SANDVIK CAPITAL MARKETS DAY 2020
32
SANDVIK CAPITAL MARKETS DAY 2020 STEFAN WIDING CEO November 3, 2020
Transcript of SANDVIK CAPITAL MARKETS DAY 2020
SANDVIKCAPITAL MARKETS DAY 2020
STEFAN WIDINGCEO
November 3, 2020
WORLD-LEADING POSITIONS
2
METAL CUTTING AND
MACHINING SOLUTIONS
MANUFACTURING
SOLUTIONS
ADVANCED
MATERIAL
ROCK
PROCESSINGMINING AND ROCK
EXCAVATION
STRATEGY FOR PROFITABLE GROWTH
3
Portfolio clean-up, ensured market
leadership in chosen segments
Decentralized, faster and better
decision-making
Improved performance, becoming
more resilient
Sustainability, safety and compliance
– rooted in business and culture
GROWTH
DIGITALIZATION
SUSTAINABILITY
AGILITY
Organic and M&A
Business and operations
Internal and supporting customers
Being agile through the cycle
NOW INCREASED FOCUS ONSTRONG FOUNDATION – FROM 2016 STRATEGY
FOCUS ON CORE
AND BE No 1 OR 2
IN CHOSEN
MARKETS
AND SEGMENTS
TECHNOLOGY
LEADERSHIP AND
INNOVATION
ACCOUNTABILITY
AND DECISIONS
CLOSE TO
CUSTOMERS
STABILITY AND
PROFITABILITY
BEFORE GROWTH
EFFICIENCY AND
CONTINUOUS
IMPROVEMENTS
CULTURE OF
DOING THINGS
RIGHT
EXCEPTIONAL
PEOPLE
RESULTED IN
FINANCIAL TARGETS FOR THE GROUP
4
≥5%
GROWTH
Through an economic
cycle organic and M&A
≥16%
ADJUSTED EBIT %
TROUGH
Rolling 12 months excl.
metal price effects
<0.5
NET DEBT /
EQUITY RATIO
Incl. net pension
liabilities
50%
DIVIDEND
PAYOUT RATIO
Through an economic
cycle. Adj. for items
affecting comparability
~3%
OUTCOME
16.8% 0.05 44%2016-2019Q3 2020Q3 2020Q1 2016-Q1 2020
PROVEN RESILIENCE
5
DESPITE SIGNIFICANT DROP ON TOPLINE EBIT% IS STILL ON TARGET
70 000
80 000
90 000
100 000
110 000
15 000
20 000
25 000
30 000
2016 2017 2018 2019 2020
Revenues, reported Organic revenues, 12M rolling
10%
13%
16%
19%
22%
2 000
3 000
4 000
5 000
6 000
2016 2017 2018 2019 2020
EBIT* EBIT%* EBIT%* R12 excl. metal prices
SEK m SEK mSEK m %
*Adjusted for Items Affecting Comparability
CONTINUING TO BE AGILE
6
2019One step ahead
2020Quick action
2021Permanentsavings
1.7 1.5SEK 1.3A business
geared for
profitable
growth
Total execution of SEK 2.2 B
Covid-19 cost measures Q2-Q3
2020
B
ANNOUNCED SAVINGS
SEK BSEK B
SUSTAINABILITY AS A GROWTH OPPORTUNITY
7
A BUSINESS ADVANTAGE FOR US AND OUR CUSTOMERS
Our offering development aim to reduce global CO2 emissions for us and our
customers. We shift to more circular business models to increase outcome
and value.
CLIMATE CIRCULARITY
KANTHAL
• Shifting from gas furnaces to electric furnaces
• CO2 reductions of, to date, 170,000 tonnes
• Innovation
• Customized solutions
SANDVIK ROCK PROCESSING SOLUTIONS (SRP)
• SRP Svedala, one of the worlds most sustainable
manganese foundries
• More than 90% recycled steel
• Life-cycle analysis proving major competitive
advantages
8
Strong culture
Passionate people
Decentralization
Portfolio clean-up
9
”WE HAVE A SOLID
PLATFORM TO START FROM.
