Sulzer AG
Annual Report 2023

Plain-text annual report

Annual Report 2023 Contents 3 Letter to the shareholders 7 Sulzer at a glance 7 Our company 8 Our key figures 10 Business review 11 Financial review 16 Business review divisions 23 Corporate governance 50 Compensation report 81 Consolidated financial statements 187 Financial statements of Sulzer Ltd 24 Corporate structure and shareholders 25 Capital structure 26 Board of Directors 39 Executive Committee 43 Shareholder participation rights 44 Takeover and defence measures 45 Auditors 46 Risk management 48 Information policy 51 Letter to the shareholders 53 Compensation governance and principles 57 Compensation architecture for the CEO and Executive Committee members 68 Compensation of the Executive Committee for 2023 73 Compensation architecture for the Board of Directors 75 Compensation of the Board of Directors in 2023 78 Auditor’s report 82 Consolidated income statement 83 Consolidated statement of comprehensive income 84 Consolidated balance sheet 85 Consolidated statement of changes in equity 87 Consolidated statement of cash flows 90 Notes to the consolidated financial statements 174 Auditor’s report 180 Supplementary information 188 Balance sheet of Sulzer Ltd 189 Income statement of Sulzer Ltd 190 Statement of changes in equity of Sulzer Ltd 191 Notes to the financial statements of Sulzer Ltd 197 Proposal of the Board of Directors for the appropriation of the available profit 198 Auditor’s report Sulzer Annual Report 2023  – Letter to the shareholders 3 Sulzer Executive Committee (at its Biopolymer pilot plant in Winterthur) From left: Tim Schulten, Division President Services; Thomas Zickler, Chief Financial Officer; Suzanne Thoma, Executive Chair; Jan Lüder, Division President Flow Equipment; Haining Auperin, Chief Human Resources Officer; Uwe Boltersdorf, Division President Chemtech As I reflect on the business landscape throughout 2023, I am reminded of the challenges that confront societies worldwide. However, I am heartened to see how well we have withstood these challenges. As we prepare to fully embrace the numerous opportunities ahead, I am pleased to present both our annual results for 2023 and our outlook for 2024. Global trends and circularity Like recent past years, there has been much disruption in 2023 – with events triggering or underscoring the energy security challenge, geopolitical unrest, inflation and climate change. At the same time, people increasingly agree that our global society can only meet its key challenges if we work together. Global business has a significant role to play in this regard by offering products, Sulzer Annual Report 2023  – Letter to the shareholders 4 services and technologies that make a difference. It is also a good role model, demonstrating how people working together find solutions together. Similarly, global business places emphasis on the common ground rather than focusing on differences that can be divisive. Sulzer is well-positioned for global trends of ever-increasing importance: energy and water security, the energy transition, increased use of natural resources, more stringent regulation of materials and chemicals, as well as emerging circular technologies. As a Group, we enable and service critical infrastructure for our customers, and our technologies help enhance much-needed resilience to external challenges. In the USA, for example, we are currently expanding our water business to support the government’s planned water and wastewater infrastructure development , ensuring clean and affordable water for social and industrial use, including agriculture and hydropower generation. Around the world, Sulzer innovation is contributing to circular economies by enabling the development of biofuels, purer chemicals and improved utilization and recycling. We are also providing valuable services and solutions to traditional end markets through energy efficiency and lifespan extension, and we continue to adapt our solutions to deliver ongoing value to our customers. We are collaborating across our portfolio to push boundaries in carbon capture and renewables and are partnering to make processes more efficient and cost-effective. Working with Crosstown H2R, a Swiss technology company, we recently unveiled a revolutionary hydrogen combustion technology to upgrade gas turbines for hydrogen compatibility. This enables our customers to transition to zero- carbon operations without the need to replace expensive engines and infrastructure. In 2023, we also considerably strengthened our polylactic acid  (PLA) value chain in support of the increased adoption of circular manufacturing practices and applications. We have commissioned a new research and development center in Singapore and most recently launched two new bioplastic technologies to help stakeholders leverage their competitive edge in sustainable manufacturing. Our global markets have demonstrable longevity and, although they will evolve, they will remain essential – even as new ones emerge. To learn more about how Sulzer technologies are creating value for our stakeholders, we invite you to click here and read our Focus Stories in the Non-Financial Report. Strong results across all divisions Sulzer delivered strong order growth throughout 2023 across all our divisions and regions, with order intake up organically by 13.9% compared to the same period in 2022.  Sales continued to increase in 2023, with a rise in operational profitability to a record 11.1% in over ten years, up by 110 basis points compared to 2022. Efficient working capital management and improvements in operational excellence supported the increase of free cash flow to CHF 301.3 million, up from CHF 58.3 million in the previous year.  Sulzer Annual Report 2023  – Letter to the shareholders 5 “ Our three divisions are connected through our value chain, technologies and key capabilities, and show attractive prospects for development. We have a clear strategy moving forward.” Suzanne Thoma Executive Chair Good Governance 2023 introduced changes to our Board of Directors. The Board extended its members from six to seven and welcomed three new independent Board members at the Annual General Meeting of April 19, 2023. Dr. Prisca Havranek Kosicek (CFO of Jenoptik), Mr. Per Utnegaard (former CEO of Bilfinger and Swissport) and Dr. Hariolf Kottmann (former CEO and Chairman of Clariant) replaced Peter Bichsel and Hanne Birgitte Breinbjerg Sørensen, who did not stand for re-election after long and distinguished tenures at Sulzer. To support corporate governance, the Board created the new function of Lead Independent Director, to which it appointed Markus Kammüller, who is also the Head of the newly created Governance Committee. Strategy 2028 Together with our new Board of Directors, we have completed our Sulzer 2028 corporate strategy review to ensure we continue to meet customer needs and expectations as we maximize our long- term growth potential. Sulzer operates in essential, growing and evolving markets that are gaining significance thanks to increasing global needs. These markets are fueled by must-haves such as affordable short- and long-term energy security, efficient use of resources and the lifespan extension of our infrastructure. The need for clean water in sufficient supply drives the market for wastewater treatment, while the need for cleaner, purer and more sustainable chemicals and materials is becoming ever more pronounced. Sulzer’s products, solutions and services are uniquely positioned to meet evolving global needs and pave the way for both prosperity and sustainability for a growing world population. Our innovation and engineering capabilities are critical to enabling new and evolved offerings of products and services in many demanding markets, focusing on efficiency improvements, higher purity requirements and the reduction of emissions and waste. Together with our customers we will lead the transformation to a less carbon-intensive economy and drive sustainable, profitable growth. We will strengthen our integrated offerings in critical applications at Sulzer, such as the retrofitting of energy infrastructure installations, integrated wastewater treatment plants, small carbon capture units, biopolymer production technology and clean fuel solutions. We will invest in research and development (R&D) for particularly demanding energy/high-pressure applications, recycling technologies, bio-based technologies and carbon capture and storage (CCS) solutions. Our three divisions have the potential to increasingly connect through our value chain, technologies, key capabilities and customers seeking more integrated solutions. In this manner, we will create objective and durable value for our shareholders, employees and global communities alike. Sulzer Annual Report 2023  – Letter to the shareholders 6 To maximize the value we add, our Sulzer 2028 strategy has two key pillars aimed at growing the company profitably, while making it more resilient, more efficient and more agile: focused profitable organic growth and operational excellence. Sulzer’s experienced leadership will empower our teams to drive performance improvements through a step-change in operational excellence, encompassing the entire value-creating process from innovation and sales to supply chain, delivery and service. This will enable us to optimize efficiency, strengthen our customer focus and grow more profitably. Outlook for 2024 Despite a global environment characterized by uncertainty, Sulzer has delivered strong financial results across all its divisions and is well-positioned for growth in the coming year and beyond. For 2024, Sulzer expects year-on-year organic order intake growth of 2 to 5%. The first half of the year is expected to see a slow development of order intake compared to the very strong first half of 2023, with performance picking up in the second half of the year – this expectation reflects the nature of the project business in Sulzer’s markets. Further, Sulzer expects organic sales growth of 6 to 9% and operational profitability to continue its upwards trajectory to around 12% of sales. As a reflection of our confidence in Sulzer’s future performance, we are pleased to propose an ordinary dividend of CHF 3.75 per share for 2023 at the Annual General Meeting. Once again, I would like to extend great appreciation and thanks to you, our shareholders, for all of your support, and to our employees, customers and partners, without whom none of our achievements would be possible. Yours sincerely, Suzanne Thoma Executive Chair Sulzer Annual Report 2023 – Sulzer at a glance – Our company 7 Serving essential markets Sulzer serves essential markets, supporting prosperous economies and a sustainable society. Important global trends make our products, services and technologies more relevant than ever. As the world population grows, there is a greater need for products and services, particularly in emerging industrial markets. In turn, this leads to greater demand for access to energy, more and cleaner water, and consumer goods like electronic devices. This increasing demand underscores the need to balance a prosperous future with a resilient and sustainable global society. Sulzer is well-positioned to offer products, services and technologies to essential markets like energy, natural resources and process industries to increasingly enable both prosperity and sustainability. Our three divisions - Flow Equipment, Services and Chemtech - serve the same important growing markets that are ensuring the security and quality of critical goods and services, as well as the transition to a more sustainable future. Connected through large, global industry customers, our divisions enhance their products and technologies, enabling efficiency improvements and circular economies. Sulzer is committed to becoming a top industrial company, creating ever more value for shareholders, customers, employees and society, as an integral contributor to global prosperity and sustainability. Flow Equipment Services Chemtech Sulzer Annual Report 2023 – Sulzer at a glance – Our key figures 8 Our key figures Order intake by division Order intake by region 2023 2023 41% Flow Equipment 35% Services 24% Chemtech Key figures millions of CHF Order intake Order intake gross margin Order backlog as of December 31 Sales EBIT 3) Operational profit Operational profitability Operational ROCEA Core net income Net income Basic earnings per share (in CHF) Free cash flow (FCF) Net debt as of December 31 36% Europe, the Middle East and Africa 38% Americas 26% Asia-Pacific 2023   2022   Change in +/–%   +/–% adjusted 1)   +/–% organic 2) 3’580.3   3’425.4   4.5   12.6   13.9 33.9%   33.5%   1’946.8   1’844.7   3’281.7   3’179.9   5.5   3.2   329.7   111.4   > 100   11.0   13.2 365.6   317.6   15.1   24.4   25.3 11.1%   10.0%   28.4%   23.7%   257.9   213.1   21.0   230.5   28.0   > 100   6.76   0.85   > 100   301.3   58.3   > 100   172.3   234.6   –26.6   Employees (number of full-time equivalents) as of December 31 13’130   12’868   2.0   1) Adjusted for currency effects. 2) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 3) 2022 was impacted by write-offs related to Russia and Poland.                                                                                                             Sulzer Annual Report 2023 – Sulzer at a glance – Our key figures 9 Stock market information Registered share price (in CHF) – high – low – year-end Market capitalization as of December 31 – number of shares outstanding – in millions of CHF – in percentage of equity P/E ratio as of December 31 Dividend yield as of December 31 Data per share CHF 2023   2022   2021   2020   2019 91.70   93.50   143.10   110.50   113.40 71.10   56.10   82.45   40.12   75.15 85.90   72.00   89.85   93.10   108.00   33’811’296   33’738’515   33’727’637   33’835’903   34’021’446 2’904   2’429   3’030   3’150   3’674 265%   237%   238%   224%   232% 12.7x   85.2x   2.1x   37.8x   4.4%   4.9%   3.9%   4.3%   2023   2022   2021   2020   23.9x 3.7% 2019 4.52 27% Net income attributable to a shareholder of Sulzer Ltd 6.76   0.85   41.93   2.46   Change from prior year 700%   –98%   1’603%   –46%   Equity attributable to a shareholder of Sulzer Ltd 32.40   30.40   37.80   41.50   46.50 Ordinary dividend Payout ratio 3.75 1)   3.50   3.50   4.00   55%   414%   8%   163%   4.00 88% Average number of shares outstanding   33’884’651   33’825’814   33’788’006   33’970’141   34’026’442 1) Proposal to the Annual General Meeting. Shareholder structure as of December 31, 2023 Number of shares 1–100 101–1’000 1’001–10’000 10’001–100’000 More than 100’000 Total registered shareholders and shares (excluding treasury shares Sulzer Ltd) Number of shareholders   Shareholding 4’314   5’159   604   95   12   10’184   0.7% 5.0% 4.7% 7.8% 54.7% 72.8%                                                                                                                                 Business review 11 Financial review 16 Business review divisions 16 Flow Equipment 19 Services 21 Chemtech Sulzer Annual Report 2023 – Business review – Financial review 11 Strong performance on all KPIs Note: If not otherwise indicated, changes from the previous year are based on organic figures (adjusted for currency effects, acquisitions and divestitures/ deconsolidations). All divisions demonstrated strong performance, with order intake growing by 13.9% and sales achieving a year-on-year increase of 13.2%. Operational profitability reached 11.1%, showing a significant improvement of 110 basis points compared with 2022. Free cash flow amounted to CHF 301.3 million, up by CHF 243.0 million from CHF 58.3 million. Orders and sales growing double-digit in all divisions Group order intake increased by 13.9% compared with 2022 and reached CHF 3’580.3 million, which represents the highest amount of order intake over the last decade. Given the strong appreciation of the Swiss franc against most currencies Sulzer operates in, currency translation effects had a negative impact on order intake of CHF 276.1 million. The impact from divestitures and deconsolidations was 1 CHF 46.9 million. The order intake gross margin increased by 0.4 percentage points to 33.9%. In the Flow Equipment division, order intake grew by 11.2%, with a significant contribution from large orders booked in the beginning of 2023 supporting energy transition and energy security. Positive end-market development in the Americas contributed to order intake growth of 19.8% in the Services division. Order intake in the Chemtech division increased by 10.5%, driven by large order bookings in the first half of the year and strong fundamentals in its products and components business.  As of December 31, 2023, the order backlog amounted to CHF 1’946.8 million (December 31, 2022: CHF 1’844.7 million). Negative currency translation effects on backlog totaled CHF 162.1 million. 1) Order intake gross margin is defined as the expected gross profit of order intake divided by order intake. Order intake  millions of CHF Order intake Order intake gross margin Order backlog as of December 31 2023   3’580.3   33.9%   1’946.8   2022 3’425.4 33.5% 1’844.7 Sales reached CHF 3’281.7 million in 2023, an increase of 13.2% compared with the previous year. Negative currency translation effects totaled CHF 247.8 million and the impact from divestitures and deconsolidations accounted for CHF 71.1 million. In the Flow Equipment division, sales increased by 10.9%, with all business units, particularly Industry, benefitting from the high order backlog and the general stabilization of the supply chain. Sales in Services also grew, leading to an overall increase of 14.5%, with all regions contributing. In Chemtech, sales were up by 15.5% thanks to solid execution of the high order backlog.         Sulzer Annual Report 2023 – Business review – Financial review 12 “ Our strong performance in 2023 demonstrates the value of our solutions and expertise to essential industries. Demand for our critical services and products is strong in both our traditional and evolving markets.” Thomas Zickler Chief Financial Officer Healthy gross profit margins Gross profit margin increased from 29.5% in 2022 to 33.0% in 2023, driven by operational excellence and a more profitable product mix, while 2022 was impacted by Russia-related write-offs. Along with increased sales volumes, margins improved and gross profit reached CHF 1’084.6 million (2022: CHF 939.6 million). Operational profitability up 110 basis points to 11.1% Higher sales volumes and better margins led to an operational profit increase of 25.3% and amounted to CHF 365.6 million (2022: CHF 317.6 million). This translates into record operational profitability for the last ten years of 11.1%, up by 110 basis points compared with the previous year (2022: 10.0%). All divisions successfully increased operational profitability. Flow Equipment: 8.0% (2022: 6.6%) on higher sales, better margins and excellence in manufacturing Services: 14.8% (2022: 14.2%) based on ongoing price management and cost discipline Chemtech: 12.3% (2022: 10.8%) given strong sales growth and a favorable margin mix across the portfolio Bridge from operational profit to EBIT millions of CHF Operational profit Amortization Impairments on tangible and intangible assets Restructuring expenses Non-operational items 1) EBIT 2023   365.6   –36.6   –0.2   –3.0   3.8   329.7   2022 317.6 –38.8 –44.5 –0.1 –122.8 111.4 1) Non-operational items include significant acquisition-related expenses, gains and losses from the sale of businesses or real estate and certain non-operational items that are non- recurring or do not regularly occur in similar magnitude.               Sulzer Annual Report 2023 – Business review – Financial review 13 Return on sales of 10.0% By December 31, 2023, EBIT amounted to CHF 329.7 million, compared with CHF 111.4 million in 2022, which included CHF 147.3 million write-offs relating to the exit from Russia and the closure in Poland. Return on sales (ROS) was 10.0%, compared with 3.5% by December 31, 2022. In 2023, the definitive deconsolidation of Russian business activities was booked and resulted in a minor gain, which was recorded as a non-operational item. Restructuring expenses of CHF 3.0 million were also incurred, mostly related to the reorganization of the Flow Equipment division. Calculation of return on sales (ROS) and operational profitability millions of CHF EBIT Sales Return on sales (ROS) Operational profit Sales Operational profitability Financial results 2023   329.7   3’281.7   10.0%   365.6   3’281.7   11.1%   2022 111.4 3’179.9 3.5% 317.6 3’179.9 10.0% Total net financial expenses amounted to CHF 22.2 million compared with CHF 1.6 million in 2022. Total net interest expense decreased by CHF 5.7 million as a result of higher interest income on cash and cash equivalents. Fair value changes on financial assets and liabilities had a positive impact of CHF 5.1 million (CHF 24.0 million in 2022) and currency exchange losses amounted to CHF 17.9 million (CHF 6.6 million in 2022). In the previous year, this figure was influenced by a positive impact of CHF 21.0 million arising from unhedged intercompany loans to Russian entities, prior to their classification as "held for sale." Other financial income amounted to CHF 2.5 million (CHF –1.5 million in 2022). Effective tax rate of 24.2% Income tax expenses decreased to CHF 73.8 million (2022: CHF 79.0 million) despite higher pre-tax income. This could be achieved thanks to an improved utilization of tax losses, obtained R&D tax credits and successfully concluded tax audits. The effective tax rate (ETR) decreased from 73.8% (excluding Russia and Poland: 30.7%) in 2022 to 24.2% in the financial year 2023.  Higher net income and core net income In 2023, net income amounted to CHF 230.5 million. This compares to CHF 28.0 million in the previous year when the Russia and Poland related exit costs of CHF 133.7 million affected Sulzer’s bottom line. Core net income, excluding the tax-adjusted effects of non-operational items, totaled CHF 257.9 million compared with CHF 213.1 million in 2022. Basic earnings per share increased from CHF 0.85 in 2022 to CHF 6.76 in 2023.                         Sulzer Annual Report 2023 – Business review – Financial review Bridge from net income to core net income  millions of CHF Net income Amortization Impairments on tangible and intangible assets Restructuring expenses Non-operational items 1) Tax impact on above items Core net income 14 2022 28.0 38.8 44.5 0.1 122.8 –21.1 213.1 2023   230.5   36.6   0.2   3.0   –3.8   –8.5   257.9   1) Non-operational items include significant acquisition-related expenses, gains and losses from the sale of businesses or real estate and certain non-operational items that are non- recurring or do not regularly occur in similar magnitude. Better balance sheet efficiency Note: If not otherwise indicated, balance sheet movements from the previous year are based on nominal figures. Total assets as of December 31, 2023, amounted to CHF 4’369.5 million, which is a decrease of CHF 250.7 million from December 31, 2022. This is mainly attributable to the repayment of borrowings, more efficient use of working capital management and increased defined benefit assets. Non-current assets increased by CHF 101.7 million to CHF 1’685.9 million. Negative foreign exchange impacts of CHF 38.9 million on goodwill, together with a decrease in other intangible assets of CHF 37.5 million, were offset by an increase in defined benefit assets of CHF 169.2 million. Current assets decreased by CHF 352.4 million, including CHF 30.4 million attributable to the deconsolidation of the Russian operations that were previously classified as "held for sale." Cash and cash equivalents decreased by CHF 221.7 million and were significantly influenced by a bond repayment. Working capital related assets, such as inventories, supplier advances, trade account receivables and contract assets, decreased overall by CHF 85.5 million. Total liabilities decreased by CHF 320.7 million to CHF 3’270.8 million as of December 31, 2023. This decrease was mainly supported by a bond repayment of CHF 290.0 million. Trade accounts payable also decreased by CHF 73.1 million, whereas an increase was recorded for contract liabilities (CHF 68.7 million). Liabilities previously classified as "held for sale" (CHF 25.4 million) were derecognized as a result of the deconsolidation of the Russian business. Equity increased by CHF 70.0 million to CHF 1’098.6 million. Increases from net income (CHF 230.5 million) and the remeasurement of defined benefit plans (CHF 128.8 million) were partly offset by negative currency translation effects (CHF 146.0 million), dividend distribution (CHF 119.2 million) and the acquisition of non-controlling interests (CHF 22.8 million). Net debt decreased from CHF 234.6 million in 2022 to CHF 172.3 million in 2023, largely due to strong operational cash flow. The net debt to EBITDA ratio improved from 0.87 in 2022 to 0.39 due to the increase in EBITDA and the reduction in net debt. Record free cash flow At CHF 301.3 million (2022: CHF 58.3 million), free cash flow significantly improved and was in excess of CHF 300 million for the first time in over a decade.                 Sulzer Annual Report 2023 – Business review – Financial review 15 Thanks to higher net income, efficient working capital management and lower tax payments, cash flow from operating activities increased by CHF 243.0 million to CHF 362.2 million (2022: CHF 119.2 million). Bridge from cash flow from operating activities to free cash flow millions of CHF Cash flow from operating activities Purchase of intangible assets Proceeds from the sale of intangible assets Purchase of property, plant and equipment Proceeds from the sale of property, plant and equipment Free cash flow (FCF) 2023   362.2   –6.1   0.0   –59.5   4.6   301.3   2022 119.2 –8.7 0.0 –61.2 9.0 58.3 Cash outflow from investing activities amounted to CHF 104.8 million, compared to CHF 87.8 million in 2022. At CHF 61.0 million, the net cash outflow for purchases and proceeds from the sale of property, plant and equipment, and intangible assets was similar to the previous year (2022: CHF 60.9 million). In addition, acquisitions and divestiture/deconsolidation related outflows amounted to CHF 45.7 million. Cash outflow from financing activities totaled CHF 448.6 million, compared with CHF 285.4 million in 2022. This mainly consisted of the bond repayment of CHF 290.0 million and dividend payments of CHF 81.2 million. Overall, the net change in cash and cash equivalents since January 1, 2023, amounted to CHF -250.3 million, including exchange losses of CHF 59.0 million. Outlook for 2024 Despite a global environment characterized by uncertainty, Sulzer has delivered strong financial results across all its divisions and is well-positioned for growth in the coming year and beyond. For 2024, Sulzer expects year-on-year organic order intake growth of 2 to 5%. The first half of the year is expected to see a slow development of order intake compared to the very strong first half of 2023, with performance picking up in the second half of the year – this expectation reflects the nature of the project business in Sulzer’s markets. Further, Sulzer expects organic sales growth of 6 to 9% and operational profitability to continue its upwards trajectory to around 12% of sales. Abbreviations EBIT: Earnings before interest and taxes ROS: Return on sales EBITDA: Earnings before interest, taxes, depreciation, amortization and impairment FCF: Free cash flow For the definition of the alternative performance measures, please refer to the “ Supplementary information ”                Sulzer Annual Report 2023 – Business review – Flow Equipment 16 Continued strong order growth and profitability Note: If not otherwise indicated, changes from the previous year are based on organic figures (adjusted for currency effects, acquisitions and divestitures/ deconsolidations). The Flow Equipment division returned a strong performance in 2023. Order intake increased by 11.2%, driven by stronger markets and extraordinarily large orders booked in the first half of 2023. Profitability rose by 140 basis points year on year. Robust sales growth of 10.9% can be attributed to a strong backlog combined with improvements in execution and supply chain stabilization. The division continues to focus on operational efficiency across its business units to meet the growing demand for infrastructure and services in support of the energy transition. Investments in growth, productivity and sustainability The Flow Equipment division continues to see strong activity in the energy markets, driven by future- proven solutions that reliably support customers in the green energy transition. Water and Industry remain strategic markets, with sales continuing to grow profitably.  The division has maintained a strategic commitment to advancing research and development efforts, with a primary focus on pioneering new transition technologies such as for  biofuels and energy storage . In 2023, Sulzer pumps were selected to enable a 100% renewable and carbon-free biofuel facility in the ambitious smart city of NEOM, Saudi Arabia, with a capacity projected at some 220’000 tonnes of carbon-free, green hydrogen per year.  The Flow Equipment division is also expanding its American water business , investing in its product manufacturing and testing facilities to support planned water and wastewater infrastructure development across the country in compliance with the U.S. Infrastructure Investment and Jobs Act. Water and sanitation remain pivotal to the division on a global scale. In Bahrain, for example, Sulzer’s advanced filtration systems have upgraded a key wastewater treatment plant, enabling it to process 250,000 m /day of wastewater for local agricultural irrigation. In 2023, the division also expanded its 3 flow equipment manufacturing plant in Riyadh, Saudi Arabia, to meet the growing demand for infrastructure development in the region. New organizational structure  To better serve customers and improve operational excellence, the Flow Equipment division was strategically reorganized, effective January 1, 2024. With an emphasis on growth, the new and more customer-centric structure consolidates the Water and Industry business units into a single unified entity, now called the Water & Industrial business unit. Desalination was integrated with the existing Energy business, leading to the establishment of the Energy & Infrastructure business unit. The reorganization will support the division in achieving the profitable growth objectives outlined in Sulzer 2028. Sulzer Annual Report 2023 – Business review – Flow Equipment 17 Key figures Flow Equipment millions of CHF Order intake Order intake gross margin Order backlog as of December 31 Sales EBIT 3) Operational profit Operational profitability 2023   2022   Change in +/–%   +/–% adjusted 1)   +/–% organic 2) 1’466.5   1’419.2   3.3   10.6   11.2 30.2%   878.3   30.2%   850.1   1’354.4   1’323.0   74.1   108.2   8.0%   32.6   87.4   6.6%   3.3   2.4   > 100   23.8   9.4   27.5   10.9 27.8 Employees (number of full-time equivalents) as of December 31 5’465   5’263   3.8   1) Adjusted for currency effects. 2) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 3) 2022 was impacted by write-offs related to Russia and Poland. Strong order intake  The Flow Equipment division continued its strong growth trajectory with orders increasing by a significant 11.2% in 2023. This was driven by large one-time orders in the first half coupled with strong expansion in energy transition and security solutions. Order intake by market segment Order intake by region 2023 2023 40% Energy 34% Water 26% Industry 42% Europe, the Middle East and Africa 36% Americas 22% Asia-Pacific Sustained growth in profitability The Flow Equipment division experienced strong overall growth in sales (10.9%), with all business units contributing. This was primarily driven by enhanced execution, supply chain stabilization and productivity investments. Operational profitability increased by 140 basis points from 6.6% to 8.0%, mainly driven by an increased focus on price realization against inflation, disciplined control of operational expenditures and improved commercial and operational excellence.                                                         Sulzer Annual Report 2023 – Business review – Flow Equipment 18 Safety performance in 2023 The Flow Equipment division achieved the best safety performance result in 2023 that it has achieved in over 15 years. The division continued to affect a positive downwards trend in its accident frequency rate (AFR), reporting 0.95 cases per million working hours compared to the previous year (2022: 1.1). The accident severity rate (ASR) decreased significantly to 16.9 lost days per million working hours, down from 33.3 in the previous year. The division participated in a Group-wide “Stop Work" campaign in 2023 that gave stop-work authority to any employee observing a tangible risk of injury. Holding safety paramount, the Flow Equipment business units delivered an excellent, sustained safety performance to achieve these good results. Abbreviations EBIT: Earnings before interest and taxes For the definition of the alternative performance measures, please refer to “ Supplementary information ” Sulzer Annual Report 2023 – Business review – Services 19 Record growth, rising profitability Note: If not otherwise indicated, changes from the previous year are based on organic figures (adjusted for currency effects, acquisitions and divestitures/ deconsolidations). In 2023, the Services division achieved its strongest growth in recent history and continues to strengthen its portfolio as the most complete player in the market. Driven by ongoing demand for energy and our customers’ efforts to optimize their operations, order intake rose by 19.8% compared to 1.6% in 2022. Sales also grew by 14.5% in 2023, supporting an overall increase in profitability to 14.8%. Improving sales and operational effectiveness The Services division continues to strengthen its offering by applying new technologies and investing in its service infrastructure. In 2023, a new Service Center was opened in Germany to better serve customers in the Dresden area and wider region. Substantial upgrades were also made in Houston and Batton Rouge, both in the USA. These investments support faster, more sustainable and differentiated service offerings for our customers. Robust market momentum in 2023, combined with strong execution by the service teams, helped the division reach more customers and achieve exceptional revenue growth. In  Nigeria , for example, the division delivered a turnkey solution on a compressor, after which a long-time pump customer expanded its service support to include turbines and motors. Also in Africa, the division is working with water utility companies to deliver planned refurbishments to some dozen pump sets that power critical water infrastructure. While reducing downtime and costs for customers, the division’s retrofit solutions are also providing benefits in improved sustainability. For a floating production storage and offloading (FPSO) vessel being relocated to the North Sea, the division recently delivered an innovative retrofit that reduces the power utilization of the water injection pumps. In China , a modular retrofit solution helped a gas turbine powerplant reduce its nitrogen oxide (NOx) emissions, delivering efficiency gains, longevity and emissions compliance. In  Indonesia , the division’s critical turbine repair at a hydropower plant is enabling cleaner energy production and significant cost savings. Key figures Services millions of CHF Order intake Order intake gross margin Order backlog as of December 31 Sales EBIT 3) Operational profit Operational profitability 2023   2022   Change in +/–%   +/–% adjusted 1)   +/–% organic 2) 1’271.3   1’171.3   8.5   18.5   19.8 38.7%   547.3   38.9%   492.9   1’154.8   1’117.0   179.6   171.3   14.8%   54.0   159.0   14.2%   11.0   3.4   > 100   7.8   12.6   19.4   14.5 20.8 Employees (number of full-time equivalents) as of December 31 4’630   4’559   1.5   1) Adjusted for currency effects. 2) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 3) 2022 was impacted by write-offs related to Russia and Poland.                                                         Sulzer Annual Report 2023 – Business review – Services 20 Strong order intake  All product lines across all regions demonstrated robust growth in 2023. The Americas outperformed the others with a growth rate of 27.9%, leading to overall growth for the division of 19.8%. The Asia Pacific region grew by 8.7%. Europe, the Middle East and Africa also strengthened its position with a growth of 14.3%, strongly supported by traditional markets. Order intake by market segment Order intake by region 2023 2023 55% Pumps Services 45% Other Equipment 49% Americas 38% Europe, the Middle East and Africa 13% Asia-Pacific Operating margins improving at high levels Sales grew to CHF 1’154.8 million in 2023 (+14.5%), with all regions contributing to the improved margins. Strict cost control and strategic price management further supported the results. Safety performance in 2023 In 2023, the Services division’s accident frequency rate (AFR) remained at a very low level of 0.9 cases per million working hours (2022: 1.0). Its accident severity rate (ASR) further decreased to 19 lost days per million working hours, down from 23.7 the previous year. A major “Stop Work” safety initiative was launched by Services in 2023, which was rolled out Group- wide. Developed to reinforce risk awareness of employees, the initiative granted individual employees the authority to stop a work activity if they observed a tangible risk of injury. The highly successful initiative is credited for safety improvements across the company. Abbreviations EBIT: Earnings before interest and taxes For the definition of the alternative performance measures, please refer to “ Supplementary information .” Sulzer Annual Report 2023 – Business review – Chemtech 21 Record year with double-digit growth Note: If not otherwise indicated, changes from the previous year are based on organic figures (adjusted for currency effects, acquisitions and divestitures/ deconsolidations). The Chemtech division continued its strong growth trajectory in 2023, achieving double-digit growth in both order intake and sales. Order intake increased by 10.5%, driven by select large projects and strong fundamentals in its products and components business. Sales grew by 15.5%, with strong profitability across all regions. The division continues to pursue its growth strategy in Renewables, supporting circular manufacturing practices, the use of sustainable materials and efficiency improvements for its customer base. Expanding biobased technologies and circularity The Chemtech division continues to invest more than 4% of its revenues in technology and innovation. In 2023, it confirmed its leadership in biopolymers by launching its new CAPSUL TM process technology for the manufacturing of polycaprolactone (PCL), a biodegradable polyester, as well as a new licensed technology for the production of polylactic acid (PLA), SULAC TM . These two new biopolymer technologies will play a significant role in the reduction of plastic waste. Coupled with the recent soft launch of its clean technology R&D center in Singapore , the division is poised to support rising demand for a more eco-conscious, circular economy of plastic, separation applications and the decarbonization of industries as a whole. The Chemtech division's wide variety of equipment and process technologies, together with its extensive system integration know-how, is enabling manufacturers worldwide to maximize cost and energy efficiency, secure product quality and reduce emissions. In 2023, the Chemtech division's separation technology enabled the production of high-quality biomethanol  in Finland to help industry reduce its greenhouse gas emissions. In Austria, the division's mass transfer technologies and equipment will enable 50,000 tons of CO 2 to be captured each year for use in the food and beverage industry, while its separation technology in Belgium is enabling the purification of hard-to- recycle  post-consumer plastic for use as chemical feedstock . Key figures Chemtech millions of CHF Order intake Order intake gross margin Order backlog as of December 31 Sales EBIT 3) Operational profit Operational profitability 2023   842.5   33.2%   521.2   772.5   84.9   95.0   2022   Change in +/–%   +/–% adjusted 1)   +/–% organic 2) 834.9   31.7%   501.7   739.9   38.3   80.0   0.9   3.9   4.4   > 100   18.7   7.5   10.5 11.3   28.2   15.5 28.5 12.3%   10.8%   Employees (number of full-time equivalents) as of December 31 2’849   2’852   –0.1   1) Adjusted for currency effects. 2) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 3) 2022 was impacted by write-offs related to Russia.                                                         Sulzer Annual Report 2023 – Business review – Chemtech 22 Strong order intake Orders in the Chemtech division continued a strong growth path, rising 10.5% in 2023. The increase was driven by large orders in the first half of the year, particularly in bioplastics, biofuels and process technologies.  Order intake by market segment Order intake by region 2023 2023 47% Chemicals 21% Gas and Refining 16% Renewables 13% Services 3% Water 54% Asia-Pacific 24% Americas 22% Europe, the Middle East and Africa Rising sales and profitability Sales also grew by a significant 15.5%, with all of Chemtech’s business units contributing to this substantial growth. The increase was driven by a high backlog, a particularly large order at the beginning of 2023 and strong commercial momentum. Profitability rose by 150 basis points to 12.3%, driven by strong sales growth, a favorable margin mix across the portfolio and ongoing cost discipline.  Safety performance in 2023  Chemtech’s accident frequency rate (AFR) decreased from an already low 0.8 cases per million working hours in 2022 to just 0.34 in 2023. Driven by a robust safety process, the accident severity rate (ASR) also decreased to 3.2 lost days per million working hours, down from a high of 44.0 the previous year. The Chemtech division participated in a Group-wide “Stop Work" campaign in 2023 that gave stop- work authority to any employee observing a tangible risk of injury. Abbreviations EBIT: Earnings before interest and taxes For the definition of the alternative performance measures, please refer to “ Supplementary information .” Corporate governance 24 Corporate structure and shareholders 25 Capital structure 26 Board of Directors 39 Executive Committee 43 Shareholder participation rights 44 Takeover and defense measures 45 Auditors 46 Risk management 48 Information policy Sulzer Annual Report 2023 – Corporate governance – Corporate structure and shareholders 24 Corporate structure and shareholders Sulzer is subject to Swiss corporate and stock exchange laws and applies the Swiss Code of Best Practice for Corporate Governance. Sulzer Ltd (the company) is subject to the laws of Switzerland, in particular Swiss corporate and stock exchange laws. The company also applies the Swiss Code of Best Practice for Corporate Governance. The information in the following section is set out in the order defined by the SIX Swiss Exchange Directive on Information relating to Corporate Governance (DCG), with subsections summarized as far as possible. Sulzer’s consolidated financial statements comply with International Financial Reporting Standards (IFRS), and in certain sections, readers are referred to the financial reporting section of the Sulzer Annual Report 2023. Sulzer reports the compensation of the Board of Directors and the Executive Committee in the compensation report . Unless otherwise indicated, the following information refers to the situation on December 31, 2023. Further information on corporate governance is published at www.sulzer.com/governance . Corporate structure The company’s business is managed on a divisional basis, and the organizational Group structure corresponds to these reporting segments, which consist of the Flow Equipment division, the Services division and the Chemtech division. The operational corporate structure is shown under  note 3  to the consolidated financial statements in the financial reporting section. Sulzer Ltd is the only Sulzer company listed on a stock exchange. It is based in Winterthur, Switzerland. Its shares are listed and traded on the SIX Swiss Exchange in Zurich (Securities No. 3838891/ISIN CH0038388911). On December 31, 2023, the market capitalization of all outstanding registered shares of Sulzer Ltd was CHF 2’943’137’583. Information on the subsidiaries included in the consolidation can be found under note 36  to the consolidated financial statements. The list comprises all consolidated direct subsidiaries of Sulzer Ltd as well as all further consolidated subsidiaries. Significant shareholders According to notifications of Sulzer shareholders, two shareholders held more than 3% of Sulzer Ltd’s share capital on December 31, 2023. As published on the SIX disclosure platform on May 29, 2018, Tiwel Holding AG held 48.82% of Sulzer’s shares. The beneficial owner of these shares is Viktor Vekselberg. Furthermore, The Capital Group Companies, Inc., announced a stake of 3.02% as published on the SIX disclosure platform on August 12, 2022. The shares are directly held by the Capital Research and Management company. For information on shareholders of Sulzer Ltd that have reported shareholdings of over 3% or a reduction of shareholdings below 3%, please refer to the website of the Disclosure Office of SIX Swiss Exchange . For the positions held by Sulzer and information on shareholders, see note 24 to the consolidated financial statements. There are no cross-shareholdings where the capital or voting stakes on either side exceed the threshold of 5%. For information on transactions with related parties, see note 32 to the consolidated financial statements. Sulzer Annual Report 2023 – Corporate governance – Capital structure 25 Capital structure Share capital The fully paid-up share capital of Sulzer Ltd amounts to CHF 342’623.70 and is divided into 34’262’370 registered shares with a par value of CHF 0.01 per share. The shares are issued in the form of uncertificated securities within the meaning of art. 973c of the Swiss Code of Obligations (CO) and are held as intermediated securities within the meaning of the Swiss Federal Act on Intermediated Securities of October 3, 2008. Each registered share entitles the holder to one vote at the Shareholders’ Meeting and all shares have equal dividend rights. The company’s Articles of Association provide for the possibility of a share capital increase in a maximum amount of CHF 17’000 through the issuance of up to 1’700’000 registered shares with a par value of CHF 0.01 per share (corresponding to 4.96% of the current share capital) through the voluntary or mandatory exercise of certain conversion, option or similar rights for the subscription of shares granted to shareholders or third parties in connection with bonds, loans or other financial market instruments of Sulzer Ltd or any of the subsidiaries controlled by it (for more details, see § 3a of the Articles of Association). The introduction of this conditional capital was approved by Sulzer Ltd’s shareholders at the AGM on April 14, 2021. There is no capital band, nor are there any participation or dividend certificates.  Restrictions on transferability and nominee registrations Sulzer shares are freely transferable provided that, when requested by the company to do so, buyers declare that they have purchased and will hold the shares in their own name and for their own account; that there is no agreement on the redemption of the relevant shares; and that they bear the economic risk associated with the shares. Nominees shall only be entered in the share register with the right to vote if they meet the following conditions: The nominee is subject to the supervision of a recognized banking and financial market regulator; the nominee has entered into a written agreement with the Board of Directors concerning its status; the share capital held by the nominee does not exceed 3% of the registered share capital entered in the commercial register; and the names, addresses and number of shares of those individuals for whose accounts the nominee holds at least 0.5% of the share capital have been disclosed. The Board of Directors is also entitled, beyond these limits, to enter shares of nominees with voting rights in the share register if the above-mentioned conditions are not met (see also § 6a of the Articles of Association ). On December 31, 2023, nine nominees holding a total of 545’761 shares (1.59% of total shares) had entered into agreements concerning their status. No exceptions were granted. All of these shares were entered in the share register with voting rights. Other than these restrictions on nominee voting, there are no transfer restrictions and no privileges under the Articles of Association. A removal or amendment of the nominee voting restrictions requires a shareholders’ resolution with a majority of at least two-thirds of the votes represented. Convertible bonds and options No convertible bonds or warrants are currently outstanding. Details of the restricted share units (RSUs) issued to the members of the Board of Directors, as well as performance share units (PSUs) and RSUs issued to the members of the Executive Committee, are set out under note 31 to the consolidated financial statements and under note 11  to the financial statements of Sulzer Ltd. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 26 Board of Directors Members of the Board of Directors are elected individually for a term until the end of the next AGM. At the AGM of April 19, 2023, Matthias Bichsel and Hanne Birgitte Breinbjerg Sørensen did not stand for re-election. All other members were re-elected. Suzanne Thoma was elected as Chair of the Board of Directors. In addition, Prisca Havranek-Kosicek, Hariolf Kottmann and Per Utnegaard were elected as new members of the Board of Directors. The Board consists of seven members. Except for Suzanne Thoma, who was also appointed the company’s CEO as of November 1, 2022, and became the Executive Chair, none of the members of the Board of Directors has ever held an executive position at Sulzer. Apart from Executive Chair Suzanne Thoma, all members of the Board of Directors are non-executive. None of the non-executive members of the Board of Directors have ever belonged to the management of a Sulzer company or to the Executive Committee, nor do any significant business relationships exist between members of the Board of Directors and Sulzer Ltd or any subsidiary of Sulzer Ltd. Elections and terms of office The Articles of Association stipulate that the Board of Directors of Sulzer Ltd shall comprise five to nine members. Each member is elected individually. The term of office for members of the Board of Directors lasts until the next AGM. At the AGM of April 19, 2023, four Board members were re-elected to the Board of Directors. Matthias Bichsel and Hanne Birgitte Breinbjerg Sørensen did not stand for re-election. Prisca Havranek-Kosicek, Hariolf Kottmann and Per Utnegaard were elected as additional members of the Board of Directors. The Board consists of seven members: one from Cyprus/Israel, one from Norway, one from Austria, one from Germany, one from France/Switzerland and two from Switzerland. Professional expertise and international experience played a key role in the selection of the members. The members of the Board of Directors and their CVs can be viewed below. Details of the former members of the Board of Directors can be found in the Corporate Governance chapter of the company’s Annual Report 2022 . According to the Board of Directors and Organization Regulations, no Board member may serve for more than twelve consecutive terms of office. In exceptional circumstances, the Board can extend this limit. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 27 Internal organization The Board of Directors constitutes itself, except for the Chair of the Board of Directors who is elected by the Shareholders’ Meeting. The Board of Directors appoints from among its members the Vice- Chair of the Board of Directors, the Lead Independent Director and the members and the chairs of the board committees, except for the members of the Remuneration Committee, who are elected by the Shareholders’ Meeting. There are currently five standing board committees (for their constitution, see below): The Audit Committee (AC) The Governance Committee (GC) The Nomination Committee (NC) The Remuneration Committee (RC) The Strategy and Sustainability Committee (SSC) The Board of Directors and Organization Regulations and the relevant Committee Regulations, which are published under  corporate governance  (see "Regulations"), define the division of responsibilities between the Board of Directors and the Executive Committee. They also define the authorities and responsibilities of the Chair of the Board of Directors and of the five standing board committees. Executive Chair and Lead Independent Director The Board of Directors appointed its Chair, Suzanne Thoma, as Executive Chair of Sulzer as of November 1, 2022. In this role, she assumed operational management of the company and also took over the responsibilities of the CEO. Following the 2023 AGM, Markus Kammüller was appointed as Lead Independent Director. The Lead Independent Director ensures, on behalf of the Board of Directors, that the rules of good corporate governance are adhered to in the decision-making of the Board. In this context, the Lead Independent Director may call for and chair meetings of the non-executive Board members whenever required. He also acts as a point of contact for members of the Board to discuss matters regarding the company’s corporate governance that they would like to raise in the absence of the Executive Chair. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 28 CVs of members of the Board of Directors Dr. Suzanne Thoma Executive Chair Chair of the Strategy and Sustainability Committee Member of the Nomination Committee Educational background Ph.D. in Technical Sciences, ETH Zurich, Switzerland Master of Science in Chemical Engineering, ETH Zurich, Switzerland Bachelor of Business Administration, Graduate School of Business Administration (GSBA), Zurich, Switzerland Other activities and vested interests Non-executive member of the Board of Directors, Beckers Group, Germany Non-executive member of the Board of Directors, BayWa r.e., Germany Vice-Chair of the Board of Trustees, Avenir Suisse Foundation, Switzerland Member of the Executive Board, Swissmem Association, Switzerland Professional background Suzanne Thoma (Swiss) was elected as a member of Sulzer’s Board of Directors in 2021 and as Chair in 2022. In addition, she was appointed Executive Chair of Sulzer as of November 1, 2022. Before joining Sulzer, Suzanne Thoma served as CEO at the International Energy, Engineering and Service company BKW AG in Bern, Switzerland, from 2013 to 2022. Prior to her appointment as CEO of BKW, she was a member of the Group Executive Committee, responsible for the Networks division. Before that, she was Head of the Automotive division for the WICOR Group in Rapperswil-Jona, Switzerland, and CEO of Rolic Technologies Ltd., Allschwil, Switzerland. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 29 Earlier in her career, Suzanne Thoma held various management roles in a number of countries at Ciba Specialty Chemicals Ltd. (now BASF). Markus Kammüller Vice-Chair of the Board 1 Lead Independent Director 2 Chair of the Governance Committee 3 Member of the Remuneration Committee 4 Member of the Audit Committee Educational background Degree in Business Administration, University of Applied Sciences, Lucerne, Switzerland Professional background Markus Kammüller (Swiss) was elected as a member of Sulzer’s Board of Directors in 2022 and was appointed Lead Independent Director in 2023. Mr. Kammüller has more than 40 years of experience in various industries and professional services through which he developed a reputation as a strong leader for organizational and technological change across different cultures. He is the Founder and Owner of ExecDelta GmbH, a company specializing in transformation and change-management consulting. Prior to establishing his own business in 2019, he held the position of Global Head of Transformation at BDO International, Brussels (2016 to 2019). Before that, he was a Partner at PwC in the role of EMEA Chief Operating Officer and Global Change Management Leader (2006 to 2016). He also held various managerial positions at IBM Switzerland (2002 to 2006) and PwC Consulting (1996 to 2002), where he was a Partner and acted as Senior Advisor for large listed international corporations. From 1985 to 1996 he held various roles in finance, treasury and risk management at Dow Chemical. From 1978 to 1982 he worked in the credit department of Swiss Volksbank. 1), 2), 3), 4) Since April 19, 2023 David Metzger Member of the Board Member of the Audit Committee Member of the Strategy and Sustainability Committee  Educational background MBA, INSEAD, Fontainebleau, France Master of Finance (lic. oec. publ.), University of Zurich, Switzerland Other listed company mandates Non-executive member of the Board of Directors, Swiss Steel Holding AG, Switzerland Non-executive member of the Board of Directors, medmix AG, Switzerland Professional background David Metzger (Swiss/French) was elected as a member of Sulzer’s Board of Directors in 2021. He is an experienced investment professional serving a range of international companies in the areas of investment, M&A and portfolio strategy. David Metzger is currently with Liwet Holding AG. Previously, he was Investment Director at the renewable energy fund Good Energies AG (now Bregal Energy, part of COFRA Holding, 2007 to 2011), Senior Manager at Bain & Company (2000 to 2007) and has also worked at Novartis and Morgan Stanley. David Metzger was also a member of the Board of Directors of publicly listed OC Oerlikon from 2016 to 2021, from Italian tech company Octo Telematics SpA from 2014 to (early) 2023, and from Norwegian Solar Energy Company Norsun from 2008 to 2009. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 30 Alexey Moskov Member of the Board Member of the Remuneration Committee Educational background Master's degree in Software Engineering/Developing, Moscow State University of Railway Engineering, Russia Other listed company mandates Non-executive member of the Board of Directors, OC Oerlikon Corporation AG, Switzerland Professional background Alexey Moskov (Cypriot/Israeli) was elected as member of Sulzer’s Board of Directors in 2020. Since 2022, he is the President of the Board of Directors of Liwet Holding AG. Since 2018, Alexey Moskov has been the Executive Chairman of Witel Ltd, Switzerland. Since 2016 he has been a member of the Board of Directors of OC Oerlikon. From 2019 to 2020, Alexey Moskov was a member of the Board of Directors of SCHMOLZ+BICKENBACH AG (now Swiss Steel Holding AG). From 2004 to 2018, he was Chief Operating Officer of Witel AG, Switzerland. Previously, he served as Vice-President and member of the Executive Board at Tyumen Oil company (now TNK- BP), Russia, and as member of the Board of Directors of OAO NGK Slavneft, Russia (1998–2004). Dr. Prisca Havranek-Kosicek 1 Member of the Board Chair of the Audit Committee Member of the Nomination Committee Member of the Governance Committee Educational background Ph.D. in Business Administration, Vienna University of Economics and Business, Austria Master of Business Administration, Vienna University of Economics and Business, Austria Other listed company mandates CFO, Jenoptik AG, Germany Professional background Prisca Havranek-Kosicek (Austrian) was elected as a member of Sulzer’s Board of Directors in 2023. She has more than 20 years of experience in the finance sector, focusing on finance management in large international companies. She is the CFO of Jenoptik AG since April 2023. Until June 2023, she was a member of the Supervisory Board and member of the Audit Committee for Allianz-Elementar Versicherungs-AG, Austria. In 2021 she co-founded Arcadia eFuels, a start-up supporting decarbonization of the aviation industry. In 2019, she joined the industrial goods manufacturer Nilfisk A/S, which she left in 2021 after completing the restructuring. From 2018 to 2019, Prisca Havranek-Kosicek was CFO of Novozymes A/S in Denmark, a listed biotech company. There she was instrumental in repositioning the company's portfolio towards stronger, performance-driven growth. Between 2016 and 2018, Prisca Havranek-Kosicek served as CFO at Kuoni Group in Switzerland. From 2011 to 2016, she worked at the life science company Royal DSM as CFO for the pharma contract manufacturing division in the U.S., as well as the Group Treasurer. She held various positions in leading strategy consulting and M&A assignments, Investor Relations and Finance Planning before that. 1) Since April 19, 2023 Sulzer Annual Report 2023 – Corporate governance – Board of Directors 31 Dr. Hariolf Kottmann 1 Member of the Board Chair of the Remuneration Committee Member of the Strategy and Sustainability Committee Member of the Governance Committee Educational background Ph.D. in Chemistry, University of Stuttgart, Germany Other activities and vested interests Member of the Supervisory Board, Plansee Holding, Austria Professional background Hariolf Kottmann (German) was elected as a member of Sulzer’s Board of Directors in 2023, bringing broad leadership experience in the roles of CEO and Chairman. As CEO of Clariant International Ltd. (Clariant) from 2008 through 2018, he led the company through highly demanding restructuring phases. Following that, he served as Executive President and later as Chairman of the Board of Directors at Clariant from 2019 until 2021. Before joining Clariant, Hariolf Kottmann was a member of the Executive Committee at SGL Carbon AG (Wiesbaden, Germany) from 2001 to 2008. At SGL Carbon, he held responsibilities for Asia, Eastern Europe, Technology & Innovation, the Graphite Specialties as well as the Carbon Fibers and Composites Businesses. From 1997 to 2001, he ran various businesses as a member of the Executive Committee at Celanese Chemicals Ltd at Summit (NJ), Dallas (TX), USA and Singapore. After completing his Ph.D. in Chemistry at the University of Stuttgart, Hariolf Kottmann began his career at Hoechst AG, (Frankfurt, Germany) in 1985, where he held several positions of increasing seniority in R&D, technology and production, marketing, finance and corporate functions. 1) Since April 19, 2023 Per Utnegaard 1 Member of the Board Chair of the Nomination Committee Member of the Strategy and Sustainability Committee Educational background Bachelor of Science, Business Administration and Marketing, Northern Michigan University, Marquette, USA Other listed company mandates Non-executive member of the Board of Directors, Executive Committee and Risk Management Committee, Saudi Ground Services, Saudi Arabia Other activities and vested interests Non-executive Director, Alvest Holding, France Professional background Per Utnegaard (Norwegian) was elected as a member of Sulzer’s Board of Directors in 2023. He has over 30 years of experience in strategic management consulting and 20 years of experience as a board member of publicly listed companies. Per Utnegaard has held several international leadership positions in logistics and transportation. Since 2016 he has been focusing on board of director roles in companies such as Alvest (Paris) and Saudi Ground Services (Jeddah). From 2015 to 2016 he served as CEO and Chairman of the Executive Board for Bilfinger SE. He ran Swissport International as CEO and President from 2007 to 2015, where he gained in-depth services experience on a global scale. Before that (2002 to 2005), Per Utnegaard was in charge of the Wholesale division of the pharma and beauty group Alliance Boots Plc. Additionally, he is an acting senior advisor for several stock- listed private equity companies. 1) Since April 19, 2023 Sulzer Annual Report 2023 – Corporate governance – Board of Directors 32 Operating principles of the Board of Directors and its committees All decisions are made by the full Board of Directors. For each application, written documentation is distributed to the members of the Board of Directors prior to the meeting. The Board of Directors and the committees meet as often as required by the circumstances. The Board of Directors meets at least five times per year; the Audit Committee, the Remuneration Committee, the Nomination Committee, and the Strategy and Sustainability Committee meet at least twice per year and the Governance Committee meets at least once a year. In 2023, the Board held seven meetings, one additional meeting for the constitution of the Board after the AGM and one video/conference call lasting an average of three and a half hours. For further details, see the table below. The CFO and the Group General Counsel or the Secretary of the Board of Directors also generally attend the Board meetings in an advisory role. Other members of the Executive Committee are invited to attend Board meetings as required to discuss the midterm planning, the strategy and the budget, as well as division-specific items (such as large investments and acquisitions). In exceptional cases, external consultants (e.g., legal advisors, management consultants or executive compensation experts) are also invited for the presentation or discussion of specific agenda items in meetings of the Board of Directors or any of its committees. The committees do not make any decisions, but rather review and discuss the matters assigned to them and submit the required proposals to the full Board of Directors for a decision. At the next full Board meeting following the committee meeting, the chairs of the committees report to the full Board of Directors on all matters discussed, including key findings, opinions and recommendations. Board of Directors Name   Nationality   Position   Entry   Elected until   Board   AC   NC   SSC   RC   GC     Attending meetings of the   April 2021   2024   9   -   3   5 1 1)   - Suzanne Thoma   Switzerland Markus Kammüller   Switzerland Chair of the Board, Chair SSC, member NC Vice-Chair of the Board, Lead Independent Director, Chair GC, member RC, member AC   April 2022   2024   -   3   1 David Metzger Switzerland / France Member AC, member SSC   April 2021   2024 Alexey Moskov   Cyprus / Israel   Member RC   April 2020   2024 Prisca Havranek- Kosicek   Austria Per Utnegaard   Norway Hariolf Kottmann   Germany Chair AC, member NC, member GC Chair NC, member SSC Chair RC, member SSC, member GC   April 2023   2024   April 2023   2024   April 2023   2024   9   9   8   8   8   8   5   5   -   4   -   -   -   -   -   5   -   2   -   2   4   -   4   -   -   -   -   1   -   -   4   3   1 AC = Audit Committee; NC = Nomination Committee; SSC = Strategy and Sustainability Committee; RC = Remuneration Committee; GC = Governance Committee 1) Attendance of RC meeting in January 2023, when Suzanne Thoma was still a member of the RC prior to the AGM 2023.                                 Sulzer Annual Report 2023 – Corporate governance – Board of Directors 33 Additional mandates of members of the Board of Directors outside the Sulzer Group According to Sulzer’s Articles of Association , the maximum number of additional mandates held by members of the Board of Directors outside the Sulzer Group is ten (of which a maximum of four mandates may be with listed companies) (§ 33). Exceptions (e.g., for mandates held at the request of Sulzer or mandates in associations) are defined in the Articles of Association (§ 33, paragraphs a, b and c). All members of the Board of Directors are within the limits of external mandates prescribed by the company’s Articles of Association. Audit Committee The Audit Committee (members listed above) assesses the midyear and annual consolidated financial statements and activities of the internal and statutory auditor, including effectiveness and independence, as well as the cooperation between the two bodies. It also assesses the Internal Control System (ICS), risk management and compliance; at least one meeting per year is dedicated to risk management and compliance. The Audit Committee is also charged with discussing the report on non-financial matters, or any other similar report that the Board or the company's management chooses to establish. The CFO, the Group General Counsel, the Head of Group Internal Audit (who is also the Secretary of this committee) and the external auditor-in-charge attend the meetings of the Audit Committee. The Executive Chair may attend the meeting unless advised otherwise by the Head of Internal Audit. In 2023, the Audit Committee held five regular meetings: one in February, two in July, one in September and one in December. The meetings lasted, on average, two hours. The statutory auditor attended all of these meetings. Internal experts, such as the Group General Counsel and the Heads of Group Internal Audit, Group Corporate Finance, Group Accounting, Group IT, Group Compliance and Risk Management, and Group Tax, gave presentations to the Audit Committee in 2023. In February, the Audit Committee is informed of compliance exposures as a result of periodic risk assessments, and it receives an overview of compliance cases under investigation. In September, the Audit Committee is briefed on the present state of risk management within the company and on the results of the risk management process – a process to systematically identify and evaluate significant risks and introduce countermeasures. In the same meeting, an update on Sulzer’s compliance approach, including the respective ongoing – and planned – activities, is provided. The major current compliance cases (if any) are reported to and discussed by the Audit Committee regularly. The regulations of the Audit Committee can be viewed at www.sulzer.com/ac-regulations . Nomination Committee The Nomination Committee (members listed above) assesses the criteria for the election and re- election of Board members and the nomination of candidates for the top two management levels and deals with succession planning. The Executive Chair and the Chief Human Resources Officer attend the meetings of the Nomination Committee. In 2023, three regular meetings were held in January, July and September, lasting an average of one hour. The regulations of the Nomination Committee are available at  www.sulzer.com/nc-regulations . Sulzer Annual Report 2023 – Corporate governance – Board of Directors 34 Remuneration Committee The Remuneration Committee (members listed above) assesses the compensation systems and recommends compensation for the members of the Board of Directors and the Executive Committee (including bonus targets for the latter) on behalf of the Board of Directors and in accordance with its specifications. It carries out broad-based compensation benchmarks with an international comparison group, supported by studies of consulting firms such as Mercer and Willis Towers Watson, and it scrutinizes the work of internal and external consultants. The members of the Remuneration Committee are elected by the Shareholders’ Meeting. In 2023, four regular meetings were held in January, July, September and December, lasting an average of fifty-five minutes. The regulations of the Remuneration Committee can be viewed at  www.sulzer.com/rc-regulations . Strategy and Sustainability Committee The Strategy and Sustainability Committee (members listed above) advises the Board of Directors on strategic matters (such as material acquisitions, divestitures, alliances and joint ventures), strategic planning, definition of development priorities, and the company’s sustainability initiatives and objectives as well as on other relevant public policy matters. In 2023, four regular meetings and one extraordinary meeting took place in January, April, July, September and November, lasting an average of two hours. The regulations of the Strategy and Sustainability Committee can be viewed at www.sulzer.com/ssc-regulations . Governance Committee The Governance Committee (members listed above) advises the Board of Directors with respect to check and balances in the executive chair model, oversees the compliance with the Swiss Code of Best Practice for Corporate Governance as well as legal and regulatory requirements and periodically reviews the principles of corporate governance. In 2023, one meeting took place in December, lasting one hour. The regulations of the Governance Committee can be viewed at www.sulzer.com/gc- regulations . Division of powers between the Board of Directors and the Executive Committee The Board of Directors has largely delegated executive management powers to the Executive Committee. However, it is still responsible for matters that cannot be delegated in accordance with art. 716a CO. These matters include corporate strategy, the approval of midterm planning and the annual budget, as well as key personnel decisions and the preparation of the annual report and the compensation report. Pursuant to art. 964a et seqq. CO, the Board of Directors is also responsible for the report of non-financial matters. Furthermore, the Board of Directors remains responsible for acquisition and divestiture decisions involving a transaction value exceeding CHF 30 million; investments in fixed assets exceeding CHF 15 million; major corporate restructurings; approval of dispute settlements with an impact on operating income of more than CHF 20 million; approval of research and development projects exceeding CHF 10 million, as well as other matters relevant to the company; and decisions that must be made by the Board of Directors by law. The competency regulations and the nature of the collaboration between the Board of Directors and the Executive Committee can be viewed in the Board of Directors and Organization Regulations at www.sulzer.com/ BoD-organizational-regulations . Sulzer Annual Report 2023 – Corporate governance – Board of Directors 35 Information and control instruments Each member of the Board of Directors receives financial information in advance of the Board meetings, in addition to the midyear and annual financial statements. These updates include information about the balance sheet, the income and cash flow statements, and key figures for the company and its divisions. They incorporate comments on the respective business results and a rolling forecast for the current business year. The Executive Chair and the CFO report at every Board meeting on business developments and all matters relevant to the company; once each year, the Board receives the forecasted annual results. During these Board meetings, the Chairs of the committees also report on all matters discussed by their committees and on the key findings and assessments, and they submit proposals accordingly. Each year, the Board of Directors discusses and approves the budget for the following year and the midterm plan, which is also subject to periodic review. In addition, the Board of Directors receives a status update on investor relations on a regular basis. Group Internal Audit Group Internal Audit reports functionally directly to the Chair of the Audit Committee, but administratively to the CFO. Meetings between Group Internal Audit and the statutory auditor take place regularly. They are used to prepare for the meetings of the Audit Committee, to review the interim and final reports of the statutory auditor, and to plan and coordinate internal and external audits. Group companies are audited by Group Internal Audit based on an audit plan that is approved by the Audit Committee. Depending on the risk category, such audits are carried out on a rotational basis either annually or every second, third or fourth year. Group Internal Audit carried out 53 audit assignments (including audit follow-up reviews and internal controls testing) in the year under review. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 36 One of the focal points is the internal control system (ICS). The results of each audit are discussed in detail with the companies and (where necessary) the divisions concerned, and key measures are agreed upon. The Executive Chair, the members of the Audit Committee, the CFO, the Group General Counsel as well as the respective Division President and other line managers of the audited entity receive a copy of the audit report. Significant findings and recommendations are also presented to and discussed with the Executive Committee and the Group General Counsel. A follow-up process is in place for all Group internal audits, which allows efficient and effective monitoring of how the improvement measures are being implemented. Each year, the Head of Group Internal Audit compiles a report summarizing activities and results. This report is distributed to members of the Board of Directors and the members of the Executive Committee, and it is presented to the Executive Committee and the Audit Committee. It is discussed in both committees and, thereafter, reported to the Board of Directors. Risk management and compliance Sulzer has established and implemented a comprehensive, value- and risk-based compliance program that focuses on prevention, detection and response. It consists of the following main elements: Strong values and building up a strong ethical and compliance culture Sulzer puts a high priority on conducting its business with integrity, in compliance with all applicable laws and internal rules (“a clean deal or no dealˮ), and on accepting only reasonable risks. Sulzer follows a zero-tolerance compliance approach. The Board of Directors and the Executive Committee firmly believe that compliant and ethical behavior in all aspects and on all levels is a precondition for successful and sustainable business. The ethical tone is set at the top, carried through to the middle and transmitted throughout the entire organization. Sulzer also fosters a speak-up culture and encourages employees to address potentially non-compliant behaviors. Retaliation against whistleblowers acting in good faith is not tolerated. Risk assessment As part of Sulzer’s integrated risk management process, compliance risks are assessed regularly and mitigated with appropriate and risk-based actions. The results are discussed both with the management and with the Audit Committee. The Audit Committee dedicates at least one full meeting per year to risk management and compliance. An overview of the main risks and corresponding mitigation measures is provided in the chapter “ Risk management ” of this corporate governance report. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 37 Internal rules and tools Sulzer has a Code of Business Conduct, which can be viewed in 18 languages at www.sulzer.com/ governance (under “Code of Business Conductˮ). Every employee of the company (including employees of newly acquired businesses) has to confirm in writing that he or she has read and understood this code, and will comply with it. Every member of the Sulzer Management Group (approximately 80 managers), the heads of the operating companies, the headquarters, regional and local compliance officers as well as the legal entity finance heads must reconfirm this compliance commitment in writing annually.  Rules Although Sulzer follows a behavior- and principle-based approach, compliance directives and processes have been implemented as elements of the governance framework. Sulzer focuses on the major compliance risks. For example: Bribery and corruption risks: Sulzer has had a group-wide anti-bribery and anti-corruption program in place since 2010. This program includes a web-based process that addresses the due diligence of intermediaries, a company-wide directive for offering and receiving gifts and hospitalities, and an e-training module (in thirteen languages) to familiarize Sulzer employees with the requirements of the directive. Antitrust and anticompetition risks: Sulzer has an antitrust directive addressing behaviors in trade associations in place. Export control risks: Employees involved in export activities have to comply with all applicable export and re-export laws and regulations. Sulzer rolled out and implemented its global Trade Control Directive in all legal entities concerned. Every exporting legal entity has an internal control program (ICP) in place that includes processes and defines responsibilities on export control matters and other important requirements to comply with export compliance laws and regulations. Further risks (e.g., non-compliance with stock exchange laws and regulations; human resource- related issues; insufficient protection of intellectual property and know-how; violations of privacy and data protection laws; product liability; risk related to environment, quality, safety and health, etc.): Focused rules and processes address these and many other potential risks. Sulzer has processes that ensure compliance with insider laws as well as stock exchange reporting and notification duties. A total of 23 face-to-face sessions were  conducted by local Compliance Officers covering 1’865 employees; 13 compliance webinars were conducted by Group Compliance covering 2’864 employees; and 26 export control trainings have been provided. Tools Sulzer has a compliance hotline and an incident reporting system that provides employees with one of many options for reporting (potential) violations of laws or internal rules. Reports can be made anonymously or openly via a free hotline or a dedicated website. The company has a directive that sets clear rules for internal investigations. Further tools are available to all employees on Sulzer’s intranet (e.g., presentations addressing the major exposures, draft agreements, sales and procurement handbooks with compliance-specific explanations and standard clauses). Sulzer has a compliance risk assessment process in place to identify and assess potential compliance risks on a local entity level and to define appropriate measures. For newly acquired companies, Sulzer sets up a post-merger integration process consisting of a systematic post-merger compliance risk analysis, which provides the foundation for risk-based mitigation actions. Sulzer Annual Report 2023 – Corporate governance – Board of Directors 38 Organization Since 2013, Sulzer has had a Legal, Compliance and Risk Management Group function (headed by the Group General Counsel). Within this organization, a line reporting structure is in place for the three regions: Americas (AME); Europe, the Middle East and Africa (EMEA); and Asia-Pacific (APAC). The local Compliance Officers ultimately report – via Regional Compliance Officers and the Chief Compliance Officer – to the Group General Counsel. In addition, the headquartered Compliance and Risk Management team steers and runs the group-wide compliance program and all compliance investigations. To ensure the consistent rollout of Group Compliance initiatives, the compliance organization uses direct reporting lines. The Group General Counsel informs the Board of Directors and the Executive Committee regularly about legal matters and key changes in legislation that may affect Sulzer, as well as on important litigation. Twice a year, the Audit Committee receives a report about any pending or threatened litigation with worst-case exposure exceeding CHF 0.5 million. Further information on reports to the Audit Committee is provided in the “Audit Committeeˮ section above. Awareness building and trainings Sulzer puts substantial effort into training its employees. Training is carried out through e-learning programs (new programs are rolled out and existing programs are updated every year), in person or through web conferences. In 2023, Sulzer employees completed 17’932 compliance e-learning courses. Controls and sanctions The Group Function Legal supports the audits done by Group Internal Audit following the same audit process. The Group Function Environment, Safety and Health (ESH) organized five external health and safety compliance audits. The results of each of these audits were discussed directly with the responsible managers, and an agreement was reached on any improvements required. Audit actions are reported in a central repository (Group tool) that enables the follow-up and tracking of closures. Any significant issues identified during these audits are included in Group Internal Audit’s reporting package to the Audit Committee. Risks relating to environment, safety and health (ESH) form part of the annual ESH audit plan, which is reported to the Audit Committee once a year. Apart from these formal audits, internal investigations (triggered by reports from the compliance hotlines, e-mails, telephone calls or other avenues of communication) were carried out during 2023 and at least nine employees had to leave Sulzer because of violations of Sulzer’s Code of Business Conduct. Others received warnings or faced other disciplinary measures. However, most of the reports received concerned non-material issues. Continuous improvement It is Sulzer’s goal to constantly improve its compliance and risk management approach. Findings of audits and internal investigations are assessed, internal processes and rules are adjusted, and training modules are improved. Sulzer always reviews compliance violations to determine whether they are rooted in a process weakness. If that is found to be the case, the process will be improved and risk- mitigating measures will be taken. Sulzer Annual Report 2023 – Corporate governance – Executive Committee 39 Executive Committee The Executive Committee consists of the Executive Chair, the Chief Financial Officer (CFO), the Chief Human Resources Officer, the Division President Services, the Division President Flow Equipment and the Division President Chemtech. Effective January 1, 2023, Armand Sohet was succeeded by Haining Auperin as Chief Human Resources Officer. Also in January 2023, Torsten Wintergerste was succeeded by Uwe Boltersdorf as Division President Chemtech and Jan Lüder was appointed Division President Flow Equipment. The Board of Directors delegates executive management powers to the Executive Chair. The Executive Chair delegates the appropriate powers to the members of the Executive Committee (EC). The Division Presidents define and attain business targets for their respective divisions in accordance with group-wide goals. The Board of Directors and Organization Regulations govern, among other things, the transfer of responsibilities from the Board of Directors to the Executive Chair and the EC. There are no management contracts with third parties. None of the Executive Committee members has a contract with a notice period exceeding 12 months. The members of the Executive Committee and their CVs can be viewed below. As mentioned above, Armand Sohet (former Chief Human Resources Officer and Chief Sustainability Officer) and Torsten Wintergerste (former Division President Chemtech) stepped down as members of the Executive Committee as of January 1, 2023, and January 6, 2023, respectively. Details on the former members of the Executive Committee can be found in the Corporate Governance chapter of the company’s Annual Report 2022 .  CVs of Executive Committee members Dr. Suzanne Thoma Executive Chair Chair of the Strategy and Sustainability Committee  Member of the Nomination Committee Educational background Ph.D. in Technical Sciences, ETH Zurich, Switzerland Master of Science in Chemical Engineering, ETH Zurich, Switzerland Bachelor of Business Administration, Graduate School of Business Administration (GSBA), Zurich, Switzerland Other activities and vested interests Non-executive member of the Board of Directors, Beckers Group, Germany Non-executive member of the Board of Directors, BayWa r.e., Germany Vice-Chair of the Board of Trustees, Avenir Suisse Foundation, Switzerland Member of the Executive Board, Swissmem Association, Switzerland Professional background Suzanne Thoma (Swiss) was elected as a member of Sulzer’s Board of Directors in 2021 and as Chair in 2022. In addition, she was appointed Executive Chair of Sulzer as of November 1, 2022. Before joining Sulzer, Suzanne Thoma served as CEO at the International Energy, Engineering and Service company BKW AG in Bern, Switzerland, from 2013 to 2022. Prior to her appointment as CEO of BKW, she was a member of the Group Executive Committee, responsible for the Networks division. Before that, she was Head of the Automotive division for the WICOR Group in Rapperswil-Jona, Switzerland, and CEO of Rolic Technologies Ltd., Allschwil, Switzerland. Earlier in her career, Suzanne Thoma held various management roles in a number of countries at Ciba Specialty Chemicals Ltd. (now BASF). Sulzer Annual Report 2023 – Corporate governance – Executive Committee 40 Thomas Zickler Chief Financial Officer Educational background Studies in Economics (1988-1994), Johann Wolfgang Goethe-University, Faculty of Economic Science, Frankfurt on Main, Frankfurt, Germany Professional background Thomas Zickler (German/Swiss) was appointed Chief Financial Officer and member of the Executive Committee on May 1, 2022. He joined Sulzer as Head of Group Treasury in 2015 and most recently served as Head of Group Corporate Finance & Shared Services. Since 2016, Thomas Zickler has been a Member of the Board of Trustees for the company's pension plans, the Sulzer Vorsorgeeinrichtung (SVE) and Johann Jakob Sulzer-Stiftung (JJS). Before joining Sulzer, he worked as Country Treasurer for ABB Switzerland in Baden (2010-2015). From 2006 until 2009, he was Vice President and Head of the External Financial Reporting & Technical Accounting Policies department for ABB Group in Zurich. Prior to that, from 1996 until 2006, he held various positions within Finance (controlling, accounting, treasury, IT consulting) at DaimlerChrysler in Stuttgart and Berlin. Thomas Zickler began his career in 1995 within the controlling department at Sherwood Medical and Metallgesellschaft in Frankfurt on Main. During his studies, he worked for Siemens AG in the Central Finance Department and Siemens Capital Corporation, in Munich and New York City. He was also an analyst at Georg Hauck & Son Bankiers in the equity research department in Frankfurt on Main. Haining Auperin 1 Chief Human Resources Officer Educational background Master in Management and Company Policy, Human Resources, Social Development and Employment, Sciences-Po, Paris, France Master in Business Management, Capital University of Economics and Business, Beijing, China Professional background Haining Auperin (French) was appointed Chief Human Resources Officer and member of the Executive Committee on January 1, 2023. She joined Sulzer in 2016 as Division Head of HR for Flow Equipment and most recently served as Head of Group Human Resources Operations. Before joining Sulzer, Haining Auperin was the Senior Vice President Human Resources Boiler Business for GE Power from 2014 to 2016. Prior to that, she held various senior HR leader positions in different areas within GE, AREVA and Ansaldo. 1) Appointed on January 1, 2023 Sulzer Annual Report 2023 – Corporate governance – Executive Committee 41 Uwe Boltersdorf 1 Division President Chemtech Educational background Ph.D. in Chemical Engineering, Fraunhofer Institute UMSICHT, Oberhausen Germany Dip.- Ing. in Chemical Engineering, University of Dortmund, Dortmund, Germany Professional background Uwe Boltersdorf (German) was appointed Division President Chemtech and member of the Executive Committee on January 1, 2023. He had joined Sulzer in 2021 as Global Head of Technologies and Operational Excellence for Chemtech. From 2014 to 2021, Uwe Boltersdorf held various management roles at thyssenkrupp Industrial Solutions in the EPC, plant engineering and licensing business, including the Chief Sales Officer role for its chemical plant engineering business (former “Uhde”). Before thyssenkrupp, he served as Head of Group Function Corporate Development for the Lanxess Group (2009-2014), a specialized German chemicals company then active in chemicals, polyamides, rubbers, additives and custom manufacturing for pharma and agrochemicals. Uwe Boltersdorf gained his international experience by assignments at Lanxess and Bayer (2001 to 2014) in process engineering, production and site management as well as in strategy functions and M&A processes. 1) Appointed on January 1, 2023 Jan Lueder 1 Division President Flow Equipment Educational background Master's Degree in Electrical Engineering, Technical University of Berlin, Germany Professional background Jan Lueder (German) joined the Sulzer Executive Committee as Division President Flow Equipment on January 1, 2023. Before joining Sulzer, Jan served since 2019 as CEO of the Mining Technologies business unit for thyssenkrupp, which has been acquired by FLSmidth in August 2022. Prior to this assignment, he held the position of CEO of thyssenkrupp Industrial Solutions South East Asia in Singapore. In parallel, he held the position of CEO of thyssenkrupp South East Asia (since 2018). Previously, Jan worked for almost 20 years, from 1995 to 2015, for Siemens in the Power Plant and Industrial Solutions business in several long-term assignments in Asia, including Malaysia, from 1997 to 2000, and China, from 2011 to 2015, and within Europe (Finland from 2002 to 2004 and Austria from 2008 to 2011). 1) Appointed on January 1, 2023 Sulzer Annual Report 2023 – Corporate governance – Executive Committee 42 Tim Schulten Division President Services Educational background Master of Science in Mechanical Engineering, Swiss Federal Institute of Technology (ETH), Zurich, Switzerland Master of Business Administration, Harvard Business School, Boston, USA Other activities and vested interests Non-executive Director, JCB Group Holdings Sàrl, Switzerland Professional background Tim Schulten (Swiss) joined the Sulzer Executive Committee as Division President Services in 2022. Prior to that he was the Group Head for Marketing, Strategy and Digital. Before joining Sulzer, Tim Schulten was the General Manager and responsible for global Product Support & Marketing for Caterpillar’s Electric Power Business. From 2012 to 2015 he was General Manager for Sales & Distribution for Caterpillar’s global gas engine business, responsible for building and leading the organization during the post-acquisition integration of MWM. From 2007 to 2012, he was a Division Manager responsible for Caterpillar’s Electric Power Retail business in Europe, Africa and the Middle East. Prior to that he held various positions in sales, marketing and product support with Caterpillar and he spent several years in California working in technology start-ups.  Additional mandates of members of the Executive Committee outside the Sulzer Group No member of the Executive Committee may hold more than five mandates, of which no more than one may be in listed companies ( Articles of Association , § 33). Exceptions (e.g., for mandates held at the request of Sulzer or mandates in associations) are defined in the Articles of Association (§ 33, paragraphs a, b and c). All members of the Executive Committee are within the limits for external mandates prescribed by the company’s Articles of Association. Sulzer Annual Report 2023 – Corporate governance – Shareholder participation rights 43 Shareholder participation rights Restrictions and representation of voting rights Only nominees are subject to restrictions (see “ Capital structure ” section of this corporate governance report). No exceptions were granted during the reporting year, and no measures to remove these restrictions are planned. According to the Articles of Association, a shareholder may be represented at a Shareholders’ Meeting by a legal representative, through a written power of attorney to any other proxy, who does not need to be a shareholder or the independent proxy. Shares held by a shareholder may be represented by only one person. Statutory quorum Changes to the Articles of Association may only be approved by a majority of at least two-thirds of the voting rights represented at the Shareholders’ Meeting, other than ordinary share capital increases (against payment in cash and without the exclusion of shareholders’ preemptive rights), which are decided by a majority of the votes represented. The dissolution or a merger of the company can only be decided upon if at least half the shares issued are represented at the Shareholders’ Meeting and two-thirds thereof vote in favor of the corresponding proposal (see also § 16 of the Articles of Association ). Convocation of the Shareholders’ Meeting and submission of agenda items The applicable regulations regarding requests for the convocation of an extraordinary Shareholders’ Meeting are in line with the applicable law regarding the convocation of a Shareholders’ Meeting. Shareholders representing at least 0.5% of the share capital may submit items for inclusion on the agenda of a Shareholders’ Meeting. Such submissions must be requested in writing at least two months prior to the meeting and must specify the agenda items and proposals of the shareholder concerned (see also § 12 of the Articles of Association ). Entry in the share register Voting rights may be exercised by shareholders who are registered in the share register on the record date stated in the invitation to the respective Shareholders’ Meeting. Independent proxy At the AGM of April 19, 2023, Proxy Voting Services GmbH was elected as the independent proxy for a term of office extending until completion of the next AGM. The Articles of Association do not contain rules on the granting of instructions to the independent proxy and the electronic participation in the Shareholders’ Meeting which deviate from the default Swiss law. Sulzer Annual Report 2023 – Corporate governance – Takeover and defense measures 44 Takeover and defense measures The Articles of Association contain no opting-out or opting-up clauses. If there is a change of control, all restricted share units (RSUs) allocated to Board members are automatically vested. Also, the performance share units (PSUs) allocated to members of the Executive Committee are converted into shares on a pro rata basis and based on actual achievement of the performance targets, without being subject to blocking restrictions. A change of control includes an acquisition of or a public takeover offer in relation to more than 33.33% (RSUs) or 50% or more (PSUs) of the voting rights. Sulzer Annual Report 2023 – Corporate governance – Auditors 45 Auditors The statutory auditor is elected at the AGM for a one-year term of office. KPMG AG has been acting as the statutory auditor since 2013. As of the financial year 2020, the acting external auditor-in-charge is Rolf Hauenstein. The external auditor-in-charge is replaced every seven years. The Audit Committee is in charge of supervising and monitoring the statutory auditor, and it reports to the Board of Directors (see “Audit Committeeˮ section in the chapter “ Board of Directors ” of this corporate governance report). The members of the Audit Committee receive summaries of audit findings and improvement proposals at least once a year. The external auditor-in-charge and his deputy were invited to attend meetings of the Audit Committee. In 2023, the statutory auditor was present at all five Audit Committee meetings. The Audit Committee or its Chair meets separately with the Head of Group Internal Audit and the statutory auditor at least once a year to assess (among other things) the independence of the internal and statutory auditors. The Audit Committee evaluates the work done by the statutory auditor based on the documents, reports and presentations provided by the statutory auditor, as well as on the materiality and objectivity of their statements. To do so, the Audit Committee gathers the opinion of the CFO. The Audit Committee reviews the fee paid to the auditor regularly and compares it with the auditing fees paid by other internationally active Swiss industrial companies. Said fee is negotiated by the CFO and approved by the Board of Directors. Further information on the auditor, in particular the auditor’s fees and any additional fees received by the auditor for advisory services outside its statutory audit mandate, is listed under note 33 to the consolidated financial statements. All advisory services provided outside the statutory audit mandate (essentially, consulting services related to audit and accounting as well as legal and tax advisory services) are compliant with the applicable independence rules. Sulzer Annual Report 2023 – Corporate governance – Risk management 46 Risk management At Sulzer, risks are assessed regularly as part of the company’s integrated risk management process. The results are discussed with the management and the Audit Committee. Risk   Risk exposure   Main loss controls External and markets Market assessment Market developments that are assessed inappropriately could lead to missed business opportunities or losses. Geopolitical shocks A geopolitical shock event could have an impact on operations and travel. Also, it could imply currency risks and default risks of countries and banks. 