long-term corporate resilience - amcham buechner...- know your cyclicality - build flexibility in...

Ton Büchner, CEO of Sulzer Ltd | March 23, 2009

Long-Term Corporate Resilience

Presentation to Swiss-American Chamber of Commerce

Swiss-AmCham | March 23, 2009 | slide 2

Long Term Corporate Resilience…It’s all common sense – living it is the hard part…

…is based on:

Vision, Mission & Strategy

Culture & Communication & Toolboxes

Structure

- Corporate Governance

- Management Team

- Processes

Flexibility

- Know your cyclicality

- Build flexibility in good times to respond to bad times: create buffer

1

2

3

4


Our visionSulzer’s vision is to be a recognized leader in innovative, sustainable, engineered, and customer-focused solutions for performance-critical applications in six main markets and selected industries.

Sulzer’s vision and values:What are we? How do we behave? 1

Our Mission

a multi-industry company with a strong branda provider of solutions that combine products, services, engineering, and customer-application expertise

close to the customer by being primarily direct-sales driven

an engineering, innovation, and technology driven firm

an attractive employer where employees can excel

a company that creates value for its shareholders

Sulzer aims to be

We are committed to high standards and show respect for people.

We exceed the expectations of our customers with

innovative and competitive solutions.

Our values

We perform on the basis ofstructured work processes

and LEAN principles.


Today’s Sulzer PortfolioFrom 15+ to 4 divisions… plus central R&D

Sulzer PumpsPumping solutions

and services

Sulzer MetcoSurface technology

solutions and services

Sulzer Turbo ServicesService and repair for thermal

turbomachinery

Sulzer InnotecContract research and

technical services

Sulzer ChemtechSeparation columns and

static mixing

1


Oil and gas(upstream)

HPI1)

(oil and gas, downstream)

Power generation

Pulp and paper Aviation Automotive Industry

Six key markets

1) HPI: Hydrocarbon Processing Industry

1


Strong position in our end markets

Share of sales

Sulzer Turbo Services

Sulzer Chemtech

Sulzer Metco

Sulzer Pumps

Other industrial markets

Auto-motive

industry

AviationPulp and paper

Power generation

HPI(oil and gas, downstream)

Oil and gas

(upstream)

1


Sulzer is a strategic holding with some common operational core processes

Financial consolidation

Small HQ

Strategic Holding Operational Holding

Operational management by HQ

Processes driven by HQ

Large HQ

We defined 6 core processes including related KPIs

Our core processes define the split of responsibilities between HQ and Divisions

Our reporting mechanism ensures execution and follow-ups on the core processes

@

Financial Holding

Strategic direction

Mid-Size HQ

Operational “control”

“Driving” with key focus topics

1


Sulzer defined six corporate activities whichtogether with the CEO team drive the divisions

Corporate Finance and Controlling

Corporate Human Resources

Corporate Strategic Planning and Acquisitions

Operational Control and Business Improvement

– Health and safety

– Lean Management & Lean Operations

Corporate Innovation and Technology

– Innotec

– R&D initiated and funded from Corporate

Corporate Communication

Those six core activities:

Request data/input from divisionsDefine and drive actions Create action plans to be executed by the divisions

Are a core tool of the CEO team (CEO/CFO/GS)

1

Annual results 2005 | Master presentation V1-02 15/02/06 | slide 9

1 554

1 2011 253

1 625

1 247

30.6

11.3

13.3

23.724.2

0

200

400

600

800

1000

1200

1400

1600

1800

2004 2005 2006 2007 20080%

5%

10%

15%

20%

25%

30%

35%

A clearly defined and implemented strategy leads to a strong increase of profitability and value creation

ROS in %EBIT

millions of CHF

Capital employed and ROCE2)

millions of CHF

EBIT and ROS1)

Operating leverage and continued operational improvements

ROCE in %Capital employed

296

394

167136

47511.1

10.6

6.76.6

12.8

0

50

100

150

200

250

300

350

400

450

500

2004 2005 2006 2007 20080%

2%

4%

6%

8%

10%

12%

14%

1) Return on sales (EBIT/sales)2) Return on average capital employed incl. goodwill at net book values

1


Long Term Corporate Resilience……is based on:



Structure


- Management Team

- Processes

Flexibility



1

2

3

4


Transition into emerging markets

Health and safety

Corporation-wide operational excellencebased on LEAN principles

Increased and faster high-quality innovation

Increased focus on service

Clearly defined key focus areas – simple to communicate and intensely repeated help a lot 2


As a publicly quoted company, statementsand results are strongly linked and publicized

Sulzer established a culture of high but achievable aspirations

Sulzer transparently communicated the aspirations

Sulzer kept the aspirations constant over a certain period of time

Sulzer delivered on the aspirations

Consistent communication of our consistent behaviour has been a strong contributor to Sulzer’s credibility in the last years.