NOW, WE SHIFT TO
GROWTH.”
10
SMT STRONGER AS A SEPARATELY LISTED COMPANY
STARTING POINT
- A leading player in its field
- A strong development
- Establishing a track-record
RATIONALE
- Realize its full potential
- Capitalize on its strategies and
opportunities to drive profitable growth
- Greater focus and clarity
OPERATIONAL
- Best possible opportunities to
grow and develop
- Inspired workforce
- Capitalize on the full supply chain
FINANCIAL
- Distinguished investment cases and
equity stories
- Facilitates separate funding and capital
allocation
- Fair valuations for both SMT and Sandvik
STRATEGIC
11
Announcement to internally
separate SMT and look
into possibility of listing
Internal separation
completed
Board decision to continue
the process towards a full
separation and listing of
SMT
Board of Directors of SMT
to be appointed
Board decision to propose
distribution of SMT to
shareholders
Publication of Information
Brochure
General Meeting of
Shareholders to resolve
distribution of SMT
Publication of SMT’s listing
prospectus
Distribution of SMT’s
shares to Sandvik’s
shareholders
First day of trading SMT’s
shares
or when the conditions
are deemed right2019 2020 2021 2022Phase 2 in separation and
preparation of SMT for a
listing process
Staff and prepare for listing
SANDVIK MACHINING
SOLUTIONS
Strong core – but needs to increase growth, and
with more focus on manufacturing adjacencies
POSITIONED FOR GROWTH
12
SANDVIK MINING & ROCK
TECHNOLOGY
In good shape – and more potential in Rock
Processing
SANDVIK MATERIALS
TECHNOLOGY
World leading materials company – better off on
its own
SANDVIK MINING &
ROCK SOLUTIONS
SANDVIK MANUFACTURING & MACHINING
SOLUTIONS
POSITIONED FOR GROWTH
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SANDVIK MATERIALS
TECHNOLOGY
SANDVIK ROCK
PROCESSING SOLUTIONS
SANDVIK MACHINING
SOLUTIONS
SANDVIK MANUFACTURING
SOLUTIONS
POTENTIAL
EXPANSION
ROCK PROCESSING
CREATING TWO WORLD LEADERS
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SEPARATIONGRINDINGCRUSHINGMATERIALS
HAULAGEDRILL & BLAST
EXPLORE
& PLAN
Separation of crushing & screening from SMRT releases
potential in both businesses
– Enhanced growth opportunities as separate businesses
– Focused strategy and more independent decision making
– Largely independent – products, customers and competitors are separate
– Increased transparency
ROCK EXTRACTION
SANDVIK MINING AND
ROCK SOLUTIONS (SMR)
SANDVIK ROCK
PROCESSING
SOLUTIONS (SRP)
ADDITIVE
EXPANDING OUR OFFER ABOVE AND BEYOND
15
VERIFICATIONMACHININGPRODUCTION
PREPARATION
COMPONENT
DESIGN
Separation of Manufacturing Solutions from Machining Solutions
releases potential in both businesses
– Enhanced growth opportunities as separate businesses
– Enhanced focus and speed in execution
– Fit-for-purpose governance models and skills-sets
– Execute together with strong independent brands
MANUFACTURING SOLUTIONS
MACHINING SOLUTIONS
POTENTIAL
EXPANSIONPOTENTIAL EXPANSION
A BUSINESS GEARED FOR GROWTH
