Sandvik : Interim report 2020 Q4.pdf

PRESS RELEASE 21 JANUARY 2021

INTERIM REPORT

FOURTH QUARTER 2020

AND FULL YEAR 2020

Q4 SANDVIK INTERIM REPORT 2020	Comments and numbers in the report relate to
continuing operations, unless otherwise stated

SHIFTING TO GROWTH WITH MARGIN AT A RECORD LEVEL

CEO'S COMMENT: The pace of recovery that was noted at the beginning of October continued throughout the fourth quarter. Demand in our long-cycle mining business was strong and we saw a sequential uptick in our short-cycle business. Consequently, organic order intake (excluding major orders) for the Group grew by 3% year on year. Despite lower revenues in the wake of Covid-19, we delivered strong and improved adjusted margin of 20.1% (19.1) in the quarter, supported by our short and long term savings initiatives, which is a confirmation of our tight cost control and our agility during this year's challenging market conditions. During the quarter, we delivered approximately SEK 920 million in savings and lower discretionary spend for the Group compared with the preceding year. However, the headwind from currency had an impact on both reported revenues and reported operating profit. Organic order intake and revenues for full year 2020 declined by -12% and -11% respectively, heavily impacted by the Covid-19 pandemic. At the same time, Sandvik has been able to maintain resilient adjusted margins of 16.9% (18.6).

A record order intake was noted for Sandvik Mining and Rock Technology, increasing by 15% year on year, with a continued strong momentum in equipment and improved performance in the aftermarket business. During the quarter, we announced the deal to acquire the market-leading safety solutions company DSI Underground, which will become part of Sandvik Mining and Rock Solutions business area. DSI Underground's consumables business adds stability to our earnings profile, strengthens Sandvik's underground mining offering and is an important step in our overall growth ambition.

Sandvik Manufacturing and Machining Solution's organic order intake declined by -7% year on year, albeit with a sig- nificant sequential improvement driven by automotive and increased activity in Asia, in particular China. Daily order intake in December was in the negative mid-single-digits year on

year, and this trend has improved in the first weeks of Janu- ary, with order intake in the negative low single digit range. In December, we completed the acquisitions of Miranda Tools, a supplier of high-speed steel and solid carbide round tools and US based CGTech, the global leader in software for numerical control, simulation, verification and optimization.

Sandvik Materials Technology's order intake declined by

-31%. Excluding major orders of SEK 1.1 billion for advanced tubular products in the year earlier period, order intake declined by -7%, attributable to the continued low demand within oil and gas, which was partially offset by increased demand within industrial heating and the consumer-related segments.

While the quarter was characterized by increased optimism and a higher degree of activity, we nonetheless find ourselves in the midst of the second wave of Covid-19. It remains difficult to predict the short-term consequences, and in the long-term, the handling of the pandemic and economic policy decisions will determine the speed and strength of the re- covery. Meanwhile, our priorities are to continue with pre-cautionary measures to keep our employees and customers safe and to stay focused on executing our savings initiatives while capturing the interesting growth opportunities that lie ahead of us.

The Board of Directors proposes an ordinary dividend of SEK

4.50 per share (0). In addition, the Board proposes an extra dividend of SEK 2.00. This total level takes into consideration current market conditions and a prioritization of a continued solid balance sheet to support our growth ambitions. The dividend proposal represents 75% (0) of adjusted EPS for the Sandvik Group in total.

Stefan Widing

President and CEO

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Q4 SANDVIK INTERIM REPORT 2020

FINANCIAL OVERVIEW, MSEK	Q4 2019	Q4 2020	CHANGE %	Q1-Q4 2019	Q1-Q4 2020	CHANGE %
Continuing operations	25,179	22,051	-2	104,075	86,287	-12
Order intake 1)
Revenues 1)	26,583	22,408	-6	103,238	86,404	-11
Gross Profit	10,380	8,644	-17	41,576	32,237	-22
% of revenues	39.0	38.6	N/M	40.3	37.3	-16
Operating profit	744	3,487	13,386	11,216
% of revenues	2.8	15.6	-11	13.0	13.0	-24
Adjusted operating proƮt 2)	5,066	4,505	19,219	14,563
% of revenues	19.1	20.1	N/M	18.6	16.9	-7
Profit after net financial items	471	3,407	12,150	11,270
% of revenues	1.8	15.2	-8	11.8	13.0	-22
Adjusted proƮt after net Ʈnancial items 3)	4,792	4,424	17,982	14,029
% of revenues	18.0	19.7	N/M	17.4	16.2	0
Profit for the period	-87	2,633	8,728	8,753
% of revenues	-0.3	11.8	N/M	8.5	10.1	0
Earnings per share, basic, SEK	-0.06	2.10	6.97	6.99
Earnings per share, diluted, SEK	-0.06	2.10	N/M	6.96	6.98	0
Adjusted earnings per share, basic, SEK 2, 3)	3.21	2.68	-16	11.12	8.64	-22
Return on capital employed, % 4)	3.9	15.6	-6	15.2	13.3	-10
Cash flow from operations	5,581	5,228	17,046	15,414
Net working capital % 4)	24.8	24.3		25.2	27.5
Discontinued operations	-62	-13	-80	-205	-32	-85
Profit for the period
Earnings per share, basic, SEK	-0.05	-0.01	N/M	-0.16	-0.03	N/M
Group Total	-149	2,621	N/M	8,523	8,721	2
Profit for the period
Earnings per share, basic, SEK	-0.11	2.09	N/M	6.81	6.96	2
Earnings per share, diluted, SEK	-0.11	2.09	N/M	6.79	6.95	2
Adjusted earnings per share, SEK 2, 3)	3.16	2.67	-15	10.96	8.61	-21

