Notes to the financial statements of Sulzer Ltd

Sulzer Ltd, Winterthur, Switzerland (the Company), is the parent company of the Sulzer Group. Its 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.

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.

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 for 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, 2018, the facility was not used, while at the end of 2017, CHF 224.6 million of the facility was used.

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

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

Shareholders holding more than 3%

Treasury shares held by Sulzer Ltd

The total number of treasury shares held by Sulzer Ltd as of December 31, 2018, amounted to 311’871 (December 31, 2017: 219’277 shares), which are mainly held for the purpose of issuing shares under the management share-based payment programs.

On July 6, 2018, Sulzer issued two bonds via dual tranches of CHF 400 million in total. The first tranche of CHF 110 million has a term of two years and carries a coupon of 0.25% and has an effective interest rate of 0.37%. The second tranche of CHF 290 million has a term of five years and carries a coupon of 1.3% and has an effective interest rate of 1.35%.

On October 22, 2018, Sulzer issued two bonds via dual tranches of CHF 460 million in total. The first tranche of CHF 210 million has a term of three years and carries a coupon of 0.625% % and has an effective interest rate of 0.71%. The second tranche of CHF 250 million has a term of six years and carries a coupon of 1.6% and has an effective interest rate of 1.62%.

All the outstanding bonds are traded at the SIX Swiss Exchange.

As of December 31, 2018, CHF 321.3 million (2017: CHF 342.0 million) of guarantees, sureties and comfort letters for subsidiaries to banks and insurance companies were utilized.

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.

In 2018, the investment income contains ordinary and extraordinary dividend payments from subsidiaries amounting to CHF 125.1 million (2017: CHF 122.9 million).

The investment and loan expenses contain allowances on investments and loans amounting to CHF 49.0 million (2017: CHF 36.8 million).

During 2018, the company sold unquoted equity instruments previously measured at cost to Sulzer Vorsorgeeinrichtung, Sulzer’s pension fund. The transaction price was CHF 31.7 million and the resulting profit CHF 28.5 million. The transaction was priced on an arm’s length basis and was settled in cash prior to December 31, 2018.

The income from trademark license amounts to CHF 36.2 million (2017: CHF 36.7 million).

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.

Granted Sulzer shares to members of the Board of Directors

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.