Sulzer well positioned for sustained success and profitable growth

Record sales, double-digit profitability, and strong increase in cash flow

Group ReleasesFriday, February 15, 2013

Sulzer achieved order intake and sales of over CHF 4 billion in 2012. Profitability remained stable in the double-digit range. The company continued to focus on customer partnership and profitable growth.

  • Order intake increased to over CHF 4 billion, and sales reached a record high, driven by the major pumps acquisition and organic growth
  • Profitability remained stable on a double-digit level despite acquisition-related charges
  • Free cash flow substantially increased to CHF 348 million
  • Sulzer continued to focus on customer orientation and profitable growth by introducing four new strategic priorities: technology leadership, outstanding services, continuous operational improvement, and collaborative advantage
  • For 2013, moderate growth is expected for order intake and sales, and profitability is forecast to increase slightly
  • Sulzer’s midrange targets remain unchanged
  • Based on a strong financial performance, the Board of Directors is proposing an increased dividend of CHF 3.20 per share
  • Manfred Wennemer proposed to succeed Jürgen Dormann as Chairman of the Board

Overview key figures

(millions of CHF)

2012

2011

Δ

Δ adj.1

Order intake

4 023.4

3 566.1

+12.8%

+3.9%

Order backlog (as of Dec. 31)

1 829.2

1 864.0

–1.9%

Sales

4 021.6

3 577.9

+12.4%

+4.1%

Operating income before depreciation / amortization (EBITDA)

540.9

482.8

+12.0%

EBITDA in % of sales

13.5%

13.5%

Operating income (EBIT)

409.5

364.1

+12.5%

Return on sales (ROS)2

10.2%

10.2%

Return on capital employed (ROCE)3

15.5%

18.8%

Net income
attr. to shareholders of Sulzer Ltd

307.1

279.8

+9.8%

Earnings per share (EPS) (in CHF)

9.03

8.25

9.5%

Free cash flow

347.9

82.3

322.7%

Net liquidity

–95.9

–336.9

Employees as of Dec. 31
(number of full-time equivalents)

17 936

17 002

+5.5%

Driven by the major pump acquisition and organic growth, order intake increased significantly by 13% to over CHF 4 billion in 2012. The oil and gas industry continued to be on a good level, both for the upstream and the downstream market segments. The power market grew moderately. The water market also showed a positive trend. Demand in the transportation industry remained high, particularly in the aviation industry. The main growth drivers were North America and Europe.

Sales increased by 12% and reached a record high of over CHF 4 billion, driven by the major pump acquisition and organic growth of all divisions. Profitability remained stable at a double-digit level despite acquisition-related charges. The return on sales figures of the divisions for 2012 include an increase of corporate charges by 50 basis points of sales. Return on capital employed remained—at 15.5%—at a value-generating level.

Net income attributable to shareholders amounted to CHF 307 million, resulting in basic earnings per share of CHF 9.03. Free cash flow improved substantially to CHF 348 million in 2012, driven by the active management of working capital.

The balance sheet remained healthy with an equity ratio (equity attributable to shareholders of Sulzer Ltd/total assets) of 50.0% (46.2% in 2011), and the gearing (borrowings/equity) decreased to 27% (from 37% in 2011).

Profitable growth through strategic priorities

Through the introduction of the new strategic priorities of technology leadership, outstanding services, continuous operational improvement, and collaborative advantage, Sulzer continued to focus on customer orientation and profitable growth. As a reliable partner, Sulzer helps customers succeed in their industries and outpace their competitors. Customer proximity is essential to offer local expertise: Sulzer’s service and production network was continuously expanded with an additional production site in China and a number of new service sites globally.

Achievements 2012

Actions 2013

Technology leadership

  • Continued innovation with new solutions launched
  • Technology portfolio expanded, e.g., cold-spray technology for innovative coatings
  • Start-up of the pilot plant for biopolymers
  • Acquisition of a carbon friction materials business
  • Continued investments in research and development
  • Expanding technology portfolio

Outstanding services

  • Share of sales in services at 41%
  • Further expanded service network with new facilities in Brazil, China, Colombia, Russia, Singapore, South Korea, and Sweden
  • Service offerings launched in new markets , e.g., marine market
  • Further strengthening of service network
  • Expanding service offering for the power industry

Continuous operational improvement

  • Frequency and severity of accidents again reduced
  • On-time delivery improved by 14%
  • Continued safe behavior program
  • Ongoing reduction of accidents
  • Further roll-out of Sulzer LEAN
  • Additional improvement of on-time delivery

Collaborative advantage

  • Cross-divisional projects and technology developments launched, presence in specific countries strengthened
  • Continued partnerships with universities and technical institutes
  • Increasing focus on company-wide cooperation
  • Seizing additional opportunities for shared services

Outlook 2013 and midrange targets 2012–2015

Building on its leading market positions and strategic priorities, Sulzer is well positioned for sustained success and profitable growth.

