Sulzer: Organic Growth in Order Intake Further Strengthened
Order intake in the first nine months of 2018 grew across all divisions, reaching CHF 2’676 million compared to CHF 2’385 million in the same period a year ago. Organic growth amounted to 7.2 percent, up from 6.5 percent reported in the first half of the year. In the third quarter, Sulzer achieved an order intake of CHF 874 million – an organic increase of 8.7 percent year on year.
With the exception of the power market, Sulzer grew in all of its target markets with the oil and gas market being the strongest driver. In light of this good momentum, Sulzer increases its guidance for 2018 order intake growth to 10 – 12 percent, up from 7 – 10 percent previously. Sulzer’s guidance for 2018 sales and opEBITA margin remains unchanged.
In the first nine months of 2018, order intake rose by CHF 291 million, with currency-adjusted growth of 11.7 percent and organic growth of 7.2 percent. Currency impact was a positive 0.5 percent and acquisitions contributed CHF 107 million. Order intake grew in all of Sulzer’s target markets with the exception of the power market. Some larger orders in Pumps Equipment and Chemtech also supported growth.
Order intake from the oil and gas industry was up by 21 percent organically compared with the same period last year. A rebound was noticeable in all segments and was particularly strong in upstream. Sulzer also recorded high organic growth rates in other markets, such as water (16 percent), CPI (24 percent), and dental (10 percent). In contrast, orders from the power industry decreased significantly (-22 percent).
Orders increased across all regions. Growth was particularly strong in the Americas, followed by Asia-Pacific and Europe, the Middle East, and Africa (EMEA).
Free float increased
On September 18, Sulzer placed all five million of its treasury shares with domestic and international investors, and increased the free float to 51 percent. The placement price of CHF 112 per share, calculated against the purchase price of CHF 109.13 per share in April 2018, resulted in a capital gain of around CHF 15 million that increases Sulzer’s equity. Sulzer acquired the five million treasury shares from its former majority shareholder Renova.
Financing mix optimized
On June 19, Sulzer raised CHF 400 million in the Swiss capital market via a dual tranche issuance to optimize its financing mix. The first tranche of CHF 110 million has a term of two years and carries a coupon of 0.25 percent at a price of 100.00 percent. The second tranche of CHF 290 million has a term of five years and carries a coupon of 1.30 percent at a price of 100.00 percent.
Taking advantage of favorable market conditions, Sulzer raised another CHF 460 million in the Swiss capital market again via a dual tranche bond issuance on September 27. The first tranche of CHF 210 million has a term of three years and carries a coupon of 0.625 percent at a price of 100.0 percent. The second tranche of CHF 250 million has a term of six years and carries a coupon of 1.6 percent at a price of 100.1 percent. The additional bonds further optimize the maturity profile of Sulzer’s financing mix. They will also support the company’s bolt-on acquisition strategy.
Guidance increased for order intake and confirmed for sales and opEBITA margin
The order intake momentum is expected to extend into Q4. Sulzer therefore increases its guidance for 2018 order intake growth to 10-12 percent, up from 7-10 percent previously, including acquisitions and adjusted for currency effects. Sulzer’s guidance for 2018 sales and opEBITA margin remains unchanged: sales are expected to grow by 6-8 percent and operational EBITA margin to be around 9.5 percent.
Sulzer expects that the above-mentioned guidance combined with lower non-operational expenses will result in a significantly higher growth rate for net income compared to the growth rate of opEBITA.
