Notes to the consolidated financial statements

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1 General information

1 General information

Sulzer Ltd (the “companyˮ) is a company domiciled in Switzerland. The address of the company’s registered office is Neuwiesenstrasse 15 in Winterthur, Switzerland. The consolidated financial statements for the year ended December 31, 2020, comprise the company and its subsidiaries (together referred to as the “groupˮ and individually as the “subsidiariesˮ) and the group’s interest in associates and joint ventures. The group specializes in pumping, agitation, mixing, separation and application technologies for fluids of all types. Sulzer was founded in 1834 in Winterthur, Switzerland, and employs around 15’000 people. The company serves clients in over 180 production and service sites around the world. Sulzer Ltd is listed on the SIX Swiss Exchange in Zurich, Switzerland (symbol: SUN).

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They were authorized for issue by the Board of Directors on February 23, 2021.

Details of the group’s accounting policies are included in note 34.

2 Significant events and transactions during the reporting period

2 Significant events and transactions during the reporting period

The financial position and performance of the group was particularly affected by the following events and transactions during the reporting period:

  • COVID-19 dominated the world stage in 2020. The lockdowns led to a standstill of public life in many countries, limited access to customer sites, travel restrictions and challenges in supply chain and sales channels. As a consequence, the group has updated the budget and the three-year strategic plan, relevant for the goodwill impairment test (see note 5 and note 14). As another consequence, the group has reassessed the expected credit losses, relevant for the calculation of the allowance for doubtful trade accounts receivable, by applying updated forward-looking information such as development of gross domestic product (GDP) and oil price development (see note 21).
  • On October 1, 2020, Sulzer acquired a 100% controlling interest of Haselmeier AG (“Haselmeierˮ) for CHF 119.2 million. The headquarters of Haselmeier is located in Stuttgart, Germany. Haselmeier employs approximately 230 people and is an own-IP provider of drug delivery devices such as subcutaneous self-injection pens for use in fast-growing indications such as reproductive health, growth disorders, osteoporosis and diabetes. With the acquisition of Haselmeier, the group will complement its healthcare portfolio and leverage its expertise in precision injection molding. The acquisition resulted in an increase in goodwill of CHF 60.4 million and other intangible assets of CHF 39.8 million at the date of acquisition (see note 4).
  • The group launched decisive measures to mitigate the impact of market disruptions on Energy-related business activities early in 2020. The group recognized restructuring costs of CHF 58.0 million (2019: CHF 23.4 million), partly offset by released restructuring provisions of CHF 2.2 million (2019: CHF 0.2 million) (see note 27). Associated with restructuring initiatives, the group further recognized impairments on tangible and intangible assets of CHF 9.8 million (2019: CHF 4.4 million) (see note 14, note 15 and note 16). These mainly relate to the closure or resizing of sites in Europe and the Americas, as well as the resizing of supporting resources.

For a detailed discussion about the group’s performance and financial position please refer to the
Financial review”.

3 Segment information

3 Segment information

Segment information by divisions

 

 

Pumps Equipment

 

Rotating Equipment Services

 

Chemtech

 

Applicator Systems

millions of CHF

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

Order intake (unaudited) 1)

 

1’297.6

 

1’458.9

 

1’130.8

 

1’193.2

 

620.8

 

670.0

 

364.8

 

425.1

Nominal growth (unaudited)

 

–11.1%

 

6.3%

 

–5.2%

 

7.5%

 

–7.3%

 

11.6%

 

–14.2%

 

–5.4%

Currency-adjusted growth (unaudited)

 

–4.1%

 

8.3%

 

2.5%

 

10.7%

 

–1.1%

 

12.8%

 

–11.0%

 

–4.3%

Organic growth 2) (unaudited)

 

–2.9%

 

8.0%

 

0.6%

 

8.6%

 

–6.9%

 

6.5%

 

–14.2%

 

–5.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Order backlog as of December 31 (unaudited)

 

845.0

 

924.3

 

435.0

 

422.2

 

396.9

 

385.3

 

82.0

 

60.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales recognized at a point in time

 

839.5

 

1’002.6

 

887.3

 

985.5

 

372.6

 

415.1

 

349.8

 

419.1

Sales recognized over time

 

456.9

 

474.3

 

191.1

 

181.6

 

220.5

 

248.8

 

1.4

 

1.5

Sales 3)

 

1’296.3

 

1’477.0

 

1’078.3

 

1’167.0

 

593.1

 

664.0

 

351.2

 

420.6

Nominal growth

 

–12.2%

 

15.0%

 

–7.6%

 

9.7%

 

–10.7%

 

17.9%

 

–16.5%

 

–7.3%

Currency-adjusted growth (unaudited)

 

–5.7%

 

17.2%

 

0.1%

 

12.8%

 

–4.8%

 

19.0%

 

–13.4%

 

–6.4%

Organic growth 2) (unaudited)

 

–4.5%

 

17.0%

 

–1.1%

 

10.0%

 

–9.7%

 

12.7%

 

–15.2%

 

–7.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational profit (unaudited)

 

55.2

 

59.7

 

150.3

 

164.5

 

56.9

 

63.8

 

44.7

 

88.2

Operational profitability (unaudited)

 

4.3%

 

4.0%

 

13.9%

 

14.1%

 

9.6%

 

9.6%

 

12.7%

 

21.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring expenses

 

–34.1

 

–5.2

 

–11.3

 

–2.6

 

–5.7

 

–0.8

 

–3.2

 

–13.7

Amortization

 

–29.6

 

–30.0

 

–9.2

 

–8.1

 

–6.8

 

–6.2

 

–19.2

 

–19.0

Impairments on tangible and intangible assets

 

–2.1

 

 

–1.5

 

 

–5.3

 

–1.0

 

–0.5

 

–1.3

Non-operational items (unaudited)

 

–5.6

 

–12.6

 

–1.9

 

–1.6

 

–3.2

 

–1.9

 

–1.6

 

–14.1

EBIT

 

–16.1

 

11.9

 

126.3

 

152.2

 

35.9

 

54.0

 

20.2

 

40.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

–34.6

 

–34.8

 

–28.5

 

–28.2

 

–12.2

 

–13.8

 

–23.4

 

–22.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating assets

 

1’456.4

 

1’605.5

 

893.6

 

960.8

 

507.0

 

590.9

 

745.0

 

608.3

Unallocated assets

 

 

 

 

 

 

 

 

Total assets as of December 31

 

1’456.4

 

1’605.5

 

893.6

 

960.8

 

507.0

 

590.9

 

745.0

 

608.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating liabilities

 

725.1

 

730.6

 

354.9

 

363.2

 

323.6

 

364.5

 

126.6

 

108.6

Unallocated liabilities

 

 

 

 

 

 

 

 

Total liabilities as of December 31

 

725.1

 

730.6

 

354.9

 

363.2

 

323.6

 

364.5

 

126.6

 

108.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating net assets

 

731.3

 

874.9

 

538.7

 

597.6

 

183.5

 

226.4

 

618.4

 

499.7

Unallocated net assets

 

 

 

 

 

 

 

 

Total net assets as of December 31

 

731.3

 

874.9

 

538.7

 

597.6

 

183.5

 

226.4

 

618.4

 

499.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure (incl. lease assets)

 

–34.7

 

–41.0

 

–40.9

 

–36.6

 

–11.1

 

–22.1

 

–70.0

 

–41.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees (number of full-time equivalents) as of December 31

 

5’362

 

5’759

 

4’449

 

4’900

 

3’221

 

3’803

 

1’857

 

1’821

1) Order intake from external customers.

2) Adjusted for currency and acquisition effects.

3) Sales from external customers.

Segment information by divisions

 

 

Total divisions

 

Others 4)

 

Total Sulzer

millions of CHF

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

Order intake (unaudited) 1)

 

3’414.1

 

3’747.2

 

 

 

3’414.1

 

3’747.2

Nominal growth (unaudited)

 

–8.9%

 

6.1%

 

 

 

–8.9%

 

6.1%

Currency-adjusted growth (unaudited)

 

–2.2%

 

8.2%

 

 

 

–2.2%

 

8.2%

Organic growth 2) (unaudited)

 

–3.8%

 

6.3%

 

 

 

–3.8%

 

6.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Order backlog as of December 31 (unaudited)

 

1’758.9

 

1’792.6

 

 

 

1’758.9

 

1’792.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales recognized at a point in time

 

2’449.2

 

2’822.3

 

 

 

2’449.2

 

2’822.3

Sales recognized over time

 

869.8

 

906.2

 

 

 

869.8

 

906.2

Sales 3)

 

3’319.0

 

3’728.5

 

 

 

3’319.0

 

3’728.5

Nominal growth

 

–11.0%

 

10.8%

 

 

 

–11.0%

 

10.8%

Currency-adjusted growth (unaudited)

 

–4.6%

 

13.0%

 

 

 

–4.6%

 

13.0%

Organic growth 2) (unaudited)

 

–5.6%

 

10.8%

 

 

 

–5.6%

 

10.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational profit (unaudited)

 

307.1

 

376.2

 

–9.5

 

–4.9

 

297.6

 

371.3

Operational profitability (unaudited)

 

9.3%

 

10.1%

 

n/a

 

n/a

 

9.0%

 

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring expenses

 

–54.4

 

–22.2

 

–1.4

 

–1.0

 

–55.8

 

–23.1

Amortization

 

–64.9

 

–63.4

 

–1.1

 

–1.1

 

–65.9

 

–64.5

Impairments on tangible and intangible assets

 

–9.4

 

–2.3

 

–0.5

 

–2.1

 

–9.8

 

–4.4

Non-operational items (unaudited)

 

–12.3

 

–30.1

 

–3.2

 

–8.2

 

–15.4

 

–38.3

EBIT

 

166.3

 

258.3

 

–15.6

 

–17.3

 

150.6

 

241.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

–98.8

 

–99.6

 

–3.0

 

–3.0

 

–101.8

 

–102.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating assets

 

3’602.0

 

3’765.5

 

71.1

 

35.6

 

3’673.1

 

3’801.1

Unallocated assets

 

 

 

1’705.6

 

1’308.4

 

1’705.6

 

1’308.4

Total assets as of December 31

 

3’602.0

 

3’765.5

 

1’776.7

 

1’344.0

 

5’378.7

 

5’109.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating liabilities

 

1’530.2

 

1’566.9

 

152.7

 

135.8

 

1’682.8

 

1’702.7

Unallocated liabilities

 

 

 

2’278.7

 

1’812.9

 

2’278.7

 

1’812.9

Total liabilities as of December 31

 

1’530.2

 

1’566.9

 

2’431.4

 

1’948.7

 

3’961.6

 

3’515.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating net assets

 

2’071.9

 

2’198.6

 

–81.6

 

–100.2

 

1’990.2

 

2’098.4

Unallocated net assets

 

 

 

–573.1

 

–504.5

 

–573.1

 

–504.5

Total net assets as of December 31

 

2’071.9

 

2’198.6

 

–654.7

 

–604.7

 

1’417.2

 

1’593.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure (incl. lease assets)

 

–156.7

 

–140.9

 

–1.3

 

–1.2

 

–158.0

 

–142.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees (number of full-time equivalents) as of December 31

 

14’888

 

16’284

 

165

 

222

 

15’054

 

16’506

1) Order intake from external customers.

2) Adjusted for currency and acquisition effects.

3) Sales from external customers.

4) The most significant activities under “Others” relate to Corporate Center.

For the definition of operational profit, operational profitability and adjustments for currency and acquisition effects, reference is made to the “Supplementary information” and for the reconciliation statements to the “Financial review”.

Information about reportable segments

Operating segments are determined based on the reports reviewed by the Chief Executive Officer that are used to measure performance, make strategic decisions, and allocate resources to the segments. The business is managed on a divisional basis and the reported segments have been identified as follows:

Pumps Equipment

The Pumps Equipment division specializes in pumping solutions specifically engineered for the processes of its customers. The division provides pumps, agitators, compressors, grinders, screens and filters developed through intensive research and development in fluid dynamics and advanced materials. The focus is on pumping solutions for water, oil and gas, power, chemicals and most industrial segments.

Rotating Equipment Services

Through a network of over 100 service sites around the world, the Rotating Equipment Services division provides cutting-edge parts as well as maintenance and repair solutions for pumps, turbines, compressors, motors and generators. The division services Sulzer original equipment, but also all associated third-party rotating equipment run by the customers, maximizing its sustainability and life cycle cost-effectiveness. The division’s technology-based solutions, fast execution and expertise in complex maintenance projects are available at its customers’ doorsteps.

Chemtech

The Chemtech division focuses on innovative mass transfer, static mixing and polymer solutions for chemicals, petrochemicals, refining and LNG. Chemtech also provides ecological solutions such as biopolymers as well as textile and plastic recycling, contributing to a circular economy. The division’s product offering ranges from technology licensing to process components all the way to complete separation process plants. Customer support ranges from engineering and field services to tray and packing installation, tower maintenance, welding and plant turnaround projects – ensuring minimal downtime.

Applicator Systems

Through its well-known brands (Mixpac, Transcodent, Cox, Medmix, Haselmeier and Geka), the Applicator Systems division develops and delivers innovative products and services for liquid application and mixing solutions within the healthcare, adhesives and beauty markets. The division’s IP-protected applicator solutions make the customers’ products precise, safe, unique and more sustainable, leveraging the division’s expertise in plastic-injection molding, two-component mixing, drug delivery and micro-brushes.

Others

Certain expenses related to the Corporate Center are not attributable to a particular segment and are reviewed as a whole across the group. Also included are the eliminations for operating assets and liabilities.

The Chief Executive Officer primarily uses operational profit to assess the performance of the operating segments. However, the Chief Executive Officer also receives information about the segments’ order intake and backlog, sales, and operating assets and liabilities on a monthly basis.

Sales from external customers reported to the Chief Executive Officer are measured in a manner consistent with that in the income statement. There are no significant sales between the segments. No individual customer represents a significant portion of the group’s sales.

Operating assets and liabilities are assets or liabilities related to the operating activities of an entity and contributing to the EBIT.

Segment information by region

The allocation of assets is based on their geographical location. Non-current assets exclude other financial assets, deferred tax assets and employee benefit assets. The allocation of sales from external customers is based on the location of the customer.

Non-current assets by region

millions of CHF

 

2020

 

2019

Europe, Middle East, Africa

 

1’451.9

 

1’346.7

– thereof Germany

 

365.1

 

275.4

– thereof Switzerland

 

274.8

 

234.1

– thereof United Kingdom

 

209.9

 

222.4

– thereof Sweden

 

187.4

 

192.9

– thereof the Netherlands

 

116.8

 

124.1

 

 

 

 

 

Americas

 

452.8

 

524.0

– thereof USA

 

417.1

 

479.3

 

 

 

 

 

Asia-Pacific

 

141.8

 

148.0

– thereof China

 

54.6

 

60.1

 

 

 

 

 

Total

 

2’046.5

 

2’018.7

Sales by region

 

 

2020

millions of CHF

 

Pumps Equipment

 

Rotating Equipment Services

 

Chemtech

 

Applicator Systems

 

Total Sulzer

Europe, Middle East, Africa

 

555.7

 

469.6

 

172.7

 

204.0

 

1’402.0

– thereof Germany

 

58.2

 

49.2

 

26.3

 

82.1

 

215.9

– thereof United Kingdom

 

25.7

 

107.4

 

7.9

 

15.4

 

156.3

– thereof Saudi Arabia

 

89.0

 

26.9

 

31.2

 

0.0

 

147.0

– thereof Russia

 

31.5

 

50.9

 

11.7

 

1.6

 

95.7

– thereof France

 

26.8

 

30.9

 

7.3

 

23.1

 

88.0

 

 

 

 

 

 

 

 

 

 

 

Americas

 

452.7

 

446.2

 

128.2

 

117.0

 

1’144.1

– thereof USA

 

297.8

 

358.8

 

81.9

 

106.5

 

845.0

 

 

 

 

 

 

 

 

 

 

 

Asia-Pacific

 

288.0

 

162.5

 

292.2

 

30.3

 

772.9

– thereof China

 

206.5

 

24.0

 

188.2

 

15.6

 

434.3

 

 

 

 

 

 

 

 

 

 

 

Total

 

1’296.3

 

1’078.3

 

593.1

 

351.2

 

3’319.0

 

 

2019

millions of CHF

 

Pumps Equipment

 

Rotating Equipment Services

 

Chemtech

 

Applicator Systems

 

Total Sulzer

Europe, Middle East, Africa

 

576.7

 

534.7

 

195.4

 

232.7

 

1’539.6

– thereof Germany

 

60.2

 

50.5

 

36.9

 

91.5

 

239.1

– thereof United Kingdom

 

26.5

 

142.1

 

6.7

 

19.6

 

194.8

– thereof Saudi Arabia

 

60.2

 

39.9

 

22.5

 

0.1

 

122.7

– thereof Russia

 

42.1

 

75.5

 

13.8

 

1.3

 

132.7

– thereof France

 

35.0

 

28.0

 

5.0

 

27.0

 

94.9

 

 

 

 

 

 

 

 

 

 

 

Americas

 

511.3

 

480.6

 

173.4

 

156.0

 

1’321.3

– thereof USA

 

345.3

 

377.1

 

103.4

 

139.9

 

965.8

 

 

 

 

 

 

 

 

 

 

 

Asia-Pacific

 

389.0

 

151.6

 

295.2

 

31.8

 

867.7

– thereof China

 

211.2

 

25.0

 

169.7

 

14.9

 

420.8

 

 

 

 

 

 

 

 

 

 

 

Total

 

1’477.0

 

1’167.0

 

664.0

 

420.6

 

3’728.5

Segment information by market segment

The following table shows the allocation of sales from external customers by market segments:

Sales by market segment

 

 

2020

millions of CHF

 

Pumps Equipment

 

Rotating Equipment Services

 

Chemtech

 

Applicator Systems

 

Total Sulzer

Oil and gas

 

319.2

 

372.3

 

183.5

 

 

875.1

Chemicals

 

185.3

 

191.5

 

369.3

 

 

746.1

General industry

 

298.3

 

170.8

 

35.0

 

 

504.1

Water

 

386.0

 

32.6

 

3.5

 

 

422.1

Power

 

107.5

 

311.1

 

1.8

 

 

420.4

Adhesives, dental, healthcare

 

 

 

 

229.5

 

229.5

Beauty

 

 

 

 

121.7

 

121.7

Total

 

1’296.3

 

1’078.3

 

593.1

 

351.2

 

3’319.0

 

 

2019

millions of CHF

 

Pumps Equipment

 

Rotating Equipment Services

 

Chemtech

 

Applicator Systems

 

Total Sulzer

Oil and gas

 

355.8

 

422.3

 

217.7

 

 

995.8

Chemicals

 

232.9

 

198.2

 

414.8

 

 

845.9

General industry

 

340.4

 

195.7

 

23.4

 

 

559.5

Water

 

432.7

 

38.2

 

0.9

 

 

471.8

Power

 

115.2

 

312.6

 

7.2

 

 

435.1

Adhesives, dental, healthcare

 

 

 

 

274.1

 

274.1

Beauty

 

 

 

 

146.5

 

146.5

Total

 

1’477.0

 

1’167.0

 

664.0

 

420.6

 

3’728.5

4 Acquisitions of subsidiaries

4 Acquisitions of subsidiaries

Acquisitions in 2020

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition, including the resulting goodwill and the total consideration paid. If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the amounts recognized below, then the accounting for the acquisition will be revised.

