Section 94 (1) (b) of companies act 1956
Balasubramanian
(Querist) 16 April 2015
This query is : Resolved
A company three years after delisting holding 97% of shares passed a resolution in an EGM with a majority for consolidation of residual shares remaining un-tendered after delisting and at the same time offered an x amount to the residual share holders and compulsorily/Involuntarily withdrew the shares from the Demat accounts of residual shareholders and credited an equivalent amount in their savings bank accounts linked to the demat account without a court sanction as section 94 (1) (b) of companies act,1956 for consolidation does not require a court sanction,whether this involuntary withdrawal of shares from demat account is fair in law?Is it not an intrusion on Ownership of demat account holder?as it is a reduction in share capital under section 100 of companies act,1956 which requires a court sanction.can some body quote a case law for such a precedent?
DR.VEDULA GOPINATH
(Expert) 17 April 2015
PLEASE SEND ME LATEST ANNUAL REPORT ANNUAL RETURN AND ANNUAL REPORT TO GIVE CONSIDESRED OPINION
CS DR VEDULA GOPINATH ADVOCATE/ARBITRATOR
vgnath@gmail.com
Balasubramanian
(Querist) 18 April 2015
Annual Report 2013
Focused on oil and gas,
power, and water
Who we are and how we are doing
Our key markets
Oil and gas Power Water
Sulzer is a global partner with
reliable and sustainable solutions for
performance-critical applications.
We specialize in pumping solutions,
rotating equipment maintenance
and services as well as separation,
reaction, and mixing technology.
Combining engineering and
application expertise, our innovative
solutions add value and strengthen
the competitive position of our
customers.
Sulzer is a leading provider in its
key markets: oil and gas, power,
and water. We serve clients
worldwide through a network of
over 150 locations.
2013
2012
2011
2010
2009
3263.9 3961.9
3340.7 4021.6
3577.9
3183.7
3350.4
From continuing operations.
2013
2012
2011
2010
2009
264.0 345.6
328.7 409.5
364.1
406.4
368.0
Sales
millions of CHF
Operating income
millions of CHF
Good level of order intake and sales
Order intake and sales were close to the levels of 2012.
Profitability decreased, impacted by low capacity utilization
in certain businesses and costs for operational measures.
The free cash flow was on a healthy level.
millions of CHF 2013 2012
Change in
+/– % +/– %2)
Order intake 3249.9 3343.4 –2.8 –1.1
Order backlog 1672.1 1753.6 –4.6
Sales 3263.9 3340.7 –2.3 –0.7
Operating income before depreciation/amortization EBITDA 378.6 437.1 –13.4
Operating income before restructuring EBITR 280.8 336.6 –16.6
Operating income EBIT 264.0 328.7 –19.7
Return on sales before restructuring ROSR 8.6% 10.1%
Return on sales ROS 8.1% 9.8%
Return on capital employed ROCE 12.6% 14.7%
Net income attributable to shareholders of Sulzer Ltd3) 234.4 302.9 –22.6
Capital expenditure 80.5 93.0 –13.4
Equity attributable to shareholders of Sulzer Ltd 2334.4 2216.6 5.3
Free cash flow3) 218.7 347.9 –37.1
Net liquidity3) –36.2 –95.9
Employees (number of full-time equivalents)
as of December 31 15382 15537 –1.0
1) Key figures from continuing operations.
2) Adjusted for currency effects as well as acquisitions and divestitures.
3) Includes continuing and discontinued operations.
CHF 2013 2012
Change in
+/– %
Closing price of the registered share as of December 31 143.90 144.10 –0.1
Net income attributable to a shareholder of Sulzer Ltd1) EPS 6.89 8.91 –22.7
Equity attributable to a shareholder of Sulzer Ltd 68.70 65.20 5.4
Dividend 3.202) 3.20 –
1) Includes the results from continuing and discontinued operations.
2) Proposal to the general meeting of shareholders.
Data per share
Key figures 1)
2013
■ Sulzer Pumps 63%
■ Sulzer Turbo Services 14%
■ Sulzer Chemtech 23%
2013
■ Europe, Middle East, Africa 43%
■ Americas 35%
■ Asia-Pacific 22%
160
180
140
120
100
80
200
1/2011 1/2012 1/2013 1/2014
Sales by division Sales by region
Share price development
+1.0%
(three-year performance 2011–2013)
Order intake Sales
millions of CHF 2013 2012
Change
in +/–% +/–%1) 2013 2012
Change
in +/–% +/–%1)
Divisions 3252.9 3334.6 –2.5 –1.1 3266.6 3332.6 –2.0 –0.7
– Sulzer Pumps 2031.3 2094.3 –3.0 –1.1 2051.3 2097.5 –2.2 –0.4
– Sulzer Turbo Services 471.7 535.2 –11.9 –9.5 471.6 510.5 –7.6 –5.2
– Sulzer Chemtech 749.9 705.1 6.4 4.9 743.7 724.6 2.6 1.3
Others –3.0 8.8 – – –2.7 8.1 – –
Total 3249.9 3343.4 –2.8 –1.1 3263.9 3340.7 –2.3 –0.7
1) Adjusted for currency effects as well as acquisitions and divestitures.
Operating income Return on sales
millions of CHF 2013 2012
Change
in +/–% 2013 2012
Divisions 289.7 316.8 –8.6 8.9% 9.5%
– Sulzer Pumps 169.1 191.2 –11.6 8.2% 9.1%
– Sulzer Turbo Services 39.2 54.9 –28.6 8.3% 10.8%
– Sulzer Chemtech 81.4 70.7 15.1 11.0% 9.8%
Others –25.7 11.9 – – –
Total 264.0 328.7 –19.7 8.1% 9.8%
By division
Sulzer | Annual Report 2013
Highlights in 2013 Contents
Introduction Business review Corporate governance Financial section
01
Introduction
The company at a glance 02
The markets we serve 04
Letter to the shareholders 06
Focus on oil and gas, power, and water 10
Business review
Financial review 18
Divisional reviews 22
– Sulzer Pumps 22
– Sulzer Turbo Services 26
– Sulzer Chemtech 30
Sustainable development 34
– Innovation and technology 36
– Health and safety, learning
and development 38
– Values, diversity, and branding 40
– Environment 42
Corporate governance
Corporate structure
and shareholders 45
Capital structure 45
Board of Directors 45
Executive Committee 52
Shareholder participation rights 53
Takeover and defense measures 53
Auditors 53
Information policy 53
Risk management 56
Compensation report 58
Sales 1)
CHF 3 264m
(2012: CHF 3 341m)
Net income 2)
CHF 234m
(2012: CHF 303m)
Operating income 1)
CHF 264m
(2012: CHF 329m)
Dividend
CHF 3.20
(proposed)
(2012: CHF 3.20)
• In total, Sulzer (including Sulzer Metco) achieved an order intake
and sales of CHF 4.0 billion and profitability of 9.2% of sales before
and 8.7% after restructuring expenses
• For continuing operations (excluding Sulzer Metco), order intake
was CHF 3.2 billion and sales were CHF 3.3 billion. Profitability
was at 8.6% of sales before and 8.1% after restructuring expenses,
impacted by low capacity utilization in the wastewater and the
electromechanical businesses and the costs for operational measures
• The free cash flow was on a healthy level of CHF 219 million
• Sulzer initiated significant changes in 2013 with the goal of becoming
one integrated and more customer-focused company
• Focusing on oil and gas, power, and water, and with an adapted
operational structure, the company is geared for profitable growth
• For 2014, good activity levels for parts in the oil and gas industry are
expected. Some recovery is anticipated for selected regions in the
water market. Activities in the power and in the general industries
are forecast to continue at similar levels
• Sulzer anticipates slight growth for order intake and sales in 2014
compared with 2013. Return on sales before restructuring is
expected to improve slightly, supported by the measures taken in
2013. Depending on market developments and capacity utilization,
restructuring measures will continue in 2014
• The Board of Directors proposes an unchanged dividend of CHF 3.20
1) From continuing operations.
2) Attributable to shareholders of Sulzer Ltd, includes the results from continuing and discontinued
operations.
Financial statements
Consolidated financial statements 65
Five-year summaries 120
Financial statements of Sulzer Ltd 123
Investor information 135
02
Sulzer | Annual Report 2013
The company at a glance
Focused on creating value
and growing profitably
Sulzer holds leading positions in its key markets: oil and
gas, power, and water. The company is dedicated to creating
long-term value and growing profitably. With its focused
portfolio, Sulzer offers both performance-critical equipment
and related services to its customers.
Divisions 1)
Profile
Order intake
Operating income
Return on sales
Market Leadership
We offer pumping solutions, related equipment, and services.
Customers benefit from extensive research and development
in fluid dynamics, process-oriented products, and reliable
services. Our global manufacturing and service network
ensures high customer proximity.
CHF 2 031m
(2012: CHF 2 094m)
CHF 2 051m
(2012: CHF 2 098m)
• Oil and gas (upstream, midstream, and downstream)
• Water (production and transport, wastewater)
• Power
Sulzer Pumps
Pump technology and solutions
of total sales
Sales
CHF 169m
(2012: CHF 191m)
8.2%
(2012: 9.1%)
See pages 22–25
63%
1) Structure as of December 31, 2013.
03
Sulzer | Annual Report 2013
Introduction
We offer repair and maintenance services for
turbomachinery, generators, and motors.
Customers benefit from reliable and efficient repair
and maintenance services for gas and steam turbines,
compressors, motors, and generators of any brand.
Our global network ensures high-quality local service.
CHF 472m
(2012: CHF 535m)
CHF 472m
(2012: CHF 511m)
CHF 750m
(2012: CHF 705m)
CHF 744m
(2012: CHF 725m)
• Separation solutions
• Tower field services
• Two-component mixing and dispensing systems
• Industrial gas and steam turbines
• Turbocompressors
• Generators and motors
Sulzer Chemtech
Separation, mixing and service solutions
We offer products and services for separation, reaction,
and mixing technology.
Customers benefit from advanced solutions in the fields of
process technology and separation equipment, as well as
two-component mixing and dispensing systems. Our global
footprint ensures local knowledge and competence.
Sulzer Turbo Services
Service solutions for rotating equipment
of total sales
CHF 81m
(2012: CHF 71m)
11.0%
(2012: 9.8%)
See pages 30–33
of total sales
CHF 39m
(2012: CHF 55m)
8.3%
(2012: 10.8%)
See pages 26–29
14% 23%
Major production and service locations
2013
■ Europe, Middle East, Africa 43%
■ Americas 35%
■ Asia-Pacific 22%
Greater than 10% of divisional sales.
Less than 10% of divisional sales.
Sulzer Turbo Services
Sulzer Chemtech
Sulzer Pumps
Share of sales 2013
Oil and gas Power Water Other industrial
markets
51% 15% 13% 21%
Market segments
04
Sulzer | Annual Report 2013
The markets we serve
Sulzer’s production and service network
A truly global presence to
increase customer proximity
A truly global presence with a strong footprint in emerging
markets is vital for Sulzer’s sustainable success. With over
150 production and service sites worldwide and more than
40% of sales in emerging markets, we are close to our
customers and help them overcome their challenges.
Sales by region
05
Sulzer | Annual Report 2013
Introduction
How we serve our key markets
Market segment
Market drivers
Our solutions
Our customers
Oil and gas
Sulzer helps cover the global
demand for oil and gas and the
respective derivatives. Our solutions
benefit customers in the up-, mid-,
and downstream segments.
Power
Sulzer helps satisfy the global demand
for energy. Our solutions add value in
fossil-fired, nuclear, and renewable
power generation.
Water
Sulzer helps meet the global demand for
clean water. Our solutions are essential
for water transport and use, as well as
wastewater treatment and desalination.
• Population, industrial growth and
wealth development
• Global power capacity additions
• New regulatory frameworks
and environmental standards
• Population and economic growth
• Upgrades and modernizations of
existing plants and new investments
• Global supply and demand of oil and gas
• Exploration and production investments
• Global refinery capacity, utilization,
refining margins
• Growing need for pipelines, floating
production, storage, and off-loading
units (FPSOs)
• Pump systems both onshore and offshore
(including subsea) for the production and
transportation of oil and liquefied natural gas
• Process components such as
fractionation trays, structured and
random packings, liquid and gas
distributors, gas-liquid separators,
and internals for separation columns
• Service of mechanical and
electromechanical rotating equipment
• Tray and packing installation, welding
services, tower maintenance and plant
turnaround projects
• Polymerization technology for the
production of PLA (polylactic acid)
and EPS (expandable polystyrene)
• Pumps for fossil-fired and nuclear power
plants as well as renewable power generation
• Advanced solutions for carbon capture
and storage
• Repair and maintenance services for
turbines, generators, and motors
• Pumps and related equipment (such as lifters,
mixers, aerators, compressors, control and
monitoring equipment, as well as services)
• Pumps for water transport and use
• Pumping solutions in wastewater treatment
and desalination
• Service for electromechanical equipment,
e.g. motors
Oil and gas majors, national
oil companies, refineries, and
contractors. Also local customers
Utility providers, contractors, end users
and local customers
Municipalities, contractors, and private water
companies, customers in the agriculture
06
Sulzer | Annual Report 2013
Letter to the shareholders
Significant changes for better
market orientation
The year 2013 was a year of change for Sulzer. The company
adapted its operational structure to better serve its three
key markets—oil and gas, power, and water. Order intake
and sales reached levels close to those of 2012, while
profitability decreased.
Dear shareholder
Sulzer initiated significant changes in 2013
with the goal of becoming one integrated
and more customer-focused company.
The strategic decision to focus on three
key markets and the adaptation of the
company’s operational structure provide
the basis for profitable growth in the future.
The adapted operational structure, effective
since January 1, 2014, consists of the
Pumps Equipment division comprising
pumps and spares including an integrated
Water business unit. The division Rotating
Equipment Services integrates maintenance
and repair services for turbines,
compressors, generators, motors, and
pumps. The Chemtech division remains
unchanged, consisting of separation,
mixing, and service solutions. As one
integrated company, we can now offer
one access point for customers and focus
on value creation and profitable growth.
Key markets offering attractive
prospects
With its new market strategy, Sulzer
focuses on three key markets oil and gas,
power, and water. This strategic step is
based on our leading positions in these
markets and global megatrends such as
population growth, urbanization, increasing
energy demand, and scarcity of water.
Oil and gas remain essential for global
economic growth. With our broad portfolio,
we are well positioned to provide solutions
for the upstream, midstream and
downstream market segments. Sulzer’s
high-performance pumps are leading
solutions for the production and
transportation of oil. Our technologies
enable efficient separation processes
for liquids and gas. We provide reliable
services for compressors, turbines,
motors, and generators.
Sulzer sees various growth opportunities
in the oil and gas market: the floating
production, storage and off-loading units
(FPSOs) for oil sources in deep water far off
the coastline; new pipelines driven by new
oil sources; refineries and petrochemical
markets driven by the shale gas boom in
the US.
Energy consumption is growing in modern
societies. Sulzer helps satisfy this global
demand across different markets, from
fossil-fired and nuclear to renewable
power. Main growth drivers are
Net income 1)
CHF 234m
(2012: CHF 303m)
Dividend
CHF 3.20
(proposed)
(2012: CHF 3.20)
1) Attributable to shareholders of Sulzer Ltd,
includes the results from continuing and
discontinued operations.
07
Sulzer | Annual Report 2013
Introduction
geographical expansion in the coal and gas
sector and the development of solar power,
wind and geothermal power generation.
Water is our most precious natural
resource and the need for clean water is
increasing fast. Sulzer covers the whole
water cycle—from fresh water (production
and transport) to wastewater (municipal
and industrial) with a comprehensive
pumps offering. Factors like population
growth, water scarcity, and environmental
protection drive market growth.
Divestiture of Sulzer Metco
As a consequence of a more focused key
market strategy, a divestiture process was
initiated to sell the Sulzer Metco division,
which is mainly active in the transportation
market. At the end of January 2014, Sulzer
signed an agreement with Oerlikon for the
divestment of its Sulzer Metco division.
Sulzer Metco is reported as discontinued
operations throughout this Annual Report.
One focused and market-orientated
company with adapted operational
structure
Sulzer wants to serve customers in its
key markets as one focused company,
achieving collaborative advantages
and synergies across its businesses by
leveraging its product portfolio, capabilities
and expertise with its over 150 production
and service sites all over the world. The
company continues to build on its four
strategic priorities: technology leadership,
outstanding services, continuous
operational improvements, and
collaborative advantage. Together with
the one company approach, we are even
more orientated toward our customers
and focused on value creation and
profitable growth. This is supported by a
new operational structure, effective since
January 1, 2014.
A leading supplier of services for
rotating equipment
The Rotating Equipment Services division
is a combination of our Turbo Services
businesses and the service activities for
pumps (excluding spares). Integrating
services for rotating equipment into one
division creates a leading provider of
services for rotating equipment from
turbines and compressors to generators
and motors as well as pumps. With a
combined global service network of 100
locations in over 25 countries, Sulzer is
Sulzer’s operational structure in 2014
Pumps Equipment
Pump technology
and solutions
60%1)
7 100 employees2)
Rotating Equipment Services
Repair and maintenance services
for rotating equipment
20%1)
4 000 employees2)
Chemtech
Separation, mixing
and service solutions
20%1)
4 100 employees2)
1) Share of sales, pro-forma estimate based on full-year figures 2013.
2) Estimated number of full-time equivalents.
Equipment
Services
Oil and gas Power Water
51% 15% 13%
Acting as one company in three key markets 1)
1) Share of sales by market segment. The remaining 21% refers to the general industries.
08
Sulzer | Annual Report 2013
Letter to the shareholders
closer to its customers. We have the
highest levels of competence and expertise
as well as first-class engineering facilities.
We can offer comprehensive solutions—
from emergency repair to long-term
service agreements—with one access
point for customers.
Sulzer will grow its service business by
leveraging its expanded geographical
footprint and combined sales force using
cross-selling opportunities for rotating
equipment. Furthermore, Sulzer will be
able to actively bundle service offerings,
for instance for combinations of pumps
and connected motors.
Pumps Equipment leverages global
sales channels and manufacturing
network
The Pumps Equipment division comprises
the new engineered pumps business and
spares for the oil and gas and the power
markets in three regional business units.
Furthermore, an integrated Water business
unit combines all products and services
for water and wastewater.
The engineered pumps business leverages
the specific growth opportunities in the
oil and gas and the power market as well
as the global manufacturing network.
Customer benefits are reliability in
demanding applications, reduced energy
consumption through high efficiency,
and a global footprint supporting
efficient manufacturing.
With the formation of the new Water
business unit, all of Sulzer’s pumps
activities in this huge market will be
bundled in one organization. This will allow
us to focus on the most attractive market
segments, selling individual product ranges
into other segments and using strong
customer relationships to cross-sell
complementary products and services.
Chemtech with strong market positions
With a distinctive, strong product portfolio
based on separation and static mixing
technologies, the Chemtech division
remains well positioned in attractive
markets worldwide. Further profitable
growth will build on an innovation pipeline
with strong growth potential, a global
footprint to benefit from local market
demand and to improve the cost base, and
the successful integration of acquisitions.
Integration of group functions
Sulzer is also aligning its staff functions
with its adapted strategy. The streamlining
and integration of central group functions
aims to realize synergies by sharing
services and pooling expertise. This
provides a regional leverage of functions
and scalable setup for future growth.
Moreover, collaborative advantages and
synergies across the company can be
better leveraged and enable the group
functions to operate more efficiently
and effectively.
Performance 2013 1)
Sales
CHF 3 264m
(2012: CHF 3 341m)
Return on sales
8.1%
(2012: 9.8%)
Return on capital employed
12.6%
(2012: 14.7%)
Building on strategic priorities and one company for profitable growth
Technology leadership
Outstanding services
Continuous operational
improvements
Collaborative
advantage
1) From continuing operations.
Customer
orientation
Profitable
growth
one
company
Leverage existing
capabilities and assets
Efficient and effective
group functions
09
Sulzer | Annual Report 2013
Introduction
Performance in 2013
Market activities in the oil and gas industry
showed growth in some areas while the
power market remained at low level.
The water market decreased slightly
with some signs of picking-up trends
in the wastewater segment by the end
of the year 2013. Demand in Asia-Pacific
was strong, while Europe continued to
be comparably weak.
To mitigate the impact of lower sales,
capacities were reduced in the wastewater
pumps business and electromechanical
services. Together with the integration
of group functions this correlates with a
reduction of over 300 full-time equivalents
and restructuring expenses of almost
CHF 17 million in 2013.
For total Sulzer, including discontinued
operations, order intake and sales
reached CHF 4.0 billion (2012: CHF 4.0
billion). Return on sales was at 9.2%
before and at 8.7% after restructuring
charges (2012: ROSR: 10.3%; ROS:
10.2%).
For continued operations, excluding Sulzer
Metco, order intake decreased slightly
compared with the previous year
to CHF 3.2 billion in 2013. Sales also
decreased slightly to CHF 3.3 billion.
Return on sales was influenced by
lower capacity utilization, especially
for wastewater pumps and for
electromechanical services, by the
operational measures in the respective
businesses, and by the integration of
central group functions. It decreased
to 8.6% of sales before and 8.1% after
restructuring expenses. Profitability
increased in the second part of 2013
compared with the first half year.
Return on capital employed remained at a
value creating level with 12.6%. Net income
attributable to shareholders, as a result of
the lower operating income, decreased to
CHF 234 million, resulting in basic earnings
per share of CHF 6.89.
The Board of Directors will propose an
unchanged dividend of CHF 3.20 per share
at the Annual General Meeting on March
20, 2014.
Changes in the board and the
management
Manfred Wennemer was elected to the
Board of Directors at the Annual General
Meeting in March 2013 and was appointed
as new Chairman, succeeding Jürgen
Dormann, who followed internal age
limitation rules. Manfred Wennemer
resigned as per end of 2013. Vice
Chairman Vladimir Kuznetsov acts as
Chairman of the Board ad interim until
the Annual General Meeting 2014. Scot
Smith became Member of the Executive
Committee and Division President of Sulzer
Pumps in May, replacing Kim Jackson. In
October, Urs Fankhauser had to step down
due to serious illness, and Oliver Bailer was
appointed Division President of Sulzer
Chemtech and member of the Executive
Committee. General Counsel Alfred Gerber
left the company in April; his successor is
not a member of the Executive Committee.
Outlook for 2014
Based on present knowledge and excluding
major changes in the general economic
conditions, good activity levels for parts
of the oil and gas industry are expected,
in particular in the Americas. Based on
positive developments in selected regions,
especially the Americas and China, some
recovery is expected for the water market.
Activities in the power and in the general
industries are forecast to continue at similar
levels. Sulzer anticipates slight growth for
order intake and sales in 2014 compared
with 2013. Return on sales before
restructuring is expected to improve slightly,
supported by the measures taken in 2013.
Depending on market developments and
capacity utilization, restructuring measures
will continue in 2014.
We thank you, our shareholders, for your
continued trust and support. We thank
our employees for their commitment and
excellent collaboration and we thank our
customers and partners for their trustful
and long-term cooperation.
Yours sincerely,
Our customers recognize us
for our leading technologies and
services, delivering innovative
and sustainable solutions.
• Customer partnership
We exceed the expectations of
our customers with innovative
and competitive solutions.
• Operational excellence
We perform on the basis of structured
work processes and lean principles.
• Committed people
We are committed to high standards
and show respect for people.
Our values
Our vision
Vladimir Kuznetsov,
Vice Chairman
of the Board
Klaus Stahlmann,
CEO
Sulzer | Annual Report 2013
10 Focus
Global megatrends influence our lives and our well-being.
Population growth, urbanization, increasing energy
demand, and scarcity of water create important
development needs in Sulzer’s three key markets—
oil and gas, power, and water. For Sulzer, this offers
attractive growth potential.
Focused on oil and
gas, power, and water
Sulzer | Annual Report 2013
11
Introduction
Oil and gas will remain essential for global
growth in the near future. The industry
faces a wide range of challenges and
opportunities in the production, transport,
and processing of oil and gas.
See pages 12–13
Modern societies use large amounts of
energy. The demand for energy efficiency
and lower carbon dioxide emissions is
steadily growing and requires improved
solutions for the future.
See pages 14–15
Water is our most precious natural
resource. With growth in the emerging
markets, the need for clean water is
increasing quickly.
See pages 16–17
Fueling the future Meeting power needs Processing water for life
Sulzer | Annual Report 2013
12 Focus
Sulzer’s solutions for the oil and gas market
enable customers to prepare for the future.
We provide services and solutions for onshore,
offshore, and subsea oil production, for the
transport of oil and gas in pipelines, and for
the processing of crude oil and gas in refineries.
Fueling the future
Sulzer | Annual Report 2013
13
Introduction
Sulzer | Annual Report 2013
14 Focus
Sulzer ensures that its customers have
energy-efficient and sustainable operations
and helps satisfy the global demand for
energy. We provide high-performance pumps
for fossil-fired, nuclear, or renewable power
generation, advanced solutions for carbon
capture and storage, and maintenance
and repair services for rotating equipment.
Meeting the
power needs
Sulzer | Annual Report 2013
15
Introduction
Sulzer | Annual Report 2013
16 Focus
The scarcity of water presents the
opportunity for Sulzer to create new,
more efficient solutions. Sulzer’s
comprehensive product portfolio
for the supply and treatment of water
and for industrial and municipal
wastewater collection supports the
demand for clean water and constitutes
sustainable business opportunities.
Processing water
for life
Introduction
Sulzer | Annual Report 2013
17
18
Sulzer | Annual Report 2013
Financial review
Healthy levels of order intake
and sales
For continuing operations, order intake and sales were at
healthy levels compared with the previous year. The operating
income was CHF 264 million. Return on sales before
restructuring decreased to 8.6% from 10.1% in the prior year.
The free cash flow was on a healthy level of CHF 219 million.
Order intake: Negative currency
translation effects influence order intake
In 2013, Sulzer received orders of CHF
3.2 billion. The order intake decreased
nominally by 2.8%; adjusted for currency
translation effects as well as acquisition
effects, the order intake was only 1.1%
below that of previous year. The currency
translation effect amounted to negative
CHF 63.5 million. The effect from
acquisitions and divestitures amounted
to CHF 8.1 million.
The strong double-digit order intake growth
in Asia-Pacific in 2013 was offset by a
comparably weak order intake in Europe
and the Americas. The share of order intake
in the emerging markets increased from
43% to 44%. The oil and gas market was
strong, while less activity was recorded in
the power and water markets than in the
previous year. The divisions reported the
following growth rates:
• Sulzer Pumps: –3.0% (–1.1% adjusted)
• Sulzer Turbo Services: –11.9%
(–9.5% adjusted)
• Sulzer Chemtech: +6.4%
(+4.9% adjusted)
Orders
millions of CHF 2013 2012
Order intake 3249.9 3343.4
Order backlog as of
December 31 1672.1 1753.6
The order backlog decreased slightly
to CHF 1 672.1 million (2012: CHF
1 753.6 million).
Sales: Impacted by currency
translation effects
Sales of CHF 3.3 billion were recorded in
2013, which is a nominal decrease of 2.3%
(adjusted –0.7%) compared to the previous
year. The growth rates of the divisions were
as follows:
• Sulzer Pumps: –2.2% (–0.4% adjusted)
• Sulzer Turbo Services: –7.6%
(–5.2% adjusted)
• Sulzer Chemtech: +2.6%
(+1.3% adjusted)
Sales were negatively influenced by the
weaker Brazilian Real and South African
Rand in particular. The negative currency
translation effect amounted to CHF 60.6
million, while acquisition and divestiture
Consolidated income statement (condensed)
millions of CHF 2013 2012
Sales 3263.9 3340.7
Cost of goods sold –2260.9 –2291.6
Gross profit 1003.0 1049.1
Selling, administrative and development expenses –722.2 –712.5
Operating income before restructuring 280.8 336.6
Restructuring expenses –16.8 –7.9
Operating income 264.0 328.7
Financial income, net –21.8 1.2
Income tax expenses –65.9 –80.6
Net income from continuing operations 176.3 249.3
Net income from discontinued operations, net of income taxes 59.9 58.5
Net income 236.2 307.8
Business review
19
Sulzer | Annual Report 2013
effects added some CHF 8.2 million. The
regions of North America and Eastern
Europe were able to increase sales from
the previous year, whereas the other
regions reported stable or decreasing
sales. The share of sales from services
was at a healthy level of 44%.
Gross profit: Slight reduction
Gross profit amounts to CHF 1 003.0
million, which is a CHF 46.1 million
decrease from the financial year 2012
(CHF 1 049.1 million). The reduction can
be explained by the lower sales volume
and the slightly lower gross margin of
30.7% in 2013, down from 31.4% during
the previous year.
Operating income: Higher operating
expenses including costs for
restructuring
Operating expenses increased by CHF
18.6 million (+2.6%) to CHF 739.0 million
despite slightly lower sales. Included in
the operating expenses are restructuring
expenses of CHF 16.8 million for costsaving
measures in operational entities,
particularly at Sulzer Pumps in Europe and
the integration of central group functions.
Corporate headquarter costs increased
because of investments to strengthen
the IT infrastructure and the relocation
in Winterthur into one office building,
which will support the new setup of the
central group functions. Research and
development (R&D) activities were further
expanded to invest in the future of the
businesses. R&D expenses increased
from CHF 66.9 million in 2012 to CHF
70.6 million in 2013, which corresponds to
2.2% of sales (2012: 2.0%). This increased
investment underscores Sulzer’s strategic
prioritization of technology leadership. It is
a key factor in achieving leading positions
in Sulzer’s key markets oil and gas, power,
and water.
Operating income (EBIT) decreased by
19.7% from CHF 328.7 million in 2012 to
CHF 264.0 million in 2013. This decline
was caused by the lower gross profit
(minus CHF 46.1 million) and by higher
operating expenses (plus CHF 18.6 million)
from restructuring costs.
Return on sales (ROS) was at 8.1%
(2012: 9.8%). Return on sales before
restructuring expenses (ROSR) was
at 8.6% (2012: 10.1%).
The divisions achieved the following return
on sales (ROS) figures:
• Sulzer Pumps: 8.2% (2012: 9.1%).
A slightly lower gross margin and
reduced sales volume plus restructuring
expenses of CHF 9.5 million could
not be fully offset by the adaptation
of operating expenses.
• Sulzer Turbo Services: 8.3% (2012:
10.8%). Lower sales and reduced gross
margins decreased profitability despite
reductions in operating expenses.
• Sulzer Chemtech: 11.0% (2012: 9.8%).
Excellent profitability increase due to
higher margins.
EBIT before depreciation and amortization
(EBITDA) was CHF 378.6 million (11.6% of
sales) compared with CHF 437.1 million in
2012 (13.1% of sales). Depreciation and
amortization totaled CHF 114.6 million in
2013. Compared with the previous year,
this represents an increase of CHF 6.2
million, which includes the higher
depreciations from the IT infrastructure.
With a return on capital employed (ROCE)
of 12.6% (2012: 14.7%), Sulzer exceeded
its internal value-creating threshold (pretax
weighted average cost of capital) and
created financial value despite the
restructuring expenses.
Financial income: Lower interest
expenses for unfunded pension plans
Net financial income in 2013 was negative
at CHF –21.8 million (2012: CHF 1.2
million). Interest income increased slightly
to CHF 5.0 million (2012: CHF 4.6 million)
driven by higher cash balances. Interest
expenses of CHF 16.8 million were lower
than last year (2012: CHF 18.4 million) due
to lower borrowings. The interest expenses
for employee benefit plans were CHF –6.4
million (2012: CHF –7.4 million). In 2012 the
financial income benefited from the sale of
third-party shares, which contributed CHF
31.0 million.
Lower pretax income taxed at higher
income tax rate of 27.2%
Lower pretax income reduced the tax
expenses by 18.2% to CHF 65.9 million in
2013. Based on the worldwide distribution
of the profit including the profit at the
headquarters in Switzerland, which is
taxed at a low rate, the structural tax rate
increased from 25.9% in 2012 to 26.7%
in 2013. The effective tax rate of 27.2%
in 2013 is slightly above the structural tax
rate. No positive one-time effects such as
the gain from sale of the third-party shares
booked in 2012 could be reported in 2013
to reduce Sulzer’s effective tax rate.
Equity ratio
51.4%
Solid balance sheet
Return on capital employed
12.6%
Above value-creating threshold
20
Sulzer | Annual Report 2013
Financial review
The liabilities decreased by CHF 182.9
million to CHF 2 203.2 million on December
31, 2013. Beside a substantial reduction in
non-current provisions, the borrowings
were reduced by CHF 36.5 million.
In connection with the intended divestiture
of Sulzer Metco, all balance sheet items
are shown on the lines assets and liabilities
held for sale on December 31, 2013, which
reduces all other balance sheet positions
accordingly. With the reclassification of all
Sulzer Metco balance sheet positions to
assets held for sale, there is a general shift
from non-current assets to current assets.
Non-current assets decreased from
CHF 2 237.8 million in 2012 to CHF 1 891.5
million at the end of 2013. The current
assets, on the other hand, increased from
CHF 2 371.7 million to CHF 2 652.4 million
on December 31, 2013. A similar but
smaller effect could be seen within the
liabilities, where the non-current liabilities
decreased by CHF 131.2 million due to
the Sulzer Metco reclassification and the
decrease of provisions related to defined
benefit plans.
Equity increased by CHF 117.3 million to
CHF 2 340.7 million. This was impacted by
the net income of CHF 236.2 million and by
the dividend payment of CHF –111.8
million. The equity ratio (equity/total assets)
increased from 48.1% in 2012 to 51.4% in
2013. The gearing (borrowings/equity)
decreased to 25% (from 27% in 2012).
Consolidated cash flow statement (condensed)
millions of CHF 2013 2012
Cash flow from operating activities 320.1 472.8
Purchase of intangible assets and property, plant and equipment –107.6 –128.2
Sale of property, plant and equipment, and intangible assets 6.2 3.3
Free cash flow 218.7 347.9
Acquisitions/divestitures –20.6 –37.5
Purchase/sale of financial assets and marketable securities 1.8 33.4
Cash flow from operating and investing activities 199.9 343.8
Cash flow from financing activities –136.7 –251.5
Exchange losses on cash and cash equivalents –20.6 –7.6
Net change in cash and cash equivalents 42.6 84.7
Cash and cash equivalents as of December 31 549.9 507.3
– thereof classified as assets held for sale 21.2 –
Divestiture of Sulzer Metco
Sulzer Metco is reported as discontinued
operations throughout this Annual Report.
By the end of January 2014, Sulzer signed
an agreement with Oerlikon for the
divestment of its Sulzer Metco division.
Net income: Lower net income of
CHF 236 million
Based on the lower operating income and
the lower financial income, the net income
of CHF 236.2 million in 2013 was 23.3%
below that of 2012 (CHF 307.8 million). Net
income attributable to Sulzer shareholders
amounted to CHF 234.4 million (7.2% of
sales) compared to CHF 302.9 million
(9.1% of sales) in 2012. Basic earnings per
share (EPS) decreased by 22.7% to CHF
6.89 (2012: CHF 8.91).
Balance sheet: Increase of equity ratio
to 51.4%
Total assets on December 31, 2013,
amounted to CHF 4 543.9 million, which
is a slight decrease of CHF 65.6 million
over the figure from 2012.
Additions to assets totaled to CHF 80.5
million, mainly related to property, plant,
and equipment (2012: CHF 93.0 million).
With depreciation and amortization of CHF
114.6 million, fixed assets were reduced in
2013. The major additions to assets were
investments for expansion (CHF 21.2
million, or 26% of total investments),
replacements (CHF 30.6 million, or 38% of
total investments), and IT investments (CHF
12.1 million, or 15% of total investments).
Business review
21
Sulzer | Annual Report 2013
Cash flow: Improving net liquidity
by CHF 59.7 million
Change in net cash was positive — at CHF
42.6 million in 2013. The main impacts on
cash flow were as follows:
• Cash flow from operating activities
totaled CHF 320.1 million in 2013, a
decrease of CHF 152.7 million from
2012. The main impacts were the lower
net income (CHF –71.6 million) and the
lower reduction in net working capital in
2012 (CHF 12.0 million) compared to
2013 (CHF 100.2 million).
• Taxes paid in 2013 (CHF 118.7 million)
were at a similar level to that of 2012
(CHF 120.5 million).
• A total cash outflow of CHF 120.2 million
resulted from investing activities. Capital
expenditures of CHF 107.6 million were
recorded in 2013, which is CHF 20.6
million below the figure from the
previous year. Cash flow for acquisitions
amounted to CHF 26.7 million, mainly
related to the acquisition of Krøger
A/S, Denmark.
• The cash flow from financing was
negative at CHF 136.7 million.
It included the cash paid out for
dividend payments, which totaled
CHF 108.7 million, and a reduction
in borrowings of CHF 21.7 million.
• Exchange losses on cash were CHF
20.6 million, mainly related to the cash
balance held in Brazilian Real (2012:
CHF –7.6 million).
Net liquidity improved by CHF 59.7 million
compared to 2012, mainly because of a
healthy contribution from the operating
activities and despite some smaller
acquisitions and the increase in dividend
payment over 2012.
Changes in accounting policies
Sulzer introduced the revised IFRS
accounting standard IAS 19 “Employee
Benefits”, on January 1, 2013. As required
by the new standard, Sulzer’s consolidated
financial statements 2012 have been
restated retrospectively to reflect
these changes.
Outlook 2014
Based on present knowledge and excluding
major changes in the general economic
conditions, good activity levels for parts
of the oil and gas industry are expected,
in particular in the Americas. Based on
positive developments in selected regions,
especially the Americas and China, some
recovery is expected for the water market.
Activities in the power and in the general
industries are forecast to continue at similar
levels. Sulzer anticipates slight growth for
order intake and sales in 2014 compared
with 2013. Return on sales before
restructuring is expected to improve slightly,
supported by the measures taken in 2013.
Depending on market developments and
capacity utilization, restructuring measures
will continue in 2014.
Sulzer | Annual Report 2013
22 Sulzer Pumps
Solid sales volume—
global footprint
further expanded
Performance 2013
Sales
CHF 2 051m
(2012: CHF 2 098m)
Return on sales
8.2%
(2012: 9.1%)
ROCE1)
12.1%
(2012: 13.1%)
1) Return on capital employed.
Sulzer Pumps achieved sales of CHF 2 billion in
2013 and expanded its service footprint in China,
India, Brazil, and South Africa.
Business review
Sulzer | Annual Report 2013
23
24
Sulzer | Annual Report 2013
Sulzer Pumps
Scot Smith,
Division President
Strengthened strategic partnership
and adapted operational structure
Sulzer Pumps signed a new strategic
partnership with the Sinopec Corporation
to develop their commercial activities
within the hydrocarbon processing
industry. The division also signed a
long-term agreement with FMC
Technologies—the global leader in subsea
system integration—to further strengthen
commercial partnership. Sulzer Pumps
expanded its global service footprint by
opening additional service centers in
China, India, Brazil, and South Africa.
Sulzer has adapted its operational
structure to support its key market strategy
more effectively. As of January 1, 2014,
the division has been renamed Pumps
Equipment. This division offers new pumps
and related systems, including spares,
for the oil and gas and the power markets.
The newly formed Water business unit
combines all products and services for the
water and wastewater market segments.
The service activities of Sulzer Pumps are
now part of the new service division called
Rotating Equipment Services.
Order intake remained solid
Sulzer Pumps achieved an order intake
of over CHF 2 billion in 2013. This
achievement was supported by large
orders in the oil and gas upstream industry
such as the supply for floating production
storage and offloading (FPSO) vessels in
Brazil and Australia in the first nine months
of the year. In addition, the pipeline pump
business in the Americas contributed with
some large orders in 2013, while the
downstream business lagged behind.
The power industry continued on a low
base, and the water market was lower
than the previous year. Good activity
was seen in the general industries.
Asia-Pacific was very strong, and North
America continued to develop well;
Europe was comparably weak.
Sales again at similar level to 2012
The division achieved sales of CHF 2
billion, which is a similar level to last year.
Sales started slowly into the year but
improved throughout 2013. Sales volume
was particularly low in the wastewater
business. Operating income before
restructuring expenses was CHF 179
million which is 10% lower than the last
year. Operating income after restructuring
expenses was CHF 169 million. Profitability
before restructuring expenses was 8.7%
of sales, while after restructuring expenses
amounted to 8.2%. The lower profitability
is mainly due to the lower volume and cost
absorption in the wastewater business,
especially in Europe, and due to lowerthan-expected
sales for engineered pumps
in Europe. The management took targeted
measures to address underutilization and
the lower operating profitability by adapting
capacities in the wastewater business
including the closure of two sites. The
frequency of accidents increased slightly
while the severity of accidents decreased.
