Note 19. Capital and reserves

Group

Details of reserves	2018	2019
Translation reserve
At the beginning of the year	3,481	5,233
Translation differences during the year	1,752	1,880
At the end of the year	5,233	7,113

Hedging reserve
At the beginning of the year	–137	–123
Translation differences during the year	14	20
At the end of the year	–123	–103

Total reserves
Reserves at the beginning of the year	3,344	5,110
Changes in reserves:
Translation reserve	1,752	1,880
Hedging reserve	14	20
Reserves at the end of the year	5,110	7,010

Other paid-in capital

Relates to payments made by owners and includes share premium reserve transferred to the statutory reserve at 31 December 2005. Any share premium as from 1 January 2006 and onwards is also recognized as paid-in capital.

Reserves

Translation reserve

The translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of foreign operations stated in a currency different from the Group’s presentation currency. Translation reserves relating to divested assets are not material.

The Parent Company’s and the Group’s presentation and functional currency is Swedish kronor (SEK).

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. The change in cash flow hedges that was transferred to profit/loss for the year amounted to 20 million SEK (14).

Retained earnings including profit or loss for the year

Retained earnings including profit or loss for the year comprises the earned profit of the Parent Company and its subsidiaries and associated companies.

Management of capital

Financial goals

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1)	Through a business cycle
2)	Adjusted for items affecting comparability

Revenue growth, organicaly and through acquisitions¹⁾

≥ 5%

EBIT margin rolling 12 months²⁾

≥ 16%

Net debt / equity ratio

< 0,5

Dividend pay –out ratio of adjusted earnings per share^1,2)

50%

Equity

Equity is defined as total shareholders’ equity including non-controlling interests.

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Equity	2018	2019
Share capital	1,505	1,505
Other paid-in capital	7,678	7,678
Reserves	5,110	7,010
Retained earnings including profit for the year	43,827	45,651
Equity attributable to equity holders of the Parent Company	58,120	61,844
Non-controlling interest	42	14
Total equity	58,162	61,858

The Board of Directors has proposed to the 2020 Annual General Meeting a dividend of 4.50 SEK per share (4.25). The proposal corresponds to approximately 41 percent of the recognized earnings per share. No changes were made to the processes for managing capital during the year. Neither the Parent Company nor any of its subsidiaries have to comply with externally imposed capital requirements.

Parent Company

Share capital

According to the Articles of Association of Sandvik AB, the share capital shall amount to a minimum of 700,000,000 SEK and a maximum of 2,800,000,000 SEK.

All issued shares are fully paid, have the same voting rights and are equally entitled to the company’s assets.

Share capital has changed as follows over the past two years:

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	No. of shares	Quotient value SEK/share	Share capital SEK
Share capital at 31 December 2017	1,254,385,923	1.20	1,505,263,108
Share capital at 31 December 2018	1,254,385,923	1.20	1,505,263,108
Share capital at 31 December 2019	1,254,385,923	1.20	1,505,263,108

A dividend is proposed by the Board of Directors in accordance with the stipulations in the Swedish Companies’ Act, and is approved at the Annual General Meeting. The proposed, not yet resolved, dividend for 2019 is estimated to amount to 5,645 million SEK (4.50 SEK per share). This amount has not been recognized as a liability.

No shares have been reserved for transfer under options or other agreements.

The Sandvik share is officially listed only on the Nasdaq Stockholm. Shares can also be traded in the US in the form of ADRs (American Depositary Receipts).

Undistributable equity

Undistributable equity may not be paid to the shareholders in the form of dividends.

Statutory reserve

The purpose of the statutory reserve has been to tie up part of the net profit that is not needed to cover an accumulated deficit. The statutory reserve includes amounts that before 1 January 2006 were included in the share premium reserve.

Distributable equity

Share premium reserve

Comprises the value of shares that have been issued at a premium, meaning the price paid was in excess of the share’s quotient value. The amount received in excess of the quotient value was transferred to the share premium reserve.

Retained earnings

Retained earnings comprise the distributable reserves recognized in the preceding year less any dividend declared. The total of such profits brought forward and the profit for the year constitute the total distributable reserves, that is the maximum amount available for distribution to the shareholders.