Net assets acquired

millions of CHF

 

Haselmeier

 

Others

 

Total

Intangible assets

 

39.8

 

1.7

 

41.5

Property, plant and equipment

 

13.1

 

0.0

 

13.1

Lease assets

 

2.4

 

 

2.4

Deferred income tax assets

 

0.3

 

 

0.3

Cash and cash equivalents

 

3.7

 

0.0

 

3.7

Trade accounts receivable

 

5.2

 

0.0

 

5.2

Other current assets

 

9.6

 

0.1

 

9.7

Lease liabilities

 

–2.4

 

 

–2.4

Provisions

 

–3.5

 

–0.0

 

–3.5

Non-current income tax liabilities

 

–2.3

 

 

–2.3

Deferred income tax liabilities

 

–5.3

 

–0.3

 

–5.6

Other liabilities

 

–1.8

 

 

–1.8

Net identifiable assets

 

58.8

 

1.5

 

60.3

Goodwill recognized in balance sheet

 

60.4

 

 

60.4

Total consideration

 

119.2

 

1.5

 

120.7

 

 

 

 

 

 

Purchase price paid in cash

 

105.0

 

1.5

 

106.5

Contingent consideration

 

14.2

 

 

14.2

Total consideration

 

119.2

 

1.5

 

120.7

Haselmeier

On October 1, 2020, Sulzer acquired a 100% controlling interest of Haselmeier AG for CHF 119.2 million. The headquarters of Haselmeier is located in Stuttgart, Germany. Haselmeier employs approximately 230 people and is a leading own-IP provider of drug delivery devices such as subcutaneous self-injection pens for use in fast-growing indications such as reproductive health, growth disorders, osteoporosis and diabetes. With the acquisition of Haselmeier, Sulzer will complement its healthcare portfolio and leverage its APS expertise in precision injection molding to seize growth opportunities in the fast-growing drug delivery devices market. Haselmeier will operate as part of Sulzer’s Applicator Systems division. The goodwill is attributable to significant synergies by leveraging scale and cross-selling opportunities. None of the goodwill is expected to be deductible for tax purposes. Transaction costs recognized in the income statement amount to CHF –0.4 million. Since the acquisition date, Haselmeier contributed order intake of CHF 13.0 million, sales of CHF 7.4 million, and net income of CHF 0.9 million to the group.

Contingent consideration

The contingent consideration is mainly dependent on technology-related proof-of-concept, project development and customer orders. The total liability is limited at CHF 16.5 million and is discounted to a present value of CHF 14.2 million. The calculation of the contingent consideration is based on management assessments that the criteria will be achieved at a probability of 100%.

Acquired receivables

The fair value of acquired trade accounts receivable is CHF 5.2 million. The gross contractual amount for trade account receivables due is CHF 5.2 million, of which none are expected to be uncollectible at the date of acquisition.

Pro forma sales and profit contribution

Had all above acquisitions occurred on January 1, 2020, management estimates that total net sales of the group would amount to CHF 3'344.2 million, and the consolidated net income would be CHF 89.9 million.

Cash flow from acquisitions of subsidiaries

millions of CHF

 

2020

 

2019

Cash consideration paid

 

–106.5

 

–94.3

Cash acquired

 

3.7

 

15.9

Payments for acquisitions in prior years

 

–5.4

 

Total cash flow from acquisitions, net of cash acquired

 

–108.2

 

–78.5

Contingent consideration

millions of CHF

 

2020

 

2019

Balance as of January 1

 

3.5

 

0.9

Assumed in a business combination

 

14.2

 

3.6

Release to other operating income

 

 

–0.9

Currency translation differences

 

0.6

 

–0.1

Total contingent consideration as of December 31

 

18.3

 

3.5

– thereof non-current

 

13.9

 

3.5

– thereof current

 

4.4

 

Acquisitions in 2019

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition, including the resulting goodwill and the total consideration paid.

millions of CHF

 

GTC Technology US, LLC

 

Alba Power

 

Other

 

Total

Intangible assets

 

19.5

 

38.2

 

5.3

 

63.1

Property, plant and equipment

 

4.0

 

3.9

 

 

8.0

Lease assets

 

5.7

 

0.1

 

 

5.8

Cash and cash equivalents

 

12.6

 

3.2

 

 

15.9

Trade accounts receivable

 

9.3

 

4.4

 

 

13.7

Other current assets

 

0.8

 

1.4

 

 

2.2

Borrowings

 

–0.4

 

 

 

–0.4

Lease liabilities

 

–5.7

 

–0.1

 

 

–5.8

Provisions

 

 

–0.7

 

 

–0.7

Other liabilities

 

–6.9

 

–4.1

 

–0.7

 

–11.7

Deferred tax liabilities

 

–2.3

 

–5.4

 

 

–7.7

Net identifiable assets

 

36.8

 

41.1

 

4.6

 

82.4

Goodwill recognized in balance sheet

 

6.8

 

13.3

 

0.7

 

20.8

Total consideration

 

43.5

 

54.4

 

5.3

 

103.2

 

 

 

 

 

 

 

 

 

Purchase price paid in cash

 

39.9

 

54.4

 

 

94.3

Purchase price not yet paid

 

 

 

5.3

 

5.3

Contingent consideration

 

3.6

 

 

 

3.6

Total consideration

 

43.5

 

54.4

 

5.3

 

103.2

5 Critical accounting estimates and judgments

5 Critical accounting estimates and judgments

All estimates and assessments are continually reviewed and are based on historical experience and other factors, including expectations regarding future events that appear reasonable under the given circumstances. The group makes estimates and assumptions that relate to the future. By their nature, these estimates will only rarely correspond to actual subsequent events. The estimates and assumptions that carry a significant risk, in the form of a substantial adjustment to the present values of assets and liabilities within the next financial year, are set out below.

Employee benefit plans

The present value of the pension obligation and the plan assets depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Assumptions used in determining the defined benefit obligation and the plan assets include the discount rate, future salary and pension increases, and mortality rates. The assumptions are reviewed and reassessed at the end of each year based on observable market data, i.e. interest rate of high-quality corporate bonds denominated in the corresponding currency and asset management studies. Further details are provided in note 9 and note 34.

Income taxes

The group is obliged to pay income taxes in numerous jurisdictions. Assumptions are required in order to determine income tax provisions. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of the business. The group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Management believes that the estimates are reasonable, and that the recognized liabilities for income-tax-related uncertainties are adequate. Further details are disclosed in note 13.

Goodwill and other intangible assets

The group carries out an annual impairment test on goodwill in the first quarter of the year (after the budget and the three-year strategic plan have been approved by the Board of Directors in February), or when indications of a potential impairment exist. Due to COVID-19, the budget and the three-year strategic plan have been updated after the approval. This update has been presented to the Board of Directors in May 2020. The goodwill impairment test is based on the updated version of the budget and the three-year strategic plan. The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations with the terminal growth rate, the discount rate, and the projected cash flows as the main variables. Information about assumptions and estimation uncertainties that have significant risk of resulting in a material adjustment in the year ending December 31, 2020, are disclosed in note 14. The accounting policies are disclosed in note 34.

Lease assets and lease liabilities

The group has applied judgment to determine the lease term for lease contracts that include renewal and termination options. The assessment of whether the group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and lease assets recognized. This assessment depends on economic incentives, such as removal and relocation costs.

Further details are disclosed in note 16 and note 34.

Sales

At contract inception, the group assesses the goods or services promised in a contract with a customer and identifies each promise to transfer to the customer as a performance obligation. The group considers the terms of the contract and all other relevant facts, including the economic substance of the transaction. Judgment is needed to determine whether there is a single performance obligation or multiple separate performance obligations. In typical engineering contracts, engineering, production and installation are treated as one single performance obligation.

If the consideration promised in a contract includes a variable amount (e.g. expected liquidated damages, early payment discounts, volume discounts), the group estimates the amount of consideration to which the group will be entitled in exchange for transferring the promised goods or services to a customer. The amount of the variable consideration is estimated by using either of the following methods, depending on which method the group expects to better predict the amount of consideration to which it will be entitled: the expected value or the most likely amount. The method selected is applied consistently throughout the contract and to similar types of contracts when estimating the effect of uncertainty on the amount of variable consideration to which the group is entitled. Depending on the outcome of the respective transactions, actual payments may differ from these estimates.

To allocate the transaction price to each performance obligation on a relative stand-alone selling price basis, the group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. If the stand-alone selling price is not directly observable, then the group estimates the amount with the expected cost plus margin method.

The group is recognizing sales either over time or at a point in time. Sales are recognized over time if any of the conditions described in note 34 is met. To determine the method, the right to payment condition is the one with the most critical estimates. The group estimates if an enforceable right to payment (including reasonable profit margin) for performance up to date exists in case the customer terminates the contract for convenience. For this estimate the group reviews the contracts and considers relevant laws, legal precedents and customary business practice.

Applying the over time method requires the group to estimate the proportional sales and costs. To measure the stage of completion, generally the cost-to-cost method is applied. Work progress of sub-suppliers is considered to determine the stage of completion. If circumstances arise that may change the original estimates of sales, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated sales or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management.

Further details are disclosed in note 20 and note 34.

Provisions

Provisions are made, among other reasons, for warranties, disputes, litigation and restructuring. A provision is recognized in the balance sheet when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The nature of these costs is such that judgment has to be applied to estimate the timing and amount of cash outflows. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. Further details are disclosed in note 27 and note 34.

6 Financial risk management

6 Financial risk management

6.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk, and price risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury). Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the group’s subsidiaries. Principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity exist in writing.

a) Market risk

(I) Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The group is exposed to transactional foreign currency risk to the extent that sales, purchases, license fees, borrowings and other balance sheet items are denominated in currencies other than the functional currencies of group companies. The functional currencies of group companies are primarily CHF, EUR, USD, CNY and GBP. Management has set up a policy to require subsidiaries to manage their foreign exchange risk against their functional currency. The subsidiaries are required to hedge their major foreign exchange risk exposure using forward contracts or other standard instruments, usually transacted with Group Treasury. The group’s management policy is to apply the following hedge ratios:

Contractual FX exposure
  • 90% – 100% of the exposure
Non-contractual FX exposure
  • 100% of the forecasted exposure for the next 1–3 months
  • 60% of the forecasted exposure for the next 4–6 months
  • 40% of the forecasted exposure for the next 7–12 months

The group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. The contracts are generally designated for hedge accounting as cash flow hedges. The group determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount and timing of the respective cash flows. For hedges of foreign currency purchases, the group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the group uses the hypothetical derivative method to assess effectiveness. In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated.

Presently, most of the contracts are designated as cash flow hedges. External foreign exchange contracts are designated as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis. The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. If required, currency exposure arising from the net assets of the group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. Derivative financial instruments are only used on an ad hoc basis to manage foreign currency translation risk.

The following tables show the hypothetical influence on the income statement for 2020 and 2019 related to foreign exchange risk of financial instruments. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. For 2020, the currency pair with the most significant exposure and inherent risk was the EUR versus the RUB. If, on December 31, 2020, the EUR had increased by 1.0% against the RUB with all other variables held constant, profit after tax for the year would have been CHF 0.6 million higher due to foreign exchange gains on EUR-denominated financial assets. A decrease of the rate would have caused a loss of the same amount.

Hypothetical impact of foreign exchange risk on income statement

millions of CHF

 

2020

Currency pair

 

EUR/RUB

 

GBP/SAR

 

GBP/USD

 

EUR/ZAR

Exposure

 

4.1

 

6.8

 

–4.6

 

–2.9

Volatility

 

20.3%

 

7.8%

 

11.0%

 

16.7%

Effect on profit after tax (rate increase)

 

0.6

 

0.4

 

–0.4

 

–0.4

Effect on profit after tax (rate decrease)

 

–0.6

 

–0.4

 

0.4

 

0.4

millions of CHF

 

2019

Currency pair

 

USD/CHF

 

USD/ARS

 

USD/CAD

 

EUR/USD

Exposure

 

14.9

 

3.4

 

9.4

 

–9.0

Volatility

 

5.5%

 

24.9%

 

5.1%

 

4.9%

Effect on profit after tax (rate increase)

 

0.6

 

0.6

 

0.4

 

–0.3

Effect on profit after tax (rate decrease)

 

–0.6

 

–0.6

 

–0.4

 

0.3

The following tables show the hypothetical influence on equity for 2020 and 2019 related to foreign exchange risk of financial instruments for the most important currency pairs as per December 31 of the respective year. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. Most of the hypothetical effect on equity is a result of fair value changes of derivative financial instruments designated as hedges of future cash flows in foreign currencies.

Hypothetical impact of foreign exchange risk on equity

millions of CHF

 

2020

Currency pair

 

USD/MXN

 

GBP/USD

 

USD/CHF

 

EUR/USD

 

EUR/RUB

 

USD/BRL

 

USD/INR

Exposure

 

–41.5

 

52.0

 

–63.5

 

49.0

 

–15.2

 

–12.5

 

–22.1

Volatility

 

18.9%

 

11.1%

 

7.4%

 

7.6%

 

21.0%

 

21.3%

 

5.4%

Effect on equity, net of taxes (rate increase)

 

–5.6

 

4.1

 

–3.4

 

2.7

 

–2.3

 

–1.9

 

–0.9

Effect on equity, net of taxes (rate decrease)

 

5.6

 

–4.1

 

3.4

 

–2.7

 

2.3

 

1.9

 

0.9

millions of CHF

 

2019

Currency pair

 

USD/MXN

 

USD/BRL

 

GBP/USD

 

USD/INR

 

EUR/USD

 

USD/CHF

 

EUR/INR

Exposure

 

37.8

 

–20.8

 

31.1

 

–43.1

 

40.6

 

36.0

 

24.6

Volatility

 

8.7%

 

12.9%

 

8.2%

 

5.8%

 

4.9%

 

5.5%

 

6.8%

Effect on equity, net of taxes (rate increase)

 

2.4

 

–2.0

 

1.9

 

–1.9

 

1.5

 

1.5

 

1.2

Effect on equity, net of taxes (rate decrease)

 

–2.4

 

2.0

 

–1.9

 

1.9

 

–1.5

 

–1.5

 

–1.2

(II) Price risk

As of December 31, 2020, the group was not exposed to significant price risk related to investments in equity securities.

(III) Interest rate sensitivity

The group’s interest rate risk arises from interest-bearing assets and liabilities. Assets and liabilities at variable rates expose the group to cash flow interest rate risk. Assets and liabilities at fixed rates only expose the group to fair value interest rate risk in the case of debt instruments that are classified as at fair value through profit or loss. The group analyzes its interest rate exposure on a net basis, and if required, enters into derivative instruments in order to keep the volatility of net interest income or expense limited. The group’s non-current interest-bearing liabilities mainly comprise six bonds with a fixed interest rate.

The following table shows the hypothetical influence on the income statement for variable-interest-bearing assets net of liabilities at variable interest rates, assuming market interest rate levels would have increased/decreased by 100 basis points. For the most significant currencies, CHF, USD, EUR, CNY and GBP, increasing interest rates would have had a positive impact on the income statement, since the value of variable-interest-bearing assets (comprising mainly cash and cash equivalents) exceed the value of variable-interest-bearing liabilities.

Hypothetical impact of interest rate risk on income statement

millions of CHF

 

2020

Variable-interest-bearing assets (net)

 

Amount

 

Sensitivity in basis points

 

Impact on post-tax profit

 

 

 

rate increase

 

rate decrease

CHF

 

501.4

 

100

 

3.6

 

–3.6

USD

 

287.4

 

100

 

2.1

 

–2.1

EUR

 

229.5

 

100

 

1.6

 

–1.6

CNY

 

181.7

 

100

 

1.3

 

–1.3

GBP

 

40.2

 

100

 

0.3

 

–0.3

millions of CHF

 

2019

Variable-interest-bearing assets (net)

 

Amount

 

Sensitivity in basis points

 

Impact on post-tax profit

 

 

 

rate increase

 

rate decrease

USD

 

251.0

 

100

 

1.9

 

–1.9

CHF

 

217.1

 

100

 

1.6

 

–1.6

EUR

 

210.9

 

100

 

1.6

 

–1.6

CNY

 

108.7

 

100

 

0.8

 

–0.8

GBP

 

25.2

 

100

 

0.2

 

–0.2

On December 31, 2020, if the interest rates on CHF-denominated assets net of liabilities had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 3.6 million higher, as a result of higher interest income on CHF-denominated assets. A decrease of interest rates on CHF-denominated assets net of liabilities would have caused a loss of the same amount. As of December 31, 2019, if the interest rates had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 1.6 million higher, as a result of higher interest income on CHF-denominated assets.

b) Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments, and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables, contract assets and committed transactions. The maximum exposure to credit risk per class of financial assets is outlined in the fair value table in note 6.3. Not exposed to credit risks are equity securities.

Credit risks of banks and financial institutions are monitored and managed centrally. Generally, only independently rated parties with a strong credit rating are accepted, and the total volume of transactions is split among several banks to reduce the individual risk with one bank.

For every customer with a large order volume, an individual risk assessment of the credit quality of the customer is performed that considers independent ratings, financial position, past experience and other factors. Additionally, bank guarantees and letters of credit are requested. For more details on the credit risk out of contract assets, please refer to note 20 and on the credit risk out of trade accounts receivable, please refer to note 21.

c) Liquidity risk

Prudent liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funding from an adequate number of committed credit facilities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury maintains flexibility in funding through a committed credit line.

Management anticipates the future development of the group’s liquidity reserve on the basis of expected cash flows by performing regular group-wide cash forecasts. In 2017, the second of the two one-year extension options of the syndicated credit line of CHF 500 million was executed, and thus the credit line was extended to 2022. If special needs arise, financing will be reviewed case by case.

The following table analyzes the group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows calculated with the year-end closing rates. Borrowings include the notional amount as well as interest payments.

Maturity profile of financial liabilities

 

 

2020

millions of CHF

 

Carrying amount

 

<1 year

 

1–5 years

 

>5 years

 

Total

Borrowings

 

1’723.1

 

246.7

 

1’207.4

 

329.6

 

1’783.7

Lease liabilities

 

119.7

 

30.0

 

67.1

 

31.7

 

128.8

Trade accounts payable

 

465.8

 

465.8

 

 

 

465.8

Other current and non-current liabilities (excluding derivative liabilities)

 

368.2

 

347.5

 

23.0

 

0.0

 

370.6

Derivative liabilities

 

8.1

 

6.9

 

 

1.2

 

8.1

– thereof outflow

 

 

 

730.1

 

 

6.1

 

736.2

– thereof inflow

 

 

 

723.2

 

 

4.9

 

728.0

 

 

2019

millions of CHF

 

Carrying amount

 

<1 year

 

1–5 years

 

>5 years

 

Total

Borrowings

 

1’330.2

 

144.0

 

1’107.3

 

125.6

 

1’376.8

Lease liabilities

 

109.7

 

27.4

 

66.4

 

15.9

 

109.7

Trade accounts payable

 

522.4

 

522.4

 

 

 

522.4

Other current and non-current liabilities (excluding derivative liabilities)

 

293.4

 

287.2

 

5.6

 

0.6

 

293.4

Derivative liabilities

 

8.2

 

8.2

 

0.0

 

 

8.2

– thereof outflow

 

 

 

434.6

 

0.4

 

 

435.0

– thereof inflow

 

 

 

426.4

 

0.4

 

 

426.8

6.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In this respect, the group aims at maintaining an investment grade credit rating, either as a perceived rating or an external rating issued by a credit rating agency.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The following table shows the net debt/EBITDA ratio as at December 31, 2020 and 2019.

Net debt/EBITDA ratio

millions of CHF

 

2020

 

2019

 

 

 

 

 

Cash and cash equivalents

 

–1’123.2

 

–1’035.5

Current financial assets

 

–305.1

 

–57.5

Non-current borrowings

 

1’491.3

 

1’199.2

Non-current lease liabilities

 

90.2

 

82.3

Current borrowings

 

231.8

 

131.0

Current lease liabilities

 

29.5

 

27.4

Net debt as of December 31

 

414.5

 

346.9

 

 

 

 

 

EBIT

 

150.6

 

241.0

Depreciation

 

101.8

 

102.6

Impairments on tangible and intangible assets

 

9.8

 

4.4

Amortization

 

65.9

 

64.5

EBITDA

 

328.1

 

412.5

 

 

 

 

 

Net debt

 

414.5

 

346.9

EBITDA

 

328.1

 

412.5

Net debt/EBITDA ratio

 

1.26

 

0.84

Another important ratio for the group is the gearing ratio (borrowings-to-equity ratio), which is calculated as total borrowings and lease liabilities divided by equity attributable to shareholders of Sulzer Ltd. The equity capital as shown in the balance sheet corresponds to the managed equity capital.

As of December 31, 2020 and 2019, the gearing ratio was as follows:

Gearing ratio (borrowings-to-equity ratio)

millions of CHF

 

2020

 

2019

Non-current borrowings

 

1’491.3

 

1’199.2

Non-current lease liabilities

 

90.2

 

82.3

Current borrowings

 

231.8

 

131.0

Current lease liabilities

 

29.5

 

27.4

Total borrowings and lease liabilities

 

1’842.8

 

1’439.9

Equity attributable to shareholders of Sulzer Ltd

 

1’404.3

 

1’580.7

Gearing ratio (borrowings-to-equity ratio)

 

1.31

 

0.91

For the definition of net debt, EBITDA and gearing ratio, please refer to “Supplementary information”.

6.3 Fair value estimation

The following tables present the carrying amounts and fair values of financial assets and liabilities as of December 31, 2020 and 2019, including their levels in the fair value hierarchy. For financial assets and financial liabilities not measured at fair value in the balance sheet, fair value information is not provided if the carrying amount is a reasonable approximation of fair value.

