Slide 1: Annual Results 2016
Annual Results 2016 Greg Poux-Guillaume, CEO | Thomas Dittrich, CFO | March 1, 2017
Slide 2: 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 may contain forward-looking statements, including but not limited to, projections of financial developments, market activities or future performance of products and solutions, containing risks and
Slide 3: Agenda
Agenda 1. Market Review 2. Update on Sulzer Full Potential program 3. Financial Review 4. New APS division / organizational changes 5. Outlook 3 Annual Results 2016 | March 1, 2017
Slide 4: Rebalancing continues: Oil & Gas 45%, Aftermarket 53%
Rebalancing continues: Oil & Gas 45%, Aftermarket 53%1 Order intake 2016 Order intake 2016 Order intake 2016 by market by region by type1 26% 21% 45% 45% 53% 47% 12% 34% 17% Oil and Gas2 Europe, Middle East, Africa Equipment Power Americas Aftermarket Water Asia-Pacific General Industry 1. Excluding
Slide 5: Power, Water and General Industry: positive trends
Power, Water and General Industry: positive trends OI share 2016 Power Water General Industry 17% 12% 26% Order intake 2016 vs. 2015 Good activity levels in Asia Solid municipal water Strong dental and beauty boosted by China and India market in US and China business US driven by gas, Acti
Slide 6: Oil & Gas: Downstream most active segment
Oil & Gas: Downstream most active segment OI share 2016 Oil & Gas Order intake (–11% 1) 2016 vs 2015 45% Upstream Midstream Downstream ~10% ~6% ~29%2 Volume still reducing Midstream construction Acceleration seen in Q4 slowed notably Significant price pressure Refinery utilization levels d
Slide 7: Oil & Gas capex –26% in 2016, stabilization ahead
Oil & Gas capex –26% in 2016, stabilization ahead Sulzer O&G order intake 20151 20161 Pumps New Equipment: –32% –24% Pumps & RES Aftermarket: –3% –5% Chemtech Separation Technology: –13% +2% –24% –26% 2014 2015 2016E 2017E 2018E 1. Adjusted for currency effects Source: Bloomberg data January 2017 -
Slide 8: Agenda
Agenda 1. Market Review 2. Update on Sulzer Full Potential program 3. Financial Review 4. New APS division / organizational changes 5. Outlook 8 Annual Results 2016 | March 1, 2017
Slide 9: SFP ahead of schedule and on track for CHF 200m
SFP ahead of schedule and on track for CHF 200m (in CHF millions) 200 ~160-180 ~20-40 CHF 124m P&L impact achieved to date Cost savings ~40-60 More than 90% of CHF (excl. direct 124 200m targeted by 20181 procurement) secured through actions already launched 88 All significant restructuring ha
Slide 10: All SFP savings levers on track
All SFP savings levers on track Cost savings by lever (in CHF millions) ~200m 2017 FY 16: 88m 124 FY 15: 36m Indirect Pumps Rotating Eqt. SG&A Chemtech Procurement Equipment Services Highlights 2016 Procurement achieved considerable savings in indirect but also direct procurement Relocation of r
Slide 11: Profitability gap is closing for second consecutive year
Profitability gap is closing for second consecutive year 2014 profitability comparison Expected 2016 profitability1 Company A Company C Company B Company B Company D Company G Company C Company A Company F Sulzer 8.3% ~350bps Company E Company D Sulzer 9.4% ~730bps Company H Company I Company M Comp
Slide 12: Agenda
Agenda 1. Market Review 2. Update on Sulzer Full Potential program 3. Financial Review 4. New APS division / organizational changes 5. Outlook 12 Annual Results 2016 | March 1, 2017
Slide 13: Above guidance despite continuing headwinds
Above guidance despite continuing headwinds Key figures Commentary In CHF millions 2016 2015 YoY YoY adj.1 Q4 orders up 19% YoY1 Order intake 2,798 2,896 -3.4% -2.0% and 14% QoQ Order intake gross margin 34.0% 33.8% Order intake gross margin slightly up on mix effects Order backlog (Dec 31) 1,43
