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Dialogue with analysts

Twentyfive analysts cover Sandvik on a continuous basis. Below are some of the most frequent questions discussed in 2023, and our answers.

Q: Sandvik has a market-leading position in underground mining. During the year you talked about your strong position in automation and batteri-electric vehicles (BEVs) and the advantage of having an integrated digital platform throughout the customers' value chain. Could you elaborate on your progress in these areas?

A: We have a clear number one position in tele-remote and autonomous underground mining solutions, with over 65 percent market share, and we have continued to increase the number of sites connected to our Automine® platform during 2023. With over 20 years experience in this field, Sandvik is the only original equipment manufacturer (OEM) that can provide large-scale underground automation. During the fourth quarter of 2023, Sandvik enhanced the already well-proven Automine® platform for trucks and loaders, with the introduction of Automine® for underground drills. With this, we became the first OEM to offer a unified traffic management system for mining equipment underground.

The progress on battery-electric vehicles has also been significant. Sandvik won 75 percent of the total BEV tenders in 2023. Our more than 10 years of experience in learning, developing and improving the technology, combined with our dedication in integrating the BEVs into customers operations (site preparation, business case, simulation studies, and service), are key factors to this success. With our BEVs, we provide value in terms of improved working environment, higher productivity and lower CO2 emissions.

With our strong automation and operational planning offering, combined with our recent software acquisitions, Deswik and Polymathian, Sandvik now has a fully integrated digital platform in underground mining. Being a full end-to-end solutions provider to our customers, digitalizing and automating their value chain further strengthens our position in underground mining.

Q: While the shift to electric vehicles (EVs) will contribute positively to the mining business, it is a headwind for your cutting tools business in terms of less cutting tools potential for EV than traditional internal combustion engines (ICEs). During the fall you provided a slightly more positive view on this development than previously, and that you will actually grow your automotive business?

A: By 2030, the cutting tool potential mix will change significantly with different vehicle types, while keeping the overall potential almost at the 2022 level. The machining intensity, i.e., the amount of cutting tools required to produce one vehicle, as compared to one ICE-powered light vehicle, varies by vehicle type, leading to different requirements for cutting tools by each sub segment. The cutting tool requirement in medium and heavy commercial vehicles (MHCV) compared to light vehicles (LVs) are almost five times greater. This is positive for Sandvik, taken into consideration the expected CAGR growth of LVs and MHCVs of 2 percent and 3 percent, respectively, as well as our exposure (60 percent towards LVs and 40 percent towards MHCVs). In addition, Sandvik will continue to expand its capabilities into lightweight/aluminum cutting tools, which has a greater potential in the manufacturing of components in electric vehicles. To conclude, Sandvik will continue to grow our automotive business until 2030.

Q: During the year, Sandvik updated the financial targets specifically for Sandvik Manufacturing Solutions (SMF). Why and are you lowering you ambitions here?

A: After having built a solid platform of software assets, identified as key levers to grow our business in the component manufacturing area, we are taking the next step. One of these steps was to change the organizational set-up slightly with, for example, the move of the powder business closer to the core: from the Sandvik Manufacturing Solutions business area segment to the Sandvik Machining Solutions business area segment. With these changes, there will be a sharper focus on developing the software business with enabling hardware in SMF. For that reason, the previous SMF revenue target SEK 6 billion in 2025, of which 60 percent was coming from software, was revised to a new target of having software revenues of SEK 4 billion in 2025. With a more concentrated share of software in the SMF portfolio, we also increased our margin target from 20.0 percent to 22.0 percent.