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Financial reporting/Notes to the consolidated financial statements

Notes to the consolidated financial statements

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 unaudited consolidated interim financial statements for the six months ended June 30, 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 15’600 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 interim financial statements have been prepared in accordance with the requirements of IAS 34 “Interim financial reportingˮ. Details of the group’s accounting policies are described in note 13.

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 has dominated the world stage in the first half of 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.
The group has initiated measures to mitigate the impact of market disruptions on Energy-related business activities caused by the pandemic. Up to June 2020, the group recognized restructuring costs of CHF 43.2 million (half year 2019: CHF 16.7 million), partly offset by released restructuring provisions of CHF 1.2 million (2019: CHF 0.4 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. Associated with restructuring initiatives, the group further recognized impairments on tangible and intangible assets of CHF 4.2 million (half year 2019: CHF 0.5 million).

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

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 1)	744.0	752.5	617.0	602.2	319.4	350.3	160.2	228.4
Nominal growth	–1.1%	4.5%	2.5%	5.3%	–8.8%	25.1%	–29.9%	–0.5%
Currency-adjusted growth	6.0%	5.9%	10.2%	7.3%	–3.2%	25.9%	–27.3%	0.1%
Organic growth 2)	7.3%	5.5%	6.3%	6.2%	–12.0%	23.3%	–27.3%	–2.1%

Order backlog as of June 30/ December 31	999.1	924.3	485.0	422.2	408.5	385.3	53.6	60.8

Sales recognized at a point in time	389.4	466.6	431.5	463.6	182.4	181.5	166.1	218.2
Sales recognized over time	227.2	223.7	96.6	97.9	105.4	122.3	–	–
Sales 3)	616.6	690.3	528.1	561.4	287.8	303.8	166.1	218.2
Nominal growth	–10.7%	16.0%	–5.9%	12.3%	–5.3%	13.5%	–23.9%	–4.7%
Currency-adjusted growth	–4.4%	17.8%	1.3%	14.9%	0.2%	14.4%	–21.0%	–4.3%
Organic growth 2)	–3.1%	17.3%	–1.2%	13.7%	–7.7%	13.0%	–21.0%	–5.9%

opEBITA	19.2	20.0	64.0	67.9	23.0	27.3	19.5	47.3
opROSA	3.1%	2.9%	12.1%	12.1%	8.0%	9.0%	11.8%	21.7%

Restructuring expenses	–28.9	–0.5	–8.0	–0.4	–3.0	–0.4	–1.1	–14.4
Amortization	–14.8	–15.0	–3.9	–3.6	–3.3	–2.5	–9.0	–9.6
Impairments on tangible and intangible assets	–0.4	–0.1	–0.0	–0.0	–3.7	–0.0	–0.1	–0.4
Non-operational items	–2.2	–4.5	–0.8	0.2	–2.4	–0.2	–0.3	–6.9
EBIT	–27.1	–0.1	51.2	64.1	10.6	24.1	9.0	15.9

Depreciation	–17.3	–17.9	–14.9	–12.5	–6.6	–5.9	–11.3	–12.7

Operating assets	1’499.0	1’605.5	893.5	960.8	538.6	590.9	611.5	608.3
Unallocated assets	–	–	–	–	–	–	–	–
Total assets as of June 30/ December 31	1’499.0	1’605.5	893.5	960.8	538.6	590.9	611.5	608.3

Operating liabilities	655.7	730.6	352.2	363.2	320.1	364.5	94.2	108.6
Unallocated liabilities	–	–	–	–	–	–	–	–
Total liabilities as of June 30/ December 31	655.7	730.6	352.2	363.2	320.1	364.5	94.2	108.6

Operating net assets	843.3	874.9	541.3	597.6	218.6	226.4	517.4	499.7
Unallocated net assets	–	–	–	–	–	–	–	–
Total net assets as of June 30/ December 31	843.3	874.9	541.3	597.6	218.6	226.4	517.4	499.7

