Slide 1: Interim Report Second Quarter 2020
INTERIM REPORT SECOND QUARTER 2020 1
Slide 2: Summary Q2
SUMMARY Q2 A CHALLENGING QUARTER • Sharp decline in the short-cycle businesses within SMS and large parts of SMT • O&G uncertainty affected SMT’s order intake • Mining underlying stable, negatively impacted by mine closures RESILIENT EARNINGS PERFORMANCE • Adjusted operating profit at 14.0% (18.8) •
Slide 3: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT % of group revenue 2019 Mining 37% Engineering 21% Automotive 11% Energy 12% Construction 8% Aerospace 7% % of group Y/Y Demand trend revenue 2019 order intake during Q2 EUROPE 37% -33% NORTH AMERICA 23% -30% ASIA 19% -12% AFRICA/MIDDLE EAST 9% +4% AUST
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES WIDESPREAD COVID-19 RELATED DECLINE MORE PROTECTED DUE TO BACKLOG IN SMRT AND SMT REPORTED P/V REPORTED P/V 18 971 -23% 20 230 -20% SEK M SEK M 30 000 110 000 30 000 110 000 100 000 100 000 25 000 25 000 90 000 90 000 20 000 20 000 80 000 80 000 15 000 70 000 15 000 70 000 2015
Slide 5: EBIT Development
GROUP LEVERAGE: EBIT DEVELOPMENT -37% SEK M -43% • Margin at 14.0% (18.8) • 14.4% (18.3) excluding metal price 6 000 22% EBIT ADJUSTED effects 5 000 19% 2 837 • -0.8%-points impact from lower production rates SEK M • Resilient earnings performance 4 000 16% in all business areas 3 000 13% EBIT % ADJ
Slide 6: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2019 44% SANDVIK MINING AND Q2 2019 Q2 2020 CHANGE ROCK TECHNOLOGY SEK M ORDER INTAKE 11 318 9 773 -10%* REVENUES 11 233 9 489 -12%* ORDERS DECLINE -10% FROM RECORD-HIGH LEVEL ADJ. OP. PROFIT 2 126 1 833 -14% − Equipment orders drop single digit on the back of successful landing of
Slide 7: Sandvik Machining Solutions
SHARE OF REVENUES 2019 41% SANDVIK MACHINING Q2 2019 Q2 2020 CHANGE SOLUTIONS SEK M ORDER INTAKE 10 629 6 821 -35%* STABILIZING TREND TOWARDS QUARTER-END REVENUES 10 674 7 247 -32%* − Europe -33%, North America -40% and Asia -18% ADJ. OP. PROFIT 2 483 927 -63% − Significant negative impact from auto
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2019 15% SANDVIK MATERIALS SEK M Q2 2019 Q2 2020 CHANGE TECHNOLOGY ORDER INTAKE 3 535 2 377 -33%* REVENUES 4 011 3 495 -13%* ADJ. OP. PROFIT 585 248 -58% SHORT-CYCLE BUSINESS IMPACTED BY COVID- CLOSURES % OF REVENUES 14.6% 7.1% − Oil price drop creates uncertainty in the oil and ga
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO 9
Slide 10: Financial Summary Q2
GROWTH Q220, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q2 ORGANIC: CURRENCY: STRUCTURE: -23 -2 -3 -20 -2 -2 TOTAL -27 -24 SEK M Q2 2019 Q2 2020 CHANGE H1 2019 H2 2020 CHANGE % % ORDER INTAKE 26 031 18 971 -23¹ 53 905 44 327 -17¹ REVENUES 26 467 20 230 -20¹ 51 492 43 851 -14¹ ADJUSTED OPERATING PROFI
Slide 11: Bridge Analysis
GROUP LEVERAGE: BRIDGE ANALYSIS -37% SANDVIK GROUP PRICE/ VOLUME/ METAL PRICE SEK M Q2 2019 PRODUCTIVITY CURRENCY EFFECTS SMT STRUCTURE Q2 2020 REVENUES 26 467 -5 206 -496 -71 -464 20 230 ADJUSTED EBIT 4 968 -1 902 +28 -207 -50 2 837 ADJUSTED EBIT MARGIN 18.8% -37% 14.0% MARGIN ACCRETION / DILUTION
Slide 12: Summary Savings Programs Q2
SUMMARY SAVINGS PROGRAMS Q2 SEK M Total Annualized SANDVIK MINING & SANDVIK MACHINING SANDVIK MATERIALS GROUP ROCK TECHNOLOGY SOLUTIONS TECHNOLOGY COMMON Program from Q3 2019 270 110 25 20 425 1 700 Work time reduction 360 175 55 15 605 n/a Other temporary savings 320 130 30 25 505 n/a Total 950 415
Slide 13: Net Financials
NET FINANCIALS SEK M Q2 19 Q2 20 • Interest net down Interest net -144 -90 • Y-o-Y due to lower debt driven by redemptions a year Pension -34 -32 ago Bank charges -10 -10 • Sequentially driven by a more normalized market in Q2 Other fin income & costs +2 -10 • Temporary revaluations of hedges bounce
Slide 14: Reported and Underlying Tax Rate
REPORTED AND UNDERLYING TAX RATE Q2 2019 Q2 2020 REPORTED 26.0% 28.1% EXCLUDING IAC 26.0% 24.3% IN LINE WITH 23-25% GUIDANCE FOR 2020 14 SANDVIK: Interim Report on the second quarter 2020 Comments and numbers refer to continuing operations unless otherwise stated.
