Dialogue with analysts

25 analysts cover Sandvik on a continuous basis. Below are some of the most frequent questions discussed in 2022, and our answers.

Q: Could you elaborate on what you foresee in terms of demand for your battery-electric vehicle offering?

A: We see a strong interest in our battery-electric vehicles (BEVs) and it has accelerated further during 2022, with a strong pipeline into 2023. The share of BEVs of total Load and Haul division orders has increased more than 10 percentage points from the year-earlier period. Bigger-sized orders are becoming more prevalent. We also see a higher degree of repeat orders from customers who have finalized their trial period and realized the equipment’s strong performance in combination with the safety and sustainability gains. These machines help our customers reduce emissions and heat, and more so, operators have highlighted the lower noise levels as a big positive contribution to the work environment. Furthermore, the equipment is built to optimize performance in the mine with, for example, higher power for increased speed and increased volume load capacity. Our ambition is that BEVs make up 50 percent of underground hardrock equipment sales in 2030. Sandvik’s quest is to shape the sustainable underground mine of the future, which will also contribute to our customers’ ambitious net zero targets.

Q: As BEVs become a larger share of your fleet, what will happen to the parts, service and consumables business? BEVs have less parts and service, will battery and service compensate for that?

A: It is true that there are less actual parts to replace and maintain in a BEV. The traditional aftermarket business connected to these machines are complemented by batteries and chargers, for which Sandvik will provide on-site expertise, including maintenance and service. With our expertise, customers mitigate risk, and can focus on their operations in the most efficient way, while Sandvik ensures that the BEVs are performing at the highest standards. On our Capital Markets Day we illustrated that the potential increase of the addressable aftermarket can actually be up to 60 percent. With BEVs, a larger share of parts, service and consumables is Sandvik own intellectual property (IP) so we get a higher share of the aftermarket.

Q: The business area segment Sandvik Machining Solutions has an ambition to grow faster than the underlying market, with a growth target of 5 percent from 2019 to 2025. Could you walk us through some of the strategic priorities that will help in achieving that?

A: There are a number of strategic priorities that will strengthen our growth profile in Sandvik Machining Solutions. One of them is to become the leader in round tools.

Round tools are expected to grow faster than inserts due to, for example, multi-axis machining and more near net shape and complex components. We also want to increase our exposure to faster growing segments such as consumer electronics and medical, and we have recently made a few acquisitions within this space. Expanding in faster-growing geographies outside Europe and in the mid-market are other examples.

Q: You have made a lot of acquisitions in the last couple of years, will you continue to do M&As at the same pace?

A: In the last 1.5 years we have made more than 20 acquisitions, eight of them during 2022. These acquisitions have been underbuilt with a strong strategic rationale. They are intended to fill value chain gaps in our offering, enhance our core portfolio and regional exposure, as well as accelerate our digital shift. The acquisition pace has been high and we have made a lot of progress and established important positions in vital areas. For example CAM within Sandvik Manufacturing Solutions and ground support and software mine planning within Sandvik Mining and Rock Solutions. Another example is the acquisition we did at the end of the year, SP Mining, which is a great complement to our Sandvik Rock Processing Solutions offering, and with which we have expanded our aftermarket offering significantly. Acquisitions are an important part of our shift to growth strategy, although a lot have been achieved so we will not see the same magnitude going forward. And while we had quite a headroom in the balance sheet for the past acquisitions, onwards, M&As will mainly be funded by our cash-flow generation.