Market outlook
From a key market perspective, the division
anticipates further growth opportunities in
selected parts of the oil and gas market in
2014. For the power market, some growth
is expected for Asia-Pacific while the rest
of the world should continue at similar low
levels. The water market is predicted to
show growth opportunities in selected
regions. Geographically, Asia-Pacific and
North America are likely to remain the
growth drivers in 2014.
Sulzer Pumps achieved
sales of CHF 2 billion in 2013.
We further strengthened
customer partnership and
expanded our service
footprint in China, India,
Brazil, and South Africa.
Solid sales volume—global
footprint further expanded
Business review
■ Oil and gas 50%
■ Power 16%
■ Water 20%
■ General industry 14%
2013
■ Europe, Middle East, Africa 45%
■ Americas 36%
■ Asia-Pacific 19%
2013
25
Sulzer | Annual Report 2013
Our strategic priorities and achievements 2013 Sales by market segments
Sales by region
Sulzer develops pump solutions for
deepwater oil and gas production.
Because subsea pumping involves
challenging operating conditions, it is
essential to test the new pumps under
realistic conditions. For this reason,
Sulzer has built a special test facility
in Leeds, UK, which holds 1.5 million
liters of water. It has both liquid and gas
testing capabilities, and continuously
monitors over 240 parameters. The tests
include all equipment that will be placed
underwater. This way, the test-bed can
validate the full system. Thanks to this
new test facility, Sulzer was able to
demonstrate the strong performance
of its new 3.2 MW subsea multiphase
pump. The customers now have
confidence that they can safely deploy
the equipment underwater. Sulzer’s
subsea pump has been internationally
recognized and is an important first
step toward a comprehensive subsea
product line.
Testing subsea pumps for the oil and gas industry
Technology
leadership
• Engaged in joint industrial development programs for the next generation
of highly efficient pumping solutions
• Standardized pump groups for global distribution
Outstanding
services
• Further expanded service footprint in China and India
• Strengthened retrofit competencies and revenues
• Signed significant long-term services agreements in China and Kazakhstan
Continuous
operational
improvement
• Optimizing factory layouts to improve on-time delivery and reduce lead times
• Monitoring and organizing workplaces with the 5S method1)
• Introducing Kanban2) process in shop floors to reduce lead times
• Improving global capacity planning and order monitoring to boost
on-time delivery
• Improving the project management process, including certifying project
managers according to PMP3) standards
Collaborative
advantage
• Offerings for pumps and other rotating equipments combined in Rotating
Equipment Services division
• Shop-in-shop concept established for combined service locations for
different pump types to optimize the global service footprint
Key figures Change in
millions of CHF 2013 2012 +/–% +/–%1)
Order intake 2031.3 2094.3 –3.0 –1.1
Order backlog 1235.0 1309.1 –5.7
Sales 2051.3 2097.5 –2.2 –0.4
Operating income before depreciation/
amortization 224.9 245.9 –8.5
Operating income before restructuring 178.6 199.3 –10.4
Operating income 169.1 191.2 –11.6
Return on sales before restructuring 8.7% 9.5%
Return on sales 8.2% 9.1%
Return on capital employed 12.1% 13.1%
Employees 8496 8573 –0.9
1) Adjusted for currency effects as well as acquisitions and divestitures.
1) A process that promotes the cleanliness, organization, and safety of all elements in a working
environment. 5S so named for its five primary undertakings: sort, set in order, shine, standardize, sustain.
2) Kanban is a scheduling system for lean and just-in-time (JIT) production. Kanban is a system to control
the logistical chain from a production point of view to improve and maintain a high level of production.
3) The title PMP means Project Management Professional and is awarded by the Project Management
Institute (PMISM).
Sulzer | Annual Report 2013
26 Sulzer Turbo Services
Performance 2013
Sales
CHF 472m
(2012: CHF 511m)
Return on sales
8.3%
(2012: 10.8%)
ROCE1)
11.1%
(2012: 14.8%)
1) Return on capital employed.
Decreased sales
and initiated
expansion of service
portfolio
Sales of Sulzer Turbo Services decreased in 2013.
The division integrated pumps services and is now
a leading provider of services for rotating equipment.
Business review
Sulzer | Annual Report 2013
27
28
Sulzer | Annual Report 2013
Sulzer Turbo Services
Decreased sales and initiated
expansion of service portfolio
Integrated service approach
shows first tangible results
Since January 1, 2014, Sulzer has a new
operational structure that supports its
focused and market orientated strategy
more effectively. The services for turbines,
compressors, motors, and generators of
Sulzer Turbo Services are now combined
with the services for pumps and the
division operates as Rotating Equipment
Services. This unification has created a
leading provider of services for rotating
equipment and supports the company in
growing sales and improving profitability.
The first tangible results of the integrated
service approach are already visible. In
2013, the division deployed its shop-inshop
strategy—adding a pumps workshop
to an electromechanical site—in Glasgow,
UK, and in Salisbury, Australia. This
addition leverages the combined customer
base and actively identifies the service
needs of current customers for other
rotating equipment. The service locations
in Neuss, Germany, and Rotterdam,
Netherlands, provide bundled service
offerings in the form of overhaul and
repair services for combinations of
rotating equipment. This is a successful
collaboration and it underlines the value
for Sulzer’s customers having a single
point of contact.
Decreased orders
Order intake decreased from the last year.
This was mainly due to the weak demand
for electromechanical services in the UK
and in Australia. Activity levels in the oil and
gas market were steady, while the power
and the general industries were weaker.
Geographically, market activities improved
in all regions after a slow start in 2013.
Demand in North America increased in
part due to the shale gas boom. South
America and Canada continued to develop
positively. China and Russia offer good
opportunities for future growth.
Profitability impacted by
low capacity utilization
Sales decreased from last year.
Operating income was CHF 39 million
which is 29% lower than 2012. Reduced
capacity utilization, especially at the
electromechanical service sites in the UK
and in Australia, affected the operating
income and profitability of the division.
Sulzer Turbo Services took targeted
measures to improve its operational
performance. These included capacity
adaptations and sales improvement
initiatives. Despite the positive effects
of the measures taken and the visible
improvements in the UK and Australia,
profitability was 8.3% and did not achieve
the same high level as in 2012. The
frequency of accidents slightly decreased,
while the severity of accidents increased
from the previous year.
Market outlook
For 2014, Rotating Equipment Services
expects some growth in the oil and gas
market, driven by the continuing high
demand of crude oil and the ongoing shale
gas boom, namely in North America. The
power market is expected to remain at
the current levels, while opportunities in
developing markets such as Russia and
China are visible. The division predicts
slow growth in the general industries,
except in China. Geographically, North
and South America, Russia, and China are
expected to continue growing. Growth in
Europe is forecast to continue on a weak
level in 2014.
Sales decreased in 2013.
With the integration of pumps
services, we are now a
leading provider of services
for a broad portfolio of rotating
equipment and we are geared
for profitable growth.
Peter Alexander,
Division President
Business review
■ Oil and gas 32%
■ Power 32%
■ Water 1%
■ General industry 35%
2013
■ Europe, Middle East, Africa 41%
■ Americas 43%
■ Asia-Pacific 16%
2013
29
Sulzer | Annual Report 2013
Our strategic priorities and achievements 2013 Sales by market segments
Key figures Change in Sales by region
millions of CHF 2013 2012 +/–% +/–%1)
Order intake 471.7 535.2 –11.9 –9.5
Order backlog 146.8 151.6 –3.2
Sales 471.6 510.5 –7.6 –5.2
Operating income before depreciation/
amortization 55.7 71.6 –22.2
Operating income before restructuring 40.5 54.9 –26.2
Operating income 39.2 54.9 –28.6
Return on sales before restructuring 8.6% 10.8%
Return on sales 8.3% 10.8%
Return on capital employed 11.1% 14.8%
Employees 2537 2703 –6.1
1) Adjusted for currency effects as well as acquisitions and divestitures.
Service solutions that optimize geothermal plants
The heat from inside the earth is a
renewable source of energy with huge
potential. More and more countries
are investing in geothermal power
generation. Rapid and reliable service
solutions are essential to run operations
at geothermal plants smoothly. Sulzer
has proven experience in overhauling
and repairing the steam turbines used
in geothermal power plants worldwide.
Thanks to its global service network,
Sulzer is close to the hot spots of
geothermal development.
Indonesia, for example, hosts some
of the largest resources of geothermal
energy in the world. Sulzer’s service
facility in Indonesia successfully carried
out numerous service projects for
geothermal plants. The team found
service solutions even for challenging
emergency repairs and managed to
improve the power capacity and to
reduce the downtime of the plants.
Technology
leadership
• Developed redesign methods for turbocompressor retrofits
• Deployed customized welding procedure for improved performance
Outstanding
services
• Improved service offerings through close cooperation with other divisions
• Extended capabilities for new technology (new building in Houston, TX, USA,
with balancing pit for F-technology)
• Extended service offerings in China
• Strengthened Contract & Engineering organization at the headquarters
in Switzerland
Continuous
operational
improvement
• Deploying shop-in-shop strategy (Glasgow, UK; Salisbury, AU), leveraging
existing assets and capabilities
Collaborative
advantage
• Bundled service offering for same customers with Sulzer Pumps (Neuss, DE;
Rotterdam, NL)
Sulzer | Annual Report 2013
30 Sulzer Chemtech
Performance 2013
Sales
CHF 744m
(2012: CHF 725m)
Return on sales
11.0%
(2012: 9.8%)
ROCE1)
19.7%
(2012: 16.3%)
1) Return on capital employed.
Increased order
intake and doubledigit
profitability
Order intake increased and profitability reached a
double-digit level. Sulzer Chemtech has been awarded
a contract for a high-performance biopolymer production
plant in Asia.
Business review
Sulzer | Annual Report 2013
31
32
Sulzer | Annual Report 2013
Sulzer Chemtech
Increased order intake
and double-digit profitability
Cutting-edge technology
and strategic acquisition
The division was awarded an order for
the delivery of the first industrial-scale
production plant based on Sulzer’s
proprietary polylactic acid (PLA)
technology to a customer in China.
The plant will produce high-performance
PLA and has a capacity of more than
10 000 tons per year. The special
characteristics of the PLA produced
are that it can withstand temperatures
as high as 180°C and that it can be used
in a broad range of applications in various
industries. Commercial production is
planned to start in the second half of
2014. This large contract represents an
important milestone for the activities in
the biopolymer industry, which offers
attractive growth potential. In 2013,
Sulzer Chemtech acquired Krøger A/S,
a leading manufacturer of dispensers.
This acquisition expands the product
portfolio of Sulzer Mixpac Systems and
strengthens its position as a technology
leader and solution provider for one- and
two-component application systems for
industrial sealants and adhesives.
Increased order intake
The division achieved healthy growth in
order intake, supported by good market
conditions. The oil and gas downstream
industry continued to develop positively
for mass transfer technology and tower
field services, supported by some large
orders from Asia and the Middle East.
The process technology business reported
high demand with various large orders for
multiple skid-mounted process solutions.
Due to higher levels of activity in key
markets, the order intake for one- and
two-component mixing systems remained
strong. Market activities continued at a
good level in all geographic regions,
especially in Asia.
Sales increased and profitability
reached a double-digit level
Sales were higher than in 2012, and
operating income increased significantly.
Profitability clearly increased—supported
by continuing operational improvements—
and reached a double-digit level. An
expansion project for skid manufacturing
was initiated, and the capacity for twocomponent
mixing and dispensing systems
was ramped up in China to capture Asian
growth. The frequency and the severity
of accidents remained at a low level.
Market outlook
For 2014, Chemtech anticipates that the oil
and gas market will stabilize at a high level.
In the general industries, the division
expects continued high levels of activity.
Geographically, Asia and the Middle East
are predicted to be the growth drivers,
while market activities in all other regions
are forecast to remain at the current level. Oliver Bailer,
Division President
Sulzer Chemtech achieved
healthy growth in order intake.
Profitability clearly increased
to a double-digit level. We
have been awarded a contract
for a high-performance
biopolymer production plant
in Asia.
Business review
■ Europe, Middle East, Africa 37%
■ Americas 27%
■ Asia-Pacific 36%
2013
■ Oil and gas 68%
■ Power 1%
■ Water 0%
■ Other industrial markets 31%
2013
33
Sulzer | Annual Report 2013
Our strategic priorities and achievements 2013 Sales by market segments
Sales by region
Remotely located gas plants are highly
dependent on performance and
reliability over a wide range of operating
conditions. Sulzer provides mass
transfer equipment that copes with
these challenges and benefits its
customers in the oil and gas industry.
Sulzer’s Umbrella ValvesTM are installed
in distillation columns in gas fields as
well as in a wide variety of columns in
refinery and petrochemical plants. Their
high capacity and efficient operation
make these new valve trays ideal for
gas applications. The uniquely shaped
umbrella valve directs vapor downward
onto the tray deck, providing better
mixing and higher capacity than existing
valve trays. The UFMTM (umbrella floating
mini-valve) valves boost capacity by
20% and provide critical material
savings of up to 15%. The result is
improved plant performance at a
lower cost.
New tray technology increases gas plant capacity
Technology
leadership
• Developed T-Mixer technology to optimize performance and minimize
waste in a wide range of two-component mixing applications
• Developed new products for separation applications, such as silanes and
CO2-capture
• Responded to growing demand for nutraceuticals (e.g. Vitamin E) with
optimized process solution
• Improved Sulzer process technology with biopolymer pilot plant to supply
wide range of PLA sample material for customer’s market development
Outstanding
services
• Started up operations in Brazil to serve local market with mass transfer
products and tower field services
• Developed new applications for construction market segment with
dispenser technology based on the acquisition of Krøger A/S, DK
• Enhanced service technologies for corrosion protection, such as thermal
spraying and welding
Continuous
operational
improvement
• Started expansion project for skid manufacturing facility in China
• Ramped-up manufacturing for two-component mixing and dispensing
systems in China
Collaborative
advantage
• Received large separation equipment order for world’s biggest floating
liquefied natural gas (FLNG) ship
Key figures Change in
millions of CHF 2013 2012 +/–% +/–%1)
Order intake 749.9 705.1 6.4 4.9
Order backlog 290.5 293.6 –1.1
Sales 743.7 724.6 2.6 1.3
Operating income before depreciation/
amortization 120.5 105.5 14.2
Operating income before restructuring 81.3 70.5 15.3
Operating income 81.4 70.7 15.1
Return on sales before restructuring 10.9% 9.7%
Return on sales 11.0% 9.8%
Return on capital employed 19.7% 16.3%
Employees 4167 4086 2.0
1) Adjusted for currency effects as well as acquisitions and divestitures.
34
Sulzer | Annual Report 2013
Sustainable development
Energy-efficient
solutions for a
sustainable world
Technology leadership and committed employees are
the cornerstones of profitable growth and sustainable
success. Sulzer continued to strive for improvements in
its social and ecological performance despite challenges
in the economic environment in 2013.
Social performance 1)
Voluntary attrition rate
7.0%
(2012: 7.9%)
Accident frequency rate
3.1
(2012: 2.8 accidents
per working hours)
Energy consumption 2)
1.0
(2012: 0.8 GJ/CHF 1 000)
Total greenhouse
gas emissions
0.1
(2012: 0.1 t CO2 eq./CHF 1 000)
Ecological performance 1)
1) From continuing operations.
2) Net value added.
Business review
35
Sulzer | Annual Report 2013
Business review
36
Sulzer | Annual Report 2013
Innovation and technology
Cutting-edge technology
from deepwater solutions
to dental applications
Strategic and mutually beneficial partnerships are crucial for
Sulzer to reinforce its technology leadership. With a highly
developed innovative and entrepreneurial mind-set, Sulzer
can offer its customers a portfolio with high-end solutions.
Technology leadership—one of Sulzer’s
strategic priorities—is a key pillar of
sustainable business success. Sulzer
has a long track record in engineering
innovative solutions with high customer
benefit. In 2013, the company invested
CHF 71 million in research and
development (2012: CHF 67 million),
which is 2.2% relative to sales (2012:
2.0% of sales). The number of patents
filed in 2013 was 46.
Collaborating with partners
to create high customer value
Sulzer Pumps and FMC Technologies—
the global leader in subsea system
integration—signed a long-term and
exclusive collaboration agreement for
subsea pumps in 2013. The agreement
includes the supply of pumps for subsea
applications to FMC Technologies and
the further development of pumping
technology to meet the growing demands
of the subsea exploration and production
industry. The new long-term partnership
between Sulzer Pumps and FMC
Technologies is beneficial for both
companies and highlights the importance
of the strategic priority collaborative
advantage for Sulzer.
Sulzer has a long history of collaboration
with academic institutions such as
ETH Zurich (Swiss Federal Institute
of Technology Zurich) or Texas A&M.
At ETH, the company sponsors a
professorship in fluid dynamics at the
department of Mechanical and Process
Engineering. With this partnership, Sulzer
benefits from access to directed research
on topics relevant to the company, and
it also attracts highly talented potential
employees. In addition, Sulzer has
intensified its networking with other
industry members such as ABB,
Alstom, and BASF.
Number of patents
46
(2012: 60)
R&D investments 1)
CHF 71m
(2.2% of sales)
(2012: CHF 67m)
Innovation and technology
play a key role for Sulzer.
Our innovative solutions
add value and strengthen
the competitive position
of our customers.
1) From continuing operations.
Business review
37
Sulzer | Annual Report 2013
Economic wastewater treatment is
crucial everywhere, but especially
in regions with a shortage of
freshwater supplies. With Sulzer’s
pioneering aeration technology,
customers can increase the
wastewater treatment efficiency
and save considerable energy costs.
Until now, Sulzer has installed over
five million diffusers and 1 600
high-speed compressors worldwide.
The city of Girona, Spain, entrusted
Sulzer with the improvement of the
wastewater treatment plant. In
Girona, Sulzer replaced the old air
distribution system with the efficient
Nopon fine bubble disc diffuser
system. Furthermore, modern HST
turbocompressors replaced the
old blowers. As a result, the energy
consumption dropped by a fifth.
This translates into massive cost
savings and a substantial reduction
of CO2 emissions. But that’s not all:
the vibration free turbocompressors
lower noise emissions as well. This
eliminates the need for expensive
noise-insulated blower houses
and provides a pleasant working
environment.
Bubbles boost wastewater
treatment efficiency
In 2013, Sulzer was awarded an order for
the delivery to China of the first industrialscale
production plant based on Sulzer’s
proprietary polylactic acid (PLA) technology.
The facility will produce more than 10 000
tons of high-performance PLA per year.
Special characteristics of the PLA
produced are that it can withstand
temperatures as high as 180°C and
can be used in a broad range of
applications in various industries like
the electronics and automotive segments.
Commercial production is planned to start
in the second half of 2014. To support
application development until the plant is
operational, Sulzer is supplying materials
to its customer from its PLA demonstration
plant in Switzerland. This 1 000-tonsper-year
demonstration facility for PLA
production was built to emphasize Sulzer’s
commitment to the bioplastics industry.
In the future, Sulzer will remain able to
support new developments made by
customers, because running samples for
application development is more flexible
at a small scale plant than on a commercial
production line.
Testing, monitoring, and upgrading
to improve life cycle cost
Sulzer develops pump solutions for deep
water (2 000 m) oil and gas production.
These subsea pumping solutions allow
oil recovery from remote subsea fields.
To validate the performance of the new
subsea pumps, the company has built
a test facility in the UK. It emulates the
conditions of the subsea installation as
closely as possible to verify all operational
conditions prior to deepwater deployment
(read more about subsea pumps testing
in the box on page 25).
While testing pumps is crucial, customers
also need to know how to monitor,
maintain, and run the pumps in the
optimum way to reach the overall best
life cycle cost. Sulzer has therefore
developed an application based on
Android and IOS. It allows connecting
the controllers and controlling panels
of the ABS wastewater pump systems.
More than 90% of a typical pipeline pump’s
life cycle cost originates from energy use.
Hence Sulzer focuses on efficiency issues
and identifies optimization strategies and
retrofits. Because pipeline pumps must
comply with continuously changing
requirements and ensure safe operation,
retrofit solutions are an ideal way of
improving reliability while maximizing
performance at a short return on investment.
Reducing turnaround time and
waste with outstanding solutions
Sulzer’s service business offers
customized weld repair solutions for critical
rotating equipment. Innovation is the key to
remaining a leader in the service business:
for instance, conventional rotor weld repair
procedures cannot be used on certain
components in specific situations. Sulzer
engineers have developed a specialized
weld procedure for gas turbine disk repairs
to solve this challenge. They thereby have
significantly decreased repair costs and
turnaround time.
During the last few years, Sulzer has
developed a new static mixing geometry
with significantly less waste volume. The
market introduction of this new patented
mixer—T-MIXERTM—started in spring 2013.
The company applied its expertise in
advanced development methods like CFD
(computational fluid dynamics) for fluid
dynamics simulation and functional
performance testing in close cooperation
with key customers. As a result, it became
possible to decrease the waste volume of
a typical application by up to 30%. This
has clear ecological and economic benefits
for Sulzer’s customers.
0
100 000
200 000
300 000
400 000
500 000
600 000
0
5
10
15
20
25
30
35
2009 2010 2011 2012 2013
Total hours/year hours/employee
Total number of training hours without Sulzer Metco
Training hours per employee without Sulzer Metco
Total number of training hours
Training hours per employee
0
20
40
60
80
100
120
140
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2009 2010 2011 2012 2013
No. of cases AFR
Cases that last > 1 day due to occupational accidents
without Sulzer Metco
Accident frequency rate (AFR) in cases per 1 000 000
working hours without Sulzer Metco
Cases that last > 1 day due to occupational accidents
Accident frequency rate (AFR) in cases per 1 000 000
working hours
38
Sulzer | Annual Report 2013
Health and safety, learning and development
Ensuring a healthy and safe
environment at work
Sulzer has established a corporate safety culture that
mitigates potential risks for its workforce. The company trains
its employees and fosters their operational and management
skills as well as their leadership competencies.
Sulzer aspires to excellence in health
and safety and is therefore committed to
complying with internationally renowned
Occupational Health and Safety (OHS)
standards. The company confirmed its
goal of zero accidents and continued to
encourage its employees to act safely at
all times.
Key performance indicators in safety show
an upward trend in 2013. The management
intensified its efforts in health and safety
and attempted to increase the impact
of these efforts on all employees.
Considerable investments were made
in safety programs and training sessions
to strengthen the company’s safety culture.
Additionally, all Sulzer manufacturing and
service centers continued to implement
and continuously improve OHS
management systems like OHSAS 18001
and/or SCC certification. In 2013, 82% of
Sulzer’s manufacturing and service centers
were certified accordingly. The company
also continued to internally align and
Training hours Accidents
Health and safety of its employees is a top priority
for Sulzer. The company encourages its
employees to act safely in all circumstances.
Business review
39
Sulzer | Annual Report 2013
harmonize its sustainability reporting and
metrics on a global level—with the ultimate
goal of a fully integrated reporting.
Improved safety culture
through tailored initiatives
Sulzer initiated new programs and
followed up on existing ones to improve
its safety culture and performance further
in 2013. Significant contributions came
from the company’s Safe Behavior
Program (SBP), the Hazardous Materials
Emissions and Exposure (HMEE) risk
mitigation program, and the blacklist
program on the substitution of (potentially)
hazardous substances.
The Safe Behavior Program, which was
rolled out globally in 2012, was established
as a change program to foster a strong
safety culture with an emphasis on
preventing accidents by encouraging
employees to act safely in all circumstances.
This program provides the necessary
platform to intervene in any unsafe
situation (read more in the box).
Continued efforts to decrease
frequency and severity of accidents
All Sulzer sites are required to report four
key indicators on health and safety on a
monthly basis: the accident frequency rate
(AFR), the accident severity rate (ASR), the
number of major/minor accidents (including
all cases of medical treatment and first aid),
and the number of occupational illnesses.
The AFR and ASR are the main indicators
and will become relevant for bonus
purposes in 2014. In 2013, Sulzer’s global
AFR target was 2.7 and the ASR target 38.
The AFR was 3.1 cases per million working
hours (2012: 2.8) in 2013. In 2013, the ASR
decreased by two days to 58 lost days per
million working hours (2012: 60). Sulzer
increased its ongoing efforts to lower the
AFR and ASR with tailored measures, as
an integral part of the company’s Safe
Behavior Program.
Programs for learning and development
boost in-house talent pool
Sulzer offers several programs to train
its employees and foster their operational
and management skills as well as their
leadership competencies. The corporate
Program for Development and Impact
(PDI) is a long-standing training program
for ambitious managers, leaders, and
functional specialists on various levels
of the organization. It is beneficial for
both the company and the participants
because it supports cross-organizational
job placements and enhances the
employability of each individual. The
program follows a philosophy of action
learning and is highly oriented towards
implementation and impact. The content
of the training fosters capabilities of the
individual, the team, and the business.
The PDI is a cornerstone of Sulzer’s
investment in leadership development
and a contributor to Sulzer’s talent pool.
In 2013, 73 managers and experts
participated in one of the three PDIs.
Being an effective leader requires not
only excellent technical, but also
interpersonal and management skills.
The Sulzer Management Training (SMT)
trains new leaders and offers a refresher
for established leaders. The SMT provides
the essential skills and knowledge required
to handle various communication and
leadership challenges faced in management
situations. In 2013, it was offered as a pilot
training course in Switzerland. More than
40 participants took this pilot training and
their feedback was consistently positive.
To manage training programs for
employees, Sulzer will implement a
learning management system (LMS).
This cloud-based platform will contain all
training courses available, both classroom
and e-learning. Moreover, team leaders
can check the training status and history
and define training plans for their team
members in this online tool. The LMS was
launched at a pilot site in August 2013.
The implementation throughout the entire
company will be completed in 2015.
Sulzer’s continued investment in human
resources is reflected in the fact that 71%
of leadership positions were filled with
internal talents in 2013.
Sulzer’s global Safe Behavior
Program fosters a proactive,
precautionary approach that lowers
risks and increases awareness,
thereby reducing the frequency
and severity of accidents. While the
program is global, the benefits are
visible on a local level. For instance,
the manufacturing site in Curitiba,
Brazil, faced a difficult time in early
2013: several accidents occurred in
short succession. To counteract this
development, a change in the safety
culture was initiated. In line with the
global Sulzer Safe Behavior Program,
the management conducted a series
of training sessions and refurbished
old machinery to meet current
standards to increase the plant’s
safety. The impact of the initiative
became visible by September 2013
when the site celebrated 100 days
without accident. “Changing the
culture of the employees was the
biggest challenge,” says Cesar
Grande, the site’s Managing Director.
“We can now clearly see a change in
internal culture where safety stops
being somebody else’s problem and
becomes their own commitment. In
other words, people are the agents
of change.”
Watch our safety vision video
featuring core behaviors of the
Safe Behavior Program at:
www.sulzer.com/sbp
“People are the agents of change”
40
Sulzer | Annual Report 2013
Values, diversity, and branding
Toward an integrated and
customer-focused company
Sulzer initiated significant changes in 2013 with the goal
of becoming one integrated and more customer-focused
company. The company strove to act as a socially
responsible employer, building on its strong values.
The integration of the service business and
new setup of group functions as of the
beginning of 2014 as well as the process
for the divestment of one division were
demanding projects for Sulzer in 2013.
Thanks to Sulzer’s highly qualified and
committed employees, the company is
convinced that it will successfully manage
the transition to being one integrated and
customer-focused company.
Strong values and
committed employees
During times of change, company values
gain importance as the fundamental
principles of interacting and doing
business. They act as an inner compass
that guides all of Sulzer’s activities.
They define who Sulzer is and how the
company behaves. There are three core
values at Sulzer:
• Customer partnership
• Operational excellence
• Committed people
Sulzer fosters diversity with respect
to gender, culture, and demography.
Diverse teams can build on different
viewpoints and, thus, have better
ways of solving problems.
0
Business review
100
200
300
400
500
600
700
800
900
1 000
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
2009 2010 2011 2012 2013
No. of leavings
Number of voluntary leavings without Sulzer Metco
Number of voluntary leavings
Voluntary attrition rate (VAR) in % without Sulzer Metco
Voluntary attrition rate (VAR) in %
VAR
■ Europe, Middle East, Africa 44%
■ Americas 28%
■ Asia-Pacific 28%
2013
41
Sulzer | Annual Report 2013
Committed employees are essential for
Sulzer to achieve profitable growth and
sustainable value. Sulzer Chemtech, for
instance, with its Committed People
Award, acknowledges the extraordinary
achievements and contributions of its
employees that have resulted in benefits
for the company and its stakeholders.
Such benefits include for example:
affirming a sense of community and
shared vision towards the Sulzer core
values; creating a positive, supportive,
and healthy work environment and culture;
and encouraging initiatives, creativity,
success, and excellence within the
company. All employees including
apprentices but excluding managers
are eligible for the award.
Commitment is also fostered by motivating
young future professionals to pursue a
technical career. Sulzer offers attractive,
future-proof apprenticeships of high
quality. Every apprentice is assigned a
supervisor who supports the apprentice
not only in acquiring the necessary
technical knowledge, but also in
developing and strengthening personal
and social skills. This not only inspires
students to take on an engineering study
but also offers an excellent opportunity
for them to develop at an early stage
in their professional lives. In 2013, the
voluntary attrition rate decreased to
7.0% (2012: 7.9%).
A diverse workforce for
one company and one brand
Diversity has always created a competitive
advantage for Sulzer. The company’s
workforce is diverse in terms of gender,
demography, and culture. In 2013, 15%
of the workforce, 14% of all managers,
and 12% of the Sulzer Management
Group (top 100 managers) were female.
Sulzer’s customer base is also highly
diverse and is located all over the world.
Teams with different backgrounds not
only create better solutions, but they are
also closer to the company’s customers
and understand their specific needs.
Sulzer employs 15 382 employees in
150 locations in over 40 countries.
About 44% of the company’s employees
work in Europe, Middle East, and Africa.
28% work in the Americas (North, Central,
and South America) and 28% work in the
Asia-Pacific region.
The company trusts and continuously
builds on the value of its strong brand and
focuses its communication on its onebrand
strategy. This clearly strengthens
the Sulzer brand, which is world renowned
for experience, innovation, reliability, and
quality. Moreover, it transports the values
of the company in a consistent and
believable manner. At the end of 2013,
Sulzer headquarters in Winterthur,
Switzerland, were united into a single
building. This relocation empowers
employees to increase internal
collaboration under one roof.
Assuming social responsibility
also in challenging times
In 2013, Sulzer had to announce a
headcount reduction of 300 full-time
equivalents (FTEs) due to the integration
of the group functions and weaknesses
in some business areas. Around 100
FTEs were affected at the headquarters
in Switzerland. The other 200 positions
were reduced in businesses facing weak
demand, particularly in the wastewater
pumps business and in electromechanical
services. Sulzer has assumed
responsibility for the employees who
were made redundant and has developed
comprehensive social plans together
with the employee representatives to
accompany those employees with the
best possible support.
Voluntary attrition rate
Geographical spread of employees 1)
1) From continuing operations.
For scope and period of data in the
section “Sustainable development”,
see Sustainability Report 2013 at
www.sulzer.com/sustainability-report
0
200 000
400 000
600 000
800 000
1 000 00
1 200 000
1 400 000
1 600 000
2009 2010 2011 2012 2013
Energy (GJ) GJ/CHF 1000 NVA1)
Total energy consumption (GJ) without Sulzer Metco
GJ/CHF 1 000 NVA without Sulzer Metco
Total energy consumption (GJ)
1) Net value added.
GJ/CHF 1 000 NVA
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
0.000
0.020
0.040
0.060
0.080
0.100
0.120
0.140
2009 2010 2011 2012 2013
t CO2 eq. t CO2 eq./CHF 1000 NVA1)
Total GHG emissions in CO2 eq. without Sulzer Metco in t
GHG emissions without Sulzer Metco in t/CHF 1 000 NVA
GHG emissions in t/CHF 1 000 NVA
Total GHG emissions in CO2 eq. in t
Energy consumption Total greenhouse gas emissions
42
Sulzer | Annual Report 2013
Environment
Reliable and energyefficient
solutions
Sulzer aspires to be a leader in providing energy-efficient
solutions. These solutions allow Sulzer to improve its
competitive edge and support its customers to create
a more sustainable economy.
Sulzer’s customers ask increasingly for
reliable and energy-efficient products.
They expect sustainable, state-of-theart
components to run processes at
optimized cost levels. Since costs and
environmental impacts occur at different
stages throughout the lifetime of a product,
Sulzer considers the entire life cycle of
its products and solutions.
Environmental impact of solutions
With standardized, externally verified
environmental product declarations
(EPD), Sulzer can provide environmental
information on many of its products’ life
cycle stages. In addition, EPDs increase
transparency and comparability. They
highlight the ecological and economical
benefits of the solutions Sulzer provides
to its customers. Sulzer’s EPDs help
customers in their investment decisions
and in the sustainable design of their
value-added chain. To date, Sulzer offers
type III EPDs for most engineered and
configured pump types. Project-specific
EPDs are available on request; examples
are available at www.sulzer.com/epd.
The company’s innovative and energyefficient
technologies and services
mainly reduce the carbon footprint
through lower electricity consumption
rates. One example is Sulzer’s innovative
and energy-efficient HST turbocompressor.
With this turbocompressor, the energy
efficiency of air production in a wastewater
treatment plant can be increased by up
to 45%.
Sulzer offers its customers energy-efficient
solutions. They help them to achieve both
economic and ecological advantages.
Business review
2 000
4 000
6 000
8 000
10 000
12 000
14 000
0.001
0.003
0.005
0.007
0.009
0.011
0.013
0.015
2009 2010 2011 2012 2013
Hazardous waste in t/CHF 1 000 NVA without Sulzer Metco
Hazardous waste in t (metric) without Sulzer Metco
Hazardous waste in t/CHF 1 000 NVA
Hazardous waste in t (metric)
Tons t/CHF 1 000 NVA1)
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
0.0
0.5
1.0
1.5
2.0
2.5
2009 2010 2011 2012 2013
m3 m3
/CHF 1 000 NVA1)
Total water consumption in m³ without Sulzer Metco
Total water consumption in m³/CHF 1 000 NVA without Sulzer Metco
Total water consumption in m³
Total water consumption in m³
1) Net value added.
43
Sulzer | Annual Report 2013
Extending lifetime of products
Lifetime extension solutions such as
revamps or maintenance services require
fewer resources than the construction of
completely new solutions. Thus, Sulzer
offers retrofit, revamp, and similar services
to upgrade capital-intense systems with
energy-efficient technologies and parts.
Like this, customers can extend the lifetime
of their products. Whenever lifetime
extension is not viable, Sulzer supports
and consults its customers in finding the
ideal ecological and economic solution
for proper disposal. The company informs
customers primarily about local or
regional recycling possibilities, because
transporting products (like pumps or
entire separation column installations
back to a Sulzer plant) is a comparably
environmentally unfriendly solution.
Comprehensive reporting system
Sulzer systematically and continuously
collects data so it can report on the
environmental impact of its solutions.
The goal is to provide management and
external stakeholders with reliable,
accurate, timely, and comparable nonfinancial
information to create a balanced
view of Sulzer’s sustainability performance
and initiatives. In 2014, extra-financial and
financial data will be consolidated on one
single reporting platform.
Measuring the environmental
performance
Sulzer collects data on the resource
consumption and effluents of its own
operations to manage its organizational
footprint. The company set itself
corporate year-on-year rolling targets
to hold or reduce this year’s values
from last year’s values.
The 2013 hazardous waste rolling target
was met by Sulzer with 0.002 t per CHF
1 000 NVA (2012: 0.003 t/CHF 1 000 NVA).
In 2013, hazardous waste decreased by
1 201 tons (metric) to 2 282 tons (2012:
3 483 tons). The continuing downward
trend shows the success of Sulzer’s efforts
to lower the amount of waste produced.
To optimize its organizational water
footprint, the company focuses on
reducing its water consumption. Sulzer
was able to lower its water consumption
values per CHF 1 000 NVA from last year’s
values by 8% to 1.6 m3. In 2013, Sulzer’s
total water consumption decreased by
6% to 1 591 611 m3.
The year-on-year rolling target for energy
consumption was not met. Energy
consumption per CHF 1000 NVA increased
by 21% to 1.01 GJ. In 2013, total energy
consumption increased by 23% to 1 017
354 GJ due to, amongst others, an
extended reporting scope.
As a result, the CO2 emissions per CHF
1 000 NVA increased by 20% to 0.097
tons, whereas the total greenhouse gas
emissions increased by 23% to 98 170
t CO2 eq.
Hazardous waste
Water consumption
For scope and period of data in the
section “Sustainable development”,
see Sustainability Report 2013 at
www.sulzer.com/sustainability-report
44
Sulzer | Annual Report 2013
Corporate governance
Creating sustainable value with
sound corporate governance
Sulzer is committed to the principles of good corporate
governance. They ensure a sound balance of power and
support the company in creating sustainable value for its
various stakeholders.
In brief
Core principles
See page 45
The rigorous application of sound corporate governance helps to
consolidate and strengthen trust in the company. Sulzer is subject to the
Swiss Corporation and Stock Exchange Law and also applies the Swiss
Code of Best Practice for Corporate Governance.
Board composition
See pages 45–46
The Board of Directors comprises six members (seven members until
December 31, 2013). Each member is elected individually. The term for
members of the Board of Directors is one year. The Board of Directors is
self-constituting, designating from among its members the Chairman of the
Board and the constitution of the board committees.
Committees of
the Board
See pages 47–50
There are currently three committees within the Board of Directors:
• The Audit Committee assesses the midyear and annual accounts and the
activities of the internal and external auditors, the Internal Control System
(ICS), and risk management.
• The Nomination and Remuneration Committee assesses the criteria for
the election and re-election of Board members and nominations for the
top two management levels. It also deals with succession planning,
remuneration systems, and compensation for the members of the Board
of Directors and the Executive Committee.
• The Strategy Committee advises the Board of Directors on strategic matters
(such as material acquisitions, divestitures, alliances, and joint ventures) as
well as strategic planning and definition of development priorities.
Changes
See pages 46, 52
The following changes occurred in the Board of Directors and the
Executive Committee:
• Jürgen Dormann, Chairman of the Board since 2009, did not stand for
re-election at the Annual General Meeting of March 27, 2013, following
internal age limitation rules.
• Manfred Wennemer was newly elected to the Board of Directors at the
Annual General Meeting of March 27, 2013. At the subsequent board
meeting, he was appointed as Chairman of the Board.
• All other board members were re-elected for terms of one year.
• Kim Jackson, Division President of Sulzer Pumps and member of the
Executive Committee, left the company on April 15, 2013.
• Alfred Gerber, General Counsel, Secretary, and member of the Executive
Committee, left the company on April 30, 2013.
• Scot Smith joined Sulzer as Division President of Sulzer Pumps and
member of the Executive Committee on May 21, 2013.
• Urs Fankhauser, Division President of Sulzer Chemtech and member
of the Executive Committee, resigned on October 31, 2013.
• Oliver Bailer was appointed Division President of Sulzer Chemtech and
member of the Executive Committee as of October 31, 2013.
• Manfred Wennemer, Chairman of the Board since March 27, 2013,
resigned as per December 31, 2013. Vladimir Kuznetsov (Vice Chairman
of the Board) acts as Chairman of the Board ad interim until the Annual
General Meeting 2014.
45
Corporate governance
Sulzer | Annual Report 2013
Sulzer Ltd is subject to the laws of
Switzerland, in particular, Swiss
corporation and stock exchange law.
The company also applies the Swiss
Code of Best Practice for Corporate
Governance. The rigorous application
of sound corporate governance helps to
consolidate and strengthen trust in the
company. A single share class and the
separation of the functions of Chairman of
the Board of Directors and CEO have been
standard practice at Sulzer for many years.
Since the Annual General Meeting on April
8, 2009, the Board of Directors has been
made up exclusively of individuals who
have never held executive positions at
Sulzer. Unless otherwise indicated, the
following information refers to the situation
on December 31, 2013. Further, continually
updated information on corporate
governance is published at www.sulzer.
com/corpgov. The information in the
following section is set out in the order
defined by the SIX Swiss Exchange
guidelines on corporate governance
information (RLCG), with subsections
summarized as far as possible. Sulzer’s
consolidated financial statements comply
with International Financial Reporting
Standards (IFRS), and in certain sections,
readers are referred to the financial section
in the Sulzer Annual Report 2013. The
compensation report can be found on
pages 58 to 64.
1 Corporate structure and shareholders
Corporate structure
The operational corporate structure is
shown in the graphic on page 50 and in
the segment reports in the financial section
on pages 89 to 91 (note 4). Sulzer Ltd
is the only Sulzer company listed on a
stock exchange. It is based in Winterthur,
Switzerland. Its shares are listed and
traded on the SIX Swiss Exchange in
Zurich (Securities No. 3838891 / ISIN
CH0038388911). On December 31, 2013,
the market capitalization of all registered
shares was CHF 4930355043. Information
on the major subsidiaries included in the
consolidation can be found under note 35
on pages 115 to 117 of the financial section.
