Ladies and gentlemen, welcome to the conference call on Sulzer's new leadership team. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Ladner, Head of Investor Relations. Please go ahead, sir.
Thank you, Alice, and good afternoon, everyone, and thank you for joining today's call. With me today is our CEO, Greg Poux-Guillaume, and his appointed successor, Frédéric Lalanne, who is currently heading Flow Equipment, our largest division. After a short introduction, you will have the opportunity to ask questions. On these words, I hand over to Greg.
Thanks, Christoph. Hello, everybody. It's my pleasure to be with you today. We announced some significant people moves this morning, and we thought that it would be time well spent to give you a little bit of context and also to give you the opportunity to meet Frédéric, who's sitting with me and who will introduce himself a little bit later in this call. The general context of what we're doing is that the transformation of Sulzer over the last six years has paid off, and Sulzer is in great shape. When I say that Sulzer is in great shape, in 2021, when our results come out, I think you'll find that we'll be at or near record profitability for all three of our divisions. So all our businesses are well-performing.
All of them have strong momentum going into 2022. Therefore, it's a good time to think about putting together the team that will lead the business for the next six or 10 years. I say six because that was my tenure, but that's certainly not a time limit. I'm sure that Frédéric has higher ambitions than I have. It's the ideal time for a transition, also because, you know, the chairman and the CEO are a tandem. In the case of Peter and I, we've been together for six years.
Having this succession planning where the chairman and the CEO can build their rapport and find their balance together right from the start and essentially benefit from the momentum that we have, but also have the investors see the strategic continuity that we have by appointing people internally. I think that's all very favorable to Sulzer and very favorable to investors. Certainly, the news has been extremely well received within Sulzer. People know Frédéric. He's a well-known entity. He's done two impressive things at Sulzer. Initially, he's essentially rebuilt our commercial approach across all three businesses. So he's quite knowledgeable and comfortable with all three businesses of Sulzer. Then after that, he turned around our largest business, the Flow Equipment business, which had operational performance issues in the past.
All of that is a thing of the past, thanks to Frédéric and his team. We take this opportunity to essentially give you visibility on how the team will be built and how Sulzer will function for the foreseeable future. It may be a lot to take in on one single day, but I think it's also a great opportunity for the market to have the full picture and to understand that we have a deep bench that allows us to find talent for all these positions, and that we have continuity, and that Sulzer is in good hands. On those words, Frédéric Lalanne, maybe you wanna say a few words about yourself?
Yeah. Thanks, Greg. I grew up in the south of France close to the border region, but left very early for my university studies. Over the last 30 years, my career brought me around the globe in many position in multinational companies, mainly in the field of infrastructure, energy, and industries. I also used to live in India and in Indonesia during more than four years. I came and joined Sulzer in 2016. Since that time, I'm here in Zurich area with my family. As just explained by Greg, my first assignment was Chief Commercial Officer for the group.
During these two years, I was able to revamp our commercial approach, develop new market, deploy also some tools like Salesforce CRM, which has been deployed throughout the company. These first two years and a half gave me a good vision of the company. I got the opportunity to lead the turnaround of the pump division, which is the largest division of the group. I've been doing that job with my team since three years, since January 2019. In difficult time with several crisis, oil and gas crisis, we have been able to reposition the division towards growth segments such as water treatment, but also industrial processes application.
We are quite happy to announce that this year we will achieve excellent results in terms of profitability.
All right. Frédéric, thank you very much. On those words, we're really happy to take questions. If there aren't any, we'll comment some more. Let's open the call and ask for questions.
We will now begin the question and answer section. Anyone who wishes to ask a question or make a comment may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. The first question comes from the line of Mr. Aurelio Calderon with Morgan Stanley. Please go ahead.
Hi. Good morning. Thanks for taking my questions. Congratulations, Greg on, and Frédéric on, your new appointment, obviously. I just had a question around and obviously I know that they are very early days, but what would be the strategic focus, or the kind of strategic priorities for Sulzer going forward? Is it going to be more of the same, i.e., trying to reposition Sulzer in attractive growth markets and trying to build up from there? Or, should we expect something more transformational?
Frederic?
Yep. First of all, I've been part of the team of Greg and being a part of what we have developed in the recent years. I fully endorse the strategy which have been developed under the leadership of Greg. Here, my first message is about continuity and based on this strong base, we will look in due time regarding new opportunities. These new opportunities might come from market segments with a sustainable growth expected. We mentioned water, which is a well-known area, and we believe that we have solid foundation to develop our activities. Continuity and build on that for new segments.
