G12 Intangible assets

Impairment tests of goodwill

The carrying amount of goodwill is essentially related to a number of major business combinations.

In 2025, there were no changes made to the business areas that have caused the cash generating units (CGUs) that existed during 2024 to change. That means that goodwill is tested for impairment on a business area level for Mining and Rock Processing and on a division/business area level for Machining and Intelligent Manufacturing with the following CGUs: Walter Group, Seco Tools, Sandvik Coromant, Dormer Pramet, China Division, and Machining and Intelligent Manufacturing business area.

Consolidated goodwill is allocated to the CGUs stated above. The recoverable amount of all of the CGUs has been assessed based on estimates of value in use. Calculations of value in use are based on the estimated future cash flows using forecasts covering a four-year period, which are based on the business plans prepared annually by each of the business areas and approved by Sandvik Group Executive Management.

These plans are founded on the business areas’ strategies and an analysis of the current and anticipated business climate, and the impact this is expected to have on the market in which the business area operates. A range of economic indicators, which differ for each market, and external and internal studies of these, are used in the analysis of the business situation. The forecasts form the basis for how the values of the material assumptions are established. The forecasts consider potential significant climate-related risks (as well as other types of risks recognized in the Sandvik Key Risk map) and the Group’s ongoing and future mitigating activities.

The assumptions mentioned below reflect past experience and the current and future situation and are consistent with external information. The most material assumptions when determining the value in use include anticipated demand, growth rate, operating margin, working capital requirements and the discount rate. Assumptions on growth rate and margins are at normal levels in relation to outcomes for all CGUs in recent years. The future revenues in 2026 are somewhat higher due to the acquisitions in 2025, but for 2027 and onwards the revenues and margins are assumed to be normalized.

The factor used to calculate growth in the terminal period after four years was 2 percent for all CGUs. Need of working capital beyond the four-year period is deemed to increase approximately at the same rate as the expected growth in the terminal period.

The discount rate consists of a weighted average cost of capital for borrowed capital and shareholders’ equity. Sandvik calculates a pre-tax discount rate for each CGU, which varied between 8.8 percent and 11.5 percent; Mining 11.4 percent (11.3), Rock Processing 11.5 percent (12.4), Walter Group 10.5 percent (10.0), Seco Tools 10.3 percent (10.5), Sandvik Coromant 10.4 percent (10.5), Dormer Pramet 10.5 percent (11.1), China Division 8.8 percent (9.1), and Machining and Intelligent Manufacturing 10.3 percent (10.5). The specific risks of the CGUs have been adjusted for future cash flow forecasts.

The impairment testing of goodwill performed during the fourth quarter 2025 did not indicate any impairment requirements. Sensitivity in the calculations implies that the goodwill value would be maintained even if the discount rate was increased by 2 percentage points or if the long-term growth rate was lowered by 2 percentage points. The goodwill value would also be maintained, given an operating margin drop of 2 percentage points.