Slide 1: Interim Report Third Quarter 2017
INTERIM REPORT THIRD QUARTER 2017 1 SANDVIK: Interim Report on the second quarter 2017
Slide 2: Summary
SUMMARY SIGNIFICANT ORDER GROWTH ORDER INTAKE +13% LARGE ORDERS RECEIVED POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS AND REGIONS EARNINGS AND MARGIN IMPROVEMENT SUPPORTED BY STRONG REVENUE GROWTH AND EFFICIENCY MEASURES PORTFOLIO CONSOLIDATION CONTINUES • GOOD PROGRESS FOR SANDVIK PROCESS SYSTEMS CAR
Slide 3: Market Development
Y/Y UNDERLYING DEMAND TREND MARKET DEVELOPMENT segment bubble size – share of group revenue 2016 % of group Y/Y Q/Q underlying revenue FY16 order intake demand trend EUROPE 40% +9% NORTH AMERICA 20% +12% ASIA 20% +14% AFRICA/MIDDLE EAST 9% +17% SOUTH AMERICA 5% +19% AUSTRALIA 6% +37% 3 SANDVIK: Inte
Slide 4: Order Intake and Revenues
ORDER INTAKE REVENUES STRONG ORDER GROWTH IN ALL BUSINESS AREAS ACCELERATION OF GROWTH DRIVEN BY SMRT AND SMS REPORTED P/V REPORTED P/V 21 888 13% 21 648 12% MSEK MSEK 25 000 95 000 25 000 95 000 20 000 85 000 20 000 85 000 15 000 75 000 15 000 75 000 2013 2014 2015 2016 2017 2013 2014 2015 2016 201
Slide 5: EBIT Development
EBIT DEVELOPMENT +28% MSEK • 42% EBIT GROWTH 4 000 18% REPORTED EXCLUDING FX AND METALS 3 500 17% 3 000 2 500 16% 15% 3 344 • EBIT MARGIN 16.8% 2 000 14% MSEK EXCLUDING FX AND METALS 1 500 13% EBIT % • SUPPORTED BY 15.4 1 000 12% 500 11% REVENUE GROWTH AND 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 6: Sandvik Machining Solutions
SHARE OF REVENUES 2016 40% SANDVIK MACHINING Q3 2016 Q3 2017 CHANGE SOLUTIONS MSEK ORDER INTAKE 7 776 8 450 +11%* REVENUES 7 859 8 488 +10%* STRONG UNDERLYING GROWTH OPERATING PROFIT 1 650 1 949 +18% − Negative working day effect of -1% % OF REVENUES 21.0% 23.0% − Positive development in all regions
Slide 7: Sandvik Mining and Rock Technology
SHARE OF REVENUES 2016 38% SANDVIK MINING AND Q3 2016 Q3 2017 CHANGE ROCK TECHNOLOGY MSEK ORDER INTAKE 7 936 9 191 +18%* REVENUES 7 791 8 987 +17%* STRONG CUSTOMER ACTIVITY OPERATING PROFIT 817 1 472 +80% − Strong development in replacement equipment % OF REVENUES 10.5% 16.4% − Strong growth in afte
Slide 8: Sandvik Materials Technology
SHARE OF REVENUES 2016 16% SANDVIK MATERIALS MSEK Q3 2016 Q3 2017 CHANGE TECHNOLOGY ORDER INTAKE 2 851 3 045 +9%* REVENUES 2 945 2 980 +3%* INCREASED ORDERS ALBEIT UNFAVORABLE MIX OPERATING PROFIT 197 -57 n/a 6.7% − Large order for capex O&G ~250MSEK % OF REVENUES¹ -1.9% UNDERLYING MARGIN³ 5.0% 0.2%
Slide 9: Tomas Eliasson, CFO
TOMAS ELIASSON CFO SANDVIK P|
Slide 10: Financial Summary Q3
GROWTH, % ORDER REVENUES INTAKE FINANCIAL SUMMARY Q3 ORGANIC: CURRENCY: +13 -2 +12 -2 STRUCTURE: 0 0 TOTAL +11 +10 MSEK Q3 2016 Q3 2017 CHANGE % Q1-3 2016 Q1-3 2017 CHANGE % ORDER INTAKE 19 700 21 888 +13¹ 59 868 71 338 +15¹ REVENUES 19 715 21 648 +12¹ 59 735 66 968 +9¹ ADJ. OPERATING PROFIT² 2 623
Slide 11: Bridge Analysis
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q3 2016 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2017 REVENUES 19 715 2 300 -400 32 21 648 ADJUSTED EBIT 2 623 1 080 -244 -115 3 344 ADJUSTED EBIT MARGIN 13.3% 47% - - 15.4% MARGIN ACCRETION / DILUTION +3.5% -0.8% -0.6% • Includes metal price eff
Slide 12: Net Working Capital
NET WORKING CAPITAL RELATIVE NWC BY BA SEASONAL UPTICK IN NWC-RATIO MSEK 27 500 35% 45% 40% 25 000 30% 35% 30% 22 500 25% 25% 20 000 20% 20% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 NWC (continuing operations) Sandvik Machining Solutions Sandvik Mining & Rock Technology NWC % of revenues (c
Slide 13: Free Operating Cash Flow
FREE OPERATING CASH FLOW MSEK 5 000 16 000 MSEK Q3 2016 Q3 2017 Δ 4 000 14 000 EBITDA + non cash 3 556 4 676 +1 120 3 000 NWC change 1 790 -48 -1 838 12 000 Capex* -1 004 -903 +101 2 000 FOCF** 4 342 3 725 -617 10 000 1 000 *Including investments and disposals in rental, tangible and intangible asse
