Substantial increases in order intake and sales and healthy profitability in 2011

• Sulzer has become a leading player in the water industry due to the strategic acquisition of Cardo Flow Solutions.

• The balance sheet remained solid and will allow further external growth.

• Based on a solid financial performance, the Board of Directors is proposing an unchanged dividend of CHF 3.00 per share.

• Sulzer expects order intake and sales to increase moderately in 2012, and profitability is forecast to remain healthy.

• Sulzer announces new midrange targets for 2012–2015.

Overview key figures

In 2011, Sulzer increased order intake and sales substantially by 14% and 17% respectively on an adjusted¹ basis. Excluding the negative currency translation effects, both key figures exceeded CHF 4 billion. On a nominal basis, order intake and sales increased by 8% and 12% respectively to over CHF 3.5 billion.

Organic growth was driven by larger orders in the oil and gas upstream market, the automotive industry, and other general industrial markets. The aviation industry remained strong. The hydrocarbon processing industry showed some growth driven by the chemical processing industry—where some larger orders were booked—while the refining business remained at a low level. In the course of the second half of the year, the power generation market stabilized, although nuclear projects suffered delays due to the incident in Japan. Strong growth was recorded in Europe and North America, and the emerging markets also continued to grow. The customer ordering behavior, which was affected by high uncertainty in the financial markets, improved again toward year-end. The acquisition of Cardo Flow Solutions was closed at the end of July and added about CHF 180 million to sales.

Profitability remained healthy. The higher non-recurring contribution from the sale of the real estate business in 2010 and acquisition-related expenses in 2011 are the main reasons for the decrease in profitability from 12.8% to 10.2% compared with the previous year. Adjusted for these effects, the return on sales would be at 10.7% for 2011 and 11.0% for 2010. Overall, the company's global presence is a natural hedge against material impacts of the strong Swiss franc on profitability. Return on capital employed remained at a clearly value-generating level.

Sulzer's balance sheet has remained solid after the acquisition of Cardo Flow Solutions and will allow further external growth. Sulzer successfully issued a CHF-denominated 2.25% domestic bond in the amount of CHF 500 million for a term of five years (due date July 11, 2016).

Based on a net income attributable to shareholders of Sulzer Ltd of CHF 279.8 million and earnings per share of CHF 8.25, the Board of Directors will propose an unchanged dividend of CHF 3.00 per share.

Key focus areas

In order to continuously create sustainable shareholder value, Sulzer has kept its focus on operational excellence, innovation, and health and safety. The company also further expanded its presence in emerging markets (which generated 41% of sales) and added new locations in Brazil, Canada, China, Columbia, and Russia to the service network.

Solutions for global energy and water needs

Sulzer is well positioned to provide performance-critical solutions for the long-term trends of increasing water scarcity and growing energy demand.

Sulzer has become a leading player in the water industry due to the strategic acquisition of Cardo Flow Solutions. The solutions portfolio covers the entire water cycle—from water production and transport to wastewater treatment. With the acquisition, water has become a key market for Sulzer, accounting for about 13% of sales (on a full-year basis).

Economic growth fuels the demand for energy, particularly in the emerging markets. Sulzer offers performance-critical and energy-efficient solutions for its customers in the power generation industry. These include pumps and carbon capture technologies for power plants, coating solutions for gas and steam turbines, and maintenance and repair services for turbines and generators.

Outlook 2012 and midrange targets 2012–

The impact of ongoing uncertainties in the financial markets cannot currently be fully assessed and bears a certain downside risk. Based on present knowledge, activities in the oil and gas industry are expected to remain stable at a high level based on the current favorable market conditions in this segment. Activities in the hydrocarbon processing industry are forecast to remain at the current levels. In the power generation market, Sulzer anticipates further stabilization with some growth potential. The activity levels in the water market are expected to grow, mainly driven by emerging markets. The automotive, the aviation, and other general industries are likely to remain stable at the current high levels. Sulzer's balance sheet has remained solid after the acquisition of Cardo Flow Solutions and will allow further external growth.

Despite the ongoing uncertainties in the financial markets and their potential negative effect on the economy, Sulzer expects order intake and sales to increase moderately in 2012, and profitability is forecast to remain healthy. The newly acquired Cardo Flow Solutions business will contribute with a first full year to order intake, sales, and operating income, whereas only five months were consolidated in 2011.

By the year 2015, Sulzer aspires to achieve a divisional return on sales of 11–13% and a divisional return on capital employed of more than 20%. Sales of the divisions are expected to grow organically by 6–8% on an average yearly basis between 2012 and 2015.

Results in detail

Sulzer Pumps: major strategic acquisition and further expansion of global network

Order intake and sales were increased strongly, driven by organic growth and also supported by the acquisition, while profitability was affected by the acquisition. Before the acquisition, profitability remained stable. With the major strategic acquisition of Cardo Flow Solutions, Sulzer Pumps became a leading provider of pumps and related equipment in the water market. Additionally, a pump company was acquired in Spain to reinforce the division's presence in the attractive water markets in Europe, the Middle East, and Africa. The portfolio for water transport and desalination pumps was further expanded, and the global service network was strengthened with additional service centers in China, Columbia, and Russia.

Activities in the oil and gas industry were at a high level in the first half of the year. In the hydrocarbon processing industry, project activity remained generally at a low level. The power generation industry weakened in the course of the year. Geographically, North America, the CIS countries, and some Middle Eastern countries helped drive the order intake.

