Return to organic order growth, improved profitability, and solid free cash flow despite market headwinds

Order intake grew by 2.2% organically and by 11.8% including acquisitions. Sales increased by 5.2% on acquisitions but declined organically as a result of a low order backlog entering the year. Sulzer Full Potential (SFP) program savings of CHF 61 million more than offset the impact of continuing market headwinds. Profitability increased to 8.4%, including a CHF 10 million (0.3%) one-time charge in the Chemtech division for a discontinued business activity. Free cash flow was CHF 127 million despite significant restructuring-related cash outlay.

If not otherwise indicated, changes compared with the previous year are based on currency-adjusted figures.

Encouraging organic order growth and strong contribution from acquisitions

Order intake increased by 11.8% (nominally 12.8%). CHF 269.1 million from acquisitions and 2.2% organic growth drove this upsurge. Order intake gross margin increased nominally by 0.4 percentage points to 34.4% as business mix effects more than offset the margin erosion from price pressure in the energy markets.

Sulzer delivered strong financial results in 2017, despite continuing market headwinds. We are well on track with our SFP program and should see its full impact on our operating margins as volumes pick up.

Thomas Dittrich Chief Financial Officer

Order intake in the Pumps Equipment division increased significantly by 8.1%, fueled by the Ensival Moret acquisition, which contributed 6.6%, which supplemented the organic growth of 1.5%. Organic growth was driven by oil and gas and general industry orders, which compensated for a strong organic decline in power. Order intake in the water market remained broadly flat on fewer large infrastructure projects, while municipal water order intake grew by 3%. In the Rotating Equipment Services division, order intake grew by 4.9% as a result of the Rotec acquisition. Orders decreased organically by 0.9%, which compared well against the broader market. This was mainly due to lower orders in the turbo services segment in a weak and highly competitive power market. Order intake in the Chemtech division grew by 5.9% (organically 5.1%) supported by the rebound of the Chinese market and strong growth in Europe. In the Applicator Systems division, orders increased by 55.7%. The strong growth resulted from two factors: the acquisitions of Geka, PC Cox, and Transcodent as well as healthy organic growth of 6.0%. Overall, Sulzer’s order intake grew in all regions, except the Middle East and Africa.

Currency translation effects amounted to a positive CHF 26.9 million, due to a stronger Russian ruble and euro, partly offset by a weaker British pound.

As of December 31, 2017, the order backlog amounted to CHF 1’593.5 million (December 31, 2016: CHF 1’439.1 million).


millions of CHF



Order intake



Order intake gross margin



Order backlog as of December 31



Higher sales due to acquisitions

Sales amounted to CHF 3’049.0 million – an increase of 5.2% (nominal: 6.0%). This rise was driven by CHF 276.4 million of acquisition-related sales, which offset an organic sales decline of 4.4%. Positive currency translation effects totaled CHF 23.8 million.

In 2017, sales in the general industry segment recorded strong growth, driven by the Geka and Ensival Moret acquisitions and organic growth. This offset slightly lower sales in all other segments. Organically, Sulzer recorded a 7.6% sales decline in the energy segment.

Sales increased in Europe, Middle East, and Africa (EMEA), and Asia-Pacific, while the Americas region was down from the previous year. Consequently, the share of sales in emerging markets increased from 38% in 2016 to 41% in 2017.

Improved gross margin

Gross margin slightly increased from 30.6% in 2016 to 30.7%. Gross margin was positively affected by the larger share of higher-margin business and the effect of the global factory footprint reduction. This offset the price erosion effect in the oil and gas and in the power markets and a CHF 10 million one-time charge in the Chemtech division for a discontinued business activity. Total gross profit increased to CHF 936.6 million (2016: CHF 879.4 million) as a result of higher sales volumes.

Operational return on sales increased to 8.4%

Operational EBITA (opEBITA) amounted to CHF 255.4 million compared with CHF 238.9 million in 2016, an increase of 5.3% (nominally 6.9%). Savings of CHF 61 million from SFP and the contribution of acquisitions more than offset the impact of headwinds. OpEBITA decreased organically by 2.9% compared with 2016.