48.82% of Sulzer’s shares are beneficially owned by Viktor F. Vekselberg, who is listed as a Specially Designated National by the US Office of Foreign Assets Control and subject to sanctions in other jurisdictions including the Ukraine, Japan, the UK, Australia, New Zealand, Canada and Poland. These sanctions and possible future sanctions in further countries could result in negative media coverage, damage to Sulzer’s reputation and impair existing business relationships with customers, suppliers, banks or other business partners as well as Sulzer’s ability to win future business. Failure in R&D and innovation activities could negatively impact the ability to operate and to grow the business. Insufficient investments in innovation to maintain technology leadership and develop innovative products. Strategic Innovation Environment, Social and Governance (ESG) ESG-related regulations could change. Stakeholder expectations related to ESG commitments could change. Not meeting regulatory requirements could result in fines, limit access to financing, impact banking channels and result in loss of business and reputational damages Operational Attraction and retention Failure to attract, retain and develop people could lead to a lack of critical skills and knowledge, which hinders both daily operations and growth potential. Health and safety An unsafe working environment could lead to harm to people, reputational damage, fines as well as liability claims and could have a serious economic impact. Environmental Environmental damage could lead to harm to people and nature, reputational damage, fines as well as liability claims and could have a serious economic impact. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Continuous monitoring and assessment of market developments Systematic midrange planning based on market developments and expectations Monitoring of exposure in critical countries Monitoring of debt situation of countries and banks Continuous monitoring of raw material prices and inflation indicators Sulzer’s global presence mitigates the effect of geopolitical shocks Continuous monitoring of international sanctions environment and seeking of advice by reputable sanctions law firms Maintaining and enhancing a robust sanctions compliance program A phased process, technical risk manageability assessments and key performance indicators to ensure quality of the development Product development council with strong focus on strategic plans and digitalization Prototypes and own test beds to test and validate products before market release Core technology council for research of basic technology Focus on innovation with strategic customers Innovation and ideation projects Implementation of an expert development program for key critical resources Board Strategy and Sustainability Committee extended to cover ESG and sustainability Setting of clear ESG-related objectives and progress tracking ESG initiatives driven by EC including different group and business functions covering regulatory requirements and supply chain due diligence ESG assessments in business projects Ensuring that Sulzer’s people and performance efforts are anchored to the company’s values and behaviors Ongoing feedback through employee opinion survey “Voice of Sulzer” Robust internal communications strategy Ongoing engagement in workshops and collaborative activities Visibility and access to creating development experiences and opportunities Consistent approach to salary grading and benchmarking Health and safety directives, guidelines, programs (e.g. Safe Behavior Program) and training OHSAS 18001 and ISO 45001 certifications Monthly health and safety controlling and regular audits, systematic risk assessments Global network of health and safety officers Mitigation in comprehensive environmental due diligence (EDD) projects for acquisitions and divestitures Elimination of environmentally damaging substances through Prohibited Substances List Sulzer sustainability strategy that defines key targets in view of climate change                                                           Sulzer Annual Report 2023 – Corporate governance – Risk management 47 Compliance Non-compliant or unethical behavior could lead to reputational damage, fines and liability claims. Quality of products and services Failure of high-quality products and services could lead to repeated work, reputational damage or liability claims. Business interruptions Financial Financial markets Credit Liquidity Business interruption, such as a fire, could cause damage to people, property and equipment. It could have a negative effect on the ability to operate at the affected site. Security incidents could impact the IT infrastructure or systems, which could result in a business interruption. Business interruption caused by pandemic-related lockdowns or bottlenecks in logistics centers, lack of transport capacities, lack of raw materials or electronic parts or increased demand could have an impact on operations and supply chains and thus could lead to serious economic impact. The unpredictability of financial markets may have a negative effect on Sulzer’s financial performance and its ability to raise or access capital. Credit risks arising from financial institutions and from customers could have a negative effect on Sulzer’s financial performance and ability to operate. Failure in liquidity risk management may have a negative effect on Sulzer’s financial performance and its ability to operate. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Active fostering of high ethical standards by tone from the top and middle management Continuous monitoring and assessment of potential exposures Continuous monitoring of regulatory environment Sulzer Code of Business Conduct and a number of supporting regulations (e.g. anticorruption, antitrust, trade control) Third-party due diligence process Global and centrally led organization of compliance and trade compliance officers Compliance training (incl. e-learning) and audits Sensitive country list with escalation process and project- specific compliance assessments in high-risk countries Speak-up culture, compliance hotline and sanction checks Quality management and assurance systems tailored to specific businesses Third-party accreditation Competence development programs and training of employees Test centers Crisis and emergency management systems (at global and local level) including close monitoring of incidents which could impact supply chains Risk management policy and guidelines Global manufacturing footprint and global procurement IT security standards, measures and incident response team Disaster recovery plans in IT Enhancement of IT infrastructure to cope with higher data volumes during extended remote work Group financial policy Foreign exchange risk policy Trading loss limits for financial instruments For financial institutions, only parties with a strong credit quality are accepted (third-party rated) Individual risk assessment of customers with large order volumes Continuous monitoring of country risks Continuous liquidity monitoring Management of liquidity reserves at group level Cash flow program to optimize liquidity and cash flow management Efficient use of available cash through cash pooling                                 Sulzer Annual Report 2023 – Corporate governance – Information policy 48 Information policy Sulzer Ltd reports on its order intake every quarter (media releases) and on its financial results every half-year. In each case, it also comments on the business performance and outlook. In addition, the company reports on important events on an ongoing basis (ad hoc publications). The reporting referred to in the compensation report (including the respective references to the financial reporting section) complies with the recommendations on the content of the compensation report as laid out in section 42 of the Swiss Code of Best Practice for Corporate Governance. The official means of publication of the company is the Swiss Official Journal of Commerce. In accordance with § 38 of the Articles of Association , the Board of Directors is at any time authorized to designate further publication organs. Notices by the company to the shareholders may, at the election of the Board of Directors, be validly published in the Swiss Official Journal of Commerce or in a form that can be evidenced by text. The address of the company’s main registered office is Neuwiesenstrasse 15, 8401 Winterthur. Key dates in 2024 February 22: Annual results 2023 April 15: Order intake Q1 2024 April 16: AGM 2024 July 25: Midyear results 2024 October 15: Order intake nine months 2024 These dates and any changes can be viewed at www.sulzer.com/events . Media releases (sent via email) can be subscribed to at www.sulzer.com/subscribe . Other information is available on the Sulzer website www.sulzer.com , or by contacting Investor Relations: https://www.sulzer.com/en/about-us/ investors  – Thomas Zickler, Chief Financial Officer, +41 52 262 33 15. Sulzer Annual Report 2023 – Corporate governance – Information policy 49 General blackout periods Generally, and regardless of whether any inside information exists or not, pursuant to Sulzer Ltd’s Securities Trading Regulation, the trading in Sulzer Ltd securities is prohibited for (a) the members of the Board of Directors and the Executive Committee, (b) any staff reporting to any member of the Executive Committee that have access to inside information, (c) members of Group Finance, Group Mergers and Acquisitions, Group Legal, Corporate Communications and Investor Relations and any relevant staff with access to inside information, including members of the Sulzer Management Group, and (d) any external advisors having access to inside information in connection with Sulzer Ltd’s financial reporting or the preparation of an offering memorandum during the following periods: (i) the periods starting on January 1 and July 1 until and including the trading day of the public releases of the respective full-year or half-year reports (if published prior to 7:30 a.m.) or the following trading day (if published between 5:40 p.m. and midnight) and (ii) the periods starting on April 1 and October 1 until and including the trading day of the public releases of the respective quarterly results (if published prior to 7:30 a.m.) or the following trading day (if published between 5:40 p.m. and midnight). Under certain circumstances (in particular in case of personal hardship), the company may allow exceptions to a blackout period upon reasoned request by an employee or concerned Board member, provided that such employee is not in possession of any inside information. Such exceptions must be issued in writing with a copy to the employee’s or Board member’s file. No such exceptions were granted in 2023. Compensation report 51 Letter to the shareholders 53 Compensation governance and principles 57 Compensation architecture for the CEO and Executive Committee members 68 Compensation of the Executive Committee for 2023 73 Compensation architecture for the Board of Directors 75 Compensation of the Board of Directors for 2023 78 Auditor’s report Sulzer Annual Report 2023 – Compensation report – Letter to the shareholders 51 Paying for sustainable performance Winterthur, February 22, 2024 Dear Shareholder, On behalf of the Board of Directors and of the Remuneration Committee (RC), I am pleased to present the 2023 Compensation Report.  2023 has been a successful year for Sulzer. Against the backdrop of a challenging global economic and political development, Sulzer has met and exceeded its ambitious financial objectives. In July 2023, Sulzer even significantly increased its guidance to the financial markets. Also, these even more ambitious targets were met in the upper range of the target bands. In 2023, Sulzer conducted an in- depth analysis of markets, economic and technology trends. Sulzer mapped these trends with its portfolio of products, services, and competencies. As a result, Sulzer has decided to adjust its strategy for the entire Group. This evolved strategy is comprised of two main pillars: Organic growth in current and adjacent markets with a focused portfolio of products and services Operational excellence across the entire Sulzer value chain Our Executive Committee has come together in the current set-up relatively recently and mainly through internal promotions. The total compensation for 2023 was entirely within the maximum compensation approved by the AGM 2022. Given our excellent performance in 2023, coupled with our ambition for Growth and Excellence through our “Sulzer 2028” strategy, we must ensure that our Executive Committee is compensated in a way that both rewards and stimulates growth and value creation for our shareholders. This entails reflecting on growing roles and responsibilities as well as evolving market trends, consistent with company performance. The AGM 2023 elected three new members to the Board of Directors and increased the total number of members on the Board of Directors to seven. The Board of Directors work focused on accompanying and guiding the strategy work as well as assuring the correct oversight and governance. Sulzer established a Governance Committee chaired by Markus Kammüller, who also serves as Lead Independent Director (LID). The Remuneration Committee is chaired by myself. The compensation paid to the Board of Directors in 2023 was well below the amounts previously approved by the AGM for the period in question. Going forward, the Board of Directors compensation should also stay aligned with the ambitious long-term growth and value creation for shareholders. Sulzer Annual Report 2023 – Compensation report – Letter to the shareholders 52 Following an excellent 2023 and based on a clear and compelling strategy that points Sulzer toward a prosperous future, I thank you on behalf of Sulzer, the Board of Directors and the Remuneration Committee for your continued trust in our company. Sincerely, Dr. Hariolf Kottmann Chairman Remuneration Committee Sulzer Annual Report 2023 – Compensation report – Compensation governance and principles 53 Compensation governance and principles Compensation policies and plans at Sulzer reward performance, sustainable growth and long-term shareholder value creation. The compensation programs are competitive, internally equitable, straightforward and transparent. The compensation report is prepared in accordance with the Articles 732 et seqq. of the Swiss Code of Obligations (CO), the SIX Swiss Exchange Directive on Information relating to Corporate Governance (RLCG) and the principles of the Swiss Code of Best Practice for Corporate Governance. Remuneration Committee The Articles of Association , the Board of Directors and Organization Regulations , and the Remuneration Committee Regulations define the functions of the Remuneration Committee (RC). The RC supports the Board of Directors in establishing and reviewing the compensation strategy and principles, and in preparing the proposals for the Shareholders’ Meeting regarding the compensation of the members of the Board of Directors and of the Executive Committee.  The RC is responsible for the following activities and submits all proposals concerning these activities to the Board of Directors, which has the final decision‑making authority: Periodic assessment of the compensation policy and programs Determination of performance targets for the CEO and the other Executive Committee positions for the purpose of the incentive plans Preparation of the proposals for the Shareholders’ Meeting on the maximum aggregate amounts of compensation for the Board of Directors and for the Executive Committee Determination of the target compensation for the CEO and for the other Executive Committee positions Preparation of the compensation report The table below describes the levels of authority: Compensation policy and programs   proposes   approves   CEO   RC   Board Aggregate maximum compensation amounts for the Executive Committee and for the Board of Directors to be submitted to vote at the AGM Remuneration system and Board member fees Compensation of the CEO Individual compensation of the other members of the Executive Committee   proposes Performance objectives and assessment of the CEO   proposes   reviews   proposes   approves   reviews   approves   reviews   reviews   approves   approves Shareholders’ Meeting approves (binding vote) Performance objectives and assessment of the other members of the Executive Committee   proposes   reviews   approves Compensation report   proposes   approves consultative (advisory vote)                                                         Sulzer Annual Report 2023 – Compensation report – Compensation governance and principles 54 As per the Remuneration Committee Regulations of Sulzer Ltd, the RC consists of at least three members who are elected individually and annually by the Shareholders’ Meeting for the period of office until the following ordinary AGM. The majority of its members are non-executive and independent. At the AGM 2023, Alexey Moskov was re-elected as a member of the RC and Markus Kammüller was elected as a member for the first time. The new Chair of the RC is Dr. Hariolf Kottmann, who was also elected for the first time at the AGM 2023. Hanne Birgitte Breinbjerg Sørensen (former Chairwoman) and Suzanne Thoma (former member) did not stand for re-election. In addition to Markus Kammüller being appointed as Lead Independent Director, there were several other new Board appointments at the AGM held on April 19, 2023. Dr. Prisca Havranek-Kosicek was elected as a member of Sulzer’s Board of Directors, serving as the Chair of the Audit Committee. Per Utnegaard was elected as a member of Sulzer’s Board of Directors and serves as the Chair of the Nomination Committee. In 2023, Haining Auperin was appointed Chief Human Resources Officer and member of the Executive Committee, Jan Lüder joined as Division President Flow Equipment and Uwe Boltersdorf as Division President Chemtech. The RC meets as often as the business requires, but at least twice a year. In 2023, the RC held four regular meetings that were attended by all members. This year’s agenda topics included a review of the Executive Committee’s compensation system, a review of the short-term incentive (STI) and performance share plan (PSP) performance targets and payouts, an analysis of the benchmark used for the Executive Committee and a continuation of the gender pay transparency study. The CEO, the Chief Human Resources Officer and the Secretary of the Board of Directors, who also acts as the Secretary of the RC, generally attend the meetings. The Chair of the Committee may invite other executives to join the meeting in an advisory capacity, when appropriate. That said, neither the CEO nor any other executive participates in the meetings, or parts thereof, when their own remuneration and/or performance is discussed. The Chair of the RC reports to the next meeting of the full Board of Directors on the activities of the RC and the matters discussed. The Chair, as far as necessary, submits the respective proposals for approval by the Board of Directors. The minutes of the RC meetings are available to all members of the Board of Directors. The RC engaged third party advisor HCM International for the analysis of the benchmarks used for the Executive Committee and retained hkp///group for advisory services on the compensation report. Sulzer Annual Report 2023 – Compensation report – Compensation governance and principles 55 Shareholders’ role and engagement The company is keen to receive shareholders’ feedback on the compensation policy and programs, and it already began the practice of holding an advisory vote on the compensation report in 2011. Additionally, the company regularly meets with shareholders and shareholder representatives to understand their perspectives. At the AGM 2023, along with changes to the governance structure, shareholders approved the maximum aggregate compensation amounts for the Board of Directors for the 2023/24 term and for the Executive Committee for the 2024 financial year. Furthermore, the Articles of Association , which are also subject to shareholders’ approval, govern the principles of compensation. Minor changes were made to the Articles of Association at the AGM 2023, as on June 19, 2020, the Swiss Parliament adopted a revision of the corporate law, which entered into force on January 1, 2023 (subject to certain transitional provisions). Swiss corporations are obliged to revise their corporate documents to comply with the new law by the end of 2024. Thus, Articles 30 and 32 of the Articles of Association were slightly amended: Article 30 does not foresee an authorization anymore to increase already approved compensation (supplemental amount) for internal promotions within the Executive Committee. Article 32 now caps the maximum non-compete compensation in connection with post- contractual non-compete agreements with members of the Executive Committee (max. average total annual compensation over the last three financial years). The Articles of Association in the current version include the following provisions related to compensation: Principles of compensation (Article 31): Non-executive members of the Board of Directors receive fixed compensation only. Members of the Executive Committee receive fixed and variable compensation elements. The variable compensation may include short-term and long- term variable compensation components. These are governed by performance metrics that take into account the performance of the Sulzer group (Group) or parts of it targets in relation to the market, other companies or comparable benchmarks and/or individual targets, as well as strategic and/or financial objectives. Compensation may be paid in the form of cash, shares, options, financial instruments or similar units, in kind, in services or in other types of benefits. Shareholders’ binding vote on compensation (Article 29): the Shareholders’ Meeting shall approve the maximum aggregate amount of compensation for the Board of Directors for the next term of office and the maximum aggregate amount of compensation for the Executive Committee for the following financial year. The Board of Directors shall submit the annual compensation report to an advisory vote at the AGM. Additional amount for members of the Executive Committee hired after the vote on compensation by the Shareholders’ Meeting (Article 30): if the maximum aggregate amount of compensation as approved by the Shareholders’ Meeting is insufficient, up to 40% of the maximum aggregate amount of compensation approved for the Executive Committee shall be available, without further approval, for the compensation of the members of the Executive Committee who were appointed after the AGM. Agreements with members of the Board of Directors and the Executive Committee (Article 32): Employment agreements for a fixed term may have a maximum duration of one year. Renewal is possible. Employment agreements for an indefinite term may have a termination notice period not exceeding twelve months. Non-compete agreements for the time after termination of an employment agreement are permissible and shall not exceed one year. Their consideration shall Sulzer Annual Report 2023 – Compensation report – Compensation governance and principles 56 not exceed the last total annual target compensation such member was entitled to prior to termination and shall in no event exceed the average of the compensation of the last three financial years. Loans, credit facilities and post-employment benefits for members of the Board of Directors and of the Executive Committee (Article 34): the company may not grant loans or credits to members of the Board of Directors or the Executive Committee. Activities in other organizations Based on Article 734e of the Swiss Code of Obligations, the compensation report must specify the functions of the members of the Board of Directors and the Executive Committee in other enterprises with an economic purpose within the meaning of Article 626 para. 2 no. 1 of the Swiss Code of Obligations (external mandates). For this, the following table includes the name of the entity and the function exercised. Member   Name of company   Function Dr. Suzanne Thoma   Beckers Group, Germany   Non-executive member of the Board of Directors   BayWa r.e., Germany   Non-executive member of the Board of Directors Markus Kammüller   ExecDelta GmbH, Switzerland   Sole Partner   Gonset Holding SA, Switzerland   Vice-Chair of the Board of Directors   Gonset Immeubles d’Entreprises SA,   Vice-Chair of the Board of Directors Switzerland David Metzger   Swiss Steel Holding AG, Switzerland   Non-executive member of the Board of Directors   medmix AG, Switzerland   Non-executive member of the Board of Directors   Mealda Capital GmbH, Switzerland   Sole Partner   Sopeli Capital GmbH, Switzerland   Sole Partner Alexey Moskov   OC Oerlikon Corporation AG, Switzerland   Non-executive member of the Board of Directors   Witel AG, Switzerland   Executive Chairman   Liwet Holding AG, Switzerland   President of the Board of Directors   A2-Link AG, Switzerland   Sole Board Member Dr. Prisca Havranek-Kosicek   Jenoptik AG, Germany   Chief Financial Officer   Jenoptik North America Inc., United States   Director of America Dr. Hariolf Kottmann   Plansee Holding, Austria   Member of the Supervisory Board Per Utnegaard   Saudi Ground Services, Saudi Arabia   Non-executive member of the Board of   HK1 AG, Switzerland   Sole member of the Board of Directors Directors   Alvest Holding, France   Non-executive Director   Per Utneegard & Partners GmbH,   Sole Partner Switzerland Tim Schulten   JCB Group Holdings Sàrl, Switzerland   Director In each individual case, the number of mandates does not exceed the maximum number of external mandates specified in Article 33 of the Articles of Association.   Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 57 Compensation architecture for the CEO and members of the Executive Committee Compensation principles The compensation of the Executive Committee is driven by the main principle of pay‑for‑performance. The compensation policy and programs are designed to reward performance, sustainable growth and long-term shareholder value creation, while offering fair and competitive compensation to be able to attract and retain highly qualified employees. The compensation principles are: Risk   Risk exposure Pay-for-performance A substantial portion of the compensation is delivered in the form of variable incentives based on company and individual performance. Strategy alignment   The performance criteria are selected to create adequate incentives for achieving the operational and strategic objectives. Ownership Part of the compensation is delivered in the form of company equity to foster ownership and to align the interests of executives with those of shareholders. Market competitiveness   Compensation levels are competitive and in line with market practice to attract and retain highly qualified employees. Internal equity   The internal compensation structure is based on a job-grading methodology applied globally. Transparency   Compensation programs are straightforward and transparently explained in the compensation report. Method of determining compensation: benchmarking To ensure compensation levels that are competitive and in line with market practice, the compensation of the members of the Board of Directors and of the Executive Committee is benchmarked against that of similar roles in comparable companies every one to two years. The RC regularly reviews the composition of the peer group, which is applied for benchmarking purposes. In 2021, the RC decided to revise the composition of the peer group from 2022 onward. Twelve industrial companies of comparable size and complexity from the Swiss market form the peer group, which is used to derive the compensation levels for the Board of Directors and for the Executive Committee. The revised benchmarking peer group maintained its comparability requirements and was utilized again in 2023.     Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 58 Compensation benchmark The comparison group reflects Sulzer’s ambitious business strategy: ALSO Bucher Industries Clariant dormakaba Forbo Galenica Geberit Georg Fischer Landis + Gyr OC Oerlikon Schindler Sonova The intention is to pay target compensation around the median of the relevant market. Nevertheless, compensation is not granted based on benchmark results alone. The role, responsibility, experience and, in particular, the difference between a new entrant to a role and someone with experience who has already demonstrated his or her impact in a similar role, are also criteria in determining compensation. A globally applied job-grading methodology fosters internal equity. The compensation of the Executive Committee is governed by internal regulations such as the bonus plan, the performance share plan and the benefits plans. The compensation of the Executive Committee is reviewed by the RC annually and, if necessary, is adjusted and approved by decision of the Board of Directors based on a proposal of the RC. The compensation of the Executive Committee is summarized as follows: Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 59 Compensation elements for the members of the Executive Committee   Base salary   Benefits Short-term incentive plan (bonus plan) Long-term incentive plan (PSP 2023) Share ownership guidelines (SOG) Main parameters Function, level of role, profile of incumbent (skill set, experience) Pension and social security contributions, fringe benefits Achievement of annual financial and individual objectives Key drivers Labor market, internal job-grading Protection against risks, labor market, internal job-grading Operational profit, sales, operational operating net cash flow (operational ONCF) Link to compensation principles Competitive compensation Competitive compensation Pay-for-performance, strategy alignment Vehicle   Cash Pension and insurance plans, perquisites   Cash Variable, capped at 200% of target bonus. Target bonus amounts to 90% of annual base salary for the CEO and 60% of annual base salary for the other members of the Executive Committee. Malus and clawback provisions implemented. Amount   Fixed   Fixed Grant/vesting/payment date   Monthly   Monthly and/or annually   March of the following year Achievement of long- term, company-wide objectives, share price performance Operational profit growth, operational return on average capital employed adjusted (operational ROCEA), relative total shareholder return (TSR) Pay-for-performance, strategy alignment, ownership Performance share units (PSUs) settled in shares Variable. Grant value is defined based on the Global Grade and corresponds to CHF 1’000’000 for the CEO and between CHF 330’000 and CHF 400’000 for the other members of the Executive Committee (EC). Vesting payout percentage is capped at 250% and vesting value is capped at CHF 2’500’000 for the CEO and at CHF 825’000 to CHF 1’000’000 for the other members of the EC. Malus and clawback provisions implemented. Grant: April 1, 2023 Vesting: December 31, 2025 Share delivery: March 2026 Performance period   –   – 1 year (January 1, 2023–December 31, 2023) 3 years (January 1, 2023–December 31, 2025)   Level of role Share price performance   Ownership Obligation to privately invest in Sulzer shares and to hold these shares until the end of the service period CEO: 200% of base salary. Other members of the Executive Committee: 100% of base salary.   –   – The compensation of the Executive Committee contains fixed, performance-independent elements to provide a secure income and to ensure that no unreasonable risks are taken. In order to create reasonable incentives for the Executive Committee, to align the interests of the Executive Committee and shareholders, to ensure pay-for-performance and implement the company’s strategy in the Executive Committee’s compensation, it also contains short‑ and long‑term performance‑dependent elements:                                                      Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 60 In line with the pay-for-performance principle, a significant portion of the compensation of the CEO (64%) and the other members of the Executive Committee (55%) consists of variable incentives based on performance. Furthermore, the compensation structure ensures sustainable long-term growth, as the long-term variable compensation makes up the largest portion of the target total compensation (see “Overview of compensation elementsˮ). Base salary (fixed, in cash) The base salary is determined at the discretion of the Board of Directors based on the market value of the respective position and the incumbent’s qualifications, skillset and experience and is paid out in cash. An internal job-grading methodology provides orientation and fosters internal equity. Benefits Members of the Executive Committee participate in the regular employee pension fund applicable to all employees in Switzerland. The retirement plan consists of a basic plan that covers annual earnings up to CHF 152’868 per year and a supplementary plan in which income over this limit, up to the ceiling set by law, is insured (including variable cash remuneration). The contributions are age‑related and are shared between the employer and the employee. Furthermore, each member of the Executive Committee is entitled to a representation allowance in line with the expense regulations for all members of management in Switzerland and approved by the tax authorities. Bonus (variable, performance-based, cash remuneration) The bonus rewards the financial performance of the company and/or its businesses, as well as the achievement of individual performance objectives over one calendar year. Performance objectives are defined at the beginning of the year during annual target setting. Achievement is assessed against each of those objectives after year-end and directly influences the variable incentive payouts. Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 61 The target bonus is expressed as a percentage of annual base salary. It amounts to 90% for the CEO and to 60% for the other members of the Executive Committee. For the CEO and the other members of the Executive Committee, 70% of the bonus is based on the achievement of financial objectives at company and/or division level, and 30% is based on the achievement of individual objectives as described below: Category   Weight   Objectives   Rationale CEO/CFO/ CHRO   Division President Operational profitability   Measure of profitability (bottom line) Division Sulzer 25%   Financial performance   70% Sales   Measure of growth (top line) Operational operating net cash flow (operational ONCF)   Measure of cash generated Sulzer Division Sulzer Division 25%   20%   7.5% 17.5% 7.5% 17.5% 6% 14% Cost-effectiveness Objectives linked to cost reduction or optimization Individual 10%   10% Growth initiatives Faster and better Individual performance   30% Sustainable Sulzer Include initiatives that support the growth of Sulzer, such as M&A projects, breaking into new markets or new accounts Initiatives focused on the profitability of Sulzer, with objectives linked to speed (“faster”) and quality (“better”) Objectives linked to the three major priorities of Sulzer’s sustainability plan, namely minimizing our carbon footprint, enabling a low carbon society and engaging our employees and communities Individual 5%   5% Individual 5%   5% Individual   Total 10%   100%   10% 100% For each financial objective, the following parameters are set upfront: An expected level of performance (“targetˮ), the achievement of which leads to a payout factor (on the respective performance metric) of 100%. A minimum level of performance (“thresholdˮ), below which the respective payout factor is zero. A maximum level of performance (“capˮ), above which the respective payout factor is capped at 200%.  Between threshold and target, as well as between target and cap, the payout factor is interpolated linearly.                                                                                 Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 62 In order to measure individual performance, each Executive Committee member is given different personal objectives for each of the four individual performance categories (“Cost-effectiveness,ˮ “Growth initiatives,ˮ “Faster and betterˮ and “Sustainable Sulzerˮ) at the beginning of the financial year. The CEO reviews the individual performance based on the personal objectives of each Executive Committee member, which in turn is reviewed by the RC. The CEO’s individual performance is assessed by the RC. “Cost‑effectivenessˮ, for example, includes objectives like cost-saving (travel spend reduction, real estate cost reduction, etc.), whereas objectives for the category “Faster and better” consider, among others, on-time delivery percentage improvement. “Growth initiatives” include, for example, successful completion of M&A project or sales growth in specific countries. The “Sustainable Sulzerˮ criteria used to assess the performance of the Executive Committee are structured around the three major priorities of Sulzer’s sustainability plan, namely minimizing our carbon footprint, enabling a low‑carbon society and engaging our employees and communities. The following topics are examples that could be considered for the Executive Committee: Minimizing carbon footprint   Enabling a low-carbon society   Engaging employees and communities — Reduction of greenhouse gas emissions — Energy consumption, and the supply of decarbonized energy to our production sites — Reduction of waste and the recycling of our waste — — — Increase in the energy efficiency of our products — Employee engagement Solutions to treat wastewater and provide access to water for populations that are deprived of it — Employee accident rate Low-carbon or decarbonized solutions such as the conversion of waste into eco-fuel or the capture of CO2 — Number of employees enrolled in the health and wellbeing program, Sulzer in Motion — Circular economy Sulzer strives for transparency in relation to pay-for-performance. However, further disclosure of financial and individual objectives may create a competitive disadvantage to the company, because it would reveal sensitive insights into Sulzer’s strategy. To ensure transparency while avoiding competitive risk, Sulzer provides a general performance assessment for each financial objective as well as the aggregated individual performance at the end of the performance cycle (see chapter “Compensation of the Executive Committee for 2023”). On the basis of this performance assessment, a payout factor is determined for each financial objective as a result of the actual performance. The weighted average of the resulting payout factors on each performance metric will be multiplied by the target bonus amount to derive the actual bonus, which will be paid out in March of the following year.                     Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 63 The objectives for the bonus plan are linked to Sulzer’s strategic goal of promoting the sustainable and profitable growth of the company. They are chosen to provide different incentives for growth and shareholder value creation. Strategic link of bonus plan Bonus plan Operational profit Sales Operational ONCF Cost-effectiveness Growth initiatives Faster and better Sustainable Sulzer Growth Profitability Long-term shareholder value creation Performance share plan (variable, performance-based, share- based remuneration) The long-term shareholder orientation and value creation is incentivized by a performance share plan (PSP) granting performance share units (PSUs) to the members of the Executive Committee. PSUs are a conditional right to a certain number of shares of the company, subject to ongoing employment and to the achievement of strategic/financial performance targets at Group level over the three-year performance period. The PSP is based on the performance of the company over three years and aligns the interests of the participants with those of the shareholders by delivering a substantial portion of the compensation as company equity. This emphasizes and supports Sulzer’s focus on pay-for-performance and sustainable growth, with a long-term perspective and additional retention effect on employees.                                                                                                         Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 64 The PSP is a plan with annual grants and is available exclusively to the members of the Executive Committee and of the Sulzer Management Group. The grant value is determined based on the level of the executive’s role and amounts to kCHF 1’000 for the CEO, Suzanne Thoma, and to between kCHF 330 and kCHF 400 (determined by the Board of Directors) for the other members of the Executive Committee. The number of PSUs granted is calculated by dividing the grant value by the three-month volume-weighted average share price before the grant date (units prorated as per entry date into employment). The key performance criteria measured over the three-year performance period of PSUs are: Operational profit growth before restructuring, amortization, impairments and non-operational items, weighted at 25% Average operational return on capital employed (operational ROCEA), weighted at 25% Relative total shareholder return (TSR) weighted at 50% and measured based on the performance against international peers, measured as a percentile ranking Peer group for relative TSR performance of PSP 2023 International peers Andritz Burckhardt Compression Ebara Flowserve ITT OC Oerlikon Pentair Wood Group Xylem Georg Fischer The Board of Directors can alter the composition of the peer group if deemed necessary, such as in the case of a merger or acquisition or any other change leading to a delisting or a fundamental change in the scope of the business of a peer group company. In such a situation, the Board will select new peer companies. There is a predefined successor list of companies to support the Board of Directors in the selection process. The threshold, target and maximum for the relative TSR in the international peer group remained unchanged. Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 65 For each performance condition of the PSP, a threshold, target and cap performance level are determined, which in turn determine the achievement factor. Sulzer strives for transparency in relation to pay-for-performance and discloses all information whose exposure cannot lead to strategic disadvantages. Disclosure of internal financial objectives may create a competitive disadvantage for the company because it could reveal sensitive insights into Sulzer’s strategy. To ensure transparency while avoiding competitive risk, Sulzer provides a general performance assessment for each performance criterion at the end of the performance cycle based on the following metric (see chapter “ Compensation of the Executive Committee for 2023 ”). Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 66 On the vesting date, the number of vested PSUs is calculated by multiplying the initial number of PSUs granted by the weighted average of the achievement factor of each performance condition. For each vested PSU, a Sulzer share will be delivered to the participant. However, while the above-mentioned performance assessment impacts the number of PSUs vested and, consequently, the number of shares delivered, there might also be an increase in value per share over the three-year performance period, which may have a relevant impact on the total value delivered after three years. Therefore, the number of vested PSUs is subject to an absolute value cap representing, in each case, 2.5 times the original grant value. The objectives for the PSP are linked to Sulzer’s strategic goal of promoting the sustainable and profitable growth of the company. They are chosen to provide different incentives for growth and shareholder value creation. Strategic link of PSP PSP Operational profit growth Operational ROCEA Relative TSR Growth Profitability Long-term shareholder value creation In the event of termination of employment, the following provisions apply: Type of termination   Provision By the employer for cause   Unvested PSUs are forfeited. As a result of retirement   Vesting and performance measurement of PSUs continues according to plan, no early allocation of the shares. Any other reason The number of unvested PSUs vest on a pro rata basis (number of months between grant date and termination date) according to the achievement factor at the end of the vesting period. There is no early allocation of the shares. Upon the occurrence of a change of control, PSUs will vest immediately on a pro rata basis, subject to a performance assessment by the Board of Directors. In such a case, the Board of Directors may also determine a cash settlement of the awards.                                                           Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the CEO and Executive Committee members 67 Malus and clawback The Board of Directors may determine that variable compensation is forfeited in full or in part (malus) or that a vested award will be recovered in full or in part (clawback) in situations of material misstatement of the financial results, an error in assessing a performance condition or in the information or assumptions on which the award was granted or vested, serious reputational damage to the company, gross negligence, or willful misconduct on the part of the participant. Sulzer may recover in full or in part any variable compensation from Executive Committee members in situations of material misstatement of the financial results, an error in assessing a performance condition or gross misconduct of the participant. Further information on share-based compensation can be found in note 31 to the consolidated financial statements of Sulzer. Contracts of employment The employment contracts of the Executive Committee are of undetermined duration and have a notice period of a maximum of 12 months. Members of the Executive Committee are not entitled to any impermissible severance or change of control payments. The employment contracts of the Executive Committee may include non-competition agreements with a time limit of one year and with maximum total compensation not to exceed the last total annual target compensation such member was entitled to prior to termination and in no event to exceed the average of the compensation of the last three financial years. Shareholding requirements Shareholding requirements for members of the Executive Committee were introduced with effect from 2020. According to these share ownership guidelines (SOGs), the members of the Executive Committee are obliged to hold part of their shares until the end of their service period. The value of the shares to be held is set at 200% of the annual gross base salary for the CEO and 100% of the annual gross base salary for the other members of the Executive Committee. Function CEO Other members of the Executive Committee   Shareholding requirement in % of base salary   200%   100% Sulzer Annual Report 2023 – Compensation report – Compensation of the Executive Committee for 2023 68 Compensation of the Executive Committee for 2023 Compensation of the Executive Committee: overview In 2023, the Executive Committee received a total compensation in the amount of kCHF 13’808 1 (previous year: kCHF 11’536). Of this total, kCHF 8’599 was in base salary and bonus (previous year: kCHF 6’947); kCHF 3’231 was in PSUs (previous year: kCHF 2’822); kCHF 1’892 was in pension and social security contributions (previous year: kCHF 1’649), and kCHF 86 was in other payments (previous year: kCHF 118). Regarding the combined role of the Chair of the Board of Directors and the CEO, there are no changes for 2023. The remuneration of both roles remains separate in accordance with market practice, except that Suzanne Thoma participates in the Performance Share Plan as CEO only and is not granted any RSUs as Chair of the Board of Directors. 