INTERIM REPORT FOURTH QUARTER 2017

Transcription

1 INTERIM REPORT FOURTH QUARTER

2 2017 RECORD YEAR IN MANY ASPECTS BROAD-BASED MARKET RECOVERY OPERATIONAL AND STRUCTURAL IMPROVEMENTS RECORD HIGH ADJUSTED EARNINGS Orders +15% and revenues +10% Group and SMT decentralization All segments and business areas in growth Progress in portfolio consolidation Footprint program finalized Deleveraged balance sheet % Net working capital record low at 22% Focused capex spend at historically low <4% % % 35% Savings initiatives* % % 30% 5 units closed in % % Revenues Orders Org. dev revenues Org. dev orders 25% 20% NWC % of revenues *Includes only externally announced savings programs 355 y/y savings EBIT adjusted EBIT % 12% 2

3 SUMMARY Q4 ROBUST DEMAND ORDER INTAKE +15% LARGE ORDER RECEIVED IN SMT POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS, REGIONS AND SEGMENTS STRONG ADJUSTED EARNINGS AND MARGIN SUPPORTED PRIMARILY BY STRONG REVENUE GROWTH ADDITIONAL STRENGTH TO BALANCE SHEET FROM DISPOSAL NET GEARING AT LOW LEVEL OF 0.33 RECORD-HIGH FREE CASH FLOW AT 5.1 BILLION SEK DIVESTMENT OF SPS GENERATED 4.7 BILLION SEK IN CASH FLOW DIVIDEND PROPOSAL: 3.5 SEK 3

4 MARKET DEVELOPMENT % of group revenue FY17 Y/Y order intake Y/Y UNDERLYING DEMAND TREND segment bubble size share of group revenue 2017 Sequential underlying demand trend EUROPE 39% +16% NORTH AMERICA 21% +17% ASIA 20% +12% AFRICA/MIDDLE EAST 9% -2% SOUTH AMERICA 5% +19% AUSTRALIA 6% +32% 4

5 ORDER INTAKE ORDER GROWTH IN ALL SEGMENTS AND ACROSS BA:S REPORTED P/V 15% REVENUES DOUBLE DIGIT GROWTH IN ALL BA:S REPORTED P/V 15% Order intake, reported Organic order intake, 12M rolling Revenues, reported Organic revenues, 12M rolling 5

6 EBIT DEVELOPMENT % 19% % EBIT ADJUSTED % EBIT GROWTH EXCLUDING FX AND METALS % ADJUSTED EBIT % 17.0 SUPPORTED BY STRONG REVENUE GROWTH Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10% EBIT* EBIT%* *Adjusted for items affecting comparability 6

7 SANDVIK MACHINING SOLUTIONS STRONG UNDERLYING GROWTH Negative working day effect of -1.5% Large orders PBT +1% Positive development in all segments Strong development in all regions RECORD-HIGH EARNINGS 29% earnings growth excluding negative FX Support from revenue growth and structural efficiency measures Q Q ORDER INTAKE REVENUES OPERATING PROFIT % OF REVENUES % % *At fixed exchange rates for comparable units EBIT & ROCE DEVELOPMENT 2,500 2,000 1,500 SHARE OF REVENUES % CHANGE +12%* +10%* +21% 45% 35% 25% 1, % 7 EBIT¹ EBIT%¹ ROCE%² ¹Adjusted for items affecting comparability ²ROCE: EBIT adj. annualized, CE 1Q avg.

8 SANDVIK MINING AND ROCK TECHNOLOGY STRONG UNDERLYING MARKET SENTIMENT Strong development in replacement equipment, both underground and surface Strong growth in aftermarket business Signs of improvement in coal Q Q ORDER INTAKE REVENUES OPERATING PROFIT % OF REVENUES % % *At fixed exchange rates for comparable units EBIT & ROCE DEVELOPMENT SHARE OF REVENUES % CHANGE +10%* +21%* +60% 30% SIGNIFICANT EARNINGS AND MARGIN GROWTH % Earnings primarily supported by significant revenue growth and efficiency measures Previous year period impacted by some costs related to the merger of Sandvik Mining and Sandvik Construction % 15% 10% 5% 8 EBIT¹ EBIT%¹ ROCE%² ¹Adjusted for items affecting comparability ²ROCE: EBIT adj. annualized, CE 1Q avg.

