Sulzer Ag · SIX:SUN
Sulzer — FY2000 Earnings Presentation
59 slides from Sulzer's earnings presentation, Mar 9, 2001
Slide 1: Annual results presentation 2000: Good Results Good Momentum
Annual results presentation 2000 Good Results Good Momentum March 9, 2001 IR-4001
Slide 2: I. Financial results summary
I. Financial results summary IR-4002
Slide 3: Net Sales 2000
Net Sales 2000 MCHF Core operations 5736 Discontinuing operations 6000 5519 +4% Sulzer Industries Others 5000 4398 4356 4000 +5% 3000 2000 1347 1182 +14% +17% 1000 0 1999 2000 19991) 20002) 1999 2000 Sulzer Medica Sulzer Industries Sulzer Corporation3) 1) Incl. Sulzer Hydro MCHF 305 2) Incl. Ahlstro
Slide 4: Operating Income before Goodwill Amortization and Exceptional Items
Operating Income before Goodwill Amortization and Exceptional Items MCHF Core operations 418 450 +35% Discontinuing operations 400 Sulzer Industries Others 350 309 270 300 +15% 250 234 175 200 +97% 150 89 100 50 0 1999 2000 19991) 20002) 1999 2000 Sulzer Medica Sulzer Industries Sulzer Corporation3)
Slide 5: Operating Income / Net Income
Operating Income / Net Income MCHF 418 –63 317 –33 –5 48 256 Goodwill –109 206 „New Non-operat. –50 Strategy“ income Minority Others Interests Taxes Exceptional items Operating income Operating Net income Net income before goodwill and income before minority exceptional items interests IR-4005
Slide 6: Earnings Per Share 1997–2000
Earnings Per Share 1997–2000 CHF As reported 80 67 68 70 70 Before exceptional 70 59 59 items (pro forma) 60 50 50 48 40 30 Cash Distribution 20 to Shareholders 10 0 1997 1998 1999 2000 IR-4006
Slide 7: Cash Flow 2000
Cash Flow 2000 MCHF 2000 1999 Total cash flow from operating activities 283 282 Total cash flow from investing activities –364 892 Net cash flow –81 1 174 Net cash 224 1) 565 – at Sulzer Medica 528 415 – at Sulzer Industries / Corporate Other –304 1) 150 1) Excl. treasury shares approx. MCHF 200 IR-
Slide 8: Sulzer Medica: Key Messages
Sulzer Medica: Key Messages Solid Sustainable Financial Performance • Delivered 14% sales and EBITA CAGR 1996 – 2000 Strong Business Fundamentals • Focused on core businesses • Attractive market positions • Increased focus on higher growth markets Securing the Future • Full near-term pipeline for la
Slide 9: Sulzer Medica: Solid Sustainable Financial Performance
Sulzer Medica: Solid Sustainable Financial Performance Sulzer Medica Group Income Statement MCHF 2000 1999 ∆ Adj. Sales 1,347 1,182 +14% +8% Operating Income* 270 234 +15% +7% Net Income 190 483 n/a Net Income adjusted** 191 148 +29% +23% Personnel on Dec. 31 3,397 3,174 +7% *) before goodwill amort
Slide 10: Sulzer Medica: Strong Business Fundamentals
Sulzer Medica: Strong Business Fundamentals Focus on core businesses Total Sales 2000 = CHF 1,347 million Orthopedics Joint / Fracture Care • Focus on market leading Spine Care 18.5% positions Dental Care • Significant technology/ 4.2% know-how Cardiovascular • Recognised for product Prostheses 13.3
Slide 11: Sulzer Medica: Outlook Year 2001
Sulzer Medica: Outlook Year 2001: Focused on delivering growth • Further US market penetration • Strategic acquisitions in higher growth businesses to enhance product portfolio – Expansion of Spine care portfolio – Paragon completes dental portfolio – IntraTherapeutics enhances cardiovascular portfo
