Strategic focus areas and outcome
Focus on core capabilities and to be number one or two in chosen segments and markets
Sandvik actively worked on its business portfolio in 2018 and divested four operations that were not considered core or did not support our goal to be number one or two in chosen segments and markets. Sandvik successfully divested Sandvik Welding Wire, Sandvik Stainless Wire, Sandvik Hyperion and the Fagersta Stainless wire rod mill for a purchase price on a cash- and debt-free basis of 4.1 billion SEK.
Sandvik also acquired Metrologic Group, Inrock, Customer Electric Manufacturing and Dura-Mill for a purchase price on a cash- and debt-free basis of 4.6 billion SEK. The divestments and acquisitions were part of our continuous efforts to obtain a more consolidated portfolio focused on the core.
Technology leadership and innovation
Sandvik focuses on innovations that help our customers increase their productivity and energy efficiency, improve safety and leverage the opportunities that are arising with digitalization and automation. A number of new products and solutions that are keeping us at the forefront of technological innovation were launched during the year.
- Sandvik Machining Solutions The sensor-equipped Silent Tools™ Plus damped adapters increase process security in internal turning with long overhangs. The acquitision of market-leading Metrologic Group broadened our offering within software metrology and the acquisitions of Dura-Mill and Kunschan Ousike Precision Tools, strengthened our leading position in round tools.
- Sandvik Mining and Rock Technology The next generation of Optimine® data analytics enables mining companies to gain operational improvements in their mining process. The new down-the-hole (DTH) drill rig Leopard™ DI650i helps customers raise productivity and reduces fuel consumption by up to 15 percent compared with conventional DTH rigs.
- Sandvik Materials Technology The intelligent tube system Sentusys™ helps customers increase safety and control the status of the tubes inside their processes with the help of cloud-based computing.
Accountability and decisions close to customers
Sandvik has been on a journey to decentralize its structure since 2016. The new structure enables quicker decision-making that is closer to customers, with greater product ownership and accountability for better performance and results. Sandvik further developed its common scorecard system which improved the transparency even more and enabled Sandvik to drive cost control on all levels in the decentralized organization.
Stability and profitability before growth
Sandvik takes continuous measures to reduce volatility and sensibility to market fluctuations. One example is the outsourcing of a relatively higher share of product assembly within Sandvik Mining and Rock Technology.
Sandvik further improved its performance as it benefited from a favorable market and had a strong focus on cost efficiency in 2018. Operational results increased with significant margin improvements in all business areas. While Sandvik had a number of loss-making divisions in 2016, there were none in 2017 and 2018. This has created a solid platform for future growth.
Sandvik Machining Solutions had another good year with record-high order intake, revenues and operating profit. The strong market growth was driven by all key geographical areas. Sandvik Mining and Rock Technology continued to benefit from a strong mining market. The favorable market situation, an intense focus on pricing, coupled with the positive effects from internal efficiencies, resulted in a solid financial year for the business area. Sandvik Materials Technology improved its performance, with increased revenues and operating margins. This resulted from higher market demand along with efficiency measures.
Efficiency and continuous improvements
Sandvik has a target to improve productivity (revenues per employee) by at least 3 percent annually. In 2018, productivity improved by 10 percent. Cash flow from operations increased 4 percent to 15,353 million SEK (14,752). Return On Capital Employed (ROCE) improved to 22.6 percent (19.4), calculated on adjusted EBIT. Reported ROCE was 22.7 percent (23.8). Net working capital (four quarter average) increased by 0.5 percentage points to 24 percent.
During the year Sandvik announced the closures of four production units and the discontinuation of a production line.
Culture of doing things right
Sandvik’s commitment to Fair Play and doing things right is long standing. During 2018, total work related injuries (TRIFR) continued to decrease, and injuries leading to lost working time (LTIFR) increased somewhat. Continued focus is needed to bring further improvement in employee health and safety.
- The roll-out of our governance model, The Sandvik Way, continued, now with implementation of the common processes into the business areas and divisions.
- 94 (93) percent of Sandvik’s employees and long-term contractors had completed Code of Conduct training. About 10,000 employees participated in some type of in-depth compliance training.
- The program for ensuring compliance with the requirements of the EU General Data Protection Regulation (GDPR) was rolled out.
- Performance management and internal control and audit efforts were strengthened.
- We continued programs to promote leadership and develop key competences. About 600 (500) people participated in Sandvik’s leadership training programs in 2018.
- About 2,900 (3,800) new employees were hired and a majority of the positions were posted on the open internal job market. 78 percent of top management positions were sourced internally (target 80).
- Increased use of social media channels leading to more precise recruitment and expanding our talent pool. For example, we received 1,688 new leads from targeted LinkedIn campaigns in 2018.
- New hire stay rate amounted to 92 percent (target 90).