Significant shareholders
According to notifications of Sulzer
shareholders, one shareholder held more
than 3% of Sulzer Ltd’s share capital on
December 31, 2013. On December 23,
2013 (published on the SIX disclosure
platform on January 6, 2014), Victor
Vekselberg indirectly held 31.20% in Sulzer
shares. The shares are directly held by
Lamesa Holding S.A., Liwet Holding AG
and Joint-Stock Company “Metkombank”.
The latter two are part of the Renova
Group. BlackRock Investment
Management (UK) Limited held
between 2.82% and 3.02% during
2013 (last publication on the SIX
disclosure platform on October 10, 2013:
2.93%). As of January 13, 2014, Norges
Bank (the Central Bank of Norway) held
3.02% in Sulzer shares (published on the
SIX disclosure platform on January 15,
2014). For detailed information, see the
respective disclosure notifications on
http://www.six-exchange-regulation.
com/obligations/disclosure/major_
shareholders_en.html. For the positions
held by Sulzer and information on shareholders,
see note 21 in the financial
section (page 106). There are no crossshareholdings
where the capital or
voting stakes on either side exceed the
threshold of 3%.
2 Capital structure
Share capital
The fully paid-up share capital of Sulzer
Ltd amounts to CHF 342 623.70 and is
divided into 34 262 370 registered shares
with a par value of CHF 0.01 per share.
Each registered share entitles the holder
to one vote at the Shareholders’ Meeting.
There is neither any authorized nor
conditional capital, nor are there any
participation or dividend certificates. The
latest version of the Articles of Association
can be viewed online at www.sulzer.com/
regulations. Information on capital changes
can be found in the financial statements
of Sulzer Ltd (page 125).
Restrictions on transferability and
nominee registrations
Sulzer shares are freely transferable
provided that, when requested by the
company to do so, buyers declare that
they have purchased and will hold the
shares in their own name and for their
own account. Nominees shall only be
entered in the share register with the
right to vote if they meet the following
conditions: the nominee is subject to
the supervision of a recognized banking
and financial market regulator; the
nominee has entered into a written
agreement with the Board of Directors
concerning its status; the share capital
held by the nominee does not exceed
3% of the registered share capital entered
in the commercial register; and the names,
addresses, and number of shares of
those individuals for whose accounts
the nominee holds at least 0.5% of the
share capital have been disclosed. The
Board of Directors is also entitled, beyond
these limits, to enter shares of nominees
with voting rights in the share register if
the above mentioned conditions are met
(see also paragraph 6a of the Articles
of Association at www.sulzer.com/
regulations). On December 31, 2013,
ten nominees holding a total of 5 302 248
shares (15.5% of total shares) had entered
into agreements concerning their status.
All of those shares have been entered in
the share register with voting rights.
There are no transfer restrictions and no
privileges under the Articles of Association;
no exceptions have been granted.
A removal or amendment of the transfer
restriction requires a shareholders’
resolution with a majority of at least
two-thirds of the votes represented.
Convertible bonds and options
No convertible bonds or warrants are
currently outstanding. Details of the
options issued to members of the Board
of Directors and the Executive Committee
(from 2002 up to and including 2008) and
restricted stock units (from 2009) as well
as performance share units issued to the
members of the Executive Committee (in
2010 and 2013) are set out in the financial
section under note 31 (page 113) and in
the financial statements of Sulzer Ltd
under note 110 (pages 128 to 130).
3 Board of Directors
None of the members of the Board
of Directors has ever belonged to the
management of a Sulzer company or
to the Executive Committee, nor do any
significant business relationships, except
as noted below, exist between members
of the Board of Directors and Sulzer Ltd
or a subsidiary of Sulzer Ltd. Vladimir
Kuznetsov and Marco Musetti have a
close relationship with Sulzer’s largest
shareholder; both are employees of
Renova Management AG. Vladimir
Kuznetsov is Managing Director,
Strategic Development of the Renova
Group and Marco Musetti is a senior
officer of Renova Management AG and
Chairman of Energetic Source S.p.A.,
in which Renova Group holds significant
shareholdings. Business relationships
in the double-digit million range exist with
companies that are directly or indirectly
controlled by the Renova Group. For
further information see financial section,
note 31 on page 113 to 114. There are
no interlocking directorships.
Elections and terms of office
The Articles of Association stipulate that
the Board of Directors of Sulzer Ltd shall
comprise five to nine members. Each
member is elected individually. The term for
46
Sulzer | Annual Report 2013
Corporate governance
as per December 31, 2013. Vladimir
Kuznetsov (Vice Chairman of the Board)
acts as Chairman of the Board ad interim
until the Annual General Meeting 2014.
There are currently three committees:
the Audit Committee (AC), the Nomination
and Remuneration Committee (NRC), and
the Strategy Committee (SC); for their
constitution, see the graphic on page 47.
The division of responsibilities between
the Board of Directors and the CEO and
the authorities and responsibilities of the
Chairman of the Board of Directors and
of the three committees are defined in
the Board of Directors and Organization
Regulations and the relevant Committee
Regulations, which are published online
at www.sulzer.com/regulations.
Operating principles of the Board of
Directors and its committees
All decisions are taken by the full Board
of Directors. For each application, written
documentation is distributed to the
members of the Board of Directors prior
to the meeting. The Board of Directors
and the committees meet as often
as required by circumstances (the Board of
Directors meets at least six times annually
(in 2013 nine times), the Audit Committee
and the Nomination and Remuneration
Committee meet at least three times
annually, and the Strategy Committee
meets at least twice annually). In 2013,
two full day meetings, five half-day
meetings and two shorter board meetings
were held. The latter lasted about one to
two hours on average. For further details,
see the table on page 46. Board meetings
are generally also attended in an advisory
members of the Board of Directors is one
year. As of the Annual General Meeting of
March 27, 2013, Manfred Wennemer was
newly elected to the Board of Directors.
At the subsequent board meeting, he
was appointed as Chairman of the Board
(replacing Jürgen Dormann). As per
December 31, 2013, Manfred Wennemer
stepped down as Chairman and Board
member. Vladimir Kuznetsov (Vice
Chairman of the Board) acts as Chairman
of the Board ad interim until the Annual
General Meeting 2014. As of January 1,
2014, the Board of Directors is made up of
six members: one Austrian, two Italians, one
Russian, one Singaporean, and one Swiss.
Professional expertise and international
experience played a key role in the selection
of the members. The CVs of the current
members of the Board of Directors can be
viewed on the pages 48 to 49 and online at
www.sulzer.com/board. According to the
organization regulations governing the
Board of Directors, the term of office of a
Board member ends no later than on the
date of the Annual General Meeting in the
year when the member reaches the age of
70. Exceptions up to but not exceeding the
year in which the member reaches the age
of 73 can be made by the Board of Directors.
Internal organization
The Board of Directors is self-constituting,
designating from among its members the
(Vice) Chairman of the Board as well as
the chairmen and members of the board
committees. Manfred Wennemer was
appointed Chairman of the Board of
Directors on March 27, 2013 and stepped
down as Chairman and Board member
Board of Directors
Attending meetings
in 2013 of the
Name Nationality Position Age Entry
Elected
until Board AC NRC SC
Jürgen Dormann German Chairman1),Chairman SC1) 74 August 2009 2013 1
Manfred Wennemer German Chairman2) Chairman SC2) 66 March 2013 2014 7 3 2
Thomas Glanzmann Swiss Member, AC, SC3) 56 April 2012 2014 9 5 2
Vladimir V. Kuznetsov Russian Vice Chairman4), Chairman NRC 53 December 2007 2014 9 3
Jill Lee Singaporean Member, AC 51 April 2011 2014 9 5
Marco Musetti Italian Member, SC3) 45 April 2011 2014 9 1
Luciano Respini Italian Member, NRC, SC5) 68 April 2004 2014 9 3 2
Klaus Sturany Austrian Member, Chairman AC, NRC 68 August 2009 2014 9 5 3
AC = Audit Committee, NRC = Nomination and Remuneration Committee, SC = Strategy Committee
1) until March 27, 2013.
2) as of March 27, 2013, until December 31, 2013.
3) as of March 27, 2013.
4) as of March 27, 2013. Chairman ad interim as from January 1, 2014, until the Annual General Meeting 2014.
5) Chairman SC as of January 1, 2014.
Audit Committee Nomination and Remuneration
Committee
Strategy Committee
Klaus Sturany (Chairman)
Jill Lee
Thomas Glanzmann
Vladimir V. Kuznetsov (Chairman)
Luciano Respini
Klaus Sturany
Thomas Glanzmann
Luciano Respini (Chairman)
Marco Musetti
Board of Directors
Vladimir V. Kuznetsov (Vice Chairman)
Thomas Glanzmann
Jill Lee
Marco Musetti
Luciano Respini
Klaus Sturany
47
Corporate governance
Sulzer | Annual Report 2013
role by the CEO, the CFO, and the Group
General Counsel (who is the Secretary of
the Board of Directors). Other members
of the Executive Committee are invited
to attend board meetings as required
to discuss the midterm planning, the
strategy, and the budget, as well as
division-specific items (such as large
investments and acquisitions).
The committees do not take any decisions,
but rather they review and discuss the
matters assigned to them and submit the
required proposals to the full Board of
Directors for a decision. At the next full
board meeting following the committee
meeting, the chairmen of the committees
report to the full Board of Directors on all
matters discussed, including key findings,
opinions, and recommendations.
Audit Committee
The Audit Committee (members listed
above) assesses the midyear and annual
consolidated financial statements and,
in particular, the activities—including
effectiveness and independence—of
the internal and external auditors as well
as the cooperation between the two bodies.
It also assesses the Internal Control System
(ICS), risk management, and compliance
with the applicable standards; at least one
full meeting per year is dedicated to risk
management and compliance. The
regulations of the Audit Committee can
be viewed at www.sulzer.com/regulations.
Meetings of the Audit Committee are
attended by the CEO, the CFO, the Group
General Counsel (at least partially), the
Head of Internal Auditing (who is also
the Secretary of this committee), and the
external auditor-in-charge. In 2013, the
Audit Committee held five meetings. The
external auditor-in-charge attended four of
these meetings. Internal experts, such as
Group General Counsel and the Heads of
Corporate Auditing, Corporate Controlling,
Corporate Treasury, Corporate IT, Corporate
QESH, Corporate Risk Management, and
Corporate Taxes held presentations to the
Audit Committee in 2013. The Group
external audit mandate was assessed in
detail, and it was decided to appoint a new
external auditor. KPMG AG was elected as
new external auditor at the Annual General
Meeting of March 27, 2013.
In February, the Audit Committee receives
and discusses a report addressing the
exposures (results of periodic risk
assessments) and compliance cases of
the prior year. In September, the Audit
Committee is briefed on the present state
of risk management within the company
and on the results of the risk management
process—a process to systematically
identify and evaluate significant risks and
initiate countermeasures. In the same
meeting, an update on Sulzer’s compliance
approach including the respective ongoing
and planned activities is provided. At each
meeting, the major current compliance
cases (if any) are reported to and discussed
by the Audit Committee.
Nomination and Remuneration
Committee
The Nomination and Remuneration
Committee (members listed above)
assesses the criteria for the election
and re-election of board members and
the nomination of candidates for the top
two management levels. It also deals
with succession planning, regularly
assesses the remuneration systems,
and recommends compensation for the
members of the Board of Directors and
the Executive Committee (including bonus
targets for the latter) on behalf of the
Board of Directors and in accordance
with its specifications. It also carries out
broadly based salary comparisons with
international third-party companies,
supported by studies of the consulting
firm Towers Watson, and it scrutinizes the
work of internal and external consultants.
The regulations of the Nomination and
Remuneration Committee can be viewed
at www. sulzer.com/regulations. Meetings
of the Nomination and Remuneration
Committee are attended by the CEO
and the Head of Corporate Human
Resources (who is also the Secretary
of this committee). In 2013, three regular
meetings were held. External experts from
Towers Watson provided benchmarking
services (see compensation report, pages
58 to 64) and supported the Nomination
and Remuneration Committee in reviewing
the remuneration packages of the
members of the Executive Committee.
Strategy Committee
The Strategy Committee (members listed
above) advises the Board of Directors
on strategic matters (such as material
acquisitions, divestitures, alliances, and
joint ventures) as well as strategic planning
and defining of development priorities. The
regulations of the Strategy Committee can
be viewed at www.sulzer.com/regulations.
In 2013, two meetings took place. The
CEO, the CFO and the four Division
The Board of Directors and its committees 1)
1) As from January 1, 2014.
48
Sulzer | Annual Report 2013
Corporate governance
The Sulzer Board of Directors consists of six 1) members
who are elected individually for one-year terms. None of
them has ever held an executive position at Sulzer. Manfred
Wennemer 2) was appointed Chairman of the Board in March
and resigned in December 2013. Vice Chairman Vladimir
Kuznetsov assumes the duties of the Chairman of the Board
on an interim basis until the Annual General Meeting 2014.
Career
Thomas Glanzmann joined the Sulzer Board of Directors
in 2012. Previously, he was CEO and President of the
Swedish company Gambro (2006 to 2011) and CEO
and Managing Director of HemoCue, also in Sweden
(2005 to 2006). From 2004 to 2005, he served as
Senior Advisor to the Executive Chairman and as a
Managing Director of the World Economic Forum,
Switzerland. From 1988 to 2004, he held various
positions with Baxter including Senior Vice President
of Baxter Healthcare Corporation, USA (1999 to 2004),
and President of Baxter Bioscience, USA (1998 to 2004)
as well as CEO of Immuno International, Austria (1996
to 1998).
Binding interests
• Chairman, Grifols Inc., USA
• Member of the Board, Grifols SA, Spain
• Member of the Board, Sage Products Inc, USA
Educational background
• MBA, IMD, Lausanne, Switzerland
• BA in Political Science, Dartmouth College, USA
• Board of Directors Certification, UCLA Anderson
School of Management, USA
Career
Vladimir Kuznetsov joined the Sulzer Board of Directors
in 2007 and was appointed Chairman of the Nomination
and Remuneration Committee in 2009. He was Vice
President of Renova Inc. in New York, USA (2001 to
2009), and he served as Chairman of the Board of OC
Oerlikon (2007 to 2011) and Venetos Management (2008
to 2010). From 1994 to 1998, he headed the Moscow
subsidiary of Salomon Brothers, and from 1992 to 1994,
he served as Deputy Director and Director of Goldman
Sachs in Moscow, Russia. Since 2004, he has been
acting as Chief Investment Officer and then as
Managing Director, Strategic Development of Renova
Management AG. Since 1998, he has been Director
General of Financial Advisory Services in Russia.
Binding interests
• Board Member Integrated Energy Systems
(a company of the Renova Group)
• Vice President of the Board of Directors,
Schmolz + Bickenbach AG
Educational background
• Master of International Affairs, Columbia University,
New York, NY, USA
• PhD, Institute of World Economy and International
Relations, Moscow, Russia
• Graduate degree in Economics, Moscow State
University, Moscow, Russia
Board of Directors
Thomas Glanzmann (1958) Swiss
Member of the Audit Committee
Member of the Strategy Committee
Vladimir V. Kuznetsov (1961) Russian
Vice Chairman of the Board
Chairman of the Nomination
and Remuneration Committee
1) Seven members until December 31, 2013. Six members as from January 1, 2014. See description of changes
on page 44.
2) For full CV of Manfred Wennemer, go to www.sulzer.com/cv-wennemer.
49
Corporate governance
Sulzer | Annual Report 2013
For full CVs, go to
www.sulzer.com/board
Career
Jill Lee joined the Sulzer Board of Directors in 2011.
Currently, she is the Senior Vice President and CFO
for ABB China and North Asia Region. Prior to this,
she served as Senior Vice President, Finance Strategy
and Investments for Neptune Orient Lines in Singapore
(2010 to 2011). She has also held a number of positions
with Siemens, including global Chief Diversity Officer
(2008 to 2010), CFO and Senior Executive Vice
President of Siemens in China (2004 to 2008), CFO
and Senior Vice President of Siemens in Singapore
(2000 to 2004), and CFO Asia Pacific and General
Manager of the Asia Regional Headquarters of
Siemens Electromechanical Components in
Singapore (1997 to 2000).
Educational background
• Master of Business Administration (MBA), Nanyang
Business School, Singapore
• BA in Business Administration, National University
of Singapore
Career
Marco Musetti joined the Sulzer Board of Directors
in 2011. Since 2014, he has been serving as Member
of the Board of Directors of CIFC Corp. Since 2013,
he is Chairman of the Board of Energetic Source Spa,
Member of the Board of En Plus SRL, and member of
the Board of Schmolz + Bickenbach AG. He was COO
and deputy CEO of Aluminium Silicon Marketing (Sual
Group) (2000 to 2007), Head of Metals and Structured
Finance Desk for Banque Cantonale Vaudoise (1998
to 2000), and Deputy Head of Metals Desk for Banque
Bruxelles Lambert (1992 to 1998). Since 2009, he has
been serving as Member of the Supervisory Board of
Renova U.S. Holdings Limited.
Binding interests
• Member of the Supervisory Board, Renova U.S.
Holdings Limited
• Chairman of the Board of Directors, Energetic Source
Spa (company of the Renova Group)
• Member of the Board of Directors, EN Plus SRL
• Member of the Board of Directors,
Schmolz + Bickenbach AG
• Member of the Board of Directors, CIFC Corp.
Educational background
• Master of Science in Accounting and Finance, London
School of Economics and Political Science, UK
• Major degree in Economics, University
of Lausanne, Switzerland
Career
Luciano Respini joined the Sulzer Board of Directors
in 2004. Respini has held a number of key positions
with the Dow Chemical Company, including President
of Dow Europe (1998 to 2006) and of Dow Latin America
(1995 to 1997). He also served as Member of the Office
of the Chief Executive of the Dow Chemical Company
in the USA (2002 to 2006). In addition he was Member
of the Board of Union Carbide Corporation, USA from
2003 to 2005.
Educational background
• Doctorate in Economics, Università Cattolica
of Milan, Italy
Career
Klaus Sturany joined the Sulzer Board of Directors
and was appointed Chairman of the Audit Committee
in 2009. He served as CFO of RWE (1999 to 2007)
and as CFO (and subsequently CEO) for GEA (1996
to 1999). He also held the position of CFO of Uhde
(now ThyssenKrupp), and from 1971 to 1990, he acted
in a number of positions with Hoechst, including Head
of Controlling.
Binding interests
• Supervisory Board Member of Bayer AG
• Supervisory Board Member of Hannover
Rückversicherung AG
Educational background
• PhD, Mathematics (major) and Physics, University
of Innsbruck, Austria
Marco Musetti (1969) Italian
Member of the Strategy Committee
Luciano Respini (1946) Italian
Chairman of the Strategy Committee
Member of the Nomination and
Remuneration Committee
Jill Lee (1963) Singaporean
Member of the Audit Committee
Klaus Sturany (1946) Austrian
Chairman of the Audit Committee
Member of the Nomination and
Remuneration Committee
Board of Directors
Chief Executive Officer
Klaus Stahlmann
Chief Financial Officer
Jürgen Brandt
Pumps Equipment Rotating Equipment Services Chemtech Sulzer Metco 2)
Scot Smith Peter Alexander Oliver Bailer César Montenegro
1) As per January 1, 2014.
2) Discontinued operations.
Organizational structure ¹)
50
Sulzer | Annual Report 2013
Corporate governance
Presidents attended both meetings.
The Group General Counsel (who is the
Secretary of this committee), and the Head
of Corporate Auditing (Secretary ad interim),
each attended one of these meetings.
Division of powers between the Board
of Directors and the CEO
The Board of Directors has largely
delegated executive management powers
to the CEO, but it is still responsible for
matters that cannot be delegated in
accordance with Art. 716a of the Swiss
Code of Obligations, such as corporate
strategy, approval of midterm planning,
and the annual budget, as well as key
personnel decisions, including approval
of the remuneration system. The same
applies to acquisition and divestiture
decisions involving an enterprise value
exceeding CHF 15 million or CHF 20 million
respectively, investments in fixed assets
exceeding CHF 15 million, major corporate
restructurings, approval of dispute
settlements with an impact on operating
income of more than CHF 20 million,
approval of research and development
projects exceeding CHF 10 million, as well
as other matters relevant to the company,
and decisions that must be made by law
by the Board of Directors (including those
defined in the Swiss Mergers Act). The
competency regulations and the nature
of the collaboration between the Board
of Directors and the Executive Committee
can be viewed in the organizational
regulations at www.sulzer.com/regulation.
Information and control instruments
Each member of the Board of Directors
receives a copy of the monthly financial
statements (January to May and July to
November), plus the midyear and annual
financial statements. These include
information about the balance sheet,
income, and cash flow statements, as well
as the key figures for the company and its
divisions (incorporating comments on the
respective business results and a six-month
rolling forecast of the key figures). The CEO
and CFO report at every Board meeting on
business developments and all matters
relevant to the company; once each year,
the board receives the forecasted annual
results. The chairmen of the committees
also report at these meetings on all matters
discussed by their committees and on the
key findings and assessments, and they
submit proposals accordingly. Each year, the
Board of Directors discusses and approves
the budget for the following year, and every
three years, it establishes a midterm plan,
which is also subject to periodic review. The
Chairman of the Board of Directors regularly
consults the CEO and other representatives
of the Executive Committee. In addition, the
board receives an investor relations status
report twice a year.
Internal Auditing
Internal Auditing reports to the CFO for
administrative purposes, but reports
functionally directly to the Chairman of
the Audit Committee. Meetings between
Internal and External Auditing take place
on a regular basis to prepare for the
meetings of the Audit Committee, to review
the interim and final reports of the External
Auditing, to plan and coordinate internal
and external audits, and to prepare audit
instructions for the attention of external
auditors of the individual companies.
Group companies are audited by Internal
Auditing based on an audit plan that is
approved by the Audit Committee;
depending on the risk category such audits
51
Corporate governance
Sulzer | Annual Report 2013
are carried out on a rotational basis either
annually or every second, third, or fourth
year. Internal Auditing carried out 51 audits
in the year under review. One of the focal
points was the internal control system. The
results of each audit are discussed in detail
with the companies and (where necessary)
the divisions concerned and key measures
are agreed upon. The Chairman of the
Board of Directors, the members of the
Audit Committee, the CEO, the CFO, the
Group General Counsel, as well as the
respective Division President and other
line managers of the audited unit receive
a copy of the audit report. The key
measures agreed upon are also presented
to and discussed with the CEO, the CFO,
the Group General Counsel, the Division
Presidents, and the Division Controllers
during monthly information meetings; twice
annually, the divisions present the status
of key measures agreed upon. A follow-up
process is in place for all corporate audits
(internal, legal and compliance, IT, and
QESH) which enables efficient and
effective monitoring of the implementation
of the improvement measures. Each year,
the Head of Internal Auditing compiles a
report summarizing activities and results.
This report is distributed to members of
the Board of Directors and the members
of the Executive Committee and presented
to the Executive Committee and the Audit
Committee. It is discussed in both
committees and thereafter reported
to the Board of Directors.
Risk management and corporate
compliance
Sulzer has established and implemented
a comprehensive and value-based
compliance program that focuses on
prevention. It consists of the following
main elements:
Strong values and “tone at the top and
the middle”
Sulzer puts a high priority on carrying out
its business with integrity, in compliance
with all applicable laws and internal rules
(‘a clean deal or no deal’), and on
accepting only reasonable contractual
risks. The Board of Directors and the
Executive Committee are convinced that
compliant and ethical behavior in all
aspects is a precondition for a successful
and sustainable future. It also fosters
a speak-up culture and encourages
employees to address potentially noncompliant
behaviors.
Risk assessment
As part of Sulzer’s integrated risk management
process, compliance risks are assessed on
a regular basis, and the results are discussed
both with the management within the
Corporate Risk Council as well as the Audit
Committee, which dedicates at least one full
meeting per year to risk management and
compliance. An overview of the main risks and
corresponding mitigation measures is provided
on pages 56 to 57.
Internal rules and tools
In 2010, Sulzer joined the UN Global
Compact initiative and introduced a
new Code of Business Conduct, which
can be viewed online at www.sulzer.com/
regulations in 19 languages. Every current
employee of the company and every
new employee (including those of newly
acquired businesses) is required to
confirm in writing that he or she has
read and understood this code and
will comply with it. Every member of
the Sulzer Management Group
(approximately 100 people) as well as
the heads of all operating companies
and all divisional and local compliance
officers must, among other things,
reconfirm this compliance commitment
in writing with certain explicit certification
on an annual basis.
Rules
Although Sulzer follows a behavior- and
principle-based approach it still requires
internal rules discussing ‘boundaries’,
defining processes, and providing
guidance and decision support. In this
respect Sulzer focuses on the major
compliance risks, e.g.:
• Bribery and corruption risks: anti-bribery
and anti-corruption guidelines were
introduced in 2010. In 2011, a process
addressing the due diligence of
intermediaries was introduced. In 2012,
this process was improved, the scope
was extended, and the tool was made
web-based. In the same year, a
corporate-wide initiative setting
maximum levels for offering and
receiving gifts and hospitalities was
carried out. The respective directive
entered into force on January 1, 2013,
and e-training (in 13 languages) was
rolled out to make Sulzer employees
enrolled in the e-training program
familiar with the content of the directive.
• Anti-trust and anti-competition risks: an
anti-trust guideline was introduced in
2010 and a directive addressing
behaviors in trade association followed
in 2012. In 2013, the roll-out of this
directive took place, including collection
of a compliance declaration from the
employees representing Sulzer in trade
association meetings.
• Export control risks: export control
policies were established and rolled
out in 2012 in most entities. At the
end of 2012 and the beginning of 2013,
e-training in trade compliance was
rolled out to the employees involved
in export issues.
• Further risks (e.g. stock exchange
laws, human resource-related,
intellectual property and know-how,
privacy and data protection laws,
product liability, environmental, quality
and health, etc.): these and many other
potential risks are addressed by focused
rules and processes. In 2012 and 2013,
new processes securing compliance
with insider law risks and stock
exchange reporting and notification
risks were introduced.
Tools
Because of its strongly fostered speak-up
culture, Sulzer offers a hot line that provides
employees with one of many options for
reporting (potential) violations of the laws
or internal rules (reports can be made
anonymously or openly via a free hotline or
a dedicated website). The company also
introduced a directive that further improves
internal reporting of compliance cases and
sets minimum standards for internal investigation
in 2012. Further tools are available to all
employees on the Sulzer Legal and Compliance
Intranet site (e.g. presentations addressing the
major exposure; draft agreements; sales and
procurement handbooks with compliancespecific
explanations and standard clauses).
In 2013, a new type of anti-fraud training was
introduced, mainly addressed to Sulzer’s finance
employees. In addition to that, e-learning related
to “Fraud and Business Integrity” was rolled out.
Organization
The company, each division, and all
operating companies have appointed
compliance officers. The group compliance
officer reports to the Group General
Counsel and steers and administers the
corporate-wide compliance program.
In line with the new organizational structure
as of January 1, 2014 (see shareholder
letter, pages 6 to 9) organizational changes
to the group functions Legal, Compliance
and Risk Management will be implemented
during 2014. The Corporate Risk Council,
comprising the CFO (Chairman), the Group
General Counsel, the Head of Internal
Auditing, the Corporate Compliance
Officer, the Heads of Risk Management
of the corporation and the divisions,
and representatives of other group staff
functions, held three meetings in 2013.
The Corporate Risk Council’s tasks
mainly include formulating and maintaining
52
Sulzer | Annual Report 2013
Corporate governance
adequate risk management policies,
systems, and guidelines; initiating and
coordinating risk management activities;
and advising the CEO and the Executive
Committee on matters relating to risk
management. Each member of the
Executive Committee receives a copy of
the minutes of the Corporate Risk Council.
In addition, if considered necessary, a
verbal report is given at the Executive
Committee meetings that follow the
meetings of the Corporate Risk Council.
The Group General Counsel informs the
Board of Directors and the Executive
Committee regularly on legal matters and
key changes in legislation that may affect
Sulzer, as well as on important litigation.
Twice a year, a report is also made to the
Audit Committee about any pending or
threatened litigation with worst-case
exposure exceeding CHF 0.5 million.
Further information on reports to the
Audit Committee is provided under
‘Audit Committee’ on page 47.
Awareness building and trainings
Sulzer puts substantial effort into the
training of its employees. Training is carried
out through e-learning programs (between
two and three new programs are rolled
out every year), on a face-to-face basis
or through web conferences. In 2013, over
450 employees (particularly sales, project
management, procurement, and middle
management) participated in contract
risk-related face-to-face training; each of
these training courses also contained a
compliance section during which the major
risks are addressed. Over 25000 e-learning
courses were conducted in 2013 and
several web conferences on specific legal
or compliance matters were carried out.
Controls and sanctions
In addition to the audits carried out by
Internal Auditing, the Corporate Legal
Department carried out seven legal audits in
2013. These audits focused on contractual
as well as compliance risks. The results
of the audits were discussed with the
responsible managers. Measures were
agreed upon, and the corresponding
reports were sent to the same group of
recipients that also receives the internal
audit reports. Implementation of these
measures is monitored (follow-up process;
see under ‘Internal Auditing’, page 50).
The departments Corporate Quality,
Environment, Health and Safety, and
Sustainable Development carried out
12 audits and organized nine external
insurance audits. The focal points were
primarily environmental protection and
workplace safety. The results of each of
these audits were discussed directly with
the responsible managers, and agreement
was reached on any improvements required.
The latest status of the company’s risks
relating to quality, environment, safety, and
health is reported to the Audit Committee
once a year. Sulzer published its externally
verified Sustainability Report 2013 parallel
to the Sulzer Annual Report 2013 (see
www.sulzer.com/sustainability). The
external institute SGS (Société Générale
de Surveillance) verified in its assurance
statement that the report is in accordance
with the highest GRI disclosure level A.
Sulzer’s sustainability performance is
regularly rated by various organizations;
e.g. oekom research has been rewarding
Sulzer with their “Prime Status” for
several consecutive years now. Sulzer
is a recognized sustainability leader in
its industry.
Apart from these formal audits, many
internal investigations (triggered by reports
via the compliance hotlines, e-mails,
telephone calls or otherwise) were carried
out in the course of 2013 and at least 14
employees had to leave Sulzer due to
non-compliant behavior with Sulzer’s Code
of Business Conduct. Others received
warnings or were internally transferred.
However, the vast majority of the reports
received concerned non-material issues.
Continuous improvement
It is Sulzer’s goal to constantly improve
its compliance and risk management
approach. Findings of audits and internal
investigations are assessed and internal
processes and rules adjusted, and/or
corporate training modules improved and/
or otherwise shared (e.g. through the
regular legal and compliance newsletter).
4 Executive Committee
The Executive Committee consists
of the CEO, the CFO, and the Division
Presidents. Executive management powers
are delegated by the Board of Directors
to the CEO. The Division Presidents are
charged by the CEO with defining and
attaining business targets for their
respective divisions in accordance with
corporate goals. The appropriate powers
have largely been delegated to the Division
Presidents by the CEO. The organization
regulation governs, among other things,
the transfer of responsibilities from the
Board of Directors to the CEO, and this
regulation can be viewed at www.sulzer.
com/regulations. The other members of the
Executive Committee support the CEO in his
corporate management tasks. There are no
53
Corporate governance
Sulzer | Annual Report 2013
management contracts with third parties.
None of the Executive Committee members
has a contract with a notice period
exceeding 12 months. The CVs of the
members of the Executive Committee can
be viewed on pages 54 to 55 and online at
www.sulzer.com/management.
5 Compensation report
Information on the remuneration of the
Board of Directors and the Executive
Committee can be found in the
compensation report (pages 58 to 64).
6 Shareholder participation rights
Restrictions and representation of
voting rights
Only nominees are subject to restrictions
(see ‘Capital structure’, page 45). No exceptions
were granted during the reporting year, and
no measures to remove these restrictions are
planned. A shareholder may be represented
at the Annual General Meeting by a legal
representative, another shareholder with
the right to vote, a corporate proxy, an
independent proxy, or a depositary. Shares
held by a shareholder may be represented
by only one person.
Statutory quorum
Changes to the Articles of Association may
only be approved by a majority of at least
two-thirds of the voting rights represented;
share capital increases are carried out,
however, upon an absolute majority of
the votes represented. The dissolution
or a merger of the company can only
be decided upon if at least half the
shares issued are represented at the
Shareholders’ Meeting and two-thirds
thereof vote in favor of the corresponding
proposal (see also paragraph 18 of the
Articles of Association).
Convocation of the Annual
General Meeting and
submission of agenda items
None of the applicable regulations deviate
from the law regarding the convocation
of a Shareholders’ Meeting. Shareholders
representing at least 2% of the share capital
may submit items for inclusion on the
agenda of a Shareholders’ Meeting. Such
submissions must be requested in writing
at least two months prior to the meeting
and must specify the agenda items and
proposals of the shareholder concerned.
Entry in the share register
Voting rights may be exercised by
registered shareholders whose names
are entered in the share register no later
than five working days prior to the Annual
General Meeting.
7 Takeover and defense measures
The Articles of Association contain no
opting-out or opting-up clause. None of
the contracts with members of the Board
of Directors contains a change of control
clause. The contracts of the members of
the Executive Committee who joined the
Executive Committee prior to April 2009
contain a remuneration clause provided
the contract is terminated or the member’s
function is changed considerably within
18 months after a change of control (see
compensation report, pages 58 to 64).
If there is a change of control (which, for
members of the Executive Committee, also
includes a replacement of the majority of
the members of the Board of Directors) or
a public takeover bid that is not supported
by the Board of Directors, all allocated
restricted stock units (RSUs) of the RSU
plan are automatically vested and the
performance share units (PSUs) are
automatically converted into shares on
a pro rata basis without being subject to
blocking restrictions. The vesting period for
those RSUs granted to the members of the
Board of Directors ends no later than the
date on which the individual steps down
from his or her respective function.
8 Auditors
The statutory auditor is elected at the
Annual General Meeting for a one-year
term of office. After having served as
statutory auditor since 1992,
PricewaterhouseCoopers AG was replaced
by KPMG AG at the Annual General
Meeting of March 27, 2013. The acting
external auditor-in-charge is François
Rouiller (since March 27, 2013). The
external auditor-in-charge is replaced
every seven years. The Audit Committee
is in charge of supervising and monitoring
the statutory auditor, and it reports to the
Board of Directors (see ‘Board of
Directors’, page 45). The members of the
Audit Committee receive summaries of
audit findings and improvement proposals
at least once a year. The external auditorin-charge
is invited to attend meetings of
the Audit Committee. In 2013, he attended
four Audit Committee meetings. The Audit
Committee or its Chairman meets
separately with the Head of Internal
Auditing and the external auditor-in-charge
at least once per year to assess (among
other things) the independence of the
internal and external auditors. The Audit
Committee evaluates the work done by the
auditors based on the documents, reports,
and presentations provided by the auditors
as well as on the materiality and objectivity
of their statements. In order to do so, the
committee gathers the opinions of the CFO
and the Head of Internal Auditing. The fee
paid to the auditor is reviewed on a regular
basis and compared with the auditing
fees paid by other internationally active
Swiss industrial companies. Said fee is
negotiated by the CFO, checked by the
Audit Committee, and signed off by the
Board of Directors. Further information
on the auditor, in particular, the amount
of the auditor’s fees and any additional
fees received by the auditor for advisory
services outside its statutory audit
mandate, is listed in the financial section
under note 32 (page 114). All advisory
services provided outside the statutory
audit mandate (essentially consisting of
consulting services related to audit and
accounting as well as legal and tax
advisory services) are compliant with
the applicable independence rules.
9 Information policy
Sulzer Ltd reports on its order intake every
quarter (media releases) and on its financial
results every half year, in each case also
commenting on business performance and
outlook. In addition, the company reports
on important events on an ongoing basis
(ad hoc publications). The reporting
referred to in Section 5 of the Corporate
Governance Report (including the
respective references to the financial
section) corresponds to the compensation
report as laid out in Section 8 of Annex 1
of the Swiss Code of Best Practice for
Corporate Governance.
Key dates in 2014
February 20 Annual results 2013
March 20 Annual General Meeting 2014
April 15 Order intake Q1 2014
July 22 Midyear report 2014
October 16 Order intake Q1 – Q3 2014
October 22 Capital Market Day
The above dates and any changes can be
viewed at www.sulzer.com/events. Media
releases (sent via e-mail) can be
subscribed to at www.sulzer.com/
newsletter. Other information is available
on the Sulzer website www.sulzer.com.
Material changes
Reference is made in the text to any
material changes occurring between the
balance sheet date (December 31, 2013)
and the copy deadline for the Annual
Report (February 19, 2014). The
implementation of the new operational
structure and integration of the various
group functions as from January 1, 2014
is ongoing and will be described in the
Annual Report 2014.
54
Sulzer | Annual Report 2013
Corporate governance
Executive Committee 1)
The Sulzer Executive Committee consists of the CEO,
the CFO, and the Division Presidents. Scot Smith and
Oliver Bailer joined the Executive Committee in 2013.
Career
Klaus Stahlmann joined the Sulzer Executive Committee
as CEO in 2012. Previously, he was CEO for MAN Diesel
and Turbo and Member of the Executive Board of MAN
SE (2010 to 2011). From 2007 to 2009, he served as
CEO for MAN Turbo, Germany. Before his engagement
with MAN, he was Managing Director of the European
Bearing Business Unit of NSK. For Allweiler, a German
pumps manufacturer, he served as CEO (2001 to 2006)
after having held various positions with the German
industrial group Krupp (1987 to 2001).
Educational background
• Master of Science in Industrial Engineering, Technical
University Darmstadt, Germany
Career
Jürgen Brandt joined the Sulzer Executive Committee
as CFO in November 2010. He was appointed CEO
on an ad interim basis as of November 1, 2011 until
February 2012. Previously, he served as CFO for the
Austrian Energy & Environment Group (2007 to 2010)
and as CFO of its Swiss subunit the Von Roll Inova
Group (2006 to 2007). He has held the CFO position
in a number of companies, including Foster Wheeler
Power Group Europe (2006) and Sylvania Lighting
International (2005 to 2006). He was also Senior
Vice President Finance of the Power and Environment
Division (1999 to 2004) and CFO Power Boilers
(1997 to 1999) of Alstom.
Binding interest
• Member of the Board of Bobst Group SA
Educational background
• BSc in Economic Engineering, University
of Esslingen, Germany
Klaus Stahlmann (1960) German
Chief Executive Officer
Jürgen Brandt (1956) German
Chief Financial Officer
1) Adapted organizational structure as per January 1, 2014.
55
Corporate governance
Sulzer | Annual Report 2013
For full CVs, go to
www.sulzer.com/management
Career
Scot Smith joined the Sulzer Executive Committee in
2013. Prior to that, he was Divisional Managing Director
of Weir Minerals of the Weir Group (2001 to 2012). From
1993 to 2001, he held a number of positions with Britax
Vision Systems, including Regional Managing Director
Americas (2000 to 2001) and Managing Director of
Britax Geco in France (1996 to 2000).
Educational background
• MBA, International Business, Ashland University, USA
• BSc, Business Administration, Bowling Green State
University, USA
Career
César Montenegro joined the Sulzer Executive
Committee as Division President of Sulzer Metco in
2008. He has held a number of positions with Sulzer
since 1977. From 2002 to 2008, he served as Head of
Business Area North America for Sulzer Pumps. He was
also Managing Director of Sulzer Mexico (1996 to 2001)
and of Sulzer de Venezuela (1989 to 1996).
Educational background
• Postgraduate studies in Business Engineering,
University Simon Bolivar, Caracas, Venezuela
• MSc in Mechanical Engineering, University Simon
Bolivar, Caracas, Venezuela
Career
Oliver Bailer joined the Sulzer Executive Committee in
2013. From 1993 to 2013, he held a number of positions
with the Chemtech division, including Head of Mixpac
Systems (2010 to 2013), Head of Mixing and Reaction
Technology (2008 to 2009), and Head of Business
Development (2006 to 2008).
Educational background
• General Management Program (GMP),
Harvard University, Boston, MA, USA
• Master of Business Administration (Executive
MBA HSG), University St. Gallen, Switzerland
• Swiss-certified Chemical Engineer
(Dipl. Chem. Ing.), ETH Zurich, Switzerland
Career
Peter Alexander joined the Sulzer Executive Committee
as Division President of Sulzer Turbo Services in 2005.
He has held a number of positions with Sulzer Turbo
Services, including Head Business Development and
Division President on an ad interim basis (2004 to 2005),
Cofounder and Director of Operations and Engineering
in Indonesia (1994 to 2004), and Engineering Manager
and Project Engineer in the USA (1987 to 1994).
