Midyear Presentation market strategy

Transcription

1 Midyear Higher order Results intake, Presentation lower profitability 2013 focused market strategy

2 THE SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT 1995 This presentation may contain forward-looking statements, including but not limited to, projections of financial developments, market activities or future performance of products and solutions, containing risks and uncertainties. These forward-looking statements are subject to change based on known or unknown risks and various other factors, which could cause the actual results or performance to differ materially from the statements made herein. 2

3 Agenda Review first six months 2013 Financial review Strategy update Outlook and summary 3

4 Summary of key figures H Order intake Good order developments CHF 2025m Moderate increase +4% CHF 2103m Solid order intake growth Three of four divisions grew Outlook for Full Year 2013: slight growth of order intake expected H H Order backlog An increased order backlog CHF 1829m Increase +11% CHF 2039m Book-to-bill H >1 Backlog increased to a high level Focus on efficient backlog execution Dec 31, 2012 Jun 30,

5 Summary of key figures H Sales CHF 1923m Slight decrease 1% CHF 1901m H H Operating income (EBIT) CHF 193m Significant decrease 23% CHF 148m H H Sales improved after slow start Slow start into the year, but volumes in recent months showed improved trends Changed business mix compared to previous year Higher volumes for second half of the year expected Outlook for Full Year 2013: slight growth of sales expected A significant decrease of operating income Significant decrease in operating income, mainly caused by the wastewater pumps business and electro-mechanical services Tailored measures taken to improve performance in the second half of the year Outlook for Full Year 2013: profitability expected to be slightly lower 6

6 Measures to improve operating performance Division Main cause of EBIT decrease Measures taken Expected effect in H Sulzer Pumps Lower sales and lower margins in Configured Solutions business (mainly wastewater) Under-utilization of capacities Accelerate synergy potential by combining wastewater business with process pumps into Configured Solutions Reduction of manufacturing sites Strong recovery in sales and profitability Restructuring measures are showing positive impacts Sulzer Metco Restructuring charge for the closure of a site in Europe Continue with strict cost control Improved margins through better cost base Sulzer Chemtech Lower sales in Process Technology due to delayed order bookings in 2012 Larger orders booked in H Higher sales resulting in better absorption Sulzer Turbo Services Lower sales in electromechanical businesses in UK and Australia Restructuring programs initiated in UK and Australia Capacity adjusted to lower demand; improved cost base Corporate Center Higher costs for modernization of IT infrastructure Cost savings measures implemented Focused spending 7

7 Agenda Review first six months 2013 Financial review Strategy update Outlook and summary 8

8 Order intake millions of CHF H H Change in % Change in 2012 % adj. 1) Full Year Sulzer Pumps % +5.4% Sulzer Metco % 0.8% Sulzer Chemtech % +9.9% Sulzer Turbo Services % 8.7% Others Total Sulzer % +3.0% Good demand North America Asia Pacific Weak demand Europe Currency translation effect CHF 3 million or 0.1% Acquisition/divestitures CHF 15 million or 0.7% Order backlog Jun 30, 2013 CHF million 22% 34% 44% Europe, Middle East, Africa Americas Asia-Pacific 1) Adjusted for currency translation as well as acquisitions and divestitures 11

9 Sales millions of CHF H H Change in % Change in 2012 % adj. 1) Full Year Sulzer Pumps % 3.2% Sulzer Metco % +1.1% Sulzer Chemtech % 3.6% Sulzer Turbo Services % +2.1% Others Total Sulzer % 1.9% thereof services in % 39.4% 40.8% 40.6% Currency translation effect: CHF 2 million or 0.1% Acquisition/divestitures: CHF 13 million or 0.7% Nominal growth in all divisions except Sulzer Pumps Business mix different than in previous year Service business share decreased by 140 bps. Slightly lower sales despite recent improved trends 1) Adjusted for currency translation as well as acquisitions and divestitures 12

10 Gross margin Main negative influence factors were: Gross margin H1-2012: 31.0% Gross margin H1-2013: 30.4% Negative market developments in some regions Changes in the business mix Gross margin decreased slightly by 0.6% Note: No material impact from raw material price changes 13

