Slide 1: Interim Report Third Quarter 2014
INTERIM REPORT OCTOBER 27 THIRD QUARTER 2014
Slide 2: Summary Q3 2014
SUMMARY Q3 2014 STRATEGY EXECUTION • One production unit closed • Divestment of distribution business STABLE MARKET CONDITIONS • Strong in Asia and North America, varied in Europe • Low order intake in Mining Systems STRONG CASH-FLOW • Inventory reductions • Net debt/Equity ratio 0.87 EBIT 2,462 MSE
Slide 3: Our Way Forward
OUR WAY FORWARD SANDVIK SANDVIK SANDVIK SANDVIK SANDVIK MINING MACHINING MATERIALS CONSTRUCTION VENTURE SOLUTIONS TECHNOLOGY Shifting geographic Adjusting overcapacity Accelerate growth of strategic Realign production footprint Develop existing portfolio footprint closer to (reducing production unit
Slide 4: New Member in Group Executive Management
NEW MEMBER IN GROUP EXECUTIVE MANAGEMENT JIM NIXON - NEW PRESIDENT OF SANDVIK VENTURE STRONG BACKGROUND FROM THE ENERGY SECTOR • Currently President of Varel International Energy Services Inc. • Previously in leading positions at SDBS, part of the global technology group Dresser Industries. EXPERIEN
Slide 5: Invoicing by Markets and Segments
INVOICING BY MARKETS AND SEGMENTS MARKETS, SHARE OF GROUP TOTAL CUSTOMER SEGMENTS EUROPE ASIA Consumer related Invoicing growth vs Q3 2013 Other 36% 20% Aerospace > +5% -5 to +5% -1%* +11%* Energy < -5% NORTH AMERICA AUSTRALIA 20% 7% Automotive Mining +6%* -10%* AFRICA SOUTH AMERICA 9% 8% Constructi
Slide 6: Order Intake and Invoicing
ORDER INTAKE INVOICING 20,981 MSEK 22,593 MSEK CHANGE P/V -5% CHANGE P/V 2% MSEK MSEK 30 000 150% 30 000 120% 25 000 125% 25 000 100% 20 000 100% 20 000 80% 15 000 75% 15 000 60% 10 000 50% 10 000 40% 5 000 25% 5 000 20% 0 0% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012
Slide 7: EBIT and Cash Flow
EBIT 2,462 MSEK CASH FLOW MARGIN 10.9% CASH FLOW FROM OPERATIONS 3 296 MSEK MSEK MSEK 5 000 40% 5 000 350% 300% 4 000 4 000 30% 250% 3 000 3 000 20% 200% 2 000 2 000 150% 10% 100% 1 000 1 000 50% 0% 0 2007 2008 2009 2010 2011 2012 2013 2014 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -10% -1 000 -2
Slide 8: Financial Targets
FINANCIAL TARGETS CURRENT TARGET MANAGEMENT FOCUS • Product launches through focused R&D GROWTH 11% 8% • Increase exposure towards high growth markets and segments • Adjust geographic footprint • Reduce Net Working Capital ROCE 11.1%* 25% • Selective capital allocation (investments) • Restore earnin
Slide 9: Mats Backman CFO
MATS BACKMAN CFO
Slide 10: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT PRODUCTION UNITS Reduce number of production units from 150 to 125 over next three to four years 150 Initiated closures Initial phase launched in Q4 2013 • Closure of ~10 units 125 • Annual savings of 800 MSEK at end 2015 • Total restructuring cost 900 MSEK (Q4 2013) 100
Slide 11: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT FIRST PHASE - PLANNED TIME OF COMPLETION FOR INITIATED CLOSURES YTD 2014 Q4 2014 2015 TOTAL SANDVIK MINING 1 1 3 5 SANDVIK MACHINING SOLUTIONS - 2 2 4 SANDVIK CONSTRUCTION 1 - 1 2 GROUP TOTAL 2 3 6 11 10 Sandvik Interim Report on the third quarter 2014
Slide 12: Net Working Capital
NET WORKING CAPITAL MSEK 35 000 45% 40% 30 000 35% 25 000 30% 20 000 25% TARGET 15 000 20% 15% 10 000 10% 5 000 5% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 Net working capital Net working capital / Invoiced sales 11 Sandvik Interim Report on the third quarter 2014
