Annual Report • Dec 31, 2015
Annual Report
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The new Silent Tools® series secures a market-leading position in vibration-reducing tools. Read more on page 21.
| YEAR IN BRIEF 1 | |
|---|---|
| LETTER FROM THE PRESIDENT AND CEO 2 | |
| OUR WORLD 5 | |
| OUR STRATEGY12 | |
| OUR EMPLOYEES 17 | |
| RESEARCH AND DEVELOPMENT 20 | |
| CUSTOMER STORIES24 | |
| BUSINESS AREAS 28 | |
| Sandvik Machining Solutions 28 | |
| Sandvik Mining 30 | |
| Sandvik Materials Technology32 | |
| Sandvik Construction 34 | |
| Sandvik Venture36 | |
| OUR SHARE38 | |
| REPORT OF THE DIRECTORS 41 | |
| Group summary 41 | |
| Development in business areas47 | |
| Integrated risk management51 | |
| Financial risk management 53 | |
| Corporate governance report61 | |
| Internal control of financial reporting 68 |
| CONSOLIDATED FINANCIAL STATEMENTS70 | |
|---|---|
| Income statement71 | |
| Balance sheet 72 | |
| Changes in equity74 | |
| Cash-flow statement75 | |
| PARENT COMPANY FINANCIAL STATEMENTS 76 | |
| Income statement77 Balance sheet 78 |
|
| Changes in equity80 | |
| Cash-flow statement81 | |
| SIGNIFICANT ACCOUNTING POLICIES82 | |
| NOTES93 | |
| BOARD'S STATEMENT ON DIVIDEND PROPOSAL121 | |
| PROPOSED APPROPRIATION OF PROFITS 122 | |
| AUDITOR'S REPORT 123 | |
| BOARD OF DIRECTORS124 | |
| GROUP EXECUTIVE MANAGEMENT 126 | |
| ANNUAL GENERAL MEETING AND DIVIDEND 128 DEFINITIONS 128 |
|
| FINANCIAL KEY FIGURES 129 |
Report on the first quarter 2016 25 April 2016 Annual General Meeting 2016 28 April 2016 Capital Markets Day 2016 24 May 2016 Report on the second quarter 2016 18 July 2016 Report on the third quarter 2016 24 October 2016 Report on the fourth quarter 2016 First quarter 2017
The Annual Report is available online at sandvik.com, where a printed copy can also be ordered, together with our other publications, such as the Sustainable Business Report.
If you have any comments on our Annual Report, please contact us at Group Communications,
The formal Annual Report comprises the pages 41–122. Please note that the official audited version of the Annual Report is the Swedish version available in the pdf and printed versions. In some cases, tables and calculations do not always agree exactly with the totals shown due to rounding.
MSEK Order intake –8%*
MSEK Invoiced sales –6%* 4,059
MSEK Profit after financial items
7.9
% Return on capital employed
1.79
SEK Earnings per share
2.50
SEK Proposed dividend
* At fixed exchange rates for comparable units and including discontinued operations.
Sandvik is a company that I have always held in high regard. I am proud to stand alongside all of its employees and be a part of the exciting future that lies ahead for our Group. First and foremost, my job is to draw on existing strengths and positions to successfully guide Sandvik through various challenges. I can see enormous possibilities to long-term enhance both our market shares and our profitability through pioneering technology and expertise in addition to close collaboration with customers the world over.
OUR ACHIEVEMENTS
record high cash flow 12,793 MSEK
15,000
number of products launched
The challenging macroeconomic situation of 2015 has spilled over into 2016. In 2015 we noticed a decline in demand compared with the previous year for both business areas and regions. Low oil prices arrested demand in the energy segment and general engineering industry, while growth in Asia was unsteady in response to China's economic downturn. The demand for mining equipment remained stable, albeit low. Growth in the aerospace and automotive segments was somewhat stronger year-on-year. Conscious and focused efforts to structurally reduce the net working capital resulted in an all-time-high cash flow for the year.
Our focus is on our customers, on our targets and on developing our operations. We are not satisfied with the year's outcome and further measures to improve profitability will be taken. Our top priority is to deliver sustainable results over time.
Sandvik should either be world leading, or have the opportunity to become world leading, in the areas and niches in which the Group operates. Today, we hold strong global positions in many segments. To maintain and strengthen these leading positions and boost our growth and returns, we aim to become even more customer-oriented, agile and global.
Clearly defined areas of responsibility and accountability, transparency in the organization and speed are key factors for success. This requires that decisions are taken close to the operations, which is where the dynamics and conformability lies – particularly important when markets and conditions change quickly. At Group level, our most important task is to provide the support that our operations need to realize their ambitions, as well as to secure clear governance of a number of selected processes common for Sandvik's way of working.
We prioritize innovation based on customer needs. Last year, we launched a record-breaking number of new products and solutions, more than 15,000 in Sandvik Machining Solutions alone. This accomplishment has advanced our positions with many of our customers. We have often helped to revolutionize production methods and we will continue to aim to be first to supply that which our customers demand and
require. Maintaining and improving our technical leadership is one of the most critical tasks for Sandvik going forward.
Efficiency programs are underway and progressing according to plan in our group functions and business areas. These projects are a natural part of our business development, and we will regularly implement new measures. Productivity should increase by at least 3 – 4% per annum, and it is vital that we constantly challenge ourselves and strive to improve our operations.
We will continue to regularly evaluate our portfolio with focus on our core areas, and proactively make acquisitions and divestments. Our objective is to sustain or advance our positions in areas where we are, or have the possibility of becoming, world leading. We aim to develop against fast-growing markets. To make Sandvik Mining more focused on its core operations, we announced our intention to divest our Mining Systems operations. We also made a smaller acquisition in the form of Dutch company SGL Technology, part of Sandvik Process Systems and manufacturer of customized machinery and equipment to the food industry.
We continued to develop our aftermarket business. It is important that our business-generating operations can assume responsibility for the customer's total value chain, from innovation and product development to installation, service and support. We should be our customer's preferred choice and speaking-partner. Close customer dialog should shadow the entire process, from concept to the actual installation of an innovative production process, shipment of an automated drill rig or an extra productive crusher. We will also support customers when the solutions are up and running, provide the best service, back-up and prompt deliveries of all the wear and spare parts needed. Sandvik Mining's Service365 is an excellent example of how we satisfy customer needs and assist in improving their productivity, reliability and safety. Yet another example is Sandvik Construction's ability to develop service concepts for the operation and maintenance of the
bridges and tunnels for which they previously supplied drill rigs and other equipment. There is vast potential here since critical infrastructures in such niche areas as quarrying and crushing are global growth areas.
Sandvik should be an attractive company to work for and invest in, and we are determined to create a winning team. Toward this end, we aim to cultivate a high-performance culture in which every employee assumes responsibility for promoting customer focus and innovation. By recruiting talents and developing our employees, we can continue to boost our capacity as a market-leading industrial company with progressive technology.
Our strong focus on safety is another central aspect of our culture. Again this year, we can be proud of the reduction in our lost time injury frequency rate which, for all operations combined, dropped to 2.1 at year-end. However, a great deal remains to be developed and improved before we can realize our Zero Harm vision.
Sustainability is an integral part of our core business, and our mission is to pioneer these issues. Sustainable solutions are also often more cost-effective in the long term, both for our customers and us. By
launching energy-efficient solutions, we enable our customers to raise their productivity, lessen their environmental impact and improve the health and safety of their employees. We were included in the Dow Jones Sustainability Index for 2015, which means that we rank as one of the ten most sustainable companies in the world in our industry.
Sandvik's focus is on long-term value creation – for all our customers, shareholders and employees. The important thing now is to adapt to today's tough market situation so that we can continue to play a significant role in global industrial developments.
Finally, I would like to thank all of our customers, shareholders and partners for your trust, and all of our employees for your high-quality efforts throughout the year.
Stockholm, February 2016
Björn Rosengren President and CEO
We are a high-tech and global engineering group with approximately 46,000 employees who share a strong commitment to enhancing customer productivity, profitability and safety. Our operations are based on unique expertise in materials technology, extensive knowledge of industrial processes and close customer cooperation.
employees worldwide
invoiced sales
91 BILLION SEK
around the globe
Sandvik is organized into five business areas responsible for research and development, production, marketing and sales of their respective products.
| In short | A market-leading manufacturer of tools and tooling systems for advanced industrial metal cutting. Products are manufactured in hard materials and are sold under brands such as Sandvik Coromant, Seco, Walter and Dormer Pramet. The focus is on increasing customer productivity by providing products, services and applications know-how. |
A leading supplier of equipment and tools, service, support and technical solutions for the mining industry. The offering covers drilling and mechanical cutting, loading and hauling, crushing and screening. |
A world-leading manufacturer of high value added products made from advanced stain less steels and special alloys. Focus is on making customers' processes safer and more efficient while reducing the environ mental impact. |
|---|---|---|---|
| Value of accessible market, SEK billion | 160 | 130 | >130 |
| Market characteristics | The premium market is highly consolidated with product solutions and service levels acting as differentiators. The mid-market has a low level of consolidation, has a lower service level and is relatively more price-sensitive. |
Continuing operations A consolidated market exists for the core area of underground hard rock mining. A large aftermarket consisting of service, spare parts and rock tools. Discontinued operations Materials handling systems, a fragmented market for large pro jects within materials handling systems. |
Selected niches in demanding industries where material requirements, as well as product quality and reliability, are extremely high. |
| Share of Sandvik invoicing, % | 36 | 30 | 15 |
| Drivers | Global industrial production and primary metals consumption, e.g. automotive, aerospace, gen eral engineering, new technology and new materials, e.g. titanium and composites, and increasing focus on productivity in emerging markets. |
GDP growth rate and resource intensity, metal and mineral prices, production levels in existing mines and expansion projects, demand in the areas of technology, health, safety and environment. |
Energy demand, global industrial production, environmental legislation and demand for safer industrial processes, aerospace and automotive production. |
| Market growth | Growth in the cutting tool market has historically averaged 2%–4%. |
Prior to the mining downturn, historical growth rates averaged 6–8% with large fluc tuations. Recent growth rates have been lower or negative, in the mining downturn, and more dependent on mining volume output levels rather than expansion. |
Historical growth rates have been about 4–6%. The market has been negatively affected since the end of 2014 due to the drop in oil price. |
| Way to market | Premium: highly advanced products, high service levels with on-site support and 24-hour delivery. Comprises direct and in-direct sales. Mid-market: sales via distributors, a limited service offering. |
95% direct sales. A consolidated customer base with about 200 large customers globally and a worldwide service network. |
Sales split: 80% direct sales and 20% via distributors. |
| Growth strategy | Increased pace of core product launches. Focus areas: automotive, aerospace, advanced mate rials and emerging markets, digital offering and service and mid-market. Bolt-on acquisitions. |
Increased pace of new product launches and aftermarket penetration, mining automation and data-driven productivity, mid-market and local premium offerings. |
Increased focus on products for energy and energy efficiency solutions and continued material evolution through focused R&D efforts. |
| Major competitors | – Kennametal with brands Kennametal and Widia – IMC Group with the Iscar and Taegutec brands – Mitsubishi – Smaller niche players |
– Atlas Copco – Metso Minerals – Caterpillar – Joy Global |
– Nippon Steel & Sumitomo Metal – Vallourec – Tubacex – Hitachi – Smaller niche players |
| A world-leading manufacturer of high value added products made from advanced stain less steels and special alloys. Focus is on making customers' processes safer and more efficient while reducing the environ mental impact. |
Provides solutions for construction industries in niches such as quarrying, tunneling, demolition, dimensional stone, recycling and civil engineering. |
Consists of four product areas: – Hyperion: products in hard and super-hard materials – Drilling and Completions (Varel): drill bits and drilling solutions for the oil & gas industry – Process Systems: industrial processing equipment – Wolfram: tungsten powders from recycled and virgin materials |
|---|---|---|
| >130 | 140 | ~100 |
| Selected niches in demanding industries where material requirements, as well as product quality and reliability, are extremely high. |
Fragmented customer base, with more than 25,000 individual customers. Local business. Significant aftermarket. |
– Hyperion: diverse customer base, highly volume dependent – Drilling & Completions: diverse customer base, productivity and reliability as key drivers – Process Systems: fairly consolidated market for high-value project business – Wolfram: consolidated supplier market with high tonnage volume |
| 15 | 10 | 9 |
| Energy demand, global industrial production, environmental legislation and demand for safer industrial processes, aerospace and automotive production. |
Global infrastructure investments and increased focus on productivity. |
– Hyperion: global industrial production – Drilling & Completions: onshore oil and gas drilling activity – Process Systems: drive for increased productivity as well as impact from gradually tightening environmental regulations – Wolfram: global industrial production and metal consumption |
| Historical growth rates have been about 4–6%. The market has been negatively affected since the end of 2014 due to the drop in oil price. |
Historical average growth rate of 4%, higher in drilling. |
– Hyperion: largely in line with global GDP – Drilling and Completions: historically some 7%, lower in 2015 due to oil price weakness – Process Systems: over time approximately 2%–4% – Wolfram: historical average of about 2–4% (market for hard metals production) |
| Sales split: 80% direct sales and 20% via distributors. |
Sales split: 50% direct and 50% via distributors. | Primarily direct sales for all four product areas. |
| Increased focus on products for energy and energy efficiency solutions and continued material evolution through focused R&D efforts. |
Sales efficiency and commercial excellence, increased aftermarket penetration and focus on growth regions. |
Increased growth through new products, contin ued globalization and bolt-on acquisitions. |
| – Nippon Steel & Sumitomo Metal – Vallourec – Tubacex – Hitachi – Smaller niche players |
– Atlas Copco – Terex – Metso – Furukawa |
– Hyperion: Element Six, US Synthetic, Ceratizit, Kennametal, Iscar – Drilling & Completions: Schlumberger Halliburton /BakerHughes, NOV – Process Systems: Berndorf, Enersul, SBS – Wolfram: HC Starck, GTP, GESAC |
Our customers are found in a variety of industries. With our solutions, we enhance our customers' productivity, profitability and safety. The mining segment is the largest component of our business, closely followed by the engineering, energy and construction segments, and we hold strong positions in high-growth segments, such as automotive and aerospace.
ENERGY 13%*
* Share of the Group's 2015 total invoiced sales; consumer goods, chemical and miscellaneous totals 6%.
Sandvik delivers drill rigs, rock-drilling tools and systems, mobile and stationary crushers, load and haul machines, tunneling equipment, continuous mining and mechanical cutting equipment, and various solutions to increase automation.
DRILLING
Our blasthole drill rigs are renowned for quality, reliability and productivity.
LOADING AND HAULING Our loading trucks are engineered for safety, productivity and reliability in the toughest of applications.
AUTOMATION AND MONITORING Our Mine Automation Systems cover all aspects of automation, from single equipment to full fleet control.
Our tools and tooling systems for metal cutting and advanced materials and components are used in engineering industries worldwide, improving productivity and increasing profitability.
SHOULDER MILLING TOOLS Shoulder milling generates two faces simultaneously, which requires peripheral milling in combination with face milling.
EXTERNAL TURNING TOOLS Turning generates cylindrical and rounded forms with a single-point tool. The tool remains stationary while the work piece rotates.
HOLEMAKING TOOLS We provide holemaking tools for every need; there are a multitude of characteristics to consider, such as positioning accuracy, hole geometry and surface
We offer solutions for all forms of energy production. These include tools and systems to satisfy the industry's metal-cutting needs as well as finished products and materials.
OIL AND GAS EXPLORATION & PRODUCTION Our super-duplex stainless steel tubes have become industry standard due to their corrosion resistance, reliability and ability to withstand extreme temperatures and pressures.
NUCLEAR POWER GENERATION We provide safe, qualitative and troublefree products in advanced stainless steels and special alloys. With >50 years in the industry, we have delivered steam generator tubes to more than 100 nuclear reactors worldwide.
RENEWABLE ENERGY We offer several products used in power generation and other types of renewable energy, such as products used in linear fresnels and solar towers.
Our cemented-carbide tools and systems for turning, milling and drilling in metals raise productivity when manufacturing such components as engines and transmissions. Our materials are found in, for example, safety belts, airbags, brakes and various instruments.
METAL-CUTTING TOOLS Tools for manufacturing transmission and engine components in, for example, steel, stainless steel, aluminum and cast iron.
COMPRESSOR VALVE STEEL Compressor valve steel with extremely high fatigue strength used in car AC systems. Designed to meet the tough demands on highly energy-efficient compressors.
GASOLINE DIRECT INJECTION TUBES PRESSURFECT ™ – seamless stainless steel tubing developed for high-pressure gasoline direct injection (GDI) engines. Significantly reduces fuel consumption. Strong, lightweight and corrosion resistant.
Providing solutions for the breaking, drilling and crushing niches of the construction industry.
CRUSHING AND SCREENING Stationary and mobile crushers, together with a wide range of screens and feeders, service applications such as quarrying, mining and aggregate production.
Our offering powers with precision in equipment such as surface drill rigs, roadheaders, tunneling jumbos and load and haul equipment.
BREAKING Our hydraulic breakers, booms, tools and accessories enable trouble-free performance in applications such as quarrying, demolition, tunneling and road construction.
As aerospace companies apply new materials to manufacture airplanes that are lighter, safer and more fuel efficient, advanced tooling solutions are critical to their success.
Material and application knowledge and performance tooling solutions are the basic set of requirements needed to succeed when machining components for landing gear and turbine blades.
DRILLING TOOLS There are approximately one million holes in an airplane, which requires several drilling operations. Our range of drills has been designed with optimum hole quality in mind.
To strengthen our leading position and increase our growth and return rates, we are developing an increasingly customeroriented, fast-moving, sustainable and global organization
VISION - WHAT WE STRIVE FOR
Over a cycle incl. acquisitions Outcome 2015: 2%
* Proposed dividend.
RETURN ON CAPITAL EMPLOYED
8% 50% 25%
Over a cycle Outcome 2015: 7.9% NET DEBT/ EQUITY RATIO
$$
<!!0.8
$$
Excluding major acquisitions Outcome 2015: 0.74
$$
\underline{50\%}
$$
Of earnings per share Yearly outcome 2015: 140% of reported and 57% of adjusted
Our operations are based on extensive expertise in materials technology and applications, close collaboration with our customers and a unique ability to industrialize high-tech products, machinery and tools.
We are world-leading in the following areas:
– Products in advanced stainless steels, special alloys, titanium, and metallic and ceramic resistance materials.
We aim to be growth-oriented and global in both mindset and footprint, flexible and able to respond to changes in the marketplace. We strive to provide leading solutions for our customers, capitalizing on new trends, and it is imperative that we employ exceptional people and create a culture that utilizes their full potential.
THE CHAIN IS COMMON, APPLICATION IS DIFFERENT
Our products, services and solutions increase our customers' productivity by lowering their costs, and enhancing the efficiency and reliability of their production operations.
Global business drivers in our external environment that influence the conditions for our operations comprise a key basis for our focus.
exchange of perspectives and reduced barriers to flows of goods, services, capital and people.
We have a clear direction for Sandvik as a Group and strategic priorities for each respective business area to ensure that we retain and strengthen our leading positions. The objectives are profitable growth, increasing returns and reduced earnings volatility.
We strive to work ever-closer to our customers in deep partnerships and over the full product lifecycle, not least within service and support.
We maintain intense focus on innovation and endeavor to further increase the launch rate of new products. For example, in 2015, Sandvik Machining Solutions launched more than 15,000 new products. The aim is to strengthen the position in core segments and also to advance the positions in the mid-market segment and in emerging markets. Research and development comprise the foundation of our operations.
We continuously evaluate our portfolio and divest non-core operations and less profitable parts to increase profitability and free capital for new growth-promoting investments.
Globalization and urbanization create new markets for our products. We are reorganizing operations to increase exposure in fast-growing industrial segments and in emerging markets such as India and China. We work to identify sustainable solutions for growing cities and more digital, global solutions.
Our relationship with customers does not end when we deliver a product or solution, rather this marks the beginning of a long partnership. Our service offering has been substantially strengthened over the past few years and has contributed to reducing volatility in our earnings.
We work with optimizing our supply chain by reducing the total number of production units and moving parts of production to Asia, which we expect to comprise the largest market in the future. We are also working to improve our internal efficiency at all units, in our business areas and at Group level through Lean processes. We are adapting our production to become more user-friendly and enhance efficiency, thereby increasing competitiveness.
Sustainability is integrated in our core operations and it is our ambition to remain at the forefront in this area. Working together with our customers is key to achieving this. By launching leading energy-efficient solutions, we enable our customers to reduce their environmental impact. Furthermore, our solutions aim to increase health and safety for both our customers and their employees.
Our strategic agenda is implemented in our five business areas. Group-wide IT, finance, HR and talent development service functions support business area operations. Each business area is autonomous and acts within its specific industry segment. Their strategic priorities strengthen the Group's overall objectives and business goals.
Sustainability is integrated into our business and our ambition is to remain at the forefront in this area. We work in close collaboration with our customers to continuously develop our business in a sustainable way. By gaining a detailed understanding of what our customers need, we are able to provide products, services and solutions that strengthen their productivity, reduce environmental impact and improve safety for their employees, thereby increasing their competitiveness.
In 2015, we updated our strategy for sustainable business. We aim to focus more intently on our customers and offerings, thereby enhancing the identification of improvement areas in our internal operations. By breaking down the strategy to apply to each of the eight dimensions of "Our offerings" and "Our operations", we maximize our possibilities to measure, control and follow up our sustainability impact. We have defined goals and have strengthened our follow-up processes.
We conduct a materiality analysis on a regular basis. This analysis provides us with a clear direction and indicates the most significant matters for us at that particular point in time. It is conducted by members of the Group Executive Management, with important input from our stakeholders and from international frameworks and institutions, such as the Global Reporting Initiative (GRI), the Dow Jones Sustainability Index and the UN Global Compact. The materiality analysis is continuously updated.
Read more about our prioritized sustainability aspects on page 67 or in our Sustainable Business Report at sandvik.com.
This year, we were included in the Dow Jones Sustainability Index, one of the world's most reputable, independent sustainability indices. We continue to be included in the FTSE-4Good Index, Ethibel Excellence Investment Register and RobecoSAM's Sustainability Yearbook.
Enabling a high-performing organization with empowered people is crucial for us. We strive to foster a culture of customer focus and innovation by securing a professional way of working and continuous development of our employees and their performance. Looking ahead, the ability to leverage our diverse talents and the skills of our employees in an open internal job market will be critical in driving growth and profitability.
A strong performance culture is vital to leverage the full potential of our employees and achieve profitable growth. Initiatives to strengthen the performance culture include focus on performance management throughout the Group. All managers in the organization are offered performance-management training in close alignment with our target-setting process. The aim is to strengthen the quality of target setting, dialogs and follow-through on execution.
We work actively to attract, develop and retain exceptional people. All activities are aligned with business needs.
We offer talent development programs and activities on a global level and in selected countries, such as China, India and the US.
We offer Group leadership programs for managers at different levels, based on the business strategy and our leadership model. Participants create a diverse group and represent all business areas and Group functions as well as geographies. Within the Group, we also drive a Next Generation Leadership Program with focus on developing the next generation of leaders.
Our core values are built on our rich heritage and support our ambitions for the future.
CUSTOMER FOCUS
We constantly strive to exceed our customers' expectations and enable them to excel in their business.
We shape the future by creating pioneering solutions throughout our operations.
We conduct business in a sustainable and responsible manner.
We are passionate about making our company number one.
To attract talented people and secure our global talent pool, we have a Global Trainee Program. Our Trainee Program is one key activity in the area of Employer Branding. Currently, we have two parallel programs running. The first program started in September 2014 with participants from China, India and Sweden. The second started in September 2015, with participants from China, India, Sweden, South Africa and the US.
We have a number of local apprentice programs for operators and production employees running globally. Through an internal analysis, we identified a need for mechanical, diesel and electrical artisan skills, and this has led to a number of dedicated apprentice programs. Since the programs started, we have trained more than 760 apprentices.
We have clear specialist and expert career paths for our R&D professionals, and a strong focus on training and development programs. In addition, a separate career path for project managers was recently introduced.
Diversity and inclusion are crucial when working toward becoming a truly global company. We view diversity as a competitive advantage and inclusion as the means to utilize it and we work continuously to improve in these areas. Our main challenge going forward is to attract and retain a diverse range of employees.
WOMEN MEN
NON-EUROPEANS IN BUSINESS AREA MANAGEMENT TEAMS
DIVERSE GROUP EXECUTIVE MANAGEMENT
3 NATIONALITIES
33.3% WOMEN
39–65 AGE SPREAD
SHARE OF WOMEN IN MANAGERIAL POSITIONS
16.5%
Dynamic meeting in the recently refurbished Sandvik US headquarters in Fair Lawn, September 2015.
Michael Eneberg is Sales Manager for Sandvik Coromant, Sandvik Machining Solutions, in Indonesia.
Learn more about his views on leadership, performance and career opportunities:
"I base my thinking on a team effort. My salespeople are the front line of the fully integrated value chain that comprises our operations. We are strongest when we communicate the entire chain to our customers and, accordingly, I invest substantial time in ensuring that everyone understands how everything is interlinked. Asia is a region where the markets and customer needs are developing rapidly, and to create results, everyone has to be able to take their own initiative and meet these needs. We have to be better at everything, the products themselves, technical advice, our ability to keep promises and the service we provide.
The creation of a performance-based culture is important and a factor in profitable growth, but perceptions vary between regions as to what actually comprises performance. In Indonesia, as in Japan where I worked previously, the collective result is what is most important. What is good for the group is good for me. Creating a successful and profitable culture means identifying the right balance between the responsibility of the individual and that of the group.
I joined Sandvik because of the many opportunities provided by working for a large international company. My experiences since then have far exceeded my expectations. The possibilities are endless, but you must keep performing, at all times. Competition is intense, some of the best people in every field work here. At the same time, this drives us to show what we can do, and to constantly accept new challenges, just as I have now done with Indonesia."
Michael Eneberg, Sales Manager, bases his thinking on team efforts.
To ensure a safe and healthy workplace for those who work in our company, safety is always our first priority. This is especially relevant because we are active in heavy industry, where the work environment and manufacturing processes in our operations hold several potential risk elements.
We strive to constantly improve the safety culture and focus intently on holding all managers accountable for EHS (Environment, Health, Safety) matters within their sphere of influence. To support this, we have introduced a structured approach throughout and have achieved a high level of control in our management systems.
We have seen that our focused work has yielded good results and we have significantly improved our safety performance. For example, we have succeeded in reducing our frequency of lost time accidents from 17.2 to 2.1 with year-on-year improvements all years except one since 2006.
Research and development (R&D) comprise the bedrock of our operations and are key success factors to create long-term, sustainable growth. Our guiding star is to collaborate closely with customers on the development of products, solutions and services. The aim is to support them and their goals to increase productivity, strengthen competitiveness, reduce environmental impact and improve health and safety.
We systematically seek out new technologies that can strengthen our position and expand our core operations, and carry out trend analysis to identify strategic development areas and ensure that we continue to focus on the right areas. Our ambition is to continuously increase the pace of new product launches. More than 2,700 engineers at research centers around the world work to realize this goal.
Their scope spans from nanotechnology to mining equipment.
Research is focused on a number of priority areas, such as developing new materials, efficient industrial processes including automation and information and communication technology (ICT), energy efficiency and additive manufacturing (3D printing).
NUMBER OF R&D EMPLOYEES:
2,700
R&D EXPENDITURE:
3,532 MSEK
ACTIVE PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS:
8,000
PATENTS GRANTED IN 2015:
850
NUMBER OF R&D CENTERS AROUND THE WORLD:
60
Silent Tools® – eliminating vibrations
Anders Digernes – Product Developer of the Year
When machining components with long overhangs – such as landing gears and jet engines for aircrafts, valves for oil rigs and seamless tubes for electric power stations – vibration is a very common issue. It affects quality and productivity, due to the problems caused for surface finishing and in relation to a smooth machining process.
Anders Digernes, from Sandvik Coromant in Norway, led the development of a new generation of the technology behind our vibration-dampened tools – Silent Tools®. Anders was named Product Developer of the Year for his efforts and received the 2015 Wilhelm Haglund medal.
The tools are designed with a dampener inside the tool body, which minimizes or even completely eliminates vibration. This enables a safe machining process even for extremely long overhangs. For shorter overhangs, they work perfectly as productivity boosters, as the cutting data can be increased without experiencing vibration.
The new Silent Tools® series secures Sandvik Coromant's market-leading position in vibrationreducing tools, and enables partnerships with high-end customers.
The Wilhelm Haglund Medal for the Product Developer of the Year is our foremost award for industrial innovations of great commercial value to Sandvik. It is named after the legendary Managing Director Wilhelm Haglund, who laid the foundations for the Group's successes in the cemented-carbide area.
R&D is kept within the four product areas.
Our business areas are responsible for and drive R&D efforts in line with their respective strategies and core operations. Their main focus is to develop core products, production methods, technology platforms and solutions adapted to meet their customers' needs. To remain relevant and competitive, the business areas work together with customers to develop new solutions.
Initiatives are being carried out to strengthen and complement the business areas' R&D investments by coordinating activities that involve several business areas. Joint projects comprise one aspect that advances positions for Sandvik, expands core operations and contributes to the Group's growth and profitability.
To maintain our position in a competitive and challenging market, we monitor and analyze global trends that impact conditions for our operations. Demographic changes, urbanization, globalization, climate changes and a lack of resources, together with the development of information and communication technology, comprise a key foundation for the priority areas targeted by our research.
geoSURE – provides immediate information about the drilled rock mass.
Sandvik Construction now defines the way rock-mass analysis will be conducted in the future. geoSURE is the first fully rig-integrated, real-time, data analysis and visualization system that provides customers with immediate information about the drilled rock mass. This unique innovation for underground construction drill rigs improves customer productivity while advancing and speeding up geological analysis. This is crucial, since increasing reporting demands and quality requirements pose a productivity challenge for our customers.
In the end, the new methods of operation improve the quality, efficiency and safety of underground construction operations. To create a user-friendly solution fit for our customers´ needs, Sandvik Construction included tunneling contractors and geologists as well as software architecture experts and research institutes in the development process of geoSURE.
In addition to contractors, the system is used in rock engineering and by consultants, which creates new customer groups for Sandvik.
Our R&D Center in Pune, India, specializes in modeling and simulation as a key technology, and carries out computational research and experiments for our business areas. The center has a team of scientists with world-leading knowledge in the field. Dr Supriya Sarkar is a key team member:
"Computer-based modeling has become a crucial tool in our R&D. Not only does it speed up development by performing trials using software, it also allows us to gain an understanding of processes and phenomena that are otherwise very difficult to observe."
Modeling reduces the development time for alloys and metallurgical products, such as tubes, strips and wires, by a process of simulation and optimization using high-tech computational systems. It reduces the need for experimentation and enables faster introductions of new products. This benefits customers and, at the same time, we secure our technological leadership.
"One of my projects has been to build an understanding of powder automization by developing a computer-based model of the process. We have also developed models of the heat flow within Sandvik Materials Technology's Kanthal furnaces. This has enabled us to increase our service by predicting how the furnace should be configured to meet the exact needs of the customer."
"Computer-based modeling reduces the development time for alloys and metallurgical products, such as tubes, strips and wires."
DR SUPRIYA SARKAR
Dr Supriya Sarkar - R&D Manager at the R&D Center in Pune, India.
Rapidly growing companies often have a great need for close collaboration with their suppliers.
LEAX Group in Köping, Sweden, a manufacturer of components for industries including the heavy vehicle industry, has had a close and productive partnership with the Sandvik-owned Seco Tools for over 20 years, a period during
which LEAX has increased its sales by an average of 30% each year. When it was time to address the troublesome production line for synchronizing rings, which comprise key transmission components, this coincided with the launch of Seco Tools' new generation of indexable inserts featuring Duratomic technology.
"We suffered numerous production outages and it was difficult to assess whether the inserts were worn and needed changing. It was obvious that we were in need of a change when, out of the blue, I received information from Seco Tools about its new Duratomic inserts in my e-mail. There was no hesitation. I rang immediately," says Mikael Axelsson, Production Engineer at LEAX Mekaniska in Köping.
A team from Seco Tools arrived quickly at the Köping plant and over a two-week period tested and adjusted indexable inserts to obtain the optimal solution for the complex production process. The TP1501 insert is one of three new types
of inserts that utilize Duratomic technology for steel turning applications.
"We were extremely pleased with how they worked. In parallel with our decision to buy the inserts for the entire production line, we visited two different trade fairs where we were able to spend more time in discussion with Seco personnel and understand more about the Duratomic technology. This just deepened our conviction."
Six months later, Mikael and his colleagues were able to note that the inserts continue to deliver. They have resulted in stable and also expanded production without interruption.
"We have increased productivity and reduced our costs. In addition, since the inserts have the new Chrome Used-Edge-Detection, the operators can easily identify which cutting edges are used. This guarantees stable turning operations and ensures we do not discard cutting edges that are still serviceable."
The manufacture of synchronization rings comprises one of eight production lines at the Köping plant. LEAX Group also has production units at four other locations in Sweden as well as units in Latvia, Hungary, Germany, China and Brazil. Given the intensive growth phase the company is experiencing, the natural course is to review possibilities for updating other parts of production with inserts based on the new Duratomic technology.
"The new TP grades are outstanding inserts for turning steel and other hard materials. We have finished our analysis and there is a high likelihood that we will proceed with the TP1501 and other Duratomic technology-based inserts. Furthermore, Seco is one of our prioritized suppliers that not only has excellent products, it also provides high-quality service. We believe it is important to continue to solve bottlenecks and other production problems together with Seco to ensure the continued successful development of the LEAX Group," concludes Mikael.
"We believe it is important to continue together with Seco to ensure the continued successful development of the LEAX Group"
Mikael Axelsson, Production Engineer, LEAX Group.
30%
LEAX's yearly average sales have increased over the past 20 years.
UAE Company National Quarries LLC had a problem. While the work of its existing crushing plant was satisfactory, scope existed to improve performance. Together with Sandvik Construction, it identified a solution using a CH660 cone crusher. The result was higher plant capacity, lower fuel consumption and an increased service life for wear parts.
National Quarries is a leading aggregate supplier in the UAE (United Arab Emirates). It uses a three-stage crushing process to produce the large amount of accurately sized aggregates demanded. This consists of jaw crusher as a primary, a cone working as the secondary and two impact crushers operating in a tertiary
"It was clear that the Sandvik team had very good technical knowledge and took the task very seriously," says Mr. Muslem, General Manager of National Quarries LLC.
To achieve the best solution possible, Sandvik used its PlantDesigner© simulation tool to check different scenarios and different machines. Changing the secondary crusher to a Sandvik CH660 would not only increase throughput in the secondary stage, but also increase net production in the impactors due to the decreased percentage going in closed circuit. Based on this analysis, National Quarries decided to replace its ity has increased 25% and we are now able to reduce the output to 0–63 mm. This has led to a higher reduction rate, resulting in an increase of 65% in the service life for wear parts in the impactors. We are also using 20% less fuel in our generators due to lower power consumption. I could never have dreamed that such major improvements could have been achieved by changing only one machine," concludes Mr. Muslem.
In 2015, it was time for National Quarries to invest in a new crushing plant. During the evaluation process, the Sandvik and National Quarries teams again worked closely together, which resulted in an
capacity. The plant has been producing well, but the secondary cone comprised a bit of a bottleneck. In 2012, Sandvik Construction was invited to take a look at the existing operation.
existing cone crusher with the CH660.
"The results have been amazing and our investment paid off much faster than we thought possible. Plant capacorder for three additional high-performance crushers, one primary feeder and three product screens.
The DC170 has a new design and features, and is fitted with the latest technology. It is stronger due to the volume of carbide material used, and disruptive vibrations during drilling are reduced to a minimum by the special orientation of the lands.
Its cooling effect counteracts the high temperature generated during drilling.
Cooling grooves have the additional function of providing a regrind scale, which makes it easy to calculate the remaining reconditioning potential.
In short: the DC170 brings four key benefits to the customer: increased tool life, higher drilling quality, reduced production costs and a reliable process.
For the foreseeable future, we will still need coal-fired thermal power plants. But thanks to more advanced technology and a new unique material, it is now possible to produce cleaner coal power, reducing CO2-emissions by up to 30%.
We have a long history of working closely with customers to make innovative technology shifts possible and to tackle the metallurgical and material challenges of the future.
The latest innovation in this field is SanicroTM25.
In short, it can handle the changing and extreme demands being placed on coal-fired power plants. One big challenge has been finding
Sandvik has delivered innovative products and materials to energy producing industries for over 50 years, tailoring each product to customers' needs and requirements. With SanicroTM25, we will help power plant owners to future-proof their energy production and build more energy-efficient plants by increasing steam temperatures from today's 620°C to 650°C. The strength of the material also makes it possible to increase the pressure in the boilers, which further improves the efficiency of coal combus-
tion. This not only saves money over
ready to launch, with the market in China as our top priority. The country is the world's largest consumer of coal, and has an urgent need to cut emissions from their large number of thermal plants to be able to improve air quality in many cities. Since coal will continue to be the main energy source in China for many decades, demand for green technologies is vast. Sanicro™25 has just been certified by the Chinese Pressure Vessel Committee, which means that it is fully compliant for the design, fabrication and assembly of the most demanding boilers. So, bring on the heat, we have the game-changing technology that our planet deserves.
advanced stainless steel materials that enable the superheaters and reheaters in ultra-supercritical steam boilers to combat steam oxidation and corrosion at higher temperatures. Sanicro™25 solves all of this. It has the highest creep strength of any commercial heat-resistant austenitic stainless steel and can safely and reliably achieve higher efficiency in boilers.
cycle of the power plant, it is now possible to reduce CO2-emissions by up to 30% due to less coal consumption.
After having put much time and effort into product development, we are now
Karari is a new underground mine in the northeastern goldfields of Western Australia being developed into a cornerstone of Saracen's Carosue Dam Operations. Since the exploration decline, RUC Mining, the contractor, has developed 3,500 meters in 11 months – 45 days ahead of schedule – and produced its first ore for Saracen several weeks early in August 2015. RUC Mining's strategy is to bring a product to the client, done on-time, and as safe as possible.
AVSNITT
When RUC Mining (RUC) initiated its search for a single supplier of equipment, tools and service for the Karari project, Barry Upton, a 33-year underground contract mining veteran, prioritized criteria in the process.
The contractor sought a versatile jumbo drill and a powerful loader to complement one another for its required development and cycle times, ultimately selecting a Sandvik DD421 twin-boom jumbo and a Sandvik LH517 loader for the project.
"We made a conscious decision to go with a single supplier of the drill rig, the loader, the drill consumables, steels, couplings, and additionals. The relationship is long-term and includes after-service. If you're a contractor, you need to have a reputable company to supply you with tools and parts, very quickly, or it can turn quite disastrous," says Upton.
"Most people would probably say capital cost is most important in equipment selection, but I think that's secondary," he says. "You can have the best unit in the world but if there's no service support and no reliable parts supply, it's going to result in downtime."
RUC relies on Sandvik for more than just equipment, tools, parts and technical support. Sandvik even resharpens dull drill bits at its workshop in Kalgoorlie.
"RUC and Sandvik are partners in many senses of the word – working together to improve performance," Upton adds.
"The loader suits us perfectly," Upton says. "We needed flexibility to operate in a number of different size headings without compromising productivity in the larger headings."
"Sandvik DD421 improves safety for us and is also very fitter-friendly. Everything is serviced from the ground and nobody has to climb on the rig. The jumbo has delivered 30 to 40 metres a month more than the contractor expected."
"We've been very pleased with the performance," Upton says. It's actually close to 20% above our expectations when we bid the job, so it's set a new benchmark for our company. We're proud of our performance at Karari, both in terms of quantity and quality of the work."
BARRY UPTON CONTRACT MINING VETERAN
| Value of accessible market, SEK billion |
160 |
|---|---|
| Market characteristics | The premium market is highly consolidated with product solutions and service levels acting as differentiators. The mid-market has a low level of consolidation, has a lower service level and is relatively more price sensitive. |
| Share of Sandvik invoicing, % |
36 |
| Drivers | Global industrial production and primary metals consumption, e.g. automotive, aerospace, general engineering, new technology and new materials, e.g. titanium and composites, and increasing focus on productivity in emerging markets. |
| Market growth | Growth in the cutting tool market has historically averaged 2%–4%. |
| Way to market | Premium: highly advanced products, high service levels with on-site support and 24-hour delivery. Comprises direct and in-direct sales. Mid-market: sales via distributors, a limited service offering. |
| Growth strategy | Increased pace of core product launches. Focus areas: automotive, aerospace, advanced materials and emerging markets, digital offering and service and mid-market. Bolt-on acquisitions. |
| Major competitors | – Kennametal with brands Kennametal and Widia – IMC Group with the Iscar and Taegutec brands – Mitsubishi – Smaller niche players |
Sales: 32,652 million SEK (30,856) with –3% organic growth Operating profit: 5,269 million SEK (6,159) Operating margin: 16.1% (20.0%) Adjusted operating profit: 6,579 million SEK (6,159) Adjusted operating margin: 20.1% (20.0%)
Sandvik Machining Solutions is the leading supplier in the global cutting tool industry.
Customer activity declined during 2015 as the general macro environment weakened. As the year progressed, total organic growth rates deteriorated, however regional trends differed significantly. Demand in North America and Asia declined from high levels at the end of last year, most notably in the US and China. In contrast, Europe showed a stable development. Low oil prices had a negative impact on demand from the energy segment as well as an indirect negative impact on demand in general engineering. The automotive segment remained largely stable, barring a slight softening in China. Favorable demand persisted within the Aerospace industry.
This year was a record year with 15,000 new products, including the new insert family Duratomic from Seco Tools, the launch of which was aimed at core segments, such as automotive and general engineering. The global market-leading position is based on the productivity solutions offering, which stems from our unique material and application knowledge and long customer relationships. The premium segment is the historical core market for Sandvik Machining Solutions and represents the vast majority of the customer base, where we are represented by the three premium brands Sandvik Coromant, Walter and Seco. From 2015, the Dormer Pramet brand represents the mid-market offering.
Jonas Gustavsson President of Sandvik Machining Solutions
Further progress with the Supply Chain Optimization Program was accomplished through rationalization of the production structure by consolidating plants and, thereby moving production volumes into fewer but larger units. In addition, operational efficiency measures were initiated within sales, administration and R&D. Sandvik Machining Solutions has a high degree of vertical integration, which makes it volume-dependent and hence emphasizing the importance of streamlining the cost base to maintain continued high returns and create value, even in a low-growth operating environment.
The Walter product area's M4000 indexable inserts are part of a tooling system that can be used universally for numerous machining requirements, thereby reducing complexity and susceptibility to production errors, while improving cost-efficiency.
With new, small diameter end mills equipped with size 07 inserts, the CoroMill® 390 is ideal for component features that have limited cutting depths. These smaller inserts deliver a higher cutter-teeth density giving superior productivity in any type of milling operation.
The new steel-turning grades from Seco Tools, based on Duratomic technology, dramatically improve customers' productivity, process reliability and cost efficiency. The Duratomic TP grades have been profoundly updated and include the new generation innovative coating technology with improved mechanical properties, and increased thermal and chemical inertness.
| Value of accessible market, SEK billion |
130 |
|---|---|
| Market characteristics | Continuing operations A consolidated market exists for the core area of under ground hard-rock mining. A large after market consisting of service, spare parts and rock tools. Discontinued operations Materials handling systems, a fragmented market for large projects within materials handling systems. |
| Share of Sandvik invoicing, % |
30 |
| Drivers | GDP growth rate and resource intensity, metal and mineral prices, production levels in existing mines and expansion projects, demand in the areas of technology, health, safety and environment. |
| Market growth | Prior to the mining downturn, historical growth rates averaged 6–8% with large fluctuations. Recent growth rates have been lower or negative, in the mining downturn, and more dependent on mining volume output levels rather than expansion. |
| Way to market | 95% direct sales. A consolidated customer base with about 200 large customers globally and a worldwide service network. |
| Growth strategy | Increased pace of new product launches and aftermarket penetration, mining automation and data-driven productivity, mid-market and local premium offerings. |
| Major competitors | – Atlas Copco – Metso Minerals – Caterpillar – Joy Global |
Continuing operations Sales: 22,421 million SEK (20,543) with 1% organic growth Operating profit: 2,585 million SEK (2,483) Operating margin: 11.5% (12.1%) Adjusted operating profit: 3,296 million SEK (2,483) Adjusted operating margin: 14.7% (12.1%)
Discontinued operations Sales: 4,977 million SEK (6,288) with –20% organic growth Operating profit: –1,209 million SEK (–85) Operating margin: –24.3% (–1.3%) Adjusted operating profit: –108 (–85) Adjusted operating margin: –2.2% (–1.3%)
Sandvik Mining is a leading supplier of equipment, tools, service and technical solutions for exploration, excavation and processing of rock and minerals.