Slide 14: Q4 orders up sequentially on O&G (+18%) and Geka
Q4 orders up sequentially on O&G (+18%) and Geka Quarterly order intake Commentary (in CHF millions ) +19% Drivers of Q4 order intake: +14% PE up by 10% YoY1 on 801 784 strong water and power 739 732 Ø 2016 businesses; O&G flat 685 685 ~700m 642 RES flat YoY1, with positive 627 O&G offset by d
Slide 15: Acquisitions partly offset headwinds impact on sales
Acquisitions partly offset headwinds impact on sales Sales By region In CHF millions 2016 2015 YOY YOY adj.1 20% Total Sulzer 2,877 2,971 -3.2% -2.0% Total Divisions 2,888 2984 -3.2% -2.0% 44% Pumps Equipment 1,504 1621 -7.2% -6.2% Rotating Equipment Services 667 693 -3.8% -1.9% Chemtech 718 670 7.2
Slide 16: OpEBITA declined mainly on O&G headwinds in Pumps Equipment division
OpEBITA declined mainly on O&G headwinds in Pumps Equipment division Operational EBITA In CHF millions 2016 2015 YOY YOY adj.1 Total Sulzer 239 254 -6.0% -4.4% opROSA % 8.3% 8.6% Divisions 235 256 -8.5% -6.9% opROSA % 8.1% 8.6% PE with lower margins mainly due to lower Pumps Equipment 86 118 -26.9%
Slide 17: SFP savings largely offset headwinds impact on profitability
SFP savings largely offset headwinds impact on profitability (in CHF millions ) Operational EBITA Headwinds –3.4pp SFP cost savings +3.1pp 254 -18 239 -52 23 88 -56 Impact of O&G headwinds Mainly under-absorption 2015 Volume Margin Mix Other SFP 2016 costs opROSA% 8.6% ∆ –0.3pp 8.3% 17 Annual Result
Slide 18: EBIT impacted by SFP costs of CHF 96m
EBIT impacted by SFP costs of CHF 96m (in CHF millions ) Operational EBITA to EBIT 239 SFP costs of 96m -47 Lower conversion -57 rate of Swiss pension plans -18 115 -36 35 PE -42 RES +2 CT -16 SFP related -12 SFP related -27 Others -1 opEBITA Amortization Restructuring Impairment Other non- Other EB
Slide 19: Adjusted effective tax rate improved to 24.3% in 2016
Adjusted effective tax rate improved to 24.3% in 2016 (vs. 24.9% in 2015) (in CHF millions ) EBIT to Net income shareholders 115 Effective tax rate 36.9% Adjusted ETR 24.3% -19 -1 -35 was -25m in 60 59 2015 -1 EBIT Financial result Income from Taxes Reported Minorites Reported 2016 associates net in
Slide 20: FCF boosted by strong working capital management
FCF boosted by strong working capital management (in CHF millions ) Free Cash Flow 201 Improved 23 net working capital +58 156 60 -18 50 -17 43 60 Depreciation 74.1 Capex -74.9 Amortization 47.3 Impairments 18.4 Net income Inventories Accounts Accounts Net advance Net of D&A Others FCF FCF 2016 rece
Slide 21: One of the strongest balance sheets in the industry
One of the strongest balance sheets in the industry (in CHF millions ) Balance Sheet 2015 2016 Balance sheet December 2016: 1217 Total net debt of: CHF 36m FCF of CHF 201m (CHF 156m in 2015) 696 Special dividend payment of CHF 498m 430 Ordinary dividend payment of CHF 119m Acquisition paym
Slide 22: Unchanged ordinary dividend of CHF 3.50 proposed
Unchanged ordinary dividend of CHF 3.50 proposed Dividend (CHF) 20 18.10 15 Ordinary dividend per share Special dividend per share 14.60 10 5 3.20 3.20 3.50 3.50 3.00 3.00 3.50 0 2010 2011 2012 2013 2014 2015 2016 Proposal to AGM Dividend 2.1% 3.0% 2.2% 2.2% 3.3% 3.7% 3.3% yield2 1. Based on DPS / r
Slide 23: Agenda
Agenda 1. Market Review 2. Update on Sulzer Full Potential program 3. Financial Review 4. New APS division / organizational changes 5. Outlook 23 Annual Results 2016 | March 1, 2017
Slide 24: SMS + Cox + Geka reported as separate Applicator Systems (APS) division
SMS + Cox + Geka reported as separate Applicator Systems (APS) division as of January 1, 2017 Mixpac Industrial adhesives Dental Healthcare Beauty + + + + = = Leading market positions in dental, industrial adhesives and beauty B2B verticals Shared industrial core in innovative high-precision pla
