Slide 1: Interim Report Fourth Quarter 2018
INTERIM REPORT FOURTH QUARTER 2018 1
Slide 2: 2018 - Record Year in Many Aspects
2018 - RECORD YEAR IN MANY ASPECTS RECORD ORDERS, RECORD-HIGH CASH FLOW …WHILST INCREASING REVENUES AND MARGIN AND 0.2 GEARING… PACE OF M&A CAGR ~21% in earnings growth 2015-18 ~1.3 BSEK in acquired revenues All segments, regions and business areas in growth 6 acquisitions signed in 2018/2019, highe
Slide 3: Summary Q4
SUMMARY Q4 ROBUST DEMAND • ORDER INTAKE +6% • MAJOR ORDERS RECEIVED IN SMRT AND SMT • POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS STRONG ADJUSTED EARNINGS AND MARGIN AT 18.1% • NEGATIVE IMPACT OF ~70 BPS FROM PLANNED DESTOCKING • SUPPORTED BY REVENUE GROWTH AND FX RECORD CASH FLOW ~6.3 BSEK • NET GEA
Slide 4: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2018 % of group Y/Y Sequential underlying revenue FY18 order intake demand trend (Q3/Q4) EUROPE 38% +3% NORTH AMERICA 21% +14% ASIA 20% +2% AFRICA/MIDDLE EAST 9% -3% SOUTH AMERICA 5% +21% AUSTRALIA 7% +21% 4
Slide 5: Order Intake and Revenues
ORDER INTAKE REVENUES RECORD-HIGH FOR SMRT POSITIVE GROWTH IN ALL THREE BUSINESS AREAS REPORTED P/V REPORTED P/V 25 627 6% 25 968 9% MSEK MSEK 30 000 105 000 30 000 105 000 25 000 95 000 25 000 95 000 20 000 85 000 20 000 85 000 15 000 75 000 15 000 75 000 2014 2015 2016 2017 2018 2014 2015 2016 201
Slide 6: EBIT Development
EBIT DEVELOPMENT MSEK +16% 6 000 22% EBIT ADJUSTED • ~11% GROWTH 5 000 19% 4 700 EXCLUDING FX, STRUCTURE AND METALS 4 000 16% MSEK 3 000 13% EBIT % ADJUSTED • SUPPORTED BY 2 000 10% 18.1 STRONG REVENUE GROWTH Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 2018 EBIT* EBIT%* *Adjusted
Slide 7: Sandvik Machining Solutions
SHARE OF REVENUES 2018 41% SANDVIK MACHINING Q4 2017 Q4 2018 CHANGE SOLUTIONS MSEK ORDER INTAKE 9 424 10 258 +2%* REVENUES 9 313 10 305 +3%* GROWTH ON ALREADY HIGH DEMAND LEVEL 2 285 ADJ. OP. PROFIT 2 475 +8% − Europe stable, NA in strong growth, Asia in slight % OF REVENUES 24.5% 24.0% decline *At
Slide 8: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2018 44% SANDVIK MINING AND Q4 2017 Q4 2018 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 9 586 11 454 +15%* REVENUES 9 721 11 720 +15%* RECORD-HIGH ORDERS IN STRONG UNDERLYING ADJ. OP. PROFIT 1 572 2 238 +42% MARKET % OF REVENUES 16.2% 19.1% − Double-digit growth in equipment and after
Slide 9: Sandvik Materials Technology
SHARE OF REVENUES 2018 15% SANDVIK MATERIALS MSEK Q4 2017 Q4 2018 CHANGE TECHNOLOGY ORDER INTAKE 3 964 3 915 +0%* REVENUES 3 630 3 942 +10%* STRONG MARKETS OPERATING PROFIT 267 252 -6% − Improvement in capex-related energy segment % OF REVENUES 7.4% 6.4% 4.6% − Order growth +11% excl. large orders U
Slide 10: Tomas Eliasson, CFO
TOMAS ELIASSON CFO 10
Slide 11: Financial Summary Q4 and FY18
GROWTH Q418, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q4 AND FY18 ORGANIC: CURRENCY: STRUCTURE: +6 +4 -4 +9 +4 -5 TOTAL +6 +9 MSEK Q4 2017 Q4 2018 CHANGE % Q1-4 2017 Q1-4 2018 CHANGE % ORDER INTAKE 24 107 25 627 +6¹ 95 444 102 440 +9¹ REVENUES 23 929 25 968 +9¹ 90 827 100 072 +11¹ ADJUSTED OPERATIN
Slide 12: Bridge Analysis
GROUP LEVERAGE: BRIDGE ANALYSIS +21% SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q4 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2018 REVENUES 23 929 2 060 +1 024 -1 045 25 968 ADJUSTED EBIT 4 062 439 +494 -294 4 700 ADJUSTED EBIT MARGIN 17.0% 21% - - 18.1% MARGIN ACCRETION / DILUTION +0.3% +1.3% -0.5% •
Slide 13: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA INVENTORY REDUCTION ACROSS BA:S MSEK 27 500 35% 45% 40% 25 000 30% 35% 30% 22 500 25% 25% 20 000 20% 20% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing operations) Sandvik Materials
