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.

Good morning from my side. The friendly voice from the background belongs to me, Marlene Bechardt. I'm responsible for communications at Solzer. And if you have a question after this webcast, please feel free to drop us an email at communications at solzer.com anytime. I will now start with the questions. So from Christian Arnold from Otto. He asks, service division, you reached a very strong top line growth, organic sales growth of 14.8%. The EBITDA margin increased only by 30 basis points, which looks modest given the high top line growth. Has operating leverage not a big role in the services business?

Thank you for the question. Absolutely right. It is true in the service business the operating leverage is probably slower than in a business where you have a larger fixed cost block, but it is still there. I would say that the service division's priority were clearly in growth and that we are not yet there where we should be when it comes to executing on our social excellence initiatives. But we do expect an improvement in profitability already this year and then going forward. Would you like to add something?

Yeah. And as I said, we have also in our strategy, in our ambition 2028, a certain facing. So first we focused on divisions like flow. and also Chemtech. And we basically had services, since they were very profitable already at the start of our program, we had basically under-prioritized them a bit. And this is what Susan and I are saying for the last six months now, that now the focus is on services. And Christian, you are absolutely right. This profitability has to increase much more. And we are doing currently everything we have, as I said, started last year already in preparing this. And you will see that by the year of the end, the profitability increase in services is much higher.

Second part of Christian Arnold's question is about sales in the U.S. that remained rather flat. We heard from other Swiss companies talking about a booming energy and electricity business in the U.S. Could you explain Sulzer's performance in the U.S. and talk about the future potential?

Yes, I'm glad to answer that. So definitely number one, we are reporting in Swiss francs. And so we are losing 15 percentage points when it comes to the sales development in US dollar in the first half of this year. Maybe Thomas will add something to that. I also saw the good development of ABB and Acceleron. I understand both companies are strongly involved in the grid business, which needs more than just a little bit of repair and maintenance. I mean the grid in the United States. We must also see that we have grown very heavily in 23 and 24 in the service business in the United States. So we did expect a little bit of flattening. But all in all, we are positive about development in the United States.

And to add on what Susan said, when we look in the United States, we have a very strong services division still. However, as we told you, in Chemtech, we have currently a bit of hesitation coming from the customer side, also in the U.S. So all in all, this offsets so that we are more or less even on the growth rate in the U.S., But on the other hand side, he was also asking for what are the future prospects, what do we see? We see especially in the US nowadays with their ambition to get in AI a leading country in the world that they are building up more and more so-called gas-fired power plants. And in these new installations, we think that we can get from all the three divisions additional business, which is currently not in any of our forecasts.

Next question from Martin Bechart, Roland Bodmer. Can you remind us of the visibility you have with your backlog? How many months?

So this is a tricky question because you know the backlog is created when you get the order, signed order, and then you add to the backlog. Depending on the segment, we have order backlog, which is just good for a couple of weeks, say in the services business or also when we sell products or parts. On the other hand side, we have in our backlog projects, they are 18 months, 24 months. So actually, normally we say we have a weighting in the backlog of around about nine plus X months. So this means between nine and 10 months as an average. If you absolutely want to have a number.

Next question from Fabian Piasta from Jefferies. He says, good morning and congrats on another strong print. First question, can you please provide details on the positive 9 million effect on EBITDA from corporate center? Can we expect the reversal in the second half year or see this rather as a run rate for the full year?

I'm happy to answer this question. This will get a run rate. So what have we done here? Because we are earning more and more and our profits are going up, we had to do certain, I call it, tax optimization measures. And what we did, we increased in the first six months of this year the so-called management fees, which we charge as a headquarter to our three divisions. And this is more or less the 10 million he's talking here about. And when now I have to answer this question, I can also address this then to you. All the profits, all the grown profits which you have seen in the divisions, they include this 10 million higher charge from the headquarter. So you see how excellently our three divisions are performing on the profitability progress.

I would like to add something more general. Of course, when we speak about social excellence, this is not only excellence in the division. This is also excellence in our functions, finance, AR, supply chain. When did I say AR, I mean HR and supply chain. We are strongly taking strong actions to reduce our total overhead in the company and that includes the corporate organization.

