Financial Section 2007 Corporation Page Content 2 Investor Information 3 Five-year Summaries of Key Financial Data 4 Financial Commentary Consolidated Financial Statements 8 Consolidated Income Statement 9 Consolidated Balance Sheet 10 Changes in Equity 11 Consolidated Cash Flow Statement 13 Index of Notes 14 Corporate Accounting Principles 25 Notes to the Consolidated Financial Statements 52 Major Subsidiaries 56 Auditors’ Report Five-year Summaries 58 Five-year Summaries by Divisions 59 Five-year Summaries by Regions Financial Statements of Sulzer Ltd (Parent Company) Content 62 Balance Sheet 63 Income Statement/Changes in Equity 64 Notes to the Financial Statements of Sulzer Ltd 70 Appropriation of Net Profit/Annual General Meeting 71 Auditors’ Report Investor Information Data per share in CHF 2007 2006 2005 2004 2003 Net income attributable to a shareholder of Sulzer Ltd 83.47 62.27 36.03 20.10 11.77 Change from prior year 34% 73% 79% 71% –51% Cash flow from operating and investing activities 52.2 48.0 29.1 18.0 17 Equity attributable to a shareholder of Sulzer Ltd 455 432 418 376 367 Dividend 281) 23 14 9 6 Payout ratio 34% 37% 39% 45% 51% Average number of shares outstanding 3 403 570 3 556 361 3 559 355 3 490 812 3 465 292 1) Proposal to the annual general meeting. Stock market information Share prices in CHF 2007 2006 2005 2004 2003 Registered share high 1 924 1 409 701 456 338 low 1 375 692 427.5 303 136 year-end 1 665 1 387 696 452.25 333 Market capitalization as of December 31 number of shares issued 3 638 030 3 638 030 3 638 030 3 638 030 3 638 030 in millions of CHF 6 057 5 046 2 532 1 645 1 211 in percentage of equity 392% 328% 170% 125% 95% P/E ratio as of December 31 19.9x 22.3x 19.3x 22.5x 28.3x Dividend yield as of December 31 1.7%1) 1.7% 2.0% 2.0% 1.8% 1) Proposal to the annual general meeting. Title Security No. Investdata Reuters Bloomberg Listed on SWX Swiss Exchange Registered share 237 645 SUN SUN.S SUN SW Additional key figures and ratios on pages 58 and 59. Share Price Development 2 000 Sulzer reg. share (CHF) Swiss Performance Index (rel.) 1600 SPI Industrial Machinery (rel.) 1200 800 400 0 1/2003 1/2004 1/2005 1/2006 1/2007 1/2008 2 Investor Information Sulzer Financial Section 2007 Five-year Summaries of Key Financial Data Key figures from consolidated income statement and cash flow statement millions of CHF 2007 2006 2005 2004 2003 Sales 3 537.0 2 801.7 2 498.2 2 067.0 1 826 Operating income before depreciation/amortization1) (EBITDA) 501.3 376.1 272.6 224.2 179 Operating income before goodwill amortization1) (EBITA) 393.5 295.6 166.8 135.6 89 return on capital employed (in percentage of capital employed)1) 2) (ROCE) 24.2% 23.7% 13.3% 11.3% 6.8% return on sales (in percentage of sales)1) (ROS) 11.1% 10.6% 6.7% 6.6% 4.9% Operating income1) 3) (EBIT) 393.5 295.6 166.8 107.6 62 Depreciation/amortization 107.8 80.5 105.8 88.6 90 Goodwill amortization3) – – – 28.0 27 Research and development expenses 51.8 40.0 43.2 41.3 40 Net income attributable to shareholders of Sulzer Ltd 284.1 221.4 128.3 70.2 41 in percentage of equity attributable to shareholders of Sulzer Ltd (ROE) 18.4% 14.4% 8.6% 5.3% 3.2% Cash flow from operating activities 261.3 259.2 162.8 142.2 126 from investing activities –83.6 –88.6 –59.3 –77.9 –67 Capital expenditure 134.8 106.0 77.8 81.4 83 Employees (number of full-time equivalents) as of December 31 11 599 10 393 9 656 9 586 8 999 Personnel expenses 948.5 788.1 731.8 650.3 627 Key figures from consolidated balance sheet millions of CHF 2007 2006 2005 2004 2003 Non-current assets 1 294.1 1 259.1 1 052.5 1 031.8 1 079 thereof property, plant and equipment 655.0 629.3 568.2 580.3 606 Current assets 2 166.7 1 806.1 1 791.8 1 463.3 1 340 thereof cash and marketable securities 384.5 361.6 550.9 444.3 385 Total assets 3 460.8 3 065.2 2 844.3 2 495.1 2 419 Equity attributable to shareholders of Sulzer Ltd 1 547.1 1 536.9 1 488.5 1 314.1 1 271 Non-current liabilities 339.8 421.0 460.1 455.2 459 thereof long-term borrowings 28.1 31.9 212.6 215.4 202 Current liabilities 1 565.7 1 099.9 883.2 714.5 677 thereof short-term borrowings 157.9 30.0 33.6 16.8 45 Net liquidity4) 198.5 299.7 304.7 212.1 138 Equity ratio5) 44.7% 50.1% 52.3% 52.7% 53% Borrowings to equity ratio (gearing) 0.12 0.04 0.17 0.18 0.19 1) In 2003 after charging restructuring costs at Sulzer Pumps of CHF 23 million. 