sulzer myr 2013 presentation
TRANSCRIPT
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Midyear Results Presentation 2013
Midyear Presentation 2013
Higher order intake, lower profitabilityfocused
market strategy
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THE SAFE HARBOR STATEMENT UNDER THE US PRIVATE
SECURITIES LITIGATION REFORM ACT 1995
This presentation may contain forward-looking statements, including
but not limited to, projections of financial developments, market
activities or future performance of products and solutions, containingrisks and uncertainties. These forward-looking statements are subject
to change based on known or unknown risks and various other
factors, which could cause the actual results or performance to differ
materially from the statements made herein.
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Agenda
Review first six months 2013
Financial review
Strategy update
Outlook and summary
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Summary of key figures H1-2013
Solid order intake growth
Three of four divisions grew
Outlook for Full Year 2013:
slight growth of order intake expected
5
CHF
2103mCHF
2025m
Moderate
increase
+4%
H1-2012 H1-2013
Order intake
Book-to-bill H1-2013 >1
Backlog increased to a high level
Focus on efficient backlog execution
Dec 31, 2012 Jun 30, 2013
Order backlog
CHF
2039mCHF
1829m
Increase
+11%
Good order developments
An increased order backlog
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Summary of key figures H1-2013
Slow start into the year, but volumes in recent months
showed improved trends
Changed business mix compared to previous year
Higher volumes for second half of the year expected
Outlook for Full Year 2013:
slight growth of sales expected
6
CHF
1901m
CHF
1923m
Slight
decrease
1%
H1-2012 H1-2013
Sales
Significant decrease in operating income, mainly
caused by the wastewater pumps business and
electro-mechanical services
Tailored measures taken to improve performance in
the second half of the year
Outlook for Full Year 2013:
profitability expected to be slightly lower
CHF
148m
CHF193m
Significant
decrease
23%
H1-2012 H1-2013
Operating income (EBIT) A significant decrease of operating income
Sales improved after slow start
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Measures to improve operating performance
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DivisionMain cause of EBIT
decreaseMeasures taken
Expected effect
in H2-2013
Sulzer
Pumps
Lower sales and lower
margins in Configured
Solutions business
(mainly wastewater)
Under-utilization of
capacities
Accelerate synergy
potential by combining
wastewater business
with process pumps into
Configured Solutions
Reduction of
manufacturing sites
Strong recovery in sales
and profitability
Restructuring measures
are showing positive
impacts
Sulzer
Metco
Restructuring charge for
the closure of a site in
Europe
Continue with strict cost
control
Improved margins
through better cost base
Sulzer
Chemtech
Lower sales in Process
Technology due to
delayed order bookings
in 2012
Larger orders booked in
H1-2013
Higher sales resulting in
better absorption
Sulzer
Turbo
Services
Lower sales in electro-
mechanical businesses
in UK and Australia
Restructuring programs
initiated in UK and
Australia
Capacity adjusted to
lower demand; improved
cost base
Corporate
Center
Higher costs for
modernization of IT
infrastructure
Cost savings measures
implemented
Focused spending
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Agenda
Review first six months 2013
Financial review
Strategy update
Outlook and summary
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Order intake
Good demand
North America
Asia Pacific
Weak demand
Europe
11
millions of CHF H1-2013 H1-2012Change
in %
Change in
% adj.1)2012
Full Year
Sulzer Pumps 1 077.7 1 022.3 +5.4% +5.4% 2 094.3
Sulzer Metco 370.7 360.5 +2.8% 0.8% 689.5
Sulzer Chemtech 411.0 361.0 +13.9% +9.9% 705.1
Sulzer Turbo Services 251.2 277.0 9.3% 8.7% 535.2
Others 7.5 4.6 0.7
Total Sulzer 2 103.1 2 025.4 +3.8% +3.0% 4 023.4
1) Adjusted for currency translation as well as acquisitions and divestitures
Currency translation effectCHF 3 million or 0.1%
Acquisition/divestitures
CHF 15 million or 0.7%
Order backlog Jun 30, 2013CHF 2 039 million
44%
34%
22%
Europe, Middle East, AfricaAmericas
Asia-Pacific
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Sales
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millions of CHF H1-2013 H1-2012Change in
%
Change in
% adj.1)2012
Full Year
Sulzer Pumps 949.9 981.0 3.2% 3.2% 2 097.5
Sulzer Metco 354.5 339.3 +4.5% +1.1% 690.3
Sulzer Chemtech 363.5 362.6 +0.2% 3.6% 724.6
Sulzer Turbo Services 239.6 236.0 +1.5% +2.1% 510.5
Others 6.2 3.8 1.3
Total Sulzer 1 901.3 1 922.7 1.1% 1.9% 4 021.6
thereof services in % 39.4% 40.8% 40.6%
1) Adjusted for currency translation as well as acquisitions and divestitures
Currency translation effect: CHF 2 million or 0.1%
Acquisition/divestitures: CHF 13 million or 0.7%
Nominal growth in all divisions except Sulzer Pumps
Business mix different than in previous year
Service business share decreased by 140 bps.
