Slide 1: Interim Report Second Quarter 2017
INTERIM REPORT SECOND QUARTER 2017 1 SANDVIK: Interim Report on the second quarter 2017
Slide 2: Summary
SUMMARY STRONG MOMENTUM ORDER INTAKE +17% REVENUES +9% POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS AND REGIONS EARNINGS GROWTH AND MARGIN IMPROVEMENT ALSO EXCLUDING POSITIVE IMPACT FROM FX IMPORTANT STEPS TOWARDS PORTFOLIO CONSOLIDATION • MINING SYSTEMS • SPS • NEW ANNOUNCEMENT: WIRE 2 SANDVIK: Inter
Slide 3: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2016 % of group Y/Y Q/Q underlying revenue FY16 order intake demand trend EUROPE 40% +5% NORTH AMERICA 20% +40% ASIA 20% +4% AFRICA/MIDDLE EAST 9% +35% SOUTH AMERICA 5% +17% AUSTRALIA 6% +42% 3 SANDVIK: Inter
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES STRONG ORDER GROWTH; 12% EXCL. MAJOR ORDERS GROWTH IN ALL BUSINESS AREAS AND MAJOR REGIONS REPORTED P/V REPORTED P/V 24 533 17% 23 553 9% MSEK MSEK 25 000 100 000 25 000 100 000 95 000 95 000 20 000 20 000 90 000 90 000 15 000 15 000 85 000 85 000 10 000 80 000 10 000 80 000 20
Slide 5: EBIT Development
EBIT DEVELOPMENT +38% MSEK • 30% EBIT GROWTH 4 000 18% ADJUSTED EXCLUDING FX AND METAL 3 500 17% 3 000 2 500 16% 15% 3 721 • HIGHEST EARNINGS 2 000 14% MSEK IN FIVE YEARS 1 500 13% EBIT % • SUPPORTED BY 15.8 1 000 12% 500 11% SIGNIFICANT REVENUE 0 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 GROWTH
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2016 40% SANDVIK MACHINING Q2 2016 Q2 2017 CHANGE SOLUTIONS MSEK ORDER INTAKE 8 320 9 312 +6%* REVENUES 8 235 9 071 +5%* STRONG UNDERLYING GROWTH OPERATING PROFIT 1 785 2 110 +18% − Negative working day effect of -3% % OF REVENUES 21.7% 23.3% − Larger orders PBT +1% *At fixed excha
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2016 38% SANDVIK MINING AND Q2 2016 Q2 2017 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 7 539 9 949 +23%* REVENUES 7 540 9 450 +17%* STRONG ORDER INTAKE OPERATING PROFIT 698 1 512 n/a − Strong development in replacement equipment % OF REVENUES 9.3% 16.0% − Strong growth in aftermarket
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2016 16% SANDVIK MATERIALS MSEK Q2 2016 Q2 2017 CHANGE TECHNOLOGY ORDER INTAKE 2 753 3 985 +40%* REVENUES 3 389 3 755 +7%* STABLE ALBEIT COMPETITIVE ENVIRONMENT ADJ. OP. PROFIT 297 187 -37% 8.8% − Stable underlying order development ~0% % OF REVENUES¹ 5.0% UNDERLYING MARGIN³ 8.5% 6
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK P|
Slide 10: Financial Summary Q2
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q2 ORGANIC: CURRENCY: +17 +6 +9 +6 STRUCTURE: 0 0 TOTAL +23 +16 MSEK Q2 2016 Q2 2017 CHANGE % ORDER INTAKE 19 869 24 533 +17¹ REVENUES 20 321 23 553 +9¹ ADJUSTED OPERATING PROFIT² 2 705 3 721 +38 % OF REVENUES 13.3 15.8 NWC %³ 28.1 23.3 CASH FLOW4 2
Slide 11: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q2 2016 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2017 REVENUES 20 321 1 738 1 312 182 23 553 ADJUSTED EBIT 2 705 815 264 -63 3 721 ADJUSTED EBIT MARGIN 13.3% 47% - - 15.8% MARGIN ACCRETION / DILUTION +2.7% +0.2% -0.4% * Includes metal price effec
Slide 12: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA RATIO ON RECORD-LOW LEVEL MSEK 27 500 35% 45% 40% 25 000 30% 35% 30% 22 500 25% 25% 20 000 20% 20% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 NWC (continuing operations) Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC % of revenues (cont
Slide 13: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 5 000 16 000 MSEK Q2 2016 Q2 2017 Δ 4 000 14 000 EBITDA + non cash 3 441 4 813 +1 372 3 000 NWC change -413 -1 267 -854 12 000 Capex* -961 -944 +17 2 000 FOCF** 2 067 2 602 +535 10 000 1 000 *Including investments and disposals in rental, tangible and intangible assets
Slide 14: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 40 000 1,4 • NET DEBT LOWERED BY -20% Y/Y 1,2 30 000 TO 28 BILLION SEK 1,0 20 000 0,8 • NET GEARING 0.71 – IN LINE WITH TARGET OF <0.8 10 000 0,6 – INCLUDING DIVIDEND PAYMENT 0 0,4 2013 2014 2015 2016 2017 Net debt excl. net pension liability Net pension liability Net