1) Including compensation granted to former members of the Executive Committee. Compensation of the Executive Committee Cash compensation thousands of CHF Base salary   Bonus 2)   Other 3)   Pension and social security contributions 4)   Total cash- based compensation   2023 Deferred compensation based on future performance Estimated value of share-based grant under the performance share plan (PSP) 5)   Total (incl. conditional share-based grant) Highest single compensation, Suzanne Thoma, CEO Total Executive Committee 1) 950   4’201   1’314   4’398   -   86   395   2’659   1’892   10’577   1’129   3’231   3’788 13’808 1) Out of the total sum, kCHF 1’827 was paid to one former member of the Executive Committee, Frédéric Lalanne, former CEO. In 2023, no other payments to former members of the Executive Committee were made. 2) Expected bonus for the performance years 2023, to be paid out in the following year (accrual principle). 3) Other consists of schooling allowances, tax services and child allowances. 4) 5) Represents the full fair value of the PSUs granted under the PSP in 2023. PSUs granted in 2023 had a fair value of CHF 88.38 at grant date, based on a third-party fair value Includes the employer contribution to social security (including the expected employer contributions on equity awards), based on the fair value of all grants made in 2023 (PSP). calculation. While the share price to convert the grant value into a number of granted PSUs is based on the three-month weighted average share price before the grant date (CHF 78.26 per PSU for April 2023 grants), the disclosed fair values are calculated on the grant dates by using market value approaches, which typically leads to differences between the original grant value according to the compensation architecture and the disclosed fair market values.                 Sulzer Annual Report 2023 – Compensation report – Compensation of the Executive Committee for 2023 69 Cash compensation thousands of CHF Base salary   Bonus 2)   Other 3)   Pension and social security contributions 4)   Total cash- based compensation   2022 Deferred compensation based on future performance Estimated value of share-based grant under the performance share plan (PSP) 5)   Total (incl. conditional share-based grant) Highest single compensation, Frédéric Lalanne, CEO from February 18 2022 to October 31 2022 Suzanne Thoma, CEO since November 1st 2022 Total Executive Committee 1) 760   736   158   3’767   142   3’180   8   -   349   1’853   1’074   2’927 118   1’649   61   361   8’714   179   540 2’822   11’536 1) The total Executive Committee compensation for 2022 includes the compensation of Frederic Lalanne, Division President Flow Equipment since January 2019 until February 2022, CEO since February 2022 until October 2022; Suzanne Thoma, CEO since November 2022; Thomas Zickler, CFO since May 2022; Tim Schulten, Division President Services since January 2022; Torsten Wintergerste, Division President Chemtech since June 2016; Armand Sohet, Chief Human Resources Officer since March 2016 until December 2022; Greg Poux-Guillaume, CEO since December 2015 until February 2022; Jill Lee, CFO since April 2018 until April 2022; and Daniel Bischofberger, Division President Services since September 2016 until February 2022. 2) Expected bonus for the performance year 2022, to be paid out in the following year (accrual principle). 3) Other consists of schooling allowances, tax services and child allowances. 4) Includes the employer contribution to social security (including the expected employer contributions on equity awards), based on the fair value of all grants made in 2022 (PSP). 5) Represents the full fair value of the PSUs granted under the PSP in 2022, respectively. PSUs granted in 2022 had a fair value of CHF 84.69 at grant date, based on a third-party fair value calculation. While the share price to convert the grant value into a number of granted PSUs is based on the three-month weighted average share price before the grant date (CHF 78.84 per PSU for April 2022 grants), the disclosed fair values are calculated on the grant dates by using market value approaches, which typically leads to differences between the original grant value according to the compensation architecture and the disclosed fair market values. Suzanne Thoma received a pro-rata grant of PSU in November 2022. No severance payments were issued to members of the Executive Committee in either the current reporting year or the prior year. No compensation was granted to any related parties of the members of the Executive Committee in the current reporting year or the prior year. As of December 31, 2023, and December 31, 2022, there were no outstanding loans or credits granted to the members of the Executive Committee, former members of the Executive Committee or related parties. The total compensation of kCHF 13’808 awarded to the members of the Executive Committee for the 1 2023 financial year is within the maximum aggregate compensation amount of kCHF 17’500 that was approved by the shareholders at the AGM 2022. 1)  Including compensation granted to former members of the Executive Committee. Compensation for the Executive Committee: pay-for- performance assessment In the following, we elaborate further on how the relevant business performance impacted the variable compensation models of our Executive Committee. More detailed information about Sulzer’s operational and strategic performance in 2023 can be found in the financial report.                    Sulzer Annual Report 2023 – Compensation report – Compensation of the Executive Committee for 2023 70 a) Total compensation and pay for performance ratio In 2023, the Executive Committee received total compensation in the amount of kCHF 13’808 (previous year: kCHF 11’536). This was an overall increase of 19.7% from the previous year, resulting in part from changes in the Executive Committee members but mainly driven by the increase in financial and individual performance. This is especially highlighted by the increase of the average overall bonus payout from 109.7% in 2022 to 143.1% in 2023. For the entire active Executive Committee, the variable component amounted to between 116.4% and 181.7% of the fixed component (base salary, other, pension and social security contributions). This pay-for-performance relation reflects Sulzer’s high-performance orientation. Further, it represents the company’s strong emphasis on aligning the interests of the Executive Committee and the shareholders to create long-term shareholder value and profitable growth. Regarding cash bonus payments and LTI amounts, see the following paragraphs. b) Short-term incentive (cash bonus payouts) In 2022, the RC made adjustments to the bonus due to the closure of sites in Poland from sanctions and the abandonment of operations in Russia. As of September 2, 2023, our two entities in Poland have been removed from the Polish sanctions list, allowing us to resume our direct business activities. Therefore, no adjustments to the bonuses were made in 2023. Sulzer Annual Report 2023 – Compensation report – Compensation of the Executive Committee for 2023 71 The financial component of the bonus for 2023 ranged from 128.2% to 160.4% of targeted payout (on average 153.8%), thanks also to a high level of achievement of individual objectives. The financial performance at the group level was as follows: KPI Sales Operational profitability Operational ONCF Total Weighting Payout factor 25% 25% 20% 70% 119% 156% 200% 155% The individual performance ranged from 90% to 150%. In aggregate, the financial and individual performance translated into an overall bonus payout factor ranging from 122.7% to 153.7% (on average 143.1%) for the members of the Executive Committee. c) Long-term incentive (PSP) We are convinced that the conditional awards to receive Sulzer shares, subject to operational return on average capital employed adjusted (operational ROCEA), operating income before restructuring, amortization, impairments and non-operational items (operational profit) growth and relative total shareholder return (TSR) performance, as well as ongoing employment through the three-year vesting period: constitutes a fair and very attractive element of variable long-term remuneration for our key management; supports and underlines the company’s focus on excellent, sustainable performance; and provides for a strong alignment of interests with shareholders – also in the longer term. The PSP framework (apart from the specific performance targets for each grant cycle), eligibility and grant entitlement remained unchanged in 2023 compared to previous years. The relevant key performance indicators (KPIs) were operating income before restructuring, amortization, impairments and non-operational items (operational profit), operational return on average capital employed adjusted (operational ROCEA) and relative total shareholder return (TSR) over the three-year measurement period from 2021 to 2023. Over this three-year period, Sulzer grew its operational profit, demonstrating strong resilience by overcoming the COVID related challenges during these years, the exit from the Russian market and the supply chain disruptions in 2022, but also by leveraging the market momentum in 2023. This performance resulted in an achievement factor of 250%, compared to the original PSP target set by the Board of Directors. Operational ROCEA also reported an achievement factor of 250%, improved to a continued high average over the three-year period, on the back of the improved profitability and the well managed capital employed. Together with a relative TSR achievement factor of 220%, which compared Sulzer’s share price development against international peers over the PSP 2021 measurement period, the resultant total payout factor is 235% for the PSP 2021.                     Sulzer Annual Report 2023 – Compensation report – Compensation of the Executive Committee for 2023 72 The payout factor results and respective weighting are as follows: KPI Operational profit growth Operational ROCEA Relative TSR Total Weighting Payout factor 25% 25% 50% 100% 250% 250% 220% 235% Overall, the PSP vesting levels fairly reflected the operational performance, also against direct peers, over their respective three-year performance cycles, especially considering the exceptional external influences which have been successfully mitigated. Therefore, Sulzer fully achieved the desired strong link between sustainable company performance and competitive long-term incentive payouts. Shareholdings of the members of the Executive Committee As of the end of 2022 and 2023, the members of the Executive Committee held the following shares, share-based instruments or options in the company: Shareholdings at December 31, 2023 Sulzer shares Share units under vesting in equity plan Sulzer shares 1) Performance share Performance share units (PSU) 2021   units (PSU) 2022   Performance share units (PSU) 2023 2023 Executive Committee Suzanne Thoma, CEO Thomas Zickler, CFO Haining Auperin, CHRO Tim Schulten, Division President Services Jan Lüder, Division President Flow Equipment Uwe Boltersdorf, Division President Chemtech 11’114   2’559   3’402   5’153   -   -   -   4’264   -   1’212   1’364   1’212   -   476   14’362   2’120   5’074   1’142   5’074   -   952   1) Total shares in all individual accounts, collected through the Corporate Governance Questionnaire. No related parties own any shares. Shareholdings at December 31, 2022 36’548 12’778 5’112 4’217 5’112 5’112 4’217 2022 Executive Committee Suzanne Thoma Thomas Zickler Armand Sohet Tim Schulten Torsten Wintergerste Sulzer shares Share units under vesting in equity plan Sulzer shares   units (PSU) 2020   units (PSU) 2021   Performance share Performance share Performance share units (PSU) 2022 32’723   16’827   12’412   20’640 744   1’513   6’791   -   23’675   -   1’273   7’777   -   7’777   -   1’212   4’994   1’212   4’994   2’120 5’074 4’186 5’074 4’186 No member of the Executive Committee held any options.                                                                             Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the Board of Directors 73 Compensation architecture for the Board of Directors The compensation of the Board of Directors is fixed and does not contain any performance-based variable component. This ensures that the Board of Directors is truly independent in fulfilling its supervisory duties towards the Executive Committee. The compensation of the Board of Directors is governed by a compensation regulation, is reviewed by the Remuneration Committee (RC) annually and, if necessary, adjusted by a decision of the full Board of Directors based on a proposal by the RC. The compensation of the Board of Directors consists of a fixed cash component and a restricted share unit (RSU) component with a fixed grant value. Each RSU represents a right to receive a Sulzer share free of charge after a certain period, as further detailed below. Further, Board members are entitled to a lump sum to cover business expenses. The RSU component strengthens the long-term alignment of the interests of the Board members with those of the shareholders. To reinforce the focus of the Board of Directors on the long-term strategy and to strengthen its independence from the Executive Committee, the compensation of the Board of Directors contains no performance-related elements and non-executive Board members are not entitled to pension benefits.  The amount of compensation for the Chairwoman and for the other members of the Board of Directors is determined based on the relevant compensation benchmarks. The list of companies is the same peer group as listed under the Compensation benchmark of the members of the Executive Committee. The compensation reflects the responsibility and complexity of their respective function, the professional and personal requirements placed on them, and the expected time required to fulfill their duties. The ongoing Board compensation structure and amounts are described in the table below: Annual compensation of the Board of Directors 1 in CHF Base fee for Board Chairperson 2) Base fee for Board Vice Chairperson Base fee for Board members Additional committee fees: Audit Committee / Strategy and Sustainability Committee Chairperson Audit Committee / Strategy and Sustainability Committee members Governance Committee Chair Nomination / Remuneration Committee Chairperson Nomination / Remuneration / Governance Committee members Cash component (net of social security contributions)   Grant value of RSUs (net of social security contributions)   Lump-sum expenses 155’000   125’000   10’000 5’000 5’000 420’000   100’000   70’000   60’000   35’000   35’000   20’000   20’000   1) Compensation for the period of service (from AGM to AGM). 2) The Chairperson of the Board of Directors does not receive additional remuneration for committee activities.                                                                 Sulzer Annual Report 2023 – Compensation report – Compensation architecture for the Board of Directors 74 The members of the Board of Directors are compensated for their service during their term of office (from AGM to AGM). The cash compensation is paid in quarterly installments for Board members and monthly installments for the Chairperson; the expense lump sum is paid out in December and the RSUs are granted once a year. The number of RSUs is determined by dividing the fixed grant value by the volume-weighted average share price of the last ten trading days before the grant date, which is the date of the AGM when they are elected. One-third of the RSUs vest on March 25 of each year following the grant date. If this date falls on a weekend, they vest on the immediately following weekday. Upon vesting, one vested RSU is converted into one share in the company. The vesting period for RSUs granted to the members of the Board of Directors ends no later than on the date on which the member steps down from the Board. Although the value of the RSU grant is fixed (at grant), it then fluctuates with the share price during the vesting period, which means that the value at vesting can differ from the value at grant. Sulzer Annual Report 2023 – Compensation report – Compensation of the Board of Directors for 2023 75 Compensation of the Board of Directors for 2023 Compensation of the Board of Directors: overview In 2023, the Board of Directors received total compensation in the amount of kCHF 2’283 (previous year: kCHF 2’340). Of this total, kCHF 1’231 was in the form of cash fees (previous year: kCHF 1’152); kCHF 780 was in RSUs (previous year: kCHF 905) and kCHF 272 was in the form of social security contributions (previous year: kCHF 283). The total Board compensation paid in 2023 was 2.4% lower than in 2022. This is mainly driven by the Chairwomen not receiving RSUs due to her dual role. The aggregate Board compensation was below the maximum aggregate compensation for the Board, which was approved at the AGM 2023. The portion of compensation delivered in RSUs ranged between 89% and 139% of the cash compensation of the members of the Board of Directors. The RSUs are subject to a staged three-year vesting period.  Compensation of the Board of Directors thousands of CHF Board of Directors Restricted share unit (RSUs) plan 4)   Social security contributions 5)   Cash fees 3)   1’231   780   272   2023 Total 2’283 Suzanne Thoma, Chair of the Board of Directors, Chair of the Strategy & Sustainability Committee and Member of the Nomination Committee 420   -   55   475 Markus Kammüller, Lead Independent Director, Vice-Chair of the Board of Directors, Chair of the Governance Committee, Member of the Remuneration Committee and Member of the Audit Committee Alexey Moskov, Member of the Remuneration Committee David Metzger, Member of the Audit Committee and Member of the Strategy & Sustainability Committee Per Utnegaard, Chair of Nomination Committee and Member of Strategy & Sustainability Committee 1) Hariolf Kottmann, Chair of the Remuneration Committee, Member of Strategy & Sustainability Committee and Member of the Governance Committee 1) Prisca Havranek-Kosicek, Chair of the Audit Committee, Member of Nomination Committee and Member of the Governance Committee 1) Hanne Birgitte Breinbjerg Sørensen 2) Matthias Bichsel 2) 174   90   155   125   140   125   94   125   109   125   128   42   34   125   -   -   44   30   37   30   32   34   6   4   373 245 302 249 266 287 48 38 1) Member of the Board of Directors since AGM 2023. 2) Member of the Board of Directors until AGM 2023. 3) Disclosed gross. 4) RSU awards granted in 2023 had a fair value of CHF 77.0509 at grant date. The amount represents the full fair value of grants made in 2023. Suzanne Thoma will not receive RSUs while participating in the PSP as CEO. 5) The amount includes mandatory social security contributions on the cash fees and estimated contributions on the RSU (based on their fair value at grant) and includes both the employer and employee contributions paid by the company on behalf of the Board members.                           Sulzer Annual Report 2023 – Compensation report – Compensation of the Board of Directors for 2023 76 thousands of CHF Board of Directors Suzanne Thoma, Chair Matthias Bichsel, Vice-Chair Alexey Moskov David Metzger Hanne Birgitte Breinbjerg Sørensen Markus Kammüller 1) Peter Löscher, former Chair 2) Gerhard Roiss 2) Mikhail Lifshitz 2) Restricted share unit (RSUs) plan 4)   905   250   155   125   125   125   125   -   -   -   Cash fees 3)   1’152   358   134   94   131   169   94   105   41   26   Social security contributions 5)   283   84   33   32   37   42   31   15   5   4   2022 Total 2’340 692 322 251 293 336 250 120 46 30 1) Member of the Board of Directors since AGM 2022. 2) Member of the Board of Directors until AGM 2022. 3) Disclosed gross. 4) RSU awards granted in 2022 had a fair value of CHF 77.8203 at grant date. The amount represents the full fair value of grants made in 2022. 5) The amount includes mandatory social security contributions on the cash fees and estimated contributions on the RSU (based on their fair value at grant) and includes both the employer and employee contributions paid by the company on behalf of the Board members. At the 2022 and 2023 AGMs respectively, shareholders approved a maximum aggregate compensation amount of kCHF 2’984 for the Board of Directors. The table below shows the reconciliation between the compensation that was/will be paid out for the two periods of office and the maximum aggregate compensation amounts approved by the shareholders. Reconciliation between the reported Board compensation and the amount approved by the shareholders at the Annual General Meeting Compensation earned during financial year as reported (A) Minus compensation earned from Jan to AGM of financial year (B) Plus compensation accrued from Jan to AGM of year following financial year (C) Total compensation earned for the period from AGM to AGM (A-B+C) Amount approved by shareholders at respective AGM   Ratio between compensation earned for the period from AGM to AGM versus amount approved by shareholders Jan 1, 2023 to Jan 1, 2024 to 2023 AGM to 2023   2023 AGM   2024 AGM   2024 AGM   2023 AGM   2023 AGM 2’283   307   363   2’339   2’984   78.4% Jan 1, 2022 to Jan 1, 2023 to 2022 AGM to 2022   2022 AGM   2023 AGM   2023 AGM   2022 AGM   2022 AGM 2’340   388   307   2’259   2’984   75.7% thousands of CHF AGM 2023–AGM 2024 Board (total) AGM 2022–AGM 2023 Board (total) As of December 31, 2023, and December 31, 2022, there were no outstanding loans or credits granted to the members of the Board of Directors, former members of the Board of Directors or related parties.  In 2023 and 2022, respectively, no compensation was granted to former members of the Board of Directors or related parties.                                             Sulzer Annual Report 2023 – Compensation report – Compensation of the Board of Directors for 2023 77 Shareholdings of the members of the Board of Directors As of the end of 2023 and 2022, the members of the Board of Directors held the following shares, share-based instruments or options in the company: Shareholdings at December 31, 2023 Board of Directors Suzanne Thoma Markus Kammüller Alexey Moskov 2) David Metzger Per Utnegaard Hariolf Kottmann Prisca Havranek-Kosicek Sulzer shares 1)   9’320   2’559   536   2’114   1’736   1’375   1’000   -   Restricted share units (RSU)   17’430   2’886   3’085   3’295   3’295   1’623   1’623   1’623   2023 Total share awards and shares 26’750 5’445 3’621 5’409 5’031 2’998 2’623 1’623 1) Total shares in all individual accounts, collected through the Corporate Governance Questionnaire. 2) In addition, as collected through the Corporate Governance Questionnaire, Mr. Moskov’s related parties own 2’217 Sulzer shares. Shareholdings at December 31, 2022 Board of Directors Suzanne Thoma Matthias Bichsel Alexey Moskov David Metzger Hanne Birgitte Breinbjerg Sørensen Markus Kammüller Sulzer shares   23’434   744   12’600   2’217   600   7’273   -   Restricted share units (RSU)   21’095   4’701   4’406   3’786   2’808   3’786   1’608   2022 Total share awards and shares 44’529 5’445 17’006 6’003 3’408 11’059 1’608 No member of the Board of Directors held any options.                                               Sulzer Annual Report 2023 – Compensation report – Auditor’s report 78 Report on the Audit of the Compensation Report Opinion We have audited the Compensation Report of Sulzer Ltd (the Company) for the year ended December 31, 2023. The audit was limited to the information pursuant to Art. 734a-734f of the Swiss Code of Obligations (CO) contained in the sections " Activities in other organizations Compensation of the ", “ Executive Committee: overview Shareholdings of the members of the Executive Committee ”, " ", “ Compensation of the Board of Directors: overview ” and " Shareholdings of the members of the Board of Directors " of the Compensation Report. In our opinion, the information pursuant to Art. 734a-734f CO in the enclosed Compensation Report complies with Swiss law and the Company’s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Compensation Report” section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the sections “Activities in other organizations”, “Compensation of the Executive Committee: overview”, “Shareholdings of the members of the Executive Committee”, “Compensation of the Board of Directors: overview” and “Shareholdings of the members of the Board of Directors” in the Compensation Report, the consolidated financial statements, the stand-alone financial statements and our auditor’s reports thereon. Our opinion on the Compensation Report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Compensation Report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the audited financial information in the Compensation Report or our knowledge obtained in the audit or otherwise appears to be materially misstated. Sulzer Annual Report 2023 – Compensation report – Auditor’s report 79 If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors’ Responsibilities for the Compensation Report The Board of Directors is responsible for the preparation of a Compensation Report in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of a Compensation Report that is free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for designing the compensation system and defining individual compensation packages. Auditor’s Responsibilities for the Audit of the Compensation Report Our objectives are to obtain reasonable assurance about whether the information pursuant to Art. 734a-734f CO is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Compensation Report. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement in the Compensation Report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Sulzer Annual Report 2023 – Compensation report – Auditor’s report 80 We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. KPMG AG Rolf Hauenstein Licensed Audit Expert Auditor in Charge Zurich, February 21, 2024 Miriam von Gunten Licensed Audit Expert KPMG AG, Badenerstrasse 172, CH-8036 Zurich © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Financial reporting 82 Consolidated financial statements 82 Consolidated income statement 83 Consolidated statement of comprehensive income 84 Consolidated balance sheet 85 Consolidated statement of changes in equity 87 Consolidated statement of cash flows 89 Notes to the consolidated financial statements 174 Auditor’s report 180 Supplementary information 188 Financial statements of Sulzer Ltd 188 Balance sheet of Sulzer Ltd 189 Income statement of Sulzer Ltd 190 Statement of changes in equity of Sulzer Ltd 191 Notes to the financial statements of Sulzer Ltd 198 Auditor’s report     Sulzer Annual Report 2023 – Financial reporting – Consolidated income statement 82 Consolidated income statement January 1 – December 31 millions of CHF Sales Cost of goods sold Gross profit Selling and distribution expenses General and administrative expenses Research and development expenses Net impairment release / (loss) on contract assets and trade accounts receivable Other operating income / (expenses), net Operating income (EBIT) Interest and securities income Interest expenses Other financial income / (expenses), net Share of profit / (loss) of associates and joint ventures Income before income tax expenses Income tax expenses Net income – thereof attributable to shareholders of Sulzer Ltd – thereof attributable to non-controlling interests Earnings per share (in CHF) Basic earnings per share Diluted earnings per share Notes   3, 20   10   11   12   12   12   17   13   25   25   2023   3’281.7   –2’197.1   1’084.6   –323.7   –370.6   –70.8   0.9   9.2   329.7   18.3   –30.3   –10.3   –3.2   304.3   –73.8   230.5   229.1   1.3   6.76   6.67   2022 3’179.9 –2’240.3 939.6 –317.0 –363.0 –66.4 –39.9 –42.1 111.4 9.7 –27.3 16.0 –2.7 107.0 –79.0 28.0 28.6 –0.6 0.85 0.83                                                                                                           Sulzer Annual Report 2023 – Financial reporting – Consolidated statement of comprehensive income 83 Consolidated statement of comprehensive income January 1 – December 31 millions of CHF Net income Items that may be reclassified subsequently to the income statement Cash flow hedges, net of tax Currency translation differences Total of items that may be reclassified subsequently to the income statement Items that will not be reclassified to the income statement Remeasurements of defined benefit plans, net of tax Equity investments at FVOCI – net change in fair value, net of tax Total of items that will not be reclassified to the income statement Total other comprehensive income Total comprehensive income for the period - thereof attributable to shareholders of Sulzer Ltd - thereof attributable to non-controlling interests Notes   29   9   18   2023   230.5   8.3   –146.0   –137.7   128.8   0.6   129.3   –8.3   222.1   221.6   0.6   2022 28.0 –7.5 –60.3 –67.8 –75.5 –11.0 –86.5 –154.3 –126.2 –125.5 –0.7                                                                                                                                         Sulzer Annual Report 2023 – Financial reporting – Consolidated balance sheet 84 Consolidated balance sheet December 31 millions of CHF Non-current assets Goodwill Other intangible assets Property, plant and equipment Lease assets Associates and joint ventures Other non-current financial assets Defined benefit assets Non-current receivables Deferred income tax assets Total non-current assets Current assets Inventories Current income tax receivables Advance payments to suppliers Contract assets Trade accounts receivable Other current receivables and prepaid expenses Current financial assets Cash and cash equivalents Total current assets without disposal group Assets of disposal group held for sale Total current assets Total assets Equity Share capital Reserves Equity attributable to shareholders of Sulzer Ltd Non-controlling interests Total equity Non-current liabilities Non-current borrowings Non-current lease liabilities Deferred income tax liabilities Non-current income tax liabilities Defined benefit obligations Non-current provisions Other non-current liabilities Total non-current liabilities Current liabilities Current borrowings Current lease liabilities Current income tax liabilities Current provisions Contract liabilities Trade accounts payable Other current and accrued liabilities Total current liabilities without disposal group Liabilities of disposal group held for sale Total current liabilities Total liabilities Total equity and liabilities Notes   14   14   15   16   17   18   9   13   19   20   21   22   18   23   24   26   16   13   13   9   27   26   16   13   27   20   28   2023   637.9   196.8   348.2   93.2   54.7   38.4   170.5   1.2   144.9   1’685.9   495.1   30.4   86.8   430.1   540.8   123.4   2.3   974.7   2’683.5   –   2’683.5   4’369.5   0.3   1’095.0   1’095.4   3.2   1’098.6   795.2   69.0   83.2   2.7   127.3   46.7   1.2   1’125.3   261.1   23.9   44.1   145.3   451.0   367.7   852.4   2’145.6   –   2’145.6   3’270.8   4’369.5   2022   676.9   234.3   360.5   90.1   41.8   28.5   1.3   1.0   149.9   1’584.2   522.4   28.3   64.4   466.1   585.5   128.7   14.0   1’196.3   3’005.6   30.4   3’036.0   4’620.2   0.3   1’023.9   1’024.3   4.4   1’028.6   1’043.9   67.2   53.0   2.7   122.2   58.2   1.3   1’348.6   311.4   22.4   30.0   155.9   382.3   440.8   874.7   2’217.5   25.4   2’242.9   3’591.5   4’620.2                                                                                                                                                                                                                                                                                                                                         Sulzer Annual Report 2023 – Financial reporting – Consolidated statement of changes in equity 85 Consolidated statement of changes in equity January 1 – December 31 millions of CHF Notes   Share capital   Retained earnings   Treasury shares   Cash flow hedge reserve   Currency translation adjustment   Non- controlling interests   Total   Total equity Equity as of January 1, 2023 0.3   1’777.7   –42.9   –4.1   –706.7   1’024.3   4.4   1’028.6 Attributable to shareholders of Sulzer Ltd Comprehensive income for the period: Net income - Cash flow hedges, net of tax - Remeasurements of defined benefit plans, net of tax - Equity investments at FVOCI – net change in fair value, net of tax - Currency translation differences Other comprehensive income Total comprehensive income for the period Transactions with owners of the company: Acquisition of non-controlling interests without a change in control Transactions with non-controlling interests   Contribution from medmix Allocation of treasury shares to share plan participants Purchase of treasury shares Share-based payments Dividends Equity as of December 31, 2023 29   9   18   4   24   24   24   31   24   24   –   –   –   –   –   –   –   –   –   229.1   –   –   –   128.8   –   –   –   0.6   –   129.3   –   358.5   –22.4   –   0.3   –   –   –   –   –   –   –   –27.2   27.2   –   –20.9   11.6   –118.9   –   –   229.1   1.3   230.5 8.3   –   8.3   –   8.3 –   –   –   –   128.8   –   128.8 –   0.6   –   0.6 –145.3   –145.3   –0.7   –146.0 8.3   –145.3   –7.6   –0.7   –8.3 8.3   –145.3   221.6   0.6   222.1 –   –   –   –   –   –   –   0.0   –22.4   –0.4   –22.8 –   –   –   –   –   –   –   –1.1   0.3   –   –20.9   11.6   –1.1 0.3 – –20.9 11.6 –118.9   –0.3   –119.2 0.3   1’979.5   –36.7   4.2   –852.0   1’095.4   3.2   1’098.6                                                                                                                                                                                 Sulzer Annual Report 2023 – Financial reporting – Consolidated statement of changes in equity 86 January 1 – December 31 millions of CHF Notes   Share capital   Retained earnings   Treasury shares   Cash flow hedge reserve   Currency translation adjustment   Non- controlling interests   Total   Total equity Equity as of January 1, 2022 0.3   1’967.7   –51.0   3.3   –646.5   1’273.8   5.5   1’279.3 Attributable to shareholders of Sulzer Ltd Comprehensive income for the period: Net income - Cash flow hedges, net of tax - Remeasurements of defined benefit plans, net of tax - Equity investments at FVOCI – net change in fair value, net of tax - Currency translation differences Other comprehensive income Total comprehensive income for the period Transactions with owners of the company: Disposal of non-controlling interests without a change of control Capital increase non-controlling interests Contribution from medmix Transaction costs Allocation of treasury shares to share plan participants Purchase of treasury shares Share-based payments Dividends Equity as of December 31, 2022 29   9   18   24   24   24   31   24   24   28.6   –   –   –   –75.5   –   –   –   –11.0   –   –86.5   –   –57.9   –0.4   –   0.4   –0.7   –   –   –   –   –   –   –   –   –27.6   27.6   –   –19.5   14.9   –118.7   –   –   –   –   –   –   –   –   –   –   –   –   28.6   –0.6   –7.5   –   –7.5   –   28.0 –7.5 –   –   –   –   –75.5   –   –75.5 –   –11.0   –   –11.0 –60.2   –60.2   –0.2   –60.3 –7.5   –60.2   –154.1   –0.2   –154.3 –7.5   –60.2   –125.5   –0.7   –126.2 –   –   –   –   –   –   –   –   –0.0   –0.4   –   0.4   –0.7   –   –19.5   14.9   –   –   –   –   –   –   –   0.8   0.5   –   –   –   –   –   0.4 0.5 0.4 –0.7 – –19.5 14.9 0.3   1’777.7   –42.9   –4.1   –706.7   1’024.3   4.4   1’028.6 –118.7   –1.6   –120.3                                                                                                                                                                             Sulzer Annual Report 2023 – Financial reporting – Consolidated statement of cash flows 87 Consolidated statement of cash flows January 1 – December 31 millions of CHF Notes   Cash and cash equivalents as of January 1, as per balance sheet Cash and cash equivalents classified as held for sale Cash and cash equivalents as of January 1 Net income Interest and securities income Interest expenses Income tax expenses Depreciation, amortization and impairments Income from disposals of tangible and intangible assets , net 12   12   13   14, 15, 16   11   Changes in inventories Changes in advance payments to suppliers Changes in contract assets Changes in trade accounts receivable Changes in contract liabilities Changes in trade accounts payable Changes in employee benefit plans Changes in provisions Changes in other net current assets Other non-cash items Interest received Interest paid Income tax paid Total cash flow from operating activities Purchase of intangible assets Proceeds from the sale of intangible assets Purchase of property, plant and equipment Proceeds from the sale of property, plant and equipment Acquisitions of subsidiaries, net of cash acquired Divestitures and deconsolidation of subsidiaries, net of cash derecognized Acquisitions of associates and joint ventures Dividends from associates Purchase of other non-current financial assets Repayments of other non-current financial assets Purchase of current financial assets Repayments of current financial assets Total cash flow from investing activities 14   14   15   15   4   5   17   17   18   18   18   18   2023   1’196.3   28.6   1’224.9   230.5   –18.3   30.3   73.8   108.2   –0.5   –17.0   –19.6   –11.4   15.8   100.9   –46.1   –4.1   –4.7   –22.7   20.4   18.3   –25.9   –65.6   362.2   –6.1   –   –59.5   4.6   –1.3   –26.6   –17.8   0.2   –0.6   0.1   –0.7   2.8   –104.8   2022 1’505.4 – 1’505.4 28.0 –9.7 27.3 79.0 159.3 –5.5 –59.8 –0.4 –60.3 –82.4 86.9 34.4 –7.6 –14.0 45.4 0.2 9.3 –24.6 –86.5 119.2 –8.7 0.0 –61.2 9.0 –4.2 3.2 –20.9 0.1 –6.7 3.2 –2.9 1.2 –87.8                                                                                                                                                                                   Sulzer Annual Report 2023 – Financial reporting – Consolidated statement of cash flows Dividends paid to shareholders of Sulzer Ltd Dividends paid to non-controlling interests in subsidiaries Purchase of treasury shares Payments of lease liabilities Divestiture (Acquisition) of non-controlling interests Capital increase non-controlling interests Proceeds from non-current borrowings Repayments of non-current borrowings Proceeds from current borrowings Repayments of current borrowings Total cash flow from financing activities Exchange gains / (losses) on cash and cash equivalents Net change in cash and cash equivalents 24   24   16   4   26   26   26   26   Cash and cash equivalents as of December 31 23   Cash and cash equivalents classified as held for sale Cash and cash equivalents as of December 31 as per balance sheet 88 –80.6 –1.6 –19.5 –32.1 0.4 0.5 169.6 –0.0 1’054.0 –1’376.1 –285.4 –26.4 –280.5 1’224.9 –28.6 1’196.3 –80.9   –0.3   –20.9   –28.3   –19.4   –   –   –   26.0   –324.9   –448.6   –59.0   –250.3   974.7   –   974.7   For the calculation of free cash flow (FCF), reference is made to the section “ Financial review ”.                                                                                                       Notes to the consolidated financial statements 90 91 92 98 99 101 104 113 114 120 121 122 123 127 129 131 133 134 135 136 137 139 140 141 143 144 146 148 149 150 151 154 155 156 170 171 01 General information 02  Significant events and transactions during the reporting period 03 Segment information 04 05  06  07  Acquisitions of subsidiaries and transactions with non-controlling interests Disposals, loss of control and disposal group held for sale Critical accounting estimates and judgments Financial risk management 08  Personnel expenses 09  Employee benefit plans 10  11  12  Research and development expenses Other operating income and expenses Financial income and expenses 13  Income taxes 14  15  Goodwill and other intangible assets Property, plant and equipment 16  Leases 17  Associates and joint ventures 18  Other financial assets 19  Inventories 20  21  22  23  Assets and liabilities related to contracts with customers Trade accounts receivable Other current receivables and prepaid expenses Cash and cash equivalents 24  Equity 25  Earnings per share 26  Borrowings 27  Provisions 28  29  Other current and accrued liabilities Derivative financial instruments 30  Contingent liabilities 31  32  Share participation plans Transactions with members of the Board of Directors, Executive Committee and related parties 33  Auditor remuneration 34  35  Key accounting policies and valuation methods Subsequent events after the balance sheet date 36  Major subsidiaries Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 90 Notes to the consolidated financial statements 1  General information Sulzer Ltd (the “companyˮ) is a company domiciled in Switzerland. The address of the company’s registered office is Neuwiesenstrasse 15 in Winterthur, Switzerland. The consolidated financial statements for the year ended December 31, 2023, comprise the company and its subsidiaries (together referred to as the “groupˮ and individually as the “subsidiariesˮ) and the group’s interest in associates and joint ventures. The group specializes in energy-efficient pumping, agitation, mixing, separation, purification, crystallization and polymerization technologies for fluids of all types. Sulzer was founded in 1834 in Winterthur, Switzerland, and employs 13'130 people. The company serves clients in 160 production and service sites around the world. Sulzer Ltd is listed on SIX Swiss Exchange in Zurich, Switzerland (symbol: SUN). Sulzer is a global leader in fluid engineering and chemical processing applications, developing innovative products and services that drive sustainable progress. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They were authorized for issue by the Board of Directors on February 21, 2024. Details of the group’s accounting policies are included in note 34 . Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 91 2 Significant events and transactions during the reporting period The financial position and performance of the group was not affected by any significant event during the period. As disclosed in the Annual Report 2022, Sulzer entered into a sales agreement for its business in Russia on February 3, 2023, and successfully sold the business in the second half of 2023. Further details are provided in note 5 . For a detailed discussion about the group’s performance and financial position, please refer to the section “ Financial review ”. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 92 3 Segment information Segment information by divisions millions of CHF Order intake (unaudited) 1) Nominal growth (unaudited) Currency-adjusted growth (unaudited) Organic growth (unaudited) 2) Flow Equipment Services 2023   1’466.5   3.3%   10.6%   11.2%   2022   1’419.2   7.1%   9.4%   8.9%   2023   1’271.3   8.5%   18.5%   19.8%   2022   1’171.3   0.7%   1.8%   1.6%   Chemtech 2023   842.5   0.9%   7.5%   10.5%   2022 834.9 22.9% 21.7% 22.5% Order backlog as of December 31 (unaudited) 878.3   850.1   547.3   492.9   521.2   501.7 Sales recognized at a point in time Sales recognized over time Sales 3) Nominal growth Currency-adjusted growth (unaudited) Organic growth (unaudited) 2) Operational profit (unaudited) Operational profitability (unaudited) Restructuring expenses Amortization Impairments on tangible and intangible assets Non-operational items (unaudited) 4) EBIT Depreciation Operating assets Unallocated assets Total assets as of December 31 Operating liabilities Unallocated liabilities Total liabilities as of December 31 Operating net assets Unallocated net assets Total net assets as of December 31 893.2   461.1   1’354.4   2.4%   9.4%   10.9%   108.2   8.0%   –2.1   –25.4   –0.1   –6.5   74.1   843.4   479.5   1’323.0   –4.8%   –3.1%   –3.4%   87.4   6.6%   0.3   –26.7   –8.0   –20.4   32.6   870.2   284.6   1’154.8   3.4%   12.6%   14.5%   171.3   14.8%   –0.7   –3.7   –0.0   12.7   179.6   825.9   291.1   1’117.0   –0.1%   0.8%   0.7%   159.0   14.2%   –1.3   –4.4   –24.2   –75.1   54.0   373.2   399.4   772.5   4.4%   11.3%   15.5%   95.0   12.3%   –0.3   –6.8   –0.1   –2.9   84.9   357.5 382.4 739.9 14.1% 12.9% 14.8% 80.0 10.8% 0.8 –6.9 –12.3 –23.4 38.3 –28.8   –30.4   –27.3   –29.0   –12.8   –13.4 1’427.7   –   1’427.7   1’554.1   –   1’554.1   718.6   –   718.6   709.1   –   709.1   730.9   –   730.9   823.2   –   823.2   944.4   –   944.4   411.2   –   411.2   533.2   –   533.2   980.0   –   980.0   456.4   –   456.4   523.7   –   523.7   533.2   –   533.2   409.1   –   409.1   124.1   –   124.1   579.7 – 579.7 439.8 – 439.8 139.9 – 139.9 Capital expenditure (incl. lease assets) –37.7   –37.9   –33.4   –42.0   –27.8   –16.8 Employees (number of full-time equivalents) as of December 31 5’465   5’263   4’630   4’559   2’849   2’852 1) Order intake from external customers. 2) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 3) Sales from external customers. 4) Mainly consists of a gain on deconsolidation relating to the Russian business of CHF 8.0 million, including the reclassification of the accumulated currency translation adjustments being allocated to the divisions.                                                                                                                                                                                                                                                                                                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 93 Segment information by divisions millions of CHF Order intake (unaudited) 3) Nominal growth (unaudited) Currency-adjusted growth (unaudited) Organic growth (unaudited) 4) Total divisions 2023   3’580.3   4.5%   12.6%   13.9%   2022   3’425.4   8.1%   9.2%   9.1%   Order backlog as of December 31 (unaudited) 1’946.8   1’844.7   Others 1) 2023   –   –   –   –   -   –   –   –   –   –   –   –8.9   n/a   0.1   –0.7   –   0.5   –9.0   2022 2) –   –   –   –   –   –   –   –   –   –   –   –8.8   n/a   0.0   –0.8   –   –3.8   –13.5   Total Sulzer 2023   3’580.3   4.5%   12.6%   13.9%   2022 2) 3’425.4 8.1% 9.2% 9.1% 1’946.8   1’844.7 2’136.6   1’145.1   3’281.7   3.2%   11.0%   13.2%   365.6   11.1%   –3.0   –36.6   –0.2   3.8   329.7   2’026.8 1’153.1 3’179.9 0.8% 1.6% 1.8% 317.6 10.0% –0.1 –38.8 –44.5 –122.8 111.4 2’136.6   1’145.1   3’281.7   3.2%   11.0%   13.2%   374.5   11.4%   –3.1   –35.9   –0.2   3.3   338.6   2’026.8   1’153.1   3’179.9   0.8%   1.6%   1.8%   326.4   10.3%   –0.1   –38.0   –44.5   –119.0   124.8   –68.9   –72.8   –2.6   –3.2   –71.4   –76.0 2’905.3   –   2’905.3   1’538.9   –   1’538.9   1’366.4   –   1’366.4   3’113.8   –   3’113.8   1’627.0   –   1’627.0   1’486.8   –   1’486.8   213.6   1’250.5   1’464.2   261.3   1’470.6   1’731.9   –47.7   –220.1   –267.8   42.6   1’463.7   1’506.4   98.1   1’866.4   1’964.5   –55.5   –402.7   –458.2   3’118.9   1’250.5   4’369.5   1’800.2   1’470.6   3’270.8   1’318.7   –220.1   1’098.6   3’156.4 1’463.7 4’620.2 1’725.1 1’866.4 3’591.5 1’431.4 –402.7 1’028.6 Sales recognized at a point in time Sales recognized over time Sales 5) Nominal growth Currency-adjusted growth (unaudited) Organic growth (unaudited) 4) Operational profit (unaudited) Operational profitability (unaudited) Restructuring expenses Amortization Impairments on tangible and intangible assets Non-operational items (unaudited) 6) EBIT Depreciation Operating assets 7) Unallocated assets 7) Total assets as of December 31 Operating liabilities 8) Unallocated liabilities 8) Total liabilities as of December 31 Operating net assets Unallocated net assets Total net assets as of December 31 Capital expenditure (incl. lease assets) –98.9   –96.7   –4.1   –3.3   –103.1   –100.0 Employees (number of full-time equivalents) as of December 31 12’944   12’674   186   194   13’130   12’868 1) The most significant activities under “Others” relate to Corporate Center. 2) Amounts in 2022 were restated, please refer to 7) and 8) below. 3) Order intake from external customers. 4) Adjusted for acquisition, divestiture/deconsolidation and currency effects. 5) Sales from external customers. 