The underlying demand remained low in 2015 as mining companies maintained a cautious approach to investments, not least due to negative price trends for many raw materials, such as coal, iron ore and copper. Material output levels continued to rise during the first half of the year, supporting mining companies' investments in replacement equipment, while in the second half of the year output stagnated and capacity was curtailed for many commodities. The overall business activity remained largely stable with variations between the different product areas. Mining Equipment posted favorable growth in order intake, primarily within underground drilling, and load and haul. Equipment orders are relatively large and a stochastic order pattern is not unusual. Demand for aftermarket products and services remained largely stable, however with a slight softening in the latter part of the year. Demand within Mining Systems deteriorated throughout the year.
Sandvik Mining is a leading supplier of equipment, tools, service and technical solutions for exploration, excavation and processing of rock and minerals in the mining industry, both for underground and surface mines. The offering includes highly
Lars Engström President of Sandvik Mining
advanced products and solutions for mature customers and markets with requirements for advanced automation and equipment monitoring capabilities. New drill rigs based on a modular design that targets small to mid-size underground hard rock mining applications were introduced during the year. The equipment is primarily sold directly to end users. A shared trait among our customers is the demand for more productive and safe equipment. This includes solutions for autonomous operations and remote control and monitoring, all combined with an ever-increasing focus on lowered emissions and energy consumption. Our aftermarket offering was further improved, for example, through the easy access repair and service kits. On 1 October 2015, we announced our intention to divest our Mining Systems operations, which is
a project business focused on the design, engineering and assembly of materials handling systems. Through the divestment, we will become more focused on our core capabilities, namely, mining equipment and the aftermarket for both underground and surface mines. Mining Systems is reported as a discontinued operation in the financial statements.
The Supply Chain Optimization Program progressed throughout the year, consolidating the footprint. These actions, combined with additional internal efficiency measures and adjustments to market activity levels, resulted in improved profitability for the business area. The focus on further improvement of internal efficiency will continue going forward.
MB670-1 increases productivity, reduces the total cost of ownership, and improves operator safety and ergonomics. This upgraded bolter miner is purpose-built for roadway development in longwall mines. The fully automatic cutting cycle results in constant and faster advances, thereby shortening panel development times by up to 30%.
The Sandvik DR461i is a diesel-powered, self-propelled, crawlermounted blasthole drill rig that is automation-ready and features forward-thinking design and technology for bulk mining operations. The DR461i is extremely reliable, easy to maintain and safe.
| Value of accessible market, SEK billion |
>130 |
|---|---|
| Market characteristics | Selected niches in demanding industries where material requirements as well as product quality and reliability are extremely high. |
| Share of Sandvik invoicing, % |
15 |
| Drivers | Energy demand, global industrial produc tion, environmental legislation and demand for safer industrial processes, aerospace and automotive production. |
| Market growth | Historical growth rates have been about 4–6%. The market has been negatively affected since the end of 2014 due to the drop in oil price. |
| Way to market | Sales split: 80% direct sales and 20% via distributors. |
| Growth strategy | Increased focus on products for energy and energy efficiency solutions and continued material evolution through focused R&D efforts. |
| Major competitors | – Nippon Steel & Sumitomo Metal – Vallourec – Tubacex – Hitachi – Smaller niche players |
Sales: 13,909 million SEK (14,907) with –8% organic growth Operating profit: 8 million SEK (1,880) Operating margin: 0.1% (12.6%) Adjusted operating profit: 818 million SEK (1,809) Adjusted operating margin: 5.9% (12.1%)
Operating profit, excluding metal price effects totalling –340 million SEK and adjusted for nonrecurring charges of 810 million SEK, amounted to 1,158 million SEK, with an underlying operating margin of 8.3%.
Sandvik Materials Technology is a leading developer and manufacturer of advanced stainless steels and special alloys for the most demanding industries.
The market situation became increasingly challenging as the year progressed, most notably in the energy segment where low and volatile oil prices hampered activity. This resulted in increased competition also for the more standardized tubular offering as free capacity was used for other segments. Demand from the automotive segment improved. Customer activity picked up within the nuclear industry, albeit from a low level. Excluding oil and gas, Europe was stable at a low level and market activity in North America remained more positive. In Asia, market activity was mixed and increasingly volatile in the second half of the year.
The new strategy implementation continued during the year, with focus on profitable growth in sectors with extremely high demands on materials, such as energy and energy efficiency-related applications as well as the aerospace and chemical industries. To strengthen the leading position in strategic niches, material evolution activities continued with focused R&D efforts and new product and material launches. These included the introduction of the unique material SanicroTM25 for cleaner coal power, Kanthal® Flow Heater for clean gas flows, used in renewable energy applications and the aerospace industry, for example, as well as Sanergy HT 441 for solid oxide fuel cells.
Petra Einarsson President of Sandvik Materials Technology
The work to improve capital efficiency continued, as well as the implementation of a lean business model for the more standardized product program, including the Supply Chain Optimization Program. However, the main focus during the year was to continuously implement measures to adjust costs and capacity – to compensate for the downturn in oil and gas. Mitigating activities included reducing shift forms, the use of different flexibility solutions such as time banks, reducing the number of employees,
consultants and contractors, focusing on cost containment and increased sales in areas unaffected by the downturn. As a result of the ongoing efficiency measures to protect profitability, the total number of employees, including third-party, were reduced by 480 during the year. Net working capital reductions have also been successful in lowering relative net working capital to 24.8% of invoicing at the end of 2015. Contingency plans are in place to manage different market scenarios going forward.
This ground-breaking solution, used for heating gases and deployed in renewable energy applications and the aerospace industry, allows a gas outlet temperature up to 400°C higher than existing, conventional technologies. While most flow heater designs are limited to a gas temperature of 800°C, the Kanthal® Flow Heater operates up to 1200°C. Benefits compared to gas burners: increased safety, improved efficiency, easier installation and a cleaner work environment.
Sanicro™25 is the next-generation austenitic stainless steel alloy developed by Sandvik to cope with extreme heat, up to 650°C. The unique material contributes to greater efficiency and significantly lower CO2 emissions. Its superior material properties make it a highly suitable option for use in heaters in advanced coal-fired power plants, contributing to the production of cleaner coal power energy.
Sandvik Sanergy HT 441 is mainly used in stationary fuel cells, such as auxiliary power units, but is suitable for all types of fuel-cell technology applications. Its unique material properties and production technology rule out the need for other more expensive materials.
General Engineering, 19% Consumer and Electronics, 14%
| Value of accessible market, SEK billion |
140 |
|---|---|
| Market characteristics | Fragmented customer base, with more than 25,000 individual customers. Local business. Significant aftermarket. |
| Share of Sandvik invoicing, % |
10 |
| Drivers | Global infrastructure investments and increased focus on productivity. |
| Market growth | Historical average growth rate of 4%, higher in drilling. |
| Way to market | Sales split: 50% direct and 50% via distributors. |
| Growth strategy | Sales efficiency and commercial excellence, increased aftermarket penetration and focus on growth regions. |
| Major competitors | – Atlas Copco – Terex – Metso – Furukawa |
Sales: 8,551 million SEK (8,553) with –9% organic growth Operating profit: 28 million SEK (45) Operating margin: 0.3% (0.5%) Adjusted operating profit: 381 million MSEK (45) Adjusted operating margin: 4.5% (0.5%)
Sandvik Construction provides solutions in niches such as quarrying, tunneling, demolition, dimensional stone, recycling and civil engineering.
The market for construction equipment remained challenging but stable with some regional differences. Europe was stable with low activity levels and Asia posted a further slight decline from an already depressed level. North America noted positive growth. The underlying market activity remained higher for surface drilling and tunneling and was more challenging for crushing and screening. The market for services, rock tools and consumables was stable as customer production rates remained intact.
With an improved time-to-market in recent years, we continue to launch new productivity-enhancing products in the market. This includes the launch of products such as a fully automated tunneling jumbo drill rig which offers customers exceptional reliability and versatility. Several new breakers were launched under the premium brand Rammer and the mid-market brand Bretec to further strengthen our market position in this niche application. Sandvik Construction is also moving towards a more complete offering within down-the-hole (DTH) drilling with a patented tool solution for well and foundation drilling. The Top Hammer business remained a solid base for the aftermarket business as the TH tunneling is strong in 2015. Within crushing and screening, the product portfolio for mobile equipment has been revised in order to best meet the customers demand and the organizational structure adjusted for enhanced customer service. Through the recent product launches within stationary crushing and screening, the CH500 family and HSI range
Dinggui Gao President of Sandvik Construction
and screens, Sandvik has strengthened the position as the premium supplier. We have also broadened our customer offer by including spare and wear parts for non-Sandvik crushers which give us a competitive advantage on the market.
Earnings recovered during the year as a result of ongoing efficiency measures. Under the Supply Chain Optimization Program, one production unit was
closed at the beginning of the year, which resulted in significantly increased efficiency in the supply chain for mobile crushing equipment. Productivity improved during the year through a continued emphasis on capacity utilization and increased capital efficiency through improved forecast-order-delivery processes. Profitability was further supported by efficiency measures in the sales organisation.
DT922i is a computer-controlled electro-hydraulic drilling jumbo especially designed for changing rock conditions. The jumbo's fast and adaptive drilling control enables optimal functionality.
geoSURE
geoSURE is a fully rig-integrated, realtime, rock mass analysis and visualization system used during percussive drilling to overcome productivity challenges in mining and rock excavation.
Software updates for SanRemo, a remote machine monitoring service with easy web access for accurate real-time jobsite data relating to productivity, performance, maintenance and fleet location.
market, SEK billion ~100 Market characteristics – Hyperion: diverse customer base, highly volume dependent – Drilling & Completions: diverse customer base, productivity and reliability as key drivers – Process Systems: fairly consolidated market for high-value project business – Wolfram: consolidated supplier market with high tonnage volume Share of Sandvik invoicing, % 9 Drivers – Hyperion: global industrial production – Drilling & Completions: onshore oil and gas drilling activity – Process Systems: drive for increased productivity as well as impact from gradually tightening environmental regulations – Wolfram: global industrial production and metal consumption Market growth – Hyperion: largely in line with global GDP – Drilling and Completions: historically some 7%, lower in 2015 due to oil price weakness – Process Systems: over time approximately 2%–4% – Wolfram: historical average of about 2–4% (market for hard metals production) Way to market Primarily direct sales for all four product areas. Growth strategy Increased growth through new products, continued globalization and bolt-on acquisitions. Major competitors – Hyperion: Element Six, US Synthetic, Ceratizit, Kennametal, Iscar – Drilling & Completions: Schlumberger Halliburton/BakerHughes, NOV – Process Systems: Berndorf, Enersul, SBS
Sales: 8,292 million SEK (7,658) with –13% organic growth Operating profit: 529 million SEK (888) Operating margin: 6.4% (11.6%) Adjusted operating profit: 579 million SEK (967) Adjusted operating margin: 7.0% (12.6%)
Sandvik Venture's product areas – Process Systems, Hyperion, Wolfram and Drilling and Completions (Varel) – are leading suppliers of products and applications in their respective niches and also serve as enablers for other Sandvik business areas.
Drilling & Completions Drilling & Completions launched the CaseRUNNER, specifically designed for challenging casing-whiledrilling applications, is robust enough to handle high axial/ lateral loading together with severe vibration.
Hyperion introduced premium carbide grades (AM50, AM70 and PN90) tailored for aerospace and hardened steel-milling applications and demonstrating industry-leading performance.
Process Systems Process systems launched Procool – a compact, energy-efficient, and virtually maintainancefree cooling unit, thereby strengthening the sulphurhandling offering.
Wolfram Wolfram introduced CRC 3.0, a tungsten-carbide powder with ultra-fine grain size for cemented-carbide applications with higher sinter stability.
Our growth prospects are based on our ability to continuously provide superior customer productivity enhancements as part of our offerings of products and services. We can do so by leveraging our core capabilities in materials knowledge and industrials applications, enabling customer solutions and ability to industrialize advanced products.
Sandvik's share is listed on Nasdaq Stockholm. During 2015, the share price decreased by 3%, while the OMXS 30-index on Nasdaq Stockholm decreased by 1.2%. At year-end 2015, the share was quoted at 74.1 SEK, corresponding to a market capitalization of 92.9 billion SEK, placing Sandvik as the 14th (17th) largest company on Nasdaq Stockholm.
A total of 2,385 million shares (1,772) were traded for a total value of 207 billion SEK (153). Trading in Sandvik shares on the Nasdaq Stockholm accounted for 63% (67%) of the total volume of Sandvik shares traded. Other markets, BATS Chi-X, Turquoise etc. accounted for 37% (33%). The Sandvik share can be traded in the US in the form of American Depositary Receipts (ADRs), a process handled by Deutsche Bank Trust Company Americas as a depository bank. In 2015, the average daily ADR trading volume was 25,463 (18,438). At the end of 2015 there were 1,858,336 ADRs outstanding.
Our yearly target is that the dividend will amount to 50% of earnings per share. The Board has proposed a dividend of 2.50 SEK (3.50) per share to the 2016 Annual General Meeting, corresponding to approximately 3.1 billion SEK (4.4) and a dividend yield of 3.4% based on the share price at year-end. Assuming the approval of the proposed dividend for 2015 of 2.50 SEK, Sandvik's dividend over the past five years has averaged 3.25 SEK annually, and a total of 75% of earnings per share has been distributed.
The number of Sandvik shares amounts to 1,254,385,923. Each share has a nominal value of 1.2 SEK and the share capital amounts to 1,505,263,108 SEK. Sandvik's share capital comprises one series of share, with each share carrying equal voting rights and equal rights to a dividend. Sandvik does not hold any shares in treasury and the most recent occasion when new shares were issued was in conjunction with the acquisition of the shares outstanding in Seco Tools in 2012.
In 2015, the number of shareholders increased to about 117,600 (115,000). There are shareholders in 91 countries, and the total ownership outside of Sweden amounted to 30% (31%) at year-end. The ten largest individual shareholders accounted for 39% of the share capital at the same date. At 31 December 2015, members of Sandvik's Group Executive Management owned a total of 198,301 shares in Sandvik. Members of the Board of Sandvik owned a total of 317,071 shares in Sandvik. Total ownership of Group Executive Management and the Board corresponds to approx. 0.04% of the capital and voting rights.
Sandvik has been included in the Dow Jones Sustainability Index (DJSI) for 2015, meaning that Sandvik is regarded as among the top 10% most sustainable companies in its industry. Sandvik was also included in the FTSE4Good Index Series for the twelfth consecutive year. It is an international index for global companies that assume their responsible business practices. Sandvik's inclusion in these indexes serves as confirmation of the Group's work in relation to environmental, financial and social responsibility issues.
| 2014 | 2015 | |
|---|---|---|
| Number of shares at year-end (millions) | 1,254 | 1,254 |
| Market capitalization at year-end | ||
| (SEK billion) | 95.8 | 92.9 |
| Number of shareholders | 115,339 | 117,583 |
| Share price at year-end, SEK | 76.4 | 74.1 |
| Earnings per share, SEK | 4.79 | 1.79 |
| P/E ratio at year-end | 15.9 | 41.4 |
| Change in share price during the year, % | –16 | –3 |
| Regular dividend, SEK/share | 3.50 | 2.50* |
| Dividend as a percentage of earnings | ||
| per share | 73 | 140 |
| Total dividend yield (price increase | ||
| + dividend), % | –12 | +0.6 |
| Proportion of shares in Sweden, % | 69 | 70 |
| Proportion of shares owned by the ten | ||
| largest shareholder groups, % | 33 | 39 |
| 2014 | 2015 | |
|---|---|---|
| AB Industrivärden | 11.7 | 11.7 |
| Alecta Pension Insurance | 4.8 | 4.9 |
| Handelsbanken's Pension | 3.8 | 3.8 |
| AMF – Insurance and Funds | 2.0 | 3.5 |
| Swedbank Robur Funds | 3.2 | 3.4 |
| SSB CL Omnibus* | 4.0 | 3.4 |
| JPM Chase NA* | 2.5 | |
| L E Lundbergföretagen AB | 2.4 | 2.4 |
| Nordea Investment Funds | 1.9 | 2.0 |
| Göranssonska Foundations | 1.9 | 1.8 |
| * Shares held in trust. | ||
| Source: Euroclear Sweden |
* Proposed dividend.
Approximately 25 analysts cover Sandvik on a continuous basis. At year-end 2015, the breakdown of recommendations relating to the Sandvik share was as follows: 44% buy/increase, 24% retain/neutral and 32% sell/decrease according to Bloomberg. Some of the most frequent topics discussed in 2015 were:
The change of CEO has not impacted the continuous efforts to deliver on the already ongoing initiatives to further improve Sandvik's performance and competitiveness. During 2016, we will return with more information about any changes to the strategy, one important date will be our Capital Markets Day, which is planned for 24 May 2016.
Active portfolio management and a focus on core operations will drive efficiency within the different business areas. We continuously review all business areas to optimize our portfolio as exemplified by the decision during 2015 to initiate the divestment of Mining Systems.
Product development is the key source of growth, especially in a low macro-growth environment, supporting both sales and margin. Being a technology leader and thereby enhancing our customers' productivity is the key to our success. Additionally, we see significant opportunities to grow the aftermarket business with a higher penetration of the installed base in Sandvik Mining. We are also continuously evaluating acquisition opportunities.
Underlying demand for mining equipment and aftermarket was stable in 2015, however, order intake varied between quarters. We do not expect mining expansion capital expenditure to recover significantly in the short term. As a result, current demand for both equipment and aftermarket is most closely linked to production rates, which have increased to date since the downturn. In a scenario where production rates decrease, there is some degree of risk to current sales levels, but we also see great potential in developing our mining aftermarket business, supporting the top line and reducing the earnings volatility for Sandvik.
Sandvik Mining is part of the ongoing Supply Chain Optimization Program, through which we will reduce the number of units, move production closer to the customers and drive best-cost country sourcing. We have seen benefits from these actions during 2015 and they will continue in 2016. In addition, we are taking actions to grow the aftermarket sales business, which is less volatile and offers good profitability.
Sandvik Machining Solutions runs a fully vertically integrated business model, hence is sensitive to volume changes. However, during 2015 the business area has launched some 15,000 new products. This aims to support our competitive advantage going forward, even in a low macro-growth environment. Sandvik Machining Solutions will generate additional savings from the Supply Chain Optimization Program as well as from general tight cost control, supporting future profitability.
The low oil price has put significant pressure on spending in the oil sector, which has impacted our business most notably in Sandvik Venture and Sandvik Materials Technology, but also to some extent in Sandvik Machining Solutions. We need to ensure good profitability also in a low-growth environment. Although measures to support profitability have been activated, in such a sharp downturn as that seen in 2015, it is challenging. However, we are acting to ensure good profitability also in a lowgrowth environment.
In 2015, market conditions deteriorated as the year progressed. The negative development was primarily driven by the slowdown in China and the US combined with overall weak demand in the Energy segment due to the low oil price. Consequently, Sandvik's order intake and invoicing declined by 8% (–2) and 6% (–2), respectively at fixed rates for comparable units.
Sandvik's financial targets are based on assessments of the company's strength and how it is positioned for the future. The Group's targets and target fulfillment are presented in the table below.
The financial targets span across a business cycle. The outcome since 2006 corresponds to average annual growth of 4% and a return on capital employed of 16%. In 2015, growth was 2% and the return on capital employed was 8%. At the end of 2015, the net debt/equity ratio was 0.7. The proposed dividend for 2015 corresponds to a payout ratio of 140% of reported earnings per share and 57% of adjusted earnings per share.
Sandvik's order intake amounted to 86,378 million SEK in 2015 (85,957), and invoicing totaled 90,822 million SEK (88,821). The operating profit was 6,062 million SEK (10,120), corresponding to 7% (11) of invoiced sales. As a result of restructuring measures and impairment losses, earnings were negatively impacted by 4,425 million SEK (–8). Movements in metal prices made a negative contribution to operating profit of 338 million SEK (302). Changes in foreign exchange rates since the beginning of the year affected earnings positively by about 1,950 million SEK (–40) compared with the preceding year.
Net financial items amounted to –2,003 million SEK (–1,856). Results after financial income and expenses for the Group was 4,059 million SEK (8,264), and 5,308 million SEK (8,369) for continuing operations. Income tax had a total impact of –1,865 million SEK (–2,272) on earnings, corresponding to 46% (27) of profit before taxes. Profit for the year attributable to equity holders of the Parent Company was 2,247 million SEK (6,011). Earnings per share for the Group amounted to 1.79 SEK (4.79), and 2.79 SEK (4.88) for continuing operations. Return on capital employed was 8% (13) and return on equity was 6% (17).
Cash flow from operating activities increased to 11,952 million SEK (9,515), driven by improvements in
| TARGETS AND | OUTCOME | ||
|---|---|---|---|
| TARGET FULFILLMENT | TARGET 2015 | 2015 | 2006–2015 |
| Annual growth over a business cycle, % | 8 | 2 | 4 |
| Return on capital employed over | |||
| a business cycle, % | 25 | 7.9 | 16 |
| Net debt/equity ratio, times | <0.8 | 0.7 | — |
| Payout ratio, % of earnings per share | 50 | 140** | 67 |
** Proposed dividend.
net working capital. Cash flow after investments was 7,791 million SEK (4,812). At the end of the year, cash and cash equivalents amounted to 6,376 million SEK (6,327).
Interest-bearing liabilities, excluding net provisions for pensions, less cash and cash equivalents, yielded a net debt of 28,173 million SEK (30,742). Sandvik's two credit facilities of 650 million EUR and 5,000 million SEK were unutilized at year-end. Under the Swedish bond program totaling 15,000 million SEK, bonds corresponding to a nominal amount of 11,011 million SEK were outstanding at year-end. Under the European bond program totaling 3,000 million EUR, a nominal amount of 1,103 million EUR was outstanding at year-end. In addition, there were bonds outstanding in the US for a nominal amount of 740 million USD. The remaining maturity of bonds averaged 3.3 years for Swedish bonds, 10.5 years for European bonds and 4 years for US bonds. At year-end, the international credit-rating agency Standard & Poor's had a rating of BBB for Sandvik's long-term borrowings, and A-2 for short-term borrowings.
Net working capital at the end of the year was 26% (28) of invoiced sales, a year-on-year improvement of two percentage points. Inventory levels at the end of the year corresponded to 26% (26) of invoiced sales, and trade receivables remained unchanged at 15% (15) of invoiced sales. The volume of net working capital changed by –3,340 million SEK (–487) compared with the preceding year, driven by lower levels of inventory and accounts receivable. Changed currency rates reduced net working capital by 195 million SEK (2,624) compared with the preceding year. The structural effect from acquisitions and divestments increased working capital by 14 million SEK (–168). Net working capital amounted to 21,726 million SEK (25,250) at the end of the year.
Equity at year-end amounted to 34,060 million SEK (36,672), or SEK 27.1 per share (29.1). The equity ratio was 34% (34).
Investments in non-current assets amounted to 4,161 million SEK, equivalent to 87% of scheduled depreciation. Proceeds from the sales of companies and shares amounted to 0 million SEK (460). Investments in internally generated intangible assets increased to 869 million SEK (772).
Sandvik Mining announced the intention to divest its Mining Systems product area on 1 October 2015. The product area is primarily a design and engineering supplier of material handling systems for the mining industry. Mining Systems' offering consists primarily of project-based solutions, which is a non-core business for Sandvik Mining. In 2015, invoiced sales amounted to approximately 5,000 million SEK, operating profit corresponded to –24% of invoiced sales, and the total number of employees was about 1,150.
Sandvik Venture acquired SGL Technology BV (SGL) on 16 September 2015. SGL is based in Breda, the Netherlands, and is a manufacturer of processing equipment for the food production industry. The core capabilities of SGL are within steel belt-based equipment for industrial processing of chocolate and other belt equipment for processing of agri-food and nonfood products. In 2014, SGL's revenues totaled approximately 60 million SEK and the total number of employees was approximately 20.
The global market conditions remained unchanged at the beginning of 2016. Over the next three to four years, the Group will focus on its development toward fast-growing markets, generating a high rate of return and reducing earnings volatility. To achieve this, accountability will be transferred closer to operations for improved transparency and speed, to ensure a stronger performance.
The Parent Company's invoicing for 2015 amounted to 15,667 million SEK (16,475) and the operating result was –761 million SEK (–1,165). Income from shares in Group companies consists primarily of dividends and Group contributions from these and amounted to 9,346 million SEK (8,224). Interest-bearing liabilities, excluding cash and cash equivalents and interestbearing assets, amounted to 11,132 million SEK (9,561). The Parent Company's total assets decreased by 1,191 million SEK (from 74,989 million SEK to 73,798 million SEK). Investments in non-current assets amounted to 907 million SEK (1,227). The number of employees in the Parent Company and the subsidiaries operating on commission for Sandvik AB at 31 December 2015 was 7,729 (8,024).
1) The Parent Company includes subsidiaries operating on commission for Sandvik AB. These are presented in Note 15.
The Sandvik Group has no material events after the close of the period to report.
The average number of employees declined to 46,563 (47,328), of whom 10,430 (10,760) work in Sweden. The employee turnover rate was 11% (10%) in 2015. Wages, salaries and other remunerations for the year totaled 20,604 (19,620) million SEK, of which 5,385 (5,230) million SEK, was paid in Sweden.
The global HR organization aims to enable a highperforming organization and create value for Sandvik at the right cost. During 2015, initiatives continued within areas such as leadership development, compensation and benefits, succession planning, talent development, employer branding, culture, diversity and inclusion, and securing internal career paths.
A strong performance culture is vital to be able to leverage the full potential of our employees. During the year, we continued to strengthen our performance culture in order to support our vision – We set the industry standard.
A global remuneration strategy has been introduced throughout the Group. The remuneration structure is designed to be competitive, fair and easy to understand.
Activities related to the performance dialog process, which encompasses all employees, follow a clear structure. In 2015, we continued the focus on a more efficient method for cascading objectives throughout the organization and ensuring that this method permeates the performance dialog process at all levels in the Group.
Sandvik has leadership programs for managers at different levels, based on the business strategy and leadership model. Participants in the leadership programs represent all business areas, with Group functions, geographies and experience playing a vital role in creating a diverse and dynamic group. During the year, we launched our second Global Trainee Program and we now have two programs running in parallel. Participants from China, India, South Africa, Sweden and the US are enrolled in the two Global Trainee programs.
Sandvik's EHS (Environment, Health & Safety) vision is Zero Harm and the Group's motto is "Safety First". We aim to achieve this vision by constantly trying to improve our safety culture. A great deal of emphasis is placed on holding managers accountable for EHS matters within their sphere of influence. We support our culture change with a structured approach in which we exercise good control through our management system.
Our 2020 EHS strategy is divided into five areas, with supporting objectives and targets. These areas are: EHS as a business advantage, EHS Leadership, Environment, Health and Safety. During the year,
| EARNINGS AND RETURN | 2014 | 2015 |
|---|---|---|
| Operating profit, MSEK | 10,120 | 6,062 |
| as a % of invoiced sales | 11.4 | 6.7 |
| Profit after financial income and expenses, MSEK | 8,264 | 4,059 |
| as a % of invoiced sales | 9.3 | 4.5 |
| Return on capital employed, % | 13.4 | 7.9 |
| Return on equity, % | 17.4 | 6.2 |
| Basic earnings per share, SEK | 4.79 | 1.79 |
| Diluted earnings per share, SEK | 4.79 | 1.79 |
| Whereof continuing operations | ||
| Operating profit, MSEK | 10,205 | 7,271 |
| as a % of invoiced sales | 12.4 | 8.5 |
| Profit after financial income and expenses, MSEK | 8,369 | 5,308 |
| as a % of invoiced sales | 10.1 | 6.2 |
| Basic earnings per share, SEK | 4.88 | 2.79 |
| FINANCIAL POSITION | 2014 | 2015 |
|---|---|---|
| Cash flow from operating activities, MSEK | 9,515 | 11,952 |
| Cash flow after capital expenditures, MSEK | 4,812 | 7,791 |
| Cash and cash equivalents and short-term | ||
| investments at 31 December, MSEK | 6,327 | 6,376 |
| Net debt at 31 December, MSEK | 30,742 | 28,173 |
| Net financial items, MSEK | –1,856 | –2,003 |
| Equity ratio, % | 34 | 34 |
| Net debt/equity ratio, times | 0.7 | 0.7 |
| Equity at 31 December, MSEK | 36,672 | 34,060 |
| Equity per share at 31 December, SEK | 29.1 | 27.1 |
| CAPITAL EXPENDITURE | 2014 | 2015 |
|---|---|---|
| Investments in non-current assets, MSEK | 4,703 | 4,161 |
| as a % of invoiced sales | 5.3 | 4.6 |
| as a % of scheduled depreciation | 116 | 87 |
| PROFIT AFTER FINANCIAL |
||||
|---|---|---|---|---|
| MSEK | INVOICED SALES | ITEMS | NET MARGIN, % | |
| 2014 | Q1 | 20,783 | 2,042 | 10 |
| Q2 | 22,051 | 2,099 | 10 | |
| Q3 | 22,593 | 2,001 | 9 | |
| Q4 | 23,394 | 2,121 | 9 | |
| 2015 | Q1 | 23,334 | 563 | 2 |
| Q2 | 23,398 | 2,367 | 10 | |
| Q3 | 22,092 | 856 | 4 | |
| Q4 | 21,998 | 272 | 1 |
Sandvik worked toward achieving a lost time injury frequency rate (LTIFR) target of 1.9. Sandvik's LTIFR improved by 15% in 2015 and was 2.1 at year-end, compared to 2.5 at year-end 2014.
During the year, we unfortunately had three work-related fatalities. These incidents are being investigated thoroughly to find the root cause, and to identify whether there are shortcomings in our routines that can be corrected.
Despite a significant improvement in the Group's LTIFR in recent years, Sandvik's safety work remains a top priority. Several initiatives were introduced in 2015 to increase employee awareness in the area. The goal is to create an industry-leading safety culture and pass this culture on to our customers and suppliers. Given the challenges and risks facing the industries in which we operate, maintaining a safe work environment must always be a top priority – out of respect for both our employees and our customers.
Our safety work primarily focuses on two overall areas. The aim of the first focus area is to identify the risks – even if the risk is extremely low but the potential consequences are serious – and to eliminate or, if this is not possible, control these risks. All business areas conduct ongoing safety assessments to identify potential substantial risks and implement systems for monitoring and minimizing these risks. The aim of the second focus area is to reduce the number of
accidents and work-related illnesses. We are also working to strengthen our existing safety systems, implementing campaigns and expanding our focus on active and visible leadership, all with the aim of changing our corporate culture and our employees' behavior.
Diversity and inclusion are vital parts of our people strategy. The recruitment of individuals with diverse backgrounds has a strong impact on Sandvik's creativity and capacity for innovation. Continued efforts related to diversity and inclusion are also a prerequisite for succeeding in the continued globalization of business. During the year, each business area conducted status analyses and identified improvement areas for driving and accelerating diversity and inclusion efforts. Actions for managing these improvement areas have been taken during 2015.
The Group Executive Management is a diverse group with different backgrounds and experiences. In terms of nationality, in addition to Swedes, the Group Executive Management has members from China and the UK.
Within the Group, the share of women in the management teams of the business areas continued to rise and is now 25% (23%). There was also an increase in the proportion of women in the pool of next-generation managers who are preparing for
NUMBER OF EMPLOYEES,
SHARE OF WOMEN, %
LTIFR BY MARKET AREA, 2014–2015
* Restated to Full Time Equivalents (FTEs) at 31 December 2015.
Our Code of Conduct and our Supplier Code of Conduct were revised during 2014 and the global roll-out began in 2015. Our Codes confirm our strong commitment to ethical and responsible business practices and compliance with the relevant laws and regulations in all markets where we operate. Our Code of Conduct is supported by a global reporting tool called "Speak Up".
senior managerial positions in the future. The ambition is to continue increasing the share of women in both managerial positions and as a percentage of all employees across the entire Group.
Sandvik's employment conditions are based on the UN Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work. All employees have the right to, if they so choose, join any union and be covered by a collective agreement. The Group has several unions represented in various countries. We always endeavor to maintain a constructive dialog with our employees and provide them with the opportunity to influence their working conditions, regardless of whether they are a member of a union or not.
The Board proposes that the Annual General Meeting resolve to adopt the following guidelines for the remuneration of senior executives for the period extending until the 2017 Annual General Meeting. These guidelines correspond essentially to those adopted by the 2015 Annual General Meeting.
The remuneration of the Group Executive Management is to comprise fixed salary, variable salary, pension and other benefits. The total remuneration package should be based on market terms, be competitive and reflect the individual's performance and responsibilities as well as the Group's earnings trend.
The variable salary may comprise short-term incentives in cash, and long-term incentives in cash, shares and/or share-based instruments in Sandvik AB. Variable salary in cash is conditional upon the fulfillment of defined and measurable goals and should be maximized in relation to the fixed salary. Long-term incentives in the form of shares and/or share-based instruments in Sandvik AB may be provided through participation in long-term incentive programs approved by the General Meeting. Terms and conditions for variable salary should be designed so that the Board, if exceptional economic circumstances prevail, has the option of limiting or refraining from
payment of variable salary if such a measure is considered reasonable.
In specific cases, agreements may be reached regarding one-off remuneration amounts. Such remuneration may not exceed an amount corresponding to the individual's annual fixed salary and maximum variable salary in cash, and may not be paid more than once per year.
Pension benefits should either be defined benefit or defined contribution, or a combination thereof.
Normally, severance pay is paid when employment is terminated by Sandvik. Members of the Group Executive Management generally have a period of notice of not more than 12 months in combination with severance pay corresponding to 6–12 months fixed salary. An alternative solution may be applied to the President comprising a period of notice of 24 months and no severance pay. No severance pay will be paid when employment is terminated by the employee.
The Board is to have the right to depart from the guidelines resolved on by the Annual General Meeting if, in an individual case, there are special reasons for this.
The sphere of senior executives encompassed by the guidelines comprises the President and other members of the Group Executive Management.
For information concerning the current remuneration of senior executives, including ongoing long-term incentive programs, refer to Note 3.5.
The guidelines adopted by the 2015 Annual General Meeting are presented in Note 3.5.
Each business area is responsible for its own R&D program that focuses on product and production development, technology platforms and new innovations. At a Group level, initiatives are carried out to strengthen and complement the business areas' R&D operations, and coordinate activities.
An R&D Board is responsible for the strategic direction of Sandvik's joint research activities, where projects are one component. The Board is led by the Executive Vice President and Head of Group R&D and includes representatives from Sandvik's business areas and Sandvik Intellectual Property.
Sandvik has a portfolio of approximately 8,000 active patents and other intellectual property rights. 850 (800) new patents and other intellectual property rights were granted in 2015. Investments in R&D increased by 15% to 3,532 million SEK (3,076) in 2015, corresponding to 4% (3%) of the Group's sales. The number of employees in R&D including Quality Assurance was approximately 2,700 (2,700) during the year. Read more about R&D on pages 20-23.
Sandvik respects and complies with environmental legislation in all countries where it operates.
The environmental impact from Sandvik's own operations is both direct and indirect.
Sandvik's emissions to the atmosphere comprise carbon dioxide, acidifying substances, particulate matters and organic substances. These emissions are mainly caused by the company's production processes and combustion of fossil fuels in conjunction with heating and transportation, and indirectly from purchases of electricity produced using fossil fuels.
Sandvik uses freshwater and discharges treated process wastewater and cooling water. Economizing with freshwater is important, particularly in waterstressed regions. A survey has been carried out of the facilities' locations relative to various water-related stress factors. Five facilities in India and one in China have reported some activities for more efficient use of water.
The indirect environmental impact relates to parts of the value chain that are not owned by Sandvik, meaning in the supplier, distribution and customer stages and the phasing out or recycling of products. Therefore, it is vital to consider the entire value chain when describing relative changes in environmental impacts. In certain cases, the environmental impact from raw materials, production and the delivery of products, can be substantially offset by environmental savings in the user phase, for example, as a result of potential energy optimization in the customer stage.
Sandvik has approximately 130 production, distribution or service sites worldwide that, where required, hold various types of environmental permits. Sandvik is entirely dependent on the environmental permits granted for these sites. In Sweden, Sandvik conducts licensed operations in accordance with the Environmental Code at 12 plants (Sandviken, Gimo, Stockholm - Västberga, Halmstad, Hallstahammar, Surahammar, Svedala, Köping, Fagersta, Arboga, Norrköping and Ludvika) and notifiable operations in Norberg. All licensed plants hold the requisite environmental permits for operations. The environmental permits relate to such activities as the manufacturing of steel and ingots/CC-blooms/CC-billets, the further processing of steel for bar, tube, strip and wire products, rock-drilling products, the manufacture of ceramics, metal powder, cemented-carbide products, castings and various equipment, and tools. For plants holding permits in Sweden, public environmental reports are submitted annually to supervisory authorities.
During 2015, the Land and Environmental court in Sweden issued final conditions for emissions of mercury from the melt shop in Sandviken. The decision from the Land and Environmental court specifies a limit value for mercury and the requirement of continuous measurement. This was the final decision on environmental conditions, thereby closing the environmental permit case in Sandviken, which started in 2002. In 2015, an investigation regarding ethanol emissions to air from Seco Tools' operation in Fagersta was submitted to the Land and Environmental Court. A decision is expected in 2016.
No breaches of permissible manufacturing volumes or limit values prescribed in the permit conditions under the Environmental Code occurred during the year. A number of guideline values were exceeded for noise and emissions to air and water at the plants in Hallstahammar and Sandviken. Actions are taken to comply with these target values, often in consultation with the supervisory authorities.
In other countries where Sandvik operates, some target values were exceeded and acted upon in cooperation with relevant environmental authorities.
Investigations and remediation activities have been performed at production sites with ground pollution. These activities are always performed in close cooperation with environmental authorities.
The production unit in Halmstad was closed during 2015. Environmental Due Diligence will be performed during 2016. Two small notifiable units in Haparanda and Nora, Sweden, is under closure.
The plants in Sandviken and Hallstahammar are included in the EU's carbon emissions trading scheme. For 2015, emission rights corresponding to 87,609 tons of CO2 were assigned.
For additional information, see the Sandvik Sustainable Business Report at sandvik.com.
Sandvik was organized into five business areas during 2015: Sandvik Machining Solutions, Sandvik Mining, Sandvik Materials Technology, Sandvik Construction and Sandvik Venture.
The overall market environment was challenging in many of Sandvik's end-segments during 2015, in particular in the second half of the year. The oil price continued to fall throughout the year, reaching the lowest point in ten years. This had a negative impact on the demand in the energy segment but also an indirect adverse effect on the general engineering segment, particularly in North America. The indirect impact occurs when customers in the general engineering segment suffer from lower demand due to low activity in the Energy segment to which they deliver. Sandvik Materials Technology and Sandvik Venture were directly impacted by the softening of the energy segment while the indirect exposure affected Sandvik Machining Solutions. In the latter part of the year, uncertainty increased in the mining segment with falling mineral prices and further capital expenditure cuts in the industry. As a consequence, a softening of the aftermarket business for Sandvik Mining was noted toward year-end. All end-segments deteriorated in China, as the slowdown in the Chinese economy continued during the year. The construction segment remained lacklustre.
Consequently, Sandvik's order intake amounted to 86,378 million SEK (85,957), an organic decrease of 8%, and invoiced sales totaled 90,822 million SEK (88,821), down 6% compared with the preceding year at fixed exchange rates for comparable units. On the back of the bleak market environment, several large structural improvement projects were introduced, including phase II and III of the Supply Chain Optimization Program with the target to close 23 production units over a four-year period. During the year, progress was also made on the initiatives to structurally right-size and adjust the cost base to current demand. Total savings generated from the program and other efficiency measures amounted to 1.1 billion SEK in annual run-rate at year-end 2015,
of the total of 2.1 billion SEK targeted by year-end 2017. The end of 2015 marked the completion of the first phase of the Supply Chain Optimization Program with the closure of a total of 11 units.
The positive effect from the savings made in addition to changes in foreign exchange rates of about 1,950 million SEK(-40) for the full-year were not enough to offset the negative effects from the organic decrease. In addition, nonrecurring charges related to the restructuring measures and impairments impacted earnings negatively in the amount of 4,425 million SEK (-8). Raw material price changes, primarily related to nickel, had an adverse impact on earnings of –338 million SEK (+302). As a result, the operating margin decreased to 6.7% (11.4%) of invoiced sales in 2015.
| MSEK | 2014 | 2015 CHANGE, % CHANGE, %* | ||
|---|---|---|---|---|
| Sandvik Machining | ||||
| Solutions | 31,328 32,682 | 4 | –5 | |
| Sandvik Mining | 19,633 | 21,247 | 8 | 0 |
| Sandvik Materials | ||||
| Technology | 14,713 | 12,625 | –14 | –15 |
| Sandvik Construction | 8,571 | 8,928 | 4 | –4 |
| Sandvik Venture | 7,795 | 8,097 | 4 | –17 |
| Group activities | 17 | 18 | 6 | n/m |
| Continued op. | 82,057 83,597 | 2 | –6 | |
| Discontinued op. | 3,900 | 2,781 | –29 | –32 |
| Group total | 85,957 86,378 | 0 | –8 |
* Change compared with the preceding year, at fixed exchange rates for comparable units.
| MSEK | 2014 | 2015 CHANGE, % CHANGE, %* | ||
|---|---|---|---|---|
| Sandvik Machining | ||||
| Solutions | 30,856 32,652 | 6 | –3 | |
| Sandvik Mining | 20,543 | 22,421 | 9 | 1 |
| Sandvik Materials | ||||
| Technology | 14,907 13,909 | –7 | –8 | |
| Sandvik Construction | 8,553 | 8,551 | 0 | –9 |
| Sandvik Venture | 7,658 | 8,292 | 8 | –13 |
| Group activities | 16 | 20 | 25 | n/m |
| Continued op. | 82,533 85,845 | 4 | –5 | |
| Discontinued op. | 6,288 | 4,977 | –21 | –20 |
| Group total | 88,821 | 90,822 | 2 | –6 |
* Change compared with the preceding year, at fixed exchange rates for comparable units.
| OPERATING PROFIT BY BUSINESS AREA | ||||||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2014 | % OF INVOICED SALES | 2015 | % OF INVOICED SALES | CHANGE, % | CHANGE, %* | ||
| Sandvik Machining Solutions | 6,159 | 20 | 5,269 | 16 | –14 | –29 | ||
| Sandvik Mining | 2,483 | 12 | 2,585 | 12 | –4 | –23 | ||
| Sandvik Materials Technology | 1,880 | 13 | 8 | 0 | –100 | –108 | ||
| Sandvik Construction | 45 | 1 | 28 | 0 | –38 | –500 | ||
| Sandvik Venture | 888 | 12 | 529 | 6 | –40 | –27 | ||
| Group activities | –1,250 | — | –1,147 | n/m | –8 | –5 | ||
| Continued operations | 10,205 | 12 | 7,271 | 8 | –29 | –47 | ||
| Discontinued operations | –85 | –1 | –1,209 | –24 | — | — | ||
| Group total | 10,120 | 11 | 6,062 | 7 | –40 | –58 |
* Change compared with the preceding year, at fixed exchange rates for comparable units.
Sandvik Machining Solutions is the leading supplier in the global cutting tool industry. Customer activity weakened during 2015 as the general macro environment deteriorated. Organic invoicing declined by 5%. Demand in North America and Asia weakened from the high levels noted at the beginning of the year, and this was most evident in China and the US. Europe remained largely stable. Low oil prices had a negative impact on demand from the energy segment as well as an indirect adverse impact on demand in general engineering. Operating profit declined by 14% and amounted to 5,269 million SEK. Internal efficiency measures and the ongoing Supply Chain Optimization Program partially offset the adverse impact of negative organic growth. The operating margin was 16%.
| INVOICED SALES & OPERATING MARGIN | FINANCIAL OVERVIEW, MSEK | 2013 | 2014 | 2015 | |
|---|---|---|---|---|---|
| Order intake | 28,715 | 31,328 | 32,682 | ||
| MSEK 34,000 |
% 21.0 |
Invoiced sales | 28,543 | 30,856 | 32,652 |
| Operating profit | 5,205 | 6,159 | 5,269 | ||
| 32,000 | 19.5 | Operating margin, % | 18.2 | 20.0 | 16.1 |
| 30,000 | 18.0 | Adjusted operating profit* | 5,695 | 6,159 | 6,579 |
| Adjusted operating margin, % | 20.0 | 20.0 | 20.1 | ||
| 28,000 | 16.5 | Return on capital employed, % | 26.30 | 29.5 | 24.1 |
| Number of employees | 19,055 | 18,927 | 18,120 | ||
| 26,000 | 15.0 |
* Operating profit adjusted for nonrecurring charges of 1,310 million SEK in 2015, and 490 million SEK in 2013.
