to change to renew to be first to adapt

Transcription

1 Corporate Change Enskilda Securities 21 European Capital Goods Seminar Stockholm, 29 August Peter Larson, Executive Vice President and CFO Heléne Gunnarson, Senior Vice President Group Communications The Sandvik Profile of Corporate Change to change to renew to be first to adapt 29 August 21, Page 3 Programs since 1994 Added substantial resources especially in Asia, E.Europe, NAFTA Increased R&D activities Integrated acquisitions Concentrated on three business areas, divestment of Sandvik Saws and Tools Developed synergies within the three business areas 29 August 21, Page 1 Enskilda 29 August 1

2 Sandvik in Asia 29 August 21, Page 11 Sandvik in Central and Eastern Europe St Petersburg Novosibirsk Nizhnij Novogorod Moscow Chelyabinsk Warszaw Minsk Toljatti Chomutov Katowice Prague Bratislava Kiev Rostov Alma Ata Krani Budapest Belgrade Sarajevo Uzice Bukarest Sofia Production units Sales offices 1 5 employees Istanbul 29 August 21, Page 12 Sandvik in NAFTA Sales USD 1 1 M Production units Sales offices 5 9 employees 29 August 21, Page 13 Enskilda 29 August 2

3 Aggressive R & D SEK 1,615 M (USD 17 M) - 4% of sales Materials development Surface-coating processes Product renewal Production technology Logistics/Distribution Administrative systems Resources: +6% since 1993 Specialists: 1 2 Patent: 3 5, +7% since 1993 Sales of products younger than 5 year Coromant >5% SMC: 4% Steel: 15% 29 August 21, Page 15 Long term Commitment to R&D SEK M % Sales R&D % of sales 29 August 21, Page 16 Acquisition Critera Within our three business areas Product niche Application area Market - geography Brand Market channel Within our areas of competence and know-how Parenting Add to EPS within 1-2 years 29 August 21, Page 17 Enskilda 29 August 3

4 Acquisitions (annual sales SEK M) CTT Tools (Swe), (1,7) Impero (Italy RGB (UK), (3) Baildonit (Poland), (4) Chomutov (Tjeckia), (13) MKTS (Russia), (5) Qingdao (China) Calamo (Sweden), (65) CML (Italy), (3) Villares Wires (Brazil), (16) Precitube (France), (4) Choksi (India), (2) Tamrock (Finland), (6,5) Kanthal (Sweden), (1,7) Alloy Wire (UK), (28) Precision Twist Drill (US), (1,) Drillmaster (US), sales (8) Globar (US), sales (12) Saxon Blades (UK), (22) Poppe&Potthof (Germany), (16) MRL (US), (182) Suh Jun Trading (S.Korea), Former agent in Ghana, JV in Zambia Brøyt (Norway), (5) Titex Tools (US) BPI, Neuson (Austria), (12) ARAF (France), (3) Hindrichs-Auffermann (Germany),(13) Beltreco Ltd. (Australia), (45) Angus MacInnes & Co (UK) Hurth-Infer (Brazil), (65) Bafco Mineria y Servicios (Chile), (85) Agreement with Metso to acquire parts of Svedala, (1,4) Jointly owned company with US-based Smith International (36) 29 August 21, Page 18 Parenting Support Product solutions Supply Technology Production Administration IT Global concepts Financial performance tools 29 August 21, Page 19 Sandvik Operational structure until 1998 Tooling Rock Tools Specialty Steels Integration Svk Rock Tools + Tamrock 1998 CTT Tools Saws and Tools Hard Materials Process Systems Divested 1999 Downsized August 21, Page 2 Enskilda 29 August 4

5 Divestment of Saws and Tools Divested Sept 1999 Annual sales SEK 2,7 B EBIT 8% 2 77 employees Why? Consumer products Different market channel Limited R&D No leading position Limited growth 29 August 21, Page 21 Tooling Sandvik as of 2 Global Leader in Selected Areas Three Core Areas Mining and Construction Specialty Steels Sales SEK B 15,5 1,2 14,2 (SECO 61%), sales SEK 3,8 B 29 August 21, Page 22 Top-line Growth SEK M 45 3 Average annual growth Yr Organic Acq % 2% % 7% 2 12% -4% August 21, Page 23 Enskilda 29 August 5