2


Our aspirations are based on our market assessment…

TransientWeakeningtoward year-endAutomotive industry

UncertainStableAviation

WeakWeakeningPulp and paper

Reducedproject activityVery goodPower generation

Clearly reducedproject activityGoodHPI (Oil and gas, downstream)

Reducedproject activityVery goodOil and gas (upstream)

Assessment

2009Market condition

in 2008

2


… and clearly communicated internally and externally

Midrange outlook3)

Achievements 2008Key figures

5.0%

30.6%

12.8% ~10%ROS - Return on sales1)

>20%ROCE - Return on capital employed2)

-5% to -8%

(CAGR adj.4))Sales growth

1) EBIT/sales2) Average capital employed incl. goodwill at net book values3) Status: February, 20094) Compound annual growth rate, adjusted for currency effects as well as acquisitions and divestitures

A realistic scenario in a highly uncertain environment

Measures ongoing – charges possible

Culture of actions; advance announcements only when required

Also more pessimistic scenarios prepared

2





Structure


- Management Team

- Processes

Flexibility



1

2

3

4


Board of DirectorsMembers of the Sulzer Board

New composition of the Board of Directors of Sulzer since 2001.

Smaller size increased efficiency and effectiveness.

Sulzer developed (in 2000) Corporate Governance requests for a Board Member:

CEO experienceNot in other Boards together (now changed with Renova)Industry expertsInternational composition

3


Sulzer’s Executive Committee Experience, energy, values, ethics are key for the team

Relatively young crewEstablished track recordHigh Asia experienceHigh service experience

New Executive Committee members were selected internally based on:energy, experience, values, ethics

3


“Our aspiration is zero accidents”

“Efficient processes and solutions to minimize the

ecological impact”

EcologicalSocial

Sustainability at Sulzer

“Sulzer’s prime objective is sustainable value creation”

Economic

Accident frequency rateReturn on capital employed1)

1) EBIT/capital employed (incl. goodwill at net book values)2) 2008 data provisional

Cas

es /

tota

l wor

king

hou

rs)

* 1 M

io w

orki

ng h

ours

0%

5%

10%

15%

20%

25%

30%

2004 2005 2006 2007 2008

Financial year

Energy/Net Value Added [GJ/1000 CHF]Energy/empl [GJ]

0

2

4

6

8

10

12

14

2006 2007 20080

50

100

150

2004 2005 2006 2007 20080

0.5

1

1.5

2

2)

3





Structure


- Management Team

- Processes

Flexibility



1

2

3

4


Why is Sulzer today better positionedfor harder times than 10 years ago?

Sulzer around 2000Swiss companyLack of speedConglomerate, no profileLow credibilityRarely benchmark performance

Sulzer todayInternational companyFlexibleClear profileHigh credibilityGood performance

Today’s existence of:

Speed…

Flexibility…

International experience…

…helps Sulzer to deal with harder times like this financial crisis

4


Industry 6

Know AND ACCEPT your position in the industry cycle is very important for a management team

Industry 3Industry 4

Industry 2Industry 1

Industry growth cycle

Industry 5

Experience is key to understand cyclicality - and its cash requirements“Living a cycle” makes you humble and that’s a strength

4


Even within Sulzer not all the businesses have the same amplitude regarding cyclicality

CAPEX cycle (e.g. new pumps, column equipment)

Production service cycle (e.g. coating services)

GDP/ Repair and spare parts cycle

Each company has to recognise, know and understand its cycles

The management team has to manage the cyclicality. During good times one has to build up buffer to deal with the bad times

4


Long Term Corporate Resilience…It’s all common sense – living it is the hard part…is based on:



Structure


- Management Team

- Processes

Flexibility



1

2

3

4

… needs to be in place… needs to be developed and then maintained top-down and bottom up… can be communicated internally & externally for additional strength & discipline


Thank you for your attention


Back-up


Sulzer PumpsMarket leader in pump technology and hydraulics

No. 1: Pulp and paperNo. 2: Oil and gas (upstream and HPI) No. 3: Power generation


Sulzer Pumps is a major engineered and pre-engineered pump player in several marketsSulzer Pumps main segments:

Oil and Gas

Hydrocarbon Processing Industry

Pulp and Paper

Power


Sulzer MetcoLeader in surface technology

No. 1: Coating equipmentNo. 1: Coating materialsNo. 3: Coating services


Longer tool life

Reduced machining time

Less cutting fluid

Higher hardnessand

lower friction

Thin film coating of cutting tools:

Industrial Markets/Automotive: Coating is used for Cutting Tools


Sulzer ChemtechComponents and services for separation technology and static mixing

No. 1: Static mixers (at high viscosity)No. 1: Two component mixing and dispensing systemsNo. 2: Separation columns


Mass Transfer Technology (MTT)Components for Separation Columns

Trays

Rings

Structured Packings

Distributor

Gas

Liqu

id

Enhanced plant performance, reduced operating costs

Tower diameter 0.3–14m, tower height 2–80m

Trays, structured packings, rings, distributors, supports, etc.


Sulzer Turbo ServicesLeading independent service provider

No. 1: Industrial gas turbinesNo. 1: Steam turbinesNo. 1: Turbo compressors


Sulzer Turbo Services is a major player in the service business of gas and steam turbines & compressors

long-term corporate resilience - amcham buechner...- know your cyclicality - build flexibility in...

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