Fair values are categorized into three different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

The fair value of financial instruments traded in active markets, including the outstanding bonds, is based on quoted market prices at the balance sheet date. Such instruments are included in level 1.

The fair values included in level 2 are based on valuation techniques using observable market input data. This may include discounted cash flow analysis, option pricing models or reference to other instruments that are substantially the same, while always making maximum use of market inputs and relying as little as possible on entity-specific inputs. The fair values of forward contracts are measured based on broker quotes for foreign exchange rates and interest rates.

Fair values measured using unobservable inputs are categorized within level 3 of the fair value hierarchy. This applies particularly to contingent considerations in business combinations.

Contingent considerations are linked to the fulfillment of certain parameters, mainly related to earn-out clauses and technology transfer. For more information please refer to note 4.

Fair value table

 

 

 

 

December 31, 2020

 

 

 

 

Carrying amount

 

Fair value

millions of CHF

 

Notes

 

Fair value hedging instruments

 

Fair value through profit or loss

 

Financial assets at amortized cost

 

Other financial liabilities

 

Total carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total fair value

Financial assets measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets (at fair value)

 

18

 

 

 

8.7

 

 

 

 

 

8.7

 

0.2

 

 

8.4

 

8.7

Derivative assets – non-current

 

29

 

1.0

 

 

 

 

 

 

 

1.0

 

 

1.0

 

 

1.0

Derivative assets – current

 

22, 29

 

12.1

 

 

 

 

 

 

 

12.1

 

 

12.1

 

 

12.1

Current financial assets (at fair value)

 

18

 

 

 

1.7

 

 

 

 

 

1.7

 

1.7

 

 

 

1.7

Total financial assets measured at fair value

 

 

 

13.2

 

10.4

 

 

 

23.6

 

2.0

 

13.2

 

8.4

 

23.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets (at amortized cost)

 

18

 

 

 

 

 

2.0

 

 

 

2.0

 

 

 

 

 

 

 

 

Non-current receivables (excluding non-current derivative assets)

 

 

 

 

 

 

 

3.3

 

 

 

3.3

 

 

 

 

 

 

 

 

Trade accounts receivable

 

21

 

 

 

 

 

599.1

 

 

 

599.1

 

 

 

 

 

 

 

 

Other current receivables (excluding current derivative assets and other taxes)

 

22

 

 

 

 

 

19.2

 

 

 

19.2

 

 

 

 

 

 

 

 

Current financial assets (at amortized cost)

 

18

 

 

 

 

 

303.3

 

 

 

303.3

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

23

 

 

 

 

 

1’123.2

 

 

 

1’123.2

 

 

 

 

 

 

 

 

Total financial assets not measured at fair value

 

 

 

 

 

2’050.0

 

 

2’050.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – non-current

 

29

 

1.2

 

 

 

 

 

 

 

1.2

 

 

1.2

 

 

1.2

Derivative liabilities – current

 

28, 29

 

6.9

 

 

 

 

 

 

 

6.9

 

 

6.9

 

 

6.9

Contingent considerations

 

4

 

 

 

18.3

 

 

 

 

 

18.3

 

 

 

18.3

 

18.3

Total financial liabilities measured at fair value

 

 

 

8.1

 

18.3

 

 

 

26.4

 

 

8.1

 

18.3

 

26.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding non-current bonds

 

26

 

 

 

 

 

 

 

1’488.5

 

1’488.5

 

1’527.5

 

 

 

1’527.5

Other non-current borrowings

 

26

 

 

 

 

 

 

 

2.7

 

2.7

 

 

 

 

 

 

 

 

Other non-current liabilities (excluding non-current derivative liabilities)

 

 

 

 

 

 

 

 

 

20.7

 

20.7

 

 

 

 

 

 

 

 

Outstanding current bonds

 

26

 

 

 

 

 

 

 

209.9

 

209.9

 

211.3

 

 

 

211.3

Other current borrowings and bank loans

 

26

 

 

 

 

 

 

 

21.9

 

21.9

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

 

 

 

 

 

 

 

465.8

 

465.8

 

 

 

 

 

 

 

 

Other current liabilities (excluding current derivative liabilities, other taxes and contingent considerations)

 

28

 

 

 

 

 

 

 

307.6

 

307.6

 

 

 

 

 

 

 

 

Total financial liabilities not measured at fair value

 

 

 

 

 

 

2’517.1

 

2’517.1

 

 

 

 

 

 

 

 

Fair value table

 

 

 

 

December 31, 2019

 

 

 

 

Carrying amount

 

Fair value

millions of CHF

 

Notes

 

Fair value hedging instruments

 

Fair value through profit or loss

 

Financial assets at amortized cost

 

Other financial liabilities

 

Total carrying amount

 

Level 1

 

Level 2

 

Level 3

 

Total fair value

Financial assets measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets (at fair value)

 

18

 

 

 

10.3

 

 

 

 

 

10.3

 

0.3

 

 

10.0

 

10.3

Derivative assets – non-current

 

29

 

0.1

 

 

 

 

 

 

 

0.1

 

 

0.1

 

 

0.1

Derivative assets – current

 

22, 29

 

6.7

 

 

 

 

 

 

 

6.7

 

 

6.7

 

 

6.7

Total financial assets measured at fair value

 

 

 

6.8

 

10.3

 

 

 

17.1

 

0.3

 

6.8

 

10.0

 

17.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets (at amortized cost)

 

18

 

 

 

 

 

2.4

 

 

 

2.4

 

 

 

 

 

 

 

 

Non-current receivables (excluding non-current derivative assets)

 

 

 

 

 

 

 

6.2

 

 

 

6.2

 

 

 

 

 

 

 

 

Trade accounts receivable

 

21

 

 

 

 

 

645.9

 

 

 

645.9

 

 

 

 

 

 

 

 

Other current receivables (excluding current derivative assets and other taxes)

 

22

 

 

 

 

 

87.9

 

 

 

87.9

 

 

 

 

 

 

 

 

Current financial assets (at amortized cost)

 

18

 

 

 

 

 

57.5

 

 

 

57.5

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

23

 

 

 

 

 

1’035.5

 

 

 

1’035.5

 

 

 

 

 

 

 

 

Total financial assets not measured at fair value

 

 

 

 

 

1’835.3

 

 

1’835.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – non-current

 

29

 

0.0

 

 

 

 

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

Derivative liabilities – current

 

28, 29

 

8.2

 

 

 

 

 

 

 

8.2

 

 

8.2

 

 

8.2

Contingent considerations

 

4

 

 

 

3.5

 

 

 

 

 

3.5

 

 

 

3.5

 

3.5

Total financial liabilities measured at fair value

 

 

 

8.2

 

3.5

 

 

 

11.7

 

 

8.2

 

3.5

 

11.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding non-current bonds

 

26

 

 

 

 

 

 

 

1’199.2

 

1’199.2

 

1’234.0

 

 

 

1’234.0

Other non-current liabilities (excluding non-current derivative liabilities)

 

 

 

 

 

 

 

 

 

6.2

 

6.2

 

 

 

 

 

 

 

 

Outstanding current bonds

 

26

 

 

 

 

 

 

 

109.9

 

109.9

 

110.3

 

 

 

110.3

Other current borrowings and bank loans

 

26

 

 

 

 

 

 

 

21.1

 

21.1

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

 

 

 

 

 

 

 

522.4

 

522.4

 

 

 

 

 

 

 

 

Other current liabilities (excluding current derivative liabilities, other taxes and contingent considerations)

 

28

 

 

 

 

 

 

 

257.8

 

257.8

 

 

 

 

 

 

 

 

Total financial liabilities not measured at fair value

 

 

 

 

 

 

2’116.7

 

2’116.7

 

 

 

 

 

 

 

 

7 Corporate risk management

7 Corporate risk management

Sulzer maintains an integrated risk management system that is under constant scrutiny for further improvement. A defined risk management process and four common tools (risk assessment schedule, risk-profiling matrix, risk description schedule, loss control schedule) are applied in order to assess and control all key risks, to implement and maintain risk financing and risk transfer measures, to monitor the results, and to define and implement corrective actions if required.

Key risks are assessed on business unit level and consolidated on group level. The business units together with the divisions and the group functions generate their respective key risk-profiling matrices and complete and update the related risk control schedules on an annual basis. These schedules identify specific risk exposures and the related risk objectives, list existing loss controls, address their effectiveness, list (where required) additional or alternative loss controls, and determine responsibilities and time frames for their implementation. The business units’ key risk-profiling matrices are reviewed at the group level and are then consolidated into a Sulzer key risk-profiling matrix. The head of Risk Management informs the Audit Committee at least once a year of the current risks and risk mitigation as well as of the progress toward achieving major risk objectives. The assessment of risk management processes is included within the charter and scope of Group Internal Audit.

8 Personnel expenses

8 Personnel expenses

millions of CHF

 

2020

 

2019

Salaries and wages

 

870.1

 

949.4

Defined contribution plan expenses

 

27.3

 

29.0

Defined benefit plan expenses

 

21.7

 

16.0

Cost of share-based payment transactions

 

14.2

 

12.5

Social benefit costs

 

131.8

 

144.9

Other personnel costs

 

58.2

 

39.2

Total personnel expenses

 

1’123.4

 

1’191.1

9 Employee benefit plans

9 Employee benefit plans

The defined benefit obligation for the active members of pension plans is the present value of accrued pension obligations at balance sheet date considering future salary and pension increases as well as turnover rates (using the Project Unit Credit Method). The defined benefit obligation for the retirees is the present value of the current and future pension benefits considering future pension increases.

Reconciliation of the amount recognized in the balance sheet as of December 31

 

 

2020

millions of CHF

 

Funded plans Switzerland

 

Funded plans United Kingdom

 

Funded plans USA

 

Funded plans Others

 

Unfunded plans

 

Total

Present value of funded defined benefit obligation

 

–1’034.7

 

–609.9

 

–68.8

 

–110.7

 

 

–1’824.1

Fair value of plan assets (funded plans)

 

1’108.4

 

469.9

 

45.1

 

66.1

 

 

1’689.5

Overfunding / (underfunding)

 

73.7

 

–139.9

 

–23.7

 

–44.6

 

 

–134.6

Present value of unfunded defined benefit obligation

 

 

 

 

 

–17.1

 

–17.1

Asset / (liability) recognized in the balance sheet

 

73.7

 

–139.9

 

–23.7

 

–44.6

 

–17.1

 

–151.7

– thereof as liabilities under defined benefit obligation

 

–1.8

 

–139.9

 

–23.7

 

–44.7

 

–17.1

 

–227.4

– thereof as other current receivables and prepaid expenses

 

75.5

 

 

 

0.1

 

 

75.7

 

 

2019

millions of CHF

 

Funded plans Switzerland

 

Funded plans United Kingdom

 

Funded plans USA

 

Funded plans Others

 

Unfunded plans

 

Total

Present value of funded defined benefit obligation

 

–1’109.5

 

–575.2

 

–69.3

 

–83.2

 

 

–1’837.2

Fair value of plan assets

 

1’140.7

 

463.3

 

46.4

 

65.0

 

 

1’715.4

Overfunding / (underfunding)

 

31.2

 

–111.9

 

–22.9

 

–18.2

 

 

–121.8

Present value of unfunded defined benefit obligation

 

 

 

 

 

–46.8

 

–46.8

Asset / (liability) recognized in the balance sheet

 

31.2

 

–111.9

 

–22.9

 

–18.2

 

–46.8

 

–168.6

– thereof as liabilities under defined benefit obligation

 

–0.9

 

–111.9

 

–22.9

 

–18.5

 

–46.8

 

–201.0

– thereof as other current receivables and prepaid expenses

 

32.1

 

 

 

0.3

 

 

32.4

Sulzer operates major funded defined benefit pension plans in Switzerland, UK and the USA. Unfunded defined benefit plans relate to German pension benefit plans. The plans are exposed to actuarial risks, e.g. longevity risk, currency risk, interest rate risk and the funded plans additionally to market (investment) risk.

In Switzerland, Sulzer contributes to two pension plans funded via two different pension funds, i.e. a base plan for all employees and a supplementary plan for employees with salaries exceeding a certain limit. Both plans provide benefits depending on the pension savings at retirement. They include certain legal minimum interest credits to the pension savings (i.e. investment return) and guaranteed rates of conversion of pension savings into an annuity at retirement. In addition, the plans offer death in service and disability benefits. The two pension funds are collective funds administrating pension plans of Sulzer group companies and also unrelated companies. In case of a material underfunding of the pension plans, the regulations include predefined steps, such as higher contribution by employer and employees or lower interest on pension savings, to eliminate the underfunding. The pension funds are legally separated from the group. The vast majority of the active participants in the two pension funds are employed by companies not belonging to the Sulzer group. The Board of Trustees for the base plan comprises ten employee and ten employer representatives. The average discount rate decreased in 2020 compared to 2019 (from 0.3% to 0.2% for active employees and from 0.1% to 0.05% for pensioners). The plan assets increased compared to 2019 due to a higher return on plan assets. The total expenses recognized in the income statement in 2020 were CHF 19.0 million (2019: CHF 15.3 million).

In the UK, the plan is a final salary plan and provides benefits linked to salary at closure to future accrual adjusted for inflation to retirement or earlier date of leaving service. The scheme is fully closed to new entrants and future accruals. The scheme is managed by six trustees forming the Board. The plan is a multi-employer scheme with Sulzer (UK) Holding being the principal sponsor. The discount rate decreased by 0.6 percentage points to 1.5% (2019: 2.1%). The net pension liabilities increased from CHF 111.9 million in 2019 to CHF 139.9 million, due to the lower discount rate and changes in the demographic assumptions. The total expenses recognized in the income statement in 2020 were CHF 3.3 million compared to CHF 3.1 million in 2019.

In the USA, Sulzer operates non-contributory defined benefit retirement plans. The salaried plans provide benefits that are based on years of service and the employee’s compensation, averaged over the five highest consecutive years preceding retirement. The hourly plans’ benefits are based on years of service and a flat dollar benefit multiplier. All plans were closed for new entrants. In 2020, an expense of CHF 1.3 million was recognized in the income statement (2019: CHF 1.3 million). The discount rate decreased to 2.6% in 2020 (2019: 3.0%). The amount recognized in other comprehensive income (OCI) in 2020 was CHF –4.2 million (2019: CHF –6.6 million).

In Germany, Sulzer operates a range of different defined benefit pension plans. The majority of these plans are unfunded and benefits are paid directly by the employer to the beneficiaries as they became due. All defined benefit plans are closed for new joiners and a new defined contribution plan for all employees was introduced in 2007. Existing employees who participated in the defined benefit plans continued to be eligible for these defined benefit pensions but became also eligible for the new defined contribution pensions. However, benefits received under the defined contribution plan are offset against the benefits under the defined benefit plans. The different defined benefit plans offer retirement pension, disability pension and survivor’s pension benefits.

Employee benefit plans

millions of CHF

 

2020

 

2019

Reconciliation of effect of asset ceiling

 

 

 

 

Adjustment to asset ceiling at January 1

 

 

–0.9

Change in effect of asset ceiling excl. interest income / (expenses)

 

 

0.9

Adjustment to asset ceiling at December 31

 

 

 

 

 

 

 

Reconciliation of asset / (liability) recognized in the balance sheet

 

 

 

 

Asset / (liability) recognized at January 1

 

–168.6

 

–148.5

Defined benefit income / (expense) recognized in the income statement

 

–25.2

 

–19.9

Defined benefit income / (expense) recognized in OCI

 

8.8

 

–29.2

Employer contribution

 

25.3

 

23.4

Currency translation differences

 

8.1

 

5.6

Asset / (liability) recognized at December 31

 

–151.7

 

–168.6

 

 

 

 

 

Components of defined benefit income / (expense) in the income statement

 

 

 

 

Current service cost (employer)

 

–22.2

 

–18.0

Interest expense

 

–16.3

 

–27.1

Interest income on plan assets

 

12.9

 

23.3

Effects of curtailments and settlement

 

2.3

 

3.4

Other administrative cost

 

–1.8

 

–1.5

Income / (expense) recognized in the income statement

 

–25.2

 

–19.9

– thereof charged to personnel expenses

 

–21.7

 

–16.0

– thereof charged to financial expense

 

–3.5

 

–3.8

 

 

 

 

 

Components of defined benefit gain / (loss) in OCI

 

 

 

 

Actuarial gain / (loss) on defined benefit obligation

 

–73.6

 

–145.2

Return on plan assets excl. interest income

 

82.2

 

114.9

Change in effect of asset ceiling excl. interest expense / (income)

 

 

0.9

Return on reimbursement right excl. interest income / (expenses)

 

0.2

 

0.2

Defined benefit gain / (loss) recognized in OCI 1)

 

8.8

 

–29.2

1) The tax effect on defined benefit cost recognized in OCI amounted to CHF -0.8 million (2019: CHF 4.3 million).

Employee benefit plans

millions of CHF

 

2020

 

2019

Reconciliation of defined benefit obligation

 

 

 

 

Defined benefit obligation as of January 1

 

–1’884.0

 

–1’805.1

Interest expense

 

–16.3

 

–27.1

Current service cost (employer)

 

–22.2

 

–18.0

Contributions by plan participants

 

–8.7

 

–10.0

Benefits paid/deposited

 

126.5

 

120.9

Effects of curtailments and settlement

 

2.3

 

3.4

Other administrative cost

 

–1.8

 

–1.5

Actuarial gain / (loss)

 

–73.6

 

–145.2

Currency translation differences

 

36.7

 

–1.4

Defined benefit obligation as of December 31 1)

 

–1’841.2

 

–1’884.0

 

 

 

 

 

Reconciliation of the fair value of plan assets

 

 

 

 

Fair value of plan assets as of January 1

 

1’715.4

 

1’657.5

Interest income on plan assets

 

12.9

 

23.3

Employer contribution

 

25.3

 

23.4

Contributions by plan participants

 

8.7

 

10.0

Benefits paid/deposited

 

–126.5

 

–120.9

Effects of curtailments and settlement

 

0.0

 

Return on plan assets excl. interest income

 

82.2

 

114.9

Currency translation differences

 

–28.4

 

7.2

Fair value of plan assets as of December 31

 

1’689.5

 

1’715.4

 

 

 

 

 

Total plan assets at fair value – quoted market price

 

 

 

 

Cash and cash equivalents

 

70.6

 

90.8

Equity instruments

 

555.7

 

587.2

Debt instruments

 

439.8

 

443.8

Real estate funds

 

35.3

 

36.7

Investment funds

 

3.9

 

4.1

Others

 

118.7

 

81.0

Total assets at fair value – quoted market price as of December 31

 

1’224.1

 

1’243.6

 

 

 

 

 

Total plan assets at fair value – non-quoted market price

 

 

 

 

Properties occupied by or used by third parties (real estate)

 

287.7

 

290.6

Others

 

177.7

 

181.2

Total assets at fair value – non-quoted market price as of December 31

 

465.5

 

471.8

 

 

 

 

 

Best estimate of contributions for upcoming financial year

 

 

 

 

Contributions by the employer

 

28.7

 

30.9

1) The defined benefit obligation includes the funded part and the unfunded part.