Slide 12: Financial Highlights
Financial Highlights Sulzer management has delivered in 2000 …. Targets set in 1999 for 2000 Results achieved in 2000 Sulzer Medica Sulzer Medica • sales growth +10% • sales growth +14% • operating income1) growth +10% • strong operating income1) growth +15% Sulzer Industries Sulzer Industries • sal
Slide 13: New Sulzer Industries: Ahead of Plan
Sulzer Industries New Sulzer: Ahead of Plan IR-40013
Slide 14: Year 2000 in Review; Future of the New Industrial Sulzer Corporation
Sulzer Industries I. Year 2000 in Review II. Future of the New Industrial Sulzer Corporation Appendix Overview of Sulzer Portfolio IR-40014
Slide 15: Three Clear Objectives
Three Clear Objectives Improve operating performance Restructure group to enable higher rate of value creation Realise value from fuel cell technology IR-40015
Slide 16: Highlights of 2000
Highlights of 2000 Record financial results • 2000 group operating income up 97% (CHF 175 mio.) • Record results achieved in Sulzer Pumps and Sulzer Metco • Progress towards 2001 group operating income target of CHF 200 mio. ahead of plan Restructuring project • Cost reduction of CHF 40 mio. “Perfor
Slide 17: Highlights of 2000 (cont.)
Highlights of 2000 (cont.) Value-focused • Accretive acquisitions completed management of portfolio in Sulzer Pumps, Sulzer Metco and Sulzer Turbomachinery Services • Sulzer Hydro and Sulzer Turbo sold at highly attractive valuations • Disposals of Sulzer Infra and Sulzer Textil ongoing and to be co
Slide 18: Sulzer Industries Key Figures 2000
Sulzer Industries Key Figures 2000 MCHF 2000 1999 Change Orders received 4 445 4 223 +5.3%1) Order backlog (31 Dec.) 1 844 1 723 +7% Net sales 4 398 4 356 +1% EBITDA2) 284 230 +23% Operating income before2) 175 89 +97% Personnel employed (31 Dec.) 18 414 3) 17 700 +4% 1) Adjusted for acquisitions an
Slide 19: “Performance” – Restructuring Ahead of Plan
“Performance” – Restructuring Ahead of Plan Original targets 2000 Achievements to date 2002 Headcount reduction ~ 1900 – 1400 headcount reduction – No major negative social issues – Ahead of plan Cost savings 2000: CHF 30 mio. – Operating income improve- ment (2000) CHF 40 mio. – Ahead of plan Provi
Slide 20: Portfolio Management on Track
Portfolio Management on Track Divestitures Acquisitions • Sulzer Hydro • Ahlstrom Pumps Sold at 20 x EBIT Accretive after goodwill and financing charge. Division achieved record • Sulzer Turbo results Sold at attractive valuation • Voith Sulzer • Interturbine Exit from joint venture Excellent strate
Slide 21: Sulzer Metco
Sulzer Metco • Excellent financial performance 2000 1999 – 12% organic sales growth MCHF – 17% EBITDA1) improvement Orders received 361 305 Order backlog (31 Dec.) 146 2) 47 • Continuing product development Net sales 338 301 successes EBITDA1) 40 35 • Integration of acquired Eldim and Margin 11.8% 1
Slide 22: Sulzer Turbomachinery Services
