Ladies and gentlemen, welcome to Sulzer's Q1 2022 Order Intake Conference Call and Live Webcast. I am Sandra, the Chorus 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, Sandra. Good morning and welcome to Sulzer's Q1 Conference Call. Today with me is our Chief Executive Officer, Frédéric Lalanne, and our Chief Financial Oficer, Jill Lee. For this call, we have prepared a presentation which you can find on our homepage. As always, I want to draw your attention on the disclaimer on slide number two. Please read it carefully. Having said that, I hand now over to Frédéric for the presentation. Thereafter, you have the opportunity to ask questions. Frédéric, please. Thanks, Christoph. Good morning, everyone, and thanks a lot for joining this morning call. Despite the challenging environment that we all know, we can say that Sulzer had a very good quarter one with orders rising 14% organically year-on-year. All our three divisions, Flow Equipment, Service, and Chemtech, and all the business units contributed to this growth during the quarter. The rebound in the energy market helped us, but we also grew strongly in all other key segments such as water, chemicals, pulp and paper, mining and fertilizers. Prices for raw materials are still increasing or remain on a high level. Remember that Sulzer is a tender-based business, which mean that for every tender, we are able to adapt and adjust our costs, both for raw material or for labor. Other action that we took to protect ourselves is to shorten the validity of the tender periods from previously three to four months, now back to one month, and in line with what our suppliers are doing. We try in that to protect ourselves during this offer period. For standard products, as previously communicated, we have adjusted our prices twice last year and once again early during this quarter. Overall, we do see this supply challenge going on during the rest of the year. Reliability of logistics is not that great, as you know. What's very important to note, I already explained, that we are not dependent at Sulzer from a global supply chain from Asia. Most of our business is local for local or regional for regional. Just highlighted the fact in China, our activities are between 80%-85% for the domestic market, and only a few parts is exported and mainly in Southeast Asia. Our sales in Russia were around CHF 86 million in 2021, about 2.7% of our sales. During the quarter, we are delivering our backlog to Russia according to the policy which has been imposed by EU, U.K., Switzerland, and U.S., of course. We are strictly following the rules also on the customers. As a consequence, our orders for the quarter in Russia are down by 80% compared to what they used to be a year ago. We keep on focusing today on essential services, Russia for Russia, mainly in the water and the power infrastructure. Again, I repeat, within the strict respect of all the sanctions which have been imposed by the countries or government I just mentioned. Highly manageable from Sulzer perspective. From a regional perspective, we have seen Europe, Middle East and Africa growing at 7%, driven by large contract signed in Africa and Middle East. Europe has been down with the impact of Russia on our European activities. Americas has been up by 40% thanks to large projects we have signed in U.S., in the chemical segment and in Brazil. Asia Pacific has been flat on an already high base in Q1 last year. Overall, I'm happy to announce that Thomas Zickler will take over as Chief Financial Officer on May 1st. Jill, who is next to me, will still support us for the H1 result and then will head back to Singapore after having spent 11 years at Sulzer, both in a board position and later as the Chief Financial Officer of the group. Once again, a great and warm congratulations to all we have done, Jill, for us here. On this slide, I will give you some more details about our orders. Flow Equipment for the former pump division was up by 15% compared to last year. Water continued to develop very strong, although according to our strategic plan, and is about 10% organic. Here we are clearly successful in positioning ourselves as a solution provider, mainly thanks to the acquisition of Nordic Water, rather than just a product supplier to this segment. In industry, we are growing by 22% versus last year, and we won orders in our target market like pulp and paper, but also a strong activity in the mining and the fertilizer business. Energy within the Pumps or Flow Equipment is also recovering and is up by 13% versus last year. We have seen an increasing tendering activity in the previous quarters, Q3 and Q4, 2021, and we now see the first impact of this increased activity. It is very clear that with price of oil above $100 per barrel, this will lead to further projects to be developed. We are at the end of the chain at Sulzer. It will take time, but we do see many projects now being under development and especially from the national oil companies such as Petrobras, Saudi Aramco, QatarEnergy or the equivalent. This will create some opportunities for us in the coming quarters, and for sure in 2023. In the service activity, we have experienced some good growth in Americas and Asia Pacific, while Europe is a bit flattish due to the decline of our activities in Russia, as I just explained before. The positive news is that in Asia Pacific, many countries have lifted their COVID restriction and then making our or the sites easier to access again. We have seen also, on the contrary, some push out of scheduled maintenance due to high oil prices and the customer instead of maintaining their assets prefer to harvest as much as possible to benefit from an oil barrel above $100. In Chemtech, we were successful in U.S. to win a major project in the chemical industry, more than $25 million. Tower Field Services was up, especially, compared to 2021, which was in the middle of the pandemic, and Tower Field Services is mainly linked with people activity, field service, and with the reopening of the site, we are quite positive on the rebound of this activity. Overall, China remains at a very solid high level. Foreign exchange impact, -CHF 4 million compared to last year, and M&A have contributed by an increase of CHF 7 million, mainly thanks to the Nordic Water acquisition that we closed in February last year. Guidance. I confirm, or we confirm our guidance that we gave in February, as shown on this slide. We expect continued growth in our markets, but we are also aware about the uncertainties linked to the pandemic, the Russian war, and the bottleneck in supply and logistics environment. The volatility is going to increase, and this might have some impact on us. Overall, with the excellent backlog that we have, more than CHF 1.9 billion of orders to be delivered in 2022 and 2023, plus the great success we have had in Q1 and also the positive trend we are seeing now in Q2, I am happy to say that we confirm our guidance that we gave earlier. In Flow Equipment, as explained, we see continuous growth in water and industry because the fundamental drivers are there. Access to water, refurbishing of infrastructure, electric mobility, creating needs in mining equipment, and we will benefit from energy rebound. In Services, the growth will be supported by the end of the site access restriction, and we expect a demand to go up like we have experienced in Q1, mainly in Asia and in Americas. In Chemtech, China is and remain robust at a high level and we have some good expectations in other regions, especially in the Middle East and U.S. I explained before as well, renewables represent a full or great potential for growth, and this will materialize mainly in the area of bioplastics or biopolymers this year, and we will see further development during the course of this year. Overall, we expect our orders to grow 3%-5% this year. For the sales, we expect Flow Equipment to be flat this year compared to last year. We explained that 2021 we saw low level of activity in the energy market and which is now translated into low level of sales, while we expect service and Chemtech to grow again. The energy or the growth in energy will resume in 2023 on a rebounding 2022 market, and for sure what we do see now in terms of tendering. Overall, we do see and we confirm sales up 2%-4% for the year 2022. Despite the cost increase for the raw materials, but also the labor, we expect our operational profitability to continue to go up in all three divisions, resulting in an operational profit margin close to 10%, being at 9.3% in 2021, and we expect to be in the range 9.5%-10% for the year. That's the end of my presentation. I give the microphone back to Christophe or the operator for the Q&A session. Thanks a lot for your attention. The first question comes from Arben Hasanaj from Vontobel. Please go ahead. Thank you very much. I would have three questions, if I may. The first one would be, in your services business. It seems that, relating to retrofits, it seems to be still difficult, in that area. Can you maybe provide an outlook, especially also with the renewed lockdowns, in China, that we are seeing? That would be the first one. The second one would be, are you seeing any signs that, customers are postponing projects due to increasing prices? I mean, your order intake was very good, but, are there any signs, that customers are getting uneasy on that side? The final question would be, on margins. Maybe you can provide some color where you are standing there. Is that also kind of running above your expectations or where do you stand in terms of margins? Thank you. Thanks a lot for your question. Regarding the service activity, the retrofit is a key part of our activity. You know that retrofitting a pump is either from our install base or also from the competitor. In fact, the retrofit like some repair you have to be at the right point in time to do that. The retrofit is mainly driven by the customer and not by us. For us, what's very important is to be able to be present and to understand when it is the right timing for retrofitting some pumps. As I said before, and it's a little bit answering your question, what we are seeing now, we see that in many regions, including North America, but also the Middle East, people are postponing some maintenance because they really want to harvest their assets. Then, of course, when something happens, it is more reparation rather than scheduling or retrofitting, which has a priority, because we do see this trend, and especially in North America. The second point, new lockdown in China, it has more an impact on the manufacturing, where the supply chain can be disrupted rather than on the service activity. What was very important for us is in Southeast Asia, because we are very well positioned in Indonesia, as an example, that Indonesia has lifted all the restriction on site access. We are seeing now a good rebound of activity in Southeast Asia. Overall, I'm not so worried because of the lockdown in China. It has more impact on the supply chain and the reliability of the supply chain rather than on the service part. Your second question regarding customer postponing projects. It is true. I just explained a little bit in service in Americas. Overall, worldwide, we do not see too many postponing of projects. I do see, in fact, more projects coming online, especially in the energy sector, but also in the mining segment. We are seeing now also linked to the Russian crisis, many more projects coming online in South America, and where you have all type of mine minerals, of course. We also do see an increase of activity