Educational background
• BSc in Marine Engineering, Texas A&M University,
College Station, TX, USA
Scot Smith (1962) American
Division President Pumps Equipment
César Montenegro (1953) Venezuelan
Division President Sulzer Metco
Oliver Bailer (1967) Swiss
Division President Chemtech
Peter Alexander (1958) American
Division President Rotating
Equipment Services
56
Sulzer | Annual Report 2013
Corporate governance
Identifying and managing risks
Thoroughly assessing and controlling risks is essential
for sustainable business success. Loss control and
mitigation are carried out through tailored and effective
measures and programs.
Risk Risk exposure Main loss controls
External and markets
Market
assessment
Market developments that are
assessed inappropriately could lead
to missed business opportunities
or losses.
• Continuous monitoring and assessment
of market developments
• Systematic midrange planning based on
market developments and expectations
Geopolitical
shocks
A geopolitical shock event could
have an impact on operations
and travel. Also, it could imply
currency risks and default risks
of countries and banks.
• Monitoring of exposure in critical countries
• Monitoring of debt situation of countries
and banks
• Continuous monitoring of raw material
prices and inflation indicators
• Sulzer’s global presence mitigates the
effect of geopolitical shocks
Strategic
Innovation
More
information
on page 36
Failure in R&D and innovation
activities could negatively impact
the ability to operate and to
grow the business.
• Six company-wide innovation
initiatives started in 2012
• Midrange planning process
• Innovation and Technology Council
• Innovation stage-gate process
Operational
Attraction
and retention
More
information
on page 40
Failure to attract and retain talent
could lead to a lack of expertise
and negatively impact the ability
to operate.
• Active fostering of corporate values
and high ethical standards
• Strong Sulzer employer brand strategy
• Regular talent review workshops
• Development plans and education
of employees
• Salary benchmarks and reviews
• Regular employee engagement surveys
Health and
safety
More
information
on page 38
An unsafe working environment
could lead to harm to people,
reputational damage, fines,
and liability claims.
• Health and safety regulations, guidelines,
programs, and training
• OHSAS 18001 certifications
• Monthly health and safety controlling
• Global network of health and safety
officers
• Regular health and safety audits
57
Corporate governance
Sulzer | Annual Report 2013
Risk Risk exposure Main loss controls
Operational continued
Compliance
More
information
on page 51
Non-compliant or unethical
behavior could lead to
reputational damage, fines,
and liability claims.
• Active fostering of high ethical standards
• Continuous monitoring and assessment
of potential exposures
• Sulzer Code of Business Conduct and
a number of supporting regulations (e.g.
anti-corruption, anti-trust, trade control)
• Global network of compliance officers
• Compliance training (incl. e-learning)
and audits
• Speak-up culture, compliance hotline,
and sanctions
Quality of
products and
services
Failure of high-quality products
and services could lead to
repeated work, reputation
damage, or liability claims.
• Quality management and assurance
systems tailored to specific businesses
• Third-party accreditation
• Competence development programs
and training of employees
• Test centers
Business
interruptions
Business interruption, such as
a fire, could cause damage to
people, property, and equipment.
It could have a negative effect
on the ability to operate at the
affected site.
• Crisis and emergency management
systems (at global and local level)
• Risk management policy and guidelines
• Corporate and local crisis and emergency
management systems
• Disaster recovery plans in IT
Financial
Financial
markets
More
information
on page 78
The unpredictability of financial
markets may have a negative
effect on Sulzer’s financial
performance and its ability
to raise or access capital.
• Corporate financial policy
• Foreign exchange risk policy
• Trading loss limits for financial instruments
Credit
More
information
on page 80
Credit risks arising from financial
institutions and from customers
could have a negative effect on
Sulzer’s financial performance
and ability to operate.
• For financial institutions, only parties with
a strong credit quality are accepted
(third-party rated)
• Individual risk assessment of customers
with large order volumes
• Continuous monitoring of country risks
Liquidity
More
information
on page 80
Failure in liquidity risk
management may have a
negative effect on Sulzer’s
financial performance and
its ability to operate.
• Continuous monitoring of the liquidity
• Management of liquidity reserves at
corporate level
• Cash flow program to optimize liquidity
and cash flow management
• Efficient use of available cash through
cash pooling
58
Sulzer | Annual Report 2013
Compensation report
Incentives for
sustainable performance
Compensation policies and plans at Sulzer are based
on performance orientation and the company’s strong
emphasis on creating long-term shareholder value
and sustainable growth.
In brief
Core principles
See page 59
Compensation policies and plans at Sulzer are based on performance
orientation and have a strong emphasis on creating long-term shareholder
value and sustainable growth. The compensation is reviewed by the
Nomination and Remuneration Committee on an annual basis and, if
necessary, adjusted by the full Board of Directors.
Compensation
for the Board
of Directors
See page 59
The compensation paid to the Chairman of the Board of Directors and
the other members of the Board of Directors is based on a compensation
regulation. The compensation of the Board of Directors consists of the
following components:
• Fixed cash component
• Restricted stock unit (RSU) component
The total amount of compensation for the Chairman as well as the other
members of the Board of Directors depends on the amount of responsibility,
the complexity of the tasks, the professional and personal requirements
placed on them, and the expected average time spent executing such duties.
Compensation
for the Executive
Committee
See pages 59–64
The compensation of the Executive Committee members is governed by
internal regulations (total reward policy, bonus plan, restricted stock unit
plan, and performance share plan). In order to reflect the objective of pay
for performance, the total direct compensation package of the CEO and the
members of the Executive Committee includes the following components:
• Fixed annual base salary (in cash)
• Variable component, which consists of:
– short-term annual performance- and results-based bonus (in cash)
– long-term incentives: the restricted share unit plan (RSU plan until
and including 2012) and since 2010 the performance share plan (PSP)
CEO Klaus Stahlmann did not participate in the RSU nor in the PSP 2010.
He joined the PSP 2013.
To ensure that the remuneration is competitive, Sulzer regularly participates
in respective benchmarks.
Advisory vote Sulzer’s Board of Directors is proposing to enable shareholders to cast
advisory votes on the compensation report at the next Annual General
Meeting on March 20, 2014.
59
Corporate governance
Sulzer | Annual Report 2013
The compensation report follows section
5 of the SIX Swiss Exchange Guidelines
on Corporate Governance Information
(RLCG). Further information relating to the
remuneration of the members of the Board
of Directors and the Executive Committee
can be found in the financial section under
note 30 (pages 111 to 113) and note 31
(page 113) as well as in the financial
statements of Sulzer Ltd under note
110 (pages 128 to 130).
Board of Directors
The compensation paid to the Chairman
of the Board of Directors and the other
members of the Board of Directors is
based on a compensation regulation.
The compensation is reviewed by the
Nomination and Remuneration Committee
(NRC) on an annual basis and, if necessary,
adjusted by the full Board of Directors
based on a proposal by the NRC. The
compensation consists of a fixed cash
component and a restricted stock unit
(RSU) component with a fixed grant value.
The latter replaced the option component in
2009 and ensures the long-term alignment
of the interests of shareholders and Board
members. The compensation does not
include a short-term variable (bonus)
element, and no Board member receives
pension benefits. No attendance fees
are paid. The members of the Board of
Directors are paid for their service over
a 12-month period starting with their
election. Whereas the cash remuneration
is paid in quarterly installments (for the
Chairman, monthly installments), the RSUs
are granted once a year (see below). The
total amount of compensation for the
Chairman as well as the other members
of the Board of Directors is guided by
compensation benchmarks (see the box
‘Compensation benchmark’ on page 60),
and it reflects the amount of responsibility,
the complexity of the tasks, the professional
and personal requirements placed on them,
and the expected average time spent
executing such duties. However, the final
compensation and the weighting of the
different criteria is ultimately the result of
discretionary decisions by the full Board.
The same is true for the higher
compensation of the Chairman, which
reflects his higher level of responsibility, the
broader scope of his tasks, and the greater
amount of time spent executing this role.
The elements and annualized values of the
compensation of the members of the Board
of Directors are shown in the table below.
The grant value of the RSUs is fixed (CHF
125000 per Board member and CHF
250000 for the Chairman of the Board).
The number of RSUs is determined by
dividing the fixed grant value by the
volume-weighted average share price of
the last ten trading days prior to the grant
date, which lies between the date of the
publication of the year-end results and the
Annual General Meeting. One-third of the
RSUs vest after the first, second, and third
anniversary of the grant date respectively.
Upon vesting, one vested RSU is converted
into one share of the company. The vesting
period for all options and RSUs granted to
the members of the Board of Directors
ends no later than the date on which the
individual steps down from his respective
function. Although the grant values of the
RSUs are fixed, they are considered a
variable compensation element since the
development of their values follows the
share price. The variable compensation
of the Chairman of the Board represented
69% of the fixed component. For the other
Board members, the variable component
represented between 0% and 123% of the
fixed component. Further details can be
found in the financial section under note
110 (pages 128 to 130). Further details on
the RSU component are available in the
Executive Committee subsection. Detailed
information on the remuneration of the
Board of Directors is given in the financial
statements of Sulzer Ltd under note 110
(pages 128 to 130).
Executive Committee
The compensation of the Executive
Committee members is governed by
internal regulations (total reward policy,
bonus plan, restricted stock unit plan,
and performance share plan 2010 and
2013). The compensation is reviewed
by the Nomination and Remuneration
Committee (NRC) on an annual basis
and, if necessary, adjusted and approved
by the full Board of Directors based on
a proposal by the NRC. The changes
introduced for 2013 are described below
under the respective package elements.
The full Board also approves the
performance targets as well as the
performance achievement levels for all
Executive Committee members based
on the recommendations of the NRC.
The members of the Executive Committee
have no right to either attend or vote at
meetings concerning their compensation.
However, the CEO attends meetings in
which the proposed compensation of
members of the Executive Committee
is being discussed, and he submits
proposals (except concerning his own
compensation). In order to reflect the
objective of pay for performance, the
total direct compensation package of the
CEO and the members of the Executive
Committee includes a fixed annual base
salary (in cash) and a variable component.
The variable component consists of a
short-term annual performance- and
Annual compensation of the members of the Board of Directors 1)
in CHF
Fixed component (fixed
amount, cash, net of social
security contributions2))
Variable component (variable,
fixed amount at grant date,
restricted stock units)
Chairman of the Board3) 420 000 250 000
Members of the Board 70 000 125 000
Audit committee – Chairman4) 30 000 –
Audit committee – Member 20 000 –
Nomination and Remuneration Committee – Chairman4) 25 000 –
Nomination and Remuneration Committee – Member 15 000 –
Strategy Committee – Chairman4) – –
Strategy Committee – Member 15 000 –
1) Annualized compensation (as of April 1, 2011). For the exact amounts of the 2013 compensation refer to note 110 on pages 128 to 130 in the financial section.
2) For gross amounts, refer to note 110 on pages 128 to 130 in the financial section.
3) The Chairman of the Board of Directors does not receive additional remuneration for committee activities.
4) Committee chairmen do not receive additional remuneration for committee membership.
Fixed compensation Variable compensation
Short-term
incentive plan
Long-term
incentive plan
Base salary, pensions and social contributions,
and other
Bonus plan Performance
share plan (PSP)
Overview compensation elements
60
Sulzer | Annual Report 2013
Compensation report
results-based bonus (in cash) as well as
long-term incentives: the restricted stock
unit plan (RSU plan until 2012) and the
performance share plan (PSP 2010 and
2013). In 2013, the variable compensation
to Klaus Stahlmann, CEO represented
194% of the fixed component (base salary,
pensions and social contributions). For the
entire Executive Committee, the variable
component represented 96% of the fixed
component (see “Bonus”). The relationship
between the fixed and the variable
component of compensation reflects
Sulzer’s high performance orientation and
the company’s strong emphasis on
aligning the interests of the Executive
Committee and the shareholders to create
long-term shareholder value and profitable
growth. Further details can be found in the
financial section under note 110 (pages 128
to 130). To ensure that the remuneration of
the members of the Executive Committee
is competitive, Sulzer regularly participates
in respective benchmarks, such as the
2012/13 study provided by Towers Watson,
a leading global consultancy. It focused on
Swiss-based multinational corporations
with—as median—a comparable number
of employees and sales volume (see the
box ‘Compensation benchmark’). Sulzer
aims for remuneration between the median
and the 75th percentile of the benchmark.
The elements of the compensation of the
members of the Executive Committee are
summarized in the table below.
Base salary (fixed, in cash)
To determine the base salary—which
ultimately is the result of a discretionary
decision by the full Board—the market
median level for the respective position,
individual qualifications and experience,
and the prevailing local labor market
conditions, i.e. for members of the
Executive Committee, Swiss labor market
conditions, are taken into account. In order
to review, assess, and, where needed,
adjust the individual compensation,
compensation benchmark studies with
Swiss-based multinational companies
issued by external advisors are used (see
‘Executive Committee’, page 59). Positions
are evaluated according to the Towers
Watson Global Grading System (GGS).
The GGS builds on company criteria such
as size, complexity, and geographic scope
to assess the number of levels. Positions
are evaluated in a two-step process of
banding and grading: Banding places
jobs in the framework based on how they
contribute to the overall organization.
Grading assesses jobs against standard
factors. For further details, see http://
www.towerswatson.com/en/Services/
Tools/job-leveling-global-grading-andcareer-map.
Bonus (variable, performance-based,
in cash)
The Board decided to increase the bonus
on target levels for 2013 to 90% of the
base salary for the CEO and kept the
bonus on target level for all other members
of the Executive Committee at 60%. The
maximum payout factor remained at two
times the bonus on target. The actual
bonus paid depends on the attainment
of the agreed targets. 70% of these targets
are of a financial nature (such as order
intake, operating income, net income,
and return on capital employed) and 30%
are individual targets, which can be both
qualitative and quantitative. For each of
those targets, a target value as well as a
lower and an upper target level are set.
Depending on the level of achievement,
a corresponding number of points is
calculated. The sum of the points
determines the payout factor, which
can be between zero and two times the
target bonus. No bonus at all is paid if
the minimum target level is not reached.
Exceptions to this policy may be defined
by the Board of Directors in response
to a proposal by the Nomination and
Remuneration Committee (NRC). For the
year 2013, two exceptions were granted:
Kim Jackson, who left the position as
President Sulzer Pumps mid-April 2013
(contractual cancelation period per end
Compensation
benchmark
The comparison group
reflects Sulzer’s ambitious
business strategy:
– ABB
– Actelion
– Clariant
– EMS Chemie
– Geberit
– Georg Fischer
– Holcim
– Lonza
– Nobel Biocare
– Oerlikon
– Rieter
– Schindler
– Sika
– Sonova
– Syngenta
61
Corporate governance
Sulzer | Annual Report 2013
Base compensation Short-term incentive plan
(bonus plan)
Long-term incentive plan (performance share plan)
PSP 2010 PSP 2013
Main
parameters
Position, function,
experience,
competency evaluation
Achievement of business,
financial and individual
targets
Achievement of long-term
net-income results, factored
by share price performance
and acquisition volume
Achievement of longterm
EBIT results and
relative Total Shareholder
Return (TSR)
Key drivers Labor market Net income, return on
capital employed, order
intake, and annual
individual targets
Aggregate net income
2010–2012, Total
Shareholder Return,
acquisition volume
Aggregate EBIT 2013-2015,
relative Total Shareholder
Return
Links to compensation
principles
Competitive
compensation
Pay for performance Sustainable value creation and growth
Form Cash Cash Performance share units (PSUs)
Amount Fixed Variable, capped at
maximum two times the
bonus on target (which
is 90% of the base salary
for the CEO and 50-60%
for the other Executive
Committee (EC) members).
The maximum amount
can reach 180% of the
base salary for the CEO
and 100-120% of the
base salary for the other
EC members 1)
Number of PSUs granted
based on a) defined
investment of Executive
Committee (EC) members
(two-thirds of 2010–2012
annual RSU grants for
CEO; one-third for other
EC members) and b)
matching by the company
(100% of amount converted
for CEO; 80% for other EC
members), divided by the
grant price of the RSUs
in 2010. The overall
amounts payable under
this plan are capped
Since 2013 no RSUs are
granted anymore to PSP
participants., i.e. the full
Long-Term Incentive is at
risk and depending on
performance. Grant values
are defined based on
the Global Grade. In the
transition year 2013 grant
values are three times
higher than for 2014 and
following years as there will
only be a first vesting in
2016. Grant Values: CEO:
2 500 000; EC Members:
765 000 to 900 000
Grant Monthly March of the year following
the performance period
April 1, 2010
(one-time plan)
April 1, 2013 (rolling plan
with annual grants. 2013
is a transitional plan with
grant values three times
higher than in the
subsequent years)
Performance period One fiscal year (2013) One fiscal year (2013) January 1, 2010 –
March 31, 2013
January 1, 2013 –
March 31, 2016
Vesting – – All units vest on March
31, 2013. 50% are
de-blocked immediately
and 30% at first, and 20%
at second anniversary of
the vesting date
All units vest on
March 31, 2016
1) The CEO (in charge since February 2012) did not participate in the 2010–2012 performance share plan.
Compensation elements for the members of the Executive Committee
62
Sulzer | Annual Report 2013
Compensation report
of September 2013), was awarded a pro
rata bonus for the business year 2013 and
Alfred Gerber, General Counsel until end of
April 2013, will receive a bonus for 2013 on
target level (contractual end of resignation
period March 31, 2014). The successor of
Kim Jackson, Scot Smith who joined May
21, 2013, will participate in the regular
bonus scheme. The successor of Alfred
Gerber is not a member of the Executive
Committee. Urs Fankhauser, President
Sulzer Chemtech, who stepped down
from the Executive Committee due to
health issues as of October 31 will receive
a regular bonus payment. His successor,
Oliver Bailer received a bonus pro rata
payment at target level for the period of
November 1, 2013 until December 31, 2013.
The bonuses for 2013, which are assessed
by the NRC and approved by the full
Board, will be paid in March 2014. For
the entire Executive Committee, the
bonus paid represented 34% of the fixed
component. The relationship between
the bonus and the fixed component
of compensation reflects Sulzer’s high
performance orientation. Further details
can be found in the financial section
under note 110 (pages 128 to 130).
Restricted stock unit plan (variable,
fixed grant value, share-based
remuneration)
Sulzer has used a restricted stock unit plan
(RSU plan) as a long-term performance
incentive since 2009. In 2012 the last RSU
grant was provided to members of the
Executive Committee. From 2013 the
RSU program is fully replaced by the
new performance share plan 2013 except
for César Montenegro (discontinued
operations) and Alfred Gerber (leaving).
Further details can be found under note
110 (pages 128 to 130).
Performance share plan (variable,
performance-based, share-based
remuneration)
In order to motivate the members of the
Executive Committee to maintain the
strong operational management of the
company, while at the same time using
balance sheet assets to make sound
investments (primarily in the form of
capital expenditures and acquisitions),
the full Board of Directors decided in
2010 to introduce a long-term performance
share plan (PSP) for the members of the
Executive Committee. The PSP 2010 was
a one-time plan with a performance period
of three years (see table on page 61). The
plan was designed by the Nomination and
Remuneration Committee with support
from Towers Watson. The members of the
Executive Committee were measured on
very ambitious targets with regard to (i) the
cumulative adjusted net income, (ii) the
total shareholder return (TSR), and (iii) the
acquisition volume. (i) Cumulative adjusted
net income: the sum of the net income
from 2010 to 2012 attributable to
shareholders, adjusted by acquisition
costs, integration costs, and effects related
to business combinations (as introduced
with IFRS 3 ‘Business Combinations’) over
the performance period (January 1, 2010
– December 31, 2012). The cumulative
income over the period amounted to CHF
887.3 million. (ii) Total shareholder return
(TSR): the share price growth plus
dividends over the performance period.
To calculate the share price growth, the
initial share price is set as the ten-day
volume-weighted average share price
prior to the grant of RSUs in 2010 (i.e.
the same amount that is used to calculate
the restricted stock units for 2010). The
ending share price is the volume-weighted
average share price between January 1,
2013, and March 31, 2013. This calculation
results in a TSR of 68.91%. (iii) Acquisition
volume: total volume spent on the
capitalization of balance sheet assets for
the purpose of acquisitions or other sound
investments of Sulzer’s liquid assets over
the performance period, for example,
investment decisions. The total acquisition
volume amounted to CHF 1 110 million.
The PSP included a requirement for the
participants to invest a portion of their
yearly RSU grant into the PSP plan. The
former CEO had to invest two-thirds of
each of the three annual RSU grants,
which results in a total investment of the
equivalent of two annual grants during
the performance period. All other
Executive Committee members had
to invest one-third of each of the three
annual RSU grants, which resulted in a
total investment of the equivalent of one
annual grant during the performance
period. At the grant date, each investment
was matched by a co-investment by the
company. The company matched 100%
of the amounts invested of the CEO and
80% of the investments of the other
Executive Committee members. The
number of performance share units
(PSUs) granted at the grant date was
based on the number of RSUs shifted
into the PSP and the company match
divided by the volume-weighted average
share price prior to the 2010 grant of
RSUs. The PSP vested end of March
2013. However, on the day when the
entire award is vested, only 50% of
the shares were de-blocked (settlement
possible in cash or shares). The remaining
50% of the shares will de-block on the
first (30%) and second (20%) anniversary
of the vesting date. The plan included
a significant leverage in the case of
extraordinary performance over the
three-year performance period. At
vesting, the number of PSUs granted
were multiplied by two factors (see
graphic on page 63). The first factor is
defined by a matrix that consists of the
cumulative adjusted net income and the
total shareholder return; it ranges from
0 to 2.5. The second factor is defined
by the acquisition volume; it ranges from
0.8 to 1.8. Of the three PSP metrics (total
shareholder return, cumulative adjusted
net income, acquisition volume), the total
shareholder return has the highest impact
on the final vesting value, which reflects
Sulzer’s strong emphasis on aligning the
interests of the Executive Committee and
the shareholders to create long-term
shareholder value. The value vested was
calculated by multiplying the final number
of PSUs vested with the share price at
March 31, 2013. The maximum payout is
capped at four (for the CEO) to five (other
members of the Executive Committee)
times the total value at grant of the PSP,
i.e. the total investment of the participant
plus the company matching. Failure to
achieve the minimum performance
thresholds (i.e. the predetermined
amounts of the cumulative net income
and the ending share price) would have
resulted in a zero payout, meaning that
the Executive Committee member would
lose the entire investment (i.e. their RSU
contribution) value at grant invested into
the PSP including the respective
company match amount. If a member
of the Executive Committee terminates
his employment during the performance
period, all PSUs granted shall lapse. If
Sulzer terminates the employment or the
Executive Committee member without
cause prior to the vesting date, the
member shall be entitled to a monetary
compensation reflecting the pro rata
achievement under the PSP.
Due to the excellent performance of the past
three years the vesting values exceeded the
defined cap values for all participants and
were subsequently reduced to the defined
maximum cap values.
In 2012 the Board decided to continue
with a long-term and performanceoriented
remuneration policy based
on a Performance Share Plan (PSP).
Restricted Stock Units (RSU) will not
be granted any more. The target
63
Corporate governance
Sulzer | Annual Report 2013
Determining number of PSU vested three years after grant
Target
Achievement
Factor 1
Factor based on
cumulative EBIT
compared to Mid
Range Plan (MRP)
Minimum cumulative EBIT
value over three years
compared to MRP is
defined at 60% and leads
to a factor of 0. 100%
achievement leads to a
factor of 1 and 140%
achievement leads
to a factor of 2.
The factor accordingly
varies from 0 to 2
according to
performance.
Target
Achievement
Factor 2
Factor based
on Relative Total
Shareholder
Return (TSR)
Minimum relative TSR
performance over three
years compared to 30
peers is defined at 10th
percentile and leads to a
factor of 0. Median TSR
performance leads to a
factor of 1 and a TSR
performance at the 90th
percentile leads to a
factor of 2.
The factor accordingly
varies from 0 to 2
according to
performance.
Number of PSU
granted
Number of PSU
granted
Since 2013 no RSU are
granted anymore to PSP
participants., i.e. the full
Long Term Incentive is at
risk and depending on
performance.
Grant values are defined
based on the Global
Grade. In the transition
year 2013 grant values
are three times higher as
for 2014 and following
years as there will only be
a first vesting in 2016.
Grant Values:
CEO: 2 500 000
EC Members: 765 000
to 900 000
Number of PSU
vested
Number of PSU
vested
The maximum payout is
capped at a multiple of
the value at grant.
CEO: 3.2
Other EC members:
3.9-4.4
Overview performance share plan (PSP)
dimensions of the new PSP are the
cumulated operating income (EBIT)
over a three-year period as well as
the total shareholder return (Sulzer’s
performance against the respective
performance of 30 defined peer
companies, more at www.sulzer.com/
peers). The new PSP 2013 is effective
as of January 1, 2013, and is governed
by three-year contractual agreements
between the members of the Executive
Committe and Sulzer. The new PSP is
designed as an annual plan with annual
grants. The annual grant will be determined
by the Board prior of entering a new
Award Agreement. The Board is entitled
to terminate the PSP, i.e. not to offer a
new Award Agreement, at any time.
The PSP 2013 is available exclusively to
the members of the Executive Committee
of Sulzer Ltd. The right to participate in the
PSP is personal and not transferable. The
PSP is an annual plan at the discretion of
the Board.
The number of granted PSU is calculated
based on the grant values per global grade.
The beginning share price (on which the
annually granted number of PSU will be
based) is defined as the three months
volume weighted average share price prior
to the annual grant (usually around April 1).
The performance periods for the two KPIs
as described below are defined as follows:
a) Cumulative EBIT: EBIT January 1,
2013 to December 31, 2015.
b) Relative Total Shareholder Return
(TSR): April 1, 2013 (beginning share
price is based on the three months
volume weighted average share price
January 1 to March 31) to March 31,
2016 (ending share price shall be
calculated based on volume weighted
average share price of January 1 to
March 31).
The full performance period reaches
from January 1, 2013 to March 31, 2016.
Each PSU represents the right to one
share of the company. On the vesting
date the final number of PSU will vest.
The performance at the end of the
performance period will be measured
based on two KPIs:
a) Achievement factor KPI 1
(minimum value: 0; maximum value:
2): Cumulative EBIT in % of the mid
range plan (MRP) EBIT defined as
Cumulative three-year EBIT over
the performance period divided by
cumulative MRP EBIT values of the
respective years. The Board can
at its sole discretion adjust the
cumulative EBIT in case of the
following events:
– Acquisitions exceeding CHF 100
million: in case of conflicts between
the KPI as defined in this plan and
targeted business objectives
beyond the time horizon of the
current plan.
– Exchange rate: adjustment in case
of deviations of the Swiss Franc
against major currencies relevant
to Sulzer exceeding a bandwidth
of +/– 2%. In such a case an
adjustment to a threshold of +/–
2% is possible.
– Unforeseen IFRS change:
depending on issue adjustments
are possible.
64
Sulzer | Annual Report 2013
Compensation report
b) Achievement factor KPI 2 (minimum
value: 0; maximum value: 2): Relative
Total Shareholder Return defined as
share price growth (ending share price
minus starting share price) during the
performance period plus dividends
over the performance period (fiscal
years n, n+1 and n+2) divided by
ending share price measured against
the performance of the defined Peer
Group based on the ranking method
(assuming dividends are not
reinvested through buying more
shares of the corresponding security).
The Board has the right to change the
composition of the Peer Group in case
of merger and acquisition or any other
change leading to a delisting or a
fundamental change in the scope
of the business of the peer group
company. In such a situation the
Board will choose a new peer
company. A pre-defined succession
list supports the Board in this process
but does not limit the authority of
the Board to choose any other
suitable company.
The final number of PSU to be converted
into shares will be calculated by multiplying
the initial number of PSUs granted with the
total achievement. The following formula
shall apply: Number of performance share
units granted x (Achievement Factor KPI 1
+ Achievement Factor KPI 2) = hypothetical
number of performance shares vested. For
the final payout calculation the defined
caps apply. The plan administrator will
notify such number to the Committee.
The conversion of PSU into shares at the
vesting date is subject to the following
minimum performance thresholds:
– Cumulative EBIT in % of MRP EBIT
> 60% or relative TSR > 10th
percentile
– The total number of shares a
participant is entitled to receive
under the PSP is capped pursuant
to defined maximum values at
vesting per Global Grades
If a participant terminates his/her
employment with the company during
the performance period, all PSU granted
to such participant shall be forfeited
without any right to compensation. In
exceptional cases and under the condition
of an outstanding performance the
Board has the right to consider a
monetary compensation.
Upon termination of the employment of
a participant as a result of disability, the
conditions of the award agreement shall
continue unchanged, meaning that all
awards granted on or before termination
shall remain effective as if the employment
would not have been terminated.
If the employer terminates the employment
without cause or if the employment
agreement expires prior to the vesting date
or in case of death, the participant or his
or her beneficiaries shall be entitled to a
monetary compensation reflecting the pro
rata achievement under this PSP. The pro
rata achievement shall be defined based
on the number of calendar days reaching
from January 1, year n to the exit date,
expiry of the employment agreement or
death of the participant divided by the
total number of calendar days of the full
performance period multiplied with the pro
rata total achievement. Calculation of the
underlying share price to determine pro
rata relative TSR growth will be based on
the volume weighted average share price
of three months preceding the exit date
or death of the participant. The pro rata
cumulative EBIT calculation will be based
on the most accurate figures available.
The final payment will be defined by the
Board considering the above calculation
but with the right to adjust the monetary
compensation in line with legal and
statutory requirements.
No severance payments to members
of the Executive Committee were made
during the reporting year. The employment
contracts of the Executive Committee
members make no provision for unusually
long notice periods or contract terms.
However, Executive Committee members
who joined the Executive Committee
prior to April 2009 were given the right to
compensation if after a change of control
an employment contract is terminated
within 18 months or in the event of a
considerable change to a member’s
function. This compensation is no
longer allowed based on the new Minder
legislation and was ended without
compensation by December 31, 2013.
65
Sulzer | Annual Report 2013
Financial section
Financial section
Consolidated financial statements
Sulzer achieved a net income attributable to shareholders of
Sulzer Ltd of CHF 234.4 million. The capital structure remains
solid with an equity ratio of 51.4%.
Consolidated financial statements
Consolidated income statement 66
Consolidated statement of comprehensive income 67
Consolidated balance sheet 68
Consolidated statement of changes in equity 69
Consolidated statement of cash flows 70
Corporate accounting principles 71
Notes to the consolidated financial statements
01 Significant changes in the scope of consolidation 85
02 Discontinued operations 87
03 Major currency exchange rates 88
04 Segment information 89
05 Personnel expenses 91
06 Employee benefit plans 92
07 Research and development expenses 95
08 Other operating income and expenses 96
09 Financial income and expenses 96
10 Income taxes 97
11 Intangible assets 99
12 Property, plant, and equipment 101
13 Other financial assets 103
14 Inventories 103
15 Percentage of completion contracts 104
16 Trade accounts receivable 104
17 Other accounts receivable and prepaid expenses 105
18 Cash and cash equivalents 105
19 Marketable securities 105
20 Pledged assets 105
21 Share capital 106
22 Earnings per share 107
23 Borrowings 107
24 Provisions 108
25 Other current and accrued liabilities 109
26 Derivative financial instruments 109
27 Other financial commitments 110
28 Contingent liabilities 110
29 Capital expenditure by category (unaudited) 110
30 Share participation plans 111
31 Transactions with members of the Board of Directors,
Executive Committee, and related parties 113
32 Auditor remuneration 114
33 Corporate risk management process 114
34 Subsequent events after the balance sheet date 114
35 Major subsidiaries 115
Auditors’ report 119
66 Consolidated financial statements
Sulzer | Annual Report 2013
Consolidated income statement
January – December
millions of CHF Notes 2013 20121)
Continuing operations
Sales 04 3263.9 3340.7
Cost of goods sold –2260.9 –2291.6
Gross profit 1003.0 1049.1
Selling and distribution expenses –334.8 –340.3
General and administrative expenses –342.4 –309.6
Research and development expenses 07 –70.6 –66.9
Other operating income 08 50.6 30.2
Other operating expenses 08 –25.0 –25.9
Operating income before restructuring 280.8 336.6
Restructuring expenses 24 –16.8 –7.9
Operating income 264.0 328.7
Interest and securities income 09 5.0 4.6
Interest expenses 09 –23.2 –25.8
Other financial income/(expenses) 09 –3.6 22.4
Income before income tax expenses 242.2 329.9
Income tax expenses 10 –65.9 –80.6
Net income from continuing operations 176.3 249.3
Discontinued operations
Net income from discontinued operations, net of income taxes 02 59.9 58.5
Net income 236.2 307.8
Attributable to shareholders of Sulzer Ltd 234.4 302.9
Attributable to non-controlling interests 1.8 4.9
Earnings per share, attributable to a shareholder of Sulzer Ltd (in CHF)
Basic earnings per share2) 22 6.89 8.91
Diluted earnings per share2) 22 6.86 8.86
Continuing operations
Basic earnings per share continuing operations 22 5.13 7.19
Diluted earnings per share continuing operations 22 5.11 7.15
Discontinued operations
Basic earnings per share discontinued operations 22 1.76 1.72
Diluted earnings per share discontinued operations 22 1.75 1.71
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
2) Restatement of prior year figures, decrease of CHF 0.12 due to the restated net income related to IAS 19R.
67
Sulzer | Annual Report 2013
Financial section
Consolidated financial statements
Consolidated statement of comprehensive income
January – December
millions of CHF Notes 2013 20121)
Net income 236.2 307.8
Items that may be reclassified subsequently to the income statement
Fair value changes on available-for-sale financial assets, net of tax – –24.4
Cash flow hedges, net of tax 26 –2.2 2.7
Currency translation differences –67.6 –8.1
Total of items that may be reclassified subsequently to the income statement –69.8 –29.8
Items that will not be reclassified to the income statement
Defined benefit cost recognized in other comprehensive income, net of tax 06 36.7 –0.7
Total of items that will not be reclassified to the income statement 36.7 –0.7
Total other comprehensive income –33.1 –30.5
Total comprehensive income for the year 203.1 277.3
Attributable to shareholders of Sulzer Ltd 202.0 272.7
Attributable to non-controlling interests 1.1 4.6
1) Restatement of prior year figures, see corporate accounting policies 2.2.
68 Consolidated financial statements
Sulzer | Annual Report 2013
Consolidated balance sheet
December 31
millions of CHF Notes 2013 2012 2011
Non-current assets
Goodwill 11 978.4 1092.7 1060.9
Other intangible assets 11 303.8 354.3 374.3
Property, plant, and equipment 12 492.0 650.0 619.5
Other financial assets 13 11.1 8.6 36.2
Non-current receivables 13.8 13.8 12.2
Deferred income tax assets1) 10 92.4 118.4 122.5
Total non-current assets 1891.5 2237.8 2225.6
Current assets
Inventories 14 436.5 622.9 675.4
Advance payments to suppliers 87.4 78.6 83.1
Trade accounts receivable 16 877.5 1012.1 1020.3
Other accounts receivable and prepaid expenses1) 17 153.4 144.4 125.6
Assets held for sale 02 568.9 0.6 0.9
Marketable securities 19 – 5.8 8.1
Cash and cash equivalents 18 528.7 507.3 422.6
Total current assets 2652.4 2371.7 2336.0
Total assets 4543.9 4609.5 4561.6
Equity
Share capital 21 0.3 0.3 0.3
Reserves1) 2334.1 2216.3 2022.1
Equity attributable to shareholders of Sulzer Ltd 2334.4 2216.6 2022.4
Non-controlling interest 6.3 6.8 6.0
Total equity 2340.7 2223.4 2028.4
Non-current liabilities
Long-term borrowings 23 515.9 533.0 531.4
Deferred income tax liabilities1) 10 101.5 113.0 130.9
Non-current income tax liabilities 10 3.8 9.3 12.8
Non-current provisions1) 24 202.2 300.4 322.5
Other non-current liabilities 1.9 0.8 1.1
Total non-current liabilities 825.3 956.5 998.7
Current liabilities
Short-term borrowings 23 56.6 76.0 236.2
Current income tax liabilities 10 26.8 55.3 49.5
Current provisions 24 127.0 138.0 171.3
Trade accounts payable 345.6 419.9 386.0
Advance payments from customers 271.9 291.0 272.2
Liabilities held for sale 02 157.7 – –
Other current and accrued liabilities 25 392.3 449.4 419.3
Total current liabilities 1377.9 1429.6 1534.5
Total liabilities 2203.2 2386.1 2533.2
Total equity and liabilities 4543.9 4609.5 4561.6
1) Restatement of prior year figures, see corporate accounting policies 2.2.
69
Sulzer | Annual Report 2013
Financial section
Consolidated financial statements
Consolidated statement of changes in equity
January – December
Attributable to shareholders of Sulzer Ltd
millions of CHF Notes
Share
capital
Retained
earnings
Treasury
stock
Cash flow
hedge
reserve
Availablefor-sale
financial
assets
Currency
translation
adjustment Total
Noncontrolling
interests
Total
equity
Equity as of January 1, 2012
(as previously reported) 0.3 2393.3 –64.3 1.8 24.4 –257.7 2097.8 6.0 2103.8
Restatement due to IAS 19 revised1) –75.4 –75.4 –75.4
Equity as of January 1, 2012
(restated) 0.3 2317.9 –64.3 1.8 24.4 –257.7 2022.4 6.0 2028.4
Comprehensive income for the year:
Net income 302.9 302.9 4.9 307.8
Cash flow hedges, net of tax 26 2.7 2.7 2.7
Fair value changes on available-forsale
financial assets, net of tax –24.4 –24.4 –24.4
Defined benefit cost recognized in other
comprehensive income, net of tax 06 –0.7 –0.7 –0.7
Currency translation differences –7.8 –7.8 –0.3 –8.1
Total comprehensive income for
the year – 302.2 – 2.7 –24.4 –7.8 272.7 4.6 277.3
Changes in ownership in subsidiaries
without loss of control – –0.2 –0.2
Transactions in treasury shares –7.8 19.8 12.0 12.0
Share-based payments 30 12.3 12.3 12.3
Dividend –102.8 –102.8 –3.6 –106.4
Equity as of December 31, 2012
(restated) 21 0.3 2521.8 –44.5 4.5 – –265.5 2216.6 6.8 2223.4
Comprehensive income for the year:
Net income 234.4 234.4 1.8 236.2
Cash flow hedges, net of tax 26 –2.2 –2.2 –2.2
Defined benefit cost recognized in
other comprehensive income, net
of tax 06 36.7 36.7 36.7
Currency translation differences –66.9 –66.9 –0.7 –67.6
Total comprehensive income for
the year – 271.1 – –2.2 – –66.9 202.0 1.1 203.1
Addition of non-controlling interests – 0.6 0.6
Transactions in treasury shares –1.6 17.6 16.0 16.0
Share-based payments 30 9.4 9.4 9.4
Dividend –109.6 –109.6 –2.2 –111.8
Equity as of December 31, 2013 21 0.3 2691.1 –26.9 2.3 – –332.4 2334.4 6.3 2340.7
1) See corporate accounting policies 2.2.
70 Consolidated financial statements
Sulzer | Annual Report 2013
Consolidated statement of cash flows
January – December
millions of CHF Notes 2013 2012
Cash and cash equivalents as of January 1 507.3 422.6
Cash flow from operating activities
Net income1) 236.2 307.8
Interest and securities income –5.2 –4.9
Interest expenses1) 24.6 27.4
Income tax expenses1) 86.3 100.8
Depreciation/amortization 134.5 131.4
Income from disposals of subsidiaries; property, plant, and equipment; and financial instruments –2.6 –31.3
Changes in inventories 52.0 44.7
Changes in advance payments to suppliers –14.4 3.4
Changes in trade accounts receivable –4.9 –11.5
Changes in advance payments from customers 2.3 24.9
Changes in trade accounts payable –23.0 38.7
Changes in provisions1) –18.4 –43.1
Changes in other net current assets –24.1 24.5
Other non-cash items1) 8.2 –5.3
Interest received 4.8 4.9
Interest paid –17.5 –19.1
Income tax paid –118.7 –120.5
Total cash flow from operating activities 320.1 472.8
Cash flow from investing activities
Purchase of intangible assets 11 –4.8 –2.4
Sale of intangible assets 0.2 0.2
Purchase of property, plant, and equipment 12 –102.8 –125.8
Sale of property, plant, and equipment 6.0 3.1
Acquisitions of subsidiaries, net of cash acquired 01 –23.8 –38.6
Acquisitions of associates –2.9 –
Divestitures of subsidiaries 6.1 1.1
Purchase of financial assets 0.1 –1.1
Sale of financial assets – 32.0
Purchase of marketable securities –1.0 –3.6
Sale of marketable securities 2.7 6.1
Total cash flow from investing activities –120.2 –129.0
Cash flow from financing activities
Dividend –108.7 –102.2
Purchase/sale of treasury stock –4.1 11.3
Dividend to non-controlling interests –2.2 –3.6
Additions in long-term borrowings 8.8 14.4
Repayment of long-term borrowings –3.6 –2.9
Additions in short-term borrowings 2.9 19.8
Repayment of short-term borrowings –29.8 –188.3
Total cash flow from financing activities –136.7 –251.5
Exchange losses on cash and cash equivalents –20.6 –7.6
Net change in cash and cash equivalents 42.6 84.7
Cash and cash equivalents as of December 31 18 549.9 507.3
– thereof classified as assets held for sale 02 21.2 –
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
71
Sulzer | Annual Report 2013
Financial section
1 General information
Sulzer Ltd (the “company”) is a company
domiciled in Switzerland. The address
of the company’s registered office is
Neuwiesenstrasse 15 in Winterthur,
Switzerland. The consolidated financial
statements as at and for the year ended
December 31, 2013, comprise the company
and its subsidiaries (together referred to as
the “corporation” and individually as the
“subsidiaries”) and the corporation’s interest in
associates and jointly controlled entities. The
corporation is mainly active in the machinery
and equipment sectors, the surfacing
technology business, and associated services.
