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Strong order growth and significant profitability improvement

Order intake grew by 8.4% organically and by 12.5% including acquisitions. Sales increased by 7.8% organically, supported by higher order backlog entering the year, and by 11.9% including acquisitions. Profitability increased by 1.1 percentage points to 9.5%, driven by CHF 45 million savings from the Sulzer Full Potential (SFP) program and acquisitions. Free cash flow grew by CHF 47 million to CHF 174 million on higher operating income.

If not otherwise indicated, changes from the previous year are based on currency-adjusted figures. These are reported without consideration of IFRS 15, applying the same accounting policies as in the prior year.

Strong order growth

Order intake increased by 12.5% in 2018. 8.4% organic growth and CHF 129.0 million from acquisitions drove this upsurge. Order intake gross margin decreased by 1.1 percentage points to 33.3%, largely because of the higher share of new equipment orders in oil and gas and continuing margin pressure in the power segment.

Sulzer delivered strong financial results in 2018 with double-digit sales growth, a significant profitability increase and healthy free cash flow.

Jill Lee, Chief Financial Officer

Order intake in the Pumps Equipment division increased significantly by 16.5%, due to 8.6% organic growth and 7.9% from acquisitions. The strong organic growth was the result of higher oil and gas orders, partly offset by the decline in the power segment. In the Rotating Equipment Services division, order intake grew by 7.6% on the back of 5.8% organic growth and acquisitions. Organic growth was boosted by a rebound in the oil and gas segment, while negatively affected by a drop in power orders. Order intake in the Chemtech division grew by 20.5% organically supported by strong growth across all regions. In the Applicator Systems division, orders increased by 4.2% as a result of the acquisitions of Transcodent and Medmix. Orders remained flat organically. Sulzer’s total order intake grew in the Americas, Europe, the Middle East and Africa, while remaining stable in Asia-Pacific.

Currency translation effects amounted to CHF –19.5 million, due to the weaker Russian rouble, Brazilian real and Argentinian peso, partly offset by the stronger euro.

As of December 31, 2018, the order backlog amounted to CHF 1’666.9 million (December 31, 2017: CHF 1’593.5 million). Negative currency translation effects totaled CHF 47.8 million.


millions of CHF

2018 (new accounting policies) 1)

2018 (previous accounting policies) 2)


Order intake




Order intake gross margin




Order backlog as of December 31




1) According to IFRS 15, see financial review and note 34 of the consolidated financial statements for details.

2) Without consideration of IFRS 15, applying the same accounting policies as in the prior year.

Higher sales on strong organic growth and acquisitions

Sales amounted to CHF 3’404.5 million in 2018 – an increase of 11.9%. This rise was driven by strong organic growth of 7.8% on the back of higher order backlog entering the year, the strong order intake during the year and CHF 126.9 million of acquisition-related sales. Negative currency translation effects totaled CHF 8.3 million.

In 2018, sales grew in all market segments. The most significant increase was recorded in the water segment, driven by strong organic growth and the JWC acquisition, as well as in the oil and gas segment, riding on the higher opening backlog. Sales in the power segment grew from the acquisition of Rotec and Brithinee, offsetting a slight organic decline. The general industry segment recorded higher sales from both organic growth and acquisitions.

Sales grew across all regions, most pronounced in Asia-Pacific. The share of sales in emerging markets increased from 41% in 2017 to 44% in 2018.

Lower gross margin

Gross margin decreased from 30.7% in 2017 to 28.7% in 2018. Gross margin was impacted by the price erosion in the oil and gas and power segments. In addition, the higher share of sales from lower-margin new equipment business negatively affected the overall gross margin. Total gross profit increased to CHF 978.0 million (2017: CHF 936.6 million) supported by higher sales volumes.

Operational return on sales increased to 9.5%

Operational EBITA (opEBITA) amounted to CHF 322.2 million compared with CHF 255.4 million in 2017, an increase of 26.7%. Higher sales, savings of CHF 45 million achieved from SFP and the contribution from acquisitions more than offset the negative margin and mix impact. OpEBITA increased organically by 18.1% compared with 2017.

Operating expenses excluding amortization, impairment on property, plant and equipment, restructuring expenses, and other non-operational items increased by 1.6% because acquisition-related cost additions exceeded SFP savings.

Operational ROSA (opROSA) increased to 9.5% compared with 8.4% in 2017.

Operational key performance ratios


2018 (new accounting policies) 1)

2018 (previous accounting policies) 2)










1) According to IFRS 15, see financial review and note 34 of the consolidated financial statements for details.

2) Without consideration of IFRS 15, applying the same accounting policies as in the prior year.

