Notes to the financial statements of Sulzer Ltd

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1 General information

Sulzer Ltd, Winterthur, Switzerland (the Company), is the parent company of the Sulzer Group. Its unconsolidated financial statements are prepared in accordance with Swiss law and serve as complementary information to the consolidated financial statements.

These financial statements were prepared according to the provisions of the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations). Where not prescribed by law, the significant accounting and valuation principles applied are described below.

2 Key accounting policies and principles

Treasury shares

Treasury shares are recognized at acquisition cost and deducted from shareholders’ equity at the time of acquisition. In case of a resale, the gain or loss is recognized through the income statement as financial income or financial expenses.

Investments in subsidiaries and third parties

The participations are valued at acquisition cost or if the value is lower, at value in use, using generally accepted valuation principles.

Non-current interest-bearing liabilities

Non-current interest-bearing liabilities are recognized in the balance sheet at amortized cost. Discounts and issue costs for bonds are amortized on a straight-line basis over the bond’s maturity period.

Share-based payments

Sulzer Ltd operates a share-based payment program that covers the Board of Directors. Restricted share units (RSU) are granted annually. The plan features graded vesting over a three-year period. One RSU award is settled with one Sulzer share at the end of the vesting period. Awards automatically vest with the departure from the Board. The fair value of the Sulzer share at vesting date is recognized as compensation to the Board of Directors.

Foregoing a cash flow statement and additional disclosures in the notes

As Sulzer Ltd has prepared its consolidated financial statements in accordance with a recognized accounting standard (IFRS), it has decided to forego presenting additional information on audit fees and interest-bearing liabilities in the notes as well as a cash flow statement in accordance with the law.

3 Cash and cash equivalents

Sulzer Ltd arranged a CHF 500 million syndicated credit facility with maturity date May 2020 with two one-year extension options. During 2017 the facility was extended by another year until May 2022. The facility is available for general corporate purposes including financing of acquisitions. The facility is subject to financial covenants based on net financial indebtedness and EBITDA, which were adhered to throughout the reporting period. As of December 31, 2017, the use of the facility was CHF 224.6 million, which is disclosed as current interest-bearing liabilities, while at the end of 2016 the facility was not used.

4 Investments in subsidiaries

A list of the major subsidiaries held directly or indirectly by Sulzer Ltd is included in note 36 of the consolidated financial statements.

5 Registered share capital

The share capital amounts to CHF 342’623.70, made up of 34’262’370 shares with a par value of CHF 0.01. All shares are fully paid in and registered.

Shareholders holding more than 3%

 

Dec 31, 2017

Dec 31, 2016

 

Number of shares

in %

Number of shares

in %

Renova Group

21’728’914

63.42

21’728’414

63.42

Treasury shares held by Sulzer Ltd

 

2017

2016

millions of CHF

Number of shares

Total transaction amount

Number of shares

Total transaction amount

Balance as of January 1

177’461

16.9

187’191

17.9

Purchase

109’720

11.8

33’989

3.1

Share-based remuneration

–67’904

–6.6

–43’719

–4.1

Balance as of December 31

219’277

22.1

177’461

16.9

The total number of treasury shares held by Sulzer Ltd as of December 31, 2017, amounted to 219’277 (December 31, 2016: 177’461 shares), which are mainly held for the purpose of issuing shares under the management share-based payment programs.

6 Non-current interest-bearing liabilities

 

2017

2016

millions of CHF

Book value

Nominal

Book value

Nominal

0.375% 07/2016–07/2022

325.4

325.0

325.5

325.0

0.875% 07/2016–07/2026

125.0

125.0

124.9

125.0

Total as of December 31

450.4

450.0

450.4

450.0

On July 11, 2016, Sulzer issued new bonds via dual tranches of CHF 450 million in total. The first tranche of CHF 325 million has a term of six years and carries a coupon of 0.375% and has an effective interest rate of 0.35%. The second tranche of CHF 125 million has a term of ten years and carries a coupon of 0.875% and has an effective interest rate of 0.88%. The bonds were issued to refinance the CHF 500 million bond maturing in July 2016 and are traded at the SIX Swiss Exchange.

7 Contingent liabilities

millions of CHF

2017

2016

Guarantees, sureties, comfort letters for subsidiaries

 

 

– to banks and insurance companies

1’393.4

1’316.4

– to customers

268.8

404.4

– to others

251.1

110.9

Guarantees for third parties

10.0

10.0

Total contingent liabilities as of December 31

1’923.3

1’841.7

As of December 31, 2017, CHF 342.0 million (2016: CHF 272.8 million) of guarantees, sureties, and comfort letters for subsidiaries to banks and insurance companies were utilized.