Second part of his question, I understand that weakness in Chemtech orders might level out in course of the year with some catch up in the second half of the year, but how can we think about the refinery Petrochem over capacities in China going forward? Are you expecting pent-up demands towards 2026 or do these volumes need to be compensated?

We do not expect pent-up capacity to be compensated in 26. We are assuming that this situation with the refining and petrochemical will remain in China and in Asia as general. Our positive outlook is based on a bit of change in China, how we work the market, with smaller markets and smaller projects and also more products in China for China. And we clearly also see that outside of China, we see more projects coming in in the renewable area. But we are not betting on a rebound in China for 2025 and 2026.

Third part of the question, can you please walk us through the measures, levers leading to margin improvements in flow and services? What was the main effect in Chemtech apart from missing scale?

I'll start and then you follow up. Okay, thank you. On a high level, we can start with how we organize order intake depending on the business unit. It's about being fast and high quality so we can immediately answer the customer's need. It is also about having more market-driven pricing and not so much cost plus. I think we have also left some margin in the past because of our cost plus focus. Everything is not happening from one day to the other, but you can say order winning. is of importance and then when we come to order execution and everything that is with that we are doing very systematic value stream mapping allowing us to increase the capacity in our plants without adding workers or making any large investment we have a very nice example of our plant in Pune in India where two weeks of very in-depth and collaborative value stream mapping led to a transformation that, believe it or not, doubled the capacity of that plant, which now says that if we grow profitably, we don't have to invest.

Yes.

It's okay? Okay.

Next question is from Alessandro Foletti from Octavian. In Chemtech, can you quantify the size of the large order for carbon capture you got recently for Teesside? And also, was it booked in the first half of the year H1 already? And finally, do they have any economic benefit by installing this system?

Okay, so I start. Actually, How can I say this? It's in the mid double-digit millions. The order size, because we are not allowed to specifically say the exact order number. Then we have booked roundabout 50% already in H1. The other 50%, this will come in October, November of this year. Susan, that's it from my side.

Okay. You asked about the economic benefit, a very interesting question. So in this project, it's about carbon capture and then storage in the North Sea. The rationale for the customer is as much independence as possible from the grid, the national grid, which then compensates for a lot of costs because you pay less grid fees and also less taxes. The additional costs are amazingly small in this project. I'm sure I'm not allowed to say the figure, but it shows that there is, if you have the carbon capture in the right place, at the right magnitude, and you factor in also the energy savings that you will have, not the least in the ever more expensive flexibility, in the energy area. So having electricity when you want it and not just when it is there, they have a good business case.

Also from Alessandro Folletti, two questions regarding Flow and Chemtech. The first one is, can you remind me in Flow how high was the large order you got last year in energy that formed the high comparison base for this year's order? And the second one, Chemtech, can you quantify the impact of a weak China and how much of this is refinery versus other business like renewables or PLA?

So I start with the first part. The large order which we received was around about 100 million US dollar or 84 million Swiss franc counter value. And this caused a high base impact last year. In Chemtech, yes, the dependency on China is high because we were basically grown over the last decades in China in the refinery business. How much is this versus renewables? I would say the core business share in China is still relatively high relative to our renewables business. I would say 80, 20, 70, 30, something like this.

If you limit the question to China, then definitely the renewable part is smaller. What we are doing now more and more is selling into segments that we have had less activities because we were going for the large projects, but it is not so that the smaller projects by definition are less profitable.

Next question is from Jörg Meyer from NZZ. What will be the longer term effect of the increasing electrification transport for example in China and increasingly in Asia on the business of Sulzer?

Electrification means you need more electricity. and you need at the same time to decarbonize your electricity supply. I think also the Asian governments, they agree on this and they also realize maybe more than we in Europe that it is a long term. journey that we undertake. So we see a positive development on the electrification of transportation simply because it will need more power and it will need more clean power.

Question from Louis Billon from Alpha Value. Order intake margin is improving. Is it due to a mixed effect? Should we expect a margin decline when we will see a recovery in order intake for project-driven business?