6) Mainly consists of a gain on deconsolidation relating to the Russia business of CHF 8.0 million, including the reclassification of the accumulated currency translation adjustments being 7) 8) allocated to the divisions. In 2022, within “Others”, operating assets were adjusted by CHF 90.1 million from CHF -47.5 million to CHF 42.6 million, the unallocated assets were adjusted by CHF -90.1 million from CHF 1’553.8 million to CHF 1’463.7 million. In “Total Sulzer”, operating assets were adjusted by CHF 90.1 million from CHF 3’066.3 million to CHF 3,156.4 million, the unallocated assets were adjusted by CHF -90.1 million from CHF 1’553.8 million to CHF 1’463.7 million. In 2022, within “Others”, operating liabilities were adjusted by CHF 90.1 million from CHF 8.0 million to CHF 98.1 million, the unallocated liabilities were adjusted by CHF -90.1 million from CHF 1’956.5 million to CHF 1’866.4 million. In “Total Sulzer”, operating liabilities were adjusted by CHF 90.1 million from CHF 1’635.0 million to CHF 1’725.1 million, the unallocated liabilities were adjusted by CHF -90.1 million from CHF 1’956.5 million to CHF 1’866.4 million. For the definition of operational profit, operational profitability, currency-adjusted growth and organic growth, reference is made to the section “ Supplementary information ” and for the reconciliation statements to the section “ Financial review ”.                                                                                                                                                                                                                                                                                                                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 94 Information about reportable segments Operating segments are determined based on the reports reviewed by the Chief Executive Officer that are used to measure performance, make strategic decisions and allocate resources to the segments. The business is managed on a divisional basis and the reported segments have been identified as follows: Flow Equipment The Flow Equipment division specializes in pumping solutions specifically engineered for the processes of its customers. The division provides pumps, agitators, compressors, grinders, screens and filters developed through intensive research and development in fluid dynamics and advanced materials. The focus is on pumping solutions for water, oil and gas, power, chemicals and most industrial segments. Services The Services division provides cutting-edge parts as well as maintenance and repair solutions for pumps, turbines, compressors, motors and generators, through a network of over 100 service sites around the world. The division services Sulzer original equipment, but also all associated third-party rotating equipment run by the customers, maximizing its sustainability and life-cycle cost- effectiveness. The division’s technology-based solutions, fast execution and expertise in complex maintenance projects are available at its customers’ doorsteps. Chemtech The Chemtech division focuses on innovative mass transfer, static mixing and polymer solutions for chemicals, petrochemicals, refining and LNG. Chemtech also provides ecological solutions such as bio-based chemicals, polymers and fuels, recycling technologies for textiles and plastic as well as carbon capture and utilization/storage, contributing to a circular and sustainable economy. The division’s product offering ranges from process components to complete process plants and technology licensing. Others Certain expenses related to the Corporate Center are not attributable to a particular segment and are assessed as a whole across the group. Also included are the eliminations for operating assets and liabilities. The Chief Executive Officer primarily uses operational profit to assess the performance of the operating segments. However, the Chief Executive Officer also receives information about the segments’ order intake and backlog, sales, and operating assets and liabilities on a monthly basis. Sales from external customers reported to the Chief Executive Officer are measured in a manner consistent with the measurement in the income statement. There are no significant sales between the segments. No individual customer represents a significant portion of the group’s sales. Operating assets and liabilities are assets or liabilities related to the operating activities of an entity and contributing to the EBIT. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 95 Segment information by region The allocation of assets is based on their geographical location. Non-current assets exclude deferred income tax assets, non-current receivables, defined benefit assets and other non-current financial assets. The allocation of sales from external customers is based on the location of the customer. Non-current assets by region millions of CHF Europe, the Middle East and Africa – thereof Switzerland – thereof United Kingdom – thereof Sweden – thereof Finland – thereof the Netherlands Americas – thereof USA Asia-Pacific – thereof China Total 2023   831.5   227.0   175.5   112.4   111.3   79.7   375.8   335.5   123.6   47.1   2022 853.5 220.5 180.1 125.7 114.6 84.6 413.4 376.6 136.7 52.4 1’330.9   1’403.6                                                       Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 96 Sales by region millions of CHF Flow Equipment   Services   Chemtech   2023 Total Sulzer Europe, the Middle East and Africa 607.7   446.5   191.8   1’246.0 – thereof United Kingdom – thereof Saudi Arabia – thereof Germany – thereof France – thereof Spain Americas – thereof USA Asia-Pacific – thereof China Total millions of CHF 36.7   91.1   60.6   34.7   43.1   123.0   32.4   46.1   36.4   5.9   15.7   30.7   39.3   8.2   5.4   175.5 154.2 145.9 79.3 54.5 452.8   561.2   185.8   1’199.8 261.7   435.3   130.7   827.7 293.9   147.2   177.7   24.7   394.9   266.7   836.0 469.1 1’354.4   1’154.8   772.5   3’281.7 Flow Equipment   Services   Chemtech   2022 Total Sulzer Europe, the Middle East and Africa 602.0   439.9   166.0   1’207.9 – thereof United Kingdom – thereof Germany – thereof Saudi Arabia – thereof France – thereof Russia Americas – thereof USA Asia-Pacific – thereof China Total 36.3   87.8   66.3   32.3   31.2   112.9   43.1   23.7   31.3   23.2   15.7   17.0   20.3   8.6   14.0   164.9 147.9 110.3 72.2 68.4 420.9   525.5   196.4   1’142.8 223.6   397.1   141.3   761.9 300.1   151.6   202.2   28.3   377.5   254.6   829.2 485.1 1’323.0   1’117.0   739.9   3’179.9                                                                                                                                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 97 Segment information by market segment The following table shows the allocation of sales from external customers by market segment.  Sales by market segment – Flow Equipment millions of CHF Water Energy Industry Total Flow Equipment Sales by market segment – Services millions of CHF Pumps Services Other Equipment Total Services Sales by market segment – Chemtech millions of CHF Chemicals Gas and Refining Renewables Services Water Total Chemtech 2023   497.7   453.0   403.7   2022 489.8 453.4 379.7 1’354.4   1’323.0 2023   629.3   525.5   1’154.8   2023   357.8   174.8   115.8   94.0   30.1   772.5   2022 593.7 523.4 1’117.0 2022 398.4 130.4 73.9 108.5 28.6 739.9                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 98 4 Acquisitions of subsidiaries and transactions with non- controlling interests  Contingent consideration for former acquisitions millions of CHF Balance as of January 1 Payment of contingent consideration Release to other operating income Currency translation differences Total contingent consideration as of December 31 – thereof non-current – thereof current 2023   1.9   –1.3   –0.5   –0.1   –   –   –   2022 5.9 –4.2 – 0.2 1.9 – 1.9 The group paid a contingent consideration in the amount of CHF 1.3 million and recorded a release to other operating income amounting to CHF 0.5 million, both related to an acquisition in 2021. The payment of CHF 1.3 million is presented in the cash flow statement in "Acquisitions of subsidiaries, net of cash acquired". No businesses were acquired in 2023. Transactions with non-controlling interests millions of CHF Carrying amount of non-controlling interests acquired (disposed) Consideration received (paid) in cash Non-cash consideration Consideration payable Decrease in equity attributable to owners of Sulzer Ltd 2023   0.4   –19.4   –2.8   –0.6   –22.4   2022 –0.8 0.4 – – –0.4 In January 2023, the group acquired the remaining 25% ownership in Sulzer Saudi Pump Company Limited for a total consideration of CHF 22.8 million, of which CHF 19.4 million were paid in cash.                              Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 99 5 Disposals, loss of control and disposal group held for sale Disposals and loss of control in 2023 In February 2023, the group entered into an agreement with a third party for the sale of four legal entities in Russia (AO Sulzer Pumps, Sulzer Pumps Rus LLC, Sulzer Turbo Services Rus LLC and Sulzer Chemtech LLC). From the date of the sales agreement, the group lost power over the relevant activities of these entities due to the contractual requirements and legal environment. Consequently, these four entities were deconsolidated in 2023, resulting in the derecognition of the assets and liabilities previously classified as held for sale. The deconsolidation resulted in a gain on deconsolidation amounting to CHF 8.0 million, of which CHF 11.2 million resulted from the reclassification of accumulated currency translation differences and CHF 0.6 million from the reclassification of cash flow hedge reserves, net of tax. The gain on deconsolidation is recorded in other operating income / (expenses), net. A loan with one of the former subsidiaries was measured at a fair value and recognized as a current financial asset at the time control was lost. The payment received on the financial asset exceeded the estimated fair value, the income from the impairment release was recorded in other financial income (see note 12 ). Including other minor disposals in 2023, a net gain on disposal (pre-tax) of CHF 7.2 million was recorded in other operating income / (expenses), net, of which CHF 10.9 million pertains to the reclassification of accumulated currency translation differences and CHF 0.6 million to the reclassification of cash flow hedge reserves, net of tax (see note 11 ). The aggregated assets and liabilities derecognized in the year 2023 as part of the disposals are presented in the below table.  millions of CHF Property, plant and equipment Deferred income tax assets Inventories and advance payments to suppliers Trade accounts receivable Cash and cash equivalents Non-current liabilities Trade accounts payable Contract liabilities Current lease liabilities Current provisions Other current and accrued liabilities Net assets derecognized 2023 1) 0.2 0.6 0.1 0.4 32.6 –0.3 –0.6 –13.3 –0.2 –0.4 –10.7 8.5 1) Assets and liabilities classified as assets and liabilities of disposal groups held for sale prior to the disposal are presented as per their initial classification prior to the classification as held for sale. Cash flow from divestments millions of CHF Cash consideration received Cash disposed of Cash consideration received for divestments in prior years Total cash flow from divestitures, net of cash derecognized 2023   5.8   –32.6   0.3   –26.6   2022 7.8 –4.6 – 3.2                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 100 Disposals and loss of control in 2022 In the first half year of 2022, the group sold its 100% shareholding in the Brazilian subsidiary Sulzer Services Brasil, Triunfo. The disposal resulted in a loss of CHF 0.6 million, including a loss of CHF 1.0 million from the reclassification of currency translation differences into the income statement. The deconsolidation of two Polish subsidiaries resulted in a loss of CHF 6.2 million, including a loss of CHF 1.2 million from the reclassification of currency translation differences into the income statement. The investment retained was valued at zero. The losses are recorded in other operating expenses (see note 11 ). The assets and liabilities derecognized in the year 2022 as part of the disposals are presented in the below table. millions of CHF Property, plant and equipment Deferred income tax assets Inventories and advance payments to suppliers Trade accounts receivable Contract assets Other current receivables Cash and cash equivalents Non-current provisions Trade accounts payable Contract liabilities Other current and accrued liabilities Net assets derecognized 2022 2.5 0.2 2.0 9.0 0.6 1.9 4.7 –0.3 –2.6 –0.7 –4.8 12.5 Disposal group held for sale in 2022 In the June 2022, the four legal entities in Russia were classified as 'held for sale,' and as a result, impairments of CHF 88.9 million were recorded, of which CHF 32.2 million in other operating expenses, CHF 38.8 million in cost of goods sold, CHF 15.7 million in general and administrative expenses, and CHF 2.2 million in the income tax expenses line. The write-downs included mainly impairments of goodwill, other intangible assets, property, plant and equipment, lease assets, inventory and advance payments from customers. The total net impairment loss recorded on contract assets and receivables amounted to CHF 37.4 million as of December 31, 2022.                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 101 6 Critical accounting estimates and judgments All estimates and assessments are continually reviewed and are based on historical experience and other factors, including expectations regarding future events that appear reasonable under the given circumstances. The group makes estimates and assumptions that relate to the future. By their nature, these estimates will only rarely correspond to actual subsequent events. The estimates and assumptions that carry a significant risk, in the form of a substantial adjustment to the measurement of assets and liabilities within the next financial year, are set out below. Employee benefit plans Assets, liabilities and costs for defined benefit pension plans and other post-employment plans are determined on an actuarial basis using a number of assumptions. Assumptions used in determining the defined benefit assets / obligations include the discount rate, future salary and pension increases, and mortality rates. The assumptions are reviewed and reassessed at the end of each year based on observable market data, i.e., market yields of high-quality corporate bonds denominated in the corresponding currency and asset management studies. In case a defined benefit plan results in a surplus, the group needs to calculate the asset ceiling and the present value of the economic benefits available in the form of refunds or reductions in future contributions to the plan. For the calculation of the economic benefits, the future benefits are discounted with the applicable discount rate, adjusted for estimated future salary increases. These estimates might significantly impact the balance sheet. Further details on the defined benefit plans are provided in note 9  and note 34 . Income taxes The group is subject to income taxes in numerous jurisdictions. Assumptions are required in order to determine income tax provisions. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Management believes that the estimates are reasonable, and that the recognized liabilities for income tax-related uncertainties are adequate. Further details are disclosed in note 13 . Goodwill and other intangible assets The group carries out an annual impairment test on goodwill in the first quarter of the year (after the budget and the three-year strategic plan have been approved by the Board of Directors in February), or when indications of a potential impairment exist. The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations, with the terminal growth rate, the discount rate, and the projected cash flows as the main variables. Information about assumptions and estimation uncertainties that have significant risk of resulting in a material adjustment are disclosed in note 14 . The accounting policies are disclosed in note 34 . Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 102 Lease assets and lease liabilities The group has applied judgment to determine the lease term for lease contracts that include renewal and termination options. The assessment of whether the group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and lease assets recognized. This assessment depends on economic incentives, such as removal and relocation costs. Further details are disclosed in note 16  and note 34 . Sales At contract inception, the group assesses the goods or services promised in a contract with a customer and identifies each promise to transfer to the customer as a performance obligation. The group considers the terms of the contract and all other relevant facts, including the economic substance of the transaction. Judgment is needed to determine whether there is a single performance obligation or multiple separate performance obligations.  If the consideration promised in a contract includes a variable amount (e.g., expected liquidated damages, early payment discounts, volume discounts), the group estimates the amount of consideration to which the group will be entitled in exchange for transferring the promised goods or services to a customer. The amount of the variable consideration is estimated by using either of the following methods, depending on which method the group expects to better predict the amount of consideration to which it will be entitled: the expected value or the most likely amount. The method selected is applied consistently throughout the contract and to similar types of contracts when estimating the effect of uncertainty on the amount of variable consideration to which the group is entitled. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. To allocate the transaction price to each performance obligation on a relative stand-alone selling price basis, the group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. If the stand-alone selling price is not directly observable, then the group estimates the amount with the expected cost-plus-margin method. The group recognizes sales either over time or at a point in time. Sales are recognized over time if any of the conditions described in note 34  are met. The most critical estimate in determining whether sales should be recorded over time or at a point in time, is the existence of a right to payment. The group estimates if an enforceable right to payment (including reasonable profit margin) for performance to date exists in case the customer terminates the contract for convenience. For this estimate, the group reviews the contracts and considers relevant laws, legal precedents and customary business practice. Applying the over time method requires the group to estimate the proportional sales and costs. To measure the stage of completion, generally, the cost-to-cost method is applied. Work progress of sub-suppliers is considered in determining the stage of completion. If circumstances arise that may change the original estimates of sales, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated sales or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management. Further details are disclosed in note 20  and note 34 . Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 103 Provisions Provisions are made, among other reasons, for warranties, disputes, litigation and restructuring. A provision is recognized in the balance sheet when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The nature of these costs is such that judgment has to be applied to estimate the timing and amount of cash outflows. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. Further details are disclosed in note 27  and note 34 .  Financial assets The fair value needs to be measured for the financial assets measured at fair value through P&L. If there is no observable fair value, valuation approaches relying on unobservable inputs are used. These inputs inherently require a higher level of judgement. Assumptions and estimates of unobservable market inputs in the fair valuation of financial assets require significant judgment and could affect amounts recognized in the statement of income. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 104 7 Financial risk management 7.1 Financial risk factors The group’s activities expose it to market, credit and liquidity risks. The group’s overall risk management program focuses on the mitigation of such risks to minimize potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures. Financial risk management is carried out by a central treasury department (Group Treasury). Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the group’s subsidiaries. Principles for overall risk management and policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non- derivative financial instruments, and investment of excess liquidity exist in writing. a) Market risk (I) Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The group is exposed to transactional foreign currency risk to the extent that sales, purchases, license fees, borrowings and other balance sheet items are denominated in currencies other than the functional currencies of group companies. The exposure originates mainly from group companies with the functional currencies CHF, USD, EUR, CNY and INR. Management has set up a policy to require subsidiaries to manage their foreign exchange risk against their functional currency. The subsidiaries are required to hedge their major foreign exchange risk exposure using forward contracts or other standard instruments, usually transacted with Group Treasury. The group’s management policy is to hedge 90% to 100% of the contractual FX exposures. The group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. The contracts are generally designated for hedge accounting as cash flow hedges. The group determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount and timing of the respective cash flows. For hedges of foreign currency purchases, the group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the group uses the hypothetical derivative method to assess effectiveness. In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated. External foreign exchange contracts are designated as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis. The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. If required, currency exposure arising from the net assets of the group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. Derivative financial instruments are only used on an ad hoc basis to manage foreign currency translation risk. The following tables show the hypothetical influence on the income statement for 2023 and 2022 related to foreign exchange risk of financial instruments. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. For 2023, the currency pair with the most significant exposure and inherent risk was the EUR versus the BRL. If, on December 31, 2023, the EUR had increased by 12.0% against the BRL with all other variables held Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 105 constant, profit after tax for the year would have been CHF 0.6 million lower due to foreign exchange losses on EUR-denominated financial assets. A decrease of the rate would have caused a profit of the same amount. Hypothetical impact of foreign exchange risk on income statement millions of CHF Currency pair Exposure Volatility Effect on profit after tax (rate increase) Effect on profit after tax (rate decrease) millions of CHF Currency pair Exposure Volatility Effect on profit after tax (rate increase) Effect on profit after tax (rate decrease) 2023 EUR/BRL   EUR/CNY   EUR/INR   USD/MXN –6.7   6.5   –5.8   3.3 12.0%   6.7%   7.2%   11.4% –0.6   0.6   0.3   –0.3   –0.3   0.3   0.3 –0.3 2022   EUR/RUB   USD/BRL   EUR/BRL   USD/BHD 5.9   7.8   –6.0   7.8 54.5%   18.9%   19.1%   10.0% 2.3   –2.3   1.1   –1.1   –0.8   0.8   0.6 –0.6 The following tables show the hypothetical influence on equity for 2023 and 2022 related to foreign exchange risk of financial instruments for the most important currency pairs as of December 31 of the respective year. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. Most of the hypothetical effect on equity is a result of fair value changes of derivative financial instruments designated as cash flow hedges. Hypothetical impact of foreign exchange risk on equity millions of CHF 2023 Currency pair   GBP/USD   USD/MXN   EUR/USD   CHF/EUR   USD/INR   EUR/BRL   USD/CAD Exposure Volatility 116.1   –57.2   52.5   –60.9   –59.9   15.7   8.3%   11.4%   7.6%   5.1%   3.2%   12.0%   –26.4 6.1% Effect on equity, net of taxes (rate increase) Effect on equity, net of taxes (rate decrease) 7.3   –4.9   3.0   –2.4   –1.5   1.4   –1.2 –7.3   4.9   –3.0   2.4   1.5   –1.4   1.2 millions of CHF 2022 Currency pair   GBP/USD   EUR/USD   USD/MXN   EUR/CHF   USD/INR   GBP/EUR   USD/CHF Exposure Volatility 156.3   47.6   –42.7   –57.9   –46.9   –28.7   12.5%   10.1%   10.4%   7.6%   5.2%   7.7%   –22.9 9.4% Effect on equity, net of taxes (rate increase) Effect on equity, net of taxes (rate decrease) 14.3   3.5   –3.2   –3.2   –1.8   –1.6   –1.6 –14.3   –3.5   3.2   3.2   1.8   1.6   1.6                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 106 (II) Price risk As of December 31, 2023, and 2022, the group was not exposed to significant price risk related to investments in equity securities. (III) Interest rate risk The group’s interest rate risk arises from interest-bearing assets and liabilities. Financial assets and liabilities at variable rates expose the group to cash flow interest rate risk. The group analyzes its interest rate exposure on a net basis, and if required, enters into derivative instruments in order to keep the volatility of net interest income or expense limited. The group’s non-current interest-bearing liabilities mainly comprise of bonds with a fixed interest rate. The following table shows the hypothetical influence on the income statement for variable interest- bearing assets net of liabilities at variable interest rates, assuming market interest rate levels would have increased/decreased by 100 basis points. For the most significant currencies, CHF, USD, EUR, CNY and INR, increasing interest rates would have had a positive impact on the income statement, since the value of variable interest-bearing assets (comprising mainly cash and cash equivalents) exceed the value of variable interest-bearing liabilities. Hypothetical impact of interest rate risk on income statement millions of CHF 2023 Variable interest-bearing assets (net) Amount Sensitivity in basis points Impact on post-tax profit rate increase   rate decrease CHF USD EUR CNY INR millions of CHF Variable interest-bearing assets (net) CHF USD EUR CNY INR 282.2   180.1   172.1   144.1   39.2   100   100   100   100   100   2.1   1.4   1.3   1.1   0.3   –2.1 –1.4 –1.3 –1.1 –0.3 2022 Amount Sensitivity in basis points Impact on post-tax profit rate increase   rate decrease 417.2   264.4   181.3   174.0   29.8   100   100   100   100   100   3.0   1.9   1.3   1.3   0.2   –3.0 –1.9 –1.3 –1.3 –0.2 On December 31, 2023, if the interest rates on CHF-denominated assets net of liabilities had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 2.1 million higher, as a result of higher interest income on CHF-denominated assets. A decrease of interest rates on CHF-denominated assets net of liabilities would have caused a loss of the same amount. As of December 31, 2022, if the interest rates had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 3.0 million higher, as a result of higher interest income on CHF-denominated assets.                                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 107 b) Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with financial institutions and credit exposures to customers, including outstanding trade receivables, and contract assets. The maximum exposure to credit risk per class of financial asset is disclosed by carrying amounts in the fair value table. Equity instruments are not exposed to credit risks. The carrying amounts of financial assets and contract assets represent the maximum credit risk exposure. Credit risks of banks and financial institutions are monitored and managed centrally. Generally, only independently rated parties with a strong credit rating are accepted, and the total volume of transactions is split among several banks to reduce the individual risk with one bank. For every customer with a large order volume, an individual risk assessment of the credit quality of the customer is performed that considers independent ratings, financial position, past experience and other factors. Additionally, bank guarantees and letters of credit are requested. For more details on the credit risk of contract assets, please refer to note 20 , and on the credit risk of trade accounts receivable, please refer to note 21 . c) Liquidity risk Prudent liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funding from an adequate number of committed credit facilities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury maintains flexibility in funding through committed and uncommitted credit lines. Management anticipates the future development of the group’s liquidity reserve on the basis of expected cash flows by performing regular group-wide cash forecasts. As of December 2023, Sulzer had access to a syndicated credit facility of CHF 500 million maturing on December 31, 2026. The facility includes two one-year extension options and a further option to increase the credit facility by CHF 250 million (subject to lenders’ approval). In 2022 and 2023, the group exercised the options, extending the term of the credit facility in the amount of CHF 415 million to December 2028. The following table analyzes the group’s financial liabilities in relevant maturity groupings based on the remaining period from the reporting to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows translated at year-end closing rates, if not denominated in CHF. Borrowings include the notional amount and interest payments. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 108 Trade accounts payable 367.7   367.7   –   Maturity profile of financial liabilities millions of CHF Borrowings Lease liabilities Other current and non-current liabilities (excluding derivative liabilities) Derivative liabilities – thereof outflow – thereof inflow millions of CHF Borrowings Lease liabilities Carrying amount   <1 year   1–5 years   >5 years   2023 Total 1’056.3   279.3   816.8   0.6   1’096.7 93.0   24.7   53.4   24.6   405.5   404.3   1.2   3.2   3.2   279.3   276.1   –   –   –   –   –   –   –   –   102.7 367.7 405.5 3.2 279.3 276.1 2022 Total 96.7 440.8 Carrying amount   <1 year   1–5 years   >5 years   1’355.3   330.0   1’080.6   –   1’410.6 89.6   22.8   48.2   25.7   Trade accounts payable 440.8   440.8   –   –   Other current and non-current liabilities (excluding derivative liabilities) Derivative liabilities – thereof outflow – thereof inflow 7.2 Capital risk management 432.5   431.2   7.0   7.0   –   –   604.7   597.7   0.1   0.0   9.9   9.9   1.2   432.5 –   –   –   7.0 614.6 607.6 The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In this respect, the group aims at maintaining an investment-grade credit rating, either as a perceived rating or an external rating issued by a credit rating agency. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.                                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 109 The following table shows the net debt/EBITDA ratio as of December 31, 2023, and 2022. Net debt/EBITDA ratio millions of CHF 2023   2022 Cash and cash equivalents Current financial assets Non-current borrowings Non-current lease liabilities Current borrowings Current lease liabilities Net debt as of December 31 Operating income (EBIT) Depreciation Impairments on tangible and intangible assets 1) Amortization EBITDA Net debt EBITDA Net debt/EBITDA ratio –974.7   –2.3   795.2   69.0   261.1   23.9   172.3   329.7   71.4   0.2   36.6   437.9   172.3   437.9   0.39   –1’196.3 –14.0 1’043.9 67.2 311.4 22.4 234.6 111.4 76.0 44.5 38.8 270.7 234.6 270.7 0.87 1) Impairments on tangible and intangible assets in 2022 include CHF 32.4 million impairments recorded in connection with the Russian business classified as held for sale, see Note 11. Another important ratio for the group is the gearing ratio (borrowings-to-equity ratio), which is calculated as total borrowings and lease liabilities divided by equity attributable to shareholders of Sulzer Ltd. As of December 31, 2023, and 2022, the gearing ratio was as follows: Gearing ratio (borrowings-to-equity ratio) millions of CHF Non-current borrowings Non-current lease liabilities Current borrowings Current lease liabilities Total borrowings and lease liabilities Equity attributable to shareholders of Sulzer Ltd Gearing ratio (borrowings-to-equity ratio) 2023   795.2   69.0   261.1   23.9   1’149.2   1’095.4   1.05   2022 1’043.9 67.2 311.4 22.4 1’444.9 1’024.3 1.41 For the definition of net debt, EBITDA and gearing ratio, please refer to the section “ Supplementary information ”.                                                                               Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 110 7.3 Fair value estimation The following tables present the carrying amounts and fair values of financial assets and liabilities as of December 31, 2023, and 2022, including their levels in the fair value hierarchy. For financial assets and financial liabilities not measured at fair value in the balance sheet, fair value information is not provided if the carrying amount is a reasonable approximation of fair value. Fair values are categorized into three different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: The fair value of financial instruments traded in active markets, including the outstanding bonds, is based on quoted market prices at the balance sheet date. Such instruments are included in level 1. The fair values included in level 2 are based on valuation techniques using observable market input data. This may include discounted cash flow analysis, option pricing models or reference to other instruments that are substantially the same, while always making maximum use of market inputs and relying as little as possible on entity-specific inputs. The fair values of forward contracts are measured based on broker quotes for foreign exchange rates and interest rates. Fair values determined using unobservable inputs are categorized within level 3 of the fair value hierarchy. Level 3 instruments consist of non-current financial assets at fair value through profit or loss. Non-current financial assets at fair value through profit or loss consist of unquoted equity or debt instruments including private equity or fund investments. Fair values are mainly determined based on external valuations. Unrealized fair value gains are recorded in other financial income / (expenses), net. For the partial release of a contingent consideration, an income of CHF 0.5 million (2022: CHF 0.0 million) was recorded in other operating income. For more information, please refer to note 4 . Level 3 financial assets at fair value through profit or loss  millions of CHF Balance as of January 1 Additions Reclassification Unrealized fair value gain, net Total level 3 financial assets at fair value through profit or loss as of December 31 2023   22.6   0.6   –3.0   1.9   22.0   2022 8.6 6.4 – 7.6 22.6 In 2022, additional assets were measured at fair value and categorized within level 3 due to the classification as held for sale. The fair value of these assets was determined to be zero and losses in the amount of CHF 32.4 million were recorded. These assets were part of the Russian business that was deconsolidated in 2023, see note 5 and note 11 .              Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 111 Fair value table millions of CHF   Notes   Financial assets measured at fair value Other non-current financial assets (at fair value) Derivative assets – current Current financial assets (at fair value) Total financial assets measured at fair value 18   22,29   18   Financial assets not measured at fair value Other non-current financial assets (at amortized cost) Non-current receivables (excluding non-current derivative assets) Trade accounts receivable Other current receivables (excluding current derivative assets and other taxes) Current financial assets (at amortized cost) Cash and cash equivalents Total financial assets not measured at fair value 18   21   22   18   23   Carrying amount Financial assets at fair value through other comprehensive income – equity instruments   Financial assets at amortized cost   Fair value hedging instruments   Fair value through profit or loss   December 31, 2023 Fair value Other financial liabilities   Total carrying amount   Level 1   Level 2   Level 3   Total fair value 22.2   9.5   13.9   31.7   13.9   9.7   –   –   13.9   22.0   –   31.7 13.9 1.6   1.6   1.6   –   –   1.6 13.9   23.8   9.5   –   –   47.2   11.3   13.9   22.0   47.2 6.7   6.7   1.2   540.8   22.6   0.7   974.7   1.2   540.8   22.6   0.7   974.7   –   –   –   1’546.7   –   1’546.7   Financial liabilities measured at fair value Derivative liabilities – current 28,29   Total financial liabilities measured at fair value 3.2   3.2   –   –   –   –   3.2   3.2   –   –   3.2   3.2   –   –   3.2 3.2 Financial liabilities not measured at fair value Outstanding non-current bonds   Other non-current borrowings Other non-current liabilities (excluding non-current derivative liabilities) Outstanding current bonds Other current borrowings and bank loans Trade accounts payable Other current liabilities (excluding current derivative liabilities and other taxes) Total financial liabilities not measured at fair value 26   26   26   26   28   786.2   –   –   786.2 250.0   –   –   250.0 794.3   0.9   794.3   0.9   1.2   250.0   11.1   367.7   1.2   250.0   11.1   367.7   404.3   404.3   –   –   –   –   1’829.5   1’829.5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 112 Fair value table millions of CHF   Notes   Fair value hedging instruments   Fair value through profit or loss   Carrying amount Financial assets at fair value through other comprehensive income – equity instruments   Financial assets at amortized cost   December 31, 2022 Fair value Other financial liabilities   Total carrying amount   Level 1   Level 2   Level 3   Total fair value Financial assets measured at fair value Other non-current financial assets (at fair value) Derivative assets – non-current Derivative assets – current Current financial assets (at fair value) Total financial assets measured at fair value Financial assets not measured at fair value Other non-current financial assets (at amortized cost) Non-current receivables (excluding non-current derivative assets) Trade accounts receivable Other current receivables (excluding current derivative assets and other taxes) Current financial assets (at amortized cost) Cash and cash equivalents Total financial assets not measured at fair value Financial liabilities measured at fair value Derivative liabilities – non- current Derivative liabilities – current Contingent considerations Total financial liabilities measured at fair value Financial liabilities not measured at fair value Outstanding non-current bonds   Other non-current liabilities (excluding non-current derivative liabilities) Outstanding current bonds Other current borrowings and bank loans Trade accounts payable Other current liabilities (excluding current derivative liabilities, other taxes and contingent considerations) Total financial liabilities not measured at fair value 18   29   22,29   18   22.8   –   0.1   13.2   1.5   13.2   24.4   8.8   8.8   22.8   0.1   13.2   0.2   –   –   –   0.1   13.2   22.6   –   –   22.8 0.1 13.2 10.3   10.3   –   –   10.3 –   –   46.4   10.5   13.2   22.6   46.4 18   21   22   18   23   5.6   5.6   0.9   585.5   23.4   3.6   1’196.3   0.9   585.5   23.4   3.6   1’196.3   –   –   –   1’815.5   –   1’815.5   29   28,29   4   0.0   7.0   7.0   1.9   1.9   0.0   7.0   1.9   8.9   –   –   –   –   0.0   7.0   –   –   –   1.9   7.0   1.9   0.0 7.0 1.9 8.9 –   –   –   26   26   26   28   1’043.9   1’043.9   1’003.7   –   –   1’003.7 288.5   –   –   288.5 1.3   289.9   21.5   440.8   1.3   289.9   21.5   440.8   396.3   396.3   –   –   –   –   2’193.6   2’193.6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 113 8 Personnel expenses millions of CHF Salaries and wages Defined contribution plan expenses Defined benefit plan expenses Cost of share-based payment transactions Social benefit costs Other personnel costs Total personnel expenses 2023   822.6   29.9   14.4   12.6   119.5   31.7   2022 793.2 29.6 15.7 15.4 112.3 36.2 1’030.8   1’002.4                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 114 9 Employee benefit plans The present value of the defined benefit obligations and costs of the defined benefits are calculated using the projected unit credit method. For active members the calculation considers future salary increases, future pension increases as well as the probability of departures, and for retirees, current and future pension benefits considering future pension increases. Reconciliation of the amount recognized in the balance sheet as of December 31 millions of CHF Present value of funded defined benefit obligation Fair value of plan assets (funded plans) Overfunding / (underfunding) Present value of unfunded defined benefit obligation Adjustment to asset ceiling Net asset / (liability) recognized in the balance sheet Funded plans Switzerland   Funded plans United Kingdom   Funded plans USA   Funded plans others   Unfunded plans   Total 2023 –731.2   –346.1   –48.6   –83.1   899.9   168.8   268.5   –77.6   38.6   56.2   –10.0   –27.0   –   –   –   –1’209.0 1’263.2 54.2 –   –   –   –   –   –   –   –   –10.9   –10.9 –   – 168.8   –77.6   –10.0   –27.0   –10.9   43.2 – thereof defined benefit obligations –   –77.6   –10.0   –28.7   –10.9   –127.3 – thereof defined benefit assets 168.8   –   –   1.7   –   170.5 millions of CHF Present value of funded defined benefit obligation Fair value of plan assets (funded plans) Overfunding / (underfunding) Present value of unfunded defined benefit obligation Adjustment to asset ceiling Net asset / (liability) recognized in the balance sheet – thereof defined benefit obligations – thereof defined benefit assets Funded plans Switzerland   Funded plans United Kingdom   Funded plans USA   Funded plans others   Unfunded plans   Total 2022 –716.8   –355.3   –53.7   –78.3   914.7   197.9   277.2   –78.0   43.5   57.1   –10.2   –21.2   –   –   –   –1’204.0 1’292.5 88.5 –   –197.9   –   –   –   –   –   –11.5   –11.5 –0.0   –   –197.9 –   –   –   –78.0   –10.2   –21.2   –11.5   –121.0 –78.0   –10.2   –22.5   –11.5   –122.2 –   –   1.3   –   1.3 The group operates major funded defined benefit pension plans in Switzerland, the UK and the USA. The main unfunded defined benefit plan is a German pension benefit plan. The plans are exposed to actuarial risks, e.g., longevity risk, currency risk and interest rate risk, and the funded plans additionally to market (investment) risk.                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 115 In Switzerland, the group contributes to two pension plans funded via two different pension funds, i.e., a base plan for all employees and a supplementary plan for employees with salaries exceeding a certain limit. Both plans provide benefits depending on the pension savings at retirement. They include certain legal minimum interest credits to the pension savings (i.e., investment return) and guaranteed rates of conversion of pension savings into an annuity at retirement. In addition, the plans offer death in service and disability benefits. The two pension funds are collective funds administrating pension plans of group companies and also unrelated companies. In case of a material underfunding of the pension plans, the regulations include predefined steps, such as higher contributions by employer and employees or lower interest on pension savings, to eliminate the underfunding. The pension funds are legally separated from the group. The vast majority of the active participants in the two pension funds are employed by companies not belonging to the group. The Board of Trustees for the base plan comprises 10 employee representatives and 10 employer representatives. The discount rate in 2023 decreased compared to 2022 (from 2.2% to 1.5% for active employees and from 2.3% to 1.5% for pensioners). In 2023, a gain from the change in effect of asset ceiling amounting to CHF 202.3 million (2022: loss of CHF 197.9 million) was recorded in other comprehensive income (OCI) related to the Swiss pension plans. The net pension asset increased from CHF 0.0 million to CHF 168.8 million. The total expenses recognized in the income statement in 2023 amounted to CHF 11.3 million (2022: CHF 13.7 million) and includes past service costs amounting to CHF 1.3 million. The past service costs were recorded for a plan amendment to one of the pension plans, enabling employees to extend the retirement saving process.  In the UK, the plan is a final salary plan and provides benefits linked to salary at closure to future accrual adjusted for inflation to retirement or earlier date of leaving service. The scheme is fully closed to new entrants and future accruals. The scheme is managed by nine trustees forming the Board. The plan is a multiemployer scheme with Sulzer (UK) Holding being the principal sponsor. The discount rate decreased in 2023 by 0.2 percentage points to 4.7% (2022: 4.9%). The net pension liability decreased from CHF 78.0 million in 2022 to CHF 77.6 million in 2023, with a loss recognized in OCI amounting to CHF 6.6 million (2022: gain of CHF 15.3 million). In 2023, the total expenses recognized in the income statement amounted to CHF 3.8 milli on (2022: CHF 2.8 million). In the USA, the group operates non-contributory defined benefit retirement plans. The salaried plans provide benefits that are based on years of service and the employee’s compensation, averaged over the five highest consecutive years preceding retirement. The hourly plans’ benefits are based on years of service and a flat dollar benefit multiplier. All plans are closed to new entrants. The discount rate decreased in 2023 to 4.7% (2022: 4.8%). The net pension liability decreased from CHF 10.2 million in 2022 to CHF 10.0 million in 2023 with a loss recognized in OCI amounting to CHF 0.4 million (2022: gain of CHF 8.9 million). The total expenses recognized in 2023 amounted to CHF 1.1 million (2022: CHF 1.1 million). In Germany, the group operates a range of different defined benefit pension plans, with one unfunded plan and two funded plans. All defined benefit plans are closed for new entrants and a new defined contribution plan for all employees was introduced in 2007. Existing employees who participated in the defined benefit plans continued to be eligible for these defined benefit pensions but also became eligible for the new defined contribution pensions. However, benefits received under the defined contribution plan are offset against the benefits under the defined benefit plans. The different defined benefit plans offer retirement pension, disability pension and survivor’s pension benefits. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 116 Employee benefit plans millions of CHF Reconciliation of effect of asset ceiling Adjustment to asset ceiling at January 1 Interest (expenses) / income on effect of asset ceiling Change in effect of asset ceiling excl. interest (expenses) / income Currency translation differences Adjustment to asset ceiling at December 31 Reconciliation of net asset / (liability) recognized in the balance sheet Net asset / (liability) recognized at January 1 Defined benefit income / (expenses) recognized in the income statement Defined benefit income / (expenses) recognized in OCI Employer contributions Divestitures of subsidiaries Reclassification 1) Currency translation differences Net asset / (liability) recognized at December 31 Components of defined benefit income / (expenses) in the income statement Current service costs (employer) Past service costs Gains and (losses) on settlement Interest expenses Interest income on plan assets Interest expenses / (income) on effect of asset ceiling Other administrative costs Income / (expenses) recognized in the income statement – thereof charged to personnel expenses – thereof charged to interest income / expenses, net Components of defined benefit gains / (losses) in OCI Actuarial gains / (losses) on defined benefit obligation Returns on plan assets excl. interest income Changes in effect of asset ceiling excl. interest expenses / (income) Returns on reimbursement right excl. interest income / (expenses) Defined benefit gains / (losses) recognized in OCI 2) 1) Defined benefit plans reclassified from provisions to defined benefit obligation, see note 27. 2) The tax effect on defined benefit cost recognized in OCI amounted to CHF -31.5 million (2022: CHF 15.4 million). 