Slide 1: Interim Report Fourth Quarter 2015
INTERIM REPORT FEBRUARY 3 FOURTH QUARTER 2015
Slide 2: Summary Q4 2015
SUMMARY Q4 2015 CHALLENGING MARKET CONDITIONS LOW VOLUMES IMPACT PROFITABILITY INTERNAL EFFICIENCY MEASURES ONGOING STRONG CASH FLOW 2 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbers refer to continuing operations unless otherwise stated
Slide 3: Order Intake by Markets
ORDER INTAKE BY MARKETS ORDER INTAKE Q4 2015 SHARE OF GROUP TOTAL Underlying sequential demand trend (q/q) NORTH AMERICA (20%) EUROPE (42%) ASIA (17%) -18% y/y 0% y/y -23% y/y SOUTH AMERICA (6%) AFRICA/MID EAST (9%) AUSTRALIA (6%) +6% y/y -3% y/y +34% y/y 3 SANDVIK: Interim Report on the fourth quar
Slide 4: Invoicing by Customer Segments
INVOICING BY CUSTOMER SEGMENTS Consumer related Other Aerospace ORGANIC INVOICING GROWTH VS Q4 2014 Energy Mining -6% > +5% –5 to +5% < –5% Automotive Demand trend compared with preceding quarter Construction General Engineering 4 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbe
Slide 5: Sandvik Machining Solutions – Q4 2015
SANDVIK MACHINING SOLUTIONS – Q4 2015 WEAKENED DEMAND IN NORTH AMERICA & ASIA − EU: stable across segments MSEK Q4 2014 Q4 2015 CHANGE − NA: energy weak, negatively affecting general ORDER INTAKE 8,129 7,890 -7%* engineering, slight decline in automotive INVOICING 8,122 8,039 -5%* − Asia: China weak
Slide 6: Sandvik Mining – Q4 2015
SANDVIK MINING – Q4 2015 INCREASED MARKET UNCERTAINTY − Good equipment order intake in weak market Q4 2014 Q4 2015 CHANGE MSEK − Some softening in the aftermarket ORDER INTAKE 4,894 4,819 -1%* − Slight earnings improvement INVOICING 5,349 5,509 +3%* OP. PROFIT 705 663 -6% NEW HEAD OF SANDVIK MINING
Slide 7: Materials Technology, Construction and Venture
SANDVIK MATERIALS TECHNOLOGY − Persistently weak demand in oil and gas, order intake -11% y/y − Ongoing efficiency measures − Net working capital first time ever below 25% SANDVIK CONSTRUCTION − Challenging market conditions, order intake -3% y/y − Large tunneling orders in Australia, book-to-bill 0
Slide 8: Dividend Proposal
DIVIDEND PROPOSAL PROPOSED DIVIDEND: 2.50 SEK PER SHARE − 140% of reported Group total EPS − 57% of reported Group total adjusted EPS − Above 50% policy STRONG CASH FLOW FUNDS DIVIDEND BALANCE SHEET FLEXIBILITY SAFEGUARD CREDIT RATING 8 SANDVIK: Interim Report on the fourth quarter 2015 Comments and
Slide 9: Mats Backman, CFO
MATS BACKMAN CFO SANDVIK P|
Slide 10: Order Intake and Invoicing
ORDER INTAKE INVOICING 19,531 MSEK 20,940 MSEK CHANGE P/V -7% CHANGE P/V -6% MSEK MSEK 30 000 90% 30 000 90% 25 000 25 000 70% 70% 20 000 20 000 50% 50% 15 000 15 000 10 000 30% 10 000 30% 5 000 5 000 10% 10% 0 0 2011 2012 2013 2014 2015 -10% 2011 2012 2013 2014 2015 -10% -5 000 -5 000 -10 000 Order
Slide 11: Adjusted EBIT and Cash Flow
ADJUSTED EBIT CASH FLOW 2,315 MSEK, 11.1% 3,404 MSEK MSEK MSEK 5 000 40% 5 000 350% 300% 4 000 30% 4 000 250% 3 000 20% 3 000 200% 2 000 10% 2 000 150% 100% 1 000 0% 1 000 50% 0 -10% 0 0% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 -1 000 EBIT EBIT margin -20% Cash flow from operations Capex /
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 2015 Net working capital Net working capital / Invoiced sales (incl Mining Systems) Net working capital / Invoiced sales (continuing operati
Slide 13: Creating a Leaner Company
CREATING A LEANER COMPANY HALF WAY THERE – IN SAVINGS AND IN TIME TOTAL SAVINGS TARGET 2.1BN SEK • Delivered 50% of targeted savings Remaining savings Right sizing 1bn SEK • Program close at year-end 2017 Supply chain optimization Adjustment of cost base • Third and final phase initiated in Q4 Achie
Slide 14: Guidance
GUIDANCE Q1 2016 Currency effect: -300 MSEK Metal price effect: -130 MSEK FULL YEAR 2016 Capex: <4.1 bn SEK Net financial items: 1.7-1.9 bn SEK Tax rate: 26-28% 14 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbers refer to continuing operations unless otherwise stated
Slide 15: Full Year 2015
FULL YEAR 2015 CHALLENGING MARKET CONDITIONS • Invoicing 86bn SEK, 12.3% adjusted EBIT margin PORTFOLIO OPTIMIZATON • Initiated divestment of Mining Systems OPERATIONAL EFFICIENCY • First phase finalized of Supply Chain Optimization • Additional efficiency measures ongoing RECORD HIGH CASH FLOW, 12.