The divisions achieved the following profitability figures (opROSA):

  • Pumps Equipment: 3.1% (2017: –0.3%). The profitability increased from the strong sales growth in the new equipment business and in the water segment, which grew organically and from the JWC acquisition.
  • Rotating Equipment Services: 13.7% (2017: 13.9%). Profitability reduced only slightly despite pressures from a very competitive power segment, which was broadly compensated by strong cost management.
  • Chemtech: 8.7% (2017: 5.2%): The profitability increase was attributed to strong sales growth. In addition, last year’s profit included a CHF 10 million operational charge, relating to a meanwhile discontinued business activity in the Tower Field Service business unit. Excluding that charge, Chemtech’s 2017 opROSA would have been 7.3%.
  • Applicator Systems: 21.1% (2017: 20.5%). The profitability grew due to higher sales volume.

(2017: 8.4%)

Bridge from EBIT to operational EBITA

millions of CHF

2018 (new accounting policies) 1)

2018 (previous accounting policies) 2)










Impairments on property, plant and equipment




Restructuring expenses




Non-operational items 3)












1) According to IFRS 15, see financial review and note 34 of the consolidated financial statements for details.

2) Without consideration of IFRS 15, applying the same accounting policies as in the prior year.

3) 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.

Non-operational costs impacted operating income

As part of the SFP program, Sulzer has continued to adapt its global factory footprint and streamline its organizational setup. Restructuring expenses significantly decreased compared with 2017. In 2018, restructuring expenses were mainly associated with measures taken in Brazil, Germany, the US, France, the Netherlands and Belgium.

In 2018, other non-operational items amounted to CHF 52.0 million (CHF 28.0 million in 2017). These included the following larger items; SFP-related expenses amounted to CHF 28.5 million (CHF 26.0 million in 2017) and acquisition-related expenses were CHF 8.8 million (CHF 8.0 million in 2017). CHF 6.5 million of costs incurred in relation to the US sanctions against Russia, mostly legal counsel and temporary disruption expenses. Sulzer incurred a CHF 30.1 million charge in Chemtech for a business activity in the Tower Field Service business unit, discontinued from the end of 2017. This was broadly offset by a CHF 28.5 million profit from the sale of unquoted equity instruments related to affordable housing historically provided to Sulzer employees. The equity instruments had previously been measured at cost.

Consequently, EBIT amounted to CHF 183.6 million, an increase of 36.8% compared with CHF 136.5 million in 2017. Return on sales (ROS) was 5.4% compared with 4.5% in 2017.

Financial income: higher interest expenses

Total financial expenses amounted to CHF 18.9 million compared with CHF 10.8 million in 2017. Interest expenses increased by CHF 5.1 million as a result of the higher borrowing volume. Other financial expenses amounted to CHF –1.5 million compared with CHF +0.3 million in 2017, mainly due to adverse currency revaluation effects and fair value changes.

In 2018, Sulzer recorded a profit of CHF 0.7 million from a joint venture compared with a loss of CHF 0.3 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 increased to CHF 49.3 million (2017: CHF 38.2 million) due to higher pre-tax income. The effective tax rate declined from 30.5% in 2017 to 29.8% in 2018. Adjusted for the effects of unrecognized deferred tax assets, restructuring expenses and the impact of the US tax reform, the effective income tax rate declined from 23.4% in 2017 to 23.1% in 2018.

Higher core net income

In 2018, net income amounted to CHF 116.1 million compared with CHF 87.2 million in the previous year. Core net income excluding the tax-adjusted effects of non-operational items totaled CHF 222.7 million compared with CHF 178.3 million in 2017. Basic earnings per share increased from CHF 2.44 in 2017 to CHF 3.54 in 2018.

Improved balance sheet efficiency

Total assets as of December 31, 2018 amounted to CHF 4’884.8 million, which is an increase of CHF 765.7 million from 2017. This was mainly the result of higher borrowings, increased business volume and acquisitions.

Non-current assets increased by CHF 139.9 million to CHF 2’052.4 million mainly due to higher goodwill (CHF 91.6 million), other intangible assets (CHF 34.7 million), and property, plant and equipment (CHF 14.9 million), due to acquisitions and higher capital expenditure. Currency translation effects on non-current assets amounted to CHF –78.0 million.

Current assets increased by CHF 793.8 million to CHF 2’832.4 million, mainly due to higher cash and cash equivalents (CHF 614.9 million) and higher working capital (CHF 152.0 million). Cash and cash equivalents also increased because of the higher borrowings. Working capital mainly increased due to the higher sales volume and backlog-related inventory increase, coupled with higher share of new equipment business in oil and gas. Currency translation effects on current assets amounted to CHF –88.3 million.

