The market conditions improved during 2017 with increased customer activity level in all customer segments and geographies. This supported our profitability. Our operating decisions are based on the priorities of stability and profitability before growth. Given our improved operational performance, the next phase of our journey will include a higher focus on growth, in particular for business area Sandvik Machining Solutions.
The Parent Company’s revenues for 2017 amounted to 16,627 million SEK (15,146) and the operating result was 1,260 million SEK (722).
Expense of shares in Group companies consists primarily of dividends and Group contributions to and from these and profit from the divestment of Sandvik Process Systems and amounted to -706 million SEK (202). Interest-bearing liabilities, minus cash and cash equivalents and interest-bearing assets, amounted to 11,180 million SEK (14,478).
The Parent Company’s total assets decreased by 5,473 million SEK (from 66,692 million SEK to 61,219 million SEK). Investments in non-current assets amounted to 875 million SEK (975). The number of employees in the Parent Company and the subsidiaries operating on commission for Sandvik AB as of 31 December 2017 was 7,204 (7,451).
The Board of Directors proposes a dividend of 3.50 SEK (2.75) per share to the 2018 Annual General Meeting, corresponding to approximately 4.4 billion SEK (3.4).
|Dividend, 3.50 SEK per share
number of shares 1,254,385,923 =
|Profits carried forward
The average number of employees amounted to 43,376 (44,769), of which 19 percent (19) are women. The employee turnover rate was 9 percent (11). Wages, salaries and other remunerations for the year totaled 21,354 (20,008) million SEK.
During the year, Sandvik worked towards achieving a total recordable injury frequency rate (TRIFR) target of 4.5. Sandvik's TRIFR improved 9 percent and was 4.6 at year-end, compared to 5.1 the year before. For lost time injury frequency rate (LTIFR) the target was 1.4. Sandvik’s LTIFR improved by 6 percent in 2017 and was 1.6 at year-end, compared to 1.7 at year-end 2016.
Proposal regarding guidelines for the remuneration of senior executives
The Board of Directors proposes that the Annual General Meeting resolve to adopt the following guidelines for the remuneration of senior executives for the period extending until the 2019 Annual General Meeting, which guidelines correspond to those adopted by the 2017 Annual General Meeting.
The remuneration of the Group Executive Management is to comprise fixed salary, variable salary, pension and other benefits. The total remuneration package should be based on market terms, be competitive and reflect the individual’s performance and responsibilities as well as the Group’s earnings trend.
The variable salary may comprise short-term incentives in cash, and long-term incentives in cash, shares and/or share-based instruments in Sandvik AB. Variable salary in cash is conditional upon the fulfillment of defined and measurable goals and should be maximized in relation to the fixed salary. Long-term incentives in the form of shares and/or share-based instruments in Sandvik AB may be provided through participation in long-term incentive programs approved by the General Meeting. Terms and conditions for variable salary should be designed so that the Board of Directors, if exceptional economic circumstances prevail, has the option of limiting or refraining from payment of variable salary if such a measure is considered reasonable.
In specific cases, agreements may be reached regarding one-off remuneration amounts provided that such remuneration does not exceed an amount corresponding to the individual’s annual fixed salary and maximum variable salary in cash, and is not paid more than once per year and individual.
Pension benefits should be defined contribution.
Normally, severance pay is paid when employment is terminated by Sandvik. Members of the Group Executive Management generally have a period of notice of not more than 12 months in combination with severance pay corresponding to 6–12 months fixed salary. An alternative solution may be applied to the President comprising a period of notice of 24 months and no severance pay. No severance pay will be paid when employment is terminated by the employee.
The Board of Directors is to have the right to depart from the guidelines resolved on by the Annual General Meeting if, in an individual case, there are special reasons for this.
The sphere of senior executives encompassed by the guidelines comprises the President and other members of the Group Executive Management.
For information concerning the current remuneration of senior executives, including ongoing long-term incentive programs, refer to Note 3.5.
The guidelines adopted by the 2017 Annual General Meeting are presented in Note 3.5.
Research and development (R&D)
Each product area/business area is responsible for its own R&D activities that focus on product development, technology platforms and new innovations.
Sandvik has a portfolio of approximately 7,300 active patents and other intellectual property rights. In 2017, 1,050 (1,150) new patents and other intellectual property rights were granted. Investments in R&D were 3,498 million SEK (3,483) in 2017, corresponding to 4 percent (4) of the Group's revenues. The number of employees in R&D, including Quality Assurance, was 2,612 (2,850).
Sandvik is a multinational group with many intercompany transactions. The OECD has issued guidelines for transfer pricing of cross-border transactions in multinational groups. Sandvik adheres to these guidelines and also to the local legislation of each country to ensure that a correct pricing model is deployed and that a correct amount of tax is paid in each country. Sandvik monitors the OECD's tax reform work (BEPS project) and the EU initiatives on Tax transparency carefully and prepares to adopt these standards when enacted. Sandvik strives to have good relations with our stakeholders, such as tax authorities, non-governmental organizations and investors.
Sandvik has initiated cooperation with tax authorities in several countries. We are convinced that an open discussion and cooperation with tax authorities around the globe will help us to reduce uncertainty about the taxes we are obliged to pay. We contribute to the local communities and countries in which we operate in the form of, for example, taxes and employment opportunities. In 2017, the Group paid 2,466 million SEK (1,650) in income taxes globally. Income tax comprises just a portion of all taxes paid by Sandvik worldwide. In addition, we pay social security contributions, environmental and energy taxes, property taxes etc. Furthermore, Sandvik collects and pays taxes at the request of governments and authorities, including indirect taxes and payroll taxes.
Sandvik respects and complies with environmental legislation in all countries where it operates. The most significant aspects of environmental impact are:
- Energy use
- Climate change
- Water management
- Waste management
Sandvik has approximately 120 sites worldwide that hold environmental permits. Sandvik is dependent on the environmental permits granted for these sites.
In Sweden, Sandvik conducts licensed operations at 11 plants and notifiable operations in one location. All these hold the requisite environmental permits. No breaches of the permits occurred during the year. A number of guideline values were exceeded for noise and emissions to air and water. Actions are taken to comply with these target values.
In other countries where Sandvik operates, some target values were exceeded and acted upon in cooperation with relevant environmental authorities.
Investigations and remediation activities have been performed at production sites with ground pollution. These activities are always performed in close cooperation with environmental authorities.
During the year, a lawsuit for alleged violations of the wastewater discharge limits at our US site in Kennewick, Washington was settled and completed. Mitigation payments and attorneys fees amounted to approximately 7.5 million SEK. In addition, improved wastewater treatment measures were fully implemented.
Statutory sustainability report
Sandvik has, in accordance with the Annual Accounts Act, prepared the statutory sustainability report as a separate report which was approved for issue by the Board of Directors and the President and CEO. The scope of the Statutory Sustainability report and Sustainable Business Report, is defined on About this report.