Capital expenditure (incl. lease assets)	–21.0	–16.9	–23.8	–14.5	–6.5	–9.2	–22.7	–18.7

Employees (number of full-time equivalents) as of June 30/ December 31	5’623	5’759	4’795	4’900	3’206	3’803	1’769	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 1)

1’840.5

1’933.3

–

1’840.5

1’933.3

Nominal growth

–4.8%

7.3%

–

–4.8%

7.3%

Currency-adjusted growth

1.7%

8.7%

–

1.7%

8.7%

Organic growth 2)

–0.6%

7.5%

–

–0.6%

7.5%

    
        Order backlog as of June 30/ December 31
      
        1’946.2
      
        1’792.6
      
        –
      
        –
      
        1’946.2
      
        1’792.6

Sales recognized at a point in time

1’169.4

1’329.9

–

1’169.4

1’329.9

Sales recognized over time

429.1

443.9

–

429.1

443.9

Sales 3)

1’598.5

1’773.8

–

1’598.5

1’773.8

Nominal growth

–9.9%

11.5%

–

–9.9%

11.5%

Currency-adjusted growth

–3.9%

13.1%

–

–3.9%

13.1%

Organic growth 2)

–5.5%

12.1%

–

–5.5%

12.1%

opEBITA

125.8

162.5

–5.6

–0.9

120.2

161.5

opROSA

7.9%

9.2%

n/a

7.5%

9.1%

Restructuring expenses

–41.0

–15.7

–1.0

–0.5

–42.0

–16.2

Amortization

–31.0

–30.8

–0.5

–31.6

–31.3

Impairments on tangible and intangible assets

–4.2

–0.5

–

–4.2

–0.5

Non-operational items

–5.7

–11.4

–0.7

–3.2

–6.4

–14.6

EBIT

43.8

104.0

–7.8

–5.1

36.0

98.9

Depreciation

–50.1

–49.0

–1.5

–1.6

–51.6

–50.6

Operating assets

3’542.7

3’765.5

–1.1

35.6

3’541.6

3’801.1

Unallocated assets

–

1’219.0

1’308.4

1’219.0

1’308.4

Total assets as of June 30/ December 31

3’542.7

3’765.5

1’218.0

1’344.0

4’760.7

5’109.5

Operating liabilities

1’422.2

1’566.9

77.8

135.8

1’500.1

1’702.7

Unallocated liabilities

–

1’908.2

1’812.9

1’908.2

1’812.9

Total liabilities as of June 30/ December 31

1’422.2

1’566.9

1’986.0

1’948.7

3’408.2

3’515.6

Operating net assets

2’120.5

2’198.6

–78.9

–100.2

2’041.6

2’098.4

Unallocated net assets

–

–689.1

–504.5

–689.1

–504.5

Total net assets as of June 30/ December 31

2’120.5

2’198.6

–768.0

–604.7

1’352.5

1’593.9

    
        Capital expenditure (incl. lease assets)
      
        –74.0
      
        –59.3
      
        –1.2
      
        –1.2
      
        –75.1
      
        –60.5

    
        Employees (number of full-time equivalents) as of June 30/ December 31
      
        15’393
      
        16’284
      
        207
      
        222
      
        15’600
      
        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 opEBITA, opROSA and adjustments for currency and acquisition effects, reference is made to the Sulzer Annual Report.

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 and screens 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 petrochemicals, refining, LNG, biopolymers and biofuels. The division’s product offering ranges from process components to complete separation process plants, including licensing. Customer support covers engineering services and field services to tray and packing installation, tower maintenance, welding and plant turnaround projects.

Applicator Systems

Through its Mixpac, Cox, Transcodent and Geka brands, the Applicator Systems division develops and delivers innovative fluid applicators for the dental, adhesives, healthcare and beauty markets. The division’s IP-protected applicator solutions leverage its expertise in plastic-injection molding, micro-brushes and two-component mixing to make the customers’ products precise, safe, unique and more sustainable.