I think that you'll hear more from Frédéric after the full year results in February. He's gonna focus on delivering record numbers and Flow Equipment for the end of the year. We'll do a handover in the early part of the year. I'll hand over the baton. I mean, I'll pass on the CEO responsibilities to Frédéric February 18th. I think around that time or soon thereafter, he'll give you a little bit of visibility on the additional ideas that he has to take Sulzer even higher. I mean, it's all about continuity is a great thing, but it's also about taking Sulzer to the next level. We have ideas as to how to do that.
Frédéric convinced the board that he was the best person to do that, and rightly so. Aurelio, anything else?
No. That, that's super helpful. Maybe just one last question from my side. I think you've already touched on this, but why do you think now is the right timing? I obviously think your answer is going to be along the lines of the Chairman, the CEO moving on, but is there any additional color that you can provide on that?
There isn't really anything. I mean, there isn't anything. How can I put this? There isn't anything beyond the interest of Sulzer. When I looked at the timing, I've been at the helm for six years. All businesses are doing really well. If you look at it from a share price or shareholder value, I mean, when I do the math, of where we were and where we are today, I think it's been a good run, and I think we can do even more in the future. There is this element of, let's put together the team for the next 10 years, and we have a transition at Chairman, and it's probably a good time to have a transition at CEO, too.
There is also the fact that we've recently split the company and we've made it less complex, but also more focused from a flow control perspective. That gives Frédéric opportunities in terms of capital allocation into some areas of flow control that we believe could greatly benefit Sulzer in the next years. You know, it's all these things kind of aligned. You wanna do this transition towards the end of the year so that the new CEO can be part of the budget process across the whole company, and he can be accountable for the budget across the whole company. It just felt like the right window for Sulzer. I truly believe it is. I hope you guys are convinced of that too.
That's super helpful. Thank you very much, and congratulations again, Frédéric, on your appointment.
Yep. Thank you.
The next question comes from the line of Patrick Rafaisz with UBS. Please go ahead.
Yes. Good afternoon, everyone, and thank you very much for taking the time and to answer a few questions. Very much appreciated. I have two questions, one for Greg and one for Frédéric, please. Greg, for you, you do remain Chairman at medmix, of course, right? According to the release this morning. Is that now a longer term focus for you? Is that an area where you put more effort into? Is that something maybe also part of your consideration for this management change?
Yeah. Let me take that one, and you can ask your question to Frédéric right after, Patrick. It is, but let me try to make it clear. Medmix is a wonderful business. We're really excited about it. It was the right time to spin it off. I believe that it's gonna do very well, and I'm really excited to be chairman of that business. I intend to be chairman of that business for the long term. Viktor Vekselberg, who's a significant shareholder, would like me to stay chairman of that business. Therefore, I am leaving Sulzer, but I committed to staying chairman of medmix.
There's really no change on the medmix side, and the business is performing really well, and I think you'll see that this year, but I think also next year will be well within the guidance that we gave you during the book building process and the Capital Markets Day before that. Having said that, you know, I'm 51. I'm a CEO. I like being CEO. I'm excited about whatever comes next in terms of a challenge. What I did though is I focused on what was the right timing for Sulzer. We were really busy this year with the spin-off and you know, the pandemic and all, everything that we had to do this year. It's also a great opportunity for me to hand over to a very competent and very knowledgeable successor at Sulzer.
While I'm considering what are the opportunities that I'm interested in down the road, spend a little bit of time and a little bit more focus on medmix first month as a publicly traded company. I think that's also an opportunity in terms of allocation. I'm certainly not retiring. You know, I think that my family would be in a state of despair if they thought for a second that I was retiring. I think that everybody wants me to be as far from home as possible and as busy as possible.
Understood, Greg. Good. We'll be keeping an eye on where you pop up next as well then. Frédéric, I think I hear what Greg said on the opportunity around the future capital allocation. Apart from that, the message is mostly around continuity, and I get that. What I'm interested in, Greg has in the past talked quite openly about his views on industry consolidation in the flow control industry globally, right? The merits of that. Do you share his views on that, or can you maybe talk a little bit on how you view the industry structure and where it could go to or what it should be like in the future, and Sulzer's role within that?
I think it's industry consolidation has always been a topic in our industry. Many people say it's a 1,000-company industry for in the flow control or in the pump business. Consolidation is a good thing, but it's not a must. We have demonstrated at Sulzer that in a difficult market environment to improve our performance both operational and financial. If any opportunity happens, why not? For sure, today is not the topic of the day.
Okay, thanks. Thanks a lot, Frédéric.
As a reminder, if you wish to register for a question, please press star and one on your telephone, star followed by one. The next question comes from the line of Arvind Hazanash with Vontobel. Please go ahead.