Slide 13: Net Working Capital
NET WORKING CAPITAL % OF INVOICING BY BUSINESS AREA 60% 50% 40% 30% TARGET 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 Sandvik Mining Sandvik Machining Solutions Sandvik Materials Technology Sandvik Construction 12 Sandvik Interim Report on the third quarter 2014
Slide 14: Net Debt
NET DEBT MSEK Net debt/Equity 36 000 1,2 NET DEBT TO EQUITY 0.87 30 000 1,0 24 000 0,8 STRONG CASH FLOW 18 000 0,6 INVENTORY REDUCTIONS 12 000 0,4 INVESTMENTS 1.1 BILLION OR 103% OF DEPRECIATION 6 000 0,2 0 0,0 2012 2013 2014 Net debt Net debt/Equity 13 Sandvik Interim Report on third quarter 2014
Slide 15: Summary
SUMMARY CONTINUED STRATEGY EXECUTION PROGRESS ON SUPPLY CHAIN OPTIMIZATION PROGRAM STRONG CASH FLOW STABLE DEMAND 14 Sandvik Interim Report on the third quarter 2014
Slide 16: Back-up Slides
BACK-UP SLIDES
Slide 17: Bridge Analysis Sandvik Group
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q3 2013 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2014 Invoicing 20,416 210 1020 950 22,593 EBIT 2,531 -420 80 270 2,462 EBIT margin 12.4% N/A - - 10.9% * Includes metal price effects 16 Sandvik Interim Report on the third quarter 2014
Slide 18: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2013 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2014 SANDVIK MINING Invoicing 6,961 -400 250 - 6,806 EBIT 858 -260 20 - 614 EBIT margin 12% -65% - - 9% SANDVIK MACHINING SOLUTIONS Invoicing 6,922 250 400 80 7,658 EBIT 1,454 -50 70 20 1,496 EBIT margin 21% N/A
Slide 19: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2013 PRODUCTIVITY CURRENCY ONE-OFFS Q3 2014 SANDVIK CONSTRUCTION Invoicing 2,055 50 130 - 2,232 EBIT 88 -80 -5 - 1 EBIT margin 4% N/A - - 0% SANDVIK VENTURE Invoicing 1,252 50 120 730 2,155 EBIT 199 -60 5 -10 133 EBIT margin 16% N/A - - 6% 18 Sandvik
Slide 20: Sandvik Mining Q3 2014
SANDVIK MINING Q3 2014 STABLE DEMAND • Equipment and aftermarket stable • Low order intake for Mining Systems EBIT 614 MSEK, 9.0% • Currency effects +20 MSEK • Low sales and production rates SUPPLY CHAIN OPTIMIZATION • Closure of one unit finalized, Krugersdorp South Africa 19 Sandvik Interim Report
Slide 21: Sandvik Mining Q3 2014
SANDVIK MINING Q3 2014 MSEK Order intake 5,566 MSEK 10 000 50% Invoicing 6,806 MSEK 8 000 40% 6 000 30% EBIT 614 MSEK 4 000 20% ROCE 8.8% 2 000 10% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -2 000 -10% Invoicing EBIT margin ROCE 12 months 20 Sandvik Interim Report on the third quarter 2014
Slide 22: Sandvik Machining Solutions Q3 2014
SANDVIK MACHINING SOLUTIONS Q3 2014 STABLE BUSINESS CONDITIONS • Strong development in the aerospace industry • Europe weakened somewhat sequentially • Continued strong development in North America EBIT 1,496 MSEK, 19.5% • Currency effects +70 MSEK STRONG CASH FLOW 21 Sandvik Interim Report on the t
Slide 23: Sandvik Machining Solutions Q3 2014
SANDVIK MACHINING SOLUTIONS Q3 2014 MSEK Order intake 7,711 MSEK 10 000 50% Invoicing 7,658 MSEK 8 000 40% EBIT 1,496 MSEK 6 000 30% 4 000 20% ROCE 27.7% 2 000 10% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -2 000 -10% Invoicing EBIT margin ROCE 12 months 22 Sandvik Interim Report on the third qua
Slide 24: Sandvik Materials Technology Q3 2014
