Sandvik Ab · OMXSTO:SAND
Sandvik Ab — Investor Day (2006)
24 slides from Sandvik Ab's investor day presentation, Oct 19, 2006
Slide 1: Capital Markets Day 2006
CAPITAL MARKETS DAY 2006 Per Nordberg Executive Vice President and CFO
Slide 2: Financial objectives and reflection
Financial objectives and reflection Business performance Financial focus areas Sandvik Capital Markets Day 2006 page 2
Slide 3: Financial objectives and reflection
Financial objectives and reflection Business performance Financial focus areas Sandvik Capital Markets Day 2006 page 3
Slide 4: ROCE
Basic concept Operating profit Growth Margin ROCE Capital efficiency Inventory A/P and A/R Fixed assets Sandvik Capital Markets Day 2006 page 4
Slide 5: Financial objectives
Financial objectives Organic growth Focus on ROCE growth and shareholder EPS value Dividend Debt/equity ratio Sandvik Capital Markets Day 2006 page 5
Slide 6: Financial objectives
Financial objectives - defined 2000 Average over a business cycle Organic growth 6 % + acquisitions ROCE 20 % Dividend > 50 % of EPS Debt/equity ratio, net < 0.7 Shareholder value > industry Sandvik Capital Markets Day 2006 page 6
Slide 7: Financial objectives
Financial objectives over a business cycle Ave. Ave. Target 2005 2-years 5-years Organic growth +6 % +15 % +16 % +6 % ROCE 20 % 23.7 % 22.1 % 19.0 % Net Working capital 25 % 27 % 28 % 33 % Payout ratio > 50 % 55 % 59 % 70 % Net debt ratio < 0.7 0.7 0.5 0.5 Sandvik Capital Markets Day 2006 page 7
Slide 8: CFO – Agenda
CFO – Agenda Overall mission: ”To deliver, based on a performance oriented culture, growth in shareholder value over the short, medium and long term” Effective processes in administration Key projects Faster reporting Corporate Governance – Risk reporting Sandvik Capital Markets Day 2006 page 8
Slide 9: Financial performance
Financial performance Strong financial position Prioritize profitable growth EPS growth – driving shareholder value Sandvik Capital Markets Day 2006 page 9
Slide 10: Business performance
Financial objectives and reflection Business performance Financial focus areas Sandvik Capital Markets Day 2006 page 10
Slide 11: Business performance
Business performance Invoicing, EBIT- margin/ SEK M ROCE 12-months 70 000 35 Strong growth in all core 60 000 30 areas Organic 50 000 25 Acquisitions 40 000 20 Good leverage ensuring high 30 000 15 profitability Improved capital efficiency 20 000 10 generates 10 000 5 record return 0 0 strong cash f
Slide 12: Capital efficiency
Capital efficiency Net Working Capital as % of sales % 35 Sustainable process in place Continued improvement 30 Close to SEK 5 bn released Increased inventory turn-over Reduced overdues 25 Reduced credit days Reduced assortment 20 Improved purchasing efficiency Q1 02 Q2 03 Q2 04 Q2 05 Q2 06 % of (Q
Slide 13: Capital structure
Capital structure Net debt/ Equity ratio % 80 Optimize capital structure 70 High dividend 60 Split 5:1 50 Sufficient capital for further 40 growth 30 High rating S&P 20 10 0 01 02 03 04 05 06H1 Sandvik Capital Markets Day 2006 page 13
Slide 14: Cash flow from operations
Cash flow from operations - Rolling 4 quarters SEK M 10 000 Increased sales 7 500 Increased profitability Improved capital efficiency 5 000 Focus on tax rate 2 500 0 2001 2002 2003 2004 2005 Q2 06 Sandvik Capital Markets Day 2006 page 14
Slide 15: Bridge analysis
Bridge analysis Rolling 12 months SEK M Q2/2005 Change Q2/2006 Change % Invoicing 58,294 +10,065 68,359 +17.3% Operating profit 8,432 2,482 10,914 +29.4% Operating margin % 14.5 24.7 16.0 ROCE % 22.2 25.9 ROE % 24.0 31.1 EPS 4.25 +1.55 5.80 +36.5% Balance sheet 59,124 +3,487 62,611 +5.9% NWC 20,202
Slide 16: Shareholder Value
Shareholder Value Rolling 12-months EPS*, ROE*, SEK % 7,00 35 Strong increase in 6,00 30 EPS 5,00 25 ROE 4,00 20 Increased profitability 3,00 15 Improved capital structure 2,00 10 1,00 5 2,90 3,05 3,05 3,85 4,95 5,80 0,00 0 01 02 03 04 05 H1 20 20 20 20 20 06 20 * excluding one-offs in PTD in Q4 200
Slide 17: Financial focus areas
Financial objectives and reflection Business performance Financial focus areas Sandvik Capital Markets Day 2006 page 17
Slide 18: Financial focus areas
Financial focus areas Support profitable growth Minimize commercial risks Efficient processes Adequate financial resources Corporate governance structure in place Sandvik Capital Markets Day 2006 page 18
Slide 19: Support profitable growth
Support profitable growth Performance measurement Reporting Analysis Evaluation Action Value creation Sandvik Value added (SVA) Solid financial position Incentive structure Sandvik Capital Markets Day 2006 page 19
Slide 20: Sandvik Value Added
Sandvik Value Added Focus on long term value creation Considers growth, profitability and capital efficiency Break-down possibility Easy to communicate Part of incentive plans Definition: EBIT- (Capital Employed x WACC) Sandvik Capital Markets Day 2006 page 20
Slide 21: Sandvik Value Added
Sandvik Value Added SEK M 6 000 SVA increase of 178% since 2003 5 000 Materials Technology had 4 000 negative value creation in 2003 despite SEK 750 M in 3 000 EBIT and 6% operating margin 2 000 1 000 0 2001 2002 2003 2004 2005 Sandvik Capital Markets Day 2006 page 21
Slide 22: CFO summary
CFO summary Continued strong business performance Strong leverage on additional businesses Improved value creation Solid position for further growth Increased shareholder value Sandvik Capital Markets Day 2006 page 22
Slide 23: www.sandvik.com
www.sandvik.com Sandvik Capital Markets Day 2006 page 23
Slide 24: Cautionary Statement
Cautionary Statement “Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially effected by other factors like for example, the effect of economic conditions, exchange-