9 SANDVIK MATERIALS TECHNOLOGY INCREASED ORDERS ALBEIT UNFAVORABLE MIX Large order for O&G of 630 Increased demand for short-cycle standard offering Q Q ORDER INTAKE REVENUES OPERATING PROFIT % OF REVENUES UNDERLYING MARGIN³ % 8.8% % 4.6% *At fixed exchange rates for comparable units EBIT & ROCE DEVELOPMENT SHARE OF REVENUES % CHANGE +38%* +10%* -33% MIX DETERIORATION IMPACT OPERATING PROFIT 9 Unfavorable product mix, less advanced (high value) products Unfavorable mix in core- and standard tubular offering Provision for staff reductions, -0.9%-pts. impact on margin NEW BUSINESS AREA PRESIDENT EBIT¹ EBIT%¹ ROCE%² EBIT%³ 20% 15% 10% 5% 0% -5% ¹Adjusted for items affecting comparability ²ROCE: EBIT adj. annualized, CE 1Q avg. ³EBIT adj. for items affecting comparability and metal prices

10 CONSOLIDATION OF BUSINESS PORTFOLIO ~10% OF GROUP REVENUES ~4% OF GROUP EBIT MINING SYSTEMS HYPERION PROCESS SYSTEMS WELDING WIRE 10 Including Mining Systems reported in discontinued operations

11 TOMAS ELIASSON CFO 11

12 FINANCIAL SUMMARY GROWTH, % ORDER REVENUES INTAKE ORGANIC: CURRENCY: -4-4 STRUCTURE: -1-1 TOTAL Q Q CHANGE % FY 2016 FY 2017 CHANGE % ORDER INTAKE ¹ ¹ REVENUES ¹ ¹ OPERATING PROFIT n/a % OF REVENUES ADJ. OPERATING PROFIT² % OF REVENUES NWC %³ CASH FLOW ROCE %³ EPS ADJ. CONT. OPS., SEK EPS ADJ. GROUP TOTAL, SEK ¹ At fixed exchange rates for comparable units ² Profit adjusted for items affecting comparability of -450 million SEK in Q and million SEK in Q ³ Quarterly calculation i.e. annualized adj. EBIT or revenues and 1Q average CE or NWC 4 Cash flow before acquisitions and disposals, financial items and taxes

13 BRIDGE ANALYSIS SANDVIK GROUP Q PRICE/ VOLUME/ PRODUCTIVITY CURRENCY STRUCTURE ONE-OFFS* Q REVENUES ADJUSTED EBIT ADJUSTED EBIT MARGIN 15.0% 39% % MARGIN ACCRETION / DILUTION +3.0% -0.8% -0.2% Includes metal price effects within Sandvik Materials Technology of +57 in alloy surcharges on revenues and -8 in metal price effect on EBIT (+109 Q vs Q4 2017). Structure -224 topline for SPS and -60 on EBIT, Structure SMT -15 on topline and +1 on EBIT. 13

14 BRIDGE ANALYSIS SANDVIK GROUP FULL YEAR 2016 PRICE/ VOLUME/ PRODUCTIVITY CURRENCY STRUCTURE ONE-OFFS* 2017 REVENUES ADJUSTED EBIT ADJUSTED EBIT MARGIN 13.5% 44% % MARGIN ACCRETION / DILUTION +2.8% -0.15% -0.05% Includes metal price effects within Sandvik Materials Technology of +447 in alloy surcharges on revenues and +49 in metal price effect on EBIT ( vs ). Structure -224 topline for SPS and -60 on EBIT, Structure SMT -15 on topline and +1 on EBIT and for SMS 20 on topline and 0on EBIT. 14

