INTERIM REPORT APRIL 27 FIRST QUARTER 2015

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Transcription:

INTERIM REPORT APRIL 27 FIRST QUARTER 2015

SUMMARY Q1 2015 EARNINGS GROWTH AND MARGIN EXPANSION Adjusted EBIT 2,934, 12.6% Currency effect +770 RECORD Q1 CASH FLOW Continued inventory reductions STABLE DEMAND Overall stable demand in Europe and Asia Demand remained on a high level in North America However with a sharp downturn in on-shore oil and gas drilling activity PROGRESS ON SUPPLY CHAIN OPTIMIZATION PROGRAM Two more units closed Announcement of second phase 2

INVOICING BY MARKETS SALES Q1 2015 SHARE OF GROUP TOTAL Demand trend compared with preceding quarter. NORTH AMERICA 21% EUROPE 37% ASIA 19% SOUTH AMERICA 8% AFRICA/MIDDLE EAST 10% AUSTRALIA 5% 3

INVOICING BY SEGMENTS CUSTOMER SEGMENTS Consumer related Other Energy Aerospace Mining INVOICING GROWTH VS Q4 2013 > +5% 5 to +5% < 5% Automotive Demand trend compared with preceding quarter Construction Engineering 4

ORDER INTAKE 23,167 INVOICING 23,334 CHANGE P/V -11% CHANGE P/V -3% 30 000 150% 30 000 120% 25 000 125% 25 000 100% 20 000 100% 20 000 80% 15 000 75% 15 000 60% 10 000 50% 10 000 40% 5 000 25% 5 000 20% 0 0% 2007-5 000 2008 2009 2010 2011 2012 2013 2014 2015-25% 0 0% 2007-5 000 2008 2009 2010 2011 2012 2013 2014 2015-20% -10 000 Order intake Organic order intake change y-o-y -50% -10 000 Invoicing Organic invoicing change y-o-y -40% Low order intake for Mining Systems and sharp decline in NA O&G on-shore drilling activity Three large energy orders more than off-set order cancellation P/V excluding major orders -3% year-on-year Record high invoicing in Sandvik Machining Solutions Invoicing for Mining Systems decreasing hampered by a shrinking order back log. 5

EBIT 1,052 CASH FLOW ADJUSTED EBIT 2,934, 12.6% CASH FLOW FROM OPERATIONS 2,431 5 000 40% 5 000 350% 4 000 30% 3 000 20% 2 000 10% 1 000 0% 0 2007 2008 2009 2010 2011 2012 2013 2014 2015-1 000-10% -2 000 EBIT EBIT margin -20% 300% 4 000 250% 3 000 200% 2 000 150% 100% 1 000 50% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Cash flow from operations Capex / Depreciation Year-on-year adjusted earnings growth supported by currency and effects from savings initiatives Nonrecurring items affecting EBIT -1.9 BSEK Personnel reduction of -461 FTE from previous quarter Record first quarter cash flow Inventory reductions most notably in Mining Investments 0.8 BSEK in Q1 6 2013 Q3 Adjusted due to tax payment of about 5,800 related to reorganization of intellectual property rights

FINANCIAL TARGETS CURRENT TARGET MANAGEMENT FOCUS GROWTH 12% 8%* ROCE 11.5% 25% NET DEBT/EQUITY RATIO 0.72 < 0.8 DIVIDEND for 73% 50% 2014** of EPS Product launches through focused R&D Increase exposure towards high growth markets and segments Adjust geographic footprint Reduce Net Working Capital Strict capital allocation (investments) Restore earnings in Sandvik Mining and Sandvik Construction Continued reductions in Q1 Strong cash flow generation Proposed dividend maintained at 3.50 SEK per share (3.50) Uninterrupted dividend since 1870 **Proposed dividend * Over a business cycle including M&A 7

