Sulzer has announced that over the first nine months of 2015, it has received an increase in orders by 3%.
For the full year 2015, Sulzer confirms its previous guidance of a slight decline in order intake and a moderate decline in sales on a currency-adjusted basis. Sulzer now expects operational EBITA to decrease in the range of 10%-15% compared to 2014 on a currency-adjusted basis. Increasing headwinds in the oil and gas market and in China are partially being offset through growth in other segments and savings from the Sulzer Full Potential program.
In the first nine months of 2015, order intake increased by 3.0% on a currency-adjusted basis compared to the same period in 2014. For the same period, the currency impact was a negative 4.4%. Currency adjusted order intake in the third quarter was 0.9% above last year’s third quarter while currency impact reached a negative 5.6%.
Since the beginning of the year, Sulzer has faced increasing headwinds in the oil and gas market which were more than offset by strong performance in the power and water markets on a currency-adjusted basis.
Regionally, currency-adjusted order intake grew in Europe, the Middle East and Africa, whereas it declined moderately in the Americas and significantly in the Asia-Pacific region, mainly impacted by China. Sulzer has not seen additional order suspensions in the oil and gas market in the third quarter of 2015.
Sulzer’s Full Potential (SFP) programme is progressing according to plan and helps the company navigate the challenging market environment. With SFP, Sulzer aims to deliver a four to six percentage point profitability improvement (opEBITA margin) by 2018.
The oil price is expected to remain low leading to further capital and operating expense discipline measures by Sulzer’s oil and gas customers. Because of these market headwinds and in-line with its SFP program, Sulzer has decided to close its Pumps Equipment manufacturing plant, located in Brookshire, Texas, US.
The closure will affect all of the Brookshire manufacturing activities. The products manufactured in Brookshire will be moved to other factories within the global operations of Pumps Equipment. However, the global management of the Oil and Gas business unit and the activities for Parts, Retrofits and Nuclear (PRN) will continue to be located in Houston, Texas, US.
Further, the company is considering closing its foundry in Kotka, Finland. The cooperation negotiations which were initiated with the local works council may lead to giving notice to all 175 employees of the foundry. The operation of the foundry has not been profitable and its utilization rate has not been at target levels. Going forward the company considers procuring castings from qualified foundries in Europe and best-cost countries. The possible closing of the foundry does not have any impact on the personnel of the other units of Sulzer Pumps Finland Oy.
Outlook for 2015
Order intake in detail
Currency-adjusted order intake for Pumps Equipment increased by 1.1% for the first nine months and decreased by 3.9% in the third quarter compared to the same periods of the previous year. Strong performance in the power and water markets compensated for the increasing headwinds in the oil and gas market.
General industry remained on a similar level compared with the first nine months in 2014. In the third quarter in 2015, continued strong order intake in the power market could not fully compensate for the decline in the oil and gas market. The order intake in the water and general industry markets was weaker compared to the same period in 2014, mainly because of the timing of large projects in the Engineered Water segment.
Regionally, Pumps Equipment reported order intake growth in Europe, the Middle East, and Africa. Market activity declined in the Asia-Pacific region, particularly in China, and in the Americas.
Rotating equipment services
Currency-adjusted order intake for Rotating Equipment Services decreased by 3.2% in the first nine months and by 5.4% in the third quarter compared with the previous year’s periods. Whereas headwinds in the oil and gas industry have increased over the first nine months of the year, the power and general industry markets contributed positively in the third quarter. Regionally, Asia-Pacific improved while Europe, the Middle East, and Africa were weaker compared with the first nine months of 2014. The Americas was almost on the same level as in the previous year’s period, with the US still showing growth.
Currency-adjusted order intake for Chemtech for the first nine months increased by 15.3% and by 21.4% in the third quarter compared to the same periods of the previous year. Driven by strong performance in the Tower Field Services business unit, Chemtech reported rising orders from the oil and gas market. General industry also showed solid growth. Regionally, the division grew strongly across Europe, the Middle East and Africa, as well as in the Americas. The Asia-Pacific region was weaker, mainly impacted by China.