Sandvik Mining and Rock Technology

Customer demand rose with commodity prices resulting in a strong 2017 for Sandvik Mining and Rock Technology. The business area continued to develop automated solutions, which are boosting customer productivity, and it focused on aftermarket sales.

2017 in figures

Revenues: 36,547 million SEK (31,093) with 15% organic growth
Operating profit: 5,743 million SEK (3,206)
Operating margin: 15.7% (10.3)
Return on capital employed: 25.4 (13.8)
Employees: 15,041 (14,087)
Gender balance: Men 85%, Women 15 %
President: Lars Engström
Lost time injury frequency rate (LTIFR): 1.0
Share of recovered metallic raw material: 91%
Estimated market size: 280 billion SEK

REVENUES BY commodity (1)

  • Gold 31
  • Copper 21
  • Zinc 10
  • Coal 8
  • Platinum 6
  • Iron ore 5
  • Diamonds 3
  • Other minerals 6
  • Other base metals 6
  • Other metals 4

REVENUES BY market AREA

  • Africa/Middle East 21
  • North America 20
  • Asia 19
  • Europe 17
  • Australia 14
  • South America 9

(1) Only for mining-related revenues, i.e. 74 percent of total revenues.

The Sandvik Mining and Rock Technology business area offers equipment, tools, service and technical solutions for the mining and construction industries. Customers are located around the world and work with applications such as rock drilling, rock cutting, crushing and screening, loading and hauling, tunneling, quarrying and breaking and demolition.

About 74 percent of Sandvik Mining and Rock Technology’s customers are in mining, 23 percent work in the construction industry and the remaining 3 percent are oil and gas customers.

Market situation

Capital expenditures among Sandvik Mining and Rock Technology’s customers rose in 2017, prompted by a rise in commodity prices. The upward trend was driven mainly by a rise in gold prices, following by higher prices for copper as well as zinc and nickel. Investments in new equipment picked up, especially in the first six months of the year, following a previous lag in spending. Infrastructure investments, which drive our business in the construction area, were stable during the year and showed encouraging signs of growth in Asia, and particularly in China due to stimulus programs. India continued to invest steadily in necessary infrastructure, while the situation in the Middle East was a bit more subdued during the year.

Being no 1 or 2

Our mining business performed very favorably in 2017, mainly driven by increased investments in new equipment. To meet the demand, we ramped up capacity by more than 100 percent in some product areas. Nonetheless, some of our plants faced challenges meeting the sudden increase in demand.

Focus on core

During the year, we continued to focus on the aftermarket and increased our share of parts and services on our installed base of equipment. We also expanded our service offering within the aftermarket, which is an area that remains profitable even in tough economic times.

In line with our strategy to focus on core capabilities, we divested the product area Mining Systems in 2017. The Mining Systems conveyor components business, including the specialist conveyor systems business in Hollola, Finland was divested to NEPEAN. The Mining Systems project business was divested to FLSmidth, with the exception of the project business assets in South Africa, which are awaiting merger control clearance. This is expected to take place in the first quarter of 2018.

Sustainable business

We continued to invest in developing products that make our customers’ workplaces healthier and safer, for example by reducing the use of diesel through the electrification of our equipment. We are also using low-emission engines in our truck fleets. This is helping to eliminate harmful exhaust fumes especially in the confined spaces where many of our customers work.

Within our operations, Sandvik Mining and Rock Technology focus on using materials and resources efficiently and on reducing emissions. Selecting lighter packaging for spare parts and recycling consumables such as drill bits through customer recycling programs, are a couple of examples of our activities.

We carefully select and audit suppliers to ensure they meet the requirements outlined in our Code of Conduct and there is zero tolerance for suppliers who do not live up to our standards.

Overview

Mining

Construction

Product portfolio

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

Market characteristics

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.

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

Demand drivers

  • 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, for example automation and electrification
  • Demand in the areas of environment, health and safety
  • GDP growth/Urbanization
  • Infrastructure investments and spending
  • Government stimulus programs
  • Aggregates production
  • Cement consumption

Competitive landscape/Major competitors

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

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

Go-to-­market model

Direct sales ~95 percent with worldwide service network

Due to a fragmented customer base, 50 percent 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.

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 complicance-related risks.

Efficiency and continuous improvements

Our operations focus on bringing value to customers through solutions that increase their productivity and efficiency. They also improve safety, with as little impact on the environment as possible.

Technology leadership and innovation

Sandvik’s remote monitoring and autonomous solutions for the mining industry, such as AutoMine™, are also making operations safer by releasing miners from areas of high heat, vibration, noise and pollution. Automated systems are also increasing productivity and cost efficiency in mining operations by enabling additional productive hours through remote operation and reducing wear and tear on equipment.

Sandvik Mining and Rock Technology works together with customers, using their insights to develop products and solutions. By using electric energy from an onboard battery during tramming, the drill rig Sandvik DD422iE produces zero emissions while maneuvering between headings. This improves health and safety for miners working underground. Less diesel usage in the mine can ease ventilation requirements while also reducing associated diesel logistics and maintenance expenses.

In March, we signed an agreement with IBM to jointly develop market leading offerings in Data Driven Productivity and Predictive Maintenance services for the mining and rock excavation industry. During the year we also started a cooperation with Cisco to provide customers with fast and reliable network infrastructure to support Sandvik's digital offering.

Profitable growth

We will continue to grow our market share by focusing on the extremely important and dependable aftermarket for parts and services. We will also invest in upgrading the way we manufacture and develop products such as our rock drills, to help our customers work more efficiently.

Sandvik Mining and Rock Technology is the market leader when it comes to running equipment autonomously and this is another important growth area. Our customers are investing in fleet management systems and autonomous equipment to improve their decision-making, maintenance, productivity, sustainability and efficiency. Connected equipment, made possible through the My Sandvik customer portal for fleet access and management, has opened a new era in fleet optimization and performance.

On-site service raises productivity

2017 product highlights

My Sandvik Digital Service Solutions

The service solution provides customers with readily analyzed data of their own operations. Data is gathered straight from the loaders, trucks or drills via a secure wireless connection, it is analyzed and made available in an easy-to-view format. Via the My Sandvik customer portal customers can access their own data 24/7 from anywhere in the world, allowing them to monitor and measure their operations as well as base decisions on accurate knowledge for improved productivity.

Sandvik CS550 Cone Crusher

This powerful secondary stage crusher is dimensioned for 700–750 ton applications. In addition to flexibility and sheer tonnage, it offers advanced automation and maintenance features for maximal productivity and uptime.

Ranger™ DXi – New series surface drill rigs

The new surface drill rig includes several new high-performing features for an improved drilling process. For example, it has 55 square meter drilling coverage and is equipped with a new powerful rock drill. This, combined with high fuel efficiency, makes it the most powerful and efficient top hammer drill rig in its class. It represents a totally new generation in the Ranger product family.