Sulzer Ag · SIX:SUN
Sulzer — FY2003 Earnings Presentation
35 slides from Sulzer's earnings presentation, Mar 3, 2004
Slide 1: Annual Results Presentation 2003
Annual Results Presentation 2003 “Trend Reversal Initiated in 2003, Ready to Deliver in 2004” March 3, 2004 E_BMK2003_040303 / page 1
Slide 2: Agenda
Agenda I. Year-in-Review 2003 Fred Kindle II. Financial Results 2003 Bruno Allmendinger III. Outlook and Goals Fred Kindle IV. Corporate Governance / Dr. Leonardo Vannotti AGM 2004 E_BMK2003_040303 / page 2
Slide 3: Summary of the Most Important Results for 2003
Summary of the Most Important Results for 2003 • The corporate restructuring proved successful in the difficult year of 2003 − All core divisions operate profitably − Core divisions with comparatively attractive, organic growth − Very sound financial basis (equity, liquidity) − Organization strength
Slide 4: Assessment of the Operating Performance of the Business Units
Assessment of the Operating Performance of the Business Units Sulzer Difficult markets hinder Measures and markets will Metco turnaround allow improvements in 2004 ☺ Continue to execute Sulzer Turbo- Good performance in view successful strategy machinery Serv. of tough environment Bring operational
Slide 5: Key Figures 2003
Key Figures 2003 in million CHF 2003 2002 Sales 1 826 1 946 • Strong influence of USD currency devaluation Sales core divisions 1 801 1 883 Order intake core divisions 1 883 1 864 • Opposite development of sales and order intake EBITDA 179 249 • Positive influences in 2002 EBITA core divisions 107 1
Slide 6: Low Sales in 2003, Better Prospects for 2004
Low Sales in 2003, Better Prospects for 2004 in million CHF Order intake Sales 1917 1908 +0% (+4%) 1946 1826 –6% (–3%) Order backlog 675 +14% 592 2002 2003 2002 2003 2002 2003 (...) Adjusted for acquisitions, divestitures, and currency effects E_BMK2003_040303 / page 6
Slide 7: Improved Operational Performance, Net Income Clearly Lower Due to One-time Factors
Improved Operational Performance, Net Income Clearly Lower Due to One-time Factors in million CHF EBITA Net income –23 –4 Restruc- 25 –16 Discont. –27 turing Sulzer operations Sulzer Other 1) Pumps Goodwill 107 Hexis –21 93 Financial income, taxes, minority 41 interests Core Continuing Sulzer divisi
Slide 8: Sulzer Metco
Sulzer Metco Products and services: Surface coating and enhancement technologies (thermal spray coatings, thin film, other processes) and services Customers: Aerospace, gas turbine manufacturers, automotive, and many more Market character: Several billion CHF total, cyclical, but with attractive gro
Slide 9: Sulzer Metco: Bleak Year 2003 Brightened Only Towards the End
Sulzer Metco: Bleak Year 2003 Brightened Only Towards the End • Simultaneous slump in two main segments in million CHF 2003 2002 – Aerospace (Iraq, SARS etc.) – Gas turbines (cyclical slump) Order intake 423 430 Order backlog1) 54 54 • Reductions in volume and margin forced restructuring (cost: CHF
Slide 10: Sulzer Turbomachinery Services
Sulzer Turbomachinery Services Products and services: Maintenance and repair services for stationary gas turbines, steam turbines, and turbocompressors, including spare parts and technical processes Customers: Power plant operators, oil and gas, petrochemical, and chemical industries Market characte
Slide 11: Sulzer Turbomachinery Services: Respectable Performance in a Difficult Market Environment
Sulzer Turbomachinery Services: Respectable Performance in a Difficult Market Environment • Difficult market situation in North America in million CHF 2003 2002 (customer reluctance, increased competi- tion); weak dollar causes lower margins in Order intake 197 193 Europe Order backlog1) 65 68 • Suc
Slide 12: Sulzer Pumps