Here I can clearly answer no, because our order... order intake cross margins, they are really sustainably growing and we have certain measures in place. It's starting with value-based pricing and it's ending then with our operational excellence measures, which we take on our side, on our cost side, on our productivity side. And therefore, we do not foresee that the order intake cross margins will go down in the foreseeable future.

Do you have some visibility for a potential recovery for the energy and infrastructure sector?

So we wouldn't speak of a recovery in the energy and infrastructure sector because we have a good development there. If you are referring to decisions for fossil-based large energy project. If that is the test of your question, then again, as mentioned in Asia and in China, we do not see it for the moment. We do expect developments in the United States, but of course that depends heavily on the oil price.

In addition to what Susan said, when we normalize our result in energy, as I told you, we have a plus 12% growth in our energy segment, which is double digit and quite sustainable. So I wouldn't speak at all about a recovery in energy.

Exactly. So, third part of Mr. Billon's question, is it possible for a client to cancel an order? Are there any tariff-related cancellation clauses in your backlog?

So, in principle, it is possible for a client to cancel a project. It is then a very expensive thing for the client to do because, of course, we will then charge all the costs that have been accrued over over the time so far we have had no project cancellations neither for tariffs or for any other reasons when we are speaking about tariff related cancellations again that is possible not happened yet and we would be compensated for the costs we have incurred

Next question comes from Adam Farley. What specific end markets or geographies are seeing project delays? Chemical, Middle East. What gives you confidence that project delays don't turn into project cancellations in the second half of 2025?

I'll take that. Absolute certainty. There is no absolute certainty. There is the possibility that we see cancellation. Hasn't happened yet. And we are balancing that with projects, large projects, particularly also out of the Middle East, that we didn't see coming over the last months. So there we have an up and potential of cancellation yes is there, there we have a down and that kind of net out. That is how we assess the situation. Then you ask about the specific geography. We see some, well, actually only one, but very large project in the area of oil and gas that has now been postponed to early 2026.

When we talk about geographics and also chemical in the Middle East and all over the world, yes, we don't have the certainty, as Susan said, But what we see, and this is the promising pipeline which we talked about, you have the following situation in the markets. In H1, everyone planned its capex investments and then caused by all these uncertainties in the markets, they all delayed and postponed. So we have now, when we look in our basically systems where we have the order intake planning and the order intake forecast, you see that there is a really pile up in H2. And yes, some of these projects, they will be further postponed to 2026. But don't forget that this pile up also has to be somehow tackled over the next couple of months. and therefore we see a more or less better H2 than H1 plus a lot of promising opportunities coming up that then overall I would say that the worst situation should be over when it comes to our say H1 performance.

Next part of the question is what specific end markets or geographies are showing relative strengths for example in the water business?

Yeah, we see indeed a relative strength in the water business. We do see a lot of growth in the Middle East indeed, and clearly in the service area, as you see in the results of the division, and we do see as a matter of fact, growing orders in the environmental technologies of Chemtech. I mean, we got a large order for bioplastics, we got a large order for sustainable aviation fuel, and we got a large order for carbon capture. that is compensating partly for the situation in China. However, it is something that I really would like to say here, that we are still speaking of our classical business and our column tower internal business as our core business. And the renewable business is coming on top. Maybe in the past we gave the impression that the renewable business is the one that will take off very, very fast and core business that we called legacy business at the time will reduce. And that is not the case and makes also no sense given at the market situation. And we are now, under the leadership of Tim Scholten, we are now correcting this. We want to grow both in what we call the core business and the renewal business, and we can grow in both areas.

Then, given increased market uncertainty, are there additional Sulzer Excellence initiatives that can be accelerated in the second half of 2025?

Well, we have done the obvious that we reduced some variable costs, but as Thomas said earlier, we do it judiciously is probably the right word. We are pushing down travel costs, things like that. We are very careful with how we spend our money, but we have a growth strategy and we are a growth case and we do not want to forego what is going to happen soon, but maybe not in 2025 by saving too intensively in 2025. But what helps this situation is to increase the cost consciousness in the whole social group. And it also means we are hiring in sales, we are hiring for people in the production, but we are very careful in hiring people in the overhead area, be it somewhere outside of a winter tour around the globe or in winter tour. So yes, it changes our approach, but we are not going into a massive cost cutting exercise at this point in time.

