Sulzer AG (SUN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Sulzer Q3 2021 Order Intake Conference Call and Live Webcast. I am Paolo, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Ladner, Head of Investor Relations. Please go ahead, sir.

Thank you, Paolo, and good morning, and welcome to Sulzer's Q3 conference call. Today with me is our CEO, Grég Poux-Guillaume; and our CFO, Jill Lee. For this call, we have prepared a presentation, which you can find on our home page. As always, I want to draw your attention on the disclaimer on Slide #2. Please read it through carefully. Before I hand over to Grég, let me say a couple of words on the treatment of Medmix on Slide #3. The spin-off of Applicator Systems was concluded at the end of Q3. Our shareholders approved the split on the extraordinary shareholder meeting on September 20. And Medmix, as it is now known, was traded for the first time as a separate company at the SIX Swiss Exchange on September 30. Since the split, Medmix is classified as a discontinued operations within Sulzer, which means that you don't find the Medmix business, our previous Applicator Systems' division in this presentation anymore. But although it is classified as discontinued, it was still part of Sulzer in Q3. And therefore, we show you the order intake numbers on this page. Medmix orders were up 41% organic year-to-date and up 21% in Q3, showing strong growth as all of the Medmix end markets recovered from the pandemic. Also important to note is that the transaction was a symmetrical or 1 for 1 split. Due to the nature of the split, Sulzer did not retain an economic interest once the split happened. On that words, on Medmix, I hand now over to Grég for the presentation of Sulzer.