Yes, good afternoon. Congratulations also from my side on the handover and the internal solution. I would have a question for Greg. In retrospect, if you look back, what would you say were your or the achievement that you are most proud of? Also on the other side, kind of in retrospect, what would you have done maybe differently? Thank you.
Thanks, Arvind. Let's see. I'll say that the achievements that I'm most proud of, you know, first and foremost is to have built a great team that functions really well. I think that manifests itself in the fact that we're making all these appointments internally, that we have the bench, that we have the talents to promote people and take the business to the next level. All of this in a context where I don't know if you followed, but Sulzer's been named as one of the world's best employers by that Forbes International survey that comes out every year. You know, we're number 218 worldwide. We're number eight in Switzerland. We're in the top 25% of engineering companies worldwide as in terms of being the best employer.
We're also recognized in the brand survey in Switzerland, the Gartner survey, where we finished 19th in that survey, knowing that there's only two B2B companies on the top 25. Quite an achievement. If you have a look at our employee surveys, you've got something that 84% of the people at Sulzer says that they understand what we're doing, and they support it, and that they go the extra mile. There's something like 92% of the people at Sulzer that say they would recommend Sulzer as a good place to work to their network. You know, it's really hard to do these transformations, and it's hard to do them while keeping people engaged, supportive and dynamic. I think that collectively, we've managed to do that.
Now beyond that, there's all sorts of financial stuff. I mean, you know, you look at the path that we've had in profitability, and we've managed to improve every year, regardless of the market, regardless of circumstances. Well, we dipped a little bit during the pandemic, but only 100 basis points when you look back at it. We've managed to create a lot of shareholder value. If you look at the beginning of my tenure, I arrived right before the moment where we did the special dividend. If you take the special dividend as a starting point, I think the equivalent share price was something like CHF 75, and we recently peaked at close to CHF 150.
If you sum Sulzer and medmix together, you're still in the 130s, despite the fact that the markets have been choppy. I think in terms of a run from an investor perspective and from an operational perspective, I think it's been a good run. I think that Frédéric will do even better. I'm quite optimistic and supportive as a continuing shareholder.
Then beyond that, I think that the repositioning of the business, you know, away from oil and gas, using the capabilities that we have and our unique knowledge, but applying that to areas that have tailwinds, and these tailwinds are in large part based on sustainability, I think that's been a good move, and that's been a move that's paid off for Sulzer and has been recognized by the markets. Overall, I'm happy with what we've managed to achieve, and I'm proud of the team. I mean, it's certainly not an individual effort. It's a team effort. The best example of that is one of our key team members, Frédéric, is getting elevated to my position. What do I regret? You know, I try not to.
I try not to live in the past too much. My regrets are usually about things that we should have done earlier, things that we should have done faster. You know, all things taken into consideration, I think that we've navigated the markets and the opportunities that we had pretty well. Once again, I strongly believe that the team that we're putting in place will take the business even higher. I'm one of the few CEOs who's happy to see the share price going up on the day when he's announcing his resignation.
You know, I think it's a great testament to what we've built, to the continuity, to the quality of the team, and to the strategy that we have, that I believe the market buys into. Arvind, I apologize for the long-winded answer. Anything else you wanna ask?
No, that's great. Thank you for the long answer. I appreciate it. Thank you.
The next question comes from the line of Dominic Feldges with NZZ. Please go ahead.
Yes, good afternoon. Well, disappointment is a bit unusual in that, Greg, you are leaving. You are 51, your successor is 58. So, maybe the question also goes to Frédéric. How long will you be on board, really? 10 years might be a bit long time at this kind of age, although it was mentioned. The second question would go to Greg. I mean, I just checked if I got it right. I think you made the shareholders of Sulzer about 20% richer since your first day. That's not spectacular performance. I mean, could you not have gone. I mean, why is that, although this, despite the successful turnaround you've achieved? Thank you.
Hi, Dominic. Let me take your questions backwards. Let's start with the value creation. I think that the 20% that you're looking at, you're looking at price only. When I do the math, and I can send you the analysis if you wanna directly pull up Bloomberg. If you adjust for the special dividend and the spin-off, and you take that, based on where we were after that, so special dividend and the end of the mandatory tender offer that was ongoing when I joined, I think that it's actually doubling in terms of shareholder value. I can send you the analysis. The difficulty about Sulzer is that we not only had a large special dividend of CHF 14.2 , I think, in 2016.
We also had the spin-off, which is the equivalent of a dividend of almost CHF 2 billion to investors because the spin-off of medmix was essentially giving medmix to investors. We increased the dividend policy under my tenure and we took that higher, which, you know, you can decide whether you wanna take into account or not. From a shareholder value, it's a doubling. At the end of the day, I'm not here to argue numbers with you guys. I think the numbers are available for all to see, and you guys can decide what you take into account or not.
