Sulzer Ag · SIX:SUN
Sulzer — FY2006 Earnings Presentation
42 slides from Sulzer's earnings presentation, Mar 1, 2007
Slide 1: The Foundation of Sulzer: Commitment to Value Creation
Annual Results Presentation 2006 The Foundation of Sulzer: Commitment to Value Creation March 1, 2007 Annual Results 2006 | 01/03/2007 | slide 0
Slide 2: Agenda
Agenda Review and Divisions Ulf Berg Financial Results Bruno Allmendinger Outlook and Targets Ton Büchner Corporate Governance Leonardo E. Vannotti Annual Results 2006 | March 1, 2007 | slide 2
Slide 3: Our Mission
Our Mission Sulzer is… …a multi-business company …B2B and not B2C …selling products and services (not plants) …an engineering and technology-driven firm …competent in materials and fluid dynamics …a place where people can develop and have fun …creating shareholder value Annual Results
Slide 4: Sulzer Today
Sulzer Today Approximately 10 000 employees Sales of approximately CHF 3 billion p.a. Four divisions in clearly defined main end markets One central research and development unit to support the divisions Sulzer Sulzer Sulzer Sulzer Share of sales Pumps Metco Chemtech Turbo Services Oil and g
Slide 5: Management Principles
Management Principles External Growth Organic Growth Operational Excellence Annual Results 2006 | March 1, 2007 | slide 5
Slide 6: 2006 at a Glance
2006 at a Glance in millions of CHF 2006 2005 U% Two main pillars Order intake 3 276.9 2 635.1 24.4% of performance 2006 Operational improvements Sales 2 801.7 2 498.2 12.1% (lean management, sales processes) EBIT Sulzer 295.6 166.8 77.2% High volume growth in good markets EBIT (divisions) 297
Slide 7: Operational Excellence 2006
Operational Excellence 2006 Sulzer divisions—consistent improvements Operating Income (EBIT) Operating Net Cash Flow1) Divisions in millions of CHF in millions of CHF 320 320 280 280 255 240 240 200 200 155 160 160 52.0 160 7.3 298 131 120 5.0 120 185 80 80 59 128 97 107 40 40 0 0 -2.1 2002 2003 200
Slide 8: Operational Excellence 2006: ROCE is key
Operational Excellence 2006 Sulzer value creation—ROCE is key Return on Sales (ROS) Return on Capital (ROCE) Divisions Divisions 12% 30% 10.7% 25.8% 10% 24% 8% 7.5% 6.3% 18% 16.4% 6% 5.2% 4.7% 12.0% 12% 4% 8.2% 7.3% 6% 2% 0% 0% 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Sulzer Pumps and Sul
Slide 9: Organic Growth: Order Intake
Organic Growth: Order Intake Sales effectiveness, innovation, and good markets CAGR1) Organic growth Organic growth nominal growth 2006 2005 2002–2006 Sulzer Pumps 30.9% 13.5% 16.8% Sulzer Metco 10.5% 9.0% 11.3% Sulzer Chemtech 40.2% 20.5% 19.1% Sulzer Turbo Services 2.7% 7.5% 6.9% Divisions 25.0% 1
Slide 10: External Growth
External Growth Six acquisitions in the last years Annual sales 2006 in millions of CHF Sulzer Chemtech Mixpac, Werfo, and Mold (Switzerland, Liechtenstein) ~120 Acquiring market leader to be combined with Sulzer Chemtech’s Quadro business (disposable mixers) Separation business of KnitMesh (UK) ~10
Slide 11: Sulzer Pumps
Sulzer Pumps Market Leader in Pump Technology and Hydraulics No. 1: Pulp and paper No. 2: Oil and gas No. 4: Power generation Annual Results 2006 | 01/03/2007 | slide 0
Slide 12: Sulzer Pumps: Review 2006
Sulzer Pumps: Review 2006 in millions of CHF 2006 2005 Strong orders Good underlying markets Order intake 1 752.6 1 367.5 Sales-force effectiveness Quality improvements Order backlog as of 31.12. 992.6 667.2 Sales growth 11% (organic 13.5%)— Sales 1 405.4 1 266.4 lagging orders Project s
Slide 13: Sulzer Pumps: Outlook
Sulzer Pumps: Outlook Next Steps Midrange Targets Expansion of service business Selected acquisitions Enhance position in power and water Organic growth: 7% p.a. Geographic expansion in Asia and the Middle East Increased emphasis on research and development Continued drive for lean pro
Slide 14: Sulzer Metco
Sulzer Metco Leader in Surface Technology No. 1: Coating equipment No. 1: Coating materials No. 3: Coating services Annual Results 2006 | 01/03/2007 | slide 0
Slide 15: Sulzer Metco: Review 2006
