Slide 1: Interim Report Third Quarter 2019
INTERIM REPORT THIRD QUARTER 2019 1
Slide 2: Summary Q3
SUMMARY Q3 SLOWDOWN IN EARLY-CYCLE COMPENSATED FOR BY ROBUST ACTIVITY IN LATE-CYCLE SEGMENTS • ORDER INTAKE -1% • SMRT IN SOLID GROWTH +5% • MAJOR ORDERS IN SMT ~700 MSEK (~500 MSEK LAST YEAR) EARNINGS SUPPORTED BY FX TAILWIND • ADJUSTED EBIT MARGIN AT 18.3% EFFICIENCY MEASURES INITIATED – HIGHER AM
Slide 3: 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 (Q2/Q3) EUROPE 38% -10% NORTH AMERICA 21% +7% ASIA 20% -5% AFRICA/MIDDLE EAST 9% +33% SOUTH AMERICA 5% -0% AUSTRALIA 7% -1% 3 S
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES SLOWDOWN IN EARLY-CYCLE DEMAND SUPPORTED BY BACKLOG IN SMRT REPORTED P/V REPORTED P/V 24 992 -1% 25 163 -1% MSEK MSEK 30 000 110 000 30 000 110 000 25 000 100 000 25 000 100 000 20 000 90 000 20 000 90 000 15 000 80 000 15 000 80 000 2015 2016 2017 2018 2019 2015 2016 2017 2018
Slide 5: EBIT Development
EBIT DEVELOPMENT MSEK +1% 6 000 22% ADJUSTED EBIT • DECLINE OF -11% 5 000 19% 4 617 EXCLUDING FX, STRUCTURE AND METALS MSEK 4 000 16% ADJUSTED EBIT % • IMPACTED BY 3 000 13% 18.3 UNDERABSORPTION OF FIXED COSTS IN SMS 2 000 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2018 41% SANDVIK MACHINING Q3 2018 Q3 2019 CHANGE SOLUTIONS MSEK ORDER INTAKE 10 047 9 609 -9%* WEAK DEMAND IN IMPORTANT SEGMENTS REVENUES 10 100 9 927 -7%* − Decline in large segments; general engineering and ADJ. OP PROFIT 2 543 2 173 -15% automotive % OF REVENUES 25.2% 21.9% − C
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2018 44% SANDVIK MINING AND Q3 2018 Q3 2019 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 10 468 11 516 +5%* REVENUES 10 838 11 754 +3%* DEMAND ON HIGH LEVEL ADJ. OP PROFIT 1 966 2 329 +18% − Mid-single digit growth for equipment on easy % OF REVENUES 18.1% 19.8% comparables *At fixed e
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2018 15% SANDVIK MATERIALS MSEK Q3 2018 Q3 2019 CHANGE TECHNOLOGY ORDER INTAKE 3 677 3 867 +4%* REVENUES 3 344 3 482 +3%* SLOWDOWN IN EARLY-CYCLE BUSINESS ADJ. OP. PROFIT 230 236 +2% % OF REVENUES 6.9% 6.8% − Slowing demand across regions and segments for UNDERLYING MARGIN³ 5.6% 5.