Thank you, Christoph. Hello, everybody. Moving to Page 5. You can see that we have new division names for new ambitions. Sulzer is now a flow control company, a pure-play flow control company. We have a very attractive technology portfolio, and we're active in markets that are driven by the trend towards sustainable solutions. The flow control market is set for consolidation, as you know. We have always been vocal that we want to play an active role in this consolidation. And in many ways, this is easier with our leaner, refocused portfolio. As we bring the spotlight back to Flow Control, after spending a lot of time talking about the split this year, we decided to rename our divisions to better reflect what they are today and where our ambitions lie. Pumps equipment becomes flow equipment as we now offer much more than pumps, take the example of our water and industry franchises, which develop end market compressors, grinders, filters, agitators, mixers and can monitor and control all of these through digital platforms. The word pumps just felt too narrow. Rotating Equipment Services becomes just services as we increasingly also service the nonrotating equipment that is part of our customer systems, like reciprocating compressors or gas engines. We are a full-service provider that uses advanced data analytics, digital solutions and additive manufacturing to maximize our customers' equipment, be it rotating or nonrotating. The name of Chemtech remains unchanged for now as chemical applications still represent about half of what we do. But the more we shift towards renewable applications such as biopolymers, recycling and carbon capture, the more likely it is that we'll come up with a new name. Moving to Page 6. Although the look and feel has changed from the slide shown at our Capital Markets Day in June, the strategy hasn't. We aim to do 4 things. We aim to grow our Water & Industry business in Flow equipment. We aim to leverage our unique proposition and leading digital and additive offering and services. We aim to capitalize on opportunities in emerging biopolymer and recycling markets in Chemtech. And last but not least, we aim to focus on ESG as an underlying strategic driver that will generate growth in areas where we can differentiate through innovation, leading to strong financial performance. The strategy is the basis for the midterm financial targets that we have introduced at the Capital Markets Day and that we show again at the end of this presentation. Moving to Page 7, our Q3 highlights. Back in July, we guided you for a lower level of orders in Q3 than in Q2 as that usually happens given seasonality in our businesses. We were wrong, but this is a good wrong. Orders in Q3 increased 15.7% adjusted for ForEx and 11.8% organic both year-on-year to CHF 803 million. This is CHF 1 million above the Q2 level and therefore, above our expectations. Main driver for the good development was the strong water industry business in Flow Equipment, good momentum in EMEA and the Americas in Services and continued strength in China as well as increasing momentum in U.S. field services in Chemtech. For the first 9 months of 2021, our orders were flat, ForEx adjusted and down 2.8% organic, still suffering from the high baseline of H1 2020 that we already commented on in July, but the baseline has not flipped and we confirm our guidance for the full year as we expect a solid Q4 that compares to a relatively low Q4 in 2020. We are often asked about the impact of supply chain and logistics bottlenecks and raw material price inflation. I'll give you more details when discussing the divisions. But let me say in general that, yes, logistics is a challenge currently, and it causes delays in certain projects, less on our side, but more on our customer's side as we usually are only a small part of a big project. And yes, we also have an impact from increased material prices, but it is manageable until today as we are the most -- as we are mostly successful in passing on these increases to our customers. I would also like to highlight the doughnut chart on that slide. Based on year-to-date orders, 51% of Sulzer is aftermarket and 49% is new equipment. This 49% new equipment is water for 12% and oil and gas for only 10% and a variety of other markets for the balance. We have more than demonstrated that our services business is not cyclical. And we look at it on a regional basis, not on the customer end market basis as the diversification and fragmentation is such that it largely neutralizes any type of cyclicality. Finally, the reduced exposure to oil and gas new equipment is not only a reflection of the current market situation, but also the result of our continued selectivity and our efforts to grow other parts of Sulzer. I hope this puts to rest the idea of a correlation of Sulzer to oil and gas. So new division names, new visuals and hopefully new questions. Let's just move to the divisions. Page 9. In Flow Equipment, orders are still behind last year's level year-to-date, but the trend has changed, and we had a strong order growth in Q3, with orders up 23% year-on-year adjusted for ForEx and up 15% organic. Water was up 20% year-on-year organic in Q3. Industry followed with 14% up, and energy was 12% up despite our continued focus on margin and therefore, strict selectivity. Tendering activities in energy had already started to increase in Q2 and accelerated in Q3. Logistics were a challenge that come with additional costs that we mitigate. But more importantly, delays in revenue recognition that we have very little control over. Still our backlog is filling up and these orders will get traded eventually. Increasing prices for raw materials and components are manageable so far. We see higher prices for electrical motors, stemming from increased prices for copper and electrical steel, while prices for castings are less impacted. For our standard products, we have adjusted price list already twice this year. Also noteworthy is that our internal green power initiative is on track. We switched our Chinese factories to a renewable power supply, and we installed PV, photovoltaic systems on our rooftops in the U.S. and in Germany. Remember that our electricity consumption is 65% of our greenhouse gas emissions. This matters. Moving to Page 10. In services, we are also experiencing the continuing recovery. Q3 orders increased by 12% year-on-year adjusted for ForEx and by 10% organic. We've seen higher growth in pump services, which is 53% of our service division, while Asia Pacific is still suffering from lockdowns in some key countries like Australia, but EMEA and the Americas have picked up significantly. In services, we have limited issues with logistics as we are present locally in most countries. Also, material price inflation is not a major topic in services. A lot of it is actually pass-through. Moving to Chemtech on Page 11. Orders were up 8% year-on-year adjusted for ForEx and organic, driven by continued market strength in China and good momentum for field services in the U.S., where we have seen an increase in turnaround services activities. While material cost inflation is manageable as we are able to pass on price increases, logistics are a challenge and caused project delays mainly on our customer's side. We're fighting to keep our revenue recognition targets. We've also seen decisions on larger projects being moved towards the end of the year. And renewables tendering is very active and the pipeline is increasing, suggesting good order intake in the quarters ahead. So to wrap this up, let me summarize on Page 13, our takeaways of this Q3. Orders in Q3 grew 11.8% organic on improving trends in many segments of the economy. And there's still more to come. As on the pandemic recovery front, we are still impacted by lockdowns in parts of Southeast Asia. Logistic challenges lead to delays on some projects, which could have an impact on our revenue recognition. Increased prices for raw materials and components are manageable to date as in most cases, we are able to pass the cost on to customers. We are excited about our refocus on Flow Control and feel confident about the quarters ahead. We confirm our 2021 guidance, which we last upgraded this summer. We see orders up 2% to 3%, sales up 6% to 8% and our operational profitability to be around 9%. We also confirm our midterm targets, which are reminded on the next slide. We believe, as you see on Page 14 that Sulzer will achieve over the midterm, an average growth rate of sales of 4% to 5% and an operational profitability between 10% and 11%. With that, that concludes our presentation. And Jill and I are happy to take your questions.