Sulzer Pumps Products and services: Pumps, pumping systems, and associated maintenance and repair services Customers: Oil and gas, HPI, power plants, pulp and paper industry, etc. Market character: Very large (>CHF 10 billion), slightly cyclical and dependent on GDP, large portion of the volume from
Slide 13: Sulzer Pumps: Successful Trend Reversal, Extensive Improvements Introduced
Sulzer Pumps: Successful Trend Reversal, Extensive Improvements Introduced • Market situation “so-so”: in million CHF 2003 2002 – Asia and oil industry good – North America and power generation Order intake 951 942 bad Order backlog1) 429 348 • Measures initiated already paying off, Net sales 870 93
Slide 14: Sulzer Chemtech
Sulzer Chemtech Products and services: Components and services for separation columns and static mixing Customers: Chemical and petrochemical process industries, and others Market character: Niche market (CHF 1–1.5 billion), cyclical Competition: As a result of consolidation, only two global players
Slide 15: Sulzer Chemtech: Dynamic Improvement Reaches Good Level
Sulzer Chemtech: Dynamic Improvement Reaches Good Level • Market situation quite varied in million CHF 2003 2002 – Asia/China: very good – Europe / ME: ok Order intake 312 299 – America: weak Order backlog1) 119 111 • Turnaround measures (2000–2002) and Net sales 307 290 excellent market position ev
Slide 16: Sulzer Hexis
Sulzer Hexis Products and services: Innovative high-temperature solid-oxide fuel cell system (SOFC) for the transformation of hydrocarbons (e.g. natural gas) into electricity and heat Customers: Homeowners, mostly in OECD countries. Marketing support by power utilities Market character: Potentially
Slide 17: Sulzer Hexis: Some Technical Milestones Reached, Near-Series-System Approaching First Tests
Sulzer Hexis: Some Technical Milestones Reached, Near-Series-System Approaching First Tests • Sales of “HXS1000 Premiere” in million CHF 2003 2002 stopped, because next-generation system, “Galileo”, already well- Order intake 0 2 progressed Systems sold (cum.) 400 400 • Key milestones in the service
Slide 18: Sulzer Corporate Center: Focus on the Essential
Sulzer Corporate Center: Focus on the Essential Corporate Center: – Cultural transformation: Our Aspirations (customer orientation, performance, and financial success) – Continuous tightening and focusing Sulzer Innotec: – Lack of third-party research mandates led to restructuring – Testing and tech
Slide 19: Agenda
Agenda I. Year-in-Review 2003 Fred Kindle II. Financial Results 2003 Bruno Allmendinger III. Outlook and Goals Fred Kindle IV. Corporate Governance / Dr. Leonardo Vannotti AGM 2004 E_BMK2003_040303 / page 19
Slide 20: Organic Growth Concealed by Currency Impacts
Organic Growth Concealed by Currency Impacts in million CHF Order Intake Sales Reported figure in 2002 1 917 1 946 in 2003 1 908 1 826 Change –9 –120 Currency effects 121 95 Effect of acquisitions and divestitures –31 –21 Organic growth 81 –46 Growth in % in 2003 +4.3% –2.5% Growth in % in 2002 +2.0
Slide 21: Core Divisions: Increased Contribution to Results
Core Divisions: Increased Contribution to Results Composition EBITA (excl. restructuring charge at Sulzer Pumps) in million CHF 200 Core divisions 6 150 Venture Division 36 61 25 123 Other (Real Estate, Markets and 100 107 Technology, Corporate Center, 97 Consolidation) 50 Discontinuing Operations (
Slide 22: Special Factors in 2002 and 2003 Accumulate to Strong Decrease in Net Income
Special Factors in 2002 and 2003 Accumulate to Strong Decrease in Net Income in million CHF 2002 2003 –17 Gain from sale of –251) Sulzer Burckhardt 83 Decline of the 1) exceptio-nally –16 161) high real estate Restructuring Improvement 41 income of Sulzer after special Pumps factors Net income Net i
Slide 23: Good Contribution from Real Estate, but Expected Decline From 2002 High
