Slide 1: Interim Report Third Quarter 2018
INTERIM REPORT THIRD QUARTER 2018 1
Slide 2: Summary
SUMMARY DEMAND ON HIGH LEVEL • LARGE O&G ORDERS IN SMT RECORD-HIGH Q3 EARNINGS AND MARGIN AT 18.9% STRONG CASH FLOW 2 SANDVIK: Interim Report on the third quarter 2018 Comments and numbers refer to continuing operations unless otherwise stated. Numbers have been restated to IFRS 15 where applicable
Slide 3: Market Development: Y/Y Underlying Demand Trend
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 (Q2/Q3) EUROPE 39% +10% NORTH AMERICA 21% +14% ASIA 20% +10% AFRICA/MIDDLE EAST 9% -16% SOUTH AMERICA 5% +3% AUSTRALIA 6% +27%
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES LARGE ORDERS IN SMT SUPPORT FROM ALL BUSINESS AREAS REPORTED P/V REPORTED P/V 24 192 9% 24 283 10% 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 10 000 70 000 10 000 70 000 2014 2015 2016 2017 2018
Slide 5: EBIT Development
EBIT DEVELOPMENT MSEK +37% 6 000 22% EBIT ADJUSTED • ~25% GROWTH 5 000 19% 4 587 EXCLUDING FX, STRUCTURE AND METALS 4 000 16% MSEK EBIT % ADJUSTED • SUPPORTED BY 3 000 13% 18.9 STRONG REVENUE GROWTH 2 000 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 2018 EBIT* EBI
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2017 40% SANDVIK MACHINING Q3 2017 Q3 2018 CHANGE SOLUTIONS MSEK ORDER INTAKE 8 450 9 942 +8%* REVENUES 8 487 9 990 +7%* STRONG DEMAND 1 949 OPERATING PROFIT 2 536 +30% − Positive development in all major regions % OF REVENUES 23.0% 25.4% − All segments strong barring for automotiv
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2017 40% SANDVIK MINING AND Q3 2017 Q3 2018 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 9 191 10 468 +8%* REVENUES 8 974 10 838 +14%* ROBUST UNDERLYING MARKET OPERATING PROFIT 1 471 1 966 +34% − Strong growth in the aftermarket business % OF REVENUES 16.4% 18.1% − Equipment overall st
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2017 15% SANDVIK MATERIALS MSEK Q3 2017 Q3 2018 CHANGE TECHNOLOGY ORDER INTAKE 3 045 3 782 +22%* REVENUES 2 955 3 454 +16%* STRONG RECOVERY IN SHORT-CYCLE OP. PROFIT -64 237 n/a BUSINESS -2.2% 6.9% % OF REVENUES − Most notable improvement for core- and standard UNDERLYING MARGIN³ 0
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK |_|
Slide 10: Financial Summary Q3 and YTD
GROWTH Q318, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q3 AND YTD ORGANIC: CURRENCY: STRUCTURE: +9 +6 -5 +10 +6 -5 TOTAL +11 +12 MSEK Q3 2017 Q3 2018 CHANGE % Q1-3 2017 Q1-3 2018 CHANGE % ORDER INTAKE 21 888 24 192 +9¹ 71 337 76 812 +9¹ REVENUES 21 608 24 283 +10¹ 66 898 74 104 +12¹ ADJUSTED OPERATI
Slide 11: Bridge Analysis
GROUP LEVERAGE: BRIDGE ANALYSIS +39% SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q3 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2018 REVENUES 21 608 2 125 +1 390 -840 24 283 ADJUSTED EBIT 3 338 839 +381 +29 4 587 ADJUSTED EBIT MARGIN 15.4% 39% - - 18.9% MARGIN ACCRETION / DILUTION +2.2% +0.5% +0.8% • In
Slide 12: Reported and Underlying Tax Rate
REPORTED AND UNDERLYING TAX RATE Q3 2018 Q1-3 2018 REPORTED 22.5 24.9 EXCL. CAPITAL GAIN HYPERION 26.1 26.3 (UNDERLYING RATE) TAX RATE 26-28% STILL VALID FOR 2018 12 SANDVIK: Interim Report on the third quarter 2018 Comments and numbers refer to continuing operations unless otherwise stated. Numbers