Operating expenses excluding amortization, impairment on property, plant, and equipment, restructuring expenses, and other non-operational items increased by 7.0% because acquisition-related cost additions were higher than SFP savings.

Operational ROSA (opROSA) increased to 8.4% compared with 8.3% in 2016, including the above-mentioned CHF 10 million (0.3%) one-time charge in 2017.

Operational key performance ratios










The divisions achieved the following profitability figures (opROSA):

  • Pumps Equipment: –0.3% (2016: 1.1%). The lower profitability was due to the significant new equipment sales decline and margin deterioration as well as the slightly negative contribution from newly acquired Ensival Moret.
  • Rotating Equipment Services: 13.9% (2016: 13.8%). The profitability was organically flat and increased by 0.1 percentage points with the Rotec acquisition.
  • Chemtech: 5.2% (2016: 4.0%). The profitability increase resulted from higher sales and lower operating expenses. Excluding the CHF 10 million one-time charge for a discontinued business activity in the Tower Field Service business unit, the Chemtech opROSA would have been 7.3%.
  • Applicator Systems: 20.5% (2016: 23.6%). The division reported lower profitability due to the first full-year consolidation of the Geka business, acquired in August 2016. On a comparable basis, opROSA increased from pro forma 20.1% in 2016 by 0.4 percentage points to 20.5% in 2017.

(2016: 8.3%)

Bridge from EBIT to operational EBITA

millions of CHF









Impairment on tangible and intangible assets



Restructuring expenses



Non-operational items 1)









1) Other non-operational items include significant acquisition-related expenses, gains, and losses from sale of businesses or real estate (including release of provisions), and certain non-operational items that are non-recurring or do not regularly occur in similar magnitude.

Restructuring expenses and SFP program costs impacted operating income

As part of the SFP program, Sulzer has continued to adapt its global factory footprint and streamline its organization. Restructuring expenses significantly decreased compared to 2016. In 2017, restructuring expenses were mainly associated with measures taken in France, China, Brazil, Switzerland and Ireland.

In 2017, other non-operational items amounted to CHF –28.0 million. SFP-related expenses (CHF 26.0 million) and acquisition-related expenses (CHF 8.0 million) were partly offset by the income from a dispute settlement with the purchaser of the group’s locomotive business. In 2016, other non-operational items amounted to CHF –0.9 million. SFP-related expenses (CHF 26.9 million), acquisition-related expenses, and other items were offset by the favorable effect resulting from a lower conversion rate of the Swiss pension plans (CHF 35.4 million).

Consequently, EBIT amounted to CHF 136.5 million compared with CHF 115.3 million in 2016. Return on sales (ROS) was 4.5% compared with 4.0% in 2016.

Financial income: lower interest expenses

Total financial expenses amounted to CHF 10.8 million compared with CHF 19.3 million in 2016. Interest expenses were down by CHF 2.2 million as a result of the 2016 bond refinancing at favorable conditions. Other financial income/(expenses) amounted to CHF +0.3 million compared with CHF –7.1 million in 2016, mainly due to significantly reduced hedging costs and currency revaluation effects.

In 2017, Sulzer incurred expenses of CHF 0.3 million from a joint venture compared with CHF 0.8 million in the prior year. This relates to a joint venture in China for the service of gas turbines.

Slightly lower adjusted effective tax rate

Income tax expenses slightly increased to CHF 38.2 million (2016: CHF 35.1 million) despite a 28.2% upsurge of the pre-tax income. The effective tax rate declined from 36.9% in 2016 to 30.5% in 2017. Adjusted for the effects of restructuring expenses in both years and the impact of the US tax reform enacted in late 2017, the effective income tax rate declined from 24.3% in 2016 to 23.4% in 2017.

Higher core net income

In 2017, net income amounted to CHF 87.2 million compared with CHF 60.1 million in the previous year. Core net income excluding the tax-adjusted effects of non-operational items totaled CHF 178.3 million compared with CHF 153.8 million in 2016. Basic earnings per share increased from CHF 1.73 in 2016 to CHF 2.44 in 2017.

Improved balance sheet efficiency

Total assets as of December 31, 2017, amounted to CHF 4’117.3 million, which is an increase of CHF 381.4 million from 2016, as a result of acquisitions and currency translation effects.

