Slide 1: Interim Report Second Quarter 2018
INTERIM REPORT SECOND QUARTER 2018 1
Slide 2: Summary Q2
SUMMARY Q2 DEMAND ON RECORD LEVEL • STRONG GROWTH IN ALL BUSINESS AREAS • SMS ORDERS ON RECORD-HIGH LEVEL • LARGE ORDER IN SMT ALL-TIME HIGH EARNINGS AND MARGIN AT 19.4% ACTIVE PORTFOLIO MANAGEMENT 2 SANDVIK: Interim Report on the second quarter 2018 Comments and numbers refer to continuing operatio
Slide 3: Increased Pace in M&A
INCREASED PACE IN M&A CLOSED SIGNED AND PRE-TRANSACTION CASH OUT ACQUISITIONS 4.5BSEK Time 2018 H2 2018 CASH IN SANDVIK FAGERSTA WELDING HYPERION STAINLESS SANDVIK 9.5 DRILLING & DIVESTMENTS PROCESS STAINLESS WIRE WIRE SYSTEMS COMPLETIONS (VAREL) O&G BSEK 3
Slide 4: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2017 % of group Y/Y Sequential underlying revenue FY17 order intake demand trend (Q1/Q2) EUROPE 39% +16% NORTH AMERICA 21% +8% ASIA 20% +17% AFRICA/MIDDLE EAST 9% +7% SOUTH AMERICA 5% +13% AUSTRALIA 6% -5% 4
Slide 5: Order Intake and Revenues
ORDER INTAKE REVENUES BOOK-TO-BILL 104% DOUBLE-DIGIT GROWTH FOR SMS AND SMRT REPORTED P/V REPORTED P/V 27 201 12% 26 136 12% 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 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Slide 6: EBIT Development
EBIT DEVELOPMENT MSEK +36% 6 000 22% EBIT ADJUSTED • ~28% GROWTH 5 000 19% 5 067 EXCLUDING FX, STRUCTURE AND METALS 4 000 16% MSEK EBIT % ADJUSTED • SUPPORTED BY 3 000 13% 19.4 STRONG REVENUE GROWTH 2 000 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 2016 2017 2018 EBIT* EBIT%*
Slide 7: Sandvik Machining Solutions
SHARE OF REVENUES 2017 40% SANDVIK MACHINING Q2 2017 Q2 2018 CHANGE SOLUTIONS MSEK ORDER INTAKE 9 312 10 322 +8%* REVENUES 9 073 10 286 +10%* RECORD-HIGH ORDER AND REVENUE LEVEL 2 110 OPERATING PROFIT 2 761 +31% % OF REVENUES 23.3% 26.8% STRONG MARKETS *At fixed exchange rates for comparable units −
Slide 8: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2017 40% SANDVIK MINING AND Q2 2017 Q2 2018 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 9 949 11 405 +15%* REVENUES 9 429 10 890 +16%* STRONG UNDERLYING MARKET OPERATING PROFIT 1 508 1 865 +24% − Double-digit growth in equipment and aftermarket % OF REVENUES 16.0% 17.1% − Strong growt
Slide 9: Sandvik Materials Technology
SHARE OF REVENUES 2017 15% SANDVIK MATERIALS MSEK Q2 2017 Q2 2018 CHANGE TECHNOLOGY ORDER INTAKE 3 985 4 550 +17%* REVENUES 3 755 3 976 +8%* STRONG RECOVERY IN SHORT-CYCLE ADJ. OP. PROFIT 189 558 n/a BUSINESS 5.0% 14.0% % OF REVENUES − Most notable improvement for core- and standard UNDERLYING MARGI
Slide 10: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK |_|
Slide 11: Financial Summary Q2 and YTD
GROWTH Q218, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q2 AND YTD ORGANIC: CURRENCY: STRUCTURE: +12 +1 -2 +12 +1 -2 TOTAL +11 +11 MSEK Q2 2017 Q2 2018 CHANGE % Q1-2 2017 Q1-2 2018 CHANGE % ORDER INTAKE 24 533 27 201 +12¹ 49 449 52 620 +9¹ REVENUES 23 532 26 136 +12¹ 45 290 49 822 +13¹ ADJUSTED OPERA
Slide 12: Bridge Analysis
GROUP LEVERAGE: BRIDGE ANALYSIS +39% SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q2 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2018 REVENUES 23 532 2 709 +293 -398 26 136 ADJUSTED EBIT 3 718 1 051 +145 +153 5 067 ADJUSTED EBIT MARGIN 15.8% 39% - - 19.4% MARGIN ACCRETION / DILUTION +2.4% +0.3% +0.9% • I
Slide 13: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA STRONG MARKETS AND SEASONAL BUILD-UP MSEK 30 000 35% 45% 40% 25 000 30% 35% 20 000 30% 25% 15 000 25% 10 000 20% 20% 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing operati