Total liabilities increased by CHF 880.5 million to CHF 3’222.3 million as of December 31, 2018, mainly due to an increase in borrowings (CHF 621.5 million) and other current and accrued liabilities (CHF 227.2 million). The latter was mainly due to non-interest-bearing payables to Sulzer’s main shareholder Renova, amounting to CHF 184.6 million. This consisted of CHF 108.6 million related to the purchase of five million own shares from Renova on April 8, 2018, subsequently sold on September 18, 2018, and CHF 76.0 million related to the 2018 dividend payment. Currency translation effects on total liabilities amounted to CHF –73.1 million.

Equity amounted to 1’662.4 million in 2018 compared with 1’702.4 million in 2017. This was mainly driven by the Sulzer dividend (CHF 119.1 million) and currency translation effects (CHF 90.6 million), which were partly offset by net income (CHF 116.1 million), and the remeasurement of the defined benefit obligation (CHF 55.9 million).

Net debt increased slightly from CHF 225.0 million in 2017 to CHF 239.0 million in 2018. Net debt to EBITDA decreased from 0.81 in 2017 to 0.73, mainly due to the increase in EBITDA.

Strong free cash flow

Cash flow from operating activities amounted to CHF 260.8 million, compared with CHF 183.7 million in 2017. This increase was mainly due to the higher net income partly offset by a lower contribution from net working capital. Free cash flow amounted to CHF 173.9 million compared with CHF 127.0 million in the prior year. This was driven by the higher cash flow from operating activities, partly offset by higher capital expenditure.

Free cash flow
CHF 173.9 million

(2017: CHF 127.0 million)

Cash-out from investing activities totaled CHF 297.4 million compared with CHF 230.8 million in the prior year. Cash-out for acquisitions amounted to CHF 218.7 million compared with CHF 162.5 million in 2017. Capital expenditure amounted to CHF 96.2 million, above the CHF 81.2 million in 2017.

Cash flow from financing activities totaled CHF 669.1 million compared with CHF 106.3 million in 2017. This was largely due to additional borrowings of CHF 625.8 million (2017: CHF 239.3 million). Dividend payments amounted to CHF 43.1 million in 2018, compared with CHF 119.4 million in 2017. While the Sulzer dividend remained unchanged at CHF 3.50 per share, CHF 76.0 million of dividend payments to Sulzer’s main shareholder Renova could not be transferred as a result of the US sanctions on Russia. Exchange losses on cash amounted to CHF 26.1 million compared with a gain of CHF 0.1 million in 2017.

Outlook 2019

Sulzer expects the positive momentum in the oil and gas market to continue in 2019. All other markets are also expected to grow, with the continued exception of power. The company’s early indicators do not show signs of an impending slowdown of the economy in its major markets. Sulzer therefore expects to continue its trend of organic growth and improved profitability.

Sulzer delivered to date cumulative SFP savings of CHF 230 million, ahead of the previously communicated cumulative 2018 target of CHF 220 million. In 2019, Sulzer expects its SFP program to deliver incremental cost savings of approximately CHF 10 million. The company is therefore raising its cumulative savings target from the previously communicated CHF 230 million (from 2019 onwards) to CHF 240 million (from 2019 onwards).

For the full year 2019, adjusted for currency effects, order intake is expected to grow organically by 2% to 5% and sales to grow organically by 3% to 5%. Sulzer expects to reach an opEBITA margin (opEBITA in percent of sales) of around 10%.

Impact of IFRS 15

Sulzer has adapted its reporting to reflect the application of IFRS 15 “Revenue from Contracts with Customersˮ. It replaced IAS 18 “Revenueˮ, and IAS 11 “Construction Contractsˮ. IFRS 15 determines whether, how much and when to recognize sales from contracts with customers. In 2018, IFRS 15 had a negative effect on sales (CHF 39.6 million) and a positive effect on opEBITA (CHF 0.3 million). Consequently, the application of IFRS 15 increased opROSA by 0.1 percentage points. These differences are related to projects where sales, cost and profit were recognized over time according to the previous accounting standards. According to IFRS 15, sales, cost and profit of these projects are recognized later at a certain point in time.

The information presented for 2017 has not been restated. For transparency, we are showing the figures for 2018 according to both the new and the old methods in the divisional business reviews. The changes in percent shown in the tables and mentioned in the text compare 2018 figures, according to the old method, with 2017 figures as previously reported. In the consolidated financial statements (note 34), a table summarizes the impact of the new accounting standards on the financial statements.


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