Geschäftsbericht 2021 - Sulzer Geschäftsbericht 2021

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7Discontinued operations

On September 20, 2021, Sulzer Ltd shareholders at their Extraordinary General Meeting approved the 100% spin-off of the Applicator Systems (APS) division (later renamed medmix) through a 1:1 share split, granting Sulzer shareholders one APS share in addition to each Sulzer share held.

The group has therefore separated the financial data for 2021 and prior years into “continuing” and “discontinued” operations. Discontinued operations include the operational results from the Applicator Systems division, certain corporate activities attributable to the Applicator Systems division prior to the spin-off on September 20, 2021 and the gain on net assets derecognized as of September 20, 2021.

The Applicator Systems division develops and delivers innovative products and services for liquid application and mixing solutions within the healthcare, adhesives and beauty markets through its well-known brands (Mixpac, Transcodent, Cox, medmix, Haselmeier and Geka).

Income statement of discontinued operations

millions of CHF	2021 1)	2020
Sales	337.9	351.2
Cost of goods sold	–201.5	–230.1
Gross profit from discontinued operations	136.5	121.2
Selling and distribution expenses	–28.4	–33.4
General and administrative expenses	–30.9	–37.5
Research and development expenses	–18.9	–20.3
Other operating income / (expenses), net	–12.0	–11.8
Operating income (EBIT) from discontinued operations	46.2	18.1
Interest and securities income	0.1	0.2
Interest expenses	–5.9	–7.7
Other financial income / (expenses), net	–0.0	–0.1
Income before income tax expenses from discontinued operations	40.3	10.5
Income tax income / (expenses)	–17.1	5.2
Net income from discontinued operations before gain on net assets derecognized	23.2	15.6
Gain on net assets derecognized	1’255.1	–
Net income from discontinued operations, net of tax	1’278.3	15.6

1) The consolidated income statement amounts reflect the period from January 1, 2021, to the completion of the spin-off on September 20, 2021.

Segment information of discontinued operations

millions of CHF	2021 1)	2020
Order intake (unaudited) 2)	401.6	364.8
Nominal growth (unaudited)	10.1%	–14.2%
Currency-adjusted growth (unaudited)	n/a	–11.0%
Organic growth (unaudited) 3)	n/a	–14.2%

Order backlog as of September 20 / December 31 (unaudited)	133.6	82.0

Sales recognized at a point in time	335.8	349.8
Sales recognized over time	2.2	1.4
Sales 4)	337.9	351.2
Nominal growth	–3.8%	–16.5%
Currency-adjusted growth (unaudited)	n/a	–13.4%
Organic growth (unaudited) 3)	n/a	–15.2%

Operational profit (unaudited)	64.8	42.6
Operational profitability (unaudited)	19.2%	12.1%

Restructuring expenses	–0.2	–3.2
Amortization	–16.6	–19.2
Impairments on tangible and intangible assets	–0.5	–0.5
Non-operational items (unaudited)	–1.3	–1.6
Operating income (EBIT)	46.2	18.1

Depreciation	–20.5	–23.4

Operating assets	756.1	n/a
Unallocated assets	86.2	n/a
Total assets as of September 20	842.3	n/a

Operating liabilities	135.8	n/a
Unallocated liabilities	462.3	n/a
Total liabilities as of September 20	598.1	n/a

Operating net assets	620.2	n/a
Unallocated net assets	–376.1	n/a
Total net assets as of September 20	244.2	n/a

Capital expenditure (incl. lease assets)	–32.4	–70.0

Employees (number of full-time equivalents) as of September 20 / December 31	1’972	1’857

1) The consolidated income statement amounts reflect the period from January 1, 2021, to the completion of the spin-off on September 20, 2021.

2) Order intake from external customers.

3) Adjusted for currency and acquisition effects.

4) Sales from external customers.

Re-presented consolidated income statement 2020

millions of CHF	2020 as originally presented	Adjustments	2020 adjusted
Sales	3’319.0	–351.2	2’967.8
Cost of goods sold	–2’325.4	230.1	–2’095.3
Gross profit	993.6	–121.2	872.4
Selling and distribution expenses	–339.2	33.4	–305.8
General and administrative expenses	–378.0	37.5	–340.5
Research and development expenses	–84.1	20.3	–63.8
Other operating income / (expenses), net	–41.6	11.8	–29.8
Operating income (EBIT)	150.6	–18.1	132.5
Interest and securities income	4.1	6.3	10.5
Interest expenses	–25.2	1.2	–24.0
Other financial income / (expenses), net	–7.0	0.1	–6.9
Share of gains / (losses) of associates	–0.7	–	–0.7
Income before income tax expenses	121.8	–10.5	111.3
Income tax expenses	–34.6	–5.2	–39.8
Net income from continuing operations	87.2	–15.6	71.5
Net income from discontinued operations, net of tax	–	15.6	15.6
Net income	87.2	–	87.2
- thereof attributable to shareholders of Sulzer Ltd	83.6	–	83.6
- thereof attributable to non-controlling interests	3.6	–	3.6

Net assets derecognized

The following table presents the Applicator Systems division net assets at the date of spin-off on September 20, 2021.

millions of CHF		September 20, 2021
Goodwill		265.4
Other intangible assets		143.9
Property, plant and equipment		165.0
Lease assets		51.6
Deferred income tax assets		6.6
Other non-current assets		0.1
Cash and cash equivalents		85.9
Inventories		71.8
Trade accounts receivable		40.7
Other current assets		11.3
Borrowings		–439.8
Lease liabilities		–51.1
Provisions		–13.7
Non-current income tax liabilities		–1.9
Deferred income tax liabilities		–24.1
Other liabilities		–67.3
Net assets derecognized		244.2

Gain on net assets derecognized

millions of CHF		September 20, 2021
Net assets derecognized		–244.2
Derecognition of distribution liability		1’485.6
Difference between net assets and distribution liability		1’241.4
Recognition of medmix Ltd shares		21.9
Currency translation differences recycled into the income statement		–7.2
Cash flow hedges, net of tax recycled into the income statement		–1.1
Gain on net assets derecognized		1’255.1

Following the approval of the Sulzer Ltd shareholders to spin-off the Applicator Systems division through a 1:1 share split, the group recognized a distribution liability at fair value amounting to CHF 1’485.6 million. The distribution liability is recognized as a deduction to retained earnings and exceeded the carrying value of the Applicator Systems division of CHF 244.2 million by CHF 1’241.4 million.

At the time of the spin-off on September 20, 2021, the group held 498’736 treasury shares. Through the spin-off the group received 498’736 medmix Ltd shares which were recognized at fair value based on the closing price at the first trading date on September 30, 2021. At initial recognition, the fair value of CHF 21.9 million was reported as a financial asset. Management has designated this investment at fair value through other comprehensive income (see note 18).

The total non-taxable, non-cash gain recognized at the distribution date of the spin-off of the Applicator Systems division amounted to CHF 1’255.1 million.