Slide 1: Interim Report Fourth Quarter 2016
INTERIM REPORT FOURTH QUARTER 2016 1 SANDVIK: Interim Report on the third quarter 2015
Slide 2: Summary
SUMMARY STABILIZING MARKETS STRONG ORDER INTAKE +8% SUPPORTED BY ALL BUSINESS AREAS EARNINGS GROWTH AND MARGIN IMPROVEMENT ALSO EXCLUDING POSITIVE IMPACT FROM FX BALANCE SHEET STRENGTHENED INCREASED DIVIDEND MINING SYSTEMS PROCESS CONTINUES 2 SANDVIK: Interim Report on the fourth quarter 2016 Commen
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 FY16 order intake demand trend EUROPE 40% +1% NORTH AMERICA 20% +15% ASIA 20% +27% AFRICA/MIDDLE EAST 9% +15% SOUTH AMERICA 5% -25% AUSTRALIA 6% -10% 3 SANDVIK: Inte
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES GROWTH IN ALL BUSINESS AREAS AND MAJOR REGIONS STABLE GROWTH SUPPORTED BY RECENT ORDER INTAKE REPORTED P/V REPORTED P/V 21 993 8% 21 817 0% 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 2
Slide 5: EBIT Development
EBIT DEVELOPMENT MSEK +42% 4 000 20% REPORTED • 24% EBIT GROWTH 3 000 15% 3 277 EXCLUDING FX 2 000 10% MSEK • PAY-OFF FROM EBIT % 1 000 5% SAVINGS ACTIONS 0 0% 15.0 SUPPLY CHAIN PROGRAMME ADDITIONAL MEASURES Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 EBIT reported Items affe
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2016 40% SANDVIK MACHINING SOLUTIONS MSEK Q4 2015 Q4 2016 CHANGE IMPROVING MARKET CONDITIONS ORDER INTAKE 8 116 8 688 +3%* − EU stable REVENUES 8 253 8 734 +1%* − NA slight decline in most segments; aerospace stable ADJ. OP. PROFIT 1 647 1 883 +14% − Asia, strong growth across most
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2016 38% SANDVIK MINING AND ROCK TECHNOLOGY MSEK Q4 2015 Q4 2016 CHANGE SIGNIFICANT GROWTH IN ORDER INTAKE ORDER INTAKE 7 322 9 145 +19%* − Order growth driven primarily by equipment 8 073 REVENUES 8 418 -1%* replacements 743 ADJ. OP. PROFIT 986 +33% − Large order in stationary C&S
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2016 16% SANDVIK MATERIALS TECHNOLOGY MSEK Q4 2015 Q4 2016 CHANGE STABLE OVERALL MARKETS ORDER INTAKE 2 999 2 943 -4%* − Initial signs of improved demand for early-cycle 3 398 REVENUES 3 366 -4%* products 118 ADJ. OP. PROFIT 404 N/M − Energy segment stabilizing % OF REVENUES¹ 3.5%
Slide 9: Dividend Proposal
DIVIDEND PROPOSAL 2.75 SEK PER SHARE − 50% of EPS for continuing operations − 10% higher than previous year − In line with 50% policy BALANCE SHEET STRENGTHENED STRONG CASH FLOW FUNDS DIVIDEND SAFEGUARD CREDIT RATING 9 SANDVIK: Interim Report on the fourth quarter 2016 Comments and numbers refer to
Slide 10: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK P|
Slide 11: Financial Summary Q4
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q4 ORGANIC: CURRENCY: +8 +5 -0 +4 STRUCTURE: 0 0 TOTAL +13 +4 MSEK Q4 2015 Q4 2016 CHANGE % ORDER INTAKE 19 531 21 993 +8¹ REVENUES 20 940 21 817 -0¹ OPERATING PROFIT 770 3 277 N/M % OF REVENUES 3.7 15.0 ADJ. OPERATING PROFIT 2 315 3 277 +42 % OF REV
Slide 12: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q4 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2016 REVENUES 20 940 -106 929 54 21 817 ADJUSTED EBIT 2 315 319 416 227 3 277 EBIT MARGIN 11.1% n/a - - 15.0% MARGIN ACCRETION / DILUTION +1.6% +1.3% +1.0% * Includes metal price effects within San
Slide 13: Net Working Capital / Relative NWC by BA
NET WORKING CAPITAL RELATIVE NWC BY BA MSEK 32 500 45% 45% 30 000 40% 40% 27 500 35% 35% 25 000 30% 30% 22 500 25% 25% 20 000 20% 20% 2013 2014 2015 2016 2013 2014 2015 2016 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing operations) Sandvik Materials Technology Other Op
Slide 14: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 5 000 16 000 4 500 14 000 4 000 MSEK Q4 2015 Q4 2016 Δ% 12 000 3 500 EBITDA + non cash 3 059 4 386 +43 10 000 3 000 NWC change +1539 +968 -37 2 500 8 000 Capex* -1 303 -1 254 +4 2 000 6 000 1 500 FOCF** 3 295 4 100 +24 4 000 1 000 2 000 *Including investments and dispos
