Individual Results for Divisions

Sulzer Pumps continued to build on its upward trend from the previous year. Orders received increased to CHF 680.5 million, up 26.0% (adjusted¹ 15.6%). Sales were up 18.4% year-on-year (adjusted¹ 7.2%) at CHF 546.9 million. As a result of overall improvements in operating excellence, margin discipline and income from the sale of tangible fixed assets, the division achieved an operating income (EBITA) of CHF 41.6 million, up 74.8%. Sulzer Pumps expects a full-year operating income well above the 2004 level.

Sulzer Metco continued to develop at the same high level as the previous year. Orders received were up 8.2% year-on-year (adjusted¹ 8.1%) at CHF 290.1 million. Meanwhile, sales rose 12.9% to CHF 288.1 million, which is equivalent to 13.2% on an adjusted¹ basis. Restructuring measures in the Netherlands only slightly impacted results, with operating income (EBITA) increasing to CHF 18.2 million. As a result of the improvement measures implemented and the more favorable market outlook, Sulzer Metco expects an increase in returns for the year as a whole.

Sulzer Chemtech posted record results; orders received were up 19.3% on the previous year at CHF 200.2 million. Sales rose by 28.7% (adjusted¹ 32.5%) to CHF 192.0 million. Operating income (EBITA) of CHF 19.6 million was achieved due to high volumes and increases in efficiency, while return on sales was 10.2%. Further, large orders are expected in the coming months, and the outlook for Sulzer Chemtech remains positive.

Sulzer Turbo Services posted a mixed performance in the first half. Orders received (+12.8%, adjusted¹ 17.1%, to CHF 123.6 million) and sales (+18.3%, adjusted 22.6%, to CHF 121.3 million) increased. However, the division achieved with CHF 1.1 million (previous year CHF 9.1 million) marginally a positive operating income (EBITA). Whereas the US entities picked up considerably, the situation in one of the Dutch companies deteriorated. To counteract this decline, capacity is being adjusted and partially transferred to other countries, leading to single-digit million restructuring provisions. For 2005, operating income will, therefore, fall substantially below the 2004 result. Orders received and sales are expected to grow further until the end of the year.

At the Sulzer Hexis venture an operating loss of CHF 9.1 million was incurred during the first six months, slightly higher than the CHF 8.2 million of the previous year. Cash expenditures, however, were reduced from CHF 9.2 million to CHF 7.2 million. Sulzer has over the past months conducted a partner search to secure the financing base and enhance market access for its fuel cell venture Sulzer Hexis. It has up to now not been successful. Sulzer has decided that from 2006 onwards the venture investments will be stopped (see today’s separate media release).

Operating income of “Other” amounted to CHF 5.5 million, which is below last year’s level of CHF 8.0 million. As expected, the therein included positive operating income from real estate activities did not reach last year’s figure, which was particularly high due to exceptional income from an insurance payment. Sulzer Innotec developed well.

Outlook for 2005

Sulzer confirms its midterm targets for returns on sales and capital employed as well as organic growth. The high growth rates seen in orders received and sales will probably decline over the next few months as market sentiment cools. Operating income (EBITA) in the core divisions should be higher in 2005 compared to the previous year on account of a healthy inflow of orders and a high order backlog. If no buyer can be found shortly, total cost of closing Sulzer Hexis would impact the operating income of the second half of 2005 by approximately CHF 20 million, of which about CHF 6 million is the cash effect. It is expected that this impact would be compensated by better results of the core divisions and the overall operating income of the corporation will improve over prior year.