FORECASTED MARKET GROWTH 2019-2025, CAGR
SANDVIK MINING &
ROCK SOLUTIONS
SANDVIK MANUFACTURING & MACHINING
SOLUTIONS
SANDVIK ROCK
PROCESSING SOLUTIONS
SANDVIK MACHINING
SOLUTIONS
SANDVIK MANUFACTURING
SOLUTIONS
~3% 2.5-3% ~2% >10%
≥5%Through an economic
cycle organic and M&A
ACQUISITIVE GROWTH
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ADDING REVENUES OF
~2 BN
~2.5%THROUGH A CYCLE
ADDING REVENUES OF
~0.6 BN
• Acquisition process to
be developed further
• Improve integrations
post acquisitions
• Make it a normal part of
driving the business in
most divisions
CLOSED ACQUISITIONS
2016-2020ANNOUNCED
ACQUISITIONS
SANDVIK MINING &
ROCK SOLUTIONS (SMR)
SANDVIK MANUFACTURING & MACHINING
SOLUTIONS (SMM)
23 DIVISIONS WILL MAKE IT HAPPEN
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SANDVIK MATERIALS
TECHNOLOGY (SMT)
SANDVIK ROCK
PROCESSING
SOLUTIONS (SRP)
SANDVIK MACHINING
SOLUTIONS (SMS)
SANDVIK MANUFACTURING
SOLUTIONS (SMF)
Underground Drilling
Mechanical Cutting
Surface Drilling
Rotary Drilling
Rock Drills & Technologies
Rock Tools
Parts & services
Load & Haul
Stationary Crushing & Screening
Mobile Crushing & Screening
Attachment Tools
Shanbao (JV)
Sandvik Coromant
Seco
Walter
Dormer Pramet
Wolfram
Design & Planning
Automation
Additive Manufacturing
Metrology
Tube
Kanthal
Strip
KEY TAKE AWAYS
– Our overall targets and strategy remain
– We have shown resilience, and we will continue to be agile
– We have a good foundation to build on – now we shift to growth
– The structure is evolving to increase focus and transparency
– Our 23 divisions will make it happen
FINANCIAL OVERVIEW2016-2020 AND GOING FORWARD
TOMAS ELIASSONCFO
November 3, 2020
WEAKENING CYCLE FOLLOWED BY COVID 19
21
0
20 000
40 000
60 000
80 000
100 000
120 000
0
5 000
10 000
15 000
20 000
25 000
30 000
2016 2017 2018 2019 2020
SE
K m
SE
K m
REVENUES
Revenues, reported Organic Revenues, 12M rolling
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2016 2017 2018 2019 2020%
ORGANIC GROWTH
Organic growth 12M rolling
SAVINGS PROGRAMS – ONE STEP AHEAD
22
Costs returns partially
as volumes returns
2019
SEK 0.4 B
Work-time
reductions
SEK 1.1 B
Temporary
savings
SEK 1.1 B
2021 - Permanent savings2020 - Quick action
SEK 1.5 B SEK 1.3 B
2019 - One step ahead
SEK1.7 B
35 000
36 000
37 000
38 000
39 000
40 000
41 000
42 000
43 000
44 000
45 000
1/1/2019 Organic 2019program
1/1/2020 Work timereduction
2019program
Organic 30/9/2020
FT
Es
STRUCTURE
50%VOLUME
50%2020
SEK 1.2 B
2021
SEK 0.1 B
Split by year
SANDVIK AND NON-SANDVIK PERSONNEL, RESTATED FOR STRUCTURE
Short-term savings to be
partially replaced by permanent
savings
2019 and 2021 savings
programs results in SEK 3 B
lower cost base
~5,000 permanent FTE
reductions estimated 2019-2021
ANNOUNCED
GROSS CONTRIBUTION SHOWS RESILIENCE
50%
52%
54%
56%
58%
60%
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
2016 2017 2018 2019 2020
%
SE
K m
GROSS CONTRIBUTION
Gross contribution Contribution margin 12M rolling