in the fertilizer business because Russia used to be a very strong country for fertilizer. Now this an opportunity for countries in the Middle East and in Morocco to push the large project in the fertilizer as well. For our positioning, mining and metal, if I look at the pure economic perspective, this is creating some opportunities in the rest of the world in this field of mining and fertilizer. I do not see that many projects being postponed, on the contrary. Regarding the margin, it is true that, we have seen a massive, inflation on the cost of the raw materials. Nickel, we have seen that. Copper as well. Steel, iron. Labor increase as well. We have been able so far to protect our margin. With the margin on order intake we have during this quarter is consistent with what we have had in the past. This shows the capability of the teams, in fact, to protect the margin. What we have now during execution at Sulzer, once you have the order, the execution, in terms of margin on execution is absolutely close to margin as booked. And no deviation. On that's also why as of today, with the visibility we have with our backlog, which is above CHF 1.9 billion, plus the order and offering we are doing, we are okay to confirm that the margins are of course under stress because we have also the competitive environment. But we do not see any degradation and we are in line with our expectations on margins. All right. Thank you very much. The next question comes from Patrick Rafaisz from UBS. Please go ahead. Thank you and good morning, everyone. Also, three questions from me please. The first is on the large chemicals order in Chemtech. Should we anticipate further orders of this magnitude in the next one or two quarters? Do you have any view on that? Related to that but on the group level with that dynamic start you had in Q1, and obviously comparables were also pretty easy from last year, but you just confirmed your guidance for the 3%-5%, which implies sort of a flattish order intake for the remaining three quarters, and I'm trying to understand, are you just trying to be very conservative here, given the various uncertainties out there? Are there reasons why the order momentum should maybe stabilize at prior levels going forward? Third question on your renewables business, bioplastics, et cetera, in Chemtech. Greg used to give us sort of an expectation for where revenues could go to in the current year. Would you venture a similar statement for your renewables business this year? Thanks. Okay. A difficult exercise. I will start with your first question. It's easier to answer. On the first one, the large chemical orders have always been part of the activity of Chemtech. Of course, these projects are not coming every quarter and the maturation time, like also in the energy for Flow, it can take several months, in fact or sometimes years. We booked one very large order in Q1, in a very large complex in Houston area, which is a chemical activity for Chemtech. The span of delivery will be mainly second part of 2022 and 2023. Of course, we expect to have and duplicate this type of orders worldwide, but not of this magnitude. It's clear that, yes, it's part of our activity, but in general, to be honest with you, I prefer to have five orders at CHF 5 million rather than one order at CHF 25 million. Mm. Because we all know that one order at CHF 25 million attracts lots of visibility, lots of competition. Five orders, it's also you manage a risk. My policy and the policy of Chemtech is not to hunt the large elephants, but maybe to target the midsize projects, which are also easy to manage. Yes, we will expect more orders to come in in 2022, sorry, but not of this magnitude. After you had a statement that it seemed pretty easy versus last year, nothing is easy at present time, believe me. We have, of course, a comparison base versus Q1 last year that helped us because Q1 in 2021 was very low. We have seen quite a nice rebound quarter by quarter, especially in Q3 and Q4. That's why we gave and I give between brackets not a conservative guidance, 3%-5%, but something that takes into account the fact that, as I explained, Russia, which was about CHF 80 million last year or CHF 85 million, now we are at minus 80%, and we do not expect any new business in Russia, especially in view of the recent development. This means that we will have to compensate somewhere else. That's why also I'm quite conservative on this guidance. The last question on the renewable and bioplastics. Last year at Chemtech, we have achieved 14% within Chemtech of these activities with a stamp or a label renewable. The perspective we can give that we aim to be around 20% in 2023 within the Chemtech activity. It's a growing area. We don't know how quick these activities will develop, how quick the PLA activity and the bioplastics market will scale up. You know that there are three major PLA plants under construction in the world at the present time, two in Asia, one in the U.S., and all three are using Sulzer technologies. How quick we go for further expansion in this business, I don't know. Overall for us, the target within Chemtech that the renewable activity should be around 20% in 2023. That's very helpful. Thank you very much. The next question comes from Christian Obst from Baader Bank. Please go ahead. Yes, good morning. Most questions are already answered, just two there. Have you seen some major change of customer behavior after the start of the war on the 24th of February? You mentioned already that there is an increasing demand coming from the fertilizer and mining industry. Have you seen already a major push there? Really some kind of a change. The second one is the current deliveries you have to take to Russia coming from the order intake last year. Are you still delivering into