The first question comes from the line of Aurelio Calderon from Morgan Stanley.

The first one is on the division renaming. Should we expect to see an independent water division at some point on the line, especially given that it's now the largest part of your flow equipment division and it's got a little bit of a different portfolio to what you used to call pumps? And that would be my first question, please.

Well, Aurelio, let me take this one. It's got a different portfolio from what we used to call pumps. But industry is the same. The grinders, the sedimentation, the filters, the agitators, all of that is in compressors. All of that is true in industry and in water. So from that perspective, they're fairly similar. I think your question is still a good one in the sense that water is now 40% of that division. And I think that if we were to make an additional acquisition in water of significant size, we would certainly consider breaking that out as a separate business.

Okay. That's very helpful. And just following up on that, you mentioned that you want to be -- you think that the flow control market is going to consolidate and you want to play an active role in terms of consolidation? Is that just in water? Or would you consider consolidating as a flow control peer?

Flow Control in general. I think that if you look at the flow control companies out there, most of them are not single segments. They all have either powering industry or oil and gas industry or watering industry. I mean, everybody has some level of diversification with the different sizes of positions in the different segments. And there's some players out there with whom we would have significant synergies. So it wouldn't be limited to one segment. But at the same time, not everybody is a good fit. So it's really a question of what makes sense for Sulzer.

Yes, I think I didn't phrase my question correctly. I wanted you maybe more touch on because some of your peers have a broader exposure in terms of the -- maybe it's on the energy side, but when you look at their portfolio, they have pumps, they have seals, they have valves and activators whereas you've been way more focused on pumps historically, especially on the energy side. So it was more if you were thinking about potentially adding new legs of the portfolio or you're happy with your current portfolio?

Okay. I understand the question, Aurelio. Well, seals, we'd add tomorrow if we saw a business that was a good fit. The difficulty about seals, we actually have a seals businesses. We, I think, are -- the Sulzer seals cover more than 80% of our needs for our water business. And I would guess, I don't recall what the exact number is, but I think it's probably about 30% of our needs in the industry. So we do make seals already. We'd like to have a larger presence in seals, but the seals market is fairly concentrated. And the really small players are not of a whole lot of interest for a bunch of different reasons. And the larger players are not available. So seals we would do and -- if the opportunity came up, valves not really. Valves I've always been clear that we don't particularly believe that there's a lot of synergies between valves and pumps, and that view hasn't changed. But if there ever was a consolidation, you know how these things work, when you rationalize the portfolio. So usually, the first move is not the final move.

Great. And maybe just one last question, if I can squeeze that in.

Sure.

Your services business performed actually quite well other than in APAC. If you could maybe comment on why APAC was so weakened. I think you called out Australia as being impacted by site access and so on, but I would be curious to know what you're seeing on the ground in China, especially. And what was the driver of that negative print in APAC?

We had issues mostly -- well, issues -- we saw difficult market conditions in Southeast Asia more than in China. China is quite active. But Southeast Asia has countries like there is Australia, but there's also Indonesia that had still significant restrictions in terms of movements. That's really what it was about. It was about the tail end. I mean, I'm hoping that it's the tail end of the pandemic in some big countries for us like Australia and Indonesia. And I mean, under Jill's control, I think that if you look at APAC for us, China is the #1 country, but probably Indonesia and Australia, are like 2 and 3.

Yes.

Or 3 and 2 I don't know and in which order. Am I correct on that, Jill.

I think Australia and then you have Indonesia and then the rest of Southeast Asia.

Yes.

Yes, as blocked, but essentially, yes, it's really the pandemic-driven containment measures that the countries had. And in the Southeast Asia, a lot of this countries are also stepping up on the vaccination rollout. And we're hoping that with this the situation with ease. So it has nothing to do really fundamentally with the demand, but the access to the sites of our customers.

Yes. Aurelio, does that answer your question?

Yes, it does.

The next question comes from the line of Alessandro Foletti from Octavian.