Employee benefit plans

millions of CHF

 

2020

 

2019

Components of defined benefit obligation, split

 

 

 

 

Defined benefit obligation for active members

 

–345.4

 

–348.8

Defined benefit obligation for pensioners

 

–1’109.9

 

–1’180.4

Defined benefit obligation for deferred members

 

–385.9

 

–354.8

Total defined benefit obligation at December 31

 

–1’841.2

 

–1’884.0

 

 

 

 

 

Components of actuarial gain / (losses) on obligations

 

 

 

 

Actuarial gain / (loss) arising from changes in financial assumptions

 

–75.6

 

–165.1

Actuarial gain / (loss) arising from changes in demographic assumptions

 

11.4

 

7.2

Actuarial gain / (loss) arising from experience adjustments

 

–9.5

 

12.7

Total actuarial gain / (loss) on defined benefit obligation

 

–73.6

 

–145.2

 

 

 

 

 

Maturity profile of defined benefit obligation

 

 

 

 

Weighted average duration of defined benefit obligation in years

 

13.5

 

13.5

Since the defined benefit obligation for the Swiss and UK pension plans represents 89% (2019: 89%) of the group, the following significant actuarial assumptions apply exclusively to these two countries:

Principal actuarial assumptions as of December 31

 

 

2020

 

2019

 

 

Funded plans Switzerland

 

Funded plans United Kingdom

 

Funded plans Switzerland

 

Funded plans United Kingdom

Discount rate for active employees

 

0.2%

 

1.5%

 

0.3%

 

2.1%

Discount rate for pensioners

 

0.05%

 

1.5%

 

0.1%

 

2.1%

Future salary increases

 

1.0%

 

0.0%

 

1.0%

 

0.0%

Future pension increases

 

0.0%

 

2.8%

 

0.0%

 

2.6%

Life expectancy at retirement age (male/female) in years

 

22/24

 

22/24

 

23/25

 

21/23

Sensitivity analysis of defined benefit obligation

millions of CHF

 

2020

 

2019

Discount rate (decrease 0.25 percentage points)

 

–59.2

 

–64.4

Discount rate (increase 0.25 percentage points)

 

64.0

 

62.1

Future salary growth (decrease 0.25 percentage points)

 

7.6

 

5.0

Future salary growth (increase 0.25 percentage points)

 

–0.5

 

–3.6

Life expectancy (decrease 1 year)

 

110.1

 

97.7

Life expectancy (increase 1 year)

 

–103.5

 

–95.1

10 Research and development expenses

10 Research and development expenses

A breakdown of the research and development expenses per division is shown in the table below:

millions of CHF

 

2020

 

2019

Pumps Equipment

 

39.1

 

43.3

Rotating Equipment Services

 

1.9

 

1.1

Chemtech

 

22.9

 

18.0

Applicator Systems

 

20.3

 

22.9

Others

 

 

0.4

Total

 

84.1

 

85.6

11 Other operating income and expenses

11 Other operating income and expenses

millions of CHF

 

2020

 

2019

Income from release of contingent consideration

 

 

0.9

Gain from sale of property, plant and equipment

 

3.2

 

0.7

Operating currency exchange gains, net

 

1.5

 

Other operating income

 

20.7

 

18.0

Total other operating income

 

25.4

 

19.6

 

 

 

 

 

Restructuring expenses

 

–55.8

 

–23.1

Impairments on tangible and intangible assets

 

–9.8

 

–4.4

Cost for mergers and acquisitions

 

–1.2

 

–2.1

Loss from sale of property, plant and equipment

 

–0.2

 

–0.3

Operating currency exchange losses, net

 

 

–1.1

Total other operating expenses

 

–67.0

 

–31.1

 

 

 

 

 

Total other operating income and expenses, net

 

–41.6

 

–11.5

Other operating income includes income from litigation cases, government grants and incentives, and recharges to third parties not qualifying as sales from customers.

The group has initiated measures to mitigate the impact of market disruptions on Energy-related business activities caused by the pandemic. For 2020, the group recognized restructuring costs of CHF 58.0 million (2019: CHF 23.4 million), partly offset by released restructuring provisions of CHF 2.2 million (2019: CHF 0.2 million). Restructuring costs mainly relate to the closure or resizing of sites in Europe and the USA, as well as the resizing of supporting resources. The group further performed impairment tests on the related production machines and facilities leading to impairments of CHF 9.0 million (2019: CHF 2.1 million). For more details refer to note 15 and note 16.

Impairments on other intangible assets amounted to CHF 0.9 million (2019: CHF 2.3 million) and were mainly related to computer software (see also note 14).

The functional allocation of the total restructuring expenses and impairments is as follows: Cost of goods sold CHF –39.8 million (2019: CHF –11.4 million), selling and distribution expenses CHF –6.3 million (2019: CHF –1.5 million), general and administrative expenses CHF –19.2 million (2019: CHF –14.0 million) and research and development expenses CHF –0.3 million (2019: CHF –0.6 million).

12 Financial income and expenses

12 Financial income and expenses

millions of CHF

 

2020

 

2019

Interest and securities income

 

4.1

 

6.6

Total interest and securities income

 

4.1

 

6.6

Interest expenses on borrowings and lease liabilities

 

–21.8

 

–21.1

Interest expenses on employee benefit plans

 

–3.5

 

–3.8

Total interest expenses

 

–25.2

 

–24.9

Total interest income and expenses, net

 

–21.1

 

–18.3

 

 

 

 

 

Fair value changes

 

6.1

 

–2.6

Other financial expenses

 

–3.7

 

–2.3

Currency exchange gains/losses, net

 

–9.5

 

–5.1

Total other financial income and expenses, net

 

–7.0

 

–10.0

 

 

 

 

 

Total financial income and expenses, net

 

–28.1

 

–28.3

– thereof fair value changes on financial assets at fair value through profit and loss

 

6.1

 

–2.6

– thereof interest income on financial assets at amortized costs

 

4.1

 

6.6

– thereof other financial expenses

 

–3.7

 

–2.3

– thereof currency exchange gains/losses, net

 

–9.5

 

–5.1

– thereof interest expenses on borrowings

 

–19.0

 

–17.8

– thereof interest expenses on lease liabilities

 

–2.8

 

–3.3

– thereof interest expenses on employee benefit plans

 

–3.5

 

–3.8

Total financial expenses, net amounted to CHF 28.1 million, compared with CHF 28.3 million in 2019.

The “Fair value changesˮ are largely related to derivative financial instruments that are classified as financial assets or financial liabilities at fair value through profit and loss and that are used as hedging instruments to hedge foreign exchange risks.

13 Income taxes

13 Income taxes

millions of CHF

 

2020

 

2019

Current income tax expenses

 

–61.5

 

–65.2

Deferred income tax income

 

26.9

 

10.1

Total income tax expenses

 

–34.6

 

–55.1

The weighted average tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes. Since the group operates in countries that have differing tax laws and rates, the consolidated weighted average effective tax rate will vary from year to year according to variations in income per country and changes in applicable tax rates.

Reconciliation of income tax expenses

millions of CHF

 

2020

 

2019

Income before income tax expenses

 

121.8

 

212.8

Weighted average tax rate

 

23.1%

 

22.5%

Income taxes at weighted average tax rate

 

–28.2

 

–48.0

Income taxed at different tax rates

 

8.6

 

11.8

Effect of tax loss carryforwards and allowances for deferred income tax assets

 

–2.8

 

–1.2

Expenses not deductible for tax purposes

 

–5.7

 

–7.8

Effect of changes in tax rates and legislation

 

–0.1

 

–1.5

Prior year items and others

 

–6.4

 

–8.4

Total income tax expenses

 

–34.6

 

–55.1

Effective income tax rate

 

28.4%

 

25.9%

The effective income tax rate for 2020 is 28.4% (2019: 25.9%). Effect of tax loss carryforwards and allowances of deferred income tax assets in the amount of CHF –2.8 million mainly consist of restructuring expenses related to closed facilities with no corresponding tax effects. Prior year items and others in the amount of CHF –6.4 million includes additional provisions for uncertain tax positions in the amount of CHF 4.2 million.

The effective income tax rate for 2019 of 25.9% was impacted by expenses not deductible for tax purposes in the amount of CHF 7.8 million mainly related to higher disallowances of group charges and interests in China, expenses related to a business reorganization in Germany in the amount of CHF 2.2 million and tax base adjustments in Russia and Mexico for prior years.

Income tax liabilities

millions of CHF

 

2020

 

2019

Balance as of January 1

 

35.9

 

34.3

Acquired through business combination

 

2.3

 

1.2

Additions

 

68.3

 

55.7

Released as no longer required

 

–5.8

 

–7.3

Utilized

 

–55.8

 

–47.3

Currency translation differences

 

–1.3

 

–0.6

Total income tax liabilities as of December 31

 

43.5

 

35.9

– thereof non-current

 

4.8

 

2.6

– thereof current

 

38.7

 

33.3

Summary of deferred income tax assets and liabilities in the balance sheet

 

 

2020

 

2019

millions of CHF

 

Assets

 

Liabilities

 

Net

 

Assets

 

Liabilities

 

Net

Intangible assets

 

17.0

 

–83.1

 

–66.1

 

13.6

 

–86.1

 

–72.5

Property, plant and equipment

 

4.5

 

–16.0

 

–11.5

 

5.2

 

–13.7

 

–8.5

Other financial assets

 

4.3

 

–1.1

 

3.2

 

5.9

 

–1.3

 

4.6

Inventories

 

27.4

 

–2.7

 

24.7

 

20.7

 

–3.2

 

17.6

Other assets

 

16.0

 

–31.2

 

–15.2

 

16.9

 

–19.2

 

–2.3

Defined benefit obligations

 

37.8

 

–1.4

 

36.4

 

29.1

 

–1.3

 

27.9

Non-current provisions

 

12.7

 

–2.0

 

10.8

 

16.0

 

–1.2

 

14.8

Current provisions

 

16.0

 

–0.6

 

15.4

 

17.9

 

–0.4

 

17.5

Other liabilities

 

36.8

 

–11.7

 

25.1

 

28.6

 

–6.0

 

22.6

Tax loss carryforwards

 

42.7

 

 

42.7

 

32.6

 

 

32.6

Elimination of intercompany profits

 

0.6

 

 

0.6

 

0.8

 

 

0.8

Tax assets/liabilities

 

215.8

 

–149.8

 

66.0

 

187.3

 

–132.3

 

55.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Offset of assets and liabilities

 

–61.3

 

61.3

 

 

–52.9

 

52.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net recorded deferred income tax assets and liabilities

 

154.5

 

–88.5

 

66.0

 

134.4

 

–79.4

 

55.0

Cumulative deferred income taxes recorded in equity as of December 31, 2020, amounted to CHF 13.3 million (2019: CHF 16.4 million). The group does not recognize any deferred taxes on investments in subsidiaries because it controls the dividend policy of its subsidiaries – i.e. the group controls the timing of reversal of the related taxable temporary differences and management is satisfied that no material amounts will reverse in the foreseeable future.

Movement of deferred income tax assets and liabilities in the balance sheet

 

 

2020

millions of CHF

 

Balance as of January 1

 

Recognized in profit or loss

 

Recognized in other comprehensive income

 

Acquisition of subsidiaries

 

Currency translation differences

 

Balance as of December 31

Intangible assets

 

–72.5

 

10.9

 

 

–5.6

 

1.2

 

–66.1

Property, plant and equipment

 

–8.5

 

–3.7

 

 

 

0.7

 

–11.5

Other financial assets

 

4.6

 

–1.0

 

 

 

–0.5

 

3.2

Inventories

 

17.6

 

7.9

 

 

 

–0.8

 

24.7

Other assets

 

–2.3

 

–9.6

 

–2.4

 

 

–0.9

 

–15.2

Defined benefit obligations

 

27.9

 

11.1

 

–0.8

 

 

–1.8

 

36.4

Non-current provisions

 

14.8

 

–3.0

 

 

 

–1.0

 

10.8

Current provisions

 

17.5

 

–0.9

 

 

0.3

 

–1.5

 

15.4

Other liabilities

 

22.6

 

3.7

 

 

 

–1.2

 

25.1

Tax loss carryforwards

 

32.6

 

11.7

 

 

 

–1.5

 

42.7

Elimination of intercompany profits

 

0.8

 

–0.2

 

 

 

 

0.6

Total

 

55.0

 

26.8

 

–3.2

 

–5.3

 

–7.3

 

66.0

 

 

2019

millions of CHF

 

Balance as of January 1

 

Recognized in profit or loss

 

Recognized in other comprehensive income

 

Acquisition of subsidiaries

 

Currency translation differences

 

Balance as of December 31

Intangible assets

 

–83.7

 

14.6

 

 

–4.0

 

0.6

 

–72.5

Property, plant and equipment

 

–5.8

 

–3.0

 

 

 

0.3

 

–8.5

Other financial assets

 

4.5

 

0.1

 

 

 

 

4.6

Inventories

 

4.9

 

16.8

 

 

–3.7

 

–0.4

 

17.6

Other assets

 

24.0

 

–24.5

 

–1.8

 

 

 

–2.3

Defined benefit obligations

 

20.3

 

3.1

 

4.3

 

 

0.1

 

27.9

Non-current provisions

 

12.3

 

2.9

 

 

 

–0.4

 

14.8

Current provisions

 

21.8

 

–3.9

 

 

 

–0.4

 

17.5

Other liabilities

 

18.2

 

4.7

 

 

 

–0.3

 

22.6

Tax loss carryforwards

 

32.3

 

–0.8

 

 

 

1.1

 

32.6

Elimination of intercompany profits

 

0.6

 

0.2

 

 

 

 

0.8

Total

 

49.4

 

10.1

 

2.5

 

–7.7

 

0.6

 

55.0

Tax loss carryforwards (TLCF)

 

 

2020

millions of CHF

 

Amount

 

Potential tax assets

 

Valuation allowance

 

Carrying amount

 

TLCF

Expiring in the next 3 years

 

0.5

 

0.1

 

–0.1

 

0.1

 

0.3

Expiring in 4–7 years

 

32.9

 

6.4

 

–3.3

 

3.1

 

14.6

Available without limitation

 

285.6

 

55.4

 

–15.9

 

39.5

 

111.7

Total tax loss carryforwards as of December 31

 

318.9

 

62.0

 

–19.3

 

42.7

 

126.6

 

 

2019

millions of CHF

 

Amount

 

Potential tax assets

 

Valuation allowance

 

Carrying amount

 

TLCF

Expiring in the next 3 years

 

0.6

 

0.1

 

–0.1

 

–0.0

 

0.9

Expiring in 4–7 years

 

24.0

 

5.4

 

–3.1

 

2.3

 

14.6

Available without limitation

 

246.0

 

46.3

 

–16.1

 

30.2

 

104.7

Total tax loss carryforwards as of December 31

 

270.7

 

51.8

 

–19.3

 

32.6

 

120.2

Deferred income tax assets are recognized for tax loss carryforwards to the extent that the realization of the related tax benefit through future taxable profits is probable. No deferred income tax assets have been recognized on tax loss carryforwards in the amount of CHF 126.6 million (2019: CHF 120.2 million).

14 Goodwill and other intangible assets

14 Goodwill and other intangible assets

 

 

2020

millions of CHF

 

Goodwill

 

Trademarks and licenses

 

Research and development

 

Computer software

 

Customer relationship

 

Total

Acquisition cost

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

1’260.8

 

220.9

 

14.6

 

52.9

 

609.8

 

2’159.0

Acquired through business combination

 

60.4

 

9.2

 

 

0.3

 

32.0

 

101.9

Additions

 

 

0.0

 

0.6

 

6.9

 

 

7.5

Disposals

 

 

–5.9

 

 

–1.5

 

–0.1

 

–7.5

Currency translation differences

 

–23.5

 

–2.5

 

0.0

 

–0.3

 

–13.3

 

–39.6

Balance as of December 31

 

1’297.7

 

221.6

 

15.3

 

58.3

 

628.4

 

2’221.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated amortization and impairment losses

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

340.0

 

138.4

 

9.8

 

45.4

 

274.5

 

808.1

Additions

 

 

15.4

 

1.6

 

3.2

 

45.7

 

65.9

Disposals

 

 

–5.9

 

 

–1.4

 

–0.0

 

–7.4

Impairments

 

 

 

0.0

 

0.9

 

 

0.9

Currency translation differences

 

 

0.8

 

–0.0

 

–1.6

 

–4.1

 

–4.9

Balance as of December 31

 

340.0

 

148.7

 

11.4

 

46.5

 

316.1

 

862.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1

 

920.8

 

82.5

 

4.9

 

7.6

 

335.2

 

1’350.9

As of December 31

 

957.7

 

73.0

 

4.0

 

11.8

 

312.3

 

1’358.8

In 2020 the group sold other intangible assets with a book value of CHF 0.1 million for CHF 0.1 million resulting in a net gain of CHF 0.0 million (2019: intangible assets sold for CHF 0.5 million with a book value of CHF 0.5 million, resulting in a net gain of CHF 0.0 million).

 

 

2019

millions of CHF

 

Goodwill

 

Trademarks and licenses

 

Research and development

 

Computer software

 

Customer relationship

 

Total

Acquisition cost

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

1’263.4

 

214.0

 

13.8

 

52.1

 

574.4

 

2’117.7

Acquired through business combination

 

20.8

 

12.3

 

 

0.0

 

50.8

 

83.9

Additions

 

 

1.0

 

0.7

 

2.9

 

1.4

 

6.0

Disposals

 

 

–2.1

 

–0.0

 

–1.3

 

–0.8

 

–4.2

Currency translation differences

 

–23.3

 

–4.2

 

0.2

 

–0.8

 

–16.1

 

–44.3

Balance as of December 31

 

1’260.8

 

220.9

 

14.6

 

52.9

 

609.8

 

2’159.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

340.0

 

128.1

 

8.3

 

43.0

 

235.6

 

754.9

Additions

 

 

14.5

 

1.6

 

2.9

 

45.4

 

64.5

Disposals

 

 

–1.3

 

–0.0

 

–2.3

 

–0.1

 

–3.7

Impairments

 

 

0.1

 

0.0

 

2.2

 

 

2.3

Currency translation differences

 

 

–2.9

 

–0.1

 

–0.5

 

–6.4

 

–9.9

Balance as of December 31

 

340.0

 

138.4

 

9.8

 

45.4

 

274.5

 

808.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1

 

923.4

 

85.9

 

5.6

 

9.1

 

338.8

 

1’362.8

As of December 31

 

920.8

 

82.5

 

4.9

 

7.6

 

335.2

 

1’350.9

Goodwill impairment test

During 2020, the regional organization of the Rotating Equipment Services business has been reorganized to align it to the overarching global strategy. Global product lines and a global management organization have been established during the year 2020. Due to the reorganization, a reassessment of the cash-generating units and how goodwill impairment tests are performed within the Rotating Equipment Services division has been carried out. As an outcome of the reassessment, the three regional Rotating Equipment Services cash-generating units have been combined into one cash-generating unit.

 

 

2020

 

2019

millions of CHF

 

Goodwill

 

Growth rate residual value

 

Pre-tax discount rate

 

Goodwill

 

Growth rate residual value

 

Pre-tax discount rate

Pumps Equipment

 

373.6

 

2.0%

 

8.8%

 

378.8

 

2.0%

 

9.0%

Rotating Equipment Services – region EMEA

 

 

n/a

 

n/a

 

153.2

 

2.0%

 

10.7%

Rotating Equipment Services – region APAC

 

 

n/a

 

n/a

 

7.7

 

2.0%

 

12.0%

Rotating Equipment Services – region AME

 

 

n/a

 

n/a

 

70.4

 

2.0%

 

10.8%

Rotating Equipment Services

 

217.2

 

2.0%

 

10.2%

 

 

n/a

 

n/a

Chemtech

 

89.8

 

1.5%

 

10.3%

 

93.3

 

1.5%

 

10.0%

Applicator Systems

 

277.1

 

2.0%

 

5.8%

 

217.4

 

1.0%

 

6.1%

Total goodwill as of December 31

 

957.7

 

 

 

 

 

920.8

 

 

 

 

Goodwill is allocated to the smallest cash-generating unit at which goodwill is monitored for internal management purposes (i.e. division or business unit). The recoverable amount of these units is determined over a five-year cash flow projection period.

The calculation is based on the budget for the first period (2020), the three-year strategic plan for subsequent two periods (2021–2022), and a management calculation for the next two periods (2023–2024). The budget and the three-year strategic plan have been approved by the Board of Directors in February 2020. Due to COVID-19, the budget and the three-year strategic plan have been updated after the approval. This update has been presented to the Board of Directors in May 2020. The calculation is based on the updated version. Cash flows beyond the planning period are extrapolated using a terminal value including the growth rates as stated above.

As of December 31, 2020, there is no indication for goodwill impairment. Updating the impairment test would not have resulted in a goodwill impairment.

Sensitivity analyses

The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations significantly impacted by the terminal growth rate used to determine the residual value, the discount rate and the projected cash flows. The table below shows the amount which the estimated recoverable amount of the CGU is exceeding its carrying amount (headroom). Management has identified that for one CGU a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. The table shows the amount by which these two assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount. Blank fields indicate that assumption change is not reasonably possible.