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 opEBITA 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 EBIT.

Segment information by region

The allocation of sales from external customers is based on the location of the customer.

Sales by region

	2020
millions of CHF	Pumps Equipment	Rotating Equipment Services	Chemtech	Applicator Systems	Total Sulzer
Europe, Middle East, Africa	263.5	219.1	84.4	96.8	663.8
– thereof Germany	30.8	23.8	13.3	37.8	105.7
– thereof United Kingdom	11.6	52.8	4.9	6.8	76.2
– thereof Saudi Arabia	35.3	11.4	17.0	0.0	63.7
– thereof Russia	16.4	30.8	5.5	1.0	53.7
– thereof France	14.1	9.8	2.3	12.0	38.3

Americas	226.0	239.1	66.9	55.5	587.5
– thereof USA	152.7	195.4	47.6	50.0	445.6

Asia-Pacific	127.0	69.8	136.5	13.8	347.2
– thereof China	93.8	10.2	89.5	6.4	199.9

Total	616.6	528.1	287.8	166.1	1’598.5

	2019
millions of CHF	Pumps Equipment	Rotating Equipment Services	Chemtech	Applicator Systems	Total Sulzer
Europe, Middle East, Africa	277.3	248.7	81.9	122.5	730.4
– thereof Germany	29.5	23.1	12.6	48.1	113.3
– thereof United Kingdom	12.0	60.6	3.4	11.4	87.3
– thereof Saudi Arabia	20.0	21.9	6.8	0.0	48.7
– thereof Russia	16.8	36.7	4.6	0.4	58.4
– thereof France	15.0	16.1	2.2	13.7	47.1

Americas	250.8	238.7	75.0	80.6	645.1
– thereof USA	173.6	188.4	49.3	57.0	468.3

Asia-Pacific	162.3	74.0	146.9	15.1	398.2
– thereof China	90.2	11.4	81.9	6.4	190.0

Total	690.3	561.4	303.8	218.2	1’773.8

Segment information by market segment

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

Sales by market segment

	2020
millions of CHF	Pumps Equipment	Rotating Equipment Services	Chemtech	Applicator Systems	Total Sulzer
Oil and gas	124.8	198.1	87.6	–	410.5
Chemicals	114.7	86.2	180.5	–	381.4
General industry	152.7	80.3	17.8	–	250.9
Water	181.2	15.0	1.2	–	197.4
Power	43.1	148.5	0.6	–	192.3
Adhesives, dental, healthcare	–	–	–	105.2	105.2
Beauty	–	–	–	60.8	60.8
Total	616.6	528.1	287.8	166.1	1’598.5

	2019
millions of CHF	Pumps Equipment	Rotating Equipment Services	Chemtech	Applicator Systems	Total Sulzer
Oil and gas	161.5	203.9	81.9	–	447.3
Chemicals	103.0	96.3	207.5	–	406.8
General industry	174.7	97.8	8.0	–	280.5
Water	193.6	18.5	0.3	–	212.4
Power	57.6	144.9	6.1	–	208.6
Adhesives, dental, healthcare	–	–	–	141.6	141.6
Beauty	–	–	–	76.6	76.6
Total	690.3	561.4	303.8	218.2	1’773.8

4 Acquisitions of subsidiaries

Cash flow from acquisitions of subsidiaries

millions of CHF	2020	2019
Cash consideration paid	–1.5	–39.9
Cash acquired	–	6.2
Payments for acquisitions in prior years	–5.3	–
Total cash flow from acquisitions, net of cash acquired	–6.8	–33.7

Contingent consideration

millions of CHF	2020	2019
Balance as of January 1	3.5	0.9
Assumed in a business combination	0.9	3.6
Release to other operating income	–	–0.9
Currency translation differences	0.4	–0.1
Total contingent consideration as of June 30/ December 31	4.8	3.5