Slide 25: Historical pro-forma figures for APS
Historical pro-forma figures for APS APS pro-forma sales APS pro-forma opEBITA (in CHF millions ) 77 375 318 320 63 51 ~20% ~20% ~17% 2014 2015 2016 2014 2015 2016 Geka SMS combined opEBITA margin Cost synergy run rate of EUR ~9m within 3 years One-off costs to achieve synergies expected to be E
Slide 26: Spare parts reported within RES from January 1, 2017
Spare parts reported within RES from January 1, 2017 PE 2016 sales and opROSA RES 2016 sales and opROSA (in CHF millions ) 1,504 -324 1,180 991 324 667 2016 Parts 2016 2016 Parts 2016 reported pro-forma reported pro-forma opROSA 5.7% ~1.3% 9.9% ~13.8% 26 Annual Results 2016 | March 1, 2017
Slide 27: Ensival Moret to strengthen PE General Industry portfolio
Ensival Moret to strengthen PE General Industry portfolio Date Closed January 31, 2017 Sales (CHF) 123m Profitability breakeven Employees ~730 EV paid 85m (CHF) EV/EBITDA – Rational Complementary application portfolio in fertilizers, sugar, mining, and chemicals Closes product gaps in axial flow
Slide 28: Rotec GT brings gas turbine service in Russia to next level
Rotec GT brings gas turbine service in Russia to next level GT Date Transaction expected to close in Q1 Sales (CHF) 35m Profitability ~20% EBITDA Employees ~50 EV paid 28m (CHF) EV/EBITDA 4x Rational Become a sizable player in the Russian/CIS GT service market with revenues of about CHF 40m (incl.
Slide 29: VIEC boosts Chemtech's upstream product portfolio
VIEC boosts Chemtech’s upstream product portfolio VIEC Date Closed January 31, 2017 Sales (CHF) Mid-single digit Profitability – Employees 13 EV paid 4m (CHF) EV/EBITDA – Rational Vessel Internal Electrostatic Coalscer (VIEC) technology complementary to Chemtech’s upstream portfolio for advanced o
Slide 30: Agenda
Agenda 1. Market Review 2. Update on Sulzer Full Potential program 3. Financial Review 4. New APS division / organizational changes 5. Outlook 30 Annual Results 2016 | March 1, 2017
Slide 31: 2017 market assumptions
2017 market assumptions Oil & Gas Power Water General Industry Rebalancing of Gas positive but Active municipal Dental, Beauty and supply and demand increasing com- markets Industrial expected for 2017, petition in service Adhesives growing Desalination leading to Sulzer Coal substantial
Slide 32: Financial guidance 2017 as of March 1
Financial guidance 2017 as of March 1 Order Intake1 up 5–8% Sales1 up 3–5% Operational ROSA2 % around 8.5% 1. Adjusted for currency effects 2. Operational EBITA divided by sales 32 Annual Results 2016 | March 1, 2017
Slide 33: Summary
Summary Oil & Gas headwinds expected to continue in 2017 before rebound in 2018 SFP program well on track to reach the CHF 200m from 2018 onwards Achieved additional CHF 88m savings in 2016 bringing total to date to CHF124m Additional cost savings of CHF 40–60m expected in 2017 Sulzer narr
Slide 34: Reconciliations and supplementary slides
Reconciliations and supplementary slides 34 Annual Results 2016 | March 1, 2017
Slide 35: Acquisitions partly offset market headwinds impact on sales
Acquisitions partly offset market headwinds impact on sales Order intake By region In CHF millions 2016 2015 YOY YOY adj.1 Total Sulzer 2,798 2,896 -3.4% -2.0% 21% Total Divisions 2,807 2,908 -3.5% -2.0% 45% Pumps Equipment 1,402 1,501 -6.6% -5.4% Rotating Equipment Services 661 698 -5.3% -3.1% Chem
Slide 36: Operational EBITA to EBIT bridges for divisions
Operational EBITA to EBIT bridges for divisions In CHF millions PE RES CT Divisions Others Total opEBITA 2016 86.3 66.2 82.1 234.6 4.3 238.9 Restructuring costs -41.5 1.8 -16.1 -55.8 -1.2 -57.0 Amortization -17.9 -6.3 -21.7 -45.9 -1.4 -47.3 Impairments tangible and -8.8 -3.8 -5.9 -18.5 0.1 -18.4 int