Russia from these orders? Thank you. Okay. Change after the war, of course, it's a change for all of us, our customers, our suppliers, all the citizens, in Europe and in the rest of the world. This, of course, has an impact on the behavior of most of the companies. What I have seen is the topic which was high on the agenda, like energy transition a few months ago. Today, the topic is more energy security and energy sovereignty. This, of course, will lead to massive consequence for overall big energy companies active in oil, in gas, but also in power generation. This, of course, is creating plenty of discussions, not only in Europe, but in the rest of the world. I think in my view, I'm not talking about mining, I just said, but the biggest change I see, at least for this year and maybe for the years to come, is that energy security and sovereignty will be higher on the agenda than the energy transition. As a citizen, we like it, or we don't like it, but it's a fact. For us at Sulzer, we are ready. If there are any opportunities or some rebound and fatigue in the market, we will of course take this opportunity. But at the same time, energy transition, midterm and long-term is the key trend and the key strategy for the positioning of Sulzer. It's not because we will have more orders in oil or power generation that we forget our main goal of Sulzer, which is the positioning of this company for the portfolio of technology, for the energy transition and for the water segment and the critical industrial applications. Your second question, delivery to Russia. We have two activities in Russia. We were delivering some products and projects for the overall industry, and we have some service activity. Within the boundaries which have been given to us by Switzerland, by E.U. and by U.S., we are delivering our backlog. We are sure also that we can transport it and of course that we are paid. Regarding the new orders, as I explained, we are -80% compared to last year. To be honest, I do not expect a lot of new orders to come, except some few service activity, which are done local by the local teams. The cross-border activity, once the backlog is delivered, which is coming soon for sure in this quarter, then the remaining activity will be only local for local and mainly around services. This can change, because if whatever evolution in the policy will take place, of course, we'll follow strictly. You all know that we expect some EU decision in the coming days or hours, and then we will, of course, strictly follow the rules imposed by EU or the new rules. Okay. Thank you very much. The next question comes from Alessandro Foletti from Octavian. Please go ahead. Yes, good morning, everybody. Thank you for taking my questions. I would like to ask you a couple related to some two or three precise segments. Starting with pulp and paper, you mentioned that there was a strong rebound. Can you maybe mention what drives that? What are the fundamentals behind that, and what kind of outlook you have there? Second question on water. Now, I understand 10% growth is a good growth, but in a way, I wonder if it was not sort of a little bit soft, considering that pricing power is very strong everywhere in every industry, and in water you have many standard products where you mentioned you had two rounds of price increase. So I wonder if maybe you can explain me why 10% is not disappointing. The last question on coal and power generation from coal. Are you positioned there? I understand what you said about being a citizen of this world. I am a citizen as well. I have children as well, but I wonder if this is an opportunity. Thank you. On pulp and paper, in fact, we developed the business on two axes, which is on the spare parts activity and a few projects in the Americas and especially in South America. The growth in pulp and paper is, for this quarter, driven by project in South America and with good activity on the parts business. Overall, I think the pulp and paper market is okay. But with a shift more to packaging, so cardboard, as we say in French, carton, more than the paper for printing can be the press or whatever. We do see also a shift in this activity, pulp and paper, which drives new CapEx or adaptation of the factories to more cardboard than run paper. We also see a trend for more bio application in the pulp and paper industry. That is what is driving the market. Overall, we are the world leader for pumping solution and also not only pumps, but also agitators, because people don't have to forget that in a pulp and paper you are pumping fluid, but you are also mixing and agitating a kind of soup full of fibers, and it's also a very strong activity for Sulzer. When you talk about 10% is not good enough in water, so I would have signed with my two hands with that a few weeks ago. If I can have another 10% growth in quarter two, I would be very happy. Here in water, of course, we try to pass the cost increase, but most of our customers, and you have to understand that, are municipalities. With their budget today, with this inflation, sometimes they answer the question of one of your predecessors, we see some municipalities hesitating. Because with the cost increase they have seen in the water segment last year, but also this year, not only from us, but from the overall industry. A small municipality, sometimes they hesitate when they have to replace some of the equipment. That's why I consider that 10% is a very good activity. What is good for us that is not only in the wastewater, but we have also won some projects in desalination in the Middle East. We are now more and more pushing for clean water. In fact, we are growing our portfolio. This growth in water is in all segments everywhere. Which is a very good sign. It's not because of one project that we want somewhere, but