 

 

2020

 

2019

millions of CHF

 

Headroom

 

Terminal growth rate: Change required for carrying amount to equal recoverable amount

 

Pre-tax discount rate: Change required for carrying amount to equal recoverable amount

 

Headroom

 

Terminal growth rate: Change required for carrying amount to equal recoverable amount

 

Pre-tax discount rate: Change required for carrying amount to equal recoverable amount

Pumps Equipment

 

235.3

 

–2.3%

 

1.7%

 

275.6

 

–2.5%

 

2.0%

Rotating Equipment Services – region EMEA

 

 

 

 

 

 

626.5

 

 

 

 

Rotating Equipment Services – region APAC

 

 

 

 

 

 

109.7

 

 

 

 

Rotating Equipment Services – region AME

 

 

 

 

 

 

405.6

 

 

 

 

Rotating Equipment Services

 

1’021.0

 

 

 

 

 

 

 

 

 

Chemtech

 

594.8

 

 

 

 

 

677.2

 

 

 

 

Applicator Systems

 

1’762.3

 

 

 

 

 

1’798.8

 

 

 

 

Total headroom as of December 31

 

3’613.5

 

 

 

 

 

3’893.4

 

 

 

 

15 Property, plant and equipment

15 Property, plant and equipment

 

 

2020

millions of CHF

 

Land and buildings

 

Machinery and technical equipment

 

Other non-current assets

 

Assets under construction

 

Total

Acquisition cost

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

380.8

 

756.6

 

193.9

 

71.5

 

1’402.9

Acquired through business combination

 

2.8

 

4.2

 

0.6

 

5.5

 

13.1

Additions

 

10.2

 

20.1

 

9.5

 

58.1

 

98.0

Disposals

 

–11.1

 

–60.3

 

–11.9

 

 

–83.3

Reclassifications

 

6.7

 

27.7

 

4.0

 

–38.5

 

Currency translation differences

 

–22.6

 

–38.2

 

–9.9

 

–7.4

 

–78.1

Balance as of December 31

 

366.8

 

710.2

 

186.3

 

89.3

 

1’352.6

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

178.4

 

525.7

 

154.4

 

 

858.5

Additions

 

11.6

 

42.1

 

12.2

 

 

65.9

Disposals

 

–10.0

 

–56.5

 

–10.8

 

 

–77.4

Impairments

 

0.9

 

4.6

 

0.2

 

 

5.7

Currency translation differences

 

–11.3

 

–26.0

 

–8.0

 

 

–45.4

Balance as of December 31

 

169.5

 

489.8

 

148.0

 

 

807.3

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

As of January 1

 

202.4

 

230.9

 

39.5

 

71.5

 

544.4

As of December 31

 

197.3

 

220.4

 

38.3

 

89.3

 

545.3

The group performed impairment tests on production machines and facilities, resulting in impairments of CHF 5.7 million as of December 31, 2020 (December 31, 2019: CHF 2.1 million), all of which were charged to other operating expenses.

In 2020 the group sold property, plant and equipment with a book value of CHF 5.9 million for CHF 8.9 million resulting in a net gain of CHF 3.0 million (2019: property, plant and equipment sold for CHF 8.1 million with a book value of CHF 7.8 million, resulting in a net gain of CHF 0.4 million).

 

 

2019

millions of CHF

 

Land and buildings

 

Machinery and technical equipment

 

Other non-current assets

 

Assets under construction

 

Total

Acquisition cost

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

379.8

 

725.5

 

185.0

 

47.3

 

1’337.7

Acquired through business combination

 

3.6

 

3.9

 

0.5

 

 

8.0

Additions

 

3.6

 

33.2

 

14.1

 

58.0

 

108.9

Disposals

 

–1.3

 

–21.7

 

–9.3

 

 

–32.3

Reclassifications

 

0.7

 

20.8

 

7.9

 

–32.8

 

–3.3

Currency translation differences

 

–5.7

 

–5.1

 

–4.2

 

–1.1

 

–16.0

Balance as of December 31

 

380.8

 

756.6

 

193.9

 

71.5

 

1’402.9

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance as of January 1

 

170.2

 

498.5

 

149.5

 

 

818.3

Additions

 

13.0

 

43.3

 

11.9

 

 

68.2

Disposals

 

–1.1

 

–16.2

 

–7.1

 

 

–24.5

Reclassifications

 

–1.0

 

0.2

 

3.3

 

 

2.4

Impairments

 

0.2

 

1.7

 

0.2

 

 

2.1

Currency translation differences

 

–2.8

 

–1.8

 

–3.3

 

 

–8.0

Balance as of December 31

 

178.4

 

525.7

 

154.4

 

 

858.5

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

As of January 1

 

209.6

 

227.0

 

35.5

 

47.3

 

519.4

As of December 31

 

202.4

 

230.9

 

39.5

 

71.5

 

544.4

The contractual commitments to acquire property, plant and equipment as of December 31, 2020, amounted to CHF 7.0 million (December 31, 2019: CHF 6.9 million).

16 Leases

16 Leases

Lease assets

 

 

2020

millions of CHF

 

Land and buildings, leased

 

Machinery and technical equipment, leased

 

Other non-current assets, leased

 

Total

Balance as of January 1

 

92.6

 

5.8

 

14.1

 

112.6

Acquired through business combination

 

2.1

 

0.0

 

0.3

 

2.4

Additions

 

39.5

 

5.0

 

8.0

 

52.5

Disposals

 

–1.3

 

–0.4

 

–1.3

 

–3.0

Depreciation

 

–25.8

 

–2.1

 

–8.0

 

–35.8

Impairments

 

–3.3

 

 

 

–3.3

Remeasurements and contract modifications

 

–0.2

 

 

1.1

 

0.9

Currency translation differences

 

–4.0

 

–0.3

 

–0.8

 

–5.1

Total lease assets as of December 31

 

99.7

 

8.2

 

13.4

 

121.2

 

 

2019

millions of CHF

 

Land and buildings, leased

 

Machinery and technical equipment, leased

 

Other non-current assets, leased

 

Total

Balance as of January 1

 

95.8

 

4.6

 

14.5

 

114.9

Acquired through business combination

 

5.7

 

 

0.1

 

5.8

Additions

 

13.8

 

3.9

 

9.5

 

27.2

Disposals

 

–0.7

 

–0.2

 

–0.5

 

–1.4

Depreciation

 

–25.2

 

–1.9

 

–7.3

 

–34.4

Remeasurements

 

–3.6

 

 

 

–3.6

Contract modifications

 

–0.1

 

 

0.1

 

–0.0

Reclassifications

 

8.1

 

–0.4

 

–2.0

 

5.7

Currency translation differences

 

–1.2

 

–0.0

 

–0.3

 

–1.6

Total lease assets as of December 31

 

92.6

 

5.8

 

14.1

 

112.6

Lease liabilities

 

 

2020

millions of CHF

 

Non-current lease liabilities

 

Current lease liabilities

 

Total

Balance as of January 1

 

82.3

 

27.4

 

109.7

Acquired through business combination

 

1.6

 

0.9

 

2.4

Additions

 

45.9

 

6.6

 

52.5

Interest expenses

 

2.1

 

0.7

 

2.8

Cash flow for repayments – principal portion

 

–9.8

 

–29.4

 

–39.2

Cash flow for repayments – interest portion

 

–2.1

 

–0.7

 

–2.8

Remeasurements and contract modifications

 

–5.3

 

4.5

 

–0.8

Reclassifications

 

–20.6

 

20.6

 

Currency translation differences

 

–3.7

 

–1.2

 

–4.9

Total lease liabilities as of December 31

 

90.2

 

29.5

 

119.7

 

 

2019

millions of CHF

 

Non-current lease liabilities

 

Current lease liabilities

 

Total

Balance as of January 1

 

87.3

 

28.6

 

115.9

Acquired through business combination

 

5.8

 

 

5.8

Additions

 

20.9

 

6.3

 

27.2

Cash flow for repayments

 

–4.0

 

–30.1

 

–34.1

Remeasurements

 

–2.7

 

–0.8

 

–3.6

Contract modifications

 

–0.2

 

0.0

 

–0.1

Reclassifications

 

–23.7

 

23.7

 

Currency translation differences

 

–1.1

 

–0.4

 

–1.5

Total lease liabilities as of December 31

 

82.3

 

27.4

 

109.7

Other leasing disclosures

millions of CHF

 

2020

 

2019

Recognized in the income statement

 

 

 

 

Expenses relating to short-term leases

 

–17.5

 

–17.4

Expenses relating to low-value asset leases, excluding short-term leases of low-value assets

 

–1.9

 

–4.2

Expenses relating to variable lease payments not included in the lease liability

 

–2.4

 

–2.7

Income from subleasing right-of-use assets

 

0.5

 

0.5

Interest expenses on lease liabilities

 

–2.8

 

–3.3

Total recognized in the income statement

 

–24.1

 

–27.0

 

 

 

 

 

Recognized in the statement of cash flows

 

 

 

 

Cash flow for short-term, low value and variable leases (included within cash flow from operating activities)

 

–21.9

 

–24.3

Cash flow from subleasing right-of-use assets (included within cash flow from operating activities)

 

0.5

 

0.5

Cash flow for repayments of interests on lease liabilities (included within cash flow from operating activities)

 

–2.8

 

–3.3

Cash flow for repayments of the principal portion on lease liabilities (included within cash flow from financing activities)

 

–39.2

 

–34.0

Total cash outflow

 

–63.3

 

–61.1

17 Associates

17 Associates

millions of CHF

 

2020

 

2019

Balance as of January 1

 

10.7

 

13.4

Additions

 

6.7

 

0.0

Reclassifications

 

4.4

 

–2.6

Share of profit/loss of associates

 

–0.7

 

0.1

Dividend payments received

 

–0.0

 

–0.1

Currency translation differences

 

0.1

 

–0.2

Total investments in associates as of December 31

 

21.2

 

10.7

On June 1, 2020, the group acquired 25% non-controlling interests of technology company Tamturbo Plc, for CHF 5.2 million. Tamturbo is a manufacturer of oil-free industrial air compressor systems, offering disruptive solutions. It enables cleaner and more energy-efficient compressed air production, complementing the group’s low-pressure compressors for wastewater aeration.

On October 26, 2020, the group increased its investment in Worn Again by CHF 1.5 million (paid in cash). Worn Again is developing a unique polymer recycling process leveraging Sulzer technology to enable the recycling of textiles and polyester packaging. See Note 18 for further details on the reclassification of CHF 4.4 million.

18 Other financial assets

18 Other financial assets

 

 

2020

millions of CHF

 

Financial assets at fair value through profit and loss

 

Financial assets at amortized costs

 

Total

Balance as of January 1

 

10.3

 

59.8

 

70.1

Changes in scope of consolidation

 

 

0.1

 

0.1

Additions

 

4.0

 

369.7

 

373.8

Disposals

 

 

–123.3

 

–123.3

Reclassifications

 

–4.1

 

–0.4

 

–4.4

Changes in fair value

 

0.1

 

 

0.1

Currency translation differences

 

–0.0

 

–0.7

 

–0.7

Balance as of December 31

 

10.4

 

305.3

 

315.7

– thereof non-current

 

8.7

 

2.0

 

10.6

– thereof current

 

1.7

 

303.3

 

305.1

 

 

2019

millions of CHF

 

Financial assets at fair value through profit and loss

 

Financial assets at amortized costs

 

Total

Balance as of January 1

 

6.8

 

2.7

 

9.4

Changes in scope of consolidation

 

 

0.2

 

0.2

Additions

 

1.2

 

57.2

 

58.4

Disposals

 

 

–0.4

 

–0.4

Reclassifications

 

2.6

 

 

2.6

Currency translation differences

 

–0.3

 

0.1

 

–0.2

Balance as of December 31

 

10.3

 

59.8

 

70.1

– thereof non-current

 

10.3

 

2.4

 

12.6

– thereof current

 

0.0

 

57.5

 

57.5

Financial assets that belong to the categories “financial assets at fair value through profit and lossˮ include investments in equity securities.

On June 10, 2020, the group increased its investment in Worn Again (previously classified as financial asset at fair value through profit and loss) by CHF 1.9 million (thereof CHF 1.5 million paid in cash and CHF 0.4 million converted from a loan, classified as financial assets at amortized costs). After this increase, the group reassessed the classification and reclassed the investment of CHF 4.4 million into investments in associates (see Note 17).

Financial assets at amortized costs include CHF 302.4 million investments in fixed-term deposits with maturities between 4 to 12 months at the date of acquisition.

19 Inventories

19 Inventories

millions of CHF

 

2020

 

2019

Raw materials, supplies and consumables

 

197.6

 

203.9

Work in progress

 

216.4

 

252.0

Finished products and trade merchandise

 

101.1

 

119.0

Total inventories as of December 31

 

515.1

 

574.9

In 2020, Sulzer recognized write-downs of CHF 26.5 million (2019: CHF 23.2 million) in the income statement. Total accumulated write-downs on inventories amounted to CHF 94.2 million as of December 31, 2020 (2019: CHF 80.8 million). Material expenses in 2020 amounted to CHF 1’225.0 million (2019: CHF 1’434.9 million).

20 Assets and liabilities related to contracts with customers

20 Assets and liabilities related to contracts with customers

millions of CHF

 

2020

 

2019

Sales recognized over time related to ongoing performance obligations

 

475.9

 

482.7

Sales recognized over time related to satisfied performance obligations

 

393.9

 

423.4

Sales recognized over time

 

869.8

 

906.2

Sales recognized at a point in time

 

2’449.2

 

2’822.3

Sales

 

3’319.0

 

3’728.5

– thereof sales recognized included in the contract liability balance at the beginning of the period

 

344.8

 

256.4

– thereof sales recognized from performance obligations satisfied (or partially satisfied) in previous periods

 

0.1

 

1.4

 

 

 

 

 

Cost of goods sold recognized over time related to ongoing performance obligations

 

–364.9

 

–386.2

Cost of goods sold recognized over time related to satisfied performance obligations

 

–289.8

 

–330.1

Cost of goods sold recognized over time

 

–654.7

 

–716.3

Cost of goods sold recognized at a point in time

 

–1’670.8

 

–1’891.0

Cost of goods sold

 

–2’325.4

 

–2’607.3

 

 

 

 

 

Gross profit recognized over time related to ongoing performance obligations

 

111.0

 

96.5

Gross profit recognized over time related to satisfied performance obligations

 

104.2

 

93.3

Gross profit recognized over time

 

215.2

 

189.9

Gross profit recognized at a point in time

 

778.4

 

931.3

Gross profit

 

993.6

 

1’121.2

 

 

 

 

 

Contract assets from sales recognized over time relating to ongoing performance obligations

 

749.3

 

779.2

Expected loss rate

 

0.1%

 

0.2%

Allowance for expected losses

 

–0.6

 

–1.2

Netting with contract liabilities

 

–423.9

 

–422.8

Contract assets

 

324.9

 

355.2

 

 

 

 

 

Contract liabilities from costs recognized over time relating to ongoing performance obligations

 

46.9

 

34.2

Advance payments from customers relating to point in time contracts

 

200.8

 

239.2

Advance payments from customers relating to over time contracts

 

476.8

 

494.1

Netting with contract assets

 

–423.9

 

–422.8

Contract liabilities

 

300.5

 

344.8

 

 

 

 

 

Order backlog (aggregate amount of transaction price allocated to unsatisfied performance obligations)

 

1’758.9

 

1’792.6

– thereof expected to be recognized as revenue within 12 months

 

1’561.5

 

1’637.3

– thereof expected to be recognized in more than 12 months

 

197.3

 

155.3

Total sales recognized over time decreased from CHF 906.2 million in 2019 to CHF 869.8 million in 2020. As a result contract assets decreased by CHF 30.3 million and contract liabilities by CHF 44.3 million.

21 Trade accounts receivable

21 Trade accounts receivable

Aging structure of trade accounts receivable

 

 

2020

 

2019

millions of CHF

 

Expected loss rate

 

Gross amount

 

Allowance

 

Net book value

 

Expected loss rate

 

Gross amount

 

Allowance

 

Net book value

Not past due

 

0.1%

 

419.7

 

–0.6

 

419.1

 

0.1%

 

446.7

 

–0.5

 

446.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1–30 days

 

0.8%

 

83.4

 

–0.7

 

82.7

 

0.8%

 

84.6

 

–0.7

 

83.9

31–60 days

 

6.2%

 

27.3

 

–1.7

 

25.6

 

2.4%

 

36.2

 

–0.9

 

35.4

61–120 days

 

4.2%

 

31.8

 

–1.3

 

30.5

 

3.3%

 

30.6

 

–1.0

 

29.6

>120 days

 

54.6%

 

90.5

 

–49.4

 

41.1

 

46.4%

 

94.9

 

–44.1

 

50.9

Total trade accounts receivable as of December 31

 

 

 

652.7

 

–53.7

 

599.1

 

 

 

693.0

 

–47.1

 

645.9

Allowance for doubtful trade accounts receivable

millions of CHF

 

2020

 

2019

Balance as of January 1

 

47.1

 

47.9

Additions

 

22.9

 

13.4

Released as no longer required

 

–10.1

 

–10.5

Utilized

 

–4.5

 

–5.3

Currency translation differences

 

–1.8

 

1.6

Balance as of December 31

 

53.7

 

47.1

Approximately 36% (2019: 36%) of the gross amount of trade accounts receivable were past due, and an allowance of CHF 53.7 million (2019: CHF 47.1 million) was recorded. The recoverability of trade accounts receivable is regularly reviewed, and the credit quality of new customers is thoroughly assessed. Due to the large and heterogeneous customer base, the credit risk from individual customers of the group is limited. The allowance for doubtful trade accounts receivable is based on expected credit losses. Due to COVID-19, the group has reassessed the expected credit losses by applying updated forward-looking information such as development of gross domestic product (GDP) and oil price development. The allowance for doubtful trade accounts receivable has increased by CHF 4.2 million as a consequence of the reassessment.

Accounts receivable by geographical region

millions of CHF

 

2020

 

2019

Europe, Middle East, Africa

 

284.7

 

298.7

– thereof United Kingdom

 

62.7

 

61.0

– thereof Saudi Arabia

 

27.2

 

34.7

– thereof Germany

 

37.4

 

31.7

– thereof France

 

21.4

 

22.5

– thereof Russia

 

18.4

 

17.5

 

 

 

 

 

Americas

 

137.2

 

164.8

– thereof USA

 

88.4

 

103.0

 

 

 

 

 

Asia-Pacific

 

177.1

 

182.3

– thereof China

 

112.2

 

116.8

 

 

 

 

 

Total as of December 31

 

599.1

 

645.9

22 Other current receivables and prepaid expenses

22 Other current receivables and prepaid expenses

millions of CHF

 

2020

 

2019

Taxes (VAT, withholding tax)

 

63.9

 

77.5

Derivative financial instruments

 

12.1

 

6.7

Other current receivables

 

19.2

 

23.4

Total other current receivables as of December 31

 

95.2

 

107.6

 

 

 

 

 

Prepaid contributions to employee benefit plans

 

75.7

 

32.4

Other prepaid expenses

 

31.3

 

32.1

Total prepaid expenses as of December 31

 

107.0

 

64.5

 

 

 

 

 

Total other current receivables and prepaid expenses as of December 31

 

202.2

 

172.0

For further details on “Derivative financial instruments”, refer to note 29 and for “Prepaid contributions to employee benefit plans”, refer to note 9. Other current receivables and prepaid expenses do not include any material positions that are past due or impaired.

23 Cash and cash equivalents

23 Cash and cash equivalents

millions of CHF

 

2020

 

2019

Cash

 

915.8

 

802.2

Cash equivalents

 

207.4

 

233.3

Total cash and cash equivalents as of December 31

 

1’123.2

 

1’035.5

As of December 31, 2020, the group held restricted cash and cash equivalents of CHF 17.3 million (2019: CHF 11.5 million).

24 Share capital

24 Share capital

 

 

2020

 

2019

thousands of CHF

 

Number of shares

 

Share capital

 

Number of shares

 

Share capital

Balance as of December 31 (par value CHF 0.01)

 

34’262’370

 

342.6

 

34’262’370

 

342.6

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.

Share ownership

Sulzer shares are freely transferable provided that, when requested by the company to do so, buyers declare that they have purchased and will hold the shares in their own name and for their own account. Nominees shall only be entered in the share register with the right to vote, provided that they meet the following conditions: the nominee is subject to the supervision of a recognized banking and financial market regulator; the nominee has entered into an agreement with the Board of Directors concerning its status; the share capital held by the nominee does not exceed 3% of the registered share capital entered in the commercial register; and the names, addresses and number of shares of those individuals for whose accounts the nominee holds at least 0.5% of the share capital have been disclosed. The Board of Directors is also entitled, beyond these limits, to enter shares of nominees with voting rights in the share register, provided that the above-mentioned conditions are met (see also paragraph 6a of the Articles of Association at www.sulzer.com/governance).

Shareholders holding more than 3%

 

 

Dec 31, 2020

 

Dec 31, 2019

 

 

Number of shares

 

in %

 

Number of shares

 

in %

Viktor Vekselberg (direct shareholder: Tiwel Holding AG)

 

16’728’414

 

48.82

 

16’728’414

 

48.82

Retained earnings

The retained earnings include prior years’ undistributed income of consolidated companies and all remeasurements of the net liability for defined benefit plans.

