Order Intake for 2008 Increased to CHF 4.1 Billion

19.01.2009

Sulzer further increased its order intake with an adjusted1 growth of 10.1% (nominal 1.5%) to CHF 4 116.6 million in 2008. The order intake was primarily driven by the strong double-digit growth of Sulzer Pumps. The negative currency translation impact was significant, while acquisitions had only a negligible effect.

The last months of the year showed a clear weakening in the relevant Sulzer markets.For 2009, order intake is expected to be lower compared to the full year 2008. Sulzer’s high-quality order backlog and its sound financial situation provide a solid foundation for continued resilience.

With the exception of the last months of the year, the relevant Sulzer markets were strong in 2008. The oil and gas (upstream) and power generation markets showed strong growth. The hydrocarbon processing industry showed reduced project activity while the aviation segment and the automotive market remained largely stable. The pulp and paper segment clearly weakened. Toward the end of the year, order intake slowed down primarily due to the effect of the general economic and financial developments resulting in increased caution in the decision making of customers. Overall demand remained high in the oil and gas and power generation markets. The aviation market remained largely stable. The pulp and paper industry softened further, while the demand for Sulzer’s solutions in the automotive sector was affected by the announced extended work stoppages at the global car manufacturers.

Geographically, the significant growth in the emerging regions, such as Asia, the Middle East, Africa, and South America, leveled off toward the end of 2008. Europe and North America weakened after stable activities in the first part of the year.

All major currencies have weakened against the Swiss franc resulting in a significant negative translation effect on the nominal growth rates. The adjusted1 figures mainly represent the growth in local currencies, while acquisitions had a minor impact.

Order intake by division

Compared with the previous year, Sulzer Pumps increased its order intake substantially to a record volume of CHF 2 308.7 million. This is a strong increase of 23.3% on an adjusted1 basis, and 11.2% on a nominal basis. The power generation and the oil and gas segments were strong drivers of growth, while the hydrocarbon processing industry remained active. The emerging markets outgrew other regions. As in recent years, the new equipment orders outperformed the service business. The growth in 2008 was supported by large projects with long lead times, including orders for power plants in South Africa and China. Toward the end of the year customers started to postpone some investment decisions in light of a deteriorating economic outlook, and difficult credit markets. Sulzer Pumps expects the number of large projects to reduce, which will affect the order intake development going forward. However, based on the strong order growth in 2008 and many projects with long lead times, the divisional order backlog is very high. For 2009, the division anticipates order intake to be clearly below the 2008 level.

Orders received by Sulzer Metco totaled CHF 715.6 million, representing an adjusted1 decrease of 1.8% and a nominal reduction of 6.2%. Demand remained stable in Sulzer Metco’s relevant markets for a large part of the year, but weakened toward the end of 2008. The reported order volume has also been affected by decreasing raw material prices. Compared with the prior year, activity in consumables and the service businesses were developing well while orders for the new equipment business were lower. Asia and Europe were the strongest regions. For 2009 Sulzer Metco currently expects continuous demand in the power generation and aviation market, but lower orders from the automotive and general industry sectors.

Compared with the previous year, Sulzer Chemtech posted an adjusted1 decrease in order intake of 9.3% (nominal –13.5%) to CHF 770.4 million. The division obtained a lower number of large orders compared to the previous period. The hydrocarbon processing industry showed lower project activity, especially toward the end of the year. Strong activity was reported in Asia. The acquisition of the TowerTech companies based in Australia, Thailand, and Singapore was signed in December 2008, but had no influence on the 2008 order intake. For 2009, the division anticipates order intake to be below the previous year.

Sulzer Turbo Services achieved an order intake of CHF 303.4 million, an increase of 5.0% on an adjusted1 basis (nominal –3.1%). The market environment remained healthy in most market segments and regions. The acquisition of the South American turbomachinery service-provider Capime was completed in December 2008, but had no influence on the 2008 order intake. For 2009, the division expects markets to soften relative to the previous year.

Outlook for 2009

The market conditions changed significantly toward the end of 2008. The general economic environment and the uncertainties in the financial markets make forward projections challenging. Sulzer closely monitors the market developments in order to react proactively on changing trends. Overall, Sulzer’s high-quality order backlog and its sound financial situation build a solid foundation for continued resilience in 2009.

In 2009, order intake is expected to be lower, especially as the extraordinary number of major orders from Sulzer Pumps in 2008 is unlikely to be repeated and significant negative currency translation effects are expected to continue. Overall, the oil and gas upstream and the power generation segment are expected to remain comparatively strong, although not at the extraordinary levels of 2008. The hydrocarbon processing industry is expected to show lower activity than the high levels realized in the recent years. The order backlog from the aviation industry should support the development in the segment. The general weakness in the automotive markets will affect Sulzer as well, even though the strength and the acceptance of Sulzer’s innovative solutions have been firmly established during 2008. The pulp and paper market is expected to remain weak. Currency and raw materials are likely to continue to be volatile. While all regions are expected to show some slowdown, activities in Asia are projected to remain stronger than in North America and Europe.

1 Adjusted for currency effects as well as acquisitions

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