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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

 

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

 

–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

5 Financial instruments

The following tables present the carrying amounts and fair values of financial assets and liabilities as of June 30, 2020, and December 31, 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 earnout clauses and technology transfer. For more information please refer to note 4.

Fair value table

 

 

 

 

June 30, 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)

 

 

 

 

 

8.3

 

 

 

 

 

8.3

 

0.3

 

 

8.0

 

8.3

Derivative assets – current

 

 

 

6.1

 

 

 

 

 

 

 

6.1

 

 

6.1

 

 

6.1

Current financial assets (at fair value)

 

 

 

 

 

0.0

 

 

 

 

 

0.0

 

 

0.0

 

 

0.0

Total financial assets measured at fair value

 

 

 

6.1

 

8.3

 

 

 

14.4

 

0.3

 

6.1

 

8.0

 

14.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets (at amortized cost)

 

 

 

 

 

 

 

2.1

 

 

 

2.1

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

5.0

 

 

 

5.0

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

 

 

 

 

 

558.8

 

 

 

558.8

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

73.8

 

 

 

73.8

 

 

 

 

 

 

 

 

Current financial assets (at amortized cost)

 

 

 

 

 

 

 

4.8

 

 

 

4.8

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

957.3

 

 

 

957.3

 

 

 

 

 

 

 

 

Total financial assets not measured at fair value

 

 

 

 

 

1’601.7

 

 

1’601.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities – non-current

 

 

 

0.0

 

 

 

 

 

 

 

0.0

 

 

0.0

 

 

0.0

Derivative liabilities – current

 

 

 

8.1

 

 

 

 

 

 

 

8.1

 

 

8.1

 

 

8.1

Contingent considerations

 

4

 

 

 

4.8

 

 

 

 

 

4.8

 

 

 

4.8

 

4.8

Total financial liabilities measured at fair value

 

 

 

8.1

 

4.8

 

 

 

12.9

 

 

8.2

 

4.8

 

12.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding non-current bonds

 

10

 

 

 

 

 

 

 

1’199.3

 

1’199.3

 

1’215.6

 

 

 

1’215.6

Other non-current borrowings

 

 

 

 

 

 

 

 

 

0.0

 

0.0

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

4.1

 

4.1

 

 

 

 

 

 

 

 

Outstanding current bonds

 

10

 

 

 

 

 

 

 

110.0

 

110.0

 

110.0

 

 

 

110.0

Other current borrowings and bank loans

 

 

 

 

 

 

 

 

 

24.0

 

24.0

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

 

 

 

 

 

 

 

423.3

 

423.3

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

318.3

 

318.3

 

 

 

 

 

 

 

 

Total financial liabilities not measured at fair value

 

 

 

 

 

 

2’079.0

 

2’079.0

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

10.3

 

 

 

 

 

10.3

 

0.3

 

 

10.0

 

10.3

Derivative assets – non-current

 

 

 

0.1

 

 

 

 

 

 

 

0.1

 

 

0.1

 

 

0.1

Derivative assets – current

 

 

 

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)

 

 

 

 

 

 

 

2.4

 

 

 

2.4

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

6.2

 

 

 

6.2

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

 

 

 

 

 

645.9

 

 

 

645.9

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

87.9

 

 

 

87.9

 

 

 

 

 

 

 

 

Current financial assets (at amortized cost)

 

 

 

 

 

 

 

57.5

 

 

 

57.5

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

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 – current

 

 

 

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

 

10

 

 

 

 

 

 

 

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

 

10

 

 

 

 

 

 

 

109.9

 

109.9

 

110.3

 

 

 

110.3

Other current borrowings and bank loans

 

 

 

 

 

 

 

 

 

21.1

 

21.1

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

 

 

 

 

 

 

 

522.4

 

522.4

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

257.8

 

257.8

 

 

 

 

 

 

 

 

Total financial liabilities not measured at fair value

 

 

 

 

 

 

2’116.7

 

2’116.7

 

 

 

 

 

 

 

 

6 Other operating income and expenses

millions of CHF

 

2020

 

2019

Gain from sale of property, plant and equipment

 

0.3

 

0.1

Operating currency exchange gains, net

 

 

2.4

Other operating income

 

7.4

 

9.4

Total other operating income

 

7.7

 

12.0

 

 

 

 

 

Restructuring expenses

 

–42.0

 

–16.2

Impairments on tangible and intangible assets

 

–4.2

 

–0.5

Cost for mergers and acquisitions

 

–0.2

 

–0.8

Loss from sale of property, plant and equipment

 

–0.1

 

–0.1

Operating currency exchange losses, net

 

–1.6

 

Total other operating expenses

 

–48.1

 

–17.7

 

 

 

 

 

Total other operating income and expenses, net

 

–40.3

 

–5.7

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. 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. The group further performed impairment tests on the related production machines and facilities leading to impairments of CHF 4.2 million (half year 2019: CHF 0.5 million).

The functional allocation of the total restructuring expenses and impairments is as follows: cost of goods sold CHF –32.3 million (half year 2019: CHF –12.0 million), selling and distribution expenses CHF –3.2 million (half year 2019: CHF –0.0 million), general and administrative expenses CHF –9.7 million (half year 2019: CHF –4.8 million) and research and development expenses CHF –1.0 million (half year 2019: CHF –0.0 million).

