Slide 1: Interim Report Second Quarter 2019
INTERIM REPORT SECOND QUARTER 2019 1
Slide 2: Summary Q2
SUMMARY Q2 MINING ROBUST BUT SLOW-DOWN IN EARLY-CYCLE DEMAND TOWARD THE END OF THE QUARTER • ORDER INTAKE -5% • HISTORICALLY HIGH ORDER LEVEL IN SMRT MARGIN IMPACTED BY LOWER VOLUMES IN SMS • ADJUSTED EBIT MARGIN AT 18.8% IMPORTANT PORTFOLIO DECISIONS • DECISION TO SEPARATE SMT • ACQUSITION OF NEWTR
Slide 3: Cost Scrutiny
COST SCRUTINY DOING MORE TOTAL PERSONNEL REDUCTION EFFICIENCY FOCUS TO IMPROVE ~2 000* THROUGH-CYCLE PERFORMANCE TOTAL ESTIMATED SAVING CONTRIBUTION FROM MANY DIVISIONS, ~1 400 ALL BA:S AND GROUP COMMON MSEK, FULL RUN-RATE BY THE END OF 2020 TOTAL ESTIMATED COSTS, MSEK ~1 200** PAYBACK TIME, YEARS 0
Slide 4: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2018 % of group Y/Y Sequential underlying revenue FY18 order intake demand trend (Q1/Q2) EUROPE 38% -10% NORTH AMERICA 21% -8% ASIA 20% -6% AFRICA/MIDDLE EAST 9% -16% SOUTH AMERICA 5% +0% AUSTRALIA 7% +57% 4
Slide 5: Order Intake and Revenues
ORDER INTAKE REVENUES SLOW-DOWN IN EARLY-CYCLE DEMAND SUPPORTED BY SMRT AND SMT’S BACKLOG REPORTED P/V REPORTED P/V 26 031 -5% 26 467 0% MSEK MSEK 30 000 110 000 30 000 110 000 25 000 100 000 25 000 100 000 20 000 90 000 20 000 90 000 15 000 80 000 15 000 80 000 2015 2016 2017 2018 2019 2015 2016 20
Slide 6: EBIT Development
EBIT DEVELOPMENT MSEK -2% 6 000 22% ADJUSTED EBIT • DECLINE OF -6% 5 000 19% 4 968 EXCLUDING FX, STRUCTURE AND METALS MSEK 4 000 16% ADJUSTED EBIT % • IMPACTED BY 3 000 13% 18.8 UNDERABSORPTION OF FIXED COSTS IN SMS 2 000 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018
Slide 7: Sandvik Machining Solutions
SHARE OF REVENUES 2018 41% SANDVIK MACHINING Q2 2018 Q2 2019 CHANGE SOLUTIONS MSEK ORDER INTAKE 10 403 10 629 -4%* SLOWING CUSTOMER DEMAND NOTED, REVENUES 10 391 10 674 -4%* PARTICULARLY IN JUNE 2 782 2 483 OPERATING PROFIT -11% − Tungsten powder business impacted revenues % OF REVENUES 26.8% 23.3%
Slide 8: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2018 44% SANDVIK MINING AND Q2 2018 Q2 2019 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 11 405 11 868 +0%* REVENUES 10 890 11 782 +3%* DEMAND ON HIGH LEVEL OPERATING PROFIT 1 865 2 115 +13% − Declining growth for most equipment categories on % OF REVENUES 17.1% 18.0% tough comparables
Slide 9: Sandvik Materials Technology
SHARE OF REVENUES 2018 15% SANDVIK MATERIALS MSEK Q2 2018 Q2 2019 CHANGE TECHNOLOGY ORDER INTAKE 4 469 3 535 -20%* REVENUES 3 871 4 011 +3%* SLOWING GROWTH IN EARLY-CYCLE BUSINESS ADJ. OP. PROFIT 537 585 +9% % OF REVENUES 13.9% 14.6% − Slowing demand across regions and segments for UNDERLYING MARGIN
Slide 10: Tomas Eliasson, CFO
TOMAS ELIASSON CFO 10
Slide 11: Financial Summary Q2 and H1
GROWTH Q219, % ORDER REVENUES INTAKE ORGANIC: -5 +0 FINANCIAL SUMMARY Q2 AND H1 CURRENCY: STRUCTURE: +4 -3 +4 -3 TOTAL -4 +1 MSEK Q2 2018 Q2 2019 CHANGE Q1-2 2018 Q1-2 2019 CHANGE % % ORDER INTAKE 27 201 26 031 -5¹ 52 620 53 905 +0¹ REVENUES 26 136 26 467 +0¹ 49 822 51 492 +1¹ ADJUSTED OPERATING PRO
Slide 12: Bridge Analysis Sandvik Group
GROUP LEVERAGE: BRIDGE ANALYSIS N/A SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q2 2018 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2019 REVENUES 26 136 28 +967 -664 26 467 ADJUSTED EBIT 5 067 -294 +390 -195 4 968 ADJUSTED EBIT MARGIN 19.4% N/A - - 18.8% MARGIN ACCRETION / DILUTION -1.1% +0.8% -0.3% • Includ
Slide 13: Net Financials