2023   –197.9   –4.4   202.3   –0.0   –   –121.0   –20.1   160.3   24.1   –   –6.0   5.9   43.2   –12.1   –1.5   0.1   –38.5   37.2   –4.4   –0.9   –20.1   –14.4   –5.7   –64.6   22.4   202.3   0.2   160.3   2022 – – –197.9 –0.0 –197.9 –45.7 –18.7 –90.8 24.8 0.2 – 9.2 –121.0 –16.4 0.9 1.3 –17.3 14.5 – –1.5 –18.7 –15.7 –2.9 366.3 –259.4 –197.9 0.2 –90.8                                                                                                                         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 117 Employee benefit plans millions of CHF 2023   2022 Reconciliation of defined benefit obligation (funded and unfunded plans) Defined benefit obligation as of January 1 –1’215.6   –1’692.3 Interest expenses Current service costs (employer) Past service costs Contributions by plan participants Benefits paid / (deposited) Gains and (losses) on settlement Other administrative costs Actuarial gains / (losses) Divestitures of subsidiaries Reclassification 1) Currency translation differences –38.5   –12.1   –1.5   –8.1   105.1   0.1   –0.9   –64.6   –   –6.0   22.1   –17.3 –16.4 0.9 –7.5 104.4 1.3 –1.5 366.3 0.2 – 46.4 Defined benefit obligation as of December 31 –1’220.0   –1’215.6 Reconciliation of the fair value of plan assets Fair value of plan assets as of January 1 1’292.5   1’646.6 Interest income on plan assets Employer contributions Contributions by plan participants Benefits (paid) / deposited Returns on plan assets excl. interest income Currency translation differences Fair value of plan assets as of December 31 Total plan assets at fair value – quoted market price Cash and cash equivalents Equity instruments Debt instruments Real estate funds Investment funds Others Total assets at fair value – quoted market price as of December 31 Total plan assets at fair value – non-quoted market price Properties occupied by or used by third parties (real estate) Others Total assets at fair value – non-quoted market price as of December 31 37.2   24.1   8.1   –104.9   22.4   –16.3   1’263.2   52.3   242.4   272.5   29.4   5.0   72.5   674.1   271.3   317.7   589.0   14.5 24.8 7.5 –104.4 –259.4 –37.1 1’292.5 44.5 237.8 292.7 33.0 4.9 80.6 693.5 270.0 329.1 599.0 Best estimate of contributions for upcoming financial year Contributions by the employer 25.3   23.9 1) Defined benefit plans reclassified from provisions to defined benefit obligation, see note 27.                                                                                                                                                   Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 118 Employee benefit plans millions of CHF Components of defined benefit obligation, split Defined benefit obligation for active members Defined benefit obligation for pensioners Defined benefit obligation for deferred members 2023   –238.5   –777.4   –204.1   2022 –211.4 –801.4 –202.7 Total defined benefit obligation as of December 31 –1’220.0   –1’215.6 Components of actuarial gains / (losses) on obligations Actuarial gains / (losses) arising from changes in financial assumptions Actuarial gains / (losses) arising from changes in demographic assumptions Actuarial gains / (losses) arising from experience adjustments Total actuarial gains / (losses) on defined benefit obligation –55.3   12.8   –22.1   –64.6   384.1 4.0 –21.8 366.3 Maturity profile of defined benefit obligation Weighted average duration of defined benefit obligation in years 10.8   10.4 The defined benefit obligations for the Swiss and UK pension plans represent 88% (2022: 88%) of the group. The following significant actuarial assumptions were used for these two countries: Principal actuarial assumptions as of December 31 Discount rate for active employees Discount rate for pensioners Future salary increases Future pension increases 2023   2022 Funded plans Switzerland   Funded plans United Kingdom   Funded plans Switzerland   Funded plans United Kingdom 1.5%   1.5%   2.3%   0.0%   n/a   4.7%   n/a   2.7%   2.2%   2.3%   1.5%   0.0%   n/a 4.9% n/a 2.7% Life expectancy at retirement age (male / female) in years 22/23   21/24   22/24   22/24                                                                                   Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 119 Sensitivity analysis of defined benefit obligations millions of CHF Discount rate (decrease 0.25 percentage points) Discount rate (increase 0.25 percentage points) Future salary growth (decrease 0.25 percentage points) Future salary growth (increase 0.25 percentage points) Life expectancy (decrease 1 year) Life expectancy (increase 1 year) 2023   –32.1   30.4   2.1   –2.0   66.6   –64.9   2022 1) –30.8 29.3 1.9 –1.9 63.7 –61.7 1) The sensitivity impacts of the comparison period 2022 were restated to correct a prior year misstatement. The adjustments are outlined in the table below. Negative amounts in the above table indicate an increase in defined benefit obligations, positive amounts indicate a decrease in defined benefit obligations. The sensitivity analysis is based on reasonably possible changes of the significant actuarial assumptions as of year end. The sensitivities provided are based on the change in one assumption while holding the other assumptions unchanged, interdependencies were not considered.  Restatement of the sensitivity analysis on defined benefit obligations millions of CHF 2022 reported   Adjustment   2022 restated Discount rate (decrease 0.25 percentage points) Discount rate (increase 0.25 percentage points) Future salary growth (decrease 0.25 percentage points) Future salary growth (increase 0.25 percentage points) Life expectancy (decrease 1 year) Life expectancy (increase 1 year) –33.7   26.5   0.6   –6.5   15.2   –15.1   2.9   2.8   1.3   4.6   48.4   –46.5   –30.8 29.3 1.9 –1.9 63.7 –61.7                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 120 10 Research and development expenses A breakdown of the research and development expenses per division is shown in the table below: millions of CHF Flow Equipment Services Chemtech Total 2023   38.6   1.6   30.7   70.8   2022 36.7 1.8 27.8 66.4           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 121 11 Other operating income and expenses millions of CHF Income from release of contingent consideration Gain from sale of property, plant and equipment Gain from deconsolidation of subsidiaries Other operating income Total other operating income Restructuring expenses Impairments on tangible and intangible assets Cost for mergers and acquisitions Loss from sale of property, plant and equipment Loss from deconsolidation of subsidiaries Operating currency exchange losses, net Total other operating expenses Total other operating income / (expenses), net 2023   0.5   0.6   8.3   8.3   17.7   –3.0   –0.2   –1.8   –0.1   –1.1   –2.3   –8.4   9.2   2022 – 5.5 – 19.2 24.7 –0.1 –44.5 –1.5 –0.0 –6.7 –13.9 –66.7 –42.1 Other operating income includes recharges to third parties not qualifying as sales to customers, government grants and incentives, and sundry other tax refunds. In 2023, other operating income included income from charges to the discontinued operation Applicator Systems division (later renamed medmix) for corporate support functions and centrally procured indirect spend utilized by medmix of CHF 1.6 million (2022: CHF 9.8 million). In 2023, the total gain from deconsolidation primarily included a gain of CHF 8.0 million from the deconsolidation of four Russian legal entities. The total gain and loss from deconsolidation includes a net gain from the reclassification of currency translation adjustments of CHF 10.9 million and a gain of CHF 0.6 million from the reclassification of cash flow hedge reserves ( see note 5 ). In 2022, the loss from deconsolidation of subsidiaries includes a loss of CHF 6.2 million resulting from the deconsolidation of two subsidiaries in Poland and a loss of CHF 0.6 million from the disposal of a subsidiary in Brazil (see note 5 ). In 2023, the group recognized net impairment losses on tangible and intangible assets amounting to CHF 0.2 million (2022: impairment losses of CHF 44.5 million), consisting of impairment losses of CHF 1.0 million, partially offset with the reversal of impairment losses amounting to CHF 0.8 million. In 2022, impairment losses amounting to CHF 12.1 million were recorded based on performed impairment tests on production machines and facilities as well as lease assets. Impairments of CHF 32.4 million on goodwill, other intangible assets, property, plant and equipment and lease assets were recorded in connection with the classification of the business in Russia as held for sale and the write-down to fair value less costs to sell (see note 5) . In 2023, the group recognized restructuring costs of CHF 5.2 million (2022: CHF 1.8 million), partially offset with the release of restructuring provisions of CHF 2.2 million (2022: CHF 1.7 million). Restructuring costs mainly relate to the reorganization in the Flow Equipment division.                                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 122 12 Financial income and expenses millions of CHF Interest and securities income Interest income on employee benefit plans Total interest and securities income Interest expenses on borrowings and lease liabilities Interest expenses on employee benefit plans Total interest expenses Total interest income / (expenses), net Fair value changes Other financial income (expenses) Currency exchange gains / (losses), net Total other financial income / (expenses), net Total financial income / (expenses), net - thereof fair value changes on financial assets at fair value through profit or loss - thereof interest income on financial assets at amortized costs - thereof other financial expenses - thereof currency exchange gains / (losses), net - thereof interest expenses on borrowings - thereof interest expenses on lease liabilities - thereof interest expenses on employee benefit plans, net 2023   18.3   0.1   18.3   –24.5   –5.7   –30.3   –11.9   5.1   2.5   –17.9   –10.3   –22.2   5.1   18.3   2.5   –17.9   –22.1   –2.5   –5.7   2022 9.3 0.4 9.7 –24.1 –3.2 –27.3 –17.6 24.0 –1.5 –6.6 16.0 –1.6 24.0 9.3 –1.5 –6.6 –22.1 –2.0 –2.9 In 2023, the total financial expenses, net amounted to CHF 22.2 million, compared with CHF 1.6 million in 2022. The total interest and securities income amounted to CHF 18.3 million (2022: CHF 9.3 million). The increase compared to the prior year is mainly due to higher variable interest rates on deposits. The line “Fair value changesˮ includes gains from fair value changes of investments in financial instruments classified at fair value through profit or loss amounting to CHF 2.7 million (2022: CHF 8.7 million), with the remainder relating to fair value changes of derivative financial instruments used as hedging instruments to hedge foreign exchange risks. Currency exchange gains/losses are mainly related to foreign currency differences of non-operating assets and liabilities recorded at the prevailing rate at the time of acquisition (or preceding year-end closing rate) as against the current balance sheet rate. The net currency exchange loss in 2022 includes a positive foreign exchange effect of CHF 21.0 million arising on unhedged intercompany loans to Russian entities prior to their classification as held for sale.                                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 123 13 Income taxes millions of CHF Current income tax expenses Deferred income tax (expenses) income Total income tax expenses 2023   –79.1   5.4   –73.8   2022 –76.3 –2.7 –79.0 The weighted average tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes. Since the group operates in countries that have differing tax laws and rates, the consolidated weighted average effective tax rate may vary from year to year according to variations in income per country and changes in applicable tax rates. Reconciliation of income tax expenses millions of CHF Income before income tax expenses from continuing operations Weighted average tax rate Income taxes at weighted average tax rate Income taxed at different tax rates Effect of tax loss carryforwards and allowances for deferred income tax assets Expenses not deductible for tax purposes Effect of changes in tax rates and legislation Prior year items and others Total income tax expenses Effective income tax rate 2023   304.3   23.7%   –72.1   –12.3   0.9   –11.4   0.0   21.2   –73.8   24.2%   2022 107.0 23.7% –25.4 3.4 –2.7 –5.2 –2.2 –47.0 –79.0 73.8% The effective income tax rate for 2023 was 24.2% (2022: 73.8%). The effective income tax rate was impacted by income taxed at different tax rates in the amount of CHF 12.3 million due to participation exemptions on dividend income and withholding taxes on dividends, trademark royalties and interests. Expenses not deductible for tax purposes in the amount of CHF 11.4 million mainly relate to disallowances of group charges for services, financing and other expenses in India, Mexico, the UK and the USA. Prior year items and others include current tax refunds and receivables from R&D tax credits in Brazil and the USA. Additionally, a deferred income tax asset of CHF 4.0 million was recognized on a step- up in relation to the Swiss Corporate Tax Reform (TRAF) enacted in prior periods. The deconsolidation of the Russian business positively impacted the reconciliation by CHF 2.3 million. The effective income tax rate for 2022 was 73.8%. The effective income tax rate was significantly impacted by recognized impairments on the Russian business upon the classification of the four Russian entities as held for sale and the wind down of the Polish business. The total tax impact amounted to CHF 37.4 million, with CHF 32.3 million presented in prior year items and others. Furthermore, the effect of tax loss carryforwards and allowances for deferred income tax assets in the amount of –2.7 million was impacted by a reversal of Russian deferred tax assets in the amount of CHF 5.1 million. The effect of changes in tax rates and legislation mainly related to the announced tax                               Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 124 rate change in France and UK causing the revaluation of a deferred tax position in the amount of CHF –2.2 million. Expenses not deductible for tax purposes in the amount of CHF –5.2 million mainly related to disallowances of group charges and interest.  Income tax liabilities millions of CHF Balance as of January 1 Additions Released as no longer required Utilized Currency translation differences Total income tax liabilities as of December 31 – thereof non-current – thereof current 2023   32.8   78.9   –13.1   –48.8   –2.9   46.8   2.7   44.1   2022 42.4 76.1 –16.6 –67.4 –1.8 32.8 2.7 30.0 Summary of deferred income tax assets and liabilities in the balance sheet millions of CHF Intangible assets Property, plant and equipment Other financial assets Inventories Other assets Defined benefit obligations Non-current provisions Current provisions Other liabilities Tax loss carryforwards Elimination of intercompany profits Assets   Liabilities   15.0   5.2   16.6   27.4   23.7   21.8   9.6   23.9   44.4   23.1   1.0   –52.4   –13.6   –1.1   –2.2   –0.1   –0.1   –1.5   –23.0   –   –   –55.9   –32.1   2023   Net   –37.4   –8.4   15.6   25.1   21.7   9.5   22.4   21.3   23.1   1.0   61.8   Assets   Liabilities   11.8   3.6   21.3   32.3   18.9   20.7   9.1   29.2   53.6   23.5   1.1   –57.9   –17.4   –1.6   –2.1   –30.7   –   –1.0   –1.0   –16.8   –   –   225.2   –128.3   2022 Net –46.1 –13.7 19.7 30.3 –11.7 20.7 8.0 28.2 36.9 23.5 1.1 96.9 Tax assets / liabilities 211.7   –149.9   Offset of assets and liabilities –66.8   66.8   –   –75.3   75.3   – Net recorded deferred income tax assets and liabilities 144.9   –83.2   61.8   149.9   –53.0   96.9 Cumulative deferred income taxes recorded in equity as of December 31, 2023, amounted to CHF – 12.5 million (2022: CHF 21.8 million). The group does not recognize any deferred taxes on investments in subsidiaries because it controls the dividend policy of its subsidiaries – i.e., the group controls the timing of reversal of the related taxable temporary differences and management is satisfied that no material amounts will reverse in the foreseeable future.                                                                                                         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 125 Movement of deferred income tax assets and liabilities in the balance sheet millions of CHF Intangible assets Property, plant and equipment Other financial assets Inventories Other assets Defined benefit obligations Non-current provisions Current provisions Other liabilities Tax loss carryforwards Elimination of intercompany profits Total millions of CHF Intangible assets Property, plant and equipment Other financial assets Inventories Other assets Defined benefit obligations Non-current provisions Current provisions Other liabilities Tax loss carryforwards Elimination of intercompany profits Total Balance as of January 1   Recognized in profit or loss   Recognized in other comprehensive income   Divestment of subsidiaries   Currency translation differences   Balance as of December 31 2023 –46.1   –13.7   19.7   30.3   –11.7   20.7   8.0   28.2   36.9   23.5   1.1   96.9   5.7   4.5   –2.5   –3.9   17.0   –0.5   2.2   –4.5   –13.8   1.2   –0.1   5.4   –   –   –   –   –36.7   2.3   –   –   –   –   –   –34.4   –   –   –   –   –   –   –   –   –   –0.6   –   –0.6   3.0   0.8   –1.7   –1.2   –0.7   –0.8   –0.7   –1.3   –1.7   –1.1   –   –5.5   –37.4 –8.4 15.6 25.1 –32.1 21.7 9.5 22.4 21.3 23.1 1.0 61.8 2022 Balance as of Recognized in January 1   profit or loss   Recognized in other comprehensive income   Currency translation differences   Balance as of December 31 –54.6   –13.6   16.6   28.2   –32.2   33.0   13.4   26.5   33.4   28.9   0.5   80.1   4.6   –0.7   3.1   1.5   15.4   –25.2   –5.2   2.2   4.7   –3.8   0.6   –2.7   –   –   –   –   5.4   15.4   –   –   –   –   –   20.7   3.9   0.6   0.0   0.6   –0.3   –2.5   –0.2   –0.5   –1.3   –1.6   –   –1.2   –46.1 –13.7 19.7 30.3 –11.7 20.7 8.0 28.2 36.9 23.5 1.1 96.9                                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 126 Tax loss carryforwards (TLCF) millions of CHF Expiring in the next 3 years Expiring in 4–7 years Available without limitation Total tax loss carryforwards as of December 31 Potential tax Amount   assets   Valuation allowance   Carrying amount   Unrecognized TLCF 2023 2.5   3.9   207.6   213.9   0.1   1.0   37.4   38.5   –0.0   –0.0   –15.4   –15.4   0.0   1.0   22.0   23.1   – 0.4 90.5 90.9 2022 millions of CHF Expiring in the next 3 years Expiring in 4–7 years Available without limitation Total tax loss carryforwards as of December 31 Potential tax Amount   assets   Valuation allowance   Carrying amount   Unrecognized TLCF 0.1   6.0   219.4   225.5   0.0   1.1   39.4   40.5   –   –0.0   –17.0   –17.0   0.0   1.1   22.4   23.5   – 0.4 97.2 97.6 Deferred income tax assets are recognized for tax loss carryforwards to the extent that the realization of the related tax benefit through future taxable profits is probable. No deferred income tax assets have been recognized on tax loss carryforwards in the amount of CHF 90.9 million (2022: CHF 97.6 million) or on some step-ups in relation with the Swiss corporate tax reform (TRAF), which entered into effect on January 1, 2020. Global Minimum top-up tax The group operates in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Romania, South Korea, Sweden, Switzerland, and the United Kingdom, which has enacted new national legislation to implement the global minimum top-up tax. The group might be subject to the top-up tax in relation to its legal entities in Bahrain, Ireland, Qatar, and United Arab Emirates. As the new top-up tax legislation enacted in Switzerland implements only Qualified Domestic Top-up Tax (“QDMTT”) from January 1, 2024, the implementation of the QDMTTs in each individual country needs to be analyzed. Furthermore, the Group has applied the temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax. The Group recognizes the top-up tax as a current tax when it incurs. If the QDMTTs had applied in 2023, then the profits relating to the subsidiaries in Bahrain, Ireland, Qatar, and the United Arab Emirates for the year ended December 31, 2023, would not be subject to material top-up tax. The effective tax rate would not significantly increase.                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 127 14 Goodwill and other intangible assets millions of CHF Acquisition cost Balance as of January 1 Additions Disposals Reclassifications Currency translation differences Balance as of December 31 Accumulated amortization and impairment losses   Balance as of January 1 Additions 1) Disposals Currency translation differences Balance as of December 31 Net book value As of January 1 As of December 31 Goodwill Trademarks and licenses   Research and development   Computer software   Customer relationship   1’016.9   –   –   –   –38.9   977.9   340.0   –   –   –   340.0   676.9   637.9   92.5   –   –   –   –4.6   88.0   45.8   7.9   –   –2.4   51.3   46.7   36.6   16.1   0.0   –   2.6   –0.1   18.6   9.3   1.3   –   –0.0   10.6   6.7   8.0   50.7   5.1   –0.7   0.0   –1.7   53.4   30.7   2.8   –0.7   –1.2   31.5   20.0   21.8   399.5   0.9   –3.3   0.5   –19.2   378.5   238.6   24.6   –3.3   –11.9   248.1   160.8   130.4   2023 Total 1’575.6 6.1 –4.0 3.1 –64.5 1’516.3 664.5 36.6 –4.0 –15.5 681.5 911.2 834.8 1) In the statement of income, the amortization expense for trademark and licenses is recognized in “Research and development expense” and in “Selling and distribution expense”, the amortization expense for Customer relationship is primarily recognized in “Selling and distribution expense”. Goodwill Trademarks and licenses   Research and development   Computer software   Customer relationship   millions of CHF Acquisition cost Balance as of January 1 Divestitures of subsidiaries Classification as held for sale 2) Additions Disposals Reclassifications Currency translation differences Balance as of December 31 Accumulated amortization and impairment losses   Balance as of January 1 Divestitures of subsidiaries Classification as held for sale 2) Additions Disposals Currency translation differences Balance as of December 31 Net book value As of January 1 As of December 31 1’067.3   –   –8.6   –   –   –   –41.8   1’016.9   340.0   –   –   –   –   –   340.0   727.3   676.9   93.8   –   –   –   –   –   –1.3   92.5   38.1   –   –   8.4   –   –0.7   45.8   55.7   46.7   9.8   –   –   2.2   –   4.1   –0.0   16.1   8.2   –   –   1.1   –   –0.0   9.3   1.6   6.7   47.2   –0.3   –0.8   6.4   –4.1   1.8   0.5   50.7   33.3   –0.3   –0.3   2.3   –4.1   –0.2   30.7   14.0   20.0   2022 Total 1’667.6 –1.7 –22.0 8.7 –12.6 6.0 –70.3 1’575.6 663.8 –1.7 –6.7 38.8 –12.6 –17.1 664.5 449.5   –1.4   –12.6   0.1   –8.6   0.2   –27.7   399.5   244.2   –1.4   –6.4   27.0   –8.6   –16.2   238.6   205.3   160.8   1’003.8 911.2 1) In 2022, Goodwill in the amount of CHF 8.6 million and other intangible assets with a net book value of 6.7 million were allocated to the Russian disposal group and fully impaired. The impairments of CHF 15.3 million were recorded in other operating expenses (see note 11).                                                                                                                                                                                                                                                                                                                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 128 Goodwill impairment test millions of CHF Flow Equipment Services Chemtech Total as of December 31 millions of CHF Flow Equipment Services Chemtech Total as of December 31 Goodwill   Headroom   Growth rate residual value   Pretax discount rate 2023 362.3   193.8   81.8   637.9   628.5   1’620.3   830.0   3’078.8   2.0%   2.0%   2.0%   9.9% 10.8% 10.9% 2022 Goodwill   Headroom   Growth rate residual value   Pretax discount rate 384.9   205.0   87.0   676.9   605.7   1’275.5   717.6   2’598.8   2.0%   2.0%   2.0%   8.9% 10.2% 10.5% Goodwill is allocated to the smallest cash-generating unit (CGU) at which goodwill is monitored for internal management purposes (i.e., division). The recoverable amount has been determined based on a value-in-use calculation. The three-year strategic plan approved by the Board of Directors in the first quarter of the year forms the basis for the projected cash flows, with two additional periods based on a management calculation. The budget and the three-year strategic plan were approved by the Board of Directors in February 2023. Cash flows beyond the planning period are extrapolated using a terminal value including a growth rate as stated above.  As of December 31, 2023, there is no indication of goodwill impairment. Updating the impairment test would not have resulted in any goodwill impairment. Sensitivity analyses The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations significantly impacted by the terminal growth rate used to determine the residual value, the discount rate and the projected cash flows. The table above shows the amount by which the estimated recoverable amount of the CGU exceeds its carrying amount (headroom). Sensitivity analyses were performed with regards to key assumptions, that would not change the conclusions of the impairment test. An increase of the discount rate by 5.0 percentage points or a decrease of the terminal growth rate by 5.0 percentage points would still lead to a recoverable amount exceeding the carrying amount for all CGU's.                                          Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 129 15 Property, plant and equipment millions of CHF Acquisition cost Balance as of January 1 Divestitures of subsidiaries Additions Disposals Reclassifications Currency translation differences Balance as of December 31 Accumulated depreciation Balance as of January 1 Divestitures of subsidiaries Additions Disposals Impairments (Reversal) Currency translation differences Balance as of December 31 Net book value As of January 1 As of December 31 millions of CHF Acquisition cost Balance as of January 1 Divestitures of subsidiaries Classification as held for sale 1) Additions Disposals Reclassifications Currency translation differences Balance as of December 31 Accumulated depreciation Balance as of January 1 Divestitures of subsidiaries Classification as held for sale 1) Additions Disposals Impairments Currency translation differences Balance as of December 31 Net book value As of January 1 As of December 31 Land and buildings   Machinery and technical equipment   Other non- current assets   Assets under construction   326.8   –0.3   3.0   –1.6   9.6   –22.9   314.6   152.9   –0.2   9.7   –1.0   -   –11.1   150.4   477.5   0.0   13.8   –14.4   13.8   –31.4   459.4   350.1   –0.1   24.5   –11.3   –0.1   –24.4   338.7   172.8   –0.1   7.4   –9.4   6.0   –11.1   165.6   147.1   –0.1   9.6   –9.0   –0.1   –7.8   139.7   173.9   164.2   127.4   120.6   25.7   25.9   36.1   –0.0   35.3   –   –29.1   –2.3   39.9   2.6   -   -   -   -   –0.1   2.4   33.5   37.5   Land and buildings   Machinery and technical equipment   Other non- current assets   Assets under construction   332.8   –0.6   –9.1   4.6   –3.1   10.5   –8.4   326.8   150.7   –0.2   –1.5   10.1   –1.6   -   –4.6   152.9   503.8   –5.4   –15.8   14.8   –24.5   20.5   –15.9   477.5   363.9   –3.6   –9.4   25.9   –22.7   7.8   –11.9   350.1   179.4   –0.6   –4.1   7.8   –6.7   2.5   –5.5   172.8   151.1   –0.5   –2.7   11.0   –6.3   0.0   –5.5   147.1   182.2   173.9   139.8   127.4   28.4   25.7   43.6   –0.1   –0.7   34.0   –   –39.5   –1.2   36.1   -   -   -   -   -   2.7   –0.1   2.6   43.6   33.5   2023 Total 1’013.2 –0.4 59.5 –25.4 0.3 –67.7 979.5 652.6 –0.3 43.9 –21.3 –0.2 –43.4 631.3 360.5 348.2 2022 Total 1’059.6 –6.7 –29.7 61.2 –34.3 –6.0 –31.0 1’013.2 665.7 –4.3 –13.5 47.0 –30.6 10.5 –22.1 652.6 394.0 360.5 1) In 2022, property, plant and equipment with a net book value of CHF 16.2 million was included in the Russian disposal group classified as held for sale and fully impaired; reference is made to note 5. The impairments of CHF 16.2 million are recorded in other operating expenses (see note 11).                                                                                                                                                                                                                                                                                                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 130 The group performed impairment tests on production machines and facilities, resulting in impairments amounting to CHF 0.6 million and reversal of impairments amounting to CHF 0.8 million as of December 31, 2023 (December 31, 2022: impairment of CHF 10.5 million), all of which were charged or credited to operating expenses.  In 2023, the group sold property, plant and equipment with a book value of CHF 4.1 million for CHF 4.6 million resulting in a net gain of CHF 0.5 million (2022: property, plant and equipment with a book value of CHF 3.6 million was sold for CHF 9.0 million, resulting in a net gain of CHF 5.5 million). The contractual commitments to acquire property, plant and equipment as of December 31, 2023, amounted to CHF 5.1 million (December 31, 2022: CHF 5.0 million). Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 131 16 Leases Lease assets millions of CHF Balance as of January 1 Additions Depreciation Impairments Remeasurements and contract modifications Currency translation differences Total lease assets as of December 31 millions of CHF Balance as of January 1 Classification as held for sale 1) Additions Disposals Depreciation Impairments Remeasurements and contract modifications Currency translation differences Total lease assets as of December 31 Land and Machinery and technical Other non-current buildings, leased   equipment, leased   assets, leased   73.0   24.4   –19.1   –0.4   0.5   –4.3   74.1   4.5   3.8   –2.1   –   –0.1   –0.4   5.7   12.6   9.3   –6.3   –   –1.3   –0.9   13.4   Land and Machinery and technical Other non-current buildings, leased   equipment, leased   assets, leased   71.7   –0.7   33.6   –5.8   –20.2   –1.6   –0.5   –3.4   73.0   5.7   –   1.4   –0.1   –2.5   –   –   –0.0   4.5   11.7   –0.0   8.4   –0.6   –6.3   –0.0   0.1   –0.7   12.6   2023 Total 90.1 37.5 –27.5 –0.4 –0.8 –5.6 93.2 2022 Total 89.2 –0.7 43.3 –6.5 –29.0 –1.7 –0.4 –4.1 90.1 1) In 2022, lease assets with a book value of CHF 0.7 million were included in the Russian disposal group classified as held for sale and fully impaired, reference is made to Note 5. The impairments of CHF 0.7m are recorded in other operating expenses (see note 11).                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 132 Lease liabilities Balance as of January 1 Classification as held for sale Additions Interest expenses Cash flow for repayments – principal portion Cash flow for repayments – interest portion Remeasurements and contract modifications Currency translation differences Total lease liabilities as of December 31 - thereof non-current lease liabilities - thereof current lease liabilities 2023   89.6   –   37.5   2.5   –28.3   –2.5   –0.4   –5.4   93.0   69.0   23.9   2022 88.8 –0.5 43.3 2.0 –32.1 –2.0 –6.0 –4.0 89.6 67.2 22.4 The group leases land and buildings used for production, storage or office space. The terms are typically fixed for a period of three to five years. Various lease contracts for buildings contain extension options, providing the group with operational flexibility and planning security. Extension options are included in the measurement of the lease liability and the lease assets only if Management assesses these extension options as reasonably certain to be exercised. Other leasing disclosures millions of CHF Recognized in the income statement Expenses relating to short-term leases Expenses relating to low-value asset leases, excluding short-term leases of low-value assets Expenses relating to variable lease payments not included in the lease liability   Income from subleasing right-of-use assets Interest expenses on lease liabilities Total recognized in the income statement Recognized in the statement of cash flows Cash flow for short-term, low-value asset and variable leases (included within cash flow from operating activities) Cash flow from subleasing right-of-use assets (included within cash flow from operating activities) Cash flow for repayments of interest on lease liabilities (included within cash flow from operating activities) Cash flow for repayments of the principal portion on lease liabilities (included within cash flow from financing activities) Total cash outflow 2023   –15.8   –1.5   –2.7   0.3   –2.5   –22.3   –20.1   0.3   –2.5   –28.3   –50.5   2022 –13.8 –1.0 –2.7 0.5 –2.0 –19.0 –17.6 0.5 –2.0 –32.1 –51.1                                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 133 17 Associates and joint ventures millions of CHF Balance as of January 1 Additions Reclassifications Share of profit / (loss) of associates and joint ventures Dividend payments received Currency translation differences Total investments in associates and joint ventures as of December 31 - thereof investments in associates: - thereof investments in joint ventures: 2023   41.8   17.8   1.8   –3.2   –0.2   –3.2   54.7   54.5   0.2   2022 25.5 20.9 – –2.7 –0.1 –1.8 41.8 41.8 – In February 2023, the group acquired a strategic stake in Fuenix Ecogy Holding B.V., a circular technology company, for CHF 10.1 million and classified the investment as an investment in associates. In September 2023, the group acquired an additional ownership in Cellicon Holding B.V. for CHF 6.5 million, in addition to an existing ownership of CHF 3.0 million and the total investment was classified as an investment in associate.   On September 22, 2022, the group increased its investment in the associate Worn Again by CHF 20.9 million. Worn Again is developing a unique polymer recycling process leveraging the group’s technology to enable the recycling of textiles and polyester packaging. Sulzer is accounting for its investment in Worn Again using the equity method of accounting.                      Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 134 18 Other financial assets millions of CHF Balance as of January 1 Recognized through deconsolidation Additions Repayments 1) Changes in fair value Other non-cash items Reclassifications Currency translation differences Balance as of December 31 – thereof non-current – thereof current Financial assets at fair value through profit or loss   Financial assets at fair value through other comprehensive Financial assets at income   amortized costs   24.4   –   1.0   –   3.3   –   –3.0   –1.7   23.8   22.2   1.6   8.8   –   –   –   0.7   –   –   –   9.5   9.5   –   9.3   3.1   0.3   –7.8   –   2.6   –   –0.2   7.4   6.7   0.7   1) Repayments in the amount of CHF 4.9 million are presented in the statement of cash flows in “Divestitures and deconsolidation of subsidiaries, net of cash”. 2023 Total 42.5 3.1 1.3 –7.8 4.0 2.6 –3.0 –2.0 40.7 38.4 2.3 2022 millions of CHF Balance as of January 1 Additions Repayments Changes in fair value Currency translation differences Balance as of December 31 – thereof non-current – thereof current Financial assets at fair value through profit or loss   Financial assets at fair value through other comprehensive Financial assets at income   amortized costs   Total 10.9   6.7   –   8.0   –1.1   24.4   22.8   1.5   22.5   –   –   –13.7   –   8.8   –   8.8   11.3   2.9   –4.4   –   –0.6   9.3   5.6   3.6   44.7 9.6 –4.4 –5.8 –1.7 42.5 28.5 14.0 Financial assets that belong to the category “financial assets at fair value through profit or lossˮ include investments in equity securities. The financial assets in the category “financial assets at fair value through other comprehensive incomeˮ are comprised of medmix shares amounting to CHF 9.5 million (2022: CHF 8.8 million), which were received as part of the Applicator Systems spin-off in 2021. The financial investment in medmix Ltd is recognized at its fair value based on the share price of medmix Ltd (a level 1 hierarchy valuation). Management has designated this investment at fair value through other comprehensive income at initial recognition. In 2023, fair value changes amounting to CHF 0.7 million (2022: CHF –13.7 million) were recorded in other comprehensive income, with an associated deferred tax effect of CHF –0.1 million (2022: CHF 2.7 million). The dividend received amounted to CHF 0.2 million (2022: CHF 0.2 million).                                                   Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 135 19 Inventories millions of CHF Raw materials, supplies and consumables Work in progress Finished products and trade merchandise Total inventories as of December 31 2023   166.9   255.4   72.8   495.1   2022 192.3 250.3 79.9 522.4 In 2023, the group recognized write-downs of CHF 16.6 million in the income statement. In 2022, the total write downs amounted to CHF 49.8 million, of which CHF 31.4 million were recorded in connection with the Russian business that was classified as 'held for sale' in that year. The accumulated write-downs on inventories amounted to CHF 72.7 million as of December 31, 2023 (2022: CHF 79.9 million). Material expenses in 2023 amounted to CHF 1’239.4 million (2022: CHF 1’192.1 million).           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 136 20 Assets and liabilities related to contracts with customers millions of CHF Sales recognized over time related to ongoing performance obligations Sales recognized over time related to satisfied performance obligations Sales recognized over time Sales recognized at a point in time Sales – thereof sales recognized included in the contract liability balance at the beginning of the period – thereof sales recognized from performance obligations satisfied (or partially satisfied) in previous periods Contract assets from sales recognized over time relating to ongoing performance obligations Expected loss rate Allowance for expected losses Reversal of write-offs / (write-offs) on contract assets in the disposal group classified as held for sale (see note 5) Netting with contract liabilities Contract assets Contract liabilities from costs recognized over time relating to ongoing performance obligations Advance payments from customers relating to point in time contracts Advance payments from customers relating to over time contracts Netting with contract assets Contract liabilities Order backlog (aggregate amount of transaction price allocated to unsatisfied performance obligations) – thereof expected to be recognized as revenue within 12 months – thereof expected to be recognized in more than 12 months 2023   625.2   519.9   1’145.1   2’136.6   3’281.7   382.3   –0.0   1’048.4   0.1%   –1.3   2.0   –619.0   430.1   145.4   203.7   720.8   –619.0   451.0   1’946.8   1’810.9   135.9   2022 641.5 511.6 1’153.1 2’026.8 3’179.9 324.5 0.1 1’087.4 0.2% –2.4 –26.8 –592.1 466.1 119.2 172.9 682.3 –592.1 382.3 1’844.7 1’650.5 194.2                                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 137 21 Trade accounts receivable Aging structure of trade accounts receivable millions of CHF Expected loss rate   Gross amount   Allowance   Net book value   Expected loss rate   Gross amount   Allowance   2023   2022 Net book value Not past due 0.1%   393.1   –0.4   392.7   0.9%   439.0   –3.7   435.2 Past due 1–30 days 31–60 days 61–120 days >120 days Total trade accounts receivable as of December 31 0.7%   2.6%   6.4%   53.7%   61.7   29.3   24.9   75.7   –0.5   –0.8   –1.6   61.2   28.6   23.3   0.9%   1.5%   8.4%   –40.6   35.0   52.2%   61.6   31.7   20.7   81.6   –0.6   –0.5   –1.7   –42.6   61.1 31.2 19.0 39.0 584.7   –43.8   540.8   634.6   –49.1   585.5 Allowance for doubtful trade accounts receivable millions of CHF Balance as of January 1 Reclassification as held for sale Additions Released as no longer required Utilized Currency translation differences Balance as of December 31 2023   49.1   –   9.0   –7.4   –3.8   –3.1   43.8   2022 56.5 –8.6 19.3 –10.1 –7.6 –0.3 49.1 The recoverability of trade accounts receivable is regularly reviewed, and the credit quality of new customers is thoroughly assessed. Due to the large and heterogeneous customer base, the credit risk from individual customers of the group is limited. The allowance for doubtful trade accounts receivable is based on expected credit losses by country and by division. These are based on historical observed default rates over the expected life of the trade receivables and are adjusted for forward-looking information such as development of gross domestic product (GDP).                                                                                                             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 138 Accounts receivable by geographical region millions of CHF Europe, the Middle East and Africa – thereof United Kingdom – thereof Saudi Arabia – thereof France – thereof Spain – thereof Germany Americas – thereof USA Asia-Pacific – thereof China Total as of December 31 2023   250.0   52.1   32.8   24.9   20.7   18.4   131.0   79.7   159.8   102.8   540.8   2022 265.9 48.0 38.6 23.4 21.7 22.8 124.8 75.3 194.8 127.5 585.5                                                       Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 139 22 Other current receivables and prepaid expenses millions of CHF Taxes (VAT, withholding tax) Derivative financial instruments Other current receivables Total other current receivables as of December 31 Prepaid expenses Total prepaid expenses as of December 31 2023   61.3   13.9   22.6   97.8   25.6   25.6   2022 55.8 13.2 23.4 92.4 36.3 36.3 Total other current receivables and prepaid expenses as of December 31   123.4   128.7 For further details on derivative financial instruments, refer to note 29 . Other current receivables and prepaid expenses do not include any material positions that are past due or impaired.                                   Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 140 23 Cash and cash equivalents millions of CHF Cash Cash equivalents Total cash and cash equivalents as of December 31 2023   780.8   193.9   974.7   2022 939.6 256.8 1’196.3 As of December 31, 2023, the group held restricted cash and cash equivalents of CHF 13.5 million (2022: CHF 15.7 million).         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 141 24 Equity Share capital thousands of CHF 2023   2022 Number of Number of shares   Share capital   shares   Share capital Balance as of December 31 (par value CHF 0.01) 34’262’370   342.6   34’262’370   342.6 The share capital amounts to CHF 342’623.70, made up of 34’262’370 shares with dividend entitlement and a par value of CHF 0.01. All shares are fully paid in and registered. On December 31, 2023, conditional share capital amounted to CHF 17’000 (2022: CHF 17’000), consisting of 1’700’000 shares with a par value of CHF 0.01. Share ownership Sulzer shares are freely transferable provided that, when requested by the company to do so, buyers declare that they have purchased and will hold the shares in their own name and for their own account. Nominees will only be entered in the share register with the right to vote provided that they meet the following conditions: the nominee is subject to the supervision of a recognized banking and financial market regulator; the nominee has entered into an agreement with the Board of Directors concerning its status; the share capital held by the nominee does not exceed 3% of the registered share capital entered in the commercial register; and the names, addresses and number of shares of those individuals for whose accounts the nominee holds at least 0.5% of the share capital have been disclosed. The Board of Directors is also entitled, beyond these limits, to enter shares of nominees with voting rights in the share register, provided that the above-mentioned conditions are met (see also paragraph 6a of the Articles of Association at https://www.sulzer.com/en/shared/about-us/ corporate-governance ). Shareholders holding more than 3% Viktor Vekselberg (direct shareholder: Tiwel Holding AG) 16’728’414   48.82   16’728’414   The Capital Group Companies, Inc. 1’034’950   3.02   1’034’950   Number of shares   in %   Number of shares   in % 48.82 3.02 Dec 31, 2023   Dec 31, 2022 Retained earnings The retained earnings include prior years’ undistributed income of consolidated companies and all remeasurements of the net defined benefit assets and liabilities and other transactions recorded directly in retained earnings. Treasury shares During 2023, the group acquired 260’000 treasury shares for CHF 20.9 million (2022: 281’349 shares for CHF 19.5 million). The total number of shares held by the group as of December 31, 2023, amounted to 451’074 treasury shares (December 31, 2022: 523'855 shares).                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 142 The treasury shares are mainly held for the purpose of issuing shares under the management share- based payment programs. Cash flow hedge reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction has not yet occurred. Amounts are reclassified to profit or loss when the associated hedged transaction affects the income statement. Currency translation reserve The currency translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of controlled entities, whose functional currency differs from the reporting currency of the group. The cumulative amount is reclassified to profit or loss when the net investment is derecognized. Acquisition of non-controlling interests without a change of control Reference is made to note 4 . Transactions with non-controlling interests An agreement entered with non-controlling shareholders of a subsidiary, agreeing on a fixed profit distribution for that subsidiary, resulted in the recognition of liability and a reduction in non-controlling interests.  Contribution from medmix The contribution relates to vested shares under Sulzer share plans for medmix employees. Dividends On April 19, 2023, the Annual General Meeting approved an ordinary dividend of CHF 3.50 (2022: ordinary dividend of CHF 3.50) per share to be paid out of reserves. The dividend was paid to shareholders on April 25, 2023. The total amount of the dividend to shareholders of Sulzer Ltd was CHF 118.9 million (2022: CHF 118.7 million), thereof paid dividends of CHF 80.9 million (2022: CHF 80.6 million), and unpaid dividends of CHF 38.1 million (2022: CHF 38.1 million). The unpaid dividends are reflected in the balance sheet position “Other current and accrued liabilitiesˮ (see note 28 ). The Board of Directors decided to propose to the Annual General Meeting 2024 a dividend for the year 2023 of CHF 3.75 per share (2022: CHF 3.50). Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 143 25 Earnings per share Net income attributable to shareholders of Sulzer Ltd (millions of CHF) Issued number of shares Adjustment for average treasury shares held Average number of shares outstanding as of December 31 2023   229.1   34’262’370   –377’719   33’884’651   2022 28.6 34’262’370 –436’556 33’825’814 Adjustment for share participation plans 490’686   697’151 Average number of shares for calculating diluted earnings per share as of December 31 34’375’337   34’522’965 Earnings per share, attributable to a shareholder of Sulzer Ltd (in CHF) as of December 31 Basic earnings per share Diluted earnings per share 6.76   6.67   0.85 0.83                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 144 26 Borrowings millions of CHF Balance as of January 1 Cash flow from proceeds Cash flow for repayments Changes in amortized costs Other non-cash increase Reclassifications Currency translation differences Total borrowings as of December 31 millions of CHF Balance as of January 1 Cash flow from proceeds Cash flow for repayments Changes in amortized costs Reclassifications Currency translation differences Total borrowings as of December 31 Borrowings by currency CHF INR IDR USD AED EUR Other Non-current borrowings   1’043.9   –   –0.0   0.3   0.9   –249.9   –0.1   795.2   Current borrowings   311.4   26.0   –324.9   0.1   0.1   249.9   –1.5   261.1   Non-current borrowings   Current borrowings   1’164.6   169.6   –0.0   0.3   –289.9   –0.8   1’043.9   345.5   1’054.0   –1’376.1   0.0   289.9   –1.8   311.4   2023 Total 1’355.3 26.0 –325.0 0.4 1.0 0.0 –1.6 1’056.3 2022 Total 1’510.1 1’223.6 –1’376.1 0.3 – –2.6 1’355.3 2023   2022 millions of millions of CHF   in %   Interest rate   CHF   in %   Interest rate 1’044.2   98.9   1.4%   1’333.8   98.4   4.7   3.3   1.5   0.9   0.5   1.2   0.4   0.3   0.1   0.1   0.0   0.1   5.6%   8.7%   3.8%   2.8%   –   –   –   8.3   6.3   5.0   –   –   0.6   0.5   0.4   –   –   1.9   0.1   1’355.3   100.0   1.4% 4.4% 7.1% 3.8% – – – – Total as of December 31 1’056.3   100.0                                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 145 As of December 2023, Sulzer had access to a syndicated credit facility of CHF 500 million maturing on December 31, 2026. The facility includes two one-year extension options and a further option to increase the credit facility by CHF 250 million (subject to lenders’ approval). In 2022 and 2023, the group exercised the options, extending the term of the credit facility in the amount of CHF 415 million to December 2028. The facility is subject to financial covenants based on net financial indebtedness and EBITDA, which were adhered to throughout the reporting period. As of December 31, 2023, and 2022, the syndicated facility was not used. Outstanding bonds millions of CHF 0.875% 07/2016–07/2026 1.300% 07/2018–07/2023 1.600% 10/2018–10/2024 0.800% 09/2020–09/2025 0.875% 11/2020–11/2027 3.350% 12/2022–11/2026 Total as of December 31 – thereof non-current – thereof current   Amortized costs   124.9   -   250.0   299.8   199.8   169.7   1’044.1   794.2   250.0   2023   Nominal   Amortized costs   125.0   289.9   249.9   299.6   199.7   169.6   1’333.8   125.0   -   250.0   300.0   200.0   170.0   1’045.0   795.0   250.0   1’043.9   289.9   2022 Nominal 125.0 290.0 250.0 300.0 200.0 170.0 1’335.0 1’045.0 290.0 On July 6, 2023, Sulzer repaid CHF 290.0 million for the second and last tranche of a bond issued in 2018. This second tranche had a term of 5 years and carried a coupon of 1.300%.   