Yes. Just 2 on the outlook maybe or, let's say, your guidance, you keep it flat, but you said today in the call that Q3 was actually better than your expectation. And you're also right that the momentum in Q4 continues. So what makes you sort of conservative to maintain the guidance instead of raising it, which probably the pure numbers would justify that.

Aurelio -- I'm sorry, Alessandro. Alessandro, I wanted to -- before I answer your question, I wanted to tell you that your latest report has had the best and most humorous title I have ever read in an analyst report. It was -- for those of you who don't read Octavian, it was a conscious uncoupling. You actually quoted Gwyneth Paltrow, which I think is a first of a kind. So well done, and we had a good chuckle about that.

All right.

Moving to your questions. I think you're correct that we've got good momentum on the orders, and we're -- we feel quite comfortable about our guidance and orders. And your point, I don't dispute your point as it relates to orders. In terms of sales, if we had to venture a guess today, we'd probably be at the bottom of our guidance range in terms of sales because when we look at logistics and the bottlenecks that we see and we think that's going to accentuate towards the end of the year as there's all that flow for Christmas presents and all that stuff that's going to be on ships all around the world. And it's going to be really, really hard to maintain supply chains at the current levels in the last quarter of the year. So I think if we had to venture a bet, we'd probably be on the low end of our guidance on sales. So you're correct, probably -- I'm confident about orders. I'm still okay with the guidance on sales, but I'd probably be looking towards the low end rather than the high end. And when I look at profitability, I think we're in really good shape because all the actions that we've undertaken have gone well. So that gives you a little bit more color, but we didn't feel it really warranted the revising our guidance. Maybe we should have, but at least now you've got some comments to help you with.

All right. That's very helpful. My second question is on oil. And please don't get upset if I ask this question, but I...

You know what, we're flexible. This is your call. So go ahead.

All right, good. I spot some sort of adversity for lack of a better word, to oil. And in a way, I don't understand because in the -- and I understand there was a ESG part and maybe you don't want to put too much focus on it. But otherwise, economically speaking and also with -- due to your positioning and so on, I don't understand so much even if you go to the -- back to the discussion earlier on seals, but you said in the Capital Markets Day, you have 235,000 pumps in the market. They will be where they are. If you have installed them in a pipeline, they are still there, I'm sure you didn't move it in a garden, right? So servicing will continue there. If you sell them seals, it will continue there and so on. So I'm not saying you are stuck with oil, but in a way, it still is a good opportunity. And CapEx must go on, in my opinion, and this may be I'm a different type of guy. But oil and gas, but also oil is the energy of the transition whether we like it or not.

Alessandro, you're 100% right. If I can react to that. I think you're 100% right. I don't dispute anything from your statements. And it's not that -- I don't have an aversion to oil. I'm a former drilling engineer. And I've always been clear that our energy pump business is here to stay in Sulzer. So it's not an aversion to oil. My aversion is more that I've been desperately trying over the last few years to break the correlation between the Sulzer share price and oil prices. If you plot that over the last 5 years, you still see that the correlation was quite significant. And I'm really just trying to make people understand that it's an important part of our business, but it's just a part of our business. And it doesn't swing our numbers in the way that people expect or in the way that's translated in how investors are trading Sulzer. So I'm really trying to talk to you guys into looking at the data and translating in your coverage that it's -- we're not the cyclical play that people still sometimes portray us as. So that's really all I'm trying to do. Now if you look at our business itself, I mean, it's still -- new equipment is still 10% of Sulzer. It's a market that's picking up currently. It's a market that will have a strong 2022 because of the obvious rebound in the CapEx cycle, and it's a market in which we're still the leader, essentially us and Flowserve neck to neck. So I don't -- I'm not embarrassed by being an oil. I'm actually supportive of that business, but it's such an important part of households or has been covered that I almost have to overcompensate the other way around when I talk about other businesses. And that's probably what comes across as aversion. So hopefully, I've corrected that view, but I understand your point.

The next question comes from the line of Rafaisz Patrick from UBS.