6 High Profitability MSEK % 6 6 Average ROCE, % 5 Year , % , % ,4 % Sandvik Return on capital employed, % Sandvik European Engineering Operating profit (excl. non-recurrent items) 29 August 21, Page 24 Cash flow, investments, equity ratio SEK M Equity ratio % Share redemption Divestment of S&T Cash flow Own investments Equity ratio Free cash flow before investments, acquisitions and dividends 29 August 21, Page 25 Financial Performance Outcome year Top-line growth, CAGR 11% Organic 4% Acquisitions 7% ROCE, average 19% Pay-out ratio, average 64% Redemption (share buy back), SEK 4 B (USD 4 M) Net debt ratio.3 end of 1999 TSR (share price, dividend), CAGR 22% New Objectives 2 Top-line growth Organic 6% Acquisitions X% ROCE, average 2% Pay-out ratio, average >5% Net debt ratio.6-.8 TSR > peers (MSCI) 29 August 21, Page 27 Enskilda 29 August 6

7 Financial Objectives 2 Tooling Mining and Construction Specialty Steels Organic sales growth >6% 6% 4-5% EBIT 2% 1-15% 12-15%* ROCE >2% 2% 15-2%* * year-end 23 (SECO 61%) 29 August 21, Page 28 Research & Development The no 1 growth driver supported by. 29 August 21, Page 29 3 years of IT development IT strategy SandNet Basic systems (Sopic etc.) Direct distribution CAD/CAM CAPP EDI PC-Network Information flow IT tool for everyone Internet Intranet Electronic commerce B2B Mobile IT support ies 8-ies 9-ies 2 fi 29 August 21, Page 3 Enskilda 29 August 7

8 Sandvik Tooling Cemented carbide and high-speed steel tools for the metalworking industry, cemented carbide blanks and components 2: Sales SEK 15 B (USD 1.6 B) Sandvik CTT Sandvik Coromant Trade marks: Dormer, Titex, Sandvik Hard Materials Prototyp, Precision Sales USD M 1, August 21, Page 33 Sandvik Hard Materials Change of Product Portfolio Defined products Rolls for hot rolling Micro drill blanks Rotary tool blanks Blanks for wood working tools Micro balls Seal rings and bushings Rotary cutters, CRC Metal forming tools Invoiced Sales, SEK M Other wear parts Defined products Ceramic dental crowns 29 August 21, Page 35 Successful Sales Growth Index 5 PCB drill blanks Carbide Rotary Cutters Index Carbide rods Index August 21, Page 36 Enskilda 29 August 8

9 External Driving Forces for the priority growth products Health and Care Investments Maintenance Ind. Production Consumers 29 August 21, Page 37 Year Year 2 2 SEK SEK M vs vs LY LY Sales Sales % 12% EBIT EBIT % 59% ROCE ROCE 16% 16% SEK M 12 Invoiced sales Sandvik Mining and Construction SEK M 1 5 Operating profit % Rolling 12 months SEK M % of sales Pro forma August 21, Page 38 SMC Actions 1998 Reduced A&S costs with SEK 5 M Formed a new organization Changed 7% of all managers Increased cost awareness Changed production and increased productivity Measured the real profit per product Reduced the number of items Increased our focus on after-market Increased service offering Introduced a lot of new products Acquired niche companies Top-line growth and continued profitability improvement 29 August 21, Page 39 Enskilda 29 August 9

10 Sandvik Tooling Strategy To be a full line supplier to the metalworking industry Acquisition of CTT Tools 29 August 21, Page 4 Index Sandvik CTT Acquired end A true turn around Operating earnings - Profitability higher than peer group CTT acq.by Sandvik August 21, Page 41 CTT - a true Turn Around Parenting Market Production technology R&D 29 August 21, Page 42 Enskilda 29 August 1

11 Acquired in The perfect fit Complementary products, customers Synergies in R&D, production, logistics Parenting The furnace industry The electronics industry 29 August 21, Page 43 The appliance industry Incentives to employees Options plan Convertible debentures Profit-sharing program 29 August 21, Page 45 Sandvik Management Management - A Global Perspective Local Internal recruitment Experience sharing 2 expatriates 23 nationalities 3 key managers 5, years of experience 75% new positions last 5 years Group Executive Management 29 August 21, Page 46 Enskilda 29 August 11

12 The Sandvik Profile of Corporate Change to change to renew to be first to adapt 29 August 21, Page 47 Enskilda 29 August 12