Report on the three months ended 31 March, 2001

Report on the three months ended 31 March, 2001 · Strong earnings: SEK 1,525 M after net financial items, up 21% · Record invoicing: SEK 12,050 M, up 17%, 11% at fixed exchange rates for comparable units · Continued favorable order intake, SEK 12,570 M, up 9%, 3% at fixed exchange rates for comparable units · Key figures Q1 Q1 Change Full- year SEK M 2001 2000 % 2000 Order intake 12 570 11 500 +9 1 45 000 ) Invoiced sales 12 050 10 320 +17 2 43 750 ) Operating profit excl. items affecting 1 640 1 395 +18 5 667 comparability3) % 14 14 13 Operating profit 1 640 1 695 -3 6 327 % 14 16 14 Profit after financial items excl. items affecting comparability3) 1 525 1 260 +21 5 144 % 13 12 12 Profit after financial items 1 525 1 560 -2 5 804 % 13 15 13 Earnings per share4), SEK 12.80 9.90 +29 12.20 Return on capital employed4), % 18.5 16.3 18.2 1) +3 % at fixed exchange rates for comparable units. 2) +11 % at fixed exchange rates for comparable units. 3) Items affecting comparability SEK +660 M in 2000, of which 300 in Q1, 2000. 4) Most recent 12 months, excl. items affecting comparability. Market outlook in near future The uncertainty over the future business climate has increased successively. The decline within the NAFTA region has not had any noticeable impact on the demand for Sandvik products in the other market areas. However, there may be a weakening of demand over the near term in a number of customer segments that are important for Sandvik. First quarter 2001 Sales (see appendix 2) [REMOVED GRAPHICS] Order intake in the first quarter amounted to SEK 12,570 M (11,500), which was an increase compared with a year earlier of 9% totally and of 3% at fixed exchange rates for comparable units. The rate rose 11% from the fourth quarter in the preceding year, and all three business areas reported higher order intake. The order intake was slightly more than SEK 500 M or 4% higher than invoicing in the first quarter. Invoiced sales amounted to SEK 12,050 M (10,320), an increase of 17% totally and of 11% at fixed exchange rates for comparable units. Higher exchange rates affected invoicing favorably by 6%. Development by market area, Q1, 2001 Invoiced sales Share, % Change * Market areas SEK M % EU 5 137 43 9 Rest of Europe 853 7 31 Europe total 5 990 50 11 NAFTA 2 960 24 0 South America 451 4 1 Africa/Middle East 611 5 59 Asia/Australia 2 038 17 14 Total 12 050 100 11 * at fixed exchange rates for comparable units. The increase in invoiced sales remained high, varying among the market areas, however. It remained strong in Europe, up 11%, which accounts for approximately 50% of the Group's total invoicing, as well as in Africa/Middle East and Asia/Australia. In these areas, order intake also exceeded invoiced sales. In NAFTA invoiced sales were unchanged, but order intake was lower than in the first quarter the preceding year. Demand from engineering industries continued to be strong, and the favorable trend for investment-related products for the oil and gas industry was strengthened. Consumer-related demand - from the automotive and electronics industries, for example - declined. Activity in the mining industry continued to be high, whereas it decreased in the construction industry. Earnings and financing in the first quarter (see appendix 1) [REMOVED GRAPHICS] Operating profit in the first quarter rose to SEK 1,640 M (1,395 preceding year excluding items affecting comparability), 14% of invoiced sales. This is an increase of 18% compared with the year-earlier period. Accordingly, operating profit before items affecting comparability was the highest ever. Earnings were favorably affected by higher volumes of invoicing, favorable capacity utilization and higher productivity. Changes in currency exchange rates had a positive effect of approximately SEK 150 M on earnings. All three business areas improved earnings sharply, with Sandvik Tooling and Sandvik Mining and Construction achieving record levels. Net financial expense was SEK 115 M (expense: 135). Profit and net financial items rose 21% to SEK 1,525 M, 13% of invoiced sales. Tax amounted to 37% and net profit to SEK 901 M (1,038). Earnings per share were SEK 3.50 in the quarter (2.90) and SEK 12.80 (9.90) for the past 12 months excluding items affecting comparability. Investments in property, plant and equipment totalled SEK 562 M and acquisitions SEK 65 M. Cash flow from operating activities amounted to SEK 969 M, an increase of SEK 258 M compared with the year-earlier period. The change was primarily attributable to the favorable trend in the underlying operating profit. Cash flow after investments