H1 2018: Strong organic order growth and profitability increase

Order intake grew in all markets except power

In the first half of 2018, Sulzer's order intake momentum was strong across all divisions, with orders increasing by 11.6% (6.5% organically) compared with the same period of the previous year. All the divisions grew organically.

All markets contributed to the increase in order intake except power. The oil and gas downstream market started to recover in early 2017, and was followed by the start of the rebound of the upstream market in 2018. While volumes recover, the company expects price pressure to continue until 2019. The global power market, which accounts for 13% of Sulzer's order intake, will continue to be challenging in the midterm. Gas turbine services are under price pressure and there are fewer projects for conventional power plants around the world. Sulzer's water business is growing strongly, further supported by the recent acquisition of JWC Environmental, LLC (JWC). Sulzer's industry businesses are also showing very positive trends. Order intake grew across all regions and particularly in the Americas (20.1%).

Order intake in the Pumps Equipment division increased by 21.3%. The increase stems from 12.1% organic growth, particularly in the oil and gas market, with additional volume coming from JWC. Order intake in the Rotating Equipment Services division grew by 6.5% as a result of organic growth of 3.1% plus acquisitions. The Chemtech division grew by 5.0%, driven by Europe, the Middle East and Africa (EMEA) as well as Latin America. Order intake in the Applicator Systems division increased by 6.3% through the acquisition of Transcodent. Dental and Adhesives grew organically by 7.5%. Beauty was impacted by a decision of a large customer to move from a First Generation product to the Second Generation product, shifting significant volume to 2019 and averaging down the APS organic growth to 1.3% for the semester.

Strong sales growth

Sales increased by 10.5%. This rise was driven by 5.4% organic growth and CHF 73.2 million from acquisitions. Sales grew in all market segments except power.

Operational EBITA (opEBITA) grew double digits on the back of higher volumes and continued cost improvements. Compared with the same period of the previous year, operational ROSA increased to 8.5% from 7.4%.

Restructuring expenses remained broadly stable compared with the first half of 2017. Consequently, EBIT amounted to CHF 78.0 million, an increase of 41.1% on a year-on-year basis.

Free cash flow impacted by volume-driven inventory buildup

Sulzer's free cash flow generation is usually back-loaded. Free cash flow amounted to CHF -29.8 million compared with CHF -2.5 million reported in the first half of 2017. The increase in order backlog of approx. CHF 210 million since the end of last year led to an inventory buildup and resulted in an increased net working capital.