Sulzer Ag · SIX:SUN
Sulzer — FY2002 Earnings Presentation
39 slides from Sulzer's earnings presentation, Mar 5, 2003
Slide 1: Annual Results Presentation 2002
Annual Results Presentation 2002 Solid foundation for successful development March 5, 2003 E_BMK2003_030305 / edo / p. 1
Slide 2: Agenda
Agenda I. Main review of 2002 Fred Kindle II. Financial results 2002 Bruno Allmendinger III. Corporate Governance / Dr. Leonardo Vannotti AGM 2003 IV. Outlook and Implications Fred Kindle E_BMK2003_030305 / edo / p. 2
Slide 3: Highlights of 2002 (I)
Highlights of 2002 (I) • Strategic, operational and financial stability established − Portfolio transformation with divestiture of Sulzer Burckhardt successfully concluded − Centerpulse recall litigation threat eliminated − All core divisions operate profitably − Attractive net income and sound bala
Slide 4: Highlights of 2002 (II)
Highlights of 2002 (II) • Operational performance of units varies from “below expectations” to “good” Sulzer Hit hard by market internal adjustments Metco deterioration on the way Sulzer Turboma- Performed well in maintain agility chinery Services difficult situation Sulzer Operational deficiencies
Slide 5: Sulzer in 2002: stability re-established in every respect
Sulzer in 2002: stability re-established in every respect Development in 2002 Results / Consequences • Divestiture of MSB: last step in • Sulzer has a clear and strategic transformation promising business stratgey − industry leaders • Centerpulse recall: litigation − related markets and/or problem s
Slide 6: Sulzer in 2002: a solid strategic foundation for success
Sulzer in 2002: a solid strategic foundation for success Sulzer Sulzer Tur- Sulzer Sulzer Sulzer Metco bom. Serv. Pumps Chemtech Hexis Surface coating Service and Pumping Chemical Fuel cell solutions and repair of thermal solutions process systems for services turbomachinery and services components
Slide 7: Key figures of 2002
Key figures of 2002 MCHF 2002 20011) Volume performance Sales 1946 2988 much affected by Sales Core Divisions 1883 1875 foreign exchange; Order intake Core Divisions 1863 1921 altogether “flat” de- velopment in 2002 EBITDA 249 46 EBITA2) 149 –59 Income performance EBIT 136 70 very positive; inclu- d
Slide 8: Volume development in 2002 was slightly negative, adjusted slightly positive
Volume development in 2002 was slightly negative, adjusted slightly positive MCHF / continuing operations only Order Intake Sales 2016 1965 1946 –1% (+4%) 1917 –5% (+2%) 1921 1863 –3% (+2%) 1875 1883 — (+4%) 2001 2002 2001 2002 Core Divisions Other incl. Sulzer Hexis (…) Adjusted for acquisitions, d
Slide 9: In spite of weaker core performance, overall income figures are attractive
In spite of weaker core performance, overall income figures are attractive MCHF EBITA Net Income 23 –30 Discontin. Goodwill Operations 61 –53 –15 Sulzer Others 143 Fin./ Hexis Taxes/ 971) Min. 832) Core Continuing Total Divisions Operations Sulzer 2001: 123 146 2 !: –21% –2% — 1) ROS: 5.2%; ROCE: 8.
