Presentation 2014 (PDF)
INVESTOR PRESENTATION Updated 29 January 2015 BUSINESS IDEA Sandvik shall develop, manufacture and market highly processed products, that contribute to improving the productivity, profitability and safety of our customers. Operations are primarily concentrated in areas where Sandvik is – or has the potential to become – a world leader. INDEX Cost development Business Idea Improved productivity Productivity gap Price development TIME OUR VISION: WE SET THE INDUSTRY STANDARD It is our guiding principle. We set the industry standard, means that we strive for nothing less than being number one. STRATEGIC DIRECTION • How we will achieve our direction GROWTH FLEXIBLE ORIENTED AND AGILE TRULY TECHNOLOGY EXCEPTIONAL GLOBAL LEADER PEOPLE OUR WAY FORWARD KEY PRIORITIES BY BUSINESS AREA SANDVIK MINING • Consolidate footprint: Manufacturing • Cost efficiency: Sourcing and A&S • Grow share of aftermarket • New offering including midmarket • Sales excellence SANDVIK MACHINING SOLUTIONS • Leverage from Multi-brand model, with backend synergies • Increase pace of core product launch and digital offer • 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 5 YIELD HIGHER RETURNS SANDVIK MATERIALS TECHNOLOGY • 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 SANDVIK CONSTRUCTION • Sales efficiency and commercial excellence • Accelerate growth of businesses • Supply chain and footprint optimization • New products • After Market development • Focused growth areas • Mid-market strategy • Structured transformation program • Improve capital efficiency • Exit non-core businesses REDUCE EARNINGS VOLATILITY SANDVIK VENTURE DEVELOP MORE TOWARDS FAST GROWING MARKETS • Continued globalization • Complimentary acquisitions SANDVIK STRENGTH FACTORS • Proven track record in premium segments • Technology leadership in product markets • High entry barriers, by vertically integrated business model • • • • 6 Value selling part of corporate culture Unique product offering Pricing power Strong customer relations and strong market position OPPORTUNITIES FOR OUR CONTINUED GROWTH • • • • • • 7 Emerging markets a stronger global force Increased wealth/demographic shift Increased energy consumption Industrial innovation Shorter product life cycles at customers Expansion possibilities beyond our premium segments FINANCIAL HIGHLIGHTS FULL YEAR 2014 MSEK Invoicing EBIT ROCE Employees 88,821 MSEK 10,120 MSEK, 11.4% 13.4% 47,318 100 000 50% 90 000 45% 80 000 40% 70 000 35% 60 000 30% 50 000 25% 40 000 20% 30 000 15% 20 000 10% 10 000 5% 0% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -5% -10 000 Adjusted 8 EBIT margin Adjusted EBIT margin* ROCE FINANCIAL TARGETS FOURTH QUARTER 2014 CURRENT GROWTH ROCE TARGET 7%* 13.4% MANAGEMENT FOCUS 8% • Product launches through focused R&D • Increase exposure towards high growth markets and segments • Adjust geographic footprint 25% • Reduce Net Working Capital • Strict capital allocation (investments) • Restore earnings in Sandvik Mining and Sandvik Construction • Strong cash flow generation NET DEBT/ EQUITY RATIO DIVIDEND 0.75 <0.8 73% for 2014** 50% of EPS * Actual reported including structure and currency ** Proposed dividend 9 • Uninterrupted dividend since 1870 INVOICING BY MARKETS AND SEGMENTS SALES 2013 SHARE OF GROUP TOTAL CUSTOMER SEGMENTS EUROPE ASIA 38% 19% NORTH AMERICA AUSTRALIA 19% 8% Consumer related 3% Aerospace 5% Other 2% Energy 14% Mining 32% Automotive 11% AFRICA 9% SOUTH AMERICA 7% Construction 11% Engineering 22% Change (p/v) compared with 2013 10 Pie chart representing share of invoicing 2014 BUSINESS AREAS SANDVIK GROUP SANDVIK MINING Equipment, tools, service and technical solutions for exploration, excavation and processing of rock and minerals in the mining industry. 