2) Until 2004 goodwill was included at historical cost in capital employed, since 2005 at net book value. 3) Until 2004 incl. goodwill amortization. 4) Cash and cash equivalents and marketable securities, less borrowings. 5) Equity attributable to shareholders of Sulzer Ltd in relation to total assets. Five-year Summaries of Key Financial Data 3 Sulzer Financial Section 2007 Financial Commentary Summary In 2007, acquisitions and divestitures had a net effect of around Favorable economic framework conditions ensured a strong demand for CHF 127 million on the sales growth compared with the previous year. The Sulzer products and services in all relevant industry segments and regions opening balance sheet amounts correlating to the majority of these sales in the reporting year. On the back of an already high order intake volume were included in 2006. No major divestiture took place in 2007. On January base of 2006, Sulzer achieved a growth rate of 23.7%. Sales rose signifi- 31, 2007, the assets of Knitmesh were acquired and consolidated in the cantly by 26.2% to CHF 3 537.0 million. The newly acquired businesses of Sulzer Chemtech division. Mixpac, Werfo, Mold, and Knitmesh, which are consolidated in Sulzer The strength of the Euro and the British pound positively influenced the Chemtech, contributed CHF 129.2 million. The notable volume through-put translation of the consolidated figures in 2007 compared to those of previous of the corporation was handled in part by increased efficiency coming year. This positive impact offset the negative influence of the weakened from the previous and ongoing operational excellence efforts together with US dollar. The effect of currency conversion on the income statement was expansion of the production sites in China, India, Mexico, and the USA. Job slightly positive with just under 1% on sales and operating income. The cor- rotation across regions and the build-up of specialist (engineering) clusters responding balance sheet impact was a negative one of some 1.5% on the also served to help cope with the high workload. The marked increase in the various asset and liability positions. operating income of 33.1% to CHF 393.5 million was principally from the four divisions. The corporation’s return on sales amounted to 11.1%, an improve- Sales ment from the previous year’s figure of 10.6%. The financial income was Sales rose by 26.2% to CHF 3 537.0 million in nominal values. The organic affected by a higher interest expense compared to previous year related to growth, adjusted for influences of acquisitions/divestitures and currency the partial usage of a new credit facility established in the reporting year, fluctuation, increase was 20.9%. The newly acquired businesses of Mixpac, which to some extent offset a sizeable gain on sale of available-for-sale Werfo, Mold, and Knitmesh contributed CHF 129.2 million. All four divisions financial assets. Income tax increased due to the much improved pre- depicted notable organic growth with Sulzer Chemtech achieving 27.4%, tax income. These factors resulted in a 28.3% higher net income attribut- Sulzer Pumps at 22.4%, and Sulzer Turbo Services and Sulzer Metco devel- able to Sulzer shareholders of CHF 284.1 million, which corresponds to oping by 15.5% and 15.1% respectively. With regards to geographic distribu- CHF 83.47 basic earnings per share. The corresponding amount in 2006 tion, only Latin America was at the same nominal sales level as previous was CHF 62.27 basic earnings per share. year. All other areas significantly outperformed their 2006 amounts (Europe Total assets have continued to increase and are now just below +43%, Asia/Australia including Middle East +25%, North America +18%, and CHF 3.5 billion. Organic growth and partial usage of the new credit facility Africa +15%). served to enlarge the balance sheet, whereas the program for the buyback The premise of the order intake increasing to the same extent as the sales of own shares, which was completed in 2007, reduced it. These develop- volume culminated in an order backlog of CHF 493.6 million above previous ments led to an equity-to-assets ratio of just below 45%; five percentage year at a record CHF 1 978.1 million. Due to the project nature of much of points below the 2006 amount.