Alternative performance measures (APM)
The financial information included in this report includes certain Alternative Performance Measures (APMs) which are not accounting measures as defined by IFRS. These APMs should not be used instead of, or considered as alternatives to, the group’s consolidated financial results based on IFRS. These APMs may not be comparable to similarly titled measures disclosed by other companies. All APMs presented relate to the performance of the current reported period and comparative periods.
Definition of alternative performance measures (APM)
Order intake includes all registered orders of the period which will be recorded or have already been recorded as sales. The reported value of an order corresponds to the undiscounted value of revenues that the group expects to recognize following delivery of goods or services subject to the order, less any trade discounts and excluding value added or sales tax. Adjustments, corrections and cancellations resulting from updating the order backlog, are respectively included in the amount of the order intake.
Order intake gross margin
The order intake gross margin is defined as the expected gross profit of order intake divided by order intake.
Order backlog represents the undiscounted value of revenues the group expects to generate from orders on hand at the end of the reporting period.
ROS (return on sales)
ROS measures the profitability relative to sales. ROS is calculated by dividing EBIT by sales.
opEBITA (operational earnings before interest, taxes and amortization)
OpEBITA is used to determine the profitability of the business, without considering impairments, restructuring expenses and other non-operational items and before interest, taxes and amortization. Other non-operational items include significant acquisition related expenses, gains and losses from sale of businesses or real estate and certain non-operational times that are non-recurring or do not occur in similar magnitude.
opROSA (operational return on sales adjusted)
OpROSA measures how the group turns sales into operating profits. Therefore, it is also called opEBITA margin, profitability or opEBITA in percent of sales. OpROSA is calculated by dividing opEBITA by sales.
opROCEA (operational return on capital employed adjusted)
OpROCEA measures how the group is generating operational profits from its capital employed. OpROCEA is calculated by dividing opEBITA by average capital employed. Therefore, it is also called opEBITA in percent of average capital employed.
EBITDA (earnings before interest, taxes, depreciation and amortization)
EBITDA is used to determine the net debt/EBITDA ratio. EBITDA is defined as EBIT before depreciation and amortization.
Core net income
Core net income is used to determine the dividend proposal. Sulzer’s long-term target is to maintain a dividend payout ratio of approximately 40–70% of core net income with due consideration to liquidity and funding requirements as well as continuity. Core net income is defined as net income before tax-adjusted effects on restructuring, amortization, impairments and non-operational items.
FCF (Free Cash Flow)
Free cash flow is used to assess the group’s ability to generate the cash required to conduct and maintain its operations. It also indicates the group’s ability to generate cash to finance dividend payments, repay debt and to undertake merger and acquisition activities. Free cash flow is calculated based on the IFRS cash flow from operating activities and adjusted for capital expenditures (investments in property, plant and equipment and intangible assets).
Net debt is used to monitor the group’s overall short- and long-term liquidity. Net debt is calculated as the sum of total current and non-current borrowings and lease liabilities less cash.
Net debt/EBITDA ratio
The net debt/EBITDA ratio is used as a measurement of leverage. It is calculated as net debt divided by EBITDA.
Gearing ratio (borrowings-to-equity ratio)
The gearing ratio compares the borrowings and lease liabilities relative to the equity. The gearing ratio represents the group’s leverage, meaning how much of the business funding comes from borrowed methods (lenders) versus company owners (shareholders). The gearing ratio is defined as borrowings and lease liabilities divided by equity attributable to shareholders of Sulzer Ltd.
Currency adjusted growth
Certain percentage changes in the financial review and the business review divisions have been calculated using constant exchange rates which allow for an assessment of the group’s financial performance with the effects of exchange rate fluctuations eliminated. The currency adjusted growth is calculated by applying the previous year’s exchange rates for the current year and calculating the growth without currency effects.
Organic growth measures changes with the same period in the previous year after adjusting for effects arising from acquisitions, divestments and foreign exchange differences.
The impact of the organic growth is determined as follows:
- Currency adjusted growth as described above
- For the current-year acquisitions, by deducting the currency adjusted amount generated during the current-year by the acquired entities
- For previous year acquisitions, by deducting the currency adjusted amount generated over the months during which the acquired entities were not consolidated in the previous year
- For current-year disposals, by adding the currency adjusted amount generated by the divested entities in the previous year over the months during which those entities were no longer consolidated in the current-year
- For the previous year disposals, by adding for the current year the currency adjusted amount generated in the previous year by the divested entities