30% SANDVIK MATERIALS TECHNOLOGY SANDVIK MACHINING SOLUTIONS Holds a clear global leadership by offering productivity enhancing products and solutions for advanced industrial metal cutting. 21% Share of Sandvik Group’s total invoicing 2014 34% 54% Industry-leading provider of high valueadded products in advanced metallic materials for selected niches in the most demanding industries. 17% 17% Share of Sandvik Group’s operating profit 2014 adjusted for nonrecurring charges SANDVIK CONSTRUCTION The world’s widest range of rock drilling, rock excavation, rock processing, demolition and bulk-materials handling equipment, tools, services and technical solutions for the construction industry. 10% 0% SANDVIK VENTURE Unique customer offering within selected areas. 9% 8% SANDVIK MINING SHARE OF GROUP’S TOTAL INVOICING 2014 30% OFFERING AREAS BUSINESS CONCEPT • • • • • ”The Safest mining supplier” Premium brand Direct sales Value-adding products and services Capital and cost efficient business system Mechanical Cutting Rock Tools Underground Load and Hauling Crushing and screening Drilling Exploration Customer Services Mining Systems KEY SUCCESS FACTORS • • • • New technologies – the future of mining World-class service and distribution network Best cost country sourcing Growth in Asia Auto Mine Competitors • • • 12 • Atlas Copco Metso Minerals Caterpillar Joy Global Customer groups • • • Boart Longyear Sany Tiandi • • • • Metal mines Coal and mineral mines Drill and blast contractors Engineering houses MINING DEMAND DRIVERS MINERAL EXPOSURE SALES DISTRIBUTION 2014 INVOICING 2014 Mining capex, metal and mineral prices and extraction levels. Diamond and Other 2% MINING INDUSTRY TRENDS • • • • • • • Environment, Health and Safety Remote locations and declining ore grades Energy consumption and water scarcity Shortage of people Semi to full automation Importance of service Larger operations, massive mining Australia 17% Europe 10% North America 13% Asia 21% Mining Systems 26% Coals & Minerals 23% Base Metals 28% Aftermarket 53% South America 17% Iron ore 17% Platinum 6% Equipment 21% Africa/ Middle East 22% Gold & Silver 24% Share of sales 2014. Aftermarket includes Spare parts, Rock tools and Services. Share of sales 2014. MARKET CHARACTERISTICS • • • • Target market size: ~185 BSEK Growth rates: 6-8% driven by mining capex Large aftermarket Niched competitive landscape MSEK Invoicing 10 000 EBIT margin ROCE 12 months 8 000 40% 6 000 30% 4 000 20% 2 000 10% 0 0% 2007 -2 000 13 50% 2008 2009 2010 2011 2012 2013 2014 -10% SANDVIK MACHINING SOLUTIONS SHARE OF GROUP’S TOTAL INVOICING 2014 34% PRODUCT AREAS Sandvik Coromant Seco Tools Walter DormerPramet BUSINESS CONCEPT • Productivity services • World-class logistics to support JIT (Just In Time) supply • Use of a multibrand strategy • Premium brands – Sandvik Coromant, Seco Tools, Walter • Mid market brands – Dormer, Carboloy, Pramet, Safety, Impero KEY SUCCESS FACTORS • Expand in emerging markets • New products / time to market 14 Premium brands The world's leading supplier of metal cutting tools, tooling solutions, service and knowhow for the metalworking industry. Leading manufacturer of high performance metal cutting tools, providing complete solutions for the metal cutting industry. Mid-market brands Innovative tool solutions for turning, drilling, milling and threading operations, as well as multilevel service programs. Competitors • • Kennametal IMC Group • • OSG Sumitomo • • Mitsubishi Kyocera Indexable tools, round tools and other products for metal cutting. MACHINING SOLUTIONS DEMAND DRIVERS • Developments in machine tools and material technology drives increased importance of niche applications and special products • Increasing importance of mid-market segment, especially in emerging markets • Indirect channels growing in importance • Importance of