Sandvik Mining is a leading supplier of equipment, tools, service and technical solutions for exploration, excavation and processing of rock and minerals. Throughout 2015, mining companies remained cautious regarding investments due to the continued negative price trend for many raw materials. However, material output levels continued to rise during the first half of the year, supporting investments for replacement equipment, while the second half of the year showed stagnating output levels and capacity curtailments for multiple commodities. For Sandvik Mining, overall business activity remained largely stable, although a slight
softening for consumables was noted during the second half of the year. Adjusted operating profit for continuing operations increased to 3,296 million SEK, supported by ongoing internal efficiency measures. The adjusted operating margin increased to 15%. On 1 October 2015, the business area announced its intention to divest its Mining Systems operations, which is a project business focused on the design, engineering and assembly of material handling systems. Market activity for Mining Systems weakened as the year progressed, with customers postponing orders for large projects.
| FINANCIAL OVERVIEW, MSEK | 2013 | 2014 | 2015 |
|---|---|---|---|
| Order intake | 27,882 | 23,533 | 24,028 |
| Invoiced sales | 30,744 | 26,831 | 27,398 |
| Operating profit | 2,743 | 2,398 | 1,375 |
| Operating margin, % | 8.9 | 8.9 | 5.0 |
| Adjusted operating profit* | 3,993 | 2,398 | 3,188 |
| Adjusted operating margin, % | 13.0 | 8.9 | 11.6 |
| Return on capital employed, % | 18.5 | 16.7 | 10.3 |
| Number of employees | 12,965 | 11,815 | 11,651 |
* Operating profit adjusted for nonrecurring charges of 1,814 million SEK in 2015, and 1,250 million SEK in 2013.
| FINANCIAL OVERVIEW, MSEK | 2013 | 2014 | 2015 |
|---|---|---|---|
| Order intake | 21,991 | 19,633 | 21,247 |
| Invoiced sales | 24,205 | 20,543 | 22,421 |
| Operating profit | 3,073 | 2,483 | 2,585 |
| Operating margin, % | 12.7 | 12.1 | 11.5 |
| Adjusted operating profit* | 3,798 | 2,483 | 3,296 |
| Adjusted operating margin, % | 15.7 | 12.1 | 14.7 |
| Return on capital employed, % | 20.9 | 18.1 | 20.0 |
| Number of employees | 11,549 | 10,541 | 10,507 |
* Operating profit adjusted for nonrecurring charges of 712 million SEK in 2015, and 725 million SEK in 2013.
Sandvik Materials Technology is a leading developer and manufacturer of advanced stainless steels and special alloys for the most demanding industries. The market situation became increasingly challenging as the year progressed, most notably in the oil and gas segment, where a low and volatile oil price hampered activity. This also resulted in increased competition for the more standardized tubular offering as unutilized capacity was deployed for other segments.
Demand from the automotive segment improved. Activity in the nuclear segment improved somewhat, albeit from a low level. Lower volumes could partly be offset by measures to adjust costs and capacity – and, as such, adjusted operating profit decreased to 818 million SEK. The adjusted operating margin decreased to 6%. Excluding metal price effects the margin was 8.3% for the full year.
| 2013 2014 INVOICED SALES & OPERATING MARGIN FINANCIAL OVERVIEW, MSEK |
2015 | ||||
|---|---|---|---|---|---|
| Order intake | 13,415 | 14,713 | 12,625 | ||
| MSEK 15,000 |
% 14.0 |
Invoiced sales | 14,035 | 14,907 | 13,909 |
| Operating profit | 1,270 | 1,880 | 8 | ||
| 14,500 | 10.5 | Operating margin, % | 9.0 | 12.6 | 0.1 |
| 14,000 | 7.0 | Adjusted operating profit* | 1,270 | 1,809 | 818 |
| Adjusted operating margin, % | 9.0 | 12.1 | 5.9 | ||
| 13,500 | 3.5 | Return on capital employed, % | 9.8 | 13.7 | 0.1 |
| 13,000 | 0.0 | Number of employees | 7,113 | 6,914 | 6,533 |
* Operating profit adjusted for nonrecurring charges of 810 million SEK in 2015 and –71 million in 2014.
In 2015 operating profit, excluding metal price effects totalling –340 million SEK and adjusted for nonrecurring charges of 810 million SEK, amounted to 1,158 million SEK, with an underlying operating margin of 8.3% (10.1% in 2014 and 11.1% in 2013).
Sandvik Construction provides solutions in niches such as quarrying, tunneling, demolition, dimensional stone, recycling and civil engineering. The market for construction equipment remained challenging but stable, with some regional differences. Europe was stable with a low activity level while Asia declined somewhat further from an already depressed level. North America noted positive growth while South America remained challenging. The underlying
market activity remained higher for surface drilling and tunneling, while it was more challenging for crushing and screening. The market for services, rock tools and consumables was stable as customer production rates remained intact. The adjusted operating profit increased to 381 million SEK supported by the implemented efficiency measures. The adjusted operating margin increased to 5%.
| FINANCIAL OVERVIEW, MSEK | 2013 | 2014 | 2015 |
|---|---|---|---|
| Order intake | 8,521 | 8,571 | 8,928 |
| Invoiced sales | 8,601 | 8,553 | 8,551 |
| Operating profit | 110 | 45 | 28 |
| Operating margin, % | 1.3 | 0.5 | 0.3 |
| Adjusted operating profit* | 310 | 45 | 381 |
| Adjusted operating margin, % | 3.6 | 0.5 | 4.5 |
| Return on capital employed, % | 1.9 | 0.8 | 0.5 |
| Number of employees | 3,147 | 2,815 | 2,927 |
* Operating profit adjusted for nonrecurring charges of 353 million SEK in 2015, and 200 million SEK in 2013.
Sandvik Venture's product areas – Process Systems, Hyperion, Wolfram and Drilling and Completions (Varel) – are leading suppliers of products and applications in their respective niches and also serve as enablers for other Sandvik business areas. The market situation became increasingly challenging as the year progressed, most notably in the energy segment, where a low and volatile oil price hampered activity.
This was most pronounced for Sandvik Drilling and Completions, but it indirectly affected most product areas. The adjusted operating profit declined by 40% and amounted to 579 million SEK. Internal efficiency measures only partly offset the adverse impact from negative organic growth. The adjusted operating margin was 7%.
| FINANCIAL OVERVIEW, MSEK | 2013 | 2014 | 2015 |
|---|---|---|---|
| Order intake | 5,535 | 7,795 | 8,097 |
| Invoiced sales | 5,394 | 7,658 | 8,292 |
| Operating profit | 606 | 888 | 529 |
| Operating margin, % | 11.2 | 11.6 | 6.4 |
| Adjusted operating profit* | 806 | 967 | 579 |
| Adjusted operating margin, % | 14.9 | 12.6 | 7.0 |
| Return on capital employed, % | 0.1 | 7.4 | 3.8 |
| Number of employees | 2,635 | 4,074 | 3,829 |
* Operating profit adjusted for nonrecurring charges of 50 million SEK in 2015,
The aim of Sandvik's risk management activities is to manage the risks involved in achieving the company's objectives and to ensure optimal leveraging of potential opportunities. Through its global presence and many product areas, Sandvik has a favorable risk diversification, with sales in about 20 product areas and a variety of industries in more than 130 countries.
The Sandvik Group applies a Group-wide, comprehensive risk management program – Enterprise Risk Management (ERM). The program covers all business areas and Group functions. ERM is an integral part of Sandvik's operational and strategic management and assists the company in making decisions and taking action when it encounters change, whether triggered by internal or external factors. Refer also to the Financial Risk Management Report on pages 53–60.
The main components of risk management are identification, evaluation, treatment, monitoring and reporting of risks at different levels in the Group. At Sandvik, formal procedures have been established for the entire ERM process and, during the year, the existing ERM policy was updated to clarify the requirements of the company's risk management work. Once risks have been identified according to the standardized methodology, action plans are created to accept, reduce, eliminate or transfer the identified risks or to leverage the potential opportunities. During 2015, two consolidated ERM Reports were submitted to the Group Executive Management and a year-end ERM report was provided to the Sandvik Board of Directors.
In 2015, risk management efforts focused on the Group's business risks and on risks associated with Sandvik's sustainability commitment. The Group's sustainability strategy was revised in order to meet the identified risks. The Group launched a revised Code of Conduct that is supported by Group policies. New processes and a new global reporting tool to address possible breaches of the Code of Conduct were launched together with the Code. The Group also strengthened its processes around sustainable supplier management.
At Sandvik, the ERM activities are focused in the different business areas and include both a top-down and bottom-up risk-mapping perspective. This means each manager with operational responsibilities is expected to ensure that risks associated with the operations are appropriately identified, evaluated and managed. Business risks include market and country risks, R&D risks, product risks, production risks, health and safety risks, environmental risks, corruption risks and human rights risks. The risk profiles are consolidated and escalated. Identified key risks for the Sandvik Group, business areas, Group functions and some countries are assigned to risk owners who are responsible for managing the key risks according to developed action plans. Refer also to the Sustainable Business Report at sandvik.com for more information.
On occasion, Sandvik is party to litigation and administrative proceedings related to its operations, including responsibility for products, the environment, health and safety. Sandvik does not expect that any of these ongoing proceedings and processes will significantly affect the Sandvik Group.
In order to protect its return on investments in marketing, research and development, the Group has a strategy to actively safeguard its marketing and technical achievements against trademark/patent infringements and copying. Sandvik enforces its intellectual property rights through legal proceedings when necessary.
Sandvik is a multinational Group with many crossborder transactions. Therefore, transfer pricing and indirect taxes comprise two main areas that are the subject of investigations by the tax authorities of various countries.
At times, Sandvik is involved in discussions with the tax authorities concerning transfer pricing issues, meaning the prices applied to transactions between Sandvik companies globally. The Group maintains detailed transfer pricing documentation to support the transfer prices applied. If the tax authorities' opinion in a transfer pricing matter differs from Sandvik's position, this may have implications for the Group's revenue recognition among countries.
When deemed necessary, a provision for disputed taxes is recognized in accordance with the valid financial accounting policies. For further information on the current provision, see Note 10 Income tax on page 101.
Sandvik conducts its business within the framework of rules and regulations that apply in the various countries, markets and industry sectors where it is active. The Group has an established governance framework including Group policies, Group procedures and other steering documentation. The scope of the governance framework, including the controls implemented, is based on legal requirements and risk exposures. In 2015, the Group consolidated management of legal compliance risks with a view to providing integrated principles, oversight and delivery of the Group's compliance programs. The consolidation included anti-bribery and anti-corruption, competition law, customs and export controls and data privacy. In addition, the Group took further steps to embed compliance resources and responsibility into the line businesses.
Operating companies within the Sandvik Group present reports on their financial performance and economic status on a regular basis in accordance with internal reporting rules and the accounting policies applied by Sandvik, the International Financial Reporting Standards (IFRS). The Group's Finance function validates and analyzes the financial information as part of the quality control of financial reporting. Refer also to the Corporate Governance Report on pages 61-69.
Through recurring updates conducted as part of the Group's ERM activities, specific changes in the business or the factors affecting the business are identified. These may relate to the acquisition of a new company, a major investment, new legislation, changes in political or market conditions, technical innovations, etc., whose implications are assessed on a case-by-case basis.
Sandvik has tailored insurance programs that transfer the risks associated with the Group's property and liability exposures. Insurable risks are continuously evaluated. Actions are taken to reduce these insurable risks, as part of Sandvik's loss-prevention strategy. Supported by the Sandvik loss-prevention standard, risk evaluations highlight opportunities to reduce the potential for significant losses and to ensure the Group's ability to deliver to its customers.
Sandvik Financial Services is the functional organization responsible for managing the greater part of the Group's financial risks. The primary objective of the function is to contribute to the creation of value by managing the financial risks to which the Group is exposed to during the ordinary course of business, and to optimize the Group's financial net.
Through its comprehensive and international operations, Sandvik is exposed to financial risks. The Board of Directors is responsible for establishing the Group's finance policy, which comprises guidelines, objectives and limits for financial management and the management of financial risks within the Group.
Sandvik Financial Services provides services to Group companies and its task is to support subsidiaries with loans, deposits and foreign exchange deals, and to act as an advisor in financial matters. The function conducts internal banking operations and is based at the head office in Stockholm. The internal bank is also responsible for the Group's cash management.
In addition, Sandvik Financial Services conducts operations for payment advice and trade finance, and is responsible for the Group's global policy for granting credit to customers in conjunction with sales. This activity is carried out mainly through the head office in Stockholm and at several locations worldwide.
Finally, Sandvik Financial Services also manages the financial risks associated with the company's defined-benefit pension plans.
Only entities with a solid financial position and high credit ratings are accepted as Sandvik's counterparties in financial transactions.
The presentations comply with the reporting requirements stated in IFRS (IFRS 7 and IAS 39).
Currency risks refer to the foreign-exchange movements affecting profit for the year, other comprehensive income, and the company's competitive situation in various ways:
Profit for the year is affected when sales and purchases are made in different currencies.
Sandvik manages the currency risks that arise in the manner described in the following section. The manner in which the currency risk is managed has not been changed compared with the preceding year.
| RISK | Under normal circumstances, Sandvik's subsidiaries which the profit/loss relates, which means that the should not be subject to any extensive translation Group's earnings are exposed to a translation risk. risk in their balance sheets, since the objective is Net assets, meaning the subsidiaries' shareholders that a subsidiary's receivables and liabilities in equity, are translated to SEK at the rate applying on foreign currency are to be balanced (currency the balance-sheet date. At 31 December, the hedged). Group's net assets in subsidiaries in foreign Profit/loss in a foreign subsidiary is translated to currency totaled 36,600 million SEK (35,700). SEK based on the average rate for the period to |
|---|---|
| EXPOSURE | FINANCING OF SUBSIDIARIES BY CURRENCY (NET), MSEK |
| Other SEK USD AUD GBP BRL CLP ZAR MXN CHF CAD CNY 0 –100 –100 4,250 6,400 –500 –400 –400 –350 –350 –350 –400 –650 –700 –850 –900 –1,100 –1,450 –1,800 –1,750 –9,700 –10,100 –26,800 –26,750 2014 2015 GROUP'S EXTERNAL BORROWING BY CURRENCY, MSEK NET ASSETS BY FOREIGN CURRENCY, MSEK 19,700 17,900 SEK USD EUR JPY Other –600 –500 –2,300 –2,500 –6,300 –6,600 6,500 6,400 4,700 4,400 2,700 2,400 |
|
| –12,400 –12,500 –13,100 2,300 1,400 –14,700 1,300 900 800 900 EUR USD CHF CNY AUD GBP Other 2014 2015 2014 2015 |
|
| COMMENTS | To avoid translation risk in the balance sheets of Sandvik has chosen not to hedge future profits in foreign subsidiaries. Net assets are also not subsidiaries, they are financed in local currency through the internal bank. The currencies required hedged, but the differences that arise due to by the subsidiaries are shown in the above diagram. changes in exchange rates since the preceding quarter are recognized directly in other compre External borrowing often takes place in a specific currency, as shown in the following diagram. The hensive income. The final diagram shows the distri currency risk that arises in the internal bank as a bution of net assets among various currencies. result of this is managed using various derivatives, thus minimizing the translation risk. |
| RISK | To gain a comprehensive understanding of how exchange-rate fluctuations impact the Group's operating profit, consideration must be given to the transaction exposure, the operating profit of the subsidiaries in their respective currencies and implemented hedges. The sensitivity of the Group's other comprehen sive income to exchange rates depends on the size |
4000 of net assets. In addition to net assets, other com prehensive income is also exposed to exchange 3000 rate risk, since certain derivative contracts are 2000 subject to hedge accounting, which means that 1000 unrealized changes in the market value of these contracts are recognized directly in other compre 0 hensive income instead of in profit for the year. |
|---|---|---|
| EXPOSURE | If the exchange rates for the exposure currencies were to change by 5% in an unfavorable direction, total operating profit over a 12-month period would change by approximately –2,500 million SEK (–1,800), assuming that the composition is the same as it was at year-end. |
The net effect on other comprehensive income of a similar change to exchange rates would be approximately –2,000 million SEK (–2,000). This net effect primarily comprises translation exposure in equity. |
| RISK | Interest-rate risk is defined as the risk that changes in market interest rates will have an adverse impact on the Group's net interest items. The impact on net interest items of a change in interest rates depends on the interest terms of assets or liabili ties. Sandvik measures interest-rate risk as the change over the forthcoming 12 months given a |
1-percentage-point change in interest rates. Interest-rate risk arises in two ways: – The company may have invested in interest bearing assets, the value of which changes when the interest rate changes. – The cost of the company's borrowing fluctuates when the general interest-rate situation changes. |
|||
|---|---|---|---|---|---|
| EXPOSURE | If market rates were to rise by 1 percentage point across all terms at 1 January 2016, in relation to loans for which the interest rate will be reset during the coming year, loans would be impacted by –91 million SEK. |
An interest-rate sensitivity analysis of interest swap agreements valid at year-end, and to which hedge accounting was applied, shows that other comprehensive income would change by 128 million SEK as a result of a 1-percentage point increase of the interest-rate curve. |
|||
| INTEREST RATES AND FIXED-INTEREST TERMS ON OUTSTANDING LOANS | |||||
| EFFECTIVE RATE OF INTEREST, % |
INCLUDING EFFECTS OF INTEREST-RATE DERIVATIVES FIXED INTEREST TERM, MONTHS |
RECOGNIZED LIABILITY, MSEK |
|||
| Bond loans, Swedish MTN | 2.8 | 21 | 11,044 | ||
| Bond loans, European MTN | 3.6 | 106 | 10,022 | ||
| Private placement | 4.1 | 42 | 6,606 | ||
| Commercial papers | 0 | 0 | 0 | ||
| Other loans from banks | 1.7 | 16 | 6,876 | ||
| Total loans | 3.0 | 49 | 34,548 | ||
| Interest effect of currency derivatives | 1.8 | ||||
| Total incl. currency derivatives | 4.8 | ||||
| COMMENTS | In the event that Sandvik has surplus liquidity, it is placed in bank deposits or in short-term money market instruments (durations of up to 90 days), which means that the interest-rate risk (the risk of a change in value) is low. The Group's interest-rate risk arises mainly in connection with borrowing. Interest-rate swap agreements are sometimes used to achieve the desired fixed-interest term. The Group CFO has a mandate to vary the average fixed-interest term of the Group's debt portfolio, provided that it does not exceed 60 months. The average fixed-interest term on Sandvik's borrowing was 49 months (52) at year end, with consideration given to interest-rate swap agreements entered into. In line with the Group's finance policy, internal lending to foreign subsidiaries is hedged. Conse quently, there is an interest-rate effect in currency derivatives of 1.8 % between the currencies the Group borrows and the currencies the Group lends. |
4.8 % (4.8). be found in Note 27. is disclosed in Note 26. |
The Group's average interest expense, including other loans and effects of various derivatives, was Hedge accounting is applied when an effective link exists between hedged loans and interest-rate swaps. Accordingly, changed market interest rates could also impact other comprehensive income, since the Group has interest-rate swap agreements to which it applies cash-flow hedging. This means that changes in the market values of these swaps are recognized directly in other comprehensive income instead of in profit for the year. A presenta tion of all interest-rate swap agreements entered into, and information regarding their duration, can Sandvik's loan conditions do not currently entail financial covenants linked to key figures. Only under exceptional circumstances are assets pledged in connection with the raising of loans. Such pledging |
| RISK | Liquidity and refinancing risk is defined as the risk that financing possibilities will be limited when loans must be refinanced, and that payment |
commitments cannot be met as a result of insufficient liquidity. |
|||
|---|---|---|---|---|---|
| EXPOSURE | MATURITY PROFILE FOR BORROWING AND LIQUID ASSETS Nominal amount, MSEK Cash and cash equivalents 6,400 Jan–June 2016 July–Dec 2016 2018 2020 2017 2019 2022 2023 2024 2021 –800 –1,100 –1,500 –2,000 –2,300 –3,100 –3,400 –3,600 –3,800 –3,900 |
2025 2026 2032 2033 –1,000 –1,000 –1,400 –3,200 |
|||
| BORROWING, SIZE OF PROGRAMS AND REMAINING CREDIT PERIODS MATURITY PROFILE FOR BORROWING AND LIQUID ASSETS |
CURRENCY | RECOGNIZED LIABILITY, MSEK |
SIZE OF PRO GRAMS, MSEK |
AVERAGE REMAINING CREDIT PERIOD (YEARS) |
|
| Nominal amount, MSEK Bond loans, Swedish MTN |
SEK | 11,044 | 15,000 | 3.3 | |
| Bond loans, European MTN | EUR | 10,022 | 27,409 | 10.5 | |
| Liquid Private placement assets |
USD | 6,606 | — | 4.0 | |
| 6,300 Commercial papers |
EUR, SEK | 0 | 16,852 | 0.0 | |
| Other loans from banks | Others | 6,876 | — | 3.2 | |
| Jan–June 2016 July–Dec 2016 Total borrowing 2017 2018 2019 2020 2022 2023 2024 2021 |
2025 2026 2027 2028 2029 |
34,548 2032 2033 |
59,261 | 5.5 | |
| COMMENTS | –500 According to the finance policy, the Group's capital –1,200 –2,000 –2,200 employed excluding cash and cash equivalents –3,100 –3,300 –3,700 –3,700 –3,700 –3,800 should be financed on a long-term basis and the short-term liquidity reserve should correspond to at least two weeks' operating expenses. At year end, the Group's capital employed, excluding cash and cash equivalents, was 71,300 million SEK and long-term financing, including share capital, pen sion liabilities, long-term tax liabilities, long-term provisions and guaranteed credit facilities, amounted to 80,600 million SEK. The short-term liquidity reserve amounted to 14,100 million SEK, comprising credit facilities and accessible cash and cash equivalents less loans that mature for payment over the next six months. This amount should be compared with two weeks' estimated operating expenses of 2,800 million SEK. |
–200 –500 –800 –1,400 –3,300 |
–900 –1,100 Sandvik has credit facilities totaling 650 million EUR and 5,000 million SEK. The facilities, which are the Group's primary liquidity reserve, were unutilized at year-end. The aim of Sandvik's financing strategy is to achieve a well-balanced maturity profile for liabilities to thereby reduce the refinancing risk. The share of long-term loans in relation to total borrowing was 85% at year-end 2015 compared with 93% one year earlier. The maturity structure for the Group's financial liabilities and derivatives is presented in Note 27. At year-end, Standard & Poor's, the international credit rating agency, had assigned a BBB credit rating to Sandvik's long-term borrowing and A-2 for its short-term borrowing. For a continuous update on Sandvik's credit rating, refer to www.sandvik.com. |
| RISK | The Group's commercial and financial transactions give rise to credit risk in relation to Sandvik's coun terparties. Credit risk or counterparty risk is defined as the risk for losses if the counterparty does not fulfill its commitments. |
be divided into three categories: – Financial credit risk – Credit risk in trade receivables – Credit risk in customer financing |
The credit risk to which Sandvik is exposed can | |
|---|---|---|---|---|
| EXPOSURE | TOTAL CREDIT RISK – FINANCIAL INSTRUMENTS MSEK Trade receivables Cash and cash equivalents Unrealized gains on derivatives Other receivables Outstanding credits Total |
2014 13,840 6,327 963 428 1,088 22,646 |
2015 12,238 6,376 708 418 1,324 21,064 |
|
| COMMENTS | Sandvik has entered into agreements with the banks that are most important to the company covering such matters as the right to offset receiv ables and liabilities that arise from financial deriva tive transactions, so-called ISDA agreements. This means that the company's counterparty exposure to the financial sector is limited to the unrealized positive results that arise in derivative agreements, and investments and bank balances. At 31 December 2015, the value of these amounted to 7,084 million SEK (7,290). Sandvik companies are exposed to the credit risk associated with outstanding trade receivables from ongoing sales. Credit risk is diversified over a large number of customers in all business areas and satisfactorily reflects the spread of sales. The credit quality of the trade receivables that have not fallen due for payment is good. In 2015, the change in Sandvik's customer bad debts amounted to –226 million SEK (–133), which corresponds to about 0.3% of sales. The total gross value of |
Note 19. (-39) was reserved for doubtful receivables. 89 million SEK (94). lease machinery was 541 million SEK (573). |
outstanding trade receivables was 13,058 million SEK (14,753) at 31 December. Total impairment of these was –820 million SEK (–913). Age analysis of trade receivables at 31 December is presented in Sandvik offers short and long-term customer financing through its own financing companies and in partnership with financial institutions and banks. At year-end, the value of outstanding credits was 1,375 million SEK (1,126), of which -51 million SEK Sandvik regularly provides buyback guarantees, that is, a promise to repurchase a machine at a price established in advance. At year-end, the outstanding buyback guarantees amounted to In addition to the traditional financing of equip ment, Sandvik also offers short-lease machinery. At year-end, the net carrying amount of this short |
| RISK | Sandvik's financial risks related to raw materials are primarily concentrated to nickel and electricity. The |
price risk associated with these is partially hedged through the signing of financial contracts. |
|---|---|---|
| EXPOSURE | When Sandvik Materials Technology obtains a cus tomer order at a fixed price for nickel, molybdenum or copper, the price of these materials is hedged by signing financial contracts. This means that Sand vik's operating profit is not impacted by movements in the price of these raw materials, relating to the aforementioned orders at a fixed price. The Group pursues hedging aimed at eliminating the metal price risk in connection with transactions conducted at a variable metal price. The measure ment of inventory is not affected by hedging. Changes in metal prices impact the result as a |
consequense of the rules regarding revaluation of inventory. The net effect is presented in the "Devel opment in business areas" section. For Sandvik's large production units in Sweden, the electricity price is continuously hedged through derivatives. Electricity consumption at these units normally totals some 800 GWh. The hedging horizon at year-end was about 19 months' (17) expected consumption. |
| COMMENTS | Net total consumption of nickel amounted to about 12,700 metric tons during the year. At year-end, the volume of hedged nickel inventory was 2,447 metric tons (1,306). The market value of commodity derivatives entered into was -63 million SEK (–12). The market value of electricity derivatives was 402 million SEK (424) at year-end. The result of these derivative contracts amounted to –133 million SEK (–86). A change in the electricity price of SEK 0.1 per |
kWh is estimated to impact Sandvik's operating profit and other comprehensive income by plus or minus 80 million SEK on an annual basis, based on the prevailing conditions at year-end 2015. Hedge accounting in accordance with IAS 39 is applied to the majority of the raw materials and electricity derivatives. To see how recognized hedging transactions will impact profit for the year, refer to Note 27. |
| RISK | Sandvik has comprehensive pension obligations for its employees in the countries in which it oper ates. The pension solutions vary depending on leg |
islation and local agreements. The most compre hensive agreements are found in Sweden, Finland, Germany, the UK, Canada and the US. |
|---|---|---|
| EXPOSURE | The average interest-rate duration for the Group's interest-bearing assets in the pension portfolio is 7.2 years, and 16.8 years for pension commitments. Since the durations of the assets and liabilities differ, a change in interest rates of 1 percentage point would have a net impact of approximately 2,300 million SEK. A 20% movement in the stock market would change assets by about 1,250 million SEK. If longevity assumptions are changed by one year, the pension liability would change by about 4%, which corresponds to 700 million SEK. The risk, measured as Value at Risk (VaR), meaning the highest amount Sandvik risks losing (with a confidence interval of 95%) during one year given the market's current volatility and correlations, is approximately 4,000 million SEK. |
TREND OF PENSION LIABILITY AND MANAGED CAPITAL MSEK % 25,000 100 20,000 80 15,000 60 10,000 40 5,000 20 0 0 2011 2012 2013 2014 2015 Liabilities Assets Funding |
| COMMENTS | To ensure the efficient administration of the sub stantial pension plans and efficient management of funds reserved for pension plans, Sandvik has established a separate entity for this purpose, the Sandvik Pensions Supervisory Board. In each country, local pension boards are also established that are responsible for compliance with legislation and local agreements. The defined-benefit pension plans are described in Note 20. |
In 2015, managed capital totaled 18,900 million SEK (18,400) and the corresponding pension commit ments amounted to 22,800 million SEK (22,700), which is equal to a consolidation level of 83% (81). The return on Sandvik's pension assets was 2.1% (11.7). Unfunded pension plans amounted to 1,900 million SEK (2,300). |
Sandvik AB has its head office in Stockholm and is the Parent Company of the Sandvik Group, with subsidiaries in more than 60 countries. The Sandvik Group has about 46,000 employees and its operations are global with sales in more than 150 countries. Sandvik AB is a public company with its shares listed on Nasdaq Stockholm (the "Stock Exchange").
Corporate governance at Sandvik comprises the system – encompassing the principles, guidelines, structures and processes – through which the Group is managed and controlled. The aim is to ensure efficient and value-creating decision-making by clearly specifying the division of roles and responsibilities among the shareholders, the Board and the Group Executive Management.
Corporate governance is based on the Swedish Companies Act, the Stock Exchange's Rule Book for Issuers and the Swedish Code of Corporate Governance (the "Code"), as well as other relevant laws and regulations. The Code is available from corporategovernanceboard.se. In 2015, Sandvik applied the Code without deviating from any of its regulations.
At 31 December 2015, Sandvik's share capital amounted to 1,505,263,107.60 SEK represented by 1,254,385,923 shares. Each share carries one vote at General Meetings of Shareholders. According to the share register, Sandvik had about 117,600 shareholders at 31 December 2015. AB Industrivärden was the largest owner with about 11.7% of the share capital. Of the total share capital at year-end, nearly 30% was owned by investors outside Sweden.
Pursuant to the Swedish Companies Act, the General Meeting of Shareholders is the highest decision-making body. At the Annual General Meeting, the shareholders are given the possibility to exercise their voting rights in relation to, for example, the Annual Report, dividends, election of the Board and appointment of auditor, and other matters stipulated in the Companies Act, the Articles of Association and, where applicable, the Code.
All shareholders who have been entered in the share register and have informed the company of
CORPORATE GOVERNANCE MODEL
As a component in the governance of the Sandvik Group, committees and other coordination and preparatory bodies have been established comprising representatives from business areas and Group functions. Examples of such bodies include the Finance Management Team, IT Board, R&D Board and Communication Management Team.
Well-attended Annual General Meeting on 7 May 2015 at the Göransson Arena in Sandviken, Sweden.
their attendance within the time limit stated in the notice of the meeting are entitled to participate at Sandvik's General Meetings and vote according to the number of shares held. Shareholders are also entitled to be represented by a proxy at the Meeting.
Shareholders representing 52.31% of the share capital and votes attended the Annual General Meeting held on 7 May 2015 in Sandviken, Sweden. Sven Unger, attorney-at-law, was elected to chair the meeting. Resolutions passed at the meeting included the following:
For additional information about the Annual General Meeting, including the minutes, refer to sandvik.com.
The next Annual General Meeting will be held on 28 April 2016 in Sandviken, Sweden. More information is available at sandvik.com.
The Nomination Committee is a preparatory body that prepares proposals for, among other things, the election of the Board of Directors, the Chairman of the Board and auditors as well as fees for adoption at the General Meeting. The Annual General Meeting has adopted an instruction for the Nomination Committee,
| AB Industrivärden | 11.7 |
|---|---|
| Alecta Pension Insurance | 4.9 |
| Handelsbanken Pension | 3.8 |
| AMF – Insurance and Funds | 3.5 |
| Swedbank Robur Funds | 3.4 |
| SSB CL Omnibus* | 3.4 |
| JPM Chase NA* | 2.5 |
| L E Lundbergföretagen AB | 2.4 |
| Nordea Investment Funds | 2.0 |
| Göranssonska Foundations | 1.8 |
* Shares held in trust.
which includes a procedure for appointing the Nomination Committee, valid until a General Meeting resolves on a change. In accordance with this instruction, the Nomination Committee should comprise representatives of the four largest shareholders, in terms of the number of votes, on the final business day in August plus the Chairman of the Board (convener).
For the 2016 Annual General Meeting, the Nomination Committee consists of Fredrik Lundberg, Chairman (Industrivärden), Kaj Thorén (Alecta), Pär Boman (Handelsbanken AB, Handelsbanken's Pension Foundation and Handelsbanken's Pension Fund), Tomas Hedberg (Swedbank Robur Funds) and Johan Molin (Sandvik's Chairman of the Board). Up to the date of the Annual General Meeting, the Nomination Committee met on at least three occasions. Through Sandvik's Chairman of the Board, the Nomination Committee has been informed of the results of the Board's own evaluation and the company's operations, stage of development and overall status. The Nomination Committee has discussed the general criteria that Board members should fulfill, including the independence requirement, and has reviewed the number of Board assignments that each Board member has in other companies. Furthermore, the Nomination Committee has paid special attention to the requirements relating to diversity and breadth as well as the requirement to strive for even gender distribution.
The Board of Directors is responsible for the company's organization and the management of the company's business. The Board is required to continuously monitor the company's and the Group's financial position.
The Board is to ensure that the company's organization is designed in a way that ensures that the financial
statements, the management of assets and the company's financial condition in general are controlled in a reassuring manner.
The President is appointed by the Board and is responsible for the daily operations pursuant to guidelines and instructions issued by the Board. The distribution of responsibilities between the Board and the President is laid down in written instructions.
The Board's Procedural Guidelines and instruction for work delegation between the Board and the President, as well as for financial reporting, are reviewed and adopted each year. The review is based on such aspects as the Board's evaluation of the individual and collective work that the Board performs.
In addition to financial reporting and the monitoring and follow-up of daily operations and profit trend, Board meetings address the goals and strategies for the operations, acquisitions and significant investments, as well as matters relating to the capital structure. Senior executives report business plans and strategic issues to the Board on an ongoing basis.
| COMPOSITION OF THE BOARD AT 31 DECEMBER 2015 | |||||||
|---|---|---|---|---|---|---|---|
| NAME | FUNCTION | INDEPENDENT IN ACC. WITH THE CODE |
SHAREHOLDING, NUMBER1) 31 DEC 2015 |
ELECTED | AUDIT COMMITTEE |
REMUNERATION COMMITTEE |
|
| Jennifer Allerton | Member | Yes | 10,000 | 2015 | |||
| Thomas Andersson | Deputy* | 612 | 2012 | ||||
| Claes Boustedt | Member | Yes | 10,000 | 2015 | Member | ||
| Jürgen M Geissinger | Member | Yes | 0 | 2012 | |||
| Johan Karlström | Member | Yes | 5,000 | 2011 | Member | ||
| Jan Kjellgren | Member* | 570 | 2008 | ||||
| Tomas Kärnström | Member* | 2,889 | 2006 | ||||
| Mats W Lundberg | Deputy* | 0 | 2015 | ||||
| Johan Molin | Chairman | Yes | 260,0002) | 2015 | Member | Chairman | |
| Hanne de Mora | Member | Yes | 16,000 | 2006 | Chairman | ||
| Lars Westerberg | Member | Yes | 12,000 | 2010 | Member |
* Employee representatives (both members and deputy members participate in Board meetings). Jan Kjellgren (member) and Mats W Lundberg (deputy) represent Unionen/Ledarna/Swedish Association of Graduate Engineers. Tomas Kärnström (member) and Thomas Andersson (deputy) represent IF Metall.
1) Pertains to own and closely related persons' shareholdings.
2) The shares are held through capital redemption policy. Johan Molin also holds 1,000,000 call options in Sandvik AB.
As per 31 December 2015, Sandvik's Board comprised seven members elected by the Annual General Meeting. Pursuant to Swedish legislation, trade unions are entitled to representation on the Board and they have appointed two members and two deputies.
In accordance with the Nomination Committee's proposal, Jennifer Allerton, Claes Boustedt and Johan Molin were elected new members of the Board, and Olof Faxander, Jürgen Geissinger, Johan Karlström, Hanne de Mora and Lars Westerberg were re-elected members of the Board at the 2015 Annual General Meeting. Johan Molin was elected new Chairman of the Board. Anders Nyrén and Simon Thompson had declined re-election. The trade unions appointed Tomas Kärnström and Jan Kjellgren as Board members, and Thomas Andersson and Mats W Lundberg as deputies. Sandvik's General Counsel Åsa Thunman served as secretary of the Board, and the Remuneration and Audit Committees. Olof Faxander subsequently resigned from the Board in August 2015 in connection with the termination of his employment as President and CEO.
The Board members are presented in more detail on pages 124–125.
All seven Board members elected by the General Meeting are independent in relation to Sandvik and its executive management, as well as the company's major shareholders. Accordingly, the composition of the Board complies with the requirements of the Code that the majority of the members elected by the
General Meeting be independent in relation to the company and its executive management and that a minimum of two of those members that are independent in relation to the company and its executive management are also to be independent in relation to the company's major shareholders.
During the year, the Board held 13 meetings. The Board addressed strategic issues. The executive managements of all five business areas presented their goals and strategies. The Board also addressed matters related to human resources, such as incentive programs, environment, health and safety, and issues concerning investments and the review of previously made investments, as well as acquisitions and divestments. The Remuneration and Audit Committees submitted reports from their respective meetings. In autumn 2015, the Board traveled around Sweden and Finland, which included visits to the Sandvik sites in Gimo (Sandvik Coromant), Fagersta (Seco Tools) and Tampere (Sandvik Mining and Sandvik Construction).
As resolved at the 2015 Annual General Meeting, the Chairman's fee is 1,700,000 SEK and the fee to each of the non-executive Board members elected by the General Meeting is 600,000 SEK.
In addition, 175,000 SEK was paid to the Chairman of the Audit Committee and 150,000 SEK to each of the other Committee members, in total 475,000 SEK.
| MEMBER | BOARD | AUDIT COMMITTEE |
REMUNERATION COMMITTEE |
|---|---|---|---|
| Total number of meetings | 13 | 5 | 3 |
| Jennifer Allerton 1) | 9 | ||
| Thomas Andersson | 12 | ||
| Claes Boustedt 1) | 9 | 3 | |
| Alicia Espinosa 2) | 4 | ||
| Olof Faxander 3) | 7 | ||
| Jürgen M Geissinger | 11 | ||
| Johan Karlström | 12 | 3 | |
| Jan Kjellgren | 13 | ||
| Tomas Kärnström | 12 | ||
| Mats W Lundberg 4) | 9 | ||
| Johan Molin 1) | 9 | 3 | 2 |
| Hanne de Mora | 12 | 5 | |
| Anders Nyrén 5) | 4 | 2 | 1 |
| Simon Thompson 5) | 4 | 2 | |
| Lars Westerberg | 13 | 3 |
1) Elected new Board member at the Annual General Meeting on 7 May 2015.
2) Left the Board in capacity of deputy employee representative in conjunction with the Annual General Meeting on 7 May 2015. 3) Left the Board in August 2015
4) Joined the Board in capacity of deputy employee representative in conjunction with the Annual General Meeting on 7 May 2015. 5) Left the Board in conjunction with the Annual General Meeting on 7 May 2015.
The Chairman of the Remuneration Committee was paid 125,000 SEK and each of the other Committee members 100,000 SEK, in total 325,000 SEK. For more detailed information on remuneration of the Board members, see Note 3.5.
To ensure the quality of the work of the Board and to identify the possible need for further expertise and experience, a systematic and structured process is implemented annually to evaluate the work of the Board and its members. In 2015, the evaluations, which were led by the Chairman of the Board, were carried out by way of each Board member responding to an online questionnaire. The compiled results were distributed in writing to the Board members, who then discussed the results at the final Board meeting of the year. The Chairman of the Board also presented the results of the evaluations at a meeting with the Nomination Committee.
The tasks of the Committees and their work procedures are stipulated in written instructions issued by the Board. The Committees' primary task is to prepare issues and present them to the Board for resolution.
Since the 2015 Annual General Meeting, the members of the Remuneration Committee are the Chairman of the Board Johan Molin (Chairman of the Committee), Johan Karlström and Lars Westerberg. The tasks of the Remuneration Committee are, among others, those prescribed by the Code, which include preparing proposals regarding guidelines for remuneration of senior executives and long-term incentive programs for senior executives.
Based on the recommendations of the Remuneration Committee, the Board decides the remuneration and terms of employment for Sandvik AB's President.
The President decides on the remuneration to be paid to the Group Executive Management in consultation with the Remuneration Committee. For additional information, see Note 3.5.
During 2015, the Remuneration Committee held three meetings.
Since the 2015 Annual General Meeting, the members of the Audit Committee are Hanne de Mora (Chairman of the Committee), Claes Boustedt and Johan Molin. Areas addressed by the Audit Committee mainly related to:
In 2015, the Audit Committee held five meetings at which Sandvik's external auditor and representatives of the company's management were present.
At the 2015 Annual General Meeting, the audit firm KPMG AB was re-elected auditor of Sandvik AB for the period until the 2016 Annual General Meeting, with George Pettersson as the auditor-in-charge.
The progress of the audit is reported regularly during the year to the management teams of individual companies and the business areas, to the Group Executive Management, the Audit Committee and to the Board of Sandvik AB. The auditor meets with the Board at least once a year without the President or
any other member of the Group Executive Management attending.
The independence of the external auditor is governed by a special instruction decided by the Audit Committee setting out the non-audit services that the external auditors may provide to Sandvik.
Audit fees are paid continuously over the period in office on an approved current account basis. For more detailed information on fees paid to the auditor, see Note 3.6.
The five business areas – Sandvik Machining Solutions, Sandvik Mining, Sandvik Materials Technology, Sandvik Construction and Sandvik Venture – comprise Sandvik's operational structure. The presidents of the business areas report directly to the President of Sandvik AB and are responsible for the business activities of their respective areas. In turn, the business areas are organized into various product areas or customer segments.
Visit sandvik.com for more detailed information relating to the Group's operational organization and business activities.
In 2015, the Group Executive Management comprised Olof Faxander (until 10 August 2015), President and CEO; Björn Rosengren (from 1 November 2015), President and CEO; Mats Backman, Executive Vice President and CFO, and acting President and CEO (10 August–31 October 2015); Jonas Gustavsson, President of Sandvik Machining Solutions; Scot Smith (until 14 December 2015), President of Sandvik Mining; Lars Engström (from 15 December 2015), President of Sandvik Mining; Petra Einarsson, President of Sandvik Materials Technology; Dinggui Gao, President of Sandvik Construction; Jim Nixon, President of Sandvik Venture; Åsa Thunman, Executive Vice President and General Counsel; Anna Vikström Persson, Executive Vice President and Head of Human Resources; Jessica Alm, Executive Vice President and Head of Group Communications; Zhiqiang (ZZ) Zhang, Executive Vice President and Head of Emerging Markets, and Olle Wijk (until 31 December 2015), Executive Vice President and Head of Group R&D. The President and other members of the Group Executive Management are presented on pages 126-127.
The Group Executive Management meet each month and deal with the Group's financial development, Group-wide development projects, leadership and competence sourcing, and other strategic issues.
Sandvik has established Group functions responsible for Group-wide activities such as legal affairs, communication, finance and HR. In addition to the Group Executive Management, business areas and Group functions, a number of committees and other coordination and preparatory bodies are commissioned to coordinate Group-wide strategic areas, such as environment, health and safety, research and development, purchasing, IT, finance and HR.
In all countries where Sandvik has registered sales, a Group Management Representative (GMR) has been appointed by the President and CEO to ensure that Sandvik, in the country or region to which the GMR is assigned, has an adequate country or regional organization to drive synergies and safeguard compliance and efficient coordination and performance of support activities in the country. The GMR should act as chairman in the country boards of his/her assignment or delegate this to a Deputy GMR and, if so, lead the regional country management team.
Each country in which Sandvik has a subsidiary has a Country Manager who acts as the representative of the Group Executive Management for a country/region, with an overall responsibility for Sandvik ownershiprelated matters and overall business activities. The Country Manager acts as a counterpart to the GMR or Deputy GMR and is responsible for promoting the wider Sandvik Group interest and initiating activities that should increase the efficiency of business operations and leverage the synergy opportunities within the Group.
For guidelines, remuneration and other benefits payable to the Group Executive Management, refer to Proposal regarding guidelines for the remuneration of senior executives on page 45 and Note 3.5.
The Board has the overall responsibility to ensure that the Group's system for risk management and internal control is effective. The Group applies a comprehensive risk management program, Enterprise Risk Management (ERM). ERM is an integral part of Sandvik's operational and strategic management and assists the company in taking action when change occurs, whether triggered by internal or external factors.
The guidelines for Sandvik's operations are assembled in Power of Sandvik, which is the governance framework incorporating the Group's strategy, Code of Conduct and policies that regulate the governance of the Sandvik Group.
With Sandvik's Sustainable Business strategy and Code of Conduct as the basis, risks and opportunities are analyzed. Objectives and targets are set to address the risks identified by the Group and to efficiently leverage the opportunities available.
The Board adopts the Group's Code of Conduct and the Group Executive Management establishes objectives and performance indicators for sustainability operations. At the end of 2014, the Board of Directors adopted a revised Code of Conduct, which was launched in 2015. Each business area assumes responsibility for ensuring compliance with the Code and that the goals are cascaded down in the organization. The business areas are also responsible for the assessment of sustainability risks (for example, environment, health, safety, corruption, human rights, working conditions and supplier responsibility) in their operations, and specific teams are appointed in each business area to coordinate issues and support the local management.
Sandvik conducts a materiality analysis on a regular basis. In 2013, and confirmed in 2014 and 2015, the following aspects were identified as material:
Compliance includes four areas: anticorruption compliance, competition law, trade compliance and data protection. The main purpose is to ensure a well-functioning structure with control over Sandvik's international business and to manage compliance risks.