11 Operating income (EBIT) detailed analysis millions of CHF H H ) Change in % ) Full Year Sulzer Pumps % Sulzer Metco % 68.7 Sulzer Chemtech % 70.7 Sulzer Turbo Services % 54.9 Others EBIT Sulzer % ROS Sulzer 7.8% 10.0% 10.2% Restructuring expenses Total EBITR Sulzer % ROSR Sulzer 8.1% 10.1% 10.3% Negative effects: Lower sales volumes Changes in business mix Under-utilization of capacities Higher restructuring expenses Higher IT cost Measures taken: Strict cost control Adapting capacities to lower demand Footprint adjustments Further increase of efficiency in sales and service networks Tailored measures initiated to improve performance going forward 1) Restatement of prior year figures regarding IAS 19 revised; see midyear report note 04 on page 15 14

12 Sulzer Pumps Review H and outlook 2013 Orders +5% Sales 3% ROS 5.7% Review H1-2013: Order intake growth supported by large orders in oil and gas Sales started slow into the year, but improved recently Operating income decreased significantly mainly due to lower volumes, changed business mix, and the under-utilization of capacities New strategic partnership agreements signed with customers (e.g. Sinopec) Further expansion of service footprint Current focus areas: Leveraging of synergies by combining wastewater business with process pumps into Configured Solutions Adaptation to lower demand in certain markets; reducing number in manufacturing sites in Configured Solutions Focus on backlog execution and increase efficiency of sales and service network Cross-selling of services for rotating equipment with Sulzer Turbo Services leveraging cross-divisional cooperation Outlook 2013 Full Year: Order intake and sales expected at similar levels as in Profitability forecast to be slightly lower than in the previous year. 16

13 Sulzer Metco Review H and outlook 2013 Orders +3% Sales +5% ROS 9.0% Review H1-2013: Growth in orders and sales Return on sales lower mainly due to higher restructuring expenses (site closure) Reinforced position in China with a new and larger production and service facility Acquisition of a small service company in Russia Enlargement of ceramics production facility in Germany to serve growing demand in semiconductors and fuel cells Current focus areas: Targeted measures toward capacity adaptations and cost reductions Continue with LEAN-principles Outlook 2013 Full Year: Moderate growth in order intake and sales expected. Profitability is forecast to be slightly lower than in the previous year. 18

14 Sulzer Chemtech Review H and outlook 2013 Orders +14% Sales stable ROS 9.6% Review H1-2013: Strong growth in orders while sales were stable Profitability slightly decreased First large industrial scale order for biopolymer plant (bioplastics) awarded Acquisition of Krøger A/S, a leading manufacturer of dispensers to strengthen the position in one-and two-component mixing system applications Current focus areas: Focus on processing the high order backlog Leveraging the new headquarter setup in Singapore for Mass Transfer Technology Further footprint development of China Outlook 2013 Full Year: High single-digit growth in order intake and sales expected. Profitability is forecast to reach a double-digit level. 20

15 Sulzer Turbo Services Review H and outlook 2013 Orders 9% Sales +2% ROS 7.6% Review H1-2013: Decrease of order intake while sales grew slightly Profitability lower due to reduced capacity utilization in the electro-mechanical business in the UK and Australia Continued to develop the Long-term Service business (LTSA) Current focus areas: Targeted measures to improve operational performance in particular in the electromechanical business in the UK and Australia Cross-selling services for rotating equipment with Sulzer Pumps leveraging crossdivisional cooperation Outlook 2013 Full Year: Decrease in order intake anticipated. Sales expected to decrease slightly. Profitability is expected to be at a lower level than in

16 Consolidated income statement below EBIT line millions of CHF H H Change in % Operating income (EBIT) % Financial income, net % Income before income tax expenses (EBT) % Income tax expenses % Net income % Attributable to shareholders of Sulzer Ltd % Attributable to non-controlling interests Earnings per share basic (EPS) in CHF % Slight improvement in net financial income due to lower interest expenses on pension obligations and debt Effective income tax rate at 25.7% (H1-2012: 26.1%) slightly lower due to different geographical distribution of profits Lower EBIT driving down net income 23

17 Free cash flow millions of CHF H H Change in % Cash flow from operating activities % Capital expenditure % Sales of PP&E and intangible assets % Free cash flow % Lower operating income dragging down cash flow from operating activities Further improvement in net working capital Cash for Growth Project Capital expenditure lower than in previous year majority for maintenance Free cash flow significantly lower than high base of prior year 24

