Business in 2018
Stability, profitability, growth
The business area’s key priority during the year was to restore profitability to the portfolio, which is in line with Sandvik’s strategy for stability and profitability before growth. We remain focused on profitability in the Strip and Tube divisions, while we have moved into growth mode for the Kanthal division. In February, Sandvik announced a 20 million EUR investment in a new plant for the manufacturing of titanium and nickel fine metal powders. The investment will expand Sandvik’s metal powder offering, enabling future growth. Construction of the plant in Sandviken, Sweden is underway and expected to be operational in 2020. As of January 1, 2019 the Powder division is operated by business area Sandvik Machining Solutions.
Efficiency and continuous improvement
Sandvik has a target to improve productivity (revenues per employee) by at least 3 percent annually. In 2018, Sandvik Materials Technology contributed to this goal by improving operating margins through internal cost efficiencies; portfolio improvements resulting in a better product mix; and better price management. The efficiency program in 2017 contributed to the improved results in 2018. Closures of a Kanthal facility in Italy and a Tube site in Canada announced late in the year will have a further impact.
2018 in figures
Revenues: 15,111 million SEK (13,618) with 12.5% organic growth
Operating profit: 1,391 million SEK (277)
Operating margin: 9.2% (2.0)
Return on capital employed: 10.5% (2.1)
Employees: 6,102 (6,5451))
Gender balance: Men 82%, Women 18%
President: Göran Björkman
Lost time injury frequency rate (LTIFR): 4.3 (3.6)
Total recordable injury frequency rate (TRIFR): 7.5 (9.9)
Estimated market size: 130 billion SEK
1) Number of employees adjusted for items affecting comparability, due to internal reallocation.
We collaborate closely with customers to help them improve energy efficiency through, for example, material technologies that conduct heat better. Kanthal®, our electric heating technology and services help customers reduce their carbon footprint by converting from gas to electric heating. Sandvik Hiflex® compressor valve steel make refrigerators and cooling systems more energy effective and our stainless steel Pressurfect® enables more power to be produced in vehicles with significantly reduced fuel consumption and emissions.
Sandvik Materials Technology is also investing in solutions that make our customers’ products safer and reduce their environmental impact. Our umbilical tubes, for example, improve safety in the oil and gas industry and our patented Safurex® material increases safety in urea plants and other applications by improving corrosion resistance in tubes. In 2018 we launched the next generation, Safurex Star, with our partner Stamicarbon in a further step towards increasing safety and productivity within our customers’ processes (see case story).
We continue to optimize our operations through reducing energy usage, waste and water usage. Among the many local initiatives in 2018 was an agreement with Gästrike Ekogas to purchase their surplus biogas. We expect to reduce our carbon dioxide emissions by about 2,000 tons per year by replacing much of our oil and gas with carbon neutral biogas.
The journey ahead
Sandvik Materials Technology had a good year in 2018, delivering on targets and building trust and confidence both internally and externally, with better profitability and stability compared to recent years. Following the divestment of products outside our core business, we can now look ahead to broadening our base within the aerospace and medical sectors. Widening certain portfolios will eliminate our dependency on a single segment. Many macro trends are moving in our favor, with an ever-increasing need for more resistant and lightweight materials that help customers in their sustainability efforts. As a company with strong competence in material science, we are in a good position to tap into these trends.