Slide 14: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 8 000 20 000 MSEK Q4 2017 Q4 2018 18 000 6 000 EBITDA + non-cash 5 223 5 466 16 000 NWC change +1 216 +2 273 4 000 Capex* -1 354 -1 441 14 000 FOCF** 5 085 6 298 2 000 12 000 *Including investments and disposals in rental, tangible and intangible assets 0 10 000 **Cash
Slide 15: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 50 000 1,2 1,0 40 000 0,8 • NET GEARING AT 0.2 30 000 0,6 20 000 0,4 • ~6 BSEK IN NET DEBT EXCL. 10 000 PENSIONS (~12 BSEK IN TOTAL) 0,2 0 0,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 2018 Net debt excl. pension Net pension liability Net gearing
Slide 16: Dividend Proposal
DIVIDEND PROPOSAL 19% INCREASE P.A. SINCE 2015 12 10 Payout ratio % 8 2016 2017 2018 6 Reported 63 33 42 Adjusted 4 63 44 43 2 2.75 3.50 4.25** 0 2016 2017 2018 Divi dend EPS Repo rted * EPS ad justed * *Group total i.e. including discontinued operations **Proposed dividend SANDVIK: Interim Report o
Slide 17: Outcome Q4 and 2018
OUTCOME Q4 AND 2018 Q4 2018 Underlying currency effect (MSEK): +528 (~400) Total currency effect (MSEK): +494 Metal price effect in quarter (MSEK): -86 (-100) FULL YEAR 2018 Capex (BSEK): ~4 (Q4: 1.2; FY18: 3.9) Net financial items (BSEK): ~1 (Q4: 0.14; FY18: 0.8) Underlying tax rate (%): 26-28 (Q4:
Slide 18: Guidance 1Q19 and FY2019
GUIDANCE 1Q19 AND FY2019 CAPEX Estimated to <4 BSEK for 2019 CURRENCY Given currency rates at end of December 2018 the effect on operating profit from transaction and EFFECTS translation would be +500 MSEK for Q1 2019 METAL PRICE Given currency rates, stock levels and metal prices at the end of Dece
Slide 19: Looking Forward
LOOKING FORWARD CONTINUOUS PERFORMANCE IMPROVEMENTS FOCUS ON CORE CONTINUE ACQUIRING GROWTH
Slide 20: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 21: Overachievement of Targets
OVERACHIEVEMENT OF TARGETS ABSOLUTE ROCE NET DEBT/ DIVIDEND EBIT GROWTH IMPROVEMENT EQUITY RATIO PAYOUT RATIO ≥7% ≥3%PTS <0.8 50% CONTINUING OPERATIONS 100% BSEK % +19% +9 pts 1.2 50% 1.0 1.0 TARGET 0% 0.8 2016 2017 2018 0.7 0.6 GROUP TOTAL ~14% ~23% 0.4 0.3 100% 10.4 17.7 0.2 0.2 2015 2018
Slide 22: End-Customer Segments
MINING ENERGY (34%) (11%) GENERAL CONSTRUCTION ENGINEERING (9%) (23%) AUTOMOTIVE AEROSPACE (12%) (6%) END-CUSTOMER SEGMENTS % of group revenues 2018 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 5% . 22 SANDVIK: Interim Report on the fourth quarter 2018
Slide 23: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT +21% +187 +494 -107 4,700 439 4,062 EBIT Q4 17 ORGANIC CURRENCY METAL PRICE STRUCTURE EBIT Q4 18 GROWTH EFFECT SMT ADJUSTED EBIT MARGIN 17.0% 18.1% 23 SANDVIK: Interim Report on the fourth quarter 2018 Comments and numbers refer to continuing operations unle
Slide 24: Bridge Analysis by Business Area
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2017 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2018 MACHINING SOLUTIONS REVENUES 9 313 297 +474 +221 10 305 ADJUSTED EBIT 2 285 -51 +202 +39 2 475 ADJUSTED EBIT MARGIN 24.5% N/A - - 24.0% MINING AND ROCK TECHNOLOGY REVENUES 9 721 1 502 +412 +85 11 720 ADJUST
Slide 25: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 3 346 3 years Fin institutions, EIB, NIB 1 100 5 years 90% Swedish MTN European MTN 5 652 11 314 2 years 8 years Bank loans 142 1 year Share swap - - SHORT TERM US Private Placement 1 787 6 months Fin institutions,
Slide 26: 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 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 26 SANDVIK: Interim Report on the fourth quarter 2018 Comments and numbers refer to continuing operations unless othe
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