Slightly lower sales despite recent improved trends
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Gross margin
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Main negative influence factors were:
Gross margin
H1-2012: 31.0%
Gross margin
H1-2013: 30.4%
Negative market developments insome regions
Changes in the business mix
Gross margin decreased slightly by 0.6%
Note: No material impact from raw material price changes
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Operating income (EBIT)detailed analysis
Negative effects:
Lower sales volumesChanges in business mix
Under-utilization of capacities
Higher restructuring expenses
Higher IT cost
14
millions of CHF H1-2013 H1-20121)Change
in %
20121)
Full Year
Sulzer Pumps 53.7 84.0 36.1% 191.2
Sulzer Metco 31.8 34.6 8.1% 68.7
Sulzer Chemtech 35.0 36.6 4.4% 70.7
Sulzer Turbo Services 18.2 24.9 26.9% 54.9
Others 9.5 13.0 23.3
EBIT Sulzer 148.2 193.1 23.3% 408.8
1) Restatement of prior year figures regarding IAS 19 revised; see midyear report note 04 on page 15
Restructuring expenses 5.9 1.0 6.2
Total EBITR Sulzer 154.1 194.1 20.6% 415.0
ROS Sulzer 7.8% 10.0% 10.2%
ROSR Sulzer 8.1% 10.1% 10.3%
Measures taken:
Strict cost control
Adapting capacities to lower
demand
Footprint adjustmentsFurther increase of efficiency
in sales and service networks
Tailored measures initiated to improve performance going forward
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Sulzer Pumps
Review H1-2013 and outlook 2013
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Order intake growth supported by large
orders in oil and gas
Sales started slow into the year, but
improved recently
Operating income decreased significantly
mainly due to lower volumes, changedbusiness mix, and the under-utilization of
capacities
New strategic partnership agreements
signed with customers (e.g. Sinopec)
Further expansion of service footprint
Outlook 2013Full Year:
Order intake and sales expected at similar
levels as in 2012. Profitability forecast to be
slightly lower than in the previous year.
Review H1-2013: Leveraging of synergies by combining
wastewater business with process pumps
into Configured Solutions
Adaptation to lower demand in certain
markets; reducing number in manufacturing
sites in Configured Solutions
Focus on backlog execution and increase
efficiency of sales and service network
Cross-selling of services for rotating
equipment with Sulzer Turbo Services
leveraging cross-divisional cooperation
Current focus areas:
Orders +5% Sales3% ROS 5.7%
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Sulzer Metco
Review H1-2013 and outlook 2013
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Growth in orders and sales
Return on sales lower mainly due to
higher restructuring expenses (site
closure)
Reinforced position in China with a new
and larger production and service facility
Acquisition of a small service company in
Russia
Enlargement of ceramics production
facility in Germany to serve growing
demand in semiconductors and fuel cells
Outlook 2013Full Year:
Moderate growth in order intake and sales
expected. Profitability is forecast to be
slightly lower than in the previous year.