Slide 14: Financial Net Debt
FINANCIAL NET DEBT MSEK GEARING 40 000 1,4 • LOWEST NET DEBT LEVEL IN AT 1,2 30 000 LEAST FOUR YEARS, ~25 BSEK 1,0 20 000 • NET GEARING 0.6 0,8 – IN LINE WITH TARGET OF <0.8 10 000 0,6 0 0,4 2013 2014 2015 2016 2017 Net debt excl. net pension liability Net pension liability Net gearing incl. net pen
Slide 15: Outcome and Guidance
OUTCOME AND GUIDANCE Q3 2017 Underlying currency effect (MSEK): -155 (~0) Total currency effect (MSEK): -244 Metal price effect in quarter (MSEK): -64 (-100) Q4 2017 Underlying currency effect (MSEK): -450* Metal price effect in quarter (MSEK): ~0** FULL YEAR 2017 Capex (BSEK): ~3.7 (YTD: 2.3) Net f
Slide 16: Summary
SUMMARY REVENUE GENERATION ON BACK OF RECENT STRONG ORDER INTAKE STABILITY PROFITABILITY • REVENUE GROWTH +12% CREATE A STABLE PLATFORM IMPROVE PERFORMANCE • TWO MAJOR ORDERS IMPROVED PERFORMANCE MARGIN AT 16.8 EXCL. METALS AND CURRENCY GROWTH GENERATE GROWTH CMD NOVEMBER 21 IN TÜBINGEN, GERMANY
Slide 17: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 18: End-Customer Segments
MINING ENERGY (27%) (12%) GENERAL CONSTRUCTION ENGINEERING (12%) (23%) AUTOMOTIVE AEROSPACE (14%) (6%) END-CUSTOMER SEGMENTS (% of group revenues 2016 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 6% ) 18 SANDVIK: Interim Report on the third quarter 201
Slide 19: Profitability Development
GROUP LEVERAGE: PROFITABILITY DEVELOPMENT +47% +85 -244 -115 3,344 0 +995 2,623 EBIT Q3 2016 ORGANIC ANNOUNCED CURRENCY METAL PRICE STRUCTURE EBIT Q3 2017 GROWTH SAVINGS EFFECT SMT PROGRAMS ADJUSTED 13.3% 15.4% MARGIN 19 SANDVIK: Interim Report on the third quarter 2017 Comments and numbers refer to
Slide 20: Bridge Analysis
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q3 2016 PRODUCTIVITY CURRENCY ONE-OFFS* Q3 2017 MACHINING SOLUTIONS REVENUES 7 859 793 -165 1 8 488 EBIT 1 650 412 -113 0 1 949 EBIT MARGIN 21.0% +52% - - 23.0% MINING AND ROCK TECHNOLOGY REVENUES 7 791 1 340 -144 - 8 987 EBIT 817 746 -91 - 1 472 EBIT MA
Slide 21: 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 185 0 14
Slide 22: Production Units Closed End of Q3
21 PRODUCTION UNITS CLOSED END OF Q3 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 (7 UNITS CLOSED) - TARGET SAVINGS 320MSEK ACHIEVED at year end 2016 THIRD
Slide 23: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS CARVE-OUT FOR PROCESS SYSTEMS DEVELOPING ACCORDING TO PLAN • Expected closure no later than Q1 2018 STRONG UNDERLYING DEMAND • Underlying demand developed positively for both Hyperion and Process Systems • Some timing issues for Process
Slide 24: Other Operations
SHARE OF REVENUES 2016 6% OTHER OPERATIONS NON-STRATEGIC ASSETS MSEK ORDER INTAKE REVENUES 2 000 25% 1 203 1 194 1 500 20% MSEK MSEK 1 000 15% EBIT ROCE 500 10% 123 13.2% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 5% MSEK 2014 2015 2016 2017 Revenues EBIT % reported ROCE %² EBIT % adjusted¹ ¹Adj
Slide 25: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 4,733 3 years Fin institutions, EIB, NIB 1,707 6 years 91% Swedish MTN European MTN 5,660 10,495 4 years 9 years Bank loans 2,766 1 year Share swap - - SHORT TERM US Private Placement 891 0 month Fin institutions,
Slide 26: Loan Maturity Profile
LOAN MATURITY PROFILE MSEK 4 500 AVERAGE 4 000 INTEREST RATE: 3 500 ~4% 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 26 SANDVIK: Interim Report on the third quarter 2017 Comments and numbers refer to continuing operations un
Slide 27: Guidance
GUIDANCE CAPEX Estimated at about 3.7 BSEK for 2017 CURRENCY Given currency rates at end of September 2017 the effect on operating profit from transaction and EFFECTS translation would be -450 MSEK for Q4 2017 METAL PRICE Given currency rates, stock levels and metal prices at the end of September 20
Slide 28: 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