OUR WAY FORWARD KEY PRIORITIES BY BUSINESS AREA SANDVIK MACHINING SOLUTIONS SANDVIK MINING SANDVIK MATERIALS TECHNOLOGY SANDVIK CONSTRUCTION SANDVIK VENTURE Leverage from Multi-brand model, with backend synergies Increase pace of core product launches and digital offering Invest in growth pockets and mid-market Conduct bolt-on M&A:s Continue site-restructuring and productivity improvements Further develop Supply Chain to optimize NWC Consolidate footprint: Manufacturing Cost efficiency: Sourcing and A&S Grow share of aftermarket New offering including midmarket Sales excellence Accelerate growth of strategic products, mainly in energy and energy efficiency Safeguard position in core and standard products through lean business model Secure utilization and cost position in the Primarysystem Improve capital efficiency Exit non-core businesses Sales efficiency and commercial excellence Supply chain and footprint optimization Aftermarket development Focused growth areas Mid-market strategy Structured transformation program Accelerate growth of businesses New products Continued globalization Complimentary acquisitions 8 YIELD HIGHER RETURNS REDUCE EARNINGS VOLATILITY DEVELOP MORE TOWARDS FAST GROWING MARKETS 4/24/2015

MATS BACKMAN CFO 9

RESTRUCTURING OUR FOOTPRINT SUPPLY CHAIN OPTIMIZATION PROGRAM 150 FIRST PHASE -11 SECOND PHASE -10 FIRST PHASE 2 UNITS CLOSED IN Q1 (total 7) 4 UNITS REMAINING in 2015 RUNRATE SAVINGS 360 END OF Q1 out of 800 target at year end 2015 125 SECOND PHASE 3 UNITS INITIATED (7 Remaining) TARGET SAVINGS at year end 2016 600 2013 Q4 Target 10

NET WORKING CAPITAL 35 000 45% 30 000 25 000 20 000 15 000 10 000 5 000 40% 35% 30% 25% 20% 15% 10% 5% TARGET 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Net working capital Net working capital / Invoiced sales Inventory / Invoiced sales 11

NET WORKING CAPITAL % OF INVOICING BY BUSINESS AREA 60% 50% 40% 30% 20% TARGET 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sandvik Machining Solutions Sandvik Mining Sandvik Materials Technology Sandvik Construction 12

GUIDANCE POSITIVE CURRENCY EFFECT OF +770 IN Q1 Guidance +600 based on currency rates mid-january Difference primarily driven by further strengthening of USD, CNY and EUR versus SEK GUIDANCE Q2 2015 CURRENCY EFFECT: METAL PRICE EFFECT: +900-150 FULL YEAR GUIDANCE 2015 CAPEX: Below 5bn. SEK NET FINANCIAL ITEMS: -1.8 to -2.0 bn. SEK TAX RATE: 26-28% for 2015 13

LOOKING FORWARD >15,000 NEW PRODUCT LAUNCHES GROW THE AFTERMARKET BUSINESS CREATING A LEANER COMPANY Sandvik Machining Solutions Sandvik Mining Sandvik Construction Supply Chain Optimization 14

SUMMARY Q1 2015 EARNINGS GROWTH RECORD Q1 CASH FLOW GOOD PROGRESS ON SUPPLY CHAIN OPTIMIZATION PROGRAM OVERALL STABLE DEMAND 15

BACK-UP SLIDES 16

BRIDGE ANALYSIS SANDVIK GROUP Q1 2014 PRICE/ VOLUME/ PRODUCTIVITY CURRENCY STRUCTURE ONE-OFFS* Q1 2015 INVOICING 20,783-750 2,830 470 23,334 EBIT 2,478-230 770-1,970 1,052 EBIT MARGIN 12% -31% - - 5% * Includes metal price effects 17

BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE Q1 2014 PRODUCTIVITY CURRENCY ONE-OFFS* Q1 2015 MACHINING SOLUTIONS INVOICING EBIT EBIT MARGIN 7,400 1,480 20% - -80 N/A 1,040 410 - - -680-8,438 1,129 13% MINING INVOICING EBIT EBIT MARGIN 6,601 688 10% -570-130 -23% 830 240 - - -730-6,863 68 1% MATERIALS TECHNOLOGY INVOICING EBIT EBIT MARGIN 3,547 421 12% -80-80 -100% 350 70 - -110-310 - 3,712 100 3% * Includes metal price effects 18

