Slide 1: Interim Report Third Quarter 2016
INTERIM REPORT THIRD QUARTER 2016 1 SANDVIK: Interim Report on the third quarter 2015
Slide 2: Summary
SUMMARY ORGANIC ORDER GROWTH STABLE FIRST QUARTER IN TWO YEARS WITHOUT NEGATIVE GROWTH EARNINGS GROWTH, MARGIN IMPROVEMENT AND RECORD HIGH Q3 CASH FLOW IMPORTANT PRODUCT LAUNCHES – DIGITAL TOOLS SANDVIK MACHINING SOLUTIONS – BATTERY POWERED MINING JUMBO AND LOADER 2 SANDVIK: Interim Report on the th
Slide 3: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2015 % of group Y/Y Q/Q underlying revenue 2015 order intake demand trend EUROPE 39% +0% NORTH AMERICA 21% +2% ASIA 20% +6% AFRICA/MIDDLE EAST 10% -3% SOUTH AMERICA 6% -13% AUSTRALIA 4% -4% 3 SANDVIK: Interim
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES POSITIVE BOOK-TO-BILL IN SMRT WEAK NORTH AMERICA AND ASIA REPORTED P/V REPORTED P/V 19 700 0% 19 715 -5% MSEK MSEK 25 000 95 000 25 000 95 000 20 000 90 000 20 000 90 000 15 000 85 000 15 000 85 000 10 000 80 000 10 000 80 000 2013 2014 2015 2016 2013 2014 2015 2016 Order intak
Slide 5: EBIT Development
EBIT DEVELOPMENT MSEK +13% 3 500 16% 3 000 14% REPORTED EBIT IMPACTED BY 2 500 12% 10% 2 623 • SAVINGS ACTIONS 2 000 8% MSEK MORE THAN OFF-SET 1 500 6% EBIT % NEGATIVE GROWTH 13.3 1 000 4% 500 2% • CURRENCY TAILWIND 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 2016 EBIT* EBIT%* *
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2015 39% SANDVIK MACHINING SOLUTIONS MSEK Q3 2015 Q3 2016 CHANGE MUTED MARKET CONDITIONS ORDER INTAKE 8 099 7 776 -4%* − EU generally unchanged; aerospace the relatively REVENUES 8 159 7 859 -4%* stronger segment ADJ. OP. PROFIT 1 481 1 650 +11% − NA challenging across most segment
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2015 39% SANDVIK MINING AND ROCK TECHNOLOGY MSEK Q3 2015 Q3 2016 CHANGE POSITIVE BOOK-TO-BILL ORDER INTAKE 7 676 7 936 +5%* − Order growth driven primarily by mining equipment, 8 270 REVENUES 7 791 -5%* gold strongest commodity 907 ADJ. OP. PROFIT 817 -10% − Signs of improvement in
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2015 16% SANDVIK MATERIALS TECHNOLOGY MSEK Q3 2015 Q3 2016 CHANGE STABLE OVERALL MARKETS ORDER INTAKE 2 847 2 851 -0%* − Large order in capex related Oil & Gas tubular REVENUES 3 161 2 945 -7%* offering ADJ. OP. PROFIT 49 197 N/M − Tough competitiveness for core and standard % OF R
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK P|
Slide 10: Financial Summary
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY ORGANIC: CURRENCY: 0 -1 -5 0 STRUCTURE: 0 0 TOTAL 0 -5 MSEK Q3 2015 Q3 2016 CHANGE % ORDER INTAKE 19 726 19 700 0* REVENUES 20 745 19 715 -5* OPERATING PROFIT 2 325 2 623 +13 % OF REVENUES 11.2 13.3 ADJ. OPERATING PROFIT 2 325 2 623 +13 % OF REVENUES
Slide 11: Profitability Development
PROFITABILITY DEVELOPMENT 2,623 -0 +186 +62 2,325 +193 -143 EBIT Q315 ORGANIC ANNOUNCED CURRENCY METAL PRICE STRUCTURE EBIT Q316 GROWTH SAVINGS PROGRAMS EFFECT SMT ADJUSTED MARGIN 11.2% 13.3% 11 SANDVIK: Interim Report on the third quarter 2016 Comments and numbers refer to continuing operations unl
Slide 12: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q3 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2016 REVENUES 20 745 -906 -78 -46 19 715 EBIT 2 325 50 62 186 2 623 EBIT MARGIN 11.2% n/a - - 13.3% MARGIN ACCRETION / DILUTION +0.8% +0.4% +0.9% * Includes metal price effects within Sandvik Mater
Slide 13: Net Working Capital and Relative NWC by BA
NET WORKING CAPITAL RELATIVE NWC BY BA MSEK 30 000 40% 55% 27 500 35% 45% 25 000 30% 35% 22 500 25% 25% 15% 20 000 20% 2013 2014 2015 2016 2013 2014 2015 2016 Sandvik Machining Solutions Sandvik Mining and Rock Technology NWC (continuing operations) Sandvik Materials Technology Other operations 13 S