e-marketing developing fast Australia 1% Mining 2% • Primary metals consumption leading to global industrial production (automotive, aerospace, energy applications etc.) METAL CUTTING INDUSTRY TRENDS INVOICING 2014 END CUSTOMER SEGMENTS Africa/ Middle East 1% South America 4% Aerospace 11% Energy 11% Engineering 48% Automotive 28% Asia 19% Europe 54% North America 22% Share of sales 2014 MSEK MARKET CHARACTERISTICS • Market size: About 150 BSEK • Market share: Around 20% • Growth rates: Industrial Production (IP) driven, 4-5% historically Invoicing 10 000 EBIT margin ROCE 12 months 8 000 40% 6 000 30% 4 000 20% 2 000 10% 0 0% 2007 -2 000 15 50% 2008 2009 2010 2011 2012 2013 2014 -10% SANDVIK MATERIALS TECHNOLOGY 17% SHARE OF GROUP’S TOTAL INVOICING 2014 PRODUCT AREAS Primary Products Tube In house up stream supplier to the other product areas - and external sales of bars, billets and rock drill steel. Seamless tubes and pipes in an extensive program of stainless steels, nickel alloys, titanium, zirconium or other advanced materials. Strip, Wire and Heating Technology BUSINESS CONCEPT • Product innovation, technology leadership and close, longterm customer relationships. • The cutting-edge expertise is based on world leading metallurgy and R&D/materials technology. • The high value-added products are aimed at helping customers fulfill – and even exceed – their productivity and performance expectations. KEY SUCCESS FACTORS Metal and ceramic resistance materials in the form of wire, strip, elements and systems for electrical heating. Strip steel and strip-based products in high and special alloy grades, metal powder, Hot Isostatic Pressed (HIP) and welding products, wire for advanced applications, controlled expansion alloy products. Competitors • Growth in the energy segment • Growth in Asia • New product development • • • 16 Sumitomo Valinox Tubacex • • Hitachi Böhler Uddeholm • • • ThyssenKrupp VDM Ugitech Jiuli • BaoSteel MATERIALS TECHNOLOGY DEMAND DRIVERS • Energy demand and oil prices (Oil & Gas and Nuclear) • Consumer demand (razors, electronics, white goods) • Automotive production END CUSTOMER SEGMENTS Mining Aerospace 3% 3% Medical 2% Construction 4% Automotive 7% Consumer & Electronics 13% General Engineering 19% Australia 5% Africa/ Middle East 1% South America 2% Chemical 7% INDUSTRY TRENDS • Increased demands on safety and reliability • Environmental demands on longer lifecycles and sustainability • Energy consumption • Increased requirements on productivity and cost-efficiency INVOICING 2014 Energy 42% Asia 17% Europe 49% North America 26% Share of sales 2014 (excluding divested businesses) MSEK MARKET CHARACTERISTICS • Market size: More than 100 BSEK • Market share: 5-50% depending on niche • Growth rates: 4-6%, normally higher growth in areas such as the energy segment 6 000 60% 5 000 50% 4 000 40% 3 000 30% 2 000 20% 1 000 10% 0 -1 000 -2 000 17 -3 000 0% 2007 2008 2009 2010 2011 2012 2013 Invoicing EBIT margin EBIT margin, excl metal price effect and nonrecurring items ROCE 12 months 2014 -10% -20% -30% SANDVIK CONSTRUCTION BUSINESS CONCEPT • • • • • Target core niches globally Be Global – Act Local Premium brands & Mid-market brand Multibrand & multichannel Low asset based and cost effective business system KEY SUCCESS FACTORS • Service is our success • Customer knowledge • Competitive offering SHARE OF GROUP’S TOTAL INVOICING 2014 10% TARGET NICHES Surface Drill & Blast Contracting • Surface Drills • Rock Tools Breaking, Crushing & Screening Contracting • Breakers • Mobile Crushers & Screens • Manganese Aggregates & Cement Quarrying Underground Civil engineering Contracting • • • • • • • Underground Drills & Bolters • Breakers • Mechanical Cutting • Loading & Hauling • Rock Tools Crushers Screens Surface Drills Systems Rock Tools Manganese