Two or 3 questions from me, please. The first one would be on flow equipment. And Grég, you mentioned your -- the price adjustments, I think there have been 2 so far. Can you add a bit of color how big these have been year-to-date? And how much of that will actually be part of revenues this year and how much will be carried over into 2022 for Flow Equipment?

Patrick, I can't really qualify that because it's such a mixed bag. It's -- if you take our 3 pump businesses or our 3 -- you actually do a better job than I do of using the new names. Our 3 flow businesses, energy, industry and water. Water is almost exclusively a price-list type of business. So we adjust these price lists and not in the same way on all the products because it really depends on their material content, for example. If you look at industry, it's more of a mixed bag because part of it is price list and part of it is kind of customized type of pumps. And if you look at energy because they're all engineered products, there's really no price list. So it's just a question of you quote on a tender and you reflect your evolving cost base in that tender. So it's really hard just to give you a number of percentage. It wouldn't be -- it wouldn't really mean a whole lot. What I can tell you to the second part of your question is that the raw material cost impact is measurable. It is significant. And it really is a battle to make sure that the price increases don't lag behind the raw material impact because otherwise, what you end up having is a backlog that fills up at margins that will be lower than anticipated if the cost element is not reflected in the price. I think we've done a good job of that for the time being. So the way I would answer your question is I think we've done a good job of maintaining the margin on our backlog at the levels at which these businesses have been operating. But it's a continuing battle because the raw material cycle hasn't plateaued yet. It hasn't leveled off. And therefore, we're constantly having discussions with our procurement people where we look at what's happening in terms of raw material and supplies and then we close the loop with our business segments people to make sure that they are not selling at prices which don't reflect the new purchasing conditions. So you're not going to see an improvement of margin. You're going to see -- if we do a good job, which we've been doing to date, you'll see margin percentage, gross margin percentages in these businesses staying at the levels that you've been used to and expect. And then what will be interesting is when the raw material cycle starts going down, how much of that do we manage to retain. And that will be an interesting debate for probably the second half of next year. Other questions, Patrick?

Yes. It's very useful. And the second one would be on Chemtech and the renewables bit. And you know I always like to ask you where you stand versus plan here on the doubling of orders in 2021. So yes, can you update us on that, please?

Sure. We didn't give precise numbers because it's a little bit lumpy. The renewable business. I mean if you win a PLA project, probably that's going to be somewhere between CHF 20 million and CHF 30 million in terms of order intake. So as you guys recall, we -- our order intake in renewables in Chemtech last year was a bit less than 50%. I think it was 47% off the top of my head. And we said that our target this year was to be around 75%. And I mentioned in a moment of enthusiasm and excitement that it's conceivable that we could double from that 47% number. When I look at where we are at this point of the year, I don't think we'll double, I think we'll be closer to our original ambition. And for a while, we were looking like we would be in a position to double, but we have a PLA customer that with whom we signed the contract and they are experiencing difficulties putting the contract in effect because they're still working to wrap up their financing. And in all likelihood that, that discussion will drag into next year because I don't think from the indications that I have, they'll be able to wrap up their financing before the end of the year. And if they don't wrap up their financing, then what we'll do is we'll de-book the project because we don't want to carry something that is not fully in effect. So we were a little bit coy about our Q3 numbers because that was still a discussion. But we'll reach a conclusion on that before the end of the year. And once again, these are projects, these are significant projects. I mean PLA plant of any size is hundreds of millions of dollars of CapEx. So I sympathize with that. And we'll tell you guys when we know more. But whichever way this goes, we still think we'll be within shooting distance of our original ambition of -- to be around 75%, I think, is what we said originally. Jill, do you want to add anything?

No, I think that describes it well. Essentially, we had the one particular order and it all depends on the development of the customers' finance.

Okay. So we'll let you guys know and -- before the end of the year once we -- once the dust settles on that one. Other questions, Patrick?

Yes. That was super useful. The last one would be just a quick one on services, which you renamed, right, to reflect that you also do service on nonrotating equipment. And maybe that will be a good opportunity to update us on the potential you see for nonrotating equipment here since you renamed the business, right? Do you think that this will become a bigger share going forward of your services business? Do you see improved momentum there? Have you changed anything?

