Slide 1: Interim Report Second Quarter 2016
INTERIM REPORT SECOND QUARTER 2016
Slide 2: Summary
SUMMARY MUTED MARKETS EARNINGS IN LINE WITH EXPECTATIONS PROGRESSION TOWARDS A LEANER ORGANIZATION – CONSOLIDATING TO THREE BUSINESS AREAS – IDENTIFYING NON-STRATEGIC OPERATIONS – DECENTRALIZATION OF DECISION MAKING – LAUNCH OF NEW FINANCIAL TARGETS – DIVESTITURE OF MINING SYSTEMS 2 SANDVIK: Interim
Slide 3: Back to the Future
BACK TO THE FUTURE BEFORE 2011 2011–2015 2016– CONGLOMERATE WITH DECENTRALIZED WITH CENTRALIZED AUTONOMOUS BA:S FULL OWNERSHIP IN PA:S GROUP GROUP BA1 BA2 BA3 BA1 BA2 BA GROUP BA5 BA3 BA4 PA PA PA 3
Slide 4: New Financial Targets
NEW FINANCIAL TARGETS AVERAGE ANNUAL RETURN ON NET DEBT/ DIVIDEND GROWTH CAPITAL EMPLOYED EQUITY RATIO PAYOUT RATIO OLD 8%INCLUDING M&A 25% OVER A BUSINESS CYCLE <0.8 EXCLUDING MAJOR ACQUISITIONS 50% OF EARNINGS PER SHARE FROM BUSINESS CYCLE ANNUAL TO SHORT-TERM ABSOLUTE EBIT ROCE NET DEBT/ DIVIDEND
Slide 5: 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% -1% NORTH AMERICA 21% -10% ASIA 20% +5% AFRICA/MIDDLE EAST 10% -20% SOUTH AMERICA 6% -3% AUSTRALIA 4% -11% 5 SANDVIK: Inter
Slide 6: Order Intake and Revenues
ORDER INTAKE REVENUES EUROPE AND ASIA LARGELY STABLE, WHILE NORTH CHALLENGING MARKETS BUT POSITIVE BOOK-TO-BILL AMERICA SOMEWHAT SOFT IN THREE OUT OF FIVE BUSINESS AREAS REPORTED P/V REPORTED P/V 19 869 -4% 20 321 -4% MSEK MSEK 25 000 90 000 25 000 90 000 20 000 85 000 20 000 85 000 15 000 80 000 15
Slide 7: EBIT Development
EBIT DEVELOPMENT MSEK -9% 3 500 16% REPORTED EBIT IMPACTED BY 3 000 14% 2 500 12% 2 705 • NEGATIVE REVENUE 2 000 10% MSEK GROWH 1 500 8% • CURRENCY HEADWIND 6% EBIT % • SAVINGS 1 000 500 4% 2% 13.3% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 EBIT* EBIT%* *Adjusted for items a
Slide 8: Sandvik Machining Solutions
SHARE OF GROUP TOTAL INVOICING 2015 38% SANDVIK MACHINING SOLUTIONS MSEK Q2 2015 Q2 2016 CHANGE OVERALL STABLE MARKET CONDITIONS ORDER INTAKE 8 355 8 053 +0%* − EU stable; East outperformed West REVENUES 8 339 8 001 - 0%* − NA challenging across most segments ADJ. OP. PROFIT 1 701 1 744 +3% − Asia s
Slide 9: Sandvik Mining
SHARE OF GROUP’S TOTAL INVOICING 2015 26% SANDVIK MINING MSEK Q2 2015 Q2 2016 CHANGE POSITIVE BOOK-TO-BILL ORDER INTAKE 5 840 5 205 -2%* − Equipment: slightly lower demand REVENUES 5 710 5 086 -1%* − Aftermarket: overall stable ADJ. OP. PROFIT 860 720 -16% % OF REVENUES 15.1% 14.2% *At fixed exchang
Slide 10: Sandvik Materials Technology
SHARE OF GROUP’S TOTAL INVOICING 2015 16% SANDVIK MATERIALS TECHNOLOGY Q2 2015 Q2 2016 CHANGE CHALLENGING MARKETS MSEK 3 054 − Price pressure for core- and standard ORDER INTAKE 2 753 -8%* tubular products remained, consequence of REVENUES 3 639 3 389 -6%* weak energy demand ADJ. OP. PROFIT 286 297
Slide 11: Sandvik Construction and Sandvik Venture
SANDVIK CONSTRUCTION SANDVIK VENTURE − Muted market conditions, order intake -13% y/y − Order intake -10% y/y; weak demand (-6% adjusted for larger orders) particularly in oil and gas − Earnings hampered by under-absorption, − Positive book-to-bill ~1.1 negative mix within aftermarket but also costs
Slide 12: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK P|
Slide 13: Financial Summary
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY ORGANIC: CURRENCY: -4 -5 -4 -5 STRUCTURE: +0 +0 TOTAL -9 -8 MSEK Q2 2015 Q2 2016 CHANGE % ORDER INTAKE 21 766 19 869 -4* REVENUES 22 200 20 321 -4* OPERATING PROFIT 2 977 2 705 -9 % OF REVENUES 13.4 13.3 ADJ. OPERATING PROFIT 2 977 2 705 -9 % OF REVE
Slide 14: Profitability Development
PROFITABILITY DEVELOPMENT 2,977 -186 +214 -391 2,705 +2 +89 EBIT Q215 ORGANIC ANNOUNCED CURRENCY METAL PRICE STRUCTURE EBIT Q216 GROWTH SAVINGS PROGRAMS EFFECT SMT ADJUSTED MARGIN 13.4% 13.3% 14 SANDVIK: Interim Report on the second quarter 2016 Comments and numbers refer to continuing operations un
Slide 15: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q2 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2016 REVENUES 22 200 -637 -1 065 -177 20 321 EBIT 2 977 28 -391 91 2 705 EBIT MARGIN 13.4% n/a - - 13.3% MARGIN ACCRETION/ +0.5% -1.1% +0.5% DILUTION * Includes metal price effects within Sandvik M
Slide 16: 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% TARGET 25% 20 000 20% 15% 2013 2014 2015 2016 2013 2014 2015 2016 NWC Sandvik Machining Solutions Sandvik Mining Net working capital / revenues (incl Mining Systems) Sandvik Materials Technology Sandv
Slide 17: Cash Flow
CASH FLOW MSEK 4 500 16 000 4 000 14 000 MSEK Q2 2015 Q2 2016 Δ% 3 500 EBITDA + non cash 3 849 3 441 -11 12 000 3 000 NWC change -33 -413 N/M 10 000 2 500 Capex** -1 074 -956 11 8 000 2 000 Cash Flow* 2 742 2 072 -24 6 000 1 500 4 000 *Cash flow before acquisitions, financial items and taxes 1 000 *
Slide 18: Financial Net Debt
FINANCIAL NET DEBT MSEK 45 000 1,4 40 000 1,2 35 000 30 000 1,0 • Net gearing ~1.0 25 000 0,8 20 000 0,6 • Increase due to dividend Q2 15 000 0,4 10 000 0,2 5 000 0 0,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 Net debt incl. pension Net gearing incl. net pension liabilities 18 S
Slide 19: Outcome and Guidance
OUTCOME AND GUIDANCE Q2 2016 Currency effect (MSEK): -391 (-500) Metal price effect (MSEK): +9 (-50) Q3 2016 Currency effect (MSEK): -100 Metal price effect (MSEK): +30 FULL YEAR 2016 - UNCHANGED Capex (BSEK): <4.1 Net financial items (BSEK): -1.7 to -1.9 Tax rate (%): 26-28 19 SANDVIK: Interim Repo
Slide 20: Brexit
BREXIT • Revenues 3,800 MSEK, 4th largest market • Net assets 3,700 MSEK • 11 production sites and 8 sales units • 1,400 employees • Currency flows match through imports and exports • Conclusion: no immediate currency impact on flows but still an important market 20 SANDVIK: Interim Report on the se
Slide 21: Looking Forward
LOOKING FORWARD STABILITY PROFITABILITY CREATE A STABLE IMPROVE PLATFORM PERFORMANCE CONTINUOUS IMPROVEMENTS GROWTH GENERATE GROWTH
Slide 22: Back-Up Slides
BACK-UP SLIDES SANDVIK P|
Slide 23: 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) 23 SANDVIK: Interim Report on the second quarter 2016 Comments and numbers refer to continuing operations unless otherwise stat
Slide 24: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q2 2016 MACHINING SOLUTIONS REVENUES 8 339 -32 -324 18 8 001 EBIT 1 701 170 -127 - 1 744 EBIT MARGIN 20.4% N/A - - 21.8% MINING REVENUES 5 710 -83 -541 - 5 086 EBIT 860 54 -194 - 720 EBIT MARGIN 15.1% N/A - - 14.2%
Slide 25: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q2 2015 PRODUCTIVITY CURRENCY ONE-OFFS Q2 2016 CONSTRUCTION REVENUES 2 283 -116 -97 - 2 070 EBIT 151 -88 -15 - 48 EBIT MARGIN 6.6% -76% - - 2.3% VENTURE REVENUES 2 226 -418 -56 +16** 1 768 EBIT 210 -120 +20 +2** 112 EBIT MARGIN 9.5% -29% - - 6.3% **SGL T
Slide 26: Creating a Leaner Company
CREATING A LEANER COMPANY SAVINGS ANNUAL RUN-RATE (MSEK) VS. LAST YEAR AND TOTAL TARGET TOTAL 2.1 BSEK SANDVIK SANDVIK SANDVIK GROUP ANNUAL SANDVIK SANDVIK MACHINING MATERIALS CONSTRUCTION ACTIVITIES RUN-RATE VS. MINING VENTURE SOLUTIONS TECHNOLOGY LAST YEAR SAVINGS ANNUAL RUN-RATE SUPPLY CHAIN OPTI
Slide 27: 16 Production Units Closed End of Q2
16 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 (5 UNITS CLOSED) - TARGET SAVINGS 320 MSEK at year end 2016 THIRD PHASE -
Slide 28: Sandvik Materials Technology
SANDVIK MATERIALS TECHNOLOGY TOUGH MARKETS • Persistently weak demand in oil and gas • Price pressure for core- and standard tubular products remain LARGER NUCLEAR ORDER ~200MSEK • More than off-set re-scheduled orders EBIT 297 MSEK, 8.8% • Excluding metal price effect 8.5% negatively effected by pr
Slide 29: Sandvik Materials Technology
SANDVIK MATERIALS TECHNOLOGY ORDER INTAKE REVENUES MSEK 2,753 3,389 4 000 40% 3 000 30% MSEK MSEK 2 000 20% EBIT ROCE 1 000 10% 297 1.1% 0 2013 2014 2015 2016 0% MSEK -1 000 -10% Revenues Excluding metal price effects 288 MSEK, 8.5 % -2 000 EBIT margin -20% EBIT margin, excl metal price effect and n
Slide 30: Sandvik Construction
SANDVIK CONSTRUCTION MUTED MARKET CONDITIONS • Crushing & screening particularly weak • EU and NA holding up better SEVERAL NEGATIVE ITEMS WEIGHTED ON EARNINGS • EBIT 48 MSEK, 2.3% • Under-absorption for crushers and negative mix effect within aftermarket but also additional charges for termination
Slide 31: Sandvik Construction
SANDVIK CONSTRUCTION ORDER INTAKE REVENUES MSEK 1,951 2,070 2 500 25% 2 000 20% MSEK MSEK 1 500 15% 1 000 10% 500 5% EBIT ROCE 0 0% 48 2.0% -500 2013 2014 2015 2016 -5% MSEK -1 000 -10% -1 500 -15% Revenues EBIT margin ROCE 12 months 31 SANDVIK: Interim Report on the second quarter 2016 Comments and
Slide 32: Sandvik Venture
SANDVIK VENTURE POSITIVE BOOK-TO-BILL ~1.1 • Persistently weak demand in oil and gas • Positive book-to-bill supported by solid order intake in Process Systems for industrial processing in Europe UNDERABSORPTION IMPACT EARNINGS • EBIT 112 MSEK, 6.3% • Price pressure in Wolfram and Drilling and Compl
Slide 33: Sandvik Venture
SANDVIK VENTURE ORDER INTAKE REVENUES MSEK 1,901 1,768 2 500 2 000 25% 20% MSEK MSEK 1 500 15% 1 000 10% EBIT ROCE 112 2.5% 500 0 5% 0% MSEK 2013 2014 2015 2016 -500 -5% Revenues EBIT margin ROCE 12 months 33 SANDVIK: Interim Report on the second quarter 2016 Comments and numbers refer to continuing
Slide 34: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 5,998 4 years Fin institutions, EIB, NIB 2,019 7 years 88% Swedish MTN European MTN 8,025 10,336 4 years 10 years Bank loans 3,182 3 years Share swap - - SHORT TERM US Private Placement 645 12 months Fin institutio
Slide 35: 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 6 Months 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 35 SANDVIK: Interim Report on the second quarter 2016 Comments and numbers refer to continuing operations unless otherwise stated
Slide 36: Guidance
GUIDANCE CAPEX Estimated at below 4.1 BSEK for 2016 CURRENCY Given currency rates at end of June 2016 the effect on operating profit from transaction and EFFECTS translation would be -100 MSEK for Q3 2016 METAL PRICE Given currency rates, stock levels and metal prices at the end of June 2016, it is
Slide 37: 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