In 2012, the activities in the oil and gas industry are expected to remain stable at a high level. Activities in the hydrocarbon processing industry are forecast to remain at the current levels, supported by non-OECD countries. In the power generation market, further stabilization is anticipated with some growth potential. The activity levels in the water market are expected to grow, mainly driven by emerging markets. The division expects increases in order intake, sales, and operating income. Profitability is forecast to remain at a healthy level.

Sulzer Metco: higher sales and double-digit profitability

The division clearly increased order intake, sales, and operating income. Profitability was strongly increased by more than one percentage point and reached a double-digit level despite some restructuring charges. Innovation remained a key focus in order to drive organic growth and strengthen the division's leading market positions. In order to strengthen its market leadership in plasma equipment and thermal-spray materials, Sulzer Metco launched a new generation of its Triplex plasma coating equipment and introduced a new line of materials dedicated to laser cladding. For further sustained organic growth, the division also added laboratory and manufacturing capabilities for the development and supply of innovative coating powders and significantly improved the functionality of high-temperature abradables-sealing systems for the aviation industry.

Demand for the division's innovative coating solutions was particularly strong in the automotive industry. Based on a continued upward trend in air travel, the aviation segment also developed positively—although the air freight demand declined in the second half of 2011. Strong growth was recorded in the general industry segment, while the power generation segment grew at a slower pace. Geographically, demand was particularly high in North America and in Europe.

The positive environment in the division's main markets is expected to continue in 2012. The automotive, the aviation, and other general industries are likely to remain stable at the current high levels. The division expects similar levels for order intake and sales, while profitability is forecast to increase slightly.

Sulzer Metco key figures

The division's largest market—the hydrocarbon processing industry—stabilized, with some larger projects for mass transfer technology applications contributing positively to the order intake. The Process Technology unit recorded a substantial increase in orders, and activity levels for Tower Field Service and Sulzer Mixpac Systems remained strong. Geographically, demand was particularly high in the Middle East and in Asia.

Activities in the hydrocarbon processing industry are expected to remain at the current levels in 2012. The activity levels for polymer applications and the markets of Sulzer Mixpac Systems are forecast to grow further. For 2012, the division expects an order intake at a similar level and higher sales. Profitability is forecast to increase to a double-digit level.

Sulzer Chemtech key figures

Larger orders from the power generation market were recorded in the first half of the year. The demand for the division's services in the oil and gas and the power generation industries was healthy. The hydrocarbon processing industry showed signs of improvement and other industrial markets continued to grow. Geographically, growth was particularly strong in Latin America.

Demand for the division's services in the oil and gas, power generation, and other industrial markets is expected to remain at the current high levels in 2012. The hydrocarbon processing industry is forecast to continue on a stable level. The sales synergies from the acquisition and long-term service agreements are predicted to support the positive development. For 2012, the division expects moderate increases in order intake, sales, and profitability.

Sulzer Turbo Services key figures

Proposals by the Board of Directors to the Annual General Meeting

Dividend
Considering this year's net income and the solid financial situation of the company, the Board of Directors will propose an unchanged dividend of CHF 3.00 per share at the upcoming Annual General Meeting on April 5, 2012.

Board of Directors
At the Sulzer Annual General Meeting, the Board of Directors is proposing that Jürgen Dormann, Vladimir V. Kuznetsov, Jill Lee, Marco Musetti, Luciano Respini, and Klaus Sturany be reelected for a one-year term each.

After serving for ten years, Daniel Sauter has decided not to stand for reelection at the Annual General Meeting on April 5, 2012.The Sulzer Board of Directors would like to thank him for his important contributions since 2002 and wishes him all the best for the future.

Key figures

Number of employees (full-time equivalents) by region
(as of December 31)

In our virtual press kit for the Annual Report 2011 (www.sulzer.com/AR11), you will find our image database and the following pdf documents:

• Annual Report 2011 (online version and pdf-format)
• Media release
• Annual results presentation
• The Company 2011

Sulzer will host a press conference today at 9.30 a.m. CET in the Casinotheater Winterthur, Switzerland.

The conference for analysts and investors is scheduled for today at 4:00 p.m. CET at the SIX Swiss Exchange in Zurich, Switzerland. Callers should dial the following numbers:

PLEASE NOTE THAT FOR DIAL-IN VIA PHONE YOU NEED TO ENTER THE BELOW STATED DIAL-IN CODE.

(Participants are requested to dial in 5–10 minutes prior to the start of the presentation)

Webcast

The analysts and investors conference call can also be followed by webcast (audio slides). Please use the following link:

http://www.media-server.com/m/p/ny6f4j2g

Playback Webcast

The playback of the webcast will be available shortly after the event under the following link:

www.sulzer.com/AR11

Key dates in 2012

¹ Adjusted for currency effects as well as acquisitions and divestitures
² EBIT in % of sales
³ EBIT in % of capital employed
⁴ Including 2 321 additional employees (FTEs) due to acquisitions
⁵ Including some CHF 30 million of non-recurring acquisition costs
⁶ Including 1 841 employees from acquisitions
⁷ Thereof Cardo Flow Solutions: CHF 160.1 million
⁸ Others consists of Corporate Center, real estate, Sulzer Innotec, and consolidation adjustments
⁹ Thereof Cardo Flow Solutions: CHF 179.0 million
¹⁰ Thereof Cardo Flow Solutions: CHF –17.8 million
¹¹ Including gains from disposal of real estate of CHF 18.2 million in 2011 and CHF 56.6 million in 2010
¹² ROS before acquisition: 11.9%
¹³ Capital employed in % of sales
¹⁴ ROCE before acquisition: 42.2%