Sulzer Metco: Review 2006 in millions of CHF 2006 2005 Good growth in orders Aerospace, power generation markets Order intake 658.7 589.2 Quality and responsiveness drives client loyalty and growth Order backlog as of 31.12. 89.9 75.6 Earnings, ROS, ROCE on the way up Sales 644.1 583.0 Dri
Slide 16: Sulzer Metco: Outlook
Sulzer Metco: Outlook Next Steps Midrange Targets Geographic service expansion Leading in customer satisfaction Organic growth: 8% p.a. Key account management Integrated ERP based pricing New products and applications Maximize yield in thermal-spray ROS: 11% powder production ROCE
Slide 17: Sulzer Chemtech
Sulzer Chemtech Components and Services for Separation, Mixing, and Cartridge Technology No. 1: Static mixers (at high viscosity) No. 2: Separation columns Annual Results 2006 | 01/03/2007 | slide 0
Slide 18: Sulzer Chemtech: Review 2006
Sulzer Chemtech: Review 2006 in millions of CHF 2006 2005 Markets and Regions Oil, gas, and plastics markets Order intake 602.1 415.5 deliver growth Taking advantage of sector growth in all Order backlog as of 31.12. 308.1 177.6 regions due to local presence Static mixing markets slow Sales
Slide 19: Sulzer Chemtech: Outlook
Sulzer Chemtech: Outlook Next Steps Midrange Targets Adjacency moves Geographic expansion Expand geographic presence Organic growth > 7% p.a. (Asia, Middle East, Central and Eastern Europe) Product development for gas/liquid separation Drive innovation Extend operations network ROS:
Slide 20: Sulzer Turbo Services
Sulzer Turbo Services Globally Leading Independent Service Provider No. 1: Industrial gas turbines No. 1: Steam turbines No. 1: Turbocompressors Annual Results 2006 | 01/03/2007 | slide 0
Slide 21: Sulzer Turbo Services: Review 2006
Sulzer Turbo Services: Review 2006 in millions of CHF 2006 2005 US market strong Oil and gas, refining Order intake 252.4 244.0 in North and South America Technology and speed lead to Order backlog as of 31.12. 91.3 82.7 customer loyalty Sales 242.5 241.3 Europe improving performance Lean
Slide 22: Sulzer Turbo Services: Outlook
Sulzer Turbo Services: Outlook Next Steps Midrange Targets Expansion in North and Organic growth > 7% p.a. South America Cooperation with Sulzer Pumps Finalize improvement program on ROS > 10% service and parts ROCE > 14% Low-cost outsourcing of parts to Central Europe Develop power-
Slide 23: Agenda
Agenda Review and Divisions Ulf Berg Financial Results Bruno Allmendinger Outlook and Targets Ton Büchner Corporate Governance Leonardo E. Vannotti Annual Results 2006 | March 1, 2007 | slide 23
Slide 24: Operating Income Year-on-Year
Operating Income Year-on-Year in millions of CHF 2006 2005 U% Sulzer Pumps 159.6 98.2 62.5% Sulzer Metco 53.4 36.1 47.9% Sulzer Chemtech 65.4 40.6 61.1% Sulzer Turbo Services 19.3 10.0 93.0% Subtotal Divisions 297.7 184.9 61.0% Other 1) –2.1 –18.1 — Total Operating Income (EBIT) 295.6 166.8 77.2% 1)
Slide 25: Other: Exit Sulzer Hexis—Good Contribution from Real Estate
Other Exit Sulzer Hexis—Good Contribution from Real Estate Operating income: CHF –2.1 million (CHF –18.1 million in 2005) Sulzer Hexis Exited in 2005, total loss of CHF 32.2 million No more cost in 2006 Real Estate Properties sold for CHF 38 million (2005: CHF 39 million), (operationally nones
Slide 26: From Operating Income to Net Income
From Operating Income to Net Income in millions of CHF 2006 2005 U% Operating income (EBIT) 295.6 166.8 77% Financial income 12.5 14.2 –12% Income taxes –83.5 –50.3 66% in % income before tax (EBT) 27.1% 27.8% Net income 224.6 130.7 73% Minority interest –3.2 –2.4 33% Net income attributable to Sulz
Slide 27: Strong Cash Flow Generation in Divisions
Strong Cash Flow Generation in Divisions in millions of CHF 2006 2005 U Cash flow generation of divisions Operating income (EBIT) 297.7 184.9 112.8 Depreciation 69.0 74.9 –5.9 EBITDA 366.7 259.8 106.9 Change net current assets/provisions –30.7 –40.0 9.3 Capital expenditures net 1) –81.3 –60.0 –21.3
Slide 28: Positive Net Cash Flow despite Acquisitions