Slide 16: Looking Forward to 2016
LOOKING FORWARD TO 2016 LEANER AND MORE EFFICIENT DELIVER ON ONGOING EFFICIENCY MEASURES FOR STRONGER PERFORMANCE IMPROVED ACCOUNTABILITY, TRANSPARENCY AND SPEED CHALLENGE BUSINESS STRUCTURE 16 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbers refer to continuing operations unl
Slide 17: Back-up Slides
BACK-UP SLIDES SANDVIK P|
Slide 18: Bridge Analysis – Sandvik Group
BRIDGE ANALYSIS SANDVIK GROUP PRICE/ VOLUME/ STRUCTURE MSEK Q4 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2015 INVOICING 21,704 -1,160 600 -210 20,940 EBIT 2,684 -360 70 -1,630 770 EBIT MARGIN 12% -31% - - 4% * Includes metal price effects 18 SANDVIK: Interim Report on the fourth quarter 2015 Comments
Slide 19: Bridge Analysis – Machining, Mining, Materials Technology
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q4 2015 MACHINING SOLUTIONS INVOICING 8,122 -410 330 - 8,039 EBIT 1,622 -100 90 -630 981 EBIT MARGIN 20% -24% - - 12% MINING INVOICING 5,349 150 10 - 5,509 EBIT 705 25 20 -90 663 EBIT MARGIN 13% +17% - - 12% MATERI
Slide 20: Bridge Analysis – Construction and Venture
BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE MSEK Q4 2014 PRODUCTIVITY CURRENCY ONE-OFFS Q4 2015 CONSTRUCTION INVOICING 2,169 -150 70 - 2,087 EBIT 4 70 -10 -190 -128 EBIT MARGIN 0% N/A - - -6% VENTURE INVOICING 2,301 -480 80 - 1,901 EBIT 335 -290 -10 -5 36 EBIT MARGIN 15% -60% - - 2% 20 SANDVIK: Interim
Slide 21: Sandvik Machining Solutions – Q4 2015
SANDVIK MACHINING SOLUTIONS – Q4 2015 RECORD HIGH CASH FLOW • Continued inventory reduction CHALLENGING MARKET CONDITIONS • Stable development in Europe • Indirect oil and gas exposure impacts North America • Low demand in Asia, especially China ADJUSTED EBIT 1,611 MSEK, 20.0% • Non-recurring charge
Slide 22: Sandvik Machining Solutions – Q4 2015
SANDVIK MACHINING SOLUTIONS – Q4 2015 ORDER INTAKE INVOICING MSEK 10 000 50% 7,890 8,039 8 000 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 981 24.1% 2 000 0 10% 0% MSEK 2011 2012 2013 2014 2015 -2 000 Invoicing EBIT margin ROCE 12 months -10% 22 SANDVIK: Interim Report on the fourth quarter 2015 Com
Slide 23: Sandvik Mining – Q4 2015
SANDVIK MINING – Q4 2015 INCREASED MARKET UNCERTAINTY SLIGHT MARGIN IMPROVEMENT • Adjusted EBIT 749 MSEK, 13.6% • Non-recurring charges -86 MSEK • Currency effects +20 MSEK • Savings +69 MSEK SUPPLY CHAIN OPTIMIZATION • Phase I completed PORTFOLIO REVIEW • Intend to divest Mining Systems 23 SANDVIK:
Slide 24: Sandvik Mining – Q4 2015
SANDVIK MINING – Q4 2015 ORDER INTAKE INVOICING MSEK 4,819 5,509 10 000 8 000 50% 40% MSEK MSEK 6 000 30% 4 000 20% EBIT ROCE 663 20.0 2 000 0 10% 0% MSEK 2011 2012 2013 2014 2015 -2 000 -10% Invoicing EBIT margin ROCE 12 months 24 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numb
Slide 25: Sandvik Materials Technology – Q4 2015
SANDVIK MATERIALS TECHNOLOGY – Q4 2015 CHALLENGING MARKET CONDITIONS • Persistently weak demand in oil and gas • Further increased competition in standardized products ADJUSTED EBIT 118 MSEK, 3.5% • Excluding metal price effect 7.0 % • Metal price effect -118 MSEK • Non-recurring charges -545 MSEK •
Slide 26: Sandvik Materials Technology – Q4 2015
SANDVIK MATERIALS TECHNOLOGY – Q4 2015 ORDER INTAKE INVOICING MSEK 2,999 3,398 6 000 30% 5 000 20% MSEK MSEK 4 000 3 000 10% 2 000 EBIT ROCE 1 000 0% -427 0.1% -1 000 0 2011 2012 2013 2014 2015 -10% MSEK -2 000 -20% Invoicing Excluding metal price effects and nonrecurring items, 236 MSEK, 6.9 % -3 0