SANDVIK MATERIALS TECHNOLOGY Q3 2014 STABLE DEMAND • Energy segment is stable at a high level • Major order from the nuclear sector DIVESTMENT OF DISTRIBUTION BUSINESS IN AUSTRALIA AND NEW ZEALAND SIGNIFICANT PROFIT CONTRIBUTION FROM CHANGED METAL PRICES 23
Slide 25: Sandvik Materials Technology Q3 2014
SANDVIK MATERIALS TECHNOLOGY Q3 2014 MSEK Order intake 3,335 MSEK 6 000 30% 5 000 Invoicing 3,735 MSEK 20% 4 000 EBIT 482 MSEK 3 000 10% Adjusted for metal price effects, 2 000 311 MSEK, 8.3 % of invoicing 0% 1 000 ROCE 14.1% 0 2007 2008 2009 2010 2011 2012 2013 2014 -10% -1 000 -20% Invoicing -2 00
Slide 26: Sandvik Construction Q3 2014
SANDVIK CONSTRUCTION Q3 2014 CONTINUED CHALLENGING MARKET CONDITIONS • Slightly higher activity in North America • Stable at a low level in China EBIT 1 MSEK, 0.0% • Low sales and production rates • Cost savings are being implemented STRONG CASH FLOW • Inventory reductions 25 Sandvik Interim Report
Slide 27: Sandvik Construction Q3 2014
SANDVIK CONSTRUCTION Q3 2014 MSEK Order intake 2,184 MSEK 4 000 40% Invoicing 2,232 MSEK 3 000 30% 2 000 20% EBIT 1 MSEK 1 000 10% ROCE -3.1% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -1 000 -10% -2 000 Invoicing EBIT margin ROCE 12 months -20% 26 Sandvik Interim Report on the third quarter 2014
Slide 28: Sandvik Venture Q3 2014
SANDVIK VENTURE Q3 2014 INCREASED ORDER INTAKE EBIT 133 MSEK (6.2%) • EBIT excluding Varel 163 MSEK (10.8%) STRONG CASH FLOW GROWTH INVESTMENT FOR LEVELING OF STEEL BELTS FINALIZED 27 Sandvik Interim Report on the third quarter 2014
Slide 29: Sandvik Venture Q3 2014
SANDVIK VENTURE Q3 2014 MSEK Order intake 2,182 MSEK 3 000 40% 2 000 30% Invoicing 2,155 MSEK 20% 1 000 EBIT 133 MSEK 0 10% 2007 2008 2009 2010 2011 2012 2013 2014 0% ROCE 6.2% -1 000 -10% -2 000 -20% -3 000 -30% -4 000 -40% -5 000 -50% Invoicing EBIT margin ROCE 12 months 28 Sandvik Interim Report
Slide 30: Loan and Duration Profile
LOAN AND DURATION PROFILE LONG TERM 89% AMOUNT MSEK AVERAGE DURATION US Private Placement 5,906 5 years Fin institutions, EIB, NIB 2,296 8 years Swedish MTN 11,508 4 years European MTN 10,069 12 years Bank loans 2,687 4 years Share swap 1,582 2 years SHORT TERM 11% Commercial paper 2,452 3 months Fi
Slide 31: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 6 000 Loan Cash position 5 000 4 000 3 000 2 000 1 000 0 -1 000 -2 000 -3 000 -4 000 -5 000 6 Q2-Q4 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 Months 2015 30 Sandvik Interim Report on the third quarter 2014
Slide 32: Acquisition of Varel
ACQUISITION OF VAREL ACQUISITION PRICE AND GOODWILL PURCHASE PRICE ALLOCATION Purchase price 5.1 BSEK Assigned to tangible and intangible assets 1.6 BSEK • Consideration for shares 2.8 BSEK • Amortized over 10 years • Loan settlement 2.3 BSEK • ~40 MSEK per quarter Assigned to inventories 170 MSEK G
Slide 33: Guidance
GUIDANCE CAPEX Estimated at below 5bn SEK for 2014. CURRENCY EFFECTS Given currency rates at quarter end the effect on EBIT would be +200 MSEK for Q4 2014. Given currency rates, stock levels and metal prices during October, it is estimated that METAL PRICE EFFECTS operating profit for Q4 2014 will b
Slide 34: Disclaimer Statement
DISCLAIMER 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 affected by other factors for example, the effect of economic conditions, exchange-rate