NET FINANCIALS MSEK Q2 18 Q2 19 Underlying interest net -174 -148 • REDEMPTION OF 5.1 BSEK IN One-off, loan redemption -200 LONG-TERM DEBT Pension -31 -34 Bank charges -16 -10 • GUIDANCE UNCHANGED Other fin income & costs -11 2 ~1 BSEK IFRS16 -29 FX & other asset classes -34 33 Total -266 -387 13 SA
Slide 14: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA SEASONAL STOCK BUILD UP MSEK 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 2014 2015 2016 2017 2018 2019 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing operations) Sand
Slide 15: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 8 000 20 000 MSEK Q2 2018 Q2 2019 18 000 6 000 EBITDA + non-cash* 6 289 5 732 16 000 NWC change -3 135 -2 457 4 000 Capex** -945 -1 121 14 000 FOCF*** 2 209 2 156 2 000 12 000 *Including amortization of lease liabilities and IFRS adoption correction from Q1 2019 -195MSE
Slide 16: Net Debt
NET DEBT MSEK GEARING • NET GEARING AT 0.32 50 000 1.4 • SEQUENTIAL INCREASE DUE TO DIVIDEND PAYMENT AND PENSION DEBT 1.2 INCREASE DUE TO CHANGED DISCOUNT 40 000 RATES 1.0 • Y/Y INCREASE DUE TO IFRS16 ADOPTION 30 000 0.8 20 000 0.6 • DIVIDEND PAID 0.4 • 5.3 BSEK FOR 2018 10 000 0.2 0 0.0 • GROSS DEB
Slide 17: Outcome Q2 and Guidance
OUTCOME Q2 AND GUIDANCE Q2 2019 Underlying currency effect (MSEK): +455 (~300) Total currency effect (MSEK): +390 Metal price effect in quarter (MSEK): +131 (+100) Q3 2019 Underlying currency effect (MSEK): +300* Metal price effect in quarter (MSEK): -20** FULL YEAR 2019 Cash capex (BSEK): <4 (Q2: 0
Slide 18: Summary Q2
SUMMARY Q2 SLOW-DOWN IN EARLY-CYCLE DEMAND MORE FOCUS ON EFFICIENCY – ACTIONS INITIATED DECISION INTERNAL SEPARATION OF SMT NEW FINANCIAL AND SUSTAINABILITY TARGETS
Slide 19: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 20: End-Customer Segments
MINING ENERGY (34%) (11%) GENERAL CONSTRUCTION ENGINEERING (9%) (23%) AUTOMOTIVE AEROSPACE (12%) (6%) END-CUSTOMER SEGMENTS % of group revenues 2018 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 5% . 20 SANDVIK: Interim Report on the second quarter 2019
Slide 21: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT N/A -68 5,067 -127 4,968 +390 -294 EBIT Q2 18 ORGANIC CURRENCY METAL PRICE STRUCTURE EBIT Q2 19 GROWTH EFFECT SMT ADJUSTED EBIT MARGIN 19.4% 18.8% 21 SANDVIK: Interim Report on the second quarter 2019 Comments and numbers refer to continuing operations unles
Slide 22: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2018 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2019 MACHINING SOLUTIONS REVENUES 10 391 -460 +414 +329 10 674 EBIT 2 782 -488 +163 +26 2 483 EBIT MARGIN 26.8% -106% - - 23.3% MINING AND ROCK TECHNOLOGY REVENUES 10 890 348 +434 +110 11 782 EBIT 1 865 91 +173
Slide 23: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 0 - Fin institutions, EIB, NIB 0 - 87% Swedish MTN European MTN 3 648 11 588 3 years 7 years Bank loans 101 1 year Share swap - - SHORT TERM US Private Placement 0 - Fin institutions, EIB, NIB 0 - 13% Swedish MTN B
Slide 24: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 000 AVERAGE 3 500 INTEREST RATE: ~3% 3 000 2 500 2 000 1 500 1 000 500 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 24 SANDVIK: Interim Report on the second quarter 2019 Comments and numbers refer to continuing operations unless otherwise
Slide 25: Guidance
GUIDANCE CASH CAPEX Estimated to <4 BSEK for 2019 CURRENCY Given currency rates at end of June 2019 the effect on operating profit from transaction and EFFECTS translation would be +300 MSEK for Q3 2019 METAL PRICE Given currency rates, stock levels and metal prices at the end of June 2019, it is es
Slide 26: 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