A sustainable supply chain and strong supplier relationships are central to Sandvik's commitment to provide customers with the best and most innovative offerings.
Comprehensive recycling programs are underway in all parts of the Group. The global raw material shortage is an impediment for a successful business. Recycling results in less virgin raw material used, lower energy consumption and reduced emissions, acidifying substances and waste water discharge, in addition to less waste. Factors important to Sandvik, the Group's customers and society at large.
Climate change affects Sandvik and we need to mitigate this risk. In addition, a high degree of energy efficiency increases the value of the energy source, resulting in lower costs and emissions, both for Sandvik and its customers.
Maintaining a safe work environment will always be a top priority, out of respect for both Sandvik's employees and customers. The Group's performance is meeting growing expectations from its customers and other stakeholders. Health and safety is a significant competitive advantage to Sandvik.
Sandvik's view is that diverse teams are more effective, more likely to think and act outside the box and contribute to greater creativity and innovation. Diversity and inclusion are integral parts of a modern society and, for Sandvik, a strong competitive advantage. Having the right mix of people, reflecting Sandvik's markets, will support the business and our ambition to meet the needs of global and local customers.
Sandvik must ensure that it has the right people in the right positions. In order to retain the Group's market-leading position in a challenging market, a high-performing culture is important.
The financial statements are established in accordance with prevailing legislation, International Financial Reporting Standards (IFRS) as adopted by EU and the listing agreement with Nasdaq Stockholm. This description of internal control over financial reporting has been prepared in accordance with the Annual Accounts Act and constitutes an integrated part of the Corporate Governance Report.
Sandvik's finance organization manages a well-established financial reporting process aimed at ensuring a high level of internal control.
The internal control system aligns with the conceptual framework of COSO, which is based on five key components that jointly facilitate good internal control. The five components are Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring and Follow-up. The internal control procedures cover all stages of the financial reporting process, from the initial recording of transactions in each subsidiary and reporting entity, the validation and analysis of each business area through to the consolidation, quality assurance, analysis and reporting at Group level. The application of the COSO framework is described below.
The Power of Sandvik regulates the governance of the Sandvik Group. It includes the Sandvik Code of Conduct, delegation of responsibilities, including signatory and authorization principles for decision making and cost approvals, and request and approval procedures in respect of investments and acquisitions, among other items.
The Sandvik Financial Reporting Policies and Procedures govern control over financial reporting. These documents contain detailed instructions regarding accounting policies and financial reporting procedures to be applied by all Sandvik reporting entities. In the 20 major countries where Sandvik operates, Country Finance Managers are appointed to support local management and finance organizations and to provide a link between reporting entities and Group finance. At Group level, Group Financial Control manages the reporting process to ensure the completeness and accuracy of financial reporting and compliance with IFRS requirements. Group Business Control performs business analysis and compiles reports on operational performance. Both statutory and management reporting is conducted in close cooperation with business areas and specialist functions such as tax, financial services and legal to ensure the correct reporting of the income statement, balance sheet, equity and cash flow.
The Enterprise Risk Management (ERM) process at Sandvik, which is described in the Integrated Risk Management Report on pages 54–55, encompasses the area of financial reporting. Risk management is a normal component of the daily work on financial reporting. Specific activities have been established with the purpose of identifying risks, weaknesses and any changes needed to the financial reporting process to minimize risks. The amalgamation of roles and responsibilities, work descriptions, IT systems, skills and expertise creates an environment that is monitored continuously to identify and manage potential risks.
Internal Control activities have been effected in all areas that impact upon financial reporting. The internal control activities follow the logic of the reporting process and the finance organization. In each reporting entity, the finance staff is responsible for accurate accounting and the closing of books. Finance staff adheres to the Sandvik Financial Reporting Policies and Procedures and validate and reconcile local accounts before submitting them to business area management and Group finance for consolidation.
Controllers in the product and business areas perform analytical reviews and investigations, conduct business trend analyses and update forecasts and budgets. They investigate certain issues related to the financial information as and when needed. All business areas present their financial performance in written reports to the Group Executive Management on a monthly and quarterly basis.
Group Financial Control and Group Business Control all have key responsibilities for control activities regarding financial reporting.
Financial reports setting out the Group's financial position and the earnings trend of operations are submitted regularly to Sandvik's Board. The Board deals with all quarterly interim reports as well as the Annual Report prior to publishing and monitors the audit of internal control and financial statements conducted by Internal Audit and the external auditors.
The business areas and major countries also have a system of internal Board meetings with a formal agenda, including financial information, monitoring and decisions related to financial and accounting matters.
Steering documents, such as policies and procedures, as well as instructions, are updated regularly on the company's intranet and are available to all of Sandvik's employees. Reporting requirements are also updated on the company's intranet and are communicated through formal and informal channels, as well as at regular meetings and conferences.
Information to external parties is communicated regularly on Sandvik's website, which contains news and press releases. Quarterly interim reports are published externally and are supplemented by investor meetings attended by the Group Executive Management. In addition, there is an established agenda for communicating information on shareholder meetings and other information to investors. The Annual Report is made available to shareholders and the general public, both as a printed version and on Sandvik's website.
Each business entity manager and their respective finance organization is ultimately responsible for continuously monitoring the financial information of the various entities. The information is also monitored at a business area level, by Group staff functions, the Group Executive Management and by the Board. The Audit Committee at Sandvik is to ensure that the company's financial reports are produced in accordance with legislation, applicable accounting standards
and other requirements for listed companies. The Audit Committee prepares issues and presents them to the Board for resolution.
The quality of the financial reporting process and internal controls is assessed by Group Finance every month as part of the quality assurance of reporting. The Sandvik internal audit function independently reviews the internal control system of financial reporting as part of its audit plan.
The external auditors continuously examine the level of internal control over financial reporting. They review the third-quarter interim report and study the financial reports prepared for the other quarters. In conjunction with the close of the third quarter, the external auditors perform a more detailed examination of the operations, as part of a hard-close audit, which includes an assessment of the Parent Company's reporting and internal control over financial reporting in the business areas, subsidiaries and Group functions. Finally, the external auditors perform an examination of the annual accounts and the Annual Report.
The Internal Audit function audits the corporate governance, internal control and risk-management procedures.
Internal Audit is subordinated to the Board's Audit Committee and the head of the unit reports to the Audit Committee.
Internal audits include, as a basis, the Group's guidelines and policies for corporate governance, risk management and internal control with regard to areas such as financial reporting, compliance with the Code of Conduct and IT. The outputs of the audits include action plans and programs for improvement. Findings are reported to the Group Executive Management and the business area management and to the Board's Audit Committee.
| INCOME STATEMENT 71 | |
|---|---|
| BALANCE SHEET 72 | |
| CHANGES IN EQUITY74 | |
| CASH-FLOW STATEMENT 75 |
| Continuing operations Revenue 1, 2 82,533 85,845 Cost of sales and services –51,329 –55,239 Gross profit 31,204 30,606 Selling expenses –11,639 –13,116 Administrative expenses –6,459 –7,079 Research and development costs 4 –2,609 –3,001 Share of results of associated companies 24 8 Other operating income 5 177 157 Other operating expenses 6 –493 –304 Operating profit 1, 3, 7, 8 10,205 7,271 Financial income 163 173 Financial expenses –1,999 –2,136 Net financing cost 9 –1,836 –1,963 Profit after financial items 8,369 5,308 Income tax 10 –2,272 –1,865 Profit for the year, continuing operations 6,097 3,443 Discontinued operations Revenue 6,288 4,977 Operating profit –85 –1,209 Profit after financial items –105 –1,249 Profit for the year, discontinued operations 30 –105 –1,249 Group total Revenue 88,821 90,822 Operating profit 10,120 6,062 Profit after financial items 8,264 4,059 Profit for the year, Group total 5,992 2,194 Other comprehensive income Items that cannot be reclassified to profit/loss for the year Actuarial gains/losses on defined-benefit pension plans 20 –1,847 589 Tax relating to items that cannot be reclassified to profit/loss for the year 10 452 –139 –1,395 450 Items that can be reclassified to profit/loss for the year Translation differences during the year 3,120 –972 Fair-value changes in cash-flow hedges –391 –107 Fair-value changes in cash-flow hedges transferred to profit/loss for the year 10 162 Tax related to fair-value changes in cash-flow hedges 10 78 –7 2,817 –924 Total other comprehensive income for the year 1,422 –474 Total comprehensive income for the year 7,414 1,720 Profit for the year attributable to: Equity holders of the Parent 6,011 2,247 Non-controlling interests –19 –53 Total comprehensive income for the year attributable to: Equity holders of the Parent 7,432 1,770 Non-controlling interests –17 –50 Earnings per share, SEK * Continuing operations 11 4.88 2.79 Discontinued operations 11 –0.08 –1.00 Group Total 11 4.79 1.79 |
MSEK | NOTE | 2014 | 2015 |
|---|---|---|---|---|
* No dilution effects during the period.
| MSEK | NOTE | 31 DEC. 2014 | 31 DEC. 2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Patents and other intangible assets | 12 | 5,580 | 5,656 |
| Goodwill | 12 | 12,743 | 12,657 |
| Total | 18,323 | 18,313 | |
| Property, plant and equipment | |||
| Land and buildings | 12 | 9,240 | 9,083 |
| Plant and machinery | 12 | 13,331 | 13,062 |
| Equipment, tools, fixtures and fittings | 12 | 1,822 | 1,691 |
| Construction in progress and advance payments | 12 | 3,216 | 2,495 |
| Total | 27,609 | 26,331 | |
| Financial assets | |||
| Investments in associated companies | 1,15 | 239 | 236 |
| Financial assets | 80 | 83 | |
| Deferred tax assets | 10 | 6,245 | 6,237 |
| Non-current receivables | 16 | 1,715 | 1,258 |
| Total | 8,279 | 7,814 | |
| Total non-current assets | 54,211 | 52,458 | |
| Current assets | |||
| Inventories | 17 | 24,056 | 21,522 |
| Current receivables | |||
| Trade receivables | 18 | 13,840 | 12,238 |
| Due from associated companies | 115 | 77 | |
| Income tax receivables | 10 | 1,162 | 1,067 |
| Other receivables | 16 | 5,626 | 4,279 |
| Prepaid expenses and accrued income | 982 | 1,106 | |
| Total | 21,725 | 18,767 | |
| Cash and cash equivalents | 6,327 | 6,376 | |
| Assets held for sale | 30 | — | 2,119 |
| Total current assets | 52,108 | 48,784 | |
| TOTAL ASSETS | 106,319 | 101,242 |
For information on contingent liabilities and pledged assets, refer to Note 26.
| MSEK | NOTE | 31 DEC. 2014 | 31 DEC. 2015 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 1,505 | 1,505 | |
| Other paid-in capital | 7,678 | 7,678 | |
| Reserves | 3,178 | 2,251 | |
| Retained earnings including profit/loss for the year | 24,177 | 22,545 | |
| Equity attributable to equity holders of the Parent | 36,538 | 33,979 | |
| Non-controlling interests | 134 | 81 | |
| TOTAL EQUITY | 19 | 36,672 | 34,060 |
| Non-current liabilities | |||
| Interest-bearing liabilities | |||
| Provisions for pensions | 20 | 7,036 | 6,252 |
| Loans from financial institutions | 4,094 | 2,059 | |
| Other liabilities | 23 | 30,296 | 27,299 |
| Total | 41,426 | 35,610 | |
| Non-interest-bearing liabilities | |||
| Deferred tax liabilities | 10 | 1,665 | 1,992 |
| Provisions for taxes | 10 | 916 | 1,060 |
| Other provisions | 21 | 855 | 1,105 |
| Other non-current liabilities | 24 | 148 | 105 |
| Total | 3,584 | 4,262 | |
| Total non-current liabilities | 45,010 | 39,872 | |
| Current liabilities | |||
| Interest-bearing liabilities | |||
| Loans from financial institutions | 1,798 | 2,177 | |
| Other liabilities | 23 | 881 | 3,013 |
| Total | 2,679 | 5,190 | |
| Non-interest-bearing liabilities | |||
| Advance payments from customers | 2,004 | 2,115 | |
| Accounts payable | 6,762 | 5,953 | |
| Due to associated companies | 8 | 3 | |
| Income tax liabilities | 10 | 1,194 | 871 |
| Other liabilities | 24 | 4,365 | 3,011 |
| Provisions | 21 | 1,165 | 2,365 |
| Accrued expenses and deferred income | 6,460 | 5,913 | |
| Total | 21,958 | 20,231 | |
| Liabilities directly attributed to assets held for sale | 30 | — | 1,889 |
| Total current liabilities | 24,637 | 27,310 | |
| TOTAL LIABILITIES | 69,647 | 67,182 | |
| TOTAL EQUITY AND LIABILITIES | 106,319 | 101,242 |
For information on contingent liabilities and pledged assets, refer to Note 26.
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY |
|||||||
|---|---|---|---|---|---|---|---|
| MSEK | SHARE CAPITAL |
OTHER PAID-IN CAPITAL |
RESERVES | RETAINED EARNINGS INCL. PROFIT/ LOSS FOR THE YEAR |
TOTAL | NON CON TROLLING INTERESTS |
TOTAL EQUITY |
| Equity at 1 January 2014 | 1,505 | 7,678 | 361 | 23,966 | 33,510 | 100 | 33,610 |
| Profit for the year | — | — | — | 6,011 | 6,011 | –19 | 5,992 |
| Other comprehensive income/loss | — | — | 2,817 | –1,395 | 1,422 | 2 | 1,424 |
| Total comprehensive income/loss for the year | — | — | 2,817 | 4,616 | 7,433 | –17 | 7,416 |
| Acquisition of non-controlling interest | — | — | — | — | — | 331 | 33 |
| New stock issue to non-controlling interest | — | — | — | — | — | 23 | 23 |
| Share-based payment settled by equity instruments |
— | — | — | –81 | –81 | — | –81 |
| Payment of options on treasury shares, hedging of options program 2012 |
— | — | — | 12 | 12 | — | 12 |
| Other options | — | — | — | 13 | 13 | — | 13 |
| Dividends, hedged options program 2011 | — | — | — | 41 | 41 | — | 41 |
| Dividend | — | — | — | –4,390 | –4,390 | –5 | –4,395 |
| Equity at 31 December 2014 | 1,505 | 7,678 | 3,178 | 24,177 | 36,538 | 134 | 36,672 |
| Equity at 1 January 2015 | 1,505 | 7,678 | 3,178 | 24,177 | 36,538 | 134 | 36,672 |
| Profit for the year | — | — | — | 2,247 | 2,247 | –53 | 2,194 |
| Other comprehensive income/loss | — | — | –927 | 450 | –477 | 3 | –474 |
| Total comprehensive income/loss for the year | — | — | –927 | 2,697 | 1,770 | –50 | 1,720 |
| Share-based payment settled by equity instruments |
— | — | — | 25 | 25 | — | 25 |
| Payment of options on treasury shares, hedging of options program 2013 |
— | — | — | 3 | 3 | — | 3 |
| Other options | — | — | — | –8 | –8 | — | –8 |
| Dividends, hedged options program 2011 | — | — | — | 41 | 41 | — | 41 |
| Dividend | — | — | — | –4,390 | –4,390 | –3 | –4,393 |
| Equity at 31 December 2015 | 1,505 | 7,678 | 2,251 | 22,545 | 33,979 | 81 | 34,060 |
1) The increase in ownership is attributable to the acquisition of Varel.
| MSEK | NOTE | 2014 | 2015 |
|---|---|---|---|
| Group total | |||
| Cash flow from operating activities | |||
| Income after financial income and expenses | 8,264 | 4,059 | |
| Adjustment for depreciation, amortization and impairment losses | 4,145 | 5,350 | |
| Adjustment for non-cash items, etc. | –1,114 | 1,569 | |
| Income tax paid | –1,899 | –1,939 | |
| Cash flow from operating activities before changes in working capital | 9,396 | 9,039 | |
| Changes in working capital | |||
| Change in inventories | 1,464 | 2,187 | |
| Change in operating receivables | 778 | 1,035 | |
| Change in operating liabilities | –1,755 | 118 | |
| Cash flow from changes in working capital | 487 | 3,340 | |
| Investments in rental equipment | –561 | –625 | |
| Divestments of rental equipment | 193 | 198 | |
| Cash flow from operating activities | 9,515 | 11,952 | |
| Cash flow from investing activities | |||
| Acquisition of companies and shares, net of cash acquired | 30 | –2,834 | –7 |
| Disposal of operations | 460 | ||
| Acquisition of tangible assets | –3,820 | –3,265 | |
| Proceeds from sale of tangible assets | 230 | 251 | |
| Acquisition of intangible assets | –839 | –949 | |
| Proceeds from sale of intangible assets | 8 | 7 | |
| Other investments, net | –44 | 53 | |
| Net cash used in investing activities | –6,839 | –3,910 | |
| Net cash flow after investing activities | 2,676 | 8,042 | |
| Cash flow from financing activities | |||
| Proceeds from borrowings | 12,683 | 923 | |
| Repayment of borrowings | –9,925 | –4,493 | |
| Dividends paid | –4,395 | –4,393 | |
| Cash flow from financing activities | –1,637 | –7,963 | |
| Cash flow for the year | 1,039 | 79 | |
| Cash and cash equivalents at beginning of year | 5,076 | 6,327 | |
| Foreign exchange differences on cash and cash equivalents | 212 | –30 | |
| Cash and cash equivalents at end of year | 6,327 | 6,376 | |
| Continuing operations | |||
| Cash flow from operations | 9,898 | 12,793 | |
| Cash flow from investing activities | –6,780 | –3,865 | |
| Cash flow from financing activities | –1,639 | –7,963 | |
| Cash flow from continuing operations | 1,479 | 965 |
For supplementary information, refer to Note 29 and Note 30.
| INCOME STATEMENT 77 | |
|---|---|
| BALANCE SHEET 78 | |
| CHANGES IN EQUITY80 | |
| CASH-FLOW STATEMENT 81 |
| MSEK | NOTE | 2014 | 2015 |
|---|---|---|---|
| Revenue | 2 | 16,475 | 15,667 |
| Cost of sales and services | –12,042 | –10,154 | |
| Gross profit | 4,433 | 5,513 | |
| Selling expenses | –662 | –551 | |
| Administrative expenses | –2,160 | –2,864 | |
| Research and development costs | 4 | –1,335 | –1,521 |
| Other operating income | 5 | 60 | 105 |
| Other operating expenses | 6 | –1,501 | –1,443 |
| Operating loss | 3, 8 | –1,165 | –761 |
| Income from shares in Group companies | 9 | 8,224 | 9,346 |
| Income from shares in associated companies | 9 | 10 | 10 |
| Interest income and similar items | 9 | 998 | 1,072 |
| Interest expenses and similar items | 9 | –1,978 | –1,402 |
| Profit after financial items | 6,089 | 8,265 | |
| Appropriations | 0 | –6 | |
| Income tax | 10 | –237 | –137 |
| Profit for the year | 5,852 | 8,122 |
Profit for the year corresponds to total comprehensive income for the year.
The classification of certain profit and loss items has changed as from 2015 affecting administrative expenses and other operating income and expenses.
Comparative figures have been adjusted accordingly.
| MSEK | NOTE | 31 DEC. 2014 | 31 DEC. 2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Patents and other intangible assets | 13 | 8 | 20 |
| Total | 8 | 20 | |
| Property, plant and equipment | |||
| Land and buildings | 13 | 961 | 1,082 |
| Plant and machinery | 13 | 4,612 | 4,926 |
| Equipment, tools, fixtures and fittings | 13 | 434 | 432 |
| Construction in progress and advance payments | 13 | 1,733 | 1,285 |
| Total | 7,740 | 7,725 | |
| Financial assets | |||
| Shares in Group companies | 14 | 32,241 | 33,221 |
| Due from Group companies | 13,762 | 13,621 | |
| Investments in associated companies | 15 | 4 | 4 |
| Other investments | 1 | 1 | |
| Non-current receivables | 16 | 30 | 31 |
| Deferred tax assets | 10 | 332 | 261 |
| Total | 46,370 | 47,139 | |
| Total non-current assets | 54,118 | 54,884 | |
| Current assets | |||
| Inventories | 17 | 3,591 | 3,186 |
| Current receivables | |||
| Trade receivables | 631 | 463 | |
| Due from Group companies | 15,162 | 13,759 | |
| Due from associated companies | 114 | 76 | |
| Income tax receivables | 10 | 180 | 179 |
| Other receivables | 16 | 362 | 319 |
| Prepaid expenses and accrued income | 830 | 931 | |
| Total | 17,279 | 15,727 | |
| Cash and cash equivalents | 1 | 1 | |
| Total current assets | 20,871 | 18,914 | |
| TOTAL ASSETS | 74,989 | 73,798 |
| MSEK | NOTE | 31 DEC. 2014 | 31 DEC. 2015 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Non-distributable equity | |||
| Share capital | 1,505 | 1,505 | |
| Statutory reserve | 1,611 | 1,611 | |
| Total | 3,116 | 3,116 | |
| Distributable equity | |||
| Share premium reserve | 0 | 0 | |
| Profit brought forward | 19,228 | 20,759 | |
| Profit for the year | 5,852 | 8,122 | |
| Total | 25,080 | 28,881 | |
| TOTAL EQUITY | 19 | 28,196 | 31,997 |
| Untaxed reserves | |||
| Other untaxed reserves | 4 | 11 | |
| Total | 4 | 11 | |
| Provisions | |||
| Provisions for pensions | 20 | 362 | 350 |
| Other provisions | 21 | 238 | 398 |
| Total | 600 | 748 | |
| Non-current interest-bearing liabilities | |||
| Loans from financial institutions | 22 | 3,926 | 2,499 |
| Loans from Group companies | 22 | 363 | 452 |
| Other liabilities | 22 | 21,472 | 18,051 |
| Total | 25,761 | 21,002 | |
| Non-current non-interest-bearing liabilities | |||
| Other liabilities | 47 | 59 | |
| Total | 47 | 59 | |
| Current interest-bearing liabilities | |||
| Loans from financial institutions | 541 | 1,352 | |
| Loans from Group companies | 7,112 | 9,761 | |
| Other liabilities | 825 | 2,999 | |
| Total | 8,478 | 14,112 | |
| Current non-interest-bearing liabilities | |||
| Advance payments from customers | 589 | 500 | |
| Accounts payable | 1,499 | 1,574 | |
| Due to Group companies | 6,970 | 1,181 | |
| Due to associated companies | 0 | 0 | |
| Other liabilities | 524 | 607 | |
| Accrued expenses and deferred income | 25 | 2,321 | 2,007 |
| Total | 11,903 | 5,869 | |
| TOTAL EQUITY AND LIABILITIES | 74,989 | 73,798 | |
| Pledged assets | 26 | — | — |
| Contingent liabilities | 26 | 15,938 | 15,583 |
| MSEK | SHARE CAPITAL |
STATUTORY RESERVE |
DISTRIBUTABLE EQUITY |
TOTAL |
|---|---|---|---|---|
| Equity at 1 January 2014 | 1,505 | 1,611 | 23,646 | 26,762 |
| Comprehensive income for the year | — | — | 5,852 | 5,852 |
| Dividend | — | — | –4,390 | –4,390 |
| Share-based payment settled by equity instruments | — | — | –81 | –81 |
| Payment of options on treasury shares, hedging of options program 2012 | — | — | 12 | 12 |
| Dividends, hedged option program 2011 | — | — | 41 | 41 |
| Equity at 31 December 2014 | 1,505 | 1,611 | 25,080 | 28,196 |
| Comprehensive income for the year | — | — | 8,122 | 8,122 |
| Dividend | — | — | –4,390 | –4,390 |
| Share-based payment settled by equity instruments | — | — | 24 | 24 |
| Payment of options on treasury shares, hedging of options program 2013 | — | — | 4 | 4 |
| Dividends, hedged options program 2011 | — | — | 41 | 41 |
| Equity at 31 December 2015 | 1,505 | 1,611 | 28,881 | 31,997 |
| MSEK | 2014 | 2015 |
|---|---|---|
| Cash flow from operating activities | ||
| Profit before tax | 6,089 | 8,265 |
| Adjustment for depreciation, amortization and impairment losses | 819 | 881 |
| Adjustment for non-cash items, etc. | 758 | 201 |
| Income tax paid | –36 | –65 |
| Cash flow from operating activities before changes in working capital | 7,630 | 9,282 |
| Changes in working capital | ||
| Changes in inventories | 47 | 406 |
| Changes in operating receivables | –6,206 | 994 |
| Changes in operating liabilities | 5,924 | –5,958 |
| Cash flow from operating activities | 7,395 | 4,724 |
| Cash flow from investing activities | ||
| Acquisition of companies and shares, net of cash acquired | –600 | –1,232 |
| Acquisition of property, plant and equipment | –1,227 | –907 |
| Proceeds from sale of companies and shares, net of cash disposed of | 22 | 211 |
| Proceeds from sale of property, plant and equipment | 86 | 62 |
| Change in non-current receivables | — | — |
| Net cash used in investing activities | –1,719 | –1,866 |
| Net cash flow after investing activities | 5,676 | 2,858 |
| Cash flow from financing activities | ||
| Changes in advances/loans to/from Group companies, net | –6,550 | 3,392 |
| Proceeds from external borrowings | 11,471 | — |
| Repayment of external borrowings | –6,206 | –1,860 |
| Dividend paid | –4,390 | –4,390 |
| Net cash used in financing activities | –5,675 | –2,858 |
| Cash flow for the year | 1 | — |
| Cash and cash equivalents at beginning of year | — | 1 |
| Cash and cash equivalents at end of year | 1 | 1 |
Supplementary information, Note 29.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) as endorsed by the EU. In addition, the recommendation RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board, has been applied.
The Parent Company has applied the same accounting policies as those applied in the consolidated financial statements except as set out below in the section "Parent Company's accounting policies."
The financial statements are presented on pages 41-122 in the printed Annual Report. The Parent Company's Annual Report and the consolidated financial statements were approved for issuance by the Board of Directors on 19 February 2016. The Group's and the Parent Company's income statements and balance sheets are subject to adoption at the Annual General Meeting on 28 April 2016.
Assets and liabilities are stated on a historical cost basis except for certain financial assets and liabilities, which are stated at their fair value. Financial assets and liabilities measured at fair value comprise derivative instruments. Receivables and liabilities and items of income and expense are offset only when required or expressly permitted in an accounting standard.
The preparation of financial statements in conformity with IFRS requires management to make assessments, estimates and assumptions that affect the application of accounting policies and recognized amounts of assets and liabilities, income and expenses. Actual results may differ from these assessments. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Judgments made by management in the application of IFRS that have a significant effect on the financial statements, and estimates with a significant risk of material adjustment in the next year, are further discussed below. Events after the balance sheet date refer to both favorable and unfavorable events that have occurred after the balance sheet date but before the date the financial statements were authorized for issue by the Board of Directors. Significant non-adjusting events, that is, events indicative
of conditions that arose after the balance sheet date, are disclosed in the financial statements. Only adjusting events, that is, those that provide evidence of conditions that existed at the balance sheet date, have been considered in the final establishment of the financial statements. The most significant accounting policies for the Group, as set out below, have been applied consistently to all periods presented in these consolidated financial statements except as specifically described. Moreover, the Group's accounting policies have been consistently applied in the Group reporting by all members of the Group and also in the Group reporting of associated companies, where necessary, by adaptation to Group policies.
The below amendments of standards and new and amended interpretations came into effect 1 January 2015. None of these standards had any material impact on Sandvik's financial statements.
– IFRIC 21 Levies. Provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. It does not include income taxes, fines and other penalties.
IFRS 15 Revenue from Contracts with Customers. The standard will be effective from 1 January 2018 and is expected to be adopted by the EU in the first quarter of 2016. The standard is not expected to have any material impact on Sandvik's financial statements, but it will require more extensive disclosures. There are three alternative ways of implementing the new standard: Full retroactivity, Partial retroactivity and Accumulated effect method, whereby equity is adjusted per 1 January 2018 with the contracts still open according to the previous standards IAS 11 and IAS 18.
IFRS 16 Leases. The standard will be effective from 1 January 2019. The standard has not yet been adopted by the EU. The company has not yet performed any evaluation of the effects of such a change. Early adoption will be permitted, provided the company has adopted IFRS 15 Revenue from Contracts with Customers.
The consolidated accounts are prepared in accordance with the Group's accounting principles and include the accounts of the Parent Company and all Group companies. Group companies are consolidated from the date the Group exercises control or influence over the company. Divested companies are included in the consolidated accounts until the date the Group ceases to control or exercise influence over them. In preparing Sandvik's consolidated financial statements, any Intra-Group transactions have been eliminated.
Subsidiaries are entities over which the Parent Company has a controlling influence. Controlling influence exists if the Parent Company has the power over the investee, meaning the investor has existing rights that give it the ability to direct the relevant activities, is exposed to or has the rights to variable return from its involvement in the investee and can, through its influence, affect the return from the involvement in the investee. In assessing controlling interest, de facto control, potential voting rights that are currently exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that the controlling influence commences until the date that control ceases.
For cases in which the subsidiary's accounting policies do not coincide with the Group's accounting policies, adjustments were made to comply with the Group's accounting policies.
The consolidated financial statements are prepared in accordance with the purchase method. In business combinations, acquired assets and assumed liabilities are identified and classified, and measured at fair value on the date of acquisition (also known as a purchase price allocation).
Transaction costs in conjunction with acquisitions are recognized directly in profit or loss for the year as other operating expenses.
Contingent considerations are recognized as financial liabilities and at fair value on the acquisition date. Contingent considerations are remeasured at each reporting period with any change recognized in profit or loss for the year.
In step acquisitions, when a controlling interest is achieved, any net assets acquired earlier in the acquired units are remeasured at fair value and the result of the remeasurement is recognized in profit or loss. If the controlling interest is lost upon divestment, net profit is recognized in profit or loss. Any residual holding in the divested business is then measured at fair value on the date of divestment and its effect is recognized in profit or loss for the year.
Non-controlling interests are recognized as a separate item in the Group's equity.
Acquisitions of non-controlling interests are recognized as a transaction within shareholders' equity, meaning between the Parent Company's owners and non-controlling interests. Accordingly, goodwill does not arise in conjunction with such transactions. Gains or losses on disposals to non-controlling interests are also recognized in equity.
Associated companies are partly owned entities over which the Group commands a significant influence, but not control, over the financial and operating policies. Normally this means a shareholding of between 20% and 50% of the voting rights. Interests in associated companies are recognized in accordance with the equity method in the consolidated financial statements. Under the equity method, the carrying amounts of interests in associated companies correspond to the recognized equity of associated companies, any goodwill and any other remaining fair value adjustments recognized at acquisition date. Sandvik's share of the associated company's income, adjusted for dissolution of acquired surplus or deficit values, is recognized as a separate item in the consolidated income statement.
The Parent Company's functional currency is Swedish kronor (SEK), which is also the reporting currency of the Parent Company and the Group. Accordingly, the financial statements are presented in SEK. All amounts are in million SEK unless otherwise stated.
Transactions in foreign currencies are translated into functional currency at the foreign exchange rate prevailing at the date of the transaction. The functional currency is the currency of the primary economic environment in which the Group entities operate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign
exchange rate prevailing at that date. Foreign exchange differences arising on translation are recognized in profit or loss for the year. Non-monetary assets and liabilities measured in terms of historical cost in a foreign currency are translated using the exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities that are measured at fair value are retranslated to the functional currency at the exchange rate prevailing at the date that the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated from the foreign operation's functional currency to the Group's reporting currency, SEK, at foreign exchange rates prevailing at the balance sheet date. Revenues and expenses of foreign operations are translated to SEK at average rates that approximate the foreign exchange rates prevailing at each of the transaction dates. Translation differences arising from the translation of the net investment in foreign operations are recognized in other comprehensive income and are accumulated in a separate component of equity, a translation reserve. When the foreign operation is divested, the accumulated translation differences attributable to the divested foreign operation are reclassified from equity to profit or loss for the year as a reclassification adjustment at the date on which the profit or loss of the divestment is recognized. For cases in which divestments made include a residual controlling influence, the proportionate share of accumulated translation differences from other comprehensive income is transferred to non-controlling interests.
Monetary non-current receivables or monetary non-current liabilities to a foreign operation for which no settlement is planned or is not likely to take place in the foreseeable future are, in practice, part of the company's net investment in foreign operations. A foreign exchange difference arising on the monetary non-current receivable or monetary non-current liability is recognized in other comprehensive income and accumulated in a separate component of shareholders' equity, entitled translation reserve. When a foreign operation is divested, the accumulated foreign exchange differences attributable to monetary non-current receivables or monetary noncurrent liabilities are included in the accumulated translation differences reclassified from the translation reserve in equity to profit or loss for the year.
Financial instruments recognized in the balance sheet include assets, such as cash and cash equivalents, loan and trade receivables, financial investments and derivatives, and liabilities such as loan liabilities, accounts payable and derivatives.
A financial asset or a financial liability is recognized on the balance sheet when the entity becomes a party to the contractual provisions of the instrument. Trade receivables are recognized upon issuance of the invoice. A liability is recognized when the counterparty has performed under the agreement and the company is contractually obliged to settle the obligation, even if no invoice has been received.
A financial asset is derecognized when the rights under the agreement are realized or have expired, or when control of the contractual rights is lost. The same applies to a portion of a financial asset. A financial liability is derecognized when the obligation specified in the contract is discharged or otherwise expires.
A financial asset and a financial liability are offset and presented in a net amount in the balance sheet only if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
A non-derivative financial instrument is initially recognized at fair value plus any transaction costs. The Group classifies its financial instruments based on the purpose for its acquisition. Management decides its classification on initial recognition. The classification of a financial asset determines how it is measured after initial recognition, as described below.
Cash and cash equivalents comprise cash balances and bank deposits, and short-term investments that have a maturity of no more than three months from the date of acquisition, and are exposed only to an insignificant risk of changes in value.
Financial assets and financial liabilities measured at fair value in profit or loss.
Financial assets and financial liabilities held for trading, which comprise all derivatives held by Sandvik to which hedge accounting is not applied. Derivative agreements are entered mainly to hedge the Group's foreign exchange and interest-rate risks. Derivatives with positive fair values are recognized as other short-term or long-term receivables (unrealized profits), while derivatives with negative fair values are recognized as other short-term or long-term liabilities (unrealized losses).
The assets held for trading consist of investments in non-listed shares. The fair value cannot be established reliably and the shares are thus measured at cost. The shares are tested regularly for impairment.
Loans and receivables are non-derivative financial assets, with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at
amortized cost using the effective interest method, less any impairment losses. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. The calculation includes all fees and points paid or received between contractual parties that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.
Bad debt provisions are made based on negative information and observed non-payment patterns. A provision for 50-100% of the value is made for receivables overdue by between 181 and 360 days, while a provision for 100% of the value is made for receivables overdue by 361 days or more.
Group borrowings are classified as short-term liabilities and long-term liabilities. Borrowings are initially measured at fair value net of transaction costs. Subsequently, borrowings are measured at amortized cost. Any difference between the loan amount, net of transaction costs, and the repayable amount is allocated to profit or loss for the year over the term of the loan using the effective interest method.
All derivatives are initially recognized at fair value excluding any transaction costs. After initial recognition, derivatives not qualified for hedge accounting are measured at fair value and the change in value is recognized in profit or loss either as other operating income or expenses or financial income or expenses.
To meet the criteria for hedge accounting, there must be a clear-cut relation to the hedged item and the hedge must be expected to be highly effective and it must be possible to measure such effectiveness reliably. Moreover, the hedge must be formally designated and documented. Gains and losses on hedges are recognized in profit or loss for the year at the same time that the gains and losses are recognized for the hedged items. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized as described below under cash-flow or fairvalue hedges.
Hedge accounting is applied when hedging a particular risk associated with highly probable future cash flows and forecast transactions. The effective portion of the change in fair value for the year, of derivatives that are qualified as cash flow hedges, is recognized in other comprehensive income and the accumulated changes in a separate component of shareholders' equity. The ineffective portion of a gain or loss is immediately recognized in profit or loss for the year. When the hedged item impacts profit or loss for the year,
the accumulated changes in value of the hedging instrument are reclassified to profit or loss for the year.
The accumulated gain or loss recognized in equity is reclassified into profit or loss for the year in the periods during which the hedged item affects profit or loss (for instance, when the forecast sales that are hedged take place). If the hedged forecast transaction subsequently results in the recognition of a non-financial asset (for instance, inventories or an item of property, plant and equipment), or a non-financial liability, the hedging reserve is dissolved and the gain or loss is included in the operating profit.
When a hedging instrument is used to hedge the exposure to changes in fair value, changes in the fair value of the instrument are recognized in profit or loss for the year. The gain or loss on the hedged item attributable to the hedged risk, adjusts the carrying amount of the hedged liability and the change for the period is recognized in profit or loss.
Fair-value hedges are used to hedge the fair value of fixed rate funding recognized in the balance sheet, provided that the hedged item is otherwise recognized at amortized cost. The derivative instrument used is interest rate swaps to hedge fixed interest rate risk on borrowings. If the hedge relationship is discontinued, the carrying amount of the hedged item is adjusted with the accumulated amount referring to the hedge relationship.
Foreign currency gains and losses are recognized net.
Sandvik's business is organized in a manner that allows the Group's chief operating decision maker, meaning the CEO, to monitor results, return and cash flow generated by the various products and services in the Group. Each operating segment has a president that is responsible for day-to-day activities and who regularly reports to the CEO regarding the results of the operating segment's work and the need for resources. Since the CEO monitors the business's result and decides on the distribution of resources based on the products the Group manufactures and sells and the services it provides, these constitute the Group's operating segments.
The Group's operations are organized in a number of business areas based on products and services. The market organization also reflects this structure. In accordance with IFRS 8, segment information is presented only on the basis of the consolidated financial statements.
Segment results, assets and liabilities include only those items that are directly attributable to the segment and the relevant portions of items that can be allocated on a reasonable basis to the segments. Unallocated items comprise interest and dividend income, gains on disposal of financial investments, interest expense, losses on the disposal of financial investments, income tax expense and certain administrative expenses. Unallocated assets and liabilities include income tax receivables and payables, financial investments and financial liabilities.
Revenue from the sale of goods is recognized in profit or loss for the year when the significant risks and rewards of ownership have been transferred to the buyer, that is, normally in connection with delivery. If the product requires installation at the buyer, and installation is a significant part of the contract, revenue is recognized when the installation is completed. Buy-back commitments may entail that sales revenue cannot be recognized if the agreement with the customer in reality implies that the customer has only rented the product for a certain period of time.
Revenue from service assignments is normally recognized in connection with the rendering of the service. Revenue from service and maintenance contracts is recognized in accordance with the percentage of completion method. The stage of completion is normally determined based on the proportion of costs incurred on the balance sheet date in relation to the estimated total costs of the assignment. Only expenditures relating to work carried out or to be carried out are included in calculating the total costs.
Construction contracts exist to some extent, mainly in the business areas Sandvik Mining and Sandvik Construction and Sandvik Venture's product area Process Systems. Contract revenue and expenses are recognized in profit or loss for the year in proportion to the stage of completion of the contract, if the customer contract is considered enforceable, contains a customer specific delivery and the proportion of stage of completion can be estimated reliably. The stage of completion is based on the input method and is determined based on the proportion that contract costs incurred to date bear to the estimated total contract costs. Expected losses are immediately recognized as an expense in consolidated profit or loss for the year.
Revenue in the form of royalty is recognized on the basis of the financial implications of the agreement.
Government grants are recognized as deferred income in the balance sheet when there is reasonable assurance that the grant will be received and that the entity will comply with the conditions attaching to them. Grants are recognized in profit or loss for the year in the same way and over the same periods as the related costs that they are intended to compensate, on a systematic basis. Grants related to assets are presented by deducting the grant from the carrying amount of the asset.
Financial expenses consists of interest expense on borrowings, interest income and expenses on interest swaps that are recognized net as an interest expense. Credit losses on financial assets and foreign exchange gains and losses on hedging instruments are recognized in profit or loss for the year.
Income tax comprises current and deferred tax. Income tax is recognized in profit or loss for the year except when the underlying transaction is recognized in other comprehensive income. In these cases, the associated tax effects are recognized in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Current tax liabilities are offset against current tax receivables and deferred tax assets are offset against deferred tax liabilities when the entity has a legal right to offset these items.
Deferred tax is recognized based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their value for tax purposes. Deferred taxes are measured at their nominal amount and based on the expected manner of realization or settlement of the carrying amount of the underlying assets and liabilities, using tax rates and fiscal regulations enacted or substantively enacted at the balance sheet date.
Deferred tax assets relating to deductible temporary differences and tax loss carry-forwards are recognized only to the extent that it is probable they can be utilized against future taxable profits.
Goodwill acquired in a business combination represents the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and an annual impairment test is made in the fourth quarter or when there is an indication of impairment. Impairment losses on goodwill are not reversed. Goodwill arising on the acquisition of an associated company is included in the carrying amount of participations in associated companies.
Expenditure on research activities related to the obtaining of new scientific or technical knowledge is expensed as incurred. Expenditure on development activities, whereby the research results or other knowledge is applied to accomplish new or improved products or processes, is recognized as an intangible asset in the balance sheet, provided the product or process is technically and commercially feasible and the company has sufficient resources to complete development, and is subsequently able to use or sell the intangible asset.
The carrying amount includes the directly attributable expenditure, such as the cost of materials and services, costs of employee benefits, fees to register intellectual property rights and amortization of patents and licenses. Other expenses for development are expensed as incurred. In the balance sheet, capitalized development expenditure is stated at cost less accumulated amortization and any impairment losses.
Other intangible assets acquired by the company are recognized at cost less accumulated amortization and any impairment losses. Capitalized expenditure for the development and purchase of software for the Group's IT operations are included here.
Intangible assets also include patents, trademarks, licenses, customer relationships and other rights. They are split between acquired and internally generated intangible assets.
Amortization is charged to profit or loss for the year on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested for impairment annually or as soon as there is an indication that the asset may be impaired. Intangible assets with a finite useful life are amortized as of the date the asset is available for use.
The estimated useful lives are as follows:
Property, plant and equipment are recognized at cost less accumulated depreciation and any impairment losses.
In the consolidated financial statements, leases are classified as either finance leases or operating leases. Further details on how Sandvik recognizes leases are found below.
Depreciation is based on cost less estimated residual value. The assets are depreciated over the estimated useful lives, as follows:
If an item of property, plant and equipment comprises components with different useful lives, each such significant component is depreciated separately. Depreciation methods and estimated residual values and useful lives are reviewed at each year-end.
Assets with an indefinite useful life are not amortized, but tested annually for impairment. Assets that are amortized or depreciated are tested for impairment whenever events or changed circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in the amount by which the carrying amount of an asset exceeds its recoverable amount, which is the greater of the fair value less selling costs and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In respect of items of property, plant and equipment and intangible fixed assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized.
Borrowing costs attributable to the construction of qualifying assets are capitalized as a portion of the qualifying asset's cost. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale. The Group considers a period in excess of one year to be a substantial period of time. For the Group, the capitalization of borrowing costs is relating to intangibles is mainly relevant for capitalized expenditure for the development of
new data systems. For tangibles it relates to the construction of production buildings on a proprietary basis.
Inventories are stated at the lower of cost and net realizable value, with due consideration of obsolescence. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Cost is based on the first-in/first-out (FIFO) principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Dividends are recognized as a liability in the period in which they are resolved at a shareholders' meeting.
The calculation of basic earnings per share is based on the profit or loss attributable to ordinary equity holders of the Parent Company and the weighted average number of ordinary shares outstanding during the year. When calculating diluted earnings per share, the weighted average number of shares outstanding is adjusted for the effects of all dilutive potential ordinary shares, which during reported periods relates to options issued to employees. The options are dilutive if the exercise price is less than the quoted stock price and increases with the size of the difference.
The Group sponsors a number of defined-contribution and defined-benefit pension plans, some of which with plan assets held by separate foundations or equivalent. A number of Group entities also provide post-employment medical benefits.
Whenever possible, Sandvik nowadays seeks definedcontribution pension solutions and in recent years defined-benefit plans have as far as possible been closed for new entrants in connection with negotiations about defined-contribution pension arrangements. The Group's Swedish companies offer all newly hired salaried employees, regardless of age, the defined-contribution pension solution (ITP 1) resulting from the renegotiation of the ITP Plan between the Confederation of Swedish Enterprise and the Negotiation Cartel for Salaried Employees in the Private Business Sector.
A defined-contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The size of the pension that the employee will ultimately receive in such case depends on the size of the contributions that the entity pays to the plan or an insurance company and the return that the contributions yield. Obligations for contributions to defined-contribution pension plans are recognized as an employee benefit expense in profit or loss for the year as the employee renders services to the entity.