15 NET WORKING CAPITAL RECORD-LOW RELATIVE NWC BY BA % 45% 40% % 35% % 30% 25% % 20% NWC (continuing operations) NWC % of revenues (continuing operations) Sandvik Machining Solutions Sandvik Materials Technology Sandvik Mining & Rock Technology Other Operations 15

16 FREE OPERATING CASH FLOW Q Q Δ EBITDA + non cash NWC change Capex* FOCF** *Including investments and disposals in rental, tangible and intangible assets **Cash flow before acquisitions and disposals, financial items and taxes 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Free operating cash flow, Free operating cash flow 12M rolling, Adjusted EBITA* 12M rolling, *Adjusted for items affecting comparability

17 NET DEBT GEARING ,4 1,2 1,0 0,8 0,6 0,4 S&P CREDIT RATING UPGRADE FROM BBB TO BBB+ NET GEARING 0.33 SUPPORTED BY SPS DIVESTMENT ,2 Net debt excl. net pension liability Net pension liability Net gearing incl. net pension liabilities 17

18 REPORTED AND UNDERLYING TAX RATE Q Q REPORTED EXCL. CAPITAL GAIN SPS EXCL. SPS AND US TAX REFORM TAX RATE 26-28% STILL VALID FOR

19 OUTCOME AND GUIDANCE Q Underlying currency effect (): -403 (-450) Total currency effect (): -375 Metal price effect in quarter (): +101 (~0) Q Underlying currency effect (): -250* Metal price effect in quarter (): +100** FULL YEAR 2018 Capex (BSEK): ~4 (FY17: 3.6) Net financial items (BSEK): ~1 (FY17: 1.1) Tax rate (%): (FY17: 27 underlying) *Based on currency rates end of January 2018 **Based on currency rates, stock levels and metal prices at the end of January

20 DIVIDEND PROPOSAL Payout ratio % Reported Adjusted ,50 2,75 3,50* *Proposed div idend Dividend EPS Reported EPS adjusted

21 LOOKING FORWARD FOCUS ON GROWTH ORGANIC AND M&A M&A MOST LIKELY IN SMS GRADUAL SMT IMPROVEMENT IMPLEMENTATION OF TURNAROUND ACTIONS CONTINUOUS EFFICIENCY IMPROVEMENTS NEW PRODUCTS PERFOMAX DRILL SECO TOOLS RANGER DXI SURFACE TOP HAMMER DRILL TITANIUM POWDER DEVELOPMENT

22 BACK-UP SLIDES 22

23 MINING (31%) ENERGY (11%) GENERAL ENGINEERING (24%) CONSTRUCTION (11%) AUTOMOTIVE (13%) AEROSPACE (6%) END-CUSTOMER SEGMENTS (% of group revenues 2017 excl. Mining systems; Other e.g. consumer goods, electronics, chemical and miscellaneous was 4% ) 23

24 REACHING THE TARGETS AHEAD OF PLAN ABSOLUTE EBIT GROWTH 7% ROCE IMPROVEMENT <0.8 50% 3%PTS NET DEBT/ EQUITY RATIO DIVIDEND PAYOUT RATIO CONTINUING OPERATIONS BSEK % 13.9 % ~14% +5 pts ~19% TARGET % 50% 0% GROUP TOTAL 150% Net gearing 100% 50% 0% Payout reported EPS Payout adj. EPS 24

25 PROFITABILITY DEVELOPMENT GROUP LEVERAGE: +39% ,066 +1,199 3,277 EBIT Q4 16 ORGANIC GROWTH ANNOUNCED SAVINGS PROGRAMS CURRENCY METAL PRICE EFFECT SMT STRUCTURE EBIT Q4 17 ADJUSTED MARGIN 15.0% 17.0% 25

