Sulzer Annual Report 2023

5Disposals, loss of control and disposal group held for sale

Disposals and loss of control in 2023

In February 2023, the group entered into an agreement with a third party for the sale of four legal entities in Russia (AO Sulzer Pumps, Sulzer Pumps Rus LLC, Sulzer Turbo Services Rus LLC and Sulzer Chemtech LLC). From the date of the sales agreement, the group lost power over the relevant activities of these entities due to the contractual requirements and legal environment. Consequently, these four entities were deconsolidated in 2023, resulting in the derecognition of the assets and liabilities previously classified as held for sale. The deconsolidation resulted in a gain on deconsolidation amounting to CHF 8.0 million, of which CHF 11.2 million resulted from the reclassification of accumulated currency translation differences and CHF 0.6 million from the reclassification of cash flow hedge reserves, net of tax. The gain on deconsolidation is recorded in other operating income / (expenses), net. A loan with one of the former subsidiaries was measured at a fair value and recognized as a current financial asset at the time control was lost. The payment received on the financial asset exceeded the estimated fair value, the income from the impairment release was recorded in other financial income (see note 12).

Including other minor disposals in 2023, a net gain on disposal (pre-tax) of CHF 7.2 million was recorded in other operating income / (expenses), net, of which CHF 10.9 million pertains to the reclassification of accumulated currency translation differences and CHF 0.6 million to the reclassification of cash flow hedge reserves, net of tax (see note 11).

The aggregated assets and liabilities derecognized in the year 2023 as part of the disposals are presented in the below table.

millions of CHF		2023 1)
Property, plant and equipment		0.2
Deferred income tax assets		0.6
Inventories and advance payments to suppliers		0.1
Trade accounts receivable		0.4
Cash and cash equivalents		32.6
Non-current liabilities		–0.3
Trade accounts payable		–0.6
Contract liabilities		–13.3
Current lease liabilities		–0.2
Current provisions		–0.4
Other current and accrued liabilities		–10.7
Net assets derecognized		8.5

1) Assets and liabilities classified as assets and liabilities of disposal groups held for sale prior to the disposal are presented as per their initial classification prior to the classification as held for sale.

Cash flow from divestments

millions of CHF	2023	2022
Cash consideration received	5.8	7.8
Cash disposed of	–32.6	–4.6
Cash consideration received for divestments in prior years	0.3	–
Total cash flow from divestitures, net of cash derecognized	–26.6	3.2

Disposals and loss of control in 2022

In the first half year of 2022, the group sold its 100% shareholding in the Brazilian subsidiary Sulzer Services Brasil, Triunfo. The disposal resulted in a loss of CHF 0.6 million, including a loss of CHF 1.0 million from the reclassification of currency translation differences into the income statement. The deconsolidation of two Polish subsidiaries resulted in a loss of CHF 6.2 million, including a loss of CHF 1.2 million from the reclassification of currency translation differences into the income statement. The investment retained was valued at zero. The losses are recorded in other operating expenses (see note 11).

The assets and liabilities derecognized in the year 2022 as part of the disposals are presented in the below table.

millions of CHF		2022
Property, plant and equipment		2.5
Deferred income tax assets		0.2
Inventories and advance payments to suppliers		2.0
Trade accounts receivable		9.0
Contract assets		0.6
Other current receivables		1.9
Cash and cash equivalents		4.7
Non-current provisions		–0.3
Trade accounts payable		–2.6
Contract liabilities		–0.7
Other current and accrued liabilities		–4.8
Net assets derecognized		12.5

Disposal group held for sale in 2022

In the June 2022, the four legal entities in Russia were classified as 'held for sale,' and as a result, impairments of CHF 88.9 million were recorded, of which CHF 32.2 million in other operating expenses, CHF 38.8 million in cost of goods sold, CHF 15.7 million in general and administrative expenses, and CHF 2.2 million in the income tax expenses line. The write-downs included mainly impairments of goodwill, other intangible assets, property, plant and equipment, lease assets, inventory and advance payments from customers. The total net impairment loss recorded on contract assets and receivables amounted to CHF 37.4 million as of December 31, 2022.