The Group's net obligation in respect of defined-benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have vested in return for their service in the current and prior periods. This benefit is discounted to its present value. The discount rate is the yield on high-quality corporate bonds, mortgage bonds – or if there is no deep market for such bonds, government bonds – that have maturity dates approximating the terms of the Group's obligations. The calculation is performed annually by a qualified actuary. In addition, the fair value of any plan assets is assessed. This method of accounting is applied to the most significant defined-benefit plans in the Group. A number of plans, which neither individually nor in the aggregate are significant in relation to the Group's total pension obligations, are still recognized in accordance with local regulations.
In measuring the present value of pension obligations and the fair value of plan assets, actuarial gains and losses may accrue either because the actual outcome differs from earlier assumptions (so-called experience adjustments) or the assumptions are changed. These actuarial gains and losses are recognized in the balance sheet and in profit or loss under other comprehensive income.
When the benefits under a plan are improved, the portion of the increased benefits that relate to past service by employees is recognized in profit or loss for the year. The amount of obligations recognized in the balance sheet for pensions and similar obligations reflects the present value of the obligations at the balance sheet date, less the fair value of any plan assets.
Actuarial assumptions are important ingredients in the actuarial methods used to measure pension obligations and they can significantly affect the recognized net liability and the annual pension cost. One critical assumption – the discount rate – is essential for the measurement of both the expense of the year and the present value of the defined-benefit obligations' current year. The discount rate is used both for calculating the present value of the obligation and as an estimate for the return on plan assets. The discount rate is reviewed quarterly, which affects the net liability, and annually, which also affects the expense for coming years. Other assumptions are reviewed annually, which can relate to demographic factors such as pension
age, mortality rates and employee turnover. A lower discount rate increases the present value of the pension obligation and the annual pension cost.
When employment is terminated, a provision is recognized only when the entity is demonstrably committed either to terminate the employment of an employee or a group of employees before the normal retirement age or provide termination benefits as a result of an offer made to encourage voluntary redundancy. In the latter case, a liability and an expense are recognized if it is probable that the offer will be accepted and the number of employees that will accept the offer can be reliably estimated.
Share-based payments refer to remuneration to employees in accordance with employee option programs and a share saving program.
Share option programs allow employees to acquire shares in the company. The fair value of options granted is recognized as an employee expense with a corresponding increase in equity. The fair value as measured at the grant date is spread over the vesting period. The fair value of the options is measured using the Black & Scholes formula, taking into account the terms and conditions upon which the options were granted. The share-based program for 2014 includes two types of rights. Matching share rights provide entitlement to shares in Sandvik if the paricipant remains employed and retains the saving share that has been purchased initially. Performance share rights provide entitlement to shares subject to the same conditions and if goals relating to operating performance are achieved.
The amount recognized as an expense is adjusted to reflect the actual number of share options/rights vested.
In order to meet its commitments under the option program, Sandvik has entered into an equity swap agreement with a financial institution. Under the agreement, the financial institution undertakes to distribute Sandvik shares to participants in the program when the date for allotment occurs in accordance with the terms and conditions of the program. The fair value of the Sandvik share when the swap agreement was signed is recognized as a financial liability and as a reduction of equity in accordance with IAS 32.
Social costs relating to share-based payments to employees are expensed over the accounting periods during which the services are provided. The charge is based on the fair value of the options at the reporting date. The fair value is calculated using the same formula as that used when the options were granted.
A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The provisions are mainly related to warranty commitments, restructuring, environmental obligations, long-term incentives and legal disputes and claims, such as value added tax issues, customer and supplier claims relating to ongoing or finished projects.
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighing of all possible outcomes with their associated probabilities.
A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. No provision is posted for future operating costs.
In accordance with the Group's published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land is recognized when land has become contaminated.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Group are lower than the unavoidable cost of meeting its obligations under the contract.
A contingent liability is recognized when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events or when there is a present obligation that cannot be recognized as a liability because it is not probable that an outflow of resources will be required, alternatively because the amount of the obligation cannot be measured with sufficient reliability.
To qualify as Discontinued operations, a component of Sandvik group must have been classified as held for sale and represent a separate major line of business or is a part of a single coordinated plan to dispose of a separate major line of business. Product area Mining System within Business Area Mining is classified as discontinued operation and reported as held for sale. The discontinued operation is measured at fair value less cost to sell. See Consolidated financial statements and Notes for further information.
There are two basic categories of leases, finance and operating. Lease contract terms, under which the lessor has transferred the majority of the risks and rewards of ownership to the lessee, are classified as finance leases. All other leases are classified as operating leases.
Under a finance lease, the lessee recognizes the leased asset measured at the lower of its fair value and the present value of future lease payments. Simultaneously, a liability corresponding to future lease expenses is recognized. The asset is depreciated according to the proper accounting policy valid for the type of asset. However, depreciation may never exceed the lease term. The lease payments are recognized against the lease liability. Operating leases are not recognized in the balance sheet. Expenses attributable to an operating lease are recognized in profit or loss for the year on a straight line basis following the lease term.
Under a finance lease, the lessor recognizes a sale and a financial receivable equal to the future lease installments and residual values that might have been guaranteed to the lessee. For the duration of the lease term, interest revenue is recognized in profit or loss for the year, while amortization is recognized as a decline of the financial receivable. Under an operating lease, the lessor recognizes the equipment as an asset, and revenue and depreciation are recognized on a straight line basis over the lease term.
The Parent Company has prepared its Annual Report in accordance with the Annual Accounts Act (1995:1554) and the standard, RFR 2 Reporting by a legal entity, issued by the Swedish Financial Reporting Board. The interpretations issued by the Financial Reporting Board valid for listed companies have also been applied. Under RFR 2, the Parent Company in its Annual Report is to apply all the IFRS and IFRIC interpretations approved by the EU to the extent possible within the framework of the Annual Accounts Act, the Act on Income Security, and taking into account the close tie between financial reporting and taxation. The standard specifies what exceptions from or additions to the IFRS shall be made.
Unless otherwise stated below, the Parent Company's accounting policies in 2015 changed in accordance with the amendments described above for the Group's accounting policies.
The Parent Company's income statement and balance sheet adhere to the presentation included in the Annual Accounts Act. The differences compared with IAS 1 Presentation of Financial Statements applied when presenting the consolidated financial statements mainly pertain to the presentation of finance income and expenses, non-current assets, equity and the presentation of provisions as a separate heading in the balance sheet.
The Parent Company recognizes shares in Group companies and associated companies in accordance with the cost model, meaning that transaction costs are included in the carrying amount of holdings in subsidiaries and associated companies. Transaction costs related to shares in Group companies are recognized directly in profit or loss in the consolidated financial statements when they arise. Contingent consideration is valued based on the probability that the consideration will be paid. Any changes in the provision/ receivable are added to/deducted from the cost. Contingent consideration is measured at fair value in the consolidated financial statements with changes in value recognized in profit or loss. Dividends from subsidiaries are recognized in full as income in profit or loss for the year.
The Parent Company recognizes all lease contracts according to the rules for operating leases.
The Parent Company recognizes all expenditure for research and development conducted on a proprietary basis as an expense in profit or loss.
In the Parent Company, borrowing costs are expensed in the periods to which they relate. Borrowing costs for assets are not capitalized.
The Parent Company calculates expenses for definedbenefit pension plans differently from the manner prescribed in IAS 19. The Parent Company applies the Act on Income Security and regulations issued by the Swedish Financial Supervisory Authority, which is a prerequisite for income tax purposes. Compared to IAS 19, the most significant differences relate to the determination of the discount rate and the fact that the obligation is calculated based on the current salary level disregarding assumptions about future levels.
The Parent Company recognizes untaxed reserves including the deferred tax component.
In the consolidated financial statements, untaxed reserves are recognized in their equity and deferred tax components. Correspondingly, portions of appropriations are not allocated to deferred tax expenses in the Parent Company's income statement.
Group contributions that a Parent Company receives from a subsidiary are recognized in the Parent Company in accordance with the same policies as normal dividends from subsidiaries. Group contributions paid by the Parent Company to subsidiaries are recognized as investments in shares in the subsidiaries.
Anticipated dividends from subsidiaries are recognized in cases where the Parent Company unilaterally may determine the size of the dividend and provided that the Parent Company has made such a decision before it published its financial statements.
The Parent Company applies a relaxation rule permitted by the Swedish Financial Reporting Board to the reporting of financial guarantees as opposed to the rules stipulated by IAS 39. This relaxation rule pertains to financial guarantee agreements issued for the benefit of subsidiaries, associated companies and joint ventures. The Parent Company recognizes financial guarantees as a provision in the balance sheet when the company has an obligation for which payment is probably necessary to settle the commitment.
In order to prepare the financial statements, management and the Board make various judgments and estimates that can affect the amounts recognized in the financial statements for assets, liabilities, revenues and expenses as well as information in general, including issues with regard to contingent liabilities. The judgments and estimates discussed in this section are those deemed to be most important for an understanding of the financial statements, considering the level of significant estimations and uncertainty. The conditions under which Sandvik operates are gradually changing meaning that the judgments also change.
Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill has been impaired, for example due to a changed business climate or a decision taken either to sell or close down certain operations. In order to determine if the value of goodwill has been impaired, the cash-generating unit to which goodwill has been allocated must be valued using present value techniques. When applying this valuation technique, the Company relies on a number of factors, including historical results, business plans, forecasts and market data. This is further described in Note 12. As can be deduced from this description, changes in the conditions for these judgments and estimates can significantly affect the assessed value of goodwill.
Sandvik's property, plant and equipment and intangible assets – excluding goodwill – are stated at cost less accumulated depreciation/amortization and any impairment losses. Other than goodwill, Sandvik has not identified any intangible assets with indefinite useful lives. The assets are depreciated or amortized over their estimated useful lives to their estimated residual values. Both the estimated useful life and the residual value are reviewed at least at each financial year-end.
The carrying amount of the Group's non-current assets is tested for impairment whenever events or changes in circumstances indicate that the carrying amount will not be recovered. The carrying amount of intangible assets not yet available for use is tested annually. If such analysis indicates an excessive carrying amount, the recoverable amount of the asset is estimated. The recoverable amount is the higher of the asset's fair value less selling costs, and its value in use. Value in use is measured as the discounted future cash flows of the asset, alternatively the cash-generating unit to which the asset belongs. The rental fleets of the Sandvik Mining, Sandvik Construction and Sandvik Venture business areas are subject to special examination considering their dependence on the business climate in the mining- and oil industry and the risk that rental agreements may be cancelled. The carrying amount of the rental fleets at the end of 2015 was 541 million SEK (573).
A call for an impairment test also arises when a non-current asset is classified as being held for sale, at which time it must be remeasured at the lower of its carrying amount and fair value less cost to sell.
Significant estimates are made to determine both current and deferred tax liabilities/assets, not least the value of deferred tax assets. The company must then determine the possibility that deferred tax assets will be utilized and offset against future taxable profits. The actual results may differ from these estimates, for instance due to changes in the business climate, changed tax legislation, or the outcome of the final review by tax authorities and tax courts of tax returns. At year-end 2015, Sandvik recognized deferred tax assets of 6,237 million SEK (6,245). Furthermore, the Group had additional tax loss carry-forward of about 2,052 million SEK (762) at the end of 2015 for which no deferred tax assets are recognized since utilization of these losses is not deemed probable. A change in the estimate of the possibility for utilization thus can affect results both positively and negatively. The expenditure recognized as a provision for ongoing tax litigations is based on management's best estimate of the outcome, and amounted to 1,060 million SEK (916) at the end of 2015.
Sandvik provides pension solutions and other post-employment benefits to employees throughout the Group. In certain countries defined-benefit plans are provided and the accounting for these plans is complex because actuarial
assumptions are required to determine the obligation and the expense. Life expectancy, inflation and discount rate are examples of assumptions used for the calculations. Furthermore, the obligations are measured on a discounted basis since they may be settled many years after the employment. The applied actuarial assumptions as well as a sensitivity analysis are presented in Note 20. Some of the defined-benefit plans are funded, with plan assets held by separate foundations or equivalent. The financial risk management associated with the defined-benefit plans are presented in the Report of Directors in the section Financial Risk Management.
Sandvik is besides the tax litigation cases set out above – party to a number of disputes and legal proceedings in the ordinary course of business. Management consults with legal experts on issues related to legal disputes and with other experts internal or external to the Company on issues related to the ordinary course of business. It is management's best estimate that neither the Parent Company, nor any subsidiary, is involved in legal proceedings or arbitration that may be deemed to have a materially negative effect on the business, the financial position or results of operations.
For additional information on risks related to disputes, refer to the Risks and Risk Management section.
| 1. | Segment information | 94 |
|---|---|---|
| 1.1 Information on business segments/business areas, continuing operations | 94 | |
| 1.2 Information by country, continuing operations | 94 | |
| 2. | Categories of revenue | 95 |
| 3. | Personnel information and remuneration of management and auditors | 95 |
| 3.1 Average number of employees | 95 | |
| 3.2 Wages, salaries, other remuneration and social costs | 95 | |
| 3.3 Wages, salaries and other remuneration by market area | 95 | |
| 3.4 Gender distribution in senior management | 95 | |
| 3.5 Remuneration of the Board of Directors and senior executives | 95 | |
| 3.6 Fees and remuneration to the Group's auditors | 98 | |
| 4. | Research, development and quality assurance | 98 |
| 5. | Other operating income | 98 |
| 6. | Other operating expenses | 98 |
| 7. | Operating expenses | 99 |
| 8. | Fees for finance and operating leases | 99 |
| 9. | Net financing cost | 99 |
| 10. | Income tax | 100 |
| 11. | Earnings per share | 101 |
| 12. | Intangible assets and property, plant and equipment, Group | 102 |
| 13. | Intangible assets and property, plant and equipment, Parent Company | 105 |
| 14. | Shares in Group companies | 106 |
| 15. | Investments in associated companies | 110 |
| 16. | Non-current receivables and other current receivables | 111 |
| 17. | Inventories | 111 |
| 18. | Trade receivables | 111 |
| 19. | Capital and reserves | 111 |
| 20. | Provisions for pension and other non-current post-employment benefits | 112 |
| 21. | Other provisions | 115 |
| 22. | Non-current interest-bearing liabilities | 115 |
| 23. | Other interest-bearing liabilities | 115 |
| 24. | Other non-interest-bearing liabilities | 115 |
| 25. | Accrued expenses and deferred income | 116 |
| 26. | Contingent liabilities and pledged assets | 116 |
| 27. | Supplementary information – financial risk management | 116 |
| 28. | Related parties | 118 |
| 29. | Supplementary information to the cash-flow statement | 118 |
| 30. | Acquisition and divestment of operations and discontinued operations | 119 |
| 31. | Parent Company particulars | 120 |
| 32. | Information on shares, owners and rights | 120 |
Consolidated and Parent Company financial statements (Amounts in tables in MSEK, unless otherwise stated)
| SANDVIK MACHINING SOLUTIONS |
SANDVIK MINING |
SANDVIK MATERIALS TECHNOLOGY |
SANDVIK CONSTRUCTION |
SANDVIK VENTURE |
CORPORATE | ELIMINATIONS | GROUP TOTAL | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | |
| Revenue | ||||||||||||||||
| External revenue | 30,856 32,652 20,543 22,421 14,907 13,909 8,553 8,551 | 7,658 | 8,292 | 16 | 20 | 82,533 85,845 | ||||||||||
| Internal revenue | 250 | 209 | 33 | 30 | 329 | 313 | 72 | 79 | 817 | 655 | 2 | — –1,503 | –1,286 | |||
| Group total | 31,106 32,861 20,576 22,451 15,236 14,222 8,625 8,630 | 8,475 | 8,947 | 18 | 20 –1,503 | –1,286 82,533 85,845 | ||||||||||
| Share of results of | ||||||||||||||||
| associated companies | 11 | 8 | 6 | 7 | 15 | –14 | — | — | — | — | –8 | 7 | 24 | 8 | ||
| Operating profit/loss by business area |
6,159 | 5,269 | 2,483 | 2,585 | 1,880 | 8 | 45 | 28 | 888 | 529 –1,250 | –1,148 | 10,205 | 7,271 | |||
| Net financing cost | –1,836 | –1,963 | ||||||||||||||
| Income tax expense for the year |
–2,272 | –1,865 | ||||||||||||||
| Profit for the year | 6,097 | 3,443 | ||||||||||||||
| Other disclosures | ||||||||||||||||
| Assets | 26,408 25,550 18,050 16,859 17,093 15,598 8,019 | 7,625 15,305 14,825 | 2,127 | 2,376 | 87,002 82,833 | |||||||||||
| Investments in associates | 40 | 37 | 57 | 64 | 143 | 129 | — | — | — | — | –1 | 6 | 239 | 236 | ||
| Total assets | 26,448 25,587 18,107 16,923 17,236 15,727 8,019 | 7,625 15,305 14,825 | 2,126 | 2,382 | 87,241 83,069 | |||||||||||
| Unallocated assets | 16,295 | 16,054 | ||||||||||||||
| Group total | 103,536 | 99,123 | ||||||||||||||
| Liabilities | 4,438 | 5,052 | 4,288 | 4,851 | 3,397 | 3,587 2,402 2,594 | 1,738 | 1,628 | 1,656 | 1,706 | 17,919 | 19,418 | ||||
| Unallocated liabilities | 49,675 | 45,874 | ||||||||||||||
| Group total | 67,594 65,292 | |||||||||||||||
| Capital expenditure | 2,106 | 1,905 | 632 | 447 | 890 | 948 | 211 | 194 | 618 | 415 | 180 | 186 | 4,636 | 4,095 | ||
| Depreciation/Amortization | –1,720 | –1,794 | –575 | –719 | –736 | –779 | –392 | –396 | –469 | –676 | –109 | –141 | –4,001 | –4,505 | ||
| Impairment losses | 29 | –66 | –17 | –37 | 2 | –511 | 41 | –184 | — | — | –27 | –18 | 27 | –816 | ||
| Other non-cash expenses | –251 | 798 | –262 | 370 | –276 | 75 | –151 | 28 | –3 | 14 | –198 | 104 | –1,142 | 1,389 |
All transactions between the business areas are on market terms. For information regarding business combinations, see Note 30.
| REVENUE BY COUNTRY, GROUP | 2014 | 2015 |
|---|---|---|
| USA | 12,814 | 13,598 |
| Germany | 6,801 | 6,980 |
| China | 6,435 | 6,406 |
| UK | 3,060 | 3,799 |
| Australia | 4,379 | 3,625 |
| Sweden | 3,407 | 3,525 |
| Italy | 3,249 | 3,245 |
| South Africa | 2,954 | 2,979 |
| France | 3,145 | 2,834 |
| Canada | 2,261 | 2,499 |
| Russia | 2,534 | 2,350 |
| India | 1,870 | 2,300 |
| Mexico | 1,774 | 2,197 |
| Japan | 1,797 | 2,079 |
| Indonesia | 1,299 | 1,542 |
| Other countries | 24,754 | 25,887 |
| Total | 82,533 | 85,845 |
Income is specified by country based on where customers are located.
| NON-CURRENT ASSETS BY COUNTRY, GROUP | 2014 | 2015 |
|---|---|---|
| Sweden | 14,040 | 13,994 |
| USA | 10,435 | 10,840 |
| Germany | 3,736 | 3,591 |
| Austria | 2,655 | 2,548 |
| UK | 2,063 | 1,979 |
| Finland | 1,816 | 1,716 |
| China | 2,250 | 1,643 |
| India | 1,080 | 1,239 |
| Australia | 1,098 | 962 |
| France | 955 | 878 |
| Czech Republic | 739 | 721 |
| Japan | 583 | 588 |
| Canada | 441 | 470 |
| Italy | 374 | 423 |
| Netherlands | 322 | 326 |
| Other countries | 2,907 | 2,726 |
| Total | 45,494 | 44,644 |
Non-current assets are specified by country based on where they are located.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||
| Sale of goods | 79,120 | 82,008 | 16,467 | 15,658 | |
| Contract revenue | 64 | 442 | 0 | 0 | |
| Rendering of services | 2,457 | 2,469 | 8 | 7 | |
| Rental income | 892 | 926 | 0 | 2 | |
| Total | 82,533 | 85,845 | 16,475 | 15,667 |
| GROUP | PARENT COMPANY | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||||||
| NUMBER | WOMEN, % | NUMBER | WOMEN, % | NUMBER | WOMEN, % | NUMBER | WOMEN, % | ||
| Sweden | 10,760 | 24 | 10,430 | 24 | 8,003 | 22 | 7,874 | 22 | |
| Rest of Europe | 14,966 | 20 | 14,847 | 20 | — | — | — | — | |
| Total Europe | 25,726 | 21 | 25,277 | 21 | 8,003 | 22 | 7,874 | 22 | |
| NAFTA | 5,882 | 18 | 6,256 | 17 | 2 | 50 | 2 | 50 | |
| South America | 2,736 | 14 | 2,482 | 15 | — | — | — | — | |
| Africa, Middle East | 2,833 | 16 | 2,820 | 17 | — | — | — | — | |
| Asia | 8,490 | 16 | 8,224 | 16 | — | — | — | — | |
| Australia | 1,661 | 17 | 1,504 | 14 | — | — | — | — | |
| Total | 47,328 | 19 | 46,563 | 19 | 8,005 | 22 | 7,876 | 22 | |
| Whereof discontinued operations | 1,346 | 1,210 | |||||||
| Continuing operations | 45,982 | 45,353 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| Wages, salaries and other | ||||
| remuneration | 19,620 | 20,604 | 3,948 | 4,039 |
| Social costs | 5,231 | 5,263 | 1,882 | 1,876 |
| Employee profit sharing | 113 | 13 | 96 | 10 |
| Total | 24,964 | 25,880 | 5,926 | 5,925 |
| Whereof discontinued operations | 646 | 533 | — | — |
| Continuing operations | 24,318 | 25,347 | 5,926 | 5,925 |
| Of which, pension costs recognized | ||||
| in social costs | 1,703 | 1,426 | 661 | 476 |
A total of 87 million SEK (63) of the Group's pension costs relates to Boards and presidents. The Group's pension liability to these persons amounted to 175 million SEK (207). Correspondingly, 21 million SEK (13) of the Parent Company's pension costs related to the Boards and presidents. The Parent Company's pension liability relating to these persons amounted to 4 million SEK (50).
To promote performance that is favorable to the Group's long-term development and also to stimulate continued employee loyalty, Sandvik has had a profit-sharing system for all employees in wholly owned companies in Sweden since 1986. The Group's return during 2015 resulted in an allocation of 13 million SEK (113) to the profit-sharing foundation.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||
| Sweden | 5,230 | 5,385 | 3,948 | 4,039 | |
| Rest of Europe | 7,235 | 7,404 | — | — | |
| Total Europe | 12,465 | 12,789 | 3,948 | 4,039 | |
| NAFTA | 2,957 | 3,522 | 0 | — | |
| South America | 835 | 707 | — | 0 | |
| Africa, Middle East | 701 | 806 | — | — | |
| Asia | 1,495 | 1,835 | — | — | |
| Australia | 1,167 | 945 | — | — | |
| Total | 19,620 | 20,604 | 3,948 | 4,039 | |
| Whereof discontinued operations | 476 | 394 | — | — | |
| Total continuing operations | 19,144 | 20,210 | 3,948 | 4,039 | |
| Of which, to Boards of | |||||
| Directors and presidents | |||||
| Salaries and other remuneration | 478 | 605 | 46 | 40 | |
| of which, variable salary | 53 | 75 | 9 | 6 |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| PROPORTION OF WOMEN, % | 2014 | 2015 | 2014 | 2015 | |
| Gender distribution in | |||||
| senior management | 12 | 12 | 10 | 20 | |
| Other senior executives | 20 | 21 | 36 | 36 |
Fees to the Chairman and other external Board members are paid in accordance with the resolution at the Annual General Meeting. No Board fees are paid to the President and the employee representatives. In accordance with the resolution of the 2015 Annual General Meeting, the total fee to the external Board members elected at the Meeting amounts to 5,300,000 SEK on an annual basis. Of this amount, 1,700,000 SEK is payable to the Chairman of the Board (Johan Molin) and 600,000 SEK to each of the other external Board members (Jennifer Allerton, Claes Boustedt, Jürgen M Geissinger, Johan Karlström, Hanne de Mora and Lars Westerberg).
In addition to these amounts, the Annual General Meeting resolved that a fee for committee work should be paid to Board members elected by the Meeting in an amount totaling 475,000 SEK to the members of the Audit Committee (Hanne de Mora 175,000 SEK, Claes Boustedt 150,000 SEK and Johan Molin 150,000 SEK) and in an amount totaling 325,000 SEK to the members of the Remuneration Committee (Johan Molin 125,000 SEK, Johan Karlström 100,000 SEK and Lars Westerberg 100,000 SEK).
The following guidelines approved by the Annual General Meeting for remuneration of senior executives have been applied since the Annual General Meeting in 2015:
The remuneration of the Group Executive Management is to comprise fixed salary, variable salary, pension and other benefits. The total remuneration package should be based on market terms, be competitive and reflect the individual's performance and responsibilities as well as the Group's earnings trend.
The variable salary may comprise short-term incentives in cash and longterm incentives in cash, shares and/or share-based instruments in Sandvik AB. Variable salary in cash is conditional upon the fulfillment of defined and measurable goals and should be maximized in relation to the fixed salary. Long-term incentives in the form of shares and/or share-based instruments in Sandvik AB may be provided through participation in long-term incentive programs approved by the General Meeting. Terms and conditions for variable salary should be designed so that the Board, if exceptional economic circumstances prevail, has the option of limiting or refraining from payment of variable salary if such a measure is considered reasonable.
1
In specific cases, agreements may be reached regarding one-off remuneration amounts provided that such remuneration does not exceed an amount corresponding to the individual's annual fixed salary and maximum variable salary in cash, and is not paid more than once per year and individual.
Pension benefits should either be defined benefit or defined contribution, or a combination thereof. The minimum retirement age for the President is 60 and for other members of the Group Executive Management the minimum retirement age is 62.
Normally, severance payment is made when employment is terminated by Sandvik. Members of the Group Executive Management generally have a period of notice of not more than 12 months, in combination with severance pay corresponding to 6–12 months' fixed salary. An alternative solution may be applied to the President comprising a period of notice of 24 months and no severance pay. No severance payment will be made when employment is terminated by the employee.
The Board is to have the right to depart from the guidelines resolved on by the Annual General Meeting if, in an individual case, there are special reasons for this. The sphere of senior executives encompassed by the guidelines comprises the President and other members of the Group Executive Management.
The proposal for principles for remuneration that the Board intends to submit to the 2016 Annual General Meeting for resolution is presented in the Report of the Directors, in the Employees section.
Effective 1 November 2015, Sandvik's President and CEO, Björn Rosengren, was paid an annual fixed salary of 12,500,040 SEK and received the fringebenefit value of a car provided by the company. In addition, an annual variable cash-based salary of not more than 75% of the fixed salary is payable. The variable salary for 2015 amounted to 468 752 SEK.
Björn Rosengren is entitled to retire with pension at age 65. A premium of 37.5% of his annual fixed salary is reserved annually. In the event of termination of employment by the company, Björn Rosengren has a notice period of 12 months and 12 months' severance pay.
In 2015, Sandvik expensed and reserved 31 million SEK in severance pay for Olof Faxander. The amount pertains to salary and pension benefits for 24 months' notice period.
For other members of the Group Executive Management who are covered by a Swedish pension plan (ITP1 or ITP2), the pension age is 62. For members that are covered by the ITP 1 plan (defined contribution) a supplement of 5% of the salary portions in excess of 7.5 income base amounts applies. For members that are covered by the ITP 2 plan (defined benefit), a supplementary defined-contribution plan under which the company each year contributes 28–38% (depending on age) of fixed salary portions in excess of 20 price base amounts applies. Of the seven members of the Group Executive Management who are covered by a Swedish pension plan and were employed as of 31 December 2015, three are encompassed by the ITP 1 plan and four are encompassed by the ITP 2 plan. Members of the Group Executive Management who are not covered by a Swedish pension plan have defined-contribution plans under which the company contributes up to 15% of the fixed annual salary.
Severance pay is due in the event that the company terminates employment. The severance pay equals 6–12 months' fixed salary in addition to the notice period, which is normally 12 months. Any other income from employment is normally deducted from the severance pay.
The 2011, 2012 and 2013 Annual General Meetings approved the Board proposals to introduce a share-based LTI program for each year. The programs are
aimed at about 400 senior executives and key individuals in the Sandvik Group and encompass a maximum total of 35,124,878 Sandvik shares.
The program participants have been allotted employee stock options that entitle the employee to acquire Sandvik shares after three years at a set exercise price, on condition that certain performance targets linked to the Sandvik Group's growth in value – Sandvik Value Added (SVA) – are met ("performance shares"). For the President, senior executives and certain top level executives, a personal investment in Sandvik shares ("saving shares"), corresponding to 10% of fixed annual pre-tax salary for the year in which the investment in saving shares is made, was required in order to receive allotment of employee stock options. Provided that such a personal investment in Sandvik shares has been made, these executives also received allotment of "matching rights" (one per saving share acquired) that entitle the executive to acquire Sandvik shares after three years at a set exercise price ("matching shares"). Employee stock options and matching rights are non-transferrable.
Each employee stock option entitles the employee to acquire one performance share not earlier than three years and not later than five years following allocation of the employee stock option. The number of the allotted employee stock options that will eventually provide entitlement to the acquisition of performance shares depends on the development of SVA over the three fiscal years following approval of the program by the Annual General Meeting. The exercise of the employee stock options to acquire performance shares requires continued employment at Sandvik and that all acquired saving shares are held for a three-year period after the allotment of the employee stock options.
Each matching right provides entitlement to acquire a matching share not earlier than three and not later than five years after the allotment of the matching rights. The exercise of matching rights to acquire matching shares requires continued employment at Sandvik and that all acquired saving shares are held for a three-year period after the allotment of matching rights.
The exercise price to acquire a performance share or matching share equals an amount corresponding to 110% and 75%, respectively, of the average volume-weighted price paid for the Sandvik share on Nasdaq Stockholm during a period of ten trading days immediately following the Annual General Meeting that approved the program. The average volume-weighted price paid was determined for 2011 at 117.20 SEK, for 2012 at 97.12 and for 2013 at 92.41 SEK.
For the 2011 LTI program, encompassing the years 2011–2013, no employee stock options were vested, since the performance targets set by the Board of Directors were not met.
For the 2012 LTI program, encompassing the years 2012–2014, 36% of the employee stock options were vested.
For the 2013 LTI program, encompassing the years 2013-2015, no employee stock options will be vested, since the performance targets set by the Board of Directors were not met.
The number of allotted employee stock options and acquired matching rights under the 2012 program for the President and other members of the Group Executive Management on 31 December 2015 corresponds to the number of outstanding employee stock options and matching rights at year-end.
The number of allotted matching rights under the 2011 and 2013 programs corresponds to the number of outstanding matching rights at 31 December 2015.
The expected volatility was determined by analyzing the historical volatility of Sandvik AB and some comparable listed companies. When determining the expected maturity, assumptions were made regarding expected behavior patterns for exercising the employee stock options and acquired matching rights among the program participants.
The 2014 and 2015 Annual General Meetings approved the Board proposal to introduce a performance share program for each year for about 350 senior executives and key individuals in the Sandvik Group, divided into four categories. For all participants, a personal investment is required in each separate program and the programs encompass a maximum total of 4,436,665 shares.
| EXPENSED DURING THE YEAR, SEK | |||||
|---|---|---|---|---|---|
| FIXED SALARY/ |
ANNUAL VARIABLE |
OTHER | LONG-TERM VARIABLE |
PENSION | |
| POSITION | BOARD FEE | SALARY 1) | BENEFITS 2) | SALARY 3) | COSTS |
| Chairman of the Board | 1,975,0004) | ||||
| Other Board members | 4,125,0004) | ||||
| President and CEO Björn Rosengren | 2,083,3405) | 468,752 | 224 | — | 64 |
| Former President and CEO Olof Faxander | 31,150,3516) | 2,586,956 | 296,510 | 786,027 | 11,016,285 |
| Other senior executives7) | 72,522,312 | 14,299,606 | 2,501,232 | 2,625,904 | 13,065,188 |
| Sum | 111,856,003 | 17,355,313 | 2,797,966 | 3,411,931 | 24,081,537 |
1) Amount pertaining to 2015 and expected to be paid in 2016.
2) Relates mainly to the fringe-benefit value of housing and company car.
3) The amounts pertain to changes in provisions made for the 2013, 2014 and 2015 LTI programs.
4) Expensed during 2015 and will be paid in 2016.
5) Björn Rosengren's fixed salary as of 1 November 2015 amounts to 12,500,040 SEK, the remaining amount relates to vacation pay, etc. Board fees are not payable to executive Board members. 6) Pertains to January–July 2015 and severance pay.
7) Pertains to the following persons in 2015: Jessica Alm, Mats Backman, Petra Einarsson, Lars Engström (Dec), Dinggui Gao, Jonas Gustavsson, Jim Nixon, Scot Smith, Åsa Thunman, Anna Vikström Persson, Olle Wijk and ZZ Zhang. The amounts also include severance pay for the former President of the Sandvik Mining business area, who left his position during the year.
31 32
1
All program participants have invested in Sandvik shares ("investment shares"), up to an amount corresponding to 10% of their fixed annual pre-tax salary at the time of the investment.
Each acquired investment share entitles participants to be allotted, free of charge, after a period of three years, one Sandvik share ("matching share") and provided certain performance targets are met, further Sandvik shares ("performance shares"). The maximum number of performance shares that may be allotted for each acquired investment share depends on the category to which the participant belongs.
The number of performance shares that will finally be allotted to the participant for each acquired investment share is dependent on the development of the Sandvik Group adjusted Earnings Per Share ("EPS") during the financial year that the investment shares were acquired, compared to adjusted EPS for the previous financial year.
In January 2014 and 2015 respectively the Board of Directors established the levels regarding adjusted EPS for the year in question that had to be attained for allotment of a certain number of performance shares. For the 2014 LTI program only matching shares will be allotted during 2017, if all the prerequisites for allotment are met. No performance shares will be allotted since the performance targets set by the Board of Directors were not met. In order for any performance shares to be allotted in the 2015 LTI program, adjusted EPS growth for the financial year 2015 must exceed 5% in relation to adjusted EPS for the financial year 2014. For the maximum number of performance shares to be allotted in the 2015 LTI program, adjusted EPS growth for the financial year 2015 must attain 24% in relation to adjusted EPS for the financial year 2014. Within the range, a proportional linear number of performance shares will be allotted.
Adjusted EPS for the financial year 2014 amounted to 4.83 SEK. For the financial year 2015, adjusted EPS amounted to 4.72 SEK, which means that the performance targets have not been met and no performance shares will be vested.
The allotment of matching and performance shares, respectively, requires continuous employment and that all investment shares be held during a period of three years from the acquisition of the investment shares.
The right to be allotted matching shares under the 2015 LTI program presupposes that the 2016 Annual General Meeting decides on dividends for the financial year 2015. Whether or not dividends are decided on does not impact a participant's right to be allotted performance shares.
If all the prerequisites for allotment are met, allotment of matching shares under the 2015 LTI program will take place during 2018, and no later than 30 June 2018.
The number of allotted matching shares under the 2015 program for the President and other members of the Group Executive Management on 31 December 2015 corresponds to the number of outstanding performance shares and matching shares at year-end.
The number of allotted matching shares under the 2014 program for the President and other members of the Group Executive Management on 31 December 2015 corresponds to the number of outstanding performance shares and matching shares at year-end.
The expected volatility was determined by analyzing the historical volatility of Sandvik AB and some comparable listed companies.
In accordance with IFRS 2, the total expense for the 2015 LTI program amounted to 32 million SEK excluding social costs, of which 5.8 million SEK for the President and other senior executives. During the year the following provisions were established: 11 million SEK, excluding social costs, for the 2015 LTI program, of which 1.9 million SEK for the President and other senior executives; 9.2 million SEK, excluding social costs, for the 2014 LTI program, of which 1.2 million SEK for the President and other senior executives; and 0.8 million SEK, excluding social costs, for the 2013 LTI program, of which 0.3 million SEK for the President and other senior executives.
The employee stock options, matching rights, matching shares and performance shares are expensed as an employee expense (excluding social costs) over the vesting period and are recognized directly against equity. The amount recognized is continuously revised throughout the vesting period of each program. Social costs are expensed during the vesting period of each program based on the change in value of the employee stock options, matching rights, matching shares and performance shares.
The Board's Remuneration Committee prepares issues relating to the Group Executive Management's remuneration. The Committee met three times during the year. Issues dealt with included the remuneration level in connection with completed recruitments, distribution between fixed and variable salary, the magnitude of any pay increases and the long-term variable incentive program.
| ASSUMPTIONS | PROGRAM 2011 (ON DATE OF ISSUE) |
PROGRAM 2012 (ON DATE OF ISSUE) |
PROGRAM 2013 (ON DATE OF ISSUE) |
|---|---|---|---|
| Share price | 117 SEK | 92.65 SEK | 94.65 SEK |
| Exercise price | 129.00/87.90 SEK | 106.80/72.80 SEK | 101.70/69.30 SEK |
| Expected volatility | 32 % | 36.50 % | 35 % |
| Expected maturity | 3 years | 3 years | 3 years |
| Present value of forecasted future dividends1) | 13.10 SEK | 12.17 SEK | 12.22 SEK |
| Risk-free interest rate | 2.6 % | 0.95 % | 0.91% |
1) Based on analysts' combined expectations.
| EMPLOYEE STOCK OPTIONS 2011 |
MATCHING RIGHTS 2011 |
EMPLOYEE STOCK OPTIONS 2012 |
MATCHING RIGHTS 2012 |
EMPLOYEE STOCK OPTIONS 2013 |
MATCHING RIGHTS 2013 |
|
|---|---|---|---|---|---|---|
| Outstanding at beginning of year | — | 44,956 | 3,407,328 | 101,206 | — | 119,304 |
| Allotted during the period | — | — | — | — | — | — |
| Exercised during the year | — | –6,335 | — | –3,941 | — | — |
| Forfeited during the year | — | –1,919 | –209,448 | –3,437 | — | –7,616 |
| Outstanding at year-end | — | 36,702 | 3,197,880 | 93,828 | — | 111,688 |
| Theoretical value when allotted | ||||||
| acc. to Black & Scholes, SEK | 17 | 33.10 | 13 | 24 | 14.30 | 26.30 |
| Exercise price, SEK | 129 | 87.90 | 106.80 | 72.80 | 101.70 | 69.30 |
| EMPLOYEE STOCK OPTIONS 2011 |
MATCHING RIGHTS 2011 |
EMPLOYEE STOCK OPTIONS 2012 |
MATCHING RIGHTS 2012 |
EMPLOYEE STOCK OPTIONS 2013 |
MATCHING RIGHTS 2013 |
|
|---|---|---|---|---|---|---|
| Outstanding at beginning of year | — | 23,384 | 503,280 | 28,265 | — | 37,869 |
| Allotted during the year | — | — | — | — | — | — |
| Exercised during the year | — | –2,443 | — | — | — | — |
| Forfeited during the year | — | — | –70,200 | — | — | — |
| Outstanding at year-end | — | 20,941 | 433,080 | 28,265 | — | 37,869 |
| Theoretical value when allotted | ||||||
| acc. to Black & Scholes, SEK | 17 | 33.10 | 13 | 24 | 14.30 | 26.30 |
| Exercise price, SEK | 129 | 87.90 | 106.80 | 72.80 | 101.70 | 69.30 |
The Board discussed the Remuneration Committee's proposals and made a decision, using the Committee's proposal as a basis. Based on the Remuneration Committee's proposals, the Board decided on the remuneration of the President for 2015. The President decided on remuneration to other senior executives after consultation with the Remuneration Committee. The Remuneration Committee performed its task supported by expertise on remuneration levels and structures. For information on the composition of the Committee, refer to the Corporate Governance Report.
| ASSUMPTIONS | PROGRAM 2014 (ON DATE OF ISSUE) |
PROGRAM 2015 (ON DATE OF ISSUE) |
|---|---|---|
| Share price | 96.45 SEK | 103.60 SEK |
| Present value of forecasted future dividends1 |
11.58 SEK | 11.51 SEK |
| Risk-free interest rate | 0.71% | 0.0% |
1) Based on analysts' combined expectations.
| PERFORMANCE SHARES 2014 | MATCHING SHARES 2014 | PERFORMANCE SHARES 2015 | MATCHING SHARES 2015 | |
|---|---|---|---|---|
| Outstanding at beginning of year | — | 373,863 | — | — |
| Allotted during the year | — | — | 1,803,798 | 359,332 |
| Forfeited during the year | — | –24,774 | –1,803,798 | –14,530 |
| Outstanding at year-end | — | 349,089 | — | 344,802 |
| Theoretical value when alloted, SEK | 84.90 | 84.90 | 92.10 | 92.10 |
| PERFORMANCE SHARES 2014 | MATCHING SHARES 2014 | PERFORMANCE SHARES 2015 | MATCHING SHARES 2015 | |
|---|---|---|---|---|
| Outstanding at beginning of year | — | 63,012 | — | — |
| Allotted during the year | — | — | 421,600 | 63,561 |
| Forfeited during the year | — | –7,893 | –421,600 | –11,488 |
| Outstanding at year-end | — | 55,119 | — | 52,073 |
| Theoretical value when allotted, SEK | 84.90 | 84.90 | 92.10 | 92.10 |
Fees and remuneration to the Group's auditors were as follows:
| KPMG | OTHER | TOTAL | ||||
|---|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | |
| AUDIT | ||||||
| Parent Company | 13.9 | 11.5 | 0.0 | 0.0 | 13.9 | 11.5 |
| Subsidiaries | 70.9 | 74.8 | 4.0 | 3.0 | 74.9 | 77.8 |
| Group | 84.8 | 86.3 | 4.0 | 3.0 | 88.8 | 89.3 |
| TAX CONSUL TANCY SERVICES |
||||||
| Parent Company | 0.0 | 0.3 | ||||
| Subsidiaries | 10.3 | 6.3 | ||||
| Group | 10.3 | 6.6 | ||||
| OTHER SERVICES | ||||||
| Parent Company | 4.5 | 3.5 | ||||
| Subsidiaries | 3.2 | 3.6 | ||||
| Group | 7.7 | 7.1 |
Audit refers to the statutory audit of the financial statements, the accounting records and the administration of the business by the Board of Directors and the President and CEO, and auditing and other review procedures performed in accordance with agreements or contracts. This includes other procedures required to be performed by the company's auditors as well as other services caused by observations during the performance of such examination and other procedures.
Tax consultancy services relate to services in the tax area. Other services essentially comprise advice in areas closely related to the audit, such as advice on accounting issues and due-diligence services in connection with acquisitions.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| EXPENDITURE FOR | ||||
| research and development | 3,076 | 3,532 | 1,490 | 1,714 |
| quality assurance | 569 | 496 | 262 | 279 |
| Total | 3,645 | 4,028 | 1,752 | 1,993 |
| of which expensed, total of which expensed relating to |
3,178 | 3,498 | 1,596 | 1,800 |
| research and development | 2,609 | 3,001 | 1,335 | 1,521 |
Research and quality assurance expenditures are expensed as incurred. Expenditure for development is recognized as an intangible asset if it meets the criteria for recognition as an asset in the balance sheet.
Other operating income amounted to 157 million SEK (177). The amounts includes gains on the divestment of operations and non-current assets, in addition to a number of smaller items recognized under operating income.
The Parent Company's other operating income mainly pertains to foreign exchange gains on operating receivables and payables and realized hedges.
Other operating expenses amounted to –304 million SEK (–493). Of this amount, –114 million SEK (–253) comprised foreign exchange losses on operating receivables and payables, in addition to legal expenses and legal agreements as well as a number of smaller items recognized as operating expenses.
The Parent Company's other operating expenses pertain mainly to royalties between Group companies, foreign exchange losses on operating receivables and payables and losses on the divestment of non-current assets.
| GROUP | 2014 | 2015 |
|---|---|---|
| Cost of goods and material | –28,114 | –28,639 |
| Employee benefit expense | –24,318 | –25,347 |
| Depreciation and amortization | –4,001 | –4,505 |
| Impairment losses, inventories | –463 | –397 |
| Impairment losses and reversal impairment losses, non-current assets |
27 | –816 |
| Impairment losses, doubtful receivables | –111 | –226 |
| Other expenses | –15,549 | –18,809 |
| Total | –72,529 | –78,739 |
Other expenses mainly relate to purchases of services and consumables.
The Group leases assets under finance lease agreements. At 31 December 2015, the planned residual value of such leased assets was 69 million SEK (76). Variable fees recognized as expenses totaled 0 million SEK (1).
Future minimum lease payments in respect of non-cancellable contracts fall due as follows:
| NOMINAL FEE | PRESENT VALUE | |||
|---|---|---|---|---|
| GROUP | 2014 | 2015 | 2014 | 2015 |
| Within one year | 18 | 19 | 13 | 13 |
| Between one and five years | 50 | 55 | 30 | 50 |
| Later than five years | 31 | 7 | 15 | 3 |
| Group total | 99 | 81 | 58 | 66 |
The Group's investments in finance leases amounted to 1,191 million SEK (1,045) at year-end 2015. Variable fees recognized in profit/loss, and unguaranteed residual values accruing to the benefit of the lessor, were minor.