8 Administrative expenses

millions of CHF

2017

2016

Compensation of Board of Directors

2.3

2.1

Other administrative expenses

59.5

58.8

Total administrative expenses

61.8

60.9

Sulzer Ltd does not have any employees. The compensation to the Board of Directors includes share-based payments and remuneration. Other administrative expenses contain management services and cost related to the Sulzer Full Potential program.

9 Investment income and investment and loan expenses

In 2017, the investment income contains ordinary and extraordinary dividend payments from subsidiaries amounting to CHF 122.9 million (2016: CHF 86.2 million).

The investment and loan expenses contain allowances on investments and loans amounting to CHF 36.8 million (2016: CHF 82.3 million).

10 Share participation of the Board of Directors, Executive Committee, and related parties

Restricted share units for members of the Board

The compensation of the Board of Directors consists of a fixed cash component and a restricted share unit (RSU) component with a fixed grant value. The number of RSU is determined by dividing the fixed grant value by the volume-weighted share price of the last ten days prior to the grant date. One-third of the RSU each vest after the first, second, and third anniversaries of the grant date, respectively. Upon vesting, one vested RSU is converted into one share of Sulzer Ltd. The vesting period for RSU granted to the members of the Board of Directors ends no later than on the date on which the member steps down from the Board.

 

2017

 

Sulzer shares

Restricted share units (RSU) 1)

Performance share units (PSU) 2015 2)

Performance share units (PSU) 2016 3)

Performance share units (PSU) 2017 4)

Board of Directors

31’044

23’483

Peter Löscher

5’244

Matthias Bichsel

3’624

3’253

Thomas Glanzmann

6’841

2’625

Axel C. Heitmann

526

2’243

Jill Lee

5’320

2’625

Mikhail Lifshitz

526

2’243

Marco Musetti

4’917

2’625

Gerhard Roiss

9’290

2’625

 

 

 

 

 

 

Executive Committee

46’835

22’546

6’594

37’266

32’624

Greg Poux-Guillaume

9’682

15’121

942

18’641

13’196

Daniel Bischofberger

1’424

3’024

Thomas Dittrich

21’000

2’826

5’178

3’666

Frédéric Lalanne

7’026

2’314

3’024

César Montenegro

14’844

2’826

5’178

3’666

Armand Sohet

3’560

3’024

Torsten Wintergerste

1’309

399

971

3’024

1) Restricted share units assigned by Sulzer.

2) The average fair value of one performance share unit 2015 at grant date amounted to CHF 193.97.

3) The average fair value of one performance share unit 2016 at grant date amounted to CHF 118.05.

4) The average fair value of one performance share unit 2017 at grant date amounted to CHF 116.02.

 

2016

 

Sulzer shares

Restricted share units (RSU) 1)

Performance share units (PSU) 2014 2)

Performance share units (PSU) 2015 3)

Performance share units (PSU) 2016 4)

Board of Directors

50’998

22’157

Peter Löscher

28’131

5’363

Matthias Bichsel

1’157

3’244

Thomas Glanzmann

5’591

2’684

Axel C. Heitmann

1’578

Jill Lee

4’070

2’684

Mikhail Lifshitz

1’578

Marco Musetti

3’667

2’684

Gerhard Roiss

8’382

2’342

 

 

 

 

 

 

Executive Committee

28’726

43’029

3’278

6’594

37’266

Greg Poux-Guillaume

30’242

942

18’641

Daniel Bischofberger

1’424

Thomas Dittrich

14’000

4’921

964

2’826

5’178

Frédéric Lalanne

7’026

2’314

César Montenegro

13’858

2’314

2’826

5’178

Armand Sohet

3’560

Torsten Wintergerste

868

840

971

1) Restricted share units assigned by Sulzer.

2) The average fair value of one performance share unit 2014 at grant date amounted to CHF 206.63.

3) The average fair value of one performance share unit 2015 at grant date amounted to CHF 193.97.

4) The average fair value of one performance share unit 2016 at grant date amounted to CHF 118.05.

Granted Sulzer shares to members of the Board of Directors

 

2017

2016

 

Quantity

Value in CHF

Quantity

Value in CHF

Allocated to members of the Board of Directors

11’001

1’156’119

14’577

1’156’248

11 Subsequent events after the balance sheet date

At the time when these financial statements were authorized for issue, the Board of Directors were not aware of any events that would materially affect these financial statements.