was SEK 381 M. The return on capital employed excluding items affecting comparability during the past 12 months amounted to 18.5% (18.2% for the entire 2000) and the return on equity amounted to 14.8% (14.7). Interest-bearing liabilities and provisions reduced by liquid funds produced a net debt of SEK 6,500 M (6,644 as per 31 December 2000). Liquid funds amounted to SEK 1,946 M (2,097) and loans decreased to SEK 5,356 M (5,927). The number of shares was 258,696,000. Equity per share was SEK 95.90 (89.00), and the equity ratio was 55% (55). The net debt/equity ratio was 0.3 (0.3). The number of employees was 34,819 at 31 March 2001, an increase of 237 for comparable units during the quarter. The increase is attributable to sales and service personnel at Sandvik Tooling and Sandvik Mining and Construction, while the number of employees at Sandvik Specialty Steels declined. Q1 Q1 Full- year Key figures 2001 2000 2000 No. of shares ('000) 258 258 258 696 696 696 Earnings per share before items affecting 12.80 9.90 12.20 comparability, SEK* Ditto after full dilution ** 12.60 9.70 12.00 Earnings per share after items affecting 13.80 16.00 14.30 comparability, SEK* Ditto after full dilution ** 13.60 15.70 14.10 Return on capital employed before items 18.5% 16.3% 18.2% affecting comparability * Return on shareholders' equity before items 14.8% 13.1% 14.7% affecting comparability * Net debt/equity ratio 0.3 0.3 0.3 * Most recent 12 months. ** No. of shares after full dilution of outstanding convertible and warrants programs amounts to 263,617,000. Accounting principles This interim report was prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR20 Interim Financial Reporting. At 1 January 2001 an additional number of recommendations from the Swedish Financial Accounting Standards Council became effective. The application from this date of RR9 Income Taxes resulted in a change in accounting principles and the comparable figures for the year 2000 were adjusted accordingly. The application of other new recommendations has not had any material effect on Sandvik's reporting. Business areas (see appendix 2) - First quarter 2001. Sandvik's operations are concentrated around its three core businesses: Sandvik Tooling, Sandvik Mining and Construction, and Sandvik Specialty Steels, areas in which the technology content is considerable and the Group occupies leading global positions in its selected areas. Sandvik Tooling (Sandvik Coromant, Sandvik CTT and Sandvik Hard Materials) Q1 Q1 Change Full-year SEK M 2001 2000 % 2000 Order intake 4 425 4 057 +5 * 15 744 Invoiced sales 4 258 3 818 +8 * 15 507 Operating profit 878 800 +10 3 135 % 21 21 20 * at fixed exchange rates for comparable units. Sandvik Tooling's order intake in the first quarter amounted to SEK 4,425 M (4,057), an increase of 5% compared with a year earlier at fixed exchange rates for comparable units. The trend was also favorable from the fourth quarter in all market areas, resulting in an increase of 7%. Demand from the automotive industry declined, while sales continued to be favorable to the engineering, aerospace, and oil and gas industries, as well as to the die and mould industry. Invoicing rose 8% amounting to SEK 4,258 M (3,818), which was a record for the business area. The increases were substantial in the EU, Eastern Europe, South America and Asia/Australia. Invoicing in NAFTA declined from a high level by 3% at fixed exchange rates. The generally favorable trend was the result of successful efforts to expand the marketing organization and service, and of new products. Sales of solid-carbide tools rose sharply. Operating profit rose 10% from the preceding year and amounted to SEK 878 M (800) or 21% of invoiced sales. Strong volume development and productivity contributed to the favorable earnings trend, offsetting higher costs for raw materials and increased activities in the marketing organization. During the quarter, it was decided to invest approximately SEK 40 M in an expansion of the cemented-carbide plant of Sandvik Hard Materials in Mexico City. This investment will increase production capacity in several rapidly growing product areas. The Mexico plant manufactures microdrill blanks in cemented carbide for the electronics industry and rods for solid-carbide tools used in the automotive, aerospace and die and mould industries. Remaining agency operations from Sandvik Saws and Tools, which has been divested, were reduced as planned through a transfer to the purchaser. Sandvik Mining and Construction Q1 Q1 Change Full-year SEK M 2001 2000 % 2000 Order intake 3 171 2 722 +7 * 10 659 Invoiced sales 2 984 2 248 +24 * 10 184 