Sulzer Ltd

to Sulzer's half year 2025 results presentation. Welcome also to Thomas Zickler, my colleague and the CFO of Sulzer. We will lead together through the presentation. Also, we will answer questions at the end of our presentations. And so please ask them then. Investor Day 2024, in June 2024 at the airport in Zurich, Sulzer presented in detail the strategy and also our mid-term financial goals. Important growth above market, an EBITDA margin above 17%, and the return on capital employed of above 22%. Two pillars in the strategy, profitable organic growth and Zulzer excellence along the entire value chain. Now, the world has definitely moved on since June 2024. Let me just quickly mention what you all know. The geopolitical framework has changed. We have tariffs and counter tariffs and in general a higher uncertainty in the markets and low visibility. Let me also mention our reporting currency, Swiss Franc, which has increased in value 15% against the dollar since the 1st of January 2025. I think we all agree we do live in a phase of accelerated change and there is, well, not too much visibility. Now, what does not change? is a strategy, profitable growth and excellence along the value chain. And what does also not change are our mid-term financial goals of 17% EBITDA margin and return on capital employed of above 22%. Quite to the contrary, we are in the midst of implementing our strategy and we are doing so successfully. Now let's quickly look at the highlights of 2025. Definitely we have had a strong sales increase. We grew above the market and this is due to our capacity to execute on our large backlog in the first half of this year. Profitability improved again. This is now the third consecutive year in which profitability improved. 23, 24 and now in the first half, 25. In 23, it's probably fair to say that we were very actively collecting the so-called low-hanging fruit. Since 24 and now in the first half of 25, the improving profitability is, among others, due to a very disciplined and proactive implementation of our excellence strategy. We have good order intake in Sulzer as a group with the exception of, unfortunately, Chemtech. The service division is excelling in order intake. Of course, also having tailwinds from the aftermarket. So the services division is more or less fully in the aftermarket, and the aftermarket is continuing very well, not influenced by outside impact, as I mentioned before. We also have very good momentum in the flow division and Thomas Tickler is going to go a little bit deeper in showing to you why this is the case. Now with Chemtech there are reasons. for the situation, they have to do with the geopolitical uncertainty, they have to do with overcapacity in Asia, particularly in China, in the refinery area and in the petrochemical business. Now, there are also some homegrown issues in chemtech and we are now very much doing our homework in innovation, in order winning and in order execution. We are doing that under the leadership of the still new division president, Tim Schulten, and we do see favorable signs going forward. Let me quickly also mention the strong return on capital employed development, definitely on our way to meet our targets of above 22%, and also in these special times, still a growing order backlog. Now it is time for me to hand over to Thomas, who will lead you in more details through our results.

Thank you very much, Susan. Let me go in the financials. So, I want to start this time with sales. When you look at our very strong sales, which we achieved in the first six months of this year, with plus 6.3%, You will see also then in the details, talking then about the divisions, that we had double digit growth on the sales side in flow and in services. In flow with 10.3% plus and in services with almost 15% plus. On the other hand side, as already indicated by Susan, in Chemtech, we have seen a minus of 13.6% on the sales side. With this, I would like to go to the order intake situation and then also elaborate during the next couple of minutes more and more on the situation which we face in the international capital and capex markets. So talking about order intake, you see here that we are the opinion that we have a good order intake for flow and for services. I think for services, it's very clear, for services we have plus 12%. When you look the order intake for flow, you see a minus 3.1%. However, when you compare H1 last year to H1 this year, you realize that in last year, we had a big 100 million US dollar order from a big project in the Middle East. And when we normalize our order intake, even on a group level, we would end not at minus 2.4, we would end at plus 2% with this normalization. What is clear after the first couple of months this year is that we are more impacted from this geopolitical uncertainties and also the tariff discussions as well as difficulties in Asia where we have over capacity in the refining area, that we are more impacted on our Chemtech side than in our other business segments. When we talk about the quality of our order intake overall, you see that our order intake margin went up again 210 basis points. So this means the quality of our order, filling our order book, is really of good quality. We see here in no division reductions or decreasing order intake margin in the first six months of this year. And believe it or not, it is not Chemtech which has the lowest addition, it is another division. When we talk about Our order backlog. Order backlog was impacted heavily by the massive US dollar devaluation over the last couple of weeks, more or less in the last two months, almost 15%. And this has also an impact. but only from a, say, FX perspective on our order backlog, because you see that our backlog actually has grown by 5% compared to H1 last year. Last but not least, let me also elaborate a bit on the currency impact on order intake and sales. As a sums rule, you can estimate roundabout 4% we have impact on orders and on sales and this is in absolute terms round about 70 million