Slide 15: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA NO SEASONAL BUILD-UP – AR OVERDUES DOWN SEK M 30 000 40% 45% 40% 27 500 35% 35% 25 000 30% 30% 22 500 25% 25% 20 000 20% 20% 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (
Slide 16: Free Operating Cash Flow
FREE OPERATING CASH FLOW SEK M 8 000 24 000 SEK M Q2 2019 Q2 2020 22 000 EBITDA + non-cash 5 733 3 445 6 000 20 000 NWC change -2 457 -89 18 000 4 000 Capex* -1 121 -894 16 000 FOCF** +2 156 +2 461 14 000 2 000 12 000 *Including investments and disposals in rental, tangible and intangible assets **C
Slide 17: Net Debt
NET DEBT SEK M GEARING 45 000 1,3 1,1 35 000 • Net gearing at 0.11 0,9 25 000 0,7 • Net cash position SEK 3.5 B 15 000 0,5 • >SEK 30 B in cash and undrawn credit lines 5 000 0,3 (un-changed from Q1) -5 000 0,1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 2019
Slide 18: Outcome Q2
OUTCOME Q2 Q2 2020 Underlying currency effect (SEK M): -86 (+100) Total currency effect (SEK M): +28 Metal price effect in quarter (SEK M): -76 (-150) Capex (SEK B): 0.8 Interest net (SEK B): -0.1 Normalized tax rate (%): 24.3 18 SANDVIK: Interim Report on the second quarter 2020 Comments and number
Slide 19: Guidance 3Q20 and FY2020
GUIDANCE 3Q20 AND FY2020 CAPEX (CASH) Estimated to <SEK 3.5 B for 2020 (updated from <SEK 4.0 B) CURRENCY Given currency rates at end of June 2020 the effect on operating profit from transaction and EFFECTS translation would be SEK -250 M for Q3 2020 METAL PRICE Given currency rates, stock levels an
Slide 20: Resilience in Challenging Markets
RESILIENCE IN CHALLENGING MARKETS RESILIENT EARNINGS PERFORMANCE • Strong support from savings and reduced spend • Shifting focus towards structural savings and more permanent volume adjustments STRONG BALANCE SHEET • Good cash flow • Net cash position SIGNS OF RECOVERY • Signs towards end of quarte
Slide 21: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 22: End-Customer Segments
MINING ENERGY (37%) (12%) GENERAL CONSTRUCTION ENGINEERING (8%) (21%) AUTOMOTIVE AEROSPACE (11%) (7%) END-CUSTOMER SEGMENTS (% of group revenues 2019 excl. Mining systems and Other Operations; Other e.g. consumer goods, electronics, chemical and miscellaneous accounted for 4%.) 22 SANDVIK: Interim R
Slide 23: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT -37% 4,968 +28 -207 2,837 -3,437 -50 1,535 ADJ. ORGANIC SAVINGS CURRENCY METAL PRICE STRUCTURE ADJ. EBIT Q2 19 GROWTH EFFECT SMT EBIT Q2 20 ADJUSTED EBIT MARGIN 18.8% 14.0% 23 SANDVIK: Interim Report on the second quarter 2020 Comments and numbers refer to c
Slide 24: Bridge Analysis by Business Area
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE/ SEK M Q2 2019 PRODUCTIVITY CURRENCY METALS SMT* Q2 2020 MACHINING SOLUTIONS REVENUES 10 674 -3 386 -74 +33 7 247 ADJUSTED EBIT 2 483 -1 586 +38 -8 927 ADJUSTED EBIT MARGIN 23.3% -47% - - 12.8% MINING AND ROCK TECHNOLOGY REVENUES 11 233 -1 365 -407 +28 9 489
Slide 25: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement - - Fin institutions, EIB, NIB - - 81% Swedish MTN European MTN 1 650 10 808 3 years 6 years Bank loans 30 2 years Share swap - - SHORT TERM US Private Placement - - Fin institutions, EIB, NIB - - 19% Swedish MTN E
Slide 26: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK AVERAGE INTEREST RATE: 4 000 ~5% 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 26 SANDVIK: Interim Report on the second quarter 2020 Comments and numbers refer to continuing operations unless otherwise state
Slide 27: 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