Treasury shares

The total number of shares held by Sulzer Ltd as of December 31, 2020, amounted to 426’467 treasury shares (December 31, 2019: 240’924 shares).

The treasury shares are mainly held for the purpose of issuing shares under the management share-based payment programs.

Cash flow hedge reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction has not yet occurred. Amounts are reclassified to profit or loss when the associated hedged transaction affects the income statement.

Currency translation reserve

The currency translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of controlled entities, whose functional currency differs from the reporting currency of the group. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

Dividends

On April 15, 2020, the Annual General Meeting approved an ordinary dividend of CHF 4.00 (2019: ordinary dividend of CHF 3.50) per share to be paid out of reserves. The dividend was paid to shareholders on April 21, 2020. The total amount of the dividend to shareholders of Sulzer Ltd is CHF 136.1 million (2019: CHF 119.2 million), thereof paid dividends of CHF 92.6 million (2019: CHF 81.2 million) and unpaid dividends of CHF 43.5 million (2019: CHF 38.1 million). The dividend payments to the group’s main shareholder Tiwel Holding AG could still not be transferred as a result of US sanctions. The unpaid dividends are reflected in the balance sheet position “other current and accrued liabilitiesˮ (see note 28).

The Board of Directors decided to propose to the Annual General Meeting 2021 a dividend for the year 2020 of CHF 4.00 per share (2019: CHF 4.00).

25 Earnings per share

25 Earnings per share

 

 

2020

 

2019

Net income attributable to shareholders of Sulzer Ltd (millions of CHF)

 

83.6

 

154.0

 

 

 

 

 

Issued number of shares

 

34’262’370

 

34’262’370

Adjustment for the average treasury shares held

 

–292’229

 

–235’928

Average number of shares outstanding as of December 31

 

33’970’141

 

34’026’442

 

 

 

 

 

Adjustment for share participation plans

 

343’482

 

313’212

Average number of shares for calculating diluted earnings per share as of December 31

 

34’313’623

 

34’339’654

 

 

 

 

 

Earnings per share, attributable to a shareholder of Sulzer Ltd (in CHF) as of December 31

 

 

 

 

Basic earnings per share

 

2.46

 

4.52

Diluted earnings per share

 

2.44

 

4.48

26 Borrowings

26 Borrowings

 

 

2020

millions of CHF

 

Non-current borrowings

 

Current borrowings

 

Total

Balance as of January 1

 

1’199.2

 

131.0

 

1’330.2

Cash flow from proceeds

 

498.9

 

72.2

 

571.1

Cash flow for repayments

 

–0.0

 

–177.1

 

–177.1

Changes in amortized costs

 

0.3

 

0.1

 

0.4

Reclassifications

 

–207.1

 

207.1

 

Currency translation differences

 

0.0

 

–1.6

 

–1.5

Total borrowings as of December 31

 

1’491.3

 

231.8

 

1’723.1

 

 

2019

millions of CHF

 

Non-current borrowings

 

Current borrowings

 

Total

Balance as of January 1

 

1’308.7

 

16.9

 

1’325.6

Acquired through business combination

 

0.4

 

 

0.4

Cash flow from proceeds

 

0.3

 

153.8

 

154.1

Cash flow for repayments

 

–0.0

 

–149.2

 

–149.2

Reclassifications

 

–110.1

 

110.1

 

Currency translation differences

 

–0.0

 

–0.7

 

–0.7

Total borrowings as of December 31

 

1’199.2

 

131.0

 

1’330.2

Borrowings by currency

 

 

2020

 

2019

 

 

millions of CHF

 

in %

 

Interest rate

 

millions of CHF

 

in %

 

Interest rate

CHF

 

1’700.2

 

98.7

 

0.9%

 

1’310.7

 

98.5

 

0.9%

INR

 

6.0

 

0.3

 

5.0%

 

9.5

 

0.7

 

6.4%

USD

 

5.1

 

0.3

 

1.8%

 

3.6

 

0.3

 

2.8%

EUR

 

10.1

 

0.6

 

1.1%

 

3.4

 

0.3

 

0.6%

Other

 

1.7

 

0.1

 

 

3.1

 

0.2

 

Total as of December 31

 

1’723.1

 

100.0

 

 

1’330.2

 

100.0

 

The group arranged a CHF 500 million syndicated credit facility with maturity date 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, 2020 and 2019, the syndicated facility was not used.

Outstanding bonds

 

 

2020

 

2019

millions of CHF

 

Amortized costs

 

Nominal

 

Amortized costs

 

Nominal

0.375% 07/2016–07/2022

 

325.1

 

325.0

 

325.3

 

325.0

0.875% 07/2016–07/2026

 

125.0

 

125.0

 

125.0

 

125.0

0.250% 07/2018–07/2020

 

 

 

109.9

 

110.0

1.300% 07/2018–07/2023

 

289.6

 

290.0

 

289.4

 

290.0

0.625% 10/2018–10/2021

 

209.9

 

210.0

 

209.7

 

210.0

1.600% 10/2018–10/2024

 

249.8

 

250.0

 

249.8

 

250.0

0.800% 09/2020–09/2025

 

299.3

 

300.0

 

 

0.875% 11/2020–11/2027

 

199.6

 

200.0

 

 

Total as of December 31

 

1’698.4

 

1’700.0

 

1’309.1

 

1’310.0

– thereof non-current

 

1’488.5

 

1’490.0

 

1’199.2

 

1’200.0

– thereof current

 

209.9

 

210.0

 

109.9

 

110.0

On August  26, 2020, Sulzer issued a CHF 300 million single tranche bond. The bond has a term of five years and carries a coupon of 0.80% at a price of 100.037%.

On October 21, 2020, Sulzer issued a CHF 200 million single tranche bond. The bond has a term of seven years and carries a coupon of 0.875% at a price of 100.101%.

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

27 Provisions

27 Provisions

 

 

2020

millions of CHF

 

Other employee benefits

 

Warranties/ liabilities

 

Restructuring

 

Environmental

 

Other

 

Total

Balance as of January 1

 

54.4

 

67.6

 

20.0

 

14.7

 

51.9

 

208.7

Acquired through business combination

 

 

0.0

 

 

 

3.5

 

3.5

Additions

 

12.2

 

44.2

 

58.0

 

 

65.6

 

179.9

Released as no longer required

 

 

–7.5

 

–2.2

 

–0.2

 

–5.6

 

–15.5

Utilized

 

–10.1

 

–15.5

 

–33.0

 

–1.4

 

–54.9

 

–114.8

Currency translation differences

 

–3.0

 

–3.6

 

–1.4

 

–0.3

 

–4.2

 

–12.5

Total provisions as of December 31

 

53.5

 

85.3

 

41.5

 

12.8

 

56.3

 

249.3

– thereof non-current

 

37.3

 

3.3

 

2.7

 

12.7

 

9.7

 

65.8

– thereof current

 

16.2

 

82.0

 

38.7

 

0.0

 

46.6

 

183.5

 

 

2019

millions of CHF

 

Other employee benefits

 

Warranties/ liabilities

 

Restructuring

 

Environmental

 

Other

 

Total

Balance as of January 1

 

49.4

 

78.9

 

10.1

 

15.1

 

60.5

 

213.9

Acquired through business combination

 

 

 

 

 

0.7

 

0.7

Additions

 

14.2

 

20.7

 

23.4

 

 

28.8

 

87.1

Released as no longer required

 

 

–11.2

 

–0.2

 

 

–11.7

 

–23.1

Utilized

 

–7.8

 

–19.4

 

–14.3

 

–0.5

 

–21.8

 

–63.7

Reclassifications

 

 

0.9

 

0.7

 

0.0

 

–1.6

 

Currency translation differences

 

–1.4

 

–2.3

 

0.4

 

0.1

 

–2.9

 

–6.2

Total provisions as of December 31

 

54.4

 

67.6

 

20.0

 

14.7

 

51.9

 

208.7

– thereof non-current

 

40.6

 

3.1

 

3.7

 

14.7

 

11.4

 

73.4

– thereof current

 

13.8

 

64.5

 

16.3

 

 

40.6

 

135.3

The category “Other employee benefitsˮ includes provisions for jubilee gifts, early retirement of senior managers and other obligations to employees.

The category “Warranties/liabilitiesˮ includes provisions for warranties, customer claims, penalties, litigation and legal cases relating to goods delivered or services rendered.

The group has initiated measures to mitigate the impact of market disruptions on Energy-related business activities caused by the pandemic. For 2020, the group recognized restructuring costs of CHF 58.0 million (2019: CHF 23.4 million), partly offset by released restructuring provisions of CHF 2.2 million (2019: CHF 0.2 million). Restructuring costs mainly relate to the closure or resizing of sites in Europe and the Americas, as well as the resizing of supporting resources. The remaining restructuring provision as of December 31, 2020, is CHF 41.5 million, of which CHF 38.7 million is expected to be utilized within one year.

“Environmentalˮ mainly consists of expected costs related to inherited liabilities.

“Otherˮ includes provisions that do not fit into the aforementioned categories. A large number of these provisions refer to indemnities, in particular related from divestitures. In addition, provisions for ongoing asbestos lawsuits and other legal claims are included. Based on the currently known facts, Sulzer is of the opinion that the resolution of the open cases will not have material effects on its liquidity or financial condition. Although Sulzer expects a large part of the category “Otherˮ to be realized in 2021, by their nature the amounts and timing of any cash outflows are difficult to predict.

28 Other current and accrued liabilities

28 Other current and accrued liabilities

millions of CHF

 

2020

 

2019

Liability related to the purchase of treasury shares

 

103.4

 

104.2

Outstanding dividend payments

 

157.6

 

114.1

Taxes (VAT, withholding tax)

 

35.6

 

29.4

Derivative financial instruments

 

6.9

 

8.2

Notes payable

 

17.0

 

9.3

Contingent consideration

 

4.4

 

Other current liabilities

 

29.6

 

30.2

Total other current liabilities as of December 31

 

354.5

 

295.5

 

 

 

 

 

Contract-related costs

 

116.3

 

104.7

Salaries, wages and bonuses

 

114.0

 

113.7

Vacation and overtime claims

 

20.8

 

31.8

Other accrued liabilities

 

116.3

 

131.7

Total accrued liabilities as of December 31

 

367.5

 

381.8

 

 

 

 

 

Total other current and accrued liabilities as of December 31

 

721.9

 

677.3

The outstanding dividend payments of CHF 157.6 million (2019: CHF 114.1 million) are explained in note 24.

29 Derivative financial instruments

29 Derivative financial instruments

 

 

2020

 

2019

 

 

Derivative assets

 

Derivative liabilities

 

Derivative assets

 

Derivative liabilities

millions of CHF

 

Notional value

 

Fair value

 

Notional value

 

Fair value

 

Notional value

 

Fair value

 

Notional value

 

Fair value

Forward exchange rate contracts

 

672.7

 

12.1

 

723.2

 

6.9

 

713.6

 

6.8

 

426.8

 

8.2

Interest rate swaps

 

4.9

 

1.0

 

4.9

 

1.2

 

 

 

 

Total as of December 31

 

677.6

 

13.2

 

728.0

 

8.1

 

713.6

 

6.8

 

426.8

 

8.2

– thereof due in <1 year

 

672.7

 

12.1

 

723.2

 

6.9

 

705.6

 

6.7

 

426.4

 

8.2

– thereof due in 1–5 years

 

 

 

 

 

8.0

 

0.1

 

0.4

 

0.0

– thereof due in >5 years

 

4.9

 

1.0

 

4.9

 

1.2

 

 

 

 

The notional value and the fair value of derivative assets and liabilities include current and also non-current derivative financial instruments. The cash flow hedges of the expected future sales were assessed as highly effective. As at December 31, 2020, a net cumulative unrealized gain of CHF 7.4 million (2019: loss of CHF 5.2 million) with a deferred tax liability of CHF 1.5 million (2019: tax asset of CHF 0.9 million) relating to these cash flow hedges were included in the Cash Flow Hedge Reserve. In 2020, a loss of CHF 6.3 million (2019: CHF 5.7 million) was reclassified from cash flow hedge reserves to profit and loss. There was no ineffectiveness that arose from cash flow hedges in 2020 (2019: CHF 0.0 million). The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet.

The hedged, highly probable forecast transactions denominated in foreign currency are mostly expected to occur at various dates during the next 12 months. Gains and losses recognized in the hedging reserve (cash flow hedges) in equity on forward foreign exchange contracts as of December 31, 2020, are recognized either in sales, cost of goods sold, or in other operating income/expenses in the period or periods during which the hedged transaction affects the income statement. This is generally within 12 months from the balance sheet date unless the gain or loss is included in the initial amount recognized for the purchase of fixed assets, in which case recognition is over the lifetime of the asset (five to ten years).

The group enters into derivative financial instruments under enforceable master netting arrangements. These agreements do not meet the criteria for offsetting derivative assets and derivative liabilities in the consolidated balance sheet. As per December 31, 2020, the amount subject to such netting arrangements was CHF 5.0 million (2019: CHF 5.3 million). Considering the effect of these agreements the amount of derivative assets would reduce from CHF 13.2 million to CHF 8.2 million (2019: from CHF 6.8 million to CHF 1.5 million), and the amount of derivative liabilities would reduce from CHF 8.1 million to CHF 3.1 million (2019: from CHF 8.2 million to CHF 2.9 million).

30 Contingent liabilities

30 Contingent liabilities

millions of CHF

 

2020

 

2019

Guarantees in favor of third parties

 

11.0

 

10.0

Total contingent liabilities as of December 31

 

11.0

 

10.0

As of December 31, 2020, guarantees provided to third parties amounted to CHF 11.0 million (2019: CHF 10.0 million), whereof CHF 10.0 million were related to certain environmental matters of disposed business (2019: CHF 10.0 million) and CHF 1.0 million to general business activities. Both guarantees will expire in 2022.

31 Share participation plans

31 Share participation plans

Share-based payments charged to personnel expenses

millions of CHF

 

2020

 

2019

Restricted share unit plan

 

1.2

 

0.9

Performance share plan

 

13.0

 

11.6

Total charged to personnel expenses

 

14.2

 

12.5

Restricted share unit plan settled in Sulzer shares

This long-term incentive plan covers the Board of Directors. Restricted share units (RSU) are granted annually depending on the organizational position of the employee. Vesting of the RSU is subject to continuous employment over the vesting period. Awards to members of the Board of Directors automatically vest with the departure from the Board. 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. The fair value of the RSU granted is measured at the grant date closing share price of Sulzer Ltd, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds for the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. Consequently, the grant date fair value of the RSU is reduced by the present value of the dividends expected to be paid during the vesting period.

Restricted share units

Grant year

 

2020

 

2019

 

2018

 

2017

 

2016

 

Total

Outstanding as of December 1, 2019

 

 

 

8’283

 

4’952

 

6’794

 

20’029

Granted

 

 

10’551

 

 

 

 

10’551

Exercised

 

 

 

–2’761

 

–2’476

 

–6’794

 

–12’031

Forfeited

 

 

 

 

 

 

Outstanding as of December 31, 2019

 

 

10’551

 

5’522

 

2’476

 

 

18’549

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of January 1, 2020

 

 

10’551

 

5’522

 

2’476

 

 

18’549

Granted

 

17’715

 

 

 

 

 

17’715

Exercised

 

 

–3’517

 

–2’761

 

–2’476

 

 

–8’754

Forfeited

 

 

 

 

 

 

Outstanding as of December 31, 2020

 

17’715

 

7’034

 

2’761

 

 

 

27’510

 

 

 

 

 

 

 

 

 

 

 

 

 

Average fair value at grant date in CHF

 

65.22

 

97.76

 

118.20

 

98.00

 

72.61

 

 

Performance share plan settled in Sulzer shares

This long-term incentive plan covers the members of the Executive Committee and the members of the Sulzer Management Group. Performance share units (PSU) are granted annually depending on the organizational position of the employee.

Vesting of the PSU is subject to continuous employment and to the achievement of performance conditions over the performance period. Participants are not entitled to dividends declared during the vesting period. Vesting of the performance share plans (PSP) is based on three performance conditions: operational income before restructuring, amortization, impairments and non-operational items (operational profit) growth over the performance period (weighted 25%), average operational return on capital employed (operational ROCEA) (weighted 25%), and on Sulzer’s total return to shareholders (TSR), compared to a selected group of ten peer companies and the SMIM Index (weighted 50%).

TSR is measured with a starting value of the volume-weighted average share price (VWAP) over the first three months of the first year, and an ending value of the VWAP over the last three months of the vesting period. The rank of Sulzer’s TSR at the end of the performance period determines the effective number of total shares. The exercise price of the PSU is zero.

The following inputs were used to determine the fair value of the PSU at grant date using a Monte Carlo simulation:

Grant year

 

2020

 

2019

 

2018

 

2017

 

2016

Fair value at grant date

 

78.18

 

115.95

 

143.62

 

116.02

 

118.05

Share price at grant date

 

76.05

 

92.46

 

120.60

 

104.80

 

98.50

Expected volatility

 

37.45%

 

29.64%

 

29.12%

 

25.10%

 

25.46%

Risk-free interest rate

 

–0.64%

 

–0.57%

 

–0.42%

 

–0.56%

 

–0.73%

The expected volatility of the Sulzer share, the peer group companies, and the SMIM Index is determined by the historical volatility. The zero yield curves of those countries in which the companies and indices are listed were used as the relevant risk-free rates. Historical data was used to arrive at an estimate for the correlation between Sulzer, the peer companies, and the SMIM Index. For the TSR calculation all dividends paid during the vesting period are added to the closing share price.

Performance share units – terms of awards

Grant year

 

2020

 

2019

 

2018

 

2017

 

2016

Number of awards granted

 

151’422

 

112’857

 

74’467

 

76’818

 

116’472

Grant date

 

June 1, 2020

 

April 1, 2019

 

July 1, 2018

 

April 1, 2017

 

August 1, 2016

Performance period for cumulative operational profit

 

01/20–12/22

 

01/19–12/21

 

01/18–12/20

 

01/17–12/19

 

01/16–12/18

Performance period for TSR

 

01/20–12/22

 

01/19–12/21

 

01/18–12/20

 

01/17–12/19

 

01/16–12/18

Fair value at grant date in CHF

 

78.18

 

115.95

 

143.62

 

116.02

 

118.05

Performance share units

Grant year

 

2020

 

2019

 

2018

 

2017

 

2016

 

Total

Outstanding as of January 1, 2019

 

 

 

74’467

 

68’759

 

90’990

 

234’216

Granted

 

 

112’857

 

 

 

 

112’857

Exercised

 

 

–630

 

–1’673

 

–1’540

 

–90’990

 

–94’833

Forfeited

 

 

–1’588

 

–2’631

 

–382

 

 

–4’601

Outstanding as of December 31, 2019

 

 

110’639

 

70’163

 

66’837

 

 

247’639

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of January 1, 2020

 

 

110’639

 

70’163

 

66’837

 

 

247’639

Granted

 

151’422

 

 

 

 

 

151’422

Exercised

 

–999

 

–3’831

 

–4’748

 

–66’837

 

 

–76’415

Forfeited

 

–3’564

 

–5’044

 

–2’158

 

 

 

–10’766

Outstanding as of December 31, 2020

 

146’859

 

101’764

 

63’257

 

 

 

311’880

32 Transactions with members of the Board of Directors, Executive Committee and related parties

32 Transactions with members of the Board of Directors, Executive Committee and related parties

Key management compensation

 

 

2020

 

2019

thousands of CHF

 

Short-term benefits

 

Equity-based compensation

 

Pension and social security contributions

 

Total

 

Short-term benefits

 

Equity-based compensation

 

Pension and social security contributions

 

Total

Board of Directors

 

1’396

 

1’155

 

257

 

2’808

 

1’282

 

1’030

 

230

 

2’542

Executive Committee

 

7’445

 

5’238

 

1’965

 

14’648

 

7’171

 

6’290

 

1’909

 

15’370

There are no outstanding loans with members of the Board of Directors or the Executive Committee as per the balance sheet date. No shares have been granted to members of the Board of Directors, the Executive Committee, or related persons, with the exception of shares granted in connection with equity-settled plans and service awards.

Related parties

As of December 31, 2020, open payables with related parties controlled by the major shareholder of CHF 261.0 million (2019: CHF 218.3 million) were recognized (thereof CHF 103.4 million related to the purchase of treasury shares and CHF 157.6 million outstanding dividend payments, see note 24 and note 28). The operating expenses amounted to CHF 0.8 million (2019: CHF 0.8 million). The interest expenses amounted to CHF 0.0 million (2019: expense CHF 0.1 million).