Euro. Now let me go to our profitability and here I want to really say continuous strong improvement of our profitability and here I want to start with the comparison. You see on the left column 14.4%. This is compared to last year, a plus of 90 basis points. If we would calculate here the massive US dollar FX impacts out, we would have even increased by 120 basis points. So 30 basis points more. And just to remind you, We come from EBITDA profitability in the year of 23 in the first half of 12.9%. Talking about return on capital employed. You see, and I think here I don't have to comment much more, 270 basis points, so almost three percentage points increase in our return on capital employed. What is the root cause for this? Our EBIT is growing very well and on the other hand side our capital employed is stable. Then let me go into the divisions starting with flow. Here on the flow side I want to focus you on the profitability improvement. You see on the EBITDA margin that flow again has increased by 50 basis points its profitability, which in my opinion is really a very, very good result. Also here as a reminder, on the EBITDA profitability, flow is coming in the H123 from 8.4%. So you see here why we always stress continuous improvement in our profitability. This is really something which we are very proud of what we have achieved here. When we talk about the sales, the sales in flow, You see that we have here on the flow side really double digit sales growth. We are growing double digit in energy and in water. I cannot give you the number because we are not disclosing these numbers, but just to indicate energy on the sales side and water, they are growing double digit. Coming now to the order intake. As I already mentioned in the beginning, We have, and I start with energy and infrastructure. We had last year this 100 million US dollar project out of the Middle East, and this project is massively impacting our comparison to last year. If we take this 100 million project out of last year and compare it with this year, you see that the energy and infrastructure division wouldn't have gone down by 13.2%. They would have went up by 12%. Just that you see the magnitude of this big order and these kind of big orders we normally get every 5 or 10 years. When we do this calculation on the flow basis, you see that we would then go from minus 3% up to plus 8% on the flow level. So you see the magnitude of this one single order which we received last year. As a last point, I also want to here address on the flow side, that the order intake margins, they are growing. It's a very stable, a very healthy business. The order pipelines, they are looking very promising. And therefore, I think here you have a good overview over our flow division. Let me go to the next services. Services, I was really in preparation of this conference asking myself, what should I really stress and what should I say about services? Because services now, when you see the headline, it's the third consecutive year where we have services growing double digit on order intake and on sales. The third consecutive year. We have sales growing in all regions with double digit. When we talk about orders, we have in America a growth rate in the first six months of this year of around about 8%. And when we look into Europe, Middle East and Africa, we are growing by 25% in the first six months of this year. And this because of The governments, the industrial corporations, they are looking for a higher security when it comes to the energy infrastructure and also energy savings when it comes to efficiency of their processes. What I want to address here on services, and this is the only thing as basically a markup also for you. Maybe you remember when we had our press conference at the year end, we said services invested last year a lot in its footprint in service locations in the Middle East, but also in other places in Asia. And we also said they invested in their sales force. So you see, Already the first Sulzer Excellence impact in the first six months of this year. You see that the profitability, the EBITDA margin is coming up by 30 basis points. When we compare this where we are right now, we are close to the profitability level, which we closed last year with 16.8%. So you can expect here further progress in the profitability development of services this year. Then Chemtech. Chemtech is a bit our division which is most impacted by all these geopolitical uncertainties. the tariff conflicts and we have in the refining area the most sensible and sensitive capex investors we have in addition in Asia a market in the refining area which is quite satisfied we have even over capacities so all these together has led to the situation in which we basically are in currently with Chemtech. What is currently not visible for us is that we have a promising pipeline of a couple of bigger, larger orders in the area of bio-based polymers, PLA, also carbon capture, but also sustainable aviation fuels. Currently, we have no visibility, as I said, which of these projects will materialize. But we are in good optimism and we think that some of these projects, they will come in H2. So what I'm trying to say here is that we expect that H2 is really getting in much better than H1 in Chemtech. When we talk about the results of Chemtech, I also want to remind you, Order intake, yes, this year minus 20%, last year it was plus 8% and the year before it was plus 25%. Just that you see the growth magnitude still with now this 20% impact on a very high base this year. What we see also, and you see it on a double digit minus on the sales side, that we have had headwinds when it came to execution of our projects. We were faced with some, I wouldn't say many, but some delays on the project customer side, where we then had to also delay our execution on this project. we also saw less new orders coming in which then led to a lower book to build ratio and then overall to a lower sales in the first six months last point EBITDA margin you see the EBITDA margin