Slide 1: Interim Report Second Quarter 2015
INTERIM REPORT JULY 17 SECOND QUARTER 2015
Slide 2: Summary Q2 2015
SUMMARY Q2 2015 STRONG CASH FLOW • Continued focus on net working capital EARNINGS GROWTH • EBIT 2,903 MSEK, 12.4% • Currency effect +775 MSEK • Savings 162 MSEK SOFT DEMAND • Stable market in Europe with signs of improvement in western regions • North America at a lower level but stable • Weak and
Slide 3: Invoicing by Markets
INVOICING BY MARKETS Order intake compared with SALES Q2 2015 SHARE OF GROUP TOTAL preceding quarter* NORTH AMERICA EUROPE ASIA 21% 37% 20% SOUTH AMERICA AFRICA/MIDDLE EAST AUSTRALIA 7% 10% 5% *) excluding major orders 3 SANDVIK: Interim Report on the second quarter 2015
Slide 4: Invoicing by Segments
INVOICING BY SEGMENTS CUSTOMER SEGMENTS Consumer related Other Aerospace INVOICING GROWTH VS Q2 2014 > +5% Energy Mining –5 to +5% < –5% Demand Automotive trend compared with preceding quarter Construction Engineering 4 SANDVIK: Interim Report on the second quarter 2015
Slide 5: Order Intake and Invoicing
ORDER INTAKE INVOICING 22,743 MSEK 23,398 MSEK CHANGE P/V -4% CHANGE P/V -5% MSEK MSEK 30 000 150% 30 000 120% 25 000 125% 25 000 100% 20 000 100% 20 000 80% 15 000 75% 15 000 60% 10 000 50% 10 000 40% 5 000 25% 5 000 20% 0 0% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 201
Slide 6: EBIT and Cash Flow
EBIT 2,903 MSEK CASH FLOW EBIT MARGIN 12.4% CASH FLOW FROM OPERATIONS 2,723 MSEK MSEK MSEK 5 000 40% 5 000 350% 4 000 300% 30% 4 000 250% 3 000 20% 3 000 200% 2 000 10% 2 000 150% 1 000 100% 0% 1 000 0 50% 2007 2008 2009 2010 2011 2012 2013 2014 2015 -1 000 -10% 0 0% 2007 2008 2009 2010 2011 2012 20
Slide 7: Financial Targets
FINANCIAL TARGETS CURRENT TARGET MANAGEMENT FOCUS • Product launches through focused R&D GROWTH 6% 8%* • Increase exposure towards high growth markets and segments • Adjust geographic footprint • Reduce Net Working Capital ROCE 12% 25% • Strict capital allocation (investments) • Restore earnings in
Slide 8: Our Way Forward
OUR WAY FORWARD KEY PRIORITIES BY BUSINESS AREA SANDVIK SANDVIK SANDVIK SANDVIK SANDVIK MACHINING MATERIALS MINING CONSTRUCTION VENTURE SOLUTIONS TECHNOLOGY • Leverage from Multi-brand • Consolidate footprint: • Accelerate growth of • Sales efficiency and • Accelerate growth of model, with backend M
Slide 9: Mats Backman, CFO
MATS BACKMAN CFO 9
Slide 10: Net Working Capital
NET WORKING CAPITAL MSEK 35 000 45% 40% 30 000 35% 25 000 30% 20 000 25% TARGET 15 000 20% 15% 10 000 10% 5 000 5% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Net working capital Net working capital / Invoiced sales Inventory / Invoiced sales 10 SANDVIK: Interim Report on the second quarter 20
Slide 11: Creating a Leaner Company
CREATING A LEANER COMPANY SAVINGS Q2 ANNUAL RUNRATE (MSEK) Target 1,9 bn. SANDVIK SANDVIK SANDVIK MATERIALS SANDVIK SAVINGS MACHINING SOLUTIONS MINING TECHNOLOGY CONSTRUCTION ANNUAL RUN-RATE SUPPLY CHAIN OPTIMIZATION 166 212 - 124 502 (1,400) ADJ COST 24 68 160** (480) 38 - BASE **) TOTAL 204 212 24
Slide 12: Guidance
GUIDANCE POSITIVE CURRENCY EFFECT OF +775 MSEK IN Q2 • Guidance +900 MSEK based on currency rates at the end of March • Difference driven by SEK strengthening towards the end of the quarter against primarily USD and CNY. GUIDANCE Q3 2015 CURRENCY EFFECT: +500 MSEK METAL PRICE EFFECT: -100 MSEK FULL