Slide 14: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 5 000 16 000 4 500 14 000 4 000 MSEK Q3 2015 Q3 2016 Δ% 12 000 3 500 EBITDA + non cash 3 241 3 556 +10 10 000 3 000 NWC change +1719 +1 790 +4 2 500 8 000 Capex** -1 079 -1 004 +7 2 000 6 000 FOCF* 3 881 4 342 +12 1 500 4 000 1 000 **Including investments and disposals
Slide 15: Financial Net Debt
FINANCIAL NET DEBT MSEK 45 000 1,4 40 000 1,2 35 000 30 000 1,0 • NET DEBT LOWERED BY -7% 25 000 0,8 SINCE Q3 2015 20 000 0,6 15 000 • NET GEARING 0.95 0,4 10 000 – DESPITE RECORD HIGH NET 0,2 PENSION LIABILITIES 5 000 0 0,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 2016 Net debt e
Slide 16: Outcome and Guidance
OUTCOME AND GUIDANCE Q3 2016 Currency effect (MSEK): +62 (-100) Metal price effect (MSEK): +51 (+30) Q4 2016 Currency effect (MSEK): +200 Metal price effect (MSEK): +50 FULL YEAR 2016 - UPDATED Capex (BSEK): <4.1 Net financial items (BSEK): -1.6 to -1.7 (-1.7 to -1.9) Tax rate (%): 26-28 16 SANDVIK:
Slide 17: Summary
SUMMARY EARNINGS AND MARGIN IMPROVEMENT DESPITE NEGATIVE ORGANIC GROWTH STABILITY PROFITABILITY CREATE A STABLE IMPROVE PLATFORM PERFORMANCE INITIAL SIGNS OF MARKET IMPROVEMENT IN MINING GROWTH GENERATE GROWTH BREAKING NEW GROUND WITH PRODUCT LAUNCHES
Slide 18: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 19: End-Customer Segments
AUTOMOTIVE MINING (12%) (28%) GENERAL CONSTRUCTION ENGINEERING (11%) (24%) ENERGY AEROSPACE (13%) (6%) END-CUSTOMER SEGMENTS (% OF GROUP REVENUES 2015 EXCL. MINING SYSTEMS) 19 SANDVIK: Interim Report on the third quarter 2016 Comments and numbers refer to continuing operations unless otherwise state
Slide 20: Bridge Analysis by Business Area
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2016 MACHINING SOLUTIONS REVENUES 8 159 -299 -17 16 7 859 EBIT 1 481 105 64 - 1 650 EBIT MARGIN 18.1% N/A - - 21.0% MINING AND ROCK TECHNOLOGY REVENUES 8 270 -389 -90 - 7 791 EBIT 907 -67 -23 - 817 EBIT MARGIN 1
Slide 21: 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 164 160 7
Slide 22: 17 Production Units Closed End of Q3
17 PRODUCTION UNITS CLOSED END OF Q3 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 (5 UNITS CLOSED) - TARGET SAVINGS 320 MSEK at year end 2016 THIRD PHASE -
Slide 23: Other Operations – Non-Strategic Assets
OTHER OPERATIONS – NON-STRATEGIC ASSETS NEUTRAL BOOK-TO-BILL ~1 • Positive book-to-bill for Process Systems supported by chemical segment • Persistently weak demand in oil and gas affecting both Process Systems and Hyperion negatively EARNINGS SUPPORTED BY CURRENCY AND EFFICIENCY MEASURES • EBIT 113
Slide 24: Other Operations – Non-Strategic Assets
OTHER OPERATIONS – NON-STRATEGIC ASSETS ORDER INTAKE REVENUES MSEK 2 000 20% 1,132 1,113 1 500 15% MSEK MSEK 1 000 10% EBIT ROCE 11% 500 5% 113 0 0% MSEK Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 Revenues EBIT margin reported EBIT margin adjusted* ROCE 12 month rolling EBIT reported 24 SANDVIK
Slide 25: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 6,032 4 years Fin institutions, EIB, NIB 2,059 7 years 85% Swedish MTN European MTN 6,934 10,541 4 years 10 years Bank loans 3,268 3 years Share swap - - SHORT TERM US Private Placement 649 9 months Fin institution
Slide 26: 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 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 26 SANDVIK: Interim Report on the third quarter 2016 Comments and numbers refer to continuing operations unless otherwise stated
Slide 27: Guidance
GUIDANCE CAPEX Estimated at below 4.1 BSEK for 2016 CURRENCY Given currency rates at end of September 2016 the effect on operating profit from transaction and EFFECTS translation would be +200 MSEK for Q4 2016 METAL PRICE Given currency rates, stock levels and metal prices at the end of September 20
Slide 28: 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