Sulzer was founded in 1834 in Winterthur,
Switzerland, and employs some 15400 people
in over 150 locations worldwide. The company
is listed on the SIX Swiss Exchange in Zurich,
Switzerland (symbol: SUN).
These consolidated financial statements were
authorized for issue by the Board of Directors
on February 19, 2014.
2 Key accounting policies and
valuation methods
2.1 Basis of preparation
The consolidated financial statements
have been prepared in accordance with
International Financial Reporting Standards
(IFRS) using the historical cost convention
except for the following:
• financial instruments at fair value through
profit or loss are measured at fair value
(incl. derivative financial instruments),
• available-for-sale financial instruments are
measured at fair value,
• liabilities for cash-settled share-based
payments are measured at fair value, and
• net defined benefit (assets) liabilities are
measured at the fair value of plan assets
less the present value of the defined benefit
obligation, limited as explained in 2.18 a).
The accounting policies set out below have
been applied consistently to all periods
presented in these consolidated financial
statements and have been applied
consistently by all subsidiaries.
The preparation of financial statements in
conformity with IFRS requires the use of
certain critical accounting estimates. It also
requires management to exercise its judgment
in the process of applying the corporation’s
accounting policies. The areas involving a
higher degree of judgment or complexity or
areas where assumptions and estimates
are significant to the consolidated financial
statements are disclosed in section 4 “Critical
accounting estimates and judgments.”
2.2 Change in accounting policies
a) Standards, amendments, and
interpretations to published standards
effective in 2013
Sulzer has adopted the following new
standards and amendments to standards,
including any consequential amendments
to other standards, with a date of initial
application of January 1, 2013:
• Amendment to IAS 1 ‘Presentation of items
in other comprehensive income.’ The main
change resulting from this amendment is
the requirement for entities to group items
presented in other comprehensive income
on the basis whether they are potentially
reclassifiable to profit or loss subsequently.
The corporation has applied the
requirements in its 2013 consolidated
financial statements.
• IAS 19 ‘Employee benefits.’ The principal
impact of this is that the return on pension
plan assets and the interest calculated on
the defined benefit obligations now use
the same interest rate reflecting the current
market yield of high-quality corporate
bonds. In addition, interest expenses on
funded post-employment schemes shown
as part of personnel expenses are now
recognized as financial expenses. It has
also been required that figures be restated
for unrecognized actuarial gains and
losses. As required by the new standard,
Sulzer’s 2012 consolidated financial
statements have been retrospectively
restated to reflect these changes (see
tables on the next page). The impact for
the full year 2013 of IAS 19 revised on the
operating expenses amounted to CHF
–18.4 million and of CHF –6.4 million to
interest expenses.
• As a result of the amendments to IFRS 7
‘Financial instruments: Disclosures,’ the
corporation has expanded its disclosures
about the offsetting of financial assets
and financial liabilities (see note 26).
• As a result of IFRS 10 ‘Consolidated
financial statements,’ the corporation
has changed its accounting policy for
determining whether it consolidates its
investees. The change did not have any
effect on the scope of consolidation.
• As a result of IFRS 11 ‘Joint arrangements,’
the corporation has changed its
Corporate accounting principles
72 Corporate accounting principles
Sulzer | Annual Report 2013
accounting policy for interests in joint
arrangements. The change did not have
any effect on the consolidated financial
statements of the corporation.
• As a result of IFRS 12 ‘Disclosure of interest
in other entities,’ the corporation has
changed its accounting policy for
disclosures of interests in other entities.
The change did not have any effect on
the consolidated financial statements
of the corporation.
• IFRS 13 ‘Fair value measurement,’ aims
to improve consistency and reduce
complexity by providing a precise definition
of fair value and a single source of fair value
measurement and disclosure requirements
for use across IFRSs (see 3 Financial risk
management).
• IAS 36 ‘Impairment of assets.’ The
corporation has early adopted the
amendments to IAS 36 (2013). As the
corporation does not have any material
assets stated at fair value less costs to sell
and no impairment was recognized, no
additional disclosures are required.
The effects and changes to IAS 27 (revised)
‘Separate financial statements,’ IAS 28
(revised) ‘Associates and joint ventures,’ IAS
32 ‘Financial instruments: Presentation,’ and
the annual improvements are not material.
b) Standards, amendments, and
interpretations which the corporation
has decided not to early adopt in 2013
• IFRS 9 ‘Financial instruments.’ The first
phase on classification and measurement
was originally published in 2009. It retains
but simplifies the mixed measurement
model and establishes two primary
measurement categories for financial
assets: amortized cost and fair value.
The basis of classification depends on the
entity’s business model and the contractual
cash flow characteristics of the financial
asset. Phase 3 on hedge accounting was
published in 2012 and delivers a more
principles-based standard that aligns
hedge accounting more closely with risk
management and therefore should result in
more meaningful information. The types of
hedging relationship remain unchanged,
but additional judgment will be required.
Phase 2 on the impairment methodology
is not yet published. IFRS 9 will not be
applicable before January 1, 2017.
• Amendment to IAS 32, ‘Financial
instruments: Presentation,’ on asset and
liability offsetting, will become effective
from January 1, 2014.
Restatement of consolidated income statement
January – December 2012
millions of CHF As reported Restatement IAS 19R Restated
Other operating expenses –37.7 –0.7 –38.4
Operating income 409.5 –0.7 408.8
Financial income 4.7 –4.9 –0.2
Income before income tax expenses 414.2 –5.6 408.6
Income tax expenses –102.2 1.4 –100.8
Net income 312.0 –4.2 307.8
Attributable to shareholders of Sulzer Ltd 307.1 –4.2 302.9
Attributable to non-controlling interests 4.9 – 4.9
Restatement of consolidated balance sheet
December 31, 2012 December 31, 2011
millions of CHF As reported
Restatement
January 1, 2012
Restatement
Jan – Dec Restated As reported Restatement Restated
Deferred income taxes
Deferred income tax assets on increase
of benefit obligations 94.5 22.4 1.5 118.4 100.1 22.4 122.5
Deferred income tax liabilities on
decrease of benefit obligations 116.5 –2.1 –1.4 113.0 133.0 –2.1 130.9
Amounts recognized in the balance sheet from employee benefit plans
Overfunding of employee benefit plans 22.5 –1.2 –7.1 14.2 16.9 –1.2 15.7
Employee benefit plans 84.6 98.7 0.9 184.2 101.3 98.7 200.0
Reserves
Retained earnings 2602.3 –75.4 –5.1 2521.8 2393.3 –75.4 2317.9
73
Sulzer | Annual Report 2013
Financial section
• The amendment to IAS 19 ‘Employee
benefits’ will reduce the complexity
and burden of accounting for certain
contributions from employees or third
parties. The amendment further clarifies
how service-linked contributions from
employees or third parties should be
included in determining net current service
cost and the defined benefit obligation.
The amendment will become effective
for annual periods beginning on or after
July 1, 2014.
• IFRIC 21 ‘Levies,’ addresses the
accounting for a liability to pay a levy if that
liability is within the scope of IAS 37, will
become effective from January 1, 2014.
• Amendments to IFRS 10, IFRS 12, and
IAS 27 on investment entities, will become
effective from January 1, 2014.
• Amendment to IAS 39, ‘Novation of
derivatives and continuation of hedge
accounting,’ requires an entity to
discontinue the hedge accounting for a
derivative that has been designated as a
hedging instrument in an existing hedging
relationship if the derivative is novated to
a central counterparty.
2.3 Consolidation
a) Business combinations
The corporation accounts for business
combinations using the acquisition method
when control is transferred to the corporation
(see 2.3 c). The consideration transferred in the
acquisition is measured at the fair value of the
assets given. Any goodwill arising is tested
annually for impairment (see 2.6 a). Any gain
on a bargain purchase is recognized in profit
or loss immediately. Acquisition-related costs
are expensed as incurred, except if related
to the issue of debt or equity securities.
Identifiable assets acquired, and liabilities
and contingent liabilities assumed in a
business combination are measured initially
at their fair values at the acquisition date.
Any contingent consideration payable is
measured at fair value at the acquisition
date. If the contingent consideration is
classified as equity, then it is not remeasured
and settlement is accounted for within equity.
Otherwise, subsequent changes in the fair
value of the contingent consideration are
recognized in profit or loss.
If share-based payment awards (replacement
awards) are required to be exchanged for
awards held by the acquiree’s employees
(acquiree’s awards), then all or a portion of
the amount of the acquirer’s replacement
awards is included in measuring the
consideration transferred in the business
combination. The determination is based
on the difference between the market-based
measure of the replacement awards
compared with the market-based measure
of the aquiree’s awards and the extent to
which the replacement awards relate to
pre-combination service.
b) Non-controlling interests
The corporation recognizes any noncontrolling
interest in the acquiree on an
acquisition-by-acquisition basis, at the
non-controlling interest’s proportionate
share of the recognized amounts of the
acquiree’s identifiable net assets.
Transactions with non-controlling interests
that do not result in loss of control are
accounted for as equity transactions.
When the corporation loses control over a
subsidiary, it derecognizes the assets and
liabilities of the subsidiary, and any related
non-controlling interest and other components
of equity. Any resulting gain or loss is
recognized in profit or loss. Any interest
retained in the former subsidiary is measured
at fair value when control is lost.
c) Subsidiaries
Subsidiaries are all entities controlled by the
corporation. The corporation controls an entity
when it is exposed to, or has the rights to,
variable returns from its involvement with the
entity and has the ability to affect those returns
through its power over the entity. The financial
statements of subsidiaries are included in the
consolidated financial statements from the date
on which control commences until the date on
which control ceases.
d) Associates and jointly controlled entities
Associates are those entities in which the
corporation has significant influence, but
not controls, over the financial and operating
policies. Significant influence is presumed to
exist when the corporation holds, directly or
indirectly, between 20% and 50% of the
voting rights. Joint ventures are those entities
over whose activities the corporation has joint
control, established by contractual agreement
and requiring unanimous consent for
strategic, financial, and operating decisions.
Associates and jointly controlled entities are
accounted for using the equity method and
are initially recognized at cost.
e) Transactions eliminated on consolidation
All material intercompany transactions and
balances and any unrealized gains or losses
arising from intercompany transactions are
eliminated in preparing the consolidated
financial statements.
f) Discontinued operation
A discontinued operation is a component of
the corporation’s business, the operations
and cash flows of which can be clearly
distinguished from the rest of the corporation
and which:
• represents a major line of business;
• is part of a single co-ordinated plan
to dispose of a separate major line of
business; or
• is a subsidiary acquired exclusively with
a view to re-sale.
Classification as a discontinued operation
occurs at the earlier of disposal or when the
operation meets the criteria to be classified as
held-for-sale. When an operation is classified
as discontinued operation, the comparative
statement of profit or loss and the OCI is
re-presented as if the operation had been
discontinued from the start of the comparative
year. All disclosures in the notes to the
consolidated financial statements refer
to continuing operations, except where
otherwise indicated.
2.4 Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided
to the Chief Executive Officer. The Chief
Executive Officer, who is responsible for
allocating resources and assessing
performance (e.g. operating income) of the
operating segments, has been identified as
the steering committee that makes strategic
decisions. The reported segments are:
• Sulzer Pumps – pump technology and
solutions
• Sulzer Turbo Services – provider of
service solutions for rotating equipment
• Sulzer Chemtech – separation, mixing,
and service solutions
Operating assets and liabilities are assets or
liabilities related to the operating activities of
an entity and contributing to the operating
income once transferred or recorded in the
income statement. Capital employed is
defined to be the average net operating
assets of the corporation over the period.
2.5 Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of
affiliated companies are measured using the
currency of the primary economic environment
in which the entity operates (the functional
currency). The consolidated financial
statements are presented in Swiss francs
(CHF), which is the functional and
presentation currency of Sulzer Ltd.
b) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the
exchange rates prevailing at the dates of the
74 Corporate accounting principles
Sulzer | Annual Report 2013
transactions. Foreign exchange gains
and losses resulting from the settlement
of such transactions and from the translation
at year-end exchange rates of monetary
assets and liabilities denominated in
foreign currencies are recognized in the
income statement, except when deferred
in other comprehensive income as qualifying
cash flow hedges and qualifying net
investment hedges.
Changes in the fair value of monetary items
denominated in foreign currency classified as
available-for-sale are analyzed between
translation differences resulting from changes
in the amortized cost of the item and other
changes in the carrying amount of the item.
Translation differences related to changes in
the amortized costs are recognized in profit
or loss and other changes in the carrying
amount are recognized in other
comprehensive income.
Translation differences on non-monetary
financial assets and liabilities are reported as
part of the fair value gain or loss. Translation
differences on non-monetary financial assets
and liabilities such as equities held at fair value
through profit or loss are recognized in profit
or loss as part of the fair value gain or loss.
Translation differences on non-monetary
financial assets such as equities classified
as available-for-sale are included in the
available-for-sale reserve in other
comprehensive income.
c) Subsidiaries
The results and financial position of all
the subsidiaries (excluding the ones with
hyperinflationary economy) that have a
functional currency different from the
presentation currency of the corporation
are translated into the presentation currency
as follows:
• assets and liabilities for each balance sheet
presented are translated at the closing rate
at the date of that balance sheet, and
• income and expenses for each income
statement are translated at average
exchange rates.
Translation differences resulting from
consolidation are taken to other
comprehensive income. In the event of
a sale or liquidation of foreign affiliated
companies, exchange differences that were
recorded in other comprehensive income
are recognized in the income statement as
part of the gain or loss on sale or liquidation.
2.6 Intangible assets
An intangible asset is classified either as an
asset with indefinite useful life when timely
limitation of generating net cash inflows is
not foreseeable, or as an asset with a finite
useful life.
Intangible assets with an indefinite useful
life are not to be amortized. The corporation
performs an annual review determining
whether events and circumstances still
support this measurement. Reassessing
the useful life indicates that an asset might
be impaired.
The intangible assets with finite useful life are
amortized in line with the expected useful life,
usually on a straight-line basis. The period of
useful life is to be assessed according to
business rather than legal criteria. This
assessment is made at least once a year.
An impairment might be required in the event
of sudden or unforeseen value changes.
a) Goodwill
Goodwill represents the difference between
the consideration transferred and the fair value
of the corporation’s share in the identifiable
net asset value of the acquired business at the
time of acquisition. Any goodwill arising as a
result of a business combination is included
within intangible assets.
Goodwill originating from the acquisition of
an associated company is included in the
book value of the participation in associated
companies. Goodwill is subject to an annual
impairment test and valued at its original
acquisition cost less accumulated impairment
losses. In cases where circumstances
indicate a potential impairment, impairment
tests are conducted more frequently. Profits
and losses arising from the sale of a business
include the book value of the goodwill
assigned to the business being sold.
Goodwill is allocated to the lowest cashgenerating
units reported to the chief
operating decision maker (CEO) for the
purpose of impairment testing. The allocation
is made to those cash-generating units or
groups of cash-generating units that are
expected to benefit from the business
combination in which the goodwill arose.
b) Trademarks and licenses
Trademarks, licenses, and similar rights
acquired from third parties. Such assets
are amortized over their expected useful
life, generally not exceeding ten years.
c) Research and development
Expenditure on research activities is
recognized in profit or loss as incurred.
Development costs for major projects are
capitalized only if the expenditure can be
measured reliably, the product or process
is technically and commercially feasible,
future economic benefits are probable and
the corporation intends and has sufficient
resources to complete development and to use
or sell the asset. Otherwise, it is recognized in
profit or loss as incurred. Subsequently such
assets are measured at cost less accumulated
amortization (max. five years) and any
accumulated impairment loss.
d) Computer software
Acquired computer software licenses are
capitalized on the basis of the cost incurred
to acquire and bring to use the specific
software. These costs are amortized over
their estimated useful lives (three to max.
five years).
e) Customer relationships
As part of a business combination, acquired
customer rights are recorded at fair value
(cost at the time of acquisition). These costs
are amortized over their estimated useful
lives, generally not exceeding 15 years.
2.7 Property, plant, and equipment
Property, plant, and equipment is stated
at acquisition cost less depreciation and
impairments. Acquisition cost includes
expenditure that is directly attributable to the
acquisition of the item. Subsequent costs are
included in the asset’s carrying amount or
recognized as a separate asset, as appropriate,
only when it is probable that the future
economic benefits associated with the item
will flow to the corporation and the cost of the
item can be measured reliably. The carrying
amount of the replaced item is derecognized.
All other repairs and maintenance are charged
to the income statement during the financial
period in which they are incurred.
Depreciation is provided on a straight-line
basis over the estimated useful life. Land is
stated at cost and is not depreciated. The
useful lives are as follows:
Buildings 20–50 years
Machinery 5–15 years
Technical equipment 5–10 years
Other non-current assets max. 5 years
Property, plant, and equipment financed by
long-term financial leases is capitalized and
amortized in the same way as other assets.
The applicable leasing commitments are
shown as liabilities and are included under
long-term borrowings.
An asset’s carrying amount is impaired
immediately to its recoverable amount if the
asset’s carrying amount is greater than its
estimated recoverable amount.
2.8 Impairment of non-financial assets
Assets with an indefinite useful life are not
75
Sulzer | Annual Report 2013
Financial section
depreciated under a fixed schedule, but
tested annually for impairment. Assets
depreciated under a fixed schedule are only
assessed for impairment if relevant events or
changes in circumstances indicate that the
book value is no longer recoverable. An
impairment loss is recorded equal to the
excess of the carrying value over the
recoverable amount. The recoverable amount
is the higher of the fair value of the asset less
disposal costs and its value in use. The value
in use is based on the estimated cash flow
over at least a five-year period and the
extrapolated projections for subsequent
years. The results are discounted using an
appropriate long-term interest rate. For the
purposes of the impairment test, assets are
grouped together at the lowest level for which
separate cash flows can be identified
(cash-generating units).
2.9 Financial assets
Financial assets, including marketable
securities, are classified into the following
four categories: “financial assets at fair value
through profit or loss,” “available-for-sale
financial assets,” “loans and receivables,”
and “held-to-maturity financial assets.”
Classification depends on the purpose for
which the financial assets were acquired.
Management determines the classification
of assets at the date of purchase and reviews
it on every accounting date. The fair value of
financial instruments is either taken from an
actively traded market or, in the case of
non-traded financial instruments, from a
valuation using standard formula-based
methods. The marketable securities held
by the corporation belong either to the first
or the second level.
a) Financial assets at fair value through profit
or loss
Assets in this category are capitalized at
fair value and subsequently adjusted to fair
values, with any adjustments charged or
credited to financial income. Derivative
financial instruments are recorded at fair
value (cost at the time of acquisition) and
subsequently adjusted to fair values. Financial
assets designated at fair value from inception
are those that are managed and their
performance is evaluated on a fair value
basis, in accordance with a documented
investment strategy. With the exception of
derivative financial instruments that meet
the requirements of a “cash flow hedge” or
a “net investment hedge,” all adjustments
are charged or credited to financial income.
Derivative financial assets are classified as
current assets or in case maturity is later than
twelve months from the balance sheet date as
non-current assets.
b) Available-for-sale financial assets
Available-for-sale financial assets are
non-derivatives that are either designated
in this category or not in any of the other
categories. They are included in non-current
assets unless management intends to dispose
of the investment within 12 months of the
balance sheet date.
c) Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are included in the current
assets, unless the maturity is greater than 12
months after the balance sheet date. These
are classified as non-current assets. Loans
and receivables are classified as trade and
other receivables in the balance sheet.
d) Held-to-maturity financial assets
Non-derivative financial assets with fixed
or determinable payment terms and fixed
maturities are classified as held-to-maturity
when there is the positive intention and ability
to hold to maturity. After initial recognition
held-to-maturity investments are measured
at amortized cost using the effective interest
method. Gains and losses are recognized
in profit or loss when the investments are
derecognized or impaired, as well as through
the amortization process.
Purchases and disposals of financial assets are
recognized on the trade date. The corporation
assesses at each balance sheet date whether
there is objective evidence that a financial
asset or group of financial assets is impaired.
Investments are initially recognized at fair
value plus transaction costs for all financial
assets not carried at fair value through profit
or loss. Financial assets carried at fair value
through profit or loss are initially recognized at
fair value and transaction costs are expensed
in the income statement. Financial assets are
derecognized when the right to receive cash
flows from the investments has expired or has
been transferred and the corporation has
transferred all substantial risks and rewards
of ownership. Available-for-sale financial assets
and financial assets at fair value through profit
or loss are subsequently carried at fair value.
Loans and receivables and held-to-maturity
financial assets are carried at amortized cost
using the effective interest method. Gains or
losses arising from changes in the fair value
of the financial assets at fair value through
profit or loss are presented in the income
statement line “Other financial income” in
the period they arise. Dividend income from
financial assets at fair value through profit
or loss is recognized in the income statement
as part of financial income.
Changes in the fair value of monetary
securities denominated in a foreign currency
and classified as available-for-sale are
analyzed between translation differences
resulting from changes in amortized cost
and other changes in the carrying amount.
The translation differences on monetary items
are recorded in the income statement, the
translation differences on non-monetary
items are recorded in equity. Changes in
the fair value of financial assets classified
as available-for-sale are recorded in equity.
When these assets are sold or impaired,
the accumulated fair value adjustments
recorded in equity are recycled and booked
to the financial income.
2.10 Derivative financial instruments
and hedging activities
The corporation uses derivative financial
instruments, such as forward currency
contracts, other forward contracts and
options, to hedge its risks associated with
fluctuations in foreign currencies arising from
operational and financing activities. Such
derivative financial instruments are initially
recognized at fair value on the date on which
a derivative contract is entered into and are
subsequently remeasured at fair value.
Derivatives are carried as assets when the
fair value is positive and as liabilities when
the fair value is negative.
Any gains or losses arising from changes in
fair value on derivatives during the year that
do not qualify for hedge accounting are taken
directly into profit or loss.
Sulzer applies hedge accounting to secure
future cash flows which have a high
probability of occurrence. These hedges are
classified as “cash flow hedges” whereas the
hedge instrument is recorded on the balance
sheet at fair value and the effective portions
are booked against “Other comprehensive
income” in the column “Cash flow hedge
reserve.” If the hedge relates to a non-financial
transaction which will subsequently be
recorded on the balance sheet, the
adjustments accumulated under “Other
comprehensive income” at that time will
be included in the initial book value of the
asset or liability. In all other cases the
cumulative changes of fair value of the
hedging instrument that have been recorded
in other comprehensive income are included
as a charge or credit to income when the
forecasted transaction is recognized or when
hedge accounting is discontinued as the
criteria are no longer met. In general, the fair
value of financial instruments traded in active
markets is based on quoted market prices at
the balance sheet date.
76 Corporate accounting principles
Sulzer | Annual Report 2013
Hedges of net investments in foreign
operations are accounted for similarly to
cash flow hedges. Any gain or loss on the
hedging instrument relating to the effective
portion on the hedge is recognized in other
comprehensive income. The gain or loss
relating to the ineffective portion is recognized
immediately in the income statement. Gains
and losses accumulated in equity are included
in the income statement when the foreign
operation is partially disposed or sold.
The corporation documents at the inception
of the transaction the relationship between
hedging instruments and hedged items, as
well as its risk management objectives and
strategy for undertaking various hedging
transactions. The corporation also documents
its assessment, both at hedge inception
and on an ongoing basis, of whether the
derivatives that are used in hedging
transactions are highly effective in offsetting
changes in fair values or cash flows of
hedged items.
2.11 Inventories
Raw materials, supplies, and consumables
are stated at the lower of cost or net realizable
value. Finished products and work in progress
are stated at the lower of production cost or
net realizable value. Production cost includes
the costs of materials, direct and indirect
manufacturing costs, and contract-related
costs of construction. Inventories are valued
by reference to weighted average costs.
Provisions are made for slow-moving and
excess inventories.
2.12 Trade receivables
Trade and other accounts receivable are
stated at nominal value less provision for
impairments. The respective value corresponds
approximately to the amortized cost. A
provision for impairment of trade receivables
is established when there is objective evidence
that the corporation will not be able to collect
all the amounts due according to the original
payment terms of the receivables. Significant
financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial
reorganization, and default or delinquency in
payments are considered indicators that the
trade receivable is impaired. Receivables are
subject to regular review and adequate
impairment is considered. The amount of
the impairment provision is the difference
between the carrying amount and the
present value of estimated future cash flows,
discounted at the original effective interest
rate. An impairment charge is booked within
selling and marketing expenses in the income
statement and the carrying amount of the trade
receivable is deducted through an allowance
account. When a trade receivable is
uncollectible, it is written off against the
allowance account for trade receivables. Any
subsequent recoveries of amounts previously
written off are credited against selling and
marketing costs in the income statement.
2.13 Cash and cash equivalents
Cash and cash equivalents comprises bills,
postal giros, and bank accounts, together
with other short-term highly liquid
investments. Bank overdrafts are reported
within borrowings in the current liabilities.
2.14 Share capital
Ordinary shares are classified as equity.
Costs directly attributable to the issue of
ordinary shares and share options are
recognized as a deduction from equity,
net of any tax effects.When share capital is
repurchased, the amount of the consideration
paid, which includes directly attributable cost,
is net of any tax effects and is recognized as
a deduction from equity. Repurchased shares
are classified as treasury shares and are
presented as a deduction from total equity.
When treasury shares are sold or reissued
subsequently, the amount received is
recognized as an increase in equity and the
resulting surplus or deficit on the transaction
is transferred to/from retained earnings.
2.15 Trade payables
Trade payables and other payables are
stated at face value. The respective value
corresponds approximately to the
amortized cost.
2.16 Borrowings
Financial debt is stated at fair value when
initially recognized, after recognition of
transaction costs. In subsequent periods,
it is valued at amortized cost. Any difference
between the amount borrowed (after
deduction of transaction costs) and the
repayment amount is reported in the income
statement over the duration of the loan using
the effective interest method. Borrowings are
classified as current liabilities unless the
corporation has an unconditional right to
defer settlement of the liability for at least
12 months after the balance sheet date.
2.17 Current and deferred income taxes
The current income tax charge is calculated
on the basis of the tax laws enacted or
substantively enacted at the balance sheet
date in the countries where the corporation’s
subsidiaries and associates operate and
generate taxable income. The management
periodically evaluates positions taken in tax
returns with respect to situations in which
applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate on the basis of amounts expected
to be paid to the tax authorities. The liability
method is used to provide deferred taxes on
all temporary differences between the tax
base of assets and liabilities and their carrying
amounts in the consolidated financial
statements. Deferred taxes are valued by
applying tax rates (and regulations) substantially
enacted on the balance sheet date or any that
have essentially been legally approved and
are expected to apply at the time when the
deferred tax asset is realized or the deferred
tax liability is settled.
Deferred tax assets are applied to the extent
that it is probable that a taxable profit will be
available against which the temporary
difference can be applied. Deferred tax liabilities
arising as a result of temporary differences
relating to investments in subsidiaries and
associated companies are applied unless
the corporation can control when temporary
differences are reversed and it is unlikely that
they will be reversed in the foreseeable future.
2.18 Employee benefits
a) Defined benefit plans
The corporation’s net obligation in respect of
defined benefit plans is calculated separately
for each plan by estimating the amount of
future benefit that employees have earned in
the current and prior periods, discounting that
amount and deducting the fair value of any
plan assets.
The calculation of defined benefit obligations
is performed annually for all material plans by
a qualified actuary using the projected unit
credit method. Smaller plans are rolled
forward and recalculated on a three-year
basis. When the calculation results in a
potential asset for the corporation, the
recognized asset is limited to the present
value of economic benefits available in the
form of any future refunds from the plan or
reductions in future contributions to the plan.
To calculate the present value of economic
benefits, consideration is given to any
applicable minimum funding requirements.
Remeasurements of the net defined benefit
liability, which comprise actuarial gains and
losses, the return on plan assets and the
effect of the asset ceiling, are recognized
immediately in OCI. The corporation
determines the net interest expense (income)
on the net defined benefit liability (asset) for
the period by applying the discount rate used
to measure the defined benefit obligation at
the beginning of the annual period to the then
net defined benefit liability (asset), taking into
account any changes in the net defined
benefit liability (asset) during the period as a
result of contributions and benefit payments.
Net interest expenses and other expenses
77
Sulzer | Annual Report 2013
Financial section
related to defined benefit plans are recognized
in profit or loss.
When the benefits of a plan are changed
or when a plan is curtailed, the resulting
change in benefit that relates to past
service or the gain or loss on curtailment
is recognized immediately in profit or loss.
The corporation recognizes gains and losses
on the settlement of a defined benefit plan
when the settlement occurs.
b) Defined contribution plans
Defined contribution plans are defined to be
pure savings plans, under which the employer
makes certain contributions into a separate
legal entity (fund) and does not have a legal
or an extendible (constructive) liability to
contribute any additional amounts in the event
this entity does not have enough funds to pay
out benefits. A “constructive” commitment
exists when it can be assumed that the
employer will voluntarily make additional
contributions in order not to endanger the
relationship with its employees. Company
contributions to such plans are considered in
the income statement as personnel expenses.
c) Other employee benefits
Some subsidiaries provide other postemployment
benefits to their employees.
Short-term benefits are payable within 12
months after the end of the period in which
the employees render the related employee
service. In the case of liabilities of a longterm
nature, the discounting effects and
employee turnover are to be taken into
consideration. Provisions for other postemployment
employee benefits are reported
as long-term provisions in the category
“Other employee benefits.”
In case of termination benefits (e.g.
contributions on early retirement) the
calculation of the provision is similar to the
calculation for post-employment benefits.
Obligations to employees arising from
restructuring measures are included under
the category “Restructuring provisions.”
d) Share-based compensation
Sulzer operates equity-settled and cashsettled
share-based compensation plans.
For the equity-settled share-based
compensation plan, the fair value of the
employee service received in exchange for
the grant of the options is recognized as an
expense. The total amount to be expensed
over the vesting period is determined by
reference to the fair value of the options
granted, excluding the impact of any
non-market vesting conditions (e.g.
profitability and sales growth targets).
At each balance sheet date, the entity
reassesses its estimates of the number of
options that are expected to be exercised. It
recognizes the impact of the reassessment
of original estimates, if any, in the income
statement, and a corresponding adjustment
to equity over the options is exercised. For
cash-settled share-based payments, a
liability equal to the proportion of the goods
or service received is recognized at the
current fair value determined at each balance
sheet date.
2.19 Provisions
Provisions for environmental restoration,
restructuring cost, and legal claims are
recognized when: the corporation has a
present legal or constructive obligation as
a result of past events; it is probable that an
outflow of resources will be required to settle
the obligation; and the amount has been
reliably estimated. Restructuring provisions
comprise lease termination penalties and
employee termination payments. Provisions
are not recognized for future operating losses.
Where there are a number of similar
obligations, the likelihood that an outflow will
be required in settlement is determined by
considering the class of obligation as a whole.
A provision is recognized even if the likelihood
of an outflow with respect to any one item
included in the same class of obligations may
be small.
Provisions are measured at the present value
of the expenditures expected to be required to
settle the obligation using a pretax rate that
reflects current market assessments of the
time value of money and the risks specific to
the obligation. The increase in the provision
due to the passage of time is recognized as
interest expense.
2.20 Revenue recognition
Revenue comprises the fair value of the
consideration received or receivable for the
sale of goods and rendering of services in the
ordinary course of the corporation’s activities.
Revenue is shown net of value added tax,
returns, rebates, and discounts and after
eliminating sales within the corporation. The
corporation recognizes revenue when the
amount of revenue can be reliably measured,
when it is probable that future economic
benefits will flow to the entity, and when
specific criteria have been met.
a) Sale of goods/products
Revenue from the sale of goods/products
derives in the ordinary course of business.
Goods and products are described as ordinary
when they are part of the official product range
of the organization. Goods and products are
those items produced/engineered and/or
purchased for resale. This includes standard
products (off the rack) as well as (pre-)
engineered or tailor-made products.
Revenue from the sale of goods is recognized
when all of the conditions stated below are
fulfilled. The return rights of products and
goods are also considered. The conditions for
the recognition of revenue from sale of goods
and products are as follows:
• it is probable that any future economic
benefit associated with the revenue will
flow to the entity,
• the revenue can be measured reliably,
• the cost incurred or to be incurred can be
measured reliably,
• the entity (seller) has transferred significant
risks and rewards of ownership to the
buyer, and
• the entity (seller) has retained neither
continuing managerial involvement nor
effective control over the goods.
Revenue is recognized only when it is probable
that it is collectible and measurable. Revenue
can only be collectible when there is a binding
sales agreement. Once revenue is recognized,
any subsequent uncertainty about the
collectability of the revenue is recognized
as an expense/adjustment to the amount
receivable rather than as an adjustment
to revenue.
b) Rendering of services
The rendering of services involves an entity
performing an agreed task for a customer.
This service may involve asset maintenance;
professional services; and the construction,
development, or customization of assets.
Service contracts may be single-element, in
which the entity renders one type of service,
or multiple-element contracts that provide for
the delivery of more than one service, or may
include the delivery of goods as well as
services. Services are often performed within
the reporting period. The percentage of
completion basis is applicable to such
services, but the stage of completion
increases from 0% to 100% within one
accounting period.
Services that are provided over a period
beyond the reporting period involve estimates.
Revenue is then recognized according to the
stage, or percentage, of completion of the
contract. The method used to determine
the stage of completion will depend on
the nature of the contract. A consistent
approach is taken to the revenue recognition
of similar contracts.
Revenue from rendering of services is
recognized by reference to the stage of
completion of the transaction when the
following conditions are cumulatively met:
78 Corporate accounting principles
Sulzer | Annual Report 2013
• the amount of revenue can be measured
reliably,
• the flow of economic benefits to the entity
is probable,
• the state of completion at the period end can
be measured reliably, and
• the cost incurred to date and the cost to
completion can be measured reliably.
c) Percentage of completion method
Major long-term customer orders are reported
using the percentage of completion method
(PoC), based on the percentage of costs
to date compared with the total estimated
contract costs, contractual milestones,
or performance. The income statement
contains a share of sales, including an
estimated share of profit, while the balance
sheet includes the corresponding trade
accounts receivable after adjustment for
advance payments received. When it appears
probable that the total costs of an order
will exceed the expected income, the total
amount of expected loss is recognized
immediately in the income statement.
d) Other revenue
Revenue from the use of entity assets by
third parties yielding interest, royalties, and
dividends in the form of:
• interest charges for the use of cash or cash
equivalents or amounts due to the entity,
• royalty charges for the use of long-term
assets (e.g. patents, trademarks,
copyrights, and computer software), and
• dividend distribution of profits to holders
of equity investments in proportion to their
holdings of a particular class of capital.
Interest is recognized using the effective
interest method. Royalties are recognized
on an accrual basis in accordance with the
substance of the relevant agreement.
Dividends are recognized when the
shareholder’s right to receive payment
is established.
2.21 Assets and disposal groups held
for sale
A non-current asset or a group of assets
is classified as “held for sale” (IFRS 5) if its
carrying amount will be recovered principally
through a sale transaction rather than
through continuing use. For this to be the
case, the management must be committed
to sell the assets, the assets must be actively
marketed for sale, and the sale is expected
to be completed within one year. A noncurrent
asset or a group of assets classified
as “held for sale” shall be measured at the
lower of its carrying amount or fair value less
selling cost.
2.22 Dividend distribution
Dividend distribution to the shareholders of
Sulzer Ltd is resolved upon decision of the
general assembly and will be paid in the same
reporting period.
3 Financial risk management
3.1 Financial risk factors
The corporation’s activities expose it to a
variety of financial risks: market risk (including
currency risk, fair value interest rate risk, cash
flow interest rate risk, and price risk), credit
risk, and liquidity risk. The corporation’s
overall risk management program focuses
on the unpredictability of financial markets
and seeks to minimize potential adverse
effects on the corporation’s financial
performance. The corporation uses
derivative financial instruments to hedge
certain risk exposures.
Risk management is carried out by a central
treasury department (Corporate Treasury).
Corporate Treasury identifies, evaluates, and
hedges financial risks in close cooperation
with the corporation’s affiliated companies.
Principles for overall risk management, as well
as policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit
risk, use of derivative financial instruments and
non-derivative financial instruments, and
investment of excess liquidity exist in writing.
a) Market risk
(i) Foreign exchange risk
The corporation operates internationally and is
exposed to foreign exchange risk arising from
various currency exposures. Foreign
exchange risk arises when future commercial
transactions or recognized assets or liabilities
are denominated in a currency that is not the
entity’s functional currency. Management has
set up a policy to require affiliated companies
to manage their foreign exchange risk against
their functional currency. The affiliated
companies are required to hedge their major
foreign exchange risk exposure using forward
contracts or other standard instruments,
usually transacted with Corporate Treasury.
For segment reporting purposes, each
affiliated company designates contracts with
Corporate Treasury as fair value hedges or
cash flow hedges, as appropriate. Presently,
most of the contracts are designated as cash
flow hedges. External foreign exchange
contracts are designated at the corporate
level as hedges of foreign exchange risk on
specific assets, liabilities, or future
transactions on a gross basis. The
corporation has certain investments in
foreign operations, whose net assets are
exposed to foreign currency translation risk.
If required, currency exposure arising from
the net assets of the corporation’s foreign
operations is managed primarily through
borrowings denominated in the relevant
foreign currencies.
The following tables show the hypothetical
influence on the income statement for 2013
and 2012 related to foreign exchange risk.
The volatility used for the calculation is the
one-year historic volatility on December 31 for
the relevant currency pair and year. For 2013,
the only currency pairs with significant inherent
risk were the USD versus the MXN as well as
the USD versus the BRL.
2013 in income statement
millions of CHF
Currency pair USD/MXN USD/BRL
Exposure 4.1 –2.5
Volatility 10.9% 13.1%
Effect on profit after tax (rate increase) 0.3 –0.2
Effect on profit after tax (rate decrease) –0.3 0.2
2012 in income statement
millions of CHF
Currency pair EUR/CNY EUR/SEK
Exposure –4.7 –5.4
Volatility 8.4% 6.8%
Effect on profit after tax (rate increase) –0.3 –0.3
Effect on profit after tax (rate decrease) 0.3 0.3
79
Sulzer | Annual Report 2013
Financial section
2013 in equity
millions of CHF
Currency pair GBP/USD USD/BRL USD/MXN EUR/CHF EUR/INR USD/CHF EUR/USD
Exposure 69.3 –32.6 –31.4 –37.1 –11.6 –15.6 6.9
Volatility 7.6% 13.1% 10.9% 4.5% 13.2% 8.6% 7.4%
Effect on equity, net of taxes (rate
increase) 3.9 –3.1 –2.5 –1.2 –1.1 –1.0 0.4
Effect on equity, net of taxes (rate
decrease) –3.9 3.1 2.5 1.2 1.1 1.0 –0.4
2012 in equity
millions of CHF
Currency pair GBP/USD USD/MXN USD/BRL USD/CHF EUR/INR EUR/CHF EUR/GBP
Exposure 67.4 –18.4 –17.6 –19.4 –12.8 –46.1 –9.8
Volatility 6.2% 10.7% 11.0% 8.1% 9.6% 1.7% 5.9%
Effect on equity, net of taxes
(rate increase) 3.1 –1.5 –1.4 –1.2 –0.9 –0.6 –0.4
Effect on equity, net of taxes
(rate decrease) –3.1 1.5 1.4 1.2 0.9 0.6 0.4
(ii) Price risk
As per December 31, 2013 the corporation
was not exposed to price risk related to
investments in equity securities either
classified as “available-for-sale” or at “fair
value through profit or loss.”