Review H1-2013:
Targeted measures toward capacity
adaptations and cost reductions
Continue with LEAN-principles
Current focus areas:
Orders +3% Sales +5% ROS 9.0%
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Sulzer Chemtech
Review H1-2013 and outlook 2013
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Strong growth in orders while sales were
stable
Profitability slightly decreased
First large industrial scale order for
biopolymer plant (bioplastics) awarded
Acquisition of Krger A/S, a leading
manufacturer of dispensers to strengthen
the position in one-and two-component
mixing system applications
Outlook 2013Full Year:
High single-digit growth in order intake and
sales expected. Profitability is forecast to
reach a double-digit level.
Review H1-2013:
Focus on processing the high order backlog
Leveraging the new headquarter setup in
Singapore for Mass Transfer Technology
Further footprint development of China
Current focus areas:
Orders +14% Sales stable ROS 9.6%
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Sulzer Turbo Services
Review H1-2013 and outlook 2013
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Decrease of order intake while sales grew
slightly
Profitability lower due to reduced capacity
utilization in the electro-mechanical
business in the UK and Australia
Continued to develop the Long-termService business (LTSA)
Outlook 2013Full Year:
Decrease in order intake anticipated. Sales
expected to decrease slightly. Profitability is
expected to be at a lower level than in 2012.
Review H1-2013:
Targeted measures to improve operational
performance in particular in the electro-
mechanical business in the UK and
Australia
Cross-selling services for rotating equipment
with Sulzer Pumpsleveraging cross-
divisional cooperation
Current focus areas:
Orders9% Sales +2% ROS 7.6%
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Consolidated income statementbelow EBIT line
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millions of CHF H1-2013 H1-2012Change
in %
Operating income (EBIT) 148.2 193.1 23.3%
Financial income, net 13.0 14.9 +12.8%
Income before income tax expenses (EBT) 135.2 178.2 24.1%
Income tax expenses 34.7 46.5 +25.4%
Net income 100.5 131.7 24.0%
Attributable to shareholders of Sulzer Ltd. 99.5 129.4 23.1%
Attributable to non-controlling interests 1.0 2.3
Earnings per sharebasic (EPS) in CHF 2.92 3.81 23.4%
Slight improvement in net financial income due to lower interest expenses on pensionobligations and debt
Effective income tax rate at 25.7% (H1-2012: 26.1%) slightly lower due to different
geographical distribution of profits
Lower EBIT driving down net income
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Cash and debt overview
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Cash and marketable securities
Debt
Net liquidity
Net liquidity (millions of CHF) Balance sheet (millions of CHF)
Equity ratio at 49% | Gearing at 28%
Solid balance sheet remained as a basis for further growth
-97 -128
-768
-609 -630
767 681
431 513
454
671
553
-337
-96 -176
-800
-600
-400
-200
0
200
400
600
800
2009 2010 2011 2012 Jun 30,2013
Equity
Liabilities
Equity in % of total assets
Gearing in %
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Agenda
Review first six months 2013
Financial review
Strategy update
Outlook and summary
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Strategy update
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Strategic priorities2
Strategy oriented toward our customers with
a focus on value creation and profitable growth
Vision and values
Focused market strategy3
1
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Vision and values
Vision:
Our customers recognize us for our leading technology and services,delivering innovative and sustainable solutions.
29
We are committed to high
standards and show
respect for people.
We exceed theexpectations of our
customers with
innovative and
competitive solutions.
We perform on the basisof structured work
processes and
LEAN principles.