BRIDGE ANALYSIS PRICE/ VOLUME/ STRUCTURE Q1 2014 PRODUCTIVITY CURRENCY ONE-OFFS Q1 2015 CONSTRUCTION INVOICING EBIT EBIT MARGIN 1,871-11 -1% -20 10 N/A 290 70 - - -160-2,144-95 -4% VENTURE INVOICING EBIT EBIT MARGIN 1,362 233 17% -90-30 -29% 320 25-580 -40-2,172 192 9% * Includes metal price effects 19

SANDVIK MACHINING SOLUTIONS Q1 2015 RECORD HIGH INVOICING 8,438 STABLE MARKET CONDITIONS Stable at a high level in North America Asia and Europe stable sequentially MARGIN EXPANSION Adjusted EBIT 1,809, 21.4 % Nonreccuring cost -680 Currency effects +410 Strong cash flow 20

SANDVIK MACHINING SOLUTIONS Q1 2015 ORDER INTAKE 8,596 INVOICING 8,438 10 000 8 000 6 000 50% 40% 30% 4 000 20% EBIT 1,129 ROCE 27.1% 2 000 10% Adjusted for nonrecurring items, 1,809, 21.4 % 0-2 000 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Invoicing EBIT margin ROCE 12 months -10% 21

SANDVIK MINING Q1 2015 STABLE MARKET ACTIVITY Stable demand for Equipment and Aftermarket Continued low order intake for Mining Systems ADJUSTED EBIT 798, 11.6% Nonrecurring cost -730 Currency effects +240 Continued inventory reductions SUPPLY CHAIN OPTIMIZATION Closure of one unit finalized in Hunter Valley, Australia 22

SANDVIK MINING Q1 2015 ORDER INTAKE 6,203 INVOICING 6,863 10 000 8 000 50% 40% 6 000 30% EBIT 68 Adjusted for nonrecurring items, 798, 11.6 % ROCE 12.2 4 000 2 000 0-2 000 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015-10% Invoicing EBIT margin ROCE 12 months 23

SANDVIK MATERIALS TECHNOLOGY Q1 2015 THREE LARGE ENERGY ORDERS MORE THAN OFF-SET CANCELLATION Stable market conditions Continued uncertainty in oil and gas ADJUSTED EBIT 365, 9.8% Nonreccuring cost -265 Currency effects +70 Metalprice effect -5 INVENTORY REDUCTION SUPPORT STRONG CASH FLOW 24

SANDVIK MATERIALS TECHNOLOGY Q1 2015 ORDER INTAKE 3,725 INVOICING 3,712 6 000 5 000 4 000 3 000 30% 20% 10% EBIT 100 Excluding metal price effects and nonrecurring items, 370, 10.0 % ROCE 11.3% 2 000 1 000 0-1 000-2 000-3 000 0% -10% 2007 2008 2009 2010 2011 2012 2013 2014 2015-20% Invoicing EBIT margin -30% EBIT margin, excl metal price effect and nonrecurring items ROCE 12 months 25

SANDVIK CONSTRUCTION Q1 2015 POSITIVE BOOK-TO-BILL Slightly higher activity in North America ADJUSTED EBIT 65, 3.0% Nonrecurring cost -160 Currency effect +70 Efficiency measures ongoing SUPPLY CHAIN OPTIMIZATION PROGRAM COMPLETED Finalized closure of mobile crushing unit in Swadlincote, UK 26

SANDVIK CONSTRUCTION Q1 2015 ORDER INTAKE 2,376 INVOICING 2,144 4 000 3 000 2 000 40% 30% 20% EBIT -95 ROCE -0.7% 1 000 0-1 000 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015-10% Adjusted for nonrecurring items, 65, 3.0 % -2 000 Invoicing EBIT margin ROCE 12 months -20% 27

SANDVIK VENTURE Q1 2015 OVERALL STABLE MARKET CONDITIONS SHARP DECLINE IN NORTH AMERICAN ON SHORE OIL AND GAS DRILLING ACTIVITY Additional mitigation actions ongoing ADJUSTED EBIT 202, 9.3% Nonrecurring cost -10 Currency effect +25 28

