. Demand for the division's highly innovative coating solutions was particularly strong in the automotive industry. The aviation industry also developed positively, and strong growth was recorded in the general industry segment. Geographically, demand was particularly pronounced in Asia-Pacific and in Europe. The division's sales and operating income improved significantly compared with the first half of the previous year. The return on sales rose by almost two percentage points to a double-digit level. The diamond-like coating business, which was acquired in July 2010, is developing successfully within Sulzer Metco's network.
The positive environment in the early-cycle markets is expected to continue. The automotive industry is likely to remain at its current high level. For the aviation and other general industries, further growth is anticipated. For the full year, the division expects double-digit growth for order intake and sales on an adjusted1 basis, albeit at a lower rate than in the first half of the year. Profitability is forecast to remain at a double-digit level.
Sulzer Metco key figures
millions of CHF | 1H 2011 | 1H 2010 | Δ | Δ adjusted1 |
Order intake | 347.1 | 310.9 | 11.6% | 21.7% |
Order backlog (June 30/Dec. 31) | 84.5 | 71.3 | 18.5% | |
Sales | 328.8 | 298.2 | 10.3% | 20.3% |
Operating income before depreciation/amortization (EBITDA) | 46.1 | 37.6 | 22.6% | |
Operating income (EBIT) | 34.5 | 25.7 | 34.2% | |
Return on sales (ROS)2 | 10.5% | 8.6% | | |
Employees(June 30/Dec. 31)
(number of full-time equivalents) | 2 200 | 2 045 | 7.6% | |
Sulzer Chemtech: higher orders, sales, and operating income
The division significantly increased its order intake compared with the first half of the previous year. Demand in the hydrocarbon processing industry stabilized, and some large projects contributed positively to the order intake. The Process Technology unit recorded a substantial increase of orders, and activity levels for Sulzer Mixpac Systems remained strong. Geographically, demand was particularly high in the Middle East and in China.Sulzer Chemtech increased sales and operating income compared with the first half of the previous year. Profitability decreased due to a change in the product mix and minor adaptations of the capacity in Europe. Sulzer Chemtech has expanded its process technology test center, and is building its own industrial-scale pilot plant for the production of bioplastics sample materials.
The hydrocarbon processing industry is projected to recover further, although at a slow pace. Project activity levels in the polymer industry and for Sulzer Mixpac Systems are expected to increase. For the full year, the division expects double-digit growth in order intake and sales on an adjusted1 basis, albeit at a lower rate than in the first half of the year. Profitability is forecast to remain at a double-digit level.
Sulzer Chemtech key figures
millions of CHF | 1H 2011 | 1H 2010 | Δ | Δ adjusted1 |
Order intake | 375.5 | 319.8 | 17.4% | 27.1% |
Order backlog (June 30/Dec. 31) | 329.4 | 274.3 | 20.1% | |
Sales | 302.9 | 274.9 | 10.2% | 18.9% |
Operating income before depreciation/amortization (EBITDA) | 47.8 | 47.0 | 1.7% | |
Operating income (EBIT) | 30.7 | 29.3 | 4.8% | |
Return on sales (ROS)2 | 10.1% | 10.7% | | |
Employees(June 30/Dec. 31)
(number of full-time equivalents) | 3 513 | 2973 | 18.2% | |
Sulzer Turbo Services: strong growth driven by acquisition and large projects
The division strongly increased its order intake compared with the first half of the previous year, driven both by significant organic growth and by strong contributions from Dowding & Mills, acquired in June 2010. The demand for the division's service offering in the oil and gas, power generation, and other industrial markets continued to grow. The hydrocarbon processing industry showed signs of improvement. In the power maintenance sector, Central and South America showed particularly high activity levels. The division strongly increased sales and doubled its operating income.Through the acquisition, Sulzer Turbo Services has been able to diversify its product and service portfolio and has achieved significant sales synergies. The global presence was further expanded by a sales and project office in Russia, which will strengthen the division's presence in that fast-growing market. Return on sales rose by more than two percentage points compared with the first half of the prior year.
Demand for the division's services in the oil and gas, power generation, and other industrial markets is predicted to remain at high levels. The hydrocarbon processing industry is forecast to improve slightly. For the full year, Sulzer Turbo Services expects double-digit growth in order intake and sales on an adjusted1 basis. The acquired business will strongly support the nominal growth. Profitability is expected to remain at a double-digit level.