On December 16, 2022, Sulzer issued a CHF 170 million single tranche bond. The bond has a term of three years and 11 months and carries a coupon of 3.350% at a price of 100.055%. All the outstanding bonds are traded on SIX Swiss Exchange.                       Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 146 27 Provisions millions of CHF Balance as of January 1 Additions Released as no longer required Utilized Reclassification 1) Currency translation differences Total provisions as of December 31 – thereof non-current – thereof current Other employee benefits   Warranties / liabilities   Restructuring   Environmental 44.5   8.0   –4.2   –7.1   –6.0   –1.9   33.2   22.0   11.2   92.3   41.6   –9.6   –19.4   –   –6.0   98.8   2.8   96.0   8.1   5.2   –2.2   –4.7   –   –1.3   5.0   0.5   4.6   11.4   1.2   –   –0.1   –   –0.2   12.4   12.3   0.0   1) Includes a reclassification of CHF 6.0 million to the defined benefit obligation, see note 9. millions of CHF Balance as of January 1 Classified as held for sale Additions Released as no longer required Utilized Currency translation differences Total provisions as of December 31 – thereof non-current – thereof current Other employee benefits   Warranties / liabilities   Restructuring   Environmental 53.9   –   11.0   –7.0   –10.6   –2.8   44.5   31.0   13.5   93.8   –2.5   26.9   –10.0   –16.1   0.1   92.3   3.2   89.1   21.0   –   1.8   –1.7   –12.7   –0.3   8.1   1.2   6.9   11.8   –   0.1   –   –0.0   –0.5   11.4   11.4   0.0   2023 Total 214.1 91.9 –32.6 –63.9 –6.0 –11.4 192.0 46.7 145.3 2022 Total 235.8 –2.5 107.8 –22.3 –97.9 –6.7 214.1 58.2 155.9 Other   57.8   35.9   –16.5   –32.5   –   –2.0   42.6   9.1   33.4   Other   55.4   –   68.0   –3.6   –58.7   –3.3   57.8   11.5   46.3   The category “Other employee benefitsˮ includes provisions for jubilee gifts and other obligations to employees.  The category “Warranties/liabilitiesˮ includes provisions for warranties, customer claims, penalties, litigation and legal cases relating to goods delivered or services rendered. Warranties that provide customers with assurance that the product complies with the agreed specifications, are accounted for as provisions over the agreed warranty period. In 2023, the group utilized CHF 4.7 million (2022: CHF 12.7 million) of restructuring provisions mainly relating to resizing measures of sites in Europe and the USA initiated in 2020 and 2021 and resizing measures in Indonesia initiated in 2022. The group recorded restructuring provisions of CHF 5.2 million (2022: CHF 1.8 million), partly offset by released restructuring provisions of CHF 2.2 million (2022: CHF 1.7 million). Restructuring costs mainly relate to reorganization in the Flow equipment division. The remaining restructuring provision as of December 31, 2023, is CHF 5.0 million, of which CHF 4.6 million is expected to be utilized within one year.                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 147 “Environmentalˮ mainly consists of expected costs related to inherited liabilities. “Otherˮ includes provisions that do not fit into the aforementioned categories. A large number of these provisions refer to onerous contracts and indemnities, in particular related to divestitures. In addition, provisions for ongoing asbestos lawsuits and other legal claims are included. Based on the currently known facts, the group is of the opinion that the resolution of the open cases will not have material effects on its liquidity or financial condition. Although the group expects a large part of the category “Otherˮ to be realized in 2024, by their nature, the amounts and timing of any cash outflows are difficult to predict. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 148 28 Other current and accrued liabilities millions of CHF Liability related to the purchase of treasury shares Outstanding dividend payments Taxes (VAT, withholding tax) Derivative financial instruments Notes payable Contingent consideration Other current liabilities Total other current liabilities as of December 31 Contract-related costs Salaries, wages and bonuses Vacation and overtime claims Other accrued liabilities Total accrued liabilities as of December 31 Total other current and accrued liabilities as of December 31 2023   88.1   277.2   31.4   3.2   –   –   38.9   438.9   121.3   121.9   23.0   147.3   413.5   852.4   2022 92.9 239.2 33.0 7.0 20.6 1.9 43.6 438.2 137.8 108.9 22.4 167.3 436.5 874.7 The outstanding dividend payments of CHF 277.2 million (2022: CHF 239.2 million) are explained in note 24.                                                   Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 149 29 Derivative financial instruments 2023   2022 Derivative assets Derivative liabilities Derivative assets Derivative liabilities Notional Notional Notional value   Fair value   value   Fair value   value   Fair value   Notional value   Fair value 817.6   13.9   276.1   3.2   575.4   13.2   607.6   817.6   13.9   276.1   3.2   575.4   13.2   607.6   817.6   13.9   276.1   3.2   571.5   13.2   597.7   –   –   –   –   3.9   0.1   9.9   7.0 7.0 7.0 0.0 millions of CHF Forward exchange rate contracts Total as of December 31 – thereof due in <1 year – thereof due in 1–5 years In 2023, the notional value and the fair value of derivative assets and liabilities consists of current derivative financial instruments. Some of these derivative assets and liabilities are dedicated as hedging instruments for cash flow hedges. The cash flow hedges of expected future sales were assessed as highly effective. In 2023, the net unrealized gains for cash flow hedges recorded in the cash flow hedge reserves in other comprehensive income amount to CHF 8.3 million (2022: losses of CHF 7.5 million), net of a deferred tax impact of CHF 2.7 million (2022: CHF 2.6 million). As of December 31, 2023, the accumulated cash flow hedge reserve amounts to CHF 5.3 million (2022: CHF –5.7 million) with the recognition of net deferred tax liabilities of CHF 1.0 million (2022: deferred tax assets of CHF 1.6 million) relating to these cash flow hedges included in the cash flow hedge reserves. In 2023, gains of CHF 2.6 million (2022: gains of CHF 0.1 million) were reclassified from the cash flow hedge reserves to the income statement. The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet. The hedged, highly probable forecast transactions denominated in foreign currencies are mostly expected to occur at various dates during the next 12 months. Gains and losses recognized in the cash flow hedge reserve in equity on forward foreign exchange contracts as of December 31, 2023, are recognized either in sales, cost of goods sold or other operating income / expenses in the period or periods during which the hedged transaction affects the income statement. This is generally within 12 months from the balance sheet date unless the gain or loss is included in the initial amount recognized for the purchase of fixed assets, in which case recognition is over the lifetime of the asset (5 to 10 years). The group enters into derivative financial instruments under enforceable master netting arrangements. These agreements do not meet the criteria for offsetting derivative assets and derivative liabilities in the consolidated balance sheet. As of December 31, 2023, the amount subject to such netting arrangements was CHF 2.1 million (2022: CHF 2.7 million). Considering the effect of these agreements, the amount of derivative assets would reduce from CHF 13.9 million to CHF 11.8 million (2022: from CHF 13.2 million to CHF 10.5 million), and the amount of derivative liabilities would reduce from CHF 3.2 million to CHF 1.1 million (2022: from CHF 7.0 million to CHF 4.3 million).                         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 150 30 Contingent liabilities millions of CHF Guarantees in favor of third parties Total contingent liabilities as of December 31 2023   9.9   9.9   2022 9.1 9.1 As of December 31, 2023, guarantees provided to third parties amounted to CHF 9.9 million (2022: CHF 9.1 million) and relate to disposed businesses.        Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 151 31 Share participation plans Share-based payments charged to personnel expenses millions of CHF Restricted share unit plan Performance share plan Total charged to personnel expenses 2023   0.9   11.7   12.6   2022 1.6 13.8 15.4 The compensation charged to personnel expenses for the services received during the period amounts to CHF 12.6 million including CHF 11.6 million relating to equity-settled plans credited in the retained earnings. The remaining CHF 1.0 million corresponds to cash-settled plans. Restricted share unit plan settled in Sulzer shares This long-term incentive plan covers the Board of Directors. Restricted share units (RSU) are granted annually. Awards to members of the Board of Directors automatically vest with the departure from the Board members. The plan features graded vesting over a three-year period. One RSU award is settled with one Sulzer share at the end of the vesting period. The fair value of the RSU granted is measured at the grant date closing share price of Sulzer Ltd, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds for the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. Consequently, the grant date fair value of the RSU is reduced by the present value of the dividends expected to be paid during the vesting period. Given the spin-off of the Applicator Systems division in 2021, the group neutralized the consequences from the demerger for the restricted share plans. The number of originally granted RSU was recalculated to neutralize the effect of the spin-off on the share price, resulting in the same fair value before and after the spin-off and did not impact the share-based payments expense. Restricted share units Grant year 2023   2022   2021   2020   2019   Total Outstanding as of January 1, 2022 Granted Exercised –   –   –   –   16’632   14’164   4’078   34’874 11’637   –   –   –   11’637 –   –10’344   –10’994   –4’078   –25’416 Outstanding as of December 31, 2022 11’637   6’288   3’170   –   21’095 Outstanding as of January 1, 2023 –   11’637   6’288   3’170   Granted Exercised 10’128   –   –   –   –   –6’279   –4’344   –3’170   Outstanding as of December 31, 2023 10’128   5’358   1’944   –   –   –   –   –   21’095 10’128 –13’793 17’430 Average fair value at grant date in CHF 77.05   77.82   106.32   65.22   97.76                                                                                         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 152 Performance share plan settled in Sulzer shares This long-term incentive plan covers the members of the Executive Committee and the members of the Sulzer Management Group. Performance share units (PSU) are granted annually, depending on the organizational position of the employee. Vesting of the PSUs is subject to continuous employment and to the achievement of performance conditions over the performance period. Participants are not entitled to dividends declared during the vesting period. Vesting of the performance share plans (PSP) is based on three performance conditions: operational income before restructuring, amortization, impairments and non-operational items (operational profit) in the last year of the performance period (weighted 25%), average operational return on capital employed (operational ROCEA) (weighted 25%), and Sulzer’s total return to shareholders (TSR), compared to a selected group of peer companies (weighted 50%). TSR is measured with a starting value of the volume-weighted average share price (VWAP) over the last three months prior to the first year, and an ending value of the VWAP over the last three months of the vesting period. The rank of Sulzer’s TSR at the end of the performance period determines the effective number of total shares. The group neutralized the consequences of the spin-off of the Applicator Systems division in 2021. The number of originally granted PSUs was recalculated to neutralize the effect of the spin-off on share price, resulting in the same fair value before and after the spin-off. The target values of the Applicator Systems business for the PSP 2019, PSP 2020 and PSP 2021, as derived from their respective three-year financial plans, are deducted for the Sulzer group. As a result, the target values for the group comprise only what remain as continuing businesses within the group. Furthermore, for each non-market performance condition (i.e., operational profit and operational ROCEA) of PSP 2019, PSP 2020 and PSP 2021, the performance curve depicting the gradient formed from the threshold and cap performance level remains unchanged. The following inputs were used to determine the fair value of the PSUs at grant date using a Monte Carlo simulation: Grant year Fair value at grant date Share price at grant date Expected volatility Risk-free interest rate 2023   2022   2021   2020   2019 88.38   84.69   124.95   78.18   115.95 77.45   76.35   101.12   76.05   92.46 28.76%   35.59%   34.68%   37.45%   29.64% 1.96%   0.39%   –0.58%   –0.64%   –0.57% The expected volatility of the Sulzer share and the peer group companies is determined by the historical volatility. The zero-yield curves of those countries in which the companies and indices are listed were used as the relevant risk-free rates. Historical data was used to arrive at an estimate for the correlation between Sulzer and the peer companies. For the TSR calculation, all dividends paid during the vesting period are added to the closing share price.           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 153 Performance share units – terms of awards Grant year 2023   2022   2021   2020   2019 Number of awards granted 99’244   97’930   90’527   151’422   112’857 Grant date Performance period for cumulative operational profit Performance period for TSR Fair value at grant date in CHF April 1, 2023   01/23– 12/25   01/23– 12/25   April 1, 2022   01/22– 12/24   01/22– 12/24   April 1, 2021   01/21– 12/23   01/21– 12/23   June 1, 2020   01/20– 12/22   01/20– 12/22   April 1, 2019 01/19– 12/21 01/19– 12/21 88.38   84.69   124.95   78.18   115.95 Performance share units Grant year Initially granted APS division spin-off restatement Outstanding as of January 1, 2022 Granted Exercised Forfeited Outstanding as of December 31, 2022 2023   2022   2021   2020   2019   Total 99’244   97’930   90’527   151’422   112’857   551’980 –   –   –   –   –   –   –   44’801   74’680   53’141   172’622 –   127’491   210’194   151’809   489’494 97’930   –   –   –   97’930 –998   –3’788   –6’202   –151’809   –162’797 –2’746   –6’634   –4’828   94’186   117’069   199’164   Outstanding as of January 1, 2023 –   94’186   117’069   199’164   Granted Exercised Forfeited Outstanding as of December 31, 2023 94’282   76’933   108’732   99’244   –   –   –   –1’576   –6’666   –6’470   –199’164   –3’386   –10’587   –1’867   –   –   –   –   –   –   –   –   –   –14’208 410’419 410’419 99’244 –213’876 –15’840 279’947                                                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 154 32 Transactions with members of the Board of Directors, Executive Committee and related parties Key management compensation Short-term benefits   Equity-based compensation   Pension and social security contributions   Total Short-term benefits   Equity-based compensation   Pension and social security contributions   2023   1’231   8’681   780   272   2’283   3’231   1’892   13’804   1’152   7’065   905   283   2’822   1’649   11’536 2022 Total 2’340 thousands of CHF Board of Directors Executive Committee As of December 31, 2023, there are no outstanding loans with members of the Board of Directors or the Executive Committee. No shares have been granted to members of the Board of Directors, the Executive Committee, or related persons, with the exception of shares granted in connection with equity-settled plans and service awards. Transactions and balances with associates and joint ventures In 2023, the group recorded transactions and balances with associates. Sales with associates amounted to CHF 0.5 million (2022: CHF 0.0 million), the operating expenses amounted to CHF 1.5 million (2022: CHF 2.5 million). As of December 31, 2023, loan receivables amount to CHF 2.0 million (2022: CHF 0.0 million), payables amount to CHF 0.1 million (2022: CHF 0.4 million). See note 17 for details on the investments in associates. Transactions and balances with other related parties In 2023, sale or other operating income with other related parties amounted to zero (2022: CHF 0.0 million), and operating expenses in relation to goods and services purchased amount to zero (2022: CHF 0.0 million). Open payables with related parties amounted to CHF 365.4 million (2022: CHF 332.0 million), of which CHF 88.1 million (2022: CHF 92.9 million) related to the purchase of treasury shares (see note 28 ) and CHF 277.2 million (2022: CHF 239.2 million) related to outstanding dividend payments (see note 24  and note 28 ).  All related party transactions are priced on an arm’s-length basis.             Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 155 33 Auditor remuneration Fees for the audit services by KPMG as the appointed group auditor amounted to CHF 3.7 million (2022: CHF 4.1 million). Additional services provided by the group auditor amounted to a total of CHF 0.6 million (2022: CHF 1.9 million). This amount includes CHF 0.2 million (2022: CHF 0.2 million) for tax services and CHF 0.4 million (2022: CHF 1.7 million) for other services. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 156 34 Key accounting policies and valuation methods 34.1 Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) using the historical cost convention except for: financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income; and net position from defined benefit plans, where plan assets are measured at fair value and the plan liabilities are measured at the present value of the defined benefit obligations (see note 34.18 a). The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all subsidiaries. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 6 .  Rounding Due to rounding, numbers presented throughout the consolidated financial statements may not add up precisely to the totals provided. All ratios, percentages and variances are calculated using the underlying amount rather than the presented rounded amount. Tables Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Dashes (–) generally indicate that the respective figure is zero, while a zero (0.0) indicates that the relevant figure has been rounded to zero. 34.2 Change in accounting policies a) Standards, amendments and interpretations which were effective for 2023 Starting from January 1, 2023, the group applied changes in standards, amendments and interpretations that became effective January 1, 2023. None of these changes had a material effect on the financial statements of the group.  The group has adopted the amendments to IAS 12 International Tax Reform – Pillar Two Model Rules upon their release in May 2023. The amendments are effective immediately and provide a mandatory temporary exception from deferred tax accounting for the top-up tax and introduce new disclosures on the Pillar Two impact. The mandatory exception from deferred tax accounting applies retrospectively. No new tax legislation implementing top-up tax was enacted or substantively enacted on December 31, 2022, in any of the jurisdiction in which the group is operating and no related deferred tax assets or liabilities were recognized at that date. The retrospective application has no impact on the group's financial statements.  Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 157 b) Standards, amendments and interpretations issued but not yet effective, which the group decided not to adopt early in 2023 The following amended standards will become effective from January 1, 2024. The group does not expect these to have a material impact on the consolidated financial statements:  Amendments to IAS 1 – Classification of liabilities as current or non-current and non-current liabilities with covenants. The amendments provide clarification when an entity should classify liabilities as current or non-current and introduce new disclosure requirements for non-current liabilities that are subject to future covenants.  Amendments to IFRS 16 Leases – Lease liability in a sale and leaseback. The amendments provide further clarification how the lease liability should be measured by a seller-lessee.   Amendments to IAS 7 and IFRS 7 – Disclosure of supplier finance arrangements. The amendments introduce new disclosure requirements for supplier finance arrangements that should allow users to assess the impact of such agreements on an entity's liabilities, cash flows and liquidity risk.  The following amended standards will become effective from January 1, 2025. The group is in the process of assessing the below amendments and does currently not expect these to have a material impact on the consolidated financial statements: Amendments to IAS 21 – Lack of exchangeability 34.3 Consolidation a) Business combinations The group accounts for business combinations using the acquisition method when control is transferred to the group. The consideration transferred in the acquisition is measured at the fair value of the assets given, the liabilities incurred to the former owner of the acquiree and the equity interest issued by the group. Any goodwill arising is tested annually for impairment. Any gain on a bargain purchase is recognized in the income statement immediately. Acquisition-related costs are expensed as incurred, except if related to the issue of debt or equity securities. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in the income statement. If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. The determination is based on the difference between the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to precombination service. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 158 b) Subsidiaries Subsidiaries are all entities controlled by the group. The group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. According to the full consolidation method, all assets and liabilities and income and expenses of the subsidiaries are included in the consolidated financial statements. The share of non-controlling interests in the net assets and results is presented separately as non-controlling interests in the consolidated balance sheet and income statement, respectively. c) Non-controlling interests The group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. When the group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognized in the income statement. Any interest retained in the former subsidiary is measured at fair value when control is lost. d) Associates and joint ventures Associates are those entities in which the group has significant influence, but no control, over the financial and operating policies. Significant influence is presumed to exist when the group holds, directly or indirectly, between 20% and 50% of the voting rights. Joint ventures are those entities over whose activities the group has joint control, established by contractual agreement and requiring unanimous consent for strategic, financial and operating decisions. Associates and joint ventures are accounted for using the equity method and are initially recognized at cost. e) Transactions eliminated on consolidation All material intercompany transactions and balances and any unrealized gains arising from intercompany transactions are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. 34.4 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer. The Chief Executive Officer, who is responsible for allocating resources and assessing performance (e.g., operating income) of the operating segments, has been identified as chief operating decision maker. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 159 34.5 Foreign currency translation a) Functional and presentation currency Items included in the financial statements of subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Swiss francs (CHF). The following table shows the major currency exchange rates for the reporting periods 2023 and 2022: CHF EUR 1 GBP 1 USD 1 CNY 100 INR 100 2023   Average rate   Year-end rate   0.93   1.08   0.84   11.89   1.01   0.97   1.12   0.90   12.68   1.09   2022 Average rate   Year-end rate 0.98 1.00   1.18   0.95   14.19   1.21   1.11 0.92 13.29 1.12 b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. c) Subsidiaries The results and balance sheet positions of subsidiaries that have a functional currency different from the presentation currency of the group are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. Income and expenses for each income statement are translated at average exchange rates. Translation differences resulting from consolidation are taken to other comprehensive income. In the event of a sale or liquidation of foreign subsidiaries, exchange differences that were recorded in other comprehensive income are recognized in the income statement as part of the gain or loss on sale or liquidation. If a loan is made to a group company, and the loan in substance forms part of the group’s investment in the group company, translation differences arising from the loan are recognized directly in other comprehensive income as foreign currency translation differences. When the group company is sold or partially disposed of, and control no longer exists, gains and losses accumulated in equity are reclassified to the income statement as part of the gain or loss on disposal.                 Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 160 34.6 Intangible assets Intangible assets with finite useful life are amortized in line with the expected useful life, usually on a straight-line basis. The period of useful life is to be assessed according to business rather than legal criteria. This assessment is made at least once a year. An impairment might be required in the event of sudden or unforeseen value changes. a) Goodwill Goodwill represents the difference between the consideration transferred and the fair value of the group’s share in the identifiable net asset value of the acquired business at the time of acquisition. Any goodwill arising as a result of a business combination is included within intangible assets. Goodwill is subject to an annual impairment test and valued at its original acquisition cost less accumulated impairment losses. In cases where circumstances indicate a potential impairment, impairment tests are conducted more frequently. Profits and losses arising from the sale of a business include the book value of the goodwill assigned to the business being sold. For impairment testing, goodwill is allocated to those cash-generating units or groups of cash- generating units that are expected to benefit from the business combination in which the goodwill arose. Goodwill originating from the acquisition of an associate or joint venture is included in the book value of the investment.  b) Trademarks and licenses Trademarks, licenses and similar rights acquired from third parties are stated at acquisition cost. Such assets are amortized over their expected useful life, generally not exceeding 10 years. c) Computer software Acquired computer software licenses in control of the group are capitalized on the basis of the cost incurred to acquire the specific software and bring to use. These costs are amortized over their estimated useful lives (three to max. five years). d) Customer relationships As part of a business combination, acquired customer rights are recorded at fair value (cost at the time of acquisition). These costs are amortized over their estimated useful lives, generally not exceeding 15 years. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 161 34.7 Property, plant and equipment Property, plant and equipment is stated at acquisition cost less depreciation and impairments. Acquisition cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced item is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is provided on a straight-line basis over the estimated useful life. Land is stated at cost and is not depreciated. The useful lives are as follows: Buildings: 20–50 years Machinery: 5–15 years Technical equipment: 5– 10 years Other non-current assets: max. 5 years 34.8 Impairment of property, plant and equipment and intangible assets Assets with a finite useful life are only tested for impairment if relevant events or changes in circumstances indicate that the book value is no longer recoverable. An impairment loss is recorded equal to the excess of the carrying value over the recoverable amount. The recoverable amount is the higher of the fair value of the asset less disposal costs and its value in use. The value in use is based on the estimated cash flow over a five-year period and the extrapolated projections for subsequent years. The results are discounted using an appropriate pretax, long-term interest rate. For the purposes of the impairment test, assets are grouped together at the lowest level for which separate cash flows can be identified (cash-generating units). 34.9 Lease assets and lease liabilities The group recognizes lease assets and lease liabilities for most leases (these leases are on-balance- sheet). However, the group has elected not to recognize lease assets and lease liabilities for leases of low-value assets and short-term leases. The group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The group presents lease assets and lease liabilities as separate line items on the balance sheet. The group recognizes lease assets and lease liabilities at the lease commencement date. The lease asset is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements. The lease liability is initially measured at the present value of the lease payments that are not paid on commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group’s incremental borrowing rate. Generally, the group uses currency and duration specific incremental borrowing rates for the discounting.  Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 162 The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised, or a termination option is reasonably certain not to be exercised. 34.10 Financial assets Financial assets are classified into the following three categories: Financial assets measured at amortized cost Financial assets at fair value through profit or loss (FVTPL) Financial assets at fair value through other comprehensive income (FVOCI) Debt instruments Financial assets measured at amortized cost Initially, financial assets are recognized at fair value. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured subsequently at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in the income statement and presented in other financial income / (expenses), net together with foreign exchange gains and losses. Impairment losses are presented as separate line items in the income statement. Equity instruments The group measures all equity investments at fair value. Where the group is holding equity instruments not for trading and group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income (OCI), there is no subsequent reclassification of fair value gains and losses to the income statement following the derecognition of the investment. Dividends from such investments continue to be recognized in the income statement as other income when the group’s right to receive payments is established. A gain or loss on an equity investment that is subsequently measured at FVTPL is recognized in the income statement and presented within other operating income and expenses or other financial income and expenses, depending on the nature of the investment, in the period in which it arises. 34.11 Derivative financial instruments and hedging activities The group uses derivative financial instruments, such as forward currency contracts and other forward contracts, to hedge its risks associated with fluctuations in foreign currencies arising from operational and financing activities. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on the derivatives during the year that do not qualify for hedge accounting are taken directly into profit or loss. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 163 The group applies hedge accounting to secure the foreign currency risks of future cash flows that have a high probability of occurrence. These hedges are classified as “cash flow hedgesˮ, whereas the hedge instrument is recorded on the balance sheet at fair value and the effective portions are booked against “Other comprehensive incomeˮ in the column “Cash flow hedge reserveˮ. If the hedge relates to a non-financial transaction that will subsequently be recorded on the balance sheet, the adjustments accumulated under “Other comprehensive incomeˮ at that time will be included in the initial book value of the asset or liability. In all other cases, the cumulative changes of fair value of the hedging instrument that have been recorded in other comprehensive income are included as a charge or credit to income when the forecasted transaction is recognized or when hedge accounting is discontinued as the criteria are no longer met. In general, the fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. At the inception of the transaction, the group documents the relationship between hedging instruments and hedged items and its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. 34.12 Inventories Raw materials, supplies and consumables are stated at the lower of cost or net realizable value. Finished products and work in progress are stated at the lower of production cost or net realizable value. Production cost includes the costs of materials, direct and indirect manufacturing costs, and contract-related costs of construction. Inventories are valued by reference to weighted average costs. Provisions are made for slow-moving and excess inventories and are recognized in the income statement in Costs of goods sold.  34.13 Trade receivables Trade and other accounts receivable are recognized initially at fair value and subsequently measured at amortized cost, less allowances for doubtful trade accounts receivable. The allowance for doubtful trade accounts receivable is based on expected credit losses. The group applies the simplified approach, measuring the loss amount based on lifetime expected credit losses. These are based on historical observed default rates over the expected life of the trade receivables and are adjusted for forward-looking information such as development of gross domestic product (GDP) and oil price development. 34.14 Cash and cash equivalents Cash and cash equivalents comprise bills, postal giros and bank accounts, together with other short- term highly liquid investments with a maturity of three months or less from the date of acquisition. Bank overdrafts are reported within borrowings in the current liabilities. 34.15 Trade payables Trade payables and other payables are stated at face value. The respective value corresponds approximately to the amortized cost. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 164 34.16 Borrowings Financial debt is stated at fair value when initially recognized, after recognition of transaction costs. In subsequent periods, it is valued at amortized cost. Any difference between the amount borrowed (after deduction of transaction costs) and the repayment amount is reported in the income statement over the duration of the loan using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. 34.17 Current and deferred income taxes The current income tax charge comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group’s subsidiaries operate and generate taxable income. The management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The liability method is used to provide deferred taxes on all temporary differences between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred taxes are valued by applying tax rates (and regulations) substantially enacted on the balance sheet date or any that have essentially been legally approved and are expected to apply at the time when the deferred tax asset is realized or the deferred tax liability is settled. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case it is recognized directly in equity or other comprehensive income. Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that a taxable profit will be available against which they can be used. Deferred tax liabilities arising as a result of temporary differences relating to investments in subsidiaries, associates and joint venture are applied, unless the group can control when temporary differences are reversed and it is unlikely that they will be reversed in the foreseeable future. 34.18 Employee benefits a) Defined benefit plans The group’s net obligation in respect of defined benefit plans is calculated separately for each plan. The calculation of defined benefit assets / obligations is performed annually by a qualified actuary using the projected unit credit method. The net obligation is estimated based on the discounted future benefit that employees have earned in the current and prior periods, deducting the fair value of any plan assets. The discount rate is determined with reference to the interest rates on high-quality corporate bonds denominated in the currency of the expected cash flows and aligned with the estimated term. When the calculation results in a potential asset for the group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 165 Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest income on plan assets), and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The group determines the net interest expense / (income) on the net defined benefit liability / (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability / (asset), taking into account any changes in the net defined benefit liability/ (asset) during the period as a result of contributions and benefit payments. Net interest expenses and other expenses related to defined benefit plans are recognized in the income statement. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in the income statement. The group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs. b) Defined contribution plans Defined contribution plans are defined as pure savings plans, under which the employer makes certain contributions into a separate legal entity (fund) and does not have a legal or an extendible (constructive) liability to contribute any additional amounts in the event this entity does not have enough funds to pay out benefits. A “constructiveˮ commitment exists when it can be assumed that the employer will voluntarily make additional contributions in order not to endanger the relationship with its employees. Company contributions to such plans are considered in the income statement as personnel expenses. c) Other employee benefits Some subsidiaries provide other employee benefits such as jubilee gifts to their employees. Jubilee gifts are other long-term benefits. For example, in Switzerland, the group makes provisions for jubilee benefits based on a Swiss local directive. The provisions are reported in the category “Other employee benefitsˮ. Short-term benefits are payable within 12 months after the end of the period in which the employees render the related employee service. In the case of liabilities of a long-term nature, the discounting effects and employee turnover are to be taken into consideration. Obligations to employees arising from restructuring measures are included under the category “Restructuring provisionsˮ. 34.19 Share-based compensation The group operates two equity-settled share-based payment plans. A performance share plan (PSP) covers the members of the Executive Committee and the members of the Sulzer Management Group. A restricted share plan (RSP) covers the members of the Board of Directors. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 166 a) Performance share plan (PSP) The fair value of the employee services received in exchange for the grant of the performance share units (PSU) is recognized as a personnel expense with a corresponding increase in equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share units granted, excluding the impact of any non-market vesting conditions (e.g., target profit levels). At each balance sheet date, the group reassesses its estimates of the number of share units that are expected to vest. It recognizes the impact of the reassessment of original estimates, if any, in the income statement, and a corresponding adjustment to equity. The fair value of PSUs granted is measured by external valuation specialists based on a Monte Carlo simulation. The group accrues for the expected cost of social charges in connection with the allotment of shares under the PSP. The dilution effect of the share-based awards is considered when calculating diluted earnings per share. b) Restricted share plan (RSP) The fair value of the employee services received in exchange for the grant of the share units is recognized as a personnel expense with a corresponding increase in equity. The total amount expensed is recognized over the vesting period, which is the period over which the specified service conditions are expected to be met. The fair value of the restricted share units (RSU) granted for services rendered is measured at the Sulzer closing share price at grant date, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds with maturities matching the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. The grant date fair value of the RSUs is consequently reduced by the present value of dividends expected to be paid during the vesting period. The group accrues for the expected cost of social charges in connection with the allotment of shares under the RSP. The dilutive effect of the share-based awards is considered when calculating diluted earnings per share. 34.20 Provisions Provisions are recognized when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required is determined by considering the class of obligation as a whole. A provision is recognized even if the likelihood of an outflow with respect to a single item included in the class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 167 34.21 Sales Sales comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the group’s activities. This includes standard products (off the rack) and configured and engineered or tailor-made products. Sales are shown net of value- added tax, returns, rebates and discounts and after eliminating sales within the group. The core principle is that sales are recognized at an amount that reflects the consideration to which the group expects to be entitled in exchange for transferring goods or services to a customer. Sales are recognized when (or as) the group satisfies a performance obligation by transferring a promised good or service (i.e., an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. A customer obtains control of a good or service if it has the ability to direct the use of, and obtain substantially all of the remaining benefits from, that good or service (e.g., use, consume, sale, hold). A customer could have the future right to direct the use of the asset and obtain substantially all of the benefits from it (i.e., upon making a prepayment for a specified product). There are two methods to recognize sales: Over time method (OT): s ales, costs and profit margin recognition in line with the progress of the project Point in time method (PIT): s ales recognition when the performance obligation is satisfied at a certain point in time The group determines at contract inception whether control of each performance obligation transfers to a customer over time or at a point in time. Arrangements where the performance obligations are satisfied over time are not limited to services arrangements. The assessment of whether control transfers over time or at a point in time is critical to the timing of revenue recognition. Over time method (OT) Sales are recognized over time if any of the following is met: The customer simultaneously receives / consumes as the group performs. The group creates/enhances an asset and the customer controls it during this process. The created asset has no alternative use for the group and the group has an enforceable right to payment (including reasonable profit margin) for performance completed to date if the customer terminates the contract for convenience. The over time method is based on the percentage of costs to date compared with the total estimated contract costs (cost-to-cost method). In rare cases, other methods, such as a milestones method, may be used for a particular project, assuming that the stage of completion can be better estimated than by applying the cost-to-cost method. Work progress of sub-suppliers is considered to determine the stage of completion. If circumstances arise that may change the original estimates of sales, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated sales or costs, and are reflected in income in the period in which the circumstances that give rise to the revision become known by management. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 168 The income statement contains a share of sales, including an estimated share of profit. The balance sheet includes the corresponding contract assets if the assets exceed the advance payments from the customer of the project. When it appears probable that the total costs of an order will exceed the expected income, the total amount of expected loss is recognized immediately in the income statement. Point in time method (PIT) A performance obligation is satisfied at a point in time if none of the criteria for satisfying a performance obligation over time is met. Sales are recognized when (or as) the customer obtains control of that asset (depending on international commercial terms). The following points indicate that a customer has obtained control of an asset: The entity has a present right to payment The customer has legal title The customer has physical possession The customer has the significant risks and rewards of ownership The customer has accepted the asset For contracts applying the point in time method, the transfer of risks and rewards of ownership (depending on international commercial terms) typically depicts the transfer of control most appropriately. Disaggregation of sales In the segment information ( note 3 ), sales are disaggregated by: Divisions (group’s reportable segments) Timing of sales recognition (sales recognition method: over time, point in time) and divisions Market segments and divisions Geographical regions and divisions Payment terms The group’s general terms and conditions of supply require payments within 30 days after the invoice date. If the group’s general terms and conditions apply for a contract, the group is entitled to issue the invoices as follows: for one-third of the contract value within five days after effective date (date when the purchase order has been accepted by the supplier, or the date of the latest signing), for one-third after expiration of half of the delivery time, and for one-third within 45 days prior to delivery. Payments for prices calculated on a time basis are invoiced on a biweekly basis or after completion of the scope of supply, whichever occurs first. Other payment terms may apply if otherwise defined in the customer contract, the purchase order, the respective change order or the quotation. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 169 Variable considerations If the consideration promised in a contract includes a variable amount (e.g., liquidated damages, early payment discount, volume discounts), the group estimates the amount of consideration to which the group will be entitled in exchange for transferring the promised goods or services to a customer. The amount of the variable consideration is estimated by using either of the following methods, depending on which method the group expects will better predict the amount of consideration to which it will be entitled: the expected value method or the most likely amount method. The method selected is applied consistently throughout the contract and to similar types of contracts when estimating the effect of uncertainty on the amount of variable consideration to which the group is entitled. If the group fails to meet the delivery date and a purchase order expressly provides liquidated damages for such failure, the purchaser is entitled to demand that the group pay liquidated damages at the rate stated in the purchase order. The group’s obligation for estimated liquidated damages are recorded as a reduction in revenue. Allocation of the transaction price To allocate the transaction price to each performance obligation on a relative stand-alone, selling- price basis, the group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. If the stand-alone selling price is not directly observable, then the group estimates the amount with the expected cost-plus-margin method. