Targets and target fulfillment

Sandvik’s financial targets in the period 2016 – 2018 stipulate improved operating profit, higher returns and a strengthening of the balance sheet, while maintaining a generous dividend policy.

Financial targets1

EBIT growth (CAGR) 7% Outcome 2017: +16%

ROCE improvement 3% PTS Outcome 2017: +4.6% PTS

net debt/equity ratio <0.8 Outcome 2017: <0.3

DIVIDEND PAYOUT RATIO 50% Outcome 2017: 44% (2)

1) For further information, see the Financial targets.2) Proposed adjusted dividend payout ratio.

In May 2016, Sandvik announced financial targets for the three-year period of 2016–2018. In 2017, a strong increase in demand and executed internal efficiency measures supported a significant improvement in adjusted operating profit and return on capital employed.

Year-end 2017, the growth rate (CAGR) in adjusted EBIT amounted to16 percent and return on capital employed had improved by 4.6 percentage points to 19 percent.

The targets for net debt/equity and dividend payout are annual and the net debt/equity ratio target was achieved in 2017. The proposed dividend payout ratio for 2017 was slightly below the target level of 50 percent. Our operating decisions are based on the priorities of stability and profitability before growth.

Given our improved operational performance and operating profit, the next phase of our journey will include a higher focus on growth, in particular for business area Sandvik Machining Solutions.

Sustainability goals

LOST TIME INJURY FREQUENCY RATE IN 2020 <1 Outcome 2017: 1.6

EMPLOYEES TRAINED IN THE CODE OF CONDUCT 100% Outcome 2017: 93%

ENERGY EFFICIENCY INCREASE IN 2020 20% Outcome 2017: 7%

MAINTAINED LEVEL OF RECOVERED METAL RAW MATERIAL 80% Outcome 2017: 79%

Sustainability targets are set at Group and business area levels to efficiently manage risks and leverage opportunities. The business areas integrate the targets in their businesses. In 2017, Sandvik worked toward achieving a lost time injury frequency rate (LTIFR) target of 1.4.

The LTIFR improved by 6 percent to 1.6 at year-end (1.7). Each business area is responsible for ensuring compliance with the Code of Conduct. By the end of 2017, 93 percent of all employees and long-term contractors had completed training in the Code of Conduct. Energy intensity is measured as energy per hours worked.

Since 2014, we have reduced hours worked more than the energy reduction during the same period. With 2014 as base year, the energy use decreased by 3 percent in absolute terms, while hours worked decreased by 10 percent.

The share of recovered metal raw material was 79 percent. Increased demand for high-alloy products explains why the target was not reached.