Sulzer AG Earnings Call: Growth Amid Challenges

Sulzer AG ((CH:SUN)) has held its Q2 earnings call. Read on for the main highlights of the call.

Sulzer AG’s recent earnings call revealed a mixed sentiment, characterized by strong sales growth and profitability improvements, yet tempered by challenges in specific divisions and currency impacts. The company showcased successful innovations and a positive order backlog, but faced hurdles in the Chemtech division and cash flow issues, balancing the overall positive outlook.

Strong Sales Growth

Sulzer reported a robust sales increase of 6.3% in the first half of the year. The Flow division led the charge with a 10.3% growth, while the Services division outperformed with nearly 15% growth. This strong performance underscores Sulzer’s effective market strategies and customer engagement.

Profitability Improvement

For the third consecutive year, Sulzer’s profitability saw an upward trend. The EBITDA margin rose by 90 basis points compared to the previous year, and the return on capital employed increased by 270 basis points, reflecting the company’s efficient operational management and cost optimization efforts.

Service Division Success

The Service division continued its impressive trajectory, achieving double-digit sales growth for the third year in a row. Order intake in this division grew by 12%, highlighting its critical role in Sulzer’s overall business strategy and future growth potential.

Innovation Success

Sulzer’s commitment to innovation paid off with successful projects in biopolymers, sustainable aviation fuels, and carbon capture. These initiatives not only demonstrate the company’s forward-thinking approach but also position it well for future opportunities in emerging markets.

Positive Order Backlog Development

Despite facing currency impacts, Sulzer’s order backlog increased by 5% compared to the first half of last year. This growth indicates a healthy demand for Sulzer’s offerings and provides a solid foundation for future revenue.

Chemtech Division Challenges

The Chemtech division experienced a 13.6% sales decline, primarily due to geopolitical uncertainties and overcapacity issues in Asia, especially China. These challenges affected the refinery and petrochemical sectors, highlighting the need for strategic adjustments in this division.

Impact of Currency Fluctuations

The Swiss franc’s 15% appreciation against the U.S. dollar since January 2025 adversely affected Sulzer’s sales and order intake by approximately 4%, equating to around CHF 70 million. This currency fluctuation poses a significant challenge for the company’s international operations.

Order Intake Decline in Flow Division

While the Flow division enjoyed sales growth, its order intake declined by 3.1%. This decrease was attributed to the absence of a large USD 100 million order from the previous year, indicating a need for new large-scale projects to sustain growth.

Cash Flow Challenges

Sulzer faced cash flow challenges, with free cash flow CHF 12 million lower than the first half of last year. This was mainly due to increased inventory and accounts receivable, resulting from project delays, which the company needs to address to improve liquidity.

Forward-Looking Guidance

Sulzer reaffirmed its midterm financial goals, targeting an EBITDA margin above 17% and a return on capital employed over 22%. Despite geopolitical and currency challenges, the company anticipates order intake growth between 2% and 5%, sales growth of 5% to 8%, and an EBITDA margin above 15% for the second half of 2025. These targets reflect Sulzer’s confidence in its strategic initiatives and market positioning.

In conclusion, Sulzer AG’s earnings call painted a picture of a company navigating both opportunities and challenges. While strong sales growth and profitability improvements are promising, issues in the Chemtech division and currency impacts require attention. The company’s forward-looking guidance remains optimistic, aiming for continued growth and operational efficiency.