Good Contribution from Real Estate, but Expected Decline From 2002 High in million CHF 2003 2002 Sales of properties and related holdings 78 219 EBITA 38 77 thereof: – from sales 30 63 – from rentals/services 8 14 Book value of operationally non-essential properties (Switzerland and abroad) 178 1) 2
Slide 24: Good Cash Flow from Operations, Decline in Proceeds from Disposals as Expected
Good Cash Flow from Operations, Decline in Proceeds from Disposals as Expected in million CHF 2003 2002 U Cash flow generation by core divisions Operating income (EBIT) 80 1) 72 8 Depreciation 71 61 10 Goodwill amortization 27 25 2 EBITDA 178 1) 158 20 Change net current assets/provisions 17 –36 53
Slide 25: Further Expansion of Financing Capacity
Further Expansion of Financing Capacity 31 Dec. 31 Dec. in million CHF 2003 2002 Cash and marketable securities 385 407 Borrowings (short and long-term) –247 –335 Net cash 138 72 Total assets 2 419 2 450 Shareholder’s equity incl. minorities 1 283 1 237 in % (in % excl. goodwill) 53% (46%) 50% (43%)
Slide 26: Agenda
Agenda I. Year-in-Review 2003 Fred Kindle II. Financial Results 2003 Bruno Allmendinger III. Outlook and Goals Fred Kindle IV. Corporate Governance / Dr. Leonardo Vannotti AGM 2004 E_BMK2003_040303 / page 26
Slide 27: Sulzer: A Company with a Desire and a Need to Grow
Sulzer: A Company with a Desire and a Need to Grow Sulzer—Core Competencies – Continuous innovation Goal: Profitable Growth – “The better product” – Business portfolio idea • Organic Growth of core divisions1) generation, knowledge sharing – 2001: 7% – 2002: 2% Sulzer—Business Segments – 2003: 5% –
Slide 28: Growth Priorities in Current Business Portfolio
Growth Priorities in Current Business Portfolio Organic Acquisitions Growth Sulzer – Overall main priority for growth Metco – Larger acquisitions also conceivable – Good organic growth potential Sulzer Turbo- – Acquisition opportunities rather with mach. Serv. smaller companies – Main focus on opera
Slide 29: Midrange Margins and Growth Targets for the Sulzer Divisions
Midrange Margins and Growth Targets for the Sulzer Divisions Organic EBITA Margin ROCE2) Comments Growth p.a.1) 7-9% 11-12% 13-14% – 2001: Just under 11% Sulzer EBITA Metco – Market recovery expected 7-9% 12% 14% – 2002: EBITA 11.5% Sulzer Turbo- – Slow market recovery mach. Serv. expected 4-6% 8%+
Slide 30: Market Assessment Spring 2004
Market Assessment Spring 2004 Market situation weak soft ok strong Power generation aftermarket Original equipment ? power generation Important: How quickly will demand 4 March 2004 for capital goods in the USA recover? Aerospace Automotive 3 March 2003 Pulp and paper Refining Oil and gas 2 February
Slide 31: Short Resumé of the Last 5 Years
Short Resumé of the Last 5 Years The year of “great Successful stabilization Positive outlook and uncertainty” at Sulzer despite difficult global high expectations economy 1999 2000 2001 2002 2003 2004 Crucial large-scale Far-reaching portfolio Despite lower net income, restructuring undertaken real
Slide 32: Confidence for 2004 and Beyond
Confidence for 2004 and Beyond Substance in the Divisions – All in leading positions – Above-average growth potential – Operational improvements in place Corporate Strategy Management Team – Clear, consistent – Relatively young, but seasoned – Proved itself in difficult years – Open, global, dynamic
Slide 33: Agenda
Agenda I. Year-in-Review 2003 Fred Kindle II. Financial Results 2003 Bruno Allmendinger III. Outlook and Goals Fred Kindle IV. Corporate Governance / Dr. Leonardo Vannotti AGM 2004 E_BMK2003_040303 / page 33
Slide 34: Upcoming Annual General Meeting 2004
Upcoming Annual General Meeting 2004 • Thursday, April 29, 2004, at 10.00h in Winterthur, Eulachhalle • Three proposals of special interest: − Dividend proposal: CHF 6.– per share (prior year: CHF 6.–) − Luciano Respini up for election into the board • 57 years old, Italian, economist Università Cat
Slide 35: 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