Sales with ROTEC (Joint Stock Company ROTEC, Russia), where the Sulzer Board member Mikhail Lifshitz is the Chairman of the Board and holds a 31% stake, amounted to CHF 0.0 million (2019: CHF 0.4 million). Expenses with ROTEC amounted to CHF 0.0 million (2019: CHF 0.3 million).

Sales with associates in 2020 amounted to CHF 1.1 million (2019: CHF 2.3 million) with open receivables of CHF 0.5 million (2019: CHF 0.0 million). The income for services with associates amounted to CHF 0.0 million (2019: CHF 0.3 million). The operating expenses amounted to CHF 0.2 million (2019: CHF 2.8 million).

33 Auditor remuneration

33 Auditor remuneration

Fees for the audit services by KPMG as the appointed group auditor amounted to CHF 3.6 million (2019: CHF 4.0 million). Additional services provided by the group auditor amounted to a total of CHF 1.8 million (2019: CHF 0.7 million). This amount includes CHF 0.5 million (2019: CHF 0.5 million) for tax services and CHF 1.3 million for other services (2019: CHF 0.2 million).

34 Key accounting policies and valuation methods

34 Key accounting policies and valuation methods

34.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) using the historical cost convention except for the following:

  • financial assets at fair value through profit and loss and financial assets at fair value through other comprehensive income, and
  • net position from defined benefit plans, where plan assets are measured at fair value and the plan liabilities are measured at the present value of the defined benefit obligation (see note 34.20 a).

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all subsidiaries.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5 “Critical accounting estimates and judgments”.

Rounding

Due to rounding, numbers presented throughout the consolidated financial statements may not add up precisely to the totals provided. All ratios, percentages and variances are calculated using the underlying amount rather than the presented rounded amount.

Tables

Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Dashes (–) generally indicate that the respective figure is zero on an actual or rounded basis.

34.2 Change in accounting policies

a) Standards, amendments and interpretations which are effective for 2020

A number of new standards and amendments to standards have become effective as of January 1, 2020, but they do not have a material effect on the group’s financial statements.

b) Standards, amendments and interpretations issued but not yet effective which the group has decided not to early adopt in 2020

There are no other IFRS standards or interpretations issued but not yet effective that would be expected to have a material impact on the group.

34.3 Consolidation

a) Business combinations

The group accounts for business combinations using the acquisition method when control is transferred to the group (see 34.3 b). The consideration transferred in the acquisition is measured at the fair value of the assets given, the liabilities incurred to the former owner of the acquiree, and the equity interest issued by the group. Any goodwill arising is tested annually for impairment (see 34.6 a). Any gain on a bargain purchase is recognized in the income statement immediately. Acquisition-related costs are expensed as incurred, except if related to the issue of debt or equity securities. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in the income statement.

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. The determination is based on the difference between the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

b) Subsidiaries

Subsidiaries are all entities controlled by the group. The group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

According to the full consolidation method, all assets and liabilities as well as income and expenses of the subsidiaries are included in the consolidated financial statements. The share of non-controlling interests in the net assets and results is presented separately as non-controlling interests in the consolidated balance sheet and income statement, respectively.

c) Non-controlling interests

The group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions.

When the group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognized in the income statement. Any interest retained in the former subsidiary is measured at fair value when control is lost.

d) Associates and joint ventures

Associates are those entities in which the group has significant influence, but no control, over the financial and operating policies. Significant influence is presumed to exist when the group holds, directly or indirectly, between 20% and 50% of the voting rights. Joint ventures are those entities over whose ­activities the group has joint control, established by contractual agreement and requiring unanimous consent for strategic, financial and operating decisions. Associates and joint ventures are accounted for using the equity method and are initially recognized at cost.

e) Transactions eliminated on consolidation

All material intercompany transactions and balances and any unrealized gains arising from intercompany transactions are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

34.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer. The Chief Executive Officer, who is responsible for allocating resources and assessing performance (e.g. operating income) of the operating segments, has been identified as chief operating decision maker.

34.5 Foreign currency translation

a) Functional and presentation currency

Items included in the financial statements of subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Swiss francs (CHF).

The following table shows the major currency exchange rates for the reporting periods 2020 and 2019:

 

 

2020

 

2019

CHF

 

Average rate

 

Year-end rate

 

Average rate

 

Year-end rate

1 EUR

 

1.07

 

1.08

 

1.11

 

1.09

1 GBP

 

1.20

 

1.20

 

1.27

 

1.27

1 USD

 

0.94

 

0.88

 

0.99

 

0.97

100 CNY

 

13.60

 

13.49

 

14.38

 

13.91

100 INR

 

1.27

 

1.21

 

1.41

 

1.36

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.

c) Subsidiaries

The results and balance sheet positions of all the subsidiaries (excluding the ones with hyperinflationary economy) that have a functional currency different from the presentation currency of the group are translated into the presentation currency as follows:

  • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet, and
  • income and expenses for each income statement are translated at average exchange rates.

Translation differences resulting from consolidation are taken to other comprehensive income. In the event of a sale or liquidation of foreign subsidiaries, exchange differences that were recorded in other comprehensive income are recognized in the income statement as part of the gain or loss on sale or liquidation.

If a loan is made to a group company, and the loan in substance forms part of the group’s investment in the group company, translation differences arising from the loan are recognized directly in other comprehensive income as foreign currency translation differences. When the group company is sold or partially disposed of, and control no longer exists, gains and losses accumulated in equity are reclassified to the income statement as part of the gain or loss on disposal.

34.6 Intangible assets

The intangible assets with finite useful life are ­amortized in line with the expected useful life, usually on a straight-line basis. The period of useful life is to be assessed according to business rather than legal criteria. This assessment is made at least once a year. An impairment might be required in the event of sudden or unforeseen value changes.

a) Goodwill

Goodwill represents the difference between the consideration transferred and the fair value of the group’s share in the identifiable net asset value of the acquired business at the time of acquisition. Any goodwill arising as a result of a business combination is included within intangible assets.

Goodwill is subject to an annual impairment test and valued at its original acquisition cost less accumulated impairment losses. In cases where circumstances indicate a potential impairment, impairment tests are conducted more frequently. Profits and losses arising from the sale of a business include the book value of the goodwill assigned to the business being sold.

For impairment testing goodwill is allocated to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Goodwill originating from the acquisition of an associated company is included in the book value of the participation in associated companies.

b) Trademarks and licenses

Trademarks, licenses and similar rights acquired from third parties are stated at acquisition cost. Such assets are amortized over their expected useful life, generally not exceeding ten years.

c) Research and development

Expenditure on research activities is recognized in the income statement as incurred. Development costs for major projects are capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the group intends and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognized in the income statement as incurred. Subsequently such assets are measured at cost less accumulated amortization (max. five years) and any accumulated impairment loss.

d) Computer software

Acquired computer software licenses are capitalized on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (three to max. five years).

e) Customer relationships

As part of a business combination, acquired customer rights are recorded at fair value (cost at the time of acquisition). These costs are amortized over their estimated useful lives, generally not exceeding 15 years.

34.7 Property, plant and equipment

Property, plant and equipment is stated at acquisition cost less depreciation and impairments. Acquisition cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced item is derec­ognized. All other repairs and maintenance are charged to the income statement during the financial ­period in which they are incurred.

Depreciation is provided on a straight-line basis over the estimated useful life. Land is stated at cost and is not depreciated.

The useful lives are as follows:
Buildings 20 – 50 years
Machinery 5 – 15 years
Technical equipment 5 – 10 years
Other non-current assets max. 5 years

34.8 Impairment of property, plant and equipment and intangible assets

Assets with a finite useful life are only tested for impairment if relevant events or changes in circumstances indicate that the book value is no longer recoverable. An impairment loss is recorded equal to the excess of the carrying value over the recoverable amount. The recoverable amount is the higher of the fair value of the asset less disposal costs and its value in use. The value in use is based on the estimated cash flow over a five-year period and the extrapolated projections for subsequent years. The results are discounted using an appropriate pre-tax, long-term interest rate. For the purposes of the impairment test, assets are grouped together at the lowest level for which separate cash flows can be identified (cash-generating units).

34.9 Lease assets and lease liabilities

The group recognizes lease assets and lease liabilities for most leases (these leases are on-balance-sheet). However, the group has elected not to recognize lease assets and lease liabilities for some leases of low value assets and short-term leases. The group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The group presents lease assets and lease liabilities as separate line items in the balance sheet.

The group recognizes lease assets and lease liabilities at the lease commencement date. The asset is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements. The lease liability is initially measured at the present value of the lease payments that are not paid on commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group’s incremental borrowing rate. In most cases, the group uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised, or a termination option is reasonably certain not to be exercised.

34.10 Financial assets

Financial assets are classified into the following three categories:

  • financial assets at fair value through profit or loss (FVTPL),
  • financial assets at fair value through other comprehensive income (FVOCI),
  • financial assets measured at amortized cost.

The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The group reclassifies debt investments when and only when its business model for managing those assets changes.

Debt instruments

Financial assets at fair value through profit or loss (FVTPL)

Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognized in profit or loss and presented within other operating income and expenses or other financial income and expenses, depending on the nature of the investment, in the period in which it arises.

Financial assets at fair value through other comprehensive income (FVOCI)

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

Financial assets measured at amortized cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

Equity instruments

The group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income when the group’s right to receive payments is established. A gain or loss on an equity investment that is subsequently measured at FVTPL is recognized in profit or loss and presented within other operating income and expenses or other financial income and expenses, depending on the nature of the investment, in the period in which it arises.

34.11 Derivative financial instruments and hedging activities

The group uses derivative financial instruments, such as forward currency contracts, other forward contracts and options, to hedge its risks associated with fluctuations in foreign currencies arising from operational and financing activities. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on the derivatives during the year that do not qualify for hedge accounting are taken directly into profit or loss.

The group applies hedge accounting to secure the foreign currency risks of future cash flows which have a high probability of occurrence. These hedges are classified as “cash flow hedges”, whereas the hedge instrument is recorded on the balance sheet at fair value and the effective portions are booked against “Other comprehensive ­incomeˮ in the column “Cash flow hedge reserve”. If the hedge relates to a non-financial transaction which will subsequently be recorded on the balance sheet, the adjustments accumulated under “Other comprehensive incomeˮ at that time will be included in the initial book value of the asset or liability. In all other cases, the cumulative changes of fair value of the hedging instrument that have been recorded in other comprehensive income are included as a charge or credit to income when the forecasted trans­action is recognized or when hedge accounting is discontinued as the criteria are no longer met. In general, the fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion on the hedge is recognized ­in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Gains and losses accumulated in equity are included in the income statement when the foreign operation is partially disposed of or sold.

At the inception of the transaction, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

34.12 Offsetting financial assets and liabilities

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

34.13 Inventories

Raw materials, supplies and consumables are stated at the lower of cost or net realizable value. Finished products and work in progress are stated at the lower of production cost or net realizable value. Production cost includes the costs of materials, direct and indirect manufacturing costs, and contract-related costs of construction. Inventories are valued by reference to weighted average costs. Provisions are made for slow-moving and excess inventories.

34.14 Trade receivables

Trade and other accounts receivable are recognized initially at fair value and subsequently measured at amortized cost, less allowances for doubtful trade accounts receivable.

The allowance for doubtful trade accounts receivable is based on expected credit losses. These are based on historical observed default rates over the expected life of the trade receivables and are adjusted for forward-looking information such as development of gross domestic product (GDP) and oil price development.

34.15 Cash and cash equivalents

Cash and cash equivalents comprise bills, postal giros and bank accounts, together with other short-term highly liquid investments with a maturity of three months or less from the date of acquisition. Bank overdrafts are reported within borrowings in the current liabilities.

34.16 Share capital

Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects. When share capital is repurchased, the amount of the consideration paid, which includes directly attributable cost, is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

34.17 Trade payables

Trade payables and other payables are stated at face value. The respective value corresponds approx­imately to the amortized cost.

34.18 Borrowings

Financial debt is stated at fair value when initially recognized, after recognition of transaction costs. In subsequent periods, it is valued at amortized cost. Any difference between the amount borrowed (after deduction of transaction costs) and the repayment amount is reported in the income statement over the duration of the loan using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

34.19 Current and deferred income taxes

The current income tax charge comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group’s subsidiaries and associates operate and generate taxable income. The management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

The liability method is used to provide deferred taxes on all temporary differences between the tax base of assets and liabilities and their carry­ing amounts in the consolidated financial statements. Deferred taxes are valued by applying tax rates (and regulations) substantially enacted on the balance sheet date or any that have essentially been legally approved and are expected to apply at the time when the deferred tax asset is realized or the deferred tax liability is settled.

Income tax is recognized in profit of loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case it is recognized directly in equity or other comprehensive income.

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that a taxable profit will be available against which they can be used. Deferred tax liabilities arising as a result of temporary differences relating to investments in subsidiaries and asso­ciated companies are applied, unless the group can control when temporary differences are reversed and it is unlikely that they will be reversed in the foreseeable future.

34.20 Employee benefits

a) Defined benefit plans

The group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest income on plan assets), and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability/(asset), taking into account any changes in the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expenses and other expenses related to defined benefit plans are recognized in the income statement.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in the income statement. The group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

b) Defined contribution plans

Defined contribution plans are defined to be pure savings plans, under which the employer makes certain contributions into a separate legal entity (fund) and does not have a legal or an extendible (constructive) liability to contribute any additional amounts in the event this entity does not have enough funds to pay out benefits. A “constructiveˮ commitment exists when it can be assumed that the employer will voluntarily make additional contributions in order not to endanger the relationship with its employees. Company contributions to such plans are considered in the income statement as personnel expenses.

c) Other employee benefits

Some subsidiaries provide other employee benefits like “Early retirement benefitsˮ or “Jubilee giftsˮ to their employees. Early retirement benefits are defined as termination benefits for employees accepting voluntary redundancy in exchange for those benefits. Jubilee gifts are other long-term benefits. For example, in Switzerland Sulzer makes provisions for jubilee benefits based on a Swiss local directive. The provisions are reported in the category “Other employee benefitsˮ (note 27).

Short-term benefits are payable within 12 months after the end of the period in which the employees render the related employee service. In the case of liabilities of a long-term nature, the discounting effects and employee turnover are to be taken into consideration.

Obligations to employees arising from restructuring measures are included under the category “Restruc­turing provisions”.

34.21 Share-based compensation

Sulzer operates two equity-settled share-based payment plans. A performance share plan (PSP) covers the members of the Executive Committee and starting 2016 also the members of the Sulzer Management Group. A restricted share plan (RSP) covers the members of the Board of Directors and until 2015 also covered the members of the Sulzer Management Group.

a) Performance share plan (PSP)

The fair value of the employee services received in exchange for the grant of the performance share units is recognized as a personnel expense with a corresponding increase in equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share units granted, excluding the impact of any non-market vesting conditions (e.g. profitability targets). At each balance sheet date, the group reassesses its estimates of the number of share units that are expected to vest. It recognizes the impact of the reassessment of original estimates, if any, in the income statement, and a corresponding adjustment to equity. The fair value of performance share units granted is measured by external valuation specialists based on a Monte Carlo simulation.

The group accrues for the expected cost of social charges in connection with the allotment of shares under the PSP. The dilution effect of the share-based awards is considered when calculating diluted earnings per share.

b) Restricted share plan (RSP)

The fair value of the employee services received in exchange for the grant of the share units is recognized as a personnel expense with a corresponding increase in equity. The total amount expensed is recognized over the vesting period, which is the period over which the specified service conditions are expected to be met.

The fair value of the restricted share units granted for services rendered is measured at the Sulzer closing share price at grant date, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds with maturities matching the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. The grant date fair value of the restricted share units is consequently reduced by the present value of dividends expected to be paid during the vesting period.

The group accrues for the expected cost of social charges in connection with the allotment of shares under the RSP. The dilutive effect of the share-based awards is considered when calculating diluted earnings per share.

34.22 Provisions

Provisions are recognized when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required is determined by considering the class of obligation as a whole. A provision is recognized even if the likelihood of an outflow with respect to a single item included in the class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense.

34.23 Sales

Sales comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the group’s activities. This includes standard products (off the rack) as well as configured and engineered or tailor-made products. Sales are shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group.

The core principle is that sales are recognized at an amount that reflects the consideration to which the group expects to be entitled in exchange for transferring goods or services to a customer.

Sales are recognized when (or as) the group satisfies a performance obligation by transferring a promised good or service (that is, an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.

A customer obtains control of a good or service if it has the ability to direct the use of, and obtain substantially all of the remaining benefits from, that good or service (e.g. use, consume, sale, hold). A customer could have the future right to direct the use of the asset and obtain substantially all of the benefits from it (for example, upon making a prepayment for a specified product).

There are two methods to recognize sales:

  • Over time method: Sales, costs and profit margin recognition in line with the progress of the project.
  • Point in time method: Sales recognition when the performance obligation is satisfied at a certain point in time.

The group determines at contract inception whether control of each performance obligation transfers to a customer over time or at a point in time. Arrangements where the performance obligations are satisfied over time are not limited to services arrangements. The assessment of whether control transfers over time or at a point in time is critical to the timing of revenue recognition.

Over time method (OT)

Sales are recognized over time if any of the following is met:

  • Customer simultaneously receives/consumes as the group performs
  • The group creates/enhances an asset and customer controls it during this process
  • Created asset has no alternative use for the customer and the group has an enforceable right to payment (including reasonable profit margin) for performance up to date if the customer terminates the contract for convenience.

The group has construction contracts without right to payment clauses in cases of termination for convenience by the customer. The group applies the point in time method to recognize sales for such contracts.

The over time method is based on the percentage of costs to date compared with the total estimated contract costs (cost-to-cost method). In rare cases, other methods, such as a milestones method, may be used for a particular project assuming that the stage of completion can be better estimated than by applying the cost-to-cost method. Work progress of sub-suppliers is considered to determine the stage of completion. If circumstances arise that may change the original estimates of sales, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated sales or costs, and are reflected in income in the period in which the circumstances that give rise to the revision become known by management.

The income statement contains a share of sales, including an estimated share of profit. The balance sheet includes the corresponding contract assets if the assets exceed the advance payments from the customer of the project. When it appears probable that the total costs of an order will exceed the expected income, the total amount of expected loss is recognized immediately in the income statement.

Point in time method (PIT)

A performance obligation is satisfied at a point in time if none of the criteria for satisfying a performance obligation over time is met. Sales are recognized when (or as) the customer obtains control of that asset (depending on incoterms). The following points indicate that a customer has obtained control of an asset:

  • The entity has a present right to payment
  • The customer has legal title
  • The customer has physical possession
  • The customer has the significant risks and rewards of ownership
  • The customer has accepted the asset

For contracts applying the point in time method, the transfer of risks and rewards of ownership (depending on international commercial terms) typically depicts the transfer in control most appropriately.

Contract classification per division

Sales are measured based on the consideration specified in a contract with a customer. Sales are recognized over time if any of the conditions above is met. If none of the criteria for satisfying a performance obligation over time is met, sales are recognized at a point in time.

The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, and the related revenue recognition method.