Based on present knowledge and excluding major changes in the general economic conditions, further growth is expected for parts of the oil and gas and for the water markets in 2013. Activities in the power and the transportation industries are forecast to continue at similar levels.

Geographically, the emerging markets and North America are likely to remain the growth drivers. Overall, moderate growth is expected for order intake and sales, and profitability is forecast to increase slightly.

The midrange targets remain unchanged. 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: Double-digit growth in orders, sales, and operating income

Sulzer Pumps increased its order intake noticeably to over CHF 2 billion, driven by acquisition effects and the positive development in the division’s key markets. Some significant orders were booked toward year-end. The oil and gas industry continued to perform well, driven by North America and Europe. Moderate growth in the power industry was mainly driven by the Asia-Pacific region. The water market also showed a positive trend. Overall, growth was particularly strong in North America and Russia.

The division achieved record sales of over CHF 2 billion in 2012, driven by the major acquisition and organic growth. The operating income grew in the double-digit range. On an adjusted basis, profitability improved. Profitability was affected by charges related to the acquisition and the increase of corporate charges by 50 basis points of sales. The ongoing integration of LEAN techniques into day-to-day business improved productivity and optimized costs. The frequency and severity of accidents further decreased.

For 2013, moderate growth is expected in the oil and gas, power, and water markets. Geographically, the highest growth is expected to come from North America and the Asia-Pacific region. For 2013, Sulzer Pumps expects moderate growth in order intake and an increase in sales. Profitability is forecast to increase slightly.

Sulzer Pumps key figures

millions of CHF

2012

2011

Δ

Δ adj.1

Order intake

2 094.3

1 705.6

+22.8%

+7.1%

Order backlog (as of Dec. 31)

1 309.1

1 343.5

-2.6%

Sales

2 097.5

1 747.8

+20.0%

+5.9%

Operating income

191.2

168.2

+13.7%

Return on sales4

9.1%

9.6%

Return on capital employed

13.1%

20.5%

Employees as of Dec. 31
(number of full-time equivalents)

8 573

8 211

+4.4%

Sulzer Metco: Increased sales and double-digit profitability

The division increased its order intake, driven by a positive environment in its key markets. The demand for Sulzer Metco’s innovative coating solutions was particularly high in the aviation industry—with record order books—and the power industry. The automotive market stabilized at high levels. Geographically, demand was particularly pronounced in North America and in the Asia-Pacific region, while activities in Europe remained stable.

Sulzer Metco further increased its sales volume. Profitability remained in the double-digit range despite additional corporate charges, which increased by 50 basis points of sales. Excluding this effect, profitability continued to increase. The division continued to improve its business processes with a number of LEAN initiatives. Productivity was increased through advanced LEAN manufacturing concepts. The division further decreased the frequency of accidents.

Global initiatives that aim to reduce emissions and increase efficiency have a positive impact on the division’s business. For 2013, activities in the transportation industry are expected to continue at current high levels, driven by the emerging markets and North America. Sulzer Metco expects moderate growth in order intake and sales. Profitability is forecast to increase slightly.

Sulzer Metco key figures

millions of CHF

2012

2011

Δ

Δ adj.1

Order intake

689.5

673.6

+2.4%

+1.2%

Order backlog (as of Dec. 31)

76.5

77.4

–1.2%

Sales

690.3

667.3

.

3.4%

+2.3%

Operating income

68.7

68.7

Return on sales4

10.0%

10.3%

Return on capital employed

17.1%

18.2%

Employees as of Dec. 31
(number of full-time equivalents)

2 399

2 259

+6.2%

Sulzer Chemtech: Higher sales and profitability

The order intake of Sulzer Chemtech remained stable compared with the previous year. The oil and gas downstream industry continued to develop positively for mass transfer technology, tower field services, and process technology. The demand for two-component mixing systems remained stable. Market activities were particularly high in Asia and the Americas, while customers were cautious with investments in Europe.