26 BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE Q PRODUCTIVITY CURRENCY ONE-OFFS* Q MACHINING SOLUTIONS REVENUES EBIT EBIT MARGIN % % % MINING AND ROCK TECHNOLOGY REVENUES EBIT EBIT MARGIN % % % MATERIALS TECHNOLOGY REVENUES ADJUSTED EBIT ADJUSTED EBIT MARGIN % n/a % * Includes metal price effects in SMT, bottom line: +109 in Q vs in Q4 2017, alloy surcharges topline: +57 and structure -15 topline and +1 bottomline 26

27 ALL PROGRAMS COMPLETED 93% DELIVERED SAVINGS ANNUAL RUN-RATE () VS. LAST YEAR AND TOTAL SANDVIK MACHINING SOLUTIONS SANDVIK MINING AND ROCK TECHNOLOGY SANDVIK MATERIALS TECHNOLOGY GROUP ACTIVITIES TOTAL ANNUAL RUN-RATE VS. LAST YEAR TARGET 2.1 BSEK SAVINGS ANNUAL RUN-RATE SUPPLY CHAIN OPTIMIZATON (1 333) ADJUST OF COST BASE/ RIGHT SIZING (762) TOTAL (2 095) *SMRT supply chain phase I did not deliver according to target (90 less) and SMT did not deliver according to target in Supply chain phase III (65 less) 27

28 ALL PROGRAMS FINALIZED 23 SITES CLOSED SUPPLY CHAIN OPTIMIZATION PROGRAM CONTINUING OPERATIONS FIRST PHASE (10) FINALIZED AT END Q RUN-RATE SAVINGS 600 END OF Q4 (out of 690 target) SECOND PHASE (8) FINALIZED AT END Q (LAST UNIT CLOSED Q4 2017) RUN-RATE SAVINGS OF 320 (320 target) THIRD PHASE (5) FINALIZED AT END OF Q (LAST UNIT CLOSED Q4 2017) RUN-RATE SAVINGS OF 260 (out of 323 target) 28

29 OTHER OPERATIONS NON-STRATEGIC ASSETS SHARE OF REVENUES % CLOSURE OF SPS DIVESTMENT 1 DEC 2017 Resulted in 3.9 BSEK capital gain DISPOSAL OF HYPERION Carve-out process progressing according to plan, closure expected during H ADJUSTED EARNINGS IMPACTED BY TRANSACTION RELATED COSTS Earnings growth off-set by about -25 in transaction related costs Underlying margin at 13.8% 29

30 OTHER OPERATIONS NON-STRATEGIC ASSETS SHARE OF REVENUES % ORDER INTAKE REVENUES % 20% % EBIT ADJUSTED 149 ROCE 18% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q % 5% Revenues ROCE %² EBIT % adjusted¹ ¹Adjusted for items affecting comparability ²ROCE: EBIT adj. annualized, CE 1Q avg. 30

31 LOAN AND DURATION PROFILE LONG TERM 96% SHORT TERM 4% AMOUNT AVERAGE DURATION US Private Placement years Fin institutions, EIB, NIB years Swedish MTN years European MTN years Bank loans year Share swap - - US Private Placement 0 0 month Fin institutions, EIB, NIB months Swedish MTN months Bank loans 55 0 month Share swap 3 0 month Cash position Revolving Credit facilities 12,724 9,100 TOTAL 23,828 6 years 31

32 LOAN MATURITY PROFILE AVERAGE INTEREST RATE: ~4%

33 GUIDANCE CAPEX CURRENCY EFFECTS METAL PRICE EFFECTS NET FINANCIAL ITEMS TAX RATE Estimated at about 4 BSEK for 2018 Given currency rates at end of January 2018 the effect on operating profit from transaction and translation would be -250 for Q Given currency rates, stock levels and metal prices at the end of January 2018, it is estimated that effect on operating profit in Q will be +100 Net financial items is estimated to be about 1 BSEK for 2018 The tax rate is estimated to about 26 28% for

34 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 and interest-rate movements, political risks, impact of competing products and their pricing, product development, commercialisation and technological difficulties, supply disturbances, and the major customer credit losses.