Slide 27: Sandvik Construction – Q4 2015
SANDVIK CONSTRUCTION – Q4 2015 CHALLENGING MARKET CONDITIONS • Relatively higher activity in North America and Northern Europe MARGIN IMPROVEMENT • Adjusted EBIT 65 MSEK, 3.1% • Non-recurring charges -193 MSEK • Savings 57 MSEK TWO LARGE ORDERS • Tunneling orders totalling 270 MSEK in Australia 27 S
Slide 28: Sandvik Construction – Q4 2015
SANDVIK CONSTRUCTION – Q4 2015 ORDER INTAKE INVOICING MSEK 2,026 2,087 4 000 40% 3 000 30% MSEK MSEK 2 000 20% 1 000 10% EBIT ROCE -128 0.5% -1 000 0 2011 2012 2013 2014 2015 0% -10% MSEK -2 000 -20% Invoicing EBIT margin ROCE 12 months 28 SANDVIK: Interim Report on the fourth quarter 2015 Comments
Slide 29: Sandvik Venture – Q4 2015
SANDVIK VENTURE – Q4 2015 WEAK OVERALL DEMAND UNDERABSORPTION IMPACT EARNINGS • Adjusted EBIT 76 MSEK, 4.0% • Non-recurring charges -40 MSEK • Currency effect -10 MSEK • Number of employees, Sandvik and non-Sandvik, reduced by ~300 compared with last year ADDITIONAL COST SAVINGS MEASURES ANNOUNCED 2
Slide 30: Sandvik Venture – Q4 2015
SANDVIK VENTURE – Q4 2015 ORDER INTAKE INVOICING MSEK 1,792 1,901 3 000 2 000 50% 40% 30% MSEK MSEK 20% 1 000 10% 0 0% EBIT ROCE 2011 2012 2013 2014 2015 -10% 36 3.8% -1 000 -2 000 -20% -30% MSEK -40% -3 000 -50% Invoicing EBIT margin ROCE 12 months 30 SANDVIK: Interim Report on the fourth quarter 2
Slide 31: Loan and Duration Profile
LOAN AND DURATION PROFILE AMOUNT MSEK AVERAGE DURATION LONG TERM US Private Placement 6,606 4 years Fin institutions, EIB, NIB 1,958 7 years 85% Swedish MTN European MTN 8,044 10,022 4 years 10 years Bank loans 2,729 3 years Share swap - - SHORT TERM Commercial paper - - Fin institutions, EIB, NIB 3
Slide 32: 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 32 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbers refer to continuing operations unless otherwise stated
Slide 33: Creating a Leaner Company
CREATING A LEANER COMPANY SAVINGS Q4 ANNUAL RUN-RATE (MSEK) Target 2.1 bn. SANDVIK SANDVIK SANDVIK SANDVIK SANDVIK GROUP MACHINING MINING MATERIALS CONSTRUCTION VENTURE ACTIVITIES SAVINGS SOLUTIONS TECHNOLOGY ANNUAL RUN-RATE SUPPLY CHAIN OPTIMIZATON 244 276 53 124 0 0 697 (1,333) ADJUST OF COST BASE
Slide 34: 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 SANDVIK: Interim Report on the fourth quarter 2015 Comments and numbers refe
Slide 35: Restructuring Our Footprint
RESTRUCTURING OUR FOOTPRINT SUPPLY CHAIN OPTIMIZATION PROGRAM FIRST PHASE CONTINUING OPERATIONS - FINALIZED AT END Q4 2015 - RUN-RATE SAVINGS 600 MSEK END OF Q4 150 FIRST PHASE -10 (out of 690 MSEK target) SECOND PHASE SECOND PHASE -8 - 8 UNITS IN SCOPE, 1 UNIT CLOSED - TARGET SAVINGS 320 MSEK THIRD
Slide 36: Restructuring Our Footprint – Summary
RESTRUCTURING OUR FOOTPRINT SUPPLY CHAIN OPTIMIZATION – SUMMARY Mining phase Achieved YTD Original plan Min Sys II review Ex MinSys Q4 # Units Savings # Units Savings # Units Savings # Units Savings # Units Savings PHASE I 11 800 -1 -110 0 0 10 690 10 600 PHASE II 10 600 0 -56 -2 -224 8 320 1 97 PHA
Slide 37: Updated Guidance
UPDATED GUIDANCE CAPEX Estimated at below 4.1 BSEK for 2016 CURRENCY Given currency rates at end of December 2015 the affect on EBIT would be -300 MSEK for Q1 2016 EFFECTS METAL PRICE Given currency rates, stock levels and metal prices at the end of December 2015, it is EFFECTS estimated that effect
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