Values:
Customer and people oriented, making sure that we act excellently
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Strategic priorities
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Outstanding services
Continuous operational
improvements
Technology leadership
Collaborative advantage
Profitablegrowth
Customerorientation
Oriented toward our customers with a focus on
value creation and profitable growth
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Strategic priorities
Technology leadership
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Continued investments in R&D
Further expansion of technology portfolio
Direction:
Increased R&D spending resulting in market success
Progress update(mid-year 2013):
Increased R&D spending by 10% toCHF 48 million
Smaller technology acquisitions
such as Krger A/S
Subsea pumps collaboration
agreement with FMC Technologies
First industrial-scale biopolymer
production plant order recorded
Test bed facility for subsea pumps Plant to produce biopolymers
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Strategic priorities
Outstanding services
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Further strengthening of service network
Expanding service offering
Direction:
Continuous expansion of service footprint
Progress update(mid-year 2013):
Addition of new service centers toglobal service network in Brazil,
China, South Africa, Russia
Smaller service-related acquisitions
and expansion of locations in China
and Russia
New service center in Durban, South Africa New service center in Chengdu, China New service center in Nova Lima, Brazil
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Strategic priorities
Continuous operational improvements
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We strive for continuous improvements in what we do
Progress update(mid-year 2013):
Improved KPIs such as AccidentSeverity Rate from 55 to 44
Based on LEAN-principles, on-time
delivery was further improved by
500 bps
Lean site in Sulzer footprint We care about our employees: social sustainability enjoys high focus at Sulzer
Direction:
Improvement programs for safe behaviorand safety KPIs
Leverage on-time delivery potential
S
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Strategic priorities
Collaborative advantage
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Increasing focus on company-widecooperation
Seizing additional opportunities for
shared services
Direction:
Better results through collaboration; acting as one company
Progress update(mid-year 2013):
Cross-selling initiative on services in
rotating equipment started
Shared service initiative for support
functions started
Sharing and leveraging complementary know-
how between the divisions
Leveraging the synergies also in support functionsworking
as one company
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Focus on three key marketsStrategy for future portfolio
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Oil and gas Power
Equipment
Services
Water
We want to be both an equipment and a services company
for performance-critical applications in three key markets
oil and gas, power, and water
We want to leverageexisting assets and capabilities and
look for synergies across the divisionsact as one
company
Focusing on three
key markets and
exploring divestiture
of the Sulzer Metco
division
Transportation
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WaterPowerOil and gas
Focus on three key markets
Focus on three key markets oil and gas, power, and water plus activities in selected general
industrial markets offers an attractive growth potential based on: Global megatrends and general industry trends
Leading and competitive positioning of our divisions
Sulzer offers both performance-critical equipment and related services in these key markets
36
1) share of sales based on full year 2012 2) pro-forma calculation based on full year 2012 after a potential divestiture of Sulzer Metco
Transportation General industry
40% 15% 12% 24%9%
WaterPowerOil and gas General industry
48% 16% 15% 21%
Focusing on three attractive key markets
Current end market distribution1)
Future end market distribution2)Three key markets
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Realignment of the portfolio to match new market strategy
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Sulzer Metco is a well performing
business and has outstanding solutions
for attractive markets, namely automotive,
aviation, power, and the general
industries
The divisions strength include
Industry-leading and most complete portfolioin surface technologies
A combined offering of coating solutions,
equipment, materials, and services, as well as
components
With its strong customer partnership,
broad global presence, and competentand committed teams, the coatings
business has excellent prospects for
continued profitable growth
Potential divestiture of Sulzer Metco division
Sulzer Metco in brief
Sulzer is looking for a
potential solution that
leverages the strengths of
Sulzer Metco in the best
possible way
1) share of sales based on full year 2012
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Acquisition strategy