Slide 14: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 8 000 18 000 MSEK Q2 2017 Q2 2018 6 000 16 000 EBITDA + non cash 4 163 6 289 NWC change -618 -3 136 4 000 14 000 Capex* -944 -945 FOCF** 2 602 2 208 2 000 12 000 *Including investments and disposals in rental, tangible and intangible assets **Cash flow before acquisitio
Slide 15: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 40 000 1,4 1,2 30 000 • NET GEARING AT 0.34 1,0 20 000 0,8 • DIVIDEND PAYMENT 0,6 10 000 0,4 0 0,2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 2016 2017 2018 Net debt excl. pension Net pension liability Net gearing incl. net pension liabilities 15
Slide 16: Outcome and Guidance
OUTCOME AND GUIDANCE Q2 2018 Underlying currency effect (MSEK): +140 (~0) Total currency effect (MSEK): +145 Metal price effect in quarter (MSEK): +201 (~100) Q3 2018 Underlying currency effect (MSEK): ~650* Metal price effect in quarter (MSEK): +100** FULL YEAR 2018 Capex (BSEK): ~4 (Q2: 0.93; YTD:
Slide 17: Summary Q2 and First Six Months
SUMMARY Q2 AND FIRST SIX MONTHS ROBUST UNDERLYING DEMAND RECORD EARNINGS AND STRONG BALANCE SHEET INCREASED PACE IN M&A
Slide 18: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 19: End-Customer Segments
MINING ENERGY (31%) (11%) GENERAL CONSTRUCTION ENGINEERING (11%) (24%) AUTOMOTIVE AEROSPACE (13%) (6%) END-CUSTOMER SEGMENTS (% of group revenues 2017 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 4% ) 19 SANDVIK: Interim Report on the second quarter 20
Slide 20: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT +39% -102 5,067 +255 +145 1,051 3,718 EBIT Q2 17 ORGANIC CURRENCY METAL PRICE STRUCTURE EBIT Q2 18 GROWTH EFFECT SMT ADJUSTED EBIT MARGIN 15.8% 19.4% 20 SANDVIK: Interim Report on the second quarter 2018 Comments and numbers refer to continuing operations un
Slide 21: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2018 MACHINING SOLUTIONS REVENUES 9 073 948 +265 - 10 286 EBIT 2 110 465 +186 - 2 761 EBIT MARGIN 23.3% +49% - - 26.8% MINING AND ROCK TECHNOLOGY REVENUES 9 429 1 499 -38 - 10 890 EBIT 1 508 476 -119 - 1 865 EBI
Slide 22: Other Operations
SHARE OF REVENUES 2017 5% OTHER OPERATIONS HYPERION STRONG UNDERLYING PERFORMACE • Transactional related costs -40 MSEK impacted margin negatively • Underlying Hyperion margin at 11.4% driven by strong revenue growth +9% HYPERION DE-CONSOLIDATED AS OF Q318 • Capital gain estimated at about 1 BSEK •
Slide 23: Other Operations: Non-Strategic Assets - Hyperion
SHARE OF REVENUES 2017 5% OTHER OPERATIONS NON-STRATEGIC ASSETS - HYPERION MSEK ORDER INTAKE REVENUES 2 000 25% 924 984 1 500 20% MSEK MSEK 1 000 15% EBIT ROCE² 500 10% 72 9.9% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 5% MSEK 2015 2016 2017 2018 Revenues ROCE %² EBIT% adjusted¹ ¹Adjusted for item
Slide 24: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 3 364 3 years Fin institutions, EIB, NIB 1 469 5 years 90% Swedish MTN European MTN 5 647 11 461 3 years 8 years Bank loans 160 1 year Share swap - - SHORT TERM US Private Placement 1 792 12 months Fin institutions
Slide 25: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 500 AVERAGE 4 000 INTEREST RATE: 3 500 ~4% 3 000 2 500 2 000 1 500 1 000 500 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 25 SANDVIK: Interim Report on the second quarter 2018 Comments and numbers refer to continuing operations unless
Slide 26: Guidance
GUIDANCE CAPEX Estimated at about 4 BSEK for 2018 CURRENCY Given currency rates at end of June 2018 the effect on operating profit from transaction and EFFECTS translation would be +650 MSEK for Q3 2018 METAL PRICE Given currency rates, stock levels and metal prices at the end of June 2018, it is es
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