is almost down three percentage points we have taken first measures and and really have decided not to overdo it at this point in time because we think, as I mentioned, that we are currently in a geopolitical environment which has nothing to do with the markets in the sense nothing has been changed on these structurally growing markets. We still believe in the markets like PLA carbon capture and aviation fuels. We also have a good core business in the gas and refining area. So taking these uncertainties away we believe that we can catch up and therefore we have only taken some very reasonable cost measures on the Chemtech side to ensure that per end of the year that we are achieving our profitability targets. Then cash flow and here you see solid cash flow. And I explained to you why I think it's solid. It's 12 million lower than in H1 last year. What is the reason or what are the reasons for this? We have, because of this economic uncertainty or geopolitical uncertainty, we have customers delaying now the projects. We have everyone hesitating now to decide. We have on the CapEx side these situations. So all over the place, we see delays. And this is happening also in our case, and therefore our inventory went up. And also when it comes a bit to the payment model, our accounts receivables went up. And when you take our inventory and accounts receivable together, we have round about an increase alone of 40 million. uh compared to h1 2024 and therefore i think with the 12 million less on our free cash flow susan it's quite a solid and a good cash flow so with this susan having our company really in good shape i want to hand back to you thank you very much and please also hand this back to me thank you well

Let's have a look at the bigger picture. I'm not going to speak about the tariff situation anymore. What I want to mention is that these uncertainties and the reduced appetite for decision is both in the United States and outside of the United States. It has also to do with the fact that customers have difficulties to calculate the costs of their project. because they don't know what tariffs will be applied, what will be passed on to them. So that gives a certain uncertainty and projects that you don't necessarily have to decide on right now, but can also do it three months later are often, not always, not even often, but sometimes then delayed by three months. Doesn't change the fact that nothing was cancelled, no projects were cancelled, they were pushed back. Those that were pushed were pushed into the second semester of this year and a few won particularly in the Middle East through the first semester of 2026. So all in all, however, the investment need for energy infrastructure, natural resources and the process industries is completely unchanged. It's a structurally growing market and what is also unchanged a bit in contradiction to what you can read in the media, is this push of our customers to reduce their ecological footprint. They worry about energy efficiency, energy savings, emission reduction, decarbonisation and higher performance. That hasn't changed at all, often also because cost and reduction in the ecological footprint is linked. And in that, we also see an increasing pipeline of large projects in what we call the environmental technologies. That is not only chemtech, that is also services and that is also flow. So nothing has changed there, although maybe the political sentiment when it comes to sustainability has in some places. respect, it is good, has changed, everything has become a bit more rational. You know the following slides, or many of you do, showing the markets in which Sulze are and how they develop, why we speak about structurally growing markets since 2010, at least this has been the case, markets growing on the order of 5% or a bit less depending on the situation per year and there have always been short-term little slowdown in the growth and then afterwards it has picked up even more. This is how we orient our market strategy and we do see the reality of this in our discussion with the customers. So let me speak for a moment about innovation. You haven't heard that much of me when it's about innovation. Although Sulzer is of course and justifiably so very proud of its innovation. The reason is that innovation is part of our overall strategy. It's part of growing profitably. and it is part of improving our excellence along the value chain. It also means helping very concretely our customers' goals, which are to grow, to be competitive, to reduce costs, and to reduce their ecological footprint. So when we speak about innovation in Solsr, now we mean research and development that really meets market needs. relatively short term. We have also some long term research that we will continue, but we are becoming very concrete. So let me show you just three examples. I will not be too long. One is the hydraulic power recovery turbine. That is helping our customer to save energy and to save cost. You can say you take the pressure energy of a pump and you turn it into electricity. There are a few steps in between, but it makes a difference for our customers and we are very happy with the development in that area. Let's look at services. Service does a lot of innovation, although we often speak about services just as repair and maintenance, but repair and maintenance has a lot of innovation. And also it's about enabling and upgrading the energy infrastructure of our customers. So Services has launched a specialized service that they call Soltzer Energy Optimization Service. It is for energy infrastructure focused on pumps. Now you will maybe ask, well, do pumps make a big difference in the energy consumption? Yes, they do. 20% of our electricity consumption worldwide happens in pumps. Interesting figure, isn't it? So if we would just increase the energy efficiency of all pumps worldwide by 1%, so very little, we would save on a worldwide scale about a little bit less, but about the energy consumption of all of Switzerland, which is about 58 