18 Cash and debt overview Net liquidity (millions of CHF) Balance sheet (millions of CHF) Cash and marketable securities Debt Net liquidity Equity Liabilities Equity in % of total assets Gearing in % Cash and marketable securities Debt Net liquidity Jun 30, 2013 Equity ratio at 49% Gearing at 28% Solid balance sheet remained as a basis for further growth 25

19 Agenda Review first six months 2013 Financial review Strategy update Outlook and summary 26

20 Strategy update 1 Vision and values 2 Strategic priorities 3 Focused market strategy Strategy oriented toward our customers with a focus on value creation and profitable growth 28

21 Vision and values Vision: Our customers recognize us for our leading technology and services, delivering innovative and sustainable solutions. Values: We exceed the expectations of our customers with innovative and competitive solutions. We perform on the basis of structured work processes and LEAN principles. We are committed to high standards and show respect for people. Customer and people oriented, making sure that we act excellently 29

22 Strategic priorities Technology leadership Outstanding services Continuous operational improvements Customer orientation Profitable growth Collaborative advantage Oriented toward our customers with a focus on value creation and profitable growth 30

23 Strategic priorities Technology leadership Direction: Continued investments in R&D Further expansion of technology portfolio Progress update (mid-year 2013): Increased R&D spending by 10% to CHF 48 million Smaller technology acquisitions such as Krøger A/S Subsea pumps collaboration agreement with FMC Technologies First industrial-scale biopolymer production plant order recorded Test bed facility for subsea pumps Plant to produce biopolymers Increased R&D spending resulting in market success 31

24 Strategic priorities Outstanding services Direction: Further strengthening of service network Expanding service offering Progress update (mid-year 2013): Addition of new service centers to global service network in Brazil, China, South Africa, Russia Smaller service-related acquisitions and expansion of locations in China and Russia New service center in Durban, South Africa New service center in Chengdu, China New service center in Nova Lima, Brazil Continuous expansion of service footprint 32

25 Strategic priorities Continuous operational improvements Direction: Improvement programs for safe behavior and safety KPIs Leverage on-time delivery potential Progress update (mid-year 2013): Improved KPIs such as Accident Severity Rate from 55 to 44 Based on LEAN-principles, on-time delivery was further improved by 500 bps Lean site in Sulzer footprint We care about our employees: social sustainability enjoys high focus at Sulzer We strive for continuous improvements in what we do 33

26 Strategic priorities Collaborative advantage Direction: Increasing focus on company-wide cooperation Seizing additional opportunities for shared services Progress update (mid-year 2013): Cross-selling initiative on services in rotating equipment started Shared service initiative for support functions started Sharing and leveraging complementary knowhow between the divisions Leveraging the synergies also in support functions working as one company Better results through collaboration; acting as one company 34

27 Focus on three key markets Strategy for future portfolio Oil and gas Power Water Transportation Equipment Services We want to be both an equipment and a services company for performance-critical applications in three key markets oil and gas, power, and water We want to leverage existing assets and capabilities and look for synergies across the divisions act as one company Focusing on three key markets and exploring divestiture of the Sulzer Metco division 35

28 Focus on three key markets Current end market distribution 1) 40% 15% 12% 9% 24% Oil and gas Power Water Transportation General industry Focus on three key markets oil and gas, power, and water plus activities in selected general industrial markets offers an attractive growth potential based on: Global megatrends and general industry trends Leading and competitive positioning of our divisions Sulzer offers both performance-critical equipment and related services in these key markets Future end market distribution 2) Three key markets 48% 16% 15% 21% Oil and gas Power Water General industry Focusing on three attractive key markets 1) share of sales based on full year ) pro-forma calculation based on full year 2012 after a potential divestiture of Sulzer Metco 36

29 Realignment of the portfolio to match new market strategy Sulzer Metco in brief Sulzer Metco is a well performing business and has outstanding solutions for attractive markets, namely automotive, aviation, power, and the general industries The division s strength include Industry-leading and most complete portfolio in surface technologies A combined offering of coating solutions, equipment, materials, and services, as well as components With its strong customer partnership, broad global presence, and competent and committed teams, the coatings business has excellent prospects for continued profitable growth Sulzer is looking for a potential solution that leverages the strengths of Sulzer Metco in the best possible way Potential divestiture of Sulzer Metco division 1) share of sales based on full year

