Notes to the financial statements of Sulzer Ltd

– Financial reporting – Notes to the financial statements of Sulzer Ltd

1General information

Sulzer Ltd, Winterthur, Switzerland (the company), is the parent company of the Sulzer group. Its financial statements are prepared in accordance with Swiss law and serve as complementary information to the consolidated financial statements.

These financial statements were prepared according to the provisions of the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations). Where not prescribed by law, the significant accounting and valuation principles applied are described below.

2Key accounting policies and principles

Treasury shares

Treasury shares are recognized at acquisition cost and deducted from shareholders’ equity at the time of acquisition. In case of a resale, the gain or loss is recognized through the income statement as financial income or financial expenses.

Investments in subsidiaries and third parties

The participations are valued at acquisition cost or if the value is lower, at value in use, using generally accepted valuation principles.

Non-current interest-bearing liabilities

Non-current interest-bearing liabilities are recognized in the balance sheet at amortized cost. Discounts and issue costs for bonds are amortized on a straight-line basis over the bond’s maturity period.

Share-based payments

Sulzer Ltd operates a share-based payment program that covers the Board of Directors. Restricted share units (RSU) are granted annually. The plan features graded vesting over a three-year period. One RSU award is settled with one Sulzer share at the end of the vesting period. Awards automatically vest with the departure from the Board. The fair value of the Sulzer share at vesting date is recognized as compensation to the Board of Directors.

Foregoing a cash flow statement and additional disclosures in the notes

As Sulzer Ltd has prepared its consolidated financial statements in accordance with a recognized accounting standard (IFRS), it has decided to forego presenting additional information on audit fees and interest-bearing liabilities in the notes and a cash flow statement in accordance with the law.

3Cash and cash equivalents

In 2021, the existing syndicated credit facility of CHF 500 million was renewed for a duration of five years until December 31, 2026. The facility includes two one-year extension options and a further option to increase the credit line by CHF 250 million (subject to lenders’ approval). The facility is subject to financial covenants based on net financial indebtedness and EBITDA of the Sulzer group, which were adhered to throughout the reporting period. As of December 31, 2021, and 2020, the syndicated facility was not used.

4Investments in subsidiaries

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

On September 20, 2021, Sulzer Ltd shareholders at their Extraordinary General Meeting approved the proposed 100% spin-off of its 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 spin-off was registered in the commercial registers of the cantons of Zurich and Zug on September 20, 2021, simultaneously with the incorporation of the new company, which was registered with a share capital 34’262’370 shares (registered shares with a nominal value of CHF 0.01 each). The spin-off became legally effective upon registration in the competent commercial registers, whereas the benefits and risks related to the assets and liabilities were economically transferred with retroactive effect as of January 1, 2021.

5Equity

Share capital

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

Shareholders holding more than 3%

Legal capital reserves and free reserves

As part of the spin-off of medmix from Sulzer Ltd by way of a 1:1 spin-off in accordance with article 29(b) and article 31(2)(a) Swiss Merger Act, Sulzer transferred total net assets amounting to CHF 344.3 million. The amount includes the net assets, as disclosed in the demerger balance sheet as of January 1, 2021, of CHF 423.6 million minus the unfulfilled part of an intercompany loan of CHF 80.2 million plus acquisition-related payments during 2021 of CHF 0.8 million. The intercompany loan represents the repayment and interest payment obligations under the loan agreement, which was transferred to medmix as part of the debt split as disclosed in the demerger plan dated May 27, 2021. The transferred net assets covered the amount of paid-in share capital of CHF 0.3 million, and the remainder was allocated to legal capital reserves (CHF 50.0 million) and free reserves (CHF 294.0 million).

Treasury shares held by Sulzer Ltd

The total number of treasury shares held by Sulzer Ltd as of December 31, 2021, amounted to 534’733 (December 31, 2020: 426’467 shares), which are mainly held for the purpose of issuing shares under the management share-based payment programs.

6Interest-bearing liabilities

All the outstanding bonds are traded on SIX Swiss Exchange.

7Contingent liabilities

As of December 31, 2021, CHF 402.5 million (2020: CHF 295.5 million) in guarantees, sureties and comfort letters for subsidiaries to banks and insurance companies were utilized.

8Administrative expenses

Sulzer Ltd does not have any employees. The compensation of the Board of Directors includes share-based payments and remuneration. Other administrative expenses contain management services and recharges from subsidiaries.

9Investment income and investment and loan expenses

In 2021, the investment income contained ordinary and extraordinary dividend payments from subsidiaries amounting to CHF 162.9 million (2020: CHF 159.0 million).

In 2021, Sulzer Ltd released hidden reserves in the amount of CHF 20.0 million (2020: CHF 30.0 million). 

The investment and loan expenses contain allowances on investments amounting to CHF 51.3 million (2020: CHF 2.1 million) and share of loss from associates amounting to CHF 2.0 million (2020: CHF 0.6 million).

10Other income

The income from trademark license amounts to CHF 42.3 million (2020: CHF 41.4 million).

11Financial income and expenses

The financial income contains interests on loans with subsidiaries amounting to CHF 34.1 million (2020: CHF 35.2 million) and foreign currency valuation effects on loans amounting to CHF 9.1 million (2020: loss of CHF 48.5 million). The valuation on marketable securities from the medmix spin-off results in a gain of CHF 21.9 million (2020: CHF 0.0 million). The financial expenses contain mainly interest expenses on interest-bearing liabilities of CHF 15.9 million (2020: CHF 12.9 million).

12Share participation of the Board of Directors, Executive Committee and related parties

Restricted share units for members of the Board

The compensation of the Board of Directors consists of a fixed cash component and a restricted share unit (RSU) component with a fixed grant value. The number of RSU is determined by dividing the fixed grant value by the volume-weighted share price of the last ten days prior to the grant date. One-third of the RSU each vest after the first, second and third anniversaries of the grant date, respectively. Upon vesting, one vested RSU is converted into one share in Sulzer Ltd. The vesting period for RSU granted to the members of the Board of Directors ends no later than on the date on which the member steps down from the Board.

Granted Sulzer shares to members of the Board of Directors

13Subsequent events after the balance sheet date

At the time when these financial statements were authorized for issue, the Board of Directors were not aware of any events that would materially affect these financial statements.