Operating profit 315 209 +51 1 073 % 11 9 11 * at fixed exchange rates for comparable units. Sandvik Mining and Construction's order intake amounted to SEK 3,171 M (2,722), an increase of 7%. Order intake during the quarter was the highest since the formation of the business area in 1998, and it was primarily demand from the mining industry that increased. The trend remained favorable compared with the fourth quarter of the preceding year even if weakening in certain markets was reported. Invoiced sales rose 24% at fixed exchange rates for comparable units, and amounted to SEK 2,984 M (2,248). The increase was attributable to most markets, particularly Africa and Asia/Australia. The exception was NAFTA where invoiced sales to the construction industry declined. Operating profit amounted to SEK 315 M (209), or 11% of invoiced sales, an increase of 51%. The sharp improvement in earnings was primarily due to a strong volume trend and high capacity utilization. During the quarter, it was decided to close the unit in Mexico that manufactures down-the-hole drilling tools, affecting approximately 60 employees. The operations of the unit will be transferred to the Sandvik Tamrock Tools rock-drilling tool plant in Sandviken, Sweden, which already manufactures similar tools. This measure facilitates the previously announced expansion of cemented-carbide manufacturing in Mexico and increases productivity. Sandvik Specialty Steels (Sandvik Steel, Kanthal and Sandvik Process Systems) Q1 Q1 Change Full-year SEK M 2001 2000 % 2000 Order intake 3 842 3 774 -4 * 14 732 Invoiced sales 3 690 3 319 +5 * 14 209 Operating profit 317 267 +19 980 % 9 8 7 * at fixed exchange rates for comparable units. Sandvik Specialty Steel's order intake in the first quarter amounted to SEK 3,842 M (3,774), a decline of 4% compared with a year earlier, at fixed exchange rates for comparable units. Demand rose in Europe but declined in NAFTA and parts of Asia/Australia. Order intake increased somewhat in relation to the fourth quarter. Demand from consumer-related customer segments such as the automotive and the electronics industries declined, while products for the oil and gas and the energy industries continued to grow. Invoiced sales amounted to SEK 3,690 M (3,319). The increase was 5% at fixed exchange rates for comparable units. Invoiced sales increased in Europe, NAFTA, Australia and Japan, but declined throughout the rest of Asia. Operating profit increased 19% in the quarter compared with a year earlier, amounting to SEK 317 M (267), or 9% of invoiced sales. The earnings improvement was due primarily to a better product mix and higher productivity. Lower prices for the nickel content in inventories affected earnings adversely by SEK 85 M. The program of change announced last year regarding Sandvik Steel is proceeding according to plan, and involves the restructuring of production and the rationalizing of the sales organization in Europe. The program, which will take place during a three-year period, will result in a total reduction in the number of employees of 600-700. During the quarter, the reduction amounted to slightly more than 150 employees. The rationalization measures announced to date are expected to achieve full impact at year-end. Structural changes In the beginning of January 2001, Sandvik Steel announced plans to shut down manufacturing of seamless tubes in the UK. The closing, scheduled for August 2001, will affect a total of approximately 250 employees. It is part of the program of change within the business sector. In the middle of January 2001, Sandvik entered as one of five joint owners of Endorsia.com International AB, an e-business site for industrial products and services in Europe. At the end of February, Sandvik CTT entered into an agreement with its former British agent Angus MacInnes & Co., Glasgow, to take over their sales and marketing of Prototyp products in the UK. Prototyp is a subsidiary of Sandvik CTT that produces mills, taps and other advanced tools in high-speed steel and solid carbide for metalworking. At the beginning of March, Sandvik acquired the remaining 49% of the shares in Sandvik Choksi Ltd. from the Indian company Choksi Tube Company Ltd. Sandvik has owned 51% of the shares since the company was founded in 1996, and the acquisition strengthens Sandvik's position in India and in the other Asian markets for extruded seamless stainless tubes. It also enhances the potential for synergies with other production units within Sandvik Steel. Sandvik has made a public offer to acquire the remaining shares representing 26.8% of the total share capital in the Indian subsidiary Sandvik