Sandvik to focus on growth following a challenging year

March 26, 2021

Osprey® metal powder is produced at Sandvik’s powder plant for titanium and nickel-base superalloys (Courtesy Sandvik Additive Manufacturing)

Sandvik AB, Stockholm, Sweden, has published its Annual Report for 2020, highlighting a challenging year with a number of strategic decisions which Stefan Widing, president and CEO, believes will strengthen and shape the future of Sandvik as it prepares for a shift towards growth.

The group reported a total order intake of SEK 86,287 million, down from SEK 104,075 in 2019. Revenues totalled SEK 86,404 million compared with SEK 103,238 million in the previous year. An operating profit of SEK 11,216 million was noted, down from the previous SEK 13,386 million.

A breakdown of revenues by customer segment showed that 40% was generated in mining; 23%, engineering; 11%, automotive; 10%, energy; 8%, construction; and 5%, aerospace, with the remaining 3% generated from unspecified segments. By region, 35% of Sandvik’s 2020 revenues came from Europe, 22% from North America, 20% from Asia, and a further 9% from Africa/Middle East, 9% from Australia and 5% from South America.

In 2020, the group acquired Allied Construction Products, CGTEch, Summerill Tube Corporation, Quimmico Centro Technológico and Miranda Tools; an agreement was also signed to acquire DSI Underground. Sandvik Materials Technology was made a separate listing and reorganisations were made within Sandvik Manufacturing and Machining Solutions, as well as Sandvik Mining and Rock Technology.

During the year, Sandvik’s Board of Directors made the decision to continue preparations for the distribution of the Sandvik Materials Technology business area to its shareholders. The board’s intent is to propose the distribution and listing of Sandvik Materials Technology on Nasdaq Stockholm at a shareholders’ meeting in 2022, provided that the circumstances at the time are deemed to be right. “I am convinced that this is the correct way forward, both for Sandvik Materials Technology and for Sandvik as a whole,” added Widing.

In line with its goal of strengthening the group’s offering, a new business area focusing on digital solutions, Sandvik Manufacturing Solutions, was established. Assets were also divested: the oil & gas operations of Sandvik Drilling and Completions (Varel), as well as an agreement signed towards the divestment of its mineral exploration business.

Moving forward, Sandvik has set a growth target of at least 5% (CAGR) through a business cycle. The company aims to increase its acquisitions and add products and technology, as well as services and digital solutions, to its existing offerings. This growth target means that Sandvik will become a SEK 115 billion company by 2025.

Sandvik Mining and Rock Technology

2020 was said to have been a solid year for Sandvik Mining and Rock Technology despite a challenging market environment. The lowered aftermarket demand was offset by increased equipment orders.

Total revenues were SEK 40,032 million, down from SEK 44,777 million in 2019. An operating profit of SEK 7,389 million was reported, down from SEK 8,602 million, with an operating margin of 18.5% (2019: 19.2%).

The division’s best-performing commodities were gold and copper, making up 38% and 17% of its 2020 revenue, respectively. Coal represented 10% of revenues, while platinum represented 6%; zinc, 6%; iron ore, 5%; and, diamonds 2%. Other minerals made up 6%; other metals, 5%; and other base metals, 5%.

By market area, 21% of the division’s revenues came from Asia, 20% from North America, 19% from Africa and the Middle East, 18% from Australia, 15% from Europe and 7% from South America.

Sandvik Manufacturing and Machining Solutions

Sandvik Machining Solutions was reported to have faced a turbulent year, due to the hits taken in aerospace and automotive segments from the pandemic, but favourable margins were still delivered. A reorganisation is hoped to create more business opportunities and strengthen the segment’s future.

Total revenues were SEK 32,477 million (2019: SEK 41,123 million). The operating profit was reported at SEK 4,606 million against 2019’s SEK 8,380 million, with an operating margin of 14.2% (2019: 20.4%). Europe represented the largest market area for the division, at 53% of total revenues, with North America second at 22%, followed by Asia (21%), South America (2%), Africa and the Middle East (1%) and Australia (1%).

Some 46% of the division’s revenues came from customers in the engineering segment, with 26% from automotive, 16% from aerospace and 9% from energy. 3% of revenues came from customers in other segments.

Sandvik Materials Technology

Despite the challenging year, progress was reported to have been made on Sandvik Material Technology’s strategic journey. Mitigations were introduced to enable favourable margins despite a noted drop in orders, where the oil & gas and aerospace segments were hit especially hard.

Total revenues in 2020 were reported at SEK 13,598 million, down from SEK 15,279 million in 2019. Operating profit was reported at SEK 492 million (2019: SEK 1,444 million), with an operating margin of 3.6% (2019: 9.4%).

By market area, the majority of the division’s revenues came from Europe at 48%, followed by North America at 39%, Asia (17%), Africa/Middle East (3%) and South America (2%).

By customer segment, 44% of the division’s revenues came from customers in energy, 20% engineering, 12% consumer and electronics, 6% chemicals, 5% automotive, 3% from both construction and aerospace, and 5% from other market segments.

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