Slide 13: Looking Forward
LOOKING FORWARD >15,000 NEW PRODUCT GROW THE AFTERMARKET CREATING A LEANER LAUNCHES BUSINESS COMPANY Sandvik Machining Solutions Sandvik Mining rock drill campaign Supply Chain Optimization • Performance upgrades • Repair kits Focus on internal efficiency measures • Price per hour maintenance option
Slide 14: Summary Q2 2015
SUMMARY Q2 2015 STRONG CASH FLOW EARNINGS GROWTH SOFT DEMAND FOCUS ON NEW PRODUCT INTRODUCTIONS AND INTERNAL EFFICIENCY 14 SANDVIK: Interim Report on the second quarter 2015
Slide 15: Back-up Slides
BACK-UP SLIDES 15
Slide 16: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q2 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2015 INVOICING 22,051 -1,100 2,300 140 23,398 EBIT 2,556 -210 775 -220 2,903 EBIT MARGIN 12% -19% - - 12% * Includes metal price effects SANDVIK: Interim Report on the second quarter 2015 16
Slide 17: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2015 MACHINING SOLUTIONS INVOICING 7,676 -200 870 - 8,339 EBIT 1,561 -145 285 - 1,701 EBIT MARGIN 20% -72% - - 20% MINING INVOICING 6,385 -150 680 - 6,908 EBIT 452 80 250 - 786 EBIT MARGIN 7% N/A - - 11% MATERIA
Slide 18: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2014 PRODUCTIVITY CURRENCY ONE-OFFS Q2 2015 CONSTRUCTION INVOICING 2,281 -260 260 - 2,283 EBIT 51 - 100 - 151 EBIT MARGIN 2% N/A - - 7% VENTURE INVOICING 1,841 -200 180 400 2,226 EBIT 187 10 -40 50 210 EBIT MARGIN 10% N/A - - 9% SANDVIK: Interim Repor
Slide 19: Net Working Capital
NET WORKING CAPITAL % OF INVOICING BY BUSINESS AREA 60% 50% 40% 30% TARGET 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sandvik Machining Solutions Sandvik Mining Sandvik Materials Technology Sandvik Construction 19 SANDVIK: Interim Report on the second quarter 2015
Slide 20: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT SUPPLY CHAIN OPTIMIZATION PROGRAM FIRST PHASE TOTAL 7 UNITS CLOSED TO DATE (No units closed in Q2) 150 FIRST PHASE -11 4 UNITS REMAINING in H2 2015 SECOND PHASE -10 RUNRATE SAVINGS 502 MSEK END OF Q2 out of 800 MSEK target at year end 2015 SECOND PHASE 125 4 UNITS INITIAT
Slide 21: Sandvik Machining Solutions – Q2 2015
SANDVIK MACHINING SOLUTIONS – Q2 2015 STRONG CASH FLOW • Inventory reduction in contrast to normal seasonality SOFT GENERAL DEMAND • Stable demand in Europe with signs of improvement in western regions • Stable demand at a lower level in North America • Mixed demand in Asia EBIT 1,701 MSEK, 20.4% •
Slide 22: Sandvik Machining Solutions – Q2 2015
SANDVIK MACHINING SOLUTIONS – Q2 2015 ORDER INTAKE INVOICING MSEK 10 000 50% 8,355 8,339 8 000 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 1,701 27.2% 2 000 0 10% 0% MSEK 2007 2008 2009 2010 2011 2012 2013 2014 2015 -2 000 Invoicing EBIT margin ROCE 12 months -10% SANDVIK: Interim Report on the seco
Slide 23: Sandvik Mining – Q2 2015
SANDVIK MINING – Q2 2015 NEUTRAL BOOK-TO-BILL FOR EQUIPMENT AND AFTERMARKET COMBINED • One large order but continued low demand for Mining Systems EBIT 786 MSEK, 11.4% • Currency effects +250 MSEK • Savings +53 MSEK SUPPLY CHAIN OPTIMIZATION • One additional unit closure communicated SANDVIK: Interi