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO 9
Slide 10: Financial Summary Q3 and 9M
GROWTH Q319, % ORDER REVENUES INTAKE ORGANIC: -1 -1 FINANCIAL SUMMARY Q3 AND 9M CURRENCY: STRUCTURE: +4 +0 +4 +0 TOTAL +3 +4 MSEK Q3 2018 Q3 2019 CHANGE Q1-3 2018 Q1-3 2019 CHANGE % % ORDER INTAKE 24 192 24 992 -1¹ 76 812 78 897 +0¹ REVENUES 24 283 25 163 -1¹ 74 104 76 655 +1¹ ADJUSTED OPERATING PRO
Slide 11: Bridge Analysis Sandvik Group
GROUP LEVERAGE: BRIDGE ANALYSIS N/A SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE/ MSEK Q3 2018 PRODUCTIVITY CURRENCY METAL IMPACT Q3 2019 REVENUES 24 283 -206 +994 +92 25 163 ADJUSTED EBIT 4 587 -518 +584 -35 4 617 ADJUSTED EBIT MARGIN 18.9% N/A - - 18.3% MARGIN ACCRETION / DILUTION -2.0% +1.7% -0.3% • In
Slide 12: Cost Scrutiny
COST SCRUTINY MORE TO DO SANDVIK MINING & SANDVIK MACHINING SANDVIK MATERIALS GROUP ROCK TECHNOLOGY SOLUTIONS TECHNOLOGY COMMON TOTAL COSTS 1 571 930 323 278 40 MSEK, BOOKED IN Q3 2019 TOTAL ESTIMATED SAVINGS ~1 710 980 440 220 70 MSEK, MAJORITY ACHIEVED BY MID-2020 PAYBACK TIME, YEARS 0.9 IMPLIED R
Slide 13: Net Financials
NET FINANCIALS MSEK Q3 18 Q3 19 Underlying interest net -150 -99 • INTEREST NET LOWERED Pension -32 -35 Bank charges -13 -7 • NEGATIVE IMPACT FROM Other fin income & costs -10 -5 DERIVATIVES IFRS16 -27 FX & other asset classes +65 -25 Total -140 -198 • GUIDANCE ~1.2 BSEK FOR FULL 2019 13 SANDVIK: In
Slide 14: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA SEASONAL STOCK REDUCTION IN SMS AND SMT MSEK 30 000 40% 45% 40% 27 500 35% 35% 25 000 30% 30% 22 500 25% 25% 20 000 20% 20% 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC (continuing
Slide 15: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 8 000 20 000 MSEK Q3 2018 Q3 2019 18 000 6 000 EBITDA + non-cash* 5 534 5 533 16 000 NWC change +220 +1 392 4 000 Capex** -1 074 -1 085 14 000 FOCF*** 4 679 5 840 2 000 12 000 *Including amortization of lease liabilities and IFRS adoption **Including investments and dis
Slide 16: Net Debt
NET DEBT MSEK GEARING 50 000 1.4 1.2 • GEARING AT 0.27 40 000 1.0 30 000 • INCREASE IN 0.8 NET PENSION LIABILITIES 0.6 20 000 0.4 10 000 0.2 0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2018 2019 Financial net debt Net pension liability Leases Gearing 16 SANDVIK: Int
Slide 17: Outcome Q3 and Guidance
OUTCOME Q3 AND GUIDANCE Q3 2019 Underlying currency effect (MSEK): +376 (~300) Total currency effect (MSEK): +584 Metal price effect in quarter (MSEK): +54 (-20) Q4 2019 Underlying currency effect (MSEK): +400* Metal price effect in quarter (MSEK): +300** FULL YEAR 2019 Cash capex (BSEK): <4 (Q3: 1;
Slide 18: Summary Q3
SUMMARY Q3 SHARP SLOWDOWN IN EARLY-CYCLE DEMAND EFFICIENCY MEASURES ONGOING STRONG CASH FLOW – SECOND BEST QUARTER EVER PROGRESS ON INTERNAL SEPARATION OF SMT
Slide 19: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 20: 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% . 20 SANDVIK: Interim Report on the third quarter 2019
Slide 21: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT N/A +11 -46 4,618 4,587 +584 -518 EBIT Q3 18 ORGANIC CURRENCY METAL PRICE STRUCTURE EBIT Q3 19 GROWTH EFFECT SMT ADJUSTED EBIT MARGIN 18.9% 18.3% 21 SANDVIK: Interim Report on the third quarter 2019 Comments and numbers refer to continuing operations unless
Slide 22: Bridge Analysis by Business Area
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2018 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2019 MACHINING SOLUTIONS REVENUES 10 100 -664 +408 +83 9 927 ADJUSTED EBIT 2 543 -557 +192 -5 2 173 ADJUSTED EBIT MARGIN 25.2% -84% - - 21.9% MINING AND ROCK TECHNOLOGY REVENUES 10 838 362 +475 +79 11 754 ADJUST
Slide 23: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 0 - Fin institutions, EIB, NIB 0 - 87% Swedish MTN European MTN 3 648 11 776 2 years 7 years Bank loans 82 1 year Share swap - - SHORT TERM US Private Placement 0 - Fin institutions, EIB, NIB 0 - 13% Swedish MTN Ba
Slide 24: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 000 AVERAGE 3 500 INTEREST RATE: ~3% 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 24 SANDVIK: Interim Report on the third quarter 2019 Comments and numbers refer to continuing operations unless otherwise s
Slide 25: Guidance
GUIDANCE CASH CAPEX Estimated to <4 BSEK for 2019 CURRENCY Given currency rates at end of September 2019 the effect on operating profit from transaction and EFFECTS translation would be +400 MSEK for Q4 2019 METAL PRICE Given currency rates, stock levels and metal prices at the end of September 2019
Slide 26: 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