Dialogue with analysts

Approximately 25 analysts cover Sandvik on a continuous basis. At year-end 2020, the breakdown of ratings relating to the Sandvik share was: 74 percent buy/increase, 26 percent retain/neutral and 0 percent sell/decrease, according to SME Direkt. Below are some of the most frequent questions discussed in 2020, and our answers.

Q: You have outlined how you are now shifting to a growth-focused strategy, while at the same time keeping the target of at least 5 percent growth over a business cycle. How are you planning to achieve that?

A: Looking at our performance over the last business cycle (2016–2020), we had 0 percent growth, mainly impacted by a Covid-19-related negative organic growth of 11 percent in 2020. Our shift to growth strategy is clarifying how we intend to meet the previously set target of 5 percent, where 2.5 percent will come from organic growth and the remainder through acquisitions. To achieve this, all our business areas aim to grow at least 2x the market. In Sandvik Manufacturing and Machining Solutions this will be done by expanding our digital and adjacent offering, increasing our round tool offering and gaining market share in the mid-market segment. In Sandvik Mining and Rock Solutions and Sandvik Rock Processing Solutions we will enhance the aftermarket services and we also see opportunities within surface drilling, to name a few of the opportunities.

Q: In 2020 your margins got support from savings programs. How much have the savings contributed to your margins in 2020 and how much is still to come?

A: In 2020, the margin was supported by approximately SEK 4.2 billion from permanent and temporary savings. We are pleased that we were already one step ahead in the beginning of the year, and we have continued to take actions. Most of the targeted savings of SEK 1.3 billion announced in 2020 will be delivered in 2021. The majority of the measures can be described as structural, for example, closure of production units or major restructurings.

Q: The increased share of electrical vehicles is seen as a headwind for Sandvik Manufacturing and Machining Solutions. What is your view on this?

A: We recognize this as a challenge long-term, albeit not as material as some might believe, and we are taking actions to offset this headwind. Near- to mid-term we do not see this having any material impact. In the time period 2019–2025 we expect the cutting tool potential to grow at a rate of 1 percent per year, while a flat development is expected in 2025–2030. The total light vehicle production is estimated to grow at a rate of 1.4 percent CAGR 2019–2030.

Q: The Crushing and Screening division has formed its own business area: Sandvik Rock Processing Solutions. What is the rationale behind this decision?

A: There are several reasons. Sandvik Rock Processing Solutions addresses different parts of the value chain than Sandvik Mining and Rock Solutions does. It also has its own aftermarket and service operations and its activities are centered more downstream on rock processing, while Sandvik Mining and Rock Solutions focuses on rock extraction. This will enable both business areas to focus on their core businesses and at the same time increase the transparency.

Q: What has been decided regarding the listing of Sandvik Materials Technology and when will this happen?

A: In 2020, the Board decided that we will proceed with the preparation to distribute Sandvik Materials Technology to Sandvik’s shareholders and list the company’s shares on Nasdaq Stockholm. The Board intends to propose the distribution and listing of the Sandvik Materials Technology shares at a shareholders’ meeting in 2022, provided that the circumstances are deemed right at the time. The intended distribution of shares is expected to meet the Lex Asea requirements and is subject to approval by Sandvik’s shareholders.

Q: Can you describe the major achievements during the year in relation to your 2030 sustainability targets? What is on top of the agenda for the coming year?

A: During the year we have seen a great commitment to the 2030 sustainability goals, and they have become a strong driving force all across the company. We have included sustainability KPIs in the performance management review process for business areas and for the Group Executive Management. The business divisions have developed roadmaps on how to contribute to the 2030 targets. In the coming years we will focus on continued data-driven performance management in order to verify that all initiatives are paying off and are in line with our ambitions.