Sandvik Mining and Rock Technology

Sandvik Mining and Rock Technology is a leading supplier in equipment and tools, service and technical solutions for the mining and construction industries. Application areas include rock drilling, rock cutting, crushing as well as screening, loading and hauling, tunneling, quarrying and breaking and demolition.

Market characteristics

Mining

Consolidated customer base of some 200 global major and junior miners. Remote locations, decreasing ore-grades as well as safety requirements drive volume output and need for semi- to fully automated solutions. Significant aftermarket business.

Construction

Sandvik is active in the niche of rock excavation and communition. Customer base is fragmented with more than 25,000 individual customers. Localized offering and local competition.

Demand drivers

Mining

  • GDP growth rate and resource intensive industry development
  • Metal and mineral prices
  • Production levels in existing mines and expansion projects (green- and brownfield)
  • Productivity improvements and new technology
  • Demand in the areas of health, safety and environment

Construction

  • GDP growth/Urbanization
  • Infrastructure investments and spending
  • Government stimulus programs
  • Aggregates production
  • Cement consumption

Estimated market value1, billion SEK

~265

Competitive landscape/Major competitors

Mining

Consolidated in certain segments i.e. underground hard-rock mining: Atlas Copco, Metso Minerals, Caterpillar, Komatsu/Joy Global

Construction

Some global competitors present in several niches but many local players: Atlas Copco, Terex, Metso, Furukawa

Revenues, billion SEK

~31

Go-to-­market model

Mining

Direct sales ~95% with world-wide service network

Construction

Due to fragmented customer base 50% of sales is via distributors. Global sales and service organization.

Growth strategy

Grow aftermarket business on the installed base. Climb the service ladder by data-driven productivity and advanced services. Mining automation, mid-market and local premium offering. Value-based selling.

Product portfolio

Equipment for drilling, cutting, breaking, crushing, loading and hauling. Drilling consumables (rock tools), service, spare- and wear parts.

Strategic risk management

Various forms of business environment risks with an impact on the mining and construction market in general, such as increased market competition with new technological developments and the emergence of new competitors, fluctuations in commodity prices and compliance related risks.

Material sustainability aspects for 2017–2018

Based on the sustainable business strategy, Sandvik Mining and Rock Technology will focus on:

Our offerings

Innovation and productivity; Health and safety; Environ­mental impact

Our operations

Governance; Compliance; Customer relations; Sustainable supplier management; Efficient use of materials and resources; Reduction of emissions; Health and safety; Equal career opportunities

1) Addressable market.

2016 in short

Market development

Mining customers have continued to extract a high level of volume output from existing mines, and we also saw an increase in the aggregated weighted price index for the basket of commodities we are exposed to. As the year progressed, customer demand improved for replacing equipment as well as for the aftermarket business. In addition, initial signs of improving customer activity in the exploration mining segment was noted. Construction related demand remained muted.

Key achievements

During 2016 we successfully merged the previous business areas Sandvik Mining and Sandvik Construction, creating Sandvik Mining and Rock Technology. In doing so, also implementing a more decentralized business model, where the highest operating level lies with the established eight product areas. This will bring higher transparency, accountability and speed to the organization, for improved cost control and performance.

During the year we successfully completed important product launches offering sustainable productivity for customers. We expanded the electrical equipment offering to also include the first battery driven underground drill rig, as well as a battery driven underground loader. Both products offering zero emissions, driving safety and reducing expensive ventilation requirements in the mine.

Going forward

Near-term focus

Growing the aftermarket business within Sandvik Mining and Rock Technology is a key focus area. This will improve profitability as well as reduce the volatility in earnings. We aim to leverage on the improved customer offering, e.g. new customer e-solutions, global roll-out of customer service centers and upgraded service and maintenance kits to capture parts potential. This will be combined with improved internal structure and processes and a higher understanding of our installed equipment base. Continuous success in product launches responding to customers’ focus on productivity, safety and sustainability.

Long-term focus

Our long-term focus is to remain a leading provider of cutting-edge technology to selected applications in mining and construction industries, by adding value to customers by making them safer, more productive and sustainable, not least through the offering of automizing the mines. Leverage on our leading technology within mechanical cutting to drive the entry of this technology from soft rock into hard rock, to make a game changer for the entire mining industry.

REVENUES BY COMMODITY*

  • Gold 32
  • Copper 24
  • Coal 10
  • Iron Ore 7
  • Platinum 6
  • Other base metals 11
  • Other 10

REVENUES BY MARKET AREA

  • Africa/Middle East 21
  • Asia 20
  • North America 18
  • Australia 13
  • South America 10

2016 IN FIGURES

Revenues: 31,093 million SEK (33,131) with -3% organic growth
Operating profit: 3,206 million SEK (2,417)
Operating margin: 10.3% (7.3)
Adjusted operating profit: 3,206 million SEK (3,492)
Adjusted operating margin: 10.3% (10.5)
President: Lars Engström
Gender balance: Men 86.2%, Women 13.8%
Lost time injury frequency rate (LTIFR): 1.1
Share of recovered metal raw material: 91% (metallic input material used in manufacturing, excluding assembled metal parts)