Slide 24: Sandvik Mining – Q2 2015
SANDVIK MINING – Q2 2015 ORDER INTAKE INVOICING MSEK 6,817 6,908 10 000 8 000 50% 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 786 14.7 2 000 0 10% 0% MSEK 2007 2008 2009 2010 2011 2012 2013 2014 2015 -2 000 -10% Invoicing EBIT margin ROCE 12 months SANDVIK: Interim Report on the second quarter 2015
Slide 25: Sandvik Materials Technology – Q2 2015
SANDVIK MATERIALS TECHNOLOGY – Q2 2015 CHALLENGING MARKET CONDITIONS • Persistently weak demand in oil and gas • Increased competition in standardized tubular products • Signs of improvement within automotive EBIT 286 MSEK, 7.9% • Excluding metal price effect 10.1 % • Metalprice effect -80 MSEK • Cu
Slide 26: Sandvik Materials Technology – Q2 2015
SANDVIK MATERIALS TECHNOLOGY – Q2 2015 ORDER INTAKE INVOICING MSEK 3,054 3,639 6 000 30% 5 000 20% MSEK MSEK 4 000 3 000 10% 2 000 EBIT ROCE 1 000 0% 286 8.7% -1 000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 -10% MSEK -2 000 -20% Invoicing Excluding metal price effects and nonrecurring items, 3
Slide 27: Sandvik Construction – Q2 2015
SANDVIK CONSTRUCTION – Q2 2015 STABLE MARKET CONDITIONS • Slightly higher activity in North America • One large order received in Australia PERFORMANCE IMPROVEMENT • EBIT 151 MSEK, 6.6% • Currency effect +100 MSEK • Savings 48 MSEK ONGOING EFFICIENCY MEASURES • Within the sales and marketing organiz
Slide 28: Sandvik Construction – Q2 2015
SANDVIK CONSTRUCTION – Q2 2015 ORDER INTAKE INVOICING MSEK 2,348 2,283 4 000 40% 3 000 30% MSEK MSEK 2 000 20% 1 000 10% EBIT ROCE 151 1.1% 0 -1 000 2007 2008 2009 2010 2011 2012 2013 2014 2015 0% -10% MSEK -2 000 -20% Invoicing EBIT margin ROCE 12 months SANDVIK: Interim Report on the second quarte
Slide 29: Sandvik Venture – Q2 2015
SANDVIK VENTURE – Q2 2015 MIXED DEMAND PATTERN SAVINGS SUPPORT EARNINGS • EBIT 210 MSEK, 9.5% • Savings 8 MSEK • Currency effect -40 MSEK CHALLENGING MARKET IN OIL & GAS CONSUMABLES 29 SANDVIK: Interim Report on the second quarter 2015
Slide 30: Sandvik Venture – Q2 2015
SANDVIK VENTURE – Q2 2015 ORDER INTAKE INVOICING MSEK 2,165 2,226 3 000 2 000 40% 30% MSEK MSEK 1 000 20% 10% 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 0% -1 000 EBIT ROCE -10% 210 6.5% -2 000 -20% -3 000 -30% MSEK -4 000 -40% -5 000 -50% Invoicing EBIT margin ROCE 12 months SANDVIK: Interim Re
Slide 31: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 6,585 4 years Fin institutions, EIB, NIB 2,306 7 years 89% Swedish MTN European MTN 10,043 10,115 4 years 11 years Bank loans 2,838 3 years Share swap 75 1 years SHORT TERM Commercial paper - - Fin institutions, EI
Slide 32: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 000 Loan Cash position 3 000 2 000 1 000 0 -1 000 -2 000 -3 000 -4 000 -5 000 6 Months 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 SANDVIK: Interim Report on the second quarter 2015 32
Slide 33: Updated Guidance
UPDATED GUIDANCE CAPEX Estimated at about 4.5 bn. SEK for 2015. CURRENCY EFFECTS Given currency rates at end of June the effect on EBIT would be +500 MSEK for Q3 2015. Given currency rates, stock levels and metal prices at the end of June, it is estimated that METAL PRICE EFFECTS effects on operatin
Slide 34: 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