Contract classification

 

Characteristics

 

Typical sales recognition method

 

 

 

 

Created asset has no alternative use for the customer and the group has enforceable right to payment (including reasonable profit margin) for performance up to date if the customer terminates the contract for convenience

 

Created asset has alternative use for the customer or the group has no enforceable right to payment (including reasonable profit margin) for performance up to date if the customer terminates the contract for convenience

Pumps Equipment

 

 

 

 

 

 

 

 

— Standard products made to stock

 

 

 

 

 

 

— New pumps

 

 

 

 

Standard business

 

— Spare parts

 

n/a

 

PIT

 

 

— Preconfigured products

 

 

 

 

Configured business

 

— Assembled and packaged on customer order

 

OT

 

PIT

 

 

— Highly customized products

 

 

 

 

Engineered business

 

— Engineered to order according to customer’s specifications

 

OT

 

PIT

Rotating Equipment Services

 

 

 

 

 

 

 

 

— Turbo

 

 

 

 

 

 

— Electromechanical

 

 

 

 

Repair

 

— Pumps

 

OT

 

PIT

 

 

— Gas turbines components

 

 

 

 

 

 

— Coils

 

 

 

 

 

 

— Pumps spares

 

 

 

 

 

 

— Retrofits

 

 

 

 

 

 

— Off-the-shelf articles or manufactured on customer order

 

 

 

 

Parts

 

— Others (tool container, remote monitoring, other spare parts)

 

OT

 

PIT

 

 

— Overhaul / field service

 

 

 

 

 

 

— Site setup

 

 

 

 

 

 

— Disassembly / reassembly

 

 

 

 

 

 

— Installation / commissioning

 

 

 

 

 

 

— Technical support

 

 

 

 

 

 

— Refurb / retrofit

 

 

 

 

 

 

— Relocation

 

 

 

 

 

 

— Long-term service agreement (LTSA) / long-term parts agreement (LTPA)

 

 

 

 

Services

 

— Customized services according to customer’s specifications

 

OT

 

PIT OT for field services (asset that the customer controls)

Chemtech

 

 

 

 

 

 

 

 

— Off-the-shelf articles of stock materials

 

 

 

 

Rush orders

 

— Articles purchased for sale

 

n/a

 

PIT

 

 

— Standard configured to customer’s requirements

 

 

 

 

 

 

— Tailor-made to customer’s requirements

 

 

 

 

 

 

— Replacement of components

 

 

 

 

 

 

— Standard mechanical engineering

 

 

 

 

 

 

— Supervision

 

 

 

 

 

 

— Installation workforce

 

 

 

 

Components

 

— Combined order for Separation Technology (ST) & Tower Field Services (TFS)

 

OT

 

PIT

 

 

— Studies

 

 

 

 

 

 

— Engineering

 

 

 

 

 

 

— Site project management

 

 

 

 

 

 

— Supervision

 

 

 

 

 

 

— Key equipment

 

 

 

PIT

 

 

— Installation

 

 

 

OT for certain service contracts

Services / Engineered solutions

 

— Procurement of equipment, spare parts

 

OT

 

where the customer simultaneously receives the service

Applicator Systems

 

 

 

 

 

 

Rush orders

 

— Off-the-shelf articles of stock materials (production to stock)

 

n/a

 

PIT

Disaggregation of sales

In the segment information (note 3) sales are disaggregated by:

  • Divisions (group’s reportable segments)
  • Timing of sales recognition (sales recognition method: over time, point in time) and divisions
  • Market segments and divisions
  • Geographical regions and divisions

Payment terms

The group’s general terms and conditions of supply require payments within 30 days after the invoice date.

If the group’s general terms and conditions apply for a contract, the group is entitled to issue the invoices as follows: for one-third of the contract value within five days after effective date (date when the purchase order has been accepted by the supplier, or the date of the latest signing), for one-third after expiration of half of the delivery time, and for one-third within 45 days prior to delivery. Payments for prices calculated on a time basis are invoiced on a bi-weekly basis or after completion of the scope of supply, whichever occurs first.

Other payment terms may apply if otherwise defined in the customer contract, the purchase order, the respective change order or the quotation.

Variable considerations

If the consideration promised in a contract includes a variable amount (e.g. liquidated damages, early payment discount, volume discounts), the group estimates the amount of consideration to which the group will be entitled in exchange for transferring the promised goods or services to a customer. The amount of the variable consideration is estimated by using either of the following methods, depending on which method the group expects to better predict the amount of consideration to which it will be entitled: the expected value method or the most likely amount method. The method selected is applied consistently throughout the contract and to similar types of contracts when estimating the effect of uncertainty on the amount of variable consideration to which the group is entitled.

The group’s general terms and conditions of supply foresee the following warranty periods. Except in cases where the scope of supply is limited to services only, the warranty period ends on the earliest of the dates below:

  • After 12 months from the initial operation of the scope of supply
  • After 18 months from delivery of the scope of supply
  • In the event that delivery is delayed or impeded for reasons beyond the supplier’s control, after 18 months from the date of the supplier’s notification that the scope of supply is ready for dispatch

Where the scope of supply is limited to services only, the warranty period ends six months after completion of such services.

If the group fails to meet the delivery date for more than two calendar weeks due to reasons for which the group is directly responsible, and provided that the purchase order expressly provides liquidated damages for such failure, the purchaser is entitled to demand that the group pays liquidated damages at the rate stated in the purchase order.

The group’s obligation for warranties, liquidated damages and other obligations is accounted for as a variable consideration in the sales and recognized as a provision.

Allocation of the transaction price

To allocate the transaction price to each performance obligation on a relative stand-alone selling price basis, the group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. If the stand-alone selling price is not directly observable, then the group estimates the amount with the expected cost plus margin method.

34.24 Assets and disposal groups held for sale

A non-current asset or a group of assets is classified as “held for saleˮ if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the management must be committed to sell the assets, the assets must be actively marketed for sale, and the sale is expected to be completed within one year. A non-current asset or a group of assets classified as “held for saleˮ shall be measured at the lower of its carrying amount or fair value less selling cost.

34.25 Dividend distribution

Dividend distribution to the shareholders of Sulzer Ltd is resolved upon decision at the Annual General Meeting and will be paid in the same reporting period.

35 Subsequent events after the balance sheet date

35 Subsequent events after the balance sheet date

The Board of Directors authorized these consolidated financial statements for issue on February 23, 2021. They are subject to approval at the Annual General Meeting, which will be held on April 14, 2021. At the time when these consolidated financial statements were authorized for issue, the Board of Directors and the Executive Committee were not aware of any events that would materially affect these financial statements.

36 Major subsidiaries

36 Major subsidiaries

December 31, 2020

 

 

Subsidiary

 

Sulzer ownership and voting rights

 

Registered capital (including paid-in capital in the USA and Canada)

 

Direct participation by Sulzer Ltd

 

Research and development

 

Production and engineering

 

Sales

 

Service

Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Switzerland

 

Sulzer Chemtech AG, Winterthur

 

100%

 

CHF 10’000’000

 

 

 

 

 

 

 

Sulzer Mixpac AG, Haag

 

100%

 

CHF 100’000

 

 

 

 

 

 

 

 

Sulzer Markets and Technology AG, Winterthur

 

100%

 

CHF 4’000’000

 

 

 

 

 

 

 

 

 

 

 

Sulzer Management AG, Winterthur

 

100%

 

CHF 500’000

 

 

 

 

 

 

 

 

 

 

 

Tefag AG, Winterthur

 

100%

 

CHF 500’000

 

 

 

 

 

 

 

 

 

 

 

Sulzer International AG, Winterthur

 

100%

 

CHF 100’000

 

 

 

 

 

 

 

 

 

 

 

Haselmeier AG 1) , St. Gallen

 

100%

 

CHF 2’000’000

 

 

 

 

 

 

 

 

Belgium

 

Sulzer Pumps Wastewater Belgium N.V./S.A., St. Stevens-Woluwe

 

100%

 

EUR 123’947

 

 

 

 

 

 

 

 

 

Ensival Moret Belgium SA, Thimister-Clermont

 

100%

 

EUR 7’400’000

 

 

 

 

 

 

 

 

 

Czech Republic

 

Sulzer GTC Technology Europe s.r.o., Brno

 

100%

 

CZK 28’053’000

 

 

 

 

 

 

 

 

Haselmeier s.r.o. 1) , Dnesice

 

100%

 

CZK 50’200’000

 

 

 

 

 

 

 

 

 

Germany

 

Sulzer Pumpen (Deutschland) GmbH, Bruchsal

 

100%

 

EUR 3’000’000

 

 

 

 

 

 

 

Sulzer Pumps Wastewater Germany GmbH, Bonn

 

100%

 

EUR 300’000

 

 

 

 

 

 

 

 

 

Sulzer Chemtech GmbH, Linden

 

100%

 

EUR 300’000

 

 

 

 

 

 

 

 

 

Sulzer APS Deutschland Holding GmbH, Bechhofen

 

100%

 

EUR 870’000

 

 

 

 

 

 

 

 

 

 

 

Geka GmbH, Bechhofen

 

100%

 

EUR 878’600

 

 

 

 

 

 

 

 

Sulzer Mixpac Deutschland GmbH, Kiel

 

100%

 

EUR 26’000

 

 

 

 

 

 

 

 

Haselmeier GmbH 1) , Stuttgart

 

100%

 

EUR 2’027’700

 

 

 

 

 

 

 

Denmark

 

Sulzer Pumps Denmark A/S, Farum

 

100%

 

DKK 500’000

 

 

 

 

 

 

 

Finland

 

Sulzer Pumps Finland Oy, Kotka

 

100%

 

EUR 16’000’000

 

 

 

 

 

France

 

Sulzer Pompes France SASU, Buchelay

 

100%

 

EUR 6’600’000

 

 

 

 

 

 

 

Sulzer Ensival Moret France SASU, Saint-Quentin

 

100%

 

EUR 10’000’000

 

 

 

 

 

 

Great Britain

 

Sulzer Pumps (UK) Ltd., Leeds

 

100%

 

GBP 9’610’000

 

 

 

 

 

 

 

 

Sulzer Chemtech (UK) Ltd., Stockton on Tees

 

100%

 

GBP 100’000

 

 

 

 

 

 

 

 

 

 

Sulzer Electro Mechanical Services (UK) Ltd., Birmingham

 

100%

 

GBP 48’756

 

 

 

 

 

 

 

 

 

Sulzer (UK) Holdings Ltd., Leeds

 

100%

 

GBP 6’100’000

 

 

 

 

 

 

 

 

 

 

 

Sulzer Mixpac (UK) Ltd., Hungerford

 

100%

 

GBP 1’000’000

 

 

 

 

 

 

 

 

 

 

Alba Power Ltd., Aberdeen

 

100%

 

GBP 1

 

 

 

 

 

 

Ireland

 

Sulzer Pump Solutions Ireland Ltd., Wexford

 

100%

 

EUR 2’222’500

 

 

 

 

 

 

 

Sulzer Finance (Ireland) Limited, Wexford

 

100%

 

EUR 100

 

 

 

 

 

 

 

 

 

Italy

 

Sulzer Italy S.r.l., Casalecchio di Reno

 

100%

 

EUR 600’000

 

 

 

 

 

 

 

 

Norway

 

Sulzer Pumps Wastewater Norway A/S, Sandvika

 

100%

 

NOK 502’000

 

 

 

 

 

 

 

 

 

Sulzer Pumps Norway A/S, Klepp Stasjon

 

100%

 

NOK 500’000

 

 

 

 

 

 

 

The Netherlands

 

Sulzer Pumps Wastewater Netherlands B.V., Maastricht-Airport

 

100%

 

EUR 15’882

 

 

 

 

 

 

 

 

 

 

Sulzer Chemtech Nederland B.V., Breda

 

100%

 

EUR 1’134’451

 

 

 

 

 

 

 

 

 

 

Process Laboratories Netherlands (PROLAB NL) B.V., Arnhem

 

100%

 

EUR 18’000

 

 

 

 

 

 

 

 

 

 

Sulzer Turbo Services Venlo B.V., Lomm

 

100%

 

EUR 443’940

 

 

 

 

 

 

 

 

Sulzer Netherlands Holding B.V., Lomm

 

100%

 

EUR 10’010’260

 

 

 

 

 

 

 

 

 

 

 

Sulzer Capital B.V., Lomm

 

100%

 

EUR 50’000

 

 

 

 

 

 

 

 

 

 

Austria

 

Sulzer Austria GmbH, Wiener Neudorf

 

100%

 

EUR 350’000

 

 

 

 

 

 

 

Poland

 

Sulzer Turbo Services Poland Sp. z o.o., Lublin

 

100%

 

PLN 2’427’000

 

 

 

 

 

 

 

 

 

 

Sulzer Pumps Wastewater Poland Sp. z o.o., Warsaw

 

100%

 

PLN 800’000

 

 

 

 

 

 

 

 

 

Sulzer Mixpac Poland Sp. z o.o., Nowa Wies Wroclawska

 

100%

 

PLN 5’000

 

 

 

 

 

 

 

 

Romania

 

GTC Technology Romania Srl, Bucharest

 

100%

 

RON 1’345’070

 

 

 

 

 

 

 

 

Russia

 

AO Sulzer Pumps, St. Petersburg

 

100%

 

RUB 8’000’000

 

 

 

 

 

 

 

 

 

 

Sulzer Pumps Rus LLC, Moscow

 

100%

 

RUB 6’000’600

 

 

 

 

 

 

 

 

 

Sulzer Turbo Services Rus LLC, Moscow

 

100%

 

RUB 14’705’882

 

 

 

 

 

 

 

 

 

 

Sulzer Chemtech LLC, Serpukhov

 

100%

 

RUB 55’500’000

 

 

 

 

 

 

Sweden

 

Sulzer Pumps Sweden AB, Vadstena

 

100%

 

SEK 3’000’000

 

 

 

 

 

Spain

 

Sulzer Pumps Spain S.A., Madrid

 

100%

 

EUR 1’750’497

 

 

 

 

 

 

 

 

Sulzer Pumps Wastewater Spain S.A., Rivas Vaciamadrid

 

100%

 

EUR 2’000’000

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada

 

Sulzer Pumps (Canada) Inc., Burnaby

 

100%

 

CAD 2’771’588

 

 

 

 

 

 

 

 

 

Sulzer Chemtech Canada Inc., Edmonton

 

100%

 

CAD 1’000’000

 

 

 

 

 

 

 

 

Sulzer Rotating Equipment Services (Canada) Ltd., Edmonton

 

100%

 

CAD 7’000’000

 

 

 

 

 

 

 

 

JWC Environmental Canada ULC, Burnaby

 

100%

 

CAD 1’832’816

 

 

 

 

 

 

 

 

USA

 

Sulzer Pumps (US) Inc., Houston, Texas

 

100%

 

USD 40’381’108

 

 

 

 

 

 

 

 

Sulzer Pumps Solutions Inc., Easley, South Carolina

 

100%

 

USD 25’589’260

 

 

 

 

 

 

 

 

 

Sulzer Pump Services (US) Inc., Houston, Texas

 

100%

 

USD 1’000

 

 

 

 

 

 

 

 

 

Sulzer Chemtech USA, Inc., Tulsa, Oklahoma

 

100%

 

USD 47’895’000

 

 

 

 

 

 

 

 

Sulzer Mixpac USA Inc., Salem, New Hampshire

 

100%

 

USD 100

 

 

 

 

 

 

 

 

 

 

 

Sulzer Turbo Services Houston Inc., La Porte, Texas

 

100%

 

USD 18’840’000

 

 

 

 

 

 

 

 

 

Sulzer Turbo Services New Orleans Inc., Belle Chasse, Louisiana

 

100%

 

USD 4’006’122

 

 

 

 

 

 

 

 

 

Sulzer Electro-Mechanical Services (US) Inc., Pasadena, Texas

 

100%

 

USD 12’461’286

 

 

 

 

 

 

 

 

 

Sulzer US Holding Inc., Houston, Texas

 

100%

 

USD 310’335’340

 

 

 

 

 

 

 

 

 

 

 

Geka Manufacturing Corporation, Elgin, Illinois

 

100%

 

USD 603’719

 

 

 

 

 

 

 

 

 

JWC Environmental Inc., Santa Ana, California

 

100%

 

USD 220’818’520

 

 

 

 

 

 

 

 

Sulzer GTC Technology US Inc., Houston, Texas

 

100%

 

USD 1

 

 

 

 

 

 

Mexico

 

Sulzer Pumps México, S.A. de C.V., Cuautitlán Izcalli

 

100%

 

MXN 4’887’413

 

 

 

 

 

 

 

 

Sulzer Chemtech, S. de R.L. de C.V., Cuautitlán Izcalli

 

100%

 

MXN 231’345’500

 

 

 

 

 

 

Central and South America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Argentina

 

Sulzer Turbo Services Argentina S.A., Buenos Aires

 

100%

 

ARS 9’730’091

 

 

 

 

 

 

Brazil

 

Sulzer Brasil S.A., Jundiaí

 

100%

 

BRL 81’789’432

 

 

 

 

 

 

 

 

Sulzer Pumps Wastewater Brasil Ltda., Jundiaí

 

100%

 

BRL 37’966’785

 

 

 

 

 

 

 

 

Sulzer Services Brasil, Triunfo

 

100%

 

BRL 40’675’856

 

 

 

 

 

 

 

 

 

 

Geka do Brasil Indústria e Comércio de Embalagens Ltda., Cotia

 

100%

 

BRL 15’009’794

 

 

 

 

 

 

Chile

 

Sulzer Bombas Chile Ltda., Vitacura

 

100%

 

CLP 46’400’000

 

 

 

 

 

 

 

 

Colombia

 

Sulzer Pumps Colombia S.A.S., Cota

 

100%

 

COP 7’142’000’000

 

 

 

 

 

 

 

Africa

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Africa

 

Sulzer Pumps (South Africa) (Pty) Ltd., Elandsfontein

 

75%

 

ZAR 100’450’000

 

 

 

 

 

 

 

 

Sulzer (South Africa) Holdings (Pty) Ltd., Elandsfontein

 

100%

 

ZAR 16’476

 

 

 

 

 

 

Morocco

 

Sulzer Maroc S.A.R.L. A.U., Nouaceur

 

100%

 

MAD 3’380’000

 

 

 

 

 

 

 

 

Nigeria

 

Sulzer Pumps (Nigeria) Ltd., Lagos

 

100%

 

NGN 5’000’000

 

 

 

 

 

 

 

Zambia

 

Sulzer Zambia Ltd., Chingola

 

100%

 

ZMK 15’000’000

 

 

 

 

 

 

 

Middle East

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Arab Emirates

 

Sulzer Pumps Middle East FZCO, Dubai

 

100%

 

AED 500’000

 

 

 

 

 

 

 

 

 

Sulzer Rotating Equipment FZE, Dubai

 

100%

 

USD 272’000

 

 

 

 

 

 

 

 

Saudi Arabia

 

Sulzer Saudi Pump Company Limited, Riyadh

 

75%

 

SAR 44’617’000

 

 

 

 

 

 

Bahrain

 

Sulzer Chemtech Middle East W.L.L., Al Seef

 

100%

 

BHD 50’000

 

 

 

 

 

 

 

 

Asia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

India

 

Sulzer Pumps India Pvt. Ltd., Navi Mumbai

 

100%

 

INR 24’893’500

 

 

 

 

 

 

 

 

Sulzer India Pvt. Ltd., Pune

 

100%

 

INR 34’500’000

 

 

 

 

 

 

 

 

Sulzer Tech India Pvt. Ltd., Navi Mumbai

 

100%

 

INR 100’000

 

 

 

 

 

 

 

 

Indonesia

 

PT. Sulzer Indonesia, Purwakarta

 

95%

 

IDR 28’234’800’000

 

 

 

 

 

 

Japan

 

Sulzer Daiichi K.K., Tokyo

 

60%

 

JPY 30’000’000

 

 

 

 

 

 

 

 

 

 

Sulzer Japan Ltd., Tokyo

 

100%

 

JPY 30’000’000

 

 

 

 

 

 

Malaysia

 

Sulzer Pumps Wastewater Malaysia Sdn. Bhd., Selangor Darul Ehsan

 

100%

 

MYR 500’000

 

 

 

 

 

 

 

 

Singapore

 

Sulzer Singapore Pte. Ltd., Singapore

 

100%

 

SGD 1’000’000

 

 

 

 

 

 

South Korea

 

Sulzer Korea Ltd., Seoul

 

100%

 

KRW 222’440’000

 

 

 

 

 

 

 

 

 

 

Sulzer GTC Technology Korea Co. Ltd., Seoul

 

100%

 

KRW 4’870’000’000

 

 

 

 

 

 

Thailand

 

Sulzer (Thailand) Co., Ltd., Rayong

 

100%

 

THB 25’000’000

 

 

 

 

 

 

 

 

People’s Republic of China

 

Sulzer Dalian Pumps & Compressors Ltd., Dalian

 

100%

 

CHF 21’290’000

 

 

 

 

 

 

 

 

Sulzer Pumps Suzhou Ltd., Suzhou

 

100%

 

CNY 282’069’324

 

 

 

 

 

 

 

 

Sulzer Pump Solutions (Kunshan) Co., Ltd., Kunshan

 

100%

 

USD 5’760’000

 

 

 

 

 

 

 

 

 

 

Sulzer Shanghai Eng. & Mach. Works Ltd., Shanghai

 

100%

 

CNY 61’432’607

 

 

 

 

 

 

 

Sulzer Pumps Wastewater Shanghai Co. Ltd., Shanghai

 

100%

 

USD 1’550’000

 

 

 

 

 

 

 

 

 

Sulzer GTC (Beijing) Technology Inc., Beijing

 

100%

 

USD 150’000

 

 

 

 

 

Australia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sulzer Australia Pty Ltd., Brisbane

 

100%

 

AUD 5’308’890

 

 

 

 

 

 

 

 

 

 

Sulzer Australia Holding Pty Ltd., Brendale

 

100%

 

AUD 34’820’100

 

 

 

 

 

 

 

 

 

1) Acquired in 2020.