And maybe let me add here on this because you took over my part with the costs. Oh, I'm sorry. No, but we also focus much more on our commercial excellence initiatives which we have in our program. We want to tackle additional markets which we haven't done so much in the past. And we also have changed our sales force so that we can tackle the additional markets in a way that, you know, the difference between hunting and farming when we talk about our sales forces. And this is what we proactively do to not wait. Like, for example, in China, we cannot wait till the market in China comes back. This maybe takes several years. and therefore we have to look for alternative markets where we, with our product and product portfolio, we have a good chance to grow in these markets.

Thank you.

That's very good. Then can you talk about expectations for increasing European infrastructure spending in the near and long term?

We have no quantifiable expectation yet. It is also quite unclear right now, this European infrastructure spending on a very high level. Going forward, we of course hope that it will revitalize the European chemical industry and in general the industry. Let's hope that this is going to happen.

Another question regarding the tariffs. What is the company's gross exposure to tariffs in the U.S. as it stands today, and what are Solter's price versus cost expectations for 2025?

I'll take the first part and give you the second part. The gross exposure to tariffs as such is really very small. I know of three or four million right now that we also didn't forward to the customer because the contract didn't allow it. Of course, we are now, wherever possible, changing the contracts. so we can pass on the tariff. So the direct exposure is small and the indirect exposure that both Thomas and I spoke about is of course there because the tariffs make it difficult for our customers to calculate their return on investment for their project and how much capital expenditure that they need for a project because everything is so volatile and uncertain. And certainly also in the United States, it will increase costs.

And let me answer the second part of the question. When it comes to cost and price expectation, it's clearly when all the industries have to produce in the US that the costs go up. The prices go up for material. The tariffs between the countries will then also be added to the end customer. So this means I expect at least in the midterm an increasing price level in the U.S.

Question from Rolf Renders from OMG Analysen und Anlagen AG. Given the significant exchange rate headwinds that started mainly in Q2, assuming this remains the case for the rest of this year, can you please provide some insights, full year 2025 impact, especially on sales and financial charges?

Oh, this is a difficult one. So when we talk about financial year impact, so for the half year, talking about EBITDA, we have round about a 16 million FX impact on our EBITDA, a negative impact. So EBITDA would have been 16 million higher without these negative headwinds out of the FX. It's difficult when we have the same currency situation as we have right now, then you have just to double the numbers to have at least a sums rule. The question is really what is going to happen, especially with the US dollar in the second half of the year. This is for me the biggest challenge. But currently, as I said in the very beginning, we have roundabout on sales and on orders 4% of FX impact, which equals 70, 80 million. So as long as the situation is stable here, you can then do the extrapolation for the full year end numbers. But we don't really expect here a much higher impact since we have a local footprint globally.

I have two more questions from Fabian Piasta from Jefferies. How much percentage of sales is China of chemtech and how much percentage is refinery and petrochemistry?

Okay, China of Chemtech would be about 25%. You correct me if I say it's a bit more, 30%. Yeah, I cannot give you the exact number, but it is significant. And the refinery part in Chemtech in China, is decreasing because of our initiatives to sell in other areas in the aftermarket, also in Chemtech. This thing is decreasing, but it's significant. You see it in the results of the order intake in Chemtech.

And I have to admit, I also couldn't answer the question out of my head. Fabian, I come back to you and send you then the numbers if they are not matching with what Susan said, because this is really a very specific question.

And the last question that I have now is consensus expects 15.7% margin in H2. What are the moving parts in your view?

Working on our excellence initiatives that we implement these initiatives that we really bring it to the ground. Also that we execute on our backlog that we bring the sales. And then it's just the mass in the end of the year. So we are on good track. I don't know if we will achieve the 15.7. We said above 15%. So let's see. But it looks good.

Thank you. So this has been the last question. Thank you very much.

Thank you.

Thank you for taking the time to be with us, for your interest, also for the interesting question. Please stay tuned for Sulzer. We are doing our homework. Thank you very much and have a good day.