The gross investment and the present value of minimum lease payments fall due as follows:
| NOMINAL FEE | PRESENT VALUE | ||||
|---|---|---|---|---|---|
| GROUP | 2014 | 2015 | 2014 | 2015 | |
| Within one year | 566 | 794 | 533 | 749 | |
| Between one and five years | 478 | 380 | 447 | 362 | |
| More than five years | 1 | 17 | 1 | 9 | |
| Group total | 1,045 | 1,191 | 981 | 1,120 |
Leasing fees for assets under operating leases, such as leased premises, machinery and major items of computer and office equipment, are recognized within operating expenses. In 2015, the Group expensed 840 million SEK (780), including minimum lease payments of 837 million SEK (760), variable fees of 7 million SEK (24), and net of sublease income of –4 million SEK (–4). The Parent Company expensed 211 million SEK (191).
Future minimum lease payments under non-cancellable operating lease contracts fall due as follows:
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| Within one year | 683 | 754 | 182 | 195 |
| Between one and five years | 1,465 | 1,579 | 602 | 594 |
| Later than five years | 590 | 634 | 396 | 418 |
| Group total | 2,738 | 2,967 | 1,180 | 1,207 |
Future minimum lease payments under non-cancellable lease contracts that pertain to subleased items amounted to 6 million SEK (20).
The planned residual value of the Group's rental fleet is 541 million SEK (573). Depreciation for the year amounted to 457 million SEK (280). The future minimum lease payments under non-cancellable leases amount to 514 million SEK (377). Variable fees amounted to 5 million SEK (13).
Future minimum lease payments under non-cancellable operating lease contracts fall due as follows:
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| Within one year | 237 | 224 | 1 | 1 |
| Between one and five years | 140 | 290 | — | — |
| Later than five years | — | — | — | — |
| Group total | 377 | 514 | 1 | 1 |
cont. NOTE 8
| GROUP | 2014 | 2015 |
|---|---|---|
| Interest income | 129 | 130 |
| Dividend | 3 | 9 |
| OTHER INVESTMENTS INCL. DERIVATIVES | ||
| Net gain on remeasurement of financial assets/ | ||
| liabilities | 12 | 22 |
| Net foreign-exchange gains | 14 | — |
| Other financial income | 5 | 11 |
| Financial income | 163 | 173 |
| Interest expense | –1,935 | –1,880 |
| OTHER INVESTMENTS INCL. DERIVATIVES | ||
| Net loss on remeasurement of financial assets/ | ||
| liabilities | –44 | –180 |
| Net foreign-exchange losses | — | –22 |
| Other financial expenses | –40 | –55 |
| Financial expenses | –2,019 | –2,136 |
| Net financing cost | –1,856 | –1,963 |
Net interest income/expense from financial assets and liabilities not measured at fair value through profit or loss amounted to –1,782 million SEK (–1,775). In 2015, the hedging of fair values resulting from the valuation of hedged items had an effect of -8 million SEK (-15) on the result, while the valuation of hedged instruments affected the result by 8 million SEK (15). No inefficiencies in cash-flow hedges impacted profit for the year (0). For further information regarding valuation policies for financial instruments, refer to Note 27.
| INCOME FROM SHARES IN GROUP COMPANIES |
INCOME FROM SHARES IN ASSOCIATED COMPANIES |
||||
|---|---|---|---|---|---|
| PARENT COMPANY | 2014 | 2015 | 2014 | 2015 | |
| Dividend, net of withholding tax | 5,254 | 7,966 | 10 | 10 | |
| Group contributions paid/ received |
3,141 | 1,422 | — | — | |
| Gain on sale of shares and participations |
12 | 116 | — | — | |
| Impairment | –183 | -157 | — | — | |
| Reversed impairment | — | — | — | — | |
| Total | 8,224 | 9,346 | 10 | 10 |
| INTEREST INCOME AND SIMILAR ITEMS |
||||
|---|---|---|---|---|
| PARENT COMPANY | 2014 | 2015 | ||
| Interest income, Group companies | 995 | 1,009 | ||
| Other interest income | 3 | 0 | ||
| Derivatives, Group companies | — | 62 | ||
| Other | 0 | — | ||
| Total | 998 | 1,072 |
| INTEREST EXPENSE AND SIMILAR ITEMS |
||||
|---|---|---|---|---|
| PARENT COMPANY | 2014 | 2015 | ||
| Interest expense, Group companies | –638 | –659 | ||
| Other interest expense | –1,182 | –731 | ||
| Derivatives, Group companies | –143 | — | ||
| Other | –15 | –13 | ||
| Total | –1,978 | –1,402 |
32
1
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| INCOME TAX EXPENSE FOR THE YEAR |
2014 | 2015 | 2014 | 2015 |
| Current tax | –1,768 | –1,590 | –26 | –32 |
| Adjustment of taxes attributable | ||||
| to prior years | –29 | –260 | — | –34 |
| Total current tax expense | –1,797 | –1,850 | –26 | –66 |
| Deferred taxes relating to | ||||
| temporary differences and tax | ||||
| loss carry-forward | –475 | –15 | –211 | –71 |
| Total tax expense | –2,272 | –1,865 | –237 | –137 |
The Group recognized tax expense for the continuing operations for the year of 1,865 million SEK (2,272) or 35.1% (27.1) of profit after financial items.
The Group's weighted average tax rate for the continuing operations, calculated in accordance with the statutory tax rates in each country, is 16.9% (20.4). The tax rate in Sweden is 22% (22). Reconciliation of the Group's weighted average tax rate, based on the tax rates in each country, and the Group's actual tax expense:
| 2014 | 2015 | |||
|---|---|---|---|---|
| CONTINUING OPERATIONS | MSEK | % | MSEK | % |
| Profit after financial items | 8,369 | 5,308 | ||
| Weighted average tax based on | ||||
| each country's tax rate | –1,710 | –20.4 | –896 | –16.9 |
| TAX EFFECT OF | ||||
| Non-deductible expenses | –336 | –4.0 | –234 | –4.4 |
| Tax-exempt income | 44 | 0.5 | 54 | 1.0 |
| Adjustments relating to prior years | –29 | –0.3 | –260 | –4.9 |
| Effects of tax loss carry-forward, net | –152 | –1.8 | –467 | –8.8 |
| Other | –89 | –1.1 | –62 | –1.1 |
| Total recognized tax expense | –2,272 | –27.1 | –1,865 | –35.1 |
The weighted average tax rate for Group total, based on the statutory tax rates in each country, is 22.1% (20.7).
| 2014 | 2015 | |||
|---|---|---|---|---|
| GROUP TOTAL | MSEK | % | MSEK | % |
| Profit after financial items | 8,264 | 4,059 | ||
| Weighted average tax based on | ||||
| each country's tax rate | –1,710 | –20.7 | –896 | –22.1 |
| TAX EFFECT OF | ||||
| Non-deductible expenses | –336 | –4.1 | –234 | –5.8 |
| Tax-exempt income | 44 | 0.5 | 54 | 1.3 |
| Adjustments relating to prior years | –29 | –0.4 | –260 | –6.4 |
| Effects of tax loss carry-forward, net | –152 | –1.8 | –467 | –11.5 |
| Other | –89 | –1.1 | –62 | –1.4 |
| Total recognized tax expense | –2,272 | –27.5 | –1,865 | –45.9 |
The Parent Company's effective tax rate is less than the nominal tax rate in Sweden, mainly due to tax-exempt dividend income from subsidiaries and associated companies.
Reconciliation of the Parent Company's nominal tax rate and actual tax expense:
| 2014 | 2015 | |||
|---|---|---|---|---|
| PARENT COMPANY | MSEK | % | MSEK | % |
| Profit before tax | 6,089 | 8,265 | ||
| Tax based on the nominal tax rate for the Parent Company |
–1,340 | –22 | –1,818 | –22 |
| TAX EFFECTS OF | ||||
| Non-deductible expenses | –54 | –0.9 | –45 | –0.5 |
| Tax-exempt income | 1,187 | 19 | 1,816 | 21.9 |
| Adjustments relating to prior years | –30 | –0.5 | –90 | –1.1 |
| Total recognized tax expense | –237 | –4.4 | –137 | –1.7 |
| 2014 | 2015 | |||||
|---|---|---|---|---|---|---|
| GROUP | BEFORE TAX |
TAX | AFTER TAX |
BEFORE TAX |
TAX | AFTER TAX |
| Actuarial gains/losses attributable to defined |
||||||
| benefit pension plans | –1,847 | 452 | –1,395 | 589 –139 | 450 | |
| Translation differences for the year |
3,120 | — | 3,120 | –972 | — | –972 |
| Fair-value changes in cash flow hedges for the year |
–391 | 80 | –311 | –107 | 29 | –78 |
| Fair-value changes in cash flow hedges carried forward |
||||||
| to profit/loss for the year | 10 | –2 | 8 | 162 | –36 | 126 |
| Other comprehensive | ||||||
| income | 892 | 530 | 1,422 | –328 –146 | –474 |
The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following assets and liabilities (liabilities shown with a minus sign).
| 2014 | 2015 | |||||
|---|---|---|---|---|---|---|
| GROUP | DEFERRED TAX ASSETS |
DEFERRED TAX LIABILITIES |
NET | DEFERRED TAX ASSETS |
DEFERRED TAX LIABILITIES |
NET |
| Intangible assets | 2,370 | –1,390 | 980 | 1,746 | –1,342 | 404 |
| Property, plant and equipment | 122 | –1,091 | –969 | 118 | –1,082 | –964 |
| Financial non-current assets | 97 | –81 | 16 | 56 | –90 | –34 |
| Inventories | 1,165 | –105 | 1,060 | 962 | –79 | 883 |
| Receivables | 331 | –129 | 202 | 260 | –120 | 140 |
| Interest-bearing liabilities | 1,522 | 0 | 1,522 | 1,478 | –4 | 1,474 |
| Non-interest-bearing liabilities | 987 | –585 | 402 | 1,124 | –143 | 981 |
| Other | 32 | — | 32 | 13 | — | 13 |
| Tax loss carry-forward | 1,335 | — | 1,335 | 1,348 | — | 1,348 |
| Total | 7,961 | –3,381 | 4,580 | 7,105 | –2,860 | 4,245 |
| Offsetting within companies | –1,716 | 1,716 | — | –868 | 868 | — |
| Total deferred tax assets and liabilities | 6,245 | –1,665 | 4,580 | 6,237 | –1,992 | 4,245 |
| 2014 | |||||||
|---|---|---|---|---|---|---|---|
| PARENT COMPANY | DEFERRED TAX ASSETS |
DEFERRED TAX LIABILITIES |
NET | DEFERRED TAX ASSETS |
DEFERRED TAX LIABILITIES |
NET | |
| Property, plant and equipment | — | –28 | –28 | — | –28 | –28 | |
| Inventories | — | –4 | –4 | 1 | — | 1 | |
| Provisions | 33 | –6 | 27 | 54 | –11 | 43 | |
| Non-interest-bearing assets and liabilities | 13 | — | 13 | 77 | — | 77 | |
| Tax loss carry-forward | 324 | — | 324 | 168 | — | 168 | |
| Total | 370 | –38 | 332 | 300 | –39 | 261 | |
| Offsetting | –38 | 38 | — | –39 | 39 | — | |
| Total deferred tax assets and liabilities | 332 | — | 332 | 261 | — | 261 |
The Group has additional tax loss carry-forward of 2,052 million SEK (762). The expiry dates of these tax loss carry-forwards are distributed as follows:
| YEAR | MSEK |
|---|---|
| 2016 | 174 |
| 2017 | 147 |
| 2018 | 83 |
| 2019 | 99 |
| 2020 and later | 585 |
| No expiry date | 964 |
| Total | 2,052 |
Related deferred tax assets were not recognized since utilization of the tax losses against future taxable profits is not deemed probable in the foreseeable future. The tax value of the unrecognized tax loss carry-forwards amounted to 573 million SEK.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| Balance at beginning of year, net | 4,953 | 4,580 | 544 | 332 |
| Recognized in profit and loss | –475 | –15 | –212 | –71 |
| Acquisitions/disposals of subsidiaries | –468 | –4 | — | — |
| Recognized in other comprehensive | ||||
| income | 530 | –146 | — | — |
| Translation differences | 40 | –170 | — | — |
| Balance at end of year, net | 4,580 | 4,245 | 332 | 261 |
In addition to the deferred tax assets and liabilities, Sandvik reports the following tax liabilities and receivables:
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||
| Other provisions for taxes | –916 | –1,060 | — | — | |
| Income tax liabilities | –1,194 | –871 | — | — | |
| Income tax receivables | 1,162 | 1,067 | 180 | 179 | |
| Net tax liabilities/receivables | –32 | 196 | 180 | 179 |
Other provisions for taxes of –1,060 million SEK (–916) relate to ongoing disputes and assessed tax risks.
| BASIC | DILUTED | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| Earnings per share, Group total | 4.79 | 1.79 | 4.79 | 1.79 |
| Earnings per share, continuing | ||||
| operations | 4.88 | 2.79 | 4.88 | 2.79 |
The calculation of the numerators and denominators used in the above calculations of earnings per share is shown below.
The calculation of earnings per share for 2015 is based on the profit for the year attributable to the equity holders of the Parent Company, Group total of 2,247 million SEK (6,011), continuing operations of 3,496 million SEK (6,116) and the weighted average number of shares (thousands) of 1,254,386 (1,254,386) during 2015. These two components have been calculated as follows:
| 2014 | 2015 | |
|---|---|---|
| Profit for the year attributable to the equity holders | ||
| of the Parent Company, Group total | 6,011 | 2,247 |
| Profit for the year attributable to equity holders | ||
| of the Parent Company, continuing operations | 6,116 | 3,496 |
| IN THOUSANDS OF SHARES | 2014 | 2015 |
|---|---|---|
| Total number of ordinary shares at 1 January | 1,254,386 1,254,386 | |
| Effects of reacquisitions and redemption | — | — |
| Weighted average number of shares outstanding | ||
| during the year, basic | 1,254,386 1,254,386 |
The calculation of diluted earnings per share for 2015 is based on the profit attributable to the equity holders of the Parent Company, Group total of 2,247 million SEK (6,011), continuing operations of 3,496 million SEK (6,116) and the weighted average number of shares (thousands) of 1,254,386 (1,254,386) during 2015. The two components have been calculated as follows:
| 2014 | 2015 | |
|---|---|---|
| Profit for the year attributable to equity holders | ||
| of the Parent Company, Group total | 6,011 | 2,247 |
| Profit for the year attributable to equity holders | ||
| of the Parent Company, continuing operations | 6,116 | 3,496 |
| IN THOUSANDS OF SHARES | 2014 | 2015 |
|---|---|---|
| Weighted average number of shares, basic | 1,254,386 1,254,386 | |
| Effect of share options | — | — |
| Weighted average number of shares outstanding during the year, diluted |
1,254,386 1,254,386 |
The 2014 and 2015 Annual General Meetings approved a share-based LTI program. This could entail future dilution effects. For information about the program, refer to Note 3.5.
32
| INTANGIBLE ASSETS | INTERNALLY GENERATED INTANGIBLE ASSETS | ACQUIRED INTANGIBLE ASSETS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CAPITAL IZED R&D EXPENDI |
IT SOFT |
PATENTS, LICENSES, TRADE MARKS, |
SUB | CAPITAL IZED R&D EXPENDI |
IT SOFT |
PATENTS, LICENSES, TRADE MARKS, |
GOOD | SUB | ||||
| COST | TURE | WARE | ETC. | OTHER | TOTAL | TURE | WARE | ETC. | WILL | OTHER | TOTAL | TOTAL |
| At 1 January 2014 | 2,337 | 1,460 | 227 | 136 | 4,160 | 26 | 484 | 772 | 8,979 | 1,288 | 11,549 | 15,709 |
| Additions | 467 | 296 | 10 | — | 772 | — | 23 | 2 | — | 40 | 65 | 837 |
| Business combinations | — | — | — | — | — | — | –2 | 1,051 | 2,439 | 880 | 4,368 | 4,368 |
| Divestments and disposals | –89 | –5 | — | –1 | –95 | — | –13 | — | — | –5 | –18 | –113 |
| Reclassifications | –46 | 50 | –6 | — | –1 | — | 17 | 7 | — | 45 | 69 | 68 |
| Translation differences for the year At 31 December 2014 |
53 2,722 |
11 1,812 |
27 258 |
20 155 |
111 4,947 |
1 27 |
34 543 |
268 | 1,325 2,100 12,743 |
328 2,576 |
1,956 17,989 |
2,067 22,936 |
| At 1 January 2015 | 2,722 | 1,812 | 258 | 155 | 4,947 | 27 | 543 | 2,100 | 12,743 | 2,576 | 17,989 | 22,936 |
| Additions | 531 | 321 | 8 | 9 | 869 | 16 | 39 | 12 | — | 13 | 80 | 949 |
| Business combinations | — | — | — | — | — | — | — | 15 | — | — | 15 | 15 |
| Divestments and disposals | –127 | –64 | — | — | –190 | –15 | –5 | — | — | –5 | –25 | –215 |
| Impairment losses | — | — | — | — | — | — | — | — | –101 | — | –101 | –101 |
| Reclassifications | 53 | –44 | — | — | 9 | — | 38 | –4 | — | 3 | 37 | 46 |
| Translation differences for the year | –42 | — | –3 | 3 | –41 | — | –8 | 77 | 127 | 72 | 268 | 226 |
| Transfer to held for sale | –11 | — | — | — | –11 | — | — | — | –112 | — | –112 | –123 |
| At 31 December 2015 | 3,126 | 2,025 | 263 | 167 | 5,583 | 28 | 607 | 2,200 12,657 | 2,659 | 18,151 | 23,733 | |
| ACCUMULATED AMORTIZATION AND IMPAIRMENT LOSSES |
||||||||||||
| At 1 January 2014 | 1,028 | 988 | 69 | 99 | 2,185 | 16 | 421 | 389 | — | 751 | 1,576 | 3,761 |
| Divestments and disposals | –51 | –5 | — | –1 | –57 | — | –12 | — | — | — | –12 | –69 |
| Impairment losses | 38 | — | — | 1 | 39 | — | — | — | — | — | — | 39 |
| Reclassifications | — | 22 | –7 | –22 | –7 | — | 1 | –2 | — | –28 | –29 | –36 |
| Amortization for the year Translation differences for the year |
225 24 |
128 5 |
12 6 |
18 14 |
383 49 |
1 — |
33 27 |
124 40 |
— — |
165 96 |
323 163 |
706 212 |
| At 31 December 2014 | 1,264 | 1,138 | 80 | 109 | 2,591 | 17 | 470 | 551 | — | 984 | 2,022 | 4,613 |
| At 1 January 2015 | 1,264 | 1,138 | 80 | 109 | 2,591 | 17 | 470 | 551 | — | 984 | 2,022 | 4,613 |
| Divestments and disposals | –71 | –47 | — | –2 | –119 | –15 | –2 | — | — | — | –17 | –136 |
| Impairment losses | 64 | — | — | 18 | 82 | — | — | 21 | — | 55 | 76 | 158 |
| Reclassifications | 19 | — | — | — | 19 | — | 12 | –5 | — | — | 7 | 26 |
| Amortization for the year | 260 | 117 | 12 | 7 | 396 | 2 | 38 | 122 | — | 231 | 392 | 788 |
| Translation differences for the year | –19 | –1 | –5 | 3 | –21 | — | –7 | –1 | — | — | –8 | –29 |
| At 31 December 2015 | 1,517 | 1,207 | 87 | 135 | 2,948 | 4 | 511 | 688 | — | 1,270 | 2,472 | 5,420 |
| NET CARRYING AMOUNTS | ||||||||||||
| 1 January 2014 | 1,309 | 472 | 158 | 37 | 1,975 | 10 | 63 | 383 | 8,979 | 538 | 9,973 | 11,948 |
| 31 December 2014 | 1,458 | 674 | 178 | 46 | 2,356 | 10 | 73 | 1,549 | 12,743 | 1,592 | 15,967 | 18,323 |
| 1 January 2015 | 1,458 | 674 | 178 | 46 | 2,356 | 10 | 73 | 1,549 12,743 | 1,592 15,967 | 18,323 | ||
| 31 December 2015 | 1,609 | 818 | 176 | 32 | 2,635 | 24 | 96 | 1,512 12,657 | 1,389 | 15,678 | 18,313 | |
| AMORTIZATION FOR THE YEAR IS INCLUDED IN THE FOLLOWING LINES IN THE 2014 INCOME STATEMENT |
||||||||||||
| Cost of sales | — | –8 | — | — | –8 | — | –20 | –64 | — | –35 | –119 | –127 |
| Selling expenses | — | –2 | –1 | –2 | –5 | — | –5 | –53 | — | –123 | –181 | –186 |
| Administrative expenses | –225 | –118 | –11 | –16 | –370 | –1 | –8 | –7 | — | –7 | –23 | –393 |
| Total AMORTIZATION FOR THE YEAR IS INCLUDED IN THE FOLLOWING LINES IN THE 2015 INCOME STATEMENT |
–225 | –128 | –12 | –18 | –383 | –1 | –33 | –124 | — | –165 | –323 | –706 |
| Cost of sales | — | –8 | — | — | –8 | — | –18 | –107 | — | –40 | –165 | –173 |
| Selling expenses | — | –3 | –1 | –3 | –7 | — | –7 | –9 | — | –188 | –204 | –211 |
| Administrative expenses | –260 | –106 | –11 | –4 | –381 | –2 | –13 | –6 | — | –3 | –24 | –405 |
| Total | –260 | –117 | –12 | –7 | –396 | –2 | –38 | –122 | — | –231 | –392 | –788 |
| IMPAIRMENT LOSSES PER LINE IN THE INCOME STATEMENT 2014 | ||||||||||||
| R&D expenditure included in administrative expenses |
38 | — | — | 1 | 39 | — | — | — | — | — | — | 39 |
| Total | 38 | — | — | 1 | 39 | — | — | — | — | — | — | 39 |
| IMPAIRMENT LOSSES/REVERSAL OF IMPAIRMENT LOSSES PER LINE IN THE INCOME STATEMENT 2015 |
||||||||||||
| Cost of sales | — | — | — | 18 | 18 | — | — | — | — | 37 | 37 | 55 |
| Selling expenses | — | — | — | — | — | — | — | 22 | 101 | 18 | 141 | 141 |
| Administrative expenses | 64 | — | — | — | 64 | — | — | — | — | — | — | 64 |
| Total | 64 | — | — | 18 | 82 | — | — | 22 | 101 | 55 | 178 | 260 |
For 2015, the impairment losses/reversal of impairment losses amounted to 260 million SEK and were related to the business areas Sandvik Mining 50 million SEK, Sandvik Materials Technology 18 million SEK, Sandvik Construction 179 million SEK and Group common 13 million SEK.
1
| COST | LAND AND BUILDINGS |
PLANT AND MACHINERY |
EQUIPMENT, TOOLS, FIXTURES AND FITTINGS |
CONSTRUCTION IN PROGRESS |
TOTAL |
|---|---|---|---|---|---|
| At 1 January 2014 | 14,562 | 36,982 | 5,876 | 2,879 | 60,299 |
| Additions | 315 | 1,531 | 314 | 2,221 | 4,381 |
| Business combinations | 48 | 240 | 3 | — | 291 |
| Divestments and disposals | –265 | –1,655 | –314 | –59 | –2,293 |
| Reclassifications | 455 | 681 | 226 | –1,990 | –628 |
| Translation differences for the year | 983 | 2,112 | 331 | 162 | 3,588 |
| At 31 December 2014 | 16,098 | 39,891 | 6,436 | 3,213 | 65,638 |
| At 1 January 2015 | 16,098 | 39,891 | 6,436 | 3,213 | 65,638 |
| Additions | 211 | 1,387 | 230 | 2,062 | 3,890 |
| Business combinations | — | 2 | — | — | 2 |
| Divestments and disposals | –408 | –1,627 | –262 | –16 | –2,313 |
| Reclassifications | 659 | 1,737 | 112 | –2,668 | –160 |
| Translation differences for the year | –99 | –336 | –100 | 6 | –530 |
| Transfer to held for sale | –212 | –272 | –84 | –102 | –670 |
| At 31 December 2015 | 16,249 | 40,782 | 6,332 | 2,495 | 65,857 |
| DEPRECIATION AND IMPAIRMENT LOSSES | |||||
| At 1 January 2014 | |||||
| Business combinations | 6,225 | 24,618 | 4,214 | –13 | 35,044 |
| Divestments and disposals | –157 | –1,330 | –276 | — | –1,763 |
| Reclassifications | –96 | –464 | –3 | 13 | –550 |
| Depreciation for the year | 493 | 2,397 | 449 | — | 3,339 |
| Impairment losses | 34 | 29 | 1 | 2 | 66 |
| Reversal of earlier impairment losses | –40 | –72 | –12 | –6 | –130 |
| Translation differences for the year | 399 | 1,382 | 242 | — | 2,023 |
| At 31 December 2014 | 6,858 | 26,560 | 4,615 | –4 | 38,029 |
| At 1 January 2015 | 6,858 | 26,560 | 4,615 | –4 | 38,029 |
| Business combinations | — | — | — | — | — |
| Divestments and disposals | –271 | –1,332 | –237 | — | –1,840 |
| Reclassifications | 73 | –263 | –62 | 4 | –248 |
| Depreciation for the year | 526 | 2,760 | 463 | — | 3,749 |
| Impairment losses | 343 | 468 | 1 | — | 812 |
| Reversal of earlier impairment losses | –218 | –42 | — | — | –260 |
| Translation differences for the year | –67 | –255 | –77 | — | –399 |
| Transfer to held for sale | –79 | –177 | –62 | — | –318 |
| At 31 December 2015 | 7,166 | 27,720 | 4,641 | 0 | 39,526 |
| NET CARRYING AMOUNTS | |||||
| 1 January 2014 | 8,337 | 12,363 | 1,663 | 2,892 | 25,255 |
| 31 December 2014 | 9,240 | 13,331 | 1,822 | 3,216 | 27,609 |
| 1 January 2015 | 9,240 | 13,331 | 1,822 | 3,216 | 27,609 |
| 31 December 2015 | 9,083 | 13,062 | 1,691 | 2,495 | 26,331 |
| IMPAIRMENT LOSSES/REVERSAL OF IMPAIRMENT LOSSES PER LINE IN THE INCOME STATEMENT 2015 |
LAND AND BUILDINGS |
PLANT AND MACHINERY |
EQUIPMENT, TOOLS, FIXTURES AND FITTINGS |
CONSTRUCTION IN PROGRESS |
TOTAL |
|---|---|---|---|---|---|
| Cost of sales | 137 | 402 | — | — | 539 |
| Selling expenses | — | 3 | — | — | 3 |
| Administrative expenses | –11 | 20 | 1 | — | 10 |
| Total | 126 | 426 | 1 | — | 552 |
| LOSSES PER BUSINESS AREA 2015 | |||||
|---|---|---|---|---|---|
| Machining Solutions | –10 | 76 | — | — | 66 |
| Mining | –3 | –11 | 1 | — | –14 |
| Materials Technology | 124 | 368 | — | — | 492 |
| Construction | 15 | –11 | — | — | 4 |
| Venture | — | — | — | — | — |
| Group Common | — | 4 | — | — | 4 |
| Total | 126 | 426 | 1 | — | 552 |
In 2014, restructuring activities implemented gave rise to a net reversal of impairment of 63 million SEK mainly attributable to Sandvik Machining Solutions and Sandvik Mining. Reversal of impairment totaling 87 million SEK was included in cost of goods sold and impairment losses amounting to 24 million SEK were included in other operating expenses.
Items of property, plant and equipment totaling 205 million SEK (213) have been pledged as security for liabilities. In 2015, contractual commitments for the acquisition of property, plant and equipment amounted to 321 million SEK (277).
Borrowing costs included in the cost of assets during the year amounted to zero for 2015 and 2014.
Goodwill was impairment tested on the balance sheet date of 31 December 2015. As stated below, the carrying amount of goodwill in the consolidated balance sheet is 12,657 million SEK (12,743), essentially related to a number of major business combinations.
| CARRYING AMOUNT | |||
|---|---|---|---|
| GOODWILL BY CASH-GENERATING UNIT | 2014 | 2015 | |
| SANDVIK MACHINING SOLUTIONS | |||
| Walter Group | 1,056 | 1,014 | |
| Seco Tools | 244 | 237 | |
| Business area level | 1,221 | 1,268 | |
| Total | 2,521 | 2,519 | |
| SANDVIK MINING | |||
| Business area level | 2,094 | 2,008 | |
| Total | 2,094 | 2,008 | |
| SANDVIK MATERIALS TECHNOLOGY | |||
| Business area level | 1,114 | 1,117 | |
| Total | 1,114 | 1,117 | |
| SANDVIK CONSTRUCTION | |||
| Mobile Crushing and Screening | |||
| (earlier Extec/Fintec) | 1,292 | 1,315 | |
| Shanghai Jianshe Luqiao | 96 | — | |
| Business area level | 329 | 325 | |
| Total | 1,717 | 1,640 | |
| SANDVIK VENTURE | |||
| Hyperion | 904 | 960 | |
| Wolfram | 1,455 | 1,396 | |
| Drilling and Completions (earlier Varel) | 2,899 | 3,089 | |
| Total | 5,258 | 5,445 | |
| Other | 39 | 40 | |
| Group total | 12,743 | 12,769 | |
| Transfer to held for sale | –112 | ||
| Continuing operations | 12,657 |
Consolidated goodwill is allocated to the cash-generating units stated above. The recoverable amount of all of the cash-generating units 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 in turn based on the three-year 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 most material assumptions when determining the value in use include anticipated demand, growth rate, operating margin, working capital requirements and the discount rate. The factor used to calculate growth in the terminal period after four years was 2% (3) for Walter, Seco Tools, Machining Solutions business area level and Hyperion. All other cash-generating units used 3% (3). Need of working capital beyond the four-year period is deemed to increase approximately 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 and was assumed to amount to 10% (10) before tax. These assumptions apply to all cash-generating units. The specific risks of the cash-generating units have been adjusted for in the future cash flow estimates.
Production and marketing processes of acquired businesses have, in most cases, been integrated into other Sandvik operations to such an extent that it is no longer possible to identify the cash flows and assets of the originally acquired businesses. For such reason, the impairment tests were largely made at a higher level although in no case above segment level. At present, the activities of Walter, Seco Tools, Mobile Crushing and Screening (earlier Extec/Fintec), Shanghai Jianshe Luqiao, Hyperion, Wolfram and Drilling and Completions (earlier Varel) are conducted in such a way that it has been possible to separately test goodwill allocated to these acquisitions.
Goodwill attributable to Shanghai Jianshe Luqiao was impaired and 101 million SEK was charged to selling expenses in 2015. The recoverable amount for Shanghai Jianshe Luqiao is based on the value in use and amounts to 196 million SEK. The discount rate applied in calculations of the impairment loss was 10% before tax. Shanghai Jianshe Luqiao is a professional crushing and screening equipment supplier in China. The product line comprises jaw crusher, cone crusher, vertical shaft impact crusher, hammer crusher, screens and feeder, spare parts and wear parts. Impairment of this goodwill was the result of declining demand in the markets in which Shanghai Jianshe Luqiao's customers operate.
Other testing of goodwill values did not indicate any impairment requirement. Sensitivity in the calculations of Mobile Crushing and Screening and Drilling and Completions implies that the goodwill value would not be maintained if the discount rate was increased by 1 percentage point or if the longterm growth rate was lowered by 1 percentage point. Sensitivity in calculations of all other cash-generating units 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 by 2 percentage points.
Intangible assets, other than goodwill, with an indefinite useful life were also tested for impairment. Property, plant and equipment and intangible assets with a definite useful life were tested for impairment when an indication for impairment was identified. The tests resulted in impairment losses of 711 million SEK (24) for 2015. For property, plant and equipment the amount was 552 million SEK and for intangible assets 159 million SEK (excluding goodwill). These were mainly related to operations in China.
| PATENTS AND OTHER INTANGIBLE ASSETS INTANGIBLE ASSETS |
||
|---|---|---|
| COST | ||
| At 1 January 2014 | 101 | |
| Additions | 9 | |
| Divestments and disposals | –5 | |
| At 31 December 2014 | 105 | |
| At 1 January 2015 | 105 | |
| Additions | 14 | |
| Divestments and disposals | –21 | |
| Reclassifications | 14 | |
| At 31 December 2015 | 112 | |
| INTANGIBLE ASSETS | ||
|---|---|---|
| ACCUMULATED AMORTIZATION | ||
| At 1 January 2014 | 97 | |
| Reclassifications | — | |
| Divestments and disposals | 0 | |
| Amortization for the year | 0 | |
| At 31 December 2014 | 97 | |
| Net carrying amount at end of year | 8 | |
| At 1 January 2015 | 97 | |
| Reclassifications | 9 | |
| Divestments and disposals | –15 | |
| Amortization for the year | 1 | |
| At 31 December 2015 | 92 | |
| Net carrying amount at end of year | 20 |
| 2014 | 2015 | |
|---|---|---|
| Administrative expenses | 0 | 1 |
| Total | 0 | 1 |
| PROPERTY, PLANT AND EQUIPMENT | LAND AND BUILDINGS |
PLANT AND MACHINERY |
EQUIPMENT, TOOLS, FIXTURES AND FITTINGS |
CONSTRUCTION IN PROGRESS |
TOTAL |
|---|---|---|---|---|---|
| COST | |||||
| At 1 January 2014 | 1,348 | 13,305 | 1,392 | 1,551 | 17,596 |
| Additions | 24 | 163 | 31 | 1,000 | 1,218 |
| Divestments and disposals | –12 | –344 | –29 | — | –385 |
| Reclassifications | 174 | 575 | 69 | –818 | 0 |
| At 31 December 2014 | 1,534 | 13,699 | 1,463 | 1,733 | 18,429 |
| At 1 January 2015 | 1,534 | 13,699 | 1,463 | 1,733 | 18,429 |
| Additions | 21 | 189 | 54 | 641 | 905 |
| Divestments and disposals | –21 | –444 | –35 | — | –500 |
| Reclassifications | 169 | 880 | 26 | –1,089 | –14 |
| At 31 December 2015 | 1,703 | 14,324 | 1,508 | 1,285 | 18,820 |
| REVALUATIONS | |||||
| At 1 January 2014 | 41 | — | — | — | 41 |
| At 31 December 2014 | 41 | — | — | — | 41 |
| At 1 January 2015 | 41 | — | — | — | 41 |
| At 31 December 2015 | 41 | — | — | — | 41 |
| DEPRECIATION | |||||
| At 1 January 2014 | 580 | 8,671 | 957 | — | 10,208 |
| Divestments and disposals | –5 | –263 | –29 | — | –297 |
| Reclassifications | 0 | 0 | 0 | — | 0 |
| Depreciation for the year | 39 | 675 | 101 | — | 815 |
| Impairment losses | — | 18 | — | — | 18 |
| Reversal of impairment losses | — | –14 | — | — | –14 |
| At 31 December 2014 | 614 | 9,087 | 1,029 | — | 10,730 |
| At 1 January 2015 | 614 | 9,087 | 1,029 | — | 10,730 |
| Divestments and disposals | –5 | –378 | –32 | — | –415 |
| Reclassifications | 5 | 3 | –17 | — | –9 |
| Depreciation for the year | 48 | 702 | 96 | — | 846 |
| Impairment losses | — | 2 | — | — | 2 |
| Reversal of impairment losses | — | –18 | — | — | –18 |
| At 31 December 2015 | 662 | 9,398 | 1,076 | — | 11,136 |
| NET CARRYING AMOUNTS | |||||
| 1 January 2014 | 809 | 4,634 | 435 | 1,551 | 7,429 |
| 31 December 2014 | 961 | 4,612 | 434 | 1,733 | 7,740 |
| 1 January 2015 | 961 | 4,612 | 434 | 1,733 | 7,740 |
| 31 December 2015 | 1,082 | 4,926 | 432 | 1,285 | 7,725 |
31 32
1
PATENTS AND OTHER
| PARENT COMPANY | ||||
|---|---|---|---|---|
| 2014 | 2015 | |||
| COST | ||||
| At beginning of year | 32,240 | 32,744 | ||
| Capital contributions | 600 | 1,232 | ||
| Divestments | –96 | –95 | ||
| Total | 32,744 | 33,881 |
| PARENT COMPANY | ||||
|---|---|---|---|---|
| 2014 | 2015 | |||
| ACCUMULATED IMPAIRMENT LOSSES | ||||
| At beginning of year | –422 | –519 | ||
| Impairment losses for the year | –183 | –157 | ||
| Impairment reversed during the year | 86 | — | ||
| Total | –519 | –676 | ||
| ACCUMULATED REVALUATIONS | ||||
| At beginning of year | 16 | 16 | ||
| Total | 16 | 16 | ||
| Carrying amount at year-end | 32,241 | 33,221 |
SANDVIK AB'S HOLDINGS OF SHARES AND PARTICIPATIONS IN SUBSIDIARIES, DIRECT HOLDINGS, ACCORDING TO BALANCE SHEET AT 31 DECEMBER
| 2014 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| CARRYING | CARRYING | ||||||
| COMPANY, DOMICILE | CORP. REG. NUMBER |
NO. OF | SHARES HOLDING, % 2) | AMOUNT 000S SEK |
NO. OF | SHARES HOLDING, % 2) | AMOUNT 000S SEK |
| SWEDEN | |||||||
| Förvaltningsbolaget Predio 4 KB, Sandviken | 916624-2181 | — | 03) | 0 | — | 03) | 0 |
| Gimo Utbildningsaktiebolag, Gimo | 556061-4041 | 1,000 | 91 | 2,591 | 1,000 | 91 | 2,591 |
| Gusab Holding AB, Sandviken | 556001-9290 | 1,831,319 | 100 | 53,474 | 1,831,319 | 100 | 53,474 |
| Gusab Stainless AB, Mjölby | 556012-1138 | 200,000 | 100 | 23,788 | 200,000 | 100 | 23,788 |
| Industri AB Skomab, Sandviken | 556008-8345 | 2,000 | 100 | 99,346 | 2,000 | 100 | 51,888 |
| Rammer Svenska AB, Sandviken | 556249-4004 | 3,000 | 100 | 851 | 3,000 | 100 | 851 |
| Tamrock Svenska AB, Sandviken | 556189-1085 | 100 | 100 | 123 | — | — | — |
| Sandvik Global Purchasing AB, Stockholm | 556052-4315 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| AB Sandvik Bruket, Sandviken | 556028-5784 | 13,500 | 100 | 1,698 | — | — | — |
| Sandvik Mining AB, Sandviken 1) | 556659-6952 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| AB Sandvik Coromant, Sandviken 1) | 556234-6865 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Coromant Sverige AB, Stockholm 1) | 556350-7846 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Far East Ltd. AB, Sandviken | 556043-7781 | 10,000 | 100 | 10,000 | 10,000 | 100 | 10,000 |
| Sandvik Försäkrings AB, Sandviken | 516401-6742 | 1,500 | 100 | 15,000 | 1,500 | 100 | 15,000 |
| Sandvik Hyperion AB, Stockholm 1) | 556234-6857 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Besöksservice AB, Sandviken 1) | 556235-3838 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Intellectual Property AB, Sandviken | 556288-9401 | 1,000,000 | 100 | 3,499,950 | 1,000,000 | 100 | 3,499,950 |
| AB Sandvik International, Sandviken 1) | 556147-2977 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Materials Technology EMEA AB, Stockholm | 556734-2026 | 501,000 | 100 | 50,100 | 501,000 | 100 | 50,100 |
| AB Sandvik Materials Technology, Sandviken 1) | 556234-6832 | 1,000 | 100 | 50 | 1,000 | 100 | 2,050 |
| Sandvik Construction AB, Sandviken 1) | 556664-9983 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Mining and Construction Sverige AB, | |||||||
| Sandviken 1) | 556288-9443 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Mining and Construction Tools AB, Sandviken 1) 556234-7343 | 1,000 | 100 | 50 | 1,000 | 100 | 50 | |
| Sandvik Nora AB, Nora | 556075-0506 | 80,000 | 100 | 34,923 | 80,000 | 100 | 8,000 |
| Sandvik Powder Solutions AB, Surahammar | 556032-6760 | 600 | 100 | 60,000 | 600 | 100 | 60,000 |
| AB Sandvik Process Systems, Sandviken 1) | 556312-2992 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Rotary Tools AB, Köping | 556191-8920 | 101,000 | 100 | 150,177 | 101,000 | 100 | 150,177 |
| AB Sandvik Skogsfastigheter, Sandviken | 556579-5464 | 1,000 | 100 | 51 | 1,000 | 100 | 51 |
| AB Sandvik Steel Investment, Sandviken | 556350-7853 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Stål Försäljnings AB, Stockholm1) | 556251-5386 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Systems Development AB, Sandviken 1) | 556407-4184 | 1,000 | 100 | 100 | — | — | — |
| Sanrip AB, Sandviken 1) | 556692-0038 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Machining Solutions AB, Sandviken 1) | 556692-0053 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Utbildnings AB, Sandviken | 556304-8791 | 910 | 91 | 91 | 910 | 91 | 91 |
| Sandvikens Brukspersonals Byggnadsförening upa, | |||||||
| Sandviken | 785500-1686 | — | 100 | 0 | — | 100 | 0 |
| Dormer Tools AB, Halmstad | 556240-8210 | 80,000 | 100 | 25,145 | 80,000 | 100 | 46,145 |
| Walter Norden AB, Halmstad | 556752-4698 | 15,000 | 100 | 5,139 | 15,000 | 100 | 5,139 |
| Sandvik Mining and Construction Köping AB, Köping 1) | 556776-9525 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Wire Sandviken AB, Sandviken 1) | 556779-3897 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik IT Services AB, Sandviken 1) | 556788-9059 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Venture AB, Stockholm 1) | 556868-7155 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Credit AB, Stockholm | 556843-7296 | 10,000 | 100 | 50,000 | 10,000 | 100 | 50,000 |
| Seco Tools AB, Fagersta | 556071-1060 | 145,467,690 | 100 | 15,658,859 | 145,467,690 | 100 | 15,658,859 |
| Svensk Export Flyg AB, Stockholm | 556934-7452 | 100,000 | 100 | 100 | 100,000 | 100 | 25,100 |
1) Subsidiaries conducting business on behalf of the Parent Company.
2) Refers to voting rights, which also equals share of capital unless otherwise indicated. 3) Remaining shares are held by other Group companies.
4) Share of capital 94%.
5) Shares up to an ownership interest of 100% are held by other Group companies.
| 2014 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| COUNTRY | COMPANY | NO. OF | SHARES HOLDING, % 2) | CARRYING AMOUNT 000S SEK |
NO. OF | SHARES HOLDING, % 2) | CARRYING AMOUNT 000S SEK |
| AUSTRALIA | Sandvik Australia Pty. Ltd. | — | 183.4) | 1,539,205 | — | 183.4) | 1,539,205 |
| Sandvik Australian Ltd. Partnership | — | 99 | — | — | 99 | — | |
| BRAZIL | Dormer Tools S.A. | 2,137,623,140 | 100 | 200,000 | 2,137,623,140 | 100 | 454,184 |
| Sandvik do Brasil S.A. | 1,894,797,190 | 100 | 577,468 | 1,894,797,190 | 100 | 821,575 | |
| Sandvik Materials Technology do Brasil S.A. | 10,877,380 | 100 | 116,677 | 10,877,380 | 100 | 142,093 | |
| Sandvik MGS S.A. | 14,999,998 | 100 | 458,423 | 14,999,998 | 100 | 797,845 | |
| Sandvik Mining and Construction do Brasil S.A. | 85,329,996 | 100 | 749,696 | 85,329,996 | 100 | 943,172 | |
| Walter do Brasil Ltda | 1,809,999 | 100 | 65,464 | 1,809,999 | 100 | 109,574 | |
| BULGARIA | Sandvik Bulgaria Ltd. | — | 100 | 0 | — | 100 | 0 |
| CHILE | Sandvik Credit Chile S.A. | 9,900 | 99 | 39,631 | 9,900 | 99 | 39,631 |
| CHINA | Sandvik China Holding Co Ltd. | — | 100 | 668,890 | — | 100 | 668,890 |
| Sandvik Materials Technology (China) Ltd. | — | 583) | 207,854 | — | 583) | 207,854 | |
| CZECH REPUBLIC | Sandvik CZ s.r.o. | — | 100 | 0 | — | 100 | 0 |
| DEMOCRATIC REPUBLIC OF |
|||||||
| CONGO | Sandvik Mining and Construction DRC S.P.R.L. | 9,990 | 100 | 66 | 9,990 | 100 | 66 |
| HUNGARY | Sandvik Magyarorszag Kft. | — | 100 | 3,258 | — | 100 | 3,258 |
| INDIA | Sandvik Asia Ltd. | 16,030,246 | 175) | 277,028 | 16,030,241 | 175) | 277,028 |
| IRELAND | Sandvik Mining and Construction Logistics Ltd. | 100 | 100 | 5,508 | 100 | 100 | 5,508 |
| JAPAN | Sandvik K.K. | 2,780,000 | 100 | 224,701 | 2,780,000 | 100 | 224,701 |
| KOREA | Sandvik Korea Ltd. | 752,730 | 100 | 46,856 | 752,730 | 100 | 46,856 |
| MALI | Sandvik Mining and Construction Mali | 25,000 | 100 | 3,462 | 25,000 | 100 | 3,462 |
| MEXICO | Sandvik Méxicana S.A. de C.V. | 406,642,873 | 903) | 71,000 | 406,642,873 | 903) | 71,000 |
| MONGOLIA | Sandvik Mongolia LLC. | 400,000 | 100 | 2,682 | 400,000 | 100 | 2,682 |
| NETHERLANDS | Sandvik Finance B.V. | 18,788 | 100 | 7,093,582 | 18,788 | 100 | 7,093,582 |
| PERU | Sandvik del Perú S.A. | 6,562,795 | 903) | 26,025 | 6,562,795 | 903) | 26,025 |
| POLAND | Sandvik Polska Sp. z.o.o. | 3,211 | 100 | 93,197 | — | — | — |
| SLOVAKIA | Sandvik Slovakia s.r.o. | — | 100 | 1,238 | — | 100 | 1,238 |
| TURKEY | Sandvik Endüstriyel Mamüller Sanayi ve Ticaret A.S. | 125,154,588 | 100 | 3,200 | 125,154,588 | 100 | 3,200 |
| UAE | Sandvik Middle East FZE. | 1 | 100 | 19,886 | 1 | 100 | 19,886 |
| ZIMBABWE | Sandvik Mining and Construction Zimbabwe (Pty) Ltd. | 233,677 | 100 | 3,269 | 233,677 | 100 | 3,269 |
| Total | 32,241,322 | 33,220,538 |
1) Subsidiaries conducting business on behalf of the Parent Company.