Slide 15: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 45 000 1,4 40 000 1,2 35 000 30 000 1,0 • NET DEBT LOWERED BY -16% Y/Y 25 000 0,8 20 000 0,6 • NET GEARING 0.73 15 000 – IN LINE WITH TARGET OF <0.8 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 Q3 Q4 2013 2014 2015 2016 Net debt excl. pension N
Slide 16: Financial Summary Full Year 2016
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY FULL YEAR 2016 ORGANIC: CURRENCY: -1 -1 -4 -1 STRUCTURE: 0 0 TOTAL -2 -5 MSEK FY 2015 FY 2016 CHANGE % ORDER INTAKE 83 597 81 861 -1¹ REVENUES 85 845 81 553 -4¹ OPERATING PROFIT 7 271 11 018 +52 % OF REVENUES 8.5 13.5 ADJ. OPERATING PROFIT 10 593 11
Slide 17: Targets - Delivering According to Plan
TARGETS - DELIVERING ACCORDING TO PLAN ABSOLUTE ROCE NET DEBT/ DIVIDEND EBIT GROWTH IMPROVEMENT EQUITY RATIO PAYOUT RATIO ≥7% ≥3%PTS <0.8 50% CONTINUING OPERATIONS BSEK % % 100% +3.1% +1ppt 1.4 1.2 50% TARGET 1.0 0% 0.8 2014 2015 2016 10.4 10.7 ~14% ~15% TARGET 0.73 GROUP TOTAL 0.6 150% 0.4
Slide 18: Outcome and Guidance
OUTCOME AND GUIDANCE Q4 2016 Currency effect (MSEK): +416 (+200) Metal price effect (MSEK): +109 (+50) Q1 2017 Currency effect (MSEK): +400* Metal price effect (MSEK): +0** FULL YEAR 2017 Capex (BSEK): ~3.9 (3 673) Net financial items (BSEK): -1.4 to -1.5 (1 652) Tax rate (%): 26-28 (27) *Based on c
Slide 19: Summary
SUMMARY STRONG FINISH TO THE YEAR STABILITY PROFITABILITY DELIVERING ACCORDING TO PLAN CREATE A STABLE PLATFORM IMPROVE PERFORMANCE 2016 WAS AN EVENTFUL YEAR – STRUCTURAL IMPROVEMENTS – INCREASED EARNINGS DESPITE NEGATIVE GROWTH GROWTH GENERATE – STRONGER BALANCE SHEET GROWTH – INCREASED DIVIDEND
Slide 20: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 21: Profitability Development
PROFITABILITY DEVELOPMENT 3,277 0 +227 +416 +183 2,315 +136 EBIT Q415 ORGANIC ANNOUNCED CURRENCY METAL PRICE STRUCTURE EBIT Q416 GROWTH SAVINGS EFFECT SMT PROGRAMS ADJUSTED MARGIN 11.1% 15.0% 21 SANDVIK: Interim Report on the fourth quarter 2016 Comments and numbers refer to continuing operations un
Slide 22: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2015 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2016 MACHINING SOLUTIONS REVENUES 8 253 123 349 9 8 734 EBIT 1 017 54 182 630 1 883 EBIT MARGIN 12.3% +44% - - 21.6% MINING AND ROCK TECHNOLOGY REVENUES 8 073 -67 412 - 8 418 EBIT 464 -10 253 279 986 EBIT MARGIN
Slide 23: 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 222 120 4
Slide 24: 18 Production Units Closed End of Q4
18 PRODUCTION UNITS CLOSED END OF Q4 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 (6 UNITS CLOSED) - TARGET SAVINGS 320MSEK ACHIEVED at year end 2016 THIRD
Slide 25: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS IMPROVED DEMAND FOR PROCESS SYSTEMS • Increased demand in particular for chemical and food segments for Process Systems • Persistently weak demand for Hyperion EARNINGS SUPPORTED BY ADDITIONAL EFFICIENCY MEASURES • Adjusted EBIT 197 MSE
Slide 26: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS MSEK ORDER INTAKE REVENUES 2 000 25% 1,211 1,296 1 500 20% MSEK MSEK 15% 1 000 10% EBIT ROCE 500 5% 197 21.2% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 0% MSEK 2014 2015 2016 Revenues EBIT margin reported EBIT margin adjusted¹ ROCE %² ¹Adju
Slide 27: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 5,337 4 years Fin institutions, EIB, NIB 1,706 7 years 85% Swedish MTN European MTN 6,235 10,486 4 years 9 years Bank loans 2,974 2 years Share swap - - SHORT TERM US Private Placement 1,705 8 months Fin institutio
Slide 28: 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 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 28 SANDVIK: Interim Report on the fourth quarter 2016 Comments and numbers refer to continuing operations unless otherwise stated
Slide 29: Guidance
GUIDANCE CAPEX Estimated at about 3.9 BSEK for 2017 CURRENCY Given currency rates at end of January 2017 the effect on operating profit from transaction and EFFECTS translation would be +400 MSEK for Q1 2017 METAL PRICE Given currency rates, stock levels and metal prices at the end of December 2016,
Slide 30: 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