Slide 1: Full Year 2015 Results Presentation
Full Year 2015 Results Presentation Greg Poux-Guillaume, CEO | Thomas Dittrich, CFO | February 25, 2016
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 Market Review Sulzer Full Potential Financial Review Outlook 3 FY 2015 results presentation | February 25, 2016 |
Slide 4: O&G exposure mitigated by geographic and aftermarket balance
O&G exposure mitigated by geographic and aftermarket balance Order intake 2015 Order intake 2015 Order intake 2015 split by market split by region split by type 4 FY 2015 results presentation | February 25, 2016 |
Slide 5: O&G market challenging
O&G market challenging Oil and Gas Order intake (-13% 1) 2015 vs 2014 50% Upstream Midstream Downstream ~16% ~4% ~30% Activity strongly impacted Midstream construction High refinery utilization Significant price pressure slowed notably building opportunity pipeline Aftermarket impacted by
Slide 6: O&G capex expectations reduced significantly over the last 12 months
O&G capex expectations1 reduced significantly over the last 12 months 900 800 -20% -30% -30% 700 -6% 600 Capex USD bn -35% 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Cumulated capex global 300 listed companies (USD bn, Jan 2015) Cumulated capex global 300 li
Slide 7: O&G upstream capex hit the hardest – Sulzer compares well to market
O&G upstream capex hit the hardest – Sulzer compares well to market development Sulzer O&G capex 2015E1 vs 2014 2015 vs 2014 1. Bloomberg figures and consensus estimates as of January 20, 2016 7 FY 2015 results presentation | February 25, 2016 |
Slide 8: Other Sulzer segments proved resilient
Other Sulzer segments proved resilient Power Water General Industry 16% 13% 21% Order intake 2015 vs 2014 Good activity levels in Asia Solid municipal water market Overall positive environment driven by China and India in US and China particularly in Pulp and Paper US driven by gas, EMEA E
Slide 9: Decent growth in the Power and Water markets
Decent growth in the Power and Water markets Capex development of Capex development of listed Power Utilities1 major listed Water Utilities1 30% 30% 20% 20% 10% 10% 0% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2007 2008 2009 2010 2011 2012 2013 2014 2015E -10% -10% -20% -20% -30% -30% Capex o
Slide 10: Slowing growth in China and decline in Brazil impacted order intake
Slowing growth in China and decline in Brazil impacted Sulzer’s order intake China Europe APAC EMEA -21% +9% -8% Americas USA Brazil OI %YOY 10 FY 2015 results presentation | February 25, 2016 |
Slide 11: Agenda
Agenda Market Review Sulzer Full Potential Financial Review Outlook 11 FY 2015 results presentation | February 25, 2016 |
Slide 12: Sulzer Full Potential program guides our transformation journey
Sulzer Full Potential program guides our transformation journey SFP key pillars SFP – key characteristics STRATEGY OPERATING OPERATIONAL Initiated in late 2014. Sets out to complete MODEL EXCELLENCE Sulzer’s transformation into a market- oriented, globally operating and Portfolio Organization Proc
Slide 13: Profitability gap to top-tier competitors narrowed by ~200bps
Profitability gap to top-tier competitors narrowed by ~200bps 2014 profitability comparison Expected 2015 profitability1 Company A Company B Company B Company C Company D Company E Company F Company A Company C Company H Company E Company F Company H Company G Company G Sulzer 8.6% ~530bps Sulzer 9.
Slide 14: SFP targets cost savings of approx. CHF 200m by 2018
SFP targets cost savings of approx. CHF 200m by 20181 with implementation costs of 1.0–1.2x Steady state 2018 going forward (in CHF millions) ~200 ~160-200 Previous range given CHF 120–180m Targeted cost savings ~100-120 36 2015 2016 2017 2018 Expected implementation ~40-60 costs 79.5 ~80-90 1. Pre
Slide 15: SFP off to a good start in 2015
SFP off to a good start in 2015 Cost savings by lever 2 (in CHF millions) ~200m X See details on following slides 2017 3 2 2016 1 Cost savings 2015 of CHF 36m (vs. 18m expected) PE CT 2018 steady Procurement operational G&A Service Go-to-market operational state excellence excellence Comprehensive
Slide 16: New procurement organization fully staffed with significant success in 2015
1 New procurement organization fully staffed and with significant success already in 2015 Objectives Achievements Establish new global Savings achieved based procurement on both short-term re- organization and negotiations and advanced sourcing reengineered mid-/ long processes term procurement
