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By Nieck Ammerlaan
ZURICH, Aug 27 (Reuters) - Sulzer said on Tuesday that first-half operating income from continuing businesses and before one-off gains fell 26 percent to 31 million Swiss francs ($20.5 million), as the industrial engineering group battles tough conditions.
Citing tough markets, particularly in the energy sector, and widespread price pressures, Sulzer said it expected its core divisions not to match 2001 operating income of 119 million francs.
Sulzer shares were down 0.9 percent at 276 francs in early trade in a flat market, having lost almost 40 percent this year amid concern about the impact of a soft dollar and a sluggish world economy on group earnings.
Sulzer, which has just completed a major streamlining, said this year's and last year's figures were not directly comparable due to the sale of non-core businesses, rounded off earlier this year, and the disposal of non-essential real estate, which is still ongoing.
The restructuring has left the group with coating technology and services division Sulzer Metco, Sulzer Turbomachinery Services, Sulzer Pumps and related services and chemical process technology business Sulzer Chemtech.
Including gains from real estate sales, Sulzer expected a "respectable" full-year net profit after posting a two million franc profit in 2001, when provisions for its share in the cost of U.S. litigation by former unit Centerpulse hit earnings.
Medical devices unit Centerpulse , the former Sulzer Medica, reached a $1.25 billion out-of-court settlement in litigation over faulty hip and knee implants.
But Sulzer was sticking to its targets of sales of three billion Swiss francs and an EBITA margin of nine percent by 2005, a spokesman said, adding Sulzer expected full-year 2002 sales roughly in line with last year's 1.97 billion francs.
Net sales were 939 million francs in the first half, matching the 2001 level.
Net profit fell to 42 million francs reflecting the absence of one-off divestment gains, which had boosted 2001 earnings. Net profit had been 120 million francs in the 2001 half. Core earnings before interest, taxes and amortisation (EBITA) from continuing businesses -- stripping out such gains from the sale of non-core businesses, but including gains form real estate sales -- rose to 57 million francs from 53 million.
Analysts had expected net profit to drop to 26-33 million, while EBITA profit seen stable in a range of 55-61 million.
Sulzer expected a stronger second half, and said its good cash position formed a solid basis for a profitable future.