Slide 15: Outcome and Guidance
OUTCOME AND GUIDANCE Q2 2017 Underlying currency effect (MSEK): +409 (+400) Total currency effect (MSEK): +264 Metal price effect (MSEK): -54 (~0) Q3 2017 Underlying currency effect (MSEK): +0* Metal price effect (MSEK): -100** FULL YEAR 2017 Capex (BSEK): ~3.9 (H1: 1.5) Net financial items (BSEK):
Slide 16: Mining Systems Exit
MINING SYSTEMS EXIT SIGNED DISPOSAL SIGNED AGREEMENT WITH SUBCONTRACTOR FLSMIDTH AGREEMENT WITH FLSMIDTH Mining-related projects Non-mining related projects + mining projects close to ~80% finalization SIGNED WITH NEPEAN CONVEYORS Conveyor components ~20% Earlier announced charge of -847 MSEK remain
Slide 17: Summary
SUMMARY REVENUE GENERATION ON BACK OF RECENT STRONG ORDER INTAKE STABILITY PROFITABILITY • REVENUE GROWTH +9% CREATE A STABLE PLATFORM IMPROVE PERFORMANCE • POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS AND MAJOR REGIONS IMPROVED PERFORMANCE EARNINGS GROWTH AND MARGIN IMPROVEMENT ALSO GROWTH GENERATE G
Slide 18: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 19: End-Customer Segments
MINING ENERGY (27%) (12%) GENERAL CONSTRUCTION ENGINEERING (12%) (23%) AUTOMOTIVE AEROSPACE (14%) (6%) END-CUSTOMER SEGMENTS (% of group revenues 2016 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 6% ) 19 SANDVIK: Interim Report on the second quarter 20
Slide 20: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT +47% -63 3,721 0 +264 +102 +713 2,705 EBIT Q2 2016 ORGANIC ANNOUNCED CURRENCY METAL PRICE STRUCTURE EBIT Q2 2017 GROWTH SAVINGS EFFECT SMT PROGRAMS ADJUSTED 13.3% 15.8% MARGIN 20 SANDVIK: Interim Report on the second quarter 2017 Comments and numbers refer t
Slide 21: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2016 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2017 MACHINING SOLUTIONS REVENUES 8 235 378 453 5 9 071 EBIT 1 785 276 49 0 2 110 EBIT MARGIN 21.7% +73% - - 23.3% MINING AND ROCK TECHNOLOGY REVENUES 7 540 1 251 659 - 9 450 EBIT 698 622 192 - 1 512 EBIT MARGIN
Slide 22: Creating a Leaner Company
CREATING A LEANER COMPANY SAVINGS ANNUAL RUN-RATE (MSEK) VS. LAST YEAR AND TOTAL TARGET 2.1 BSEK GROUP TOTAL SANDVIK MACHINING SANDVIK MINING AND SANDVIK MATERIALS ACTIVITIES ANNUAL RUN-RATE SOLUTIONS ROCK TECHNOLOGY TECHNOLOGY VS. LAST YEAR SAVINGS ANNUAL RUN-RATE SUPPLY CHAIN OPTIMIZATON 213 0 26
Slide 23: 20 Production Units Closed End of Q2
20 PRODUCTION UNITS CLOSED END OF Q2 SUPPLY CHAIN OPTIMIZATION PROGRAM FIRST PHASE CONTINUING OPERATIONS - FINALIZED AT END Q4 2015 - RUN-RATE SAVINGS 600 MSEK END OF Q4 (out of 690 MSEK target) SECOND PHASE - 8 UNITS IN SCOPE (7 UNITS CLOSED) - TARGET SAVINGS 320MSEK ACHIEVED at year end 2016 THIRD
Slide 24: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS SIGNED CONTRACT FOR PROCESS SYSTEMS DISPOSAL • Expected closure no later than Q1 2018 STRONG UNDERLYING DEMAND • Underlying demand developed positively for both Hyperion and Process Systems • Some timing issues for Process Systems EARNI
Slide 25: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS MSEK ORDER INTAKE REVENUES 2 000 25% 1 287 1 276 1 500 20% MSEK MSEK 1 000 15% EBIT ROCE 500 10% 124 13.1% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 5% MSEK 2014 2015 2016 2017 Revenues EBIT % reported ROCE %² EBIT % adjusted¹ ¹Adjust
Slide 26: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 4,952 3 years Fin institutions, EIB, NIB 1,728 6 years 88% Swedish MTN European MTN 5,928 10,620 4 years 9 years Bank loans 2,901 2 years Share swap - - SHORT TERM US Private Placement 937 4 months Fin institutions
Slide 27: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 27 SANDVIK: Interim Report on the second quarter 2017 Comments and numbers refer to continuing operations unless otherwise stated
Slide 28: Guidance
GUIDANCE CAPEX Estimated at about 3.9 BSEK for 2017 CURRENCY Given currency rates at end of June 2017 the effect on operating profit from transaction and EFFECTS translation would be +0 MSEK for Q3 2017 METAL PRICE Given currency rates, stock levels and metal prices at the end of June 2017, it is es
Slide 29: 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