Slide 13: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA MSEK 30 000 35% 45% 40% 25 000 30% 35% 20 000 25% 30% 15 000 20% 25% 10 000 15% 20% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing operations) Sandvik Materials Technology NWC % of
Slide 14: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 10 000 20 000 MSEK Q3 2017 Q3 2018 8 000 18 000 EBITDA 4 832 6 339 6 000 16 000 Non-cash items 447 -806 NWC change -651 +220 4 000 14 000 Capex* -902 -1 075 FOCF** 3 726 4 679 2 000 12 000 *Including investments and disposals in rental, tangible and intangible assets **
Slide 15: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 40 000 1,4 1,2 30 000 • NET GEARING AT LOW 0.27 1,0 20 000 0,8 • NET DEBT INCREASED 0,6 ONLY BY ~0.7 BSEK FROM M&A 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 Q3 2014 2015 2016 2017 2018 Net debt excl. pension Net pension liability Net geari
Slide 16: Outcome and Guidance
OUTCOME AND GUIDANCE Q3 2018 Underlying currency effect (MSEK): +608 (~650) Total currency effect (MSEK): +381 Metal price effect in quarter (MSEK): +39 (~100) Q4 2018 Underlying currency effect (MSEK): ~400* Metal price effect in quarter (MSEK): -100** FULL YEAR 2018 Capex (BSEK): ~4 (Q3: 1.1; YTD:
Slide 17: Summary
SUMMARY DEMAND ON A HIGH LEVEL RECORD Q3 WITH STRONG BALANCE SHEET AWARD-WINNING PRODUCTS & SUSTAINABILITY RECOGNITION ─ IMTS AWARD: COROMANT SILENT TOOLS™ PLUS ─ INCLUSION IN DOW JONES SUSTAINABILITY INDEX CAPITAL MARKETS DAY 21-22 MAY 2019 IN FINLAND
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 third quarter 201
Slide 20: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT +39% +103 -74 4,587 +381 839 3,338 EBIT Q3 17 ORGANIC CURRENCY METAL PRICE STRUCTURE EBIT Q3 18 GROWTH EFFECT SMT ADJUSTED EBIT MARGIN 15.4% 18.9% 20 SANDVIK: Interim Report on the third quarter 2018 Comments and numbers refer to continuing operations unless
Slide 21: Bridge Analysis by Business Area
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2018 MACHINING SOLUTIONS REVENUES 8 487 577 +677 +249 9 990 EBIT 1 949 274 +262 +51 2 536 EBIT MARGIN 23.0% +47% - - 25.4% MINING AND ROCK TECHNOLOGY REVENUES 8 974 1 250 +536 +78 10 838 EBIT 1 471 434 +52 +9 1
Slide 22: Other Operations
SHARE OF REVENUES 2017 5% OTHER OPERATIONS ALL BUSINESSES DIVESTED • Capital gain of 618 MSEK booked in Q3 • VAT provision -130 MSEK • Project related costs as well as some operational cost amounted to -34 MSEK • Hyperion now an external customer to SMS, adding 127 MSEK on topline • Reported as stru
Slide 23: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 3 309 3 years Fin institutions, EIB, NIB 1 470 5 years 90% Swedish MTN European MTN 5 648 11 304 3 years 8 years Bank loans 148 1 year Share swap - - SHORT TERM US Private Placement 1 764 8 months Fin institutions,
Slide 24: 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 24 SANDVIK: Interim Report on the third quarter 2018 Comments and numbers refer to continuing operations unless
Slide 25: Guidance
GUIDANCE CAPEX Estimated at about 4 BSEK for 2018 CURRENCY Given currency rates at end of September 2018 the effect on operating profit from transaction and EFFECTS translation would be +400 MSEK for Q4 2018 METAL PRICE Given currency rates, stock levels and metal prices at the end of September 2018
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