It's a good question, and it's a very valid point that at some -- that we should give you guys some flavor of what potential we see for the nonrotating part of the business and services. And let me take that as an action and we'll try to do that next time. We'll have -- we may have Daniel on the call to -- Daniel Bischofberger to talk to you guys through that. I was being politically correct. I don't want to get into reciprocating compressors. I don't want to set my friend, Marcel Pawlicek or anybody else. But it's our customers, they all have nonrotating equipment in their value chain. They have reciprocating compressors. They have gas engines. They have a bunch of different things that don't rotate, but on which we have all the skills and all the competence. And increasingly, our customers see us as a full service shop. And some years back, they'd see Sulzer as, okay, well, I'll give Sulzer my pumps. Then afterwards as well, I'll give Sulzer my pumps and other people's pumps because we are very good at -- we do CHF 200 million of pump service on other people's pumps every year. CHF 500 million on Sulzer Pumps, CHF 200 million in other people's pumps, and that's growing fast. So we're eating into our competitors' installed base. And then they saw us as, well, these guys also do electrical equipments, motors and drives, and that was really helpful from their perspective. We've been servicing their turbines and compressors for a long time. And there's a moment where they start asking you, well, why do you not do? And the answer is there's not a whole lot in their value chain that we're not able to do. So increasingly, our customers have a tendency to say, "Well, it'd make my life simpler if I could just use Sulzer as my end-to-end full service shop." And we were excited to do that. So we'll take the action. We'll make sure that we give you more flavor next time around on this and that we quantify the opportunity a little bit. Sorry, we can't do that today. I should have anticipated the question. Anything else, Patrick?

That was very good.

All right. And don't tell Marcel, okay?

Okay.

Thank you, guys. What else?

The next question comes from the line of [ Dominique Valdes from Ansett ].

Grég. Well, I was wondering in your expectation, how long it will take until the market will really recognize that you are not such an oil and gas-oriented business anymore. I mean, how much more time do you have to give yourself? And if I may ask just a second question. You've said, of course, for the new equipment their business, 10% is still oil and gas. But all in all, I mean, for the whole order intake or maybe also the revenue I mean, how much does oil and gas still make up of it?

[ Dominique ]. I'll take your second question. The oil and gas is about 10% of new equipment -- I mean, sorry, it's about 10% of Sulzer oil and gas new equipment is about 10% of Sulzer. And if I added the service revenue related to oil and gas, I'd probably add another 10% to 15%. But I don't even know what the exact number is because as I told you, we don't look at it that way. We look at our services business geographically, and we have no cyclicality. I mean if you look at our numbers for the last 5 years in service, you'll see that whether the cycle in oil and gas was up or was down, our business was growing and the margins never moved. So it's -- I understand that people want to sum up the numbers because they want to say, well, Grég says it's 10%, but really he's hiding another 10% to 15%, somewhere else and he's not talking about it. The reason why I'm not talking about it is that we don't even measure it because it -- we only measure things that help us manage the business. And what you see in our services business is there's no cyclicality and therefore, measuring what comes from oil and gas versus what comes from power versus what comes from industry doesn't help us manage the business. It's really more about how much business we generate for each service center because these are all very local operations. So that's the thinking, but you got the numbers, and hopefully, that answers your question. In terms of the market recognition, I think some of it was our fault. We did our first Capital Markets Day in June of this year. I've been in this job for 6 years on the 1st of December, and that was our first Capital Markets Day. So I should probably look in the mirror first before I start complaining about coverage. We should have done that earlier. I think that I sensed in the coverage that we received from the people on this call that our Capital Markets Day really made a difference in terms of people's understanding of Sulzer and the exciting developments in water and industry and flow and the exciting developments in renewables and Chemtech and everything that we're doing on digital and additive and services. But I think we were probably a bit slow telling the story. Now when I look at our coverage, the analyst coverage, I think it's fair in its balance and it recognizes our growth areas, and it talks about them in quite a significant extent and a lot less about oil and gas. I think the press coverage lags a little bit, and it lags a little bit because people kind of remember the old Sulzer. And I get it, but I'm still trying to change it. [ Dominique ], does that answer your question?