Slide 10: Metco: Surface coating solutions and services
Sulzer Metco Surface coating solutions and services E_BMK2003_030305 / edo / p. 10
Slide 11: Metco: a very difficult year which impacted results
Sulzer Metco: a very difficult year which impacted results • Aerospace and industrial gas turbines MCHF 2002 2001 (IGT) weak from Q2 on; other markets below average Orders received 429 429 • Overall volume and margin reductions (systems, equipment, consumables) Order backlog 54 93 • Restructuring me
Slide 12: Turbomachinery Services
Sulzer Turbomachinery Services Service and repair of thermal turbomachinery E_BMK2003_030305 / edo / p. 12
Slide 13: Turbomachinery Services: very good performance despite adverse market conditions
Sulzer Turbomachinery Services: very good performance despite adverse market conditions • Serious downturn of US power MCHF 2002 2001 generation market in summer 2002; Europe, Middle East and Asia in Orders received 193 206 better condition Order backlog 68 75 • Fast adjustment to local conditions i
Slide 14: Pumps: Pumping solutions and services
Sulzer Pumps Pumping solutions and services E_BMK2003_030305 / edo / p. 14
Slide 15: Pumps: progress stalled due to markets and internal problems
Sulzer Pumps: progress stalled due to markets and internal problems • Apart from oil & gas, markets in poor MCHF 2002 2001 condition (power, pulp & paper) Orders received 942 984 • Internal problems adding to market challenges (operational performance Order backlog 348 453 in US and UK, workload in
Slide 16: Chemtech: Chemical process components and services
Sulzer Chemtech Chemical process components and services E_BMK2003_030305 / edo / p. 16
Slide 17: Chemtech: positive development confirming actions taken
Sulzer Chemtech: positive development confirming actions taken • Markets in very different situation: MCHF 2002 2001 – US: very weak – Europe: weak Orders received 299 302 – Middle East: good Order backlog 111 113 – Asia: very good Net sales 290 312 • Operational turnaround measures taken in 2001 an
Slide 18: Hexis: Fuel cell systems for residential applications
Sulzer Hexis Fuel cell systems for residential applications E_BMK2003_030305 / edo / p. 18
Slide 19: Hexis: several important milestones achieved, more to come in 2003
Sulzer Hexis: several important milestones achieved, more to come in 2003 • “HXS1000 Premiere”: 400 units MCHF 2002 2001 sold, 80 units delivered Orders received 2 8 • Strong list of distribution partnerships with utilities in Europe # units sold (cum.) 400 250 • Next-generation fuel cell devel- # u
Slide 20: Corporate Center: rapid implementation of the previously announced goals
Sulzer Corporate Center: rapid implemen- tation of the previously announced goals Corporate Center: Sharpened focus on four core processes: strategy, execution, people, and communication Sulzer Innotec: Transition to a market-oriented technology service provider (~70% of sales from non-Sulzer custom
Slide 21: Agenda
Agenda I. Main review of 2002 Fred Kindle II. Financial results 2002 Bruno Allmendinger III. Corporate Governance / Dr. Leonardo Vannotti AGM 2003 IV. Outlook and Implications Fred Kindle E_BMK2003_030305 / edo / p. 21
Slide 22: Operating income dominated by Continuing Operations again
Operating income dominated by Continuing Operations again MCHF Continuing Discontinuing Center- Operations Operations pulse 2002 2001 2002 2001 2001 Sales 1946 1965 — 1023 713 EBITDA 243 226 6 –180 –755 Operating income EBITA 143 146 6 –205 –797 Goodwill amortization –30 –27 — –2 –28 Income from dis
Slide 23: Real Estate operations (Other) compensate core divisions decline
Real Estate operations (Other) compensate core divisions decline MCHF EBITA – Continuing Operations Core Divisions 123 Sulzer Hexis 97 Other (Real Estate, Markets and Technology, 61 Corporate Center) 36 –13 –15 2001 2002 2001 2002 2001 2002 E_BMK2003_030305 / edo / p. 23
Slide 24: A buoyant year for Real Estate
A buoyant year for Real Estate MCHF Total 2002 2001 2002 and 2001 Sales of properties and related 219 62 281 holdings well in EBITA 77 45 excess of of which: MCHF 200 target set in − from sales 63 34 spring 2001 − from rentals 14 11 Cash proceeds from sales 181 1) 32 1) After tax and capital expendi
Slide 25: Strong recovery in net income
Strong recovery in net income MCHF 2002 20011) Operating income EBIT 136 70 Financial income –10 –33 Income taxes –37 –30 In % of income before taxes and minority interests 29% 81% Other taxes –5 –5 Minority interests –1 0 Net income 83 2 Per share in CHF 23.97 0.58 1) Excl. Centerpulse E_BMK2003_03
