Slide 1: Interim Report Fourth Quarter 2014
INTERIM REPORT JANUARY 29 FOURTH QUARTER 2014
Slide 2: Full Year 2014
FULL YEAR 2014 ACTIVE PORTFOLIO MANAGEMENT YIELD HIGHER • Acquisition of Varel International Energy Services RETURNS • Divestments of Sandvik Material Technologies distribution business in AUS/NZ and Power Spring business in North America PROGRESS ON SUPPLY CHAIN OPTIMIZATION REDUCE • 11 site closur
Slide 3: Summary Q4 2014
SUMMARY Q4 2014 MIXED DEMAND PATTERN • Strong development in North America and stable in Asia and Europe • Continued low order intake in Mining Systems • Demand in the energy segment impacted by lower oil price STRONG CASH-FLOW • Cash-flow from operating activities 4.1 BSEK • Inventory reductions •
Slide 4: Invoicing by Markets and Segments
INVOICING BY MARKETS AND SEGMENTS MARKETS, SHARE OF GROUP TOTAL CUSTOMER SEGMENTS EUROPE ASIA Consumer related Invoicing growth vs Q4 2013 Other 38% 19% Aerospace > +5% -5 to +5% +0%* -7%* Energy < -5% NORTH AMERICA AUSTRALIA Mining 20% 5% +5%* -14%* Automotive AFRICA SOUTH AMERICA 10% 8% Constructi
Slide 5: Order Intake 21,286 MSEK, Invoicing 23,394 MSEK
ORDER INTAKE INVOICING 21,286 MSEK 23,394 MSEK CHANGE P/V -6% CHANGE P/V -1% 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 2007 2008 2009 2010 2011 201
Slide 6: EBIT 2,623 MSEK and Cash Flow
EBIT 2,623 MSEK CASH FLOW MARGIN 11.2% CASH FLOW FROM OPERATIONS 4 104 MSEK MSEK MSEK 5 000 40% 5 000 350% 300% 4 000 4 000 30% 250% 3 000 3 000 20% 200% 2 000 2 000 150% 10% 100% 1 000 1 000 50% 0% 0 2007 2008 2009 2010 2011 2012 2013 2014 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -10% -1 000 -2
Slide 7: Financial Targets
FINANCIAL TARGETS CURRENT TARGET MANAGEMENT FOCUS • Product launches through focused R&D GROWTH 7%* 8% • Increase exposure towards high growth markets and segments • Adjust geographic footprint • Reduce Net Working Capital ROCE 13.4% 25% • Strict capital allocation (investments) • Restore earnings i
Slide 8: Mats Backman, CFO
MATS BACKMAN CFO
Slide 9: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT PRODUCTION UNITS Reduce number of production units from 150 to 125 by 2017 150 Initiated closures Initial phase launched in Q4 2013 • Closure of 11 units 125 • Annual savings of 800 MSEK at end 2015 • Total restructuring cost 900 MSEK (Q4 2013) • Personnel net, about -750
Slide 10: Restructuring Our Footprint: Planned Completion
RESTRUCTURING OUR FOOTPRINT FIRST PHASE - PLANNED TIME OF COMPLETION FOR INITIATED CLOSURES 2014 Q1 2015 Q2-Q4 2015 TOTAL SANDVIK MINING 2 1 2 5 SANDVIK MACHINING 2 - 2 4 SOLUTIONS SANDVIK CONSTRUCTION 1 1 - 2 GROUP TOTAL 5 2 4 11 9 Sandvik Interim Report on the fourth quarter 2014
Slide 11: Restructuring Our Footprint: Savings Profile
RESTRUCTURING OUR FOOTPRINT FIRST PHASE – SAVINGS PROFILE (MSEK) SAVINGS PROFILE ANNUAL RUN-RATE SANDVIK SANDVIK SANDVIK MINING MACHINING SOLUTIONS CONSTRUCTION 2014 60 120 80 260 2015 440 80 20 540 TOTAL 500 200 100 800 MSEK 10 Sandvik Interim Report on the fourth quarter 2014
Slide 12: 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 Net working capital Net working capital / Invoiced sales Inventory / Invoiced sales 11 Sandvik Interim Report on the fourth quarter 2014
Slide 13: Net Working Capital by Business Area
NET WORKING CAPITAL % OF INVOICING BY BUSINESS AREA 60% 50% 40% 30% TARGET 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 Sandvik Mining Sandvik Machining Solutions Sandvik Materials Technology Sandvik Construction 12 Sandvik Interim Report on the fourth quarter 2014
Slide 14: Net Debt
NET DEBT MSEK Net debt/Equity 36 000 1,2 30 000 1,0 NET DEBT TO EQUITY 0,75 24 000 0,8 STRONG CASH FLOW 18 000 0,6 12 000 0,4 INVENTORY REDUCTIONS 6 000 0,2 0 0,0 2012 2013 2014 Net debt Net debt/Equity 13 Sandvik Interim Report on the fourth quarter 2014
Slide 15: Summary Q4 2014
SUMMARY Q4 2014 EARNINGS GROWTH STRONG CASH FLOW NET DEBT TO EQUITY 0.75 GOOD PROGRESS ON SUPPLY CHAIN OPTIMIZATION PROGRAM MIXED DEMAND 14 Sandvik Interim Report on the fourth quarter 2014
Slide 16: Our Way Forward
OUR WAY FORWARD KEY PRIORITIES BY BUSINESS AREA SANDVIK SANDVIK SANDVIK SANDVIK SANDVIK MACHINING MATERIALS MINING CONSTRUCTION VENTURE SOLUTIONS TECHNOLOGY • Consolidate footprint: • Leverage from Multi-brand • Accelerate growth of • Sales efficiency and • Accelerate growth of Manufacturing model,
Slide 17: Looking Forward into 2015
LOOKING FORWARD INTO 2015 >15,000 NEW PRODUCT LAUNCHES in Sandvik Machining Solutions GROW THE AFTERMARKET BUSINESS in Sandvik Mining and Sandvik Construction ACTIVE PORTFOLIO MANAGEMENT across the group 16 Sandvik Interim Report on the fourth quarter 2014
Slide 18: Back-up Slides
BACK-UP SLIDES
Slide 19: Oil & Gas Exposure
OIL & GAS EXPOSURE ~1/20 REVENUE FROM O&G IN 2014 ~7.5 BN. SEK 8% ~1/4 ~1/3 92% OTHER O&G Venture Sandvik Materials Technology Sandvik Machining Solutions • Limited exposure to O&G sector ~8% • Exposure over 3 business areas • O&G/Energy is a long-term commitment for Sandvik • Highest in Venture wit
Slide 20: Diverse Exposure within Oil and Gas
DIVERSE EXPOSURE WITHIN OIL AND GAS UPSTREAM DOWNSTREAM Sandvik Materials Technology • Complex off-shore projects with long EXPLORATION PRODUCTION planning horizon and long pay-off times • Investment decisions based on long- CAPEX OPEX term oil price Sandvik Venture/Varel ON-SHORE OFF-SHORE • Produc
Slide 21: Bridge Analysis Sandvik Group
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q4 2013 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2014 Invoicing 21,770 -360 1,440 550 23,394 EBIT 590 -140 270 1,900 2,623 EBIT margin 3% -39% - - 11% * Includes metal price effects 20 Sandvik Interim Report on the fourth quarter 2014
Slide 22: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2013 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2014 SANDVIK MINING Invoicing 7,334 -660 360 - 7,039 EBIT -480 -150 20 1250 644 EBIT margin -7% -23% - - 9% SANDVIK MACHINING SOLUTIONS Invoicing 7,363 220 540 - 8,112 EBIT 1,084 60 130 350 1,622 EBIT margin 15%
Slide 23: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2013 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2014 SANDVIK CONSTRUCTION Invoicing 2,174 -160 160 - 2,169 EBIT -223 10 15 200 4 EBIT margin -10% N/A - - 0% SANDVIK VENTURE Invoicing 1,538 -80 190 650 2,301 EBIT 309 -15 15 25 335 EBIT margin 20% -19% - - 15%
Slide 24: Sandvik Mining Q4 2014
SANDVIK MINING Q4 2014 STABLE DEMAND • Stable demand for Equipment and Aftermarket • Continued low order intake for Mining Systems EBIT 644 MSEK, 9.2% • Currency effects +20 MSEK • Low sales and production rates • Continued net working capital reduction SUPPLY CHAIN OPTIMIZATION • Closure of one uni
Slide 25: Sandvik Mining Q4 2014
SANDVIK MINING Q4 2014 MSEK Order intake 5,695 MSEK 10 000 50% Invoicing 7,039 MSEK 8 000 40% 6 000 30% EBIT 644 MSEK 4 000 20% ROCE 16.7% 2 000 10% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -2 000 -10% Invoicing EBIT margin ROCE 12 months 24 Sandvik Interim Report on the fourth quarter 2014
Slide 26: Sandvik Machining Solutions Q4 2014
SANDVIK MACHINING SOLUTIONS Q4 2014 RECORD HIGH INVOICING 8,129 MSEK UNCHANGED MARKET TREND • Strong development in the aerospace industry • Continued strong development in North America • Asia and Europe stable sequentially EBIT 1,622 MSEK, 20.0% • Currency effects +130 MSEK • Strong cashflow PROGR
Slide 27: Sandvik Machining Solutions Q4 2014
SANDVIK MACHINING SOLUTIONS Q4 2014 MSEK Order intake 8,129 MSEK 10 000 50% Invoicing 8,122 MSEK 8 000 40% EBIT 1,622 MSEK 6 000 30% 4 000 20% ROCE 29.5% 2 000 10% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -2 000 -10% Invoicing EBIT margin ROCE 12 months 26 Sandvik Interim Report on the fourth qu
Slide 28: Sandvik Materials Technology Q4 2014
SANDVIK MATERIALS TECHNOLOGY Q4 2014 MIXED DEMAND • Increased uncertainty in oil and gas • Major order from the nuclear segment EBIT 330 MSEK, 8.8% • Currency effects +90 MSEK • Metalprice effect -71 MSEK • Net EBIT effect from divestments +71 MSEK NET WORKING CAPITAL REDUCTIONS DRIVE STRONG CASH-FL
Slide 29: Sandvik Materials Technology Q4 2014
SANDVIK MATERIALS TECHNOLOGY Q4 2014 MSEK Order intake 3,296 MSEK 6 000 30% 5 000 Invoicing 3,758 MSEK 20% 4 000 EBIT 330 MSEK 3 000 10% Adjusted for metal price effects and 2 000 nonrecurring items, 330 MSEK, 8.8 % 0% 1 000 ROCE 13.7% 0 2007 2008 2009 2010 2011 2012 2013 2014 -10% -1 000 -20% Invoi
Slide 30: Sandvik Construction Q4 2014
SANDVIK CONSTRUCTION Q4 2014 CONTINUED CHALLENGING MARKET CONDITIONS • Slightly higher activity in North America EBIT 4 MSEK, 0.2% • Low sales and production rates • Efficiency measures ongoing STRONG CASH FLOW • Inventory reductions 29 Sandvik Interim Report on the fourth quarter 2014
Slide 31: Sandvik Construction Q4 2014
SANDVIK CONSTRUCTION Q4 2014 MSEK Order intake 2,038 MSEK 4 000 40% Invoicing 2,169 MSEK 3 000 30% 2 000 20% EBIT 4 MSEK 1 000 10% ROCE 0.8% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -1 000 -10% -2 000 Invoicing EBIT margin ROCE 12 months -20% 30 Sandvik Interim Report on the fourth quarter 2014
Slide 32: Sandvik Venture Q4 2014
SANDVIK VENTURE Q4 2014 STABLE DEMAND ACROSS SEGMENTS SLIGHT ADVERCE IMPACT ON DEMAND FROM LOWER OIL PRICE EBIT 335 MSEK (14.6%) • 310 MSEK (18.7%) excluding Varel STRONG CASH FLOW 31 Sandvik Interim Report on the fourth quarter 2014
Slide 33: Sandvik Venture Q4 2014
SANDVIK VENTURE Q4 2014 MSEK Order intake 2,123 MSEK 3 000 40% 2 000 30% Invoicing 2,301 MSEK 20% 1 000 EBIT 335 MSEK 0 10% 2007 2008 2009 2010 2011 2012 2013 2014 0% ROCE 7.4% -1 000 -10% -2 000 -20% -3 000 -30% -4 000 -40% -5 000 -50% Invoicing EBIT margin ROCE 12 months 32 Sandvik Interim Report
Slide 34: Loan and Duration Profile
LOAN AND DURATION PROFILE LONG TERM 93% AMOUNT MSEK AVERAGE DURATION US Private Placement 6,328 5 years Fin institutions, EIB, NIB 2,380 8 years Swedish MTN 11,043 4 years European MTN 10,437 11 years Bank loans 2,633 4 years Share swap 1,579 1 years SHORT TERM 7% Commercial paper 692 4 months Fin i
Slide 35: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 8 000 Loan Cash position 6 000 4 000 2 000 0 -2 000 -4 000 -6 000 6 Q3-Q4 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 Months 2015 34 Sandvik Interim Report on the fourth quarter 2014
Slide 36: Acquisition of Varel
ACQUISITION OF VAREL ACQUISITION PRICE AND GOODWILL PURCHASE PRICE ALLOCATION Purchase price 5.1 BSEK Assigned to tangible and intangible assets 1.6 BSEK • Consideration for shares 2.8 BSEK • Amortized over 10 years • Loan settlement 2.3 BSEK • ~40 MSEK per quarter Assigned to inventories 170 MSEK G
Slide 37: Guidance
GUIDANCE CAPEX Estimated at below 5bn SEK for 2015. CURRENCY EFFECTS Given currency rates in mid-January the effect on EBIT would be +600 MSEK for Q1 2015. Given currency rates, stock levels and metal prices at the end of December, it is METAL PRICE EFFECTS estimated that effects on operating profit
Slide 38: 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