Yes. Good luck with that, of course.

Well, that's my cross to bear, but I'll continue chipping away.

Sure.

The next question comes from the line of Christian Arnold from Stifel.

Yes. Brief question on order intake gross margin. You have shared the information with the H1 figures going up 200 basis points to 35.3%. Of course, at that time, there was still the APS business included. So maybe if you have the information for the H1 gross margin business without APS and then maybe shared information about Q3 or 9 months?

Jill, do you want to help me on that one?

Yes. I mean what you see -- and you're right that the gross margin in H1 improved primarily from APS because you recall that we had a quarter in which the market kind of froze for our parts of our applicator system business. Now if I look to the gross margin for the rest of the business, it's been fairly stable, actually. It's around the 30% range from -- for the 3 divisions in aggregate. And as Grég mentioned, I think so far, we've been able to ensure that the price and the cost, the factor costs are kind of in sync most of the time. So we see ourselves trading around that range at the same level.

Christoph, do you have anything that you want to add on this? I don't know if you have the numbers handy, but...

No, I mean we can add, as Jill exactly said, we are around 30% in on gross profit -- order intake gross profit margin on Flow Equipment and Chemtech and a little bit higher on the service side.

Yes.

And that's been quite constant this year. And once again, it's -- it reflects the fact that we're absorbing the raw material and logistics price increases by managing the pricing in a way that keeps the gross margin on order intake pretty much constant.

Yes.

The next question comes from the line of Arben Hasanaj from Vontobel.

Everyone, I would just have a short question on services. So I was wondering if you could provide some color on the mix there, so whether you saw a pickup in retrofits or what kind of project you were seeing?

Arben, in terms of mix, the part on which we suffered during the pandemic was mainly pump retrofits and pump retrofits is a high-margin business. A pump retrofit involves taking, for example, one of our competitors' pumps, taking all the internals out of the casing and replacing these internals with the Sulzer internals and Sulzer Hydraulics to have a modern, more efficient pump. It's a great advantage to our customers because it doesn't change anything to the layout of their facility. They don't have to reconnect anything or change the foundations or the piping or anything like that, and they gain a modern efficient pump. But it's also a high-touch type of business. And what I mean by high touch is that it involves a lot of back and forth between us and the customer. And during the pandemic, that was difficult because that was not -- people were working from home, and they were maybe a little bit less organized for these types of opportunities. It's been picking up, but that's still the part that was lagging, I think, at the end of Q3. I don't know if I'm able to quantify that. Jill, do you have quantification or do we get back to Arben on that question? I don't think we can quantify it off the top of our head, but we'll get back to you on that question. The rest, if I look at the services business, the nonpump business has been doing very well, and the pump service business has been doing well, apart from the retrofit side, which was a little bit challenging and is higher margin. And retrofit, if I take the pump service business, which is roughly CHF 700 million, you got about CHF 200 million of that that's third-party pump service. And out of the CHF500 million of OE -- well, let me answer the question differently, out of the CHF 700 million of pump service, there's probably something like CHF 150 million of retrofit roughly. I think that's the order of magnitude and that was down versus normal years by a factor of, let's say, I don't know, between 10% and 20%, probably if I had to quantify it off the top of my head. And that's completely going to recover. And keep in mind that as that recovers, that's a higher-margin part of our mix in services. And therefore, this is part of what will help us go from 14% to 15% margin in services. I did my best to try to answer that off the top of my head, but we'll try to come back with the more precise numbers to you, Arben. Anything else?

Sure. That's very helpful.

There are no further questions at this time.

I think Christoph tells me that there's no other questions from online. So that probably wraps up our call. Really appreciate your attention today. I know it's a busy time of year and lots of companies are reporting numbers. Sulzer is moving full speed ahead that our -- the split that we talked a lot about is behind us and is completely in the rearview mirror. We're looking forward. We're looking ahead, the new division names, the new visual identity, and that -- those 4 strategic access that we really strongly believe that will take Sulzer to the next level. And you got our midterm targets, and now it's our job to deliver them. What I would say is 9 months into the year, we're well on our way to fulfill those expectations. So thank you again, and talk to you soon.