Slide 26: Strong free cash flow generation in 2002
Strong free cash flow generation in 2002 2002 Adjust- 2002 20011) MCHF reported ments adjusted reported Cash flow from operating activities 30 2 Adjustment: Centerpulse 79 109 payment Cash flow from investing 43 312 activities Adjustment: cash transfer to 59 102 marketable securities Free cash flow
Slide 27: Selected financial ratios
Selected financial ratios Financing capacity successfully enlarged MCHF 2002 2001 Cash & marketable securities 407 288 1) Borrowings (short and long-term) –335 –389 Net cash / debt 72 –101 Total assets 2 450 2 802 Shareholder’s equity including minorities 1 237 1 201 In % (in % excl. goodwill) 50% (
Slide 28: Agenda
Agenda I. Main review of 2002 Fred Kindle II. Financial results 2002 Bruno Allmendinger III. Corporate Governance / Dr. Leonardo Vannotti AGM 2003 IV. Outlook and Implications Fred Kindle E_BMK2003_030305 / edo / p. 28
Slide 29: Corporate governance at Sulzer: a very modern organization
Corporate governance at Sulzer: a very modern organization 1 Since AGM 2002, Sulzer has very shareholder friendly articles of association (“one share, one vote”) 2 The Sulzer Board has been downsized, rejuvenated, and internationalized − 6 members (3 CH, 1 DE, 1 NO, 1 USA) − Nomination & Remuneratio
Slide 30: Upcoming Annual General Meeting 2003
Upcoming Annual General Meeting 2003 • Wednesday, April 16, 2003, at 10.00h in Winterthur, Eulachhalle • Apart from regular agenda items, three proposals of special interest − Dividend proposal: CHF 6.– per share − Sulzer CEO, Fred Kindle, up for election into the Board − Mario Fontana and Daniel J.
Slide 31: Agenda
Agenda I. Main review of 2002 Fred Kindle II. Financial results 2002 Bruno Allmendinger III. Corporate Governance / Dr. Leonardo Vannotti AGM 2003 IV. Outlook and Implications Fred Kindle E_BMK2003_030305 / edo / p. 31
Slide 32: A legal issue facing our industry: asbestos claims
A legal issue facing our industry: asbestos claims Facts • “Asbestos Litigation Industry” launching 3rd wave (1)Asbestos material manufacturers (2)Producers of products containing asbestos, and users thereof (3)Manufacturers of products which include components containing asbestos • More than 8400 c
Slide 33: Market assessment back in March 2002
Market assessment back in March 2002 Market situation “Weak” “Soft” “OK” “Strong” power generation power generation original equipment aftermarket 4 2003 aerospace automotive 3 2nd halfyear 2002 pulp & paper refining oil & gas 2 February 2002 chemical industry petrochemical / HPI 1 1st halfyear 2001
Slide 34: Today's view on our markets
Today’s view on our markets Market situation “Weak” “Soft” “OK” “Strong” power generation power ge- original equipment neration aftermarket aerospace automotive pulp & paper refining oil & gas chemical industry petrochemical / HPI (because of Asia) E_BMK2003_030305 / edo / p. 34
Slide 35: Today's view on our markets / outlook
Today’s view on our markets / outlook Market situation “Weak” “Soft” “OK” “Strong” power generation power generation original equipment aftermarket 2nd halfyear 2003 4 auto- in “controllable scenario” aerospace motive 3 March 2003 pulp & paper refining oil & gas 2 February 2002 chemical industry pet
Slide 36: The outlook for 2003 needs to be addressed in scenarios
The outlook for 2003 needs to be addressed in scenarios “Controllable scenario” “Uncontrollable scenario” • Either no Iraq conflict or a very • Prolonged Iraq conflict with short one; “certainty and security negative implications on Middle back by May” East and global security • Assumption: global G
Slide 37: Whatever the future may bring, we are confident
Whatever the future may bring, we are confident … Clear, stable, promising, built on leading positions Strategy of our businesses (technology, services, customer reputation) Financial Healthy situation, strong balance sheet (high Resources equity portion, positive net liquidity) People / Weathered s
Slide 38: Sulzer – our aspirations
Sulzer – our aspirations Customer dedication Performance Financial success “We make our “We meet high “We deliver financial customers more standards” value” competitive” E_BMK2003_030305 / edo / p. 38
Slide 39: The Safe Harbor Statement under the US Private Securities Litigation Reform Act 1995
THE SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT 1995 This presentation contains forward-looking statements, including but not limited to, projections of future performance of materials and products, containing risks and uncertainties. These statements are subject to c