Sandvik Machining Solutions
Sandvik Machining Solutions is a market-leading manufacturer of tools and tooling systems for advanced industrial metal cutting. The focus is on increasing customer productivity by providing products, services and applications know-how.
High barriers of entry due to capital intensive business model and IP throughout the value chain (high degree of vertical integration). Cutting tools represent a small share of total manufacturing cost for the customers however they are significant for the productivity. Service levels and product solutions are the main differentiator for premium offering. Lower service degree for mid-market which is more price sensitive.
- Global industrial production
- Primary metals consumption
- Materials evolution: aluminum, titanium, composites
- New technologies: additive manufacturing, near-net shaping, 5-axis machining
Estimated market value1, billion SEK
Competitive landscape/Major competitors
- Consolidated in the premium segment: IMC group (Iscar brand), Kennametal (Kennametal brand)
- Fragmented in premium mid-market including global premium players present with their mid-market brands: Mitsubishi, IMC group (Taegutec brand), Kennametal (Widia brand), Zhuzhou
Revenues, billion SEK
Direct sales ~55-60%. Different go-to-market model depending on the geography: NA more distribution sales, EU more direct sales, Asia predominantly distribution sales with limited service offering in the mid-market segment, while majority direct sales with high service level in the premium segment.
Continuous product launches in core segments and increased focus on round tools. Strengthen offer in digital manufacturing and as a solutions provider. Increased focus on channel strategy. Bolt-on acquisitions in core and digital areas.
Multi-brand strategy: Sandvik Coromant, Seco, Walter and Dormer Pramet.
Metal-cutting tools: majority of revenues are derived through inserts and round tools (consumables). Smaller part from tool holders.
Strategic risk management
Various forms of business environment risks with an impact on the metal cutting market in general, mainly changes in customer behavior, increased competition, brand positioning and the development of new products and services.
Material sustainability aspects for 2017–2018
Based on the sustainable business strategy, Sandvik Machining Solutions will focus on:
Innovation and productivity
Compliance; Sustainable supplier management; Efficient use of materials and resources; Health and Safety
1) Addressable market.
2016 in short
Activity in the global cutting tool industry was lacklustre during 2016 and the muted customer activity resulted in negative organic growth in Sandvik Machining Solutions. However, demand improved towards the end of the year and positive growth was achieved in the fourth quarter. In the year in total, North America declined and was the relatively weakest region. Europe and Asia remained over all stable, with Asia – and particularly China – improving strongly towards the end of the period. Demand in the aerospace segment was strong. Customer activity in the general engineering segment improved gradually, while the automotive segment softened in the latter half of the year.
Despite negative organic growth Sandvik Machining Solutions improved the operating margin, supported by the ongoing structural program for consolidation of the manufacturing footprint, reduction of front- and back-office resources as well as a general tight cost control.
Launch of 11,000 new products, focused on the core segments and applications, including the introduction of the first digital tools on the market. These launches are essential to maintain the global No. 1 position.
The integration of the product area Powder and Blanks Technology was successful. It consists of the tungsten mine and recycling business Wolfram Bergbau und Hütten as well as the internal supply of round tool blanks in Sandvik Hyperion. Both operations were previously within the former business area Sandvik Venture.
It is imperative that we maintain the strong flow of product launches in to core segments and applications, for Sandvik Machining Solutions to be the relative winner also in muted market environments. New materials will require new cutting tool solutions and we will leverage on our leading material knowledge and customer understanding. Additionally, to further add to value creation, we will ensure a strict cost control and review of sales-, general- and administration costs and ensure we respond swiftly to changes in customer requirements.
Through close relations and collaboration with customers all over the world we maintain our leading material- and application know-how which enables us to deliver more productive solutions to the market. We will broaden the scope of the offering and expand our digital offer and develop additive manufacturing in order to provide the right solutions to our customers.