7 Financial income and expenses

millions of CHF

 

2020

 

2019

Interest and securities income

 

2.5

 

2.9

Total interest and securities income

 

2.5

 

2.9

Interest expenses on borrowings and lease liabilities

 

–10.3

 

–10.0

Interest expenses on employee benefit plans

 

–1.4

 

–2.4

Total interest expenses

 

–11.7

 

–12.4

Total interest income and expenses, net

 

–9.3

 

–9.5

 

 

 

 

 

Income from investments and other financial assets

 

0.0

 

0.0

Fair value changes

 

11.9

 

4.7

Other financial expenses

 

–1.3

 

–1.2

Currency exchange gains/losses, net

 

–13.6

 

–6.0

Total other financial income and expenses, net

 

–3.0

 

–2.5

 

 

 

 

 

Total financial income and expenses, net

 

–12.3

 

–12.0

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

 

11.9

 

4.7

– thereof other income from financial assets at fair value through profit and loss

 

0.0

 

0.0

– thereof interest income on financial assets at amortized costs

 

2.5

 

2.9

– thereof other financial expenses

 

–1.3

 

–1.2

– thereof currency exchange gains/losses, net

 

–13.6

 

–6.0

– thereof interest expenses on borrowings

 

–9.1

 

–8.5

– thereof interest expenses on lease liabilities

 

–1.2

 

–1.5

– thereof interest expenses on employee benefit plans

 

–1.4

 

–2.4

Total financial expenses amounted to CHF 12.3 million, compared with CHF 12.0 million in the first half of 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.

8 Income taxes

Income tax expenses comprise current and deferred tax. Income tax expenses are recognized based on the estimated income tax rate for the full financial year. The estimated average annual tax rate used for the year 2020 is 28.4%, compared with 22.8% for the six months ended June 30, 2019. The effective income tax rate used for 2020 was impacted by restructuring expenses related to closed facilities with no corresponding tax effects.

9 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.

Treasury shares

The total number of shares held by Sulzer Ltd as of June 30, 2020, amounted to 281’477 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.

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 77.5 million) and unpaid dividends of CHF 43.5 million (2019: CHF 41.7 million). The unpaid dividends are reflected in the balance sheet position “other current and accrued liabilitiesˮ (see note 12).

10 Borrowings

 

 

2020

millions of CHF

 

Non-current borrowings

 

Current borrowings

 

Total

Balance as of January 1

 

1’199.2

 

131.0

 

1’330.2

Additions (cash flow effective)

 

0.1

 

43.2

 

43.3

Repayments (cash flow effective)

 

–0.0

 

–39.0

 

–39.0

Currency translation differences

 

–0.0

 

–1.2

 

–1.2

Total borrowings as of June 30

 

1’199.3

 

134.0

 

1’333.3

 

 

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

Additions (cash flow effective)

 

0.3

 

153.8

 

154.1

Repayments (cash flow effective)

 

–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

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 June 30, 2020, and December 31, 2019, the syndicated facility of CHF 500 million was not used.

Outstanding bonds

 

 

2020

 

2019

millions of CHF

 

Amortized costs

 

Nominal

 

Amortized costs

 

Nominal

0.375% 07/2016–07/2022

 

325.2

 

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

 

110.0

 

110.0

 

109.9

 

110.0

1.300% 07/2018–07/2023

 

289.6

 

290.0

 

289.4

 

290.0

0.625% 10/2018–10/2021

 

209.8

 

210.0

 

209.7

 

210.0

1.600% 10/2018–10/2024

 

249.8

 

250.0

 

249.8

 

250.0

Total as of June 30

 

1’309.3

 

1’310.0

 

1’309.1

 

1’310.0

– thereof non-current

 

1’199.3

 

1’200.0

 

1’199.2

 

1’200.0

– thereof current

 

110.0

 

110.0

 

109.9

 

110.0

All outstanding bonds are traded at the SIX Swiss Exchange.

11 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

Additions

 

6.7

 

15.4

 

43.2

 

 

17.8

 

83.0

Released as no longer required

 

 

–2.9

 

–1.2

 

–0.2

 

–2.0

 

–6.3

Utilized

 

–5.7

 

–7.7

 

–12.5

 

–0.3

 

–13.9

 

–40.2

Currency translation differences

 

–1.6

 

–3.5

 

–2.4

 

–0.4

 

–1.4

 

–9.3

Total provisions as of June 30

 

53.8

 

68.9

 

47.1

 

13.7

 

52.4

 

236.0

– thereof non-current

 

37.2

 

3.0

 

3.3

 

13.7

 

10.9

 

68.1

– thereof current

 

16.7

 

65.9

 

43.8

 

0.0

 

41.5

 

167.9

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. 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. The remaining restructuring provision as of June 30, 2020, is CHF 47.1 million, of which CHF 43.8 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 one year, by their nature the amounts and timing of any cash outflows are difficult to predict.

12 Other current and accrued liabilities

millions of CHF

 

2020

 

2019

Liability related to the purchase of treasury shares

 

102.1

 

104.2

Outstanding dividend payments

 

157.6

 

114.1

Taxes (VAT, withholding tax)

 

34.1

 

29.4

Derivative financial instruments

 

8.1

 

8.2

Notes payable

 

7.8

 

9.3

Other current liabilities

 

55.5

 

30.2

Total other current liabilities as of June 30/ December 31

 

365.3

 

295.5

 

 

 

 

 

Contract-related costs

 

86.0

 

104.7

Salaries, wages and bonuses

 

79.2

 

113.7

Vacation and overtime claims

 

33.8

 

31.8

Other accrued liabilities

 

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