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Sandvik as an investment

Sandvik has world leading positions and brands in the market segments where we operate. Through solid strategy execution we have built a leading digital and software platform and with our expertise, innovative offerings, and close customer relationships, we continue to support in our customers’ transition to a more digital, automated and sustainable business. Sustainability is embedded in our business model and our solutions support mines to run safer and more efficient; rock processing to extract maximum value with less energy consumption; and the manufacturing industry to be more productive and resource efficient. Innovation is at the core of our culture and strategy and a lever to maintaining our leading positions. It supports organic growth and value-based pricing. We have accelerated our R&D investments in recent years, and in 2023 investments amounted to SEK 4.8 billion.

Our ambition is to deliver profitable growth by staying agile throughout the cycle and executing on our shift to growth priorities. To reach our growth target of 7 percent, we will continue to expand and strengthen our positions in fast-growing regions and segments and in our customer’s value chain. Todays' important shifts towards digitalization, automation and sustainability, are an integral part of our strategy for growth and we will continue to be at the forefront of digitalization and offering sustainable solutions. We have set out to expand our digital offering to SEK 6.5 billion in revenue by 2025 and during 2023 Sandvik’s targets for reducing greenhouse gas (GHG) emissions was validated by the Science Based Targets initiative (SBTi) as aligned with the latest climate science and consistent with the goals of the Paris Agreement.

We see several global trends in our favor. The growing middle class and rapid urbanization drives the need for metals, minerals, and infrastructure investments. The need for infrastructure in turn, drives the demand for industrial production and manufacturing. The green transition requires electrification minerals and machining of lightweight materials. Demand for increased productivity, efficiency and sustainability through new technology, digitalization and automation is in line with our purpose and strategy. Our growth target of 7 percent will come from organic growth and acquisitions. Sandvik has made good progress and has since 2019 added SEK 19 billion in revenues through strategic acquisitions. In 2023 revenues grew by 13 percent, of which 6 percent was organic. To achieve profitable growth we need to stay agile. Our decentralized organization enables us to respond faster to market trends, economic fluctuations and customer needs. We work continuously with improving our own operational efficiency and have increased the share of variable costs to reduce earnings volatility. Cash-flow generation is strong in the Group, and for the year 2023 free operating cash-flow amounted to SEK 19.6 billion. With a solid balance sheet, good cash flow generation and margin resilience Sandvik has a strong platform to build from and is well positioned to capture future growth opportunities.

Our purpose is to advance the world through our engineering capabilities, creating value for all our stakeholders – customers, employees and communities – ultimately leading to shareholder value. For 2023, the Board of Directors suggested a dividend of SEK 5.50 per share, corresponding to a payout ratio of 43 percent, well-aligned with our ambition to distribute 50 percent of adjusted EPS through a business cycle.

The customer’s first choice

  • By focusing on improving customers’ productivity and sustainability we secure market-leading positions and can maintain value-based pricing
  • Strategic and long-term relationships with our customers combined with a decentralized decision model enable us to adapt faster to current and future needs
  • About 4 percent of our annual revenues are spent on R&D to ensure a leading product offering
  • High barriers to entry, resulting from leading technology position, capital intensity, materials know-how and customer relationships

Shift to growth

  • A solid balance sheet, good cash-flow generation
  • Growth target of at least 7 percent through a business cycle to come from organic and acquired growth
  • Capex at <SEK 5.4 billion in 2023, for 2024 approximately SEK 5.0 billion
  • Investments in product development
  • Acquisitions to broaden our value-creating offering, lead digitalization and automation and expand geographically in fast-growing markets

Agile through cycle

  • Solid adjusted EBITA margin in 2023 of 20.0 percent, within our target range of 20–22 percent
  • Strengthened margin resilience and reduced sales cyclicity by growing our parts, services and consumable businesses including software offerings
  • Flexible cost structures to ensure resilience in downturns
  • Continuous work to improve cost structures and operational efficiency

Shareholders rewarded

  • Responsible and value-creating capital allocation
  • Dividend payout policy of 50 percent of adjusted earnings per share through a business cycle
  • Payout ratio of 43 percent for the year, with the average payout ratio for a three-year period amounting to 42 percent and for a five-year period to 39 percent
  • Adjusted earnings per share growth of 6 percent over one year, 14 percent over three years and 5 percent over five years