it's more completely scattered and in a sense it makes this growth more solid and sustainable. For me, this 10% is a good figure. To your last question on coal, it's clear that today the only new investment in coal are in China. In China, in 2021, they have launched the equivalent of 30 gigawatts of new coal plants. For the people who know, it's more or less half the capacity of what is installed in France. They have just done that in China last year in coal. Coal represents 70% of the electricity generation in China, 60% in India. We are present more in the servicing of the install base rather than the new equipment. The new equipment today for coal is only in India and in China. India, very limited. The last market which is building new plants is in China, and they have sufficient companies active in this field. For us, it's a very marginal activity. That's why we never report because it's a very small activity. I do not see a revival of coal anywhere in the world, except China, who has his own policy. Okay, thank you very much. Have a nice day. Thank you. The next question comes from Dominik Vonier from LSEG. Please go ahead. Yes, good morning. Thank you. I was wondering about these EU sanctions, which might come really in any minute. I mean, do you think that they might make it completely impossible, you know, for you to do any business, I mean, even services business in Russia? I mean, was that your point before? Another question would regard just, I mean, obviously, anything, you know, with a Russian angle or is being considered, you know, as difficult these times and not to be touched upon? You know, I mean, do you face maybe now increasing difficulties in attracting talent, you know? I mean, because I mean, if you're, you know, your Russian main shareholder there, I mean, is this a problem for you or might this become a problem as Russia really gets even more marginalized? Last question really, about the board, can you give us maybe any any explanations for these two changes, which came a bit unexpected there? I mean, will the board then just remain as it is? I mean, with just six members rather than eight members, what's the planning there? Thank you. Thank you very much, Dominik. To your first question on EU sanctions, I'm not speculating at all on the sanctions to come from EU. I read the press this morning that they were talking about a ban on the import of coal. It seems that coal represents EUR 4 billion of revenue for Russia, mainly meant for Germany. That, of course, has no impact for us, so I'm not speculating on that. To be clear and very clear to all of you, if EU say that you are not allowed to do business anymore in Russia, if in the water segment or in the energy, and of course, immediately we will strictly follow the rules. As of today, I do not have any indication that it would be the case. If it is, of course, we will stop immediately, and we will adapt ourselves to that. Your second question about growing difficulties in attracting talent, it's clear that I had some interviews myself recently. There are some questions, but Sulzer is seen as a Swiss mid-sized company being global. So far, I do not have any issues in attracting talent. Recently, we have just onboarded a few commercial and experienced commercial managers, financial people as well, joining from some renowned Swiss company here to join Sulzer soon. So we do not have a problem in attracting talent. We have more questions, it's clear, but once they listen to our explanations, they are convinced and they join Sulzer. So far, not a problem. Regarding your last question about the unexpected changes in the board that took place very recently, on this one, I cannot comment. The AGM will take place today at 10:00 A.M. The decision from these two people to step down or not to go for election is some personal decision. I have no view, and I cannot comment on that. Thank you. Thank you. Okay. I think there are no more questions. Maybe some last words from Frédéric and to close the call. Thanks a lot for your question. As I just explained, we have had quite a good order momentum in Q1, but as I confirm our guidance before, but as someone say, it's quite easy, no, at least to compare versus Q1 in 2021. This year is all my 30 years of my career, international career. I think it's one of the most difficult, and for sure the most challenging we see. Not only because of the inflation or because the logistic challenge, but because we are entering times that we've unknown. What is true today might not be true tomorrow, and maybe not wrong, but not true anymore. For every organization, can be mid-sized or very large corporation, we will have to adapt to this highly volatile market. For me, the company that will succeed are the one which are agile, bold, and having a very large footprint, and not relying on this segment, but being able to manage our business with a global perspective. A lot of risks of course, but at the same time, as I explained, many opportunities for us. Energy security, energy sovereignty is high on the agenda and might represent or will represent some opportunities for us. At the same time, we clearly are continuing our strategy to develop our water and industrial business in the Flow Equipment and the renewables for Chemtech. Any opportunities, of course, that might come in the energy sector for service activity, for Flow and for Chemtech, we'll take them. Today, we try to stick, we said about the positioning midterm, long-term with Sulzer, but every opportunity in the energy sector, of course, we'll take them. Once again, thanks a lot for interest. Thanks a lot for your question, always very sharp. Also for your support. Have a great day, and happy to interact with you in the future again. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye