Slide 1: Interim Report First Quarter 2015
INTERIM REPORT APRIL 27 FIRST QUARTER 2015
Slide 2: Summary Q1 2015
SUMMARY Q1 2015 EARNINGS GROWTH AND MARGIN EXPANSION • Adjusted EBIT 2,934 MSEK, 12.6% • Currency effect +770 MSEK RECORD Q1 CASH FLOW • Continued inventory reductions STABLE DEMAND • Overall stable demand in Europe and Asia • Demand remained on a high level in North America • However with a sharp d
Slide 3: Invoicing by Markets
INVOICING BY MARKETS Demand trend compared with SALES Q1 2015 SHARE OF GROUP TOTAL preceding quarter. NORTH AMERICA EUROPE ASIA 21% 37% 19% SOUTH AMERICA AFRICA/MIDDLE EAST AUSTRALIA 8% 10% 5% 3 SANDVIK: Interim Report on the first quarter 2015
Slide 4: Invoicing by Segments
INVOICING BY SEGMENTS CUSTOMER SEGMENTS Consumer related Other Aerospace INVOICING GROWTH VS Q4 2013 > +5% Energy Mining –5 to +5% < –5% Demand trend Automotive compared with preceding quarter Construction Engineering 4 SANDVIK: Interim Report on the first quarter 2015
Slide 5: Order Intake and Invoicing
ORDER INTAKE INVOICING 23,167 MSEK 23,334 MSEK CHANGE P/V -11% CHANGE P/V -3% 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 20
Slide 6: EBIT and Cash Flow
EBIT 1,052 MSEK CASH FLOW ADJUSTED EBIT 2,934 MSEK, 12.6% CASH FLOW FROM OPERATIONS 2,431 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 201
Slide 7: Financial Targets
FINANCIAL TARGETS CURRENT TARGET MANAGEMENT FOCUS • Product launches through focused R&D GROWTH 12% 8%* • Increase exposure towards high growth markets and segments • Adjust geographic footprint • Reduce Net Working Capital ROCE 11.5% 25% • Strict capital allocation (investments) • Restore earnings
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 SANDVIK P|
Slide 10: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT SUPPLY CHAIN OPTIMIZATION PROGRAM FIRST PHASE 2 UNITS CLOSED IN Q1 (total 7) 150 FIRST PHASE -11 4 UNITS REMAINING in 2015 RUNRATE SAVINGS 360 MSEK SECOND PHASE -10 END OF Q1 out of 800 MSEK target at year end 2015 SECOND PHASE 125 3 UNITS INITIATED (7 Remaining) TARGET S
Slide 11: 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 11 SANDVIK: Interim Report on the first quarter 201
Slide 12: 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 12 SANDVIK: Interim Report on the first quarter 2015
Slide 13: Guidance
GUIDANCE POSITIVE CURRENCY EFFECT OF +770 MSEK IN Q1 • Guidance +600 MSEK based on currency rates mid-January • Difference primarily driven by further strengthening of USD, CNY and EUR versus SEK GUIDANCE Q2 2015 CURRENCY EFFECT: +900 MSEK METAL PRICE EFFECT: -150 MSEK FULL YEAR GUIDANCE 2015 CAPEX:
Slide 14: Looking Forward
LOOKING FORWARD >15,000 NEW PRODUCT GROW THE AFTERMARKET CREATING A LEANER LAUNCHES BUSINESS COMPANY Sandvik Machining Solutions Sandvik Mining Supply Chain Optimization Sandvik Construction 14 SANDVIK: Interim Report on the first quarter 2015
Slide 15: Summary Q1 2015
SUMMARY Q1 2015 EARNINGS GROWTH RECORD Q1 CASH FLOW GOOD PROGRESS ON SUPPLY CHAIN OPTIMIZATION PROGRAM OVERALL STABLE DEMAND 15 SANDVIK: Interim Report on the first quarter 2015
Slide 16: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 17: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q1 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q1 2015 INVOICING 20,783 -750 2,830 470 23,334 EBIT 2,478 -230 770 -1,970 1,052 EBIT MARGIN 12% -31% - - 5% * Includes metal price effects SANDVIK: Interim Report on the first quarter 2015 17
Slide 18: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q1 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q1 2015 MACHINING SOLUTIONS INVOICING 7,400 - 1,040 - 8,438 EBIT 1,480 -80 410 -680 1,129 EBIT MARGIN 20% N/A - - 13% MINING INVOICING 6,601 -570 830 - 6,863 EBIT 688 -130 240 -730 68 EBIT MARGIN 10% -23% - - 1% MA
Slide 19: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q1 2014 PRODUCTIVITY CURRENCY ONE-OFFS Q1 2015 CONSTRUCTION INVOICING 1,871 -20 290 - 2,144 EBIT -11 10 70 -160 -95 EBIT MARGIN -1% N/A - - -4% VENTURE INVOICING 1,362 -90 320 580 2,172 EBIT 233 -30 25 -40 192 EBIT MARGIN 17% -29% - - 9% * Includes metal
Slide 20: Sandvik Machining Solutions – Q1 2015
SANDVIK MACHINING SOLUTIONS – Q1 2015 RECORD HIGH INVOICING 8,438 MSEK STABLE MARKET CONDITIONS • Stable at a high level in North America • Asia and Europe stable sequentially MARGIN EXPANSION • Adjusted EBIT 1,809 MSEK, 21.4 % • Nonreccuring cost -680 MSEK • Currency effects +410 MSEK • Strong cash
Slide 21: Sandvik Machining Solutions – Q1 2015
SANDVIK MACHINING SOLUTIONS – Q1 2015 ORDER INTAKE INVOICING MSEK 10 000 50% 8,596 8,438 8 000 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 1,129 27.1% 2 000 0 10% 0% MSEK 2007 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted for nonrecurring items, 1,809 MSEK, 21.4 % -2 000 Invoicing EBIT margin ROC
Slide 22: Sandvik Mining – Q1 2015
SANDVIK MINING – Q1 2015 STABLE MARKET ACTIVITY • Stable demand for Equipment and Aftermarket • Continued low order intake for Mining Systems ADJUSTED EBIT 798 MSEK, 11.6% • Nonrecurring cost -730 MSEK • Currency effects +240 MSEK • Continued inventory reductions SUPPLY CHAIN OPTIMIZATION • Closure
Slide 23: Sandvik Mining – Q1 2015
SANDVIK MINING – Q1 2015 ORDER INTAKE INVOICING MSEK 6,203 6,863 10 000 8 000 50% 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 68 12.2 2 000 0 10% 0% MSEK 2007 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted for nonrecurring items, 798 MSEK, 11.6 % -2 000 -10% Invoicing EBIT margin ROCE 12 months 23
Slide 24: Sandvik Materials Technology – Q1 2015
SANDVIK MATERIALS TECHNOLOGY – Q1 2015 THREE LARGE ENERGY ORDERS MORE THAN OFF-SET CANCELLATION • Stable market conditions • Continued uncertainty in oil and gas ADJUSTED EBIT 365 MSEK, 9.8% • Nonreccuring cost -265 MSEK • Currency effects +70 MSEK • Metalprice effect -5 MSEK INVENTORY REDUCTION SUP
Slide 25: Sandvik Materials Technology – Q1 2015
SANDVIK MATERIALS TECHNOLOGY – Q1 2015 ORDER INTAKE INVOICING MSEK 3,725 3,712 6 000 30% 5 000 20% MSEK MSEK 4 000 3 000 10% 2 000 EBIT ROCE 1 000 0% 100 11.3% -1 000 0 2007 2008 2009 2010 2011 2012 2013 2014 -10% 2015 MSEK -2 000 -20% Invoicing Excluding metal price effects and nonrecurring items,
Slide 26: Sandvik Construction – Q1 2015
SANDVIK CONSTRUCTION – Q1 2015 POSITIVE BOOK-TO-BILL • Slightly higher activity in North America ADJUSTED EBIT 65 MSEK, 3.0% • Nonrecurring cost -160 MSEK • Currency effect +70 MSEK • Efficiency measures ongoing SUPPLY CHAIN OPTIMIZATION PROGRAM COMPLETED • Finalized closure of mobile crushing unit
Slide 27: Sandvik Construction – Q1 2015
SANDVIK CONSTRUCTION – Q1 2015 ORDER INTAKE INVOICING MSEK 2,376 2,144 4 000 40% 3 000 30% MSEK MSEK 2 000 20% 1 000 10% EBIT ROCE -95 -0.7% -1 000 0 2007 2008 2009 2010 2011 2012 2013 2014 0% 2015 -10% MSEK Adjusted for nonrecurring items, 65 MSEK, 3.0 % -2 000 -20% Invoicing EBIT margin ROCE 12 mo
Slide 28: Sandvik Venture – Q1 2015
SANDVIK VENTURE – Q1 2015 OVERALL STABLE MARKET CONDITIONS SHARP DECLINE IN NORTH AMERICAN ON SHORE OIL AND GAS DRILLING ACTIVITY • Additional mitigation actions ongoing ADJUSTED EBIT 202 MSEK, 9.3% • Nonrecurring cost -10 MSEK • Currency effect +25 MSEK 28 SANDVIK: Interim Report on the first quart
Slide 29: Sandvik Venture – Q1 2015
SANDVIK VENTURE – Q1 2015 ORDER INTAKE INVOICING MSEK 2,263 2,172 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% 192 7.1% -2 000 -20% -3 000 -30% MSEK -4 000 -40% Adjusted for nonrecurring items, 202 MSEK, 9.3 % -5 000 -50% Invoici
Slide 30: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 6,888 5 years Fin institutions, EIB, NIB 2,327 7 years 92% Swedish MTN European MTN 11,046 10,206 4 years 11 years Bank loans 2,840 4 years Share swap 1,503 1 years SHORT TERM Commercial paper 692 4 months Fin inst
Slide 31: 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 Months Q4 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 31 SANDVIK: Interim Report on the first quarter 2015
Slide 32: Creating a Leaner Company
CREATING A LEANER COMPANY SAVINGS PROFILE (MSEK) SANDVIK SANDVIK SANDVIK MATERIALS SANDVIK SAVINGS PROFILE MACHINING SOLUTIONS MINING TECHNOLOGY CONSTRUCTION ANNUAL RUN-RATE PHASE I TOTAL 200 500 - 100 800* YE 2015 PHASE II TOTAL 130 400 70 - 600 YE 2016 ADJ COST BASE 150 - 95 160 480** YE 2016 TOTA
Slide 33: Oil & Gas Exposure
OIL & GAS EXPOSURE REVENUE FROM O&G IN 2014 ~7.5 BN. SEK 8% O&G OTHER 92% • Limited exposure to O&G sector ~8% • O&G/Energy is a long-term commitment for Sandvik albeit short/mid-term variances in order intake • Exposure over 3 business areas ~1/20 • Highest in Venture with 1/3 towards oil and gas •
Slide 34: Diverse Exposure Within Oil and Gas
DIVERSE EXPOSURE WITHIN OIL AND GAS UPSTREAM DOWNSTREAM Sandvik Materials Technology • Complex off-shore projects with long planning horizon and long day-off times EXPLORATION PRODUCTION • Investment decisions based on long-term oil price Sandvik Venture/Varel CAPEX OPEX • Productivity enhancing pro
Slide 35: 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 Goodwill 2.5 BSEK Assigned to invent
Slide 36: Updated Guidance
UPDATED GUIDANCE CAPEX Estimated at below 5bn SEK for 2015. CURRENCY EFFECTS Given currency rates at end of March the effect on EBIT would be +900 MSEK for Q2 2015. Given currency rates, stock levels and metal prices at the end of March, it is estimated METAL PRICE EFFECTS that effects on operating
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