Consumables, wear parts, spare parts and services Sandvik: premium brand for full offering Rammer: premium brand for breakers Shanbao: mid-market for breakers, crushers and screens Largest global competitors: Atlas Copco, Terex, Metso, Furukawa 18 CONSTRUCTION DEMAND DRIVERS • • • • Population growth World economy Urbanization Infrastructure INVOICING 2014 SALES DISTRIBUTION Australia 5% Surface drill Underground civil engineering and blast contracting 20% 20% Asia 21% Europe 39% CONSTRUCTION INDUSTRY TRENDS • • • • • • • Environment, Health and Safety Mobile solutions and flexibility Increased productivity Advances in technology Emergence of “mid-market” Importance of the competition from Asia Importance of service Aggregates and cement quarrying 30% • • • • • Target market size: 140 BSEK Growth rates: 4% average long-term More than 20,000 customers Large aftermarket Local business South America 10% North America 17% Share of sales 2014 MSEK Invoicing 4 000 MARKET CHARACTERISTICS Africa/ Middle East 11% Breaking, crushing and screening contracting 30%: EBIT margin ROCE 12 months 40% 3 000 30% 2 000 20% 1 000 10% 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 -1 000 -10% -2 000 -20% 19 SANDVIK VENTURE SHARE OF GROUP’S TOTAL INVOICING 2014 PRODUCT AREAS Wolfram Bergbau und Hütten Sandvik Process Systems Sandvik Hyperion 9% Varel International Energy Services BUSINESS CONCEPT • Sandvik Venture creates value through profitable growth of small to mid-sized businesses of particular interest for Sandvik • Grow profitable stand-alone businesses that can provide value to Sandvik, strategically as well as financially A world leading manufacturer of tungsten oxide-, tungsten metal-, and tungsten carbide powders. Competitors • • • 20 Kennametal Iscar Berndorf A leading global manufacturer of Hard and Superhard materials Providing high performance steel belts and steel plates, steel belt based processing equipment and processing equipment based on adjacent technologies. • • Ceratizi HC Starck • • Element Six GTP A leading global supplier of oil and gas drilling solutions; drill bits, down-hole products for well construction and well completion. VENTURE DEMAND DRIVERS • Demand for productivity improvements • Increased recycling focus • Primary metals consumption leading to global industrial production (aerospace, energy applications etc) • Growth of oil & gas sector and shift to more advanced drilling techniques • Chemical industry development • Construction (wood based panels) INVOICING 2014 SALES DISTRIBUTION Consumer related 4% Mining 11% Aerospace 4% Australia 1% Engineering 24% Automotive 5% Other 12% Construction 9% Africa/ Middle East 2% South America 3% Energy 31% Asia 20% Europe 57% North America 17% MARKET CHARACTERISTICS • Market share: 5-60% depending on niche • Growth rates: Group average at 4-6% Share of sales 2014 (Including Varel) MSEK 4 000 40% 3 000 30% 2 000 20% 1 000 10% 0 -1 000 2008 2009 2010 2011 2012 2013 2014 -10% -2 000 -20% -3 000 -30% -4 000 -40% -5 000 21 0% 2007 Invoicing EBIT margin ROCE 12 months -50% GROUP EXECUTIVE MANAGEMENT OLOF FAXANDER President and CEO JIM NIXON President of Sandvik Venture JESSICA ALM Executive Vice President and Head of Communications SCOT SMITH President of Sandvik Mining MATS BACKMAN Chief Financial Officer and Executive Vice President ÅSA THUNMAN Excecutive Vice President and General Councel PETRA EINARSSON President of Sandvik MaterialsTechnology DINGGUI GAO President of Sandvik Construction JONAS GUSTAVSSON President of Sandvik Machining Solutions ANNA VIKSTRÖM PERSSON Executive Vice President and Head of Human Resources OLLE WIJK Executive Vice President and Head of Group R&D ZZ ZHANG Executive Vice President and Head of Emerging Markets SANDVIK.COM 23
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