Sulzer Reports Increased Income
2004 was a successful year for Sulzer. The core divisions posted significantly higher sales (CHF 2,049 million, +14%) and operating income (EBITA: CHF 130 million, +55%). Net profit for the corporation reached CHF 73 million, an increase of 78% over that of the prior year.
In accordance, the board of directors proposes a dividend of CHF 9 per share (prior year: CHF 6). With the high order intake (CHF 2,198 million, +15%) and efficiency improvement programs in place, the foundations for a promising business year in 2005 have been laid.
Above-average volume growth
In a largely positive market environment, the Corporation recorded a 15% year-on-year rise in orders received (adjusted1: +14%), to CHF 2,198 million. Sales advanced by 13% to CHF 2,067 million (adjusted1: +12%).
Core divisions drive income higher
Operating income (EBITA) rose by 56% to CHF 139 million (prior year: CHF 89 million). The core divisions played a central role in this result, increasing their contribution from CHF 84 million (excluding restructuring costs at Sulzer Pumps: CHF 107 million) to CHF 130 million. The sharp rise in income is primarily attributable to operational improvements at Sulzer Pumps and Sulzer Chemtech, which more than compensated the unsatisfactory Sulzer Metco result.
Net income 78% above prior-year figure
Improvements in operating business also led to a higher net income, up 78% from CHF 41 million to CHF 73 million. Earnings per share rose to CHF 21,03 from CHF 11,77 in the prior year.
Results for the core divisions in detail
Sulzer Pumps achieved high growth in 2004, breaking through the one billion Swiss franc barrier for the first time in its history in terms of orders received (CHF 1,073 million, prior year: CHF 951 million; +13%, adjusted1: 12%) and sales (CHF 1,002 million, prior year: CHF 870 million; +15%, adjusted1: 15%). Operating income (EBITA) rose from CHF 25 million (CHF 48 million before restructuring costs) to CHF 64 million, while return on sales (ROS; EBITA/sales) advanced to 6.4%. These increases are attributable to the good business environment and the effects of operational improvements. As the pumping lines Johnston, Paco, and Crown in the US were not acquired until late 2004, they had little impact on the results for the year.
Sulzer Metco posted sales of CHF 521 million and received orders totaling CHF 534 million in 2004, exceeding the half billion Swiss franc mark for the first time in both instances. The growth rates were 23% and 26% respectively (adjusted1: +14% and +16%). Demand from the aerospace industry picked up slightly, but the industrial gas turbine business remained at a low level. Operating income (EBITA) only recovered slightly, from CHF 17 million in the previous year to CHF 19 million, resulting in a return on sales (ROS) of 3.6%. This unsatisfying result was mainly attributable to the one-off balance sheet corrections published in October 2004, the depreciation of the US dollar, and effects from the application of purchase accounting rules for the new acquisitions.
Sulzer Chemtech enjoyed another year of good business performance in 2004. The robust Asian market and strong demand for static mixers led to a high volume of orders received, up 11% to CHF 346 million (adjusted1: +14%) despite negative currency effects and weak European markets. Sales advanced by 2% to CHF 313 million (adjusted1: +5%). Sulzer Chemtech posted an increase in operating income (EBITA) of 30% year-on-year to CHF 30 million, and a return on sales (ROS) of 9.6%.
For Sulzer Turbo Services, the year was marked by increased competition, the weak US dollar, and continuing political insecurity in the Middle East and South-East Asia. Thanks to a few large contracts, orders received climbed sharply to CHF 226 million (+15% compared to the prior year, adjusted1: +20%), making for a substantially higher order backlog. Sales advanced by 7% to CHF 213 million (adjusted1: +11%). Operating income (EBITA) stood at CHF 17 million (prior year: CHF 19 million) with a return on sales (ROS) of 8%, reflecting tough competition in the market as well as investment in the in-house production of replacement parts.
Sulzer Hexis achieved important technical milestones in system design during 2004. These are a key prerequisite for series production and market introduction, and will support the associated selection of potential partners. As in the previous year, the division recorded an operating loss of CHF 16 million.
Other activities, which are primarily influenced by real estate transactions, generated an operating income of CHF 25 million, including a special item. It is slightly above the figure of CHF 21 million for the previous year.
The divisions are currently well positioned, but growth and results will largely depend on how the global markets will perform. Sulzer expects slower sales growth and a further increase in operating income. With the expectation of a higher operating income of the core divisions, a lower income of 'Other', and the elimination of annual amortization of goodwill, Sulzer expects to post a significant improvement in net income in 2005 overall.
At the annual general meeting on April 15, 2005, the board of directors will propose a dividend of CHF 9 (prior year: CHF 6). Upon approval, the date of the dividend payment is April 21, 2005.
Board of Directors: Re-election
At the forthcoming annual general meeting, the board members Leonardo Vannotti and Thor Håkstad stand for re-election.