1. Change from the preceding year at Ʈxed exchange rates for comparable units. 2) ProƮt adjusted for items aƬecting comparability of SEK -1.0 billion in Q4 2020 (-4.3) and to SEK -3.3 billion YTD 2020 (-5.8). For Q4 2020 these are primarily related to savings measures, the FY 2020 is also primarily impacted by costs related to Varel Oil & Gas disposal in Q1. FY 2019 is primarily related to ef- Ʈciency measures, impairment and divestment of Hyperion. See page 23. 3) Net Ʈnancial items includes items aƬecting comparability of SEK 0.6 billion for FY 2020 (0). There are no items aƬecting comparability in net Ʈnancial items for Q4 2020 (0), see page 23. 4) Quarter is quarterly annualized and year-to-date numbers are based on a four quarter average.

Tables and calculations in the report do not always agree exactly with the totals due to rounding.

Comparisons refer to the year-earlier period, unless stated otherwise.

For deƮnitions see home.sandvik

N/M = not meaningful

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Q4 SANDVIK INTERIM REPORT 2020

MARKET DEVELOPMENT

ORDER INTAKE

GROWTH

Q4	ORDER INTAKE	REVENUES
Price/volume, %	-2	-6
Structure, %	-2	-2
Currency, %	-9	-9
TOTAL, %	-12	-16

Change compared to same quarter last year. The table is multiplicative, i.e.. the diƬerent components must be multiplied to determine the total eƬect.

MSEK

1. 000

1. 000

1. 000

1. 000

1. 000

During the quarter, order intake declined organically by -2% year on year. Ex-

0

cluding major orders in Sandvik Materials Technology received in the year earlier

2018

2019

2020

period, order intake grew by 3%. Revenues declined organically by -6%.

Q1

Q2

Q3

Q4

In the midst of a second wave of Covid-19, a gradual recovery was seen in specific

end-markets and segments in the fourth quarter. Organic order intake for the Group

was slightly negative, but excluding major orders, showed a positive development

REVENUES AND BOOK TO BILL

year on year for the first time since the first quarter of 2019, fueled by strong de-

mand in the mining business. While demand in aerospace and oil & gas remained

MSEK

PERCENT

subdued, customer activity in engineering and, in particular, automotive intensified in

120 000

120

the period.

100 000

The sentiment in mining remained solid with high demand and favorable development

80 000

60 000

100

for mineral prices, resulting in organic order intake growth of 15% for Sandvik Mining

and Rock Technology. Sandvik Manufacturing and Machining Solutions reported a

40 000

year on year decline in organic order intake of -7%. Organic order intake improved

20 000

sequentially for Sandvik Materials Technology, but compared to the corresponding

0

80

period in the preceding year declined by -31%. Excluding major orders received in

2018

2019

2020

the year earlier period of SEK 1.1 billion within advanced tubular products for the en-

ergy segment, Sandvik Materials Technology's organic order intake declined by -7%.

Q1

Q2

Q3

Q4

Book-to-bill (YTD)

Demand in parts of Europe improved sequentially driven by automotive and mining activity, and overall organic order intake declined year on year by -2%. North America declined with -23% while order intake in Asia increased by 4%, reflecting the continued economic recovery in the region.

Changed exchange rates had a negative impact of -9% on both order intake and on

revenues.

MINING

GENERAL

AUTOMOTIVE

ENERGY

CONSTR.

AERO

Q4

ENGINEERING

40%

23%

11%

10%

8%

5%

UNDERLYING MARKET DEVELOPMENT

of 2020 revenues

% of 2020

Order intake Y/Y

Group revenue

(excl. large orders)

Europe

35%

-2%

(-2%)

North

22%

-23%

America

(-6%)

Asia

20%

+4%

(+4%)

Africa/

9%

+26%

Middle East

(+26%)

Australia

9%

+4%

(+4%)

South

5%

+24%

America

(+24%)

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