SANDVIK VENTURE Q1 2015 ORDER INTAKE 2,263 INVOICING 2,172 3 000 2 000 1 000 40% 30% 20% EBIT 192 Adjusted for nonrecurring items, 202, 9.3 % ROCE 7.1% 0-1 000-2 000-3 000-4 000-5 000 10% 2007 2008 2009 2010 2011 2012 2013 2014 2015 0% -10% -20% -30% -40% -50% Invoicing EBIT margin ROCE 12 months 29

LOAN AND DURATION PROFILE LONG TERM 92% SHORT TERM 8% AMOUNT AVERAGE DURATION US Private Placement 6,888 5 years Fin institutions, EIB, NIB 2,327 7 years Swedish MTN 11,046 4 years European MTN 10,206 11 years Bank loans 2,840 4 years Share swap 1,503 1 years Commercial paper 692 4 months Fin institutions, EIB, NIB 463 6 months Swedish MTN 825 7 months Bank loans 764 0 months Share swap 154 1 months Cash position Revolving Credit facilities 7,318 11,050 TOTAL 37,709 6 years 30

LOAN MATURITY PROFILE 8 000 Loan Cash position 6 000 4 000 2 000 0-2 000-4 000-6 000 6 Months Q4 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2032 2033 31

CREATING A LEANER COMPANY SAVINGS PROFILE () SANDVIK MACHINING SOLUTIONS SANDVIK MINING SANDVIK MATERIALS TECHNOLOGY SANDVIK CONSTRUCTION SAVINGS PROFILE ANNUAL RUN-RATE PHASE I TOTAL YE 2015 200 500-100 800* PHASE II TOTAL YE 2016 130 400 70-600 ADJ COST BASE YE 2016 150-95 160 480** TOTAL 480 900 165 260 1,880** *) Annual run-rate at end Q1 2015 360 **) Including 25 for Sandvik Venture and 50 for Group Activities 32

OIL & GAS EXPOSURE REVENUE FROM O&G IN 2014 ~7.5 BN. SEK Limited exposure to O&G sector ~8% O&G/Energy is a long-term commitment for Sandvik albeit short/mid-term variances in order intake 8% O&G OTHER 92% Exposure over 3 business areas Highest in Venture with 1/3 towards oil and gas Different parts of O&G sector Upstream (mainly production) & downstream Off- and on-shore CAPEX and OPEX driven business Geographical spread: NA and RoW ~1/3 ~1/4 ~1/20 33 Venture Sandvik Materials Technology Sandvik Machining Solutions

DIVERSE EXPOSURE WITHIN OIL AND GAS UPSTREAM EXPLORATION CAPEX ON-SHORE NORTH AMERICA OIL DOWNSTREAM PRODUCTION OPEX OFF-SHORE RoW GAS Sandvik Materials Technology Complex off-shore projects with long planning horizon and long day-off times Investment decisions based on long-term oil price Sandvik Venture/Varel Productivity enhancing products with relatively low cost OPEX-driven decisions Quick reactions in shale exploration (new technology) Sandvik Machining Solutions Downturn in oil and gas off-set by other segments e.g. Aerospace and Automotive Group (weighted) 34

ACQUISITION OF VAREL ACQUISITION PRICE AND GOODWILL Purchase price 5.1 BSEK Consideration for shares 2.8 BSEK Loan settlement 2.3 BSEK PURCHASE PRICE ALLOCATION Assigned to tangible and intangible assets 1.6 BSEK Amortized over 10 years ~40 per quarter Goodwill 2.5 BSEK Growth and profitability Strong market position in the oil and gas sector Assigned to inventories 170 Amortized over 3-9 months ~ 35 Q2 2014 ~ 80 Q3 2014 ~ 35 Q4 2014 ~ 20 Q1 2015 35

UPDATED GUIDANCE CAPEX Estimated at below 5bn SEK for 2015. CURRENCY EFFECTS Given currency rates at end of March the effect on EBIT would be +900 for Q2 2015. METAL PRICE EFFECTS Given currency rates, stock levels and metal prices at the end of March, it is estimated that effects on operating profit Q2 2015 will be about -150. NET FINANCIAL ITEMS Net financial items is estimated to be -1.8 to -2.0 bn. SEK for 2015. TAX RATE The tax rate is estimated to about 26 28% for 2015. 36

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.