Non-current assets increased nominally by CHF 180.6 million mainly due to higher goodwill (CHF 85.6 million), other intangibles (CHF 85.5 million), and higher property, plant, and equipment (CHF 20.6 million), while deferred income tax assets decreased by CHF 17.9 million to CHF 139.7 million. Goodwill, other intangible assets, and property, plant, and equipment increased by CHF 123.2 million on a currency-adjusted basis, mainly due to acquisitions.

Current assets increased nominally by CHF 200.8 million, due to higher working capital and higher cash and cash equivalents.

Total liabilities nominally increased by CHF 270.0 million to CHF 2’414.9 million as of December 31, 2017. An increase in borrowings (CHF 248.4 million), trade accounts payable (CHF 54.5 million), advance payments from customers (CHF 30.3 million), and other current and accrued liabilities (CHF 24.1 million) was partly offset by lower defined benefit obligations (CHF 100.5 million).

Equity nominally increased by CHF 111.4 million to CHF 1’702.4 million. This was mainly driven by net income (CHF 87.2 million), the remeasurement of the defined benefit obligation (CHF 91.8 million), and currency translation effects (CHF 54.6 million) which were partly offset by the Sulzer dividend payment (CHF 119.4 million).

Net debt to EBITDA increased from 0.14 in 2016 to 0.81, mainly due to an increase in short-term debt as a result of acquisitions.

Solid free cash flow

Free cash flow amounted to CHF 127.0 million compared with CHF 200.5 million reported in the prior year. The decrease was mainly due to CHF 31.1 million higher cash-out for restructuring (2017: CHF –59.0 million, 2016: CHF –27.9 million) and CHF 34.4 million lower contribution from net working capital (2017: CHF +22.9 million, 2016: CHF +57.3 million). The lower contribution from net working capital came from higher inventories on strong 2017 order growth, while inventory levels had decreased in 2016.

Free cash flow
CHF 127.0 million

(2016: CHF 200.5 million)

Cash flow from investing activities totaled CHF –230.8 million compared with CHF –168.8 million in the prior year. Cash-out for acquisitions amounted to CHF –162.5 million compared with CHF –313.4 million in 2016. Capital expenditures amounted to CHF 81.2 million, slightly above the CHF 74.9 million in 2016.

Cash flow from financing activities totaled CHF 106.3 million compared with CHF –680.6 million in 2016. Dividend payments amounted to CHF 119.4 million in 2017. In the previous year, dividend payments amounted to 617.5 million, which included a special dividend of CHF 498.1 million. Additional borrowings increased available cash by CHF 239.3 million (2016: CHF –59.4 million). Exchange gains on cash amounted to CHF 0.1 million compared with a gain of CHF 6.7 million in 2016.

Outlook 2018

Sulzer expects that the oil and gas market, which accounts for approximately 40% of its sales, will gradually recover and translate into a commercial rebound mostly visible in 2019. The power market is expected to decline, while all other Sulzer markets are expected to continue on their current growth path in 2018. This should lead to a slight increase in organic order level for the company, supplemented by additional volume from newly acquired businesses.

Sulzer delivered to date cumulative SFP savings of CHF 185 million, ahead of the previously communicated range of CHF 160 to 180 million. Sulzer decided to extend its SFP program by an additional year. The company is therefore raising its cumulative savings target from the previously communicated CHF 200 million (from 2018 onwards) to CHF 230 million (from 2019 onwards). In 2018, Sulzer expects its SFP program to deliver incremental cost savings of approximately CHF 25 million to cumulatively reach CHF 210 million.

For the full year 2018, including acquisitions signed in 2017 and adjusted for currency effects, order intake is expected to grow by 5 to 7% and sales to grow by 4 to 6%. Sulzer expects opEBITA margin at around 9.5% (opEBITA in percent of sales).


EBIT: Operating income
ROS: Return on sales (EBIT/sales)
opEBITA: Operating income before restructuring, amortization, impairments, and non-operational items
opROSA: Return on sales before restructuring, amortization, impairments, and non-operational items (opEBITA/sales)
opROCEA: Return on capital employed (opEBITA/average capital employed)
EBITDA: Operating income before depreciation and amortization