Positive Net Cash Flow despite Acquisitions in millions of CHF 2006 2005 U Cash flow statement according to IFRS Cash flow from operating activities 259.2 162.8 96.4 Cash flow from investing activities –108.0 –53.5 –54.5 thereof: Capital expenditures –106.0 –77.8 –28.2 Acquisitions –151.8 –35.3 –116
Slide 29: Solid Balance Sheet, High Financing Potential
Solid Balance Sheet, High Financing Potential Net Liquidity Balance Sheet Ratios Equity Liabilities in millions of CHF Cash and marketable securities Equity in % of total assets Gearing in % Debt 800 Net liquidity Total assets in millions of CHF 600 551 3500 60% 444 3000 407 385 50% 400 362 305 212
Slide 30: Share Buy-Back
Share Buy-Back Program launched in November 2006 Size of program CHF 300 million Duration November 2006 until 2007 Purpose Optimization of leverage of balance sheet, i.e., cost of capital Status: End of End of 2006 February 2007 Shares purchased 100 150 154 400 Amount CHF 133 million CHF 211
Slide 31: Agenda
Agenda Review and Divisions Ulf Berg Financial Results Bruno Allmendinger Outlook and Targets Ton Büchner Corporate Governance Leonardo E. Vannotti Annual Results 2006 | March 1, 2007 | slide 31
Slide 32: Sulzer's Perception of its Markets
Sulzer’s Perception of its Markets Current Midterm Market Condition Growth Rate Oil and Gas—upstream Very Good 5–8% Oil and Gas—downstream/refining Very Good 5–8% Power Generation Good 5–10% Pulp and Paper Good 3–4% Aerospace Good 6–8% Automotive Good 5–7% Annual Results 2006 | March 1, 2007 | slide
Slide 33: Midrange Targets for Sulzer's Divisions
Midrange Targets for Sulzer’s Divisions Sulzer Sulzer Sulzer Sulzer Pumps Metco Chemtech Turbo Services Divisions 15% 15.0% 13.1% 11.4% >10.5% 11.0% 10.7% ~11.0% >10.0% 10% 8.3% 8.0% ROS 5% 0% 41.0% 39.8% 30% 40% >30.0% >25.0% 25.8% >20.0% 20% >15% >14.0% ROCE 12.2% 11.7% 10% 0% 24.1% 25% 20% Organi
Slide 34: Conclusion
Conclusion Market positioning Value-creating acquisitions: 2005/2006: CHF 100 million p.a. From 2007 onwards: higher pace Principle: Discipline and accretion Organic growth Profit before growth Invest in sales processes and geographic reach Invest in products and innovation Customer sati
Slide 35: Agenda
Agenda Review and Divisions Ulf Berg Financial Results Bruno Allmendinger Outlook and Targets Ton Büchner Corporate Governance Leonardo E. Vannotti Annual Results 2006 | March 1, 2007 | slide 35
Slide 36: Annual General Meeting 2007: Dividend
Annual General Meeting 2007 Dividend CHF 25 23 Wednesday April 4, 2007, 10 a.m. in the 20 Eulachhalle, Winterthur 14 15 Proposed dividend: CHF 23.– per share (+64%) 10 9 (last year: CHF 14.–) 6 Payout ratio ~37% 5 Dividend yield: 0 approx. 1.7% on year-end 2003 2004 2005 2006 share price Ann
Slide 37: Annual General Meeting 2007: Change in Chairmanship
Annual General Meeting 2007 Change in Chairmanship L. Vannotti hands over after Proposed for election 14 years of service to Sulzer Ltd. New chairman if elected L. Vannotti U. Berg Annual Results 2006 | March 1, 2007 | slide 37
Slide 38: Annual General Meeting 2007: Board of Directors
Annual General Meeting 2007 Board of Directors Proposed for reelection: L. Hughes H.H. Lienhard L. Respini Annual Results 2006 | March 1, 2007 | slide 38
Slide 39: Changes in Executive Management 2007
Changes in Executive Management 2007 CEO CFO Sulzer Pumps T. Büchner P. Meier K. Jackson (as of April 1) (as of March 1) (as of April 1) U. Berg B. Allmendinger T. Büchner (until March 31) (until March 1) (until March 31) Annual Results 2006 | March 1, 2007 | slide 39
Slide 40: The Foundation of Sulzer: Commitment to Value Creation
The Foundation of Sulzer: Commitment to Value Creation Annual Results 2006 | 01/03/2007 | slide 0
Slide 41: Contact
Contact Sulzer Ltd Zürcherstrasse 14 8401 Winterthur, Switzerland Phone +41 52 262 11 22 Fax +41 52 262 01 01 www.sulzer.com Corporate Communications and Investor Relations Phone +41 52 262 72 72 Fax +41 52 262 00 25 communications@sulzer.com Annual Results 2006 | March 1, 2007 | slide 41
Slide 42: 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