The division increased sales compared with the previous year. Profitability also improved despite the rise in corporate charges by 50 basis points of sales. The currency translation effects had a positive impact in 2012. Core processes were strengthened by rolling out the ERP (enterprise resource planning) system to additional locations. The frequency of accidents remained at a low level.

The outlook for the division’s key markets is positive. Strong growth is forecast in Asia-Pacific and the Americas, while investment levels in Europe are expected to remain at the current lower levels. For 2013, Sulzer Chemtech expects a high single-digit increase in order intake and sales. Profitability is forecast to reach a double-digit level.

Sulzer Chemtech key figures

millions of CHF

2012

2011

Δ

Δ adj.1

Order intake

705.1

701.7

+0.5%

–4.1%

Order backlog (as of Dec. 31)

293.6

310.7

–5.5%

Sales

724.6

667.0

+8.6%

+4.0%

Operating income

70.7

63.1

+12.0%

Return on sales4

9.8%

9.5%

Return on capital employed

16.3%

15.3%

Employees as of Dec. 31

(number of full-time equivalents)

4 086

3 634

+12.4%

Sulzer Turbo Services:  Higher order intake and sales

The division again increased its order intake significantly, supported by the positive development in the markets oil and gas, and power. Activity levels in general industries remained at a stable level. Growth was supported by large projects in the Americas and Europe as well as contributions from new markets in the Asia-Pacific region.

Sulzer Turbo Services increased its sales volume and operating income. Profitability remained on a double-digit level despite additional corporate charges, which increased by 50 basis points of sales. Excluding this effect, profitability improved. Operational improvements were achieved through reduction of inventory and a reorganization of facilities according to LEAN principles. The frequency and severity of accidents were significantly decreased.

For 2013, the oil and gas and the power markets as well as the general industries are expected to continue at current levels. Sulzer Turbo Services sees opportunities to grow, particularly in the emerging markets. For 2013, the division expects a moderate growth in order intake and an increase in sales. Profitability is forecast to increase slightly.

Sulzer Turbo Services key figures

millions of CHF

2012

2011

Δ

Δ adj.1

Order intake

535.2

477.6

+12.1%

+8.4%

Order backlog (as of Dec. 31)

151.6

130.1

+16.5%

Sales

510.5

488.0

+4.6%

+0.8%

Operating income

54.9

53.2

+3.2%

Return on sales4

10.8%

10.9%

Return on capital employed

14.8%

14.9%

Employees as of Dec. 31
(number of full-time equivalents)

2 703

2 654

+1.8%

Proposals by the Board of Directors to the Annual General Meeting

Dividend of CHF 3.20

Considering this year’s net income and the solid financial situation of the company, the Board of Directors will propose an increased dividend of CHF 3.20 per share (2011: CHF 3.00) at the Annual General Meeting on March 27, 2013.

Board of Directors: Manfred Wennemer proposed to succeed Jürgen Dormann as Chairman of the Board

Jürgen Dormann, who has been Chairman of the Board of Directors since 2009, will not stand for reelection at the Annual General Meeting on March 27, 2013, following internal age limitation rules. The Sulzer Board would like to thank Jürgen Dormann already today for his important contributions over the past years to the stable development, successful expansion, and continued success of Sulzer.
 
The Sulzer Board of Directors will propose Manfred Wennemer as new Member of the Board to the Annual General Meeting and intends to subsequently elect him as Chairman of the Board. Manfred Wennemer (65) has broad international experience in major industrial companies on an operational leadership level and as the chairman of advisory boards. From 1994 to 2008 he worked for the major automotive supplier Continental: from 1998 to 2001 as Member of the Executive Board and Chairman of the Management Board of ContiTech, and from 2001 to 2008, as Chairman of the Executive Board. From 2009 to 2011, he was Chairman of the Supervisory Board at Kion, and from 2011 to 2012, Chairman of the Supervisory Board of Hochtief. Manfred Wennemer is Chairman of the Advisory Board of Springer Science + Business Media  S.A, Luxembourg, Deputy Chairman of the Advisory Board of Knorr-Bremse, Germany and Member of the Advisory Boards of NV Bekaert SA, Belgium, and Allianz Deutschland AG, Germany.