(iii) Interest rate sensitivity
The corporation’s interest rate risk arises from
interest-bearing assets and liabilities. Assets
and liabilities at variable rates expose the
corporation to cash flow interest rate risk.
Assets and liabilities at fixed rates expose the
corporation to fair value interest rate risk.
The corporation analyzes its interest rate
exposure on a net basis. The following table
shows the hypothetical influence on the
income statement for variable-interestbearing
assets net of liabilities at variable
interest rates, assuming market interest rate
levels would have increased/decreased by
100 basis points. For the most significant
currencies CHF, USD, CNY, BRL and INR,
increasing interest rates would have a
positive impact on the income statement,
since the value of variable-interest-bearing
assets (comprising mainly cash and cash
equivalents) would exceed the value of
variable- interest-bearing liabilities.
If, on December 31, 2013, the USD had
increased by 10.9% against the MXN with
all other variables held constant, profit after
tax for the year would have been CHF 0.3
million higher mainly due to foreign exchange
gains on USD-denominated assets. A
decrease of the rate would have caused
a loss of the same amount.
The following tables show the hypothetical
influence on equity for 2013 and 2012 related
to foreign exchange risk of the most
important currency pairs as at December 31
of the respective year. The volatility used for
the calculation is the one-year historic
volatility on December 31 for the relevant
currency pair and year. Most of the
hypothetical effect on equity is a result of
fair value changes of derivative financial
instruments designated as hedges of future
cash flows in foreign currencies.
80 Corporate accounting principles
Sulzer | Annual Report 2013
On December 31, 2013, if the interest rates on
CHF-denominated assets net of liabilities had
been 100 basis points higher with all other
variables held constant, post-tax profit for the
year would have been CHF 1.6 million higher
(2012: CHF 1.0 million higher), mainly as a
result of higher interest income on cash and
cash equivalents. A decrease of interest rates
on CHF-denominated assets net of liabilities
would have had no impact on post-tax profit
of 2013 and 2012.
b) Credit risk
Credit risk is managed on a corporation-wide
basis. Credit risk arises from cash and cash
equivalents, derivative financial instruments
and deposits with banks and financial
institutions, as well as credit exposures to
wholesale and retail customers, including
outstanding receivables and committed
transactions. For banks and financial
institutions, generally only independently rated
parties with a strong credit rating are
accepted, and the total volume of transactions
is split among several banks to reduce the
individual risk with one bank.
For every wholesale customer with a large
order volume, an individual risk assessment to
credit the quality of the customer is performed
that consider independent ratings, financial
position, past experience, and other factors.
Additionally, bank guarantees and letters of
credit are requested. For more details on the
credit risk out of trade accounts receivable,
please refer to note 16.
c) Liquidity risk
Prudent liquidity risk management includes
the maintenance of sufficient cash and
marketable securities, the availability of
funding from an adequate number of
committed credit facilities, and the ability
to close out market positions. Due to the
dynamic nature of the underlying businesses,
Corporate Treasury maintains flexibility in
funding through a committed credit line.
Management monitors forecast figures of
the corporation’s liquidity reserve on the basis
of expected cash flow. In 2012, a syndicated
credit line of CHF 500 million with a maturity
date of 2017 was established to furthermore
provide financial flexibility in the short run. If
special needs arise, financing will be reviewed
case by case.
The following table analyzes the corporation’s
financial liabilities that will be settled on a net
basis into relevant maturity groupings based
on the remaining period at the balance sheet
to the contractual maturity date. The amounts
disclosed in the table are the contractual
undiscounted cash flows calculated with the
year-end closing rates. Borrowings include the
notional amount as well as interest payments.
millions of CHF 2013 2012
5 years Total 5 years Total
Borrowings 70.7 29.5 507.3 1.0 608.5 91.3 20.6 552.5 15.5 679.9
Trade accounts payable 345.6 – – – 345.6 419.9 – – – 419.9
Other liabilities 66.6 0.3 0.3 1.3 68.5 94.3 0.4 0.3 – 95.0
millions of CHF 2013
Variable-interest-bearing assets (net) Amount Sensitivity Impact on post-tax profit
in basis points rate increase rate decrease
CHF 215.0 100 1.6 –
USD 98.2 100 0.7 –0.1
CNY 43.2 100 0.3 –0.1
BRL 43.0 100 0.3 –0.3
INR 14.3 100 0.1 –0.1
millions of CHF 2012
Variable-interest-bearing assets (net) Amount Sensitivity Impact on post-tax profit
in basis points rate increase rate decrease
CHF 137.6 100 1.0 –
USD 75.7 100 0.6 –0.2
EUR 73.2 100 0.5 –
CNY 36.7 100 0.3 –0.1
BRL 26.4 100 0.2 –0.2
81
Sulzer | Annual Report 2013
Financial section
The following table analyzes the corporation’s
derivative financial instruments that will be
settled on a gross basis into relevant maturity
groupings based on the remaining period at
the balance sheet date to the contractual
maturity date. The amounts disclosed in the
table are the contractual undiscounted cash
flows calculated with the year-end closing
rates. With every forward exchange contract
the corporation is obliged to pay an amount;
however, it also receives the equivalent amount
in a different currency. In case of options, only
sold options are considered, as only these
positions may generate a payment liability.
millions of CHF 2013
5 years Total
Forward exchange contracts
– outflow –1194.8 –20.0 – – –1214.8
– inflow 1194.8 20.0 – – 1214.8
Other derivative instruments
– outflow –0.7 – – – –0.7
– inflow – – – – –
millions of CHF 2012
5 years Total
Forward exchange contracts
– outflow –1195.3 –28.1 – – –1223.4
– inflow 1195.3 28.1 – – 1223.4
Other derivative instruments
– outflow –21.1 – – – –21.1
– inflow 33.2 – – – 33.2
3.2 Capital risk management
The corporation’s objectives when managing
capital are to safeguard the corporation’s
ability to continue as a going concern in
order to provide returns for shareholders
and benefits for other stakeholders and
to maintain an optimal capital structure to
reduce the cost of capital. In this respect
the corporation aims at maintaining an
investment grade credit rating, either as a
perceived rating or an external rating issued
by a rating agency.
In order to maintain or adjust the capital
structure, the corporation may adjust the
amount of dividends paid to shareholders,
return capital to shareholders, issue new
shares, or sell assets to reduce debt.
As do others in the same industry, the
corporation monitors capital on the basis
of the gearing ratio. This ratio is calculated
as total financial debt divided by equity
attributable to shareholders of Sulzer Ltd
(debt-to-equity ratio). The equity capital as
shown in the balance sheet corresponds to
the managed equity capital.
The decrease in the gearing ratio during 2013
resulted from a decrease in financial debt as
well as an increase in equity.
The gearing ratio as at December 31, 2013
and 2012, was as follows:
millions of CHF 2013 2012
Borrowings 572.5 609.0
Equity attributable to shareholders of Sulzer Ltd 2334.4 2216.6
Borrowings-to-equity ratio (gearing) 0.25 0.27
82 Corporate accounting principles
Sulzer | Annual Report 2013
3.3 Fair value estimation
The following table presents the carrying
amounts and fair values of financial assets
and liabilities as at December 31, 2013,
including their levels in the fair value hierarchy.
For financial assets and financial liabilities not
measured at fair value in the balance sheet,
fair value information is not provided if the
carrying amount is a reasonable
approximation of fair value.
The fair value of financial instruments traded in
active markets (such as trading and availablefor-sale
securities, or the outstanding bond) is
based on quoted market prices at the balance
sheet date. Such instruments (if any) are
included in level 1.
The fair value of financial instruments that are
not traded in an active market (e.g. over-thecounter
derivatives) is determined by using
valuation techniques. Forward exchange and
other forward contracts are valued using a
market comparison technique: the fair values
are based on quoted or otherwise observable
prices for similar instruments at the balance
sheet date. Forward exchange and other
forward contracts are included in level 2.
Contingent considerations (Level 3) are linked
on the fulfillment of certain parameters, mainly
related to technology transfer and retention of
key personnel. The corporation considered
the maximum amount and assumes the
fulfillment of the defined clauses.
millions of CHF Notes
Carrying
amount Fair value Level 1 Level 2 Level 3
Financial assets measured at fair value
Derivative assets 26 11.9 11.9 – 11.9 –
Total financial assets measured at fair value 11.9 11.9 – 11.9 –
Financial assets not measured at fair value
Loans and receivables 13 6.6
Available-for-sale financial assets 13 4.5
Non-current receivables (excluding derivative assets) 13.4
Trade accounts receivables 16 877.5
Other accounts receivables (excluding
derivative assets) 17 129.6
Cash and cash equivalents 18 528.7
Total financial assets not measured at fair value 1560.3 – – – –
Financial liabilities measured at fair value
Derivative liabilities 25, 26 5.4 5.4 – 5.4 –
Contingent considerations 2.3 2.3 2.3
Total financial liabilities measured at fair value 7.7 7.7 – 5.4 2.3
Financial liabilities not measured at fair value
Outstanding bond 23 498.1 519.2 519.2 – –
Bank loans and other borrowings 23 74.4
Trade accounts payable 345.6
Total financial liabilities not measured at fair value 918.1 519.2 519.2 – –
83
Sulzer | Annual Report 2013
Financial section
Contingent consideration
millions of CHF 2013 2012
Balance as of January 1 3.4 4.7
Assumed in a business combination 1.8 1.4
Transfer to liabilities held for sale –1.0 –
Release to other operating income –0.9 –
Payment of contingent consideration –1.0 –2.7
Total contingent consideration as of December 31 2.3 3.4
The following table presents the carrying amounts and fair values of financial assets and liabilities as at December 31, 2012.
millions of CHF Notes
Carrying
amount Fair value Level 1 Level 2 Level 3
Financial assets measured at fair value
Financial assets at fair value through profit or loss 19 5.8 5.8 1.3 4.5 –
Derivative assets 26 9.1 9.1 – 9.1 –
Total financial assets measured at fair value 14.9 14.9 1.3 13.6 –
Financial assets not measured at fair value
Loans and receivables 13 8.6
Available-for-sale financial assets 13 –
Non-current receivables (excluding derivative assets) 13.4
Trade accounts receivables 16 1012.1
Other accounts receivables (excluding
derivative assets) 17 121.5
Cash and cash equivalents 18 507.3
Total financial assets not measured at fair value 1662.9 – – – –
Financial liabilities measured at fair value
Derivative liabilities 25, 26 4.2 4.2 – 4.2 –
Contingent considerations 3.4 3.4 3.4
Total financial liabilities measured at fair value 7.6 7.6 – 4.2 3.4
Financial liabilities not measured at fair value
Outstanding bond 23 497.4 522.1 522.1 – –
Bank loans and other borrowings 23 111.6
Trade accounts payable 419.9
Notes payable 25 2.1
Total financial liabilities not measured at fair value 1031.0 522.1 522.1 – –
The vast majority of the corporation’s
contingent considerations represents
retention bonuses for key management
personnel. The corporation considers the
full amount as long as key management
personnel’s employment is ongoing.
84 Corporate accounting principles
Sulzer | Annual Report 2013
4 Critical accounting estimates
and judgments
All estimates and assessments are
continually reviewed and are based on
historical experience and other factors,
including expectations regarding future
events that appear reasonable under the
given circumstances. The corporation makes
estimates and assumptions that relate to the
future. By their nature, these estimates will
only rarely correspond to actual subsequent
events. The estimates and assumptions
that carry a significant risk, in the form of a
substantial adjustment to the present values
of assets and liabilities within the next financial
year, are set out below.
a) Goodwill
Goodwill amounted as per December 31,
2013 to CHF 978.4 million. In accordance
with the accounting policies set forth in
section 2.6 “Intangible assets,” the corporation
carries out an annual impairment test on
goodwill in the fourth quarter of the year, or
when indications of a potential impairment
exist. The recoverable amount from cashgenerating
units is measured on the basis
of value-in-use calculations influenced
materially by the terminal growth rate, the
discount rate, and the projected cash flows.
Information about assumptions and estimation
uncertainties that have significant risk of
resulting in a material adjustment in the year
ending December 31, 2014 are disclosed
in note 11.
b) Income taxes
The corporation is obliged to pay income
taxes in numerous jurisdictions. Significant
assumptions are required in order to
determine global tax provisions. There are
many transactions and calculations for which
the ultimate tax determination is uncertain
during the ordinary course of the business.
c) Provisions
The provisions for warranties/liabilities
include significant amounts to cover
pending items in connection with liabilities
and disagreements with the buyer of the
locomotive business. The assessment of
the related risks is, in view of the complex
character of the contracts involved and
their partially long-term nature, difficult.
d) Revenue recognition
The corporation uses the percentage of
completion method (PoC) in accounting
for major long-term contracts. The use of
the PoC method requires the corporation
to estimate the proportional revenue and
costs. If circumstances arise that may
change the original estimates of revenues,
costs, or extent of progress toward
completion, estimates are revised.
These revisions may result in increases
or decreases in estimated revenues or
costs and are reflected in income in the
period in which the circumstances that
give rise to the revision become known by
management. Revenue from the application
of the PoC method amounted as per
December 31, 2013 CHF 446.7 million
(see note 15).
e) Employee benefit plans
The present value of the pension obligation
and the plan assets depends on a number
of factors that are determined on an actuarial
basis using a number of assumptions.
Assumptions used in determining the defined
benefit obligation and the plan assets include
the discount rate, the expected rate of return
on plan assets, and the participation of
Sulzer in the pension plans. The assumptions
are reviewed and reassessed at the end of
each year based on observable market data,
i.e. interest rate of high-quality corporate
bonds denominated in the corresponding
currency and asset management studies.
The participation of Sulzer in the pension
plans covers the active employees and the
retirees related to Sulzer.
85
Sulzer | Annual Report 2013
Financial section
01 Significant changes in the scope of consolidation
All current figures related to business combinations in the reporting period are of temporary nature only as they can change
during the measurement period. If the estimates need to be revised, the allocation of the cost of the business combination shall
be adjusted accordingly.
Significant changes in 2013
Krøger A/S
On February 5, 2013, Sulzer acquired Krøger A/S, a leading manufacturer of dispensers in Greve, Denmark. Krøger A/S achieved sales
of approximately CHF 9.0 million in 2012 with 34 employees. The acquisition expands the product portfolio of the business unit Sulzer
Mixpac Systems. Transaction costs recognized in general and administrative expenses amounted to CHF 0.4 million. The goodwill is
attributable to synergies from combined solutions and shared services. For the year 2013, order intake came to CHF 7.9 million, sales
amounted to CHF 7.7 million, and operating income totaled CHF 0.1 million.
Acquired net assets of Krøger A/S
millions of CHF Fair value
Intangible assets 12.3
Property, plant, and equipment 0.7
Inventories 2.2
Trade accounts receivable 1.3
Other current assets 0.1
Liabilities with third parties –7.8
Identified acquired net assets 8.8
Purchase price (total consideration) 17.8
Contingent consideration 0.3
Goodwill 9.3
Tartek Oy
On October 31, 2013, Sulzer Pumps acquired Tartek Oy, a family owned company established in 1978, located in Rauma, Finland. Tartek
Oy is a specialist in development, manufacture, repair and maintenance of high-quality mechanical seals. With this acquisition, Sulzer
Pumps further expands its technology portfolio to provide extended seal offerings to customers in the pulp and paper, power, and water
industries. The goodwill is attributable to synergies from additional and combined solutions. For the year 2013, the order intake and sales
totaled CHF 0.1 million, operating income CHF 0.0 million.
Acquired net assets of Tartek Oy
millions of CHF Fair value
Property, plant, and equipment 0.2
Current assets 0.1
Liabilities with third parties –0.1
Identified acquired net assets 0.2
Purchase price paid in cash 4.7
Contingent consideration 1.5
Goodwill 6.0
Other
Sulzer Metco acquired 60% of Zigong Golden China Specialty Carbides, China, for a purchase price of CHF 0.3 million. The contribution
of this acquisition to the consolidated financial statements of Sulzer is not material.
Notes to the consolidated
financial statements
86 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
01 Significant changes in the scope of consolidation (continued)
Significant changes in 2012
Hidrotecar S.A.
On January 10, 2012, Sulzer Pumps acquired the privately owned pump company Hidrotecar S.A. in Burgos, Spain, for a purchase
price of EUR 12.2 million (CHF 14.8 million) paid in cash. The acquired company achieved sales of CHF 7.7 million in 2012 and employs
approximately 50 employees.
Acquired net assets of Hidrotecar S.A.
millions of CHF Fair value
Intangible assets 2.9
Property, plant, and equipment 5.5
Inventories 2.8
Trade accounts receivable 4.2
Liabilities with third parties –3.3
Identified acquired net assets 12.1
Purchase price (total consideration) 14.8
Goodwill 2.7
Thermoset Inc.
On December 26, 2012, Sulzer Metco acquired the assets of the carbon business of Thermoset Inc. in Mequon, Wisconsin, USA, for a
total consideration of USD 21.5 million (CHF 19.6 million) paid in cash. Transaction costs recognized in general and administrative
expenses amounted to CHF 0.2 million. For the year 2013, the order intake totaled CHF 17.2 million, sales amounted to CHF 17.2 million,
and the operating income totaled CHF 2.0 million.
Acquired net assets of Thermoset Inc.
millions of CHF Fair value
Intangible assets 6.9
Property, plant, and equipment 0.4
Inventories 0.9
Identified acquired net assets 8.2
Purchase price (total consideration) 19.6
Goodwill 11.4
No changes to the provisional purchase price allocation disclosed in the Sulzer Annual Report 2012 had to be considered.
Cash flow from acquisitions
millions of CHF 2013 2012
Non-current assets –13.5 –17.3
Inventories –2.2 –4.0
Other current assets –2.1 –4.2
Liabilities 7.8 3.3
Identified acquired net assets –10.0 –22.2
Cash acquired 0.7 –
Subtotal –9.3 –22.2
Goodwill –15.3 –16.0
Purchase price to be paid in future periods 1.8 2.0
Payments of purchase price relating to prior periods –1.0 –2.4
Total cash flow from acquisitions –23.8 –38.6
87
Sulzer | Annual Report 2013
Financial section
02 Discontinued operations
Sulzer Metco, with half of its sales in the automotive and aviation industries and about one-third in general industries, has a clear focus
outside Sulzer’s three key markets. On January 30, 2014, Sulzer has signed an agreement with Oerlikon for the divestment of its Sulzer
Metco division. As a consequence, Sulzer Metco is presented as discontinued operations and the assets and liabilities are classified as
held for sale. The comparative consolidated income statement and statement of comprehensive income have been restated to show
discontinued operation separately from continuing operations.
Income statement from discontinued operations
millions of CHF 2013 2012
Sales 698.0 680.9
Expenses –616.4 –600.8
Operating income 81.6 80.1
Financial result –1.3 –1.4
Income tax expenses –20.4 –20.2
Net income from discontinued operations 59.9 58.5
Attributable to shareholders of Sulzer Ltd 59.9 58.5
Attributable to non-controlling interests – –
Cash flows from discontinued operations
millions of CHF 2013 2012
Total cash flow from operating activities 67.6 65.6
Total cash flow from investing activities –27.2 –55.9
Total cash flow from financing activities –22.7 –9.3
88 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
02 Discontinued operations (continued)
Balance sheet of discontinued operations
millions of CHF 2013
Intangible assets 133.5
Property, plant, and equipment 146.0
Investments in associates 2.9
Other financial assets 0.1
Non-current receivables 15.4
Deferred income tax assets 11.8
Inventories 117.7
Advance payments to suppliers 3.0
Trade accounts receivable 101.4
Other accounts receivable and prepaid expenses 15.9
Cash and cash equivalents 21.2
Assets classified as held for sale 568.9
Long-term borrowings 13.5
Deferred income tax liabilities 3.9
Non-current provisions 29.0
Short-term borrowings 0.1
Current income tax liabilities 12.7
Current provisions 6.5
Trade accounts payable 36.3
Advance payments from customers 9.0
Other current and accrued liabilities 46.7
Liabilities classified as held for sale 157.7
03 Major currency exchange rates
CHF 2013 2012
Average
rate
Year-end
rate
Average
rate
Year-end
rate
1 EUR 1.23 1.23 1.21 1.21
1 GBP 1.45 1.47 1.49 1.48
1 USD 0.93 0.89 0.94 0.92
1 BRL 0.43 0.38 0.48 0.45
1 CAD 0.90 0.84 0.94 0.92
100 CNY 15.08 14.70 14.86 14.69
100 INR 1.59 1.44 1.76 1.67
100 MXN 7.27 6.81 7.13 7.05
100 SEK 14.23 13.86 13.85 14.06
1 SGD 0.74 0.70 0.75 0.75
100 ZAR 9.64 8.49 11.45 10.78
89
Sulzer | Annual Report 2013
Financial section
04 Segment information
millions of CHF Sulzer Pumps Sulzer Turbo Services Sulzer Chemtech Total Divisions
2013 2012 2013 2012 2013 2012 2013 2012
Order intake (unaudited) 2031.3 2094.3 471.7 535.2 749.9 705.1 3252.9 3334.6
Nominal growth (unaudited) –3.0% 22.8% –11.9% 12.1% 6.4% 0.5% –2.5% n/a
Adjusted growth (unaudited)1) –1.1% 7.1% –9.5% 8.4% 4.9% –4.1% –1.1% n/a
Order backlog (unaudited) 1235.0 1309.1 146.8 151.6 290.5 293.6 1672.3 1754.3
Sales 2051.3 2097.5 471.6 510.5 743.7 724.6 3266.6 3332.6
Nominal growth –2.2% 20.0% –7.6% 4.6% 2.6% 8.6% –2.0% n/a
Adjusted growth (unaudited)1) –0.4% 5.9% –5.2% 0.8% 1.3% 4.0% –0.7% n/a
Research and development expenses 34.8 31.8 – – 35.8 33.2 70.6 65.0
Operating income before
depreciation/amortization EBITDA 224.9 245.9 55.7 71.6 120.5 105.5 401.1 423.0
Depreciation/amortization –55.8 –54.7 –16.5 –16.7 –39.1 –34.8 –111.4 –106.2
Operating income before restructuring EBITR 178.6 199.3 40.5 54.9 81.3 70.5 300.4 324.7
Restructuring expenses –9.5 –8.1 –1.3 – 0.1 0.2 –10.7 –7.9
Operating income EBIT 169.1 191.2 39.2 54.9 81.4 70.7 289.7 316.8
Return on sales (EBIT/sales) ROS 8.2% 9.1% 8.3% 10.8% 11.0% 9.8% 8.9% 9.5%
Return on sales before restructuring
(EBITR/sales) ROSR 8.7% 9.5% 8.6% 10.8% 10.9% 9.7% 9.2% 9.7%
Return on capital employed (EBIT
in % of average capital employed) ROCE 12.1% 13.1% 11.1% 14.8% 19.7% 16.3% 13.4% 14.0%
Operating assets 2199.7 2257.7 488.0 510.6 606.8 626.6 3294.5 3394.9
Unallocated assets – – – – – – – –
Total assets as of December 31 2199.7 2257.7 488.0 510.6 606.8 626.6 3294.5 3394.9
Operating liabilities 808.3 860.7 143.6 140.1 230.3 209.8 1182.2 1210.6
Unallocated liabilities – – – – – – – –
Total liabilities as of December 31 808.3 860.7 143.6 140.1 230.3 209.8 1182.2 1210.6
Operating net assets 1391.4 1397.0 344.4 370.5 376.5 416.8 2112.3 2184.3
Unallocated net assets – – – – – – – –
Total net assets as of December 31 1391.4 1397.0 344.4 370.5 376.5 416.8 2112.3 2184.3
Capital expenditure 37.7 39.7 13.4 13.1 23.3 30.0 74.4 82.8
Employees (number of full-time
equivalents) as of December 31 8496 8573 2537 2703 4167 4086 15200 15362
1) Adjusted for currency effects as well as acquisitions and divestitures.
There are no significant transactions across the segments.
90 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
04 Segment information (continued)
millions of CHF Others Total Sulzer Sulzer Metco
2013 20122) 2013 20122) 2013 2012
Order intake (unaudited) –3.0 8.8 3249.9 3343.4 716.5 689.5
Nominal growth (unaudited) – – –2.8% n/a 3.9% 2.4%
Adjusted growth (unaudited)1) – – –1.1% n/a 1.7% 1.2%
Order backlog (unaudited) –0.2 –0.7 1672.1 1753.6 82.8 76.5
Sales –2.7 8.1 3263.9 3340.7 708.2 690.3
Nominal growth – – –2.3% n/a 2.6% 3.4%
Adjusted growth (unaudited)1) – – –0.7% n/a 0.6% 2.3%
Research and development expenses – 1.9 70.6 66.9 24.0 22.8
Operating income before
depreciation/amortization EBITDA –22.5 14.1 378.6 437.1 97.3 91.7
Depreciation/amortization –3.2 –2.2 –114.6 –108.4 –25.9 –23.0
Operating income before restructuring EBITR –19.6 11.9 280.8 336.6 72.4 67.0
Restructuring expenses –6.1 – –16.8 –7.9 –1.0 1.7
Operating income EBIT –25.7 11.9 264.0 328.7 71.4 68.7
Return on sales (EBIT/sales) ROS – – 8.1% 9.8% 10.1% 10.0%
Return on sales before restructuring (EBITR/sales) ROSR – – 8.6% 10.1% 10.2% 9.7%
Return on capital employed (EBIT in
% of average capital employed) ROCE – – 12.6% 14.7% 16.5% 17.1%
Operating assets 29.1 26.5 3323.6 3421.4 530.7 539.4
Unallocated assets (includes assets held for sale) – – 1220.3 1188.1 – –
Total assets as of December 31 29.1 26.5 4543.9 4609.5 530.7 539.4
Operating liabilities 76.9 60.1 1259.1 1270.7 110.1 115.1
Unallocated liabilities (includes liabilities held for sale) – – 944.1 1115.4 – –
Total liabilities as of December 31 76.9 60.1 2203.2 2386.1 110.1 115.1
Operating net assets –47.8 –33.6 2064.5 2150.7 420.6 424.3
Unallocated net assets – – 276.2 72.7 – –
Total net assets as of December 31 –47.8 –33.6 2340.7 2223.4 420.6 424.3
Capital expenditure 6.1 10.2 80.5 93.0 28.4 35.2
Employees (number of full-time
equivalents) as of December 31 182 175 15382 15537 2450 2399
1) Adjusted for currency effects as well as acquisitions and divestitures.
2) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
91
Sulzer | Annual Report 2013
Financial section
04 Segment information (continued)
by geographical region
millions of CHF
Operating assets by
company location
Capital expenditure in intangible and
tangible assets by company location Sales by region
2013 20121) 2013 20122) 2013 20122)
Europe, Middle East, Africa 2237.8 2593.1 49.7 47.4 1402.4 1421.2
– thereof Switzerland 325.2 392.0 21.7 29.3 41.7 45.7
– thereof Germany 123.7 224.3 3.9 2.5 168.7 172.5
– thereof United Kingdom 368.7 367.0 5.5 3.5 227.1 258.9
Americas 648.1 836.2 17.6 20.6 1130.0 1145.5
– thereof USA 432.3 544.4 10.7 13.5 699.8 675.7
– thereof Brazil 123.6 156.8 4.6 3.2 144.4 176.1
Asia-Pacific 437.7 531.5 13.2 25.0 731.5 774.0
– thereof China 273.0 311.8 7.0 18.6 355.5 349.9
– thereof India 61.0 73.3 2.2 2.8 42.5 65.7
Total 3323.6 3960.8 80.5 93.0 3263.9 3340.7
1) Includes discontinued operations.
2) Restated, includes only continuing operations.
Sales of divisions by region (as percentage)
Europe, Middle East, Africa Americas Asia-Pacific
2013 2012 2013 2012 2013 2012
Sulzer Pumps 45.4% 45.4% 35.5% 34.3% 19.1% 20.3%
Sulzer Turbo Services 40.9% 39.4% 42.9% 44.0% 16.2% 16.6%
Sulzer Chemtech 37.4% 35.6% 27.1% 28.0% 35.5% 36.4%
05 Personnel expenses
millions of CHF 2013 20121)
Salaries and wages 838.6 821.9
Employee defined contribution plans 24.1 23.0
Employee defined benefit plans 18.4 17.6
Cost of share-based payments 8.4 10.3
Other personnel costs 157.9 147.0
Total personnel expenses 1047.4 1019.8
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
Personnel expenses increased by CHF 27.6 million from the previous year as a consequence of the acquisitions as well as higher other
personnel costs.
92 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
06 Employee benefit plans
The defined benefit obligation for the active members of pension plans is the present value of accrued pension obligations at balance
sheet date considering future salary and pension increases as well as turnover rates (using the Project Unit Credit Method). The defined
benefit obligation for the retirees is the present value of the ongoing pensions considering future pension increases.
millions of CHF 2013 20121)
Funded
plans
Switzerland
Funded
plans
United
Kingdom
Funded
plans
USA
Funded
plans
Others
Unfunded
plans Total Total
Reconciliation of the amount recognized in the balance
sheet as of December 31
Present value of funded defined benefit obligation –1357.0 –516.0 –45.9 –49.4 – –1968.3 –2042.2
Fair value of plan assets 1420.0 471.8 35.8 42.0 – 1969.6 1947.9
Overfunding (+) / underfunding (–) 63.0 –44.2 –10.1 –7.4 – 1.3 –94.3
Present value of unfunded defined benefit obligation – – – – –66.4 –66.4 –63.8
Adjustment to asset ceiling –51.5 – – – – –51.5 –11.9
Asset (+) / liability (–) recognized in the balance sheet 11.5 –44.2 –10.1 –7.4 –66.4 –116.6 –170.0
– thereof as liabilities under non-current provisions –0.5 –44.2 –10.1 –7.7 –48.8 –111.3 –184.2
– thereof as prepaid expenses 12.0 – – 0.3 – 12.3 14.2
– thereof as liabilities held for sale – – – – –17.6 –17.6 –
1) Restatement of prior year figures, see corporate accounting policies 2.2.
Sulzer operates major funded defined benefit (“DB”) pension plans in Switzerland, UK, Ireland, and the USA. Unfunded defined benefit
plans refer to German defined benefit plans. The plans are exposed to actuarial risks, e.g. longevity risk, currency risk, interest rate risk
and the funded plans additionally to market (investment) risk.
In Switzerland Sulzer contributes to two pension plans funded via two different pension funds, i.e. a base plan for all employees and
a supplementary plan for employees with salaries exceeding a certain limit. Both plans provide benefits depending on the pension
savings at retirement. They offer certain guarantees by law as minimum interest credits to the pension savings (i.e. investment return)
and guaranteed rates of conversion of pension savings into an annuity at retirement. In addition the plans offer death in service and
disability benefits. The pension funds are legally separated from the corporation. The vast majority of the active participants in the two
pension funds are employed at businesses not belonging to the corporation. The board of trustees for the base plan comprises ten
employee and ten employer representatives of the contributing businesses. Both plans are fully funded by the end of the year according
to IAS 19R.
In the UK Sulzer operates two funded defined benefit plans managed as sections of the Sulzer Pension Scheme. The scheme is
structured as Sulzer Pension Trustees Ltd with six Trustee Directors forming the Trustee Board. Four Trustee Directors are company
nominated, one Trustee Director is Sulzer member nominated and one Trustee Director is Sulzer Dowding & Mills member nominated.
Both plans are multi-employer schemes with Sulzer (UK) Holding being the sponsor. Both plans are closed to new entrants and the
John Holt Defined Benefit Pension Scheme is closed for future accruals since February 2010.
In the USA, Sulzer operates non contributory defined benefit retirement plans covering substantially all of their employees. The salaried
plans provide benefits that are based on years of service and the employee’s compensation, averaged over the five highest consecutive
years preceding retirement. The hourly plans’ benefits are based on years of service and a flat dollar benefit multiplier. All plans are
closed to new entrants. This led in 2013 to a negative past service cost of CHF 3.1 million.
In addition Sulzer sponsors two Irish funded defined benefit plans. During the year the following changes were made to past and future
service benefits of the staff plan. First; retirement ages were extended to 66, 67 and 68 depending on year of birth; compulsory
commutation of 25% of each member’s benefit was introduced on retirement; and the staff defined benefit plan has been closed for new
entrants in 2013 and a new defined contribution plan has been introduced. The effect of these changes amounted to CHF 5.2 million
negative past service cost.
In Germany, Sulzer operates a range of different DB pension plans. The majority of these plans are unfunded and benefits are paid
directly by the employer to the beneficiaries as they fall due. All DB plans are closed for new joiners and a new defined contribution plan
for all employees was introduced in 2007. Existing employees who participated in the DB plans continued to be eligible for these DB
pensions but became also eligible for the new DC pensions. However, the benefits under the DC plan are offset against the benefits
under the DB plans. The different DB plans offer old age pension, disability pension and survivors pension benefits.
93
Sulzer | Annual Report 2013
Financial section
06 Employee benefit plans (continued)
millions of CHF 2013 20121)
Reconciliation of effect of asset ceiling
Adjustment to asset ceiling at January 1 11.9 16.6
Interest expense/(income) on effect of asset ceiling 0.2 0.4
Change in effect of asset ceiling excl. interest expense/(income) 39.4 –5.1
Currency translation adjustment – –
Adjustment to asset ceiling at December 31 51.5 11.9
Reconciliation of asset (+)/liability (–) recognized in the balance sheet
Asset (+)/liability (–) recognized at January 1 –170.0 –184.3
Defined benefit cost recognized in profit or loss –28.9 –28.6
Defined benefit cost recognized in OCI 48.6 –2.8
Contributions by the employer/benefit paid directly by the entity 34.9 45.3
Change in scope of consolidation – –
Currency translation differences –1.2 0.4
Asset (+) / liability (–) recognized at December 31 –116.6 –170.0
Components of defined benefit cost in profit or loss
Current service cost (employer) –30.5 –27.2
Interest cost –55.6 –62.4
Interest income on plan assets 49.4 54.7
Past service cost 8.3 7.1
Effects of curtailments and settlement 0.1 –
Interest expense on effect of asset ceiling –0.2 –0.4
Other administrative cost –0.4 –0.4
Expense recognized in profit or loss –28.9 –28.6
– thereof charged to personnel expenses –18.4 –17.6
– thereof charged to financial income –6.4 –7.4
– thereof charged to net income from discontinued operations –4.1 –3.6
Components of defined benefit cost in OCI
Actuarial gain/(loss) on defined benefit obligation 23.8 –90.4
Return on plan assets excl. interest income 64.0 82.5
Change in effect of asset ceiling excl. interest expense/income –39.4 5.1
Return on reimbursement right excl. interest income 0.2 –
Others – –
Defined benefit cost recognized in OCI2) 48.6 –2.8
1) Restatement of prior year figures, see corporate accounting policies 2.2.
2) The tax effect on defined benefit cost recognized in OCI amounted to CHF -11.9 million (2012: CHF 2.1 million).
94 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
06 Employee benefit plans (continued)
millions of CHF 2013 20121)
Reconciliation of defined benefit obligation
Defined benefit obligation as of January 1 2106.0 2027.0
Interest cost 55.6 62.4
Current service cost (employer) 30.5 27.2
Contributions by plan participants 12.1 11.3
Past service cost –8.3 –7.1
Benefits paid/deposited –133.9 –112.6
Effects of curtailments and settlement –0.4 –
Other administrative cost 0.4 0.4
Actuarial gain (–)/loss (+) on obligation –23.8 90.5
Currency translation differences –3.5 6.9
Defined benefit obligation as of December 312) 2034.7 2106.0
Reconciliation of the fair value of plan assets
Fair value of plan assets as of January 1 1947.9 1859.4
Interest income on plan assets 49.4 54.7
Contributions by the employer/benefits paid directly by the employer3) 34.9 45.3
Contributions by plan participants 12.1 11.3
Benefits paid/deposited –133.9 –112.6
Effects of curtailments and settlement –0.3 –
Return on plan assets excl. interest income 64.0 82.5
Currency translation differences –4.5 7.3
Fair value of plan assets as of December 31 1969.6 1947.9
Total plan assets at fair value – Quoted market price
Cash and cash equivalents 69.6 96.7
Equity instruments third parties 622.2 528.7
Equity instruments Sulzer Ltd 0.4 1.2
Debt instruments third parties 722.1 746.5
Real estate funds 44.6 41.3
Investment funds 0.2 –
Others 42.0 45.3
Total assets at fair value – Quoted market price as of December 31 1501.1 1459.7
Total plan assets at fair value – Non-quoted market price
Properties occupied by or used by third parties (Real estate) 283.4 288.6
Others 185.1 199.6
Total assets at fair value – Non-quoted market price as of December 31 468.5 488.2
Best estimate of contributions for upcoming financial year
Contributions by the employer/benefits paid directly by the employer3) 31.4 30.1
Contributions by plan participants 11.8 11.9
1) Restatement of prior year figures, see corporate accounting policies 2.2.
2) The defined benefit obligation 2013 includes the funded part (CHF 1968.3 million) and the unfunded part (CHF 66.4 million).
3) Benefits paid directly by the employer mainly refer to the German plans.
95
Sulzer | Annual Report 2013
Financial section
06 Employee benefit plans (continued)
millions of CHF 2013 20121)
Components of defined benefit obligation, split (§137)
Defined benefit obligation at December 31 for active members 406.6
Defined benefit obligation at December 31 for pensioners 1607.4
Defined benefit obligation at December 31 for deferred members 20.7
Total defined benefit obligation at December 31 2034.7 2106.0
Components of actuarial (gain)/losses on obligations (§141 lit. c)
Actuarial (gain)/loss arising from changes in financial assumptions –50.5
Actuarial (gain)/loss arising from changes in demogr. assumptions –
Actuarial (gain)/loss arising from experience adjustments 26.7
Actuarial (gain)/loss on defined benefit obligation –23.8 90.5
Components of economic benefit available (§141 lit. c)
Economic benefits available in form of refund 0.4 –
Economic benefits available in form of reduction in future contribution 11.9 14.2
Total economic benefit available 12.3 14.2
Maturity profile of defined benefit obligation (§147 lit. c)
Weighted average duration of defined benefit obligation in years 13.0
Sensitivity analysis of defined benefit obligation
Discount rate (decrease 0.25%) 2088.8
Discount rate (increase 0.25%) 1975.6
Future salary growth (decrease 0.25%) 2023.9
Future salary growth (increase 0.25%) 2038.4
Life expectance (decrease 1 year) 1948.3
Life expectance (increase 1 year) 2111.7
Principal actuarial assumptions as of December 31
Discount rate 2.9% 2.7%
Future salary increases 1.3% 1.9%
Future pension increases 0.7% 0.7%
Expected average remaining working lives in years 9.4 9.4
Life expectance at retirement age (male/female) in years 21/25 21/25
1) Restatement of prior year figures, see corporate accounting policies 2.2.
07 Research and development expenses
In 2013, total research and development expenses amounted to CHF 70.6 million (2012: CHF 66.9 million). A breakdown of the research
and development expenses per division is shown in note 04, “Segment information.”
96 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
08 Other operating income and expenses
millions of CHF 2013 20121)
Income from disposal of group companies to third party 10.0 2.6
Income from services to third parties 8.2 6.4
Operating currency exchange gains 5.2 –
Income from litigation cases 1.6 1.9
Income from negative past service costs 8.3 7.1
Other operating income 17.3 12.2
Total other operating income 50.6 30.2
Loss from litigation cases –3.5 –0.9
Operating currency exchange losses – –1.9
Expenses from adjustments to defined benefit cost –3.4 –2.0
Other operating expenses –18.1 –21.1
Total other operating expenses –25.0 –25.9
Total other operating income and expenses, net 25.6 4.3
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
Total other operating income and expenses amounted to CHF 25.6 million in 2013 compared to CHF 4.3 million in the previous year. In 2013,
Sulzer was able to release no longer required provisions of CHF 9.5 million, relating to the sale of Sulzer Real Estate Ltd (2012: CHF 2.6 million).
Additional CHF 8.3 million (2012: CHF 7.1 million) resulted from negative past service cost related to defined benefit plans (refer to note 06).
09 Financial income and expenses
millions of CHF 2013 20121)
Interest and securities income 5.0 4.6
Interest expenses –16.8 –18.4
Interest on employee benefit plans –6.4 –7.4
Interest expenses –23.2 –25.8
Total interest expenses –18.2 –21.2
Income from investments and other financial assets –0.1 31.3
Fair value changes 0.9 4.1
Other financial income/expenses 0.4 –1.7
Currency exchange losses –4.8 –11.3
Total other financial income/(expenses) –3.6 22.4
Total financial income/(expenses) –21.8 1.2
– thereof from financial assets held at fair value through profit or loss 0.9 4.1
– thereof from available-for-sale financial assets – 31.0
– thereof from loans and receivables – 0.4
– thereof from borrowings –16.8 –18.4
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
The income on interest and securities slightly increased while interest expenses decreased compared with 2012, mainly due to the
reduction of borrowings. The “Fair value changes” largely comprise the fair valuation of derivative financial instruments that are classified
as financial assets or financial liabilities at fair value through profit or loss and that are used as hedging instruments with regard to foreign
exchange risks. The impact of the fair valuation of these derivatives partially offsets the currency exchange losses incurred during 2013.