Sulzer Turbo Services key figures
millions of CHF | 1H 2011 | 1H 2010 | Δ | Δ adjusted1 |
Order intake | 259.9 | 161.8 | 60.6% | 31.4% |
Order backlog (June 30/Dec. 31) | 142.4 | 115.1 | 23.7 % | |
Sales | 220.5 | 145.8 | 51.2% | 15.3% |
Operating income before depreciation/amortization (EBITDA) | 30.7 | 15.7 | 95.5% | |
Operating income (EBIT) | 22.6 | 11.3 | 100.0% | |
Return on sales (ROS)2 | 10.2% | 7.7% | | |
Employees (June 30/Dec. 31)
(number of full-time equivalents) | 2 680 | 2 587 | 3.6% | |
As announced in June, CEO Ton Büchner has decided to pursue a career opportunity outside Sulzer. The search process has been started, and a successor will be announced in due course. Ton Büchner will remain CEO until his official leave, which is expected in the fourth quarter of this year.
The Midyear Report 2011 is available on the Web at www.sulzer.com/MYR11.
Key Figures
Order intake (millions of CHF) | 1 H 2011 | 1 H 2010 | Δ | Δ adjusted1 |
Divisions | 1821.0 | 1616.6 | 12.6% | 20.9% |
Sulzer Pumps | 838.5 | 824.1 | 1.7% | 16.2% |
Sulzer Metco | 347.1 | 310.9 | 11.6% | 21.7% |
Sulzer Chemtech | 375.5 | 319.8 | 17.4% | 27.1% |
Sulzer Turbo Services | 259.9 | 161.8 | 60.6% | 31.4% |
Others4 | 3.4 | 5.4 | | |
Total | 1824.4 | 1622.0 | 12.5% | 20.6% |
Sales (millions of CHF) | | | | |
Divisions | 1595.4 | 1465.8 | 8.8% | 15.9% |
Sulzer Pumps | 743.2 | 746.9 | –0.5% | 13.2% |
Sulzer Metco | 328.8 | 298.2 | 10.3% | 20.3% |
Sulzer Chemtech | 302.9 | 274.9 | 10.2% | 18.9% |
Sulzer Turbo Services | 220.5 | 145.8 | 51.2% | 15.3% |
Others4 | 5.2 | 5.7 | | |
Total | 1600.6 | 1471.5 | 8.8% | 15.7% |
Operating income before depreciation/amortization (EBITDA; millions of CHF)
Divisions | 221.9 | 197.7 | 12.2% |
Sulzer Pumps | 97.3 | 97.4 | –0.1% |
Sulzer Metco | 46.1 | 37.6 | 22.6% |
Sulzer Chemtech | 47.8 | 47.0 | 1.7% |
Sulzer Turbo Services | 30.7 | 15.7 | 95.5% |
Others4 | 5.1 | 6.5 | |
Total | 227.0 | 204.2 | 11.2% |
Operating income (EBIT; millions of CHF) | | |
Divisions | 173.2 | 150.9 | 14.8% |
Sulzer Pumps | 85.4 | 84.6 | 0.9% |
Sulzer Metco | 34.5 | 25.7 | 34.2% |
Sulzer Chemtech | 30.7 | 29.3 | 4.8% |
Sulzer Turbo Services | 22.6 | 11.3 | 100.0% |
Others4 | 3.9 | 4.0 | |
Total | 177.1 | 154.9 | 14.3% |
Return on sales (ROS)2 | 1 H 2011 | 1 H 2010 |
Divisions | 10.9% | 10.3% |
Sulzer Pumps | 11.5% | 11.3% |
Sulzer Metco | 10.5% | 8.6% |
Sulzer Chemtech | 10.1% | 10.7% |
Sulzer Turbo Services | 10.2% | 7.7% |
Others4 | – | – |
Total | 11.1% | 10.5% |
1 Adjusted for currency effects as well as acquisitions and divestitures
2 EBIT/sales
3 Attributable to shareholders of Sulzer Ltd
4 Others consist of: Corporate Center, Sulzer Real Estate, Sulzer Innotec and consolidation adjustments
Analyst and Investor Conference Call
Sulzer Ltd will hold a conference call on the occasion of the publication of Midyear Results 2011:
Click on the link to find out more about the upcoming Analyst and Investor Conference Call.
Webcast
The conference can also be followed by webcast (audio and slides) at www.sulzer.com/MYR11/webcast.
The playback of the webcast will be available shortly after the event under the same link.