Slide 17: Strengthen operational capabilities to compete efficiently
2 Strengthen operational capabilities to compete efficiently in the years to come Objectives Achievements Adjust global footprint Reorganization of PE to market demand and division into three market- develop global oriented business units production strategy Introduction of a dedicated Lever
Slide 18: G&A transformation targets cost reduction of >20%
3 G&A transformation targets cost reduction of >20% Objectives Achievements Share resources across Harmonized finance divisions for an processes with strong integrated and more cost- orientation towards shared efficient setup service options Improve service levels Successful IT cost internal
Slide 19: Agenda
Agenda Market Review Sulzer Full Potential Financial Review Outlook 19 FY 2015 results presentation | February 25, 2016 |
Slide 20: FY2015 impacted by headwinds in O&G
FY2015 impacted by headwinds in O&G Key figures Commentary In CHF millions 2015 20141 YOY YOY adj.2 Q4 orders down 22% YOY2 Order intake 2'895.8 3'160.8 -8.4% -3.7% Order intake gross margin Order intake gross margin 33.8% 33.5% 0.3pp 0.4pp slightly up on mix effects Order backlog (Dec 31) 1'510
Slide 21: Q4 orders reflecting intensified O&G market weakness
Q4 orders reflecting intensified O&G market weakness Order intake Key figures Commentary (in CHF millions) 932 Drivers of Q4 order intake: 859 807 828 PE fell by 27% YOY1 on decline 801 784 753 758 755 in O&G and water markets and 719 a very high comparable base 685 627 RES increased by 8% YOY
Slide 22: Order suspensions in O&G and China slowdown resulted in lower sales
Order suspensions in O&G and China slowdown resulted in lower sales Sales By region In CHF millions 2015 2014 YOY YOY adj.1 Total Sulzer 2'971.0 3'212.1 -7.5% -3.2% 21% Total Divisions 2'983.8 3'221.0 -7.4% -3.1% 41% Pumps Equipment 1621.0 1754.9 -7.6% -1.6% Rotating Equipment Services 693.2 724.6 -
Slide 23: OpEBITA declined on lower volumes and price pressure
OpEBITA declined on lower volumes and price pressure Operational EBITA In CHF millions 2015 2014 YOY YOY adj.1 Total Sulzer 254.1 302.9 -16.1% -11.8% opROSA % 8.6% 9.4% Divisions 256.3 318.7 -19.9% -15.8% PE with lower margins opROSA % 8.6% 9.9% on lower volumes in O&G, FX impact and Pumps Equipment
Slide 24: Sulzer Full Potential partially offset headwinds
Sulzer Full Potential partially offset headwinds Operational EBITA (in CHF millions ) SFP cost savings Headwinds ~2pp ~1.2pp1 303 -22 36 254 -38 -22 -28 25 Impact of Translational headwinds in Higher share of impact: 13.1m O&G in PE and aftermarket in Mainly under- transactional lower volumes Pumps
Slide 25: EBIT impacted by SFP costs of CHF 80m and legal case
EBIT impacted by SFP costs of CHF 80m and legal case of CHF9m Operational EBITA to EBIT (in CHF millions ) 254 SFP costs of 80m -42 -41 -13 121 -28 -9 PE 24 RES 10 CT 7 opEBITA Amortization Restructuring Impairment Other non- Legal case 1 EBIT 2015 of assets operational 2015 items 1. Following the d
Slide 26: Tax rate declined to 24.9% in 2015 from 28.3% in 2014
Tax rate declined to 24.9% in 2015 from 28.3% in 2014 EBIT to Net income shareholders (in CHF millions ) 121 -25 Effective income tax rate: 24.9% 4 -5 75 74 -25 -1 Of which 5m accrued interest for the legal case EBIT Financial result Income from Taxes Reported Minorites Reported 2015 associates net
Slide 27: Free cash flow improved by CHF 58m
Free cash flow improved by CHF 58m, resulting in net income to FCF conversion of >100% Free Cash Flow (in CHF millions ) 56 33 156 -28 50 4 -33 Mainly tax 98 payments 75 Cash collection 73 Lower sales volumes and reversal of 2014 build-up 25 Net income Inventories Accounts Accounts Net Net of D&A Ot
Slide 28: Strong balance sheet, with net cash of CHF 696m
Strong balance sheet, with net cash of CHF 696m Balance Sheet (in CHF millions ) 2014 2015 1302 1217 1'200 Balance sheet December 2015: 774 800 696 Total net cash of: CHF 696m FCF of CHF 156m (98m in 2014) 400 Dividend payment of CHF 119m Acquisitions of CHF 70m 0 Negative FX impact of CHF
Slide 29: Capital structure optimized via CHF 500m special dividend, M&A and SFP
Capital structure optimized via CHF 500m special dividend, M&A and SFP Optimize capital structure Commentary Net debt (cash) / EBITDA1 Confidence in free cash Leverage well within flow generation and solid investment strong start of SFP grade rating Keeping headroom for accretive M&A while optim
Slide 30: Sulzer proposes CHF 14.60 one time special dividend