2) Refers to voting rights, which also equals share of capital unless otherwise indicated. 3) Remaining shares are held by other Group companies.
4) Share of capital 94%.
5) Shares up to an ownership interest of 100% are held by other Group companies.
1
| COUNTRY | COMPANY | 20141) | 20151) |
|---|---|---|---|
| SWEDEN | Sandvik Heating Technology AB | 100 | 100 |
| Sandvik SRP AB | 100 | 100 | |
| Sandvik Treasury AB | 100 | 100 | |
| Alfa Tool International AB AB Sandvik Materials Technology (fastighetsbolaget) |
100 100 |
100 100 |
|
| ARGENTINA | Sandvik Argentina S.A. | 100 | 100 |
| Sandvik Mining and Construction Argentina S.A. | 100 | 100 | |
| AUSTRALIA | Sandvik Mining and Construction Pty. Ltd. Australia Sandvik Mining and Construction Australia (Production Supply) Pty. Ltd |
100 100 |
100 100 |
| Seco Tools Australia Pty. Ltd. | 100 | 100 | |
| Varel International (Australia) Pty., Ltd. | — | 100 | |
| AUSTRIA | Walter Austria GmbH | 100 | 100 |
| Wolfram Bergbau und Hütten AG Sandvik in Austria Ges.m.b.H. |
100 100 |
100 100 |
|
| Sandvik Mining and Construction GmbH | 100 | 100 | |
| Sandvik Mining and Construction Materials Handling GmbH & Co. KG | 100 | 100 | |
| Seco Tools Gesellschaft m.b.H. | 100 | 100 | |
| BELGIUM | Walter Benelux N.V./S.A. S.A. Seco Tools Benelux N.V. |
100 100 |
100 100 |
| BOTSWANA | Sandvik Botswana Pty Ltd. | 100 | 100 |
| BRAZIL | Seco Tools Indústria e Comérico Ltda | 100 | 100 |
| CANADA | Sandvik Canada Inc. | 100 | 100 |
| CHILE | Varel Rock Bits Canada, Inc. Sandvik Chile S.A. |
— 100 |
100 100 |
| Sandvik Mining and Construction Chile S.A. | 100 | 100 | |
| CHINA | Sandvik International Trading (Shanghai) Co. Ltd. | 100 | 100 |
| Sandvik Mining and Construction (China) Co. Ltd. | 100 | 100 | |
| Sandvik Mining and Construction Trading (Shanghai) Co. Ltd. Sandvik Hyperion (Wuxi) Co., Ltd. |
100 100 |
100 100 |
|
| Sandvik Process Systems (Shanghai) Co. Ltd. | 100 | 100 | |
| Sandvik Tooling Round Tools Langfang Co., Ltd. | 100 | 100 | |
| Sandvik Tooling Production (Langfang) Co. Ltd. | 100 | 100 | |
| Sandvik Coromant Cutting Tools (Shanghai) Ltd. Sandvik (Qingdao) Ltd. |
100 100 |
100 100 |
|
| Walter Wuxi Co. Ltd. | 100 | 100 | |
| Shanghai Jianshe Luqiao Machinery Co. Ltd | 80 | 80 | |
| Shandong Energy Machinery Group ZhongRui Mining Equipment Manufacturing Co., Ltd. | 502) | 502) | |
| Seco Tools (Shanghai) Co. Ltd. Pramet Tools (Shanghai) Co. Ltd. |
100 100 |
100 100 |
|
| Dormer Tools (Shanghai) Co Ltd | — | 100 | |
| COLOMBIA | Sandvik Colombia S.A.S. | 70 | 70 |
| CZECH REPUBLIC | Sandvik Chomutov Precision Tubes s.r.o. | 100 | 100 |
| Walter CZ s.r.o. Seco Tools CZ s.r.o. |
100 100 |
100 100 |
|
| Pramet Tools s.r.o. | 100 | 100 | |
| DENMARK | Sandvik A/S | 100 | 100 |
| Seco Tools A/S | 100 | 100 | |
| FINLAND | Sandvik Mining and Construction Finland Oy Sandvik Mining and Construction Oy |
100 100 |
100 100 |
| Seco Tools Oy | 100 | 100 | |
| FRANCE | Sandvik Mining and Construction Chauny S.A.S. | 100 | 100 |
| Sandvik Hyperion S.A.S. | 100 | 100 | |
| Sandvik Materials Technology France S.A.S. Sandvik Mining and Construction Lyon S.A.S. |
100 100 |
100 100 |
|
| Sandvik Mining and Construction France S.A.S. | 100 | 100 | |
| Sandvik Tooling France S.A.S. | 100 | 100 | |
| Gunther Tools S.A.S. | 100 | 100 | |
| Safety Production S.A.S. Walter France S.A.S. |
100 100 |
100 100 |
|
| Seco Tools France S.A.S. | 100 | 100 | |
| SECO - E.P.B S.A.S. | 100 | 100 | |
| Varel Europe S.A.S. | — | 100 | |
| GERMANY | Seco Tools Reaming SAS Sandvik Mining and Construction Crushing Technology GmbH |
— 100 |
100 100 |
| Prototyp-Werke GmbH | 100 | 100 | |
| Sandvik Materials Technology Deutschland GmbH | 100 | 100 | |
| Sandvik Mining and Construction Europe GmbH | 100 | 100 | |
| Sandvik Mining and Construction Supply GmbH Sandvik Tooling Deutschland GmbH |
100 100 |
100 100 |
|
| TDM Systems GmbH | 100 | 100 | |
| Walter AG | 100 | 100 | |
| Walter Deutschland GmbH | 100 | 100 | |
| Werner Schmitt PKD-Werkzeug GmbH Seco Tools GmbH |
100 100 |
100 100 |
|
| Pramet GmbH | 100 | 100 | |
| Sandvik Mining & Construction Central Europe GmbH | 100 | 100 | |
| GHANA | Sandvik Mining and Construction Ghana Ltd. | 100 | 100 |
| HONG KONG HUNGARY |
Sandvik Hong Kong Ltd. Walter Hungaria Kft. |
100 100 |
100 100 |
| Seco Tools Kft. | 100 | 100 | |
| INDIA | Walter Tools India Pvt. Ltd. | 100 | 100 |
| Seco Tools India Private Limited | 100 | 100 | |
| INDONESIA | PT Sandvik Indonesia | 100 | 100 |
| PT Sandvik Mining and Construction Indonesia PT Sandvik SMC |
100 100 |
100 100 |
|
| ITALY | Sandvik Italia S.p.A. | 100 | 100 |
| Walter Italia S.R.L. | 100 | 100 | |
| Seco Tools Italia S.p.A. | 100 | 100 |
| COUNTRY | COMPANY | 20141) | 20151) |
|---|---|---|---|
| JAPAN | Sandvik Tooling Supply Japan K.K. | 100 | 100 |
| Walter Japan K. K. | 100 | 100 | |
| KAZAKHSTAN | Seco Tools Japan K.K. Sandvik Mining and Construction Kazakhstan Ltd |
100 100 |
100 100 |
| KOREA | Sandvik SuhJun Ltd. | 100 | 100 |
| Walter Korea Ltd. | 100 | 100 | |
| MALAYSIA | Seco Tools Korea Ltd. Sandvik Malaysia Sdn. Bhd. |
100 100 |
100 100 |
| Sandvik Mining and Construction (Malaysia) Sdn. Bhd. | 100 | 100 | |
| MEXICO | Sandvik de México S.A. de C.V. | 100 | 100 |
| Sandvik Mining and Construction de México S.A. de C.V. Walter Tools S.A. de C.V. |
100 100 |
100 100 |
|
| Sandvik Hard Materials de Mexico S.A. de C.V. | 100 | 100 | |
| Varel de Mexico S.A. de C.V. | — | 100 | |
| Varel International de Mexico S.A. de C.V. | — | 100 | |
| NAMIBIA NETHERLANDS |
Sandvik Namibia Pty Ltd Sandvik Benelux B.V. |
100 100 |
100 100 |
| Jabro Tools B.V. | 100 | 100 | |
| SGL Technology B.V. | — | 100 | |
| NIGERIA | Sandvik Mining and Construction Nigeria Ltd. | 100 | 100 |
| NORWAY | Teeness ASA Sandvik Norge AS |
100 100 |
100 100 |
| Seco Tools AS | 100 | 100 | |
| NEW ZEALAND | Sandvik New Zealand Ltd. | 100 | 100 |
| PHILIPPINES | Sandvik Tamrock (Philippines) Inc. | 100 | 100 |
| POLAND | Walter Polska Sp. z.o.o. Sandvik Mining and Construction Sp. z.o.o. |
100 100 |
100 100 |
| Seco Tools (Poland) Sp. z.o.o. | 100 | 100 | |
| ROMANIA | Sandvik SRL | 100 | 100 |
| Walter Tools SRL | 100 | 100 | |
| RUSSIA | LLC Sandvik OOO Walter |
100 100 |
100 100 |
| Sandvik Mining and Construction CIS LLC | 100 | 100 | |
| Sandvik-MKTC OAO | 100 | 100 | |
| Firma ALG LLC LLC Pramet |
100 100 |
100 100 |
|
| LLC "Seco Tools" | 100 | 100 | |
| SINGAPORE | Sandvik Mining and Construction S.E. Asia Pte. Ltd. | 100 | 100 |
| Sandvik South East Asia Pte. Ltd. | 100 | 100 | |
| Walter AG Singapore Pte. Ltd. Seco Tools (SEA) Pte. Ltd. |
100 100 |
100 100 |
|
| SLOVENIA | Sandvik D.o.o. | — | 100 |
| SOUTH AFRICA | Sandvik Mining RSA (Pty) Ltd. | 100 | 100 |
| Sandvik (Pty) Ltd. | 100 | 100 | |
| SPAIN | Seco Tools South Africa (Pty) Ltd. Sandvik Española S.A. |
100 100 |
100 100 |
| Walter Tools Iberica S.A.U. | 100 | 100 | |
| Seco Tools España S.A. | 100 | 100 | |
| SWITZERLAND | Sandvik AG Santrade Ltd. |
100 100 |
100 100 |
| Walter (Schweiz) AG | 100 | 100 | |
| Seco Tools AG | 100 | 100 | |
| TAIWAN | Sandvik Hyperion Taiwan Limited | 100 | 100 |
| TANZANIA | Sandvik Taiwan Ltd. Sandvik Mining and Construction Tanzania Ltd. |
100 100 |
100 100 |
| THAILAND | Sandvik Thailand Ltd. | 100 | 100 |
| Walter (Thailand) Co. Ltd. | 100 | 100 | |
| TURKEY | Seco Tools (Thailand) Co., Ltd Walter Cutting Tools Industry and Trade LLC |
— 100 |
100 100 |
| Seco Tools Kesici Takımlar Makina San.Tic. A.S | — | 100 | |
| UK | Dormer Tools Ltd. | 100 | 100 |
| Sandvik Construction Mobile Crushers and Screens Ltd. | 100 | 100 | |
| Sandvik Materials Technology UK Ltd. Sandvik Ltd. |
100 100 |
100 100 |
|
| Sandvik Osprey Ltd. | 100 | 100 | |
| Walter GB Ltd. | 100 | 100 | |
| Seco Tools (U.K) Ltd. Sandvik Mining and Construction Ltd. |
100 100 |
100 100 |
|
| Downhole Products Limited | — | 100 | |
| UKRAINE | Sandvik Ukraine | 100 | 100 |
| US | Diamond Innovations Inc. | 100 | 100 |
| Sandvik Wire and Heating Technology Corporation Sandvik Thermal Process Inc. |
100 100 |
100 100 |
|
| Pennsylvania Extruded Tube Co. | 70 | 70 | |
| Precision Dormer LLC | 100 | 100 | |
| Sandvik Customer Finance LLC Sandvik Inc. |
100 100 |
100 100 |
|
| Sandvik Mining and Construction USA LLC | 100 | 100 | |
| Sandvik Process Systems LLC | 100 | 100 | |
| Sandvik Special Metals LLC | 100 | 100 | |
| Walter USA LLC Seco Tools Inc |
100 100 |
100 100 |
|
| Niagara Cutter, LLC | 100 | 100 | |
| Precorp Inc. | 100 | 100 | |
| Varel International Ind., L.P. | — | 100 | |
| ZAMBIA | Aberdeen Products, Inc. Sandvik Mining and Construction Zambia Ltd. |
— 100 |
100 100 |
32
1) Refers to share of capital, which also corresponds to voting rights for the total number of shares, unless otherwise stated. 2) Share of votes 60% (60).
| GROUP SHARES IN ASSOCIATED COMPANIES | 2014 | 2015 |
|---|---|---|
| ACCUMULATED SHARE OF EQUITY | ||
| At beginning of year | 211 | 239 |
| Acquisition of associates | 6 | — |
| Divestment of associates | — | –1 |
| Share of profits for the year | 24 | 8 |
| Less dividend received | –11 | –11 |
| Translation differences during the year | 9 | 1 |
| Carrying amount at end of year | 239 | 236 |
| PARENT COMPANY'S SHARES IN ASSOCIATED COMPANIES |
2014 | 2015 |
|---|---|---|
| ACCUMULATED COST | ||
| At beginning of year | 4 | 4 |
| Carrying amount at end of year | 4 | 4 |
| COUNTRY | REVENUE | PROFIT | ASSETS | LIABILITIES | EQUITY | GROUP'S SHARE, % |
|---|---|---|---|---|---|---|
| Sweden | 93 | 17 | 95 | 31 | 64 | 49.0 |
| India | 270 | 29 | 307 | 52 | 254 | 25.1 |
| Sweden | 1,285 | -25 | 637 | 373 | 264 | 50.0 |
| Sweden | 0 | 0 | 3 | 2 | 1 | 50.0 |
| Sweden | 7 | 0 | 9 | 7 | 2 | 50.0 |
| France | 0 | 0 | — | — | — | — |
| China | 7 | -2 | 13 | 3 | 10 | 40.0 |
| Sweden | 84 | 0 | 445 | 436 | 10 | 45.0 |
| COUNTRY | REVENUE | PROFIT | ASSETS | LIABILITIES | EQUITY | GROUP'S SHARE, % |
| OWNED DIRECTLY BY SANDVIK AB | |||||||
|---|---|---|---|---|---|---|---|
| Oerlikon Balzers Sandvik Coating AB | Sweden | 92 | 20 | 101 | 35 | 66 | 49.0 |
| OWNED INDIRECTLY BY SANDVIK AB | |||||||
| Eimco Elecon | India | 225 | 23 | 276 | 46 | 227 | 25.1 |
| Fagersta Stainless AB | Sweden | 1,392 | 40 | 875 | 582 | 292 | 50.0 |
| Fagersta Seco AB | Sweden | 0 | 0 | 3 | 2 | 1 | 50.0 |
| Fagerstahälsan AB | Sweden | 7 | 0 | 9 | 7 | 2 | 50.0 |
| S.C.I. Le Palatinat | France | 1 | 1 | 2 | 0 | 2 | 49.0 |
| Shanghai Innovatools Co. Ltd. | China | 15 | 1 | 17 | 5 | 12 | 40.0 |
| Bromma Business Jet AB | Sweden | 141 | 6 | 499 | 483 | 16 | 45.0 |
The close of the reporting period for the associate Eimco Elecon is 31 March 2015. The dividend paid in 2015 is included in the calculation of the proportion of equity. No financial statements as of a later date have been obtained. Other associates are recognized one month in arrears. The outstanding shares in the associated company S.C.I. Le Palatinat were acquired in 2015. Revenue and profit were recognized up to the date of acquisition. In 2015, Sandvik signed an agreement to divest its interest in Bromma Business Jet AB.
| CORP. REG. NO. | SHARE OF CAPITAL AND VOTING RIGHTS, % |
|
|---|---|---|
| 2015 Oerlikon Balzers Sandvik Coating AB, Stockholm |
556098-1333 | 49 |
| 2014 Oerlikon Balzers Sandvik Coating AB, Stockholm |
556098-1333 | 49 |
31 32
| GROUP | 2014 | 2015 |
|---|---|---|
| NON-CURRENT RECEIVABLES | ||
| Derivatives designated as hedging instruments | 110 | 18 |
| Funded pension plans | 301 | 334 |
| Other non-interest-bearing receivables | 488 | 338 |
| Other interest-bearing receivables | 816 | 651 |
| Total | 1,715 | 1,341 |
| Whereof discontinued operations | –83 | |
| Continuing operations | 1,258 | |
| OTHER CURRENT RECEIVABLES | ||
| Derivatives held as investments | — | — |
| Derivatives designated as hedging instruments | 853 | 691 |
| Due from customers for contract work | 1,300 | 804 |
| Other non-interest-bearing receivables | 2,285 | 2,303 |
| Other interest-bearing receivables | 675 | 897 |
| Advances to suppliers | 513 | 414 |
| Total | 5,626 | 5,109 |
| Whereof discontinued operations | –830 | |
| Continuing operations | 4,279 |
| PARENT COMPANY | 2014 | 2015 |
|---|---|---|
| NON-CURRENT RECEIVABLES | ||
| Derivatives | 1 | 2 |
| Other non-interest-bearing receivables | 0 | 0 |
| Other interest-bearing receivables | 29 | 29 |
| Total | 30 | 31 |
| OTHER CURRENT RECEIVABLES | ||
| Derivatives | 38 | 33 |
| Other non-interest-bearing receivables | 315 | 283 |
| Other interest-bearing receivables | 9 | 3 |
| Total | 362 | 319 |
| CONSTRUCTION CONTRACTS, GROUP | 2014 | 2015 |
| Contract costs incurred and recognized profits | ||
| (less recognized losses) | 13,156 | 12,505 |
| Advances received | 1,778 | 358 |
| Amounts retained by customers | 120 | 79 |
| Gross amount due from customers | 1,300 | 804 |
| Gross amount due to customers | 1,000 | 748 |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||
| Raw materials and consumables | 6,570 | 5,141 | 1,430 | 877 | |
| Work in progress | 3,949 | 3,936 | 1,204 | 1,548 | |
| Finished goods | 13,537 | 12,622 | 957 | 761 | |
| Total | 24,056 | 21,699 | 3,591 | 3,186 | |
| Whereof discontinued operations | –177 | ||||
| Continuing operations | 21,522 |
| AGE ANALYSIS OF TRADE RECEIVABLES, GROUP | 2014 | 2015 | ||||
|---|---|---|---|---|---|---|
| GROSS | ALLOWANCE FOR BAD DEBTS |
NET CARRYING AMOUNT |
GROSS | ALLOWANCE FOR BAD DEBTS |
NET CARRYING AMOUNT |
|
| Current receivables | 11,099 | –149 | 10,950 | 10,610 | –69 | 10,541 |
| Past due receivables 0–3 months |
2,268 | –53 | 2,216 | 1,820 | –57 | 1,763 |
| Past due receivables 3–12 months |
658 | –201 | 457 | 608 | –185 | 423 |
| Past due receivables >12 months |
728 | –511 | 217 | 601 | –541 | 60 |
| Group total | 14,753 | –913 | 13,840 | 13,639 | –852 | 12,787 |
| Whereof discountinued operations | –581 | 32 | –549 | |||
| Continuing operations | 13,058 | –820 | 12,238 |
| DETAILS OF RESERVES | 2014 | 2015 |
|---|---|---|
| TRANSLATION RESERVE | ||
| At beginning of year | 394 | 3,514 |
| Translation differences during the year | 3,120 | –975 |
| At end of year | 3,514 | 2,539 |
| HEDGING RESERVE | ||
| At beginning of year | –33 | –336 |
| Cash-flow hedges recognized in other | ||
| comprehensive income | –303 | 48 |
| At end of year | –336 | –288 |
| TOTAL RESERVES | ||
| Reserves at beginning of year | 361 | 3,178 |
| CHANGES IN RESERVES: | ||
| Translation reserve | 3,120 | –975 |
| Hedging reserve | –303 | 48 |
| Reserves at end of year | 3,178 | 2,251 |
Relates to payments made by owners and includes share premium reserve transferred to the statutory reserve at 31 December 2005. Any share premium as from 1 January 2006 and onwards is also recognized as paid-in capital.
The translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of foreign operations stated in a currency different from the Group's presentation currency. Translation reserves relating to divested assets are not material.
The Parent Company's and the Group's presentation currency is Swedish kronor (SEK).
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash-flow hedging instruments related to hedged transactions that have not yet occurred. The change in cash-flow hedges that was transferred to profit/loss for the year amounted to 162 million SEK (10).
| Growth, total, over a business cycle | 8% |
|---|---|
| Return on capital employed, over a business cycle | 25% |
| Net debt/equity ratio | <0.8 |
| Dividend payout percentage | 50% |
Equity is defined as total shareholders' equity, including non-controlling interests.
| EQUITY | 2014 | 2015 |
|---|---|---|
| Share capital | 1,505 | 1,505 |
| Other paid-in capital | 7,678 | 7,678 |
| Reserves | 3,178 | 2,251 |
| Retained earnings including profit for the year | 24,177 | 22,545 |
| Equity attributable to equity holders of | ||
| the Parent | 36,538 | 33,979 |
| Non-controlling interests | 134 | 81 |
| Total equity | 36,672 | 34,060 |
The Board of Directors has proposed to the 2016 Annual General Meeting a dividend of 2.50 SEK per share (3.50). The proposal corresponds to approximately 140% of the recognized earnings per share. No changes were made to the processes for managing capital during the year. Neither the Parent Company nor any of its subsidiaries have to comply with externally imposed capital requirements.
According to the Articles of Association of Sandvik AB, the share capital shall amount to a minimum of 700,000,000 SEK and a maximum of 2,800,000,000 SEK. All issued shares are fully paid, have the same voting rights and are equally entitled to the company's assets.
Share capital has changed as follows over the past two years:
| NO. OF SHARES | QUOTIENT VALUE SEK/SHARE | SHARE CAPITAL SEK | |
|---|---|---|---|
| Share capital at 31 December 2013 | 1,254,385,923 | 1.20 | 1,505,263,108 |
| Share capital at 31 December 2014 | 1,254,385,923 | 1.20 | 1,505,263,108 |
| Share capital at 31 December 2015 | 1,254,385,923 | 1.20 | 1,505,263,108 |
A dividend is proposed by the Board of Directors in accordance with the stipulations in the Swedish Companies' Act, and is approved at the Annual General Meeting. The proposed, not yet resolved, dividend for 2015 is estimated to amount to 3,136 million SEK (2.50 SEK per share). This amount has not been recognized as a liability.
No shares have been reserved for transfer under options or other agreements. The Sandvik share is officially listed only on the Nasdaq Stockholm. Shares can also be traded in the US in the form of ADRs (American Depositary Receipts).
Undistributable equity may not be paid to the shareholders in the form of dividends.
The purpose of the statutory reserve has been to tie up part of the net profit that is not needed to cover an accumulated deficit. The statutory reserve
Comprises the value of shares that have been issued at a premium, meaning the price paid was in excess of the share's quotient value. The amount received in excess of the quotient value was transferred to the share premium reserve.
includes amounts that before 1 January 2006 were included in the share pre-
Retained earnings comprise the distributable reserves recognized in the preceding year less any dividend declared. The total of such profits brought forward and the profit for the year constitute the total distributable reserves, that is the maximum amount available for distribution to the shareholders.
Sandvik provides direct pension solutions and otherwise participates in a number of defined-benefit, defined-contribution and other plans for longterm post-employment benefits to employees throughout the Group. The plans are structured in accordance with local regulations and practices. In recent years, Sandvik has sought to move from defined-benefit based plans to pension solutions that are defined-contribution plans and, to an ever increasing extent, the total pension expense comprises the costs for such plans. In principle, the plans cover all employees. The Group's most significant defined-benefit pension plans are described below.
The Swedish pension plan is funded through a foundation and is based on salary at the time of retirement and is partly closed for new participants, meaning that only new employees born prior to 1979 have the option of joining the plan. Employees born after 1979 are encompassed by a defined-contribution plan. There are no funding requirements for the defined-benefit plan. Pension payments to retirees are made directly from Sandvik.
The commitment for family pension, also a defined-benefit plan, is insured with Alecta. Sufficient information to use defined-benefit accounting for this plan was not available, which is why these commitments are recognized as a defined-contribution plan. At the end of 2015, Alecta reported a preliminary plan surplus of 153% (144).
The main pension plan in the UK is funded through a foundation, which is closed for new participants and the pension is based on salary at the time of retirement. The funding level is revalued every three years, and if this valuation indicates a requirement to increase the funding, the company pays money into the plan over a certain period of time. The plan is governed by Trustees who make investment decisions after having consulted with the company. As a part of the actuarial valuation, Sandvik and the Trustees have agreed a plan to clear shortfall and meet the costs of the further build-up of benefits. Pension payments to retirees are made from the plan.
There are a number of pension plans in the US, including commitments for medical benefits. The largest pension plan covers approximately 75% of the total commitment in the US. The pension is based on salary at the time of retirement and is closed for new participants. The funding level is revalued every year with a target of restoring the funding level over a seven-year period. Pension payments to retirees are primarily made from the plan.
In Finland, Sandvik sponsors a defined-benefit pension plan funded in a foundation. The benefits offered include an old-age pension and disability pension. In addition to the benefits guaranteed by the Finnish subsidiary, there is also a defined-contribution pension component. Pension payments to retirees are made from the plan.
In Germany, Sandvik has defined-benefit pension plans. A few years ago, Sandvik formed a foundation, a Contractual Trust Agreement (CTA), which covers the current employees in most of Sandvik's German companies. The pension commitments for retirees and paid-up policyholders remain unfunded. The pension is based on salary at the time of retirement and other parameters. There are no funding requirements and employees in the plan are required to contribute a certain percentage of their salary to the plan. Pension payments to retirees are mainly made from the company.
There are a number of pension plans in Canada. The pension is based on average salary at the time of retirement and is closed for new participants for non-bargaining unit plans starting 2008. The funding level is revalued every year or up to every three years for the plans, and is based on the solvency ratio determined by actuaries. Pension payments to retirees are mainly made from the company. Employees who joined the company after 1 January 2008 are included in a defined-contribution plan.
| INFORMATION BY COUNTRY, 31 DECEMBER 2014 | SWEDEN | UK | US | FINLAND | GERMANY | CANADA | OTHER | TOTAL |
|---|---|---|---|---|---|---|---|---|
| Amount in the balance sheet | ||||||||
| Present value of funded and unfunded pension obligations | 4,668 | 6,241 | 5,884 | 3,190 | 2,405 | 597 | 1,973 | 24,958 |
| - of which for actives | 2,389 | 1,540 | 3,159 | 833 | 1,209 | 309 | 1,232 | 10,671 |
| - of which for vested deferreds | 901 | 1,749 | 798 | 961 | 195 | 29 | 439 | 5,072 |
| - of which for retirees | 1,378 | 2,952 | 1,927 | 1,396 | 1,001 | 259 | 302 | 9,215 |
| Plan assets | 2,228 | 5,805 | 4,601 | 2,935 | 1,171 | 613 | 1,083 | 18,436 |
| Total surplus/(deficit) | –2,440 | –436 | –1,283 | –255 | –1,234 | 16 | –890 | –6,522 |
| Funding level, % | 48% | 93% | 78% | 92% | 49% | 103% | 55% | 74% |
| Pension plans recognized according to local rules | — | — | — | — | — | — | — | –213 |
| Duration (remaining term of pension obligation), years | 23 | 18 | 15 | 18 | 10 | 18 | — | 17 |
| Amount in income statement/other comprehensive income | ||||||||
| Current service cost | –133 | –78 | –136 | –51 | –16 | –16 | –36 | –466 |
| Net interest | –56 | –36 | –34 | 10 | –32 | 1 | –20 | –167 |
| Actuarial gains/(losses) | –899 | 453 | –366 | –518 | –277 | –9 | –231 | –1,847 |
| Total cost of defined-benefit pension plans before tax | –1,088 | 339 | –536 | –559 | –325 | –24 | –287 | –2,480 |
| Amount in cash flow | ||||||||
| Employer contributions to pension plans | –134 | –185 | 6 | –33 | –27 | –64 | –437 | |
| Pension payments directly from the company | –103 | –21 | –66 | –2 | –48 | –240 | ||
| Settlements paid | –86 | –86 | ||||||
| Key assumptions used in the valuation of the pension liability | ||||||||
| Life expectancy, years1 | 22 | 22 | 21 | 19 | 19 | 21 | — | — |
| Inflation, % | 1.50% | 3.20% | 2.50% | 2.00% | 2.00% | 2.00% | — | 2.32% |
| Discount rate, % (weighted average) | 2.65% | 3.90% | 3.96% | 2.25% | 1.90% | 4.00% | — | 3.15% |
| Future salary increases (weighted average) | 3.00% | 3.36% | 3.00% | 2.50% | 3.00% | 3.00% | — | 3.05% |
| 1) Expressed as the expected remaining life expectancy of a 65 year old in number of years. | ||||||||
| INFORMATION BY COUNTRY, 31 DECEMBER 2015 | SWEDEN | UK | US | FINLAND | GERMANY | CANADA | OTHER | TOTAL |
| Amount in the balance sheet | ||||||||
| Present value of funded and unfunded pension obligations | 4,256 | 6,409 | 6,055 | 3,206 | 2,330 | 527 | 1,853 | 24,636 |
| - of which for actives | 2,316 | 1,554 | 3,007 | 862 | 1,115 | 275 | 1,193 | 10,322 |
| - of which for vested deferreds | 836 | 1,752 | 853 | 938 | 170 | 26 | 379 | 4,954 |
| - of which for retirees | 1,104 | 3,103 | 2,195 | 1,406 | 1,045 | 226 | 281 | 9,360 |
| Plan assets | 2,275 | 5,904 | 4,943 | 2,916 | 1,191 | 560 | 1,157 | 18,946 |
| Total surplus/(deficit) | –1,981 | –505 | –1,112 | –290 | –1,139 | 33 | –696 | –5,690 |
| Funding level, % | 53% | 92% | 82% | 91% | 51% | 106% | 62% | 77% |
| Pension plans recognized according to local rules | — | — | — | — | — | — | — | –228 |
| Duration (remaining term of pension obligation), years | 23 | 17 | 14 | 17 | 10 | 15 | — | 16 |
| Amount in income statement/other comprehensive income | ||||||||
| Current service cost | –190 | –70 | –176 | –77 | –48 | –20 | –60 | –641 |
| Net interest | –62 | –15 | –41 | –6 | –26 | 1 | –23 | –172 |
| Actuarial gains/(losses) | 564 | –136 | –14 | 43 | 15 | 16 | 101 | 589 |
| Total cost of defined-benefit pension plans before tax | 312 | –221 | –231 | –40 | –59 | –3 | 18 | –224 |
| Amount in cash flow | ||||||||
| Employer contributions to pension plans Pension payments directly from the company |
–102 | –159 | –348 –27 |
4 | –37 –67 |
–21 –2 |
–60 –35 |
–621 –233 |
| Settlements paid | –46 | –85 | –40 | –171 | ||||
| Key assumptions used in the valuation of the pension liability | ||||||||
| Life expectancy, years1 | 22 | 22 | 21 | 21 | 19 | 21 | — | — |
| Inflation, % | 1.50% | 3.11% | 2.50% | 2.00% | 2.00% | 2.00% | — | 2.31% |
| Discount rate, % (weighted average) | 3.35% | 3.89% | 4.34% | 2.40% | 1.91% | 4.12% | — | 3.41% |
| Future salary increases (weighted average) | 3.00% | 3.20% | 3.00% | 2.50% | 2.99% | 3.00% | — | 3.00% |
1) Expressed as the expected remaining life expectancy of a 65 year old in number of years.
1
| UNFUNDED PENSION OBLIGATIONS | 2014 | 2015 |
|---|---|---|
| At 1 January | 19,577 | 24,958 |
| Current service cost | 466 | 641 |
| Settlements | –86 | –187 |
| Interest expense | 805 | 802 |
| Employee contributions | 23 | 27 |
| Pension payments | –863 | –893 |
| Actuarial gains/(losses) attributable to: | ||
| - Financial assumptions | 3,012 | –1,209 |
| - Demographic assumptions | 224 | 188 |
| - Experience adjustments | –248 | 186 |
| Other | –77 | –42 |
| Foreign exchange differences | 2,125 | 164 |
| At 31 December | 24,958 | 24,636 |
| PLAN ASSETS | 2014 | 2015 |
|---|---|---|
| At 1 January | 15,177 | 18,436 |
| Interest income | 638 | 630 |
| Settlements | –86 | –187 |
| Employer contributions to pension plans | 437 | 621 |
| Pension payments directly from the company | 240 | 233 |
| Settlements paid by employer | 86 | 170 |
| Employee contributions | 23 | 27 |
| Pension payments | –863 | –893 |
| Return on plan assets, excluding amount included in | ||
| interest income | 1,141 | –246 |
| Other | –84 | –18 |
| Foreign exchange differences | 1,727 | 173 |
| At 31 December | 18,436 | 18,946 |
An asset is recognized if the value of the plan assets for a certain plan exceeds the liability. Funded pension plans are recognized as an asset in the amount of 334 million SEK (301) in the item non-current receivables. Provisions for pensions include pension plans of 6,252 million SEK (7,036). The total net liability is 5,918 million SEK (6,735).
Three main categories of risks are associated with the company's definedbenefit pension plans. The first category is linked to future pension payments. Greater life expectancy, increased inflation assumptions and higher salaries can increase future pension payments and thus also the liability for the pension obligation. The second category refers to the assets in the foundations that are funded. Low returns may, in the future, lead to the assets being insufficient for covering future pension payments. The third and final category pertains to the measurement methods and accounting of defined-benefit pension plans, primarily regarding the discount rate utilized in the measurement of the present value of the pension obligations. This rate can fluctuate, leading to major changes in the recognized pension liability. The discount rate also affects the interest rate component of the pension liability and that is recognized in net financial items.
To determine the discount rate, AA credit rated corporate bonds are used that correspond to the duration of the pension obligation. If there is no deep market for corporate bonds, government bonds are instead used as the basis for determining the discount rate. Mortgage bonds are used in Sweden and Norway to determine the discount rate.
A sensitivity analysis of the most important assumptions affecting the recognized pension liability is provided below. Note that this sensitivity analysis is not intended to be the expression of an opinion by the company regarding the probability of such events occurring.
| (NET) | SE | UK | US | FI | DE | CA | TOTAL |
|---|---|---|---|---|---|---|---|
| Life expectancy, | |||||||
| +1 year | 180 | 211 | 137 | 127 | 8 | 15 | 678 |
| Inflation, +1.0% | 127 | 336 | 1 | 7 | 25 | 3 | 499 |
| Discount rate, –1% | 939 | 255 | 528 | 517 | 69 | –14 | 2,294 |
| Shares –20% | 92 | 337 | 547 | 209 | 47 | 22 | 1,254 |
| 1,338 | 1,139 | 1,213 | 860 | 149 | 26 | 4,725 |
Sandvik estimates that approximately 670 million SEK (800) will be paid into existing defined-benefit plans in 2016.
Plan assets amounted to 18,946 million SEK (18,436). Actual return on plan assets was 384 million SEK (1,779) in 2015. The consolidation ratio for funded plans is 83% (81). For all plans including unfunded plans, the consolidation ratio is 77% (74).
Assets without quoted prices amounted to approximately 8% (9) of the total plan assets of 18,946 million SEK.
The fair value of plan assets on 31 December 2015 included loans of 33 million SEK (32) to Sandvik companies and the value of properties leased to Sandvik of 211 million SEK (245).
The defined-benefit and defined-contribution plans are governed through Sandvik's Pension Supervisory Board (PSB). PSB meets twice a year and has the following areas of responsibility:
– Implement policies and directives
The Group Pension Committee (GPC) is another operating body, which is also preparatory to the PSB, that has representatives from countries with large defined-benefit plans and the relevant Group functions. The GPC's task is to monitor developments in countries, submit proposals on changes to pension plans to the PSB and approve the principle of how actuarial assumptions are established. GPC meets twice a year.
The aims of the investment decisions made in the foundations managing plan assets are as follows:
– Ensure that the plan assets are sufficient to cover the foundation's future pension commitments
– Achieve optimal returns while taking into account a reasonable level of risk Each foundation is to have a written investment policy approved by GPC. Reviews are performed annually. The foundation makes its own decisions on its investment strategy and takes into consideration the composition of the pension commitments, requirements of cash and cash equivalents and available investment opportunities. The investment strategy is to be long term and in line with the guidelines established by PSB. An investment committee is to be in place.
The Parent Company's recognized pension provision was 350 million SEK (362). The Parent Company's PRI pensions are secured through Sandvik's own pension foundation, the Sandvik Pension Foundation in Sweden. Sandvik AB and most of its Swedish subsidiaries are members of the foundation. The total value of the assets held by the foundation was 2,275 million SEK (2,228), which was 384 million SEK lower than the capital value of the corresponding pension obligations for the entire foundation. The deficit was recognized as a liability in the companies. The Parent Company's funded obligations mainly comprise ITP Plans.
| OBLIGATIONS | 2014 | 2015 |
|---|---|---|
| Present value of funded and unfunded pension | ||
| obligations | 1,967 | 2,063 |
| Plan assets | 1,733 | 1,760 |
| Deficit in the assets of the pension foundation | –128 | –47 |
| Net amount recognized for pension obligations | –362 | –350 |
| GROUP | WARRANTIES RESTRUCTURING | EMPLOYEE BENEFITS |
ENVIRONMENTAL OBLIGATIONS |
LEGAL DISPUTES | OTHER OBLIGATIONS |
TOTAL | |
|---|---|---|---|---|---|---|---|
| Balance at 31 December 2014 | 498 | 522 | 325 | 349 | 107 | 219 | 2,020 |
| Provisions made during the year | 323 | 2,876 | 323 | 20 | 74 | 454 | 4,070 |
| Provisions used during the year | –250 | –1,379 | –213 | –65 | –20 | –139 | –2,066 |
| Unutilized provisions reversed during the year | –72 | –69 | –15 | –2 | –4 | –12 | –174 |
| Reclassifications | –2 | 10 | 0 | 0 | 0 | –8 | 0 |
| Translation differences | –11 | –6 | –18 | –16 | –11 | –7 | –69 |
| Transfer to liabilities held for sale | –61 | –8 | –30 | — | –12 | –200 | –311 |
| Balance at 31 December 2015 | 425 | 1,946 | 372 | 286 | 134 | 307 | 3,470 |
| of which current | 325 | 1,496 | 150 | 76 | 86 | 231 | 2,364 |
| of which non-current | 100 | 450 | 222 | 210 | 48 | 76 | 1,106 |
| PARENT COMPANY | |||||||
| Balance at 31 December 2014 | 17 | 122 | 88 | 11 | — | 1 | 238 |
| Provisions made during the year | 23 | 202 | 100 | 4 | — | 1 | 330 |
| Provisions used during the year | –3 | –88 | –70 | –1 | — | –1 | –162 |
| Unutilized provisions reversed during the year | –2 | –6 | 0 | — | — | — | –8 |
| Reclassifications | — | — | 0 | — | — | — | 0 |
| Balance at 31 December 2015 | 35 | 230 | 118 | 14 | — | 1 | 398 |
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighing of all possible outcomes against their associated probabilities.
A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.
A provision for personnel-related benefits is recognized in accordance with agreements entered for long-term incentive programs, local bonus programs, part-time pensions and other personnel obligations.
Non-current interest-bearing liabilities fall due as follows:
Environment-related provisions include provisions for environmental remediation measures related to the Group's sites.
Legal disputes include provisions for claims which, at the balance sheet date, had not been closed.
Other obligations include provisions for onerous contracts and obligations within the scope of Sandvik Försäkring AB's operations. Provisions classified as current are expected to result in an outflow of resources within twelve months from the balance sheet date.
| 2014 | 2015 | |||||
|---|---|---|---|---|---|---|
| WITHIN ONE TO FIVE YEARS |
LATER THAN FIVE YEARS |
TOTAL | WITHIN ONE TO FIVE YEARS |
LATER THAN FIVE YEARS |
TOTAL | |
| Loans from financial institutions | — | 3,926 | 3,926 | 2,499 | — | 2,499 |
| Loans from Group companies | — | 363 | 363 | 452 | — | 452 |
| Other liabilities | 5,397 | 16,075 | 21,4721) | 4,352 | 13,699 | 18,0511) |
| Total | 5,397 | 20,364 | 25,761 | 7,303 | 13,699 | 21,002 |
1) Other liabilities mainly comprise bond loans.
| GROUP | 2014 | 2015 |
|---|---|---|
| NON-CURRENT LIABILITIES | ||
| Bond issues | 27,800 | 24,657 |
| Other | 2,496 | 2,642 |
| Total | 30,296 | 27,299 |
| CURRENT LIABILITIES | ||
| Bond issues | 826 | 3,001 |
| Other | 55 | 12 |
| Total | 881 | 3,013 |
For information on contractual terms, scheduled repayments and the exposure to interest risk and foreign-currency risk, refer to the section "Financial risk management."
| GROUP | 2014 | 2015 |
|---|---|---|
| OTHER NON-CURRENT LIABILITIES | ||
| Derivatives designated as hedging instruments | 100 | 67 |
| Other | 48 | 38 |
| Total | 148 | 105 |
| OTHER CURRENT LIABILITIES | ||
| Derivatives designated as hedging instruments | 1,478 | 804 |
| Bills payable | 110 | 71 |
| Gross amount due to construction contract | ||
| customers | 1,002 | 748 |
| Other | 1,775 | 2,094 |
| Total | 4,365 | 3,717 |
| Whereof discontinued operations | –706 | |
| Continuing operations | 3,011 |
Sandvik Annual Report 2015 115
| PARENT COMPANY | 2014 | 2015 |
|---|---|---|
| Personnel related | 1,811 | 1,341 |
| Expenses related to finance | 383 | 366 |
| Other | 127 | 300 |
| Total | 2,321 | 2,007 |
On occasion, Sandvik is party to litigation and administrative proceedings related to its operations, including responsibility for products, the environment, health and safety. However, Sandvik does not deem that any of these ongoing proceedings and processes will significantly affect the Sandvik Group.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| CONTINGENT LIABILITIES | 2014 | 2015 | 2014 | 2015 | |
| Bills discounted | 11 | 13 | — | — | |
| Other surety undertakings and | |||||
| contingent liabilities | 326 | 258 | 15,937 | 15,583 | |
| Total | 337 | 271 | 15,937 | 15,583 | |
| of which for subsidiaries | 15,488 | 15,112 |
The Parent Company's surety undertakings and contingent liabilities amounted to 15,583 million SEK (15,937), of which 8,508 million SEK (8,930) related to the Parent Company's guarantees for Sandvik Treasury AB's financial borrowings. The remainder comprised mainly indemnity bonds for commitments of Group companies to their customers and vendors, and to financial institutions relating to local borrowings, guarantees on advances received and various types of performance bonds.
The Group's surety undertakings and contingent liabilities amounted to 271 million SEK (337) and mainly comprised pension guarantees and ongoing proceedings.
Pledged assets for own liabilities and provisions.
| GROUP | 2014 | 2015 |
|---|---|---|
| Property mortgages | 213 | 205 |
| Chattel mortgages | 101 | 94 |
| Total | 314 | 299 |
No assets of the Parent Company had been pledged in 2015 and 2014.