Sulzer Turbomachinery Services • Strong sales growth of 15% 2000 1999 MCHF • Profitability hit by two one-offs Orders received 131 106 (chapter 11, loss contract) Order backlog (31 Dec.) 62 2) 30 • Control procedures reviewed to Net sales 117 102 prevent future issues EBITDA1) 10 11 Margin 8.5% 10.8
Slide 23: Sulzer Pumps
Sulzer Pumps • Excellent financial improvement: 20002) 1999 – 10% order growth (pro forma) MCHF – 31% increase in EBITDA1) Orders received 869 628 Order backlog (31 Dec.) 393 349 • Major restructuring implemented Net sales 855 709 (“Performance”); further EBITDA1) 76 58 benefits in 2001 Margin 8.9%
Slide 24: Sulzer Chemtech
Sulzer Chemtech • Performance of Chemtech poor: 2000 1999 – Sales growth continued (12%) MCHF – Falling profits due to poor margins Orders received 275 233 Order backlog (31 Dec.) 124 143 • Most difficult market situation since Net sales 293 262 1992 led to significant problems EBITDA1) 6 29 at all
Slide 25: Sulzer Hexis: Overview
Sulzer Hexis: Overview • Fuel cells are expected to account for a large portion of the growing US$ 10 bn decentralised power market • Hexis™ fuel cell technology has at least one year lead on competition • Patents, knowledge and people provide a significant competitive advantage • Market entry in 20
Slide 26: Sulzer Hexis milestones for success
Sulzer Hexis milestones for success Phase I Phase II Phase III 1989-1997 1998-2000 2001-2003 2004-2006 Value creation Market Entry • Mass-market Alpha Testing • Field demonstra- R&D product ready • Systems tions of proto- • Market entry North • Basic fuel cell R&D integration types in homes America,
Slide 27: Sulzer Hexis Potential for Value Creation
Sulzer Hexis Potential for Value Creation 2005 2010 • Market volume (units)1) Europe: 2.7 mio. 3 mio. (Gas heating / hot water heating) USA: 3 mio. 3.5 mio. • Hexis™ market share 1% (Germany) 4% • Hexis™ units 10 000 260 000 • Hexis™ average price/unit CHF 7 500 2) CHF 3 650 2) • Hexis™ sales CHF 75
Slide 28: Mixed Performance in Non-Core Divisions
Mixed Performance in Non-Core Divisions MCHF, Results 2000 (1999) Operating EBITDA1) income1) Sulzer Infra 20 (33) 10 (23) • Strong performance from core activities • Disappointing results in Communication and Consulting • Divestiture underway Sulzer Textil 52 (3) 34 (–20) • Business strongly reboun
Slide 29: Year 2000 in Review; Future of the New Industrial Sulzer Corporation
Sulzer Industries I. Year 2000 in Review II. Future of the New Industrial Sulzer Corporation Appendix Overview of Sulzer Portfolio IR-40029
Slide 30: Sulzer in 2003
Sulzer in 2003 • A successful global multi-industry company • Four focused businesses with leading positions under a leading brand • Sales volume of ~ CHF 3 bn and EBIT of CHF 270 mio. • Sulzer Hexis fuel cell technology proven and established – visibility of forward growth • Committed to delivering
Slide 31: The Implementation of the New Industrial Sulzer Has Started Already
The Implementation of the New Industrial Sulzer has Started Already 1. Active portfolio management • Four core operating divisions • One “venture” division (Sulzer Hexis) • Continued disposal programme • Regular and systematic business evaluation 2. Corporate re-organization • Focused corporate gove
Slide 32: The Implementation of the New Industrial Sulzer Has Started Already (cont.)