97
Sulzer | Annual Report 2013
Financial section
10 Income taxes
millions of CHF 2013 20121)
Current income tax expenses –77.8 –99.7
Deferred income tax expenses 11.9 19.1
Total income tax expenses continuing operations –65.9 –80.6
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
The weighted average tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes and
non-controlling interest. Since the corporation operates in countries that have differing tax laws and rates, the consolidated weighted
average effective tax rate will vary from year to year according to variations in income per country and changes in applicable tax rates.
millions of CHF 2013 20121)
Income continuing operations before income tax expenses 242.2 329.9
Weighted average tax rate 26.7% 25.9%
Income taxes at weighted average tax rate –64.7 –85.4
Income taxed at different tax rates –3.6 5.6
Effect of tax loss carryforwards and allowances for deferred income tax assets – –3.6
Expenses not deductible for tax purposes –4.4 –4.6
Effect of changes in tax rates and legislation 1.7 1.7
Prior period items and others 5.1 5.7
Total income tax expenses –65.9 –80.6
Effective income tax rate 27.2% 24.4%
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
The increase in the effective income tax rate to 27.2% can be explained through a change in allocation of taxable profit to countries with
higher income tax rates and the one-time effect recorded in 2012 from the gain from sale of third-party shares taxable at a low tax rate.
Income tax liabilities
millions of CHF 2013 2012
Balance as of January 1 64.6 62.3
Changes in scope of consolidation 0.8 –
Additions 65.6 71.8
Released as no longer required –7.9 –7.3
Released for utilization –78.5 –61.6
Transfer to liabilities held for sale –12.7 –
Currency translation differences –1.3 –0.6
Total income tax liabilities as of December 31 30.6 64.6
– thereof non-current 3.8 9.3
– thereof current 26.8 55.3
98 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
10 Income taxes (continued)
Summary of deferred income tax assets and liabilities in the balance sheet
millions of CHF 2013 20121)
Assets Liabilities Assets Liabilities
Intangible assets 1.8 88.9 2.4 96.5
Property, plant, and equipment 2.0 17.9 2.3 20.9
Other financial assets 1.0 5.7 0.1 6.6
Inventories 23.4 2.1 27.4 4.4
Other assets 19.6 9.7 22.5 10.1
Non-current provisions 27.0 4.6 42.7 0.1
Current provisions 24.2 1.5 28.0 2.6
Other current liabilities 21.3 25.3 24.4 31.2
Tax loss carryforwards 33.0 – 33.9 –
Elimination of intercompany profits 2.8 – 4.6 –
Total potential tax effect 156.1 155.7 188.3 172.4
Valuation allowances –9.5 – –10.5 –
Deferred income tax – gross 146.6 155.7 177.8 172.4
Offset of assets and liabilities –54.2 –54.2 –59.4 –59.4
Net recorded deferred income tax assets and liabilities 92.4 101.5 118.4 113.0
1) Restatement of prior year figures, see corporate accounting policies 2.2 and note 02.
Deferred income tax liabilities directly recorded in equity amounted to CHF –6.8 million (2012 Deferred income tax assets: CHF 2.9
million). In compliance with the exception clause of IAS 12, the corporation does not recognize deferred taxes on investments in
subsidiaries in the balance sheet.
Tax loss carryforwards
millions of CHF 2013 2012
Amount
Potential tax
assets
Valuation
allowance
Carrying
amount Amount
Potential tax
assets
Valuation
allowance
Carrying
amount
Expiring in the next 3 years 22.5 5.5 –0.4 5.1 29.7 6.5 –1.7 4.8
Expiring in 4–7 years 25.0 5.5 –5.4 0.1 15.3 3.3 –1.2 2.1
Available without limitation 100.4 22.0 –3.6 18.4 110.5 24.1 –7.6 16.5
Total tax loss carryforwards 147.9 33.0 –9.4 23.6 155.5 33.9 –10.5 23.4
Deferred income tax assets are recognized for tax loss carryforwards to the extent that the realization of the related tax benefit through
future taxable profits is probable.
99
Sulzer | Annual Report 2013
Financial section
11 Intangible assets
millions of CHF 2013
Goodwill
Trademarks
and licenses
Research and
development
Computer
software
Customer
relationship Total
Acquisition cost
Balance as of January 1 1092.7 158.9 1.8 48.4 338.0 1639.8
Changes in scope of consolidation 15.3 2.2 – – 10.1 27.6
Additions – 0.4 0.7 3.7 – 4.8
Disposals – – – –1.7 – –1.7
Reclassifications – – – 0.3 0.4 0.7
Transfer to assets held for sale –114.9 –5.0 – –6.1 –25.3 –151.3
Currency translation differences –14.7 –1.4 – –0.6 –7.0 –23.7
Balance as of December 31 978.4 155.1 2.5 44.0 316.2 1496.2
Accumulated amortization
Balance as of January 1 – 61.7 – 42.2 88.9 192.8
Additions – 15.2 – 3.4 26.3 44.9
Disposals – – – –1.5 – –1.5
Transfer to assets held for sale – –3.0 – –5.2 –10.4 –18.6
Currency translation differences – –0.5 – –0.4 –2.7 –3.6
Balance as of December 31 – 73.4 – 38.5 102.1 214.0
Net book value
As of January 1 1092.7 97.2 1.8 6.2 249.1 1447.0
As of December 31 978.4 81.7 2.5 5.5 214.1 1282.2
The changes in scope of consolidation in 2013 refer to the acquisitions of Krøger A/S and Tartek Oy. For further details refer to note 01.
100 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
11 Intangible assets (continued)
millions of CHF 2012
Goodwill
Trademarks
and licenses
Research and
development
Computer
software
Customer
relationship Total
Acquisition cost
Balance as of January 1 1060.9 155.8 – 47.5 321.8 1586.0
Changes in scope of consolidation 16.2 0.2 – – 11.4 27.8
Additions – 0.6 – 1.8 – 2.4
Disposals – –0.3 – –0.9 –0.1 –1.3
Reclassifications – 0.1 1.8 0.5 – 2.4
Currency translation differences 15.6 2.5 – –0.5 4.9 22.5
Balance as of December 31 1092.7 158.9 1.8 48.4 338.0 1639.8
Accumulated amortization
Balance as of January 1 – 46.4 – 40.1 64.3 150.8
Additions – 15.4 – 3.4 24.6 43.4
Disposals – –0.3 – –0.9 – –1.2
Currency translation differences – 0.2 – –0.4 – –0.2
Balance as of December 31 – 61.7 – 42.2 88.9 192.8
Net book value
As of January 1 1060.9 109.4 – 7.4 257.5 1435.2
As of December 31 1092.7 97.2 1.8 6.2 249.1 1447.0
Goodwill impairment test
millions of CHF
Sulzer
Pumps
Sulzer Turbo
Services
Sulzer
Chemtech
Sulzer
Metco
Goodwill, net book value as of December 31, 2013 677.1 184.7 116.6 114.9
The test is based on the following assumptions:
Growth rate for the residual amount 1.4% 0.0% 0.0% 2.0%
Pretax discount rate 10.6% 10.1% 10.7% 9.2%
Goodwill, net book value as of December 31, 2012 679.6 189.1 110.1 113.9
The test is based on the following assumptions:
Growth rate for the residual amount 1.5% 0.0% 0.0% 2.0%
Pretax discount rate 11.0% 9.9% 12.3% 10.4%
Goodwill is allocated to the smallest identifiable cash-generating unit (CGU) at which the goodwill is monitored for internal management
purposes (i.e. business units and areas). The fair value of these units is determined by calculating its value in use. The calculation is
generally based on five-year cash flow projections derived from mid-range plans that have been approved by management. Cash flows
beyond this planning period are extrapolated using a terminal value including the growth rates as stated above. The assumptions above
were used for the analysis of every cash-generating unit. Significant goodwill positions relate to the Configured Solutions (Sulzer Pumps)
business with CHF 647.9 million and to Sulzer Turbo Services EMEA with CHF 148.6 million.
Compared with the prior year, growth and pretax discount rates were adjusted where necessary to reflect management’s latest estimate
and to adjust for current market data. No impairment was recognized in 2013 and 2012. Sensitivity analyses using the key parameters
such as sales growth and discount rates showed that for none of the CGUs an impairment is considered reasonably probable with the
exception of the Configured Solutions business, for which an increase of the pretax discount rate from 10.2% to 12.4% or a reduction of
the future cash flows by 3.2% would result in a value in use being identical to the carrying amount of the goodwill. As a consequence any
further reduction would trigger an impairment charge.
101
Sulzer | Annual Report 2013
Financial section
12 Property, plant, and equipment
millions of CHF 2013
Land and
buildings
Machinery
and technical
equipment
Other
non-current
assets
Assets
under
construction Total
Acquisition cost
Balance as of January 1 432.7 922.2 233.6 50.0 1638.5
Changes in scope of consolidation 0.5 4.9 –0.1 – 5.3
Additions 6.4 35.7 18.3 43.8 104.2
Disposals –7.9 –44.8 –16.9 – –69.6
Reclassifications 8.9 29.9 13.9 –54.1 –1.4
Transfer to assets held for sale –81.3 –277.9 –53.5 –10.1 –422.8
Currency translation differences –12.5 –18.0 –6.3 –1.0 –37.8
Balance as of December 31 346.8 652.0 189.0 28.6 1216.4
Accumulated depreciation
Balance as of January 1 165.8 642.4 180.3 – 988.5
Changes in scope of consolidation 0.2 3.9 –0.1 – 4.0
Additions 17.0 59.9 19.3 – 96.2
Disposals –5.2 –41.0 –15.2 – –61.4
Transfer to assets held for sale –40.4 –201.5 –40.2 – –282.1
Impairment –0.3 –0.2 –0.2 – –0.7
Currency translation differences –4.1 –11.7 –4.3 – –20.1
Balance as of December 31 133.0 451.8 139.6 – 724.4
Net book value
As of January 1 266.9 279.8 53.3 50.0 650.0
As of December 31 213.8 200.2 49.4 28.6 492.0
Thereof leased property, plant, and equipment
Acquisition cost of leased property, plant, and equipment 0.7 0.7 0.1 – 1.5
Accumulated depreciation – 0.3 – – 0.3
Net book value as of December 31 0.7 0.4 0.1 – 1.2
Leasing commitments (present value) 0.4 0.3 0.1 – 0.8
Fire insurance value 526.4 1135.4 466.4 28.6 2156.8
102 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
12 Property, plant, and equipment (continued)
millions of CHF 2012
Land and
buildings
Machinery
and technical
equipment
Other
non-current
assets
Assets
under
construction Total
Acquisition cost
Balance as of January 1 408.5 875.1 224.0 54.7 1562.3
Changes in scope of consolidation 3.1 2.3 – 0.1 5.5
Additions 5.5 41.3 15.1 63.9 125.8
Disposals –1.2 –23.6 –8.8 – –33.6
Reclassifications 21.8 36.3 7.5 –68.0 –2.4
Currency translation differences –5.0 –9.2 –4.2 –0.7 –19.1
Balance as of December 31 432.7 922.2 233.6 50.0 1638.5
Accumulated depreciation
Balance as of January 1 153.1 615.1 174.6 – 942.8
Changes in scope of consolidation – –0.1 –0.4 – –0.5
Additions 15.5 55.3 17.2 – 88.0
Disposals –0.9 –21.8 –8.3 – –31.0
Impairment – – – – –
Currency translation differences –1.9 –6.1 –2.8 – –10.8
Balance as of December 31 165.8 642.4 180.3 – 988.5
Net book value
As of January 1 255.4 260.0 49.4 54.7 619.5
As of December 31 266.9 279.8 53.3 50.0 650.0
Thereof leased property, plant, and equipment
Acquisition cost of leased property, plant, and equipment 6.1 1.6 0.1 – 7.8
Accumulated depreciation 2.8 0.7 – – 3.5
Net book value as of December 31 3.3 0.9 0.1 – 4.3
Leasing commitments (present value) 3.7 0.4 0.1 – 4.2
Fire insurance value 614.1 1447.4 401.4 50.0 2512.9
103
Sulzer | Annual Report 2013
Financial section
13 Other financial assets
millions of CHF 2013
Available-forsale
Loans and
receivables Total
Balance as of January 1 – 8.6 8.6
Additions – 0.3 0.3
Disposals – – –
Reclassifications 4.5 –1.2 3.3
Transfer to assets held for sale – –0.1 –0.1
Changes in fair value – – –
Currency translation differences – –1.0 –1.0
Balance as of December 31 4.5 6.6 11.1
millions of CHF 2012
Available-forsale
Loans and
receivables Total
Balance as of January 1 28.2 8.0 36.2
Additions – 1.2 1.2
Disposals –32.0 –0.1 –32.1
Reclassifications – – –
Changes in fair value 3.8 –0.1 3.7
Currency translation differences – –0.4 –0.4
Balance as of December 31 – 8.6 8.6
Financial assets that belong to the category “Available-for-sale financial assets” include investments in equity securities. The category “Loans and
receivables” includes items with maturities beyond 12 months.
14 Inventories
millions of CHF 2013 2012
Raw materials, supplies, and consumables 108.4 167.5
Work in progress 243.9 323.4
Finished products and trade merchandise 84.2 132.0
Total inventories 436.5 622.9
In 2013, Sulzer recognized write-downs of CHF 18.9 million (2012: CHF 14.8 million) in the income statement. Total accumulated write-downs on
inventories amounted to CHF 64.2 million as of December 31, 2013 (2012: CHF 74.3 million). Material expenses in 2013 amounted to CHF 1365.9
million (2012: CHF 1310.6 million).
104 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
15 Percentage of completion contracts
millions of CHF 2013 2012
Contract revenue recognized in the period 446.7 377.3
Net receivables resulting from construction contracts 191.6 174.9
Net liabilities resulting from construction contracts –29.2 –35.6
Advance payments received from customers –471.4 –502.7
Sales recognized in accordance with the percentage of completion method for the reporting period amounted to CHF 446.7 million, which corresponds
to 13.7% of total sales (2012: CHF 377.3 million, or 11.3% of sales). The costs related to this sales figure amounted to CHF 352.5 million (2012: CHF 305.4
million). The impact on gross profit was CHF 94.2 million, which corresponds to 9.4% of total gross profit (2012: CHF 71.9 million, 6.9%).
16 Trade accounts receivable
Aging structure of trade accounts receivable
millions of CHF 2013 2012
Gross
amount Allowance
Net book
value
Gross
amount Allowance
Net book
value
Not past due 645.7 –6.8 638.9 736.3 –2.3 734.0
Past due
1–30 days 91.8 –0.7 91.1 124.8 –1.0 123.8
31–60 days 37.0 –1.4 35.6 49.4 –4.0 45.4
61–90 days 26.7 –0.6 26.1 27.2 –1.7 25.5
91–120 days 19.6 –1.5 18.1 20.2 –2.0 18.2
>120 days 90.2 –22.5 67.7 95.0 –29.8 65.2
Total trade accounts receivable 911.0 –33.5 877.5 1052.9 –40.8 1012.1
Allowance for doubtful trade accounts receivable
millions of CHF 2013 2012
Balance as of January 1 40.8 45.1
Changes in scope of consolidation – –
Additions 26.8 35.7
Released as no longer required –21.8 –25.1
Released for utilization –7.2 –14.1
Reclassifications to assets held for sale –2.6 –
Currency translation differences –2.5 –0.8
Balance as of December 31 33.5 40.8
Approximately 29.1% (2012: 30.1%) of the gross amount of trade accounts receivable is past due, and an allowance of CHF 33.5 million (2012: CHF
40.8 million) was recorded. The recoverability of trade accounts receivable is regularly reviewed, and the credit quality of new customers is thoroughly
assessed. Due to the large and heterogeneous customer base, the credit risk of the corporation is limited.
105
Sulzer | Annual Report 2013
Financial section
17 Other accounts receivable and prepaid expenses
millions of CHF 2013 2012
Receivables from tax authorities 64.6 64.9
Derivative financial instruments 11.5 8.7
Other accounts receivable 32.3 24.0
Total other accounts receivable 108.4 97.6
Insurance premiums 2.6 3.8
Prepaid contributions to employee benefit plans1) 12.3 14.2
Other prepaid expenses 30.1 28.8
Total prepaid expenses 45.0 46.8
Total other accounts receivable and prepaid expenses 153.4 144.4
1) Restatement of prior year figures, see corporate accounting policies 2.2.
For further details on the position “Derivative financial instruments,” refer to note 26. Other accounts receivable do not include any material
positions that are past due or impaired.
18 Cash and cash equivalents
millions of CHF 2013 2012
Average eff.
interest rate Amount
Average eff.
interest rate Amount
Cash 479.2 486.1
Cash equivalents 49.5 21.2
Total cash and cash equivalents 0.73 528.7 0.89 507.3
19 Marketable securities
millions of CHF 2013 2012
Designated at fair value through profit or loss – 5.8
Total marketable securities – 5.8
As of December 31, 2013 no marketable securities designated at fair value through profit or loss were recorded.
20 Pledged assets
millions of CHF 2013 2012
Land and buildings 14.4 15.3
Machinery and equipment 1.6 1.2
Total pledged assets 16.0 16.5
106 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
21 Share capital
thousands of CHF 2013 2012
Number of
shares
Share
capital
Number of
shares
Share
capital
Balance as of December 31 (par value CHF 0.01) 34262370 342.6 34262370 342.6
The share capital amounts to CHF 342623.70, made up of 34262370 shares with dividend entitlement and a par value of CHF 0.01. All shares are
fully paid in and registered.
Share ownership
Sulzer shares are freely transferable provided that, when requested by the company to do so, buyers declare that they have purchased and will
hold the shares in their own name and for their own account. Nominees shall only be entered in the share register with the right to vote, provided
that they meet the following conditions: The nominee is subject to the supervision of a recognized banking and financial market regulator; the
nominee has entered into an agreement with the Board of Directors concerning his status; the share capital held by the nominee does not exceed
3% of the registered share capital entered in the commercial register; and the names, addresses, and number of shares of those individuals for
whose account the nominee holds at least 0.5% of the share capital have been disclosed. The Board of Directors is also entitled, beyond these
limits, to enter shares of nominees with voting rights in the share register, provided that the above-mentioned conditions are met (see also
paragraph 6a of the Articles of Association at www.sulzer.com/regulations).
2013 2012
Number of
shares in %
Number of
shares in %
Shareholders holding more than 3% and Sulzer Ltd
Renova Group 10688812 31.20 10699797 31.23
BlackRock – – 1058976 3.09
Sulzer Ltd 282415 0.82 229560 0.67
Sulzer Ltd is not aware of any agreements between the shareholders named above regarding the shares held or regarding the execution of voting
rights. The total number of shares held by Sulzer Ltd as of December 31, 2013, amounted to 282415, which are mainly held for the purpose of the
management stock option and restricted stock unit plan.
107
Sulzer | Annual Report 2013
Financial section
22 Earnings per share
2013 20122)
Net income attributable to shareholders of Sulzer Ltd - continuing operations 174.5 244.4
Net income attributable to shareholders of Sulzer Ltd - discontinued operations 59.9 58.5
Net income attributable to shareholders of Sulzer Ltd (millions of CHF) 234.4 302.9
Issued number of shares 34262370 34262370
Adjustment for treasury shares held –262941 –253103
Average number of shares outstanding 33999429 34009267
Adjustment for share participation plans 159177 190741
Average number of shares for calculating diluted earnings per share 34158606 34200008
Earnings per share, attributable to a shareholder of Sulzer Ltd (in CHF)
Basic earnings per share 6.89 8.91
– thereof basic earnings per share continuing operations 5.13 7.19
– thereof basic earnings per share discontinued operations 1.76 1.72
Diluted earnings per share 6.86 8.86
– thereof diluted earnings per share continuing operations 5.11 7.15
– thereof diluted earnings per share discontinued operations 1.75 1.71
Dividend per share 3.201) 3.20
1) Proposal to the Annual General Meeting.
2) Restatement of prior year figures, see corporate accounting policies 2.2.
23 Borrowings
millions of CHF 2013 2012
Short-term Long-term Total Short-term Long-term Total
Bonds – 498.1 498.1 – 497.4 497.4
Bank loans 56.2 16.5 72.7 75.6 24.0 99.6
Mortgage loans – – – – 7.0 7.0
Other loans and debts 0.1 0.5 0.6 – 0.5 0.5
Leasing obligations 0.3 0.8 1.1 0.4 4.1 4.5
Total borrowings 56.6 515.9 572.5 76.0 533.0 609.0
– thereof due in 5 years – 1.0 1.0 – 15.1 15.1
Borrowings by currency
2013 2012
millions of
CHF in %
Interest
rate
millions of
CHF in %
Interest
rate
BRL 16.5 2.9 8.0% 12.0 2.0 7.9%
CHF 503.3 87.9 2.2% 512.8 84.2 2.2%
EUR 28.1 4.9 1.3% 58.0 9.5 2.2%
GBP 11.8 2.1 1.3% 11.8 2.0 1.9%
USD 1.2 0.2 3.1% 6.9 1.1 3.0%
Other 11.6 2.0 – 7.5 1.2 –
Total 572.5 100.0 – 609.0 100.0 –
108 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
23 Borrowings (continued)
In 2012 a CHF 500 million syndicated credit facility with maturity in April 2017 was arranged. The facility is subject to financial covenants based
on net financial indebtedness and EBITDA, which were adhered to throughout the reporting period. As of December 31, 2013 the use of the
syndicated credit line was CHF 36.3 million compared to CHF 58.1 million at the end of the previous year, and the amount of short-term
borrowings was reduced accordingly. Also the outstanding long-term borrowings decreased during 2013.
Outstanding bond
millions of CHF 2013 2012
Amortized
costs Nominal
Amortized
costs Nominal
2.25% 2011–2016 498.1 500.0 497.4 500.0
Total 498.1 500.0 497.4 500.0
In 2011 Sulzer Ltd issued a CHF-denominated 2.25% domestic bond in the aggregate principal amount of CHF 500 million for a term of five years.
The effective interest rate is 2.42%. The fair value of the outstanding bond amounts to CHF 519.2 million as per December 31, 2013 (2012: CHF
522.1 million). The fair value of the other financial borrowings is approximately equivalent to their carrying amount.
24 Provisions
millions of CHF
Employee
benefit plans1)2)
Other employee
benefits
Warranties/
liabilities Restructuring Environmental Other Total
Balance as of December 31, 2012 184.2 49.5 95.5 7.2 18.2 83.8 438.4
Changes in scope of consolidation – – – – – – –
Additions 6.0 9.3 43.4 12.7 0.1 22.1 93.6
Released as no longer required –34.3 –4.5 –18.4 –1.2 –1.5 –18.1 –78.0
Released for utilization –25.8 –4.3 –23.3 –5.8 –0.2 –18.0 –77.4
Reclassifications 0.1 –0.1 – –0.1 – 0.2 0.1
Reclassifications to liabilities held for sale –17.6 –10.1 –5.1 –1.8 – –0.8 –35.4
Currency translation differences –1.3 –1.5 –6.8 – – –2.5 –12.1
Total provisions as of
December 31, 2013 111.3 38.3 85.3 11.0 16.6 66.7 329.2
– thereof non-current 111.3 34.1 17.3 – 16.5 23.0 202.2
– thereof current – 4.2 68.0 11.0 0.1 43.7 127.0
1) For further details of employee benefit plans refer to note 06 “Employee benefit plans.”
2) Restatement of prior year figures regarding IAS 19 revised, see corporate accounting policies 2.2.
The largest position in provisions refers to “Employee benefit plans.” In 2013, this position decreased by CHF 72.9 million to CHF 111.3 million
mainly due to actuarial gains on defined benefit obligations and related plan assets recorded in other comprehensive income. The category “Other
employee benefits” decreased by CHF 11.2 million to CHF 38.3 million. The category of “Other employee benefits” includes provisions for jubilee
gifts, early retirement of senior managers, and other obligations to employees.
The category “Warranties/liabilities” decreased by CHF 10.2 million to CHF 85.3 million. These provisions include customer claims, penalties,
litigation, and legal cases relating to goods delivered or services rendered. The provision for risks referring to an ongoing dispute with the
purchaser of the locomotive business (sold in 1998) is accrued within this category.
The increase in restructuring provision is related to the program communicated in October. CHF 15.8 million of the expenses recognized in 2013
(CHF 16.8 million) is related to personnel restructuring expenses. “Environmental” mainly consist of expected costs related to inherited liabilities.
“Other” includes provisions that do not fit into the aforementioned categories. A large number of these provisions refer to onerous contracts, in
particular from divestitures. In addition, provisions for ongoing asbestos lawsuits and other legal claims are included. Based on the currently
known facts, Sulzer is of the opinion that the resolution of the open cases will not have material effects on its liquidity or financial condition.
Although Sulzer expects a large part of the category “Other” to be realized in 2014, by their nature, the amounts and timing of any cash outflows
are difficult to predict.
109
Sulzer | Annual Report 2013
Financial section
25 Other current and accrued liabilities
millions of CHF 2013 2012
Notes payable – 2.1
Social security institutions 12.4 13.0
Taxes (VAT, withholding tax) 33.3 35.2
Derivative financial instruments 5.4 4.2
Other current liabilities 20.9 44.0
Total other current liabilities 72.0 98.5
Vacation and overtime claims 32.2 42.3
Salaries, wages, and bonuses 76.0 86.0
Contract-related costs 120.2 127.5
Other accrued liabilities 91.9 95.1
Total accrued liabilities 320.3 350.9
Total other current and accrued liabilities 392.3 449.4
In 2012 the line “Other current liabilities” included a forward contract on treasury shares of CHF 19.2 million, which was sold during 2013.
26 Derivative financial instruments
millions of CHF 2013 2012
Derivative assets Derivative liabilities Derivative assets Derivative liabilities
Notional
value
Fair
value
Notional
value
Fair
value
Notional
value
Fair
value
Notional
value
Fair
value
Forward exchange contracts 688.6 11.9 526.2 5.4 677.4 8.6 546.0 4.2
Other derivative instruments 0.7 – – – 4.6 0.5 – –
Total 689.3 11.9 526.2 5.4 682.0 9.1 546.0 4.2
– thereof due in 5 years – – – –
The notional and the fair value of derivative assets and liabilities include current and also non-current derivative financial instruments. The cash
flow hedges of the expected future sales were assessed as highly effective. As at December 31, 2013, a net unrealized profit of CHF 0.3 million
(2012: CHF 3.7 million) with a deferred tax asset of CHF 2.0 million (2012: CHF 0.8 million) relating to these cash flow hedges were included in
other comprehensive income. In 2013, a gain of CHF 1.9 million (2012: a gain of CHF 2.4 million) cash flow hedge reserve was recognized in
profit or loss. There was no ineffectiveness that arose from cash flow hedges in 2013 (2012: CHF 0.0 million). There was no ineffectiveness to
be recorded from fair value hedges and net investments in foreign entity hedges. The maximum exposure to credit risk at the reporting date is
the fair value of the derivative assets in the balance sheet.
The hedged, highly probable forecast transactions denominated in foreign currency are mostly expected to occur at various dates during the
next 12 months. Gains and losses recognized in the hedging reserve (cash flow hedges) in equity on forward foreign exchange contracts as of
December 31, 2013, are recognized either in sales, cost of goods sold, or in other operating income/expenses in the period or periods during
which the hedged transaction affects the income statement. This is generally within 12 months from the balance sheet date unless the gain or
loss is included in the initial amount recognized for the purchase of fixed assets, in which case, recognition is over the lifetime of the asset (five
to ten years).
The Group enters into derivative financial instruments under enforceable master netting arrangements. These agreements do not meet the
criteria for offsetting derivative assets and derivative liabilities in the consolidated balance sheet. As per December 31, 2013 the amount subject
to such netting arrangements was CHF 2.3 million. Considering the effect of these agreements, the amount of derivative assets would reduce
from CHF 11.9 million to CHF 9.6 million, and the amount of derivative liabilities would reduce from CHF 5.4 million to CHF 3.1 million.
110 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
27 Other financial commitments
millions of CHF 2013 2012
Rented
premises Other Total
Rented
premises Other Total
Maturity 5 years 25.4 – 25.4 17.9 – 17.9
Operating lease 132.5 27.4 159.9 103.0 29.3 132.3
– thereof continuing operations 104.7 23.7 128.4 79.0 26.0 105.0
– thereof discontinued operations 27.8 3.7 31.5 24.0 3.3 27.3
Total commitments for future investments and acquisitions 1.6 3.6 5.2 0.3 4.2 4.5
– thereof continuing operations 1.6 2.5 4.1 0.3 2.9 3.2
– thereof discontinued operations – 1.1 1.1 – 1.3 1.3
28 Contingent liabilities
millions of CHF 2013 2012
Pledges in favor of third parties 0.8 0.9
Guarantees in favor of third parties – –
Total contingent liabilities 0.8 0.9
29 Capital expenditure by category (unaudited)
millions of CHF 2013 in % 20121) in %
Expansion 21.2 26.3 40.5 43.6
Rationalization 3.5 4.3 4.3 4.6
Replacing 30.6 38.0 23.8 25.6
IT 12.1 15.0 12.6 13.5
QESH (Quality, environment, safety, and health) 3.3 4.1 1.1 1.2
Other 9.8 12.3 10.7 11.5
Total capital expenditure by category 80.5 100.0 93.0 100.0
1) Restatement of prior year figures, see note 02.
The total capital expenditure of continuing operations for intangible assets amounted to CHF 4.3 million (2012: CHF 1.3 million) and for property,
plant, and equipment to CHF 76.2 million (2012: CHF 91.7 million).
111
Sulzer | Annual Report 2013
Financial section
30 Share participation plans
Stock option plan
From 2002 until 2008, there was a Sulzer stock option plan in place for the Sulzer Management Group and board members. Awards were
made annually and were dependent on the organizational position of the employee. The exercise price was determined on the basis of the
average stock market price of the Sulzer share during the last ten days before the options were granted.
Sulzer operates equity- and cash-settled compensation plans. For equity-settled compensation plans, 25% of the options vest after one year, with
an additional 25% vesting in each of the following three years. Equity-settled options are valid for ten years from the grant date. They do not lead to
an increase of the company’s share capital. For cash-settled compensation plans, one-third of the options vest after one year, with an additional
one-third vesting in each of the following two years. Cash-settled options are valid for five years from the date of grant. One option entitles the
purchase of ten shares. In 2013 and 2012, a total of CHF 0.0 million was charged to the operating income for the existing option plans. The
cash-settled plan is hedged with derivative instruments of a Swiss bank.
For details on option holdings by members of the Board of Directors and the Executive Committee, see note 110 of Sulzer Ltd’s financial statements.
Option right for ten Sulzer shares 2013
Grant year
Outstanding
01.01.2013
Granted
2013
Exercised
2013
Forfeited
2013
Expired
2013
Outstanding
31.12.2013
Average
exercise price
in CHF
2004 1485 – 1285 – – 200 31.80
2005 2635 – 1225 – – 1410 52.20
2008 1890 – 1890 – – – 127.90
Total 6010 – 4400 – – 1610
Weighted average exercise
price in CHF 70.97 – 78.76 – – 49.67 –
Option right for ten Sulzer shares 2012
Grant year
Outstanding
01.01.2012
Granted
2012
Exercised
2012
Forfeited
2012
Expired
2012
Outstanding
31.12.2012
Average
exercise price
in CHF
2002 1250 – 1250 – – – 34.08
2003 1390 – 1350 40 – – 17.30
2004 2880 – 1315 80 – 1485 31.80
2005 3343 – 708 – – 2635 52.20
2007 10920 – 2930 – 7990 – 149.50
2008 16082 – 14192 – – 1890 127.90
Total 35865 – 21745 120 7990 6010
Weighted average exercise
price in CHF 112.15 – 110.27 26.97 149.50 70.97 –
112 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
30 Share participation plans (continued)
Expiry of option rights for ten Sulzer shares
Year of expiry 2013 2012
Number of
options
Average
exercise
price in CHF
Number of
options
Average
exercise
price in CHF
2013 – – 1890 127.90
2014 200 31.80 1485 31.80
2015 1410 52.20 2635 52.20
Outstanding as of December 31 1610 6010
In 2013, no options were granted.
Restricted stock unit plan settled in Sulzer shares
Since 2009, there has been a restricted stock unit (RSU) plan in place for the Sulzer Management Group and board members. Awards are made
annually and depend on the organizational position of the employee. For equity-settled restricted stock unit plans, one-third of the RSUs vest after
one year, with an additional one-third vesting in each of the following two years. One RSU award is settled with one Sulzer share. The number of
awards granted is determined on the basis of the average stock market price of the Sulzer share during the last ten days before the awards are
granted and the cash equivalent determined per participant. After vesting, the unrestricted shares are transferred to the plan participant. They
do not lead to an increase of the company’s share capital. In 2013, a total of CHF 6.7 million (2012: CHF 6.4 million) was charged for this restricted
stock unit plan to the operating income. Awards to members of the Board of Directors automatically vest with the departure from the board.
For details of restricted stock unit holdings by members of the Board of Directors and the Executive Committee, see note 110 of the financial
statements of Sulzer Ltd.
Restricted stock units 2013
Grant year
Outstanding
01.01.2013
Granted
2013
Exercised
2013
Forfeited
2013
Expired
2013
Outstanding
31.12.2013
Average stock
price at grant
date in CHF
2010 22167 – 22167 – – – 98.41
2011 34826 – 17998 1147 – 15681 142.62
2012 60807 – 21561 2536 – 36710 129.13
2013 – 50451 – 816 – 49635 166.61
Total 117800 50451 61726 4499 – 102026
Restricted stock units 2012
Grant year
Outstanding
01.01.2012
Granted
2012
Exercised
2012
Forfeited
2012
Expired
2012
Outstanding
31.12.2012
Average stock
price at grant
date in CHF
2009 48557 – 48557 – – – 47.48
2010 45182 – 23015 – – 22167 98.41
2011 53469 – 18409 234 – 34826 142.62
2012 – 61587 – 780 – 60807 129.13
Total 147208 61587 89981 1014 – 117800
113
Sulzer | Annual Report 2013
Financial section
30 Share participation plans (continued)
Performance share plan settled in Sulzer shares
Executive Committee members received performance share units (PSUs) of Sulzer Ltd, Winterthur, as a portion of their compensation. Sulzer
operated two performance share plans (PSP).
The first PSP was a front-loaded one-off plan with a performance period of three years (2010–2012), which vested on March 31, 2013. The PSP
included a requirement for the participants to invest a portion of their restricted stock unit (RSU) grants 2010–2012 into the PSP. The company
matched these investments by a defined co-investment. The number of the performance share units (PSUs) granted at the grant date is based
on the number of RSUs shifted into the PSP and the company match divided by the grant price of the 2010 RSU plan. The achievement of the
defined performance indicators based on financial objectives determined the effective number of PSUs. The plan did not lead to an increase of
the company’s share capital. In 2013, an income of CHF 0.8 million (2012: an expense of CHF 3.9 million) was charged to the operating income.
The second PSP was introduced in 2013 with a performance period from January 1, 2013 to March 31, 2016. Key performance indicators may
consist of financial objectives and are based on the relative Total Shareholder Return (TSR) of Sulzer over the performance period, within a Peer
Group consisting of 30 companies including Sulzer. TSR is measured with a starting value of the Volume Weighted Average Share Price (VWAP)
over the first three months of the first year, and an ending value of the VWAP over the last three months of the vesting period. The average fair
market value at grant date was CHF 294.81 and has been calculated using a Monte Carlo Simulation. Main assumptions include a stock price
of CHF 157.61 and an average expected volatility of the peer group of 31.84%. The rank of Sulzer’s TSR at the end of the Performance Period
determines the effective number of total shares. At Rank 3 of the peer group or above, a maximum payout of 200 % of target performance share
awards (PSA) are converted into shares. At Rank 15 of the peer group, the payout is 100 %, at Rank 21 it is 75% and at Rank 27 or below, it is 0%.
The plan will not lead to an increase of the company’s share capital. In 2013, an expense of CHF 2.5 million was charged to the operating income
(2012: CHF 0.0 million).
For details of performance share units by members of the Executive Committee, see note 110 of the financial statements of Sulzer Ltd.
Performance share units 2013
Grant year
Outstanding
01.01.2013
Granted
2013
Exercised
2013
Forfeited
2013
Expired
2013
Outstanding
31.12.2013
Average stock
price at grant
date in CHF
2010 31643 – 31643 – – – 98.41
2013 – 37035 – – – 37035 166.61
31 Transactions with members of the Board of Directors, Executive Committee, and related parties
Key management compensation
thousands of CHF 2013 2012
Short-term
benefits
Equity-based
compensation
Pensions and
social
contributions Total
Short-term
benefits
Equity-based
compensation
Pensions and
social
contributions Total
Board of Directors 961 878 140 1979 1046 953 157 2156
Executive Committee 6388 2286 2626 11300 6395 6058 1467 13920
The amounts for equity-based compensation are valued according to IFRS 2. There are no outstanding loans with members of the Board of
Directors or the Executive Committee as per balance sheet date. No shares have been granted to members of the Board of Directors, the
Executive Committee, or related persons, with the exception of shares granted in connection with equity-settled plans and service awards.
Related parties
Administration and asset management of the Sulzer pension fund in Switzerland were done by staff members of Sulzer Management Ltd. The
individual foundations do not have their own staff. The related costs were invoiced to the foundations (2013: CHF 4.0 million; 2012: CHF 4.2 million).
As of December 31, 2013, sales with related parties controlled by the major shareholder (Renova Group) amounted to CHF 13.8 million (2012: CHF
8.8 million) with open receivables of CHF 0.5 million (2012: CHF 2.3 million). Fees for consulting services from a company controlled by the major
shareholder of Sulzer amounted to CHF 0.1 million (2012: CHF 0.0 million). Sales with other related parties recorded in 2013 amounted to CHF 0.2
million (2012: CHF 0.0 million).
At the time of completion of the corporation’s consolidated financial statements on February 19, 2014, no other major business transactions
or outstanding balances with the Renova Group, their representatives, or any other related parties or companies were known.
114 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
31 Transactions with members of the Board of Directors, Executive Committee, and related parties (continued)
Board and Executive Committee compensation disclosures as required by Swiss law (article CO 663b–663c)
These consolidated financial statements have been prepared in accordance with IFRS. The compensation disclosure requirements in accordance
with the Swiss law for companies, the Swiss Code of Obligations (CO), are disclosed in the financial statements of Sulzer Ltd, note 110.
32 Auditor remuneration
Fees for the audit work by KPMG as the group auditor amounted to CHF 2.5 million (2012 PricewaterhouseCoopers: CHF 2.7 million).
Additional services provided by the group auditor amounted to a total of CHF 1.3 million (2012: CHF 0.6 million). This figure includes
CHF 0.0 million (2012: CHF 0.1 million) for accounting-related fees, CHF 0.2 million (2012: CHF 0.3 million) for tax and legal fees, CHF 0.8
million related to the divestiture of Sulzer Metco and CHF 0.3 million for other consulting services (2012: CHF 0.2 million).
33 Corporate risk management process
Sulzer has an integrated risk management system that is under constant scrutiny for further improvement.
A defined risk management process and four common tools (risk assessment schedule, risk-profiling matrix, risk description schedule,
loss control schedule) are applied in order to assess and control all key risks, to implement and maintain risk financing and risk transfer
measures, to monitor the results, and to define and implement corrective actions if required. The divisions and the corporation generate
their respective key risk-profiling matrices and complete and update the related risk control schedules on an annual basis. These schedules
identify specific risk exposures and the related risk objectives, list existing loss controls, address their effectiveness, list (where required)
additional or alternative loss controls, and determine responsibilities and time frames for their implementation. The divisions’ key riskprofiling
matrices are reviewed at the corporate level and are then consolidated into a division’s key risk-profiling matrix. The head of
Corporate Risk Management informs the Audit Committee at least once a year of the current risks and risk mitigation as well as of the
progress toward achieving major risk objectives. The risk management process is audited by corporate auditing.
34 Subsequent events after the balance sheet date
On January 30, 2014, Sulzer has signed an agreement with Oerlikon for the divestment of its Sulzer Metco division. The transaction is based on
an enterprise value of CHF 1 billion. Sulzer expects cash proceeds after taxes of approximately CHF 850 million from the deal. The divestment
agreement is subject to merger control and regulatory approval. Closing is expected in the third quarter 2014.