You know, if you give me credit for the special dividend or not, and if you believe the medmix spin-off is for Sulzer shareholders or not. I'm happy with that run. I think that I wouldn't say satisfied. I think that you always wanna do more for shareholders. You always wanna do more for all stakeholders. I think that we've managed to do things that move the needle significantly. I certainly think there's more under the pedal, and that Frédéric will be the guy to make that happen. Beyond that, I mean, I'll hand over to Frédéric for the other question, but I'd like to say, Dominic, that, you know, 58 is the new 38, you know?
I mean, it's people work for a very long time these days. Frédéric, if we're sitting next to each other, he probably looks healthier than I do. You know, he's a ski instructor. He's not a very good one, but he's a healthy guy, and I don't think that he's got any of the intention of retiring in the next 10 years. Frédéric, you wanna take that?
Absolutely. Thanks for the compliment about my level of skill. It's clear that 58 today does not really matter. What matters is the enthusiasm, is the energy. I've proven all over my career that my level of energy is intact. With such a challenge, I'm even more energized. I really welcome the challenge. Together with Suzanne, we have a great opportunity to write together a new chapter of Sulzer irrespective of our age.
All right. I got the point. Thank you very much, gentlemen.
Anything else, Dominic?
No, no, that's all. Thank you.
Either from me or from the young guy. Thanks, Dominic. What else? Other questions?
We have a question coming from the line of Mr. Rolf Renders with Helvea. Please go ahead.
Yes, good afternoon. Thanks for taking my question. Can you remind me what the midterm targets are for Sulzer?
The midterm targets. Frédéric, you want to give them the midterm targets?
Yes. The midterm target we gave during the Capital Markets Day in June are the following. Overall for the company, we estimate a 4%-5% CAGR growth on the sales and reaching an operational profitability in a range of 10%-11%. This has been split among the three division. Overall that's the perspective. 4%-5% on the sales per year and 10%-11% on operating profit.
Rolf, do you want us to run you through the breakdown per division or? I mean, it's all in the Capital Markets Day presentation, and I think we reiterated it recently in one of our financial presentations that's on our website. We're all very committed to these numbers, and we think that these numbers are quite achievable for Sulzer.
Okay. No, I just look, I don't have these figures off the top of my head.
Yeah.
Thanks for just reminding me. That was the only reason.
Yeah.
to have the similar starting point. The other thing would be good to hear from Frédéric is if he commits personally to these targets.
Absolutely. I commit to these targets, not only for the pump division or the Flow division, but I completely commit for the overall Sulzer. We worked together with Greg during the CMDs to build this presentation, so I fully endorse his targets midterm.
I mean, honestly, he told me he can do better, but you know. We'll give him time to explain that.
Okay. The M&A comes on top?
M&A is on top, yeah. This is pure organic.
Okay, that's great. Thank you and good luck.
Thank you.
Thanks, Rolf.
There are no more questions.
Any other questions?
There are no more questions at this time. Back to you for any closing remarks.
Okay. What we'll do is, unless somebody jumps in before I finish my closing statement, we'll adjourn this call. I wanted to thank you guys for taking part today. We think what we announced today is really exciting and positive news for Sulzer. It gives the markets and stakeholders at large a lot of visibility as to how Sulzer is gonna be run over the next years. It shows that there's a strong talent bench at Sulzer. It shows that there's strong continuity. By the way, when I say there's strong talents, I mean, Daniel Bischofberger is leaving to become CEO in another company. You guys may have seen that Fabrice Billard, who was with us until recently, is the new CEO of Burckhardt Compression.
I mean, there's a lot of senior talents, a lot of CEOs that are coming out of Sulzer, have come out of Sulzer the last few years. I'd really like to highlight that because people sometimes underestimate how much of a talent provider Sulzer has turned out to be over the last few years. We're in really good shape. It's a smooth transition. I know Frédéric very well. We've worked together for 10 years in three different companies. I'm beyond excited that the board chose him as my successor. It was my recommendation, but it was certainly the board's decision and the board solely. I think it's a very positive move for the company. On a personal note, I'll be CEO of Sulzer until February 18th.
It's been an absolute honor to run this business, this wonderful business for the last six years. I look forward to the next few months, and I will remain a supporter, a shareholder, and a friend of Sulzer for the long term. We'll have other opportunities to catch up, certainly at the full year results, if not before that. Thank you again for your time and please join me in congratulating Frédéric for this exciting move and for being excited for Sulzer for whatever comes next. I do think that what comes next is gonna be very positive. Thank you and have a great day.
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