The Implementation of the New Industrial Sulzer has Started Already (cont.) 3. Continued operational improvements • Second stage of project “Performance” • Integration of acquisitions 4. Value focused targets • Committed and clear financial targets • Value enhancing use of debt capacity • Accelerate
Slide 33: Ad 1: Active portfolio management – Progress Update
Ad 1: Active portfolio management – Progress Update March 2000 Update March 2001 “Venture” Hexis Hexis Key milestones achieved “Build” Metco Metco Acquired Eldim/Interturbine Turbom. Serv. Turbom. Serv. Acquired Elbar/Interturbine Pumps Pumps Acquired Ahlstrom pumps Infra Chemtech Value creation ide
Slide 34: Ad 1: Radical Portfolio Re-alignment
Ad 1: Radical Portfolio Re-alignment Old Sulzer New Sulzer Metco • 60% of sales classified Turbomach. Serv. Metco as non-core Pumps Turbomach. Serv. Chemtech • High-quality residual portfolio Pumps Infra with EBITDA margins of Chemtech Textil in excess of 10% and Hexis Turbo considerable upside pote
Slide 35: Ad 2: The Organization Chart for the New Industrial Sulzer AG
Ad 2: The Organization Chart for the New Industrial Sulzer AG as of April 19, 2001 Sulzer CEO F. Kindle General Secretary K. Hägi Finance Corporate Markets and Development Technologies B. Allmendinger P. Kilchmann B. Walser Sulzer Sulzer Sulzer Sulzer Sulzer Discontinuing Metco Turb. Serv. Pumps Che
Slide 36: Ad 3: Continued operational improvements
Ad 3: Continued operational improvements Project “Performance” Focus on extracting CHF 60 mio. from ongoing businesses Key Operational Targets Current 2003 targets EBIT EBIT Sales Margin2) Sales Margin2) Sulzer Metco 338 9.5% 12% Sulzer Turbomachinery Services 117 5.1% 12% Sulzer Pumps 855 6.0% 8.0%
Slide 37: Ad 4: Value Focused Targets
Ad 4: Value Focused Targets Targets for 2001 Targets by 2003 • Significant increase of EBIT from • EBIT margin of 9% continued operations • Organic growth of 5–8% • Improvement of net debt position by divestitures -> debt capacity • ROI (before tax) of 14% • Accelerate realization of • Focus on comm
Slide 38: Sulzer Corporation – a Compelling Investment Opportunity
Sulzer Corporation – a Compelling Investment Opportunity • High-quality multi-industry group with leadership positions in all major business lines and strong growth potential • Newly organized group with focused governance and new executive management group • Management has successfully demonstrated
Slide 39: View on the offer
View on the offer Value of offer clearly below value of business – Assigns low valuation for core business – No value assigned to upside from fuel cells Wrong time to sell – value enhancing restructuring on-track – very significant margin upside InCentive offer not attractive IR-40039
Slide 40: Year 2000 in Review; Future of the New Industrial Sulzer Corporation
Sulzer Industries I. Year 2000 in Review II. Future of the New Industrial Sulzer Corporation Appendix Overview of Sulzer Portfolio IR-40040
Slide 41: Sulzer Metco: Exploit Market Position to Deliver Strong Growth
Sulzer Metco: Exploit Market Position to Deliver Strong Growth • Market characteristics – Segments: Power generation, aerospace, automotive and many others – Size: Consumables / equipment: USD 1 bn Services: USD 3 bn Components: Very large (USD 20 bn+) – Growth: Above GDP, some high-growth segments
Slide 42: Sulzer Turbomachinery Services: Build on Leadership Position
Sulzer Turbomachinery Services: Build on Leadership Position • Market characteristics – Segments: Power generation, aerospace, others – Size: USD 7.5 bn of which +1.5–2 bn for independents – Growth: Currently booming (+20% p.a.) • Competitive position – Market dominated by large OEMs (GE, Siemens-We
Slide 43: Sulzer Pumps: Continue as Active Consolidator
Sulzer Pumps: Continue as Active Consolidator • Market characteristics – Segments: Oil & gas, HPI, pulp & paper, power generation, etc. – Size: Several to many billion USD (depending on definition) – Growth: Along GDP • Competitive position – No. 1 in P&P (No. 2 is ITT Goulds) – No. 2 in oil & gas a
Slide 44: Sulzer Chemtech: Consolidate Position and Grow Organically