Under the IFRS 13 disclosure requirements, the method applied to the valuation of assets and liabilities measured at fair value in the balance sheet is presented below. The valuation is divided into three levels:
All of Sandvik's financial instruments are measured according to Level 2. Information on financial risks is also presented in the financial risk section of the Report of the Directors.
The following is a summary of the methods and assumptions primarily applied to determine the fair value of the financial instruments presented in the table below.
The fair value of foreign exchange contracts is determined based on observable market prices. The fair value of interest-rate swaps is based on discounting estimated future cash flows under the contractual terms and conditions and maturity dates and based on the market interest rate for similar instruments on the balance sheet date. Where discounted cash flows are used, the future cash flows are calculated on the best assessments of company management. The discount rate applied is the market-based interest rate of similar instruments on the balance sheet date.
All valuation techniques applied are accepted in the market and take into account all parameters that the market would consider in its pricing. These techniques are reviewed regularly so as to ensure their reliability. Applied assumptions are compared against actual outcomes to identify any needs for adjusting the measurement or forecasting tools.
For means of payment, receivables and liabilities with variable interest and current receivables and liabilities (for example, trade receivables and accounts payable), the fair value has been considered to correspond to the carrying amount.
| FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE |
2014 | 2015 | |
|---|---|---|---|
| Financial assets | |||
| Derivatives | Foreign exchange | ||
| contracts | 837 | 657 | |
| Foreign currency options | 23 | 0 | |
| Interest-rate swaps | 37 | 32 | |
| Commodity and electricity | |||
| derivatives | 67 | 19 | |
| Total | 964 | 708 | |
| Financial liabilities | |||
| Derivatives | Foreign exchange | ||
| contracts | 1,135 | 433 | |
| Foreign currency options | — | — | |
| Interest-rate swaps | 327 | 232 | |
| Commodity and electricity | |||
| derivatives | 116 | 199 | |
| Total | 1,578 | 864 |
Financial assets and liabilities are not offset in the balance sheet. Derivative contracts are subject to framework agreements governing offsetting, and the carrying amounts of assets not offset in the balance sheet amounted to 708 million SEK. The carrying amount of corresponding liabilities was -864 million SEK. No collateral has been received or pledged. In the event of a default by a derivative counterparty, assets and liabilities for a total value of 460 million SEK would be offset in accordance with the framework agreement governing offsetting.
Financial assets and liabilities, except financial derivatives, are measured at amortized cost. Calculation at fair value would increase the Group's non-current borrowings by 2,154 million SEK (2,975). When measuring interest-bearing liabilities, the company's Swedish and European bond loans have then been remeasured using observable market prices for identical securities to value the Group's marketable debt instruments. Other non-current debt has been remeasured in accordance with the principles described above. For short-term loans and deposits, no remeasurement was carried out, given that the carrying amount is considered to represent a good approximation of the fair value due to the short duration.
The table below shows the fair value of financial assets and liabilities compared with their carrying amounts. Fair value is the amount at which an asset or liability can be sold between well-informed partners who are independent in relation to each other and who have a vested interest in completing the transaction.
| ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE-SHEET ITEMS | DERIVATIVES FOR HEDGE ACCOUNTING1) |
DERIVATIVES HELD FOR TRADING2) |
AVAILABLE-FOR-SALE FINANCIAL ASSETS |
LOANS AND RECEIVABLES |
TOTAL CARRYING AMOUNT |
FAIR VALUE | ||||||
| FINANCIAL ASSETS | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 |
| Financial investments | — | — | 80 | 83 | 80 | 83 | 80 | 83 | ||||
| Trade receivables | — | — | — | 13,840 | 12,238 | 13,840 | 12,238 | 13,840 | 12,238 | |||
| Other receivables 3) | — | — | — | 1,646 | 1,638 | 1,646 | 1,638 | 1,646 | 1,638 | |||
| Derivatives 4) | 178 | 118 | 786 | 592 | — | — | 964 | 710 | 964 | 710 | ||
| Cash and cash | ||||||||||||
| equivalents | — | — | — | 6,327 | 6,376 | 6,183 | 6,315 | 6,183 | 6,315 | |||
| Total financial assets | 178 | 118 | 786 | 592 | 80 | 83 | 21,813 | 20,252 | 22,713 | 20,984 | 22,713 | 20,984 |
| LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE-SHEET ITEMS | DERIVATIVES FOR HEDGE ACCOUNTING1) |
DERIVATIVES HELD FOR TRADING2) |
OTHER FINANCIAL LIABILITIES |
TOTAL CARRYING AMOUNT |
FAIR VALUE | |||||
| FINANCIAL LIABILITIES | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 |
| Borrowings5) | — | — | 37,070 | 34,548 | 37,070 | 34,548 | 40,045 | 36,702 | ||
| Derivatives6) | 565 | 458 | 1,013 | 413 | — | 1,578 | 871 | 1,578 | 871 | |
| Accounts payable | — | — | 6,762 | 5,953 | 6,762 | 5,953 | 6,762 | 5,953 | ||
| Due to associates | — | — | 8 | 3 | 8 | 3 | 8 | 3 | ||
| Other liabilities7) | — | — | 110 | 71 | 110 | 71 | 110 | 71 | ||
| Total financial liabilities | 565 | 458 | 1,013 | 413 | 43,950 | 40,575 | 45,528 | 41,446 | 48,503 | 43,600 |
1) Of which –369 million SEK (-424) pertains to cash-flow hedges recognized in the hedging reserve in equity and 35 million SEK (21) pertains to fair-value hedges recognized in profit or loss.
2) Of which 179 million SEK (-227) pertains to financial hedges; hedge accounting is not applied.
3) Comprises parts of the Group's non-current receivables, accrued income and other receivables recognized in the balance sheet.
4) Derivatives form part of the other receivables recognized in the balance sheet. 5) Recognized in the balance sheet as non-current and current liabilities to financial institutions and other liabilities.
6) Derivatives form part of the other liabilities recognized in the balance sheet. 7) Form part of the Group's non-current liabilities, accrued expenses and other liabilities recognized in the balance sheet.
In addition to fair value adjustment, interest and currency movement effects are included.
| 2014 | 2015 | |
|---|---|---|
| Assets and liabilities at fair value (Derivatives) | –1,083 | –185 |
| Loans and accounts receivables | 959 | 42 |
| Available-for-sale financial assets | 3 | 9 |
| Financial liabilities | –1,813 | –1,771 |
The company's financial liabilities amounted to 41,446 million SEK (45,528) at year-end.
| 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| <6 MONTHS | 6–12 MONTHS |
1–5 YEARS | >5 YEARS | <6 MONTHS | 6–12 MONTHS |
1–5 YEARS | >5 YEARS | ||
| Bank loans | SEK | –1,924 | –45 | –4,802 | –703 | –547 | –406 | –4,304 | –660 |
| Commercial papers | SEK | — | — | — | — | — | — | — | — |
| Medium Term Notes | SEK | –458 | –543 | –7,992 | –3,729 | –1,088 | –2,055 | –7,573 | –1,027 |
| European Medium Term Notes | EUR | –254 | –123 | –1,886 | –12,806 | –244 | –118 | –1,825 | –12,177 |
| Private placement | USD | –166 | –166 | –5,505 | –1,429 | –176 | –176 | –5,593 | –1,440 |
| Derivatives | |||||||||
| – Currency derivatives | –45 | –17 | 41 | — | 176 | 37 | –1 | 0 | |
| – Interest-rate derivatives | –48 | –24 | –231 | –144 | –55 | –40 | –260 | –101 | |
| – Commodity and electricity | |||||||||
| derivatives | –17 | –40 | –47 | — | –49 | –82 | –62 | 0 | |
| Finance leases | –9 | –9 | –50 | –31 | –10 | –9 | –55 | –7 | |
| Accounts payable | –6,762 | — | — | — | –5,953 | — | — | — | |
| Total | –9,683 | –967 | –20,472 | –18,842 | –7,946 | –2,849 | –19,673 | –15,412 |
31 32
| Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | 2018 AND LATER |
|
|---|---|---|---|---|---|---|---|---|---|
| Currency derivatives | 7 | 20 | 16 | 15 | –1 | 0 | 0 | 0 | 0 |
| Interest derivatives | — | — | — | –34 | — | — | –33 | 0 | –165 |
| Commodity and electricity | |||||||||
| derivatives | –28 | –22 | –5 | –76 | –4 | –1 | –1 | –46 | –11 |
| Total | –21 | –2 | 11 | –95 | –5 | –1 | –34 | –46 | –176 |
The Group's sales to associated companies amounted to 721 million SEK (860). The Group's purchases from associated companies amounted to 219 million SEK (309). Loans to associated companies amounted to 206 million SEK (219). Interest income on loans to associated companies amounted to 6 million SEK (7). Guarantees have been made for the obligations of associated companies in the amount of 0 million SEK (0). All transactions are carried out on market terms.
Sales to Group companies from the Parent Company amounted to 12,121 million SEK (13,277), or 77% (81) of total sales. The share of exports was 73% (72). The Parent Company's purchases from Group companies amounted to 2,575 million SEK (1,942), or 17% (12) of total purchases. The Parent Company granted no loans to associated companies. Guarantees have been made for obligations of associated companies in the amount of 0 million SEK (0). All transactions are effected on an arm's length basis.
Except as indicated in Note 3.5, Remuneration of the Board of Directors and senior executives, and in the description of the Board of Directors, no transactions took place with persons closely associated with the company.
| CASH AND CASH EQUIVALENTS | 2014 | 2015 |
|---|---|---|
| GROUP | ||
| Cash and cash equivalents comprise: | ||
| Cash and bank | 4,100 | 3,586 |
| Short-term investments comparable to cash and cash | ||
| equivalents | 2,227 | 2,790 |
| Total in the balance sheet | 6,327 | 6,376 |
| Total in the cash-flow statement | 6,327 | 6,376 |
| PARENT COMPANY | ||
| Cash and cash equivalents comprise: | ||
| Cash and bank | 1 | 1 |
| Total in the balance sheet | 1 | 1 |
| Total in the cash-flow statement | 1 | 1 |
A short-term investment is classified as a cash and cash equivalent if:
– The risk of changes in value is insignificant.
– It is readily convertible into cash.
– It has a maturity of no more than three months from the date of acquisition.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | |
| INTEREST AND DIVIDEND PAID AND RECEIVED | ||||
| Dividend received | 3 | 9 | 5,264 | 7,975 |
| Interest received | 128 | 134 | 1,083 | 1,087 |
| Interest paid | –1,944 –1,891 –2,001 –1,405 | |||
| Total | –1,813 –1,748 | 4,346 | 7,657 |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2014 | 2015 | ||
| ADJUSTMENT FOR NON-CASH ITEMS, ETC. | |||||
| Changes in value of financial instruments | — | — | 235 | –31 | |
| Unappropriated results of associated | |||||
| companies | –14 | 3 | — | — | |
| Gains and losses on disposal of non | |||||
| current assets | –38 | –72 | 1 | –34 | |
| Provisions for pensions | — | — | 34 | 6 | |
| Other provisions | –1,089 | 1,832 | 38 | 142 | |
| Unrealized foreign exchange differences | — | — | 384 | — | |
| Other | 27 | –194 | 66 | 118 | |
| Total | –1,114 | 1,569 | 758 | 201 |
| 2014 | 2015 | |
|---|---|---|
| ACQUISITIONS OF SUBSIDIARIES AND OTHER BUSINESS OPERATIONS – GROUP |
||
| Net assets acquired: | ||
| Intangible assets | 1,929 | 15 |
| Property, plant and equipment | 291 | 2 |
| Financial assets | 242 | — |
| Inventories | 725 | 3 |
| Current receivables | 568 | 5 |
| Cash and cash equivalents | 118 | 4 |
| Total assets | 3,873 | 29 |
| Interest-bearing liabilities | –2,279 | — |
| Non-interest-bearing liabilities | –1,081 | –18 |
| Total provisions and liabilities | –3,360 | –18 |
| Net identifiable assets and liabilities | 513 | 11 |
In 2015, acquired assets and liabilities refer to the acquisition of SGL Technology B.V.
| 2014 | 2015 | |
|---|---|---|
| DIVESTMENTS OF SUBSIDIARIES AND OTHER BUSINESS UNITS – GROUP |
||
| Divested assets and liabilities: | ||
| Property, plant and equipment | 106 | — |
| Inventories | 310 | — |
| Current receivables | 1 | — |
| Cash and cash equivalents | — | — |
| Total assets | 417 | — |
| Non-interest-bearing liabilities | –28 | — |
| Total liabilities | –28 | — |
| Net identifiable assets and liabilities | 389 | — |
| Purchase consideration received | 460 | — |
The business combinations effected during 2014 and 2015 are set out below. Annual revenue and number of employees reflect the situation at the date of the respective acquisition.
| BUSINESS AREA | COMPANY | ACQUISITION DATE | ANNUAL REVENUE | NO. OF EMPLOYEES |
|---|---|---|---|---|
| Sandvik Venture | Varel International Energy Services Inc. | 21 May 2014 | 2,300 | 1,300 |
| Sandvik Venture | SGL Technology B.V. | 15 September 2015 | 60 | 20 |
On 15 September 2015, Sandvik acquired 100% of the shares in SGL Technology B.V. A cash payment of 11 million SEK was made for the shares. SGL is a manufacturer of industrial processing equipment for the food processing industry. The core capabilities of the company are within steel belt-based equipment for industrial processing of chocolate and other belt equipment for processing of agri-food and non-food products. SGL's offering consists of new equipment as well as service and spare parts. The company has over 30 years of experience in developing processing solutions for customers in the food segment. The acquisition will widen Sandvik's product portfolio of industrial solutions for customers in the food processing business and, in combination with Sandvik's existing capabilities, it will strengthen the market position of Sandvik.
The fair value of assets and liabilities in SGL Technology B.V. is presented in the table below.
FAIR VALUE RECOGNIZED IN THE GROUP
| Intangible assets | 15 |
|---|---|
| Property, plant and equipment | 2 |
| Inventories | 3 |
| Current receivables | 5 |
| Cash and cash equivalents | 4 |
| Non-interest-bearing liabilities | –18 |
| Net identifiable assets and liabilities | 11 |
| Purchase consideration | 11 |
| Cash and cash equivalents in acquired businesses | –4 |
| Net cash outflow | 7 |
The value of acquired assets and assumed liabilities has been finalized for the acquisition of SGL Technology B.V. A fair-value measurement increased the value of net assets by 11 million SEK.
No goodwill arose relating to the acquisition of SGL Technology B.V.
Acquisition-related expenses amounted to 2 million SEK. The expenses relate to consultant fees in conjunction with due diligence and were recognized as other operating expenses.
The fair value of trade receivables amounts to 3 million SEK.
| TRANSFERRED COMPENSATION | |
|---|---|
| Cash and cash equivalents | 11 |
| Contingent purchase consideration | |
| 11 |
The value of acquired assets and assumed liabilities has been finalized for the acquisition of Varel International Energy Services Inc., which was implemented in 2014. No adjustment was made to the acquistion values.
| FAIR VALUE RECOGNIZED IN THE GROUP | |
|---|---|
| Intangible assets | 1,929 |
| Property, plant and equipment | 291 |
| Financial assets | 242 |
| Inventories | 725 |
| Current receivables | 568 |
| Cash and cash equivalents | 118 |
| Interest-bearing liabilities | –2,279 |
| Non-interest-bearing liabilities | –1,081 |
| Net identifiable assets and liabilities | 513 |
| Goodwill | 2,439 |
| Purchase consideration | 2,952 |
| Cash and cash equivalents in acquired businesses | –118 |
| Net cash outflow | 2,834 |
| SANDVIK MACHINING SOLUTIONS |
SANDVIK MINING |
SANDVIK MATERIALS TECHNOLOGY |
SANDVIK CONSTRUCTION |
SANDVIK VENTURE |
TOTAL | |
|---|---|---|---|---|---|---|
| CONTRIBUTIONS AS OF ACQUISITION DATE | ||||||
| Revenue | — | — | — | — | 25 | 25 |
| Profit/loss for the year | — | — | — | — | 1 | 1 |
| CONTRIBUTIONS AS THOUGH THE ACQUISITION DATE HAD BEEN 1 JANUARY 2015 |
||||||
| Revenue | — | — | — | — | 67 | 67 |
| Profit/loss for the year | — | — | — | — | 3 | 3 |
| SANDVIK MACHINING SOLUTIONS |
SANDVIK MINING |
SANDVIK MATERIALS TECHNOLOGY |
SANDVIK CONSTRUCTION |
SANDVIK VENTURE |
TOTAL | |
|---|---|---|---|---|---|---|
| CONTRIBUTIONS AS OF ACQUISITION DATE | ||||||
| Revenue | — | — | — | — | 1,547 | 1,547 |
| Profit/loss for the year | — | — | — | — | 100 | 100 |
| CONTRIBUTIONS AS THOUGH THE ACQUISITION DATE HAD BEEN 1 JANUARY 2014 |
||||||
| Revenue | — | — | — | — | 2,457 | 2,457 |
| Profit/loss for the year | — | — | — | — | 145 | 145 |
On 1 October 2015, Sandvik announced its intention to divest the product area Mining Systems, which is a separate product area within Sandvik Mining and a supplier of design and engineering of material handling systems for the mining industry. The divestment of Mining Systems will make Sandvik Mining more focused on its core operations. In connection with the ongoing divestment, a write-down of assets has been made to a value that corresponds to the estimated sale price less selling costs. The write-down of assets, related to projects, and the provision for estimated selling costs amount to 998 million SEK. As from the third quarter 2015 and until closure of the divestment, Mining Systems operations will be reported as discontinued operations in the Sandvik Group's financial statements. The divestment is expected to be completed during 2016.
The following tables present the income statement of Mining Systems for the financial year, the balance sheet in summary at 31 December 2015 and the condensed cash flow statement for the financial year.
| 2014 | 2015 | |
|---|---|---|
| Revenue | 6,288 | 4,977 |
| Cost of sales and services | –5,889 | –5,512 |
| Gross profit | 399 | –535 |
| Selling expenses | –228 | –201 |
| Administrative expenses | –260 | –404 |
| Research and development costs | –20 | –13 |
| Other operating income | 31 | 1 |
| Other operating expenses | –7 | –57 |
| Operating loss | –85 | –1,209 |
| Financial income | — | — |
| Financial expenses | –20 | –40 |
| Net financing costs | –20 | –40 |
| Loss after financial items | –105 | –1,249 |
| Income tax | — | — |
| Loss for the year | –105 | –1,249 |
| 2015 | |
|---|---|
| Non-current assets | 558 |
| Current assets | 1,561 |
| Total assets | 2,119 |
| Non-current liabilities | 26 |
| Current liabilities | 1,863 |
| Total liabilities | 1,889 |
| 2014 | 2015 | |
|---|---|---|
| Cash flow from operating activities | –383 | –841 |
| Cash flow from investing activities | –58 | –45 |
| Cash flow from financing activities | 2 | 0 |
| Cash flow from discontinued operations | –440 | –886 |
Sandvik Aktiebolag, corporate registration number 556000-3468, is a Swedish limited liability company. The registered office of its Board of Directors is in Stockholm, Sweden. The address of the head office is PO Box 510, SE-101 30 Stockholm, Sweden. The visiting address is World Trade Center, Kungsbron 1, section G, floor 6.
The Parent Company's shares are quoted on Nasdaq Stockholm. Shares can also be traded in the US in the form of ADRs (American Depositary Receipts).
The 2015 consolidated financial statements comprise the Parent Company and all its subsidiaries, jointly the Group. The Group also includes the owned share of investments in associated companies.
The following information is presented in accordance with the provisions of Chapter 6, Section 2.a. of the Swedish Annual Accounts Act.
The Parent Company has issued one series of shares and each share carries one vote. The total number of shares shall be no less than 1,000,000,000 and no more than 4,000,000,000.
At the end of 2015, 1,254,385,923 shares (1,254,385,923) with a quotient value of 1.20 SEK per share had been issued. Shareholders have a preferential right to subscribe to newly issued shares issued for cash or with terms and conditions concerning rights of setoff. All shares are fully negotiable.
Shareholdings that directly and indirectly represent at least 10% of the voting rights are held by AB Industrivärden (11.7%).
Sandvik AB's Articles of Association govern such policies as the direction of the business, domicile and share capital (minimum and maximum capital). The Articles do not stipulate that the members of the Board of Directors shall be elected in any other way than at the Annual General Meeting. However, Board representatives of the employees are appointed by the trade unions under the Private Sector Employees (Board Representation) Act.
Companies in the Group entered into borrowing agreements that include conditions coming into effect should the control of the company change as a result of a public takeover bid.
There are no agreements between the companies in the Group and the Parent Company's directors or employees if those persons give notice of termination, or their services are improperly terminated, or the employment is terminated as a consequence of a public takeover bid.
32
Board statement in accordance with Chapter 18, Section 4 of the Swedish Companies Act.
The nature and extent of the company's operations are stated in the Articles of Association and issued annual reports.
Such nature and extent do not entail risks over and above those inherent, or reasonably to be expected, in the industry or otherwise inherent in business operations. For information on significant events, reference is made to the Report of the Directors.
The company's financial position at 31 December 2015 is apparent from this Annual Report. The proposed dividend does not infringe on investments deemed to be required. In addition, the company's liquidity reserve is in the form of two unutilized credit facilities amounting to 650 million EUR
and 5,000 million SEK, respectively, which means that the company should reasonably be able to meet unexpected events and temporary fluctuations in cash flows of reasonable proportions. The company's financial position supports the assessment that the company will be able to continue its business and meet its obligations in both the short and long term.
In view of the above and based on what the Board is otherwise aware, the proposed dividend in the Board's opinion is justified considering the requirements which the nature, extent and risks associated with the operations place on the size of the equity of the company, and also taking into consideration the company's need to strengthen its balance sheet, liquidity and financial position in general.
Stockholm, 19 February 2016 Sandvik Aktiebolag (publ) BOARD OF DIRECTORS
The Board of Directors and the President and CEO proposes that the profits at the disposal of the Annual General Meeting:
| profits carried forward | 20,758,977,502 |
|---|---|
| and result for the year | 8,121,615,476 |
| SEK | 28,880,592,978 |
| be appropriated as follows: a dividend of 2.50 SEK per share |
|
| to the shareholders | 3,135,964,808 |
| profits carried forward | 25,744,628,170 |
| SEK | 28,880,592,978 |
The proposed record date for dividends is Monday, 2 May 2016.
The income statements and the balance sheets of the Group and of the Parent Company are subject to the adoption by the Annual General Meeting on 28 April 2016.
The Board of Directors and the President hereby certify that the Annual Report has been prepared in accordance with generally accepted accounting principles in Sweden, and that the consolidated financial statements have been prepared in accordance with the international financial reporting standards referred to in the regulation (EU) no. 1606/2002 of the European Parliament and Council dated 19 July 2002, pertaining to the application of international financial reporting standards. The Annual Report and the consolidated financial statements give a true and fair view of the Parent Company's and the Group's financial position and results. The Report of the Directors pertaining to the Parent Company and the Group gives a fair overview of the development of the Parent Company's and the Group's operations, financial position and results, and describes the significant risks and uncertainties facing the Parent Company and the companies included in the Group.
Stockholm, 19 February 2016
Johan Molin Jennifer Allerton Claes Boustedt Chairman Board member Board member
Jürgen M Geissinger Johan Karlström Jan Kjellgren Board member Board member Board member
Tomas Kärnström Hanne de Mora Lars Westerberg
Board member Board member Board member
Björn Rosengren President and CEO
Our audit report was submitted on 1 March 2016
KPMG AB
George Pettersson Authorized Public Accountant
We have audited the annual accounts and consolidated accounts of Sandvik AB (publ) for the year 2015. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 41–122.
The Board of Directors and the President and CEO are responsible for the preparation and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the President and CEO determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the President and CEO, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts
Act and present fairly, in all material respects, the financial position of the group as of 31 December 2015 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the President and CEO of Sandvik AB (publ) for the year 2015.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the President and CEO are responsible for administration under the Companies Act.
Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.
As basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
As basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the President and CEO is liable to the company. We also examined whether any member of the Board of Directors or the President and CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the President and CEO be discharged from liability for the financial year.
Stockholm 1 March 2016
KPMG AB
George Pettersson Authorized Public Accountant
JOHAN MOLIN JENNIFER ALLERTON CLAES BOUSTEDT
JÜRGEN M GEISSINGER JOHAN KARLSTRÖM HANNE DE MORA
LARS WESTERBERG JAN KJELLGREN
TOMAS KÄRNSTRÖM
DEPUTY MEMBERS
THOMAS ANDERSSON MATS W LUNDBERG
Chairman of the Board since 2015. Chairman of the Remuneration Committee and member of the Audit Committee.
Education and business experience: Degree from the Stockholm School of Economics. President and CEO of ASSA ABLOY since 2005, President and CEO of Nilfisk-Advance 2001–2005 and various positions within the Atlas Copco Group 1983–2001.
Current Board assignments: Board member of ASSA ABLOY AB.
Shareholding in Sandvik (own and closely related persons): 260,000 (through capital redemption policy), 1,000,000 call options.
Board member since 2015.
Education and business experience: M.Sc. in Physics and B.Sc. in Mathematics, Physical Sciences and Geosciences. Chief Information Officer at F. Hoffmann-La Roche Ltd 2002–2012, Technology Director at Barclaycard 1999–2002 and various positions at ServiceNet, USA, BOC (now Linde), Cable & Wireless Business Networks and Unilever plc.
Current Board assignments: Board member of Iron Mountain Inc, AVEVA Group plc and Oxford Instruments plc.
Shareholding in Sandvik (own and closely related persons): 10,000.
Board member since 2015. Member of the Audit Committee.
Education and business experience: MBA. Vice President of L E Lundbergföretagen AB since 1997 and President of L E Lundberg Kapitalförvaltning AB since 1995. Current Board assignments: Board member of
Hufvudstaden AB. Shareholding in Sandvik (own and closely related persons): 10,000.
Board member since 2012. Education and business experience: PhD in Mechanical Engineering. CEO of Senvion Holding GmbH since 2015. President and CEO of Schaeffler AG 1998–2013, various senior positions at ITT Automotive 1992–1998.
Current Board assignments: Member of the Supervisory Board of MTU Aero Engines AG. Shareholding in Sandvik (own and closely related persons): 0.
Board member since 2011. Member of the Remuneration Committee. Education and business experience: M.Sc. (Eng.)
President of Skanska AB since 2008, various senior positions at BPA (currently Bravida) 1995–2000.
Current Board assignments: Board member of Skanska AB.
Shareholding in Sandvik (own and closely related persons): 5,000.
Board member since 2006. Chairman of the Audit Committee.
Education and business experience: B.Sc. (Econ.), MBA, IESE, Barcelona. One of the founders and owners, also Chairman of the Board of the management company a-connect (group) ag since 2002, partner in McKinsey & Company Inc. 1989– 2002, various positions within brand management and controlling at Procter & Gamble 1986–1989. Current Board assignments: Board member of AB Volvo and IMD Foundation Board. Shareholding in Sandvik (own and closely related persons): 16,000.
Board member since 2010. Member of the Remuneration Committee.
Education and business experience: M.Sc. (Eng.) and B.Sc. (Econ.). President and CEO of Autoliv Inc. 1999–2007, Gränges AB 1994–1999 and ESAB 1991–1994. Various positions at ESAB and ASEA from 1972.
Current Board assignments: Chairman of Husqvarna AB, Board member of SSAB, AB Volvo, Stena AB and Meda AB.
Shareholding in Sandvik (own and closely related persons): 12,000.
Board member since 2008 (Employee representative). Education and business experience: Senior R&D
engineer, AB Sandvik Coromant. Various positions at Sandvik since 1981. Current Board assignments: —
Shareholding in Sandvik (own and closely related persons): 570.
Board member since 2006 (Employee representative).
Education and business experience: Principal safety representative Sandvik Materials Technology. Various positions at Sandvik since 1986.
Current Board assignments: — Shareholding in Sandvik (own and closely related persons): 2,889.
Deputy Board member since 2012 (Employee representative). Education and business experience: Chairman of the Union Committee, Metal Workers' Union, Sandvik Coromant, Gimo. Various operator positions at Gimoverken since 1984. Construction firm Anders Diös 1980–1984. Current Board assignments: — Shareholding in Sandvik (own and closely related persons): 612.
Deputy Board member since 2015 (Employee representative).
Education and business experience: Master of Science and PhD in Chemical Engineering. Principal R&D Engineer, Sandvik Materials Technology since 2010. Scientist and postdoctoral researcher at Risø DTU, Denmark 2007–2010 and Technical Sales Specialist at Spectral Solutions AB 2005–2007.
Current Board assignments: —
Shareholding in Sandvik (own and closely related persons): 0.
Chairman of the Board of Sandvik AB 1983–2002.
Secretary to the Sandvik Board of Directors since 2014.
Education and business experience: Master of Laws (LL.M). Securitas Group 2009–2014, general counsel from 2011, Elekta AB 1999–2009, several senior positions, including general counsel. Lagerlöf & Leman law firm 1996–1999. Current Board assignments: — Shareholding in Sandvik (own and closely related
persons): 3,034.
Auditor-in-charge: George Pettersson, b. 1964. Authorized Public Accountant. Other auditing assignments: Auditor in charge for Skanska AB, Nobia AB, Lagercrantz Group AB and Addtech AB, among others. Shareholding in Sandvik (own and closely related persons): 0.
Information regarding Board assignments and holdings of shares as of 31 December 2015. Current Board assignments refers to assignments in companies outside the Sandvik Group.
PETRA EINARSSON LARS ENGSTRÖM DINGGUI GAO
JONAS GUSTAVSSON
JIM NIXON
ÅSA THUNMAN
ANNA VIKSTRÖM PERSSON ZHIQIANG (ZZ) ZHANG
President and CEO of Sandvik AB since November 2015.
Education and business experience: M.Sc. in Technology. President and CEO of Wärtsilä 2011–2015. Senior Executive Vice President Atlas Copco AB and Business Area President for Construction and Mining Technique 2002–2011. President of the Atlas Copco Rock Drilling Equipment division 2001–2002. President of the Atlas Copco Craelius division 1998–2001. GM of Nordhydraulic, Nordwin AB, Sweden 1995–1998. Various positions within ESAB Group 1985–1995.
Current Board assignments: Member of the Board of Danfoss A/S.
Shareholding in Sandvik (own and closely related persons): 65,000
Executive Vice President and Head of Group Communications, Sandvik AB, since 2013. Education and business experience: M.Sc. in Geological and Earth Sciences/Geosciences, and Journalism. Employed at Sandvik since 2006. Various senior positions, including Vice President Communication and Marketing at Sandvik Coromant 2012–2013 and Internal Communication Manager at Sandvik Coromant 2010–2012. Current Board assignments: — Shareholding in Sandvik (own and closely related
persons): 3,851.
Executive Vice President and Chief Financial Officer, Sandvik AB, since 2013. Education and business experience: B.Sc. in Business Administration and Economics. Various senior positions at Sandvik since 2007. Outokumpu Oy 2001–2007, Nordea 1999–2001, Boliden 1996–1999.
Current Board assignments: —
Shareholding in Sandvik (own and closely related persons): 24,030.
President of the Sandvik Materials Technology business area since 2013.
Education and business experience: B.Sc. in Business Administration and Economics. Employed at Sandvik since 1990. Various senior positions, including Financial Manager at Sandvik Materials Technology 2004–2007, President of the Strip product area 2007–2011 and President of the Tube product area 2011–2013.
Current Board assignments: Board member of SSAB, the Swedish Association of Industrial Employers and the Council of the Swedish Steel Producers' Association.
Shareholding in Sandvik (own and closely related persons): 16,443.
President of the Sandvik Mining business area since December 2015.
Education and business experience: M Sc Industrial Engineering and Management. Acting President and CEO BE Group AB 2014-2015, Acting President and CEO Munters AB 2006-2014. Various senior positions within Atlas Copco 1994–2006, such as President of the Atlas Copco Rock Drilling Equipment/Underground Rock Excavation Division 2002–2006 and General Manager Atlas Copco CMT Australia and New Zealand 2000–2002. Various positions within Seco Tools 1988–1994.
Current Board assignments: Board member of Studsvik AB.
Shareholding in Sandvik (own and closely related persons): 0.
President of the Sandvik Construction business area since 2013.
Education and business experience: MBA and B.Sc. in Mechanical Engineering. Various senior positions at Bosch, Eagle Ottawa China, Honeywell Automotive Parts and Sinotruk Hong Kong 1991–2013.
Current Board assignments: —
Shareholding in Sandvik (own and closely related persons): 9,034.
President of the Sandvik Machining Solutions business area since 2013. Education and business experience: M.Sc. (Eng.) Various senior positions at Sandvik since 2008,
including President of the Sandvik Materials Technology business area between 2011 and 2013. Vice President Operations at Rotax 2002– 2007, various senior positions at Bombardier 1997–2002 and ABB 1995–1997. Current Board assignments: Board member of
the Steel and Metal Employers Association. Shareholding in Sandvik (own and closely related persons): 29,674.
President of the Sandvik Venture business area since January 2015.
Education and business experience: ONC in Mechanical Engineering and The City and Guilds of London Institute full technician's certificate in production engineering. President and CEO of Varel International Energy Services 1998-2014. Various positions at the Dresser Industries Group 1990-1998.
Current Board assignments: Advisory Board member of Ecoserv, LLC.
Shareholding in Sandvik (own and closely related persons): 7,006.
Executive Vice President and General Counsel, Sandvik AB, since 2014. Education and business experience: Master of Laws (LL.M). Securitas Group 2009–2014, general counsel from 2011, Elekta AB 1999–2009, several senior positions, including general counsel. Lagerlöf & Leman law firm 1996–1999. Current Board assignments: — Shareholding in Sandvik (own and closely related persons): 3,034.
Executive Vice President and Head of Human Resources, Sandvik AB, since 2011. Education and business experience: Master of Laws. Executive Vice President and Head of Human Resources at SSAB 2006–2011. Head of Human Resources for Ericsson's Swedish operations 2004–2006. Various senior positions in Human Resources and Organizational Development for the Ericsson Group 1998–2006. Current Board assignments: — Shareholding in Sandvik (own and closely related persons): 18,426.
Executive Vice President and Head of Emerging Markets, Sandvik AB. Country Manager China and Managing Director Sandvik China Holding Co. Ltd. Joined the Group Executive Management in 2014. Education and business experience: MBA, Bachelor in Electronic Engineering. Employed at Sandvik since 2012. Various senior positions at the Siemens Group 1987–2012, including President Siemens VDO China 1998–2005 and President Nokia Siemens Networks China 2007–2012. Current Board assignments: Board member of Georg Fischer AG.
Shareholding in Sandvik (own and closely related persons): 21,803.
President and CEO and member of the Board of Sandvik AB.
President of the Sandvik Mining business area.
Executive Vice President and Head of Group R&D, Sandvik AB.
Information regarding Board assignments and holdings of shares as of 31 December 2015. Current Board assignments refers to assignments in companies outside the Sandvik Group.
The Annual General Meeting will be held on Thursday, 28 April 2016 at 5:00 p.m. at the Göransson Arena, Sätragatan 21, Sandviken, Sweden.
Shareholders who wish to participate in the Meeting must notify the company either by letter to Computershare AB, "Sandvik's AGM", Box 610, SE-182 16 Danderyd, Sweden, by telephone +46 26 26 09 40 from 9:00 a.m. to 4:00 p.m. on weekdays, or at sandvik.com. Such notification must reach Sandvik AB not later than Friday, 22 April 2016. Shareholders must also have been entered in the share register kept by Euroclear Sweden AB on Friday, 22 April 2016 to be entitled to participate in the Meeting.
Shareholders whose shares are registered in the name of a nominee must have the shares temporarily re-registered with Euroclear Sweden AB in their own name on Friday, 22 April 2016 to be entitled to participate in the Meeting. Note that this procedure also applies with respect to shares held on a bank's shareholder deposit account and certain investment savings accounts.
When providing notification, please state your name, personal or corporate registration number, address and telephone number, and details of any assistants. If you plan to be represented at the Meeting by proxy, such proxy must be sent to Sandvik AB prior to the Meeting.
The Board proposes that the 2016 Annual General Meeting declare a dividend of 2.50 SEK per share.
The proposed record date is Monday, 2 May 2016. If this proposal is adopted by the Annual General Meeting, it is expected that dividends will be paid on Thursday, 5 May 2016. Dividends will be sent to those who, on the record date, are entered in the share register or on the separate list of assignees, etc. To facilitate the distribution of dividends, shareholders who have changed address should report their change of address to their bank in sufficient time prior to the record date.
The Annual Report is available at sandvik.com, where a printed copy can also be ordered.
Profit/loss for the year attributable to equity holders of the Parent Company divided by the average number of shares outstanding during the year.
Shareholders' equity including noncontrolling interests in relation to total capital.
Interest-bearing current and non-current debts (excluding net provisions for pensions) less cash and cash equivalents divided by shareholders' equity excluding accumulated actuarial gains/losses on benefit-based pension plans after tax and including non-controlling interests.
Invoiced sales divided by average total capital.
Average working capital divided by invoicing in the most recent quarter adjusted to annual rate.
Profit/loss after financial income and expenses, plus interest expenses, as a percentage of average total capital, less non-interest-bearing debts.
Consolidated net profit/loss for the year as a percentage of average shareholders' equity during the year.
Profit/loss after financial income and expenses, plus interest expenses, as a percentage of average total capital.
Total of inventories, trade receivables, accounts payable and other noninterest-bearing receivables and liabilities, excluding tax assets and liabilities.
Do you have any comments on our Annual Report, please contact us at Group Communications, +46 8 456 11 00 or [email protected].
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Invoiced sales, MSEK | 72,289 | 86,338 | 92,654 | 71,937 | 82,654 | 94,084 | 98,529 | 87,328 | 88,821 | 90,822 |
| Change, % | +14 | +19 | +7 | –22 | +15 | +14 | +5 | –11 | +2 | +2 |
| of which organic, % | +14 | +18 | +5 | –30 | +17 | +20 | +5 | –7 | –2 | –6 |
| of which structural, % | +1 | +3 | +2 | 0 | +1 | 0 | 0 | 0 | +2 | 0 |
| of which currency, % | –1 | –2 | 0 | +10 | –2 | –5 | 0 | –5 | +2 | +8 |
| Operating profit/loss, MSEK | 12,068 | 14,394 | 12,794 | –1,412 | 11,029 | 10,148 | 13,490 | 8,638 | 10,120 | 6,062 |
| as % of invoicing | 17 | 17 | 14 | –2 | 13 | 11 | 14 | 10 | 11 | 7 |
| Profit/loss after financial items, MSEK | 11,113 | 12,997 | 10,577 | –3,472 | 9,412 | 8,179 | 11,516 | 6,753 | 8,264 | 4,059 |
| as % of invoicing | 15 | 15 | 11 | –5 | 11 | 9 | 12 | 8 | 9 | 4 |
| Consolidated net profit for the year, MSEK | 8,107 | 9,594 | 7,836 | –2,596 | 6,943 | 5,861 | 8,107 | 5,008 | 5,992 | 2,194 |
| Shareholders' equity1), MSEK | 27,198 | 29,823 | 36,725 | 29,957 | 33,813 | 31,264 | 32,536 | 33,610 | 36,672 | 34,060 |
| Equity ratio1), % | 41 | 35 | 36 | 33 | 38 | 32 | 31 | 36 | 34 | 34 |
| Net debt/equity ratio3), multiple | 0.6 | 1.0 | 0.9 | 1.0 | 0.7 | 0.7 | 0.6 | 0.7 | 0.7 | 0.7 |
| Rate of capital turnover3), % | 115 | 112 | 101 | 73 | 92 | 100 | 97 | 89 | 89 | 86 |
| Cash and cash equivalents, MSEK | 1,745 | 2,006 | 4,998 | 7,506 | 4,783 | 5,592 | 13,829 | 5,076 | 6,327 | 6,376 |
| Return on shareholders' equity1), % | 31.8 | 34.4 | 24.8 | –7.9 | 22.1 | 18.5 | 25.3 | 15.3 | 17.4 | 6.2 |
| Return on capital employed1), % | 27.6 | 27.0 | 19.9 | –1.3 | 17.4 | 16.0 | 19.8 | 12.6 | 13.4 | 7.9 |
| Investments in non-current assets, MSEK | 4,175 | 4,811 | 6,634 | 4,006 | 3,378 | 4,994 | 4,820 | 4,185 | 4,703 | 4,161 |
| Total investments, MSEK | 5,455 | 9,480 | 7,766 | 6,161 | 4,493 | 5,332 | 4,859 | 4,674 | 7,537 | 4,168 |
| Cash flow from operations, MSEK | 7,741 | 5,076 | 9,335 | 11,792 | 12,149 | 7,764 | 11,892 | 5,133 | 9,515 | 11,952 |
| Cash flow, MSEK | 357 | 179 | 2,764 | 2,471 | –2,642 | 907 | 8,450 | –8,656 | 1,039 | 79 |
| Number of employees, 31 December | 41,743 | 47,123 | 50,028 | 44,355 | 47,064 | 50,030 | 48,742 | 47,338 | 47,318 | 45,808 |
1) As of 2011, comparative figures adjusted due to amended accounting policies.
2) Total equity, including minority interest.
3) As of 2011, comparative figures adjusted due to changed definition. For definitions, see page 128.
(All historical figures are adjusted taking
| into account the 5:1 split.) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Basic earnings 1) | 6.45 | 7.65 | 6.30 | –2.24 | 5.59 | 4.63 | 6.51 | 4.00 | 4.79 | 1.79 |
| Diluted earnings 2) | 6.45 | 7.65 | 6.29 | –2.24 | 5.59 | 4.63 | 6.51 | 4.00 | 4.79 | 1.79 |
| Equity 3) | 22.00 | 24.10 | 30.00 | 24.4 | 27.5 | 25.2 | 25.9 | 26.7 | 29.1 | 27.1 |
| Dividend (2015 as proposed) | 3.25 | 4.00 | 3.15 | 1.00 | 3.00 | 3.25 | 3.50 | 3.50 | 3.50 | 2.50 |
| Direct return 4), % | 3.3 | 3.6 | 6.4 | 1.2 | 2.3 | 3.8 | 3.4 | 3.9 | 4.6 | 3.4 |
| Payout percentage 5), % | 50 | 52 | 50 | — | 54 | 70 | 54 | 88 | 73 | 140 |
| Quoted prices, Sandvik share, highest | 106 | 151 | 108 | 90 | 133 | 135 | 107 | 108 | 97 | 107 |
| lowest | 71 | 96 | 42 | 41 | 76 | 73 | 82 | 79 | 74 | 68 |
| year-end | 100 | 111 | 49 | 86 | 131 | 84 | 103.50 | 90.70 | 76.40 | 74.05 |
| No. of shares at year-end, million | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 |
| Average no. of shares, million | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,186.3 | 1,245.9 | 1,254.4 | 1,254.4 | 1,254.4 |
| P/E ratio 6) | 15.4 | 14.5 | 7.8 | — | 23.5 | 18.2 | 15.9 | 22.7 | 15.9 | 41.4 |
| Quoted price, % of equity 2) 7) | 452 | 462 | 163 | 352 | 476 | 333 | 400 | 340 | 261 | 273 |
1)Profit/loss for the year per share.
4)Dividend by the quoted price at year-end.
5)Dividend by basic earnings per share.
6) Market price of share at year-end in relation to earnings per share.
7) Market price of share at year-end, as a percentage of equity per share.
Supplementary definitions, see page 128.
outstanding convertible program.
2) Profit/loss for the year per share after dilution of 3) As of 2011, comparative figures adjusted due to
amended accounting policies.
DEVELOPMENT BY BUSINESS AREA, GROUP TOTAL
| INVOICED SALES | OPERATING PROFIT AND OPERATING MARGIN | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 MSEK |
2013 MSEK |
2014 MSEK |
2015 MSEK |
MSEK | 2012 % |
MSEK | 2013 % |
MSEK | 2014 % |
MSEK | 2015 % |
|
| Sandvik Machining Solutions | 28,482 | 28,543 | 30,856 | 32,652 | 6,256 | 22 | 5,205 | 18 | 6,159 | 20 | 5,269 | 16 |
| Sandvik Mining | 37,762 | 30,744 | 26,831 | 27,398 | 6,004 | 16 | 2,743 | 9 | 2,398 | 9 | 1,375 | 5 |
| Sandvik Materials | ||||||||||||
| Technology | 15,366 | 14,035 | 14,907 | 13,909 | 592 | 4 | 1,270 | 9 | 1,880 | 13 | 8 | 0 |
| Sandvik Construction | 9,683 | 8,601 | 8,553 | 8,551 | 748 | 8 | 110 | 1 | 45 | 1 | 28 | 0 |
| Sandvik Venture | 7,194 | 5,394 | 7,658 | 8,292 | 1,238 | 17 | 606 | 11 | 888 | 12 | 529 | 6 |
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