On February 2, 2014, Sulzer signed an agreement for the acquisition of a 75% stake in Saudi Pump Factory with Nabil Al Hashim, the owner
and founder of the company. The agreed purchase price for the 75% stake is CHF 33 million. Closing of the transaction is expected for the
second quarter of 2014 and is subject to local regulatory approval.
The Board of Directors authorized these consolidated financial statements for issue on February 19, 2014. They are subject to approval at
the Annual General Meeting, which will be held on March 20, 2014. The Board of Directors and the Executive Committee are, at the time of
completion of the corporation’s consolidated financial statements on February 19, 2014, not aware of any events that would materially affect
these statements.
115
Sulzer | Annual Report 2013
Financial section
35 Major subsidiaries
31.12.2013
Europe Subsidiary Participation
Registered capital
(including paid-in
capital in the USA
and Canada)
Research &
development
Production &
Engineering
Sales
Service
Division
Switzerland Sulzer Pumpen AG, Winterthur 100% CHF 3 000 000 PU
Sulzer Metco AG, Wohlen 100% CHF 5 000 000 SM
Sulzer Chemtech AG, Winterthur 100% CHF 10 000 000 CT
Sulzer Mixpac AG, Haag 100% CHF 100 000 CT
Sulzer Markets and Technology AG, Winterthur 100% CHF 4 000 000 CT
Sulzer Management AG, Winterthur 100% CHF 500 000 Oth
Germany Sulzer Pumpen (Deutschland) GmbH, Bruchsal 100% EUR 2 300 000 PU
Sulzer Pumps Wastewater Germany GmbH, Bonn 100% EUR 300 000 PU
Sulzer Pump Solutions Germany GmbH, Lohmar 100% EUR 1 000 000 PU
Sulzer Metco Europe GmbH, Kelsterbach 100% EUR 1 000 000 SM
Sulzer Metco Coatings GmbH, Salzgitter 100% EUR 1 000 000 SM
Sulzer Friction Systems (Germany) GmbH, Bremen 100% EUR 1 000 000 SM
Sulzer Metaplas GmbH, Bergisch Gladbach 100% EUR 1 000 000 SM
Sulzer Metco WOKA GmbH, Barchfeld 100% EUR 1 000 000 SM
Sulzer Chemtech GmbH, Linden 100% EUR 300 000 CT
Sulzer Holding (Deutschland) GmbH, Singen 100% EUR 20 000 000 Oth
Sulzer Beteiligungen (Deutschland) GmbH, Singen 100% EUR 25 000 Oth
Denmark Sulzer Mixpac Denmark A/S 100% DKK 500 000 CT
Finland Sulzer Pumps Finland Oy, Kotka 100% EUR 16 000 000 PU
France Sulzer Pompes France SASU, Mantes 100% EUR 6 600 000 PU
Sulzer Sorevi S.A.S., Limoges 100% EUR 250 000 SM
Great Britain Sulzer Pumps (UK) Ltd., Leeds 100% GBP 9 610 000 PU
Sulzer Metco (UK) Ltd., Cwmbran 100% GBP 500 000 SM
Sulzer Metco Coatings Ltd., Cheshire 100% GBP 57 125 SM
Neomet Ltd., Stockport 100% GBP 292 671 SM
Sulzer Chemtech (UK) Ltd., Stockton on Tees 100% GBP 100 000 CT
Dowding & Mills Plc., Birmingham 100% GBP 15 409 555 TS
Sulzer (UK) Holdings Ltd., Leeds 100% GBP 6 100 000 Oth
Ireland Sulzer Pump Solutions Ireland Ltd., Wexford 100% EUR 2 222 500 PU
Italy Sulzer Friction Systems (Italia) S.r.l., Caivano 100% EUR 250 000 SM
Sulzer Pumps Wastewater Italy S.r.l., Casalecchio di Reno 100% EUR 600 000 PU
Sulzer Chemtech Italia S.r.l., Milano 100% EUR 100 000 CT
Norway Sulzer Pumps Wastewater Norway A/S, Sandvika 100% NOK 502 000 PU
The Netherlands Sulzer Pumps Wastewater Netherlands B.V., Maastricht-Airport 100% EUR 79 000 PU
Sulzer Eldim (NL) B.V., Lomm 100% EUR 396 375 SM
Sulzer Chemtech Nederland B.V., Breda 100% EUR 1 134 451 CT
Sulzer Turbo Services Rotterdam B.V., Europoort 100% EUR 18 000 TS
Sulzer Turbo Services Venlo B.V., Lomm 100% EUR 444 705 TS
Sulzer Netherlands Holding B.V., Breda 100% EUR 10 010 260 Oth
Sulzer Capital B.V., Breda 100% EUR 50 000 Oth
Austria Sulzer Pumps Wastewater Austria GmbH, Wiener Neudorf 100% EUR 55 000 PU
Poland Sulzer Turbo Services Poland Sp. z o.o., Lublin 100% PLN 2 427 000 TS
Russia ZAO Sulzer Pumps, St. Petersburg 100% RUB 8 000 000 PU
Sulzer Pumps Rus LLC, Moscow 100% RUB 6 000 600 PU
Sulzer Chemtech LLC, Serpukhov 100% RUB 55 500 000 CT
Sweden Sulzer Pumps Sweden AB, Norrköping 100% SEK 3 000 000 PU
Sulzer Pump Solutions AB, Malmö 100% SEK 30 000 000 PU
Sulzer Pump Solutions Sweden AB, Mölndal 100% SEK 600 000 PU
PU Sulzer Pumps
SM Sulzer Metco
CT Sulzer Chemtech
TS Sulzer Turbo Services
Oth Others
116 Notes to the consolidated financial statements
Sulzer | Annual Report 2013
Spain Sulzer Pumps Spain S.A., Madrid 100% EUR 1 750 497 PU
Sulzer Pumps Wastewater Spain S.A., Rivas Vaciamadrid 100% EUR 2 000 000 PU
Hungary Sulzer Eldim (HU) Kft., Debrecen 100% HUF 161 000 000 SM
North America
Canada Sulzer Pumps (Canada) Inc., Burnaby 100% CAD 2 771 588 PU
Sulzer Metco (Canada) Inc., Fort Saskatchewan 100% CAD 14 210 627 SM
Sulzer Chemtech Canada Inc., Edmonton 100% CAD 1 000 000 CT
Sulzer Turbo Services Canada Ltd., Edmonton 100% CAD 7 000 000 TS
USA Sulzer Pumps (US) Inc., Brookshire, Texas 100% USD 40 381 108 PU
Sulzer Pump Solutions (US) Inc., Meriden, Connecticut 100% USD 1 000 PU
Sulzer Process Pumps (US) Inc., Easley, South Carolina 100% USD 27 146 250 PU
Sulzer Metco (US) Inc., Westbury, New York 100% USD 26 865 993 SM
Sulzer Friction Systems (US) Inc., Dayton, Ohio 100% USD 5 297 189 SM
Sulzer Chemtech USA Inc., Tulsa, Oklahoma 100% USD 47 895 000 CT
Sulzer Mixpac USA Inc., Salem, New Hampshire 100% USD 100 CT
Sulzer Turbo Services Houston Inc., La Porte, Texas 100% USD 18 840 000 TS
Sulzer Turbo Services New Orleans Inc., Belle Chasse, Louisiana 100% USD 4 006 122 TS
Sulzer EMS Inc., Phoenix, Arizona 100% USD 97 TS
Sulzer US Holding Inc., Sugar Land, Texas 100% USD 200 561 040 Oth
Mexico Sulzer Pumps México, S.A. de C.V., Cuautitlán Izcalli 100% MXN 4 887 413 PU
Sulzer Chemtech, S. de R.L. de C.V., Cuautitlán Izcalli 100% MXN 31 345 500 CT
Central and South America
Argentina Sulzer Turbo Services Argentina S.A., Buenos Aires 100% ARS 9 730 091 TS
Brazil Sulzer Brasil S.A., Jundiaí 100% BRL 82 054 659 PU
Sulzer Pumps Wastewater Brasil Ltda., Curitiba 100% BRL 8 077 706 PU
Sulzer Friction Systems do Brasil Ltda., Diadema 100% BRL 4 418 273 SM
Sulzer Services Brasil, Municipio de Vinhedo 100% BRL 21 675 856 CT
Venezuela Sulzer Pumps (Venezuela) S.A., Barcelona 100% VEB 200 000 000 PU
Africa
South Africa Sulzer Pumps (South Africa) (Pty) Ltd., Elandsfontein 75% ZAR 100 450 000 PU
Nigeria Sulzer Pumps (Nigeria) Ltd., Lagos 100% NGN 10 000 000 PU
Middle East
United Arab Emirates Sulzer Pumps Middle East FZCO, Dubai 100% AED 500 000 PU
Saudi Arabia Sulzer Pumps (Saudi Arabia) LLC, Al Khobar 100% SAR 1 000 000 PU
Bahrain Sulzer Chemtech Middle East S.P.C., Al Seef 100% BHD 50 000 CT
Asia
India Sulzer Pumps India Ltd., Navi Mumbai 99% INR 25 000 000 PU
Sulzer Friction Systems (India) Ltd., Chennai 100% INR 7 100 000 SM
Sulzer India Ltd.1), Pune 96% INR 34 500 000 CT
Sulzer Chemtech Tower Field Services (India) Pvt. Ltd., Mumbai 100% INR 500 000 CT
Indonesia PT Sulzer Turbo Services Indonesia, Purwakarta 100% IDR 28 234 800 000 TS
Japan Sulzer Daiichi K.K., Tokyo 60% JPY 30 000 000 PU
Sulzer Metco (Japan) Ltd., Tokyo 100% JPY 180 000 000 SM
Singapore Sulzer Pumps Asia Pacific Pte Ltd., Singapore 100% SGD 1 000 000 PU
Sulzer Metco (Singapore) Pte Ltd., Singapore 100% SGD 600 000 SM
Sulzer Chemtech Pte Ltd., Singapore 100% SGD 1 000 000 CT
South Korea Sulzer Korea Ltd., Seoul 100% KRW 222 440 000 PU
People’s Republic of China Sulzer Dalian Pumps & Compressors Ltd., Dalian 100% CNY 115 000 000 PU
Sulzer Pumps Suzhou Ltd., Suzhou 100% CNY 82 069 324 PU
PU Sulzer Pumps
SM Sulzer Metco
CT Sulzer Chemtech
TS Sulzer Turbo Services
Oth Others
35 Major subsidiaries (continued)
31.12.2013
Europe Subsidiary Participation
Registered capital
(including paid-in
capital in the USA
and Canada)
Research &
development
Production &
Engineering
Sales
Service
Division
117
Sulzer | Annual Report 2013
Financial section
People’s Republic of China Sulzer Pump Solutions (Kunshan) Co., Ltd., Kunshan 100% USD 5 760 000 PU
Sulzer Metco Surface Technology (Shanghai) Co. Ltd., Shanghai 100% CHF 9 500 000 SM
Sulzer Shanghai Eng. & Mach. Works Ltd., Shanghai 100% CNY 61 432 607 CT
Australia
Sulzer Pumps (ANZ) Pty Ltd., Wheelers Hill 100% AUD 100 000 PU
Sulzer Metco Australia Pty Ltd., Sydney 100% AUD 500 000 SM
Sulzer Chemtech Pty Ltd., Adelaide 100% AUD 500 000 CT
Dowding & Mills (Australia) Pty Ltd., Brendale 100% AUD 5 308 890 TS
Sulzer Australia Holding Pty Ltd., Wheelers Hill 100% AUD 11 320 100 Oth
1) Shareholding increase according to the numbers of shares bought back.
35 Major subsidiaries (continued)
31.12.2013
Europe Subsidiary Participation
Registered capital
(including paid-in
capital in the USA
and Canada)
Research &
development
Production &
Engineering
Sales
Service
Division
PU Sulzer Pumps
SM Sulzer Metco
CT Sulzer Chemtech
TS Sulzer Turbo Services
Oth Others
118
Sulzer | Annual Report 2013
119
Sulzer | Annual Report 2013
Financial section
Auditors’ report
Report of the Statutory Auditor to the General Meeting of Shareholders of
Sulzer Ltd, Winterthur
Report of the Statutory Auditor on the Consolidated Financial Statements
As statutory auditor, we have audited the accompanying consolidated financial statements of Sulzer Ltd, which comprise the income
statement, statement of comprehensive income, balance sheet, statement of changes in equity, statement of cash flows and notes
(pages 66 to 117) for the year ended December 31, 2013.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing
and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying
appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we
plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal
control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of
accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended December 31, 2013 give a true and fair view of the financial position,
the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Other Matter
The consolidated financial statements of Sulzer Ltd for the year ended December 31, 2012 were audited by another auditor who expressed
an unmodified opinion on those statements on February 8, 2013.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728
CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of consolidated financial statements according to the instructions of the board of directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
François Rouiller Roman Wenk
Licensed Audit Expert Licensed Audit Expert
Auditor in Charge
Zurich, February 19, 2014
120 Five-year summaries of key financial data
Sulzer | Annual Report 2013
Key figures from consolidated income statement and
statement of cash flows
millions of CHF 2013 20123) 2011 2010 2009
Sales 3263.9 3340.7 3577.9 3183.7 3350.4
Operating income before depreciation/amortization EBITDA 378.6 437.1 482.8 511.0 479.2
Operating income before restructuring EBITR 280.8 336.6 379.1 410.3 416.6
Operating income EBIT 264.0 328.7 364.1 406.4 368.0
Return on sales before restructuring (EBITR/sales) ROSR 8.6% 10.1% 10.6% 12.9% 12.4%
Return on sales (EBIT/sales) ROS 8.1% 9.8% 10.2% 12.8% 11.0%
Return on capital employed (EBIT/capital employed) ROCE 12.6% 14.7% 18.8% 28.1% 24.8%
Depreciation/amortization 114.6 108.4 118.7 104.6 111.2
Research and development expenses 70.6 66.9 71.7 58.5 63.4
Net income attributable to shareholders of Sulzer Ltd 234.4 302.9 279.8 300.4 270.4
– in percentage of equity attributable to shareholders of Sulzer Ltd ROE 10.0% 13.7% 13.8% 15.9% 15.2%
Capital expenditure 80.5 93.0 113.2 118.1 112.2
Free cash flow 218.7 347.9 82.3 149.5 528.8
Cash flow from operating and investing activities 199.9 343.8 –729.0 62.2 501.0
Employees (number of full-time equivalents) as of December 31 15382 15537 17002 13740 12183
Personnel expenses 1047.4 1019.8 1056.3 973.6 944.0
Key figures from consolidated balance sheet
millions of CHF 2013 2012 2011 2010 2009
Non-current assets 1891.5 2237.8 2225.6 1295.6 1200.4
– thereof property, plant, and equipment 492.0 650.0 619.5 531.6 558.1
Current assets 2652.4 2371.7 2336.0 2196.1 2183.8
– thereof cash and cash equivalents and marketable securities 528.7 513.1 430.7 680.8 767.1
Total assets 4543.9 4609.5 4561.6 3491.7 3384.2
Equity attributable to shareholders of Sulzer Ltd 2334.4 2216.6 2022.4 1895.0 1777.5
Non-current liabilities 825.3 956.5 998.7 348.1 327.2
– thereof long-term borrowings 515.9 533.0 531.4 44.2 49.0
Current liabilities 1377.9 1429.6 1534.5 1242.4 1268.1
– thereof short-term borrowings 56.6 76.0 236.2 83.8 47.5
Net liquidity1) –36.2 –95.9 –336.9 552.8 670.6
Equity ratio2) 51.4% 48.1% 44.3% 54.3% 52.5%
Borrowings-to-equity ratio (gearing) 0.25 0.27 0.38 0.07 0.05
1) Cash and cash equivalents and marketable securities, less short- and long-term borrowings from continuing and discontinued operations.
2) Equity attributable to shareholders of Sulzer Ltd in relation to total assets.
3) Restatement of prior year figures.
Five-year summaries of key financial data
121
Sulzer | Annual Report 2013
Financial section
Five-year summaries of key financial data
Order intake Sales
millions of CHF 2013 20122) 2011 2010 2009 2013 20122) 2011 2010 2009
Divisions 3252.9 3334.6 3558.5 3278.5 3006.7 3266.6 3332.6 3570.1 3173.3 3336.3
Sulzer Pumps 2031.3 2094.3 1705.6 1613.7 1684.5 2051.3 2097.5 1747.8 1576.1 1856.7
Sulzer Turbo Services 471.7 535.2 477.6 400.4 278.3 471.6 510.5 488.0 399.1 291.3
Sulzer Chemtech 749.9 705.1 701.7 621.3 498.4 743.7 724.6 667.0 574.6 632.3
Sulzer Metco – – 673.6 643.1 545.5 – – 667.3 623.5 556.0
Others –3.0 8.8 7.6 10.2 10.9 –2.7 8.1 7.8 10.4 14.1
Total 3249.9 3343.4 3566.1 3288.7 3017.6 3263.9 3340.7 3577.9 3183.7 3350.4
Operating income (EBIT) Capital employed (average)
millions of CHF 2013 20122) 2011 2010 2009 2013 20122) 2011 2010 2009
Divisions 289.7 316.8 353.2 346.5 312.7 2158.7 2270.1 1965.9 1447.5 1436.8
Sulzer Pumps 169.1 191.2 168.2 189.0 204.7 1394.4 1464.6 820.0 340.5 416.7
Sulzer Turbo Services 39.2 54.9 53.2 41.9 33.0 351.5 371.5 356.2 308.9 190.1
Sulzer Chemtech 81.4 70.7 63.1 58.5 54.5 412.8 434.0 412.2 406.2 417.9
Sulzer Metco – – 68.7 57.1 20.5 – – 377.5 391.9 412.1
Others –25.7 11.9 10.9 59.9 55.3 –68.9 –26.2 –29.4 –0.6 49.9
Total 264.0 328.7 364.1 406.4 368.0 2089.8 2243.9 1936.5 1446.9 1486.7
Order backlog Employees1)
millions of CHF 2013 20122) 2011 2010 2009 2013 20122) 2011 2010 2009
Divisions 1672.3 1754.3 1861.7 1797.3 1869.3 15200 15362 16758 13509 11890
Sulzer Pumps 1235.0 1309.1 1343.5 1336.6 1436.0 8496 8573 8211 5904 5928
Sulzer Turbo Services 146.8 151.6 130.1 115.1 137.2 2537 2703 2654 2587 1189
Sulzer Chemtech 290.5 293.6 310.7 274.3 238.9 4167 4086 3634 2973 2977
Sulzer Metco – – 77.4 71.3 57.2 – – 2259 2045 1796
Others –0.2 –0.7 2.3 2.5 2.4 182 175 244 231 293
Total 1672.1 1753.6 1864.0 1799.8 1871.7 15382 15537 17002 13740 12183
1) Number of full-time equivalents as of December 31.
2) Restatement of prior year figures.
Five-year summaries by division
122 Five-year summaries of key financial data
Sulzer | Annual Report 2013
Order intake by region
millions of CHF 2013 20122) 2011 2010 2009
Europe, Middle East, Africa 1329.7 1431.2 1554.5 1349.8 1330.7
Americas 1123.2 1214.9 1225.5 1131.9 1051.6
Asia-Pacific 797.0 697.3 786.1 807.0 635.3
Total 3249.9 3343.4 3566.1 3288.7 3017.6
Sales by region
millions of CHF 2013 20122) 2011 2010 2009
Europe, Middle East, Africa 1402.4 1421.2 1574.6 1331.4 1471.4
Americas 1130.0 1145.5 1167.6 1164.0 1190.4
Asia-Pacific 731.5 774.0 835.7 688.3 688.6
Total 3263.9 3340.7 3577.9 3183.7 3350.4
Capital employed (average) by company location
millions of CHF 2013 20122) 2011 2010 2009
Europe, Middle East, Africa 1365.1 1500.2 1319.7 922.5 961.2
Americas 481.0 497.0 418.1 389.8 426.2
Asia-Pacific 243.7 246.7 198.7 134.6 99.3
Total 2089.8 2243.9 1936.5 1446.9 1486.7
Employees by company location1)
2013 20122) 2011 2010 2009
Europe, Middle East, Africa 6749 6938 8211 6480 5436
Americas 4361 4653 4739 3757 3687
Asia-Pacific 4272 3946 4051 3503 3060
Total 15382 15537 17001 13740 12183
1) Number of full-time equivalents as of December 31.
2) Restatement of prior year figures.
Five-year summaries by region
123
Sulzer | Annual Report 2013
Financial section
Financial section
Financial statements of Sulzer Ltd
Financial statements of Sulzer Ltd
Balance sheet of Sulzer Ltd 124
Income statement of Sulzer Ltd 125
Statement of changes in equity of Sulzer Ltd 125
Notes to the financial statements of Sulzer Ltd 126
Appropriation of net profit 131
Annual General Meeting 131
Auditors’ report 133
124 Financial statements of Sulzer Ltd
Sulzer | Annual Report 2013
Balance sheet of Sulzer Ltd
December 31
millions of CHF Notes 2013 2012
Non-current assets
Operational assets – 0.1
Investments in subsidiaries and other entities 1301.7 1316.5
Loans to subsidiaries 724.0 698.7
– thereof subordinated CHF 2.8 million (2012: CHF 9.6 million)
Other loans and financial assets 4.6 0.6
Total non-current assets 2030.3 2015.9
Current assets
Accounts receivable from subsidiaries 227.8 194.7
Other accounts receivable and prepayments 7.3 7.1
Marketable securities 103 40.6 71.4
Cash 146.2 14.4
Total current assets 421.9 287.6
Total assets 2452.2 2303.5
Equity
Registered share capital 104 0.3 0.3
Legal reserves 178.6 180.2
Reserves for treasury stock 104 26.9 25.3
Free reserves 1226.5 986.5
Retained earnings 13.6 13.9
Net profit for the year 371.5 349.3
Total equity 1817.4 1555.5
Non-current liabilities
Non-current financial liabilities 498.1 497.4
Non-current provisions 67.8 77.4
Non-current liabilities with subsidiaries – –
Total non-current liabilities 565.9 574.8
Current liabilities
Current financial liabilities - 10.0
Current provisions 6.1 10.9
Current liabilities with subsidiaries 33.1 126.1
Accounts payable and accrued liabilities 105 29.7 26.2
Total current liabilities 68.9 173.2
Total liabilities 634.8 748.0
Total equity and liabilities 2452.2 2303.5
125
Sulzer | Annual Report 2013
Financial section
Income statement of Sulzer Ltd
January – December
millions of CHF Notes 2013 2012
Revenues
Investment income 109 448.5 289.7
Financial income 52.1 93.9
Other income 53.8 52.2
Total revenues 554.4 435.8
Expenses
Administrative expenses 107 87.0 39.7
Financial expenses 78.9 22.2
Investment and loan expenses 15.4 15.4
Income taxes 0.7 8.5
Other expenses 0.9 0.7
Total expenses 182.9 86.5
Net profit for the year 371.5 349.3
Statement of changes in equity of Sulzer Ltd
January – December
millions of CHF
Share
capital
Legal
reserves
Reserves for
treasury stock
Free
reserves
Retained
earnings
Net
income Total
Equity as of January 1, 2011 0.3 159.3 46.2 676.5 6.5 413.9 1302.7
Dividend –102.8 –102.8
Allocation of net income 310.0 1.1 –311.1 –
Net profit for the year 109.1 109.1
Change in reserves for treasury stock 1.1 –1.1 –
Equity as of December 31, 2011 0.3 160.4 45.1 986.5 7.6 109.1 1309.0
Dividend –102.8 –102.8
Allocation of net income 6.3 –6.3 –
Net profit for the year 349.3 349.3
Change in reserves for treasury stock 19.8 –19.8 –
Equity as of December 31, 2012 0.3 180.2 25.3 986.5 13.9 349.3 1555.5
Dividend –109.6 –109.6
Allocation of net income 240.0 –0.3 –239.7 –
Net profit for the year 371.5 371.5
Change in reserves for treasury stock –1.6 1.6 –
Equity as of December 31, 2013 0.3 178.6 26.9 1226.5 13.6 371.5 1817.4
126 Financial statements of Sulzer Ltd
Sulzer | Annual Report 2013
Notes to the financial statements of Sulzer Ltd
101 Valuation principles
The financial statements as of December 31, 2013, are in compliance with the requirements of the Swiss Corporation law.
102 Investments in subsidiaries
A list of the major subsidiaries held directly or indirectly by Sulzer Ltd is included on pages 115 to 117 (note 35).
103 Marketable securities
millions of CHF 2013 2012
Treasury stock 40.6 65.6
Other shares - 5.8
Total marketable securities 40.6 71.4
104 Registered share capital
The share capital amounts to CHF 342 623.70, made up of 34 262 370 shares with a par value of CHF 0.01. All shares are fully paid in and
registered.
Share ownership
Details of the composition and changes relating to the issued share capital, the share capital authorized but not issued, and the shares
held as treasury stock, are included in note 21 to the consolidated financial statements. Details of share data ownership are also
provided in note 21.
Treasury stock held by Sulzer Ltd
millions of CHF
Number
of shares
Total
acquisition
cost
Balance as of January 1, 2013 229560 25.3
Purchase 199729 18.6
Sale –146874 –17.0
Balance as of December 31, 2013 282415 26.9
The treasury stock held covers the options from the shares participation plan and restricted stock unit plan. The total number of shares
as of December 31, 2013, amounted to 282 415 (2012: 229 560).
127
Sulzer | Annual Report 2013
Financial section
105 Accounts payable and accrued liabilities
millions of CHF 2013 2012
Other liabilities 1.1 2.3
Accrued liabilities 28.6 23.9
Total accounts payable and accrued liabilities 29.7 26.2
106 Contingent liabilities
millions of CHF 2013 2012
Guarantees, sureties, comfort letters for subsidiaries
– to banks and insurance companies 1341.4 1303.4
– to customers 389.4 395.3
– to others 150.7 34.5
Total contingent liabilities 1881.5 1733.2
As of December 31, 2013, CHF 399.8 million (2012: CHF 400.0 million) of guarantees, sureties, and comfort letters for subsidiaries to
banks and insurance companies were utilized.
107 Administrative expenses
millions of CHF 2013 2012
Personnel expenses 22.8 17.3
Other administrative expenses 64.2 22.4
Total administrative expenses 87.0 39.7
108 Risk management process
Sulzer Ltd is the ultimate parent company of the Sulzer corporation. The key risks of Sulzer Ltd are covered through the risk management process
(see note 33 to the consolidated financial statements) of the corporation.
109 Investment income
Sulzer Finance (Switzerland) Ltd has been merged with Sulzer Ltd in the reporting year. The merger gain amounted to CHF 112.0 million and is
included in investment income.
128 Financial statements of Sulzer Ltd
Sulzer | Annual Report 2013
110 Compensation and share participation of the Board of Directors, Executive Committee, and related parties
This note has been prepared in accordance with the requirements of the Swiss Code of Obligations (CO), and differs from the
compensation disclosures in note 31, mainly due to different valuation.
Compensation 2013
thousands of CHF
Base
salary Bonus4)
Subtotal
cash
compensation
Other
Restricted
stock unit
(RSU) plan5)
Performance
share
plan (PSP)
20136)
Performance
share
plan (PSP)
20107)
Pensions and
social
contributions Total
Board of Directors 957 – 957 4 778 – – 140 1879
Manfred Wennemer, Chairman1)
and Chairman of
the Strategy Committee 321 – 321 – 223 – – – 544
Jürgen Dormann2) 106 – 106 4 – – – 48 158
Thomas Glanzmann 109 – 109 – 111 – – 10 230
Vladimir V. Kuznetsov, Vice Chairman,
Chairman of the Nomination
and Remuneration Committee 100 – 100 – 111 – – 33 244
Jill Lee 96 – 96 – 111 – – 13 220
Marco Musetti 90 – 90 – 111 – – 12 213
Luciano Respini 105 – 105 – 111 – – 14 230
Klaus Sturany, Chairman of the Audit
Committee 30 – 30 – – – – 10 40
Executive Committee3) 3878 2298 6176 212 495 3639 – 2626 13148
– thereof highest single compensation
Klaus Stahlmann, CEO 820 637 1457 2 – 1495 – 276 3230
No compensation was granted to former members of the Board of Directors, former members of the Executive Committee, or other related
parties.
1) Chairman from March 27 to December 31, 2013.
2) Chairman until March 27, 2013.
3) Members of the Executive Committee:
– Klaus Stahlmann, CEO
– Peter Alexander, President of Sulzer Turbo Services
– Oliver Bailer, President of Sulzer Chemtech since November 1, 2013
– Jürgen Brandt, CFO
– Urs Fankhauser, President of Sulzer Chemtech until October 31, 2013
– Alfred Gerber, General Counsel until April 30, 2013
– Kim Jackson, President of Sulzer Pumps until mid April 2013
– César Montenegro, President of Sulzer Metco
– Scot Smith, President of Sulzer Pumps since May 21, 2013.
4) Expected variable wage elements.
5) RSU awards assigned during the reporting period had a fair value of CHF 148.28 at grant date. The fair value includes an 11% discount according to the tax
procedure regarding reduction due to the limited availability at the grant date (i.e. CHF 18.33). Employer contribution to the social security institutions due to the
execution of equity instruments is not included.
6) Represents one-third of the fair value of the granted performance share units of the PSP 2013.
7) In 2013, the 2010 performance share plan vested. Due to the excellent performance of the years 2010 to 2012, the vesting value exceeded the defined cap value for
all participants and was subsequently reduced to the cap value. The vesting amount of CHF 15.5 million was settled in cash (CHF 8.0 million) and in restricted shares
with a value after tax discount of CHF 7.5 million.
129
Sulzer | Annual Report 2013
Financial section
110 Compensation and share participation of the Board of Directors, Executive Committee, and related parties (continued)
Compensation 2012
thousands of CHF
Base
salary Bonus4)
Subtotal
cash
compensation
Other
Restricted
stock unit
(RSU) plan5)
Performance
share
plan (PSP)
2013
Performance
share
plan (PSP)
20106)
Pensions and
social
contributions Total
Board of Directors 1044 – 1044 2 889 – – 157 2092
Jürgen Dormann, Chairman
and Chairman of
the Strategy Committee 443 – 443 – 223 – – 45 711
Thomas Glanzmann2) 68 – 68 – 111 – – 2 181
Vladimir V. Kuznetsov, Vice Chairman,
Chairman of the Nomination
and Remuneration Committee 101 – 101 – 111 – – 18 230
Jill Lee 96 – 96 – 111 – – 9 216
Marco Musetti 92 – 92 – 111 – – 8 211
Luciano Respini 105 – 105 – 111 – – 26 242
Daniel J. Sauter1) 24 – 24 2 – – – 49 75
Klaus Sturany,
Chairman of the Audit Committee 115 – 115 – 111 – – – 226
Executive Committee3) 3372 2871 6243 152 1113 – 959 1467 9934
– thereof highest single compensation
Klaus Stahlmann, CEO 685 867 1552 – – – – 187 1739
No compensation was granted to former members of the Board of Directors, former members of the Executive Committee, or other
related parties.
1) Member until April 5, 2012.
2) Member since April 5, 2012.
3) Members of the Executive Committee:
– Klaus Stahlmann, CEO (since February 22, 2012)
– Peter Alexander, President of Sulzer Turbo Services
– Jürgen Brandt, CFO and ad interim CEO (until February 22, 2012)
– Urs Fankhauser, President of Sulzer Chemtech
– Alfred Gerber, General Counsel
– Kim Jackson, President of Sulzer Pumps
– César Montenegro, President of Sulzer Metco.
4) Expected variable wage elements.
5) RSU awards assigned during the reporting period had a fair value of CHF 114.93 at grant date. The fair value includes an 11% discount according to the tax
procedure regarding reduction due to the limited availability at the grant date (i.e. CHF 14.20). Employer contribution to the social security institutions due to
the execution of equity instruments is not included.
6) Represents one-third of the fair value of the granted performance share units of the PSP 2010.
130 Financial statements of Sulzer Ltd
Sulzer | Annual Report 2013
110 Compensation and share participation of the Board of Directors, Executive Committee, and related parties (continued)
Shareholders 2013
Sulzer
shares
Restricted
Stock Units
(RSU) (NF)1)
Other call
options
Total call
options, share
awards and
shares
Put
options
Blocked Sulzer
shares out of
PSP 2010
Performance
Share Units
(PSU)2)
Board of Directors 54878 10609 – 65487 – – –
Manfred Wennemer – 1503 – 1503 – – –
Thomas Glanzmann 2723 1399 – 4122 – – –
Vladimir V. Kuznetsov 40315 1692 – 42007 – – –
Jill Lee 909 1692 – 2601 – – –
Marco Musetti 909 1692 – 2601 – – –
Luciano Respini 6757 1692 – 8449 – – –
Klaus Sturany 3265 939 – 4204 – – –
Executive Committee 2183 8268 – 10451 – 24739 32175
Klaus Stahlmann – – – – – – 15881
Peter Alexander – 1651 – 1651 – 9277 4860
Oliver Bailer 202 1332 – 1534 – – –
Jürgen Brandt 98 1651 – 1749 – 6185 5717
César Montenegro 1883 3634 – 5517 – 9277 –
Scot Smith – – – – – – 5717
1) Restricted Stock Units assigned by Sulzer as compensation.
2) The average fair value of one performance share unit of the PSP 2013 at grant date amounted to CHF 294.14.
Shareholders 2012
Sulzer
shares
Options
free to be
sold (F)1)
Options not
free to be
sold (NF)1)
Restricted
Stock Units
(RSU) (NF)1)
Other call
options
Total call
options, share
awards and
shares2)
Put
options
Board of Directors 20887 750 – 13971 – 42358 –
Jürgen Dormann 5648 – – 3955 – 9603 –
Thomas Glanzmann 1000 – – 969 – 1969 –
Vladimir V. Kuznetsov 3775 750 – 1979 – 13254 –
Jill Lee 293 – – 1555 – 1848 –
Marco Musetti 293 – – 1555 – 1848 –
Luciano Respini 7653 – – 1979 – 9632 –
Klaus Sturany 2225 – – 1979 – 4204 –
Executive Committee 12496 – 18789 – 31285 –
Klaus Stahlmann – – – – – – –
Peter Alexander 2825 – – 3243 – 6068 –
Jürgen Brandt 865 – – 2734 – 3599 –
Urs Fankhauser 305 – – 3479 – 3784 –
Alfred Gerber 4645 – – 2375 – 7020 –
Kim Jackson 10 – – 3479 – 3489 –
César Montenegro 3846 – – 3479 – 7325 –
1) Options/Restricted Stock Units assigned by Sulzer as compensation.
2) One option entitles the purchase of ten shares, one RSU award is converted into one share. This has been reflected in the total balance.
131
Sulzer | Annual Report 2013
Financial section
Appropriation of net profit
in CHF 2013 2012
Net profit for the year 371500000 349300000
Unallocated profit carried forward from previous year 13590600 13930184
Total available profit 385090600 363230184
Proposal by the Board of Directors:
Appropriation to free reserves 260000000 240000000
Dividend 109639584 109639584
Balance carried forward 15451016 13590600
Distribution per share CHF 0.01
Gross dividend 3.20 3.20
less 35% withholding tax 1.12 1.12
Net payment 2.08 2.08
The Board of Directors proposes the payment of a dividend of CHF 3.20 per share to the Annual General Meeting on March 20, 2014.
Annual General Meeting
The 100th ordinary Annual General Meeting will be held on Thursday, March 20, 2014, at 10.00 a.m. at Eulachhalle, Wartstrasse 73,
Winterthur (Switzerland).
132
Sulzer | Annual Report 2013
133
Sulzer | Annual Report 2013
Financial section
Auditors’ report
Report of the Statutory Auditor to the General Meeting of Shareholders of
Sulzer Ltd, Winterthur
Report of the Statutory Auditor on the Financial Statements
As statutory auditor, we have audited the financial statements of Sulzer Ltd, which comprise the balance sheet, income statement, statement of
changes in equity and notes (pages 124 to 130) for the year ended December 31, 2013.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the
company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to
the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further
responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss
law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies
used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended December 31, 2013 comply with Swiss law and the company’s articles of incorporation.
Other Matter
The financial statements of Sulzer Ltd for the year ended December 31, 2012 were audited by another auditor who expressed an unmodified
opinion on those statements on February 8, 2013.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO
and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of financial statements according to the instructions of the board of directors.
We further confirm that the proposed appropriation of net profit complies with Swiss law and the company’s articles of incorporation.
We recommend that the financial statements submitted to you be approved.
KPMG AG
François Rouiller Roman Wenk
Licensed Audit Expert Licensed Audit Expert
Auditor in Charge
Zurich, February 19, 2014
neutral
Printed Matter
No. 01-14-740692 – www.myclimate.org
© myclimate – The Climate Protection Partnership
PERFORMANCE
134 Imprint
Sulzer | Annual Report 2013
Imprint
This document may contain forward-looking statements, including, but not limited to, projections of financial developments
and future performance of materials and products, containing risks and uncertainties. These statements are subject to
change based on known and unknown risks and various other factors that could cause the actual results or performance
to differ materially from the statements made herein.
The Sulzer Annual Report 2013 is also available in German and online at www.sulzer.com/AR2013. Furthermore, the report
is available as a summary in German or in English. The original version is in English.
Published by: Sulzer Ltd, Winterthur, Switzerland, © 2014
Concept/Layout: Addison Group, London, UK
Photographs: Andy Wilson, London, UK
Getty (cover, pages 10/16); Comstock/Jumper/Andreea Manciu/Fotosearch,
Getty (internal front cover, pages 5/7); Jason Hawkes, Getty (pages 11/12/14);
Redvers Paley (page 25)
Printing: Mattenbach AG, Winterthur, Switzerland
This report is printed in a climate-neutral process on Forest Stewardship Council (FSC) certified paper.
Sulzer | Annual Report 2013
Investor information 135
Data per share
CHF 2013 2012 2011 2010 2009
Net income attributable to a shareholder of Sulzer Ltd 6.89 8.91 8.25 8.92 8.06
Change from prior year –23% 8% –8% 11% –16%
Free cash flow 6.43 10.23 2.43 4.44 15.75
Equity attributable to a shareholder of Sulzer Ltd 68.70 65.20 59.60 56.20 52.95
Dividend 3.201) 3.20 3.00 3.00 2.80
Payout ratio 46% 36% 36% 34% 35%
Average number of shares outstanding 33999429 34009267 33906689 33693120 33567516
1) Proposal to the Annual General Meeting.
Stock market information
2013 2012 2011 2010 2009
Registered share (in CHF)
– high 171.00 147.50 158.50 144.00 96.40
– low 129.60 101.40 84.35 80.10 39.15
– year-end 143.90 144.10 100.40 142.50 81.10
Market capitalization as of December 31
– number of shares outstanding 33979955 34032810 33804507 33715892 33570526
– in millions of CHF 4890 4904 3394 4805 2723
– in percentage of equity 209% 221% 168% 254% 153%
P/E ratio as of December 31 20.9x 16.2x 12.2x 16.0x 10.1x
Dividend yield as of December 31 2.2% 2.2% 3.0% 2.1% 3.5%
Shareholder structure as of December 31, 2013
number of shares
Number of
shareholders Shareholding
1–100 5770 0.8%
101–1000 5021 4.8%
1001–10000 637 5.2%
10001–100000 109 9.6%
More than 100000 24 52.6%
Total registered shareholders and shares (excluding treasury shares Sulzer Ltd) 11561 73.0%
Title Security No. Investdata Reuters Bloomberg
Listed on SIX Swiss Exchange
Registered share 3838891 SUN SUN.S SUN SW
Sulzer Ltd
8401 Winterthur
Switzerland
Phone +41 52 262 11 22
Fax +41 52 262 01 01
www.sulzer.com
Group Communications
Phone +41 52 262 72 72
Fax +41 52 262 00 25
communications@sulzer.com
Investor Relations
Phone +41 52 262 20 22
Fax +41 52 262 00 25
investor.relations@sulzer.com
DR.VEDULA GOPINATH
(Expert) 18 April 2015
dear sir
It is very lengthy I cannot read it here. Kindly mail me docs. thru courier to
dr vedula gopinath advocate/arbitrator
58=14-91, Sai Krupa, HIG 15, VUDA layout
N.A.D.POST
VISAKHAPATNAM 530 009 QPINDIA
PHONE 0891-2713121
Guest
(Expert) 18 April 2015
Mr. Balasubramanian,
You have not indicated any purpose for asking such a query and how you are concerned with such a problem, if that relates to you in any way.
However, if that is really a problem, better give complete description of the problem, as your instant query is nothing, except an academic query.
T. Kalaiselvan, Advocate
(Expert) 24 April 2015