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Targeted acquisitions to strengthen strategic positioning
Focus areas:
Equipment and associated services in the rotating equipment and flow control space
Market position:
Leaders with differentiated offering/technology or potential to become leaders
Characteristics:
Small to mid-sized, bolt-on; larger deals possibleFunding:
Given a healthy balance sheet and profits, significant external funding capacity available
W ki t th
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Working together as one company
Cross-selling of services for rotating equipment
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Services for rotating equipment
MechanicalTurbines and compressors Generators and motors
Electro-mechanical Pump servicesPumps
Strengthening Sulzers position in services for rotating equipment
Cross-divisional collaboration
Sulzer Pumps and Sulzer Turbo Services work together more closely to cross-
sell services
Initiative aims to leverage the complimentary technical know how and offering
for services with the combined global footprint and customer base Providers of a full service portfolio to our customers from one single source
W ki t th
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Working together as one company
Shared services in support functions
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Shared services
Finance Human resources Information technology
Leveraging synergy potential in support functions
Group-wide support functions
Initiative aims to assess potential synergy potential through increased
collaboration and standardization in support functions
The scope currently included Finance, HR, and IT areas
Main goals are to secure cost benefits and improve processes
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Agenda
Review first six months 2013
Financial review
Strategy update
Outlook and summary
41
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Market update
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Oil and gas
Power
Water
Development
year-over-year
Expected trend for
remainder of 20131)Assessment Full Year 20132)
Further growth
for parts of the market
Forecast at similar levels
Forecast at similar levels
Forecast at similar levels
Transportation
1) published on July 23, 2013; based on present knowledge and excluding major changes in the general economic conditions; 2) assessment for full year 2013 vs. 2012
Some growth
Remained at low level
Decreased vs. high base
Stable at high levels
Continue at similar levels
Continue at similar levels
Continue at similar levels
Continue at similar levels
with some signs for a picking-
up trend in wastewater
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Outlook 2013
Outlook Full Year 20131):
43
Orderintake
Sales
Returnon sales
H1-2013year-over-year
1) published on July 23, 2013; based on present knowledge and excluding major changes in the general economic conditions;
nominal growth for order intake and sales; Full year 2013 vs. Full year 2012; Basis for ROS: EBIT as stated all-in
Slight growth
Slight growth
Slightly lower
+3.8%
Moderategrowth
Decreasedto 7.8%
1.1%
Slightdecrease
H2-2013expectation1)
Similar levels ofactivity expected
Better levelsexpected based onhigh backlog
Expected toimprove based onhigher volumes andinitiated measures
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Financial midrange targetsby the year 2015
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Midrange
targets2012-2015 Sulzer Pumps Sulzer Metco Sulzer Chemtech
Sulzer Turbo
Services Total Divisions
FY
2012
Target
corridor
by 2015
FY
2012
Target
corridor
by 2015
FY
2012
Target
corridor
by 2015
FY
2012
Target
corridor
by 2015
FY
2012
Target
corridor
by 2015
Sales
growth1+5.9% 6-8% +2.3% 5-7% +4.0% 6-8% +0.8% 5-7% +4.2% 6-8%
EBIT
margin
(ROS)29.5% 11-13% 10.0% 11-13% 9.8% 12-14% 10.8% 12-14% 9.8% 11-13%
Return
on capital
(ROCE)2
13.6% >20% 17.1% >20% 16.3% >20% 14.8% >18% 14.7% >20%
1) Targets 2015: compound annual growth rate in %; base year 2011; organic; portfolio as of December 31, 2011; constant FX
2) Basis: EBIT before major non-recurring items (major restructuring, M&A related expenses such as step ups, integration, transaction costs etc.);
from 2012 including 0.5% higher corporate charges to divisions compared with 2011; Capital Employed including Goodwill and other intangible assets.
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Summary and conclusion
45
Solid order intake growth, while sales slightly decreased
Significant decrease of EBIT, tailored measures to improve initiated
Better operational performance expected for remainder of the year
Continued focus on net working capital management
Balance sheet remained strong; solid foundation for further growth
H1-2013 review
Strategy
Outlook
Clear vision and strong values; remained unchanged
Further progress made in strategic priorities
New focus on three key markets
Full year 2013: slight growth of orders and sales
and a slightly lower profitability expected compared to 2012
Midterm targets: under review
Sulzer has all the ingredients for sustainable future success
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Visit us online: www.sulzer.com
Midyear Presentation 2013
http://www.sulzer.com/http://www.sulzer.com/