The first six months of 2006 developed very positively for Sulzer. Order intake (already published on July 13) grew by 26.8% to CHF 1,654.8 million. Sales rose by 15.4% to CHF 1,336.6 million. Adjusted for currency and minor acquisition/divestiture effects the increases were 23.4% in order intake and 12.3% in sales The operating income (EBIT) was boosted to CHF 136.3 million (+77.2%). This improvement is largely due to the combined effect of operational improvements and increased volumes as well as some non-recurring income (divestiture gains at Sulzer Pumps). All four divisions improved their results. Sulzer Pumps and Sulzer Chemtech set new records. Both benefited in particular from the surge in volume, which was well absorbed by the streamlined organizations. However, delivery times have increased due to both internal and external capacity constraints. Financial income amounted to CHF 9.8 million; it stems largely from the sale of the participations in the German Voith Group. Net income attributable to the shareholders of Sulzer climbed to CHF 104.3 million, noticeably exceeding the previous year’s figure of CHF 58.9 million. This corresponds to CHF 29.29 per share for 2006 (First half 2005: CHF 16.57).

Individual Results of the Divisions

The positive trend at Sulzer Pumps continued. The division took advantage of the favorable market conditions and boosted its order intake by 28.9% (adjusted1 27.1%) and sales by 22.7% (adjusted¹ 21.2%). The integration of the business acquired in Houston, Texas, USA in 2004 progressed according to plan and these operations contributed to the improved results. Operating income climbed by 59.4% to CHF 66.3 million corresponding to a return on sales (ROS) of 9.9%. Included in this result are non-recurring gains from disposals of the Paco business and of surplus facilities. Due to high levels of activity in all regions and market segments, Sulzer Pumps expects order intake, sales, and operating income to clearly exceed 2005 values.

Order intake of Sulzer Metco rose by 14.7% (adjusted¹ 12.2%) to CHF 332.6 million. Sales increased by 3.7% (adjusted¹ 1.6%). The increase (+20.3%) of operating income to CHF 21.9 million has been proportionally higher than volume growth and is predominantly due to the improvement initiatives launched in 2004. With a ROS of 7.3% (previous year 6.3%), the division is on its way to the aspired double-digit margin.The prospects for Sulzer Metco remain good.Order intake is set to continue with the current trend.The division expects an increase in operating income and higher margins for the full year.

Sulzer Chemtech again reached new highs. Order intake for the first six months was 60.9% (adjusted2 48.7%) above the previous year at CHF 322.1 million. Sales rose by 25.7% (adjusted¹ 15.6%) to CHF 241.4 million. Operating income jumped to CHF 31.6 million achieving a ROS of 13.1%. All segments and regions were very active and supported the strong growth and profitability of Sulzer Chemtech. There are a high number of projects, also large ones, coming in particular from the refinery industry. The service business acquired last year from Cana-Tex in Houston, Texas, USA has been successfully incorporated. Sulzer Chemtech expects ongoing high levels of capital expenditure by its clients. Order intake, sales, and operating income for the second half of 2006 are expected to continue the strong showing of the first six months.

Sulzer Turbo Services experienced a mixed environment for the first six months. Restructuring programs and concentration on projects with attractive margins led to a decline in order intake of 4.0% (adjusted¹ –7.4%) to CHF 118.6 million. Sales (CHF 122.2 million) remained stable at the same level as the previous year’s figures (+0.7%, adjusted¹–2.7%). Operating income recovered from CHF 1.1 million (burdened with restructuring charges) to CHF 9.3 million, reaching a 7.6% ROS. The US market developed satisfactorily, while the situation in the Middle East remained difficult. Sulzer Turbo Services does not expect any major change in the current situation. For the year as a whole, the division expects to achieve a clear increase in income, while volume will likely be unchanged from the previous year.

Operating income of Other amounted to CHF 7.2 million. Real Estate contributed positively to the good result by selling a number of properties, which are non-essential to the company’s operations. Sulzer Innotec profited from lively demand. The previous year’s income figure of CHF –3.6 million was burdened with the operating loss of the fuel cell venture of CHF 9.1 million. Sulzer completed its exit from Sulzer Hexis in the second half of 2005 and no charges were incurred in 2006 anymore.

Outlook for 2006

The high level of order activity and the positive mood in the relevant markets are expected to continue. As a result, order intake is likely to remain good during the second half of the year leading to a further increase in sales. Capacity constraints and procurement issues on the part of the suppliers are the main challenges. The operating performance improvements and the economy-of-scale effects of the volume growth will continue to drive the operating and net income. In 2006, both are expected to be substantially above 2005.

Today a media release concerning the acquisition of Mixpac, Werfo, and Mold by Sulzer Chemtech was published. Order intake figures for the third quarter of 2006 will be announced on October 24, 2006.

Key Figures for the First Half of the Year 2006

(January to June)