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 170 35 Subsequent events after the balance sheet date The Board of Directors authorized these consolidated financial statements for issue on February 21, 2024. They are subject to approval at the Annual General Meeting, which will be held on April 16, 2024. At the time when these consolidated financial statements were authorized for issue, the Board of Directors and the Executive Committee were not aware of any events that would materially affect these financial statements. Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 171 36 Major subsidiaries December 31, 2023   Subsidiary Europe Switzerland   Sulzer Chemtech AG, Winterthur Sulzer Markets and Technology AG, Winterthur Sulzer Management AG, Winterthur   Tefag AG, Winterthur Sulzer International AG, Winterthur Sulzer Pumps Wastewater Belgium N.V.,Anderlecht Ensival Moret Belgium SA, Thimister-Clermont Sulzer Pumpen (Deutschland) GmbH, Bruchsal Sulzer Pumps Wastewater Germany GmbH, Bonn   Sulzer Chemtech GmbH, Krefeld     Nordic Water GmbH, Neuss Sulzer Pumps Denmark A/S, Farum   Sulzer Pumps Finland Oy, Kotka Sulzer Pompes France SASU, Buchelay Sulzer Ensival Moret France SASU, Saint-Quentin   Sulzer Pumps (UK) Ltd., Leeds Sulzer Chemtech (UK) Ltd., Stockton on Tees Sulzer Services (UK) Ltd., Birmingham   Sulzer (UK) Holdings Ltd., Leeds   Alba Power Ltd., Aberdeen Sulzer Pump Solutions Ireland Ltd., Wexford Sulzer Finance (Ireland) Limited, Wexford Sulzer Italy S.r.l., Casalecchio di Reno Sulzer Pumps Wastewater Norway A/S, Sandvika Belgium Germany Denmark Finland France UK Ireland Italy Norway Sulzer Pumps Norway A/S, Klepp Stasjon Nordic Water Products A/S, Straume Sulzer Pumps Wastewater Netherlands B.V., Maastricht- Airport The Netherlands   Sulzer Chemtech Nederland B.V., Breda Sulzer Turbo Services Venlo B.V., Lomm Sulzer Netherlands Holding B.V., Lomm   Sulzer Capital B.V., Lomm Sulzer Austria GmbH, Wiener Neudorf Sulzer GTC Technology Romania S.R.L., Bucharest Sulzer Pumps Sweden AB, Vadstena Nordic Water Products AB, Mölndal   Sulzer Pumps Spain S.A., Madrid   Sulzer Pumps Wastewater Spain S.A.U., Rivas Vaciamadrid Austria Romania Sweden Spain Sulzer ownership and voting rights   Registered capital (including paid-in capital in the USA and Canada)   Direct participation by Sulzer Ltd   Research and development   Production and engineering   Sales   Service 100%   CHF 10’000’000   100%   CHF 4’000’000   100%   100%   CHF 500’000   CHF 500’000   100%   CHF 100’000   100%   EUR 123’947   100%   EUR 7’400’000   100%   EUR 3’000’000   100%   100%   100%   EUR 300’000   EUR 300’000   EUR 25’565   100%   100%   DKK 501’000   EUR 16’000’000   100%   EUR 6’600’000   100%   100%   EUR 10’000’000   GBP 9’610’000   100%   GBP 100’000   100%   100%   100%   GBP 48’756   GBP 6’100’000   GBP 1   100%   EUR 2’222’500   100%   EUR 100   100%   EUR 600’000   100%   NOK 502’000   100%   NOK 500’000   100%   NOK 150’000   100%   EUR 45’378   100%   EUR 1’134’451   100%   EUR 443’940   100%   100%   EUR 10’010’260   EUR 50’000   100%   EUR 350’000   100%   RON 1’345’070   100%   SEK 3’000’000   100%   100%   SEK 200’000   EUR 1’750’497   100%   EUR 2’000’000   • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 172 North America Canada USA Mexico Central and South America Sulzer Pumps (Canada) Inc., Burnaby Sulzer Chemtech Canada Inc., Edmonton Sulzer Rotating Equipment Services (Canada) Ltd., Edmonton   JWC Environmental Canada ULC, Burnaby Sulzer Pumps (US) Inc., Houston, Texas Sulzer Pumps Solutions Inc., Easley, South Carolina Sulzer Pump Services (US) Inc., Houston, Texas Sulzer Chemtech USA, Inc., Tulsa, Oklahoma Sulzer Turbo Services Houston Inc., La Porte, Texas Sulzer Turbo Services New Orleans Inc., Belle Chasse, Louisiana Sulzer Electro-Mechanical Services (US) Inc., Pasadena, Texas Sulzer US Holding Inc., Houston, Texas JWC Environmental Inc., Santa Ana, California Sulzer GTC Technology US Inc., Houston, Texas Sulzer Pumps México, S.A. de C.V., Cuautitlán Izcalli Sulzer Chemtech, S. de R.L. de C.V., Cuautitlán Izcalli Argentina Sulzer Turbo Services Argentina S.A., Buenos Aires Brazil   Sulzer Brasil S.A., Jundiaí Sulzer Pumps Wastewater Brasil Ltda., Jundiaí Sulzer Bombas Chile Ltda., Vitacura Sulzer Pumps Colombia S.A.S., Cota Chile Colombia Africa South Africa   Sulzer Pumps (South Africa) (Pty) Ltd., Elandsfontein Sulzer (South Africa) Holdings (Pty) Ltd., Elandsfontein Sulzer Maroc S.A.R.L. A.U., Nouaceur Sulzer Pumps (Nigeria) Ltd., Lagos   Sulzer Zambia Ltd., Chingola Morocco Nigeria Zambia Middle East     United Arab Emirates Sulzer Pumps Middle East FZCO, Dubai Saudi Arabia   Sulzer Saudi Pump Company Limited, Riyadh Sulzer Chemtech Middle East W.L.L., Al Seef Bahrain Asia India Sulzer Pumps India Pvt. Ltd., Navi Mumbai   Sulzer India Pvt. Ltd., Pune Sulzer Tech India Pvt. Ltd., Navi Mumbai Indonesia Japan   PT. Sulzer Indonesia, Purwakarta     Sulzer Daiichi K.K., Tokyo   Sulzer Japan Ltd., Tokyo • • • • • 100%   CAD 2’771’588   100%   CAD 1’000’000   100%   CAD 7’000’000   • • 100%   CAD 1’832’816   100%   USD 40’381’108   100%   USD 25’589’260   100%   USD 1’000   100%   USD 47’895’000   100%   USD 18’840’000   100%   USD 4’006’122   100%   USD 12’461’286   100%   USD 310’335’340   • 100%   USD 220’818’520   100%   USD 1   100%   MXN 4’887’413   100%   MXN 231’345’500   100%   100%   ARS 9’730’091   BRL 81’789’432   100%   BRL 37’966’785   100%   CLP 46’400’000   COP 7’142’000’000   100%   75%   ZAR 100’450’000   100%   ZAR 16’476   100%   MAD 3’380’000   100%   NGN 5’000’000   100%   ZMK 15’000’000   100%   AED 500’000   100%   SAR 44’617’000   100%   BHD 50’000   100%   100%   INR 24’893’500   INR 34’500’000   100%   95%   60%   100%   INR 100’000   IDR 28’234’800’000   JPY 30’000’000   JPY 30’000’000   • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Sulzer Annual Report 2023 – Financial reporting – Notes to the consolidated financial statements 173 Sulzer Pumps Wastewater Malaysia Sdn. Bhd., Selangor Darul Ehsan Sulzer Singapore Pte. Ltd., Singapore Malaysia Singapore South Korea   Sulzer Korea Ltd., Seoul Thailand People’s Republic of China Sulzer GTC Technology Korea Co. Ltd., Seoul Sulzer (Thailand) Co., Ltd., Rayong Sulzer Dalian Pumps & Compressors Ltd., Dalian Sulzer Pumps Suzhou Ltd., Suzhou Sulzer Pump Solutions (Kunshan) Co., Ltd., Kunshan Sulzer Shanghai Eng. & Mach. Works Ltd., Shanghai Sulzer Pumps Wastewater Shanghai Co. Ltd., Shanghai Sulzer GTC (Beijing) Technology Inc., Beijing Nordic Water Products (Beijing) Co., Ltd., Beijing Australia   Sulzer Australia Pty Ltd., Brisbane   Sulzer Australia Holding Pty Ltd., Brendale • • • • • • • • • • • 100%   MYR 1’000’000   100%   SGD 1’000’000   100%   KRW 222’440’000   KRW 4’870’000’000   100%   100%   THB 25’000’000   100%   CHF 21’290’000   100%   CNY 282’069’324   100%   USD 5’760’000   100%   CNY 54’267’608   100%   USD 1’550’000   100%   USD 150’000   100%   USD 800’000   100%   AUD 5’308’890   100%   AUD 34’820’100   • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •                                                                                                                                                                                                                                                                             Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 174 Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Sulzer Ltd and its subsidiaries (the Group), which comprise the “ Consolidated balance sheet ” as at December 31, 2023, the “ Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ”, “ ”, “ changes in equity ” and “ Consolidated statement of cash flows ” for the year then ended, and “ Notes to the consolidated financial statements ”, including material accounting policy information. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at December 31, 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISA) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law, together with the requirements of the Swiss audit profession, as well as those of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 175 Customer contracts – existence and accuracy of revenue, valuation of contract assets, work in progress (WIP), and accuracy of contract liabilities Key Audit Matter As per December 31, 2023, revenue from customer Our response Our procedures included, among others, obtaining an contracts amounts to CHF 3’281.7 million, contract understanding of the project execution processes and assets amount to CHF 430.1 million, contract liabilities to relevant controls relating to the accounting for customer CHF 451.0 million and the balance of work in progress contracts. (WIP) amounts to CHF 255.4 million. Under IFRS 15 revenue is recognized when a evaluated selected key controls, including results reviews performance obligation is satisfied by transferring control by management, and performed procedures to gain over a promised good or service. sufficient audit evidence on the accuracy of the accounting for customer contracts and related financial For the revenue recognized throughout the year, we Revenue and related costs from long-term customer statement captions. orders (construction and service contracts) are recognized over time (OT), provided they fulfill the criteria These procedures included reading significant new of International Financial Reporting Standards, specifically contracts to understand the terms and conditions and having the right to payment in case of termination for their impact on revenue recognition. We performed convenience. The OT method allows recognizing inquiries with management to understand their project revenues by reference to the stage of completion of the risk assessments and inspected meeting minutes from contract. The application of the OT method is complex project reviews performed by management to identify and requires judgments by management when estimating relevant changes in their assessments and estimates. We the stage of completion, total project costs and the costs challenged these assessments and estimates for OT to complete the work. Incorrect assumptions and projects including comparing estimated project financials estimates can lead to revenue being recognized in the between reporting periods and assessed the historical wrong reporting period or in amounts inadequate to the accuracy of these estimates. actual stage of completion, and therefore to an incorrect result for the period. On a sample basis, we reconciled revenue to the supporting documentation, validated estimates of costs During order fulfillment, contractual obligations may need to complete, tested the mathematical accuracy of to be reassessed. In addition, change orders or calculations and the adequacy of project accounting. We cancelations have to be considered. As a result, total also examined costs included within contract assets on a estimated project costs may exceed total contract sample basis by verifying the amounts back to source revenues and therefore require write-offs of contract documentation and tested their recoverability through assets, receivables and the immediate recognition of the comparing the net realizable values as per the expected loss as a provision. agreements with estimated cost to complete. Regarding the projects recognized at a point in time (PIT), We further performed testing for PIT projects on a sample the risks include inappropriate revenue recognition from basis to confirm the appropriate application of revenue revenue being recorded in the wrong accounting period recognition policies and to verify valuation of WIP as well as overstated WIP that requires impairment balances. This included reconciling accounting entries to adjustments. supporting documentation. When doing this, we specifically put emphasis on those transactions occurring close before or after the balance sheet date to obtain sufficient evidence over the accuracy of cut-off. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 176 For further information on Customer contracts – existence and accuracy of revenue, valuation of contract assets, work in progress (WIP) and accuracy of contract liabilities refer to the following: Note 19  to the consolidated financial statements Note 20  to the consolidated financial statements Accounting for warranties and other costs to fulfil contract obligations Key Audit Matter As per December 31, 2023, provisions in the amount of Our response Based on our knowledge gained through contract and CHF 98.8 million are held on the balance sheet to cover project reviews, we assessed the need for and the expected costs arising from product warranties. accuracy of provisions. Additional expected costs to fulfil contract obligations from onerous contracts are recorded as other provisions. We further challenged management’s contract risk Sulzer is exposed to claims from customers for not and review of correspondence with customers where assessments by inquiries, inspection of meeting minutes meeting contractual obligations. Remedying measures, available. addressing technical shortcomings or settlement negotiations with clients, may take several months and Where milestones or contract specifications were not cause additional costs. The assessment of these costs to met, we challenged the recognition and appropriateness satisfy order related obligations contains management of provisions by recalculating the amounts, obtaining assumptions with a higher risk of material misjudgment. written management statements and evidence from supporting documents such as correspondence with clients or legal assessments of external counsels where available. We also evaluated the historical accuracy of estimates made by management through retrospective reviews. In order to gain a complete and clear understanding of legal matters we further performed inquiry procedures with the office of Sulzer’s General Counsel and reviewed relevant documents. For further information on accounting for warranties and other cost to fulfil contract obligations refer to the following: Note 27  to the consolidated financial statements Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 177 Other Information in the Annual Report The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the standalone financial statements of the company, the compensation report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors’ Responsibilities for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISA and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, ISA and SA-CH, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 178 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Auditor’s report 179 Report on Other Legal and Regulatory Requirements In accordance with Art. 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. KPMG AG Rolf Hauenstein Licensed Audit Expert Auditor in Charge Zurich, February 21, 2024 Miriam von Gunten Licensed Audit Expert KPMG AG, Badenerstrasse 172, CH-8036 Zurich © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Supplementary information 180 Supplementary information Alternative performance measures (APM) The financial information included in this report includes certain alternative performance measures (APMs), which are not accounting measures as defined by IFRS. These APMs should not be used instead of, or considered as alternatives to, the group’s consolidated financial results based on IFRS. These APMs may not be comparable to similarly titled measures disclosed by other companies. All APMs presented relate to the performance of the current reporting period and comparative periods. Definition of alternative performance measures (APM) Order intake  Order intake includes all registered orders of the period that will be recorded or have already been recorded as sales. The reported value of an order corresponds to the undiscounted value of sales that the group expects to recognize following delivery of goods or services subject to the order, less any trade discounts and excluding value added or sales tax. Adjustments, corrections and cancellations resulting from updating the order backlog are respectively included in the amount of the order intake. Order intake gross margin The order intake gross margin is defined as the expected gross profit of order intake divided by order intake. Order backlog  Order backlog represents the undiscounted value of sales the group expects to generate from orders on hand at the end of the reporting period. Return on sales (ROS)  ROS measures the profitability relative to sales. ROS is calculated by dividing EBIT by sales. Operational profit  Operational profit is used to determine the profitability of the business, without considering impairments, restructuring expenses and other non-operational items and before interest, taxes and amortization. Non-operational items include significant acquisition-related expenses, gains and losses from sale of businesses or real estate, and certain non-operational items that are non-recurring or do not occur in similar magnitude. Operational profitability  Operational profitability measures how the group turns sales into operating profits. Operational profitability is calculated by dividing operational profit by sales. Operational ROCEA (operational return on capital employed) Operational ROCEA measures how the group generates operational profits from its capital employed. Operational ROCEA is calculated by dividing operational profit by average capital employed. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Supplementary information 181 Capital employed Capital employed refers to the amount of capital investment the group uses to operate and provides an indication of how the group is investing its money. For the calculation of the capital employed, please refer to the reconciliation statement below. EBITDA (earnings before interest, taxes, depreciation and amortization) The group uses EBITDA to determine the net debt/EBITDA ratio. EBITDA is defined as EBIT before depreciation, amortization and impairment. Core net income Core net income is used to determine the dividend proposal. Sulzer’s long-term target is to maintain a dividend payout ratio of approximately 40% to 70% of core net income with due consideration to liquidity and funding requirements as well as continuity. Core net income is defined as net income before tax-adjusted effects on restructuring, amortization, impairments and non-operational items. Free cash flow (FCF)  FCF is used to assess the group’s ability to generate the cash required to conduct and maintain its operations. It also indicates the group’s ability to generate cash to finance dividend payments, repay debt and to undertake merger and acquisition activities. FCF is calculated based on the IFRS cash flow from operating activities and adjusted for capital expenditures (investments in property, plant and equipment and intangible assets).  Net debt Net debt is used to monitor the group’s overall short- and long-term liquidity. Net debt is calculated as the sum of total current and non-current borrowings and lease liabilities less cash and cash equivalents and current financial assets. Net debt/EBITDA ratio Net debt/EBITDA is a ratio measuring the amount of income generated and available to pay down debt before covering interest, taxes, depreciations and amortization expenses. The net debt/EBITDA ratio is used as a measurement of leverage. It is calculated as net debt divided by EBITDA. Gearing ratio (borrowings-to-equity ratio) The gearing ratio compares the borrowings and lease liabilities relative to the equity. The gearing ratio represents the group’s leverage, comparing how much of the business’s funding comes from borrowed funds (lenders) versus company owners (shareholders). The gearing ratio is defined as borrowings and lease liabilities divided by equity attributable to shareholders of Sulzer Ltd. Currency-adjusted growth Certain percentage changes in the financial review and the business review divisions have been calculated using constant exchange rates, which allow for an assessment of the group’s financial performance with the effects of exchange rate fluctuations eliminated. The currency-adjusted growth is calculated by applying the previous year’s exchange rates for the current year and calculating the growth without currency effects. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Supplementary information 182 Organic growth Organic growth measures changes with the same period in the previous year after adjusting for effects arising from acquisitions, divestitures/deconsolidations and foreign exchange differences. The impact of the organic growth is determined as follows: Currency-adjusted growth as described above For the current-year acquisitions, by deducting the currency-adjusted amount generated during the current-year by the acquired entities For prior-year acquisitions, by deducting the currency-adjusted amount generated over the months during which the acquired entities were not consolidated in the previous year For current-year disposals, by adding the currency-adjusted amount generated by the divested entities in the previous year over the months during which those entities were no longer consolidated in the current year For the prior-year disposals, by adding for the current year the currency-adjusted amount generated in the previous year by the divested entities Reconciliation statements for alternative performance measures (APM) For reconciliation statements of operational profit, operational profitability, core net income and free cash flow, please refer to the section “Financial review”, for EBITDA, net debt and gearing ratio to  note 7 and for operational ROCEA to the table below. Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Supplementary information 183 Operational ROCEA reconciliation statement millions of CHF Total assets ./. Other intangible assets ./. Cash and cash equivalents ./. Current financial assets ./. Total current and non-current income and deferred tax assets and liabilities ./. Total non-current liabilities ./. Total current liabilities Non-current borrowings Current borrowings Liability related to the purchase of treasury shares Outstanding dividend payments Adjustment for average calculation and currency translation differences Average capital employed Operational profit Average capital employed Operational ROCEA 2023   4’369.5   –196.8   –974.7   –2.3   –45.3   –1’125.3   –2’145.6   795.2   261.1   88.1   277.2   –12.6   1’288.6   365.6   1’288.6   28.4%   2022 4’620.2 –234.3 –1’196.3 –14.0 –92.4 –1’348.6 –2’217.5 1’043.9 311.4 92.9 239.2 135.8 1’340.2 317.6 1’340.2 23.7%                                             Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Five-year summaries 184 Five-year summaries of key financial data Key figures from consolidated income statement and statement of cash flows 1) millions of CHF Order intake 2023   2022   2021   2020 2) 2019 2) 3’580.3   3’425.4   3’167.6   3’049.2   3’322.1 Currency-adjusted growth order intake 12.6%   9.2%   3.6%   –1.1%   Order intake gross margin 33.9%   33.5%   33.1%   32.6%   Order backlog Sales Operating income (EBIT) Operational profit Operational profitability 1’946.8   1’844.7   1’724.1   1’676.8   3’281.7   3’179.9   3’155.3   2’967.8   329.7   365.6   111.4   317.6   11.1%   10.0%   221.8   293.3   9.3%   Net income attributable to shareholders of Sulzer Ltd 229.1   28.6   1’416.7   – in percentage of equity attributable to shareholders of Sulzer Ltd (ROE) 20.9%   2.8%   111.2%   Basic earnings per share (in CHF) Depreciation Amortization Impairments of tangible and intangible assets Research and development expenses 6.76   –71.4   –36.6   –0.2   –70.8   0.85   –76.0   –38.8   –44.5   –66.4   41.93   –81.0   –50.2   –4.2   –64.4   Personnel expenses –1’030.8   –1’002.4   –1’018.1   –1’014.4   –1’078.7 Capital expenditure (incl. lease assets) –103.1   –100.0   –119.4   Free cash flow (FCF) FCF conversion (free cash flow/net income) 301.3   1.31   58.3   2.08   210.5   1.50   –88.0   262.6   3.67   –100.8 156.8 1.18 Employees (number of full-time equivalents) as of December 31 13’130   12’868   13’816   13’197   14’685 1) The comparatives are based on the foreign currency exchange rates of the respective year and are not adjusted for changes in currency exchange rates. 2) Comparative information has been re-presented due to discontinued operations in 2021. n/a 32.0% 1’731.8 3’307.9 202.8 283.1 8.6% 154.0 9.7% 4.52 –79.7 –45.5 –3.1 –62.7 132.5   255.0   8.6%   83.6   6.0%   2.46   –78.3   –46.7   –9.4   –63.8                                               Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Five-year summaries 185 Key figures from consolidated balance sheet 1) millions of CHF Non-current assets 2023   2022   2021   2020 2) 2019 1’685.9   1’584.2   1’834.2   2’279.9   2’172.0 – thereof property, plant and equipment 348.2   360.5   394.0   545.3   Current assets 2’683.5   3’036.0   3’176.2   3’087.1   – thereof cash and cash equivalents 974.7   1’196.3   1’505.4   1’123.2   Total assets 4’369.5   4’620.2   5’010.4   5’367.0   Equity attributable to shareholders of Sulzer Ltd 1’095.4   1’024.3   1’273.8   1’404.3   544.4 2’937.5 1’035.5 5’109.5 1’580.7 1’644.1 1’199.2 82.3 1’125.3   1’348.6   1’568.8   1’976.0   795.2   1’043.9   1’164.6   1’491.3   69.0   67.2   64.5   90.2   2’145.6   2’242.9   2’162.3   1’973.8   1’871.5 261.1   23.9   172.3   0.39   311.4   22.4   234.6   0.87   345.5   24.3   66.8   0.15   231.8   29.5   414.5   1.26   131.0 27.4 346.9 0.84 25.1%   22.2%   25.4%   26.1%   30.9% Non-current liabilities – thereof non-current borrowings – thereof non-current lease liabilities Current liabilities – thereof current borrowings – thereof current lease liabilities Net debt Net debt/EBITDA ratio Equity ratio 3) 1) The comparatives are based on the foreign currency exchange rates of the respective year and are not adjusted for changes in currency exchange rates. 2) Comparative information has been re-presented due to discontinued operations in 2021. The balance sheet as of December 31, 2020, has been adjusted following the finalization of the purchase price accounting and measurement period adjustments related to acquisitions in 2020. Defined benefit assets are presented as non-current assets and comparative information is re-presented. 3) Equity attributable to shareholders of Sulzer Ltd in relation to total assets.                                                         Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Five-year summaries 186 Five-year summaries by division millions of CHF Flow Equipment Services Chemtech Total millions of CHF Flow Equipment Services Chemtech Divisions Others Total millions of CHF Flow Equipment Services Chemtech Divisions Others Total Order intake 1) Sales 1) 2023   2022   2021   2020 2) 2019 2) 2023   2022   2021   2020 2) 2019 2) 1’466.5   1’419.2   1’324.7   1’297.6   1’458.9   1’354.4   1’323.0   1’389.0   1’296.3   1’477.0 1’271.3   1’171.3   1’163.4   1’130.8   1’193.2   1’154.8   1’117.0   1’117.7   1’078.3   1’167.0 842.5   834.9   679.5   620.8   670.0   772.5   739.9   648.5   593.1   664.0 3’580.3   3’425.4   3’167.6   3’049.2   3’322.1   3’281.7   3’179.9   3’155.3   2’967.8   3’307.9 Order backlog 1) Employees 3) 2023   2022   2021   2020 2) 2019 2) 2023   2022   2021   2020 2) 2019 2) 878.3   850.1   811.5   845.0   924.3   5’465   5’263   5’325   5’362   5’759 547.3   492.9   479.5   435.0   422.2   4’630   4’559   4’571   4’449   4’900 521.2   501.7   433.2   396.9   385.3   2’849   2’852   3’734   3’221   3’803 1’946.8   1’844.7   1’724.1   1’676.8   1’731.8   12’944   12’674   13’631   13’032   14’463 1’946.8   1’844.7   1’724.1   1’676.8   1’731.8   13’130   12’868   13’816   13’197   14’685 186   194   185   165   222 Operational profit 1) Operational profitability 2023   2022   2021   2020 2) 2019 2) 2023   2022   2021   2020 2) 2019 2) 108.2   87.4   81.4   55.2   59.7   8.0%   6.6%   5.9%   4.3%   4.0% 171.3   159.0   158.7   150.3   164.5   14.8%   14.2%   14.2%   13.9%   14.1% 95.0   80.0   64.8   56.9   63.8   12.3%   10.8%   10.0%   9.6%   9.6% 374.5   326.4   304.9   262.4   288.0   11.4%   10.3%   9.7%   8.8%   8.7% –8.9   –8.8   –11.6   –7.4   –4.9   n/a   n/a   n/a   n/a   n/a 365.6   317.6   293.3   255.0   283.0   11.1%   10.0%   9.3%   8.6%   8.6% 1) The comparatives are based on the foreign currency exchange rates of the respective year and are not adjusted for changes in currency exchange rates. 2) Comparative information has been re-presented due to discontinued operations in 2021. 3) Number of full-time equivalents as of December 31.                                                                                                                                                                                                                                       Americas Asia-Pacific Total Americas Asia-Pacific Total Sulzer Annual Report 2023 – Financial reporting – Consolidated financial statements – Five-year summaries 187 Five-year summaries by region Order intake by region 1) millions of CHF 2023   2022   2021   2020 2) 2019 2) Europe, the Middle East and Africa 1’278.3   1’322.9   1’281.2   1’211.6   1’353.8   1’193.2   1’051.8   1’009.5   948.2   909.3   834.6   828.2   3’580.3   3’425.4   3’167.6   3’049.2   3’322.1 1) The comparatives are based on the foreign currency exchange rates of the respective year and are not adjusted for changes in currency exchange rates. 2) Comparative information has been re-presented due to discontinued operations in 2021. Sales by region 1) millions of CHF 2023   2022   2021   2020 2) 2019 2) Europe, the Middle East and Africa 1’246.0   1’207.9   1’297.5   1’198.1   1’199.8   1’142.8   836.0   829.2   978.1   879.7   1’027.1   742.6   3’281.7   3’179.9   3’155.3   2’967.8   3’307.9 1) The comparatives are based on the foreign currency exchange rates of the respective year and are not adjusted for changes in currency exchange rates. 2) Comparative information has been re-presented due to discontinued operations in 2021. Employees by company location 1 ) millions of CHF Europe, the Middle East and Africa Americas Asia-Pacific Total 1) Number of full-time equivalents as of December 31. 2) Comparative information has been re-presented due to discontinued operations in 2021. 2023   5’445   3’642   4’043   2022   5’602   3’422   3’845   2021   5’795   4’207   3’815   2020 2) 2019 2) 5’709   3’960   3’528   6’246 4’429 4’010 13’130   12’868   13’816   13’197   14’685 1’375.8 1’134.6 811.7 1’306.9 1’165.3 835.8                                     Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Balance sheet of Sulzer Ltd 188 Balance sheet of Sulzer Ltd December 31 millions of CHF Current assets Cash and cash equivalents Marketable securities Accounts receivable from subsidiaries Prepaid expenses and other current accounts receivable Total current assets Non-current assets Loans to subsidiaries Financial assets Investments in subsidiaries Investments in associates Total non-current assets Total assets Current liabilities Current interest-bearing liabilities Current liabilities with subsidiaries Current liabilities with shareholders Accrued liabilities and other current liabilities Current provisions Total current liabilities Non-current liabilities Non-current interest-bearing liabilities Non-current provisions Total non-current liabilities Total liabilities Equity Registered share capital Legal capital reserves Reserves from capital contribution Voluntary retained earnings – Free reserves – Retained earnings – Net profit for the year Treasury shares Total equity Total equity and liabilities Notes   3   4   6   6   5   5   5   5   2023   275.7   –   207.3   6.3   489.3   621.2   23.7   1’545.2   22.0   2’212.1   2’701.4   250.0   6.5   365.7   8.4   4.7   635.3   794.3   33.1   827.4   1’462.7   0.3   155.5   200.7   791.5   31.7   95.7   –36.7   1’238.7   2’701.4   2022 388.0 8.8 324.2 3.1 724.1 743.9 12.3 1’486.6 5.4 2’248.2 2’972.3 289.9 0.2 332.3 11.9 5.2 639.5 1’043.9 33.2 1’077.1 1’716.6 0.3 155.5 200.7 891.5 48.8 1.8 –42.9 1’255.7 2’972.3                                                                                                                                                                                                                                                                                                                   Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Income statement of Sulzer Ltd 189 Income statement of Sulzer Ltd January 1 – December 31 millions of CHF Income Investment income Financial income Other income Total income Expenses Administrative expenses Financial expenses Investment and loan expenses Other expenses Direct taxes Total expenses Net profit for the year Notes   9   11   10   8   11   9   2023   200.6   41.9   44.2   286.7   100.9   66.7   14.1   8.2   1.1   191.0   95.7   2022 160.0 44.0 42.3 246.3 70.1 45.7 118.5 9.3 0.9 244.5 1.8                                                                                                 Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Statement of changes in equity of Sulzer Ltd 190 Statement of changes in equity of Sulzer Ltd January 1 – December 31 millions of CHF Share capital   Legal reserves   Reserves from capital contribution  Free reserves   Retained earnings   Net Treasury income   shares   Total Equity as of January 1, 2022 0.3   155.5   200.7   891.5   46.2   121.3   –51.0   1’364.5 Dividend Allocation of net income Net profit for the year Change in treasury shares –118.7   –118.7 2.6   –2.6   1.8   – 1.8 8.1 8.1   Equity as of December 31, 2022 0.3   155.5   200.7   891.5   48.8   1.8   –42.9   1’255.7 Dividend Allocation of net income Net profit for the year Change in treasury shares –118.9   –118.9 –100.0   –17.1   117.1   95.7   6.2   – 95.7 6.2 Equity as of December 31, 2023 0.3   155.5   200.7   791.5   31.7   95.7   –36.7   1’238.7                                                                                                                                                                                                                                                                                                                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 191 Notes to the financial statements of Sulzer Ltd 1 General information Sulzer Ltd, Winterthur, Switzerland (the company), is the parent company of the Sulzer group. Its financial statements are prepared in accordance with Swiss law and serve as complementary information to the consolidated financial statements. These financial statements were prepared according to the provisions of the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations). Where not prescribed by law, the significant accounting and valuation principles applied are described below. 2 Key accounting policies and principles Treasury shares Treasury shares are recognized at acquisition cost and deducted from shareholders’ equity at the time of acquisition. In case of a resale, the gain or loss is recognized through the income statement as financial income or financial expenses. Investments in subsidiaries and third parties The participations are valued at acquisition cost or if the value is lower, at value in use, using generally accepted valuation principles. Non-current interest-bearing liabilities Non-current interest-bearing liabilities are recognized in the balance sheet at amortized cost. Discounts and issue costs for bonds are amortized on a straight-line basis over the bond’s maturity period. Share-based payments Sulzer Ltd operates a share-based payment program that covers the Board of Directors. Restricted share units (RSU) are granted annually. The plan features graded vesting over a three-year period. One RSU award is settled with one Sulzer share at the end of the vesting period. Awards automatically vest with the departure from the Board. The fair value of the Sulzer share at vesting date is recognized as compensation to the Board of Directors. Foregoing a cash flow statement and additional disclosures in the notes As Sulzer Ltd has prepared its consolidated financial statements in accordance with a recognized accounting standard (IFRS), it has decided to forego presenting additional information on audit fees and interest-bearing liabilities in the notes and a cash flow statement in accordance with the law. Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 192 3 Cash and cash equivalents As of December 2023, Sulzer had access to a syndicated credit facility of CHF 500 million maturing on December 31, 2026. The facility includes two one-year extension options and a further option to increase the credit facility by CHF 250 million (subject to lenders' approval). In 2022 and 2023, the group exercised the options, extending the term of the credit facility in the amount of CHF 415 million to December 2028. The facility is subject to financial covenants based on net financial indebtedness and EBITDA, which were adhered to throughout the reporting period. As of December 31, 2023, and 2022, the syndicated facility was not used. 4 Investments in subsidiaries A list of the major subsidiaries held directly or indirectly by Sulzer Ltd is included in note 36  to the consolidated financial statements. 5 Equity Share capital The share capital amounts to CHF 342’623.70, made up of 34’262’370 shares with dividend entitlement and a par value of CHF 0.01. All shares are fully paid in and registered. Shareholders holding more than 3% Viktor Vekselberg (direct shareholder: Tiwel Holding AG) 16’728’414   48.82   16’728’414   The Capital Group Companies, Inc. 1’034’950   3.02   1’034’950   Number of shares   in %   Number of shares   in % 48.82 3.02 Dec 31, 2023   Dec 31, 2022 Treasury shares held by Sulzer Ltd millions of CHF Balance as of January 1 Purchase Share-based remuneration Balance as of December 31 2023   Total transaction amount   42.9   20.9   Number of shares   523’855   260’000   Number of shares   534’733   281’349   –332’781   –27.1   –292’227   451’074   36.7   523’855   2022 Total transaction amount 51.0 19.5 –27.6 42.9 The total number of treasury shares held by Sulzer Ltd as of December 31, 2023, amounted to 451'074 (December 31, 2022: 523'855 shares), which are mainly held for the purpose of issuing shares under the management share-based payment programs.                           Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 193 6 Interest-bearing liabilities 125.0 290.0 250.0 300.0 200.0 170.0 1’335.0 1’045.0 290.0 2022 937.3 258.2 455.7 9.0 millions of CHF 0.875% 07/2016–07/2026 1.300% 07/2018–07/2023 1.600% 10/2018–10/2024 0.800% 09/2020–09/2025 0.875% 11/2020–11/2027 3.350% 12/2022–12/2026 Total as of December 31 – thereof non-current – thereof current 2023   2022 Book value   Nominal   Book value   Nominal 125.0   125.0   –   250.0   299.8   199.8   169.7   –   250.0   300.0   200.0   170.0   125.0   289.9   249.9   299.6   199.7   169.7   1’044.3   1’045.0   1’333.8   794.3   250.0   795.0   250.0   1’043.9   289.9   All the outstanding bonds are traded on SIX Swiss Exchange. 7 Contingent liabilities millions of CHF Guarantees, sureties and comfort letters for subsidiaries – to banks and insurance companies – to customers – to others Guarantees for third parties 2023   845.5   216.3   399.3   9.3   Total contingent liabilities as of December 31 1’470.4   1’660.2 As of December 31, 2023, CHF 406.3 million (2022: CHF 410.8 million) in guarantees, sureties and comfort letters for subsidiaries to banks and insurance companies were utilized. 8 Administrative expenses millions of CHF Compensation of Board of Directors Other administrative expenses Total administrative expenses 2023   2.6   98.3   100.9   2022 1.8 68.3 70.1 Sulzer Ltd does not have any employees. The compensation of the Board of Directors includes share- based payments and remuneration. Other administrative expenses contain management services and recharges from subsidiaries.                                                     Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 194 9 Investment income and investment and loan expenses In 2023, the investment income contains ordinary and extraordinary dividend payments from subsidiaries amounting to CHF 182.3 million (2022: CHF 142.9 million). The release of allowances on investments amounts to CHF 17.6 million (2022: CHF 0.0 million). The income from the sale of subsidiaries amounts to CHF 0.4 million (2022: CHF 7.0 million), net. The investment and loan expenses contain allowances on investments amounting to CHF 10.5 million (2022: CHF 44.6 million) and waivers on loans and receivables amounting to CHF 0.8 million (2022: CHF 71.3 million). The share of loss from associates amounts to CHF 2.9 million (2022: CHF 2.5 million). 10 Other income The income from trademark license amounts to CHF 44.2 million (2022: CHF 42.3 million). 11 Financial income and expenses The financial income contains interests on loans with subsidiaries amounting to CHF 35.1 million (2022: CHF 42.1 million) and CHF 2.5 million (2022: CHF 0.5 million) with banks. The realized and unrealized gain on marketable securities amounts to CHF 4.3 million (2022: loss of CHF 18.5 million).  The financial expenses contain mainly interest expenses on interest-bearing liabilities of CHF 17.5 million (2022: CHF 15.8 million). The foreign currency revaluation on intercompany loans resulted in a loss of CHF 48.8 million (2022: loss of CHF 11.4 million). Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 195 12 Share participation of the Board of Directors, Executive Committee and related parties Restricted share units for members of the Board The compensation of the Board of Directors consists of a fixed cash component and a restricted share unit (RSU) component with a fixed grant value. The number of RSU is determined by dividing the fixed grant value by the volume-weighted share price of the last ten days prior to the grant date. One-third of the RSU each vest after the first, second and third anniversaries of the grant date, respectively. Upon vesting, one vested RSU is converted into one share in Sulzer Ltd. The vesting period for RSU granted to the members of the Board of Directors ends no later than on the date on which the member steps down from the Board. Board of Directors Suzanne Thoma Markus Kammüller Alexey Moskov David Metzger Per Utnegaard Hariolf Kottmann Prisca Havranek-Kosicek Executive Committee Suzanne Thoma Thomas Zickler Haining Auperin Tim Schulten Jan Lüder Uwe Boltersdorf   Sulzer shares   Restricted share units (RSU) 1)   Performance share units (PSU) 2021 2)   Performance share units (PSU) 2022 3)   Performance share units (PSU) 2023 4) 2023 9’320   2’559   536   2’114   1’736   1’375   1’000   –   11’114   2’559   3’402   5’153   –   –   –   17’430   2’886   3’085   3’295   3’295   1’623   1’623   1’623   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   4’264   14’362   –   1’212   1’364   1’212   –   476   2’120   5’074   1’142   5’074   –   952   – – – – – – – – 36’548 12’778 5’112 4’217 5’112 5’112 4’217 1) Restricted share units assigned by Sulzer. 2) The average fair value of one performance share unit 2021 at grant date amounted to CHF 124.95. 3) The average fair value of one performance share unit 2022 at grant date amounted to CHF 84.69. 4) The average fair value of one performance share unit 2023 at grant date amounted to CHF 88.38.                                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 196 2022 Board of Directors Suzanne Thoma Matthias Bichsel Alexey Moskov David Metzger Hanne Birgitte Breinbjerg Sørensen Markus Kammüller Executive Committee Suzanne Thoma Thomas Zickler Armand Sohet Tim Schulten Torsten Wintergerste   Sulzer shares   Restricted share units (RSU) 1)   Performance share units (PSU) 2020 2)   Performance share units (PSU) 2021 3)   Performance share units (PSU) 2022 4) 23’434   21’095   744   12’600   2’217   600   7’273   –   32’723   744   1’513   6’791   –   23’675   4’701   4’406   3’786   2’808   3’786   1’608   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   –   – – – – – – – 16’827   12’412   20’640 –   1’273   7’777   –   7’777   –   1’212   4’994   1’212   4’994   2’120 5’074 4’186 5’074 4’186 1) Restricted share units assigned by Sulzer. 2) The average fair value of one performance share unit 2020 at grant date amounted to CHF 78.18. 3) The average fair value of one performance share unit 2021 at grant date amounted to CHF 124.95. 4) The average fair value of one performance share unit 2022 at grant date amounted to CHF 84.69. Granted Sulzer shares to members of the Board of Directors 2023   2022 Quantity   Value in CHF   Quantity   Value in CHF Allocated to members of the Board of Directors 10’128   780’000   11’637   905’000 13 Subsequent events after the balance sheet date At the time when these financial statements were authorized for issue, the Board of Directors was not aware of any events that would materially affect these financial statements.                                           Sulzer Annual Report 2023 – Financial reporting – Notes to the financial statements of Sulzer Ltd 197 Proposal of the Board of Directors for the appropriation of the available profit in CHF Net profit for the year Unallocated profit carried forward from previous year Total available profit Appropriation from free reserves Ordinary dividend Balance carried forward Dividend distribution per share CHF 0.01 Gross dividend Withholding tax (35%) Net dividend 2023   95’734’000   31’684’494   127’418’494   2022 1’802’000 48’819’259 50’621’259 100’000’000 –126’792’360   –118’936’766 626’134   31’684’494 3.75   –1.31   2.44   3.50 –1.23 2.27 The Board of Directors proposes the payment of a dividend of CHF 3.75 per share to the Annual General Meeting on April 16, 2024. The company will not pay a dividend on treasury shares held by Sulzer Ltd or one of its subsidiaries.                                           Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Auditor’s report 198 Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Sulzer Ltd (the Company), which comprise the “ Balance sheet of Sulzer Ltd ” as at December 31, 2023, the “ Income statement of Sulzer Ltd ” and the “ Statement of changes in equity of Sulzer Ltd ” for the year then ended, and “ Notes to the financial statements of Sulzer Ltd ”, including a summary of significant accounting policies. In our opinion, the financial statements for the year ended December 31, 2023, comply with Swiss law and the Company’s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the Company in accordance with the provisions of Swiss law, together with the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters  Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. We have determined that there are no key audit matters to communicate in our report. Board of Directors’ Responsibilities for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Auditor’s report 199 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Sulzer Annual Report 2023 – Financial reporting – Financial statements of Sulzer Ltd – Auditor’s report 200 Report on Other Legal and Regulatory Requirements In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. KPMG AG Rolf Hauenstein Licensed Audit Expert  Auditor in Charge Zurich, February 21, 2024 Miriam von Gunten Licensed Audit Expert KPMG AG, Badenerstrasse 172, CH-8036 Zurich © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Sulzer Annual Report 2023 – Investor contact 201 Investor contact Thomas Zickler Chief Financial Officer Sulzer Ltd Neuwiesenstrasse 15 8401 Winterthur Switzerland Phone +41 52 262 33 15 Contact form Route | Sulzer Annual Report 2023 – Imprint 202 Imprint Published by: Sulzer Ltd, Winterthur, Switzerland © 2024 Layout/graphics: Office for spatial identity, Zurich, Switzerland Sergeant, Zurich, Switzerland Publishing system: ns.wow by mms solutions AG, Zurich, Switzerland Photographs: Sulzer Management Ltd, Winterthur, Switzerland Geri Krischker, Zurich, Switzerland (management portrait, Suzanne Thoma) Fabian Hugo, Bern, Switzerland (management portrait, Thomas Zickler) Max Schwank, Basel-Landschaft, Switzerland (Executive Committee photo) Sulzer Annual Report 2023 – Disclaimer 203 Disclaimer This report may contain forward-looking statements, including, but not limited to, projections of financial developments and future performance of materials and products, containing risks and uncertainties. These statements are subject to change based on known and unknown risks and various other factors that could cause the actual results or performance to differ materially from the statements made herein. Rounding Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. All ratios, percentages and variances are calculated using the underlying amount rather than the presented rounded amount. Tables Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Dashes (–) generally indicate that the respective figure is zero, while a zero (0.0) indicates that the relevant figure has been rounded to zero. Languages Parts of the Sulzer Annual Report 2023 have been translated into German. Please note that the English-language version of the Sulzer Annual Report is the binding version. 

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