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

Key figures

Order Intake (millions of CHF)

2012

2011

Δ

Δ adj.1

Divisions

4 024.1

3 558.5

+13.1%

+4.0%

Sulzer Pumps

2 094.3

1 705.6

+22.8%

+7.1%

Sulzer Metco

689.5

673.6

+2.4%

4.7%

+1.2%

Sulzer Chemtech

705.1

701.7

+0.5%

–4.1%

Sulzer Turbo Services

535.2

477.6

+12.1%

+8.4%

Others5

–0.7

7.6

Total

4 023.4

3 566.1

+12.8%

+3.9%


Sales (millions of CHF)

2012 2012 Δ Δ adj.1

Divisions

4 022.9

3 570.1

+12.7%

+4.2%

Sulzer Pumps

2 097.5

1 747.8

+20.0%

+5.9%

Sulzer Metco

690.3

667.3

+3.4%

+2.3%

Sulzer Chemtech

724.6

667.0

+8.6%

+4.0%

Sulzer Turbo Services

510.5

488.0

+4.6%

+0.8%

Others5

–1.3

7.8

Total

4 021.6

3 577.9

+12.4%

+4.1%

Operating income (EBIT)
(millions of CHF)

2012 2011 Δ      Δ adj.1

Divisions

385.5

353.2

+9.1%

Sulzer Pumps

191.2

168.2

+13.7%

Sulzer Metco

68.7

68.7

Sulzer Chemtech

70.7

63.1

+12.0%

Sulzer Turbo Services

54.9

53.2

+3.2%

Others5

24.0

10.9

Total

409.5

364.1

+12.5%

Return on sales (ROS)4

2012

2011

Divisions

9.6%

9.9%

Sulzer Pumps

9.1%

9.6%

Sulzer Metco

10.0%

10.3%

Sulzer Chemtech

9.8%

9.5%

Sulzer Turbo Services

10.8%

10.9%

Others

Total

10.2%

10.2%

Return on capital employed (ROCE)

2012 2011

Divisions

14.4%

18.0%

Sulzer Pumps

13.1%

20.5%

Sulzer Metco

17.1%

18.2%

Sulzer Chemtech

16.3%

15.3%

Sulzer Turbo Services

14.8%

14.9%

Others

Total

15.5%

18.8%

Sales by region (millions of CHF)

2012 2011

Share in 2012

Europe

1 483.3

1 268.0

37%

North America

1 015.9

837.1

25%

Central and South America

306.5

330.4

8%

Asia, Middle East, Australia

1 073.2

984.3

27%

Africa

142.7

158.1

3%

Total

4 021.6

3 577.9

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

2012

2011

Europe

7 848

7 595

North America

3 523

3 308

Central and South America

1 756

1 431

Asia, Middle East, Australia

4 347

4 186

Africa

462

482

Total

17 936

17 002

1 Adjusted for currency effects as well as acquisitions and divestitures
2 EBIT in % of sales
3 EBIT in % of capital employed
4 Figures of the divisions for 2012 include an increase of corporate charges by 50 basis points (0.5 percentage point) of sales.
5 Others mainly consists of Sulzer Innotec (until August 2012), Corporate Center, and consolidation adjustments

Virtual press kit

In our virtual press kit for the Annual Report 2012 (www.sulzer.com/AR2012), you will find our image database and the following pdf documents:

Press conference

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

Conference for analysts and investors

The conference for analysts and investors is scheduled for today at 4:00 p.m. CET (3:00 p.m. GMT / 10:00 a.m. EST) at the SIX Swiss Exchange in Zurich, Switzerland. Callers should dial the following numbers:

Dial-in Code: 5279463

+41(0)43 547 8000

Swiss Toll

0800 345 603

Swiss Toll Free

+44(0)20 7784 1036

UK Toll

0800 279 4841

UK Toll Free

+1212 444 0481

USA Toll

1877 249 9037

USA Toll Free

(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/q8kof77p

Playback Webcast

The playback of the webcast will be available shortly after the event under the following link: www.sulzer.com/ar12webcast

Key dates in 2013

March 27

Annual General Meeting 2013

April 16

Order intake Q1 2013

July 23

Midyear report 2013

October 17

Order intake Jan. – Sept. 2013

November 8

Capital Market Day 2013




News Release