Asia Ltd. The total value of the offer is approximately SEK 95 M. Sandviken 7 May 2001 SANDVIK AB; (publ) Clas Åke Hedström President and CEO Appendices: 1. Group summary 2. Invoicing and operating profit Sandvik Group's result for the first quarter of 2001 has not been audited by the Company's auditors. The next interim report, on the first six months in 2001, will be released on 8 August. For additional information, please call +46 (0)26-26 10 01 A telephone conference will be held on 7 May at 5:00 p.m. For further information visit www.sandvik.com Consolidated Financial Information, SEK M Q1 Q1 Full- year Income statement 2001 2000 2000 Invoiced sales 12 050 10 320 43 750 Cost of goods sold -7 940 -6 714 -29 357 Gross profit 4 110 3 606 14 393 Selling, general and administrative expenses -2 331 -2 197 -9 029 Other operating income and expenses -139 -14 303 Items affecting comparability 300 660 Operating profit 1 640 1 695 6 327 Financial income and expenses, net -115 -135 -523 Profit after financial items 1 525 1 560 5 804 Taxes -558 -466 -1 881 Minority interests -66 -56 -211 Net profit 901 1 038 3 712 Balance sheet Fixed assets 19 867 18 145 19 156 Inventories 12 554 10 265 11 508 Current receivables 12 506 10 461 11 147 Liquid assets 1 946 2 209 2 097 Total assets 46 873 41 080 43 908 Shareholders' equity 24 817 21 496 23 019 Minority interests 1 023 949 931 Interest-bearing provisions and liabilities 8 446 8 340 8 741 Non-interest-bearing provisions and liabilities 12 587 10 295 11 217 Total provisions, liabilities and shareholders' 46 873 41 080 43 908 equity Cash-flow statement Profit after financial items 1 525 1 560 5 804 Items not affecting cash flow +197 -138 -871 Reversal of depreciation 581 556 2 336 Taxes paid -534 -527 -1 688 Change in working capital -800 -740 -1 105 Cash flow from operating activities 969 711 4 476 Investments, acquisitions and divestments -588 -824 -2 691 Cash used in financial activities, changes in -595 -41 -2 119 loans, dividends Net cash flow -214 -154 -334 Liquid funds at beginning of period 2 097 2 369 2 369 Exchange-rate differences in liquid funds +63 -6 +62 Liquid funds at end of period 1 946 2 209 2 097 Change in shareholders' equity Opening equity as shown in approved balance 22 472 20 109 20 109 sheet Effect of change in accounting principles 547 516 516 Opening equity adjusted to new principles 23 019 20 625 20 625 Effect of change in exchange rates 897 -167 752 Dividend to shareholders -2 070 Result of the period 901 1 038 3 712 Closing balance 24 817 21 496 23 019 Q1 Q2 Q3 Q4 Full-year Q1 Change Invoices sales by market area, SEK M 2000 2000 2000 2000 2000 2001 % %1) EU (excl. 3 825 3 951 3 527 4 256 15 559 4 551 19 1 Sweden) 1 Sweden 623 616 502 634 2 375 586 -6 - 3 Rest of Europé 628 639 643 713 2 623 853 36 3 1 Europe total 5 076 5 206 4 672 5 603 20 557 5 990 18 1 1 NAFTA 2 722 2 817 2 760 2 974 11 273 2 960 9 0 South America 419 490 491 488 1 888 451 8 1 Africa/Middle 391 420 550 560 1 921 611 56 5 East 9 Asia/Australia 1 712 2 107 1 977 2 315 8 111 2 038 19 1 4 Group total 10 320 11 040 10 450 11 940 43 750 12 050 17 1 1 Invoices sales by market area, SEK M Svk Tooling 3 818 3 832 3 653 4 204 15 507 4 258 12 8 Svk Mining and 2 248 2 666 2 602 2 668 10 184 2 984 33 2 Construction 4 Svk Specialty 3 319 3 583 3 286 4 021 14 209 3 690 11 5 Steels Seco Tools2) 916 946 895 1 028 3 785 1 103 20 8 Group 19 13 14 19 65 15 / / activities Group total 10 320 11 040 10 450 11 940 43 750 12 050 17 1 1 Operating profit by business area, SEK M Svk Tooling 800 770 735 830 3 135 878 Svk Mining and 209 287 286 291 1 073 315 Construction Svk Specialty 267 321 86 306 980 317 Steels Seco Tools2) 197 190 156 197 740 240 Group -78 -73 -38 -72 -261 -110 activities Op. profit excl. items 1 395 1 495 1 225 1 552 5 667 1 640 affecting comparability Items 300 360 / / 660 / affecting comparability Op. profit incl. items 1 695 1 855 1 225 1 552 6 327 1 640 affecting comparability Operating profit by business area, % of invoicing Svk Tooling 21 20 20 20 20 21 Svk Mining and 9 11 11 11 11 11 Construction Svk Specialty 8 9 3 8 7 9 Steels Seco Tools2) 22 20 17 19 20 22 Op. profit excl. items 14 14 12 13 13 14 affecting comparability Op. profit incl. items 16 17 12 13 14 14 affecting comparability 1) Change compared with year earlier at fixed exchange rates for comparable units. 2) As a result of the majority holding in Seco Tools, Sandvik consolidates this company. For comments refer to the company's interim report. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/07/20010507BIT00520/bit0001.doc http://www.bit.se/bitonline/2001/05/07/20010507BIT00520/bit0001.pdf