Sulzer proposes CHF 14.60 one time special dividend Dividend Ordinary dividend per share (lhs) Special dividend per share (lhs) Payout ratio of ordinary dividend (rhs)1 Dividend (CHF) Payout ratio (%) 20 18.10 100 15 69% 10 14.60 50 5 3.00 3.00 3.20 3.20 3.50 3.50 0 0 2010 2011 2012 2013 2014 2015 P
Slide 31: Agenda
Agenda Market Review Sulzer Full Potential Financial Review Outlook 31 FY 2015 results presentation | February 25, 2016 |
Slide 32: Market assessment for 2016: O&G weak, flat to slight growth elsewhere
Market assessment for 2016: O&G continues to be weak, flat to slight growth in other segments Oil & Gas Power Water General Industries 50% 16% 13% 21% 2016 market assessment Further capex and Conventional and Growth driven by Positive outlook for opex reductions nuclear growth municipal pulp
Slide 33: SFP targets and milestones to be achieved in 2016
SFP targets and milestones to be achieved in 2016 Cost savings by lever (in CHF millions) ~200m Expected additional 2016 cost savings of Expected cumulative CHF ~60-80m cost savings of CHF ~100-120m 2015 cost savings of CHF 36m PE CT 2018 steady Procurement operational G&A Service Go-to-Market opera
Slide 34: Financial guidance 2016
Financial guidance 20161 Order Intake2 down 5–10% Sales2 down 5–10% Operational ROSA3 % around 8% 1. As of February 25, 2016 2. Adjusted for currency effects 3. Operational EBITA divided by sales 34 FY 2015 results presentation | February 25, 2016 |
Slide 35: Summary
Summary Significant market headwinds in 2015 expected to continue in 2016 Unleashing Sulzer’s Full Potential SFP accelerated and cost savings target increased from CHF 120-180m to CHF ~200m from 2018 onwards Additional cost savings of CHF ~60-80m expected in 2016 Sulzer narrowed profitabil
Slide 36: Key reporting dates 2016 and contacts
Key reporting dates 2016 and contacts Financial Calendar April 7th, 2016 AGM April 21st, 2016 Q1 Order Intake July 28th, 2016 H1 Report October 20th, 2016 Q3 Order Intake Your investor relations contact: Your media relations contact: Christoph Ladner Matthias Hochuli Head of Investor Relations Media
Slide 37: Reconciliations and supplementary slides
Reconciliations and supplementary slides 37 FY 2015 results presentation | February 25, 2016 |
Slide 38: Swiss franc recovered, but not fully against Euro
Swiss franc recovered, but not fully against Euro CHF/EUR Sulzer FX exposure CHF/USD 38 FY 2015 results presentation | February 25, 2016 |
Slide 39: Increasing headwinds in O&G resulted in lower order intake
Increasing headwinds in O&G resulted in lower order intake Order intake by region In CHF millions 2015 2014 YOY YOY adj.1 Total Sulzer 2'895.8 3'160.8 -8.4% -3.7% 18% Total Divisions 2'907.9 3'169.1 -8.2% -3.6% Pumps Equipment 1'500.8 1'725.5 -13.0% -6.7% 45% Rotating Equipment Services 698.2 725.2
Slide 40: Group charges, divisional shifts and transactional FX impact
Group charges, divisional shifts and transactional FX impact YoY comparison In CHF millions PE RES CT Others Total Adjustments for charges/shifts/FX opEBITA 2015 (as reported) 118.1 70.8 67.4 -2.2 254.1 opROSA 7.3% 10.2% 10.1% 8.6% Group charges 4.2 4.9 2.3 -11.4 Divisional shifts 15.8 -15.8 transac
Slide 41: Operational EBITA to EBIT bridges for divisions
Operational EBITA to EBIT bridges for divisions In CHF millions PE RES CT Divisions Others Total opEBITA 2015 118.1 70.8 67.4 256.3 -2.2 254.1 Restructuring costs -23.8 -10.3 -7.2 -41.3 0.1 -41.2 Amortization -17.2 -6.3 -16.7 -40.2 -2.1 -42.3 Impairments tangible and -6.4 -1.3 -5.4 -13.1 0.1 -13.0 i
Slide 42: Financial result impacted by legal case
Financial result impacted by legal case In CHF millions 2015 20141 YOY YOY adj.2 EBIT 120.9 271.0 -55.4% -53.2% Financial income (net) -24.7 -16.7 -47.9% Share of profit/(loss) of associates 3.7 Income before taxes (EBT) 99.9 254.3 -60.7% Income tax expenses -24.9 -71.9 -65.4% tax rate (%) 24.9% 28.
Slide 43: Core net income
Core net income In CHF millions 2015 2014 Net income reported 75.0 278.1 Metco divestiture – -435.7 Impairment on tangible and intangible assets 13.0 340.4 Amortization 42.3 43.3 Restructuring expenses 41.2 11.2 Other non-operational items 36.7 -23.0 Tax impact -33.2 -8.9 Core net income 175.0 205.4
Slide 44: Forward-looking statements disclaimer
This document may contain forward-looking statements, including, but not limited to, projections of financial developments and future performance of materials and products, containing risks and uncertainties. These statements are subject to change based on known and unknown risks and various other f