Pricing positive despite top line pressure
Variablized cost structure supports
Footprint consolidation
GROSS MARGIN IMPACTED BY FIXED COSTS
2424
35%
37%
39%
41%
43%
45%
0
2 000
4 000
6 000
8 000
10 000
12 000
2016 2017 2018 2019 2020
%
SE
K m
GROSS PROFIT
Gross profit Gross margin 12M rolling
Fixed cost structure
Longer lead time
Footprint consolidation will support
CONTINUED SG&A COST REDUCTION
25
GOING FORWARD
Partially replace temporary savings with
permanent savings to keep SG&A% at
healthy levels20%
22%
24%
26%
28%
30%
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2016 2017 2018 2019 2020
%
SE
K m
S, G & A
SG&A SG&A% 12M rolling
Ratio to revenues troughed at 26% 2016
Back on 23% at peak 2018
In current downturn – down to 22% with
strong support from temporary savings
RESILIENT EBIT MARGIN
10,0%
12,0%
14,0%
16,0%
18,0%
20,0%
0
1 000
2 000
3 000
4 000
5 000
6 000
2016 2017 2018 2019 2020
%
SE
K m
EBIT
EBIT EBIT% 12M rolling EBIT% 12M rolling ex metals
Financial
target
Sharp drop in demand
Savings programs: one step ahead
Decentralizing drives agility
More variabilized costs and supply chain
consolidation drives efficiency to mitigate
downturns
Continuously reviewed contingency plans
depending on scenario
INTEREST NET AND TAXES
27
20,0%
21,0%
22,0%
23,0%
24,0%
25,0%
26,0%
27,0%
28,0%
29,0%
2016 2017 2018 2019 2020
%
TAX RATE
Tax Rate
0
200
400
600
800
1000
1200
1400
1600
0
50
100
150
200
250
300
350
400
2016 2017 2018 2019 2020
SE
K M
SE
K m
INTEREST NET
Interest Net Interest net 12M rolling
STRONG CASH FLOW AND MANAGING NWC
0
5 000
10 000
15 000
20 000
25 000
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2016 2017 2018 2019 2020
SE
K m
SE
K m
CASH FLOW
Cash Flow EBITA 12M rolling Cash flow 12M rolling
15,0%
17,0%
19,0%
21,0%
23,0%
25,0%
27,0%
29,0%
31,0%
33,0%
10 000
12 000
14 000
16 000
18 000
20 000
22 000
24 000
26 000
28 000
30 000
2016 2017 2018 2019 2020
%
SE
K m
WORKING CAPITAL
NWC NWC%
STRENGTHENED BALANCE SHEET
HEADROOM FOR M&A
29
0,00
0,50
1,00
1,50
2,00
2,50
3,00
3,50
2016 2017 2018 2019 2020
Net
de
bt/
EB
ITD
A
NET DEBT / EBITDA (S&P definition)
Net debt / EBITDA
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
1,1
-15 000
-10 000
-5 000
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
2016 2017 2018 2019 2020
Net
de
bt /
eq
uity
SE
K m
NET DEBT
Financial Debt Pensions Leases Gearing
Financial
target
Rating
threshold
CAPITAL ALLOCATION
DEBT
REDUCTIONDIVIDEND
M&A
BALANCE SHEET READY TO SUPPORT GROWTH
2016-2020: GETTING BALANCE SHEET IN SHAPE 2020- : LEVERAGE GROWTH OPPORTUNITIES
Annual cash flow after dividend
~SEK 5 B equals ~2% acquired growth
Gearing target 0.5 implies headroom of
> SEK 30 B in balance sheet
Gearing target does not include
transformational M&A
BALANCE SHEET AFTER SMT SPIN
GROUP NEW GROUP NEW SMT
Cash 23.4 22.4 1.0
Net Debt 3.1 2.6 0.5
Equity 66.0 54.4 11.6
Gearing 0.05 0.05 0.04
SIMULATION BASED ON B/S END OF Q3 2020
Stefan Widing
Tomas EliassonQ&A32