terawatt hours. So these are big things, although just with Yeah, technically little impact. Speaking about Chemtech, clearly decarbonizing the material supply chain with biopolymer. This is an emerging industry, is an emerging need. Innovation right now is about making this technology cheaper. less costly and also to broaden the application field we are happy with the development in this area with very large orders that came in in the first half of this year and we have also now inaugurated our engineering and application hub here in Winterthur and I am very happy to report that it is already running at full capacity with paid customer projects and also formulation development which just speaks to the fact that this technology is very interesting for our customers around the globe. Let's just look a little bit, get the flavor of what Sulzer is doing. Just a few examples. Well, Venice Lagoon is known for very flamboyant weddings, and so it is important that the water stays clean, but not only for the weddings, also for the whole population. That is more or less given right now. However, there was a regulation change in Italy, and that means that also Excessive water from storm, storm water in the future has to be cleaned. And then you have a problem because you don't have that much space in Venice and you still need to add capacity. SASUZU gave a solution that allows to save 90% of the space. You need 90% less space compared to the standard sedimentation technology. We also reduce the energy consumption by 50% and by 100% the amount of rinsing water necessary. This is what we mean with making our customers more competitive, reducing their ecological footprint and enable them to live up to their goals. Another completely different example is from South Africa. Grid stability in South Africa is a major issue. They have regular power outages and also, of course, peak needs. And we have been awarded a large contract in the area of the overhaul of five large gas turbines. Eskom is a Sulze customer since more than 30 years. That made us even more proud to get this order because they really know whom they are dealing with and they seem to think well of us. And also I'm glad to report that we are not only overhauling these turbines, we are also training the local people, local engineers, so that they can build expertise going forward. That is also part of this package. Let's have a look at a technology that is slowly making its way into the market and that is carbon capture and storage. As far as I know, the largest carbon capture project worldwide is the Net Zero Teesside Power Project. What is it about? It is about decarbonization of an industrial cluster that still needs a lot of energy and also flexible energy. and so it is about the decarbonization of a gas-fired power plant. It's a big gas-fired power plant, 740 megawatt. That's now one and that's now two together, plus, minus, and it's about taking out 2 million tons of CO2 per year. The mid-term goal of our customer is to take out 10 million tons of CO2 per year. and Sulzer provided the internal powers, the critical equipment and all the engineering that comes before that to separate the CO2 from the flue gas. Next example, interesting, coming from Malaysia. This is a customer who is investing a large amount in a also large pilot plant for sustainable aviation fuel. They are doing that with technology, particularly for the purifying step and that is very important because this project will not be in competition with the food chain. It is fully supplied by waste material and so the purification step is even more important. You see to the left our business unit head from process solution Ilya Milkenberg receiving the award in front of a big conference in Malaysia about sustainable aviation fuel. So these are enough examples. They give you a little view on what we are doing and why we are saying that we are serving critical infrastructure, both for a profitable economy and also a sustainable society. I'm coming to a close. On track for Ambition 2028. The ambition that we formulated 14 months ago remains the same and we will reach it, although we do have a bit different circumstances than we had 14 months ago. One of the elements is clearly that Sulzer has a strong aftermarket, so non-project related business and all in all, over the three divisions, the aftermarket represents 50% of our business and of our order intake. We definitely do have a good order intake with unfortunately the exception of Chemtech. But yes, we are working on it together with the division. And as Thomas Zickler just said, we do also see some very positive development. Now, market uncertainties persist. And interesting enough, it's really uncertainties because situation can become worse, but it can also become better. That is quite interesting. And that means that we do have a pipeline of new growing projects that we didn't see a few months ago that are coming in and are coming in from all three divisions. But a pipeline is not yet an order, but still it is also an encouraging sign. Definitely, social excellence along the value chain, the way we do business, the way we win orders, the way we execute orders is picking up speed throughout the whole company. We're definitely not yet... in the area where we would plateau there is much more potential in the company but it is something that will also need a few years to really give the full results so proudly we serve essential industry and we contribute to a prosperous economy and sustainable society that allows us also in this circumstances in which we are to confirm the guidance. There is no reason neither to up the guidance nor to lower the guidance. We see clearly that at this point in time, of course, that the order intake will be up between 2 and 5%, sales up between 5 and 8%, and the EBITDA margin above 15%. Thank you very much. Thank you for your interest, also for your interest in Sulzer and for taking the time to follow us. We are now at the beginning of the Q&A session, so please do ask your questions.