30 Acquisition strategy Focus areas: Equipment and associated services in the rotating equipment and flow control space Market position: Leaders with differentiated offering/technology or potential to become leaders Characteristics: Small to mid-sized, bolt-on; larger deals possible Funding: Given a healthy balance sheet and profits, significant external funding capacity available Targeted acquisitions to strengthen strategic positioning 38

31 Working together as one company Cross-selling of services for rotating equipment Services for rotating equipment Mechanical Turbines and compressors Electro-mechanical Generators and motors Pump services Pumps Cross-divisional collaboration Sulzer Pumps and Sulzer Turbo Services work together more closely to crosssell services Initiative aims to leverage the complimentary technical know how and offering for services with the combined global footprint and customer base Providers of a full service portfolio to our customers from one single source Strengthening Sulzer s position in services for rotating equipment 39

32 Working together as one company Shared services in support functions Shared services Finance Human resources Information technology Group-wide support functions Initiative aims to assess potential synergy potential through increased collaboration and standardization in support functions The scope currently included Finance, HR, and IT areas Main goals are to secure cost benefits and improve processes Leveraging synergy potential in support functions 40

33 Agenda Review first six months 2013 Financial review Strategy update Outlook and summary 41

34 Market update Development year-over-year Expected trend for remainder of ) Assessment Full Year ) Oil and gas Some growth Continue at similar levels Further growth for parts of the market Forecast at similar levels Power Remained at low level Continue at similar levels Water Decreased vs. high base Continue at similar levels with some signs for a pickingup trend in wastewater Forecast at similar levels Forecast at similar levels Transportation Stable at high levels Continue at similar levels 1) published on July 23, 2013; based on present knowledge and excluding major changes in the general economic conditions; 2) assessment for full year 2013 vs

35 Outlook 2013 H year-over-year H expectation 1) Outlook Full Year ) : Order intake +3.8% Moderate growth Similar levels of activity expected Slight growth Sales 1.1% Slight decrease Better levels expected based on high backlog Slight growth Return on sales Decreased to 7.8% Expected to improve based on higher volumes and initiated measures Slightly lower 1) published on July 23, 2013; based on present knowledge and excluding major changes in the general economic conditions; nominal growth for order intake and sales; Full year 2013 vs. Full year 2012; Basis for ROS: EBIT as stated all-in 43

36 Financial midrange targets by the year 2015 Midrange targets Sulzer Pumps Sulzer Metco Sulzer Chemtech Sulzer Turbo Services Total Divisions FY 2012 Target corridor by 2015 FY 2012 Target corridor by 2015 FY 2012 Target corridor by 2015 FY 2012 Target corridor by 2015 FY 2012 Target corridor by 2015 Sales growth % 6-8% +2.3% 5-7% +4.0% 6-8% +0.8% 5-7% +4.2% 6-8% EBIT margin 9.5% 11-13% 10.0% 11-13% 9.8% 12-14% 10.8% 12-14% 9.8% 11-13% (ROS) 2 Return on capital 13.6% >20% 17.1% >20% 16.3% >20% 14.8% >18% 14.7% >20% (ROCE) 2 1) Targets 2015: compound annual growth rate in %; base year 2011; organic; portfolio as of December 31, 2011; constant FX 2) Basis: EBIT before major non-recurring items (major restructuring, M&A related expenses such as step ups, integration, transaction costs etc.); from 2012 including 0.5% higher corporate charges to divisions compared with 2011; Capital Employed including Goodwill and other intangible assets. 44

37 Summary and conclusion H review Solid order intake growth, while sales slightly decreased Significant decrease of EBIT, tailored measures to improve initiated Better operational performance expected for remainder of the year Continued focus on net working capital management Balance sheet remained strong; solid foundation for further growth Strategy Clear vision and strong values; remained unchanged Further progress made in strategic priorities New focus on three key markets Outlook Full year 2013: slight growth of orders and sales and a slightly lower profitability expected compared to 2012 Midterm targets: under review Sulzer has all the ingredients for sustainable future success 45

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