Sulzer Chemtech: Consolidate Position and Grow Organically • Market characteristics – Segments: Refinery, petrochemical and chemical industry, etc. – Size: ~ USD 1 bn – Growth: Slightly above GDP, but cyclical • Competitive position – No. 2 in separation / mass transfer components (No. 1 is Koch-Gli
Slide 45: Sulzer Hexis is Leader in SOFC Fuel Cell Technology
Sulzer Hexis is Leader in SOFC Fuel Cell Technology • Residential market characteristics – Market size: > CHF 1 bn in 2004 – Growth: Local/fragmented market with geographical differences in climate and utility pricing • Competitive position – Global No. 1 in SOFC fuel cell technology (residential ap
Slide 46: I. Spin-off / Rejection of the Bid
I. Spin-off / Rejection of the Bid Appendix Spin-off Structure IR-40046
Slide 47: Rationale for Separation
Rationale for Separation • Allows each management team to focus on their growth strategy • Enhances transparency of the underlying business activities • Enhances strategic flexibility of both companies • Gives investors choice between Sulzer Medica and Sulzer Industries • Increases liquidity of Sulz
Slide 48: Implementation of Spin-Off
Implementation of Spin-Off • Clean and simple separation of Sulzer and Sulzer Medica: – At the end of the transaction Sulzer shareholders will hold one Sulzer and two Sulzer Medica shares – Fast execution – July / August 2001 – Tax efficient – tax ruling obtained, tax-privileged transaction under Sw
Slide 49: Spin-Off Plan Sulzer Medica
Spin-Off Plan Sulzer Medica Preliminary calendar 19 April 2001 Annual General Meeting of Sulzer AG to decide upon spin-off 20 April 2001 Annual General Meeting of Sulzer Medica AG July/August 20011) Distribution of Sulzer Medica shares to Sulzer AG shareholders (2 Sulzer Medica shares per one Sulzer
Slide 50: InCentive’s Two Sets of Proposals
InCentive’s Two Sets of Proposals • InCentive - currently a 5% shareholder - secures Board control at the AGM with no payment to shareholders: – Change of all Board members to put in place InCentive’s representatives – Removal of all voting restrictions – A spin-off of Sulzer Medica • InCentive has
Slide 51: Next Steps
Next Steps AGM Sulzer: Spin-off of EGM Sulzer Spin-off decision Sulzer Medica Medica 19 Feb. 30 March 17 April 19 April 15 May August Q3 InCentive wants ??? Board control Spin-off? Offer period Planned date of offer publication Pre-announced Sulzer schedule take-over bid InCentive schedule IR-40051
Slide 52: InCentive’s Proposals Amount to Hijacking
InCentive’s Proposals Amount to Hijacking • InCentive’s proposals aim to obtain control of the Sulzer Board – and consequently also Sulzer Medica – before – The outcome of the take-over bid is known – The spin-off has been completed • InCentive would gain control without paying for it • InCentive’s
Slide 53: Voting Restrictions
Voting Restrictions • Current status – Introduced by shareholders – Not unusual in Switzerland – Known by investors • Sulzer wants voting restrictions to be removed but... – After the spin-off – And not at the time of this attempt to gain Board control IR-40053
Slide 54: Summing Up: Sulzer vs InCentive
Summing Up Sulzer InCentive Clarity Achieved None Strategy Fully deployed None Value for All shareholders InCentive IR-40054
Slide 55: Appendix: Spin-off Structure
I. Spin-off / Rejection of the Bid Appendix Spin-off Structure IR-40055
Slide 56: Current Structure of Sulzer Group
Current Structure of Sulzer Group • Sulzer currently holds 74% of Public Public Sulzer Medica Shareholders Shareholders • Public shareholders own 100% of Sulzer and 26% of Sulzer Medica Sulzer AG 74% 26% Sulzer Medica AG IR-40056
Slide 57: Process Summary
Process Summary Step 1 Public Public Shareholders Shareholders • Sulzer creates a new company (“NewCo”) • NewCo is capitalised by the Sulzer AG contribution of approximately 7.3 million Sulzer Medica shares 100% 1% remaining Step 2 shares • Capital reduction of Sulzer from NewCo CHF 60 by CHF 59.97
Slide 58: Process Result
Process Result Step 3 Public market Public market • Simultaneously with step 2 NewCo is absorbed by Sulzer Medica by way of merger • Two Sulzer Medica shares (corresponding to two NewCo shares) are allocated for each Sulzer share 73% 26% • Sulzer is left with around 1% of Sulzer 100% Medica1) Sulzer
Slide 59: Safe Harbor Statement
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